XNYS:BDC Belden Inc Quarterly Report 10-Q Filing - 7/1/2012

Effective Date 7/1/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2012

Commission File No. 001-12561

 

 

BELDEN INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   36-3601505

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

7733 Forsyth Boulevard, Suite 800

St. Louis, Missouri 63105

(Address of principal executive offices)

(314) 854-8000

Registrant’s telephone number, including area code

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨.

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer þ      Accelerated filer ¨
Non-accelerated filer ¨   (Do not check if a smaller reporting company)    Smaller reporting company ¨

As of August 6, 2012, the Registrant had 44,789,871 outstanding shares of common stock.

 

 

 


PART I FINANCIAL INFORMATION

Item 1.     Financial Statements

BELDEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     July 1, 2012     December 31, 2011  
     (Unaudited)        
     (In thousands)  
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 337,278      $ 382,716   

Receivables, net

     322,572        299,070   

Inventories, net

     183,954        202,143   

Deferred income taxes

     20,073        19,660   

Other current assets

     21,013        21,832   
  

 

 

   

 

 

 

Total current assets

     884,890        925,421   

Property, plant and equipment, less accumulated depreciation

     287,802        286,933   

Goodwill

     343,795        348,032   

Intangible assets, less accumulated amortization

     143,513        151,683   

Deferred income taxes

     19,128        12,219   

Other long-lived assets

     65,193        63,832   
  

 

 

   

 

 

 
   $ 1,744,321      $ 1,788,120   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

Current liabilities:

    

Accounts payable

   $ 214,595      $ 227,571   

Accrued liabilities

     124,413        153,995   
  

 

 

   

 

 

 

Total current liabilities

     339,008        381,566   

Long-term debt

     550,265        550,926   

Postretirement benefits

     129,421        131,237   

Other long-term liabilities

     27,827        29,842   

Stockholders’ equity:

    

Preferred stock

     —          —     

Common stock

     503        503   

Additional paid-in capital

     593,844        601,484   

Retained earnings

     338,419        276,363   

Accumulated other comprehensive loss

     (40,321     (22,709

Treasury stock

     (194,645     (161,092
  

 

 

   

 

 

 

Total stockholders’ equity

     697,800        694,549   
  

 

 

   

 

 

 
   $ 1,744,321      $ 1,788,120   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

 

-1-


BELDEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended     Six Months Ended  
     July 1, 2012     July 3, 2011     July 1, 2012     July 3, 2011  
     (In thousands, except per share data)  

Revenues

   $ 484,042      $ 536,251      $ 948,333      $ 997,879   

Cost of sales

     (332,121     (379,637     (654,694     (710,810
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     151,921        156,614        293,639        287,069   

Selling, general and administrative expenses

     (77,931     (84,380     (161,157     (159,316

Research and development

     (15,029     (14,530     (29,062     (28,159

Amortization of intangibles

     (2,570     (3,347     (5,805     (7,026

Income from equity method investment

     1,960        3,855        4,701        7,717   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     58,351        58,212        102,316        100,285   

Interest expense

     (12,502     (12,748     (24,423     (24,556

Interest income

     211        156        562        315   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before taxes

     46,060        45,620        78,455        76,044   

Income tax expense

     (3,670     (10,739     (11,790     (19,145
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     42,390        34,881        66,665        56,899   

Loss from discontinued operations, net of tax

     —          (156     —          (284
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 42,390      $ 34,725      $ 66,665      $ 56,615   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares and equivalents:

        

Basic

     45,526        47,401        45,720        47,304   

Diluted

     46,305        48,414        46,623        48,372   

Basic income (loss) per share:

        

Continuing operations

   $ 0.93      $ 0.73      $ 1.46      $ 1.20   

Discontinued operations

     —          —          —          (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 0.93      $ 0.73      $ 1.46      $ 1.19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted income (loss) per share:

        

Continuing operations

   $ 0.92      $ 0.72      $ 1.43      $ 1.18   

Discontinued operations

     —          —          —          (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 0.92      $ 0.72      $ 1.43      $ 1.17   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 14,152      $ 42,326      $ 49,053      $ 86,973   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per share

   $ 0.05      $ 0.05      $ 0.10      $ 0.10   

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

 

-2-


BELDEN INC.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)

 

     Six Months Ended  
     July 1, 2012     July 3, 2011  
     (In thousands)  

Cash flows from operating activities:

    

Net income

   $ 66,665      $ 56,615   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     23,659        25,111   

Share-based compensation

     6,339        5,716   

Provision for inventory obsolescence

     3,056        1,160   

Pension funding less than pension expense

     883        1,820   

Tax benefit related to share-based compensation

     (3,909     (1,796

Income from equity method investment

     (4,701     (7,717

Deferred income tax expense (benefit)

     (10,368     176   

Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:

    

Receivables

     (27,553     (50,623

Inventories

     13,418        (18,616

Accounts payable

     (10,823     19,282   

Accrued liabilities

     (23,754     (14,535

Accrued taxes

     3,566        12,864   

Other assets

     (1,832     1,310   

Other liabilities

     (4,084     383   
  

 

 

   

 

 

 

Net cash provided by operating activities

     30,562        31,150   

Cash flows from investing activities:

    

Capital expenditures

     (21,753     (14,883

Cash used to acquire businesses, net of cash acquired

     (587     (52,418

Proceeds from disposal of tangible assets

     353        1,222   
  

 

 

   

 

 

 

Net cash used for investing activities

     (21,987     (66,079

Cash flows from financing activities:

    

Payments under share repurchase program

     (50,000     —     

Cash dividends paid

     (4,712     (4,718

Payments under borrowing arrangements

     (600     —     

Debt issuance costs

     —          (3,296

Proceeds from exercise of stock options

     2,198        4,554   

Proceeds from settlement of derivatives

     2,733        —     

Tax benefit related to share-based compensation

     3,909        1,796   
  

 

 

   

 

 

 

Net cash used for financing activities

     (46,472     (1,664

Effect of foreign currency exchange rate changes on cash and cash equivalents

     (7,541     7,252   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (45,438     (29,341

Cash and cash equivalents, beginning of period

     382,716        358,653   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 337,278      $ 329,312   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

 

-3-


BELDEN INC.

CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENT

SIX MONTHS ENDED JULY 1, 2012

(Unaudited)

 

                                           Accumulated Other
Comprehensive Income
(Loss)
       
                  

Additional

Paid-In

Capital

                     

 

Translation

Component
of Equity

   

Pension and

Postretirement

Liability

       
     Common Stock       

Retained

Earnings

    Treasury Stock        
     Shares      Amount          Shares     Amount         Total  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                               (In thousands )                    

Balance at December 31, 2011

     50,335       $ 503       $ 601,484      $ 276,363        (4,510   $ (161,092   $ 27,463      $ (50,172   $ 694,549   

Net income

     —           —           —          66,665        —          —          —          —          66,665   

Foreign currency translation

     —           —           —          —          —          —          (17,612     —          (17,612
                    

 

 

 

Comprehensive income

                       49,053   

Exercise of stock options, net of tax withholding forfeitures

     —           —           (6,785     —          210        7,800        —          —          1,015   

Conversion of restricted stock units into commom stock, net of tax withholding forfeitures

     —           —           (11,103     —          172        8,647        —          —          (2,456

Share repurchase program

     —           —           —          —          (1,417     (50,000     —          —          (50,000

Share-based compensation

     —           —           10,248        —          —          —          —          —          10,248   

Dividends ($0.10 per share)

     —           —           —          (4,609     —          —          —          —          (4,609
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at Juy 1, 2012

     50,335       $ 503       $ 593,844      $ 338,419        (5,545   $ (194,645   $ 9,851      $ (50,172   $ 697,800   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

 

-4-


BELDEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements include Belden Inc. and all of its subsidiaries (the Company, us, we, or our). We eliminate all significant affiliate accounts and transactions in consolidation.

The accompanying Condensed Consolidated Financial Statements presented as of any date other than December 31, 2011:

 

   

Are prepared from the books and records without audit, and

 

   

Are prepared in accordance with the instructions for Form 10-Q and do not include all of the information required by accounting principles generally accepted in the United States for complete statements, but

 

   

Include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial statements.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Supplementary Data contained in our 2011 Annual Report on Form 10-K.

Business Description

We design, manufacture, and market a portfolio of cable, connectivity, and networking products in markets including industrial, enterprise, broadcast, and consumer electronics. Our products provide for the transmission of signals for data, sound, and video applications.

