FINANCIAL HIGHLIGHTS
Thomas & Betts Corporation
In thousands
(except per share data) 1996 1995
Net sales $1,985,145 $1,733,368
Special charges(1) $ 97,067 $ 23,000
Net earnings (after special charges) $ 59,868 $ 88,502
Net earnings per common share $ 1.13 $ 1.69
Cash dividends declared per
common share $ 1.12 $ 1.12
Average shares outstanding 53,059 52,494
Shareholders' equity $ 868,382 $ 850,312
Capital expenditures $ 107,807 $ 131,442
Employees 14,700 12,600
Shareholders of record 5,611 5,494
As a result of the merger of Thomas & Betts Corporation and Augat
Inc. on December 11, 1996, accounted for as a pooling of
interests, all Financial Highlights except dividends per share
include the combined amounts of both companies for all periods
presented.
1996 1996 1995 1995
Before After Before After
Special Special Special Special
Charges Charges Charges Charges
Net sales (in millions) $1,985 $1,985 $1,733 $1,733
Net earnings (in millions)(2) $125.5 $ 59.9 $103.8 $ 88.5
Earnings per share(2) $ 2.36 $ 1.13 $ 1.98 $ 1.69
Return on average
shareholders' equity(2) 13.9% 7.0% 12.5% 10.8%
(1) Special charges of $97.1 million pretax in 1996 consisted of
merger costs, restructuring costs and other charges. Augat
special charges of $23.0 million pretax in 1995 consisted of
restructuring costs and other charges. Excluding these
charges, earnings per share would have been $2.36 in 1996
and $1.98 in 1995. See Notes 3 and 4 to Consolidated
Financial Statements.
(2) Special charges in 1995 and 1996 reduced net earnings,
earnings per share and return on average shareholders'
equity as shown.
FINANCIAL REVIEW
1996 vs. 1995
The Corporation's 1996 financial results reflect two significant
acquisitions. First, the financial results of Amerace
Corporation ("Amerace"), a January 2, 1996 acquisition accounted
for as a purchase, are included effectively for all of 1996.
Second, the merger with Augat Inc. ("Augat"), the Corporation's
largest-ever acquisition, occurred in December 1996. The
financial results of the Corporation and Augat have been combined
for all periods presented as called for under pooling of
interests accounting. In conjunction with the Augat merger, the
Corporation recorded special charges of $97.1 million pretax for
merger costs, restructuring costs and other charges.
Sales for 1996 were a record $1,985.1 million, 15 percent
above 1995 sales of $1,733.4 million, with sales from new
acquisitions coupled with expansion of existing businesses
providing the growth. Overall, price increases and currency
effects were not significant in either 1996 or 1995.
Approximately one-quarter of the Corporation's sales in both 1996
and 1995 were made to customers outside the U.S.
Net earnings for 1996 of $59.9 million, or $1.13 per share,
were below the 1995 level of $88.5 million, or $1.69 per share,
due to the special charges of $97.1 million recorded in the
fourth quarter. Excluding the after-tax impact of the special
charges ($65.6 million in 1996 and $15.3 million in 1995), net
earnings would have been $125.5 million in 1996, or $2.36 per
share, an increase of 21 percent from $103.8 million, or $1.98
per share, in 1995. This increase resulted from the additional
sales volume generated by acquisitions as well as existing
businesses, lower commodity costs and cost reductions from prior-
years' restructuring initiatives.
Sales and earnings from operations, excluding special
charges, improved in all three of the Corporation's business
segments.
Electrical Construction and Maintenance Components' segment
sales increased 8 percent to $627.3 million in 1996. Higher
volumes of existing and new products in industrial, commercial
and residential markets contributed most of the growth. Earnings
from operations, excluding special charges, improved 11 percent
on the higher sales volume.
Electronic/OEM Components' segment sales increased 11
percent to $920.7 million in 1996, reflecting increased
penetration of domestic professional electronics markets together
with acquisitions and new product launches in OEM electronics.
Earnings from operations, excluding special charges, rose 14
percent as a result of the higher sales volume and cost
reductions from prior-years' restructuring initiatives.
The Other Products and Components' segment sales increased
36 percent to $437.1 million in 1996, primarily driven by sales
from the Amerace acquisition and aided by gains from existing
utility and telecommunications products. Earnings from
operations, excluding special charges, grew 59 percent as a
result of higher sales volume, higher-margin product sales and
lower commodity costs.
Consolidated gross margin of 29.6 percent in 1996 was
slightly improved from the 1995 gross margin of 29.5 percent.
Excluding the special charges of $13.8 million in 1996 and $2.5
million in 1995, gross margin improved to 30.3 percent from 29.7
percent, reflecting restructuring-related cost savings and lower
commodity costs.
Marketing, general and administrative expenses were 17.1
percent of sales in 1996. Excluding special charges of $19.7
million in 1996 and $1.8 million in 1995, these expenses were
16.1 percent of sales in 1996, a modest improvement from 16.3
percent in 1995, as a result of the administrative efficiencies
realized from integration of acquired businesses into the
Corporation. Research and development expenses increased 7
percent in 1996 and constituted 2.4 percent of sales.
Amortization expense increased by $4.0 million in 1996 versus
1995 primarily due to additional amortization of goodwill
resulting from the acquisition of Amerace at the beginning of the
year.
The 1996 merger expense included legal and financial
advisory fees and change-of-control payments. The provision for
restructured operations in 1996 and 1995 is described more fully
under Restructuring.
Other expense for 1996 increased by $14.5 million versus
1995. The increase was the result of higher interest expense on
increased debt from the acquisition of Amerace and the Augat
merger's special charges, partially offset by higher income from
equity investees, primarily from joint ventures acquired in the
Amerace purchase.
The effective tax rate of 34.1 percent for 1996 was 2.7
points higher than the 1995 tax rate primarily due to the impact
of non-deductible merger expenses in 1996.
The Corporation's net earnings as a percent of sales
declined to 3.0 percent in 1996 because of the special charges.
Excluding special charges in both years, return on sales would
have improved to 6.3 percent in 1996 compared to 6.0 percent in
1995.
1995 vs. 1994
Sales in 1995 rose 10 percent to a record $1,733.4 million
compared to 1994 sales of $1,573.6 million. Sales growth came
equally from expansion of existing businesses and acquisitions.
Overall, price increases and currency effects were not
significant in either 1995 or 1994. Total sales outside the U.S.
represented approximately one-quarter of consolidated sales in
both 1995 and 1994.
The impact of additional sales volume and savings realized
from the Corporation's restructuring initiatives announced in the
third quarter of 1994 were offset by the restructuring charge
recorded by Augat in 1995, resulting in net earnings of $88.5
million, or $1.69 per share, for 1995, down 6 percent from $94.0
million, or $1.85 per share, recorded in 1994. Excluding the
special charges, 1995 net earnings would have been $103.8
million, or $1.98 per share, up 10 percent from 1994.
All three of the Corporation's business segments contributed
year-over-year improvements in sales and earnings from operations
excluding special charges.
Electrical Construction and Maintenance Components' segment
sales increased 17 percent to $580.0 million in 1995, with solid
growth generated from existing products as well as from newly
acquired businesses. Industrial, commercial and residential
construction and renovation activity was particularly strong in
the first half of the year. Savings related to the 1994
restructuring in this segment were offset in part by higher
commodity costs and a less favorable product sales mix than in
the prior year, but 1995 earnings from operations still achieved
10 percent growth compared to 1994 earnings excluding special
charges.
Electronic/OEM Components' segment sales increased 6 percent
to $832.7 million in 1995, with one-half of the increase derived
from sales growth in existing products and expansion of the
customer base and the remainder primarily from strengthening
currencies in Europe and the Far East. Higher demand in the
automotive, computer, industrial automation and
telecommunications markets drove volume gains in all regions -
North America, Europe and the Far East. Volume gains, coupled
with restructuring-related cost savings, produced 13 percent
higher earnings from operations in 1995 compared to 1994,
excluding special charges in both years.
The Other Products and Components' segment sales increased 9
percent to $320.7 million in 1995, with two-thirds of the
increase from existing products and markets and one-third from
acquisitions. Demand for heating products continued strong in
1995 while demand for utility and telecommunication products and
components improved versus the prior year, resulting in 18
percent earnings from operations growth in 1995 compared to 1994,
excluding special charges.
Consolidated gross margin improved to 29.5 percent in 1995
versus 28.9 percent in 1994. The 1994 margin included $3.8
million of special facilities-related charges while the 1995
margin benefited from restructuring-related cost reductions in
North America and Europe that more than offset higher commodity
costs.
Marketing, general and administrative expenses were 16.3
percent of sales in 1995 excluding special charges, essentially
unchanged from 16.2 percent in 1994. Research and development
expenses increased by 9 percent in 1995 and constituted 2.5
percent of sales. Amortization expense declined $1.0 million in
1995 due to intangibles that became fully amortized during 1994.
Other expense for 1995 declined $3.2 million from 1994
principally as a result of prior-year currency exchange losses,
primarily in Mexico, that did not recur in 1995, and a gain on
the sale of certain assets of the Electripak business.
