Thomas & Betts Corporation (Thomas & Betts) has reported net sales of $2.5 billion for the year-end 2008, up 15.8%, compared with the net sales of $2.14 billion in the previous year-end. It has also reported net earnings of $265.3 million, or $4.64 per diluted share, for the year-end 2008, compared with the net earnings of $183.2 million, or $3.12 per diluted share, in the previous year-end.
2008 earnings from continuing operations were $273.7 million, or $4.79 per diluted share. Earnings from continuing operations include a net benefit of $1.31 per diluted share from the following items: the sale of the company’s minority interest in Leviton Manufacturing Company; a favorable legal settlement; and a non-cash tax charge (all recorded in the second quarter) and a $32.7 million pre-tax, non-cash charge for the impairment of intangible assets taken in the fourth quarter. In 2007, earnings from continuing operations were $183.7 million, or $3.13 per share.
In addition to the items noted earlier, the company recorded an $8.4 million net loss from discontinued operations in 2008. This compares to a net loss of $0.5 million from discontinued operations for the year 2007.
“2008 was another strong year for Thomas & Betts from both an operations and financial perspective,” said Dominic J. Pileggi, chairman and chief executive officer. “We reported record earnings and exhibited outstanding working capital management while using our strong cash generation to return value to our shareholders through selective, strategic acquisitions and share repurchases. We also completed the integration of six acquisitions; divested the non-core pipe businesses acquired as part of Lamson & Sessions; monetized our minority interest in Leviton Manufacturing, and won Supplier of the Year and other best-in-class awards from several key distributors and customers — all while operating in a very challenging environment.”
The 15.8% year-over-year increase in sales was driven largely by acquisitions, which accounted for $314 million of the increase. Price increases related to higher commodity and energy costs helped to offset lower underlying sales volumes. Foreign currency benefited sales by about $19 million.
Gross profit improved to 31.4% of sales for 2008 compared to 31.0% in 2007. The improvement in year-over-year gross profit largely reflects the favorable impact of acquisitions.
Selling, general and administrative expense (SG&A) increased $58.9 million to $430.7 million in 2008, largely as a result of acquisitions. As a% of sales, SG&A was 17.4% in both years. 2008 SG&A included $26.6 million of intangible asset amortization expense and a favorable $12.0 million legal settlement. 2007 SG&A included $8.3 million of amortization expense, a $7.0 million legal charge and $7.0 million of environmental-related charges.
Net interest expense increased by about $20 million in 2008 primarily as a result of funding required for acquisitions and lower interest income.
The effective tax rate in 2008 was 36.5% compared to 30.4% in 2007. Items impacting the higher 2008 rate include the previously noted second quarter Leviton sale and non-cash tax charge, partially offset by the fourth quarter impairment charge.
Fourth Quarter 2008 Results:
Fourth quarter net sales were $571.3 million, down 5.2% on a year-over-year basis. The sales decline is largely due to significantly lower US sales volumes and the dramatic appreciation of the US dollar versus other global currencies. Price increases related to higher material and energy costs and the impact of acquisitions partially offset the impact of lower volumes and foreign currency.
Gross profit in the fourth quarter declined year over year by $9.7 million as a result of lower sales volumes. As a percentage of sales, gross profit improved slightly to 31.8% in 2008.
SG&A expenses declined year over year by $4.2 million to $107.0 million. As a% of sales, SG&A was up slightly year over year to 18.7%. Intangible asset amortization included in SG&A increased by $1.7 million to $6.2 million in the fourth quarter 2008.
As noted earlier, the company took a $32.7 million pre-tax; non-cash charge ($0.36 cents per diluted share) for intangible asset impairment in the fourth quarter.
Net interest expense decreased by about $0.8 million in 2008 primarily as a result of lower average debt outstanding. Other expense increased by $4.5 million as a result of foreign exchange-related losses.
The effective tax rate in the quarter was 8.0% compared to 28.7% in the prior-year period. The lower tax rate primarily reflects the impact of the impairment charge on pre-tax earnings.
The company recorded a $7.2 million net loss from discontinued operations in the quarter compared to a $0.5 million net loss one year ago. The higher year-overyear amount primarily reflects a fourth-quarter loss on the sale of the HDPE pipe operations acquired as part of Lamson & Sessions in late 2007. The sale of the HDPE pipe business completes all intended divestitures reported as discontinued operations.
Net earnings were $17.1 million in the quarter or $0.31 per diluted share including the $0.36 per share impairment charge and a $0.14 per share loss from discontinued operations. This compares to $48.3 million or $0.83 per diluted share last year.
Consolidated Segment Results:
In the fourth quarter 2008, total segment earnings declined 3.9% to $113.9 million as a result of lower sales volumes and unfavorable foreign currency. As a% of sales, segment earnings improved slightly to 19.9% from 19.7% in the fourth quarter of 2007.
For the year 2008, total segment earnings increased 15.2% to $486.8 million. The earnings increase was due largely to the contribution from acquisitions in the Electrical segment. As a% of sales, segment earnings were 19.7%, in line with 2007.
Electrical Segment Results:
Sales in the company’s Electrical segment were $464.7 million in the fourth quarter, down 6.6% year over year. The decrease is largely due to significantly lower US sales volumes and unfavorable foreign currency. Price increases related to higher material and energy costs and the impact of acquisitions partially offset the impact of lower volumes and foreign currency.
Electrical segment’s earnings were 19.5% of sales in the fourth quarter 2008, up slightly from 19.4% in the prior-year period despite lower sales volumes. On a dollar basis, Electrical segment earnings declined 6.1%, slightly less than the sales decline to $90.6 million in the fourth quarter.
For the full year 2008, Electrical segment sales increased 19.1% to $2.1 billion. Acquisitions contributed $314 million to the year-over-year increase. Price increases related to higher material and energy costs offset lower underlying sales volumes.
Full-year Electrical segment earnings increased 18.1% to $416.7 million or 19.8% of sales, roughly flat as a% of sales compared to 2007. The increase largely reflects the impact of acquisitions.
Steel Structures Segment Results:
Fourth quarter 2008 Steel Structures segment sales were $67.5 million, up 13.8% compared to the prior-year period. For the full year, segment sales were $231.6 million, compared to $227.4 million in 2007.
Steel Structures segment earnings were $14.7 million, or 21.8% of sales, in the fourth quarter compared to $11.7 million, or 19.8% of sales, in the prior year quarter. For the full year, segment earnings were $44.3 million or 19.1% of sales compared to $42.6 million or 18.7% of sales in 2007. The fourth quarter and full year improvement in earnings was primarily driven by fourth quarter project mix.
HVAC Segment Results:
Fourth quarter HVAC segment sales declined $6.2 million or 13.6% to $39.1 million largely as a result of lower sales volumes. For the full year 2008, HVAC sales decreased $3.8 million or 2.7% to $139.1 million.
HVAC earnings in the fourth quarter were $8.5 million or 21.9% of sales. This compares to $10.2 million or 22.5% of sales in the 2007 quarter. For the full year, HVAC segment earnings were $25.7 million or 18.5% of sales. In 2007, segment earnings were $27.2 million or 19.0% of sales. The decline in both the quarter and full year earnings as a% of sales is due to lower sales volumes, most notably in the fourth quarter.