Executive Overview

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

Critical Accounting Policies

The preparation of financial statements contained in this report requires the use of estimates and assumptions to determine certain amounts reported as net sales, costs, expenses, assets or liabilities and certain amounts disclosed as contingent assets or liabilities. Actual results may differ from those estimates or assumptions. Our significant accounting policies are described in Note 2 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008. We believe our critical accounting policies include the following:

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

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

• Goodwill and Other Intangible Assets: We apply the acquisition (purchase) method of accounting for all business combinations. Under this method, all assets and liabilities acquired in a business combination, including goodwill, indefinite-lived intangibles and other intangibles, are recorded at fair value. The initial recording of goodwill and other intangibles requires subjective judgments concerning estimates of the fair value of the acquired assets and liabilities. Goodwill consists principally of the excess of cost over the fair value of net

assets acquired in business combinations and is not amortized. For each amortizable intangible asset, we use a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed. If that pattern cannot be reliably determined, the straight-line amortization method is used. We also follow the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires an annual impairment test of goodwill and indefinite-lived intangible assets. We perform our annual impairment assessment as of the beginning of the fourth quarter of each year, unless circumstances dictate more frequent interim assessments. In evaluating when an interim assessment of goodwill is necessary, we consider, among other things, the trading level of our common stock, changes in expected future cash flows and mergers and acquisitions involving companies in our industry. In evaluating when an interim assessment of indefinite-lived intangible assets is necessary, we review for significant events or significant changes in circumstances. Our evaluation process did not result in an interim assessment of goodwill or long-lived intangible assets for recoverability during 2009.

Under the provisions of SFAS No. 142, each test of goodwill requires us to determine the fair value of each reporting unit and compare the fair value to the reporting unit's carrying amount. SFAS No. 142 defines a reporting unit as an operating segment or one level below an operating segment. We determine the fair value of our reporting units using a combination of three valuation methods: market multiple approach; discounted cash flow approach; and comparable transactions approach. The market multiple approach provides indications of value based on market multiples for public companies involved in similar lines of business. The discounted cash flow approach calculates the present value of projected future cash flows using appropriate discount rates. The comparable transactions approach provides indications of value based on an examination of recent transactions in which companies in similar lines of business were acquired. The fair values derived from these three valuation methods are then weighted to arrive at a single value for each reporting unit. Relative weights assigned to the three methods are based upon the availability, relevance and reliability of the underlying data. We then reconcile the total values for all reporting units to our market capitalization and evaluate the reasonableness of the implied control premium.

To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired, and we must perform a second more detailed impairment assessment. The second impairment assessment involves allocating the reporting unit's fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit's goodwill as of the assessment date. The implied fair value of the reporting unit's goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date.

Methods used to determine fair values for indefinite-lived intangible assets involve customary valuation techniques that are applicable to the particular class of intangible asset and apply inputs and assumptions that we believe a market participant would use.

• Long-Lived Assets: We follow the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 establishes accounting standards for the impairment of long-lived assets such as property, plant and equipment and intangible assets subject to amortization. For purposes of recognizing and measuring impairment of long-lived assets, we evaluate assets at the lowest level of identifiable cash flows for associated product groups. We review long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of

the assets may not be recoverable. Indications of impairment require significant judgment by management. If the sum of the undiscounted expected future cash flows over the remaining useful life of the primary asset in the associated product groups is less than the carrying amount of the assets, the assets are considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. When fair values are not available, we estimate fair values using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the assets. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to dispose.

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

• Income Taxes: We use the asset and liability method of accounting for income taxes. This method recognizes the expected future tax consequences of temporary differences between book and tax bases of assets and liabilities and requires an evaluation of asset realizability based on a more-likely-than-not criteria. We have valuation allowances for deferred tax assets primarily associated with foreign net operating loss carryforwards and foreign income tax credit carryforwards. Realization of the deferred tax assets is dependent upon our ability to generate sufficient future taxable income. We believe that it is more-likely-than-not that future taxable income, based on enacted tax laws in effect as of June 30, 2009, will be sufficient to realize the recorded deferred tax assets net of existing valuation allowances.

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

2009 Outlook

We experienced continued pressure in all of our key markets in the first half of 2009. The lack of any meaningful improvement in credit availability crippled capital investment in the global

industrial base and severely curtailed spending on construction projects. We have not yet seen any notable impact from government-initiated stimulus spending. As a result, we did not experience the usual increase in construction-related demand in our Electrical segment that normally drives our second quarter performance and sets the stage for second half results. Constraints on credit availability and unfavorable vacancy rates continue to have a serious impact on commercial construction spending. Residential markets continue to suffer from overcapacity as well as credit constraints. Given these factors, we believe that our markets will not show meaningful improvement in the second half of the year.