The effective tax rate of 31.4 percent for 1995 was below
the U.S. statutory tax rate primarily due to tax benefits derived
from the Corporation's operations in Puerto Rico. The 1995 rate
exceeds the 1994 rate of 30.1 percent because of the significant
impact that the restructuring charge had on pretax earnings from
continuing operations in 1994.
The Corporation's net earnings as a percent of sales
declined to 5.1 percent in 1995 due to Augat's special charges.
Excluding special charges, 1995 return on sales would have been
6.0 percent, equal to the 1994 rate.
Liquidity and Capital Resources
Net cash flow from operating activities for the years 1994, 1995
and 1996 was $414.0 million. Earnings from continuing operations
plus depreciation and amortization for these three years totaled
$416.5 million. These funds were used for working capital needed
to support sales growth, expenditures relating to restructuring
activities, capital projects, business acquisitions and dividend
payments. Working capital needs included higher levels of
accounts receivable relating to higher sales volume, increased
inventory levels to support sales growth and spending for
restructuring initiatives. These working capital needs were
partially offset by higher payables due to increased purchases
and higher taxes payable due to higher pre-restructuring taxable
income.
In January 1996, the Corporation issued $150.0 million of
10-year 6.50 percent senior notes. The net proceeds from the sale
of these securities were used to reduce January 1996 borrowings
under the Corporation's credit facility incurred to finance the
acquisition of Amerace.
The Corporation has access to funds made available under a
$500 million, five-year revolving credit facility. At December
29, 1996, $205 million of borrowings under the facility were
outstanding. The Corporation continues to fund its capital and
operating needs with cash flows from operations augmented by
borrowing under this revolving credit facility and from other
sources.
Mergers, Acquisitions and Investments
Augat Inc.
On December 11, 1996 Augat Inc. was merged with a subsidiary of
the Corporation. Approximately 12.8 million shares of the
Corporation's common stock were exchanged for all of the
outstanding common stock of Augat. Augat is a worldwide
manufacturer of electronic connectors and devices used in markets
such as telecommunications, automotive, information processing
and cable television.
Amerace
On January 2, 1996 the Corporation acquired all the outstanding
stock of Amerace Corporation for $212.5 million in cash. Amerace
is a manufacturer of electrical products for utility and
industrial markets. Its most significant products are
underground power and distribution connectors sold under the
Elastimold brand name. Excluding its Hendrix Wire and Cable
business, which was sold by the Corporation in May 1996, Amerace
generated 1996 sales of $147.0 million. The cash purchase price
was financed in part by use of the Corporation's revolving credit
facility and in part by the issuance of senior notes.
Other
The Corporation completed six acquisitions during 1996 in
addition to Augat and Amerace for a total of approximately $46.0
million consisting of cash and 57,714 shares of the Corporation's
common stock. These acquisitions were: in January, certain
assets of Bowers Manufacturing Corporation, manufacturer of
metallic and non-metallic electrical outlet boxes and surface
raceway systems; in March, Porta Systems Corporation, a fiber
optics business; in June, the Pilgrim Group of companies, a
Canadian manufacturer of cable tray wiring systems; in June,
International Energy Saver, manufacturer of evaporative cooling
and heat recovery systems; in November, Reznor Europe, a group of
companies that manufacture high-quality heating systems; and in
November, the assets of Microlectric Canada Ltd., manufacturer of
electric meter boxes and accessories. All were accounted for
using the purchase method of accounting, and represented
approximately $37.0 million of sales reported by the Corporation
in 1996.
During 1995, the Corporation completed five acquisitions for
approximately $48.0 million consisting of cash and 657,810 shares
of the Corporation's common stock. These acquisitions were: in
February, certain assets of the Anchor Electric meter center
business; in May, Photon Systems Corp., a designer and
manufacturer of systems that enable telecommunication and cable
companies to distribute signals over fiber optic networks; in
June, Elastomeric Technologies Inc., a manufacturer of customized
interconnection technology used in communications and portable
electronics; in July, E. K. Campbell Company, a custom industrial
heating and cooling equipment manufacturer; and in October,
Catamount Manufacturing, Inc., a manufacturer of cable ties, wire
connectors and related electrical products. The Anchor Electric,
Photon Systems and Elastomeric acquisitions were accounted for
using the purchase method of accounting and the E. K. Campbell
and Catamount acquisitions were accounted for as immaterial
poolings of interests without restating prior-years' results.
During 1994, the Corporation completed four acquisitions for
approximately $73.0 million consisting of cash and 447,432 shares
of common stock. Three were purchases from Eaton Corporation
involving primarily inventories and equipment: in January,
certain circuit protection products; in August, Commander
Electrical Products, Inc., a Canadian metal outlet box and
fittings business; and in November, a U.S. non-metallic
electrical outlet box business. Separately, in February, the
Corporation purchased certain assets from Anford, Inc., a
Canadian manufacturer of cable tray. In August 1994, the
Corporation also purchased a minority interest (approximately
29%) in Leviton Manufacturing Co., Inc., the leading U.S.
manufacturer of wiring devices, for approximately $51.0 million
consisting of cash and common stock.
Capital Spending
Capital spending of $107.8 million in 1996 returned to a more
typical level following the completion of a major spending
program on distribution facilities initiated during 1995 when
capital spending reached a record $131.4 million. Spending in
1994 was $98.4 million. Capital funds for this three-year period
were used for restructuring projects to improve service and
reduce operating costs, to expand manufacturing and distribution
capacity and produce new products, and to increase efficiency in
keeping with the Corporation's strategic focus on core businesses
and product lines. Projects in 1996 included completion of the
new central distribution center near Memphis, continued expansion
of the Corporation's operations in Mexico and restructuring-
related spending at Augat to consolidate manufacturing
operations. Projects in 1995 included spending on three new
state-of-the-art distribution facilities near Memphis and in
Canada and Belgium; the expansion of production capabilities in
Puerto Rico; and new equipment and efficiency-related
improvements at facilities in Arkansas and Mexico. In 1994, the
Corporation began refurbishment of a new, leased manufacturing
facility in Arkansas, completed a second expansion of its
existing distribution facility near Memphis, completed the
refurbishment and equipment upgrade at a new, leased distribution
facility in Nevada and began construction of the new distribution
facility in Canada.
Environmental Matters
The Corporation believes it is substantially in compliance with
all applicable environmental laws and regulations and that the
cost of maintaining substantial compliance with such laws and
regulations will not be material to its financial statements.
In connection with the merger with Augat in the fourth
quarter of 1996, the Corporation conducted environmental site
assessments on certain manufacturing facilities being remediated
or potentially requiring remediation. As a result of these
studies, as well as an evaluation of Augat's liabilities under
Superfund or similar statutes, the special charges associated
with this acquisition included $5.1 million to augment already
existing Augat environmental reserves. In 1995 and 1994, $1.8
and $7.0 million, respectively, were provided for potential
environmental remediation of planned facility closings. The
Corporation paid approximately $2.0, $1.5 and $1.0 million for
remediation and corrective matters for the years 1996, 1995 and
1994, respectively, with payments for Superfund-related matters
being less than $0.5 million in any year. The Corporation's
policy is to accrue undiscounted future remediation expenses to
the extent known and determinable.
Restructuring
During the fourth quarter of 1996, the Corporation recorded a
restructuring charge of $24.5 million relating to the integration
of Augat and initiatives to optimize operations and improve
future profitability. This charge included non-cash charges of
$6.6 million for the write-down of equipment to be disposed of
and cash charges of $17.9 million, primarily for employee
severance and related benefit costs. Cost savings resulting from
these initiatives are expected to be approximately $5.0 to $10.0
million in 1997 and $15.0 to $20.0 million annually thereafter.
In the fourth quarter of 1995, Augat recorded a
restructuring charge of $18.7 million for closing redundant or
excess facilities, abandoning excess equipment, discontinuing
inventory in low-margin product lines and employee severance
costs. At the end of 1996 only $0.7 million of the reserve
remained, primarily for ongoing employee severance costs.
Activities related to the $79.0 million pretax restructuring
charge taken by the Corporation in 1994 are essentially complete
and only $4.1 million of the reserve remained at the end of 1996,
primarily for ongoing environmental remediation costs at idled
facilities. All restructuring actions have been implemented and
have produced the cost savings anticipated when the charge was
taken.
Other Matters
The Corporation manages its foreign currency exchange rate risk
by entering into foreign exchange contracts to hedge its foreign
currency transaction exposures. The Corporation will, on
occasion, enter into interest rate swaps to reduce the impact of
changes in interest rates on portions of its floating-rate debt.
It does not trade in these instruments for speculative purposes.
The Corporation maintains a portfolio of marketable
securities and cash equivalents in Puerto Rico, which at year-end
1996 was valued at $113.4 million. Although these investments
represent currently available funds, they remain invested so the
Corporation can obtain favorable, partially tax-exempt status on
earnings generated in Puerto Rico.
Dividends and Related Security-Holder Matters
In 1996, the Corporation declared cash dividends of $1.12 per
share, or $45.2 million. In addition to cash dividends of $1.12
per share declared on the Corporation's common stock, Augat
declared and paid cash dividends of $0.16 per share, or $3.2
million, prior to the merger in 1996. These dividends represent
81 percent of net earnings in 1996 compared to dividends
representing 54 percent of net earnings in 1995. Debt covenants
permit the Corporation to continue paying dividends at the
current rate, with increases allowed only if the dividend payout
does not exceed 50 percent of earnings. Thomas & Betts has paid
dividends for 63 consecutive years.