Reporting Periods

Our fiscal year and fiscal fourth quarter both end on December 31. Our fiscal first quarter ends on the Sunday falling closest to 91 days after December 31, which was April 1, 2012, the 92nd day of our fiscal year 2012. Our fiscal second quarter has 91 days and ended on July 1, 2012. Our fiscal third quarter has 91 days and will end on September 30, 2012.

The six months ended July 1, 2012 and July 3, 2011 included 183 and 184 days, respectively.

Reclassifications

We have made certain reclassifications to the 2011 Condensed Consolidated Financial Statements with no impact to reported net income in order to conform to the 2012 presentation.

Fair Value Measurement

Accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources or reflect our own assumptions of market

 

-5-


participant valuation. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

 

   

Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

 

   

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets, or financial instruments for which significant inputs are observable, either directly or indirectly;

 

   

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

As of and for the three and six months ended July 1, 2012 and July 3, 2011, we utilized Level 1 inputs to determine the fair value of cash equivalents. As of and for the three and six months ended July 1, 2012, we utilized Level 2 inputs to determine the fair value of derivatives and hedging instruments (see Note 7). We did not have any derivatives and hedging instruments outstanding as of or for the three and six months ended July 3, 2011. We did not have any transfers between Level 1 and Level 2 fair value measurements during the year.

Cash and Cash Equivalents

We classify cash on hand and deposits in banks, including commercial paper, money market accounts, and other investments with an original maturity of three months or less, that we hold from time to time, as cash and cash equivalents. We periodically have cash equivalents consisting of short-term money market funds and other investments. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations. We do not enter into investments for trading or speculative purposes. These cash equivalents are recorded at fair value of $175.7 million as of July 1, 2012, which is based on quoted market prices in active markets (i.e., Level 1 valuation).

Contingent Liabilities

We have established liabilities for environmental and legal contingencies that are probable of occurrence and reasonably estimable. We accrue environmental remediation costs based on estimates of known environmental remediation exposures developed in consultation with our environmental consultants and legal counsel. We are, from time to time, subject to routine litigation incidental to our business. These lawsuits primarily involve claims for damages arising out of the use of our products, allegations of patent or trademark infringement, and litigation and administrative proceedings involving employment matters and commercial disputes. Based on facts currently available, we believe the disposition of the claims that are pending or asserted will not have a materially adverse effect on our financial position, results of operations or cash flow.

As of July 1, 2012, we were party to standby letters of credit, bank guaranties, and surety bonds totaling $6.4 million, $4.7 million, and $1.7 million, respectively.

Revenue Recognition

We recognize revenue when all of the following circumstances are satisfied: (1) persuasive evidence of an arrangement exists, (2) price is fixed or determinable, (3) collectibility is reasonably assured, and (4) delivery has occurred. Delivery occurs in the period in which the customer takes title and assumes the risks and rewards of ownership of the products specified in the customer’s purchase order or sales

 

-6-


agreement. We record revenue net of estimated rebates, price allowances, invoicing adjustments, and product returns. We record revisions to these estimates in the period in which the facts that give rise to each revision become known.

Derivatives and Hedging Activities

We are exposed to various market risks, including fluctuations in foreign currency exchange rates. From time to time, we manage a portion of this risk through the use of derivative financial instruments to reduce our exposure to foreign currency risk. We do not hold or issue any derivative instrument for trading or speculative purposes.

We report all derivative financial instruments on the balance sheet at fair value. Foreign currency derivative instruments may be designated as a hedge of our net investment in certain foreign operations. If a derivative is designated as a net investment hedge, the effective portion of the gain or loss on the derivative is reported in accumulated other comprehensive income as part of the cumulative translation component of equity. Any ineffectiveness is recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Discontinued Operations

On December 16, 2010, we completed the sale of Trapeze Networks, Inc. (Trapeze) for $152.1 million. At the time the transaction closed, we received $136.9 million in cash, and the remaining $15.2 million was placed in escrow as partial security for our indemnity obligations under the sale agreement. As of July 1, 2012, we have not collected any amounts from the escrow, and we are in negotiations with the buyer of Trapeze regarding the status of the escrow and certain claims raised by the buyer. The $15.2 million remains classified on our Condensed Consolidated Balance Sheets within accounts receivable.

During 2005, we completed the sale of our discontinued communications cable operation in Phoenix, Arizona. In connection with this sale and related tax deductions, we established a reserve for uncertain tax positions. For the three and six months ended July 3, 2011 we recognized $0.3 million and $0.5 million of interest expense, respectively ($0.2 million and $0.3 million net of tax, respectively) related to the uncertain tax positions, which is included in discontinued operations.

Subsequent Events

We have evaluated subsequent events after the balance sheet date through the financial statement issuance date for appropriate accounting and disclosure. See Note 12.

Current-Year Adoption of Accounting Pronouncements

On January 1, 2012, we adopted new accounting guidance issued by the FASB with regard to the presentation and disclosure of comprehensive income. The adoption of this guidance did not have a material impact on our financial statements.

Note 2: Operating Segments

We have organized the enterprise around geographic areas. We conduct our operations through three reported operating segments—Americas; Europe, Middle East and Africa (EMEA); and Asia Pacific.

We allocate corporate expenses to the segments for purposes of measuring segment operating income. Corporate expenses are allocated on the basis of each segment’s relative operating income prior to the

 

-7-


allocation. Beginning on January 1, 2012, the results of our equity method investment in Xuzhou Hirschmann Electronics Co. Ltd. (the Hirschmann JV) are no longer included in our EMEA segment due to a change in our organizational reporting structure for the Hirschmann JV. The results of the Hirschmann JV are analyzed separately from the results of our operating segments, and they are not included in the corporate expense allocation. The prior period presentation of segment operating income has been modified accordingly.

 

     Americas      EMEA      Asia
Pacific
     Total
Segments
 
     (In thousands)  

For the three months ended July 1, 2012

           

External customer revenues

   $ 308,775       $ 93,401       $ 81,866       $ 484,042   

Affiliate revenues

     9,936         29,960         1,400         41,296   

Operating income

     44,698         21,089         9,409         75,196   

For the three months ended July 3, 2011

           

External customer revenues

     325,732         115,498         95,021         536,251   

Affiliate revenues

     11,475         27,482         398         39,355   

Operating income

     40,001         20,079         9,138         69,218   

For the six months ended July 1, 2012

           

External customer revenues

     608,397         187,530         152,406         948,333   

Affiliate revenues

     20,022         57,448         2,006         79,476   

Operating income

     80,976         38,504         14,078         133,558   

For the six months ended July 3, 2011

           

External customer revenues

     602,730         219,188         175,961         997,879   

Affiliate revenues

     23,543         50,148         499         74,190   

Operating income

     71,118         33,848         15,421         120,387   

The following table is a reconciliation of the total of the reportable segments’ operating income to consolidated income from continuing operations before taxes.

 

     Three Months Ended     Six Months Ended  
     July 1, 2012     July 3, 2011     July 1, 2012     July 3, 2011  
           (In thousands)        

Segment operating income

   $ 75,196      $ 69,218      $ 133,558      $ 120,387   

Income from equity method investment

     1,960        3,855        4,701        7,717   

Eliminations

     (18,805     (14,861     (35,943     (27,819
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating income

     58,351        58,212        102,316        100,285   

Interest expense

     (12,502     (12,748     (24,423     (24,556

Interest income

     211        156        562        315   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before taxes

   $ 46,060      $ 45,620      $ 78,455      $ 76,044   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues by major product group were as follows:

 

     Three Months Ended      Six Months Ended  
     July 1, 2012      July 3, 2011      July 1, 2012      July 3, 2011  
            (In thousands)         

Cable products

   $ 345,415       $ 378,497       $ 674,680       $ 697,625   

Networking products

     71,785         81,534         137,095         152,789   

Connectivity products

     66,842         76,220         136,558         147,465   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

   $ 484,042       $ 536,251       $ 948,333       $ 997,879   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

-8-


The main categories of cable products are (1) copper cables, including shielded and unshielded twisted pair cables, coaxial cables, and stranded cables, (2) fiber optic cables, which transmit light signals through glass or plastic fibers, and (3) composite cables, which are combinations of multiconductor, coaxial, and fiber optic cables jacketed together or otherwise joined together to serve complex applications and provide ease of installation. Networking products include wireless and wired Industrial Ethernet switches and related equipment and security features, fiber optic interfaces and media converters used to bridge fieldbus networks over long distances, and load-moment indicators for mobile cranes and other load-bearing equipment. Connectivity products include both fiber and copper connectors for the enterprise, broadcast, and industrial markets. Connectors are also sold as part of end-to-end structured cabling solutions.

