Electrical Products Grouplibrary.corporate-ir.net/.../items/294695/TNB_EPG_.pdfElectrical Products...
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Electrical Products Group Electrical Products Group Dominic J. Pileggi Dominic J. Pileggi Chairman & CEO Chairman & CEO Thomas & Betts Corporation Thomas & Betts Corporation May 20, 2008 May 20, 2008
Transcript of Electrical Products Grouplibrary.corporate-ir.net/.../items/294695/TNB_EPG_.pdfElectrical Products...
Electrical Products GroupElectrical Products Group
Dominic J. PileggiDominic J. PileggiChairman & CEOChairman & CEOThomas & Betts CorporationThomas & Betts Corporation
May 20, 2008May 20, 2008
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AgendaAgenda
CORPORATE OVERVIEW & HISTORY
FINANCIAL PERFORMANCE
ACQUISITION UPDATE
COMPANY POSITIONING
SUMMARY
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COMMON THREADS:
Essential components
Market-leading brands
Diversified end markets
Excellent engineering capabilities
Culture of continuous improvement
Differentiated distribution model
Best-in-class e-commerce/IT systems2007 SALES $2.1 Billion
ELECTRICAL PRODUCTS83%
HVAC7%
STEEL STRUCTURES10%
Strong, Growing BusinessesStrong, Growing Businesses
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Historical PerspectiveHistorical Perspective
GROWTH ENGINE RESTARTED
2005
Disciplines maintainedStrategic brand/product management R&D revitalizedMarket leadership regainedSelective value-based acquisitionsAggressive share repurchase
New managementCost & cash focus Working capital fixedManufacturing rationalizedCosts reducedProduct lines prunedMarket-focused culture launched
1997-2000
TURMOIL
2000-2004
TURNAROUND
B2B strategyWeak controls/policiesIneffective systems implementation Complex structureTop-line focus
Strong economy; Poor execution
Weak economy; Internal focus
Strong economy; Strong execution
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FIVE-YEAR SUMMARY
430bp30.9%26.6%Gross Margin (% sales)
400bp17.4%21.4%SG&A (% Sales)
730bp 13.5%6.2%Operating Earnings (% sales)
$ 96.8
$ 81.6
$ 1.3
2003
170.0% $ 261.4Cash Flow - Operations
254.7% $ 289.4Operating Earnings (millions)
61.5%$ 2.1Sales (billions)
Change2007
Strong Financial PerformanceStrong Financial Performance
Proven Ability to Execute & Deliver
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2007 Highlights2007 Highlights
Record net earnings driven by growth in all businesses
Gross margin, segment earnings, operating earnings all up as % of sales
Strong cash from operations supporting acquisition activity
Overhead reduction driven by Lean initiatives
Capacity expanded in steel structures segment
IT systems leveraged to drive increased E-commerce and productivity
Four strategic acquisitions completed
Annual sales approximately $0.4 billion
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7.4% 8.4%
16.8%
24.0%
14.4%
1Q07 2Q07 3Q07 4Q07 FY07
All Businesses Contributing to Growth
Strong Sales GrowthStrong Sales Growth
FULL YEAR:
6% Acquisitions
4% Volume
2% Price
2% FX
2007 SALES GROWTH
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Excellent Segment EarningsExcellent Segment Earnings
SEGMENT EARNINGS
$354$423
$301
$100$200
$300$400
$500
2005 2006 2007
SEGMENT EARNINGS
17.7% 18.9% 19.8%
0%5%
10%15%
20%
2005 2006 2007
KEY DRIVERS:
Operating leverage
Lean manufacturing initiatives
Product mix
Proven value proposition
Conversions/share gains
CAGR 18.5%$ MILLIONS
% OF SALES
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14.5% 14.9% 14.3%
0%
10%
2005 2006 2007**
Strong Discipline & Focus
% OF SALES
*Reflects A/R + inventory – A/P **2007 excludes acquisition impact
Best in Class PerformanceBest in Class Performance
KEY DRIVERS:
Strong internal discipline
Culture focused on cash management
Flexible, pull manufacturing
Fast-cycle logistics
WORKING CAPITAL*
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$193$221
$261
$0
$100
$200
$300
2005 2006 2007
Sustainable Model
$ MILLIONS
Excellent Cash GenerationExcellent Cash Generation
MAJOR USES OF CASH:
Acquisitions
Share repurchase
Debt repayment
Steady internal investment
CASH FROM OPERATIONS
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1Q 2008 Highlights1Q 2008 Highlights
Soft segment-specific U.S. markets offset by acquisitions and international growth
Excellent segment earnings across all businesses
Base Electrical margins up modestly despite weak volume
Strong expense controls maintained
Earnings in line with guidance
Fast-track acquisition integration activities on schedule
Two strategic acquisitions completed
Annual sales approximately $100 million
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1Q08 includes $108.6mm in sales and $17mm in earnings from acquisitions completed 2H07 & 1Q08 and $3.2mm in acquisition-related charges.