The Corporation's common stock is traded on the New York
Stock Exchange. Thomas & Betts had 53,303,000 shares of common
stock outstanding at December 29, 1996, which were held by 5,611
shareholders of record.
CONSOLIDATED STATEMENT OF EARNINGS
Thomas & Betts Corporation
In thousands (except per share data) 1996 1995 1994
Net Sales $1,985,145 $1,733,368 $1,573,602
Costs and Expenses
Cost of sales 1,398,031 1,221,463 1,118,224
Marketing, general and administrative 339,124 283,861 255,073
Research and development 47,229 44,083 40,543
Amortization of intangibles 15,323 11,314 12,345
Merger expense 30,558 - -
Provision for restructured operations 24,501 18,700 79,011
1,854,766 1,579,421 1,505,196
Earnings from operations 130,379 153,947 68,406
Other expense-net 39,501 25,017 28,212
Earnings from continuing operations
before income taxes 90,878 128,930 40,194
Income taxes 31,010 40,428 12,107
Earnings from continuing operations 59,868 88,502 28,087
Earnings from discontinued operations,
net of income taxes of $4,628 - - 7,350
Gain on sale of discontinued
operations, net of income taxes
of $40,492 - - 58,583
Net earnings $ 59,868 $ 88,502 $ 94,020
Share Data
Earnings from continuing operations $ 1.13 $ 1.69 $ 0.55
Earnings from discontinued operations - - 0.15
Gain on sale of discontinued operations - - 1.15
Net earnings $ 1.13 $ 1.69 $ 1.85
Cash dividends declared $ 1.12 $ 1.12 $ 1.12
Average shares outstanding 53,059 52,494 50,862
See Notes to Consolidated Financial Statements
CONSOLIDATED BALANCE SHEET
Thomas & Betts Corporation
December 29, December 31,
In thousands 1996 1995
Assets
Current Assets
Cash and cash equivalents $ 126,355 $ 75,155
Marketable securities 35,940 60,638
Receivables, net 361,511 272,472
Inventories 363,306 304,989
Deferred income taxes 62,121 30,967
Prepaid expenses 7,818 6,165
Total Current Assets 957,051 750,386
Property, Plant and Equipment
Land 16,944 18,891
Buildings 217,792 214,165
Machinery and equipment 765,240 658,848
999,976 891,904
Less accumulated depreciation 460,032 419,071
539,944 472,833
Intangible Assets-Net 519,276 346,120
Investments and Other Assets 114,966 97,519
Total Assets $ 2,131,237 $1,666,858
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable $ 49,365 $ 50,018
Current maturities of long-term debt 15,690 29,202
Accounts payable 190,184 146,654
Accrued liabilities 189,961 147,412
Income taxes 35,372 18,367
Dividends payable 11,328 11,221
Total Current Liabilities 491,900 402,874
Long-Term Liabilities
Long-term debt 645,096 353,666
Other long-term liabilities 100,676 35,510
Deferred income taxes 25,183 24,496
Shareholders' Equity
Common stock 284,639 26,383
Additional paid-in capital - 243,448
Retained earnings 569,869 559,968
Cumulative translation adjustment 15,084 24,255
Cost of treasury stock - (3,404)
Other (1,210) (338)
Total Shareholders' Equity 868,382 850,312
Total Liabilities and Shareholders' Equity $ 2,131,237 $1,666,858
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
Thomas & Betts Corporation
In thousands 1996 1995 1994
Cash Flows From Operating Activities
Earnings from continuing operations $ 59,868 $ 88,502 $ 28,087
Adjustments:
Depreciation and amortization 91,581 76,495 71,953
Provision for restructured operations 24,501 18,700 79,011
Accrued merger and other special charges 51,145 4,300 10,632
Deferred income taxes (26,728) 7,782 (38,400)
Changes in operating assets and
liabilities, net:
Receivables (63,147) (10,980) (29,505)
Inventories (29,159) (16,984) (17,129)
Accounts payable 22,386 (7,118) 43,028
Accrued liabilities (30,847) (26,977) 2,418
Income taxes payable 20,789 (5,681) 10,676
Cash from discontinued operations - - 7,606
Other 492 (5,615) 2,322
Net cash provided by operating activities 120,881 122,424 170,699
Cash Flows From Investing Activities
Purchases of and investments in businesses (256,390) (19,983) (84,084)
Purchases of property, plant and equipment (107,807) (131,442) (90,561)
Proceeds from sale of property, plant and
equipment 37,535 4,993 7,807
Marketable securities acquired (26,636) (50,925) (30,509)
Proceeds from matured marketable securities 51,387 49,500 19,292
Proceeds from sale of subsidiary, net of tax - - 144,700
Net investments in discontinued operations - - (7,781)
Other - 4,502 1,733
Net cash used in investing activities (301,911) (143,355) (39,403)
Cash Flows From Financing Activities
Increase (decrease) in borrowings with
original maturities less than 90 days (16,798) 46,938 (10,543)
Proceeds from long-term debt and other
borrowings 386,437 24,789 43,998
Repayment of long-term debt and other
borrowings (95,137) (31,658) (121,952)
Stock options exercised 12,812 10,194 8,916
Cash dividends paid (48,305) (47,138) (44,548)
Net cash provided by (used in)
financing activities 239,009 3,125 (124,129)
Effect of Exchange Rate Changes on Cash (6,779) 2,755 1,990
Net increase (decrease) in cash and cash
equivalents 51,200 (15,051) 9,157
Cash and cash equivalents - beginning of year 75,155 90,206 81,049
Cash and cash equivalents - end of year $ 126,355 $ 75,155 $ 90,206
Cash payments for interest $ 37,359 $ 32,176 $ 31,418
Cash payments for taxes $ 29,066 $ 36,699 $ 81,887
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Thomas & Betts Corporation
Additional Cumulative
Common Stock Paid-In Retained Translation Treasury Stock
In thousands Shares Amount Capital Earnings Adjustment Shares Amount
Balance at January 2, 1994 49,960 $24,980 $181,048 $467,475 $12,884 (117) $(3,699)
Net earnings - - - 94,020 - - -
Dividends declared - - - (44,958) - - -
Stock options and incentive awards 467 234 11,245 - - 28 980
Business acquisition and investments 1,246 623 38,660 - - - -
Translation adjustments,
net of taxes of $915 - - - - 6,865 - -
Balance at January 1, 1995 51,673 25,837 230,953 516,537 19,749 (89) (2,719)
Immaterial poolings of interests 656 328 1,616 2,309 - - -
Net earnings - - - 88,502 - - -
Dividends declared - - - (47,380) - - -
Stock options and incentive awards 436 218 10,879 - - (18) (685)
Translation adjustments,
net of taxes of $719 - - - - 4,506 - -
Balance at December 31, 1995 52,765 26,383 243,448 559,968 24,255 (107) (3,404)
Reincorporation (107) 240,044 (243,448) - - 107 3,404
Net earnings - - - 59,868 - - -
Dividends declared - - - (48,412) - - -
Stock options and incentive awards 587 16,263 - - - - -
Business acquisitions and investments 58 1,949 - (39) - - -
Change in subsidiaries' year-end - - - (1,516) - - -
Translation adjustments,
net of taxes of $1,569 - - - - (9,171) - -
Balance at December 29, 1996 53,303 $284,639 $ - $569,869 $15,084 - $ -
Preferred Stock: Authorized 500,000 shares, no par value. None issued
to date.
Common Stock: Authorized 80,000,000 shares, no par value.
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations
Thomas & Betts Corporation (the "Corporation" or "T&B") designs,
manufactures and markets, on a global basis, electronic and
electrical connectors and components as well as other related
products and accessories for construction, maintenance and
original equipment manufacturer ("OEM") markets. The Corporation
is a worldwide designer and manufacturer of a broad range of
electromechanical components and subsystems that provide
solutions for the automotive, communication and information
processing industries in North America, Europe and the Far East.
The Corporation is also one of the largest manufacturers in North
America of electrical connectors and accessories for industrial,
commercial and residential construction, renovation and
maintenance applications, and is a leading supplier of
transmission poles, towers and industrial lighting products to
the utility and telecommunications industries and of products and
components to the heating, mechanical and refrigeration markets
in North America and Europe.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
Corporation and its wholly owned domestic and foreign
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. The
Corporation uses the equity method of accounting for its
investments in 20 to 50-percent-owned companies.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fiscal Year
The Corporation's fiscal year ends on the Sunday closest to the
end of the calendar year. Results for 1996, 1995 and 1994 are for
the 52 weeks ended December 29, 1996, December 31, 1995 and
January 1, 1995, respectively. In 1996, Augat changed the fiscal
year of its European and Far Eastern subsidiaries from November
30 to the Corporation's fiscal year-end to eliminate the one-
month reporting lag, resulting in a charge against retained
earnings of $1.5 million.