We now expect full-year 2009 consolidated net sales to be down approximately 20% to 25% compared to 2008 results. In our Electrical segment, we expect year-over-year net sales to be down 25% to 28%, and in our HVAC segment, we expect net sales to be down 20% to 25%. The sales declines in our Electrical and HVAC segments should be somewhat mitigated by expected mid single-digit net sales growth in our Steel Structures segment. We expect that the year-over-year sales decline in the fourth quarter will not be as severe due to a more favorable comparison with last year's fourth quarter which reflected a significant strengthening of the U.S. dollar and weak market conditions. We expect Electrical segment earnings in the range of 17% to 19% of net sales for the second half of 2009. This reflects the favorable impact of lower commodity costs and the benefit of actions taken during the first half of the year to reduce operating expenses in our business. We also expect Steel Structures segment earnings moderating towards the range of 17% to 20% of net sales for the balance of the year.

We have revised our expectation for diluted per share earnings for the full-year 2009 to be in the range of $2.10 to $2.40 per diluted share. Full-year 2009 earnings guidance assumptions include annual depreciation of $50 million, annual acquisition-related amortization of $25 million, annual share-based compensation expense of $15 million, corporate expense of $12 million per quarter, annual net interest expense of $35 million, an effective tax rate of approximately 30% and 53 million fully diluted average shares outstanding.

With our expectation of continued weak market demand in the second half of 2009, we have continued to focus on adjusting production to match demand, reducing headcount and curtailing wage costs, tightly managing discretionary spending and prudently managing cash. The key risks to achieving results within our full year 2009 earnings per share range include further disruption in credit markets and the negative impact on credit availability, excessive fluctuation in foreign currencies versus the U.S. dollar, volatility in commodity costs and availability and additional or heightened slowdowns in key market segments and geographic regions.

                        Summary of Consolidated Results


                                                           Quarter Ended June 30,
                                                   2009                              2008
                                                           % of Net                          % of Net
                                        In Thousands        Sales         In Thousands        Sales

Net sales                              $      460,996          100.0     $      641,317          100.0
Cost of sales                                 329,053           71.4            441,342           68.8

Gross profit                                  131,943           28.6            199,975           31.2
Selling, general and administrative            93,038           20.2            100,489           15.7

Earnings from operations                       38,905            8.4             99,486           15.5
Interest expense, net                          (8,378 )         (1.8 )          (11,768 )         (1.9 )
Other (expense) income, net                     1,845            0.4               (670 )         (0.1 )
Gain on sale of equity interest                     -              -            169,684           26.5

Earnings from continuing operations
before income taxes                            32,372            7.0            256,732           40.0
Income tax provision                            9,711            2.1            108,692           16.9

Net earnings from continuing
operations                                     22,661            4.9            148,040           23.1
Earnings from discontinued
operations, net                                     -              -               (200 )            -

Net earnings                           $       22,661            4.9     $      147,840           23.1

Basis earnings per share:
Continuing operations                  $         0.43                    $         2.56
Discontinued operations                             -                                 -

Net earnings                           $         0.43                    $         2.56

Diluted earnings per share:
Continuing operations                  $         0.43                    $         2.54
Discontinued operations                             -                                 -

Net earnings                           $         0.43                    $         2.54

                                                          Six Months Ended June 30,
                                                   2009                              2008
                                                           % of Net                          % of Net
                                        In Thousands        Sales         In Thousands        Sales

Net sales                              $      920,831          100.0     $    1,236,821          100.0
Cost of sales                                 651,480           70.7            850,585           68.8

Gross profit                                  269,351           29.3            386,236           31.2
Selling, general and administrative           185,648           20.2            216,774           17.5

Earnings from operations                       83,703            9.1            169,462           13.7
Interest expense, net                         (17,839 )         (1.9 )          (24,100 )         (1.9 )
Other (expense) income, net                     3,750            0.4             (1,947 )         (0.2 )
Gain on sale of equity interest                     -              -            169,684           13.7

Earnings from continuing operations
before income taxes                            69,614            7.6            313,099           25.3
Income tax provision                           20,884            2.3            126,898           10.2

Net earnings from continuing
operations                                     48,730            5.3            186,201           15.1
Earnings from discontinued
operations, net                                     -              -               (109 )         (0.1 )

Net earnings                           $       48,730            5.3     $      186,092           15.0

Basis earnings per share:
Continuing operations                  $         0.93                    $         3.22
Discontinued operations                             -                                 -

Net earnings                           $         0.93                    $         3.22

Diluted earnings per share:
Continuing operations                  $         0.92                    $         3.20
Discontinued operations                             -                                 -

Net earnings                           $         0.92                    $         3.20

2009 Compared with 2008

Overview

Net sales in the second quarter and the first six months of 2009 decreased significantly from the respective prior-year periods reflecting lower sales volumes on weaker demand primarily in our Electrical and HVAC segments. A stronger U.S. dollar during 2009 also negatively impacted net sales in the second quarter and first six months of 2009. Gross profit in the second quarter and first six months of 2009 decreased as a percent of net sales reflecting the impact of significantly lower production volumes.

Earnings from operations in dollars and as a percent of sales decreased from the respective prior-year periods primarily as a result of lower sales and production volumes. Earnings from operations in the second quarter and first six months of 2008 reflect a favorable $12 million legal settlement included in selling, general and administrative expense.