Note 3: Income per Share

The following table presents the basis for the income per share computations:

 

     Three Months Ended     Six Months Ended  
     July 1, 2012      July 3, 2011     July 1, 2012      July 3, 2011  
     (In thousands)  

Numerator:

          

Income from continuing operations

   $ 42,390       $ 34,881      $ 66,665       $ 56,899   

Loss from discontinued operations, net of tax

     —           (156     —           (284
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $ 42,390       $ 34,725      $ 66,665       $ 56,615   
  

 

 

    

 

 

   

 

 

    

 

 

 

Denominator:

          

Weighted average shares outstanding, basic

     45,526         47,401        45,720         47,304   

Effect of dilutive common stock equivalents

     779         1,013        903         1,068   
  

 

 

    

 

 

   

 

 

    

 

 

 

Weighted average shares outstanding, diluted

     46,305         48,414        46,623         48,372   
  

 

 

    

 

 

   

 

 

    

 

 

 

For the three and six months ended July 1, 2012, diluted weighted average shares outstanding do not include outstanding equity awards of 1.3 million and 1.0 million, respectively, because to do so would have been anti-dilutive. For the three and six months ended July 3, 2011, diluted weighted average shares outstanding do not include outstanding equity awards of 0.7 million and 0.6 million, respectively, because to do so would have been anti-dilutive.

For purposes of calculating basic earnings per share, unvested restricted stock units are not included in the calculation of basic weighted average shares outstanding until all necessary conditions have been satisfied and issuance of the shares underlying the restricted stock units is no longer contingent. Necessary conditions are not satisfied until the vesting date, at which time holders of our restricted stock units receive shares of our common stock.

For purposes of calculating diluted earnings per share, unvested restricted stock units are included to the extent that they are dilutive. In determining whether unvested restricted stock units are dilutive, each issuance of restricted stock units is considered separately.

Once a restricted stock unit has vested, it is included in the calculation of both basic and diluted weighted average shares outstanding.

Note 4: Inventories

The major classes of inventories were as follows:

 

-9-


 

     July 1, 2012     December 31, 2011  
     (In thousands)  

Raw materials

   $ 70,645      $ 78,743   

Work-in-process

     44,644        46,683   

Finished goods

     85,143        92,126   

Perishable tooling and supplies

     2,859        3,232   
  

 

 

   

 

 

 

Gross inventories

     203,291        220,784   

Obsolescence and other reserves

     (19,337     (18,641
  

 

 

   

 

 

 

Net inventories

   $ 183,954      $ 202,143   
  

 

 

   

 

 

 

Note 5: Long-Lived Assets

Disposals

During the six months ended July 3, 2011, we sold certain real estate of the Americas segment for $1.1 million. There was no gain or loss recognized on the sale.

Depreciation and Amortization Expense

We recognized depreciation expense of $9.0 million and $17.9 million in the three and six months ended July 1, 2012, respectively. We recognized depreciation expense of $8.9 million and $18.1 million in the three and six months ended July 3, 2011, respectively.

We recognized amortization expense related to our intangible assets of $2.6 million and $5.8 million in the three and six months ended July 1, 2012, respectively. We recognized amortization expense related to our intangible assets of $3.3 million and $7.0 million in the three and six months ended July 3, 2011, respectively.

Note 6: Long-Term Debt and Other Borrowing Arrangements

Senior Secured Facility

On April 25, 2011, we entered into a new senior secured credit facility (Senior Secured Facility). The borrowing capacity under the Senior Secured Facility is $400.0 million, and it matures on April 25, 2016. Under the Senior Secured Facility, we are permitted to borrow and re-pay funds in various currencies. Interest on outstanding borrowings is variable, based on either the three month LIBOR rate or the prime rate. It is secured by certain of our assets in the United States as well as the capital stock of certain of our subsidiaries. We paid $3.3 million of fees associated with the Senior Secured Facility, which are being amortized over the life of the Senior Secured Facility using the effective interest method.

The Senior Secured Facility contains a leverage ratio covenant and a fixed charge coverage ratio covenant. As of July 1, 2012, we were in compliance with all of the covenants of the Senior Secured Facility.

The Senior Secured Facility replaced our $230.0 million senior secured credit facility that was scheduled to mature in January 2013. There were no outstanding borrowings under the prior facility at the time of its termination.

 

-10-


As of July 1, 2012, there were no outstanding borrowings under the Senior Secured Facility, and we had $387.2 million in available borrowing capacity, as our borrowing capacity is reduced by outstanding credit instruments.

See Note 12 for a discussion of changes in our long-term debt and other borrowing arrangements subsequent to July 1, 2012.

Senior Subordinated Notes

We have outstanding $200.0 million in senior subordinated notes due 2019 with a coupon interest rate of 9.25% and an effective interest rate of 9.75%. The notes are guaranteed on a senior subordinated basis by certain of our subsidiaries. The notes rank equal in right of payment with our senior subordinated notes due 2017 and with any future senior subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Senior Secured Facility. Interest is payable semiannually on June 15 and December 15. As of July 1, 2012, the carrying value of the notes was $200.9 million.

We also have outstanding $349.4 million aggregate principal amount of 7.0% senior subordinated notes due 2017. The notes are guaranteed on a senior subordinated basis by certain of our subsidiaries. The notes rank equal in right of payment with our senior subordinated notes due 2019 and with any future senior subordinated debt; they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Senior Secured Facility. Interest is payable semiannually on March 15 and September 15. As of July 1, 2012, the carrying value of the notes was $349.4 million.

The indentures governing our senior subordinated notes require that we reinvest the proceeds from qualifying dispositions of assets in the business. To the extent that such proceeds are not reinvested (excess proceeds), we are required to offer to repurchase our notes at par. We made such an offer in December 2011, as a result of excess proceeds from our disposition of Trapeze Networks, Inc. in 2010. Holders of $0.6 million of our senior subordinated notes due 2017 accepted the offer, and such notes were repurchased at par in January 2012.

Under the terms of our Senior Secured Facility, we are permitted to repurchase up to $55.0 million of our senior subordinated notes.

Fair Value of Long-Term Debt

The fair value of our debt instruments at July 1, 2012 was approximately $579.2 million based on quoted prices of the debt instruments in an inactive market (Level 2 valuation). This amount represents the fair value of our senior subordinated notes with a face value of $549.4 million.

Note 7: Derivative Instruments and Hedging Activities

We are exposed to various market risks, including fluctuations in foreign currency exchange rates. From time to time, we manage a portion of this risk through the use of derivative financial instruments to reduce our exposure to foreign currency risk. We do not hold or issue any derivative instrument for trading or speculative purposes.

We have entered into foreign currency forward contracts that have been formally designated and qualify as net investment hedges of our operations in certain European subsidiaries. The forward contracts are recorded at fair value on our Condensed Consolidated Balance Sheets. To the extent that the hedge

 

-11-


relationship is effective, the gains or losses on the forward contracts are reported in Accumulated Other Comprehensive Income (AOCI) as part of the cumulative translation component of equity. We utilize the forward-rate method of assessing hedge ineffectiveness. Any ineffectiveness is recognized in the Condensed Consolidated Statements of Operations and Comprehensive Income.

The forward contracts expose us to credit risk to the extent that the counterparties to our forward contracts are unable to meet the terms of the agreements. We seek to mitigate such risks by limiting the counterparties to major financial institutions and by executing our agreements across multiple counterparties. Additionally, our forward contracts are short-term in duration. No significant concentration of credit risk existed at July 1, 2012.

The following tables summarize our forward contracts outstanding as of July 1, 2012 and the effect on the Condensed Consolidated Financial Statements:

 

     Notional Amount
(in USD)
     Notional Amount
(in EUR)
     Maturity Date      Fair Value Included
Within Accrued
Liabilities
 
    

(In thousands)

 

Euro foreign currency forward contracts

   $ 93,541       75,000         July 23, 2012       $ (215

 

     Pre-tax Gain Recognized in AOCI  
     Three Months Ended
July 1, 2012
     Six Months Ended
July 1, 2012
 
     (In thousands)  

Euro foreign currency forward contracts

   $ 2,518       $ 2,518   

There was no ineffectiveness and no amount reclassified from AOCI into earnings for the three and six months ended July 1, 2012. There were no outstanding derivatives as of December 31, 2011 or as of or for the three and six months ended July 3, 2011.

All cash flows associated with derivatives are classified as financing cash flows in the Condensed Consolidated Cash Flow Statements. We collected $2.7 million in proceeds upon the settlement of foreign currency forward contracts for the six months ended July 1, 2012.

Foreign currency forward contracts are valued using a present value calculation based on forward foreign currency prices adjusted for credit and non-performance risk and are classified within Level 2 of the fair value hierarchy.