Financial Instruments and Concentrations of Credit Risk
The Corporation enters into forward foreign exchange contracts to
hedge foreign currency transaction exposures when deemed
appropriate for periods consistent with those committed
exposures. These financial instruments are with major financial
institutions and expose the Corporation to market and credit
risks and may at times be concentrated with certain
counterparties. The creditworthiness of counterparties is
subject to continuing review and full performance by these
counterparties is anticipated. Foreign exchange contracts
generally have maturities which do not exceed one year.
Currency hedging minimizes the impact of foreign exchange
rate movements on the Corporation's operating results as gains
and losses on contracts are offset by losses and gains on the
assets, liabilities and transactions being hedged. A high
correlation is maintained between the transactions and the hedges
to minimize currency risk. In most cases, both the exposed
transactions and the hedging contracts are marked to market
monthly with gains and losses included in earnings. Gains and
losses on certain contracts which hedge specific foreign currency
denominated commitments are deferred and recognized in the period
in which the transaction is completed.
As of December 29, 1996 and December 31, 1995, the
Corporation had outstanding contracts to sell $10.7 and $88.0
million, respectively, of principally Canadian and European
currencies for U.S. dollars and to buy the equivalent of $33.6
million at December 31, 1995 of European currencies, all maturing
within 180 days. Deferred contract gains and losses at December
29, 1996 and December 31, 1995 were not material.
Credit risk with respect to trade receivables is limited due
to the large number of customers comprising the Corporation's
customer base and their dispersion across many different
industries and geographic areas.
The Corporation will, on occasion, enter into interest rate
swaps to reduce the impact of changes in interest rates on
portions of its floating-rate debt. The rate differential paid
or received under these agreements is accrued monthly consistent
with the terms of the agreements and market interest rates.
These agreements are with financial institutions having at least
a double-A credit rating, which minimizes non-performance risk.
Receivables
Receivables are stated net of allowance for doubtful accounts and
cash discounts of $8.7 million at December 29, 1996 and $7.1
million at December 31, 1995.
Inventories
Inventories are stated at lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for
approximately one-half of the Corporation's inventories (U.S. and
Europe, excluding Augat), and the first-in, first-out (FIFO)
method for the remainder of inventories, including Augat. The
LIFO value of inventories held at December 29, 1996 approximated
their current cost.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures
for maintenance and repair are charged to costs and expenses as
incurred. Significant renewals and betterments that extend the
lives of assets are capitalized. Depreciation is computed
principally on the straight-line method over the estimated useful
lives of the assets which range principally from 10 to 25 years
for land improvements, 5 to 45 years for buildings, and 3 to 15
years for machinery and equipment.
Intangible Assets
Intangible assets consist principally of the excess of cost over
the fair value of net assets (goodwill) acquired in business
combinations accounted for as purchases. These assets are being
amortized on a straight-line basis over various periods not
exceeding 40 years. Goodwill is reevaluated when business events
and circumstances indicate that the carrying amount may not be
recoverable. Reevaluation is based on projections of related
undiscounted future cash flows. As of December 29, 1996 and
December 31, 1995, accumulated amortization of intangible assets
was $71.6 and $56.7 million, respectively.
Income Taxes
The Corporation uses the asset and liability method of accounting
for income taxes. This method recognizes the expected future tax
consequences of temporary differences between the book and tax
bases of assets and liabilities and provides a valuation
allowance based on a "more-likely-than-not" standard.
Undistributed earnings of foreign subsidiaries held for
reinvestment in overseas operations amounted to $93.8 million at
December 29, 1996. Additional U.S. income taxes may be due upon
remittance of those earnings (net of foreign tax credits
resulting from the distribution), but it is impractical to
determine the amount of any such additional taxes.
Shareholders' Equity
In February 1996, the Board of Directors approved a two-for-one
stock split, which has been retroactively reflected in the
accompanying consolidated financial statements for all periods
presented. Also in February 1996, the Board of Directors
approved an amendment to the Certificate of Incorporation to
increase the authorized shares of common stock from 40 million to
80 million shares.
In May 1996, the Corporation's state of incorporation was
changed from New Jersey to Tennessee. The reincorporation
resulted in each outstanding share of the Corporation's common
stock, par value of $0.50, being converted into one share of
common stock, no par value. Tennessee law requires shares
repurchased by a corporation to be returned to the status of
authorized but unissued shares and, accordingly, the shares of
common stock previously held in treasury were canceled. There
was no change in total shareholders' equity as a result of the
elimination of par value and treasury stock.
Shareholders' equity included $0.8 million at both December
29, 1996 and December 31, 1995 and $0.9 million at January 1,
1995, related to unrealized gains on marketable securities;
reductions to equity of $2.0, $0.5 and $0.7 million at December
29, 1996, December 31, 1995 and January 1, 1995, respectively,
related to non-vested restricted stock awards; and a reduction to
equity of $0.6 million at December 31, 1995 related to a minimum
pension liability adjustment. Compensation expense related to
the restricted stock awards is recognized over the vesting
period.
Earnings per Share
Earnings per share are computed by dividing net earnings by the
weighted average number of shares of common stock outstanding
during the year. The effect on earnings per share resulting from
the assumed exercise of outstanding options is not material.
Cash Flow Information
Cash equivalents consist of investments with maturities at date
of purchase of less than 90 days that have a low risk of change
in value due to interest rate changes. Foreign currency cash
flows have been converted to U.S. dollars at appropriately
weighted average exchange rates or the exchange rates in effect
at the time of the cash flows, where determinable.
Reclassification
In 1996, outbound freight expense was classified as a reduction
of sales to conform the Corporation's presentation method to one
that is more prevalent in its industry. Corresponding prior
years' amounts previously classified as marketing, general and
administrative expenses were reclassified to conform to this
method of presentation.
3. Mergers, Acquisitions and Divestitures
Augat Inc.
On December 11, 1996, Augat Inc. was merged with a subsidiary of
the Corporation. All of the outstanding common stock of Augat
was exchanged for 12,827,600 shares of the Corporation's common
stock. In addition, options to acquire Augat common stock were
converted to options to acquire 791,400 shares of the
Corporation's common stock. Augat is a worldwide manufacturer of
electronic connectors and devices used in markets such as
telecommunications, automotive, information processing and cable
television.
The merger was accounted for as a pooling of interests and
the Corporation's financial statements have been restated to
include the results of Augat for all periods presented, except
for dividends per share which reflect the Corporation's
historical per share amount.
Combined and separate results of T&B and Augat during the
periods preceding the merger were as follows:
In millions T&B Augat Combined
Nine months ended September 29, 1996 (unaudited)
Net sales $1,042.3 $441.3 $1,483.6
Net earnings $ 68.7 $ 22.0 $ 90.7
Fiscal year ended December 31, 1995
Net sales $1,198.5 $534.9 $1,733.4
Net earnings $ 80.9 $ 7.6 $ 88.5
Fiscal year ended January 1, 1995
Net sales $1,042.9 $530.7 $1,573.6
Earnings from continuing
operations $ 1.9 $ 26.2 $ 28.1
Net earnings $ 67.8 $ 26.2 $ 94.0
In the fourth quarter of 1996, the Corporation recorded
special charges totaling $97.1 million. The charges provided for
merger expenses, including legal and financial advisory fees and
change-of-control payments; restructuring expenses related to
both the Corporation's existing operations and the operations of
Augat (see also Note 4); adjustments to accounting estimates of
Augat's liabilities, primarily environmental, litigation,
warranty and employee benefit accruals, and provisions for
inventory obsolescence; the cost of index put options purchased
and held through the merger's stock pricing period; and other
generally one-time expenses, including certain termination
benefits related to the Corporation's executive retirement plan
and previously idled facility charges. The charges were recorded
in the statement of earnings as follows: net sales, $2.4 million;
cost of sales, $13.8 million; marketing, general and
administrative, $19.7 million; merger expense, $30.6 million;
provision for restructured operations, $24.5 million; and other
expense, $6.1 million.
Amerace
On January 2, 1996 the Corporation acquired all the outstanding
stock of Amerace Corporation for $212.5 million in cash
(originally $220.6 million, subsequently reduced through post-
closing adjustments). Amerace is a manufacturer of electrical
products for utility and industrial markets. Its most
significant products are underground power and distribution
connectors sold under the Elastimold brand name. This
acquisition was accounted for using the purchase method. The
aggregate purchase price was allocated to the acquired assets of
Amerace based on their respective fair values with the excess of
approximately $150 million allocated to goodwill. The goodwill
is being amortized on a straight-line basis over 40 years.
Results of operations of Amerace after the acquisition date
are included in the Consolidated Statement of Earnings. If the
acquisition and its financing had occurred on January 2, 1995,
management estimates that on an unaudited pro forma basis, net
sales, net earnings and net earnings per share would have been
$1,890.4 million, $93.9 million and $1.79 per share,
respectively, for the year ended December 31, 1995. These pro
forma results have been prepared for comparative purposes only
and are not necessarily indicative of the combined results of
operations that would have resulted had the acquisition taken
place on January 2, 1995, nor are they necessarily indicative of
results of operations for any future period. On May 14, 1996 the
Corporation sold most of the assets of the Hendrix Wire and Cable
business of Amerace Corporation. No gain or loss was incurred as
a result of this sale.