As a percent of sales, acquisition earnings were 15.6% in 1Q08.
---19.5%18.8%SEGMENT EARNINGS (% sales)
20.8%$ 92.5$ 111.8SEGMENT EARNINGS (millions)*
25.5%$ 474.6 $ 595.5SALES (millions)*
% CHANGE1Q 20071Q 2008
Acquisitions Begin to Gain Traction
Solid Momentum ContinuesSolid Momentum Continues
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Lower Transaction
Costs; Stronger
Distributor Presence
MultiMulti--Tiered Growth StrategyTiered Growth Strategy
1. CORE BUSINESS GROWTHPremium brands, innovative new products, pull thru sales, distributor partnership
2. BROAD & BALANCED MARKET FOCUS
Commercial, industrial, utility, retail
U.S. + international
INCREASED PRODUCTIVITYLean manufacturing, asset efficiency, maximize use of technology
1. STRATEGIC ACQUISITIONSLeading brands, leverage infrastructure, broaden shelf goods portfolio
Market Growth, Share Gains, Acquisitions
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Acquisition PhilosophyAcquisition Philosophy
OBJECTIVE:
1. Strengthen long-term strategic position
2. Act as platform for incremental growth, not a substitute for core growth
CRITERIA:
Market-leading brands that complement core competencies
Enhance value proposition
Leverage fast-cycle logistics model
Provide operational/cost synergies
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20072007--2008 Acquisitions2008 Acquisitions
Selective, Value-Enhancing Acquisitions
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Acquisition Integration Acquisition Integration -- StatusStatus
Cross-functional/product training for sales teamProduct management aligned with TNBSales organizations realigned
2008SALES & MARKETING
Close 4 LMS DCs, integrate with TNBMigrate to common IT platformsRep and distributor training
2Q08DISTRIBUTION & LOGISTICS
Separate shelf goods products from pipeMigrate to common IT platformsMigrate to TNB operating culture
1Q08OPERATIONS
Eliminate duplicative public co costsRealign support/admin organizationPipeCo organization established
4Q07CORPORATE FUNCTIONS
MAJOR MILESTONESDEADLINE
Expect $20 Million Annual Savings
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2008 Operating Environment2008 Operating Environment
EXTERNAL:Mixed market outlook
U.S. economy slowing – residential overhang, credit crisisIndustrial MRO & commercial construction solidAlternative energy markets growing Power transmission spending strong - 10% of TNB sales
International economies still growing – industrial and energy strongInternational = 35% of 1Q08 sales
Volatile material and energy costsLimited channel, end user and supplier consolidation
INTERNAL:Acquisition integrationContinuous improvement – productivity, expense leverage
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Sales growth – approximately 25%
Mid-single digit underlying growth driven by FX, price, volume
20% contribution from acquisitions
Segment earnings growth – approximately 25%
Approximately 60% from acquisitions; 40% from base business
Diluted E.P.S. up 20+% to range of $3.93 - $4.08
$3.80 - $3.95 from operations plus $0.13 from 2Q legal benefit
2008 Earnings Outlook2008 Earnings Outlook
Accelerating Sales & Earnings Growth
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Electrical Segment OverviewElectrical Segment Overview
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INDUSTRIALMRO37%
ELECTRICAL PRODUCTS83% COMMERCIAL
36%
UTILITY20%
RETAIL7%
1Q 2008 ELECTRICAL SALES $509 Million
Balanced Product PortfolioBalanced Product Portfolio
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Excellent PerformanceExcellent Performance
ELECTRICAL SALES
$1,377$1,512
$1,767
$0
$500
$1,000
$1,500
$2,000
2005 2006 2007
KEY DRIVERS:
Market-focused culture
Lean, flexible manufacturing
Tight expense controls
Quantifiable, differentiated value proposition
ELECTRICAL EARNINGS
20.0%19.3%17.6%
0%
5%
10%
15%
20%
25%
2005 2006 2007
$ MILLIONS
% OF SALES
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Portfolio Overview Portfolio Overview -- CommercialCommercial
