Summary of THOMAS & BETTS CORP

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Thomas & Betts Corporation is a global leader in the design, manufacture, and marketing of essential components used to manage the connection, distribution, transmission and reliability of electrical power in industrial, construction and utility applications. We are also a leading producer of commercial heating and ventilation units used in commercial and industrial buildings and highly engineered steel structures used for utility transmission. We have operations in over 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, 2011. 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. 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. We provide allowances for doubtful accounts when credit losses are both probable and estimable.

• 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 history and 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 purchase price allocation requires subjective judgments concerning estimates of the fair value of the acquired assets and liabilities. Goodwill

Table of Contents
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 perform 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, our market capitalization, 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 for the quarter ended March 31, 2012.

In conjunction with each test of goodwill we determine the fair value of each reporting unit and compare the fair value to the reporting unit's carrying amount. A reporting unit is defined 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 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. 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. 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

Table of Contents
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 recognize the overfunded or underfunded status of benefit plans in our consolidated balance sheets. 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 the realizability of deferred income tax assets 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 March 31, 2012, 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 requires subjective judgments by management in assessing environmental or occupational health and safety liabilities.

Table of Contents

                        Summary of Consolidated Results



                                                            Quarter Ended March 31,
                                                  2012                                    2011
                                                           % of Net                                % of Net
                                     In Thousands           Sales            In Thousands           Sales
Net sales                           $      607,088             100.0        $      523,135             100.0
Cost of sales                              407,195              67.1               359,532              68.7

Gross profit                               199,893              32.9               163,603              31.3
Selling, general and
administrative                             115,564              19.0               104,101              19.9

Earnings from operations                    84,329              13.9                59,502              11.4
Interest expense, net                       (6,185 )            (1.0 )              (7,765 )            (1.5 )
Other (expense) income, net                   (574 )            (0.1 )                (985 )            (0.2 )

Earnings from continuing
operations before income taxes              77,570              12.8                50,752               9.7
Income tax provision                        22,495               3.7                15,226               2.9

Net earnings                        $       55,075               9.1        $       35,526               6.8

Earnings per share:
Basic                               $         1.06                          $         0.69

Diluted                             $         1.03                          $         0.67

2012 Compared with 2011

Overview

Net sales in the first quarter of 2012 increased from the prior-year period primarily reflecting higher organic sales volumes in our Electrical and Steel Structures segments, the positive impact of current year pricing in our Steel Structures segment and the impact of the July 2011 acquisition of AmbiRad Group ("AmbiRad") in our HVAC segment.

Earnings from operations, both in dollars and as a percentage of sales, increased from the respective prior-year period. These improvements reflect the impact of increased organic sales volumes, increased manufacturing leverage from stronger production volumes and the impact of the 2011 AmbiRad acquisition. The first quarter of 2012 included pre-tax merger related charges of approximately $6 million. The first quarter of 2011 included facility consolidations charges of approximately $3 million.

Net earnings in the first quarter of 2012 were $55.1 million ($1.03 per diluted share) compared to net earnings of $35.5 million ($0.67 per diluted share) in the first quarter of 2011. The first quarter of 2012 included net after tax merger related charges, as described below of $3.8 million ($0.08 per diluted share). The first quarter of 2011 included net after tax facility consolidation charges, as described below of $2.3 million ($0.04 per diluted share).

Net Sales and Gross Profit

Net sales in the first quarter of 2012 were $607.1 million, up 16.1%, from the prior-year period. Higher organic sales volumes in our Electrical and Steel Structures segments and the positive impact of pricing in our Steel Structures segment positively impacted year-over-year sales in 2012. The first quarter sales increase from the prior-year period attributable to the 2011 AmbiRad acquisition was approximately $12.2 million.

Table of Contents

Gross profit in the first quarter of 2012 was $199.9 million, or 32.9% of net sales, compared to $163.6 million or 31.3% of net sales, in the first quarter of 2011. The year-over-year increase in gross profit as a percentage of sales reflects increased manufacturing leverage from stronger production volumes and the positive impact of more favorable pricing in our Steel Structures segment. Gross profit in the first quarter of 2011 included pre-tax charges for facility consolidations of $2.4 million.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expense in the first quarter of 2012 was $115.6 million, or 19.0% of net sales, compared to $104.1 million, or 19.9% of net sales, in the prior-year period. SG&A expense in the first quarter of 2012 includes pre-tax merger related charges of approximately $6 million. SG&A in the first quarter of 2011 also includes pre-tax charges of $0.8 million for facility consolidations.

