BELDEN INC.
10-Ks and 10-Qs
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Table of Contents
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Washington, D.C. 20549
Form 10-K
| (Mark One) | ||
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended December 31, 2009 | ||
|
or
|
||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
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) |
(IRS Employer
Identification No.) |
7733
Forsyth Boulevard
Suite 800 St. Louis, Missouri 63105
(Address of Principal Executive Offices and Zip Code)
Suite 800 St. Louis, Missouri 63105
(Address of Principal Executive Offices and Zip Code)
(314) 854-8000
(Registrant’s telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
|
Title of Each Class
|
Name of Each Exchange on Which Registered
|
|
|
Common Stock, $.01 par value
Preferred Stock Purchase Rights |
The New York Stock Exchange
The New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the
Act:
None
None
Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
þ
No
o
.
Indicate by check mark if the Registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
o
No
þ
.
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 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
o
.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
o
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
o
No
o
.
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
o
Non-accelerated
filer
o
Smaller
reporting
company
o
(Do
not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
o
No
þ
.
At June 26, 2009, the aggregate market value of Common
Stock of Belden Inc. held by non-affiliates was $720,890,491
based on the closing price ($17.45) of such stock on such date.
There were 46,682,691 shares of registrant’s Common
Stock outstanding on February 19, 2010.
DOCUMENTS
INCORPORATED BY REFERENCE
The registrant intends to file a definitive proxy statement for
its annual meeting of stockholders within 120 days of the
end of the fiscal year ended December 31, 2009 (the
“Proxy Statement”). Portions of such proxy statement
are incorporated by reference into Part III.
TABLE OF
CONTENTS
Table of Contents
| Item 1. | Business |
General
Belden Inc. (Belden) designs, manufactures, and markets cable,
connectivity, and networking products in markets including
industrial automation, enterprise, transportation,
infrastructure, and consumer electronics. We focus on market
segments that require highly differentiated, high-performance
products. We add value through design, engineering, excellence
in manufacturing, product quality, and customer service.
Belden is a Delaware corporation incorporated in 1988. The
Company reports in four segments: the Americas segment, the
Europe, Middle East, and Africa (EMEA) segment, the Asia Pacific
segment, and the Wireless segment. Financial information about
the Company’s four operating segments appears in
Note 4 to the Consolidated Financial Statements.
In July 2008, Belden acquired Trapeze Networks, Inc. During
2007, Belden completed three acquisitions: Hirschmann Automation
and Control GmbH, LTK Wiring Co. Ltd., and Lumberg Automation
Components. For more information regarding these acquisitions,
see Note 3 to the Consolidated Financial Statements.
As used herein, unless an operating segment is identified or the
context otherwise requires, “Belden,” the
“Company” and “we” refer to Belden Inc. and
its subsidiaries as a whole.
Products
Belden produces and sells cable, connectivity, and networking
products.
We have thousands of different cable products, including:
| • | Copper cables , including shielded and unshielded twisted pair cables, coaxial cables, and stranded cables | |
| • | Fiber optic cables , which transmit light signals through glass or plastic fibers | |
| • | 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 |
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.
Networking products include Industrial Ethernet switches and
related equipment, 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. Networking products also include a suite of wireless
local area network and location products for use in a variety of
markets including the healthcare, education, and enterprise
markets.
Markets
and Products, Americas Segment
The Americas segment designs, manufactures, and markets various
product types, including cables, Ethernet switches, and
industrial connectivity for use in the following principal
markets: industrial; audio and video; security; networking; and
communications. The segment also designs, manufactures, and
markets connectivity, cable management products, and cabinetry
for the enterprise market. This segment contributed
approximately 54%, 52%, and 57% of our consolidated revenues in
2009, 2008, and 2007, respectively.
For this segment, we define the
industrial
market to
include applications ranging from advanced industrial networking
and robotics to traditional instrumentation and control systems.
Our cable products are used in discrete manufacturing and
process operations involving the connection of computers,
programmable controllers, robots, operator interfaces, motor
drives, sensors, printers, and other devices. Many industrial
environments, such as petrochemical and other harsh-environment
operations, require cables with exterior armor or jacketing that
can endure physical abuse and exposure to chemicals, extreme
temperatures, and outside elements. Other applications require
conductors, insulating, and jacketing materials that can
withstand repeated flexing. In addition to cable product
configurations for these applications, we supply heat-shrinkable
tubing and wire management products to
1
Table of Contents
protect and organize wire and cable assemblies. We sell our
industrial products primarily through value-added resellers,
industrial distributors, and original equipment manufacturers
(OEMs).
We manufacture a variety of multiconductor and coaxial products,
which distribute
audio and video
signals for use in
broadcast television (including digital television and high
definition television), broadcast radio, pre- and
post-production facilities, recording studios, and public
facilities such as casinos, arenas, and stadiums. Our
audio/video cables are also used in connection with microphones,
musical instruments, audio mixing consoles, effects equipment,
speakers, paging systems, and consumer audio products. Our
primary market channels for these broadcast, music, and
entertainment products are broadcast specialty distributors and
audio systems installers. The Americas segment also sells
directly to music OEMs and the major networks including ABC,
CBS, Fox, and NBC.
We provide specialized cables for
security
applications
such as video surveillance systems, airport baggage screening,
building access control, motion detection, public address
systems, and advanced fire alarm systems. These products are
sold primarily through distributors and also directly to
specialty system integrators.
In the
networking
market, we supply structured cabling
solutions for the electronic and optical transmission of data,
voice, and video over local and wide area networks. End-use
applications are hospitals, financial institutions, government,
service providers, transportation, data centers, manufacturing,
industrial, education, and enterprise customers. Products for
this market include high-performance copper cables (including
10-gigabit Ethernet technologies over copper), fiber optic
cables, connectors, wiring racks, panels, interconnecting
hardware, intelligent patching devices, and cable management
solutions for complete
end-to-end
network structured wiring systems. Our systems are installed
through a network of highly trained system integrators and are
supplied through authorized distributors.
In the
communications
market, we manufacture flexible,
copper-clad coaxial cable for high-speed transmission of voice,
data, and video (broadband), used for the “drop”
section of cable television (CATV) systems and satellite direct
broadcast systems. These cables are sold primarily through
distributors.
Markets
and Products, EMEA Segment
In addition to EMEA’s cable operations, the segment
includes the global operations of the Hirschmann and Lumberg
Automation businesses acquired on March 26, 2007 and
April 30, 2007, respectively. This segment contributed
approximately 24%, 29%, and 27% of our consolidated revenues in
2009, 2008, and 2007, respectively.
We design, manufacture, and market Industrial Ethernet switches
and related equipment, both rail-mounted and rack-mounted, for
factory automation, power generation and distribution, process
automation, and large-scale infrastructure projects such as
bridges, wind farms, and airport runways. Rail-mounted switches
are designed to withstand harsh conditions including electronic
interference and mechanical stresses. We also design,
manufacture, and market fiber optic interfaces and media
converters used to bridge fieldbus networks over long distances.
In addition, we design, manufacture, and market a broad range of
industrial connectors for sensors and actuators, cord-sets,
distribution boxes, and fieldbus communications. These products
are used both as components of manufacturing equipment and in
the installation and networking of such equipment. We also
design, manufacture, and market load-moment indicators. Our
switches, communications equipment, connectors, and load-moment
indicators are sold directly to industrial equipment OEMs and
through a network of distributors and system integrators.
In the segment’s cable operations, we design, manufacture,
and market our cable, enterprise connectivity, and other
products primarily to customers in Europe, the Middle East, and
Africa for use in the industrial, networking, communications,
audio and video, and security markets (as such markets are
described with respect to the Americas segment above), through
distributors and to OEMs. We also market copper-based CATV trunk
distribution cables that meet local specifications of cable TV
system operators.
In 2009, we sold a 95% ownership interest in a German cable
business that sells primarily to the automotive industry. In
2008, we sold our Czech cable assembly operation, and in 2007 we
completed our global exit from the outside plant telecom cable
business with the sale of our Czech cable operation.
2
Table of Contents
Markets
and Products, Asia Pacific Segment
The Asia Pacific segment includes the operations of LTK Wiring
Co. Ltd. acquired on March 27, 2007, in addition to the
Belden cable business. This segment contributed approximately
18%, 19%, and 16% of our consolidated revenues in 2009, 2008,
and 2007, respectively.
The Asia Pacific segment designs, manufactures, and markets
cable products used in a wide range of consumer electronics and
other manufactured consumer products. Under the LTK brand, we
provide Appliance Wiring Materials (AWM) that comply with UL
standards for the internal wiring of a wide range of electronic
devices; coaxial and miniature coaxial cable for internal wiring
in electronic game consoles, laptop computers, mobile
telephones, personal digital assistant devices, and global
positioning systems; high-temperature resistant wire for heating
mats and electronic ignitions; highly flexible and temperature
resistant automotive wire; flexible cords; and miscellaneous
audio and video cable. Some of our products manufactured in Asia
have won recognition from customers and industry groups around
the world for their inherent environmental responsibility. These
products are sold principally within China to international and
Chinese OEMs and contract manufacturers.
We also market the full range of Belden products to our
customers operating in Asia, Australia, and New Zealand.
These customers include a mix of regional as well as global
customers from North America or Europe, in the industrial,
networking, communications, audio and video, and security
markets. We pursue both direct and channel sales depending upon
the nature and size of the market opportunities.
Markets
and Products, Wireless Segment
The Wireless segment designs and markets a suite of wireless
local area network (WLAN) and location products for use in a
variety of markets, principally in the healthcare and education
markets, as well as the retail, manufacturing, logistics,
financial, government, hospitality, and enterprise markets. The
Wireless segment consists of Trapeze Networks, Inc. (Trapeze),
which we acquired on July 16, 2008. This segment
contributed approximately 4% and 1% of our consolidated revenues
in 2009 and 2008, respectively.
Under the Trapeze Networks brand, we offer a broad variety of
indoor and outdoor WLAN products and provide services associated
with these products and their use. Trapeze has developed an
innovative new WLAN architecture called Smart
Mobile
®
.
Smart
Mobile
®
introduced “intelligent switching,” which combines the
advantages of both centralized and distributed approaches to
networking. As a result, Smart
Mobile
®
allows organizations to adopt high-performance 802.11n networks,
deliver high-quality voice for hundreds of users, and scale
their WLANs across the enterprise indoors and outdoors, without
compromising security or manageability and without having to
upgrade their existing switching or WLAN controller
infrastructures. Trapeze’s products include Trapeze
Networks Mobility System
Software
®
,
a full line of Mobility
Exchange
®
controllers, Mobility
Point
®
access points, our advanced access control product,
SmartPass
®
,
the
RingMaster
®
wireless management suite, antennas and accessories, and
location-based software and appliances.
The Wireless segment sells and licenses its products primarily
through distributors and value added resellers worldwide. In
addition, the Wireless segment also sells and licenses its
products through OEM partners who market the products and
technology under their own brand name. The Wireless segment has
thousands of direct, as well as several OEM (indirect) customers
globally, including many large enterprises, numerous government
agencies, schools, universities, hospitals, and metropolitan
Wi-Fi carriers.
Customers
As discussed above, we sell to distributors and directly to OEMs
and installers of equipment and systems. Sales to the
distributor Anixter International Inc. represented approximately
17% of our consolidated revenues in 2009.
We have supply agreements with distributors and with OEM
customers in the Americas, Europe, and Asia. In general, our
customers are not contractually obligated to buy our products
exclusively, in minimum amounts, or for a significant period of
time. The loss of one or more large customers or distributors
could result in lower total revenues and profits. However, we
believe that our relationships with our customers and
distributors are satisfactory and that they choose Belden
products, among other reasons, due to the breadth of our product
offering and the quality and performance characteristics of our
products.
3
Table of Contents
There are potential risks in our relationships with
distributors. For example, adjustments to inventory levels
maintained by distributors (which adjustments may be accelerated
through consolidation among distributors) may adversely affect
sales. In addition, if the costs of materials used in our
products fall and competitive conditions make it necessary for
us to reduce our list prices, we may be required, according to
the terms of contracts with certain of our distributors, to
reimburse them for a portion of the price they paid for our
products in their inventory. Further, certain distributors are
allowed to return certain inventory in exchange for an order of
equal or greater value. We have recorded reserves for the
estimated impact of these inventory policies.
International
Operations
We have manufacturing facilities in Canada, Mexico, China, and
Europe. During 2009, approximately 57% of Belden’s sales
were from customers outside the United States. Our primary
channels to international markets include both distributors and
direct sales to end users and OEMs.
The effect of changes in the relative value of currencies
impacts our results of operations. However, our revenues and
costs are typically in the same currency, reducing our overall
currency risk.
A risk associated with our European manufacturing operations is
the higher relative expense and length of time required to
reduce manufacturing employment if needed. In addition, some of
our foreign operations are subject to economic and political
risks inherent in maintaining operations abroad, such as
economic and political destabilization, international conflicts,
restrictive actions by foreign governments, and adverse foreign
tax laws.
Financial information for Belden by geographic area is shown in
Note 4 to the Consolidated Financial Statements.
Competition
We face substantial competition in our major markets. The number
and size of our competitors vary depending on the product line
and operating segment. Some multinational competitors have
greater financial, engineering, manufacturing, and marketing
resources than we have. There are also many regional competitors
that have more limited product offerings.
For each of our operating segments, the market can be generally
categorized as highly competitive with many players. The market
can be influenced by economic downturns as some competitors that
are highly leveraged both financially and operationally could
become more aggressive in their pricing of products.
The principal competitive factors in all our product markets are
product features, availability, price, customer support, and
distribution coverage. The relative importance of each of these
factors varies depending on the customer. Some products are
manufactured to meet published industry specifications and are
less differentiated on the basis of product characteristics. We
believe that Belden stands out in many of its markets on the
basis of the breadth of our product offering, the quality and
performance characteristics of our products, and our service and
technical support.
Although we believe that we have certain technological and other
advantages over our competitors, realizing and maintaining such
advantages will require continued investment in engineering,
research and development, marketing, and customer service and
support. There can be no assurance that we will continue to make
such investments or that we will be successful in maintaining
such advantages.
Research
and Development
We engage in continuing research and development programs,
including new and existing product development, testing and
analysis, process and equipment development and testing, and
compound materials development and testing. Hirschmann, Lumberg
Automation, and Trapeze engage in businesses that involve higher
levels of research and development because of advanced
technology requirements and shorter product life cycles.
Therefore, our aggregate research and development expense has
risen since we acquired these operations in 2007 and 2008. See
the Consolidated Statements of Operations for amounts incurred
for research and development.
4
Table of Contents
Patents
and Trademarks
We have a policy of seeking patents when appropriate on
inventions concerning new products, product improvements, and
advances in equipment and processes as part of our ongoing
research, development, and manufacturing activities. We own many
patents and registered trademarks worldwide that are used to
varying degrees by our operating segments, with numerous others
for which applications are pending. Although in the aggregate
our patents are of considerable importance to the manufacturing
and marketing of many of our products, we do not consider any
single patent to be material to the business as a whole. We
consider the following trademarks to be of material value to our
business:
Belden
®
,
Alpha
tm
,
Mohawk
®
,
West Penn
Wire/CDT
®
,
Hirschmann
®
,
Lumberg
Automation
tm
,
LTK
tm
,
Trapeze
®
,
Newbury
tm
,
and
Telecast
tm
.
Raw
Materials
The principal raw material used in many of our products is
copper. Other materials we purchase in large quantities include
fluorinated ethylene-propylene (both
Teflon
®
and other FEP), polyvinyl chloride (PVC), polyethylene,
aluminum-clad steel and copper-clad steel conductors, other
metals, optical fiber, printed circuit boards, and electronic
components. With respect to all major raw materials used by us,
we generally have either alternative sources of supply or access
to alternative materials. Supplies of these materials are
generally adequate and are expected to remain so for the
foreseeable future.
Over the past three years, the prices of metals, particularly
copper, have been highly volatile. Copper prices rose to a
5-year
high
in July 2008 before falling by 66% by the end of December 2008.
During 2009, copper prices again rose as the price at the end of
2009 was approximately 140% greater than the price at the end of
2008. Prices for materials such as PVC and other plastics
derived from petrochemical feedstocks have also fluctuated.
Since Belden utilizes the first in, first out inventory costing
methodology, the impact of copper and other raw material cost
changes on our cost of goods sold is delayed by approximately
two months based on our inventory turns.
We seek to be neutral in our pricing for fluctuations in
commodity prices, however, we can experience short-term
favorable or unfavorable variances. When the cost of raw
materials increases, we are generally able to recover these
costs through higher pricing of our finished products. The
majority of our products are sold through distribution, and we
manage the pricing of these products through published price
lists, which we update from time to time, with new prices taking
effect a few weeks after they are announced. Some OEM customer
contracts have provisions for passing through raw material cost
changes, generally with a lag of a few weeks to three months.
Backlog
Our business is characterized generally by short-term order and
shipment schedules. Our backlog consists of product orders for
which we have received a customer purchase order or purchase
commitment and which have not yet been shipped. Orders are
subject to cancellation or rescheduling by the customer,
generally with a cancellation charge. At December 31, 2009,
our backlog of orders believed to be firm was
$120.5 million compared with $130.1 million at
December 31, 2008. The backlog at December 31, 2009 is
scheduled to be shipped in 2010.
Environmental
Matters
We are subject to numerous federal, state, provincial, local and
foreign laws and regulations relating to the storage, handling,
emission, and discharge of materials into the environment,
including the Comprehensive Environmental Response,
Compensation, and Liability Act, the Clean Water Act, the Clean
Air Act, the Emergency Planning and Community
Right-To-Know
Act, and the Resource Conservation and Recovery Act. We believe
that our existing environmental control procedures and accrued
liabilities are adequate, and we have no current plans for
substantial capital expenditures in this area.
We do not currently anticipate any material adverse effect on
our results of operations, financial condition, cash flow, or
competitive position as a result of compliance with federal,
state, provincial, local or foreign environmental laws or
regulations, including
clean-up
costs. However, some risk of environmental liability and other
costs is inherent in the nature of our business, and there can
be no assurance that material environmental costs will not
arise. Moreover, it is possible that future developments, such
as increasingly strict requirements of
5
Table of Contents
environmental laws and enforcement policies thereunder, could
lead to material costs of environmental compliance and
clean-up.
Employees
As of December 31, 2009, we had approximately
6,200 employees worldwide. We also utilized about 1,000
workers under contract manufacturing arrangements. Approximately
800 employees are covered by collective bargaining
agreements at various locations around the world. We believe our
relationship with our employees is generally good.
Importance
of New Products and Product Improvements;
Impact of Technological Change; Impact of Acquisitions
Impact of Technological Change; Impact of Acquisitions
Many of the markets we serve are characterized by advances in
information processing and communications capabilities,
including advances driven by the expansion of digital
technology, which require increased transmission speeds and
greater bandwidth. Our markets are also subject to increasing
requirements for mobility and information security. The relative
costs and merits of copper cable solutions, fiber optic cable
solutions, and wireless solutions could change in the future as
various competing technologies address the market opportunities.
We believe that our future success will depend in part upon our
ability to enhance existing products and to develop and
manufacture new products that meet or anticipate such changes.
An important element of our business strategy is to increase our
capabilities in the different modes of signal transmission
technology, specifically copper cable, optical fiber, and
wireless.
Fiber optic technology presents a potential substitute for
certain of the copper-based products that comprise the majority
of our sales. Fiber optic cables have certain advantages over
copper-based cables in applications where large amounts of
information must travel great distances and where high levels of
information security are required. While the cost to interface
electronic and light signals and to terminate and connect
optical fiber remains high, we expect that in future years these
disadvantages will diminish. We produce and market fiber optic
cables and many customers specify these products in combination
with copper cables.
Advances in copper cable technologies and data transmission
equipment have increased the relative performance of copper
solutions. For example, in early 2005 we introduced the Belden
10GX System for the data networking or enterprise market,
providing reliable 10
gigabits-per-second
performance over copper based cables and connectivity.
Belden’s 10GX System accomplishes this using unshielded
twisted pair cables and patented connector technology. The
finalization in February 2008 of the industry’s
10-gig-over-copper, Category 6A cabling standard and the recent
10GBASE-T product announcements have begun to accelerate the
adoption of these higher-capacity copper network solutions.
The final stage of most networks remains almost exclusively
copper-based and we expect that it will continue to be copper
for some time. However, if a significant decrease in the cost of
fiber optic systems relative to the cost of copper-based systems
were to occur, such systems could become superior on a
price/performance basis to copper systems. We do not control our
own source of optical fiber production and, although we cable
optical fiber, we could be at a cost disadvantage to competitors
who both produce and cable optical fiber.
The installation of wireless devices has required the
development of new types of wired infrastructure systems. In the
future, we expect that wireless communications technology will
be an increasingly viable alternative technology to both copper
and fiber optic-based systems for certain applications. We
believe that problems such as insufficient signal security,
susceptibility to interference and jamming, installation
difficulties, and relatively slow transmission speeds of current
systems will gradually be overcome, making the use of wireless
technology more acceptable in many markets, including not only
office LANs but also industrial and broadcast installations.
This is evidenced by the increasing adoption rate of the larger
bandwidth 802.11n networks for the purpose of voice, data, and
video transmission.
In the industrial automation market, there is a growing trend
toward adoption of Industrial Ethernet technology, bringing to
the factory floor the advantages of digital communication and
the ability to network devices made by different manufacturers
and then link them to enterprise systems. Adoption of this
technology is at a more
6
Table of Contents
advanced stage among European manufacturers than those in the
United States and Asia, but we believe that the trend will
globalize.
Our strategy includes continued acquisitions to support our
signal transmission solutions strategy. There can be no
assurance that future acquisitions will occur or that those that
do occur will be successful.
Available
Information
We file annual, quarterly, and current reports, proxy statements
and other information with the Securities and Exchange
Commission (SEC). These reports, proxy statements, and other
information contain additional information about us. You may
read and copy these materials at the SEC’s Public Reference
Room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at
1-800-SEC-0330
for more information about the operation of the Public Reference
Room. The SEC also maintains a web site that contains reports,
proxy and information statements, and other information about
issuers who file electronically with the SEC. The Internet
address of the site is
http://www.sec.gov.
Belden maintains an Internet website at
www.belden.com
where our Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
and all amendments to those reports are available without
charge, as soon as reasonably practicable following the time
they are filed with or furnished to the SEC.
We will provide upon written request and without charge a
printed copy of our Annual Report on
Form 10-K.
To obtain such a copy, please write to the Corporate Secretary,
Belden Inc., 7733 Forsyth Boulevard, Suite 800,
St. Louis, MO 63105.
New York
Stock Exchange Matters
Pursuant to the New York Stock Exchange (NYSE) listing
standards, we submitted a Section 12(a) CEO Certification
to the NYSE in 2009. Further, we are herewith filing with the
Securities and Exchange Commission (as exhibits hereto), the
Chief Executive Officer and Chief Financial Officer
certifications required under Section 302 of the
Sarbanes-Oxley Act of 2002.
Executive
Officers
The following table sets forth certain information with respect
to the persons who were Belden executive officers as of
February 26, 2010. All executive officers are elected to
terms that expire at the organizational meeting of the Board of
Directors following the Annual Meeting of Shareholders.
|
Name
|
Age
|
Position
|
||||
|
John S. Stroup
|
43 | President, Chief Executive Officer and Director | ||||
|
Gray G. Benoist
|
57 | Senior Vice President, Finance, Chief Financial Officer and Chief Accounting Officer | ||||
|
Steven Biegacki
|
51 | Senior Vice President, Global Sales and Marketing | ||||
|
Kevin L. Bloomfield
|
58 | Senior Vice President, Secretary and General Counsel | ||||
|
Henk Derksen
|
41 | Treasurer, Vice President, Financial Planning and Analysis | ||||
|
Naresh Kumra
|
39 | Executive Vice President, Asia Pacific Operations | ||||
|
John S. Norman
|
49 | Vice President, Finance — EMEA | ||||
|
Cathy O. Staples
|
59 | Senior Vice President, Human Resources | ||||
|
Denis Suggs
|
44 | Executive Vice President, Americas Operations and Global Cable Products | ||||
John S. Stroup was appointed President, Chief Executive Officer
and member of the Board in October 2005. From 2000 to the date
of his appointment with the Company, he was employed by Danaher
Corporation, a manufacturer of professional instrumentation,
industrial technologies, and tools and components. At Danaher,
he initially served as Vice President, Business Development. He
was promoted to President of a division of Danaher’s
7
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Motion Group and later to Group Executive of the Motion Group.
Earlier, he was Vice President of Marketing and General Manager
with Scientific Technologies Inc. He has a B.S. in Mechanical
Engineering from Northwestern University and an M.B.A. from the
University of California at Berkeley Haas School of Business.
Gray G. Benoist was appointed Vice President, Finance and Chief
Financial Officer (title changed as reflected in the above table
in February 2009) in August 2006. He was named Chief
Accounting Officer in November 2009. Mr. Benoist was
previously Senior Vice President, Director of Finance of the
Networks Segment of Motorola Inc., a $6.3 billion business
unit responsible for the global design, manufacturing, and
distribution of wireless and wired telecom system solutions.
During more than 25 years with Motorola, Mr. Benoist
served in senior financial and general management roles across
Motorola’s portfolio of businesses, including the Personal
Communications Sector, Integrated and Electronic Systems Sector,
Multimedia Group, Wireless Data Group, and Cellular
Infrastructure Group. He has a B.S. in Finance &
Accounting from Southern Illinois University and an M.B.A. from
the University of Chicago.
Steven Biegacki was appointed Vice President, Global Sales and
Marketing (title changed as reflected in the above table in
February 2009) in March 2008. Mr. Biegacki was
previously Vice President, Marketing for Rockwell Automation. At
Rockwell, he initially served as DeviceNet Program Manager, was
promoted to Business Manager, Automation Networks in 1997, Vice
President, Integrated Architecture Commercial Marketing in 1999,
and Vice President, Components and Power Control Commercial
Marketing in 2005. Previously, he was an Automation Systems
Architecture Marketing Manager for Allen-Bradley Company. He has
a B.S. in Electrical Engineering Technology from ETI Technical
College in Cleveland, Ohio.
Kevin L. Bloomfield has been Vice President, Secretary and
General Counsel of the Company (title changed as reflected in
the above table in February 2009) since July 2004. From
August 1993 until July 2004, Mr. Bloomfield was Vice
President, Secretary and General Counsel of Belden 1993 Inc. He
was Senior Counsel for Cooper Industries, Inc. from February
1987 to July 1993, and had been in Cooper’s Law Department
from 1981 to 1993. He has a B.A. in Economics, a J.D. from the
University of Cincinnati and an M.B.A. from The Ohio State
University.
Henk Derksen has been Treasurer, Vice President, Financial
Planning and Analysis of the Company since January 2010. In
August of 2003, he became Vice President, Finance for the
Company’s EMEA division, after joining the Company at the
end of 2000. He was Vice President and Controller of Plukon
Poultry, a food processing company from 1998 to 2000, and has
5 years experience in public accounting with
PriceWaterhouse and Baker Tilly. Mr. Derksen has a M.A. in
Accounting from the University of Arnhem in the Netherlands and
holds a doctoral degree in Business Economics in addition to an
Executive Master of Finance & Control from Tias
Business School in the Netherlands.
Naresh Kumra joined Belden in March 2006 as Vice President of
Business Development, and was named Vice President, Operations
and President, Asia Pacific (title changed as reflected in the
above table in February 2009) in June 2006. From 1999 to
2006, he worked for McKinsey & Company, Inc., a global
management consulting firm. From 1991 to 1997, he worked for
industrial and electronics businesses of Schlumberger Industries
in New Delhi, India, and Poitiers, France. He graduated from the
Indian Institute of Technology in Delhi with a B.S. in Computer
Science and has an M.B.A. from the Darden School at the
University of Virginia.
John S. Norman joined Belden in May 2005 as Controller, was
named Chief Accounting Officer in November 2005, and was named
Vice President of Belden in February 2009. In January 2010, he
became Vice President, Finance for the Company’s EMEA
division. He was vice president and controller of Graphic
Packaging International Corporation, a paperboard packaging
manufacturing company, from 1999 to 2003, and has 17 years
experience in public accounting with PricewaterhouseCoopers LLP.
Mr. Norman has a B.S. in Accounting from the University of
Missouri and is a Certified Public Accountant.
Cathy Odom Staples has been Vice President, Human Resources of
the Company (title changed as reflected in the above table in
February 2009) since July 2004, and held the same position
with Belden 1993 Inc. from May 1997 through July 2004. She was
Vice President, Human Resources for Belden Electronics from May
1992 to May 1997. Ms. Staples has a B.S.B.A. in Human
Resources from Drake University.
Denis Suggs joined Belden in June 2007 as Vice President,
Operations, and President, Belden Americas (title changed as
reflected in the above table in February 2009). Prior to joining
Belden, he held various senior executive positions at Danaher
Corporation, most recently as the President, Portescap and
serving as the Chairman of the
8
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Board — Portescap International, Portescap
Switzerland, Danaher Motion India Private Ltd., and Airpax
Company. Mr. Suggs holds a B.S. in Electrical Engineering
from North Carolina State University and an M.B.A. from Duke
University.
| Item 1A. | Risk Factors |
We make forward-looking statements in this Annual Report on
Form 10-K,
in other materials we file with the SEC or otherwise release to
the public, and on our website. In addition, our senior
management might make forward-looking statements orally to
analysts, investors, the media, and others. Statements
concerning our future operations, prospects, strategies,
financial condition, future economic performance (including
growth and earnings) and demand for our products and services,
and other statements of our plans, beliefs, or expectations,
including the statements contained in Item 7,
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” that are not
historical facts, are forward-looking statements. In some cases
these statements are identifiable through the use of words such
as “anticipate,” “believe,”
“estimate,” “expect,” “intend,”
“plan,” “project,” “target,”
“can,” “could,” “may,”
“should,” “will,” “would,” and
similar expressions. The forward-looking statements we make are
not guarantees of future performance and are subject to various
assumptions, risks, and other factors that could cause actual
results to differ materially from those suggested by these
forward-looking statements. These factors include, among others,
those set forth below and in the other documents that we file
with the SEC.
We expressly disclaim any obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law. Following is a discussion of some of the more significant
risks that could materially impact our business.
The
challenging global economic environment and the downturn in the
markets we serve could continue to adversely affect our
operating results and stock price in a material
manner.
The challenging global economic environment could continue to
cause substantial reductions in our revenue and results of
operations as a result of weaker demand by the end users of our
products and, for some products, price erosion. Such price
erosion may occur through competitors becoming more aggressive
in their pricing practices, which could adversely impact our
gross margins. These global economic conditions also make it
difficult for our customers, our vendors, and us to accurately
forecast and plan future business activities. Our customers also
may face issues gaining timely access to sufficient credit,
impairing their ability to pay us, which could have an adverse
effect on results of operation if such events cause delays in
collection or write-offs of receivables due to customer
insolvencies. Further, the demand for many of our products is
economically sensitive and will vary with general economic
activity, trends in nonresidential construction, investment in
manufacturing facilities and automation, demand for information
technology equipment, and other economic factors.
We may
be unable to successfully implement our strategic
plan.
Our strategic plan is designed to improve revenues and
profitability, reduce costs, and improve working capital
management. To achieve these goals, our strategic priorities are
to improve our market delivery system so as to capture market
share through end-user engagement, channel management, and
vertical strategy; improve our recruitment and development of
talented associates; develop strong global connector, fiber, and
wireless platforms; acquire businesses that fit our strategic
plan; and become a leading Lean(1) company. We have a
disciplined process for deploying this strategic plan through
our associates. There is a risk that we may not be successful in
executing these measures to achieve the expected results for a
variety of reasons, including market developments, economic
conditions, shortcomings in establishing appropriate action
plans, or challenges with executing multiple initiatives
simultaneously. For example, our market delivery system
initiative may not succeed or we may lose market share due to
challenges in choosing the right products to market, integrating
products of acquired companies into our sales and marketing
strategy, or strategically bidding against OEM partners; we may
not be able to acquire businesses that fit our strategic plan on
acceptable business terms; or we may not achieve our other
strategic priorities.
(1) Lean refers to a business management system that
strives to create value for customers and deliver that value to
the right place, at the right time, and in the right quantities
while reducing or eliminating waste from all processes.
9
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We
rely on several key distributors in marketing our
products.
The majority of our sales are through distributors. These
distributors carry the products of competitors along with our
products. Our largest distributor customer, Anixter
International Inc., accounted for 17% of our revenue in 2009. If
we were to lose a key distributor, our revenue and profits would
likely be reduced, at least temporarily.
In the past, we have seen some distributors acquired and
consolidated. If there were further consolidation of the
electronics and cable distributors, this could have an effect on
our relationships with these distributors. It could also result
in consolidation of distributor inventory, which would
temporarily depress our revenue. We have also experienced
financial failure of distributors from time to time, resulting
in our inability to collect accounts receivable in full. The
current global economic downturn raises the potential of our
customers incurring financial difficulties (including
bankruptcy), which would adversely impact our results of
operation as a result of lower customer sales and write-offs of
uncollectible accounts receivable.
The
global cable, connectivity, and networking industries are highly
competitive.
We compete with other manufacturers of cable, connectivity, and
networking products, and also face potential competition, in
North America, Europe and Asia. These companies compete on
price, reputation and quality, product technology and
characteristics, and terms. Actions that may be taken by
competitors, including pricing, business alliances, new product
introductions, and other actions, could have a negative effect
on our revenue and profitability.
We may
encounter difficulties with restructuring issues, including
difficulties in realigning manufacturing capacity and
capabilities among our global manufacturing facilities that
could adversely affect our ability to meet customer demands for
our products.
As part of our Lean culture to pursue continuous improvement, we
periodically realign manufacturing capacity among our global
facilities to reduce costs by improving manufacturing efficiency
and to improve our long-term competitive position. We have also
taken these measures in response to the challenging global
economic environment. The implementation of these initiatives
may include significant shifts of production capacity among
facilities.
