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- Quarterly Report (10-Q)

Date : 05/10/2012 @ 1:04PM
Source : Edgar (US Regulatory)
Stock : Belden (BDC)
Quote : 75.26  -0.57 (-0.75%) @ 3:36PM
Belden Inc share price Chart

- Quarterly Report (10-Q)

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 April 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 May 7, 2012, the Registrant had 45,513,186 outstanding shares of common stock.

 

 

 


 

PART I FINANCIAL INFORMATION

Item 1.    Financial Statements

BELDEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

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

Current assets:

    

Cash and cash equivalents

   $ 370,017      $ 382,716   

Receivables, net

     289,915        299,070   

Inventories, net

     200,900        202,143   

Deferred income taxes

     20,123        19,660   

Other current assets

     20,781        21,832   
  

 

 

   

 

 

 

Total current assets

     901,736        925,421   

Property, plant and equipment, less accumulated depreciation

     290,257        286,933   

Goodwill

     349,552        348,032   

Intangible assets, less accumulated amortization

     149,419        151,683   

Deferred income taxes

     9,816        12,219   

Other long-lived assets

     66,946        63,832   
  

 

 

   

 

 

 
   $ 1,767,726      $ 1,788,120   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

Current liabilities:

    

Accounts payable

   $ 222,725      $ 227,571   

Accrued liabilities

     123,732        153,995   
  

 

 

   

 

 

 

Total current liabilities

     346,457        381,566   

Long-term debt

     550,295        550,926   

Postretirement benefits

     133,948        131,237   

Other long-term liabilities

     29,138        29,842   

Stockholders’ equity:

    

Preferred stock

     —          —     

Common stock

     503        503   

Additional paid-in capital

     593,282        601,484   

Retained earnings

     298,321        276,363   

Accumulated other comprehensive loss

     (12,083     (22,709

Treasury stock

     (172,135     (161,092
  

 

 

   

 

 

 

Total stockholders’ equity

     707,888        694,549   
  

 

 

   

 

 

 
   $ 1,767,726      $ 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  
     April 1, 2012     April 3, 2011  
     (In thousands, except per share amounts)  

Revenues

   $ 464,291      $ 461,628   

Cost of sales

     (322,573     (331,173
  

 

 

   

 

 

 

Gross profit

     141,718        130,455   

Selling, general and administrative expenses

     (83,226     (74,936

Research and development

     (14,033     (13,629

Amortization of intangibles

     (3,235     (3,679

Income from equity method investment

     2,741        3,862   
  

 

 

   

 

 

 

Operating income

     43,965        42,073   

Interest expense

     (11,921     (11,808

Interest income

     351        159   
  

 

 

   

 

 

 

Income from continuing operations before taxes

     32,395        30,424   

Income tax expense

     (8,120     (8,406
  

 

 

   

 

 

 

Income from continuing operations

     24,275        22,018   

Loss from discontinued operations, net of tax

     —          (128
  

 

 

   

 

 

 

Net income

   $ 24,275      $ 21,890   
  

 

 

   

 

 

 

Weighted average number of common shares and equivalents:

    

Basic

     45,912        47,209   

Diluted

     46,938        48,330   

Basic income (loss) per share

    

Continuing operations

   $ 0.53      $ 0.47   

Discontinued operations

     —          (0.01
  

 

 

   

 

 

 

Net income

   $ 0.53      $ 0.46   
  

 

 

   

 

 

 

Diluted income (loss) per share

    

Continuing operations

   $ 0.52      $ 0.46   

Discontinued operations

     —          (0.01
  

 

 

   

 

 

 

Net income

   $ 0.52      $ 0.45   
  

 

 

   

 

 

 

Comprehensive income

   $ 34,901      $ 44,647   
  

 

 

   

 

 

 

Dividends declared per share

   $ 0.05      $ 0.05   

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

 

-2-


BELDEN INC.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)

 

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

Cash flows from operating activities:

    

Net income

   $ 24,275      $ 21,890   

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

    

Depreciation and amortization

     12,157        12,860   

Share-based compensation

     2,977        2,925   

Provision for inventory obsolescence

     2,491        878   

Pension funding less than pension expense

     756        1,613   

Income from equity method investment

     (2,741     (3,862

Tax benefit related to share-based compensation

     (4,119     (1,668

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

    