Other
The Corporation completed six acquisitions during 1996 in
addition to Augat and Amerace for a total of approximately $46.0
million consisting of cash and 57,714 shares of the Corporation's
common stock. These acquisitions were: in January, certain
assets of Bowers Manufacturing Corporation, manufacturer of
metallic and non-metallic electrical outlet boxes and surface
raceway systems; in March, Porta Systems Corporation, a fiber
optics business; in June, the Pilgrim Group of companies, a
Canadian manufacturer of cable tray wiring systems; in June,
International Energy Saver, manufacturer of evaporative cooling
and heat recovery systems; in November, Reznor Europe, a group of
companies that manufacture high-quality heating systems; and in
November, the assets of Microlectric Canada Ltd., manufacturer of
electronic meter boxes and accessories. All were accounted for
using the purchase method of accounting, and represented
approximately $37.0 million of sales reported by the Corporation
in 1996. The excess of the purchase price over the fair value of
the acquired assets in the above acquisitions was approximately
$26.0 million recorded as goodwill.
In 1995 the Corporation completed five acquisitions for
approximately $48.0 million consisting of cash and 657,810 shares
of the Corporation's common stock. These acquisitions were: in
February, certain assets of the Anchor Electric meter center
business; in May, Photon Systems Corp., a designer and
manufacturer of systems that enable telecommunication and cable
companies to distribute signals over fiber optic networks; in
June, Elastomeric Technologies Inc., a manufacturer of customized
interconnection technology used in communications and portable
electronics; in July, E. K. Campbell Company, a custom industrial
heating and cooling equipment manufacturer; and in October,
Catamount Manufacturing, Inc., a manufacturer of cable ties, wire
connectors and related electrical products. The Anchor Electric,
Photon Systems and Elastomeric acquisitions were accounted for
using the purchase method of accounting and the E. K. Campbell
and Catamount acquisitions were accounted for as immaterial
poolings of interests without restating prior-years' results.
Businesses acquired in 1995 represented approximately $39.0
million of sales reported by the Corporation in 1995.
In 1994 the Corporation completed four acquisitions for
approximately $73.0 million consisting of cash and 447,432 shares
of common stock. All of these acquisitions were accounted for
using the purchase method of accounting and represented
approximately $54.0 million of sales reported by the Corporation
in 1994. Three were purchases from Eaton Corporation involving
primarily inventories and equipment: in January, certain circuit
protection products; in August, Commander Electrical Products,
Inc., a Canadian metal outlet box and fittings business; and in
November, a U.S. non-metallic electrical outlet box business.
Separately, in February, the Corporation purchased certain assets
from Anford, Inc., a Canadian manufacturer of cable tray.
On July 18, 1994, the Corporation sold its multi-layer
ceramic chip capacitor subsidiary, Vitramon, Incorporated, for
$184.0 million in cash ($144.7 million after tax payments) and
realized a $58.6 million gain after tax.
On August 10, 1994 the Corporation completed the purchase of
a minority interest (approximately 29%) in Leviton Manufacturing
Co., Inc., the leading U.S. manufacturer of wiring devices, for
approximately $51.0 million consisting of cash and common stock.
4. Restructuring
During the fourth quarter of 1996, the Corporation recorded a
restructuring charge of $24.5 million relating to the integration
of Augat and initiatives affecting Augat's and other of the
Corporation's operations. Restructuring initiatives include the
closure of Augat's corporate headquarters facility in Mansfield,
Massachusetts and redundant non-U.S. administrative facilities as
well as the rationalization of the combined sales force and
manufacturing operations. Capital expenditures for restructure-
related projects are estimated to be $28.0 million. All
restructuring actions are expected to be completed by the first
quarter of 1998. This charge included a $17.9 million provision
for cash expenditures, primarily for severance benefits and
employee termination costs, and $6.6 million for non-cash losses
due to the disposal of property and equipment associated with the
closing of facilities.
In the fourth quarter of 1995, Augat recorded a
restructuring charge of $18.7 million. This charge included $9.3
million for redundant or excess facilities and equipment being
closed or abandoned, $3.9 million for inventory in low-margin
product lines to be discontinued and $5.5 million for employee
severance and benefit costs. Through December 29, 1996 Augat
used $9.1 million for costs related to those redundant facilities
and equipment, $3.9 million for inventory write-downs in those
product lines and $5.0 million for related employee severance
benefits. Remaining reserves of $0.7 million, primarily for
ongoing employee severance costs, are believed to be adequate for
the purposes for which they were established.
In the third quarter of 1994, the Corporation recorded a
$79.0 million restructuring charge. This charge included $38.8
million for cash severance benefits, employee termination costs
and ongoing carrying and environmental remediation costs at
facilities to be closed and $40.2 million to cover non-cash
losses associated with the closing of plant facilities and
disposal of equipment and inventory related to products to be
discontinued. At December 29, 1996 the restructuring program was
essentially complete. The remaining reserve of $4.1 million is
primarily for environmental remediation at idled facilities over
the next two years. This reserve is believed adequate for the
purpose for which it was established.
5. Income Taxes
The components of earnings from continuing operations before
income taxes were as follows:
In thousands 1996 1995 1994
Domestic $45,330 $ 83,875 $27,154
Foreign 45,548 45,055 13,040
Total $90,878 $128,930 $40,194
The components of income tax expense on continuing operations
were as follows:
In thousands 1996 1995 1994
Current
Federal $ 33,923 $14,250 $37,471
Foreign 17,112 15,023 7,332
State and local 4,982 2,263 3,884
Total current 56,017 31,536 48,687
Deferred
Domestic (23,682) 7,333 (36,685)
Foreign ( 1,325) 1,559 105
Total deferred (25,007) 8,892 (36,580)
Income taxes $31,010 $40,428 $12,107
The reconciliation between the Federal statutory tax rate and the
Corporation's effective tax rate on earnings from continuing
operations was as follows:
1996 1995 1994
Federal statutory tax rate 35.0% 35.0% 35.0%
Increase(reduction)resulting from:
State tax - net of Federal tax
benefit 2.3 1.3 6.9
Partially tax-exempt income (9.4) (4.8) (16.1)
Goodwill 4.5 2.4 7.5
Merger expenses 5.6 - -
Change in valuation allowance (5.0) (1.4) 0.3
Other 1.1 ( 1.1) ( 3.5)
Effective tax rate 34.1% 31.4% 30.1%
The components of the Corporation's net deferred tax asset
were:
December 29, December 31,
In thousands 1996 1995
Deferred tax assets
Special-charge-related reserves $33,773 $12,202
Accrued employee benefits 10,333 12,567
Other accruals 24,197 20,963
Asset reserves 10,289 9,148
Foreign tax credit and loss
carryforwards 11,087 13,634
Other 11,206 8,444
Valuation allowance (10,825) (15,367)
Net deferred tax assets 90,060 61,591
Deferred tax liabilities
Property, plant and equipment (42,044) (35,152)
Pension benefits 7,470 (2,036)
Unremitted earnings of foreign
subsidiaries - ( 3,522)
Other (18,548) (14,410)
Total deferred tax liabilities (53,122) (55,120)
Net deferred tax asset $36,938 $6,471
The valuation allowance for deferred tax assets was
decreased by $4.5 million in 1996 due to utilization of foreign
net operating loss and foreign tax credit carryforwards. The
remaining valuation allowance at December 29, 1996 related to
foreign net operating loss carryforwards.
6. Fair Value of Financial Instruments
The Corporation's financial instruments include cash and cash
equivalents, marketable securities, short-term borrowings, long-
term debt, interest rate swaps and foreign currency contracts.
The carrying amounts of these financial instruments generally
approximated their fair values at December 29, 1996 and December
31, 1995 except that, based on the borrowing rates currently
available to the Corporation, management believes the fair value
of long-term debt was approximately $664.9 and $396.2 million at
December 29, 1996 and December 31, 1995, respectively.
The cost basis and fair market value of marketable securities
at December 29, 1996 and December 31,1995 were:
Amortized Gross Gross Fair
Cost Unrealized Unrealized Market
In thousands Basis Gains Losses Value
December 29, 1996
Mortgage-backed $33,477 $1,442 $(583) $34,336
Equity and other 1,074 530 - 1,604
Total $34,551 $1,972 $(583) $35,940
December 31, 1995
Mortgage-backed $44,716 $1,236 $(409) $45,543
Equity and other 14,586 509 - 15,095
Total $59,302 $1,745 $(409) $60,638
There were no sales of available-for-sale securities during
the year. The mortgage-backed securities held at December 29,
1996 have expected maturities ranging from one to eleven years.
7. Long-Term Debt
The Corporation's long-term debt at December 29, 1996 and
December 31, 1995 was as follows:
December 29, December 31,
In thousands 1996 1995
Revolving credit facility with
a weighted average interest
rate at December 29, 1996 of 5.83% $205,000 $ 92,500
Notes payable with a weighted
average interest rate at
December 29, 1996 of 7.40% due
through 2006 353,821 175,483
Other bank borrowings with a
weighted average interest rate at
December 29, 1996 of 5.59% 44,419 48,400
Non-U.S. borrowings with a
weighted average interest rate of
2.87% at December 29, 1996, due
through 2002 25,094 30,897
Industrial revenue bonds with a
weighted average interest rate at
December 29, 1996 of 3.95%, due
from 1997-2013 23,900 28,800
Other (primarily capital leases) 8,552 6,788
660,786 382,868
Less current portion 15,690 29,202
Long-term debt $645,096 $ 353,666
The Corporation holds one interest rate swap whereupon it
receives interest on a $25.0 million notional amount at the one-
month LIBOR rate in exchange for its payment at 7.09% through
April 1997.