There are significant risks inherent in implementing these
initiatives, including that:
| • | We have adequate production capacity to meet customer demand while capacity is being shifted among facilities; | |
| • | We can effectively deal with employee issues arising from a plant shut down or reduction in workforce (especially at our European facilities that are typically unionized or require that we consult or obtain approval of representatives of the workforce before taking such action); | |
| • | We maintain product quality as a result of shifting capacity; | |
| • | We can successfully remove, transport and re-install equipment; | |
| • | We have trained personnel at the new site; and | |
| • | We can effectively change the management reporting structure, including providing accurate information to decision-makers under the new structure. |
If these initiatives are not successfully implemented, we could
experience lost future sales and increased operating costs as
well as customer and employee relations problems, which could
have a material adverse effect on our results of operations.
Changes
in the price and availability of raw materials we use could be
detrimental to our profitability.
Copper is a significant component of the cost of most of our
products. Over the past three years, the prices of metals,
particularly copper, have been highly volatile. Copper rose
rapidly in price for much of this period and remains a volatile
commodity. Prices of other materials we use, such as PVC and
other plastics derived from
10
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petrochemical feedstocks, have also been volatile. Generally, we
have recovered much of the higher cost of raw materials through
higher pricing of our finished products. The majority of our
products are sold through distribution, and we manage the
pricing of these products through published price lists which we
update from time to time, with new prices taking effect a few
weeks after they are announced. Some OEM contracts have
provisions for passing through raw material cost changes,
generally with a lag of a few weeks to three months. If we are
unable to raise prices sufficiently to recover our material
costs, our earnings will be reduced. If we raise our prices but
competitors raise their prices less, we may lose sales, and our
earnings will be reduced. If the price of copper were to
decline, we may be compelled to reduce prices to remain
competitive, which could have a negative effect on revenue. We
believe the supply of raw materials (copper, plastics, and other
materials) is adequate and we do not expect any substantial
interruption of supply or shortage of materials. If such a
supply interruption or shortage were to occur, however, this
could have a negative effect on revenue and earnings.
We may
experience significant variability in our quarterly and annual
effective tax rate.
We have a complex tax profile due to the global nature of our
operations, which encompass multiple taxing jurisdictions.
Variability in the mix and profitability of domestic and
international activities, identification and resolution of
various tax uncertainties, changes in tax laws and rates, and
the extent to which we are able to realize net operating loss
and other carryforwards included in deferred tax assets, among
other matters, may significantly impact our effective income tax
rate in the future.
Our effective income tax rate is the result of the income tax
rates in the various countries in which we do business. Our mix
of income and losses in these jurisdictions impacts our
effective tax rate. Relatively, more income in higher tax rate
jurisdictions or relatively, more losses in lower tax rate
jurisdictions would increase our effective tax rate and thus
lower our net income. If we generate losses in tax jurisdictions
for which no benefits are available, our effective income tax
rate will increase. A significant increase in our effective
income tax rate could have a material adverse impact on our
earnings.
Because
we do business in many countries, our results of operations are
affected by changes in currency exchange rates and are subject
to political and economic uncertainties.
More than half of our sales are outside the United States. Other
than the United States dollar, the principal currencies to which
we are exposed through our manufacturing operations and sales
are the euro, the Canadian dollar, the Hong Kong dollar, the
Chinese yuan, the Mexican peso, the Australian dollar, and the
British pound. In most cases, we have revenues and costs in the
same currency, thereby reducing our overall currency risk,
although the realignment of our manufacturing capacity among our
global facilities may alter this balance. When the
U.S. dollar strengthens against other currencies, the
results of our
non-U.S. operations
are translated at a lower exchange rate and thus into lower
reported earnings.
We have manufacturing facilities in China, Canada, Mexico, and
several European countries. We rely on suppliers in many
countries, including China. Our foreign operations are subject
to economic and political risks inherent in maintaining
operations abroad such as economic and political
destabilization, land use risks, international conflicts,
restrictive actions by foreign governments, and adverse foreign
tax laws.
If we
are unable to retain senior management and key employees, our
business operations could be adversely affected.
Our success has been largely dependent on the skills,
experience, and efforts of our senior management and key
employees. The loss of any of our senior management or other key
employees (including due to acquisitions or restructuring
activities) could have an adverse effect on us. There can be no
assurance that we would be able to find qualified replacements
for these individuals or that the integration of potential
replacements would not be disruptive to our business.
More broadly, a key determinant of our success is our ability to
attract and retain talented associates. While this is one of our
strategic priorities, there can be no assurance that we will
succeed in this regard.
11
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Volatility
of credit markets could adversely affect our
business.
Uncertainty in U.S. and global financial and equity markets
could make it more expensive for us to conduct our operations
and may cause us to be unable to pursue or complete acquisitions.
Our
strategic plan includes further acquisitions.
Our ability to successfully acquire businesses may decline if
the competition among potential buyers increases or the cost of
acquiring suitable businesses becomes too expensive. As a
result, we may be unable to make acquisitions or be forced to
pay more or agree to less advantageous acquisition terms for the
companies that we are able to acquire. Our ability to implement
our business strategy and grow our business, particularly
through acquisitions, may depend on our ability to raise capital
by selling equity or debt securities or obtaining additional
debt financing. We cannot make assurances that we will be able
to obtain financing when we need it or on terms acceptable to us.
We may
have difficulty integrating the operations of acquired
businesses. Should we fail to integrate their operations, our
results of operations and profitability could be negatively
impacted.
Aside from the challenges of realigning existing operations, we
may have difficulty integrating acquired businesses and future
acquisitions might not meet our performance expectations. Some
of the integration challenges we might face include differences
in corporate culture and management styles, additional or
conflicting governmental regulations, preparation of the
acquired operations for compliance with the Sarbanes-Oxley Act
of 2002, financial reporting that is not in compliance with
U.S. generally accepted accounting principles, disparate
company policies and practices, customer relationship issues,
and retention of key personnel. In addition, management may be
required to devote a considerable amount of time to the
integration process, which could decrease the amount of time we
have to manage the other businesses. Some of the businesses we
acquired or are interested in acquiring involve more complex
technology and shorter product life cycles than are typical for
Belden, and we might not be able to properly evaluate and
develop the technology. We cannot make assurances that we will
successfully or cost-effectively integrate operations. The
failure to do so could have a negative effect on results of
operations or profitability. The process of integrating
operations could cause some interruption of, or the loss of
momentum in, the activities of acquired businesses.
Our
future success depends on our ability to develop and introduce
new products.
Our markets are characterized by the introduction of products
with increasing technological capabilities, including fiber
optic and wireless signal transmission solutions that compete
with the copper cable solutions that comprise the majority of
our revenue. The relative costs and merits of copper cable
solutions, fiber optic cable solutions, and wireless solutions
could change in the future as various competing technologies
address the market opportunities. We believe that our future
success will depend in part upon our ability to enhance existing
products and to develop and manufacture new products that meet
or anticipate such changes. We have long been successful in
introducing successive generations of more capable products, but
if we were to fail to keep pace with technology or with the
products of competitors, we might lose market share and harm our
reputation and position as a technology leader in our markets.
Competing technologies could cause the obsolescence of many of
our products. See the discussion above in Part I,
Item 1, under
Importance of New Products and Product
Improvements; Impact of Technological Change; Impact of
Acquisitions
We
face risk associated with missed opportunities.
Our business decisions are influenced by market intelligence we
receive at micro- and macro- levels, which information may be
incomplete or inaccurate, resulting in missed opportunities.
We may
suffer a loss in our product quality, adversely affecting our
business.
Due to several factors including the migration of our production
to low cost regions, third party outsourcing of our production,
and a potential reduced emphasis on quality arising from
personnel changes, there is a risk that our
12
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products may suffer a decline in quality or that our on-time
delivery rate may fall. These developments could damage our
brand reputation and result in lower sales.
We
rely on several key Original Equipment Manufacturers (OEMs) in
marketing our Trapeze wireless products.
We sell and license a significant portion of our wireless
Trapeze products under private label to OEM partners, who market
the products and technology under their own brand names. In the
past, we have seen one OEM partner acquired and consolidated,
resulting in lower Trapeze sales. If there were further
consolidations of our Trapeze OEM partners, this could have an
adverse effect on sales if the consolidated OEM purchases
wireless products from Trapeze competitors. Trapeze also has
experienced financial failure (including bankruptcy) of its OEM
partners from time to time, resulting in reduced sales and in
our inability to collect accounts receivable in full. The
current global economic downturn raises the potential of such
Trapeze customers incurring financial difficulties (including
bankruptcy), which would adversely impact Trapeze’s results
of operation as a result of lower customer sales and write-offs
of uncollectible accounts receivable.
If our
goodwill or other intangible assets become further impaired, we
may be required to recognize charges that would reduce our
income.
Under accounting principles generally accepted in the United
States, goodwill and certain other intangible assets are not
amortized but must be reviewed for possible impairment annually,
or more often in certain circumstances if events indicate that
the asset values are not recoverable. We have incurred
significant charges for the impairment of goodwill and other
intangible assets in the past, and we may be required to do so
again in future periods. Such a charge would reduce our income
without any change to our underlying cash flow.
This list of risk factors is not exhaustive. Other
considerations besides those mentioned above might cause our
actual results to differ from expectations expressed in any
forward-looking statement.
We
have defined benefit pension plans that are not fully
funded.
We have defined benefit pension plans in the United States, the
United Kingdom, Canada, and Germany. The cash funding
requirements for these plans depends on the financial
performance of the funds’ assets, actuarial life
expectancies, discount rates, and other factors. The fair value
of the assets in the plans may be less than the projected
benefits owed by us. In most years, we are required to
contribute cash to fund the pension plans, and the amount of
funding required may vary significantly. We expect to contribute
approximately $12 million to our pension plans in 2010.
Future contributions we may make to fund our pension plans may
be significant and could have a material adverse effect on our
financial condition.
We
might have difficulty protecting our intellectual property from
use by competitors, or competitors might accuse us of violating
their intellectual property rights.
Disagreements about patents and intellectual property rights
occur in our served markets, especially for wireless. There,
third parties have asserted and may in the future assert claims
of infringement of intellectual property rights against us or
against our customers or channel partners for which we may be
liable. Due to the rapid pace of technological change in the
wireless industry, much of the wireless business relies on
proprietary technologies of third parties, and to the extent our
products may need these technologies, we may not be able to
obtain, or continue to obtain, licenses from such third parties
on reasonable terms. Furthermore, a successful claimant could
secure a judgment that requires us to pay substantial damages or
prevents us from distributing certain products or performing
certain services.
Potential
problems with our information systems could interfere with our
business and operations.
We rely on our information systems and those of third parties
for processing customer orders, shipping of products, billing
our customers, tracking inventory, supporting accounting
functions and financial statement preparation, paying our
employees, and otherwise running our business. Any disruption in
our information systems and those of the third parties upon whom
we rely could have a significant impact on our business. In
addition, we
13
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may need to enhance our information systems to provide
additional capabilities and functionality. The implementation of
new information systems and enhancements is frequently
disruptive to the underlying business of an enterprise. Any
disruptions impacting our ability to accurately report our
financial performance on a timely basis could adversely affect
our business in a number of respects. If we are unable to
successfully implement information systems enhancements, our
financial position, results of operations, and cash flows could
be negatively impacted.
Some
of our employees are members of collective bargaining groups,
and we might be subject to labor actions that would interrupt
our business.
Some of our employees, primarily outside the United States, are
members of collective bargaining units. We believe that our
relations with employees are generally good. However, if there
were a dispute with one of these bargaining units, the affected
operations could be interrupted resulting in lost revenues, lost
profit contribution, and customer dissatisfaction.
We are
subject to current environmental and other laws and regulations,
including the risks associated with possible climate change
legislation.
We are subject to the environmental laws and regulations in each
jurisdiction where we do business. We are currently, and may in
the future be, held responsible for remedial investigations and
clean-up
costs of certain sites damaged by the discharge of hazardous
substances, including sites that have never been owned or
operated by us but at which we have been identified as a
potentially responsible party under federal and state
environmental laws. Changes in environmental and other laws and
regulations in both domestic and foreign jurisdictions could
adversely affect our operations due to increased costs of
compliance and potential liability for noncompliance.
Greenhouse gas emissions have increasingly become the subject of
a large amount of attention. Bills related to climate change
have been introduced in the U.S. Congress. In addition,
future regulation of greenhouse gas could occur pursuant to
future U.S. treaty obligations or statutory or regulatory
changes under existing environmental laws. While not all are
likely to become law, additional climate change regulation may
adversely impact our costs by increasing energy costs and raw
material prices and requiring equipment modification or
replacement.
Aside from regulating greenhouse gases, the U.S. Congress
is considering legislation creating a
“cap-and-trade”
system that would establish a limit (or cap) on overall
greenhouse gas emissions and create a market for the purchase
and sale of emissions permits or “allowances.” We as
an energy user may incur increased energy costs as fuel
providers pass on the cost of the emissions allowances, which
they would be required to obtain, to cover the emissions from
fuel production and the eventual use of fuel by the Company or
its energy suppliers. Other countries are also considering or
have implemented
“cap-and-trade”
systems. Future environmental regulatory developments related to
climate change are possible, which could materially increase
operating costs in our industry and thereby increase our
manufacturing and delivery costs.
| Item 1B. | Unresolved Staff Comments |
None.
| Item 2. | Properties |
Belden has a corporate office that it leases in St. Louis,
Missouri and various manufacturing facilities, warehouses, and
sales and administration offices. The significant facilities as
of December 31, 2009 are as follows:
Used by the Americas operating segment:
|
Primary Character
|
||||
|
(M=Manufacturing,
|
||||
|
Number of Properties by Country
|
W=Warehouse) | Owned or Leased | ||
|
United States-15
|
10 M, 5 W | 10 owned | ||
| 5 leased | ||||
|
Canada-1
|
M | 1 owned | ||
|
Mexico-3
|
M | 3 leased |
14
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Used by the EMEA operating segment:
|
Primary Character
|
||||
|
(M=Manufacturing,
|
||||
|
Number of Properties by Country
|
W=Warehouse) | Owned or Leased | ||
|
United Kingdom-2
|
1 M, 1 W | 1 owned | ||
| 1 leased | ||||
|
The Netherlands-2
|
1 M, 1 W | 2 leased | ||
|
Germany-6
|
5 M, 1 W | 4 owned | ||
| 2 leased | ||||
|
Italy-2
|
M | 1 owned | ||
| 1 leased | ||||
|
Denmark-2
|
1 M, 1 W | 2 owned | ||
|
Hungary-1
|
1 M | 1 owned | ||
|
Czech Republic-1
|
1 M | 1 owned | ||
|
Sweden-1
|
W | 1 leased | ||
|
United States-1
|
M | 1 owned |
Used by the Asia Pacific operating segment:
|
Primary Character
|
||||
|
(M=Manufacturing,
|
||||
|
Number of Properties by Country
|
W=Warehouse) | Owned or Leased | ||
|
China-7
|
6 M, 1 W | 2 owned | ||
| 5 leased | ||||
|
India-1
|
W | 1 leased | ||
|
Australia-1
|
W | 1 leased | ||
|
Singapore-1
|
W | 1 leased |
The total size of all Americas operating segment locations is
approximately 2.9 million square feet; the total size of
all EMEA operating segment locations is approximately
1.6 million square feet; the total size of all Asia Pacific
operating segment locations is approximately 1.8 million
square feet; and the total size of all Wireless operating
segment locations is approximately 0.1 million square feet.
We believe our physical facilities are suitable for their
present and intended purposes and adequate for our current level
of operations.
| Item 3. | 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, 91 of which are pending as of
February 4, 2010, 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
February 4, 2010, we have been dismissed, or reached
agreement to be dismissed, in more than 300 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.
| Item 4. | Submission of Matters to a Vote of Security Holders |
During the fourth quarter of the fiscal year covered by this
report, no matters were submitted to a vote of security holders
of the Company.
15
Table of Contents
| Item 5. | Market for Registrant’s Common Equity and Related Shareholder Matters |
Our common stock is traded on the New York Stock Exchange under
the symbol “BDC.”
As of February 25, 2010, there were 588 record holders of
common stock of Belden Inc.
We paid a dividend of $0.05 per share in each quarter of 2009
and 2008. We anticipate that comparable cash dividends will
continue to be paid quarterly in the foreseeable future.
Common
Stock Prices and Dividends
| 2009 (By Quarter) | ||||||||||||||||
| 1 | 2 | 3 | 4 | |||||||||||||
|
Dividends per common share
|
$ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | ||||||||
|
Common stock prices:
|
||||||||||||||||
|
High
|
$ | 21.99 | $ | 21.08 | $ | 24.42 | $ | 26.88 | ||||||||
|
Low
|
$ | 8.18 | $ | 11.61 | $ | 15.13 | $ | 21.72 | ||||||||
| 2008 (By Quarter) | ||||||||||||||||
| 1 | 2 | 3 | 4 | |||||||||||||
|
Dividends per common share
|
$ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | ||||||||
|
Common stock prices:
|
||||||||||||||||
|
High
|
$ | 46.00 | $ | 42.97 | $ | 42.41 | $ | 32.05 | ||||||||
|
Low
|
$ | 33.04 | $ | 30.28 | $ | 27.96 | $ | 11.00 | ||||||||
16
Table of Contents
Stock
Performance Graph
The following graph compares the cumulative total shareholder
return on Belden’s common stock over the five-year period
ended December 31, 2009, with the cumulative total return
during such period of the Standard and Poor’s 500 Stock
Index and the Dow Jones Electronic & Electrical
Equipment Index. The comparison assumes $100 was invested on
December 31, 2004, in Belden’s common stock and in
each of the foregoing indices and assumes reinvestment of
dividends. The stock performance shown on the graph below
represents historical stock performance and is not necessarily
indicative of future stock price performance.
Comparison
of Cumulative Five Year Total Return
Total
Return to Shareholders
(Includes reinvestment of dividends)
(Includes reinvestment of dividends)
| Annual Return Percentage | ||||||||||||||||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
|
Belden Inc.
|
6.3 | % | 61.0 | % | 14.3 | % | −52.8 | % | 6.2 | % | ||||||||||
|
S&P 500 Index
|
4.9 | % | 15.8 | % | 5.5 | % | −37.0 | % | 26.5 | % | ||||||||||
|
Dow Jones Electronic & Electrical Equipment
|
4.3 | % | 13.8 | % | 18.9 | % | −46.6 | % | 47.7 | % | ||||||||||
| Indexed Returns | ||||||||||||||||||||||||
| Years Ending December 31, | ||||||||||||||||||||||||
| 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||||||
|
Belden Inc.
|
$ | 100.00 | $ | 106.28 | $ | 171.06 | $ | 195.52 | $ | 92.37 | $ | 98.09 | ||||||||||||
|
S&P 500 Index
|
100.00 | 104.91 | 121.48 | 128.16 | 80.74 | 102.11 | ||||||||||||||||||
|
Dow Jones Electronic & Electrical Equipment
|
100.00 | 104.34 | 118.69 | 141.11 | 75.37 | 111.30 | ||||||||||||||||||
| (1) | This chart and the accompanying data are “furnished,” not “filed,” with the SEC. |
17
Table of Contents
| Item 6. | Selected Financial Data |
| Years Ended December 31, | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||
|
Statement of operations data:
|
||||||||||||||||||||
|
Revenues
|
$ | 1,415,262 | $ | 2,005,890 | $ | 2,032,841 | $ | 1,495,811 | $ | 1,245,669 | ||||||||||
|
Operating income (loss)
|
1,641 | (342,188 | ) | 220,736 | 118,478 | 68,538 | ||||||||||||||
|
Income (loss) from continuing operations
|
(23,505 | ) | (361,826 | ) | 136,195 | 71,563 | 33,568 | |||||||||||||
|
Basic income (loss) per share from continuing operations
|
(0.50 | ) | (8.10 | ) | 3.03 | 1.65 | 0.74 | |||||||||||||
|
Diluted income (loss) per share from continuing operations
|
(0.50 | ) | (8.10 | ) | 2.71 | 1.48 | 0.69 | |||||||||||||
|
Balance sheet data:
|
||||||||||||||||||||
|
Total assets
|
1,620,578 | 1,658,393 | 2,068,392 | 1,355,968 | 1,306,735 | |||||||||||||||
|
Long-term debt
|
543,942 | 590,000 | 350,000 | 110,000 | 172,051 | |||||||||||||||
|
Long-term debt, including current maturities
|
590,210 | 590,000 | 458,744 | 172,000 | 231,051 | |||||||||||||||
|
Stockholders’ equity
|
551,048 | 570,868 | 1,072,206 | 843,901 | 713,508 | |||||||||||||||
|
Other data:
|
||||||||||||||||||||
|
Basic weighted average common shares outstanding
|
46,594 | 44,692 | 44,877 | 43,319 | 45,655 | |||||||||||||||
|
Diluted weighted average common shares outstanding
|
46,594 | 44,692 | 50,615 | 50,276 | 52,122 | |||||||||||||||
|
Dividends per common share
|
$ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | ||||||||||
In an effort to reduce costs and mitigate the weakening demand
experienced throughout the global economy, we have streamlined
our manufacturing, sales, and administrative functions
worldwide. In 2009, we recognized severance and employee
relocation expenses of $30.7 million, asset impairment
charges of $27.8 million, loss on sale of assets of
$17.2 million, adjusted depreciation expense of
$2.6 million, and other charges related to our global
restructuring actions of $24.0 million.
In July 2008, we acquired Trapeze. The results of operations of
Trapeze are included in our operating results from July 2008.
During 2008, we recognized goodwill and other asset impairment
charges of $476.5 million, severance expense of
$39.9 million, loss on sale of assets of $3.7 million,
expenses from the effects of purchase accounting of
$1.5 million, and other charges related to our various
restructuring actions of $4.9 million.
In 2007, we acquired Hirschmann, LTK, and Lumberg Automation
during our fiscal second quarter. The results of operations of
these entities are included in our operating results from their
respective acquisition dates. During 2007, we recognized
expenses from the effects of purchase accounting of
$15.8 million and severance expense of $4.2 million,
asset impairment expense of $3.3 million, and adjusted
depreciation expense of $0.2 million related to our various
restructuring actions. We also recognized an $8.6 million
gain on sales of assets.
In 2006, we recognized severance expense of $20.4 million,
asset impairment expense of $11.1 million, and adjusted
depreciation expense of $2.0 million related to our
decisions to restructure our European and North American
manufacturing operations and to eliminate positions worldwide to
reduce production, selling, and administrative costs. We also
recognized a $4.7 million favorable settlement of a
prior-period tax contingency.
In 2005, we recognized asset impairment expense of
$8.0 million, severance expense of $7.7 million, and
adjusted depreciation expense of $1.2 million related to
our decisions to exit the United Kingdom communications cable
market and to restructure our European manufacturing operations.
We also recognized executive succession expense of
$7.0 million during 2005.
18
Table of Contents
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Overview
We design, manufacture, and market cable, connectivity, and
networking products in markets including industrial automation,
enterprise, transportation, infrastructure, and consumer
electronics. We strive to create shareholder value by:
| • | Capturing additional market share by improving channel and end-user relationships, and concentrating sales efforts on vertical markets; | |
| • | Investing in both organic and inorganic growth in fast-growing regions; | |
| • | Continuously improving business processes throughout the enterprise via a comprehensive Lean tool set and the institution of a continuous improvement mind-set across the company; | |
| • | Migrating our manufacturing capacity to low-cost locations within each major geographic region to be closer to our customers and to reduce the landed cost of our products; | |
| • | Managing our product portfolio to position products according to value, eliminate low-margin revenue, and increase revenue in higher margin and strategically important products; | |
| • | Recruiting and developing the best talent we can find and improving the effectiveness of our performance management processes; and | |
| • | Protecting and enhancing the value of the Belden brand and our family of brands. |
To accomplish these goals, we use a set of tools and processes
that are designed to continuously improve business performance
in the critical areas of quality, delivery, cost, and
innovation. We consider revenue growth, operating margin, cash
flows, return on invested capital, and working capital
management metrics to be our key operating performance
indicators. We also seek to acquire businesses that we believe
can help us achieve the objectives described above. The extent
to which appropriate acquisitions are made and integrated can
affect our overall growth, operating results, financial
condition, and cash flows.
Approximately 57% of our sales were derived outside the United
States in 2009. As a global business, our operations are
affected by worldwide, regional, and industry economic and
political factors. Our market and geographic diversity limits
the impact of any one market or the economy of any single
country on our consolidated operating results. Our individual
businesses monitor key competitors and customers, including to
the extent possible their sales, to gauge relative performance
and the outlook for the future. In addition, we use indices
concerning general economic trends to predict our outlook for
the future given the broad range of products manufactured and
end markets served.
Although consolidated revenues grew each quarter sequentially
throughout 2009, we continued to experience broad-based market
declines compared to prior years. As a result, consolidated
revenues for 2009 decreased 29.4% from 2008.
We continue to operate in a highly competitive business
environment in the markets and geographies served. Our
performance will be impacted by our ability to address a variety
of challenges and opportunities in these markets and
geographies, including trends toward increased utilization of
the global labor force, expansion of market opportunities in
emerging markets such as China and India, migration away from a
fragmented, sub-scale, high-cost manufacturing footprint, and
potential volatility in raw material costs.
Although we use the United States dollar as our reporting
currency, a substantial portion of our assets, liabilities,
operating results, and cash flows reside in or are derived from
countries other than the United States. These assets,
liabilities, operating results, and cash flows are translated
from local currencies into the United States dollar using
exchange rates effective during the respective period. We have
generally accepted the exposure to currency exchange rate
movements without using derivative financial instruments to
manage this risk. Both positive and negative movements in
currency exchange rates against the United States dollar will
continue to affect the reported amount of assets, liabilities,
operating results, and cash flows in our consolidated financial
statements.
19
Table of Contents
Significant
Trends and Events in 2009
Many of our customers are distributors that stock inventory for
resale. Due to the weakening demand experienced throughout the
global economy, many of our customers have lowered their
inventory balances during 2009. Our revenues are negatively
impacted by these inventory reductions. Our customers may
continue this trend.
In 2009, we sold a 95% ownership interest in a German cable
business that sells primarily to the automotive industry. The
sales price was $0.4 million, and we recognized a loss of
$17.2 million on the transaction. In addition to retaining
a 5% interest in the business, we retained the associated land
and building, which we are leasing to the buyer. Prior to the
sale, we determined that certain long-lived assets of that
German cable business were impaired. We estimated the fair
market value of these assets based upon the terms of the sales
agreement and recognized an impairment loss of
$20.4 million in the operating results of the EMEA segment.
In addition to the sale of a German cable business, we incurred
other restructuring charges related to our plan to streamline
our manufacturing, sales, and administrative functions worldwide
in an effort to reduce costs and mitigate the weakening demand
experienced throughout the global economy. In 2009, we
recognized severance costs and asset impairment losses of
$28.4 million and $7.4 million, respectively, related
to these restructuring actions. In 2010, we may recognize
approximately $10.0 million of additional costs related to
previously announced restructuring actions. Furthermore, any new
restructuring actions would likely result in additional charges.
On June 29, 2009, we issued $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%. We used the
$193.7 million in net proceeds of this debt offering to
repay amounts drawn under our senior secured credit facility.
Results
of Operations
Consolidated
Continuing Operations
| Percentage Change | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Revenues
|
$ | 1,415,262 | $ | 2,005,890 | $ | 2,032,841 | −29.4 | % | −1.3 | % | ||||||||||
|
Gross profit
|
413,198 | 563,682 | 561,370 | −26.7 | % | 0.4 | % | |||||||||||||
|
Selling, general and administrative expenses
|
289,672 | 362,122 | 317,481 | −20.0 | % | 14.1 | % | |||||||||||||
|
Research and development
|
60,870 | 50,089 | 17,843 | 21.5 | % | 180.7 | % | |||||||||||||
|
Operating income (loss)
|
1,641 | (342,188 | ) | 220,736 | 100.5 | % | −255.0 | % | ||||||||||||
|
Income (loss) from continuing operations before taxes
|
(34,414 | ) | (368,470 | ) | 200,113 | 90.7 | % | −284.1 | % | |||||||||||
|
Income (loss) from continuing operations
|
(23,505 | ) | (361,826 | ) | 136,195 | 93.5 | % | −365.7 | % | |||||||||||
2009
Compared to 2008
Revenues decreased in 2009 compared to 2008 for the following
reasons:
| • | A decrease in unit sales volume due to broad-based market declines resulted in a revenue decrease of $460.8 million. | |
| • | A decrease in copper prices resulted in sales price decreases totaling $84.2 million. | |
| • | Unfavorable currency translation of $31.3 million due to the U.S. dollar strengthening against many foreign currencies including the euro and Canadian dollar. | |
| • | Lost sales from the disposal of two businesses in Europe resulted in a revenue decrease of $56.7 million. |
The negative impact that the factors listed above had on the
revenue comparison was partially offset by $26.0 million of
revenues from acquisitions, primarily our July 16, 2008
acquisition of Trapeze Networks, Inc.
20
Table of Contents
(Trapeze). The remaining change in total revenues was due to an
increase in the amount of revenue recognized by Trapeze during
the year that had been previously deferred.
Gross profit decreased in 2009 compared to 2008 due to the
decrease in revenue as discussed above and increases in
severance and other restructuring costs. In 2009, cost of sales
included $37.8 million of severance and other restructuring
costs. These costs primarily relate to global restructuring
actions to further streamline our manufacturing functions
worldwide in an effort to reduce costs and mitigate the
weakening demand experienced throughout the global economy.
Other restructuring costs include equipment transfer costs,
contract termination costs, employee relocation costs, and other
restructuring related charges. Cost of sales in 2008 included
$14.0 million of severance and other restructuring costs.
Excluding the impact of these items, gross profit margin in 2009
increased 260 basis points due to cost reductions from our
Lean Enterprise strategies and global restructuring actions.
Selling, general and administrative (SG&A) expenses
decreased 20% in 2009 compared to 2008. This decrease is
primarily due to lower payroll costs associated with a reduction
in the number of sales and administration employees and lower
discretionary spending for items such as travel, consulting, and
advertising. SG&A expenses in 2009 included
$5.4 million less severance and other restructuring costs
compared to 2008 but included $13.1 million additional
expense due to the acquisition of Trapeze in July 2008.
Excluding these costs, SG&A expenses decreased 24% in 2009.
The increase in research and development costs in 2009 is
primarily due to recognizing a full year of expense from Trapeze
compared to only six months in 2008.
During 2009, we sold a 95% ownership interest in a German cable
business that sells primarily to the automotive industry. The
sales price was $0.4 million, and we recognized a loss of
$17.2 million on the transaction. In 2008, we sold a
non-strategic portion of the Hirschmann business and recorded a
loss on the sale of $2.8 million. We also sold and leased
back certain Americas segment real estate in Mexico for
$25.0 million and recognized a loss of $0.9 million.
During 2009, we recognized asset impairment losses totaling
$27.8 million primarily related to a German cable business
that we sold. Due to equity market conditions in 2008 and the
difference between our market value and book value, the carrying
amounts of certain reporting units exceeded their respective
fair values resulting in a goodwill impairment charge of
$433.7 million. In addition, the carrying amounts of
certain trademarks exceeded their respective fair values
resulting in a trademark impairment charge of
$22.4 million. In 2008, we also recognized tangible asset
impairment losses totaling $20.4 million primarily related
to decisions to close our manufacturing facility in Manchester,
Connecticut, consolidate capacity, and dispose of excess
machinery and equipment.
Loss from continuing operations before taxes decreased in 2009
compared to 2008 due to an improvement in operating income
partially offset by higher interest expense resulting from
higher interest rates on our senior subordinated notes issued
during 2009.
Our annual effective tax rate was 31.7% in 2009 compared to 1.8%
in 2008. The effective rate in 2008 was low because the majority
of the $433.7 million goodwill impairment charge was
nondeductible.
2008
Compared to 2007
Revenues decreased in 2008 compared to 2007 for the following
reasons:
| • | A decline in unit sales volume due to broad-based market declines resulted in a revenue decrease of $240.5 million. | |
| • | Lost sales from the disposal of our assembly and telecommunications cable operation in the Czech Republic resulted in a revenue decrease of $40.1 million. |
The negative impact that the factors listed above had on the
revenue comparison were partially offset by the following
factors:
| • | Acquired revenues from LTK, Hirschmann, Lumberg, and Trapeze totaled $189.6 million. Acquired revenues from LTK and Hirschmann represent revenues generated from these entities in the first quarter |
21
Table of Contents
| of 2008. Acquired revenues from Lumberg represent revenues generated from this entity from January through April 2008. Acquired revenues from Trapeze represent revenues generated from this entity from its acquisition date of July 16, 2008 through December 31, 2008. |
| • | Favorable currency translation resulted in a revenue increase of $45.6 million. | |
| • | Sales price increases totaled $18.5 million. |
Gross profit increased in 2008 compared to 2007 primarily for
the following reasons:
| • | Acquired gross profit from LTK, Hirschmann, Lumberg, and Trapeze was in total $65.1 million in 2008. | |
| • | Our Lean and regional manufacturing initiatives contributed more than $26 million of productivity and cost improvements. |
The positive impact that the factors listed above had on the
gross profit comparison were partially offset by the following
factors:
| • | The decline in revenues due to lower unit sales volume as discussed above also contributed to a decrease in gross profit. | |
| • | We recognized $8.2 million more excess and obsolete inventory charges in 2008 as the lower demand experienced in 2008 resulted in excess inventory levels. | |
| • | We incurred $4.9 million more of charges in 2008 related to the effects of purchase accounting, severance, and other restructuring actions. |
Selling, general and administrative (SG&A) expenses
increased in 2008 compared to 2007 primarily for the following
reasons:
| • | We incurred expenses for an additional quarter in 2008 from the prior year acquisitions and for two quarters from the current year acquisition, which contributed in total $46.0 million to the SG&A increase. | |
| • | We incurred $21.6 million more of severance and other restructuring charges in 2008 primarily related to our global restructuring actions announced during the fourth quarter of 2008. |
The increases in SG&A expenses listed above were partially
offset by an $11.0 million decrease in total incentive plan
compensation as certain financial targets were not achieved,
favorable foreign currency translation of $2.8 million, and
cost savings from our Lean Enterprise strategy.