Note 8: Income Taxes

Income tax expense was $3.7 million and $11.8 million for the three and six months ended July 1, 2012, respectively. The effective rate reflected in the provision for income taxes on income from continuing operations before taxes is 8.0% and 15.0% for the three and six months ended July 1, 2012, respectively.

The most significant factor in the difference between the effective rate and the amount determined by applying the applicable statutory United States tax rate of 35% is the effect of changes in our deferred tax asset valuation allowance. For the three and six months ended July 1, 2012, we recorded reductions of $10.7 million and $10.4 million, respectively, in our valuation allowance associated primarily with net operating losses in certain foreign tax jurisdictions. We evaluated and assessed the expected utilization of net operating losses, future book and taxable income, available tax planning strategies, and our overall deferred tax position to determine the appropriate amount and timing of valuation allowance adjustments. As a result of changes in our business, available tax planning strategies, and future taxable income

 

-12-


projections, we determined that the weight of evidence regarding the future realizability of the deferred tax assets had become predominately positive and realization of the deferred tax assets was more likely than not.

As of July 1, 2012 and December 31, 2011, our deferred tax asset valuation allowance was $13.3 million and $24.9 million, respectively.

The tax rate differential associated with our foreign earnings is also a significant factor in the difference between the effective rate and the amount determined by applying the applicable statutory United States tax rate of 35%.

Note 9: Pension and Other Postretirement Obligations

The following table provides the components of net periodic benefit costs for our pension plans:

 

      Pension Obligations     Other Postretirement Obligations  
      July 1, 2012     July 3, 2011     July 1, 2012     July 3, 2011  
     (In thousands)  

Three Months Ended

        

Service cost

   $ 1,432      $ 1,364      $ 30      $ 41   

Interest cost

     3,037        2,867        545        672   

Expected return on plan assets

     (3,169     (2,901     —          —     

Amortization of prior service credit

     (19     (36     (29     (59

Net loss recognition

     1,490        1,545        223        111   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 2,771      $ 2,839      $ 769      $ 765   
  

 

 

   

 

 

   

 

 

   

 

 

 

Six Months Ended

                        

Service cost

   $ 2,864      $ 2,713      $ 62      $ 81   

Interest cost

     6,047        5,678        1,133        1,353   

Expected return on plan assets

     (6,333     (5,761     —          —     

Amortization of prior service credit

     (39     (72     (58     (119

Net loss recognition

     2,982        3,088        485        230   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 5,521      $ 5,646      $ 1,622      $ 1,545   
  

 

 

   

 

 

   

 

 

   

 

 

 

Note 10: Comprehensive Income

The following table summarizes total comprehensive income:

 

     Three Months Ended      Six Months Ended  
     July 1, 2012     July 3, 2011      July 1, 2012     July 3, 2011  
     (In thousands)  

Net income

   $ 42,390      $ 34,725       $ 66,665      $ 56,615   

Foreign currency translation gain (loss)

     (28,238     7,601         (17,612     30,358   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total comprehensive income

   $ 14,152      $ 42,326       $ 49,053      $ 86,973   
  

 

 

   

 

 

    

 

 

   

 

 

 

Note 11: Share Repurchases

In July 2011, our Board of Directors authorized a share repurchase program, which allows us to purchase up to $150.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance with applicable securities laws and other restrictions. For the three months

 

-13-


ended July 1, 2012, we repurchased 0.8 million shares of our common stock under the program through prepaid variable share repurchase agreements for an aggregate cost of $25.0 million and an average price per share of $32.21. For the six months ended July 1, 2012, we repurchased 1.4 million shares of our common stock under the program through prepaid variable share repurchase agreements for an aggregate cost of $50.0 million and an average price per share of $35.28. From the inception of the program to July 1, 2012, we have repurchased 3.1 million shares of our common stock under the program for an aggregate cost of $100.0 million and an average price per share of $32.76.

Note 12: Subsequent Events

In July 2012, we acquired 100% of the outstanding shares of Miranda Technologies, Inc. (Miranda) for cash consideration of $374.7 million. Miranda is a leading provider of hardware and software solutions for the broadcast infrastructure industry and will expand our solution offerings in the broadcast end-market. Miranda is headquartered in Montreal, Quebec, Canada.

The initial accounting for the Miranda acquisition, including the measurement of the fair value of the assets acquired and liabilities assumed as well as the conversion of Miranda’s financial statements from International Financial Reporting Standards to accounting principles generally accepted in the United States, is incomplete, and as a result, further details have not been disclosed.

In order to finance the purchase price, on July 23, 2012, we executed an amendment to our Senior Secured Facility and subsequently borrowed CAN$250.0 million under a new term loan (the Term Loan). The Term Loan matures in 2017 and requires quarterly amortization payments. Interest on the Term Loan is variable, based on the three month Canadian money-market rate plus an applicable spread. The remainder of the purchase price was funded with available cash.

Note 13: Supplemental Guarantor Information

As of July 1, 2012, Belden Inc. (the Issuer) has outstanding $549.4 million aggregate principal amount of senior subordinated notes. The notes rank equal in right of payment with any of our future senior subordinated debt. The notes are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Senior Secured Facility. Belden Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the notes on a joint and several basis. The financial position, results of operations, and cash flows of the guarantor subsidiaries are not material and are combined with the Issuer in the following consolidating financial information. All subsidiary guarantors are 100% owned by the Issuer.

The following consolidating financial information presents information about the Issuer and non-guarantor subsidiaries. Investments in subsidiaries are accounted for on the equity basis. Intercompany transactions are eliminated.

 

-14-


Supplemental Condensed Consolidating Balance Sheets

 

     July 1, 2012  
     Issuer     Non-
Guarantor
Subsidiaries
     Eliminations     Total  
    

(Unaudited)

(In thousands)

 
ASSETS   

Current assets:

         

Cash and cash equivalents

   $ 30,489      $ 306,789       $ —        $ 337,278   

Receivables, net

     141,397        181,175         —          322,572   

Inventories, net

     106,650        77,304         —          183,954   

Deferred income taxes

     15,737        4,336         —          20,073   

Other current assets

     9,715        11,298         —          21,013   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total current assets

     303,988        580,902         —          884,890   

Property, plant and equipment, less accumulated depreciation

     134,174        153,628         —          287,802   

Goodwill

     242,808        100,987         —          343,795   

Intangible assets, less accumulated amortization

     75,055        68,458         —          143,513   

Deferred income taxes

     (3,473     22,601         —          19,128   

Other long-lived assets

     12,690        52,503         —          65,193   

Investment in subsidiaries

     1,356,804        —           (1,356,804     —     
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 2,122,046      $ 979,079       $ (1,356,804   $ 1,744,321   
  

 

 

   

 

 

    

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

Current liabilities:

         

Accounts payable

   $ 80,899      $ 133,696       $ —        $ 214,595   

Accrued liabilities

     57,397        67,016         —          124,413   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total current liabilities

     138,296        200,712         —          339,008   

Long-term debt

     550,265        —           —          550,265   

Postretirement benefits

     33,135        96,286         —          129,421   

Other long-term liabilities

     23,539        4,288         —          27,827   

Intercompany accounts

     (40,861     40,861         —          —     

Total stockholders’ equity

     1,417,672        636,932         (1,356,804     697,800   
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 2,122,046      $ 979,079       $ (1,356,804   $ 1,744,321   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

-15-


     December 31, 2011  
     Issuer     Non-
Guarantor
Subsidiaries
     Eliminations     Total  
     (In thousands)  
ASSETS   

Current assets:

         

Cash and cash equivalents

   $ 92,586      $ 290,130       $ —        $ 382,716   

Receivables, net

     117,920        181,150         —          299,070   

Inventories, net

     125,168        76,975         —          202,143   

Deferred income taxes

     15,737        3,923         —          19,660   

Other current assets

     10,121        11,711         —          21,832   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total current assets

     361,532        563,889         —          925,421   

Property, plant and equipment, less accumulated depreciation

     132,909        154,024         —          286,933   

Goodwill

     242,808        105,224         —          348,032   

Intangible assets, less accumulated amortization

     77,455        74,228         —          151,683   

Deferred income taxes

     (1,829     14,048         —          12,219   

Other long-lived assets

     13,666        50,166         —          63,832   

Investment in subsidiaries

     1,306,843        —           (1,306,843     —     
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 2,133,384      $ 961,579       $ (1,306,843   $ 1,788,120   
  

 

 

   

 

 

    

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

Current liabilities:

         

Accounts payable

   $ 94,647      $ 132,924       $ —        $ 227,571   

Accrued liabilities

     73,579        80,416         —          153,995   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total current liabilities