Floor boxes
Pre-fab components
Conduit & cable fittings
Fastening & wire management
Boxes & covers
Metal framing
Lighting controls
Weatherproof
Broad Line, Leading Brands
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Fastening & wire managementCorrosion protectionHazardous lighting & controlsPower quality & protection Tray & metal framing Corrosion protectionConnectors & terminalsGroundingIdentification Fittings
Portfolio Overview Portfolio Overview -- IndustrialIndustrial
Broad Line, Leading Brands
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Molded accessories
Switches & switchgear
Overhead & grounding connectors
Current-limiting fuses
Automation & controls
Underground connectors
Telecomm connectors
Splices
Portfolio Overview Portfolio Overview -- UtilityUtility
Broad Line, Leading Brands
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CARLON
Plastic boxes
Fittings
Elbows
T&B
Weatherproof (Red Dot)
Metal framing (Superstrut)
Portfolio Overview Portfolio Overview -- RetailRetail
Strategic, Limited Offering
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MarketMarket--Focused CultureFocused Culture
VISION:
Be the “BRAND OF CHOICE” for end users
Be the “SUPPLIER OF CHOICE” for distributors
MISSION:
To be FAST, FLEXIBLE and CUSTOMER FOCUSED
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Brand of ChoiceBrand of Choice
BRAND OF
CHOICE
Innovative Solutions
Broad Availability
Broad Portfolio 35+ Lines
Leading, Premium Brands
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High-quality, reliable products
Continuous flow of new products focused on “lowering the installed cost”
Frequent sales, engineering and technical interaction with end users
Market-specific products and service strategies
Brand of ChoiceBrand of ChoiceKINDORF ANGLER CLAMP
2007 Product of the Year
KINDORF TRAPNUT
Problem Solving
Innovation2006 Product of the Year
InnovativeSolutions
Lower Installed Cost
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Supplier of ChoiceSupplier of Choice
SUPPLIEROF
CHOICE
Strategic Brand
Management
Reduced Working Capital
“One Stop Shop”ProductPortfolio
Lower Transaction
Costs
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Premium brands asked for by name
Continuous flow of new products
Targeted end-user marketing
“Hands on” training (distributor, end user)
Exclusive distributor promotions
Supplier of ChoiceSupplier of Choice
Drives Pull-Thru Sales at Distribution
Strategic Brand
Management
Best Brands, Broadest Portfolio
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Non-discretionary, essential products
Strong spec position with contractors
Premium brands asked for by name
Reputation for high quality
Broad selection of standard & new products
Strategic portfolio expansion thru acquisitions
Supplier of ChoiceSupplier of Choice
Brands preferred
by end users
Acquisitions Enhanced Portfolio Breadth
“One Stop Shop”Product Portfolio
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Supplier of ChoiceSupplier of Choice
Acquisitions Added Leading Brands
“One Stop Shop”Product Portfolio
Strategic Brand
Management
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One order, one shipment, one invoice
Best-in-class e-commerce capabilities
Dedicated customer service teams
Excellent on-line resources
Supplier of ChoiceSupplier of Choice
Improved Margin for
TNB & Customer
Easiest To Do Business With
Lower Transaction
Costs
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Total Cost = $900 Total Cost = $150
Thomas & BettsThomas & Betts
30 Lines30 Lines
One Sales ForceOne Sales Force
= $150= $150
1 Invoice @ $50
1 Shipment @ $50
1 PO @ $50
Quantifiable Lower Transaction CostsQuantifiable Lower Transaction Costs
* Hypothetical processing costs example
Direct Agent
Region Mgmt
1
Shipment @ $50
1 PO @ $50
1 Invoice @ $50
= $150= $150
Mfgr. 5Mfgr. 4
Direct Agent
Region Mgmt
1
Shipment @ $50
1 PO @ $50
1 Invoice @ $50
= $150= $150
Mfgr. 3
Direct Agent
Region Mgmt
1