Research and development costs increased in 2008 compared to
2007 primarily due to the current year and prior year
acquisitions.
In 2008, we sold a non-strategic portion of the Hirschmann
business and recorded a loss of $2.8 million. We also sold
and leased back certain Americas segment real estate in Mexico
for $25.0 million and recognized a loss of
$0.9 million. In 2007, we completed the sale of our
telecommunications cable operation in the Czech Republic for
$25.7 million and recorded a gain of $7.8 million. We
also sold a plant in Illinois and recorded a gain of
$0.7 million.
Due to equity market conditions in 2008 and the difference
between our market value and book value, the carrying amounts of
certain reporting units exceeded their respective fair values
resulting in a goodwill impairment charge of
$433.7 million. In addition, the carrying amounts of
certain trademarks exceeded their respective fair values
resulting in a trademark impairment charge of
$22.4 million. We did not recognize any goodwill or
trademark impairment charges in 2007.
In 2008, we recognized tangible asset impairment losses totaling
$20.4 million primarily related to decisions to close our
manufacturing facility in Manchester, Connecticut, consolidate
capacity, and dispose of excess machinery and equipment. In
2007, we identified certain tangible long-lived assets related
to our plants in Czech Republic, the Netherlands, and Canada for
which the carrying values were not fully recoverable. We
recognized an impairment loss related to these assets totaling
$3.3 million.
Operating income decreased in 2008 compared to 2007 primarily
due to the goodwill and other asset impairment charges and a
change in the mix of our businesses.
22
Table of Contents
Income from continuing operations before taxes decreased in 2008
compared to 2007 due to a decrease in operating income coupled
with higher interest expense resulting from additional
borrowings under our revolving credit facility to fund the
acquisition of Trapeze.
Our effective annual tax rate was a 1.8% benefit in 2008
compared to an expense of 31.9% in 2007. This change is
primarily attributable to the decrease in income from continuing
operations before taxes and the nondeductible nature of the
majority of the goodwill impairment charge.
Americas
Segment
| Percentage Change | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total revenues
|
$ | 810,058 | $ | 1,102,815 | $ | 1,228,378 | −26.5 | % | −10.2 | % | ||||||||||
|
Operating income
|
117,324 | 106,893 | 210,597 | 9.8 | % | −49.2 | % | |||||||||||||
|
as a percent of total revenues
|
14.5 | % | 9.7 | % | 17.1 | % | ||||||||||||||
Americas total revenues, which include affiliate revenues,
decreased in 2009 from 2008 due to lower unit sales volume of
$219.8 million. Lower demand in the United States
contributed to lower volume across all vertical markets as
approximately 76% of the segment’s external customer
revenues are generated from customers located in the United
States. Similarly, lower demand in Europe and Asia and
increasing localization of manufacturing in our Asia Pacific
segment resulted in a decrease in affiliate revenues in 2009 of
$18.1 million. A decrease in copper prices resulted in
lower selling prices that contributed $47.0 million to the
decrease in revenues. The remaining decrease in revenues was due
to unfavorable currency translation, which was primarily a
result of the U.S. dollar strengthening against the
Canadian dollar.
Operating income increased in 2009 from 2008 primarily due to a
decrease in impairment charges and other restructuring costs. In
2009, the segment recognized $21.5 million of severance and
other restructuring charges primarily related to our global
restructuring actions. In 2008, the segment recognized goodwill
and other asset impairment charges totaling $50.8 million
and other restructuring charges of $15.8 million. Excluding
these charges, operating income decreased $34.7 million but
operating margin improved from 15.7% in 2008 to 17.1% in 2009
due to manufacturing cost savings resulting from the benefits of
our restructuring actions and the successful execution of our
regional manufacturing and Lean Enterprise strategies.
Americas total revenues decreased in 2008 from 2007 primarily
due to lower volume across most product lines, which in total
contributed 13 percentage points to the revenue decrease.
Lower demand in the United States contributed to the lower
volume as approximately 80% of the segment’s external
customer revenues are generated from customers located in the
United States. The lower volume was partially offset by acquired
revenues from certain portions of Hirschmann and Lumberg, higher
selling prices, and favorable currency translation, which in
total represented a 3 percentage point increase.
Operating income decreased in 2008 from 2007 due to the
decreases in revenues and certain other charges. In 2008, the
Americas segment recognized goodwill and other asset impairment
charges totaling $50.8 million and other restructuring
charges of $15.8 million. The goodwill and other asset
impairment charges include $36.6 million related to
goodwill and trademarks and $14.2 million related to
tangible assets. The tangible asset impairments are due to the
decisions to close our Connecticut facility, consolidate
capacity, and dispose of excess machinery and equipment. The
other restructuring charges primarily relate to severance
expenses associated with various restructuring actions.
Excluding these charges, operating margin in 2008 was 15.7%.
Operating margins decreased in 2008 from 2007 primarily due to
the lower unit sales volume discussed above.
23
Table of Contents
EMEA
Segment
| Percentage Change | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total revenues
|
$ | 400,452 | $ | 663,311 | $ | 619,262 | −39.6 | % | 7.1 | % | ||||||||||
|
Operating income (loss)
|
(43,232 | ) | (218,379 | ) | 42,360 | 80.2 | % | −615.5 | % | |||||||||||
|
as a percent of total revenues
|
−10.8 | % | −32.9 | % | 6.8 | % | ||||||||||||||
EMEA total revenues, which include affiliate revenues, decreased
in 2009 from 2008 due to lower unit sales volume of
$142.5 million. The broad-based market declines have
continued in Europe resulting in lower volume across all
vertical markets. Similarly, lower demand in the United States
and Asia resulted in a decrease in affiliate revenues in 2009 of
$30.4 million. Lost sales from the disposal of two
businesses contributed $56.8 million to the revenue
decrease. The decrease in revenues was also due to
$23.7 million of unfavorable currency translation,
primarily from the U.S. dollar strengthening against the
euro. The remaining decrease in revenues was due to a decrease
in copper prices that resulted in lower selling prices.
Operating loss improved in 2009 from 2008 primarily due to a
decrease in impairment charges and other restructuring costs. In
2009, the segment recognized $77.3 million of asset
impairment, loss on sale of assets, severance, and other
restructuring charges primarily related to the sale of a German
cable business and our global restructuring actions. In 2008,
the segment recognized goodwill and other asset impairment
charges totaling $253.4 million and other restructuring
charges of $28.6 million. Excluding these charges,
operating income decreased $29.5 million and operating
margin decreased from 9.6% in 2008 to 8.5% in 2009 as the
decrease in revenues more than offset the cost savings from our
various restructuring actions.
EMEA total revenues increased in 2008 from 2007 due to several
factors. Acquired revenues from the 2007 acquisitions
contributed $86.5 million to the revenue increase,
favorable foreign currency translation contributed
$34.0 million, and an increase in affiliate revenues
contributed $23.1 million. Acquired revenues include the
portions of Hirschmann and Lumberg included in this segment and
represent Hirschmann’s external revenues from the first
quarter of 2008 and Lumberg Automation’s external revenues
from January through April 2008. These revenue increases were
partially offset by $57.6 million of lower external
customer unit sales volume and $40.1 million of lost
revenues from the disposal of our assembly and
telecommunications cable operations in the Czech Republic. The
remaining change in revenues is due to decreases in selling
prices.
Operating income decreased in 2008 from 2007 primarily due to
impairment charges and certain other charges. In 2008, the EMEA
segment recognized goodwill and other asset impairment charges
totaling $253.4 million and other restructuring charges of
$28.6 million. The goodwill and other asset impairment
charges include $252.2 million related to goodwill and
trademarks and $1.2 million related to tangible assets. The
tangible asset impairment is due to the decision to close our
Hoyerswerda, Germany facility. The other restructuring charges
primarily relate to severance expenses associated with our
global restructuring actions that we announced during the fourth
quarter of 2008. Operating income in 2007 included charges of
$7.0 million primarily related to the effects of purchase
accounting. Excluding these charges, operating margin increased
to 9.6% in 2008 from 8.0% in 2007 due primarily to the impact of
a full year of operating income from the relatively higher
margin businesses of Hirschmann and Lumberg.
Asia
Pacific Segment
| Percentage Change | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total revenues
|
$ | 250,250 | $ | 373,360 | $ | 321,192 | −33.0 | % | 16.2 | % | ||||||||||
|
Operating income (loss)
|
28,794 | (66,093 | ) | 37,991 | 143.6 | % | −274.0 | % | ||||||||||||
|
as a percent of total revenues
|
11.5 | % | −17.7 | % | 11.8 | % | ||||||||||||||
Asia Pacific total revenues, which include affiliate revenues,
decreased in 2009 from 2008 due to lower unit sales volume of
$98.0 million. The broad-based market declines continued in
Asia during 2009 resulting in lower
24
Table of Contents
volume across most vertical markets. A decrease in copper prices
resulted in lower selling prices that contributed
$25.5 million to the decrease in revenues. These decreases
were partially offset by favorable currency translation.
Operating income increased in 2009 primarily due to a decrease
in impairment charges and other restructuring costs. In 2009,
the segment recognized $1.1 million of asset impairment and
other restructuring charges. In 2008, the segment recognized
goodwill and other asset impairment charges totaling
$112.0 million and other restructuring charges of
$2.1 million. Excluding these charges, operating income
decreased $18.2 million and operating margin decreased from
12.9% in 2008 to 12.0% in 2009 as the decrease in revenues more
than offset gross profit margin improvement from our product
portfolio management actions and cost savings from our
restructuring actions.
Asia Pacific total revenues increased in 2008 from 2007
primarily due to $72.4 million of acquired revenues,
$9.8 million of favorable foreign currency translation, and
$3.4 million of higher selling prices. These increases were
partially offset by lower unit sales volume, which resulted from
the weakening global economic environment and our strategic
initiative in product portfolio management at LTK. Acquired
revenues primarily represent LTK’s revenues from the first
quarter of 2008.
Operating income decreased in 2008 from 2007 primarily due to
impairment charges and certain other charges. In 2008, the Asia
Pacific segment recognized goodwill and other asset impairment
charges totaling $112.0 million and other restructuring
charges of $2.1 million. The goodwill and other asset
impairment charges include $102.8 million related to
goodwill and $9.2 million related to trademarks. The other
restructuring charges primarily relate to severance expenses
associated with our global restructuring actions that we
announced during the fourth quarter of 2008. Operating income in
2007 included charges of $2.3 million primarily related to
the effects of purchase accounting. Excluding these charges,
operating income margin decreased as the improvement in gross
profit margin that resulted from our product portfolio actions
was more than offset by the decrease in unit sales volume.
Wireless
Segment
| Percentage Change | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total revenues
|
$ | 53,247 | $ | 14,020 | $ | — | 279.8 | % | n/a | |||||||||||
|
Operating loss
|
(28,325 | ) | (54,317 | ) | — | 47.9 | % | n/a | ||||||||||||
|
as a percent of total revenues
|
−53.2 | % | −387.4 | % | n/a | |||||||||||||||
The Wireless segment consists of Trapeze, which we acquired on
July 16, 2008. This segment sells and licenses its products
primarily through distributors and value added resellers. In
addition, its products are sold and licensed through OEM
partners who market the products and technology under their own
brand name. During 2009, revenues to the OEM partners decreased
primarily due to the bankruptcy of one of these partners, Nortel
Networks. This decrease was offset by an increase in revenues to
distributors and value added resellers.
Sales transactions from our Wireless segment often involve
multiple elements in which the sales proceeds are deferred and
recognized ratably over the period related to the last delivered
element. As of December 31, 2009, total deferred revenue
and deferred cost of sales were $22.7 million and
$8.3 million, respectively. The deferred revenue and
deferred cost of sales are expected to be amortized over various
periods ranging from one to three years.
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The changes in the deferred revenue and deferred cost of sales
balances are as follows (in thousands):
|
Deferred
|
Deferred Cost
|
Deferred Gross
|
||||||||||
| Revenue | of Sales | Profit | ||||||||||
|
Balance, December 31, 2009
|
$ | 22,730 | $ | 8,306 | $ | 14,424 | ||||||
|
Balance, December 31, 2008
|
20,166 | 7,270 | 12,896 | |||||||||
|
Increase
|
$ | 2,564 | $ | 1,036 | $ | 1,528 | ||||||
|
Balance, December 31, 2008
|
$ | 20,166 | $ | 7,270 | $ | 12,896 | ||||||
|
Balance, July 16, 2008
|
1,900 | — | 1,900 | |||||||||
|
Increase
|
$ | 18,266 | $ | 7,270 | $ | 10,996 | ||||||
Wireless total revenues increased in 2009 from 2008 due to
$25.3 million of acquired revenues, which include revenues
from Trapeze for the period from January 1, 2009 through
July 16, 2009. Total revenues also increased due to an
increase in the amount of revenue recognized by Trapeze during
the year that had been previously deferred.
Operating loss improved in 2009 due to the increase in revenues
as discussed above. Operating loss also improved because the
prior year period included $32.8 million of goodwill and
trademark impairment charges and $2.7 million of expenses
from the effects of purchase accounting, including in-process
research and development charges of $1.5 million,
amortization of the sales backlog intangible asset of
$0.7 million, and inventory cost
step-up
of
$0.5 million, which was included in cost of sales.
Corporate
Expenses
| Percentage Change | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total corporate expenses
|
$ | 41,378 | $ | 74,889 | $ | 43,313 | −44.7 | % | 72.9 | % | ||||||||||
Corporate expenses include administrative and other costs that
are not allocated to the operating segments. These expenses
decreased in 2009 from 2008 primarily due to the
$27.5 million of goodwill and other asset impairment
charges recognized in 2008. The decrease is also due to lower
consulting fees and other discretionary items such as travel
costs.
Total corporate expenses increased in 2008 from 2007 primarily
due to goodwill and other asset impairment charges of
$27.5 million. A portion of goodwill related to a previous
acquisition was considered corporate goodwill because it
benefited the entire Company. For purposes of testing goodwill
for impairment, this corporate goodwill is allocated to certain
reporting units. Based on the 2008 goodwill impairment analysis,
$22.5 million of the corporate goodwill was impaired. We
also recognized a $5.0 million impairment of a cost method
investment due to the decline in its estimated fair value. The
remaining increase is primarily due to new corporate programs
such as global sales and marketing.
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. In 2009, we
recognized $2.1 million of interest expense
($1.4 million net of tax) related to the uncertain tax
positions, which is included in discontinued operations. Due to
the utilization of other net operating loss carryforwards from
2005 through 2008, we did not recognize interest expense related
to this reserve prior to 2009.
Liquidity
and Capital Resources
Significant factors affecting our cash liquidity include
(1) cash provided by operating activities,
(2) disposals of tangible assets, (3) exercises of
stock options, (4) cash used for acquisitions,
restructuring actions, capital expenditures, share repurchases,
and dividends, and (5) our available credit facilities and
other borrowing arrangements. We expect our operating activities
to generate cash in 2010 and believe our sources of liquidity
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Table of Contents
are sufficient to fund current working capital requirements,
capital expenditures, contributions for our retirement plans,
quarterly dividend payments, severance payments from our
restructuring actions, and our short-term operating strategies.
Economic conditions worldwide, customer demand, competitive
market forces, customer acceptance of our product mix, and
commodities pricing could affect our ability to continue to fund
our future needs from business operations.
The following table is derived from our Consolidated Cash Flow
Statements:
|
Years Ended
|
||||||||
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Net cash provided by (used for):
|
||||||||
|
Operating activities
|
$ | 151,810 | $ | 173,874 | ||||
|
Investing activities
|
(59,049 | ) | (160,047 | ) | ||||
|
Financing activities
|
(22,048 | ) | 60,120 | |||||
|
Effects of currency exchange rate changes on cash and cash
equivalents
|
10,753 | (6,498 | ) | |||||
|
Increase in cash and cash equivalents
|
81,466 | 67,449 | ||||||
|
Cash and cash equivalents, beginning of year
|
227,413 | 159,964 | ||||||
|
Cash and cash equivalents, end of year
|
$ | 308,879 | $ | 227,413 | ||||
Net cash provided by operating activities, a key source of our
liquidity, decreased by $22.1 million in 2009 from 2008
primarily due to a decrease in income excluding non-cash
impairment charges. This decrease was partially offset by a
favorable net change in operating assets and liabilities. This
favorable change was primarily due to improvements in accounts
payable and inventories as we reduced production and inventory
levels at a greater rate than the decrease in customer demand.
In 2009, the change in accrued liabilities included
$62.1 million of total severance payments related to our
restructuring actions compared to $14.7 million in 2008. We
expect to pay more than $10 million of severance in 2010
related to our global restructuring actions (see Note 11 to
the Consolidated Financial Statements).
Net cash used for investing activities totaled
$59.0 million in 2009 compared to $160.0 million in
2008. Investing activities in 2009 primarily related to capital
expenditures for enterprise resource planning software and
capacity enhancements at certain locations and payments for
acquisitions including a fiber optic company. Investing
activities in 2008 primarily related to payments for the
acquisition of Trapeze and capital expenditures that include the
construction of a new manufacturing facility in China partially
offset by proceeds from the sales of assets including sales of
certain real estate in Mexico and our telecommunications cable
operations in the Czech Republic.
Net cash used for financing activities totaled
$22.0 million in 2009 compared to net cash provided by
financing activities of $60.1 million in 2008. Financing
activities in 2009 included $193.7 million of proceeds from
the issuance of senior subordinated notes and offsetting
payments on our senior secured credit facility. We also incurred
$11.8 million of debt issuance costs and paid
$9.4 million of dividends. Financing activities in 2008
primarily related to $240.0 million of borrowings under our
senior secured credit facility to fund the acquisition of
Trapeze and pay the $110.0 million of principal on our
convertible subordinated debentures that were redeemed. We also
repurchased $68.3 million of our common stock.
In the first quarter of 2009, we amended our senior secured
credit facility and changed the definition of EBITDA used in the
computation of the debt-to-EBITDA leverage ratio covenant. In
the third quarter of 2009, we further amended the facility to
extend the term from January 2011 to January 2013 and to reduce
the size from $350.0 million to $250.0 million through
January 2011. In January 2011, the size of the facility reduces
from $250.0 million to $230.0 million. Although the
amendments increased the cost of borrowings under the facility,
they provide us with additional flexibility in managing
liquidity through the weaker global demand in our served
markets. As of December 31, 2009, we had $60.4 million
in available borrowing capacity under our senior secured credit
facility and we were in compliance with all of the amended
covenants. Our outstanding debt obligations as of
December 31, 2009, consisted of $350.0 million of
7.0% senior subordinated notes due 2017,
$193.9 million of 9.25% senior subordinated notes due
2019, and $46.3 million of outstanding borrowings under our
senior secured
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Table of Contents
credit facility. On February 16, 2010, we made a
$46.3 million payment related to the amount drawn under our
senior secured credit facility. After this payment, we did not
have any outstanding borrowings under the facility.
Contractual obligations outstanding at December 31, 2009
have the following scheduled maturities:
|
Less than
|
1-3
|
3-5
|
More than
|
|||||||||||||||||
| Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Long-term debt obligations(1)(2)
|
$ | 590,210 | $ | 46,268 | $ | — | $ | — | $ | 543,942 | ||||||||||
|
Interest payments on long-term debt obligations(3)
|
359,785 | 43,285 | 86,000 | 86,000 | 144,500 | |||||||||||||||
|
Operating lease obligations(4)
|
71,087 | 13,584 | 19,765 | 12,598 | 25,140 | |||||||||||||||
|
Purchase obligations(5)
|
11,653 | 11,653 | — | — | — | |||||||||||||||
|
Other commitments(6)
|
27,778 | 7,037 | 19,571 | 1,170 | — | |||||||||||||||
|
Pension and other postemployment obligations
|
122,980 | 12,130 | 31,141 | 22,825 | 56,884 | |||||||||||||||
|
Total
|
$ | 1,183,493 | $ | 87,689 | $ | 202,745 | $ | 122,593 | $ | 770,466 | ||||||||||
| (1) | As described in Note 12 to the Consolidated Financial Statements. | |
| (2) | Amounts do not include accrued and unpaid interest. Accrued and unpaid interest related to long-term debt obligations is reflected on a separate line in the table. | |
| (3) | Assumes interest payments on our senior secured credit facility at 3.74% until February 16, 2010, which is the date we made a $46.3 million payment on the facility (see Note 23 to the Consolidated Financial Statements). | |
| (4) | As described in Note 17 to the Consolidated Financial Statements. | |
| (5) | Includes agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. | |
| (6) | Represents obligations for uncertain tax positions (see Note 13 to the Consolidated Financial Statements). |
Our commercial commitments expire or mature as follows:
|
Less than
|
1-3
|
3-5
|
More than
|
|||||||||||||||||
| Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Standby financial letters of credit
|
$ | 9,969 | $ | 4,097 | $ | 5,872 | $ | — | $ | — | ||||||||||
|
Bank guarantees
|
8,691 | 8,691 | — | — | — | |||||||||||||||
|
Surety bonds
|
1,629 | 1,629 | — | — | — | |||||||||||||||
|
Total
|
$ | 20,289 | $ | 14,417 | $ | 5,872 | $ | — | $ | — | ||||||||||
Standby financial letters of credit, guarantees, and surety
bonds are generally issued to secure obligations we have for a
variety of commercial reasons such as risk self-insurance
programs, unfunded retirement plans, and the importation and
exportation of product.
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.
Current-Year
Adoption of Recent Accounting Pronouncements
Discussion regarding our adoption of accounting pronouncements
is included in Note 2 to the Consolidated Financial
Statements.
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Table of Contents
Pending
Adoption of Recent Accounting Pronouncements
Discussion regarding our pending adoption of accounting
pronouncements is included in Note 2 to the Consolidated
Financial Statements.
Critical
Accounting Estimates
The preparation of financial statements and related disclosures
in conformity with accounting principles generally accepted in
the United States (GAAP) requires us to make estimates and
judgments that affect the amounts reported in our Consolidated
Financial Statements. We base our estimates and judgments on
historical experience or various assumptions that are believed
to be reasonable under the circumstances, and the results form
the basis for making judgments about the reported values of
assets, liabilities, revenues, and expenses that are not readily
apparent from other sources. Actual results may differ from
these estimates. We believe the following critical accounting
policies affect our more significant estimates and judgments
used in the preparation of the Consolidated Financial
Statements. We provide a detailed discussion on the application
of these and other accounting policies in Note 2 to the
Consolidated Financial Statements.
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.
Sales from our Wireless segment often involve multiple elements,
principally hardware, software, hardware and software
maintenance, and other support services. When a sale involves
multiple elements, we allocate the proceeds from the arrangement
to each respective element based on its Vendor Specific
Objective Evidence (VSOE) of fair value and recognize revenue
when each element’s revenue recognition criteria are met.
VSOE of fair value for each element is established based on the
price charged when the same element is sold separately. If VSOE
of fair value cannot be established, the proceeds from the
arrangement are deferred and recognized ratably over the period
related to the last delivered element.
In October 2009, the Financial Accounting Standards Board (FASB)
issued an update to existing guidance on revenue recognition
that will become effective for us beginning January 1,
2011, with earlier adoption permitted. Under the new guidance on
arrangements that include software elements, tangible products
that have software components that are essential to the
functionality of the tangible product will no longer be within
the scope of the software revenue recognition guidance and
software-enabled products will now be subject to other relevant
revenue recognition guidance. Additionally, the FASB issued an
update to existing guidance on revenue arrangements with
multiple deliverables that are outside the scope of the software
revenue recognition guidance. Under the new guidance, when VSOE
or third party evidence of the selling price for deliverables in
an arrangement cannot be determined, a best estimate of the
selling price is required to separate deliverables and allocate
arrangement consideration using the relative selling price
method. The new guidance includes new disclosure requirements on
how the application of the relative selling price method affects
the timing and amount of revenue recognition. We expect to early
adopt the new guidance on January 1, 2010. We expect this
new guidance will affect revenue recognition for our Wireless
segment by significantly decreasing the amount of revenue that
is deferred on arrangements with multiple deliverables.
Accounts
Receivable
At the time of sale, we establish an estimated reserve for
trade, promotion, and other special price reductions such as
contract pricing, discounts to meet competitor pricing, and
on-time payment discounts. We also adjust receivables balances
for, among other things, correction of billing errors, incorrect
shipments, and settlement of customer disputes. Customers are
allowed to return inventory if and when certain conditions
regarding the physical state of the inventory and our approval
of the return are met. Certain distribution customers are
allowed to return inventory at original cost, in an amount not
to exceed three percent of the prior year’s purchases, in
exchange for an order of equal or greater value. Until we can
process these reductions, corrections, and returns (together,
the
29
Table of Contents
Adjustments) through individual customer records, we estimate
the amount of outstanding Adjustments and recognize them against
our gross accounts receivable and gross revenues. We also adjust
inventory and cost of sales for the estimated level of returns.
We base these estimates on historical and anticipated sales
demand, trends in product pricing, and historical and
anticipated Adjustments patterns. We make revisions to these
estimates in the period in which the facts that give rise to
each revision become known. Future market conditions and product
transitions might require us to take actions to further reduce
prices and increase customer return authorizations.
We evaluate the collectibility of accounts receivable based on
the specific identification method. A considerable amount of
judgment is required in assessing the realization of accounts
receivable, including the current creditworthiness of each
customer and related aging of the past due balances. We perform
ongoing credit evaluations of our customers’ financial
condition. Through these evaluations, we may become aware of a
situation where a customer may not be able to meet its financial
obligations due to deterioration of its financial viability,
credit ratings, or bankruptcy. In circumstances where we are
aware of a customer’s inability or unwillingness to pay
outstanding amounts, we record a specific reserve for bad debts
against amounts due to reduce the receivable to its estimated
collectible balance. There have been occasions in the past where
we recognized an expense associated with the rapid collapse of a
distributor for which no specific reserve had been previously
established. The reserve requirements are based on the best
facts available to us and are reevaluated and adjusted as
additional information is received.
Inventories
We evaluate the realizability of our inventory on a
product-by-product
basis in light of sales demand, technological changes, product
life cycle, component cost trends, product pricing, and
inventory condition. In circumstances where inventory levels are
in excess of historical and anticipated market demand, where
inventory is deemed technologically obsolete or not saleable due
to condition, or where inventory cost exceeds net realizable
value, we record a charge to cost of goods sold and reduce the
inventory to its net realizable value.
Deferred
Tax Assets
We recognize deferred tax assets resulting from tax credit
carryforwards, net operating loss carryforwards, and deductible
temporary differences between taxable income on our income tax
returns and income before taxes under GAAP. Deferred tax assets
generally represent future tax benefits to be received when
these carryforwards can be applied against future taxable income
or when expenses previously reported in our Consolidated
Financial Statements become deductible for income tax purposes.
A deferred tax asset valuation allowance is required when some
portion or all of the deferred tax assets may not be realized.
We are required to estimate taxable income in future years or
develop tax strategies that would enable tax asset realization
in each taxing jurisdiction and use judgment to determine
whether or not to record a deferred tax asset valuation
allowance for part or all of a deferred tax asset.
We have significant tax credit carryforwards in the United
States on which we have not recorded a valuation allowance. The
utilization of these credits is dependent upon the recognition
of both U.S. taxable income as well as income characterized
as foreign source under the U.S. tax laws. The Company
expects to generate enough taxable income in the future to be
able to utilize these tax credits. Furthermore, in 2010 we
expect to implement tax planning strategies that will help
generate sufficient foreign source income in the carryforward
period.
Income
Taxes
Our effective tax rate is based on expected income, statutory
tax rates, and tax planning opportunities available to us in the
various jurisdictions in which we operate. Significant judgment
is required in determining our effective tax rate and in
evaluating our uncertain tax positions. We establish accruals
for uncertain tax positions when, despite the belief that our
tax return positions will more likely than not be sustained upon
examination, we believe that certain positions are likely to be
challenged and that the full amount of the associated tax
benefit may not be realized. To the extent we were to prevail in
matters for which accruals have been established or be required
to pay amounts in excess of reserves, there could be a material
effect on our income tax provisions in the period in which such
determination is made. In addition, certain portions of our
foreign subsidiaries’ undistributed income are
30
Table of Contents
considered to be indefinitely reinvested and, accordingly, we do
not record a provision for United States federal and state
income taxes on this foreign income. If this income was not
considered to be indefinitely reinvested, it would be subject to
United States federal and state income taxes and could
materially effect our income tax provision.
Long-Lived
Assets
The valuation and classification of long-lived assets and the
assignment of depreciation and amortization useful lives and
salvage values involve significant judgments and the use of
estimates. The testing of these long-lived assets under
established accounting guidelines for impairment also requires
significant use of judgment and assumptions, particularly as it
relates to the identification of asset groups and reporting
units and the determination of fair market value. We test our
tangible long-lived assets and intangible long-lived assets
subject to amortization for impairment when indicators of
impairment exist. We test our goodwill and intangible long-lived
assets not subject to amortization for impairment on an annual
basis during the fourth quarter or when indicators of impairment
exist. We base our estimates on assumptions we believe to be
reasonable, but which are not predictable with precision and
therefore are inherently uncertain. Actual future results could
differ from these estimates.
When we evaluate goodwill for impairment, we compare the fair
value of each reporting unit to its carrying value. We determine
the fair value using the income approach as reconciled to our
aggregate market capitalization. Under the income approach, we
calculate the fair value of a reporting unit based on the
present value of estimated future cash flows using growth rates
and discount rates that are consistent with current market
conditions in our industry. For example, in our 2009 goodwill
impairment analysis, the discount rates for our reporting units
ranged from 10% to 18% and the long-term growth rates ranged
from 2% to 4%. If the fair value of the reporting unit exceeds
the carrying value of the net assets including goodwill assigned
to that unit, goodwill is not impaired. If the carrying value of
the reporting unit’s net assets including goodwill exceeds
the fair value of the reporting unit, then we determine the
implied fair value of the reporting unit’s goodwill. If the
carrying value of a reporting unit’s goodwill exceeds its
implied fair value, then an impairment of goodwill has occurred
and we recognize an impairment loss for the difference between
the carrying amount and the implied fair value of goodwill as a
component of operating income.
Accrued
Sales Rebates
We grant incentive rebates to participating distributors as part
of our sales programs. The rebates are determined based on
certain targeted sales volumes. Rebates are paid quarterly or
annually in either cash or receivables credits. Until we can
process these rebates through individual customer records, we
estimate the amount of outstanding rebates and recognize them as
accrued liabilities and reductions in our gross revenues. We
base our estimates on both historical and anticipated sales
demand and rebate program participation. We charge revisions to
these estimates back to accrued liabilities and revenues in the
period in which the facts that give rise to each revision become
known. Future market conditions and product transitions might
require us to take actions to increase sales rebates offered,
possibly resulting in an incremental increase in accrued
liabilities and an incremental reduction in revenues at the time
the rebate is offered.
Pension
and Other Postretirement Benefits
Our pension and other postretirement benefit costs and
obligations are dependent on the various actuarial assumptions
used in calculating such amounts. These assumptions relate to
discount rates, salary growth, long-term return on plan assets,
health care cost trend rates, and other factors. We base the
discount rate assumptions on current investment yields on
high-quality corporate long-term bonds. The salary growth
assumptions reflect our long-term actual experience and future
or near-term outlook. Long-term return on plan assets is
determined based on historical portfolio results and
management’s expectation of the future economic
environment. Our health care cost trend assumptions are
developed based on historical cost data, the near-term outlook,
and an assessment of likely long-term trends. Our key
assumptions are described in further detail in Note 14 to
the Consolidated Financial Statements. Actual results that
differ from our assumptions are accumulated and, if in excess of
the lesser of 10% of the projected benefit obligation or the
fair market value of plan assets, amortized over the estimated
future working life of the plan participants.
31
Table of Contents
Share-Based
Compensation
We compensate certain employees with various forms of
share-based payment awards and recognize compensation costs for
these awards based on their fair values. The fair values of
certain awards are estimated on the grant date using the
Black-Scholes-Merton option-pricing formula, which incorporates
certain assumptions regarding the expected term of an award and
expected stock price volatility. We develop the expected term
assumption based on the vesting period and contractual term of
an award, our historical exercise and post-vesting cancellation
experience, our stock price history, plan provisions that
require exercise or cancellation of awards after employees
terminate, and the extent to which currently available
information indicates that the future is reasonably expected to
differ from past experience. We develop the expected volatility
assumption based on historical price data for our common stock
and other economic data trended into future years. After
calculating the aggregate fair value of an award, we use an
estimated forfeiture rate to discount the amount of share-based
compensation cost to be recognized in our operating results over
the service period of the award. We develop the forfeiture
assumption based on our historical pre-vesting cancellation
experience. Our key assumptions are described in further detail
in Note 15 to the Consolidated Financial Statements.
Business
Combination Accounting
We allocate the cost of an acquired entity to the assets and
liabilities acquired based upon their estimated fair values at
the business combination date. We also identify and estimate the
fair values of intangible assets that should be recognized as
assets apart from goodwill. We have historically relied upon the
use of third-party valuation specialists to assist in the
estimation of fair values for tangible long-lived assets and
intangible assets other than goodwill. The carrying values of
acquired receivables, inventories, and accounts payable have
historically approximated their fair values at the business
combination date. With respect to accrued liabilities acquired,
we use all available information to make our best estimates of
their fair values at the business combination date. When
necessary, we rely upon the use of third-party actuaries to
assist in the estimation of fair value for certain liabilities.
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Market risks relating to our operations result primarily from
currency exchange rates, certain commodity prices, interest
rates, and credit extended to customers. Each of these risks is
discussed below.
Currency
Exchange Rate Risk
For most of our products, the currency in which we sell the
product is the same as the currency in which we incur the costs
to manufacture the product, resulting in a natural hedge. Our
currency exchange rate management strategy involves the use of
natural techniques, where possible, such as the offsetting or
netting of like-currency cash flows. We do not generally use
foreign currency derivatives and did not have any outstanding at
December 31, 2009.