Principal payments on long-term debt including capital
leases in each of the five years subsequent to December 29, 1996
are $15.7, $16.2, $10.2, $257.1 and $47.2 million, respectively.
The Corporation has a $500 million revolving credit facility
with a group of banks which makes funds available through March
29, 2000. The Corporation has the option, at the time of drawing
funds under this facility, of selecting an interest rate based on
a number of benchmarks including LIBOR, the certificate of
deposit rate and the prime rate of Morgan Guaranty Trust Company.
This credit facility includes covenants, among which are
limitations on the amount of future indebtedness that are based
on certain financial ratios. Dividends are permitted to continue
at the current rate per share and may be increased, provided the
annual payout does not exceed 50 percent of net earnings.
In January 1996, the Corporation completed the sale of
$150.0 million of 10-year 6-1/2% senior notes. The net proceeds
from this sale were used to reduce borrowings under the
Corporation's revolving credit facility incurred to finance the
acquisition of Amerace.
In the normal course of its business activities, the
Corporation is required under certain contracts to provide
letters of credit which may be drawn down in the event the
Corporation fails to perform under the contracts. Outstanding
letters of credit amounted to $52.6 million at December 29, 1996.
8. Stock Option and Incentive Plans
The Corporation has stock option plans that provide for the
purchase of the Corporation's common stock by its key employees.
Following is a summary of the option transactions for the
years 1994, 1995 and 1996:
Average
Per Share
Shares Option Price
Balance at January 2, 1994 1,934,067 $25.48
Granted 927,288 31.23
Exercised (396,723) 22.41
Terminated (145,116) 29.28
Balance at January 1, 1995 2,319,516 28.07
Granted 660,128 27.08
Exercised (380,210) 23.26
Terminated (189,310) 29.66
Balance at December 31, 1995 2,410,124 28.45
Granted 375,063 37.36
Exercised (502,420) 23.90
Terminated (116,535) 31.85
Balance at December 29, 1996 2,166,232 $30.71
Exercisable at January 1, 1995 1,111,250 $27.50
Exercisable at December 31, 1995 1,111,612 $27.48
Exercisable at December 29, 1996 1,536,214 $28.95
Following is a summary of the options outstanding at
December 29, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
Range Weighted-Average
of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
$18.49 - $27.93 699,098 2.9 years $24.95 670,914 $24.91
$28.19 - $32.03 543,705 5.5 $30.64 465,351 $30.48
$32.38 - $37.37 637,920 7.1 $33.52 399,949 $33.96
$38.59 - $44.32 285,509 9.1 $38.67 - -
$18.49 - $44.32 2,166,232 5.6 $30.71 1,536,214 $28.95
The 1993 Management Stock Ownership Plan provides that, for
each calendar year, up to 1-1/4% of the issued and outstanding
common stock of the Corporation shall be available for issuance
as grants or awards. This plan provides for granting stock
options at a price not less than the fair market value on the
date of grant with a term not to exceed ten years. The plan also
provides for the issuance of restricted stock awards as incentive
compensation to key employees. The awards are subject to certain
restrictions, including one that provides for full vesting if the
recipient remains in the employ of the Corporation three years
after receipt of the award. The value of the awards is
deductible by the Corporation as compensation expense.
Restricted shares plus cash payments for federal and state taxes
awarded under this plan were 63,844 shares plus $0.5 million
awarded in 1996, 41,748 shares plus $0.6 million awarded in 1995,
and 56,332 shares plus $0.9 million awarded in 1994.
At December 29, 1996 a total of 2,874,646 shares was
reserved for issuance under stock options or restricted stock
awards already granted or available for future grant.
The Corporation has a Restricted Stock Plan for Nonemployee
Directors under which each director receives 200 restricted
shares of common stock annually for a full year of service. These
shares remain restricted during the director's term. Shares
issued under this plan were 2,162 in 1996, 1,850 in 1995, and
1,600 in 1994.
The outstanding restricted stock of Augat was converted into
equivalent shares of the Corporation's common stock and became
fully vested upon change of control of Augat. Equivalent shares
issued were 9,216 for 1996, 8,898 for 1995 and 20,975 for 1994.
The Corporation continues to account for its stock-based
employee compensation plans in accordance with Accounting
Principals Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, no compensation cost has been
recognized for fixed stock option plans. In accordance with
Financial Accounting Standard No. 123, "Accounting for Stock-
Based Compensation," a valuation using the fair-value-based
accounting method has been made for stock options issued in 1996
and 1995. This valuation was performed using the Black-Scholes
option-pricing model.
The Corporation's ten-year term options were valued assuming
risk-free interest rates of 5.25% and 7.5% on their respective
issuance dates in 1996 and 1995, a dividend yield of 2.5%, an
average expected option life of 5 years and volatility of 20% for
both years. The valuation determined a per-share weighted-
average fair value for ten-year options granted during 1996 and
1995 of $8.03 and $8.20, respectively. Had these options been
accounted for using the fair-value method, it would have resulted
in additional compensation cost of $1.1 and $0.6 million after
tax for 1996 and 1995, respectively. Because the fair-value
method amortizes the estimated value of these options over their
three-year vesting period, the full pro forma effect of this
method will not be evident until 1997.
The Corporation also has five-year term options outstanding
that were issued in exchange for outstanding options of Augat.
These options were valued using an assumed risk-free interest
rate of 5.4% on their original issuance date in 1995, a dividend
yield of 2.5%, an average expected option life of 2.5 years and
volatility of 20%. The value of five-year options issued in 1996
was not significant. The valuation resulted in a per share
weighted-average fair value for these five-year options of
$11.91. Under the fair-value method, the entire value of these
options would have been recorded as additional compensation cost
of $3.2 million after tax in 1996 due to accelerated vesting of
these options upon change of control of Augat.
Had the Corporation adopted the fair-value-based accounting
method for stock options effective January 2, 1995, net earnings
would have been $55.6 million or $1.05 per share in 1996 and
$87.9 million or $1.67 per share in 1995.
9. Postretirement Benefits
Pension Plans
The Corporation and its subsidiaries have several noncontributory
pension plans covering substantially all employees. These plans
generally provide pension benefits that are based on compensation
levels and years of service. Annual contributions to the plans
are made according to the established laws and regulations of the
applicable countries. Plan assets are primarily invested in
equity securities, fixed income securities, cash equivalents and
real estate.
Net periodic pension cost for 1996, 1995 and 1994 for the
Corporation's defined benefit pension plans included the
following components:
In thousands 1996 1995 1994
Service cost--benefits earned during
the period $ 7,773 $ 6,344 $ 6,813
Interest cost on projected benefit
obligation 13,110 11,670 10,879
Actual return on assets (22,848) (18,308) (3,353)
Net amortization and deferral 6,136 4,087 (10,761)
Net periodic pension cost $ 4,171 $ 3,793 $ 3,578
Assumptions used in developing the net periodic pension cost
were:
U.S. Plans Non-U.S.Plans
1996 1995 1994 1996 1995 1994
Discount rate 7.5% 7.9% 7.6% 7.2% 7.4% 7.6%
Rate of increase in
compensation level 4.5% 5.5% 5.0% 4.8% 5.0% 5.1%
Expected long-term rate of
return on plan assets 9.0% 8.5% 8.5% 8.6% 8.5% 8.6%
Rates are weighted averages.
The following table sets forth the funded status of the
Corporation's defined benefit plans and amounts recognized in the
Corporation's balance sheet:
December 29, December 31,
1996 1995
Actuarial present value of projected
benefits based on employment
service to date and present pay
levels:
Vested employees $ 162,557 $ 145,752
Non-vested employees 5,372 5,749
Accumulated benefit obligation 167,929 151,501
Additional amounts related to
projected pay increases 12,061 16,395
Projected benefit obligation 179,990 167,896
Plan assets at fair value 192,849 162,645
Plan assets in excess of (less than)
projected benefit obligation 12,859 (5,251)
Unrecognized transition assets (6,407) (7,825)
Unrecognized net (gain) loss (11,461) 9,891
Unrecognized prior service cost 2,338 1,784
Accrued pension cost $ (2,671) $ (1,401)
The present value of projected benefits for U.S. plans
recorded at December 29, 1996 and December 31, 1995 was
determined using discount rates of 7.75% and 7.5%, respectively,
and an assumed rate of increase in compensation of 4.5% for both
years.
Certain of the Corporation's non-U.S. defined contribution
pension plans are principally funded through insurance programs.
Pension expense related to non-U.S. plans in 1996, 1995 and 1994
was $1.5, $0.9 and $0.7 million, respectively.
The Corporation maintains a non-qualified supplemental
pension plan covering certain key executives, which provides for
benefit payments that exceed the limit imposed by income tax
regulations, and a retirement plan for nonemployee directors,
which provides benefits to those board members based on
compensation and years of service. The projected benefit
obligation relating to these unfunded plans was $18.5 million at
December 29, 1996 and $13.3 million at December 31, 1995.