     168,226        213,340         —          381,566   

Long-term debt

     550,926        —           —          550,926   

Postretirement benefits

     42,855        88,382         —          131,237   

Other long-term liabilities

     23,628        6,214         —          29,842   

Intercompany accounts

     (33,617     33,617         —          —     

Total stockholders’ equity

     1,381,366        620,026         (1,306,843     694,549   
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 2,133,384      $ 961,579       $ (1,306,843   $ 1,788,120   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

-16-


Supplemental Condensed Consolidating Statements of Operations and Comprehensive Income (Unaudited)

 

     Three Months Ended July 1, 2012  
     Issuer     Non-
Guarantor
Subsidiaries
    Eliminations     Total  
     (In thousands)  

Revenues

   $ 272,477      $ 271,689      $ (60,124   $ 484,042   

Cost of sales

     (194,020     (198,225     60,124        (332,121
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     78,457        73,464        —          151,921   

Selling, general and administrative expenses

     (44,014     (33,917     —          (77,931

Research and development

     (3,495     (11,534     —          (15,029

Amortization of intangibles

     (1,153     (1,417     —          (2,570

Income from equity method investment

     —          1,960        —          1,960   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     29,795        28,556        —          58,351   

Interest expense

     (11,734     (768     —          (12,502

Interest income

     14        197        —          211   

Intercompany income (expense)

     (942     942        —          —     

Income (loss) from equity investment in subsidiaries

     31,720        —          (31,720     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     48,853        28,927        (31,720     46,060   

Income tax benefit (expense)

     (6,463     2,793        —          (3,670
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 42,390      $ 31,720      $ (31,720   $ 42,390   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 42,308      $ 3,564      $ (31,720   $ 14,152   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Three Months Ended July 3, 2011  
     Issuer     Non-
Guarantor
Subsidiaries
    Eliminations     Total  
     (In thousands)  

Revenues

   $ 281,225      $ 302,918      $ (47,892   $ 536,251   

Cost of sales

     (212,163     (215,366     47,892        (379,637
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     69,062        87,552        —          156,614   

Selling, general and administrative expenses

     (44,251     (40,129     —          (84,380

Research and development

     (2,840     (11,690     —          (14,530

Amortization of intangibles

     (820     (2,527     —          (3,347

Income from equity method investment

     —          3,855        —          3,855   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     21,151        37,061        —          58,212   

Interest expense

     (12,162     (586     —          (12,748

Interest income

     29        127        —          156   

Intercompany income (expense)

     (13,004     13,004        —          —     

Income (loss) from equity investment in subsidiaries

     39,679        —          (39,679     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     35,693        49,606        (39,679     45,620   

Income tax expense

     (812     (9,927     —          (10,739
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     34,881        39,679        (39,679     34,881   

Loss from discontinued operations, net of tax

     (156     —          —          (156
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 34,725      $ 39,679      $ (39,679   $ 34,725   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 35,321      $ 46,684      $ (39,679   $ 42,326   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

-17-


     Six Months Ended July 1, 2012  
     Issuer     Non-
Guarantor
Subsidiaries
    Eliminations     Total  
           (In thousands)        

Revenues

   $ 531,744      $ 534,408      $ (117,819   $ 948,333   

Cost of sales

     (379,405     (393,108     117,819        (654,694
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     152,339        141,300        —          293,639   

Selling, general and administrative expenses

     (90,937     (70,220     —          (161,157

Research and development

     (7,078     (21,984     —          (29,062

Amortization of intangibles

     (2,330     (3,475     —          (5,805

Income from equity method investment

     —          4,701        —          4,701   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     51,994        50,322        —          102,316   

Interest expense

     (23,638     (785     —          (24,423

Interest income

     38        524        —          562   

Intercompany income (expense)

     (1,911     1,911        —          —     

Income (loss) from equity investment in subsidiaries

     49,959        —          (49,959     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     76,442        51,972        (49,959     78,455   

Income tax expense

     (9,777     (2,013     —          (11,790
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 66,665      $ 49,959      $ (49,959   $ 66,665   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 64,939      $ 34,073      $ (49,959   $ 49,053   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Six Months Ended July 3, 2011  
     Issuer     Non-
Guarantor
Subsidiaries
    Eliminations     Total  
    

(In thousands)

 

Revenues

   $ 521,349      $ 571,565      $ (95,035   $ 997,879   

Cost of sales

     (388,902     (416,943     95,035        (710,810
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     132,447        154,622        —          287,069   

Selling, general and administrative expenses

     (83,818     (75,498     —          (159,316

Research and development

     (5,650     (22,509     —          (28,159

Amortization of intangibles

     (1,640     (5,386     —          (7,026

Income from equity method investment

     —          7,717        —          7,717   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     41,339        58,946        —          100,285   

Interest expense

     (23,944     (612     —          (24,556

Interest income

     72        243        —          315   

Intercompany income (expense)

     (14,686     14,686        —          —     

Income (loss) from equity investment in subsidiaries

     55,653        —          (55,653     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     58,434        73,263        (55,653     76,044   

Income tax expense

     (1,535     (17,610     —          (19,145
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     56,899        55,653        (55,653     56,899   

Loss from discontinued operations, net of tax

     (284     —          —          (284
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 56,615      $ 55,653      $ (55,653   $ 56,615   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 57,211      $ 85,415      $ (55,653   $ 86,973   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

-18-


Supplemental Condensed Consolidating Statements of Cash Flows (Unaudited)

 

     Six Months Ended July 1, 2012  
     Issuer     Non-
Guarantor
Subsidiaries
    Total  
    

(In thousands)

 

Net cash provided by (used for) operating activities

   $ (5,586   $ 36,148      $ 30,562   

Cash flows from investing activities:

      

Capital expenditures

     (9,471     (12,282     (21,753

Cash used to acquire businesses, net of cash acquired

     (587     —          (587

Proceeds from disposal of tangible assets

     19        334        353   
  

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (10,039     (11,948     (21,987

Cash flows from financing activities:

      

Payments under share repurchase program

     (50,000     —          (50,000

Cash dividends paid

     (4,712     —          (4,712

Payments under borrowing arrangements

     (600     —          (600

Proceeds from exercise of stock options

     2,198        —          2,198   

Tax benefit related to share-based compensation

     3,909        —          3,909   

Proceeds from settlement of derivatives

     2,733        —          2,733   
  

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

     (46,472     —          (46,472

Effect of currency exchange rate changes on cash and cash equivalents

     —          (7,541     (7,541
  

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (62,097     16,659        (45,438

Cash and cash equivalents, beginning of period

     92,586        290,130        382,716   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 30,489      $ 306,789      $ 337,278   
  

 

 

   

 

 

   

 

 

 

 

-19-


     Six Months Ended July 3, 2011  
           Non-        
           Guarantor        
     Issuer     Subsidiaries     Total  
           (In thousands)        

Net cash provided by (used for) operating activities

   $ (14,436   $ 45,586      $ 31,150   

Cash flows from investing activities:

      

Cash used to acquire businesses, net of cash acquired

     (52,418     —          (52,418

Capital expenditures

     (9,615     (5,268     (14,883

Proceeds from disposal of tangible assets

     1,201        21        1,222   
  

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (60,832     (5,247     (66,079

Cash flows from financing activities:

      

Cash dividends paid

     (4,718     —          (4,718

Debt issuance costs

     (3,296     —          (3,296

Tax benefit related to share-based compensation

     1,796        —          1,796   

Proceeds from exercises of stock options

     4,554        —          4,554   

Intercompany capital contributions

     4,158        (4,158     —     
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     2,494        (4,158     (1,664

Effect of currency exchange rate changes on cash and cash equivalents

     —          7,252        7,252   
  

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (72,774     43,433        (29,341

Cash and cash equivalents, beginning of period

     173,699        184,954        358,653   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 100,925      $ 228,387      $ 329,312   
  

 

 

   

 

 

   

 

 

 

 

-20-


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

Overview

We design and manufacture a portfolio of cable, connectivity, and networking products, which we market through regional business segments to industrial, enterprise, broadcast, and consumer electronics markets.

We consider revenue growth, operating margin, cash flows, return on invested capital, and working capital management metrics to be our key operating performance indicators.

Trends and Events

The following trends and events during 2012 have had varying effects on our financial condition, results of operations, and cash flows.

Commodity Prices

Our operating results can be affected by changes in prices of commodities, primarily copper, silver, and compounds, which are components in some of the products we sell. Generally, as the costs of inventory purchases increase due to higher commodity prices, we raise selling prices to customers to cover the increase in costs, resulting in higher sales revenue but a lower gross profit percentage. Conversely, a decrease in commodity prices would result in lower sales revenue but a higher gross profit percentage. Selling prices of our products are affected by many factors, including end market demand, capacity utilization, overall economic conditions, and commodity prices. Importantly, however, there is no exact measure of the effect of changing commodity prices, as there are thousands of transactions in any given quarter, each of which has various factors involved in the individual pricing decisions. Therefore, all references to the effect of copper prices or other commodity prices are estimates.