Receivables

     11,904        (12,431

Inventories

     (4     (24,622

Accounts payable

     (5,634     10,528   

Accrued liabilities

     (30,141     (30,638

Accrued taxes

     5,105        7,347   

Other assets

     (215     (794

Other liabilities

     (4,063     347   
  

 

 

   

 

 

 

Net cash provided by (used for) operating activities

     12,748        (15,627

Cash flows from investing activities:

    

Capital expenditures

     (7,557     (6,798

Cash used to acquire businesses, net of cash acquired

     (587     (23,192

Proceeds from disposal of tangible assets

     —          1,136   
  

 

 

   

 

 

 

Net cash used for investing activities

     (8,144     (28,854

Cash flows from financing activities:

    

Payments under share repurchase program

     (25,000     —     

Cash dividends paid

     (2,409     (2,392

Payments under borrowing arrangements

     (600     —     

Proceeds from exercise of stock options

     2,179        3,952   

Tax benefit related to share-based compensation

     4,119        1,668   
  

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     (21,711     3,228   

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

     4,408        5,685   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (12,699     (35,568

Cash and cash equivalents, beginning of period

     382,716        358,653   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 370,017      $ 323,085   
  

 

 

   

 

 

 

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

 

-3-


BELDEN INC.

CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENT

THREE MONTHS ENDED APRIL 1, 2012

(Unaudited)

 

                                           Accumulated Other
Comprehensive Income (Loss)
       
                  

Additional

Paid-In

Capital

                     

 

Translation

Component

of Equity

    

Pension and

Postretirement

Liability

   

Total

 
     Common Stock       

Retained

Earnings

    Treasury Stock         
     Shares      Amount          Shares     Amount         
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
                               (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

     —           —           —          24,275        —          —          —           —          24,275   

Foreign currency translation

     —           —           —          —          —          —          10,626         —          10,626   
                     

 

 

 

Comprehensive income

                        34,901   

Exercise of stock options, net of tax withholding forfeitures

     —           —           (6,359     —          202        7,398        —           —          1,039   

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

     —           —           (8,939     —          127        6,559        —           —          (2,380

Share repurchase program

     —           —           —          —          (641     (25,000     —           —          (25,000

Share-based compensation

     —           —           7,096        —          —          —          —           —          7,096   

Dividends ($0.05 per share)

     —           —           —          (2,317     —          —          —           —          (2,317
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Balance at April 1, 2012

     50,335       $ 503       $ 593,282      $ 298,321        (4,822   $ (172,135   $ 38,089       $ (50,172   $ 707,888   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

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 and third quarters each have 91 days. The three months ended April 3, 2011 included 93 days.

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 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;

 

-5-


   

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 during the three months ended April 1, 2012 and April 3, 2011, we utilized Level 1 inputs to determine the fair value of cash equivalents.

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. The fair value of these cash equivalents as of April 1, 2012 was $187.2 million and 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 April 1, 2012, we were party to standby letters of credit, bank guaranties, and surety bonds totaling $7.0 million, $4.9 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 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.

 

-6-


Discontinued Operations

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 months ended April 3, 2011 we recognized $0.2 million of interest expense ($0.1 million net of tax) 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.

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 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 April 1, 2012

           

External customer revenues

   $ 299,622       $ 94,129       $ 70,540       $ 464,291   

Affiliate revenues

     10,086         27,488         606         38,180   

Operating income

     36,278         17,415         4,669         58,362   

For the three months ended April 3, 2011

           

External customer revenues

   $ 276,998       $ 103,690       $ 80,940       $ 461,628   

Affiliate revenues

     12,068         22,666         101         34,835   

Operating income

     31,117         13,769         6,283         51,169   

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

 

-7-


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

Segment operating income

   $ 58,362      $ 51,169   

Income from equity method investment

     2,741        3,862   

Eliminations

     (17,138     (12,958
  

 

 

   

 

 

 

Total operating income

     43,965        42,073   

Interest expense

     (11,921     (11,808

Interest income

     351        159   
  

 

 

   

 

 

 

Income from continuing operations before taxes

   $ 32,395      $ 30,424   
  

 

 

   

 

 

 

Revenues by major product group were as follows:

 

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

Cable products

   $ 329,265       $ 319,128   

Networking products

     65,310         71,255   

Connectivity products

     69,716         71,245   
  

 

 

    

 

 

 

Total revenues

   $ 464,291       $ 461,628   
  

 

 

    

 

 

 

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.