Pension expense for these plans was $10.7 million in 1996 and
$2.4 million in each of 1995 and 1994. The 1996 pension expense
includes $7.9 million for early retirement of certain executives.
Other Postretirement Benefit Plans
The Corporation also sponsors defined-contribution 401(k) savings
plans for its non-union U.S. employees for which the
Corporation's contributions are based on a percentage of employee
contributions. The cost of these plans for continuing operations
was $4.5, $3.5 and $3.1 million in 1996, 1995 and 1994,
respectively.
The Corporation provides certain health care and life
insurance benefits to certain retired employees and certain
active employees who meet age and length of service requirements.
The Corporation is recognizing the estimated liability for these
benefits over the estimated lives of the individuals covered.
The Corporation is not funding this liability. There have been
essentially no new entrants to these benefit plans since 1993.
The net periodic cost for postretirement health care and
life insurance benefits in 1996 and 1995 included the following
components:
In thousands 1996 1995
Service cost--benefits earned during the period $ 89 $ 108
Interest cost on accumulated benefit 2,430 1,377
Net amortization 829 590
Net cost $ 3,348 $ 2,075
The following table shows the Corporation's accumulated
postretirement benefit obligations and the amounts recognized on
the balance sheet at December 29, 1996 and December 31, 1995:
In thousands 1996 1995
Retirees $ 30,332 $ 16,451
Fully eligible active participants 624 424
Other active participants 1,775 1,585
Total accumulated postretirement
benefit obligation 32,731 18,460
Unrecognized transition liability (15,927) (16,936)
Unrecognized net gain 4,643 1,231
Unrecognized prior service cost (162) (203)
Accrued postretirement benefit costs $ 21,285 $ 2,552
The increase in accrued postretirement benefit costs from
1995 to 1996 reflects the inclusion of the Amerace plan in 1996.
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% in 1996
and 7.25% in 1995. An increase in the cost of covered health
care benefits of 9.5% was assumed for 1997, graded down annually
to 5.5% for 2004 and future years. A 1% increase in the health
care cost trend rate would increase the accumulated
postretirement benefit obligation by $1.7 million at December 29,
1996 and the net periodic cost by $0.1 million for the year then
ended.
10. Commitments
The Corporation and its subsidiaries are parties to various
leases relating to plants, distribution facilities, office
facilities, automobiles and other equipment, principally data
processing. All leases expire prior to the year 2023. Related
real estate taxes, insurance and maintenance expenses are
normally obligations of the Corporation. It is expected that in
the normal course of business the majority of the leases will be
renewed or replaced by other leases. Capitalized leases are not
material.
Future minimum payments under noncancelable operating leases
consisted of the following at December 29, 1996:
Future Minimum
In thousands Payments
1997 $25,903
1998 11,678
1999 10,230
2000 8,150
2001 6,153
Thereafter 19,450
Total minimum operating lease payments $81,564
Rent expense for operating leases of continuing operations
was $34.2, $32.3 and $29.3 million in 1996, 1995 and 1994, respectively.
11. Other Financial Data
Other expense - net consisted of the following:
In thousands 1996 1995 1994
Investment income $ 8,716 $ 7,197 $ 6,546
Interest expense (48,689) (31,775) (31,064)
Index put options (5,452) - -
Income from equity investees 7,920 2,149 1,863
Foreign currency losses (2,065) (100) (1,634)
Foreign exchange contract
gains(losses) 1,077 (658) (1,298)
Other (1,008) (1,830) (2,625)
Other expense - net $(39,501) $(25,017) $(28,212)
Interest rate swaps increased interest expense by $0.1
million in 1996 and $2.4 million in 1994, while reducing interest
expense by $0.2 million in 1995.
The Corporation expenses the cost of advertising as it is
incurred. Total advertising expense was $18.0 million in 1996,
$17.3 million in 1995 and $16.7 million in 1994.
Accrued liabilities include salaries, fringe benefits and
other compensation amounting to $31.1 and $41.0 million in 1996
and 1995, respectively.
Inventories consisted of the following:
December 29, December 31,
In thousands 1996 1995
Finished goods $153,067 $138,187
Work in process 64,979 60,484
Raw materials 145,260 106,318
Total inventories $363,306 $304,989
12. Business Segments
The Corporation operates in three business segments: Electrical
Construction and Maintenance Components ("Electrical"),
Electronic/OEM Components ("Electronic"), and Other Products and
Components ("Other"). Net sales are comprised of sales to
unaffiliated customers; intersegment sales are immaterial.
Segment earnings from operations consist of net sales less cost
of sales and operating expenses. General corporate expenses have
not been allocated to segments. General corporate assets not
allocated to segments are principally cash and investments.
In thousands 1996 1995 1994
Net Sales
Electrical $ 627,276 $ 579,996 $ 493,667
Electronic 920,742 832,701 786,285
Other 437,127 320,671 293,650
Total $1,985,145 $1,733,368 $1,573,602
Earnings from Operations(a)
Electrical $ 100,456 $ 92,064 $ 29,862
Electronic 37,061 68,309 57,653
Other 50,752 34,211 24,813
General Corporate (57,890) (40,637) (43,922)
Total $ 130,379 $ 153,947 $ 68,406
Identifiable Assets
Electrical $ 517,961 $ 491,166 $ 465,919
Electronic 747,882 628,013 554,600
Other 570,482 326,128 319,969
General Corporate 294,912 221,551 225,682
Total $2,131,237 $1,666,858 $1,566,170
Capital Expenditures
Electrical $ 30,273 $ 53,318 $ 28,508
Electronic 61,520 61,599 48,190
Other 13,265 14,285 10,025
General Corporate 2,749 2,240 3,838
Discontinued Operations - - 7,797
Total $ 107,807 $ 131,442 $ 98,358
Depreciation and Amortization
Electrical $ 27,240 $ 24,480 $ 22,010
Electronic 41,541 37,182 35,463
Other 20,350 11,937 12,459
General Corporate 2,450 2,896 2,021
Discontinued Operations - - 4,726
Total $ 91,581 $ 76,495 $ 76,679
(a) 1996 included special charges of $1.5 million in Electrical,
$67.1 million in Electronic, $3.5 million in Other and $18.9
million in General Corporate. 1995 included special charges
of $23.0 million in Electronic. 1994 included special
charges of $54.0 million in Electrical, $23.1 million in
Electronic, $4.3 million in Other and $8.2 million in General
Corporate. See Notes 3 and 4.
13. Financial Information Relating to Operations in Different
Geographic Areas
The Corporation's operations are conducted in three principal
areas: U.S., Europe and Other (primarily Canada, Mexico and the
Far East) locations. Transfers between geographic areas were
priced on a basis that yields an appropriate rate of return based
on assets employed, risk and other factors. General corporate
expenses have not been allocated to geographic areas. General
corporate assets not allocated to geographic areas are
principally cash and investments.
In thousands 1996 1995 1994
Sales to Unaffiliated
Customers
U.S. $1,504,210 $1,306,458 $1,229,610
Europe 201,853 202,153 165,102
Other 279,082 224,757 178,890
Total $1,985,145 $1,733,368 $1,573,602
Sales or Transfers Between
Geographic Areas
U.S. $ 101,272 $ 87,425 $ 69,562
Europe 12,787 15,432 9,271
Other 49,452 32,198 22,917
Total $ 163,511 $ 135,055 $ 101,750
Earnings Before Income
Taxes(a)
U.S. $ 125,517 $ 131,209 $ 88,469
Europe 23,052 27,658 2,389
Other 39,700 35,717 21,470
General Corporate (57,890) (40,637) (43,922)
Earnings from
operations 130,379 153,947 68,406
Other expense - net (39,501) (25,017) (28,212)
Total $ 90,878 $ 128,930 $ 40,194
Identifiable Assets
U.S. $1,397,562 $1,088,188 $1,019,987
Europe 209,066 160,732 144,404
Other 230,963 200,980 181,791
General Corporate 294,912 221,551 225,682
Adjustments and
eliminations (1,266) (4,593) (5,694)
Total $2,131,237 $1,666,858 $1,566,170
(a) 1996 included charges of $61.9 million in U.S., $6.7 million
in Europe, $3.5 million in Other, $18.9 million in General
Corporate and $6.1 million in Other expense. 1995 included
charges of $19.9 million in U.S., $1.0 million in Europe and
$2.1 million in Other. 1994 included charges of $67.1
million in U.S., $12.2 million in Europe, $2.2 million in
Other and $8.1 million in General Corporate. See Notes 3 and 4.