We generally view our investments in international subsidiaries
with functional currencies other than the United States dollar
as long-term. As a result, we do not generally use derivatives
to manage these net investments. In terms of foreign currency
translation risk, we are exposed primarily to exchange rate
movements between the United States dollar and the euro,
Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso,
Australian dollar, and British pound. Our net foreign currency
investment in foreign subsidiaries and affiliates translated
into United States dollars using year-end exchange rates was
$314.9 million and $365.5 million at December 31,
2009 and 2008, respectively. We estimate a one percent change of
the United States dollar relative to foreign currencies would
have changed 2009 pre-tax income (loss) of our foreign
operations by approximately $0.2 million. This sensitivity
analysis has inherent limitations as it assumes that rates of
multiple foreign currencies will always move in the same
direction relative to the value of the United States dollar over
time.
Commodity
Price Risk
Certain raw materials used by us are subject to price volatility
caused by supply conditions, political and economic variables,
and other unpredictable factors. The primary purpose of our
commodity price management activities is to manage the
volatility associated with purchases of commodities in the
normal course of business. We do not speculate on commodity
prices.
32
Table of Contents
We are exposed to price risk related to our purchase of copper
used in the manufacture of our products. Our copper price
management strategy involves the use of natural techniques,
where possible, such as purchasing copper for future delivery at
fixed prices. We do not generally use commodity price
derivatives and did not have any outstanding at
December 31, 2009.
The following table presents unconditional copper purchase
obligations outstanding at December 31, 2009. The
unconditional copper purchase obligations settle during 2010.
|
Purchase
|
Fair
|
|||||||
| Amount | Value | |||||||
|
(In thousands, except
|
||||||||
| average price) | ||||||||
|
Unconditional copper purchase obligations:
|
||||||||
|
Commitment volume in pounds
|
1,551 | |||||||
|
Weighted average price per pound
|
$ | 3.00 | ||||||
|
Commitment amounts
|
$ | 4,660 | $ | 5,158 | ||||
We are also exposed to price risk related to our purchase of
selected commodities derived from petrochemical feedstocks used
in the manufacture of our products. We generally purchase these
commodities based upon market prices established with the
vendors as part of the purchase process. Pricing of these
commodities are volatile as they tend to fluctuate with the
price of oil. Historically, we have not used commodity financial
instruments to hedge prices for commodities derived from
petrochemical feedstocks.
Interest
Rate Risk
We have occasionally managed our debt portfolio by using
interest rate derivative instruments, such as swap agreements,
to achieve an overall desired position of fixed and floating
rates. We were not a party to any interest rate derivative
instruments at December 31, 2009 or during the year then
ended.
The following table provides information about our financial
instruments that are sensitive to changes in interest rates. The
table presents principal amounts by expected maturity dates and
fair values as of December 31, 2009.
| Principal Amount by Expected Maturity |
Fair
|
|||||||||||||||
| 2010 | Thereafter | Total | Value | |||||||||||||
| (In thousands, except interest rates) | ||||||||||||||||
|
Fixed-rate senior subordinated notes
|
$ | — | $ | 350,000 | $ | 350,000 | $ | 340,813 | ||||||||
|
Average interest rate
|
7.00 | % | ||||||||||||||
|
Fixed-rate senior subordinated notes
|
$ | — | $ | 200,000 | $ | 200,000 | $ | 211,250 | ||||||||
|
Average interest rate
|
9.75 | % | ||||||||||||||
|
Variable-rate senior secured credit facility
|
$ | 46,268 | $ | — | $ | 46,268 | $ | 46,268 | ||||||||
|
Interest rate at December 31, 2009
|
3.74 | % | ||||||||||||||
|
Total
|
$ | 596,268 | $ | 598,331 | ||||||||||||
Because the senior secured credit facility has a variable
interest rate, its carrying value approximates fair value.
Concentrations
of Credit Risk
Financial instruments that potentially subject us to significant
concentrations of credit risk consist of cash and cash
equivalents and accounts receivable. We are exposed to credit
losses in the event of nonperformance by counterparties to these
financial instruments. We place cash and cash equivalents with
various high-quality financial institutions throughout the
world, and exposure is limited at any one financial institution.
Although we do not obtain collateral or other security to
support these financial instruments, we evaluate the credit
standing of the counterparty financial institutions. At
December 31, 2009, we had $25.6 million in accounts
receivable outstanding from Anixter International Inc.
(Anixter). This represented approximately 11% of our total
accounts receivable outstanding at December 31, 2009.
Anixter generally pays all outstanding receivables within thirty
to sixty days of invoice receipt.
33
Table of Contents
| Item 8. | Financial Statements and Supplementary Data |
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Belden Inc.
We have audited the accompanying consolidated balance sheets of
Belden Inc. (the Company) as of December 31, 2009 and 2008,
and the related consolidated statements of operations,
stockholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2009. Our audits
also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Belden Inc. at December 31, 2009 and
2008, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2009, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
As discussed in Note 2 to the consolidated financial
statements, on January 1, 2009, Belden Inc. changed its
method of accounting for convertible debt that may be settled in
cash upon conversion.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Belden Inc.’s internal control over financial reporting as
of December 31, 2009, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 26, 2010
expressed an unqualified opinion thereon.
/s/ Ernst &
Young LLP
St. Louis, Missouri
February 26, 2010
34
Table of Contents
Belden
Inc.
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands, except par value) | ||||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 308,879 | $ | 227,413 | ||||
|
Receivables, less allowance for doubtful accounts of $3,590 and
$4,898 at 2009 and 2008, respectively
|
242,145 | 292,236 | ||||||
|
Inventories, net
|
151,262 | 216,022 | ||||||
|
Deferred income taxes
|
26,996 | 16,430 | ||||||
|
Other current assets
|
35,036 | 34,826 | ||||||
|
Total current assets
|
764,318 | 786,927 | ||||||
|
Property, plant and equipment, less accumulated depreciation
|
299,586 | 324,569 | ||||||
|
Goodwill
|
313,030 | 321,478 | ||||||
|
Intangible assets, less accumulated amortization
|
143,013 | 156,025 | ||||||
|
Deferred income taxes
|
37,205 | 16,006 | ||||||
|
Other long-lived assets
|
63,426 | 53,388 | ||||||
| $ | 1,620,578 | $ | 1,658,393 | |||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 169,763 | $ | 160,744 | ||||
|
Accrued liabilities
|
141,922 | 180,801 | ||||||
|
Current maturities of long-term debt
|
46,268 | — | ||||||
|
Total current liabilities
|
357,953 | 341,545 | ||||||
|
Long-term debt
|
543,942 | 590,000 | ||||||
|
Postretirement benefits
|
121,745 | 120,256 | ||||||
|
Other long-term liabilities
|
45,890 | 35,724 | ||||||
|
Stockholders’ equity:
|
||||||||
|
Preferred stock, par value $0.01 per share —
2,000 shares authorized; no shares outstanding
|
— | — | ||||||
|
Common stock, par value $0.01 per share —
200,000 shares authorized; 50,335 shares issued;
46,660 and 46,491 shares outstanding at 2009 and 2008,
respectively
|
503 | 503 | ||||||
|
Additional paid-in capital
|
591,917 | 585,704 | ||||||
|
Retained earnings
|
72,625 | 106,949 | ||||||
|
Accumulated other comprehensive income
|
14,614 | 10,227 | ||||||
|
Treasury stock, at cost — 3,675 and 3,844 shares
at 2009 and 2008, respectively
|
(128,611 | ) | (132,515 | ) | ||||
|
Total stockholders’ equity
|
551,048 | 570,868 | ||||||
| $ | 1,620,578 | $ | 1,658,393 | |||||
The accompanying notes are an integral part of these
Consolidated Financial Statements
35
Table of Contents
Belden
Inc.
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands, except per share amounts) | ||||||||||||
|
Revenues
|
$ | 1,415,262 | $ | 2,005,890 | $ | 2,032,841 | ||||||
|
Cost of sales
|
(1,002,064 | ) | (1,442,208 | ) | (1,471,471 | ) | ||||||
|
Gross profit
|
413,198 | 563,682 | 561,370 | |||||||||
|
Selling, general and administrative expenses
|
(289,672 | ) | (362,122 | ) | (317,481 | ) | ||||||
|
Research and development
|
(60,870 | ) | (50,089 | ) | (17,843 | ) | ||||||
|
Amortization of intangibles
|
(16,080 | ) | (13,440 | ) | (10,604 | ) | ||||||
|
Gain (loss) on sale of assets
|
(17,184 | ) | (3,727 | ) | 8,556 | |||||||
|
Goodwill and other asset impairment
|
(27,751 | ) | (476,492 | ) | (3,262 | ) | ||||||
|
Operating income (loss)
|
1,641 | (342,188 | ) | 220,736 | ||||||||
|
Interest expense
|
(41,857 | ) | (37,908 | ) | (28,966 | ) | ||||||
|
Interest income
|
1,046 | 5,300 | 6,544 | |||||||||
|
Other income
|
4,756 | 6,326 | 1,799 | |||||||||
|
Income (loss) from continuing operations before taxes
|
(34,414 | ) | (368,470 | ) | 200,113 | |||||||
|
Income tax benefit (expense)
|
10,909 | 6,644 | (63,918 | ) | ||||||||
|
Income (loss) from continuing operations
|
(23,505 | ) | (361,826 | ) | 136,195 | |||||||
|
Loss from discontinued operations, net of tax
|
(1,396 | ) | — | — | ||||||||
|
Net income (loss)
|
$ | (24,901 | ) | $ | (361,826 | ) | $ | 136,195 | ||||
|
Weighted average number of common shares and equivalents:
|
||||||||||||
|
Basic
|
46,594 | 44,692 | 44,877 | |||||||||
|
Diluted
|
46,594 | 44,692 | 50,615 | |||||||||
|
Basic income (loss) per share:
|
||||||||||||
|
Continuing operations
|
$ | (0.50 | ) | $ | (8.10 | ) | $ | 3.03 | ||||
|
Discontinued operations
|
(0.03 | ) | — | — | ||||||||
|
Net income (loss)
|
$ | (0.53 | ) | $ | (8.10 | ) | $ | 3.03 | ||||
|
Diluted income (loss) per share:
|
||||||||||||
|
Continuing operations
|
$ | (0.50 | ) | $ | (8.10 | ) | $ | 2.71 | ||||
|
Discontinued operations
|
(0.03 | ) | — | — | ||||||||
|
Net income (loss)
|
$ | (0.53 | ) | $ | (8.10 | ) | $ | 2.71 | ||||
The accompanying notes are an integral part of these
Consolidated Financial Statements
36
Table of Contents
Belden
Inc.
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net income (loss)
|
$ | (24,901 | ) | $ | (361,826 | ) | $ | 136,195 | ||||
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
55,857 | 56,836 | 51,746 | |||||||||
|
Goodwill and other asset impairment
|
27,751 | 476,492 | 3,262 | |||||||||
|
Loss (gain) on disposal of tangible assets
|
17,184 | 3,727 | (8,556 | ) | ||||||||
|
Share-based compensation expense
|
11,748 | 13,568 | 10,562 | |||||||||
|
Provision for inventory obsolescence
|
4,550 | 12,994 | 4,802 | |||||||||
|
Tax deficiency (benefit) related to share-based compensation
|
1,564 | (1,279 | ) | (8,533 | ) | |||||||
|
Amortization of discount on long-term debt
|
210 | 1,256 | 1,459 | |||||||||
|
Deferred income tax expense (benefit)
|
(23,421 | ) | (37,803 | ) | 24,423 | |||||||
|
Pension funding in excess of pension expense
|
(8,973 | ) | (6,917 | ) | (5,883 | ) | ||||||
|
Changes in operating assets and liabilities, net of the effects
of currency exchange rate changes and acquired businesses:
|
||||||||||||
|
Receivables
|
52,369 | 73,526 | 5,148 | |||||||||
|
Inventories
|
50,645 | 28,188 | 21,428 | |||||||||
|
Deferred cost of sales
|
(1,036 | ) | (7,270 | ) | — | |||||||
|
Accounts payable
|
9,728 | (35,666 | ) | 18,935 | ||||||||
|
Accrued liabilities
|
(33,483 | ) | (14,042 | ) | 9,161 | |||||||
|
Deferred revenue
|
2,564 | 18,266 | — | |||||||||
|
Accrued taxes
|
7,597 | (31,562 | ) | (30,620 | ) | |||||||
|
Other assets
|
5,260 | (1,533 | ) | (12,835 | ) | |||||||
|
Other liabilities
|
(3,403 | ) | (13,081 | ) | (15,138 | ) | ||||||
|
Net cash provided by operating activities
|
151,810 | 173,874 | 205,556 | |||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Capital expenditures
|
(40,377 | ) | (53,561 | ) | (63,501 | ) | ||||||
|
Cash used to invest in or acquire businesses
|
(20,703 | ) | (147,384 | ) | (589,816 | ) | ||||||
|
Proceeds from disposal of tangible assets
|
2,031 | 40,898 | 60,182 | |||||||||
|
Cash provided by other investing activities
|
— | — | 2,911 | |||||||||
|
Net cash used for investing activities
|
(59,049 | ) | (160,047 | ) | (590,224 | ) | ||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Borrowings under credit arrangements
|
193,732 | 240,000 | 566,000 | |||||||||
|
Payments under borrowing arrangements
|
(193,732 | ) | (110,000 | ) | (278,000 | ) | ||||||
|
Debt issuance costs paid
|
(11,810 | ) | — | (11,070 | ) | |||||||
|
Cash dividends paid
|
(9,373 | ) | (8,926 | ) | (9,026 | ) | ||||||
|
Tax benefit (deficiency) related to share-based compensation
|
(1,564 | ) | 1,279 | 8,533 | ||||||||
|
Proceeds from exercises of stock options
|
699 | 6,103 | 32,335 | |||||||||
|
Payments under share repurchase program
|
— | (68,336 | ) | (31,664 | ) | |||||||
|
Net cash provided by (used for) financing activities
|
(22,048 | ) | 60,120 | 277,108 | ||||||||
|
Effect of currency exchange rate changes on cash and cash
equivalents
|
10,753 | (6,498 | ) | 13,373 | ||||||||
|
Increase (decrease) in cash and cash equivalents
|
81,466 | 67,449 | (94,187 | ) | ||||||||
|
Cash and cash equivalents, beginning of year
|
227,413 | 159,964 | 254,151 | |||||||||
|
Cash and cash equivalents, end of year
|
$ | 308,879 | $ | 227,413 | $ | 159,964 | ||||||
The accompanying notes are an integral part of these
Consolidated Financial Statements
37
Table of Contents
Belden
Inc.
Consolidated Stockholders’ Equity Statements
Consolidated Stockholders’ Equity Statements
|
Accumulated Other
|
||||||||||||||||||||||||||||||||||||
| Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||
|
Translation
|
Pension and
|
|||||||||||||||||||||||||||||||||||
| Common Stock |
Paid-In
|
Retained
|
Treasury Stock |
Component
|
Postretirement
|
|||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Shares | Amount | of Equity | Liability | Total | ||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||
|
Balance at December 31, 2006
|
50,335 | $ | 503 | $ | 591,416 | $ | 348,069 | (6,184 | ) | $ | (111,100 | ) | $ | 44,841 | $ | (29,828 | ) | $ | 843,901 | |||||||||||||||||
|
Net income
|
— | — | — | 136,195 | — | — | — | — | 136,195 | |||||||||||||||||||||||||||
|
Foreign currency translation
|
— | — | — | — | — | — | 63,879 | — | 63,879 | |||||||||||||||||||||||||||
|
Adjustments to pension and postretirement liability, net of
$6.4 million tax benefit
|
— | — | — | — | — | — | — | 14,306 | 14,306 | |||||||||||||||||||||||||||
|
Comprehensive income
|
214,380 | |||||||||||||||||||||||||||||||||||
|
Share repurchase program
|
— | — | — | — | (677 | ) | (31,664 | ) | — | — | (31,664 | ) | ||||||||||||||||||||||||
|
Exercise of stock options, net of tax withholding forfeitures
|
— | — | 27,651 | — | 1,125 | 4,573 | — | — | 32,224 | |||||||||||||||||||||||||||
|
Share-based compensation, net of tax withholding forfeitures
|
— | — | 19,623 | — | (6 | ) | (313 | ) | — | — | 19,310 | |||||||||||||||||||||||||
|
Dividends ($0.20 per share)
|
— | — | — | (9,100 | ) | — | — | — | — | (9,100 | ) | |||||||||||||||||||||||||
|
Exchange of convertible notes
|
— | — | (988 | ) | — | — | — | — | — | (988 | ) | |||||||||||||||||||||||||
|
Accretion of convertible notes
|
1,459 | — | — | — | — | — | 1,459 | |||||||||||||||||||||||||||||
|
Adoption of FIN No. 48
|
— | — | — | 2,684 | — | — | — | — | 2,684 | |||||||||||||||||||||||||||
|
Balance at December 31, 2007
|
50,335 | 503 | 639,161 | 477,848 | (5,742 | ) | (138,504 | ) | 108,720 | (15,522 | ) | 1,072,206 | ||||||||||||||||||||||||
|
Net loss
|
— | — | — | (361,826 | ) | — | — | — | — | (361,826 | ) | |||||||||||||||||||||||||
|
Foreign currency translation
|
— | — | — | — | — | — | (63,045 | ) | — | (63,045 | ) | |||||||||||||||||||||||||
|
Adjustments to pension and postretirement liability, net of
$14.3 million tax benefit
|
— | — | — | — | — | — | — | (19,926 | ) | (19,926 | ) | |||||||||||||||||||||||||
|
Comprehensive loss
|
(444,797 | ) | ||||||||||||||||||||||||||||||||||
|
Share repurchase program
|
— | — | — | — | (1,754 | ) | (68,336 | ) | — | — | (68,336 | ) | ||||||||||||||||||||||||
|
Exercise of stock options, net of tax withholding forfeitures
|
— | — | 1,141 | — | 239 | 4,900 | — | — | 6,041 | |||||||||||||||||||||||||||
|
Release of restricted stock, net of tax withholding forfeitures
|
— | — | (2,225 | ) | — | 69 | 918 | (1,307 | ) | |||||||||||||||||||||||||||
|
Share-based compensation
|
— | — | 14,847 | — | — | — | — | — | 14,847 | |||||||||||||||||||||||||||
|
Accretion of convertible notes
|
— | — | 1,256 | — | — | — | — | — | 1,256 | |||||||||||||||||||||||||||
|
Conversion of convertible subordinated debentures
|
— | — | (68,507 | ) | — | 3,344 | 68,507 | — | — | — | ||||||||||||||||||||||||||
|
Dividends ($0.20 per share)
|
— | — | 31 | (9,073 | ) | — | — | — | — | (9,042 | ) | |||||||||||||||||||||||||
|
Balance at December 31, 2008
|
50,335 | 503 | 585,704 | 106,949 | (3,844 | ) | (132,515 | ) | 45,675 | (35,448 | ) | 570,868 | ||||||||||||||||||||||||
|
Net loss
|
— | — | — | (24,901 | ) | — | — | — | — | (24,901 | ) | |||||||||||||||||||||||||
|
Foreign currency translation
|
— | — | — | — | — | — | 12,385 | — | 12,385 | |||||||||||||||||||||||||||
|
Adjustments to pension and postretirement liability, net of
$0.8 million tax benefit
|
— | — | — | — | — | — | — | (7,998 | ) | (7,998 | ) | |||||||||||||||||||||||||
|
Comprehensive loss
|
(20,514 | ) | ||||||||||||||||||||||||||||||||||
|
Exercise of stock options
|
— | — | 5 | — | 33 | 694 | — | — | 699 | |||||||||||||||||||||||||||
|
Release of restricted stock, net of tax withholding forfeitures
|
— | — | (4,007 | ) | — | 136 | 3,210 | — | — | (797 | ) | |||||||||||||||||||||||||
|
Share-based compensation
|
— | — | 10,184 | — | — | — | — | — | 10,184 | |||||||||||||||||||||||||||
|
Dividends ($0.20 per share)
|
— | — | 31 | (9,423 | ) | — | — | — | — | (9,392 | ) | |||||||||||||||||||||||||
|
Balance at December 31, 2009
|
50,335 | $ | 503 | $ | 591,917 | $ | 72,625 | (3,675 | ) | $ | (128,611 | ) | $ | 58,060 | $ | (43,446 | ) | $ | 551,048 | |||||||||||||||||
The accompanying notes are an integral part of these
Consolidated Financial Statements
38
Table of Contents
Notes to
Consolidated Financial Statements
| Note 1: | Basis of Presentation |
Business
Description
Belden Inc. (the Company, Belden, we, us, or our) designs,
manufactures, and markets cable, connectivity, and networking
products in markets including industrial automation, enterprise,
transportation, infrastructure, and consumer electronics.
Consolidation
The accompanying Consolidated Financial Statements include
Belden Inc. and all of its subsidiaries. We eliminate all
significant affiliate accounts and transactions in consolidation.
Foreign
Currency Translation
For international operations with functional currencies other
than the United States dollar, we translate assets and
liabilities at current exchange rates; we translate income and
expenses using average exchange rates. We report the resulting
translation adjustments, as well as gains and losses from
certain affiliate transactions, in accumulated other
comprehensive income (loss), a separate component of
stockholders’ equity. We include exchange gains and losses
on transactions in operating income.
Reporting
Periods
Our fiscal year and fiscal fourth quarter both end on
December 31. Typically, our fiscal first, second, and third
quarter each have ended on the last Sunday falling on or before
their respective calendar quarter-end. Beginning in 2010, our
fiscal first quarter will end on the Sunday falling closest to
91 days after December 31. Our fiscal second and third
quarter will each have 91 days. Our fiscal fourth quarter
will end on December 31.
Use of
Estimates in the Preparation of the Financial
Statements
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, and operating results
and the disclosure of contingencies. Actual results could differ
from those estimates. We make significant estimates in regard to
receivables collectibility, inventory valuation, realization of
deferred tax assets, valuation of goodwill and other long-lived
assets, valuation of contingent liabilities, calculation of
share-based compensation, calculation of pension and other
postretirement benefits expense, and valuation of acquired
businesses.
Reclassifications
We have made certain reclassifications to the 2008 and 2007
Consolidated Financial Statements with no impact to reported net
income in order to conform to the 2009 presentation.
Accounting
Standards Codification
In the third quarter of 2009, we adopted changes issued by the
Financial Accounting Standards Board (FASB) to the authoritative
hierarchy of accounting principles generally accepted in the
United States (GAAP). These changes establish the FASB
Accounting Standards Codification (Codification) as the source
of authoritative accounting principles recognized by the FASB to
be applied in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the
Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP.
The FASB will no longer issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force
Abstracts; instead the FASB will issue Accounting Standards
Updates. These changes and the Codification itself do not change
GAAP. Other than the manner in which new accounting guidance is
referenced, the adoption of these changes had no impact on our
financial statements.
39
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 2: | Summary of Significant Accounting Policies |
Fair
Value Measurement
We use fair value accounting and reporting to specify 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; | |
| • | 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 year ended December 31, 2009, we
utilized Level 1 inputs to determine the fair value of cash
equivalents and we utilized Level 2 inputs to determine the
fair value of certain long-lived assets (see Notes 8, 9 and
10).
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 values of these cash
equivalents as of December 31, 2009 and 2008 were
$153.0 million and $130.0 million, respectively, and
are based on quoted market prices in active markets.
Accounts
Receivable
We classify amounts owed to us and due within twelve months,
arising from the sale of goods or services in the normal course
of business, as current receivables. We classify receivables due
after twelve months as other long-lived assets.
At the time of sale, we establish an estimated reserve for
trade, promotion, and other special price reductions such as
contract pricing, discounts to meet competitor pricing, and
on-time payment discounts. We also adjust receivable balances
for, among other things, correction of billing errors, incorrect
shipments, and settlement of customer disputes. Customers are
allowed to return inventory if and when certain conditions
regarding the physical state of the inventory and our approval
of the return are met. Certain distribution customers are
allowed to return inventory at original cost, in an amount not
to exceed three percent of the prior year’s purchases, in
exchange for an order of equal or greater value. Until we can
process these reductions, corrections, and returns (together,
the Adjustments) through individual customer records, we
estimate the amount of outstanding Adjustments and recognize
them against our gross accounts receivable and gross revenues.
We also adjust inventory and cost of sales for the estimated
level of returns. We base these estimates on historical and
anticipated sales demand, trends in product pricing, and
historical and anticipated Adjustments patterns. We make
revisions to these estimates in the period in which the facts
that give rise to each revision become known. Future market
conditions might require us to take actions to further reduce
prices and increase customer return authorizations. Unprocessed
receivable credits recognized against our gross accounts
receivable balance at December 31, 2009 and 2008 totaled
$18.0 million and $11.3 million, respectively.
40
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
We evaluate the collectibility of accounts receivable based on
the specific identification method. A considerable amount of
judgment is required in assessing the realizability of accounts
receivable, including the current creditworthiness of each
customer and related aging of the past due balances. We perform
ongoing credit evaluations of our customers’ financial
condition. Through these evaluations, we may become aware of a
situation where a customer may not be able to meet its financial
obligations due to deterioration of its financial viability,
credit ratings, or bankruptcy. We record a specific reserve for
bad debts against amounts due to reduce the receivable to its
estimated collectible balance. We recognized bad debt expense of
$1.4 million, $3.2 million and $1.6 million in
2009, 2008, and 2007, respectively.
Inventories
and Related Reserves
Inventories are stated at the lower of cost or market. We
determine the cost of all raw materials,
work-in-process,
and finished goods inventories by the first in, first out
method. Cost components of inventories include direct labor,
applicable production overhead, and amounts paid to suppliers of
materials and products as well as freight costs and, when
applicable, duty costs to import the materials and products.
We evaluate the realizability of our inventory on a
product-by-product
basis in light of historical and anticipated sales demand,
technological changes, product life cycle, component cost
trends, product pricing, and inventory condition. In
circumstances where inventory levels are in excess of
anticipated market demand, where inventory is deemed
technologically obsolete or not saleable due to condition, or
where inventory cost exceeds net realizable value, we record a
charge to cost of goods sold and reduce the inventory to its net
realizable value. The allowances for excess and obsolete
inventories at December 31, 2009 and 2008 totaled
$20.5 million and $25.2 million, respectively.
Property,
Plant and Equipment
We record property, plant and equipment at cost. We calculate
depreciation on a straight-line basis over the estimated useful
lives of the related assets ranging from 10 to 40 years for
buildings, 5 to 12 years for machinery and equipment, and 5
to 10 years for computer equipment and software.
Construction in process reflects amounts incurred for the
configuration and build-out of property, plant and equipment and
for property, plant and equipment not yet placed into service.
We charge maintenance and repairs — both planned major
activities and less-costly, ongoing activities — to
expense as incurred. We capitalize interest costs associated
with the construction of capital assets and amortize the costs
over the assets’ useful lives.
We review property, plant and equipment to determine whether an
event or change in circumstances indicates the carrying values
of the assets may not be recoverable. We base our evaluation on
such impairment indicators as the nature of the assets, the
future economic benefit of the assets, and any historical or
future profitability measurements, as well as other external
market conditions or factors that may be present. If such
impairment indicators are present or other factors exist that
indicate that the carrying amount of an asset may not be
recoverable, we determine whether impairment has occurred
through the use of an undiscounted cash flow analysis at the
lowest level for which identifiable cash flows exist. If
impairment has occurred, we recognize a loss for the difference
between the carrying amount and the fair value of the asset (see
Note 8).
Intangible
Assets
Our intangible assets consist of (a) definite-lived assets
subject to amortization such as developed technology, favorable
customer contracts, customer relationships, and backlog, and
(b) indefinite-lived assets not subject to amortization
such as goodwill and trademarks. We calculate amortization of
the definite-lived intangible assets on a straight-line basis
over the estimated useful lives of the related assets ranging
from less than one year for backlog to in excess of twenty-five
years for certain of our customer relationships.
We evaluate goodwill for impairment annually or at other times
if events have occurred or circumstances exist that indicate the
carrying value of goodwill may no longer be recoverable. We
compare the fair value of each reporting unit to its carrying
value. We determine the fair value using the income approach as
reconciled to our
41
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
aggregate market capitalization. Under the income approach, we
calculate the fair value of a reporting unit based on the
present value of estimated future cash flows. If the fair value
of the reporting unit exceeds the carrying value of the net
assets including goodwill assigned to that unit, goodwill is not
impaired. If the carrying value of the reporting unit’s net
assets including goodwill exceeds the fair value of the
reporting unit, then we determine the implied fair value of the
reporting unit’s goodwill. If the carrying value of a
reporting unit’s goodwill exceeds its implied fair value,
then an impairment of goodwill has occurred and we recognize an
impairment loss for the difference between the carrying amount
and the implied fair value of goodwill as a component of
operating income. In 2008, we recognized goodwill impairment
charges totaling $433.7 million. We did not recognize any
goodwill impairment charges in 2009 or 2007. See Note 9 for
further discussion.
We also evaluate intangible assets not subject to amortization
for impairment annually or at other times if events have
occurred or circumstances exist that indicate the carrying
values of those assets may no longer be recoverable. We compare
the fair value of the asset with its carrying amount. If the
carrying amount of the asset exceeds its fair value, we
recognize an impairment loss in an amount equal to that excess.
In 2009 and 2008, we recognized trademark impairment charges
totaling $2.7 million and $22.4 million, respectively.
We did not recognize any trademark impairment charges in 2007.
See Notes 8 and 9 for further discussion.
We review intangible assets subject to amortization whenever an
event or change in circumstances indicates the carrying values
of the assets may not be recoverable. We test intangible assets
subject to amortization for impairment and estimate their fair
values using the same assumptions and techniques we employ on
property, plant and equipment. In 2009, we recognized impairment
charges for amortizable intangible assets totaling
$3.6 million. We did not recognize any impairment charges
for amortizable intangible assets in 2008 and 2007. See
Note 8 for further discussion.
Pension
and Other Postretirement Benefits
Our pension and other postretirement benefit costs and
obligations are dependent on the various actuarial assumptions
used in calculating such amounts. These assumptions relate to
discount rates, salary growth, long-term return on plan assets,
health care cost trend rates, and other factors. We base the
discount rate assumptions on current investment yields on
high-quality corporate long-term bonds. The salary growth
assumptions reflect our long-term actual experience and future
or near-term outlook. We determine the long-term return on plan
assets based on historical portfolio results and
management’s expectation of the future economic
environment. Our health care cost trend assumptions are
developed based on historical cost data, the near-term outlook,
and an assessment of likely long-term trends. Actual results
that differ from our assumptions are accumulated and, if in
excess of the lesser of 10% of the projected benefit obligation
or the fair market value of plan assets, amortized over the
estimated future working life of the plan participants.
Accrued
Sales Rebates
We grant incentive rebates to participating customers as part of
our sales programs. The rebates are determined based on certain
targeted sales volumes. Rebates are paid quarterly or annually
in either cash or receivables credits. Until we can process
these rebates through individual customer records, we estimate
the amount of outstanding rebates and recognize them as accrued
liabilities and reductions in our gross revenues. We base our
estimates on both historical and anticipated sales demand and
rebate program participation. We charge revisions to these
estimates back to accrued liabilities and revenues in the period
in which the facts that give rise to each revision become known.
Future market conditions and product transitions might require
us to take actions to increase sales rebates offered, possibly
resulting in an incremental increase in accrued liabilities and
an incremental reduction in revenues at the time the rebate is
offered. Accrued sales rebates at December 31, 2009 and
2008 totaled $19.0 million and $20.5 million,
respectively.
42
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Contingent
Liabilities
We have established liabilities for environmental and legal
contingencies that are probable of occurrence and reasonably
estimable. A significant amount of judgment and use of estimates
is required to quantify our ultimate exposure in these matters.
We review the valuation of these liabilities on a quarterly
basis, and we adjust the balances to account for changes in
circumstances for ongoing and emerging issues.
We accrue environmental remediation costs on an undiscounted
basis, based on estimates of known environmental remediation
exposures developed in consultation with our environmental
consultants and legal counsel. We expense environmental
compliance costs, which include maintenance and operating costs
with respect to ongoing monitoring programs, as incurred. We
generally depreciate capitalized environmental costs over a
15-year
life. We evaluate the range of potential costs to remediate
environmental sites. The ultimate cost of site
clean-up
is
difficult to predict given the uncertainties of our involvement
in certain sites, uncertainties regarding the extent of the
required
clean-up,
the availability of alternative
clean-up
methods, variations in the interpretation of applicable laws and
regulations, the possibility of insurance recoveries with
respect to certain sites, and other factors.
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. Assessments regarding the ultimate cost of
lawsuits require judgments concerning matters such as the
anticipated outcome of negotiations, the number and cost of
pending and future claims, and the impact of evidentiary
requirements. 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.
Business
Combination Accounting
We allocate the cost of an acquired entity to the assets and
liabilities acquired based upon their estimated fair values at
the business combination date. We also identify and estimate the
fair values of intangible assets that should be recognized as
assets apart from goodwill. We have historically relied upon the
use of third-party valuation specialists to assist in the
estimation of fair values for tangible long-lived assets and
intangible assets other than goodwill. The carrying values of
acquired receivables and accounts payable have historically
approximated their fair values at the business combination date.
With respect to accrued liabilities acquired, we use all
available information to make our best estimates of their fair
values at the business combination date. When necessary, we rely
upon the use of third-party actuaries to assist in the
estimation of fair value for certain liabilities.
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 charge revisions to these estimates back to
revenue in the period in which the facts that give rise to each
revision become known. Future market conditions and product
transitions might require us to take actions to increase
customer rebates and price allowance offerings, possibly
resulting in an incremental reduction of revenue at the time the
rebate or allowance is offered. We recognized rebates,
allowances, adjustments, and product returns totaling
$118.2 million, $146.7 million, and
$109.0 million as deductions to gross revenues in 2009,
2008, and 2007, respectively.