Interest Expense, Net

Interest expense, net was $6.2 million for the first quarter of 2012, down $1.6 million from the prior-year period, primarily reflecting lower average interest rates in the current year period. Interest income included in interest expense, net was $1.1 million for the first quarter of 2012 and $0.7 million for the prior-year period.

Income Taxes

The effective tax rate from continuing operations in the first quarter of 2012 was 29.0% compared to 30.0% in the first quarter of 2011. The effective rate for both periods reflects benefits from our Puerto Rican manufacturing operations.

Net Earnings

Net earnings in the first quarter of 2012 were $55.1 million, or $1.03 per diluted share, compared to net earnings of $35.5 million, or $0.67 per diluted share, in the first quarter of 2011. Net earnings in the first quarter of 2012 include net after-tax merger related charges of $3.8 million ($0.08 per diluted share). Net earnings in the first quarter of 2011 included net after-tax facility consolidation charges of $2.3 million ($0.4 per diluted share).

Table of Contents

                           Summary of Segment Results

Net Sales



                                             Quarter Ended March 31,
                                     2012                              2011
                                             % of Net                          % of Net
                          In Thousands        Sales         In Thousands        Sales
      Electrical         $      483,964           79.7     $      443,520           84.8
      Steel Structures           82,108           13.5             50,945            9.7
      HVAC                       41,016            6.8             28,670            5.5

                         $      607,088          100.0     $      523,135          100.0

Segment Earnings



                                                                  Quarter Ended March 31,
                                                        2012                                   2011
                                                                 % of Net                               % of Net
                                           In Thousands           Sales           In Thousands           Sales
Electrical                                $      100,422              20.7       $       86,936              19.6
Steel Structures                                  19,389              23.6                4,292               8.4
HVAC                                               7,664              18.7                4,562              15.9

Segment earnings                                 127,475              21.0               95,790              18.3
Corporate expense                                (19,710 )                              (11,509 )
Depreciation and amortization expense            (20,220 )                              (21,037 )
Share-based compensation expense                  (3,216 )                               (3,742 )
Interest expense, net                             (6,185 )                               (7,765 )
Other (expense) income, net                         (574 )                                 (985 )

Earnings before income taxes              $       77,570                         $       50,752

We have three reportable segments: Electrical, Steel Structures and HVAC. We evaluate our business segments primarily on the basis of segment earnings, with segment earnings defined as earnings before corporate expense, depreciation and amortization expense, share-based compensation expense, interest, income taxes and certain other items.

Our consolidated segment earnings are significantly influenced by the operating performance of our Electrical segment that accounts for a substantial portion of our consolidated net sales and consolidated segment earnings during the periods presented.

Electrical Segment

Electrical segment net sales in the first quarter of 2012 were $484.0 million, up $40.4 million, or 9.1%, from the first quarter of 2011. Increased organic sales volumes positively impacted year-over-year sales.

Electrical segment earnings in the first quarter of 2012 were $100.4 million, up $13.5 million, or 15.5%, from the first quarter of 2011. Segment earnings as a percentage of sales increased to 20.7% in

Table of Contents

the first quarter of 2012 compared to 19.6% in the prior-year period. Segment earnings in the first quarter of 2011 reflect pre-tax facility consolidation charges of $2.5 million. Year-over-year segment earnings reflect improved manufacturing leverage from increased volumes, a favorable product and geographic mix and the benefits of prior-year right-sizing actions.

Steel Structures Segment

Net sales in the first quarter of 2012 in our Steel Structures segment were $82.1 million, up $31.2 million, or 61.2%, from the first quarter of 2011. The net sales increase in the first quarter reflects increased organic sales volumes, the positive price impact from the pass-through of higher year-over-year plate steel costs and a more favorable pricing environment.

Steel Structures segment earnings in the first quarter of 2012 were $19.4 million, up $15.1 million, or 351.8%, from the prior-year period. The increase in year-over-year segment earnings in dollars and as a percentage of sales in 2012 reflects the increase in project margins due to improved project mix and a more favorable pricing environment.

HVAC Segment

Net sales in the first quarter of 2012 in our HVAC segment were $41.0 million, up $12.3 million, or 43.1%, from the first quarter of 2011. The first quarter sales increase from the prior-year period attributable to the July 2011 acquisition of AmbiRad was approximately $12.2 million.

HVAC segment earnings in the first quarter of 2012 were $7.7 million, up $3.1 million, or 68.0%, from the first quarter of 2011. Increased year-over-year segment earnings as a percentage of sales in 2012 reflect the 2011 acquisition of AmbiRad. Segment earnings in the first quarter of 2011 reflect a pre-tax facility consolidation charge of $0.7 million.