Channel Inventory

Our operating results also can be affected by the levels of Belden products held as inventory by our channel partners and customers. Our channel partners and customers purchase and hold our products in their inventory in order to meet the service and on-time delivery requirements of their end customers. Generally, as our channel partners and customers change the level of Belden products held in their inventory, it impacts our revenues. Comparisons of our results between periods can be impacted by changes in the levels of channel inventory.

Restructuring Activities

As a result of uncertainty in the global economic environment, we expect to execute restructuring activities in 2012 in order to continue managing our costs and competitive position and to support our strategic plan.

Subsequent Events

In July 2012, we acquired 100% of the outstanding shares of Miranda Technologies, Inc. (Miranda) for cash consideration of $374.7 million. Miranda is a leading provider of hardware and software solutions for the broadcast infrastructure industry and will expand our solution offerings in the broadcast end-market. Miranda is headquartered in Montreal, Quebec, Canada.

 

-21-


In order to finance the purchase price, on July 23, 2012, we executed an amendment to our Senior Secured Facility and subsequently borrowed CAN$250.0 million under a new term loan (the Term Loan). The remainder of the purchase price was funded with available cash.

See Note 12 to the Condensed Consolidated Financial Statements for additional discussion of the acquisition of Miranda.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows that are or would be considered material to investors.

Critical Accounting Policies

During the six months ended July 1, 2012:

 

   

We did not change any of our existing critical accounting policies from those listed in our 2011 Annual Report on Form 10-K;

   

No existing accounting policies became critical accounting policies because of an increase in the materiality of associated transactions or changes in the circumstances to which associated judgments and estimates relate; and

   

There were no significant changes in the manner in which critical accounting policies were applied or in which related judgments and estimates were developed.

Results of Operations

Consolidated Continuing Operations

 

     Three Months Ended      %
Change
    Six Months Ended      %
Change
 
     July 1, 2012      July 3, 2011        July 1, 2012      July 3, 2011     
            (In thousands, except percentages)                

Revenues

   $ 484,042       $ 536,251         -9.7   $ 948,333       $ 997,879         -5.0

Gross profit

     151,921         156,614         -3.0     293,639         287,069         2.3

Selling, general and administrative expenses

     77,931         84,380         -7.6     161,157         159,316         1.2

Research and development

     15,029         14,530         3.4     29,062         28,159         3.2

Operating income

     58,351         58,212         0.2     102,316         100,285         2.0

Income from continuing operations before taxes

     46,060         45,620         1.0     78,455         76,044         3.2

Income from continuing operations

     42,390         34,881         21.5     66,665         56,899         17.2

Revenues decreased in the three and six months ended July 1, 2012 from the comparable periods of 2011 primarily for the following reasons:

 

   

Decreases in unit sales volume, changes in channel inventory, pricing changes related to non-copper commodity cost decreases, and other pricing changes resulted in revenue decreases of $24.1 million and $18.0 million, respectively.

   

Unfavorable currency translation, primarily due to the U.S. dollar strengthening against the euro, resulted in revenue decreases of $14.4 million and $18.0 million, respectively.

   

Decreases in selling prices due to lower copper costs resulted in estimated revenue decreases of approximately $14 million and $24 million, respectively.

 

-22-


These decreases were partially offset by revenue due to acquisitions of $0.3 million and $10.5 million, respectively.

Gross profit decreased in the three months ended July 1, 2012 from the comparable period of 2011 due to the decrease in revenues as discussed above. This impact was partially offset by improved product mix on an end-market basis and as a result of deliberate product portfolio management actions. Gross profit also benefited from favorable manufacturing input costs and improved productivity due to our Lean enterprise initiatives. As a result of these factors, our gross profit percentage increased from 29.2% for the three months ended July 3, 2011 to 31.4% for the three months ended July 1, 2012.

Gross profit increased in the six months ended July 1, 2012 from the comparable period of 2011 due to improved product mix, favorable manufacturing input costs, improved productivity due to our Lean enterprise initiatives, and the impact of our acquisitions. As a result of these factors, our gross profit percentage increased from 28.8% for the six months ended July 3, 2011 to 31.0% for the six months ended July 1, 2012.

Selling, general and administrative expenses decreased in the three months ended July 1, 2012 from the comparable period of 2011. The decrease is primarily due to cost management initiatives, including decreased discretionary spending, as a result of uncertain economic conditions. Selling, general, and administrative expenses also decreased due to the impact of foreign currency translation. Selling, general and administrative expenses increased in the six months ended July 1, 2012 from the comparable period of 2011 due to investments in our strategic initiatives, including our Market Delivery System and Talent Management.

Research and development expenses increased in the three and six months ended July 1, 2012 from the comparable periods of 2011 primarily due to increased investments in new product development and our acquisitions completed in 2011.

Income from our equity method investment decreased in the three and six months ended July 1, 2012 from the comparable periods of 2011 by $1.9 million and $3.0 million, respectively, primarily due to a slowdown in the Chinese construction industry.

Operating income increased in the three and six months ended July 1, 2012 from the comparable periods of 2011 due to the factors discussed above. Our operating income percentage increased from 10.8% and 10.0% for the three and six months ended July 3, 2011, respectively, to 12.1% and 10.8% for the three and six months ended July 1, 2012, respectively.

Income from continuing operations before taxes increased in the three and six months ended July 1, 2012 due to the increases in operating income discussed above.

Our effective tax rate for the three and six months ended July 1, 2012 was 8.0% and 15.0%, respectively, compared to 23.5% and 25.2% for the three and six months ended July 3, 2011, respectively. These changes are primarily attributable to tax benefits recorded for the three and six months ended July 1, 2012 of $10.7 million and $10.4 million, respectively, due to reductions of our valuation allowance for certain deferred tax assets.

Americas Segment

 

-23-


     Three Months Ended     %
Change
    Six Months Ended     %
Change
 
     July 1, 2012     July 3, 2011       July 1, 2012     July 3, 2011    
           (In thousands, except percentages)              

Total revenues

   $ 318,711      $ 337,207        -5.5   $ 628,419      $ 626,273        0.3

Operating income

     44,698        40,001        11.7     80,976        71,118        13.9

as a percent of total revenues

     14.0     11.9       12.9     11.4  

Americas total revenues, which include affiliate revenues, decreased in the three months ended July 1, 2012 from the comparable period of 2011. A decrease in selling prices due to lower copper costs resulted in an estimated decrease in revenues of approximately $8 million. Lower unit sales volume, changes in channel inventory, pricing changes related to non-copper commodity cost decreases, and other pricing changes resulted in a decrease in revenues of $4.7 million. Unfavorable currency translation, primarily due to the U.S. dollar strengthening against the Canadian dollar and Brazilian real, resulted in a decrease in revenue of $4.3 million. A decrease in affiliate sales resulted in a decrease in revenues of $1.5 million. Our APAC segment has increased local manufacturing capabilities of products previously purchased from the Americas segment, which resulted in the decrease in affiliate sales for the Americas segment.

Americas total revenues increased in the six months ended July 1, 2012 from the comparable period of 2011. Higher unit sales volume, changes in channel inventory, pricing changes related to non-copper commodity cost changes, and other pricing changes resulted in an increase in revenues of $15.6 million. Acquisitions contributed $9.6 million to the increase in revenues. These increases were partially offset by other factors. A decrease in selling prices due to lower copper costs resulted in an estimated decrease in revenues of approximately $14 million. Unfavorable currency translation, primarily due to the U.S. dollar strengthening against the Canadian dollar and the Brazilian real, resulted in a decrease in revenue of $5.6 million. A decrease in affiliate sales resulted in a decrease in revenues of $3.5 million.

Operating income increased in the three and six months July 1, 2012 from the comparable periods of 2011 primarily due to improved product mix and favorable manufacturing input costs. Our acquisitions completed in 2011 also contributed to the increase in operating income as compared to the prior year. As a result of these factors and improved productivity due to our Lean enterprise initiatives, the Americas operating income percentage expanded from 11.9% and 11.4% for the three and six months ended July 3, 2011, respectively, to 14.0% and 12.9% for the three and six months ended July 1, 2012, respectively.