Sales from our Wireless segment often involve multiple elements,
principally hardware, software, hardware and software
maintenance, and other support services. When a sale involves
multiple elements, we allocate the proceeds from the arrangement
to each respective element based on its VSOE of fair value and
recognize revenue when each element’s revenue recognition
criteria are met. VSOE of fair value for each element is
established based on the price charged when the same element is
sold separately. If VSOE of fair value cannot be established,
the proceeds from the arrangement are deferred and recognized
ratably over the period related to the last delivered
43
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
element. Through December 31, 2009, our Wireless segment
did not establish VSOE of fair value of post-contract customer
support. As a result, the proceeds and related cost of sales
from multiple-element revenue transactions involving
post-contract customer support were deferred and recognized
ratably over the post-contract customer support period, ranging
from one to three years. The following table shows the amount of
deferred revenue and cost of sales as of December 31, 2009
and 2008.
| Year Ended December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Deferred revenue:
|
||||||||
|
Current
|
$ | 19,249 | $ | 17,507 | ||||
|
Long-term
|
3,481 | 2,659 | ||||||
|
Total
|
22,730 | 20,166 | ||||||
|
Deferred cost of sales:
|
||||||||
|
Current
|
7,119 | 6,365 | ||||||
|
Long-term
|
1,187 | 905 | ||||||
|
Total
|
8,306 | 7,270 | ||||||
|
Deferred gross profit
|
||||||||
|
Current
|
12,130 | 11,142 | ||||||
|
Long-term
|
2,294 | 1,754 | ||||||
|
Total
|
$ | 14,424 | $ | 12,896 | ||||
Pending
Adoption of Recent Accounting Pronouncements
In October 2009, the FASB issued an update to existing guidance
on revenue recognition that will become effective for us
beginning January 1, 2011, with earlier adoption permitted.
Under the new guidance on arrangements that include software
elements, tangible products that have software components that
are essential to the functionality of the tangible product will
no longer be within the scope of the software revenue
recognition guidance and software-enabled products will now be
subject to other relevant revenue recognition guidance.
Additionally, the FASB issued an update to existing guidance on
revenue arrangements with multiple deliverables that are outside
the scope of the software revenue recognition guidance. Under
the new guidance, when VSOE or third party evidence of the
selling price for deliverables in an arrangement cannot be
determined, a best estimate of the selling price is required to
separate deliverables and allocate arrangement consideration
using the relative selling price method. The new guidance
includes new disclosure requirements on how the application of
the relative selling price method affects the timing and amount
of revenue recognition. We expect to early adopt the new
guidance on January 1, 2010. We expect this new guidance
will affect revenue recognition for our Wireless segment by
significantly decreasing the amount of revenue that is deferred
on arrangements with multiple deliverables.
Shipping
and Handling Costs
We recognize fees earned on the shipment of product to customers
as revenues and recognize costs incurred on the shipment of
product to customers as a cost of sales. We recognized certain
handling costs, primarily incurred at our distribution centers,
totaling $13.0 million as selling, general and
administrative (SG&A) expenses in 2007. All handling costs
were recognized as cost of sales in 2009 and 2008.
Research
and Development Costs
Research and development costs are expensed as incurred.
44
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Advertising
Costs
Advertising costs are expensed as incurred. Advertising costs
were $13.7 million, $19.0 million, and
$16.9 million for 2009, 2008, and 2007, respectively.
Share-Based
Compensation
We compensate certain employees with various forms of
share-based payment awards and recognize compensation costs for
these awards based on their fair values. We estimate the fair
values of certain awards on the grant date using the
Black-Scholes-Merton option-pricing formula, which incorporates
certain assumptions regarding the expected term of an award and
expected stock price volatility. We develop the expected term
assumption based on the vesting period and contractual term of
an award, our historical exercise and post-vesting cancellation
experience, our stock price history, plan provisions that
require exercise or cancellation of awards after employees
terminate, and the extent to which currently available
information indicates that the future is reasonably expected to
differ from past experience. We develop the expected volatility
assumption based on historical price data for our common stock.
After calculating the aggregate fair value of an award, we use
an estimated forfeiture rate to discount the amount of
share-based compensation cost to be recognized in our operating
results over the service period of the award. We develop the
forfeiture assumption based on our historical pre-vesting
cancellation experience.
Income
Taxes
Income taxes are provided based on earnings reported for
financial statement purposes. The provision for income taxes
differs from the amounts currently payable to taxing authorities
because of the recognition of revenues and expenses in different
periods for income tax purposes than for financial statement
purposes. Income taxes are provided as if operations in all
countries, including the United States, were stand-alone
businesses filing separate tax returns. We have determined that
substantially all undistributed earnings from our international
subsidiaries will not be remitted to the United States in the
foreseeable future and, therefore, no additional provision for
United States taxes has been made on foreign earnings.
We recognize deferred tax assets resulting from tax credit
carryforwards, net operating loss carryforwards, and deductible
temporary differences between taxable income on our income tax
returns and pretax income under GAAP. Deferred tax assets
generally represent future tax benefits to be received when
these carryforwards can be applied against future taxable income
or when expenses previously reported in our Consolidated
Financial Statements become deductible for income tax purposes.
Our effective tax rate is based on expected income, statutory
tax rates, and tax planning opportunities available to us in the
various jurisdictions in which we operate. Significant judgment
is required in determining our effective tax rate and in
evaluating our tax positions. We establish accruals for
uncertain tax positions when, despite the belief that our tax
return positions will more likely than not be sustained upon
examination, we believe that certain positions are likely to be
challenged and that the full amount of the associated tax
benefit may not be realized. To the extent we were to prevail in
matters for which accruals have been established or be required
to pay amounts in excess of reserves, there could be a material
effect on our income tax provisions in the period in which such
determination is made.
Subsequent
Events
We have evaluated subsequent events after the balance sheet date
through the financial statement issuance date of
February 26, 2010 for appropriate accounting and disclosure
(see Note 23).
Current-Year
Adoption of Accounting Pronouncements
On January 1, 2009, we adopted changes issued by the FASB
to accounting for business combinations. This guidance states
that the purchase method must be used for all business
combinations and that an acquirer must be
45
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
identified for each business combination. This guidance defines
the acquirer as the entity that obtains control of one or more
businesses in the business combination and establishes the
acquisition date as the date that the acquirer achieves control
instead of the date that the consideration is transferred. An
acquirer in a business combination must recognize the assets
acquired, liabilities assumed, and any noncontrolling interest
in the acquiree at the acquisition date, measured at their fair
values as of that date, with limited exceptions. This guidance
also requires the recognition of assets acquired and liabilities
assumed arising from certain contractual contingencies as of the
acquisition date, measured at their acquisition-date fair values.
On January 1, 2009, we adopted changes issued by the FASB
to accounting for convertible debt instruments that may be
settled in cash upon conversion. These changes affected the
accounting for our $110.0 million aggregate principal
convertible subordinated debentures that were converted into
cash and shares of common stock in 2008 (see Note 12). This
guidance requires that we allocate the proceeds from the debt
issuance between debt and equity components in a manner that
reflects our nonconvertible debt borrowing rate. The equity
component reflects the value of the conversion feature of the
debentures. This guidance requires retrospective application to
all periods presented and does not grandfather existing debt
instruments. As such, we have adjusted our prior year financial
statements. The cumulative impact of the adjustments as of
January 1, 2009 was a $1.7 million decrease to
retained earnings with a corresponding increase to additional
paid in capital. The following table summarizes the impact of
the adjustments to the years ended December 31, 2008 and
2007. The prior year income tax amounts disclosed in
Note 13 have also been adjusted.
| Year Ended December 31, | ||||||||||||||||
| 2008 | 2007 | |||||||||||||||
|
As Previously
|
As Previously
|
|||||||||||||||
| Reported | As Adjusted | Reported | As Adjusted | |||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||
|
Interest expense
|
$ | (36,660 | ) | $ | (37,908 | ) | $ | (27,516 | ) | $ | (28,966 | ) | ||||
|
Income (loss) before taxes
|
(367,222 | ) | (368,470 | ) | 201,563 | 200,113 | ||||||||||
|
Income tax benefit (expense)
|
6,195 | 6,644 | (64,440 | ) | (63,918 | ) | ||||||||||
|
Net income (loss)
|
$ | (361,027 | ) | $ | (361,826 | ) | $ | 137,123 | $ | 136,195 | ||||||
|
Basic shares
|
44,692 | 44,692 | 44,877 | 44,877 | ||||||||||||
|
Diluted shares
|
44,692 | 44,692 | 50,615 | 50,615 | ||||||||||||
|
Basic income (loss) per share
|
$ | (8.08 | ) | $ | (8.10 | ) | $ | 3.06 | $ | 3.03 | ||||||
|
Diluted income (loss) per share
|
$ | (8.08 | ) | $ | (8.10 | ) | $ | 2.73 | $ | 2.71 | ||||||
During 2009, we adopted changes issued by the FASB with regard
to the accounting for and disclosure of subsequent events. This
new guidance establishes general standards for accounting for
and disclosure of events that occur after the balance sheet date
but before financial statements are available to be issued. More
specifically, this guidance sets forth the period after the
balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for
potential recognition in the financial statements, identifies
the circumstances under which an entity should recognize events
or transactions occurring after the balance sheet date in its
financial statements, and the disclosures that should be made
about events or transactions that occur after the balance sheet
date. The adoption of this guidance did not have a material
impact on our financial statements.
| Note 3: | Acquisitions |
We acquired Telecast Fiber Systems, Inc. (Telecast) for cash of
$20.1 million on December 18, 2009. Telecast is a
Massachusetts-based manufacturer of products to connect copper
systems to fiber systems, which include audio multiplexers,
portable broadcast systems, camera adapters, and transceivers.
Its products are designed to meet the growing demand for high
bandwidth signal transmission over distances greater than 100
meters in applications where ease and speed of deployment are
critical. The results of operations of Telecast have been
included in our results of operations from December 18,
2009, and are reported within the Americas segment. The Telecast
46
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
acquisition was not material to our financial position or
results of operations reported as of and for the year ended
December 31, 2009.
On July 16, 2008, we acquired Trapeze Networks, Inc.
(Trapeze) for cash of $136.1 million, including transaction
costs and net of cash acquired. We financed the total purchase
price with borrowings under our revolving credit facility.
California-based Trapeze is a provider of wireless local area
networking equipment. The acquisition of Trapeze improves our
ability to provide a full complement of signal transmission
solutions including wireless systems. Furthermore, it positions
us to continue serving customers that are adopting wireless
technology in applications previously solved with copper or
fiber cable solutions. The results of operations of Trapeze have
been included in our results of operations from July 16,
2008. Trapeze is reported as a separate operating segment
disclosed as the Wireless segment. The following table
summarizes the fair values of the assets acquired and
liabilities assumed as of July 16, 2008 (in thousands).
|
Receivables
|
$ | 9,367 | ||
|
Inventories
|
6,058 | |||
|
Other current assets
|
2,328 | |||
|
Deferred taxes
|
23,970 | |||
|
Property, plant and equipment
|
1,700 | |||
|
Goodwill
|
66,666 | |||
|
Other intangible assets
|
39,240 | |||
|
Other long-lived assets
|
216 | |||
|
Total assets
|
$ | 149,545 | ||
|
Accounts payable
|
$ | 7,630 | ||
|
Accrued liabilities
|
5,816 | |||
|
Other long-term liabilities
|
41 | |||
|
Total liabilities
|
13,487 | |||
|
Net assets
|
$ | 136,058 | ||
The allocation above differs from our preliminary allocation
previously disclosed due to the completion in 2009 of a
comprehensive study of the availability of the acquired net
operating loss carryforwards and resolution of a contingent
liability. As a result of these changes, the amount allocated to
deferred taxes increased by $14.1 million and the amount
allocated to accrued liabilities decreased by $0.6 million,
which in total decreased goodwill by $14.7 million.
47
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Goodwill and other intangible assets reflected above were
determined to meet the criterion for recognition apart from
tangible assets acquired and liabilities assumed. None of the
goodwill related to the Trapeze acquisition is deductible for
tax purposes. Intangible assets related to the acquisition
consisted of the following:
|
Estimated
|
Amortization
|
|||||||
| Fair Value | Period | |||||||
| (In thousands) | (In years) | |||||||
|
Intangible assets subject to amortization:
|
||||||||
|
Developed technologies
|
$ | 20,100 | 4.0 | |||||
|
Customer relations
|
11,400 | 10.0 | ||||||
|
Backlog
|
740 | 0.1 | ||||||
|
Total intangible assets subject to amortization
|
32,240 | |||||||
|
Intangible assets not subject to amortization:
|
||||||||
|
Goodwill
|
66,666 | |||||||
|
Trademark
|
7,000 | |||||||
|
Total intangible assets not subject to amortization
|
73,666 | |||||||
|
Total intangible assets
|
$ | 105,906 | ||||||
|
Weighted average amortization period
|
6.0 | |||||||
During 2007, we completed three acquisitions. We acquired
Hirschmann Automation and Control GmbH (Hirschmann) on
March 26, 2007, for $258.0 million. Hirschmann has its
headquarters in Germany and is a leading supplier of industrial
networking solutions and industrial connectivity. The
acquisition of Hirschmann enables us to deliver connectivity and
networking solutions for demanding industrial environments and
large-scale infrastructure projects worldwide. On March 27,
2007, we acquired LTK Wiring Co. Ltd. (LTK), a Hong Kong
company, for $214.4 million. LTK is one of the largest
manufacturers of electronic cable for the China market. LTK
gives us a strong presence in China among OEM customers,
including consumer electronics manufacturers. On April 30,
2007, we purchased the assets of Lumberg Automation Components
(Lumberg Automation) for $117.6 million. Lumberg Automation
has its headquarters in Germany and is a leading supplier of
industrial connectors, high performance cord-sets, and fieldbus
communication components for factory automation machinery.
Lumberg Automation complements the industrial connectivity
portfolio of Hirschmann as well as our expertise in signal
transmission. The results of operations of each acquisition have
been included in our results of operations from their respective
acquisition dates. Hirschmann and Lumberg Automation are
included primarily in the Europe, Middle East and Africa (EMEA)
segment, and LTK is included in the Asia Pacific segment.
48
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
All three 2007 acquisitions were cash transactions and were
valued in total at $590.0 million, net of cash acquired and
including transaction costs. The following table summarizes the
estimated fair values of the assets acquired and liabilities
assumed as of the respective acquisition dates in 2007 (in
thousands).
|
Receivables
|
$ | 143,514 | ||
|
Inventories
|
80,047 | |||
|
Other current assets
|
11,531 | |||
|
Property, plant and equipment
|
94,239 | |||
|
Goodwill
|
372,225 | |||
|
Other intangible assets
|
88,629 | |||
|
Other long-lived assets
|
29,014 | |||
|
Total assets
|
$ | 819,199 | ||
|
Accounts payable
|
$ | 92,824 | ||
|
Accrued liabilities
|
50,210 | |||
|
Postretirement benefits
|
57,274 | |||
|
Deferred income taxes
|
21,988 | |||
|
Other long-term liabilities
|
6,926 | |||
|
Total liabilities
|
229,222 | |||
|
Net assets
|
$ | 589,977 | ||
The allocation above differs from our previously disclosed
allocation due to an adjustment in 2009 to severance accruals
which decreased accrued liabilities by $6.1 million with a
corresponding decrease to goodwill. The change in severance
accruals was due to a change in the estimated number of employee
terminations and lower severance costs than originally estimated.
Goodwill and other intangible assets reflected above were
determined to meet the criterion for recognition apart from
tangible assets acquired and liabilities assumed. Intangible
assets related to the 2007 acquisitions consisted of the
following:
|
Estimated
|
Amortization
|
|||||||
| Fair Value | Period | |||||||
| (In thousands) | (In years) | |||||||
|
Intangible assets subject to amortization:
|
||||||||
|
Customer relations
|
$ | 25,103 | 17.0 | |||||
|
Developed technologies
|
24,739 | 4.7 | ||||||
|
Backlog
|
2,430 | 0.1 | ||||||
|
Total intangible assets subject to amortization
|
52,272 | |||||||
|
Intangible assets not subject to amortization:
|
||||||||
|
Goodwill
|
372,225 | |||||||
|
Trademarks
|
36,357 | |||||||
|
Total intangible assets not subject to amortization
|
408,582 | |||||||
|
Total intangible assets
|
$ | 460,854 | ||||||
|
Weighted average amortization period
|
10.4 | |||||||
Goodwill of $270.8 million and $101.4 million was
assigned to the EMEA segment and Asia Pacific segment,
respectively. Approximately $67.0 million of the total
goodwill related to the 2007 acquisitions is deductible for tax
purposes.
49
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Trademarks for the 2009, 2008, and 2007 acquisitions have been
determined by us to have indefinite lives and are not being
amortized, based on our expectation that the trademarked
products will generate cash flows for us for an indefinite
period. We expect to maintain use of trademarks on existing
products and introduce new products in the future that will also
display the trademarks, thus extending their lives indefinitely.
Portions of the goodwill and trademarks associated with the 2008
and 2007 acquisitions were impaired during 2008. See Note 9.
The amortizable intangible assets for the 2009, 2008, and 2007
acquisitions were determined by us to have finite lives. The
useful lives for the developed technologies intangible assets
were based on the estimated time that the technology provides us
with a competitive advantage and thus approximates the period of
consumption of the intangible assets. The useful lives for the
customer relations intangible assets were based on our forecasts
of customer turnover. The useful lives of the backlog intangible
assets were based on our estimate of when the ordered items
would ship.
The following table reflects the 2008 unaudited pro forma
operating results of the Company as if the Trapeze acquisition
had been completed as of January 1, 2008. The following
table reflects the 2007 unaudited pro forma operating results of
the Company as if the Trapeze, Hirschmann, LTK, and Lumberg
acquisitions had been completed as of January 1, 2007.
| Years Ended December 31, | ||||||||
| 2008 | 2007 | |||||||
|
Unaudited
|
||||||||
|
(In thousands, except per
|
||||||||
| share data) | ||||||||
|
Revenues
|
$ | 2,029,667 | $ | 2,233,971 | ||||
|
Net income (loss)
|
(380,689 | ) | 106,468 | |||||
|
Net income (loss) per diluted share
|
(8.52 | ) | 2.12 | |||||
For purposes of the pro forma disclosures, 2008 includes
expenses of $2.7 million ($1.7 million after tax) from
the effects of purchase accounting. For 2007, the pro forma
disclosures include $18.5 million ($12.1 million after
tax) of expenses from the effects of purchase accounting,
including inventory cost
step-up
of
$13.8 million that was recognized in cost of sales,
amortization of sales backlog intangible assets of
$3.2 million, and other charges of $1.5 million. The
pro forma information above also reflects interest expense
assuming borrowings at the beginning of each respective period
of $350.0 million of 7.0% senior subordinated notes
and $376.0 million at 5.6% interest under our senior
secured credit agreement to finance the acquisitions.
The above unaudited pro forma financial information is presented
for informational purposes only and does not purport to
represent what our results of operations would have been had we
completed these acquisitions on the dates assumed, nor is it
necessarily indicative of the results that may be expected in
future periods. Pro forma adjustments exclude cost savings from
any synergies resulting from the acquisitions.
| Note 4: | Operating Segments and Geographic Information |
In 2009, we made organizational changes to consolidate our North
American operations, primarily consisting of consolidating our
former Specialty Products and Belden Americas segments. This
reorganization resulted in a change in our reported operating
segments. We have organized the enterprise around geographic
areas except for our wireless business. We now conduct our
operations through four reported operating segments —
Americas, EMEA, Asia Pacific, and Wireless. We have reclassified
prior year segment disclosures to conform to the new segment
presentation.
The Americas, EMEA, and Asia Pacific segments design,
manufacture, and market cable, connectivity, and networking
products in markets including industrial automation, enterprise,
transportation, infrastructure, and consumer electronics. The
Wireless segment designs and markets networking products
including wireless LAN and location products for use in a
variety of markets. We sell the products manufactured by our
segments principally through distributors or directly to systems
integrators and original equipment manufacturers.
50
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
We evaluate segment performance based on operating income and
working capital. Operating income of the segments includes all
the ongoing costs of operations, but excludes interest and
income taxes. Allocations to or from these segments are not
significant. Transactions between the segments are conducted on
an arms-length basis. With the exception of unallocated goodwill
and tangible assets located at our corporate headquarters,
substantially all of our assets are utilized by the segments.
Operating
Segment Information
|
Asia
|
Total
|
|||||||||||||||||||
|
Year Ended December 31, 2009
|
Americas | EMEA | Pacific | Wireless | Segments | |||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
External customer revenues
|
$ | 766,569 | $ | 345,196 | $ | 250,250 | $ | 53,247 | $ | 1,415,262 | ||||||||||
|
Affiliate revenues
|
43,489 | 55,256 | — | — | 98,745 | |||||||||||||||
|
Total revenues
|
810,058 | 400,452 | 250,250 | 53,247 | 1,514,007 | |||||||||||||||
|
Depreciation and amortization
|
(20,331 | ) | (18,115 | ) | (9,259 | ) | (7,038 | ) | (54,743 | ) | ||||||||||
|
Asset impairment
|
(3,691 | ) | (23,020 | ) | (1,040 | ) | — | (27,751 | ) | |||||||||||
|
Operating income (loss)
|
117,324 | (43,232 | ) | 28,794 | (28,325 | ) | 74,561 | |||||||||||||
|
Total assets
|
516,372 | 461,503 | 258,325 | 121,867 | 1,358,067 | |||||||||||||||
|
Acquisition of property, plant and equipment
|
14,501 | 9,364 | 7,891 | 511 | 32,267 | |||||||||||||||
|
Asia
|
Total
|
|||||||||||||||||||
|
Year Ended December 31, 2008
|
Americas | EMEA | Pacific | Wireless | Segments | |||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
External customer revenues
|
$ | 1,041,247 | $ | 577,672 | $ | 373,249 | $ | 13,722 | $ | 2,005,890 | ||||||||||
|
Affiliate revenues
|
61,568 | 85,639 | 111 | 298 | 147,616 | |||||||||||||||
|
Total revenues
|
1,102,815 | 663,311 | 373,360 | 14,020 | 2,153,506 | |||||||||||||||
|
Depreciation and amortization
|
(21,794 | ) | (19,748 | ) | (9,080 | ) | (5,512 | ) | (56,134 | ) | ||||||||||
|
Asset impairment
|
(50,823 | ) | (253,361 | ) | (112,047 | ) | (32,808 | ) | (449,039 | ) | ||||||||||
|
Operating income (loss)
|
106,893 | (218,379 | ) | (66,093 | ) | (54,317 | ) | (231,896 | ) | |||||||||||
|
Total assets
|
425,895 | 526,727 | 273,543 | 127,236 | 1,353,401 | |||||||||||||||
|
Acquisition of property, plant and equipment
|
11,243 | 10,693 | 20,702 | 66 | 42,704 | |||||||||||||||
|
Asia
|
Total
|
|||||||||||||||
|
Year Ended December 31, 2007
|
Americas | EMEA | Pacific | Segments | ||||||||||||
| (In thousands) | ||||||||||||||||
|
External customer revenues
|
$ | 1,155,348 | $ | 556,765 | $ | 320,728 | $ | 2,032,841 | ||||||||
|
Affiliate revenues
|
73,030 | 62,497 | 464 | 135,991 | ||||||||||||
|
Total revenues
|
1,228,378 | 619,262 | 321,192 | 2,168,832 | ||||||||||||
|
Depreciation and amortization
|
(23,243 | ) | (21,221 | ) | (7,005 | ) | (51,469 | ) | ||||||||
|
Asset impairment
|
(1,870 | ) | (1,392 | ) | — | (3,262 | ) | |||||||||
|
Operating income
|
210,597 | 42,360 | 37,991 | 290,948 | ||||||||||||
|
Total assets
|
618,104 | 865,349 | 369,348 | 1,852,801 | ||||||||||||
|
Acquisition of property, plant and equipment
|
32,810 | 13,254 | 16,166 | 62,230 | ||||||||||||
51
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Total segment operating income (loss) differs from net income
(loss) reported in the Consolidated Financial Statements as
follows:
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Total segment operating income (loss)
|
$ | 74,561 | $ | (231,896 | ) | $ | 290,948 | |||||
|
Corporate expenses
|
(41,378 | ) | (74,889 | ) | (43,313 | ) | ||||||
|
Eliminations
|
(31,542 | ) | (35,403 | ) | (26,899 | ) | ||||||
|
Total operating income (loss)
|
1,641 | (342,188 | ) | 220,736 | ||||||||
|
Interest expense
|
(41,857 | ) | (37,908 | ) | (28,966 | ) | ||||||
|
Interest income
|
1,046 | 5,300 | 6,544 | |||||||||
|
Other income
|
4,756 | 6,326 | 1,799 | |||||||||
|
Income tax benefit (expense)
|
10,909 | 6,644 | (63,918 | ) | ||||||||
|
Income (loss) from continuing operations
|
(23,505 | ) | (361,826 | ) | 136,195 | |||||||
|
Loss from discontinued operations, net of tax
|
(1,396 | ) | — | — | ||||||||
|
Net income (loss)
|
$ | (24,901 | ) | $ | (361,826 | ) | $ | 136,195 | ||||
Below are reconciliations of other segment measures to the
consolidated totals.
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Total segment depreciation and amortization
|
$ | (54,743 | ) | $ | (56,134 | ) | $ | (51,469 | ) | |||
|
Corporate depreciation and amortization
|
(1,114 | ) | (702 | ) | (277 | ) | ||||||
|
Total depreciation and amortization
|
$ | (55,857 | ) | $ | (56,836 | ) | $ | (51,746 | ) | |||
|
Total segment asset impairment
|
$ | (27,751 | ) | $ | (449,039 | ) | $ | (3,262 | ) | |||
|
Corporate asset impairment
|
— | (27,453 | ) | — | ||||||||
|
Total asset impairment
|
$ | (27,751 | ) | $ | (476,492 | ) | $ | (3,262 | ) | |||
|
Total segment assets
|
$ | 1,358,067 | $ | 1,353,401 | $ | 1,852,801 | ||||||
|
Corporate assets
|
262,511 | 304,992 | 215,591 | |||||||||
|
Total assets
|
$ | 1,620,578 | $ | 1,658,393 | $ | 2,068,392 | ||||||
|
Total segment acquisition of property, plant and equipment
|
$ | 32,267 | $ | 42,704 | $ | 62,230 | ||||||
|
Corporate acquisition of property, plant and equipment
|
8,110 | 10,857 | 1,271 | |||||||||
|
Total acquisition of property, plant and equipment
|
$ | 40,377 | $ | 53,561 | $ | 63,501 | ||||||
52
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Product
Group Information
Revenues by major product group were as follows:
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Cable products
|
$ | 1,039,541 | $ | 1,518,044 | $ | 1,679,079 | ||||||
|
Networking products
|
231,960 | 264,880 | 171,614 | |||||||||
|
Connectivity products
|
143,761 | 222,966 | 182,148 | |||||||||
|
Total revenues
|
$ | 1,415,262 | $ | 2,005,890 | $ | 2,032,841 | ||||||
Cable products consist of thousands of different types of cables
including copper cables, fiber optic cables, and composite
cables.
Networking products include Industrial Ethernet switches and
related equipment, 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. Networking products also include a suite of wireless
local area network and location products for use in a variety of
markets including the healthcare, education, and enterprise
markets.
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.
The increase in networking and connectivity products revenue in
2008 compared to 2007 was primarily due to a full year of
revenues from the acquisitions in 2007 as well as a partial year
of revenues from the 2008 acquisition (see Note 3). In
2008, networking products revenue and connectivity products
revenue included $73.3 million and $41.5 million of
acquired revenues, respectively.
Geographic
Information
The following table identifies revenues by country based on the
location of the customer and long-lived assets by country based
on physical location.
|
United
|
Canada &
|
Europe, Africa
|
Asia
|
|||||||||||||||||
| States | Latin America | & Middle East | Pacific | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Year ended December 31, 2009
|
||||||||||||||||||||
|
Revenues
|
$ | 611,134 | $ | 167,221 | $ | 365,642 | $ | 271,265 | $ | 1,415,262 | ||||||||||
|
Percent of total revenues
|
43 | % | 12 | % | 26 | % | 19 | % | 100 | % | ||||||||||
|
Long-lived assets
|
$ | 133,559 | $ | 20,121 | $ | 140,610 | $ | 68,722 | $ | 363,012 | ||||||||||
|
Year ended December 31, 2008
|
||||||||||||||||||||
|
Revenues
|
$ | 842,766 | $ | 192,524 | $ | 570,115 | $ | 400,485 | $ | 2,005,890 | ||||||||||
|
Percent of total revenues
|
42 | % | 10 | % | 28 | % | 20 | % | 100 | % | ||||||||||
|
Long-lived assets
|
$ | 133,766 | $ | 16,223 | $ | 154,427 | $ | 73,541 | $ | 377,957 | ||||||||||
|
Year ended December 31, 2007
|
||||||||||||||||||||
|
Revenues
|
$ | 925,697 | $ | 222,207 | $ | 548,456 | $ | 336,481 | $ | 2,032,841 | ||||||||||
|
Percent of total revenues
|
45 | % | 11 | % | 27 | % | 17 | % | 100 | % | ||||||||||
|
Long-lived assets
|
$ | 149,373 | $ | 47,158 | $ | 173,630 | $ | 58,438 | $ | 428,599 | ||||||||||
53
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Major
Customer
Revenues generated from sales to Anixter International Inc.,
primarily in the Americas segment, were $239.7 million (17%
of revenue), $329.3 million (16% of revenue), and
$336.8 million (17% of revenues) for 2009, 2008, and 2007
respectively.
| Note 5: | 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. In 2009, we
recognized $2.1 million of interest expense
($1.4 million net of tax) related to the uncertain tax
positions, which is included in discontinued operations (see
Note 13). Due to the utilization of other net operating
loss carryforwards from 2005 through 2008, we did not recognize
interest expense related to this reserve prior to 2009.
| Note 6: | Income (Loss) Per Share |
The following table presents the basis of the income (loss) per
share computation:
| For The Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Numerator for basic income (loss) per share:
|
||||||||||||
|
Income (loss) from continuing operations
|
$ | (23,505 | ) | $ | (361,826 | ) | $ | 136,195 | ||||
|
Loss from discontinued operations
|
(1,396 | ) | — | — | ||||||||
|
Net income (loss)
|
$ | (24,901 | ) | $ | (361,826 | ) | $ | 136,195 | ||||
|
Numerator for diluted income (loss) per share:
|
||||||||||||
|
Income (loss) from continuing operations
|
$ | (23,505 | ) | $ | (361,826 | ) | $ | 136,195 | ||||
|
Tax-effected interest expense on convertible subordinated
debentures
|
— | — | 875 | |||||||||
|
Adjusted income (loss) from continuing operations
|
(23,505 | ) | (361,826 | ) | 137,070 | |||||||
|
Loss from discontinued operations
|
(1,396 | ) | — | — | ||||||||
|
Adjusted net income (loss)
|
$ | (24,901 | ) | $ | (361,826 | ) | $ | 137,070 | ||||
|
Denominator:
|
||||||||||||
|
Denominator for basic income (loss) per share —
weighted average shares
|
46,594 | 44,692 | 44,877 | |||||||||
|
Effect of dilutive common stock equivalents
|
— | — | 5,738 | |||||||||
|
Denominator for diluted income (loss) per share —
adjusted weighted average shares
|
46,594 | 44,692 | 50,615 | |||||||||
For the years ended December 31, 2009, 2008 and 2007,
diluted weighted average shares outstanding do not include
outstanding equity awards of 3.4 million, 2.8 million
and 0.5 million, respectively, because to do so would have
been anti-dilutive.
54
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 7: | Inventories |
The major classes of inventories were as follows:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Raw materials
|
$ | 50,973 | $ | 62,701 | ||||
|
Work-in-process
|
31,977 | 45,900 | ||||||
|
Finished goods
|
84,689 | 128,672 | ||||||
|
Perishable tooling and supplies
|
4,081 | 3,946 | ||||||
|
Gross inventories
|
171,720 | 241,219 | ||||||
|
Obsolescence and other reserves
|
(20,458 | ) | (25,197 | ) | ||||
|
Net inventories
|
$ | 151,262 | $ | 216,022 | ||||
| Note 8: | Property, Plant and Equipment |
The carrying values of property, plant and equipment were as
follows:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (in thousands) | ||||||||
|
Land and land improvements
|
$ | 37,351 | $ | 34,462 | ||||
|
Buildings and leasehold improvements
|
135,678 | 139,268 | ||||||
|
Machinery and equipment
|
387,274 | 386,002 | ||||||
|
Computer equipment and software
|
56,467 | 47,464 | ||||||
|
Construction in process
|
32,710 | 35,376 | ||||||
|
Gross property, plant and equipment
|
649,480 | 642,572 | ||||||
|
Accumulated depreciation
|
(349,894 | ) | (318,003 | ) | ||||
|
Net property, plant and equipment
|
$ | 299,586 | $ | 324,569 | ||||
Disposals
During 2009, we sold a 95% ownership interest in a German cable
business that sells primarily to the automotive industry. The
sales price was $0.4 million, and we recognized a loss of
$17.2 million on the transaction. In addition to retaining
a 5% interest in the business, we retained the associated land
and building, which we are leasing to the buyer. The lease term
is 15 years with a lessee option to renew up to an
additional 10 years.
During 2008, we sold our cable assembly operation in the Czech
Republic for $8.2 million and recognized no gain or loss on
the transaction. We also sold a non-strategic portion of the
Hirschmann business and recorded a loss of $2.8 million in
the EMEA segment operating results.
We sold and leased back under a normal sale-leaseback certain
Americas segment real estate in Mexico during 2008. The sales
price was $25.0 million, and we recognized a loss of
$0.9 million on the transaction. The lease term is
15 years with an option to renew up to an additional
10 years.
During 2007, we completed the sale of our telecommunications
cable operation in the Czech Republic for $25.7 million and
recorded a gain of $7.8 million in the EMEA segment
operating results. Of the $25.7 million in proceeds,
$19.9 million was received in 2007 and $5.8 million
was received in 2008. We also sold certain EMEA segment real
estate in the Netherlands for $4.0 million and recognized a
gain of $0.1 million.
55
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
We sold and leased back certain EMEA segment real estate in the
Netherlands during 2007. The sales price was $10.0 million,
and we deferred a gain of $1.6 million. The lease term is
five years with an option to renew up to an additional five
years. Of the $10.0 million in proceeds, $9.3 million
was received in 2007 and $0.7 million was received in 2008.