 

-8-


Note 3: Income per Share

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

 

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

Numerator:

     

Income from continuing operations

   $ 24,275       $ 22,018   

Loss from discontinued operations, net of tax

     —           (128
  

 

 

    

 

 

 

Net income

   $ 24,275       $ 21,890   
  

 

 

    

 

 

 

Denominator:

     

Weighted average shares outstanding, basic

     45,912         47,209   

Effect of dilutive common stock equivalents

     1,026         1,121   
  

 

 

    

 

 

 

Weighted average shares outstanding, diluted

     46,938         48,330   
  

 

 

    

 

 

 

For the three months ended April 1, 2012 and April 3, 2011, diluted weighted average shares outstanding do not include outstanding equity awards of 0.7 million and 0.4 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:

 

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

Raw materials

   $ 76,508      $ 78,743   

Work-in-process

     47,827        46,683   

Finished goods

     94,182        92,126   

Perishable tooling and supplies

     3,021        3,232   
  

 

 

   

 

 

 

Gross inventories

     221,538        220,784   

Obsolescence and other reserves

     (20,638     (18,641
  

 

 

   

 

 

 

Net inventories

   $ 200,900      $ 202,143   
  

 

 

   

 

 

 

 

-9-


Note 5: Long-Lived Assets

Disposals

During the three months ended April 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 $8.9 million and $9.2 million in the three months ended April 1, 2012 and April 3, 2011, respectively.

We recognized amortization expense related to our intangible assets of $3.2 million and $3.7 million in the three months ended April 1, 2012 and April 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 April 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.

As of April 1, 2012, there were no outstanding borrowings under the Senior Secured Facility, and we had $386.3 million in available borrowing capacity, as our borrowing capacity is reduced by outstanding letters of credit.

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 April 1, 2012, the carrying value of the notes was $200.9 million.

 

-10-


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 April 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 April 1, 2012 was approximately $580.9 million based on sales prices of the debt instruments from recent trading activity (Level 1 valuation). This amount represents the fair value of our senior subordinated notes with a face value of $549.4 million.

Note 7: Income Taxes

Income tax expense was $8.1 million for the three months ended April 1, 2012. The most significant factor in the difference between the effective tax rate of 25.1% and the amount determined by applying the applicable statutory United States tax rate of 35% for the three months ended April 1, 2012 is the tax rate differential associated with our foreign earnings.

Note 8: 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  

Three Months Ended

   April 1, 2012     April 3, 2011     April 1, 2012     April 3, 2011  
           (In thousands)        

Service cost

   $ 1,432      $ 1,349      $ 32      $ 40   

Interest cost

     3,010        2,811        588        681   

Expected return on plan assets

     (3,165     (2,860     —          —     

Amortization of prior service credit

     (19     (36     (29     (60

Net loss recognition

     1,492        1,543        262        119   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 2,750      $ 2,807      $ 853      $ 780   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

-11-


Note 9: Comprehensive Income

The following table summarizes total comprehensive income:

 

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

Net income

   $ 24,275       $ 21,890   

Foreign currency translation income

     10,626         22,757   
  

 

 

    

 

 

 

Total comprehensive income

   $ 34,901       $ 44,647   
  

 

 

    

 

 

 

Note 10: 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. As of April 1, 2012, we have repurchased 2.3 million shares of our common stock under the program through prepaid variable share repurchase agreements for an aggregate cost of $75.0 million and an average price per share of $32.95.

Note 11: Supplemental Guarantor Information

As of April 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. In addition, effective April 25, 2011, in connection with the refinancing of our Senior Secured Facility, the guarantor subsidiaries of the notes have been revised. 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.