EMEA Segment

 

     Three Months Ended     %
Change
    Six Months Ended     %
Change
 
     July 1, 2012     July 3, 2011       July 1, 2012     July 3, 2011    
           (In thousands, except percentages)              

Total revenues

   $ 123,361      $ 142,980        -13.7   $ 244,978      $ 269,336        -9.0

Operating income

     21,089        20,079        5.0     38,504        33,848        13.8

as a percent of total revenues

     17.1     14.0       15.7     12.6  

EMEA total revenues, which include affiliate revenues, decreased in the three and six months ended July 1, 2012 from the comparable periods of 2011. Unfavorable currency translation, primarily from the U.S. dollar strengthening against the euro, resulted in decreases in revenue of $11.0 million and $14.6 million, respectively. Lower unit sales volume, including changes in channel inventory, resulted in decreases in revenue of $10.4 million and $16.0 million, respectively, primarily due to softening economic conditions in Europe, including government austerity measures. Decreases in selling prices due to lower copper costs resulted in estimated decreases in revenue of approximately $1 million and $2 million, respectively. The decreases in revenues were partially offset by increases in affiliate sales of $2.5 million and $7.3 million, respectively. Acquisitions contributed $0.3 million and $0.9 million of revenues, respectively.

 

-24-


Operating income increased in the three and six months ended July 1, 2012 from the comparable periods of 2011 due to favorable product mix and improved productivity due to our Lean enterprise initiatives. As a result of these factors, the EMEA operating income percentage expanded from 14.0% and 12.6% for the three and six months ended July 3, 2011, respectively, to 17.1% and 15.7% for the three and six months ended July 1, 2012, respectively.

Asia Pacific Segment

 

     Three Months Ended     %
Change
    Six Months Ended     %
Change
 
     July 1, 2012     July 3, 2011       July 1, 2012     July 3, 2011    
           (In thousands, except percentages)              

Total revenues

   $ 83,266      $ 95,419        -12.7   $ 154,412      $ 176,460        -12.5

Operating income

     9,409        9,138        3.0     14,078        15,421        -8.7

as a percent of total revenues

     11.3     9.6       9.1     8.7  

Asia Pacific total revenues, which include affiliate revenues, decreased in the three and six months ended July 1, 2012 from the comparable periods of 2011. Lower sales volume as a result of softening economic conditions in China and a decrease in the inventory levels held by our channel partners resulted in decreases in revenue of $8.9 million and $16.5 million, respectively. Lower sales volume was also due to deliberate product portfolio actions taken to improve profitability in our consumer electronics business within this segment. We continue to evaluate strategic alternatives to address the underperforming consumer electronics business in this segment. Decreases in selling prices due to lower copper costs resulted in estimated decreases in revenue of approximately $5 million and $9 million, respectively. The decreases in revenue were partially offset by other factors. Higher affiliate sales resulted in revenue increases of $1.0 million and $1.5 million, respectively. Favorable currency translation, primarily from the Chinese renminbi strengthening against the U.S. dollar, resulted in revenue increases of $0.7 million and $2.0 million.

Operating income increased in the three months ended July 1, 2012 from the comparable period of 2011 due to improved product mix as a result of deliberate product portfolio management actions. Operating income also benefited from improved productivity due to our Lean enterprise initiatives. As a result of these factors, the APAC operating income percentage expanded from 9.6% for the three months ended July 3, 2011 to 11.3% for the three months ended July 1, 2012.

Operating income decreased in the six months ended July 1, 2012 from the comparable period of 2011 due to the decreases in revenues discussed above. The impact of improved product mix due to deliberate product portfolio management actions offset the impact of the decreases in revenues. As a result, the APAC operating income percentage expanded from 8.7% for the six months ended July 3, 2011 to 9.1% for the six months ended July 1, 2012.

Product Group Information

Revenues by major product group were as follows:

 

     Three Months Ended      %
Change
    Six Months Ended      %
Change
 
     July 1, 2012      July 3, 2011        July 1, 2012      July 3, 2011     
                   (In thousands, except percentages)  

Cable products

   $ 345,415       $ 378,497         -8.7   $ 674,680       $ 697,625         -3.3

Networking products

     71,785         81,534         -12.0     137,095         152,789         -10.3

Connectivity products

     66,842         76,220         -12.3     136,558         147,465         -7.4

 

-25-


Cable product revenues decreased in the three and six months ended July 1, 2012 from the comparable periods of 2011. Decreases in selling prices due to lower copper costs resulted in estimated decreases in revenues of approximately $14 million and $24 million, respectively. Decreases in unit sales volume, changes in channel inventory, pricing changes related to non-copper commodity costs and other pricing changes resulted in revenue decreases of $12.4 million and $0.7 million, respectively. Unfavorable currency translation resulted in decreases in revenues of $6.7 million and $7.8 million, respectively. For the six months ended July 1, 2012, the decrease in cable product revenues was partially offset by revenues from acquisitions of $9.6 million.

Networking product revenues decreased in the three and six months ended July 1, 2012 from the comparable periods of 2011 primarily due to decreases in unit sales volume of $5.7 million and $10.9 million, respectively, as a result of decreases in inventory levels held by our channel partners, a slowdown in the Chinese construction industry, and softening economic conditions in Europe, including government austerity measures. Unfavorable currency translation resulted in decreases in networking product revenues of $4.3 million and $5.7 million, respectively. These decreases were partially offset by revenues from acquisitions of $0.3 million and $0.9 million, respectively.

Connectivity product revenues decreased in the three and six months ended July 1, 2012 from the comparable periods of 2011 primarily due to decreases in unit sales volume, including changes in channel inventory, of $6.0 million and $6.3 million, respectively. Unfavorable currency translation resulted in decreases in connectivity product revenues of $3.4 million and $4.6 million, respectively.

Discontinued Operations

On December 16, 2010, we completed the sale of Trapeze Networks, Inc. (Trapeze) for $152.1 million. At the time the transaction closed, we received $136.9 million in cash, and the remaining $15.2 million was placed in escrow as partial security for our indemnity obligations under the sale agreement. As of July 1, 2012, we have not collected any amounts from the escrow, and we are in negotiations with the buyer of Trapeze regarding the status of the escrow and certain claims raised by the buyer. The $15.2 million remains classified on our Condensed Consolidated Balance Sheets within accounts receivable.

During 2005, we completed the sale of our discontinued communications cable operation in Phoenix, Arizona. In connection with this sale and related tax deductions, we established a reserve for uncertain tax positions. For the three and six months ended July 3, 2011 we recognized $0.3 million and $0.5 million of interest expense, respectively ($0.2 million and $0.3 million net of tax, respectively) related to the uncertain tax positions, which is included in discontinued operations.

Liquidity and Capital Resources

Significant factors affecting our cash liquidity include (1) cash provided by operating activities, (2) disposals of businesses and tangible assets, (3) exercises of stock options, (4) cash used for acquisitions, restructuring actions, capital expenditures, share repurchases, dividends, and senior subordinated note repurchases, and (5) our available credit facilities and other borrowing arrangements. We expect our operating activities to generate cash in 2012 and believe our sources of liquidity are sufficient to fund current working capital requirements, capital expenditures, contributions to our retirement plans, share repurchases, senior subordinated note repurchases, quarterly dividend payments, and our short-term operating strategies. Our ability to continue to fund our future needs from business operations could be affected by many factors, including, but not limited to: economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product mix, and commodities pricing.

 

-26-


The following table is derived from our Condensed Consolidated Cash Flow Statements:

 

     Six Months Ended  
     July 1, 2012     July 3, 2011  
     (In thousands)  

Net cash provided by (used for):

    

Operating activities

   $ 30,562      $ 31,150   

Investing activities

     (21,987     (66,079

Financing activities

     (46,472     (1,664

Effects of currency exchange rate changes on cash and cash equivalents

     (7,541     7,252   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (45,438     (29,341

Cash and cash equivalents, beginning of period

     382,716        358,653   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 337,278      $ 329,312   
  

 

 

   

 

 

 

Net cash provided by operating activities, a key source of our liquidity, decreased by $0.6 million for the six months ended July 1, 2012 from the comparable period of 2011. The increased use of cash by operating assets and liabilities was substantially offset by an increase in net income.

Accounts receivable were a use of cash of $27.6 million for the six months ended July 1, 2012, compared to a use of cash of $50.6 million for the comparable period of 2011. Our days’ sales outstanding improved from 62 days as of July 3, 2011 to 61 days as of July 1, 2012. We calculate days’ sales outstanding by dividing accounts receivable as of the end of the quarter by the average daily revenues recognized during the quarter.

Inventories were a source of cash of $13.4 million for the six months ended July 1, 2012, while inventories were a use of cash of $18.6 million for the comparable period of 2011. Inventory turns decreased from 7.5 turns as of July 3, 2011 to 7.2 turns as of July 1, 2012. We calculate inventory turns by dividing annualized cost of sales for the quarter by the inventory balance at the end of the quarter.