During 2007, we sold certain Americas segment real estate and
equipment in South Carolina, Vermont, and Canada for
$20.4 million cash. We recognized an aggregate
$0.1 million loss on the disposals of these assets in the
Americas segment operating results. We also sold certain
Americas segment real estate and equipment in Illinois for
$4.2 million cash and recognized a gain of
$0.7 million.
Impairment
Prior to the sale of a German cable business in 2009, we
determined that certain long-lived assets of that business were
impaired. We estimated the fair market value of these assets
based upon the terms of the sales agreement and recognized an
impairment loss in 2009 of $20.4 million in the operating
results of the EMEA segment. Of this total impairment loss,
$14.1 million related to machinery and equipment and
$2.7 million, $2.3 million, and $1.3 million
related to trademarks, developed technology, and customer
relations intangible assets, respectively. We also recognized
impairment losses on property, plant and equipment of
$3.7 million, $2.7 million, and $1.0 million in
the Americas, EMEA, and Asia Pacific segments, respectively,
primarily related to actions taken to implement our Lean
Enterprise strategies and corresponding decisions to consolidate
capacity and dispose of excess machinery and equipment. The fair
values of these assets were based upon quoted prices for
identical assets.
During 2008, we recognized an impairment loss of
$7.3 million in the operating results of our Americas
segment due to the decision to close our manufacturing facility
in Manchester, Connecticut. We also recognized impairment losses
of $6.9 million and $1.2 million in the operating
results of our Americas and EMEA segments, respectively, related
to our decision to consolidate capacity and dispose of excess
machinery and equipment. We estimated the fair values of the
asset groups based upon anticipated net proceeds from their
disposals.
During 2007, we determined that certain asset groups in the
Americas and EMEA segments were impaired. The asset groups in
the Americas segment were impaired because of the cessation of
manufacturing at a facility in Canada. The asset group in the
EMEA segment was impaired because of product portfolio
management and product sourcing actions. We estimated the fair
values of the asset groups based upon anticipated net proceeds
from their sales and recognized impairment losses of
$1.9 million and $1.4 million in the Americas and EMEA
segments, respectively.
Depreciation
Expense
We recognized depreciation expense of $39.8 million,
$41.9 million, and $41.1 million, in 2009, 2008, and
2007, respectively.
56
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 9: | Intangible Assets |
The carrying values of intangible assets were as follows:
| December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
|
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
| Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Goodwill
|
$ | 313,030 | $ | — | $ | 313,030 | $ | 321,478 | $ | — | $ | 321,478 | ||||||||||||
|
Intangible assets subject to amortization:
|
||||||||||||||||||||||||
|
Customer relations
|
$ | 93,145 | (17,758 | ) | $ | 75,387 | $ | 92,736 | (13,074 | ) | $ | 79,662 | ||||||||||||
|
Developed technology
|
53,294 | (22,103 | ) | 31,191 | 52,100 | (13,313 | ) | 38,787 | ||||||||||||||||
|
Favorable contracts
|
1,094 | (1,094 | ) | — | 1,094 | (1,094 | ) | — | ||||||||||||||||
|
Backlog
|
3,628 | (3,597 | ) | 31 | 4,613 | (4,613 | ) | — | ||||||||||||||||
|
Total intangible assets subject to amortization
|
151,161 | (44,552 | ) | 106,609 | 150,543 | (32,094 | ) | 118,449 | ||||||||||||||||
|
Trademarks
|
36,404 | — | 36,404 | 37,576 | — | 37,576 | ||||||||||||||||||
|
Intangible assets
|
$ | 187,565 | $ | (44,552 | ) | $ | 143,013 | $ | 188,119 | $ | (32,094 | ) | $ | 156,025 | ||||||||||
Segment
Allocation of Goodwill and Trademarks
The changes in the carrying amount of goodwill are as follows:
|
Asia
|
||||||||||||||||||||||||
| Americas | EMEA | Pacific | Wireless | Corporate | Consolidated | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Balance at December 31, 2007
|
$ | 97,202 | $ | 307,089 | $ | 100,907 | $ | — | $ | 143,684 | $ | 648,882 | ||||||||||||
|
Acquisitions and purchase
|
||||||||||||||||||||||||
|
accounting adjustments
|
— | 30,822 | 644 | 84,188 | 8,584 | 124,238 | ||||||||||||||||||
|
Impairment
|
(35,509 | ) | (243,460 | ) | (102,774 | ) | (29,541 | ) | (22,453 | ) | (433,737 | ) | ||||||||||||
|
Translation impact
|
— | (19,128 | ) | 1,223 | — | — | (17,905 | ) | ||||||||||||||||
|
Balance at December 31, 2008
|
61,693 | 75,323 | — | 54,647 | 129,815 | 321,478 | ||||||||||||||||||
|
Acquisitions and purchase
|
||||||||||||||||||||||||
|
accounting adjustments
|
11,287 | (6,130 | ) | — | (14,743 | ) | — | (9,586 | ) | |||||||||||||||
|
Translation impact
|
— | 1,138 | — | — | — | 1,138 | ||||||||||||||||||
|
Balance at December 31, 2009
|
$ | 72,980 | $ | 70,331 | $ | — | $ | 39,904 | $ | 129,815 | $ | 313,030 | ||||||||||||
We believe that corporate goodwill benefits the entire Company
because it represents acquirer-specific synergies unique to a
previous acquisition.
57
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
The changes in the carrying amount of trademarks are as follows:
|
Asia
|
||||||||||||||||||||
| Americas | EMEA | Pacific | Wireless | Consolidated | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Balance at December 31, 2007
|
$ | 10,114 | $ | 29,462 | $ | 14,411 | $ | — | $ | 53,987 | ||||||||||
|
Acquisitions
|
— | — | — | 7,000 | 7,000 | |||||||||||||||
|
Impairment
|
(1,120 | ) | (8,695 | ) | (9,274 | ) | (3,267 | ) | (22,356 | ) | ||||||||||
|
Translation impact
|
— | (1,157 | ) | 102 | — | (1,055 | ) | |||||||||||||
|
Balance at December 31, 2008
|
8,994 | 19,610 | 5,239 | 3,733 | 37,576 | |||||||||||||||
|
Acquisitions
|
1,500 | — | — | — | 1,500 | |||||||||||||||
|
Impairment
|
— | (2,696 | ) | — | — | (2,696 | ) | |||||||||||||
|
Translation impact
|
— | 24 | — | — | 24 | |||||||||||||||
|
Balance at December 31, 2009
|
$ | 10,494 | $ | 16,938 | $ | 5,239 | $ | 3,733 | $ | 36,404 | ||||||||||
Impairment
The annual measurement date for our goodwill and trademarks
impairment test is fiscal November month-end. Due to equity
market conditions at the end of November 2008 and the difference
between our market value and book value, the carrying amounts of
certain reporting units exceeded their respective fair values
resulting in a goodwill impairment charge of
$433.7 million. We determined the estimated fair values of
our reporting units by calculating the present values of their
estimated future cash flows. We did not recognize any goodwill
impairment charges in 2009 or 2007.
Similar to the goodwill impairment test, we determined the
estimated fair values of our trademarks by calculating the
present values of the estimated cash flows attributable to the
respective trademarks. In 2009 and 2008, the carrying amounts of
certain trademarks exceeded their respective fair values
resulting in trademark impairment charges of $2.7 million
and $22.4 million, respectively. We did not recognize any
trademark impairment charges in 2007.
Amortization
Expense
We recognized amortization expense of $16.1 million,
$14.9 million, and $10.6 million in 2009, 2008, and
2007, respectively. We expect to recognize annual amortization
expense of $16.9 million in 2010, $14.9 million in
2011, $10.1 million in 2012, $5.9 million in 2013, and
$5.1 million in 2014.
| Note 10: | Other Long-Lived Assets |
During 2008, we recognized a $5.0 million impairment of a
cost method investment due to the decline in its estimated fair
value. The decline in fair value was deemed to be other than
temporary based on the investee’s inability to sustain an
earnings capacity which would justify the carrying amount of the
investment. The carrying value of the cost method investment was
zero as of December 31, 2009 and 2008.
58
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 11: | Accrued Liabilities |
The carrying value of accrued liabilities was as follows:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Wages, severance and related taxes
|
$ | 46,786 | $ | 72,985 | ||||
|
Employee benefits
|
17,274 | 25,429 | ||||||
|
Accrued rebates
|
19,045 | 20,496 | ||||||
|
Deferred revenue
|
19,249 | 17,507 | ||||||
|
Other (individual items less than 5% of total current
liabilities)
|
39,568 | 44,384 | ||||||
|
Accrued liabilities
|
$ | 141,922 | $ | 180,801 | ||||
Global
Restructuring
In the fourth quarter of 2008, we announced our decision to
streamline our manufacturing, sales, and administrative
functions worldwide in an effort to reduce costs and mitigate
the weakening demand experienced throughout the global economy.
In 2008, we recognized severance costs totaling
$26.3 million ($14.1 million in cost of sales and
$12.2 million in S&A expenses) related to these
restructuring actions. Severance costs of $18.9 million,
$4.7 million, $2.1 million, and $0.6 million were
recognized by the EMEA segment, Americas segment, Asia Pacific
segment, and corporate, respectively. In 2009, we continued to
implement our plan to streamline these functions and recognized
severance costs primarily in the EMEA segment totaling
$28.4 million ($18.2 million in cost of sales;
$8.5 million in selling, general and administrative
expenses; $1.7 million in research and development). We
expect to recognize approximately $2.0 million of
additional severance costs in the Americas segment associated
with our plan that we announced in July 2009 to close one of our
two manufacturing plants in Leominster, Massachusetts.
EMEA
Manufacturing Restructuring
In 2008, we finalized certain plans to realign part of our EMEA
operations in order to consolidate manufacturing capacity. We
recognized $28.9 million of severance and other
restructuring costs related to these realignment plans,
including $23.9 million that was accounted for through
purchase accounting and $5.0 million that was charged to
the statement of operations ($4.8 million in SG&A
expenses and $0.2 million in cost of sales). In prior
years, we announced various decisions to restructure certain
EMEA operations in an effort to reduce manufacturing floor space
and overhead. From inception of these restructuring actions
through December 31, 2009, we have recognized severance
costs totaling $38.6 million (including amounts accounted
for through purchase accounting). We do not expect to recognize
additional costs related to these restructuring actions.
Voluntary
Separation Program
In 2007, we announced a voluntary separation program primarily
for associates in the United States who were at least
50 years of age and had 10 years of service with the
Company and recognized $0.7 million of severance costs
($0.4 million in SG&A expenses and $0.3 million
in cost of sales) primarily in the Americas segment. In 2008, we
recognized $6.5 million of additional severance costs
($3.5 million in SG&A expenses and $3.0 million
in cost of sales) primarily in the Americas segment. We
completed this program in 2009.
59
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
The table below sets forth restructuring activity that occurred
during the last three years. The balances at each year-end are
included in accrued liabilities.
|
EMEA
|
Voluntary
|
|||||||||||
|
Global
|
Manufacturing
|
Separation
|
||||||||||
| Restructuring | Restructuring | Program | ||||||||||
| (In thousand) | ||||||||||||
|
Balance at December 31, 2006
|
$ | — | $ | 4,482 | $ | — | ||||||
|
New charges:
|
||||||||||||
|
Special termination benefits
|
— | — | 707 | |||||||||
|
Cash payments
|
— | (3,932 | ) | — | ||||||||
|
Foreign currency translation
|
— | 133 | — | |||||||||
|
Other adjustments
|
— | 76 | — | |||||||||
|
Balance at December 31, 2007
|
— | 759 | 707 | |||||||||
|
New charges:
|
||||||||||||
|
Ongoing benefits arrangement
|
26,290 | 4,986 | — | |||||||||
|
Special termination benefits
|
— | — | 6,479 | |||||||||
|
Purchase accounting severance
|
— | 23,850 | — | |||||||||
|
Cash payments
|
(2,304 | ) | (6,935 | ) | (5,476 | ) | ||||||
|
Foreign currency translation
|
1,124 | 1,960 | — | |||||||||
|
Other adjustments
|
(153 | ) | (263 | ) | (269 | ) | ||||||
|
Balance at December 31, 2008
|
24,957 | 24,357 | 1,441 | |||||||||
|
New charges:
|
||||||||||||
|
Ongoing benefits arrangement
|
28,389 | — | — | |||||||||
|
Purchase accounting adjustment
|
— | (6,130 | ) | — | ||||||||
|
Cash payments
|
(43,268 | ) | (17,569 | ) | (1,300 | ) | ||||||
|
Foreign currency translation
|
2,795 | (201 | ) | — | ||||||||
|
Other adjustments
|
(613 | ) | (53 | ) | (141 | ) | ||||||
|
Balance at December 31, 2009
|
$ | 12,260 | $ | 404 | $ | — | ||||||
We continue to review our business strategies and evaluate
further restructuring actions. This could result in additional
severance and other charges in future periods.
60
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 12: |
|
The carrying values of long-term debt and other borrowing
arrangements were as follows:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Senior subordinated notes, face amount of $350,000 due 2017,
|
||||||||
|
contractual interest rate 7.0%, effective interest rate 7.0%
|
$ | 350,000 | $ | 350,000 | ||||
|
Senior subordinated notes, face amount of $200,000 due 2019,
|
||||||||
|
contractual interest rate 9.25%, effective interest rate 9.75%
|
193,942 | — | ||||||
|
Senior secured credit facility, matures in 2013, interest based
on
|
||||||||
|
LIBOR or the prime rate
|
46,268 | 240,000 | ||||||
|
Total debt and other borrowing arrangements
|
590,210 | 590,000 | ||||||
|
Less current maturities
|
(46,268 | ) | — | |||||
|
Long-term debt and other borrowing arrangements
|
$ | 543,942 | $ | 590,000 | ||||
Senior
Subordinated Notes
In 2009, we issued $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 domestic
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 credit facility. Interest is
payable semiannually on June 15 and December 15. We used
the $193.7 million in net proceeds of this debt offering to
repay amounts drawn under our senior secured credit facility.
We also have outstanding $350.0 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 domestic 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 credit facility.
Interest is payable semiannually on March 15 and
September 15.
Senior
Secured Credit Facility
In the first quarter of 2009, we amended our senior secured
credit facility and changed the definition of EBITDA used in the
computation of the
debt-to-EBITDA
leverage ratio covenant. The amendment also increased the cost
of borrowings under the facility by 100 basis points and we
incurred $1.5 million of fees that are included in other
expense in the Consolidated Statements of Operations. In the
third quarter, we further amended the facility to extend the
term from January 2011 to January 2013 and to reduce the size
from $350.0 million to $250.0 million through January
2011. In January 2011, the size of the facility reduces from
$250.0 million to $230.0 million. As of
December 31, 2009, we were in compliance with all of the
amended covenants of the facility.
At December 31, 2009, there were outstanding borrowings of
$46.3 million under the facility at a 3.74% interest rate,
and we had $60.4 million in available borrowing capacity.
The facility has a variable interest rate based on LIBOR or the
prime rate and is secured by our overall cash flow and certain
of our assets in the United States. On February 16, 2010,
we made a $46.3 million payment related to the amount drawn
under our senior secured credit facility. After this payment, we
did not have any outstanding borrowings under the facility.
61
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Convertible
Subordinated Debentures
On July 14, 2008, we called all of our convertible
subordinated debentures for redemption as of July 31, 2008.
As a result of the call for redemption, holders of the
debentures had the option to convert each $1,000 principal
amount of their debentures and receive value in a combination of
cash and shares equal to 56.8246 shares of Belden’s
common stock (a conversion price of $17.598). All holders of the
debentures elected to convert their debentures. We completed the
conversion on August 29, 2008 and paid $110.0 million
in cash and issued 3,343,509 shares of common stock. We
financed the cash portion of the conversion through borrowings
under our senior secured credit facility.
Maturities
Maturities on outstanding long-term debt and other borrowings
during each of the five years subsequent to December 31,
2009 are as follows (in thousands):
|
2010
|
$ | 46,268 | ||
|
2011
|
— | |||
|
2012
|
— | |||
|
2013
|
— | |||
|
2014
|
— | |||
|
Thereafter
|
543,942 | |||
| $ | 590,210 | |||
| Note 13: | Income Taxes |
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Income (loss) from continuing operations before taxes:
|
||||||||||||
|
United States operations
|
$ | (29,484 | ) | $ | (96,303 | ) | $ | 93,864 | ||||
|
Foreign operations
|
(4,930 | ) | (272,167 | ) | 106,249 | |||||||
| $ | (34,414 | ) | $ | (368,470 | ) | $ | 200,113 | |||||
|
Income tax expense (benefit):
|
||||||||||||
|
Currently payable:
|
||||||||||||
|
United States federal
|
$ | 3,757 | $ | 9,826 | $ | 10,960 | ||||||
|
United States state and local
|
2,874 | 1,706 | 3,165 | |||||||||
|
Foreign
|
5,881 | 19,627 | 25,370 | |||||||||
| 12,512 | 31,159 | 39,495 | ||||||||||
|
Deferred:
|
||||||||||||
|
United States federal
|
(13,973 | ) | (16,956 | ) | 21,163 | |||||||
|
United States state and local
|
(360 | ) | 1,425 | 1,227 | ||||||||
|
Foreign
|
(9,088 | ) | (22,272 | ) | 2,033 | |||||||
| (23,421 | ) | (37,803 | ) | 24,423 | ||||||||
|
Total income tax expense (benefit)
|
$ | (10,909 | ) | $ | (6,644 | ) | $ | 63,918 | ||||
62
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Effective income tax rate reconciliation:
|
||||||||||||
|
United States federal statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
State and local income taxes
|
(4.9 | )% | 0.4 | % | 2.1 | % | ||||||
|
Impact of change in deferred tax asset valuation allowance
|
(14.3 | )% | 1.0 | % | (2.9 | )% | ||||||
|
Impact of change in tax contingencies
|
(7.5 | )% | (0.3 | )% | 0.6 | % | ||||||
|
Foreign income tax rate differences
|
21.5 | % | (6.9 | )% | (2.7 | )% | ||||||
|
Impact of goodwill impairment charges
|
0.0 | % | (28.0 | )% | 0.0 | % | ||||||
|
Other
|
1.9 | % | 0.6 | % | (0.2 | )% | ||||||
| 31.7 | % | 1.8 | % | 31.9 | % | |||||||
Deferred income taxes have been established for differences in
the basis of assets and liabilities for financial statement and
tax reporting purposes as adjusted by a tax sharing agreement
with Cooper Industries Ltd., our former parent. This tax
agreement requires us to pay Cooper most of the tax benefits
resulting from basis adjustments arising from an initial public
offering on October 6, 1993. The effect of the Cooper tax
agreement is to put us in the same financial position we would
have been in had there been no increase in the tax basis of our
assets (except for a retained 10% benefit). The retained 10%
benefit reduced income tax expense for 2009, 2008, and 2007 by
$0.0 million, $1.5 million, and $1.5 million,
respectively. Included in taxes paid for 2009, 2008, and 2007
were $0.0 million, $1.3 million, and
$38.9 million, respectively, paid to Cooper in accordance
with the tax agreement.
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Components of deferred income tax balances:
|
||||||||
|
Deferred income tax liabilities:
|
||||||||
|
Plant, equipment and intangibles
|
$ | (56,052 | ) | $ | (55,902 | ) | ||
|
Deferred income tax assets:
|
||||||||
|
Postretirement, pensions, and stock compensation
|
23,154 | 28,234 | ||||||
|
Reserves and accruals
|
25,299 | 14,463 | ||||||
|
Net operating loss and tax credit carryforwards
|
94,498 | 80,991 | ||||||
|
Valuation allowances
|
(22,698 | ) | (35,350 | ) | ||||
| 120,253 | 88,338 | |||||||
|
Net deferred income tax asset
|
$ | 64,201 | $ | 32,436 | ||||
| December 31, | ||||||||||||||||||||||||
| 2009 | 2008 | |||||||||||||||||||||||
| Current | Noncurrent | Total | Current | Noncurrent | Total | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Deferred income tax assets
|
$ | 26,996 | $ | 93,257 | $ | 120,253 | $ | 16,430 | $ | 71,908 | $ | 88,338 | ||||||||||||
|
Deferred income tax liabilities
|
— | (56,052 | ) | (56,052 | ) | — | (55,902 | ) | (55,902 | ) | ||||||||||||||
| $ | 26,996 | $ | 37,205 | $ | 64,201 | $ | 16,430 | $ | 16,006 | $ | 32,436 | |||||||||||||
In 2009, the change in deferred income tax assets is primarily
due to the release of the valuation allowance on the federal
portion of the net operating losses assumed in the acquisition
of Trapeze as well as the creation of net operating losses in
various jurisdictions in Europe and Asia that are expected to be
utilized in the future.
63
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
As of December 31, 2009, we had $320.5 million of net
operating loss carryforwards and $16.0 million of tax
credit carryforwards, as adjusted by the Cooper tax agreement.
Unless otherwise utilized, net operating loss carryforwards will
expire as follows: $0.1 million in 2010, $0.2 million
in 2011, $42.7 million between 2012 and 2014, and
$194.2 million between 2015 and 2028. Net operating losses
with an indefinite carryforward period total $83.3 million.
Unless otherwise utilized, tax credit carryforwards of
$13.6 million will expire between 2018 and 2028. Tax credit
carryforwards with an indefinite carryforward period total
$2.4 million.
In 2009, we recorded tax expense of $2.0 million related to
a planned distribution of Canadian earnings in 2010. However,
undistributed earnings of the Company’s foreign
subsidiaries are considered to be permanently reinvested and
accordingly no provision for U.S. income taxes has been
provided thereon.
In 2009, we recognized a $3.1 million increase to reserves
for uncertain tax positions. A reconciliation of the beginning
and ending gross amount of unrecognized tax benefits is as
follows (in thousands):
| 2009 | 2008 | |||||||
|
Balance at beginning of year
|
$ | 24,657 | $ | 19,828 | ||||
|
Additions based on tax positions related to the current year
|
786 | 768 | ||||||
|
Additions for tax positions of prior years
|
4,331 | 4,555 | ||||||
|
Reductions for tax positions of prior years
|
(1,996 | ) | (494 | ) | ||||
|
Balance at end of year
|
$ | 27,778 | $ | 24,657 | ||||
The entire balance of unrecognized tax benefits at
December 31, 2009 would impact the effective tax rate, if
recognized.
As of December 31, 2009, we believe it is reasonably
possible that the total amount of unrecognized tax benefits
related to several audits may significantly change within the
next twelve months. First, we believe that several uncertain
positions stemming from an audit by the Canada Revenue Agency of
one of our Canadian subsidiaries are likely to be settled in
2010. We estimate the range of reasonably possible tax
adjustments related to this audit to be $0.2 million to
$3.9 million. Second, we believe that ongoing audits of two
of our German subsidiaries by the German tax authorities will
likely be concluded in 2010. We estimate the range of reasonably
possible tax adjustments related to these audits to be
$1.7 million to $2.2 million.
Our practice is to recognize interest accrued related to
uncertain tax positions in interest expense and penalties in
operating expenses. During 2009, 2008, and 2007 we recognized
approximately $2.8 million, $1.2 million, and
$0.1 million, respectively, in interest expense and
penalties. Of the $2.8 million recognized in 2009,
$2.1 million is included in discontinued operations (see
Note 5). We have approximately $4.6 million and
$1.8 million for the payment of interest and penalties
accrued at December 31, 2009 and 2008, respectively.
Our federal income tax returns for the tax years 2003 and later
remain subject to examination by the Internal Revenue Service.
Our state income tax returns for the tax years 2004 and later
remain subject to examination by various state taxing
authorities. Our foreign income tax returns for the tax years
2003 and later remain subject to examination by various foreign
taxing authorities.
| Note 14: | Pension and Other Postretirement Benefits |
We sponsor defined benefit pension plans and defined
contribution plans that cover substantially all employees in
Canada, the Netherlands, the United Kingdom, the United States,
and certain employees in Germany. We closed the
U.S. defined benefit pension plan to new entrants effective
January 1, 2010. Employees who are not active participants
in the U.S. defined benefit pension plan on
December 31, 2009, will not be eligible to participate in
the plan. Annual contributions to retirement plans equal or
exceed the minimum funding requirements of applicable local
regulations. The assets of the funded pension plans we sponsor
are maintained in various trusts and are invested primarily in
equity and fixed income securities.
64
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Benefits provided to employees under defined contribution plans
include cash contributions by the Company based on either hours
worked by the employee or a percentage of the employee’s
compensation. Defined contribution expense for 2009, 2008, and
2007 was $6.8 million, $9.1 million, and
$8.8 million, respectively.
We sponsor unfunded postretirement medical and life insurance
benefit plans for certain of our employees in Canada and the
United States. The medical benefit portion of the United States
plan is only for employees who retired prior to 1989 as well as
certain other employees who were near retirement and elected to
receive certain benefits.
The following tables provide a reconciliation of the changes in
the plans’ benefit obligations and fair value of assets as
well as a statement of the funded status and balance sheet
reporting for these plans.
| Pension Benefits | Other Benefits | |||||||||||||||
|
Years Ended December 31,
|
2009 | 2008 | 2009 | 2008 | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Change in benefit obligation:
|
||||||||||||||||
|
Benefit obligation, beginning of year
|
$ | (197,070 | ) | $ | (229,955 | ) | $ | (36,599 | ) | $ | (46,010 | ) | ||||
|
Service cost
|
(4,949 | ) | (5,577 | ) | (91 | ) | (134 | ) | ||||||||
|
Interest cost
|
(12,163 | ) | (12,444 | ) | (2,330 | ) | (2,494 | ) | ||||||||
|
Participant contributions
|
(130 | ) | (96 | ) | (17 | ) | (24 | ) | ||||||||
|
Plan amendments
|
1,272 | (42 | ) | — | — | |||||||||||
|
Actuarial gain (loss)
|
(19,157 | ) | 7,254 | (3,772 | ) | 3,927 | ||||||||||
|
Liability settlements
|
— | (1,621 | ) | — | — | |||||||||||
|
Foreign currency exchange rate changes
|
(5,788 | ) | 14,377 | (3,980 | ) | 5,305 | ||||||||||
|
Benefits paid
|
15,037 | 31,034 | 2,557 | 2,831 | ||||||||||||
|
Benefit obligation, end of year
|
$ | (222,948 | ) | $ | (197,070 | ) | $ | (44,232 | ) | $ | (36,599 | ) | ||||
| Pension Benefits | Other Benefits | |||||||||||||||
|
Years Ended December 31,
|
2009 | 2008 | 2009 | 2008 | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Change in Plan Assets:
|
||||||||||||||||
|
Fair value of plan assets, beginning of year
|
$ | 114,051 | $ | 179,060 | $ | — | $ | — | ||||||||
|
Actual return on plan assets
|
22,361 | (34,871 | ) | — | — | |||||||||||
|
Employer contributions
|
17,077 | 15,903 | 2,540 | 2,807 | ||||||||||||
|
Plan participant contributions
|
130 | 96 | 17 | 24 | ||||||||||||
|
Foreign currency exchange rate changes
|
4,909 | (15,103 | ) | — | — | |||||||||||
|
Benefits paid
|
(15,037 | ) | (31,034 | ) | (2,557 | ) | (2,831 | ) | ||||||||
|
Fair value of plan assets, end of year
|
$ | 143,491 | $ | 114,051 | $ | — | $ | — | ||||||||
|
Funded status, end of year
|
$ | (79,457 | ) | $ | (83,019 | ) | $ | (44,232 | ) | $ | (36,599 | ) | ||||
| Pension Benefits | Other Benefits | |||||||||||||||
|
Years Ended December 31,
|
2009 | 2008 | 2009 | 2008 | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Amounts recongized in the balance sheets:
|
||||||||||||||||
|
Prepaid benefit cost
|
$ | 5,411 | $ | 7,796 | $ | — | $ | — | ||||||||
|
Accrued benefit liability (current)
|
(4,411 | ) | (4,355 | ) | (2,944 | ) | (2,803 | ) | ||||||||
|
Accrued benefit liability (noncurrent)
|
(80,457 | ) | (86,460 | ) | (41,288 | ) | (33,796 | ) | ||||||||
|
Net funded status
|
$ | (79,457 | ) | $ | (83,019 | ) | $ | (44,232 | ) | $ | (36,599 | ) | ||||
65
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
In 2009, the change in benefit obligation for pension plans
stems primarily from the use of lower discount rates in 2009
than in 2008.
The accumulated benefit obligation for all defined benefit
pension plans was $218.2 million and $193.4 million at
December 31, 2009 and 2008, respectively.
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension plans
with an accumulated benefit obligation in excess of plan assets
were $185.9 million, $181.4 million, and
$101.0 million, respectively, as of December 31, 2009
and $169.3 million, $165.7 million, and
$78.5 million, respectively, as of December 31, 2008. The
projected benefit obligation, accumulated benefit obligation,
and fair value of plan assets for pension plans with an
accumulated benefit obligation less than plan assets were
$37.1 million, $36.8 million, and $42.5 million,
respectively, as of December 31, 2009, and were
$27.8 million, $27.7 million, and $35.6 million,
respectively, as of December 31, 2008.
The following table provides the components of net periodic
benefit costs for the plans.
| Pension Benefits | Other Benefits | |||||||||||||||||||||||
|
Years Ended December 31,
|
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Components of net periodic benefit cost:
|
||||||||||||||||||||||||
|
Service cost
|
$ | 4,949 | $ | 5,577 | $ | 6,348 | $ | 91 | $ | 134 | $ | 418 | ||||||||||||
|
Interest cost
|
12,163 | 12,444 | 11,804 | 2,330 | 2,494 | 2,409 | ||||||||||||||||||
|
Expected return on plan assets
|
(11,455 | ) | (12,150 | ) | (12,266 | ) | — | — | — | |||||||||||||||
|
Amortization of prior service cost
|
20 | 14 | 14 | (203 | ) | (210 | ) | (106 | ) | |||||||||||||||
|
Curtailment loss (gain)
|
— | 1,674 | (2,373 | ) | — | — | (938 | ) | ||||||||||||||||
|
Special termination benefits
|
— | — | 1,104 | — | — | — | ||||||||||||||||||
|
Net loss recognition
|
2,293 | 1,378 | 2,254 | 248 | 685 | 610 | ||||||||||||||||||
|
Net periodic benefit cost
|
$ | 7,970 | $ | 8,937 | $ | 6,885 | $ | 2,466 | $ | 3,103 | $ | 2,393 | ||||||||||||
The following table presents the assumptions used in determining
the benefit obligations and the net periodic benefit cost
amounts.
| Pension Benefits | Other Benefits | |||||||||||||||
|
Years Ended December 31,
|
2009 | 2008 | 2009 | 2008 | ||||||||||||
|
Weighted average assumptions for benefit obligations at
year end: |
||||||||||||||||
|
Discount rate
|
5.4 | % | 6.3 | % | 5.3 | % | 6.8 | % | ||||||||
|
Salary increase
|
4.0 | % | 4.0 | % | N/A | N/A | ||||||||||
|
Weighted average assumptions for net periodic cost for
the year:
|
||||||||||||||||
|
Discount rate
|
6.3 | % | 5.9 | % | 6.8 | % | 5.9 | % | ||||||||
|
Salary increase
|
4.0 | % | 3.8 | % | N/A | N/A | ||||||||||
|
Expected return on assets
|
7.3 | % | 7.3 | % | N/A | N/A | ||||||||||
|
Assumed health care cost trend rates:
|
||||||||||||||||
|
Health care cost trend rate assumed for next year
|
N/A | N/A | 8.8 | % | 9.3 | % | ||||||||||
|
Rate that the cost trend rate gradually declines to
|
N/A | N/A | 5.0 | % | 5.0 | % | ||||||||||
|
Year that the rate reaches the rate it is assumed to remain at
|
N/A | N/A | 2017 | 2017 | ||||||||||||
66
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care plan. A one
percentage-point change in the assumed health care cost trend
rates would have the following effects on 2009 expense and
year-end liabilities.
| 1% Increase | 1% Decrease | |||||||
| (In thousands) | ||||||||
|
Effect on total of service and interest cost components
|
$ | 205 | $ | (175 | ) | |||
|
Effect on postretirement benefit obligation
|
$ | 4,182 | $ | (3,526 | ) | |||
Plan assets are invested using a total return investment
approach whereby a mix of equity securities and fixed income
securities are used to preserve asset values, diversify risk,
and achieve our target investment return benchmark. Investment
strategies and asset allocations are based on consideration of
the plan liabilities, the plan’s funded status, and our
financial condition. Investment performance and asset allocation
are measured and monitored on an ongoing basis.
Plan assets are managed in a balanced portfolio comprised of two
major components: an equity portion and a fixed income portion.
The expected role of equity investments is to maximize the
long-term real growth of assets, while the role of fixed income
investments is to generate current income, provide for more
stable periodic returns, and provide some protection against a
prolonged decline in the market value of equity investments.
Absent regulatory or statutory limitations, the target asset
allocation for the investment of the assets for our ongoing
pension plans is 25% in fixed income securities and 75% in
equity securities and for our pension plans where the majority
of the participants are in payment or terminated vested status
is 75%-80% in fixed income securities and 20%-25% in equity
securities. Equity securities include U.S. and
international equity, primarily invested through investment
funds. Fixed income securities include government securities and
investment grade corporate bonds, primarily invested through
investment funds and group insurance contracts. We develop our
expected long-term rate of return assumptions based on the
historical rates of returns for equity and fixed income
securities of the type in which our plans invest.