 

-12-


Supplemental Condensed Consolidating Balance Sheets

 

     April 1, 2012  
     Issuer     Non-
Guarantor
Subsidiaries
     Eliminations     Total  
     (Unaudited)  
     (In thousands)  
ASSETS   

Current assets:

         

Cash and cash equivalents

   $ 53,454      $ 316,563       $ —        $ 370,017   

Receivables, net

     108,123        181,792         —          289,915   

Inventories, net

     120,976        79,924         —          200,900   

Deferred income taxes

     15,737        4,386         —          20,123   

Other current assets

     9,616        11,165         —          20,781   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total current assets

     307,906        593,830         —          901,736   

Property, plant and equipment, less accumulated depreciation

     134,100        156,157         —          290,257   

Goodwill

     242,808        106,744         —          349,552   

Intangible assets, less accumulated amortization

     76,242        73,177         —          149,419   

Deferred income taxes

     (3,182     12,998         —          9,816   

Other long-lived assets

     13,099        53,847         —          66,946   

Investment in subsidiaries

     1,325,084        —           (1,325,084     —     
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 2,096,057      $ 996,753       $ (1,325,084   $ 1,767,726   
  

 

 

   

 

 

    

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY   

Current liabilities:

         

Accounts payable

   $ 90,793      $ 131,932       $ —        $ 222,725   

Accrued liabilities

     49,582        74,150         —          123,732   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total current liabilities

     140,375        206,082         —          346,457   

Long-term debt

     550,295        —           —          550,295   

Postretirement benefits

     33,255        100,693         —          133,948   

Other long-term liabilities

     23,092        6,046         —          29,138   

Intercompany accounts

     (43,165     43,165         —          —     

Total stockholders’ equity

     1,392,205        640,767         (1,325,084     707,888   
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 2,096,057      $ 996,753       $ (1,325,084   $ 1,767,726   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

-13-


     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   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

-14-


Supplemental Condensed Consolidating Statements of Comprehensive Income (Unaudited)

 

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

Revenues

   $ 259,267      $ 262,719      $ (57,695   $ 464,291   

Cost of sales

     (185,385     (194,883     57,695        (322,573
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     73,882        67,836        —          141,718   

Selling, general and administrative expenses

     (46,924     (36,302     —          (83,226

Research and development

     (3,583     (10,450     —          (14,033

Amortization of intangibles

     (1,177     (2,058     —          (3,235

Income from equity method investment

     —          2,741        —          2,741   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     22,198        21,767        —          43,965   

Interest expense

     (11,904     (17     —          (11,921

Interest income

     24        327        —          351   

Intercompany income (expense)

     (970     970        —          —     

Income (loss) from equity investment in subsidiaries

     18,241        —          (18,241     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     27,589        23,047        (18,241     32,395   

Income tax expense

     (3,314     (4,806     —          (8,120
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 24,275      $ 18,241      $ (18,241   $ 24,275   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 22,630      $ 30,512      $ (18,241   $ 34,901   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

-15-


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

Revenues

   $ 256,666      $ 252,105      $ (47,143   $ 461,628   

Cost of sales

     (185,576     (192,740     47,143        (331,173
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     71,090        59,365        —          130,455   

Selling, general and administrative expenses

     (43,976     (30,960     —          (74,936

Research and development

     (4,708     (8,921     —          (13,629

Amortization of intangibles

     (1,710     (1,969     —          (3,679

Income from equity method investment

     —          3,862        —          3,862   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     20,696        21,377        —          42,073   

Interest expense

     (11,782     (26     —          (11,808

Interest income

     43        116        —          159   

Intercompany income (expense)

     (1,682     1,682        —          —     

Income (loss) from equity investment in subsidiaries

     15,466        —          (15,466     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before taxes

     22,741        23,149        (15,466     30,424   

Income tax expense

     (723     (7,683     —          (8,406
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     22,018        15,466        (15,466     22,018   

Loss from discontinued operations, net of tax

     (128     —          —          (128
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 21,890      $ 15,466      $ (15,466   $ 21,890   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 21,890      $ 38,223      $ (15,466   $ 44,647   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

-16-


Supplemental Condensed Consolidating Statements of Cash Flows (Unaudited)

 

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

Net cash provided by (used for) operating activities

   $ (11,907   $ 24,655      $ 12,748   

Cash flows from investing activities:

      

Capital expenditures

     (4,927     (2,630     (7,557

Cash used to acquire businesses, net of cash acquired

     (587     —          (587
  

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (5,514     (2,630     (8,144

Cash flows from financing activities:

      

Payments under share repurchase program

     (25,000     —          (25,000

Cash dividends paid

     (2,409     —          (2,409

Payments under borrowing arrangements

     (600     —          (600

Proceeds from exercise of stock options

     2,179        —          2,179   

Tax benefit related to share-based compensation

     4,119        —          4,119   
  

 