Net cash used for investing activities totaled $22.0 million for the six months ended July 1, 2012 compared to $66.1 million for the comparable period of 2011. Investing activities in the six months ended July 1, 2012 included capital expenditures of $21.8 million and a payment related to a previous acquisition of $0.6 million. Investing activities in the six months ended July 3, 2011 included payments for our acquisitions, net of cash acquired, of $52.4 million, capital expenditures of $14.9 million, and the receipt of $1.1 million of proceeds from the sale of real estate in the Americas segment.

Net cash used for financing activities for the six months ended July 1, 2012 totaled $46.5 million compared to $1.7 million for the comparable period of 2011. This change is primarily due to payments under our share repurchase program of $50.0 million for the six months ended July 1, 2012.

Our cash and cash equivalents balance was $337.3 million as of July 1, 2012. Of this amount, $306.2 million was held outside of the U.S. in our foreign operations. Substantially all of the foreign cash and cash equivalents are readily convertible into U.S. dollars or other foreign currencies. Our strategic plan does not require the repatriation of foreign cash in order to fund our operations in the U.S., and it is our current intention to permanently reinvest the foreign cash and cash equivalents outside of the U.S. If we were to repatriate the foreign cash, we may be required to accrue and pay taxes in accordance with applicable tax rules and regulations of the U.S. or other tax jurisdictions as a result of the repatriation.

 

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Our outstanding debt obligations as of July 1, 2012 consisted of $349.4 million aggregate principal of 7.0% senior subordinated notes due 2017 and $200.0 million aggregate principal of 9.25% senior subordinated notes due 2019. As of July 1, 2012, there were no outstanding borrowings under our senior secured credit facility, we were in compliance with all of the covenants of the facility, and we had $387.2 million in available borrowing capacity. Additional discussion regarding our various borrowing arrangements is included in Notes 6 and 12 to the Condensed Consolidated Financial Statements.

Forward-Looking Statements

Statements in this report other than historical facts are “forward looking statements” made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995. Forward looking statements include any statements regarding future revenues, costs and expenses, operating income, earnings per share, margins, cash flows, dividends, and capital expenditures. These forward looking statements are based on forecasts and projections about the markets and industries which we serve and about general economic conditions. They reflect management’s beliefs and expectations. They are not guarantees of future performance, and they involve risk and uncertainty. Our actual results may differ materially from these expectations. Changes in the global economy may impact our results. Turbulence in financial markets may increase our borrowing costs. Additional factors that may cause actual results to differ from our expectations include: our reliance on key distributors in marketing products; our ability to execute and realize the expected benefits from strategic initiatives (including revenue growth, cost control and productivity improvement programs); changes in the level of economic activity in our major geographic markets; difficulties in realigning manufacturing capacity and capabilities among our global manufacturing facilities; the competitiveness of the global cable, connectivity, and networking industries; variability in our quarterly and annual effective tax rates; changes in accounting rules and interpretations of those rules which may affect our reported earnings; changes in currency exchange rates and political and economic uncertainties in the countries where we conduct business; demand for our products; the cost and availability of materials including copper, plastic compounds derived from fossil fuels, electronic components, and other materials; energy costs; our ability to achieve acquisition performance expectations and to integrate acquired businesses successfully; our ability to develop and introduce new products; having to recognize charges that would reduce income as a result of impairing goodwill and other intangible assets; security risks and the potential for business interruption from operating in volatile countries; disruptions or failures of our (or our suppliers or customers) systems or operations in the event of a major earthquake, weather event, cyber-attack, terrorist attack, or other catastrophic event that could cause delays in completing sales, providing services, or performing other mission-critical functions; and other factors.

For a more complete discussion of risk factors, please see our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on February 29, 2012. We disclaim any duty to update any forward-looking statements as a result of new information, future developments, or otherwise.

 

Item 3: Quantitative and Qualitative Disclosures about Market Risks

We are exposed to various market risks, including fluctuations in foreign currency exchange rates. From time to time, we manage a portion of this risk through the use of derivative financial instruments to reduce our exposure to foreign currency risk. We do not hold or issue any derivative instrument for trading or speculative purposes. As of July 1, 2012, we had $93.5 million aggregate outstanding notional amount related to foreign currency forward contracts accounted for as net investment hedges of our investment in certain European subsidiaries. The fair value of the forward contracts was $0.2 million, classified within accrued liabilities within the Condensed Consolidated Balance Sheets. See Note 7 to the Condensed Consolidated Financial Statements for additional discussion.

 

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Item 7A of our 2011 Annual Report on Form 10-K provides more information as to the practices and instruments that we use to manage market risks. There were no other material changes in our exposure to market risks since December 31, 2011.

 

Item 4: Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

-29-


PART II OTHER INFORMATION

 

Item 1: Legal Proceedings

We are a party to various legal proceedings and administrative actions that are incidental to our operations. These proceedings include personal injury cases, 109 of which are pending as of July 30, 2012, in which we are one of many defendants. Electricians have filed a majority of these cases, primarily in Pennsylvania and Illinois, generally seeking compensatory, special, and punitive damages. Typically in these cases, the claimant alleges injury from alleged exposure to a heat-resistant asbestos fiber. Our alleged predecessors had a small number of products that contained the fiber, but ceased production of such products more than 20 years ago. Through July 30, 2012, we have been dismissed, or reached agreement to be dismissed, in more than 400 similar cases without any going to trial, and with only a small number of these involving any payment to the claimant. In our opinion, the proceedings and actions in which we are involved should not, individually or in the aggregate, have a material adverse effect on our financial condition, operating results, or cash flows. However, since the trends and outcome of this litigation are inherently uncertain, we cannot give absolute assurance regarding the future resolution of such litigation, or that such litigation may not become material in the future.

We are a former owner of a property located in Kingston, Canada. The Ontario, Canada Ministry of the Environment is seeking to require current and former owners of the Kingston property to delineate and remediate soil and groundwater contamination at the site, which we believe was caused by Nortel (a former owner of the site). We are in the process of assessing whether we have any liability for the site, as well as the scope of contamination, cost of remediation, allocation of costs among the parties, and the other parties’ financial viability. Based on our current information, we do not believe this matter should have a material adverse effect on our financial condition, operating results, or cash flows. However, since the outcome of this matter is uncertain, we cannot give absolute assurance regarding its future resolution, or that such matter may not become material in the future.

 

Item 1A: Risk Factors

There have been no material changes with respect to risk factors as previously disclosed in our 2011 Annual Report on Form 10-K.

 

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Set forth below is information regarding our stock repurchases for the three months ended July 1, 2012.

 

Period    Total Number of Shares
Purchased
     Average Price Paid per
Share
     Total Number of Shares
Repurchased as Part of
Publicly Announced
Plans or Programs (1)
     Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs
 

April 2, 2012 through May 6, 2012

     —         $ —           —         $ 75,000,000   

May 7, 2012 through June 3, 2012

     —           —           —           75,000,000   

June 4, 2012 through July 1, 2012

     776,240         32.21         776,240         50,000,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     776,240       $ 32.21         776,240       $ 50,000,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
(1) In July 2011, our Board of Directors authorized a share repurchase program, which allows us to purchase up to $150.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance with applicable securities laws and other restrictions. The program does not have an expiration date and may be suspended at any time at the discretion of the Company. From inception of the program to July 1, 2012, we have repurchased 3.1 million shares of our common stock under the program for an aggregate cost of $100.0 million and an average price of $32.76.

 

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Item 6: Exhibits

Exhibits

 

  Exhibit 31.1    Certificate of the Chief Executive Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.
  Exhibit 31.2    Certificate of the Chief Financial Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.
  Exhibit 32.1    Certificate of the Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
  Exhibit 32.2    Certificate of the Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS    XBRL Instance Document
Exhibit 101.SCH    XBRL Taxonomy Extension Schema
Exhibit 101.CAL    XBRL Taxonomy Extension Calculation
Exhibit 101.DEF    XBRL Taxonomy Extension Definition
Exhibit 101.LAB    XBRL Taxonomy Extension Label
Exhibit 101.PRE    XBRL Taxonomy Extension Presentation

 

-31-


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    BELDEN INC.
Date:    August 9, 2012     By:   /s/ John S. Stroup        
      John S. Stroup
      President, Chief Executive Officer and Director
Date:    August 9, 2012     By:   /s/ Henk Derksen        
      Henk Derksen
      Senior Vice President, Finance, and Chief Financial Officer
Date:    August 9, 2012     By:   /s/ John S. Norman        
      John S. Norman
      Vice President, Controller, and Chief Accounting Officer

 

-32-

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