The following table presents the fair values of the pension plan
assets by asset category.
|
Quoted Prices
|
||||||||||||||||
|
Fair Market
|
in Active
|
Significant
|
Significant
|
|||||||||||||
|
Value at
|
Markets for
|
Observable
|
Unobservable
|
|||||||||||||
|
December 31,
|
Identical Assets
|
Inputs
|
Inputs
|
|||||||||||||
| 2009 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Asset Category:
|
||||||||||||||||
|
Equity securities(a)
|
$ | 90,392 | $ | — | $ | 90,392 | $ | — | ||||||||
|
Debt securities(b)
|
35,441 | — | 35,441 | — | ||||||||||||
|
Real estate
|
— | — | — | — | ||||||||||||
|
Other(c)
|
17,658 | 36 | 17,622 | — | ||||||||||||
|
Total
|
$ | 143,491 | $ | 36 | $ | 143,455 | $ | — | ||||||||
| (a) | This category includes investments in actively managed and indexed investment funds that invest in a diversified pool of equity securities of large, medium, and small sized companies, primarily in the U.S. and other developed countries throughout the world. The funds are valued using the net asset value method in which an average of the market prices for the underling investments is used to value the fund. | |
| (b) | This category includes investments in investment funds that invest in U.S. treasuries, other government bonds, and corporate bonds of highly rated companies from diversified industries. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund. | |
| (c) | This category includes cash and insurance contracts. |
67
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
The plans do not invest in individual securities, all
investments are through well diversified investment funds, as
such there are no significant concentrations of risk within the
plan assets.
The following table reflects the benefits as of
December 31, 2009 expected to be paid in each of the next
five years and in the aggregate for the five years thereafter
from our pension and other postretirement plans as well as
Medicare subsidy receipts. Because our other postretirement
plans are unfunded, the anticipated benefits with respect to
these plans will come from our own assets. Because our pension
plans are primarily funded plans, the anticipated benefits with
respect to these plans will come primarily from the trusts
established for these plans.
|
Medicare
|
||||||||||||
|
Pension
|
Other
|
Subsidy
|
||||||||||
| Plans | Plans | Receipts | ||||||||||
| (In thousands) | ||||||||||||
|
2010
|
15,989 | 3,022 | 230 | |||||||||
|
2011
|
15,360 | 3,084 | 224 | |||||||||
|
2012
|
16,759 | 3,125 | 217 | |||||||||
|
2013
|
15,846 | 3,120 | 208 | |||||||||
|
2014
|
14,697 | 3,044 | 196 | |||||||||
|
2015-2019
|
88,122 | 14,813 | 773 | |||||||||
|
Total
|
$ | 166,773 | $ | 30,208 | $ | 1,848 | ||||||
We anticipate contributing $9.3 million and
$2.8 million to our pension and other postretirement plans,
respectively, during 2010.
The amounts in accumulated other comprehensive income that have
not yet been recognized as components of net periodic benefits
cost at December 31, 2009, the changes in these amounts
during the year ended December 31, 2009, and the expected
amortization of these amounts as components of net periodic
benefit cost for the year ended December 31, 2010 are as
follows.
|
Pension
|
Other
|
|||||||
| Benefits | Benefits | |||||||
| (In thousands) | ||||||||
|
Components of accumulated other comprehensive income:
|
||||||||
|
Net actuarial loss
|
$ | 62,917 | $ | 7,879 | ||||
|
Net prior service cost (credit)
|
(810 | ) | (777 | ) | ||||
| $ | 62,107 | $ | 7,102 | |||||
68
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
|
Pension
|
Other
|
|||||||
| Benefits | Benefits | |||||||
| (In thousands) | ||||||||
|
Changes in accumulated other comprehensive income:
|
||||||||
|
Net actuarial loss, beginning of year
|
$ | 56,410 | $ | 4,436 | ||||
|
Amortization cost
|
(2,293 | ) | (248 | ) | ||||
|
Liability loss
|
19,157 | 3,772 | ||||||
|
Asset gain
|
(10,906 | ) | — | |||||
|
Currency impact
|
549 | (81 | ) | |||||
|
Net actuarial loss, end of year
|
$ | 62,917 | $ | 7,879 | ||||
|
Prior service cost, beginning of year
|
$ | 477 | $ | (876 | ) | |||
|
Amortization cost
|
(20 | ) | 203 | |||||
|
Plan amendment
|
(1,272 | ) | — | |||||
|
Currency impact
|
5 | (104 | ) | |||||
|
Prior service cost, end of year
|
$ | (810 | ) | $ | (777 | ) | ||
|
Pension
|
Other
|
|||||||
| Benefits | Benefits | |||||||
| (In thousands) | ||||||||
|
Expected 2010 amortization:
|
||||||||
|
Amortization of prior service cost
|
$ | (129 | ) | $ | (193 | ) | ||
|
Amortization of net losses
|
4,578 | 444 | ||||||
| $ | 4,449 | $ | 251 | |||||
| Note 15: | Share-Based Compensation |
Compensation cost charged against income, primarily SG&A
expense, and the income tax benefit recognized for our
share-based compensation arrangements is included below:
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Total share-based compensation cost
|
$ | 11,748 | $ | 13,568 | $ | 10,562 | ||||||
|
Income tax benefit
|
3,536 | 4,803 | 3,919 | |||||||||
We currently have outstanding stock appreciation rights (SARs),
stock options, restricted stock units with service vesting
conditions, and restricted stock units with performance vesting
conditions. We grant SARs and stock options with an exercise
price equal to the market price of our common stock on the grant
date. Generally, SARs and stock options may be converted into
shares of our common stock in equal amounts on each of the first
3 anniversaries of the grant date and expire 10 years from
the grant date. Certain awards provide for accelerated vesting
if there is a change in control of the Company. Restricted stock
units with service conditions generally vest 3 or 5 years
from the grant date. Restricted stock units issued based on the
attainment of the performance conditions vest 50% on the second
anniversary of their grant date and 50% on the third anniversary.
We recognize compensation cost for all awards based on their
fair values. The fair values for SARs and stock options are
estimated on the grant date using the Black-Scholes-Merton
option-pricing formula which incorporates the assumptions noted
in the following table. Expected volatility is based on
historical volatility, and expected term is based on historical
exercise patterns of option holders. The fair value of
restricted stock shares and units is the market price of our
common stock on the date of grant. Compensation costs for awards
with service conditions are
69
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
amortized to expense using the straight-line method.
Compensation costs for awards with performance conditions are
amortized to expense using the graded attribution method.
| Years Ended December 31, | ||||||||||||||||
| 2009 | 2008 | 2007 | ||||||||||||||
|
(In thousands, except weighted
|
||||||||||||||||
| average fair value and assumptions) | ||||||||||||||||
|
Weighted-average fair value of SARs and options granted
|
$ | 6.38 | $ | 15.56 | $ | 21.75 | ||||||||||
|
Total intrinsic value of SARs converted and options exercised
|
128 | 3,377 | 23,112 | |||||||||||||
|
Cash received for options exercised
|
699 | 6,103 | 32,335 | |||||||||||||
|
Tax benefit (deficiency) related to share-based compensation
|
(1,564 | ) | 1,279 | 8,533 | ||||||||||||
|
Weighted-average fair value of restricted stock shares and units
granted
|
13.80 | 33.10 | 44.67 | |||||||||||||
|
Total fair value of restricted stock shares and units vested
|
7,318 | 3,541 | 434 | |||||||||||||
|
Expected volatility
|
48.44 | % | 37.21 | % | 37.85 | % | ||||||||||
|
Expected term (in years)
|
6.1 | 6.1 | 6.2 | |||||||||||||
|
Risk-free rate
|
2.21 | % | 3.11 | % | 4.71 | % | ||||||||||
|
Dividend yield
|
1.50 | % | 0.51 | % | 0.41 | % | ||||||||||
| SARs and Stock Options |
Restricted Shares
|
|||||||||||||||||||||||
|
Weighted-
|
and Units | |||||||||||||||||||||||
|
Weighted-
|
Average
|
Weighted-
|
||||||||||||||||||||||
|
Average
|
Remaining
|
Aggregate
|
Average
|
|||||||||||||||||||||
|
Exercise
|
Contractual
|
Intrinsic
|
Grant-Date
|
|||||||||||||||||||||
| Number | Price | Term | Value | Number | Fair Value | |||||||||||||||||||
| (In thousands, except exercise prices, fair values, and contractual terms) | ||||||||||||||||||||||||
|
Outstanding at January 1, 2009
|
2,231 | $ | 31.48 | 578 | $ | 30.90 | ||||||||||||||||||
|
Granted
|
871 | 11.92 | 614 | 15.32 | ||||||||||||||||||||
|
Exercised or converted
|
(33 | ) | 21.29 | (216 | ) | 33.78 | ||||||||||||||||||
|
Forfeited or expired
|
(302 | ) | 33.73 | (242 | ) | 18.47 | ||||||||||||||||||
|
Outstanding at December 31, 2009
|
2,767 | $ | 25.21 | 6.9 | $ | 9,437 | 734 | $ | 21.11 | |||||||||||||||
|
Vested or expected to vest at December 31, 2009
|
2,688 | $ | 25.39 | 6.9 | $ | 8,819 | ||||||||||||||||||
|
Exercisable or convertible at December 31, 2009
|
1,426 | 26.48 | 5.3 | 1,578 | ||||||||||||||||||||
At December 31, 2009, the total unrecognized compensation
cost related to all nonvested awards was $12.9 million.
That cost is expected to be recognized over a weighted-average
period of 1.8 years.
Historically, we have issued treasury shares, if available, to
satisfy award conversions and exercises.
| Note 16: | Stockholder Rights Plan |
Under our Stockholder Rights Plan, each share of our common
stock generally has “attached” to it one preferred
share purchase right. Each right, when exercisable, entitles the
holder to purchase 1/1000th of a share of our Junior
Participating Preferred Stock Series A at a purchase price
of $150.00 (subject to adjustment). Each 1/1000th of a
share of Series A Junior Participating Preferred Stock will
be substantially equivalent to one share of our common stock and
will be entitled to one vote, voting together with the shares of
common stock.
The rights will become exercisable only if, without the prior
approval of the Board of Directors, a person or group of persons
acquires or announces the intention to acquire 20% or more of
our common stock. If we are acquired through a merger or other
business combination transaction, each right will entitle the
holder to purchase $300.00 worth of the surviving company’s
common stock for $150.00 (subject to adjustment). In addition,
if a
70
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
person or group of persons acquires 20% or more of our common
stock, each right not owned by the 20% or greater shareholder
would permit the holder to purchase $300.00 worth of our common
stock for $150.00 (subject to adjustment). The rights are
redeemable, at our option, at $.01 per right at any time prior
to an announcement of a beneficial owner of 20% or more of our
common stock then outstanding. The rights expire on
December 9, 2016.
| Note 17: | Operating Leases |
Operating lease expense incurred primarily for office space,
machinery and equipment was $22.8 million,
$27.1 million, and $19.6 million in 2009, 2008, and
2007, respectively.
Minimum annual lease payments for noncancelable operating leases
in effect at December 31, 2009 are as follows (in
thousands):
|
2010
|
$ | 13,584 | ||
|
2011
|
10,682 | |||
|
2012
|
9,083 | |||
|
2013
|
6,684 | |||
|
2014
|
5,914 | |||
|
Thereafter
|
25,140 | |||
| $ | 71,087 | |||
Certain of our operating leases include step rent provisions and
rent escalations. We include these step rent provisions and rent
escalations in our minimum lease payments obligations and
recognize them as a component of rental expense on a
straight-line basis over the minimum lease term.
| Note 18: | Market Concentrations and Risks |
Concentrations
of Credit
We sell our products to many customers in several markets across
multiple geographic areas. The ten largest customers constitute
in aggregate approximately 34%, 32%, and 34% of revenues in
2009, 2008, and 2007, respectively.
Unconditional
Copper Purchase Obligations
At December 31, 2009, we were committed to purchase
approximately 1.6 million pounds of copper at an aggregate
cost of $4.7 million. At December 31, 2009, the fixed
cost of this purchase was $0.5 million under the market
cost that would be incurred on a spot purchase of the same
amount of copper. The aggregate market cost was based on the
current market price of copper obtained from the New York
Mercantile Exchange. These commitments will mature in 2010.
Labor
Approximately 12% of our labor force is covered by collective
bargaining agreements at various locations around the world.
Approximately 9% of our labor force is covered by collective
bargaining agreements that we expect to renegotiate during 2010.
71
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
International
Operations
The carrying amounts of net assets belonging to our
international operations were as follows:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Canada and Latin America
|
$ | 85,239 | $ | 89,270 | ||||
|
Europe, Africa and Middle East
|
21,119 | 133,557 | ||||||
|
Asia Pacific
|
208,497 | 142,689 | ||||||
Fair
Value of Financial Instruments
Our financial instruments consist primarily of cash and cash
equivalents, trade receivables, trade payables, and debt
instruments. The carrying amounts of cash and cash equivalents,
trade receivables, and trade payables at December 31, 2009
are considered representative of their respective fair values.
The carrying amount of our debt instruments at December 31,
2009 was $590.2 million. The fair value of our debt
instruments at December 31, 2009 was approximately
$598.4 million based on sales prices of the debt
instruments from recent trading activity. Included in this
amount are estimated fair values of $340.8 million and
$211.3 million of senior subordinated notes with respective
face values of $350.0 million and $200.0 million, and
an estimated $46.3 million fair value of borrowings under
our senior secured credit facility.
| Note 19: | Contingent Liabilities |
General
Various claims are asserted against us in the ordinary course of
business including those pertaining to income tax examinations,
product liability, customer, employment, vendor, and patent
matters. Based on facts currently available, management believes
that the disposition of the claims that are pending or asserted
will not have a materially adverse effect on our financial
position, operating results, or cash flow.
Letters
of Credit, Guarantees and Bonds
At December 31, 2009, we were party to unused standby
letters of credit and unused bank guarantees totaling
$10.0 million and $8.7 million, respectively. We also
maintain bonds totaling $1.6 million in connection with
workers compensation self-insurance programs in several states,
taxation in Canada, and the importation of product into the
United States and Canada.
| Note 20: | Supplemental Cash Flow Information |
Supplemental cash flow information is as follows:
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Income tax refunds received
|
$ | 6,840 | $ | 1,997 | $ | 1,968 | ||||||
|
Income taxes paid
|
(11,227 | ) | (54,025 | ) | (55,898 | ) | ||||||
|
Interest paid, net of amount capitalized
|
(37,923 | ) | (32,281 | ) | (21,740 | ) | ||||||
| Note 21: | Share Repurchases |
In 2007, the Board of Directors authorized the Company to
repurchase up to $100.0 million of common stock in the open
market or in privately negotiated transactions. From the
inception of the share repurchase program in August 2007 through
its completion in 2008, we repurchased a total of
2,430,594 shares of our common stock at an aggregate cost
of $100.0 million, an average price per share of $41.14.
72
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 22: | Quarterly Operating Results (Unaudited) |
|
2009
|
1 st | 2 nd | 3 rd | 4 th | Year | |||||||||||||||
| (In thousands, except days and per share amounts) | ||||||||||||||||||||
|
Number of days in quarter
|
88 | 91 | 91 | 95 | 365 | |||||||||||||||
|
Revenues
|
$ | 328,512 | $ | 343,821 | $ | 355,159 | $ | 387,770 | $ | 1,415,262 | ||||||||||
|
Gross profit
|
84,193 | 108,518 | 108,073 | 112,414 | 413,198 | |||||||||||||||
|
Operating income (loss)
|
(37,647 | ) | 4,269 | 18,440 | 16,579 | 1,641 | ||||||||||||||
|
Income (loss) from continuing operations
|
(32,454 | ) | (4,886 | ) | (7,476 | ) | 21,311 | (23,505 | ) | |||||||||||
|
Loss from discontinued operations, net of tax
|
— | — | — | (1,396 | ) | (1,396 | ) | |||||||||||||
|
Net income (loss)
|
(32,454 | ) | (4,886 | ) | (7,476 | ) | 19,915 | (24,901 | ) | |||||||||||
|
Basic income (loss) per share
|
||||||||||||||||||||
|
Continuing operations
|
$ | (0.70 | ) | $ | (0.10 | ) | $ | (0.16 | ) | $ | 0.46 | $ | (0.50 | ) | ||||||
|
Discontinued operations
|
— | — | — | (0.03 | ) | (0.03 | ) | |||||||||||||
|
Net income (loss)
|
$ | (0.70 | ) | $ | (0.10 | ) | $ | (0.16 | ) | $ | 0.43 | $ | (0.53 | ) | ||||||
|
Diluted income (loss) per share
|
||||||||||||||||||||
|
Continuing operations
|
$ | (0.70 | ) | $ | (0.10 | ) | $ | (0.16 | ) | $ | 0.45 | $ | (0.50 | ) | ||||||
|
Discontinued operations
|
— | — | — | (0.03 | ) | (0.03 | ) | |||||||||||||
|
Net income (loss)
|
$ | (0.70 | ) | $ | (0.10 | ) | $ | (0.16 | ) | $ | 0.42 | $ | (0.53 | ) | ||||||
|
2008
|
1 st | 2 nd | 3 rd | 4 th | Year | |||||||||||||||
| (In thousands, except days and per share amounts) | ||||||||||||||||||||
|
Number of days in quarter
|
90 | 91 | 91 | 94 | 366 | |||||||||||||||
|
Revenues
|
$ | 511,826 | $ | 556,303 | $ | 520,494 | $ | 417,267 | $ | 2,005,890 | ||||||||||
|
Gross profit
|
145,817 | 166,473 | 153,652 | 97,740 | 563,682 | |||||||||||||||
|
Operating income (loss)
|
26,598 | 65,858 | 47,738 | (482,382 | ) | (342,188 | ) | |||||||||||||
|
Income (loss) from continuing operations
|
12,885 | 41,805 | 31,534 | (448,050 | ) | (361,826 | ) | |||||||||||||
|
Net income (loss)
|
12,885 | 41,805 | 31,534 | (448,050 | ) | (361,826 | ) | |||||||||||||
|
Basic net income (loss) per share
|
$ | 0.29 | $ | 0.96 | $ | 0.71 | $ | (9.64 | ) | $ | (8.10 | ) | ||||||||
|
Diluted net income (loss) per share
|
$ | 0.27 | $ | 0.88 | $ | 0.67 | $ | (9.64 | ) | $ | (8.10 | ) | ||||||||
Included in the first quarter, second quarter, and fourth
quarter of 2009 are asset impairment charges of
$24.7 million, $1.5 million, and $1.6 million,
respectively. Included in the first quarter, third quarter, and
fourth quarter of 2008 are goodwill and other asset impairment
charges of $11.5 million, $0.8 million, and
$464.2 million, respectively.
| Note 23: | Subsequent Event |
On February 16, 2010, we made a $46.3 million payment
related to the amount drawn under our senior secured credit
facility. After this payment, we did not have any outstanding
borrowings under the facility.
73
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 24: | Supplemental Guarantor Information |
As of December 31, 2009, Belden Inc. (the Issuer) has
outstanding $550.0 million aggregate principal amount
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
credit facility. Belden Inc. and its current and future material
domestic subsidiaries have fully and unconditionally guaranteed
the notes on a joint and several basis. The following
consolidating financial information presents information about
the Issuer, guarantor subsidiaries, and non-guarantor
subsidiaries. Investments in subsidiaries are accounted for on
the equity basis. Intercompany transactions are eliminated.
Supplemental
Condensed Consolidating Balance Sheets
| December 31, 2009 | ||||||||||||||||||||
|
Non-
|
||||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
Current assets:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 49,878 | $ | 8,977 | $ | 250,024 | $ | — | $ | 308,879 | ||||||||||
|
Receivables, net
|
21 | 69,444 | 172,680 | — | 242,145 | |||||||||||||||
|
Inventories, net
|
— | 86,960 | 64,302 | — | 151,262 | |||||||||||||||
|
Deferred income taxes
|
— | 22,188 | 4,808 | — | 26,996 | |||||||||||||||
|
Other current assets
|
5,179 | 13,825 | 16,032 | — | 35,036 | |||||||||||||||
|
Total current assets
|
55,078 | 201,394 | 507,846 | — | 764,318 | |||||||||||||||
|
Property, plant and equipment, less accumulated depreciation
|
— | 120,655 | 178,931 | — | 299,586 | |||||||||||||||
|
Goodwill
|
— | 242,699 | 70,331 | — | 313,030 | |||||||||||||||
|
Intangible assets, less accumulated amortization
|
— | 82,129 | 60,884 | — | 143,013 | |||||||||||||||
|
Deferred income taxes
|
— | 16,436 | 20,769 | — | 37,205 | |||||||||||||||
|
Other long-lived assets
|
14,154 | 3,054 | 46,218 | — | 63,426 | |||||||||||||||
|
Investment in subsidiaries
|
853,555 | 321,200 | — | (1,174,755 | ) | — | ||||||||||||||
| $ | 922,787 | $ | 987,567 | $ | 884,979 | $ | (1,174,755 | ) | $ | 1,620,578 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Accounts payable
|
$ | — | $ | 59,846 | $ | 109,917 | $ | — | $ | 169,763 | ||||||||||
|
Accrued liabilities
|
15,552 | 57,423 | 68,947 | — | 141,922 | |||||||||||||||
|
Current maturities of long-term debt
|
46,268 | — | — | — | 46,268 | |||||||||||||||
|
Total current liabilities
|
61,820 | 117,269 | 178,864 | — | 357,953 | |||||||||||||||
|
Long-term debt
|
543,942 | — | — | — | 543,942 | |||||||||||||||
|
Postretirement benefits
|
— | 35,000 | 86,745 | — | 121,745 | |||||||||||||||
|
Other long-term liabilities
|
27,636 | 9,581 | 8,673 | — | 45,890 | |||||||||||||||
|
Intercompany accounts
|
238,152 | (527,873 | ) | 289,721 | — | — | ||||||||||||||
|
Total stockholders’ equity
|
51,237 | 1,353,590 | 320,976 | (1,174,755 | ) | 551,048 | ||||||||||||||
| $ | 922,787 | $ | 987,567 | $ | 884,979 | $ | (1,174,755 | ) | $ | 1,620,578 | ||||||||||
74
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| December 31, 2008 | ||||||||||||||||||||
|
Non-
|
||||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
Current assets:
|
||||||||||||||||||||
|
Cash and cadi equivalents
|
$ | 130 | $ | 57,522 | $ | 169,761 | $ | — | $ | 227,413 | ||||||||||
|
Receivables, net
|
— | 83,923 | 208,313 | — | 292,236 | |||||||||||||||
|
Inventories, net
|
— | 110,018 | 106,004 | — | 216,022 | |||||||||||||||
|
Deferred income taxes
|
— | 7,963 | 8,467 | — | 16,430 | |||||||||||||||
|
Other current assets
|
1,782 | 7,133 | 25,911 | — | 34,826 | |||||||||||||||
| — | ||||||||||||||||||||
|
Total current assets
|
1,912 | 266,559 | 518,456 | — | 786,927 | |||||||||||||||
|
Property, plant and equipment, less accumulated depreciation
|
— | 123,530 | 201,039 | — | 324,569 | |||||||||||||||
|
Goodwill
|
— | 243,233 | 78,245 | — | 321,478 | |||||||||||||||
|
Intangible assets, less accumulated amortization
|
— | 83,586 | 72,439 | — | 156,025 | |||||||||||||||
|
Deferred income taxes
|
— | 16,235 | (229 | ) | — | 16,006 | ||||||||||||||
|
Other long-lived assets
|
7,753 | 2,323 | 43,312 | — | 53,388 | |||||||||||||||
|
Investment in subsidiaries
|
838,088 | 362,329 | — | (1,200,417 | ) | — | ||||||||||||||
| $ | 847,753 | $ | 1,097,795 | $ | 913,262 | $ | (1,200,417 | ) | $ | 1,658,393 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Accounts payable
|
$ | — | $ | 49,738 | $ | 111,006 | $ | — | $ | 160,744 | ||||||||||
|
Accrued liabilities
|
12,723 | 56,290 | 111,788 | — | 180,801 | |||||||||||||||
|
Total current liabilities
|
12,723 | 106,028 | 222,794 | — | 341,545 | |||||||||||||||
|
Long-term debt
|
590,000 | — | — | — | 590,000 | |||||||||||||||
|
Postretirement benefits
|
— | 49,561 | 70,695 | — | 120,256 | |||||||||||||||
|
Other long-term liabilities
|
24,091 | 5,807 | 5,826 | — | 35,724 | |||||||||||||||
|
Intercompany accounts
|
130,852 | (386,116 | ) | 255,264 | — | — | ||||||||||||||
|
Total stockholders’ equity
|
90,087 | 1,322,515 | 358,683 | (1,200,417 | ) | 570,868 | ||||||||||||||
| $ | 847,753 | $ | 1,097,795 | $ | 913,262 | $ | (1,200,417 | ) | $ | 1,658,393 | ||||||||||
75
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Supplemental
Condensed Consolidating Statements of Operations
| Year Ended December 31, 2009 | ||||||||||||||||||||
|
Non-
|
||||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Revenues
|
$ | — | $ | 735,243 | $ | 835,322 | $ | (155,303 | ) | $ | 1,415,262 | |||||||||
|
Cost of sales
|
— | (508,383 | ) | (648,984 | ) | 155,303 | (1,002,064 | ) | ||||||||||||
|
Cross profit
|
— | 226,860 | 186,338 | — | 413,198 | |||||||||||||||
|
Selling, general and administrative expenses
|
(385 | ) | (151,324 | ) | (137,963 | ) | — | (289,672 | ) | |||||||||||
|
Research and development
|
— | (30,052 | ) | (30,818 | ) | — | (60,870 | ) | ||||||||||||
|
Amortization of intangibles
|
— | (8,217 | ) | (7,863 | ) | — | (16,080 | ) | ||||||||||||
|
Loss on sale of assets
|
— | — | (17,184 | ) | — | (17,184 | ) | |||||||||||||
|
Goodwill and other asset impairment
|
— | (4,343 | ) | (23,408 | ) | — | (27,751 | ) | ||||||||||||
|
Operating income (loss)
|
(385 | ) | 32,924 | (30,898 | ) | — | 1,641 | |||||||||||||
|
Interest expense
|
(41,684 | ) | 301 | (474 | ) | — | (41,857 | ) | ||||||||||||
|
Interest income
|
137 | 120 | 789 | — | 1,046 | |||||||||||||||
|
Other income
|
(1,541 | ) | — | 6,297 | — | 4,756 | ||||||||||||||
|
Intercompany income (expense)
|
12,203 | (12,115 | ) | (88 | ) | — | — | |||||||||||||
|
Income (loss) from equity investment in subsidiaries
|
(4,616 | ) | (21,167 | ) | — | 25,783 | — | |||||||||||||
|
Income (loss) from continuing operations before taxes
|
(35,886 | ) | 63 | (24,374 | ) | 25,783 | (34,414 | ) | ||||||||||||
|
Income tax benefit (expense)
|
12,381 | (4,679 | ) | 3,207 | — | 10,909 | ||||||||||||||
|
Income (loss) from continuing operations
|
(23,505 | ) | (4,616 | ) | (21,167 | ) | 25,783 | (23,505 | ) | |||||||||||
|
Loss from discontinued operations, net of tax
|
(1,396 | ) | — | — | — | (1,396 | ) | |||||||||||||
|
Net income (loss)
|
$ | (24,901 | ) | $ | (4,616 | ) | $ | (21,167 | ) | $ | 25,783 | $ | (24,901 | ) | ||||||
76
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Year Ended December 31, 2008 | ||||||||||||||||||||
|
Non-
|
||||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Revenues
|
$ | — | $ | 973,255 | $ | 1,239,693 | $ | (207,058 | ) | $ | 2,005,890 | |||||||||
|
Cost of sales
|
— | (711,501 | ) | (937,765 | ) | 207,058 | (1,442,208 | ) | ||||||||||||
|
Gross profit
|
— | 261,754 | 301,928 | — | 563,682 | |||||||||||||||
|
Selling, general and administrative expenses
|
(267 | ) | (159,847 | ) | (202,008 | ) | — | (362,122 | ) | |||||||||||
|
Research and development
|
— | (15,432 | ) | (34,657 | ) | — | (50,089 | ) | ||||||||||||
|
Amortization of intangibles
|
— | (5,513 | ) | (7,927 | ) | — | (13,440 | ) | ||||||||||||
|
Loss on sale of assets
|
— | — | (3,727 | ) | — | (3,727 | ) | |||||||||||||
|
Goodwill and other asset impairment
|
— | (117,308 | ) | (359,184 | ) | — | (476,492 | ) | ||||||||||||
|
Operating income (loss)
|
(267 | ) | (36,346 | ) | (305,575 | ) | — | (342,188 | ) | |||||||||||
|
Interest expense
|
(36,073 | ) | 29 | (1,864 | ) | — | (37,908 | ) | ||||||||||||
|
Interest income
|
— | 445 | 4,855 | — | 5,300 | |||||||||||||||
|
Other income
|
— | — | 6,326 | — | 6,326 | |||||||||||||||
|
Intercompany income (expense)
|
13,037 | (20,054 | ) | 7,017 | — | — | ||||||||||||||
|
Income (loss) from equity investment in subsidiaries
|
(347,358 | ) | (284,960 | ) | — | 632,318 | — | |||||||||||||
|
Income (loss) from continuing operations before taxes
|
(370,661 | ) | (340,886 | ) | (289,241 | ) | 632,318 | (368,470 | ) | |||||||||||
|
Income tax benefit (expense)
|
8,835 | (6,472 | ) | 4,281 | — | 6,644 | ||||||||||||||
|
Net income (loss)
|
$ | (361,826 | ) | $ | (347,358 | ) | $ | (284,960 | ) | $ | 632,318 | $ | (361,826 | ) | ||||||
77
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Year Ended December 31, 2007 | ||||||||||||||||||||
|
Non-
|
||||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Revenues
|
$ | — | $ | 1,057,939 | $ | 1,226,602 | $ | (251,700 | ) | $ | 2,032,841 | |||||||||
|
Cost of sales
|
— | (787,152 | ) | (936,019 | ) | 251,700 | (1,471,471 | ) | ||||||||||||
|
Gross profit
|
— | 270,787 | 290,583 | — | 561,370 | |||||||||||||||
|
Selling, general and administrative expenses
|
(969 | ) | (151,935 | ) | (164,577 | ) | — | (317,481 | ) | |||||||||||
|
Research and development
|
— | (603 | ) | (17,240 | ) | — | (17,843 | ) | ||||||||||||
|
Amortization of intangibles
|
— | (2,259 | ) | (8,345 | ) | — | (10,604 | ) | ||||||||||||
|
Gain on sale of assets
|
— | 716 | 7,840 | — | 8,556 | |||||||||||||||
|
Goodwill and other asset impairment
|
— | — | (3,262 | ) | — | (3,262 | ) | |||||||||||||
|
Operating income (loss)
|
(969 | ) | 116,706 | 104,999 | — | 220,736 | ||||||||||||||
|
Interest expense
|
(28,917 | ) | (110 | ) | 61 | — | (28,966 | ) | ||||||||||||
|
Interest income
|
— | 2,827 | 3,717 | — | 6,544 | |||||||||||||||
|
Other income (expense)
|
— | (2,016 | ) | 3,815 | — | 1,799 | ||||||||||||||
|
Intercompany income (expense)
|
15,171 | (11,006 | ) | (4,165 | ) | — | — | |||||||||||||
|
Income (loss) from equity investment in subsidiaries
|
145,745 | 81,006 | — | (226,751 | ) | — | ||||||||||||||
|
Income (loss) before taxes
|
131,030 | 187,407 | 108,427 | (226,751 | ) | 200,113 | ||||||||||||||
|
Income tax benefit (expense)
|
5,165 | (41,662 | ) | (27,421 | ) | — | (63,918 | ) | ||||||||||||
|
Net income (loss)
|
$ | 136,195 | $ | 145,745 | $ | 81,006 | $ | (226,751 | ) | $ | 136,195 | |||||||||
78
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Supplemental
Condensed Consolidating Cash Flow Statements
| Year Ended December 31, 2009 | ||||||||||||||||
|
Non-
|
||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Net cash provided by (used for) operating activities
|
$ | 111,990 | $ | (48,814 | ) | $ | 88,634 | $ | 151,810 | |||||||
|
Cash flows from investing activities:
|
||||||||||||||||
|
Capital expenditures
|
— | (20,725 | ) | (19,652 | ) | (40,377 | ) | |||||||||
|
Cash used to invest in or acquire businesses
|
(20,110 | ) | — | (593 | ) | (20,703 | ) | |||||||||
|
Proceeds from disposal of tangible assets
|
— | 910 | 1,121 | 2,031 | ||||||||||||
|
Net cash used for investing activities
|
(20,110 | ) | (19,815 | ) | (19,124 | ) | (59,049 | ) | ||||||||
|
Cash flows from financing activities:
|
||||||||||||||||
|
Borrowings under credit arrangements
|
193,732 | — | — | 193,732 | ||||||||||||
|
Payments under borrowing arrangements
|
(193,732 | ) | — | — | (193,732 | ) | ||||||||||
|
Debt issuance costs paid
|
(11,810 | ) | (11,810 | ) | ||||||||||||
|
Cash dividends paid
|
(9,373 | ) | — | — | (9,373 | ) | ||||||||||
|
Tax deficiency related to share-based payments
|
(1,564 | ) | — | — | (1,564 | ) | ||||||||||
|
Proceeds from exercises of stock options
|
699 | — | — | 699 | ||||||||||||
|
Intercompany capital contributions
|
(20,084 | ) | 20,084 | — | — | |||||||||||
|
Net cash provided by (used for) financing activities
|
(42,132 | ) | 20,084 | — | (22,048 | ) | ||||||||||
|
Effect of currency exchange rate changes
|
||||||||||||||||
|
on cash and cash equivalents
|
— | — | 10,753 | 10,753 | ||||||||||||
|
Increase (decrease) in cash and cash equivalents
|
49,748 | (48,545 | ) | 80,263 | 81,466 | |||||||||||
|
Cash and cash equivalents, beginning of year
|
130 | 57,522 | 169,761 | 227,413 | ||||||||||||
|
Cash and cash equivalents, end of year
|
$ | 49,878 | $ | 8,977 | $ | 250,024 | $ | 308,879 | ||||||||
79
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Year Ended December 31, 2008 | ||||||||||||||||
|
Non-
|
||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Net cash provided by (used for) operating activities
|
$ | 206,284 | $ | (64,730 | ) | $ | 32,320 | $ | 173,874 | |||||||
|
Cash flows from investing activities:
|
||||||||||||||||
|
Capital expenditures
|
— | (19,607 | ) | (33,954 | ) | (53,561 | ) | |||||||||
|
Cash used to invest in or acquire businesses
|
(136,032 | ) | (3,009 | ) | (8,343 | ) | (147,384 | ) | ||||||||
|
Proceeds from disposal of tangible assets
|
— | 679 | 40,219 | 40,898 | ||||||||||||
|
Net cash used for investing activities
|
(136,032 | ) | (21,937 | ) | (2,078 | ) | (160,047 | ) | ||||||||
|
Cash flows from financing activities:
|
||||||||||||||||
|
Borrowings under credit arrangements
|
240,000 | — | — | 240,000 | ||||||||||||
|
Payments under borrowing arrangements
|
(110,000 | ) | — | — | (110,000 | ) | ||||||||||
|
Cash dividends paid
|
(8,926 | ) | — | — | (8,926 | ) | ||||||||||
|
Tax benefit related to share-based payments
|
1,279 | — | — | 1,279 | ||||||||||||
|
Proceeds from exercises of stock options
|
6,103 | — | — | 6,103 | ||||||||||||
|
Payments under share repurchase program
|
(68,336 | ) | — | — | (68,336 | ) | ||||||||||
|
Intercompany capital contributions
|
(130,242 | ) | 130,242 | — | — | |||||||||||
|
Net cash provided by (used for) financing activities
|
(70,122 | ) | 130,242 | — | 60,120 | |||||||||||
|
Effect of currency exchange rate changes
|
||||||||||||||||
|
on cash and cash equivalents
|
— | — | (6,498 | ) | (6,498 | ) | ||||||||||
|
Increase in cash and cash equivalents
|
130 | 43,575 | 23,744 | 67,449 | ||||||||||||
|
Cash and cash equivalents, beginning of year
|
— | 13,947 | 146,017 | 159,964 | ||||||||||||
|
Cash and cash equivalents, end of year
|
$ | 130 | $ | 57,522 | $ | 169,761 | $ | 227,413 | ||||||||
80
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Year Ended December 31, 2007 | ||||||||||||||||
|
Non-
|
||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Net cash provided by (used for) operating activities
|
$ | (224,116 | ) | $ | 235,598 | $ | 194,074 | $ | 205,556 | |||||||
|
Cash flows from investing activities:
|
||||||||||||||||
|
Capital expenditures
|
— | (33,668 | ) | (29,833 | ) | (63,501 | ) | |||||||||
|
Cash used to invest in or acquire businesses
|
— | — | (589,816 | ) | (589,816 | ) | ||||||||||
|
Proceeds from disposal of tangible assets
|
— | 11,023 | 49,159 | 60,182 | ||||||||||||
|
Cash provided by other investing activities
|
— | — | 2,911 | 2,911 | ||||||||||||
|
Net cash used for investing activities
|
— | (22,645 | ) | (567,579 | ) | (590,224 | ) | |||||||||
|
Cash flows from financing activities:
|
||||||||||||||||
|
Borrowings under credit arrangements
|
566,000 | — | — | 566,000 | ||||||||||||
|
Payments under borrowing arrangements
|
(216,000 | ) | (62,000 | ) | — | (278,000 | ) | |||||||||
|
Debt issuance costs
|
(11,070 | ) | — | — | (11,070 | ) | ||||||||||
|
Cash dividends paid
|
(9,026 | ) | — | — | (9,026 | ) | ||||||||||
|
Tax benefit related to share-based payments
|
8,533 | — | — | 8,533 | ||||||||||||
|
Proceeds from exercises of stock options
|
32,335 | — | — | 32,335 | ||||||||||||
|
Payments under share repurchase program
|
(31,664 | ) | — | — | (31,664 | ) | ||||||||||
|
Intercompany capital contributions
|
(114,992 | ) | (273,619 | ) | 388,611 | — | ||||||||||
|
Net cash provided by (used for) financing activities
|
224,116 | (335,619 | ) | 388,611 | 277,108 | |||||||||||
|
Effect of currency exchange rate changes
|
||||||||||||||||
|
on cash and cash equivalents
|
— | — | 13,373 | 13,373 | ||||||||||||
|
Increase (decrease) in cash and cash equivalents
|
— | (122,666 | ) | 28,479 | (94,187 | ) | ||||||||||
|
Cash and cash equivalents, beginning of year
|
— | 136,613 | 117,538 | 254,151 | ||||||||||||
|
Cash and cash equivalents, end of year
|
$ | — | $ | 13,947 | $ | 146,017 | $ | 159,964 | ||||||||
81
Table of Contents
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
| Item 9A. | Controls and Procedures |
Conclusion
Regarding the Effectiveness of Disclosure 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, as amended (the
Exchange Act)). 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.