COMPANY REPORT ON FINANCIAL STATEMENTS
To the Shareholders of Thomas & Betts Corporation:
The accompanying financial statements, as well as all financial
data in this annual report, have been prepared by the Corporation
in accordance with generally accepted accounting principles
consistently applied. As such, they include certain amounts that
are based on the Corporation's estimates and judgments. The
Corporation has systems of internal control that are designed to
provide reasonable assurance that the financial records are
reliable for preparing financial statements and maintaining
accountability for assets, and that assets are safeguarded
against loss from unauthorized use or disposition. These systems
are augmented by the positive attitude of management in
maintaining a sound control environment, communication of
established written policies and procedures, the maintenance of a
qualified internal auditing group, the selection and training of
qualified personnel and an organizational structure that provides
appropriate delegation of authority, segregation of duties and
regular review of financial performance by management. In
addition to the systems of internal control, additional
safeguards are provided by the independent auditors and the Audit
Committee of the Board of Directors. The independent auditors,
whose report is set forth opposite, perform an objective,
independent audit of the Corporation's financial statements taken
as a whole. The Audit Committee, composed entirely of outside
directors, meets periodically with the independent auditors,
director of internal auditing and members of management to review
matters relating to the quality of financial reporting and
internal accounting control and the nature, extent and results of
audit efforts.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of Thomas & Betts
Corporation: We have audited the consolidated balance sheets of
Thomas & Betts Corporation and subsidiaries as of December 29,
1996 and December 31, 1995, and the related consolidated
statements of earnings, cash flows, and shareholders' equity for
each of the years in the three-year period ended December 29,
1996. These consolidated financial statements are the
responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the
financial statements of Augat Inc., a wholly owned subsidiary,
which statements reflect total assets constituting 20 percent and
24 percent as of December 29, 1996, and December 31, 1995,
respectively, and total revenues constituting 29 percent, 31
percent and 34 percent for each of the years in the three-year
period ended December 29, 1996, respectively, of the related
consolidated totals. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for Augat Inc., is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the
other auditors, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Thomas & Betts Corporation and subsidiaries at
December 29, 1996 and December 31, 1995 and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 29, 1996, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Memphis, Tennessee
February 6, 1997
QUARTERLY REVIEW
Thomas & Betts Corporation
In thousands
(except per share data) 1996 1995 1994
First Quarter
Net sales $ 486,733 $ 435,062 $ 368,411
Gross profit 143,298 125,050 103,701
Earnings from continuing operations 26,080 22,788 15,964
Net earnings 26,080 22,788 19,577
Earnings per share - continuing operations .49 .44 .32
Earnings per share .49 .44 .39
Cash dividends declared per share .28 .28 .28
Market price range $39 1/2 - 35 15/16 $34 3/8 - 32 3/8 $34 - 29 1/8
Second Quarter
Net sales $ 499,780 $ 428,707 $ 388,106
Gross profit 151,276 130,061 114,027
Earnings from continuing operations 30,965 26,419 19,722
Net earnings 30,965 26,419 23,050
Earnings per share - continuing operations .58 .50 .39
Earnings per share .58 .50 .46
Cash dividends declared per share .28 .28 .28
Market price range $40 1/4 - 37 $34 1/4 - 31 3/8 $33 - 30 5/8
Third Quarter (a)
Net sales $ 497,046 $ 430,165 $ 396,874
Gross profit 150,894 126,954 114,916
Earnings (loss) from continuing operations 33,622 25,473 (34,315)
Net earnings 33,622 25,473 24,677
Earnings (loss) per share - continuing operations .63 .49 (.68)
Earnings per share .63 .49 .48
Cash dividends declared per share .28 .28 .28
Market price range $39 1/2 - 34 3/4 $35 1/8 - 32 1/4 $34 1/8 - 30 1/2
Fourth Quarter (b) (c)
Net sales $ 501,586 $439,434 $ 420,211
Gross profit 141,646 129,840 122,734
Earnings (loss) from continuing operations (30,799) 13,822 26,716
Net earnings (loss) (30,799) 13,822 26,716
Earnings (loss) per share - continuing operations (.57) .26 .52
Earnings (loss) per share (.57) .26 .52
Cash dividends declared per share .28 .28 .28
Market price range $45 7/8 - 37 7/8 $37 5/8 - 31 1/4 $35 5/8 - 32 5/8
Restated to include the results of Augat Inc., acquired December 11, 1996
and accounted for as a pooling of interests.
Includes the results of Amerace Corporation from January 2, 1996.
Per share amounts are based on average shares outstanding in each quarter.
(a) 1994 includes a pretax gain of $99.1 million from the sale of
Vitramon, Inc. (discontinued operation), a pretax charge of
$79.0 million for restructuring, and a pretax operating write-down
of $10.6 million for previously vacated facilities.
(b) 1995 includes special charges of $23.0 million pretax ($0.29 per
share).
(c) 1996 includes special charges of $97.1 million pretax ($1.23 per
share) as detailed in Note 3.
SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA
Thomas & Betts Corporation
Dollars and shares in thousands
(except per share data) 1996 (a) 1995 (b) 1994 (c) 1993 1992 1991
Operational Data
Net sales $1,985,145 $1,733,368 $1,573,602 $1,349,446 $1,273,080 $ 739,013
Costs and expenses
Cost of sales 1,398,031 1,221,463 1,118,224 945,102 880,326 483,527
Marketing, general and administrative 339,124 283,861 255,073 239,231 227,027 160,355
Research and development 47,229 44,083 40,543 37,176 36,346 28,540
Amortization of intangibles 15,323 11,314 12,345 13,072 14,760 4,687
Merger expense 30,558 - - - - -
Provision for restructured operations 24,501 18,700 79,011 - 15,000 22,000
1,854,766 1,579,421 1,505,196 1,234,581 1,173,459 699,109
Earnings from operations 130,379 153,947 68,406 114,865 99,621 39,904
Other expense - net (39,501) (25,017) (28,212) (31,323) (36,883) (6,033)
Earnings from continuing operations
before income taxes 90,878 128,930 40,194 83,542 62,738 33,871
Income taxes 31,010 40,428 12,107 24,353 15,572 15,421
Earnings from continuing operations
before cumulative effect of change
in accounting for income taxes 59,868 88,502 28,087 59,189 47,166 18,450
Percent of sales 3.0% 5.1% 1.8% 4.4% 3.7% 2.5%
Earnings from discontinued operations
net of income taxes - - 7,350 11,322 10,343 7,938
Gain on sale of discontinued operations,
net of income taxes of $40,492 - - 58,583 - - -
Earnings before cumulative effect of
change in accounting for income taxes 59,868 88,502 94,020 70,511 57,509 26,388
Cumulative effect of change in accounting
for income taxes - - - 1,628 - -
Net earnings $ 59,868 $ 88,502 $ 94,020 $ 72,139 $ 57,509 $ 26,388
Net return on sales 3.0% 5.1% 6.0% 5.3% 4.5% 3.6%
Return on average shareholders' equity 7.0% 10.8% 12.8% 10.9% 9.7% 4.8%
Financial Position (at year end)
Current assets $ 957,051 $ 750,386 $ 732,453 $ 665,599 $ 621,104 $ 489,830
Current liabilities $ 491,900 $ 402,874 $ 353,987 $ 263,045 $ 249,426 $ 213,356
Working capital $ 465,951 $ 347,512 $ 378,466 $ 402,554 $ 371,678 $ 276,474
Current ratio 1.9 to 1 1.9 to 1 2.1 to 1 2.5 to 1 2.5 to 1 2.3 to 1
Property, plant and equipment - net $ 539,944 $ 472,833 $ 396,364 $ 396,003 $ 394,400 $ 315,195
Long-term debt $ 645,096 $ 353,666 $ 354,552 $ 439,299 $ 477,284 $ 118,506
Shareholders' equity $ 868,382 $ 850,312 $ 790,564 $ 682,443 $ 644,543 $ 540,027
Total assets $2,131,237 $1,666,858 $1,566,170 $1,451,042 $1,412,511 $ 892,901
Common Stock Data
Cash dividends declared $ 48,412 $ 47,380 $ 44,958 $ 42,220 $ 41,948 $ 44,973
Percent of net earnings 81% 54% 48% 59% 73% 170%
Per share
Earnings from continuing operations $ 1.13 $ 1.69 $ 0.55 $ 1.19 $ 0.96 $ 0.40
Net earnings $ 1.13 $ 1.69 $ 1.85 $ 1.45 $ 1.17 $ 0.58
Cash dividends declared $ 1.12 $ 1.12 $ 1.12 $ 1.12 $ 1.12 $ 1.11
Shareholders' equity $ 16.29 $ 16.15 $ 15.33 $ 13.69 $ 13.09 $ 11.78
Market price range $ 45 7/8 - $ 37 5/8 - $ 35 5/8 - $ 36 - $ 34 1/2 - $ 30 1/2 -
34 3/4 31 1/4 29 1/8 28 1/2 27 3/8 22 1/2
Other Data
Capital expenditures $ 107,807 $ 131,442 $ 98,358 $ 58,932 $ 61,929 $ 54,532
Depreciation $ 76,258 $ 65,181 $ 63,674 $ 60,592 $ 56,011 $ 46,501
Employees at year-end 14,700 12,600 11,800 12,300 11,500 8,800
Average shares outstanding 53,059 52,494 50,862 49,616 49,110 45,662
Restated to include the results of Augat Inc., acquired December 11, 1996
and accounted for as a pooling of interests.
Includes the results of Amerace Corporation from January 2, 1996 and
American Electric from January 2, 1992.
(a) Includes special charges of $97.1 million pretax ($1.23 per share) as
detailed in Note 3.
(b) Includes special charges of $23.0 million pretax ($0.29 per share).
(c) Includes a pretax gain from the sale of Vitramon Inc. (discontinued
operation), of $99.1 million, a pretax charge of $79.0 million for
restructuring, and a pretax operating write-down of $10.6 million for
previously vacated facilities.