 

   

 

 

   

 

 

 

Net cash used for financing activities

     (21,711     —          (21,711

Effect of currency exchange rate changes
on cash and cash equivalents

     —          4,408        4,408   
  

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (39,132     26,433        (12,699

Cash and cash equivalents, beginning of period

     92,586        290,130        382,716   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 53,454      $ 316,563      $ 370,017   
  

 

 

   

 

 

   

 

 

 

 

-17-


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

Net cash provided by (used for) operating activities

   $ (21,326   $ 5,699      $ (15,627

Cash flows from investing activities:

      

Cash used to acquire businesses, net of cash acquired

     (23,192     —          (23,192

Capital expenditures

     (4,164     (2,634     (6,798

Proceeds from disposal of tangible assets

     1,118        18        1,136   
  

 

 

   

 

 

   

 

 

 

Net cash used for investing activities

     (26,238     (2,616     (28,854

Cash flows from financing activities:

      

Cash dividends paid

     (2,392     —          (2,392

Tax benefit related to share-based compensation

     1,668        —          1,668   

Proceeds from exercise of stock options

     3,952        —          3,952   

Intercompany capital contributions and dividends

     (27,546     27,546        —     
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     (24,318     27,546        3,228   

Effect of currency exchange rate changes
on cash and cash equivalents

     —          5,685        5,685   
  

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (71,882     36,314        (35,568

Cash and cash equivalents, beginning of period

     173,699        184,954        358,653   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 101,817      $ 221,268      $ 323,085   
  

 

 

   

 

 

   

 

 

 

 

-18-


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.

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 three months ended April 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;

 

-19-


   

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
 
     April 1, 2012      April 3, 2011     
     (In thousands, except percentages)  

Revenues

   $ 464,291       $ 461,628         0.6

Gross profit

     141,718         130,455         8.6

Selling, general and administrative expenses

     83,226         74,936         11.1

Research and development

     14,033         13,629         3.0

Operating income

     43,965         42,073         4.5

Income from continuing operations before taxes

     32,395         30,424         6.5

Income from continuing operations

     24,275         22,018         10.3

Revenues increased in the three months ended April 1, 2012 from the comparable period of 2011 primarily for the following reasons:

 

   

Acquisitions contributed $10.2 million to the increase in revenues.

 

   

Increases in unit sales volume, primarily due to market growth and increased share in many of our end markets, as well as pricing changes related to non-copper commodity cost increases and other pricing changes, resulted in a revenue increase of $6.1 million. Changes in channel inventory were unfavorable to revenue.

These increases were partially offset by the following decreases in revenue:

 

   

A decrease in selling prices due to lower copper costs resulted in an estimated revenue decrease of approximately $10 million.

 

   

Unfavorable currency translation, primarily due to the U.S. dollar strengthening against the euro, resulted in a revenue decrease of $3.6 million.

Gross profit increased in the three months ended April 1, 2012 from the comparable period of 2011 due to the increases in revenues as discussed above. Our acquisitions completed in 2011 also contributed to the increase in gross profit as compared to the prior year. As a result of these factors and improved productivity due to our Lean enterprise initiatives, our gross profit percentage expanded from 28.3% for the three months ended April 3, 2011 to 30.5% for the three months ended April 1, 2012.

Selling, general and administrative expenses increased in the three months ended April 1, 2012 from the comparable period of 2011. The increases are primarily due to investments in our strategic initiatives, including our Market Delivery System and Talent Management. The increases are also due to our acquisitions completed in 2011.

 

-20-


The increase in research and development costs in the three months ended April 1, 2012 from the comparable period of 2011 is primarily due to increased investments in new product development and our acquisitions completed in 2011.

Operating income increased in the three months ended April 1, 2012 from the comparable period of 2011 due to the increases in revenues and gross profit as discussed above. In addition, operating income increased due to the successful execution of our Lean enterprise initiatives and our recent acquisitions. The increases in operating income were partially offset by a $1.1 million decrease in income from our equity method investment, primarily due to a slowdown in the Chinese construction industry.