Shipment @ $50
1 PO @ $50
1 Invoice @ $50
= $150= $150
Mfgr. 2
Direct Agent
Region Mgmt
1
Shipment @ $50
1 PO @ $50
1 Invoice @ $50
= $150= $150
Mfgr. 1
Direct Agent
Region Mgmt
1
Shipment @ $50
1 PO @ $50
1 Invoice @ $50
= $150= $150
Mfgr. 6
Direct Agent
Region Mgmt
1
Shipment @ $50
1 PO @ $50
1 Invoice @ $50
= $150= $150
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Fast-cycle logistics
Differentiated distribution model
95%+ first fill rates
Rapid-response, flexible manufacturing
Best-in-class technological support
Growing web-based commerce
Supplier of ChoiceSupplier of Choice
High Service Rates Requires Less Distributor Inventory
Reduced Distributor
Working Capital
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Electrical SummaryElectrical Summary
COMPELLING VALUE PROPOSITIONBest products, best sales support, best serviceLower transaction costs and working capital
PROFITABLY GROWING LEADERSHIP POSITIONBroad product line, strong brandsDedicated sales force creates pull-thru demandContinuous introduction of differentiated, labor-saving productsComplementary, synergistic acquisitions
DIFFERENTIATED OPERATIONAL MODELFast-cycle logisticsPull manufacturing process
Well Positioned For Continued Growth
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Steel Structures OverviewSteel Structures Overview
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Leading supplier of steel structures for utility transmission
Non-commodity, highly engineered, customized product
Sold direct to utility (project-based)
Excellent customer and supplier relationships
Leader in using technology to lower costs and lead times
Excellent engineering & project management capabilities
Capacity added 2007 to support near-term market needs
Positioned for long-term growth
Leader in High-Growth Market
Steel Structures SegmentSteel Structures Segment
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$186$222 $227
$0
$60
$120
$180
$240
2005 2006 2007
* 19.7%17.5%
18.7%
0%
10%
20%
2005 2006 2007
$ MILLIONS
Steel Structures SegmentSteel Structures Segment
% OF SALES
EARNINGSSALES
Strong Financial Performance*Includes $23 million of lattice towers sourced from a third party
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HVAC Segment OverviewHVAC Segment Overview
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HVAC SegmentHVAC Segment
Commercial and industrial HVAC products
Reputation for innovative engineering and products
Leading global brand: Reznor ®
Broad, modular-based product line plus custom engineered solutions
Highly fragmented competition
Engineered solutions for green initiatives, indoor air quality and energy efficiency
Code changes, standards and technology help drive growth
Well Positioned, Niche Supplier
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$132 $135 $143
$0
$50
$100
$150
2005 2006 2007
16.1%17.6%
19.0%
0%
10%
20%
2005 2006 2007
$ MILLIONS
HVAC SegmentHVAC Segment
% OF SALES
HVAC EARNINGSHVAC SALES
Strong Financial Performance
SummarySummary
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SummarySummary
Thomas & Betts is a leader
in electrical, utility and HVAC markets
with a proven ability to execute
and has a solid foundation
for strong sales and earnings growth.
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ForwardForward--Looking StatementLooking Statement
This presentation includes both historical and forward-looking information. Statements that are not historical fact constitute“forward-looking statements” including any projections for the
year 2008 and beyond regarding business strategies, operations, sales and expenditures. Although Thomas & Betts’
management believes the expectations reflected in those forward-looking statements are reasonable, we cannot assure you that those expectations will prove to have been correct.
For additional information, please see the “Risk Factors”section of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2007.
Investor Inquiries:Tricia Bergeron 901.252.8266