We sold our minority interest in Leviton Manufacturing Company ("Leviton") in the second quarter of 2008 for net proceeds of $280 million and recognized a pre-tax gain of $169.7 million ($1.74 per diluted share after tax).

Net earnings in the second quarter of 2009 were $22.7 million, or $0.43 per diluted share compared to net earnings of $147.8 million, or $2.54 per diluted share in the prior-year period. Net earnings in the first six months of 2009 were $48.7 million, or $0.92 per diluted share compared to net earnings of $186.1 million, or $3.20 per diluted share in the prior-year period. The second quarter and first six months of 2008 included unusual items which, on a net basis, contributed $1.63 per diluted share.

Net Sales and Gross Profit

Net sales in the second quarter of 2009 were $461.0 million, down $180.3 million, or 28.1%, from the prior-year period. For the first six months of 2009, net sales were $920.8 million, down $316.0 million, or 25.6%, from the prior-year period. The year-over-year sales decrease in both periods primarily reflects weaker demand in virtually all of the product and geographic markets we serve. The stronger U.S. dollar negatively impacted sales by approximately $38 million in the second quarter of 2009 and approximately $73 million in the first six months of 2009 when compared to the prior-year periods.

Gross profit in the second quarter of 2009 was $131.9 million, or 28.6% of net sales, compared to $200.0 million, or 31.2% of net sales, in the second quarter of 2008. Gross profit in the first six months of 2009 was $269.4 million, or 29.3% of net sales, compared to $386.2 million, or 31.2% of net sales, in the prior-year period. The year-over-year decrease as a percent of sales in both periods reflects the impact of lower sales and production volumes.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expense in the second quarter of 2009 was $93.0 million, or 20.2% of net sales, compared to $100.5 million, or 15.7% of net sales, in the prior-year period. SG&A expense in the first six months of 2009 was $185.6 million, or 20.2% of net sales, compared to $216.8 million, or 17.5% of net sales, in the prior-year period. Both prior-year periods reflect a favorable $12 million legal settlement.

Interest Expense, Net

Interest expense, net was $8.4 million for the second quarter of 2009, down $3.4 million from the prior-year period. Interest expense, net was $17.8 million for the first six months of 2009, down $6.3 million from the prior-year period. Both current year periods reflect lower average debt outstanding. Interest income included in interest expense, net was $0.2 million for the second quarter of 2009 and $0.9 million for the second quarter of 2008. Interest income included in interest expense, net was $0.2 million for the first six months of 2009 and $2.3 million for the first six months of 2008.

Income Taxes

The effective tax rate in the second quarter of 2009 was 30.0 percent compared to 42.3 percent in the second quarter of 2008. The effective tax rate for the first six months of 2009 was 30.0 percent compared to 40.5 percent in the first six months of 2008. The higher prior year effective rates reflect the second quarter 2008 gain on sale of our minority interest in Leviton and a $14 million second quarter 2008 non-cash tax charge. The effective rate for both years reflects benefits from our Puerto Rican manufacturing operations.

Net Earnings

Net earnings in the second quarter of 2009 were $22.7 million, or $0.43 per diluted share, compared to $147.8 million, or $2.54 per diluted share, in the prior-year period. Net earnings in the first six months of 2009 were $48.7 million, or $0.92 per diluted share, compared to $186.1 million, or $3.20 per diluted share, in the prior-year period. The second quarter and first six months of 2008 included a net after-tax gain of $1.63 per diluted share related to the gain on the sale of our minority interest in Leviton of $1.74 per diluted share, a favorable legal settlement of $0.13 per diluted share and a non-cash tax charge related to an adjustment of prior period deferred income taxes of $0.24 per diluted share.

                           Summary of Segment Results

Net Sales


                                   Quarter Ended June 30,                                     Six Months Ended June 30,
                             2009                          2008                          2009                           2008
                       In          % of Net          In          % of Net          In          % of Net          In           % of Net
                   Thousands        Sales        Thousands        Sales        Thousands        Sales         Thousands        Sales

Electrical         $  383,358           83.2     $  550,795           85.9     $  752,190           81.7     $ 1,059,565           85.7
Steel Structures       54,950           11.9         56,431            8.8        116,895           12.7         108,391            8.7
HVAC                   22,688            4.9         34,091            5.3         51,746            5.6          68,865            5.6

                   $  460,996          100.0     $  641,317          100.0     $  920,831          100.0     $ 1,236,821          100.0

Segment Earnings


                                                   Quarter Ended June 30,                                        Six Months Ended June 30,
                                            2009                            2008                            2009                            2008
                                     In           % of Net           In           % of Net           In           % of Net           In           % of Net
                                 Thousands         Sales         Thousands         Sales         Thousands         Sales         Thousands         Sales

Electrical                       $   58,773            15.3      $  110,826            20.1      $  116,213            15.4      $  206,947            19.5
Steel Structures                     12,118            22.1          10,545            18.7          26,548            22.7          20,587            19.0
HVAC                                  2,562            11.3           6,160            18.1           8,284            16.0          11,795            17.1

. . .