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

Our effective tax rate for the three months ended April 1, 2012 was 25.1% compared to 27.6% for the three months ended April 3, 2011. This change is primarily attributable to $1.0 million tax benefit recorded for the three months ended April 1, 2012 due to the favorable settlement of a foreign tax audit.

Americas Segment

 

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

Total revenues

   $ 309,708      $ 289,066        7.1

Operating income

     36,278        31,117        16.6

as a percent of total revenues

     11.7     10.8  

Americas total revenues, which include affiliate revenues, increased in the three months ended April 1, 2012 from the comparable period of 2011. Higher unit sales volume, as well as pricing changes related to non-copper commodity cost increases and other pricing changes, resulted in an increase in revenues of $20.3 million. Changes in channel inventory were unfavorable to revenue. Acquisitions contributed $9.6 million to the increase in revenues. These increases were partially offset by decreases in revenues. A decrease in selling prices due to lower copper costs resulted in an estimated decrease in revenues of approximately $6 million. Decreases in affiliate sales and unfavorable currency translation resulted in decreases in revenues of $2.0 million and $1.3 million, respectively. 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.

Operating income increased in the three months ended April 1, 2012 from the comparable period of 2011 primarily due to the increase in revenues discussed above. 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 10.8% for the three months ended April 3, 2011 to 11.7% for the three months ended April 1, 2012.

 

-21-


EMEA Segment

 

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

Total revenues

   $ 121,617      $ 126,356        -3.8

Operating income

     17,415        13,769        26.5

as a percent of total revenues

     14.3     10.9  

EMEA total revenues, which include affiliate revenues, decreased in the three months ended April 1, 2012 from the comparable period of 2011. Lower unit sales volume resulted in a $5.5 million decrease in revenue, primarily due to softening economic conditions in Europe. Unfavorable currency translation, primarily from the U.S. dollar strengthening against the euro, resulted in a $3.6 million decrease in revenue. A decrease in selling prices due to lower copper costs resulted in an estimated decrease in revenues of approximately $1 million. The decreases in revenues were partially offset by an increase in affiliate sales of $4.8 million and the impact of acquisitions, which contributed an increase in revenues of $0.6 million. Operating income increased in the three months ended April 1, 2012 from the comparable period of 2011 due to favorable product mix.

Asia Pacific Segment

 

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

Total revenues

   $ 71,146      $ 81,041        -12.2

Operating income

     4,669        6,283        -25.7

as a percent of total revenues

     6.6     7.8  

Asia Pacific total revenues, which include affiliate revenues, decreased in the three months ended April 1, 2012 from the comparable period of 2011 primarily due to a $7.7 million decrease from lower unit sales volume as a result of softening economic conditions in China and a decrease in the inventory levels held by our channel partners. A decrease in selling prices due to lower copper costs resulted in an estimated decrease in revenues of approximately $4 million. The decreases in revenue were partially offset by increases in revenues. Favorable currency translation, primarily from the Chinese renminbi strengthening against the U.S. dollar, resulted in revenue increases of $1.3 million. Higher affiliate sales resulted in increases in revenues of $0.5 million.

Operating income decreased in the three months ended April 3, 2011 due to the decreases in revenues as discussed above. Operating income decreased for our consumer electronics end market business in the segment, and we continue to evaluate strategic alternatives to address this underperforming business.

 

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Product Group Information

Revenues by major product group were as follows:

 

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

Cable products

   $ 329,265       $ 319,128         3.2

Networking products

     65,310         71,255         -8.3

Connectivity products

     69,716         71,245         -2.1

Cable product revenues increased in the three months ended April 1, 2012 from the comparable period of 2011. Increases in unit sales volume, primarily due to market growth and increased share in many of our end markets, as well as pricing changes related to non-copper commodity cost increases and other pricing changes, resulted in a revenue increase of $11.6 million. Acquisitions contributed $9.6 million to the increase in cable product revenues. These increases in revenues were partially offset by decreases in revenues. A decrease in selling prices due to lower copper costs resulted in an estimated decrease in revenues of approximately $10 million. Unfavorable currency translation resulted in a decrease in revenues of $1.1 million.

Networking product revenues decreased in the three months ended April 1, 2012 from the comparable period of 2011 primarily due to decreases in unit sales volume of $5.1 million as a result of a decrease in inventory levels held by our channel partners in China and softening economic conditions in Europe, including government austerity measures. Unfavorable currency translation resulted in a decrease in networking product revenues of $1.4 million. These decreases were partially offset by an increase in revenues due to acquisitions of $0.6 million.

Connectivity product revenues decreased in the three months ended April 1, 2012 from the comparable period of 2011 primarily due to unfavorable currency translation of $1.2 million and decreases in unit sales volume of $0.3 million.

Discontinued Operations

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 months ended April 3, 2011 we recognized $0.2 million of interest expense ($0.1 million net of tax) 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. In the first quarter of each year, cash from operating activities reflects the payments of annual rebates to our channel partners and incentive compensation to our associates. 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.

 

-23-


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

 

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

Net cash provided by (used for):

    

Operating activities

   $ 12,748      $ (15,627

Investing activities

     (8,144     (28,854

Financing activities

     (21,711     3,228   

Effects of currency exchange rate changes on cash and cash equivalents

     4,408        5,685   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (12,699     (35,568

Cash and cash equivalents, beginning of period

     382,716        358,653   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 370,017      $ 323,085   
  

 

 

   

 

 

 

Net cash provided by operating activities, a key source of our liquidity, increased by $28.4 million for the three months ended April 1, 2012 from the comparable period of 2011. The most significant factor impacting the increased cash provided by operating activities was the change in operating assets and liabilities. For the three months ended April 1, 2012, changes in operating assets and liabilities were a use of cash of $23.0 million, as compared to a use of cash of $50.3 million for the comparable period of 2011.

Inventories were not a significant use of cash for the three months ended April 1, 2012, while inventories were a use of cash of $24.6 million for the comparable period of 2011. Inventory turns were 6.4 turns as of both April 1, 2012 and April 3, 2011. We calculate inventory turns by dividing annualized cost of sales for the quarter by the inventory balance at the end of the quarter.

Accounts receivable were a source of cash of $11.9 million for the three months ended April 1, 2012, compared to a use of cash of $12.4 million for the comparable period of 2011. Our days’ sales outstanding improved from 65 days as of April 3, 2011 to 57 days as of April 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.

Net cash used for investing activities totaled $8.1 million for the three months ended April 1, 2012 compared to $28.9 million for the comparable period of 2011. Investing activities in the three months ended April 1, 2012 included capital expenditures of $7.5 million and a payment related to a previous acquisition of $0.6 million. Investing activities in the three months ended April 3, 2011 included payments for our acquisitions, net of cash acquired, of $23.2 million, capital expenditures of $6.8 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 three months ended April 1, 2012 totaled $21.7 million compared to cash provided by financing activities of $3.2 million for the comparable period of 2011. This change is primarily due to payments under our share repurchase program of $25.0 million for the three months ended April 1, 2012.

Our cash and cash equivalents balance was $370.0 million as of April 1, 2012. Of this amount, $316.3 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

 

-24-


current intention to permanently reinvest the foreign cash and cash equivalents outside of the U.S. If we were to repatriate the foreign cash to the U.S., we may be required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations as a result of the repatriation.

Our outstanding debt obligations as of April 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 April 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 $386.3 million in available borrowing capacity. Additional discussion regarding our various borrowing arrangements is included in Note 6 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

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 material changes in our exposure to market risks since December 31, 2011.

 

-25-


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.

 

-26-


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, 100 of which are pending as of April 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 April 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 April 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
 

January 1, 2012 through February 5, 2012

     —         $ —           —         $ 100,000,000   

February 6, 2012 through March 4, 2012

     —           —           —           100,000,000   

March 5, 2012 through April 1, 2012

     640,816         39.01         640,816         75,000,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     640,816       $ 39.01         640,816       $ 75,000,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
(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. As of April 1, 2012, we have repurchased 2.3 million shares of our common stock under the program for an aggregate cost of $75.0 million and an average price of $32.95.

 

-27-


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

 

-28-


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:    May 10, 2012     By:   /s/ John S. Stroup        
      John S. Stroup
      President, Chief Executive Officer and Director
Date:    May 10, 2012     By:   /s/ Henk Derksen        
      Henk Derksen
      Senior Vice President, Finance, and Chief Financial Officer
Date:    May 10, 2012     By:   /s/ John S. Norman        
      John S. Norman
      Vice President, Controller, and Chief Accounting Officer

 

-29-

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