Management’s
Report on Internal Control over Financial Reporting
The management of Belden is responsible for establishing and
maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
Belden management conducted an evaluation of the effectiveness
of our internal control over financial reporting as of
December 31, 2009. In conducting its evaluation, Belden
management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control — Integrated Framework.
Based
on that evaluation, Belden management believes our internal
control over financial reporting was effective as of
December 31, 2009.
Our internal control over financial reporting as of
December 31, 2009 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as
stated in their report that follows.
82
Table of Contents
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Belden Inc.
We have audited Belden Inc.’s internal control over
financial reporting as of December 31, 2009, based on
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Belden Inc.’s
management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting
included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is
to express an opinion on the company’s internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Belden Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Belden Inc. as of
December 31, 2009 and 2008 and the related consolidated
statements of operations, stockholders’ equity, and cash
flows for each of the three years in the period ended
December 31, 2009, of Belden Inc., and our report dated
February 26, 2010 expressed an unqualified opinion thereon.
/s/ Ernst &
Young LLP
St. Louis, Missouri
February 26, 2010
83
Table of Contents
| Item 9B. | Other Information |
None.
| Item 10. | Directors, Executive Officers and Corporate Governance |
Information regarding directors is incorporated herein by
reference to “Proposal to Be Voted On — Election
of Directors,” as described in the Proxy Statement.
Information regarding executive officers is set forth in
Part I herein under the heading “Executive
Officers.” The additional information required by this Item
is incorporated herein by reference to “Board Structure and
Compensation” (opening paragraph and table), “Board
Structure and Compensation — Audit Committee,”
“Stock Ownership of Certain Beneficial Owners and
Management — Section 16(a) Beneficial Ownership
Reporting Compliance”, “Board Structure and
Compensation — Corporate Governance” and the
answer to “May I propose actions for consideration at next
year’s annual meeting of stockholders or nominate
individuals to serve as directors?”, as described in the
Proxy Statement.
| Item 11. | Executive Compensation |
Incorporated herein by reference to “Executive
Compensation,” “Director Compensation” and
“Board Structure and Compensation — Board
Leadership Structure and Role in Risk Oversight” as
described in the Proxy Statement.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
Incorporated herein by reference to “Equity Compensation
Plan Information on December 31, 2009” and “Stock
Ownership of Certain Beneficial Owners and Management” as
described in the Proxy Statement.
| Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Incorporated herein by reference to “Board Structure and
Compensation — Related Party Transactions” and
“Board Structure and Compensation” (paragraph
following the table) as described in the Proxy Statement.
| Item 14. | Principal Accountant Fees and Services |
Incorporated herein by reference to “Board Structure and
Compensation — Fees to Independent Registered Public
Accountants for 2009 and 2008” and “Board Structure
and Compensation — Audit Committee’s Pre-Approval
Policies and Procedures” as described in the Proxy
Statement.
84
| Item 15. | Exhibits and Financial Statement Schedules |
(a) Documents filed as part of this Report:
1.
Financial Statements
2.
Financial Statement Schedule
Schedule II —
Valuation and Qualifying Accounts
|
Charged to
|
||||||||||||||||||||||||||||
|
Beginning
|
Costs and
|
Divestures/
|
Charge
|
Currency
|
Ending
|
|||||||||||||||||||||||
| Balance | Expenses | Acquisitions | Offs | Recoveries | Movement | Balance | ||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
|
Accounts Receivable — Allowance for Doubtful
Accounts:
|
||||||||||||||||||||||||||||
|
2009
|
$ | 4,898 | $ | 1,546 | $ | 69 | $ | (2,824 | ) | $ | (151 | ) | $ | 52 | 3,590 | |||||||||||||
|
2008
|
3,893 | 3,498 | 549 | (2,644 | ) | (304 | ) | (94 | ) | 4,898 | ||||||||||||||||||
|
2007
|
2,637 | 1,715 | 1,468 | (2,077 | ) | (142 | ) | 292 | 3,893 | |||||||||||||||||||
|
Inventories — Obsolescence and Other Valuation
Allowances:
|
||||||||||||||||||||||||||||
|
2009
|
$ | 25,197 | $ | 4,550 | $ | (865 | ) | $ | (8,696 | ) | $ | — | $ | 272 | $ | 20,458 | ||||||||||||
|
2008
|
19,529 | 12,994 | 2,274 | (9,035 | ) | — | (565 | ) | 25,197 | |||||||||||||||||||
|
2007
|
15,187 | 4,802 | 9,973 | (11,907 | ) | — | 1,474 | 19,529 | ||||||||||||||||||||
|
Deferred Income Tax Asset — Valuation Allowance:
|
||||||||||||||||||||||||||||
|
2009
|
$ | 35,350 | $ | 6,557 | $ | (14,102 | ) | $ | (5,173 | ) | $ | (1,279 | ) | $ | 1,345 | 22,698 | ||||||||||||
|
2008
|
12,585 | 691 | 30,513 | (527 | ) | (8,282 | ) | 370 | 35,350 | |||||||||||||||||||
|
2007
|
20,073 | — | — | (555 | ) | (6,933 | ) | — | 12,585 | |||||||||||||||||||
All other financial statement schedules not included in this
Annual Report on Form
10-K
are
omitted because they are not applicable.
3.
Exhibits
The following exhibits are filed
herewith or incorporated herein by reference, as indicated.
Documents indicated by an asterisk (*) identify each management
contract or compensatory plan.
|
The filings referenced for incorporation by
|
||||||
|
Exhibit
|
reference are Company (Belden Inc.) filings unless
|
|||||
|
Number
|
Description of Exhibit
|
noted to be those of Belden 1993 Inc.
|
||||
| 3 | .1 | Certificate of Incorporation, as amended | February 29, 2008 Form 10-K, Exhibit 3.1 | |||
| 3 | .2 | Amended and Restated Bylaws, as amended | November 24, 2008 Form 8-K, Exhibit 3.1.; May 22, 2009 Form 8-K, Exhibit 3.1 | |||
| 4 | .1 | Rights Agreement | December 11, 1996 Form 8-A, Exhibit 1.1 | |||
85
Table of Contents
|
The filings referenced for incorporation by
|
||||||
|
Exhibit
|
reference are Company (Belden Inc.) filings unless
|
|||||
|
Number
|
Description of Exhibit
|
noted to be those of Belden 1993 Inc.
|
||||
| 4 | .2 | Amendment to Rights Agreement | November 15, 2004 Form 10-Q, Exhibit 4.1 | |||
| 4 | .3 | Amendment to Rights Agreement | December 8, 2006 Form 8-A/A, Exhibit 4.2(a) | |||
| 4 | .4 | Indenture relating to 7% Senior Subordinated Notes due 2017 | March 19, 2007 Form 8-K, Exhibit 4.1 | |||
| 4 | .5 | Indenture relating to 9.25% Senior Subordinated Notes due 2019 | June 29, 2009 Form 8-K, Exhibit 4.1 | |||
| 4 | .6 | Notation of Guarantee relating to 9.25% Senior Subordinated Notes due 2019 | June 29, 2009 Form 8-K, Exhibit 4.2 | |||
| 10 | .1 | Tax Sharing and Separation Agreement | November 15, 1993 Form 10-Q of Belden 1993 Inc., Exhibit 10.6 | |||
| 10 | .2 | Trademark License Agreement | November 15, 1993 Form 10-Q of Belden 1993 Inc., Exhibit 10.2 | |||
| 10 | .3* | Belden Inc. Long-Term Incentive Plan, as amended | March 1, 2007 Form 10-K, Exhibit 10.3 | |||
| 10 | .4* | Belden Inc. 2003 Long-Term Incentive Plan, as amended | March 1, 2007 Form 10-K, Exhibit 10.4 | |||
| 10 | .5* | CDT 1999 Long-Term Performance Incentive Plan | October 27, 1999 Form 10-K, Exhibit 10.16 | |||
| 10 | .6* | Amendment No. 2 to CDT 1999 Long-Term Performance Incentive Plan | October 27, 2000 Form 10-K, Exhibit 10.15 | |||
| 10 | .7* | Form of June 11, 1999 Stock Option Grant | October 27, 1999 Form 10-K, Exhibit 10.18 | |||
| 10 | .8* | Form of April 23, 1999 Stock Option Grant | October 27, 1999 Form 10-K, Exhibit 10.19 | |||
| 10 | .9* | Amendments to CDT Long Term Performance Incentive Plans | November 15, 2004 Form 10-Q, Exhibit 10.61 | |||
| 10 | .10* | CDT 2001 Long-Term Performance Incentive Plan, as amended | April 6, 2009 Proxy Statement, Appendix I | |||
| 10 | .11* | Form of Director Nonqualified Stock Option Grant | March 15, 2001 Form 10-Q, Exhibit 99.2 | |||
| 10 | .12* | Form of Restricted Stock Grant | December 16, 2002 Form 10-Q, Exhibit 10.22; November 15, 2004 Form 10-Q, Exhibit 10.20; May 19, 2005 Form 8-K, Exhibit 10.01 | |||
| 10 | .13* | Form of Stock Option Grant | May 10, 2005 Form 10-Q, Exhibit 10.1 | |||
| 10 | .14* | Form of Stock Appreciation Rights Award | May 5, 2006 Form 10-Q, Exhibit 10.1; February 29, 2008 Form 10-K, Exhibit 10.16; February 27, 2009 Form 10-K, Exhibit 10.16 | |||
| 10 | .15* | Form of Performance Stock Units Award | February 29, 2008 Form 10-K, Exhibit 10.17; February 27, 2009 Form 10-K, Exhibit 10.17 | |||
| 10 | .16* | Form of Restricted Stock Units Award | February 29, 2008 Form 10-K, Exhibit 10.18; February 27, 2009 Form 10-K, Exhibit 10.18 | |||
| 10 | .17* | Form of Stock Appreciation Rights Award | May 5, 2006 Form 10-Q, Exhibit 10.4 | |||
| 10 | .18* | Belden Inc. Annual Cash Incentive Plan, as amended | Filed herewith | |||
| 10 | .19* | 2004 Belden CDT Inc. Non-Employee Director Deferred Compensation Plan | December 21, 2004 Form 8-K, Exhibit 10.1 | |||
| 10 | .20* | Belden Wire & Cable Company (BWC) Supplemental Excess Defined Benefit Plan, with First, Second and Third Amendments | March 22, 2002 Form 10-K of Belden 1993 Inc., Exhibits 10.14 and 10.15; March 14, 2003 Form 10-K of Belden 1993 Inc., Exhibit 10.21; November 15, 2004 Form 10-Q, Exhibit 10.50 | |||
86
Table of Contents
|
The filings referenced for incorporation by
|
||||||
|
Exhibit
|
reference are Company (Belden Inc.) filings unless
|
|||||
|
Number
|
Description of Exhibit
|
noted to be those of Belden 1993 Inc.
|
||||
| 10 | .21* | BWC Supplemental Excess Defined Contribution Plan, with First, Second and Third Amendments | March 22, 2002 Form 10-K of Belden 1993 Inc., Exhibits 10.16 and 10.17; March 14, 2003 Form 10-K of Belden 1993 Inc., Exhibit 10.24; November 15, 2004 Form 10-Q, Exhibit 10.51 | |||
| 10 | .22* | Trust Agreement, with First Amendment | November 15, 2004 Form 10-Q, Exhibits 10.52 and 10.53 | |||
| 10 | .23* | Trust Agreement, with First Amendment | November 15, 2004 Form 10-Q, Exhibits 10.54 and 10.55 | |||
| 10 | .24* | Amended and Restated Executive Employment Agreement with John Stroup, with First Amendment | April 7, 2008 Form 8-K, Exhibit 10.1, December 17, 2008 Form 8-K, Exhibit 10.1 | |||
| 10 | .25* | Amended and Restated Executive Employment Agreement with Gray Benoist | December 22, 2008 Form 8-K, Exhibit 10. | |||
| 10 | .26* | Executive Employment Agreement with Richard Kirschner | August 3, 2007 Form 10-Q, Exhibit 10.2 | |||
| 10 | .27* | Employment Agreement with Wolfgang Babel, with First Amendment | February 29, 2008 Form 10-K, Exhibit 10.38, November 7, 2008 Form 10-Q, Exhibit 10.1 | |||
| 10 | .28* | Executive Employment Agreement with Steven Biegacki | May 8, 2008 Form 10-Q, Exhibit 10.1 | |||
| 10 | .29* | Amended and Restated Executive Employment Agreement with Kevin L. Bloomfield | December 22, 2008 Form 8-K, Exhibit 10.2 | |||
| 10 | .30* | Amended and Restated Executive Employment Agreement with Stephen H. Johnson | February 27, 2009 Form 10-K, Exhibit 10.35 | |||
| 10 | .31* | Amended and Restated Executive Employment Agreement with John Norman | February 27, 2009 Form 10-K, Exhibit 10.36 | |||
| 10 | .32* | Amended and Restated Executive Employment Agreement with Louis Pace | February 27, 2009 Form 10-K, Exhibit 10.37 | |||
| 10 | .33* | Amended and Restated Executive Employment Agreement with Cathy O. Staples | February 27, 2009 Form 10-K, Exhibit 10.38 | |||
| 10 | .34* | Amended and Restated Executive Employment Agreement with Denis Suggs | February 27, 2009 Form 10-K, Exhibit 10.39 | |||
| 10 | .35* | Severance Agreement with Naresh Kumra | February 27, 2009 Form 10-K, Exhibit 10.40 | |||
| 10 | .36* | Executive Employment Agreement with Henk Derksen | Filed herewith | |||
| 10 | .37* | Form of Indemnification Agreement with each of the Directors and Wolfgang Babel, Gray Benoist, Steven Biegacki, Kevin Bloomfield, Henk Derksen, Stephen Johnson, Naresh Kumra, John Norman, Cathy Staples, John Stroup and Denis Suggs | March 1, 2007 10-K, Exhibit 10.39 | |||
| 10 | .38* | Separation of Employment Agreement-Retirement with D. Larrie Rose | February 29, 2008 Form 10-K, Exhibit 10.36 | |||
| 10 | .39* | Separation of Employment Agreement with Peter Sheehan | February 29, 2008 Form 10-K, Exhibit 10.37 | |||
| 10 | .40* | Separation of Employment Agreement with Louis Pace | February 27, 2009 Form 10-K, Exhibit 10.45 | |||
| 10 | .41 | Credit Agreement | January 27, 2006 Form 8-K, Exhibit 10.1 | |||
| 10 | .42 | Credit Agreement Consent | November 3, 2006 Form 10-Q, Exhibit 10.4 | |||
| 10 | .43 | First Amendment to Credit Agreement and Waiver | February 22, 2007 Form 8-K, Exhibit 10.2 | |||
| 10 | .44 | Second Amendment to Credit Agreement | December 26, 2007 8-K, Exhibit 10.1 | |||
87
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|
The filings referenced for incorporation by
|
||||||
|
Exhibit
|
reference are Company (Belden Inc.) filings unless
|
|||||
|
Number
|
Description of Exhibit
|
noted to be those of Belden 1993 Inc.
|
||||
| 10 | .45 | Wachovia Commitment Letter | February 8, 2007 Form 8-K, Exhibit 10.1 | |||
| 10 | .46 | Third Amendment to Credit Agreement | March 30, 2009 Form 8-K, Exhibit 10.1 | |||
| 10 | .47 | Fourth Amendment to Credit Agreement | June 29, 2009 Form 8-K, Exhibit 10.3 | |||
| 10 | .48 | Registration Rights Agreement relating to 9.25% Senior Subordinated Notes | June 29, 2009 Form 8-K, Exhibit 10.2 | |||
| 12 | .1 | Computation of Ratio of Earnings to Fixed Charges | Filed herewith. | |||
| 14 | .1 | Code of Ethics | August 25, 2008 Form 8-K, Exhibit 14.1. | |||
| 21 | .1 | List of Subsidiaries of Belden Inc. | Filed herewith. | |||
| 23 | .1 | Consent of Ernst & Young LLP | Filed herewith. | |||
| 24 | .1 | Powers of Attorney from Members of the Board of Directors | Filed herewith. | |||
| 31 | .1 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer | Filed herewith. | |||
| 31 | .2 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer | Filed herewith. | |||
| 32 | .1 | Section 1350 Certification of the Chief Executive Officer | Filed herewith. | |||
| 32 | .2 | Section 1350 Certification of the Chief Financial Officer | Filed herewith. | |||
| * | Management contract or compensatory plan |
Copies of the above Exhibits are available to shareholders at a
charge of $0.25 per page, minimum order of $10.00. Direct
requests to:
Belden Inc., Attention: Secretary
7733 Forsyth Boulevard, Suite 800
St. Louis, Missouri 63105
7733 Forsyth Boulevard, Suite 800
St. Louis, Missouri 63105
88
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| By |
/s/
JOHN
S. STROUP
|
John S. Stroup
President, Chief Executive Officer and Director
Date: February 26, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
date indicated.
|
/s/
JOHN
S. STROUP
|
President, Chief Executive Officer and Director | February 26, 2010 | ||||
|
/s/
GRAY
G. BENOIST
|
Senior Vice President, Finance, Chief Financial Officer and Chief Accounting Officer | February 26, 2010 | ||||
|
/s/
BRYAN
C. CRESSEY*
|
Chairman of the Board and Director | February 26, 2010 | ||||
|
/s/
DAVID
ALDRICH*
|
Director | February 26, 2010 | ||||
|
/s/
LORNE
D. BAIN*
|
Director | February 26, 2010 | ||||
|
/s/
LANCE
BALK*
|
Director | February 26, 2010 | ||||
|
/s/
JUDY
L. BROWN*
|
Director | February 26, 2010 | ||||
|
/s/
GLENN
KALNASY*
|
Director | February 26, 2010 | ||||
|
/s/
MARY
S. MCLEOD*
|
Director | February 26, 2010 | ||||
|
/s/
JOHN
M. MONTER*
|
Director | February 26, 2010 | ||||
|
/s/
BERNARD
G. RETHORE*
|
Director | February 26, 2010 | ||||
|
/s/
JOHN
S. STROUP
|
||||||
89
Table of Contents
INDEX TO
EXHIBITS
The following exhibits are filed herewith or incorporated herein
by reference, as indicated. Documents indicated by an asterisk
(*) identify each management contract or compensatory plan.
|
The filings referenced for incorporation by
|
||||||
|
Exhibit
|
reference are Company (Belden Inc.) filings unless
|
|||||
|
Number
|
Description of Exhibit
|
noted to be those of Belden 1993 Inc.
|
||||
| 3 | .1 | Certificate of Incorporation, as amended | February 29, 2008 Form 10-K, Exhibit 3.1 | |||
| 3 | .2 | Amended and Restated Bylaws, as amended | November 24, 2008 Form 8-K, Exhibit 3.1.; May 22, 2009 Form 8-K, Exhibit 3.1 | |||
| 4 | .1 | Rights Agreement | December 11, 1996 Form 8-A, Exhibit 1.1 | |||
| 4 | .2 | Amendment to Rights Agreement | November 15, 2004 Form 10-Q, Exhibit 4.1 | |||
| 4 | .3 | Amendment to Rights Agreement | December 8, 2006 Form 8-A/A, Exhibit 4.2(a) | |||
| 4 | .4 | Indenture relating to 7% Senior Subordinated Notes due 2017 | March 19, 2007 Form 8-K, Exhibit 4.1 | |||
| 4 | .5 | Indenture relating to 9.25% Senior Subordinated Notes due 2019 | June 29, 2009 Form 8-K, Exhibit 4.1 | |||
| 4 | .6 | Notation of Guarantee relating to 9.25% Senior Subordinated Notes due 2019 | June 29, 2009 Form 8-K, Exhibit 4.2 | |||
| 10 | .1 | Tax Sharing and Separation Agreement | November 15, 1993 Form 10-Q of Belden 1993 Inc., Exhibit 10.6 | |||
| 10 | .2 | Trademark License Agreement | November 15, 1993 Form 10-Q of Belden 1993 Inc., Exhibit 10.2 | |||
| 10 | .3* | Belden Inc. Long-Term Incentive Plan, as amended | March 1, 2007 Form 10-K, Exhibit 10.3 | |||
| 10 | .4* | Belden Inc. 2003 Long-Term Incentive Plan, as amended | March 1, 2007 Form 10-K, Exhibit 10.4 | |||
| 10 | .5* | CDT 1999 Long-Term Performance Incentive Plan | October 27, 1999 Form 10-K, Exhibit 10.16 | |||
| 10 | .6* | Amendment No. 2 to CDT 1999 Long-Term Performance Incentive Plan | October 27, 2000 Form 10-K, Exhibit 10.15 | |||
| 10 | .7* | Form of June 11, 1999 Stock Option Grant | October 27, 1999 Form 10-K, Exhibit 10.18 | |||
| 10 | .8* | Form of April 23, 1999 Stock Option Grant | October 27, 1999 Form 10-K, Exhibit 10.19 | |||
| 10 | .9* | Amendments to CDT Long Term Performance Incentive Plans | November 15, 2004 Form 10-Q, Exhibit 10.61 | |||
| 10 | .10* | CDT 2001 Long-Term Performance Incentive Plan, as amended | April 6, 2009 Proxy Statement, Appendix I | |||
| 10 | .11* | Form of Director Nonqualified Stock Option Grant | March 15, 2001 Form 10-Q, Exhibit 99.2 | |||
| 10 | .12* | Form of Restricted Stock Grant | December 16, 2002 Form 10-Q, Exhibit 10.22; November 15, 2004 Form 10-Q, Exhibit 10.20; May 19, 2005 Form 8-K, Exhibit 10.01 | |||
| 10 | .13* | Form of Stock Option Grant | May 10, 2005 Form 10-Q, Exhibit 10.1 | |||
| 10 | .14* | Form of Stock Appreciation Rights Award | May 5, 2006 Form 10-Q, Exhibit 10.1; February 29, 2008 Form 10-K, Exhibit 10.16; February 27, 2009 Form 10-K, Exhibit 10.16 | |||
| 10 | .15* | Form of Performance Stock Units Award | February 29, 2008 Form 10-K, Exhibit 10.17; February 27, 2009 Form 10-K, Exhibit 10.17 | |||
| 10 | .16* | Form of Restricted Stock Units Award | February 29, 2008 Form 10-K, Exhibit 10.18; February 27, 2009 Form 10-K, Exhibit 10.18 | |||
| 10 | .17* | Form of Stock Appreciation Rights Award | May 5, 2006 Form 10-Q, Exhibit 10.4 | |||
90
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|
The filings referenced for incorporation by
|
||||||
|
Exhibit
|
reference are Company (Belden Inc.) filings unless
|
|||||
|
Number
|
Description of Exhibit
|
noted to be those of Belden 1993 Inc.
|
||||
| 10 | .18* | Belden Inc. Annual Cash Incentive Plan, as amended | Filed herewith | |||
| 10 | .19* | 2004 Belden CDT Inc. Non-Employee Director Deferred Compensation Plan | December 21, 2004 Form 8-K, Exhibit 10.1 | |||
| 10 | .20* | Belden Wire & Cable Company (BWC) Supplemental Excess Defined Benefit Plan, with First, Second and Third Amendments | March 22, 2002 Form 10-K of Belden 1993 Inc., Exhibits 10.14 and 10.15; March 14, 2003 Form 10-K of Belden 1993 Inc., Exhibit 10.21; November 15, 2004 Form 10-Q, Exhibit 10.50 | |||
| 10 | .21* | BWC Supplemental Excess Defined Contribution Plan, with First, Second and Third Amendments | March 22, 2002 Form 10-K of Belden 1993 Inc., Exhibits 10.16 and 10.17; March 14, 2003 Form 10-K of Belden 1993 Inc., Exhibit 10.24; November 15, 2004 Form 10-Q, Exhibit 10.51 | |||
| 10 | .22* | Trust Agreement, with First Amendment | November 15, 2004 Form 10-Q, Exhibits 10.52 and 10.53 | |||
| 10 | .23* | Trust Agreement, with First Amendment | November 15, 2004 Form 10-Q, Exhibits 10.54 and 10.55 | |||
| 10 | .24* | Amended and Restated Executive Employment Agreement with John Stroup, with First Amendment | April 7, 2008 Form 8-K, Exhibit 10.1, December 17, 2008 Form 8-K, Exhibit 10.1 | |||
| 10 | .25* | Amended and Restated Executive Employment Agreement with Gray Benoist | December 22, 2008 Form 8-K, Exhibit 10. | |||
| 10 | .26* | Executive Employment Agreement with Richard Kirschner | August 3, 2007 Form 10-Q, Exhibit 10.2 | |||
| 10 | .27* | Employment Agreement with Wolfgang Babel, with First Amendment | February 29, 2008 Form 10-K, Exhibit 10.38, November 7, 2008 Form 10-Q, Exhibit 10.1 | |||
| 10 | .28* | Executive Employment Agreement with Steven Biegacki | May 8, 2008 Form 10-Q, Exhibit 10.1 | |||
| 10 | .29* | Amended and Restated Executive Employment Agreement with Kevin L. Bloomfield | December 22, 2008 Form 8-K, Exhibit 10.2 | |||
| 10 | .30* | Amended and Restated Executive Employment Agreement with Stephen H. Johnson | February 27, 2009 Form 10-K, Exhibit 10.35 | |||
| 10 | .31* | Amended and Restated Executive Employment Agreement with John Norman | February 27, 2009 Form 10-K, Exhibit 10.36 | |||
| 10 | .32* | Amended and Restated Executive Employment Agreement with Louis Pace | February 27, 2009 Form 10-K, Exhibit 10.37 | |||
| 10 | .33* | Amended and Restated Executive Employment Agreement with Cathy O. Staples | February 27, 2009 Form 10-K, Exhibit 10.38 | |||
| 10 | .34* | Amended and Restated Executive Employment Agreement with Denis Suggs | February 27, 2009 Form 10-K, Exhibit 10.39 | |||
| 10 | .35* | Severance Agreement with Naresh Kumra | February 27, 2009 Form 10-K, Exhibit 10.40 | |||
| 10 | .36* | Executive Employment Agreement with Henk Derksen | Filed herewith | |||
| 10 | .37* | Form of Indemnification Agreement with each of the Directors and Wolfgang Babel, Gray Benoist, Steven Biegacki, Kevin Bloomfield, Henk Derksen, Stephen Johnson, Naresh Kumra, John Norman, Cathy Staples, John Stroup and Denis Suggs | March 1, 2007 10-K, Exhibit 10.39 | |||
| 10 | .38* | Separation of Employment Agreement-Retirement with D. Larrie Rose | February 29, 2008 Form 10-K, Exhibit 10.36 | |||
91
Table of Contents
|
The filings referenced for incorporation by
|
||||||
|
Exhibit
|
reference are Company (Belden Inc.) filings unless
|
|||||
|
Number
|
Description of Exhibit
|
noted to be those of Belden 1993 Inc.
|
||||
| 10 | .39* | Separation of Employment Agreement with Peter Sheehan | February 29, 2008 Form 10-K, Exhibit 10.37 | |||
| 10 | .40* | Separation of Employment Agreement with Louis Pace | February 27, 2009 Form 10-K, Exhibit 10.45 | |||
| 10 | .41 | Credit Agreement | January 27, 2006 Form 8-K, Exhibit 10.1 | |||
| 10 | .42 | Credit Agreement Consent | November 3, 2006 Form 10-Q, Exhibit 10.4 | |||
| 10 | .43 | First Amendment to Credit Agreement and Waiver | February 22, 2007 Form 8-K, Exhibit 10.2 | |||
| 10 | .44 | Second Amendment to Credit Agreement | December 26, 2007 8-K, Exhibit 10.1 | |||
| 10 | .45 | Wachovia Commitment Letter | February 8, 2007 Form 8-K, Exhibit 10.1 | |||
| 10 | .46 | Third Amendment to Credit Agreement | March 30, 2009 Form 8-K, Exhibit 10.1 | |||
| 10 | .47 | Fourth Amendment to Credit Agreement | June 29, 2009 Form 8-K, Exhibit 10.3 | |||
| 10 | .48 | Registration Rights Agreement relating to 9.25% Senior Subordinated Notes | June 29, 2009 Form 8-K, Exhibit 10.2 | |||
| 12 | .1 | Computation of Ratio of Earnings to Fixed Charges | Filed herewith. | |||
| 14 | .1 | Code of Ethics | August 25, 2008 Form 8-K, Exhibit 14.1. | |||
| 21 | .1 | List of Subsidiaries of Belden Inc. | Filed herewith. | |||
| 23 | .1 | Consent of Ernst & Young LLP | Filed herewith. | |||
| 24 | .1 | Powers of Attorney from Members of the Board of Directors | Filed herewith. | |||
| 31 | .1 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer | Filed herewith. | |||
| 31 | .2 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer | Filed herewith. | |||
| 32 | .1 | Section 1350 Certification of the Chief Executive Officer | Filed herewith. | |||
| 32 | .2 | Section 1350 Certification of the Chief Financial Officer | Filed herewith. | |||
92
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission Of Matters To A Vote Of Security HoldersPart IIItem 5. Market For Registrant S Common Equity and Related Shareholder MattersItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 1: Basis Of PresentationNote 2: Summary Of Significant Accounting PoliciesNote 3: AcquisitionsNote 4: Operating Segments and Geographic InformationNote 5: Discontinued OperationsNote 6: Income (loss) Per ShareNote 7: InventoriesNote 8: Property, Plant and EquipmentNote 9: Intangible AssetsNote 10: Other Long-lived AssetsNote 11: Accrued LiabilitiesNote 12: Long-term Debt and Other Borrowing ArrangementsNote 13: Income TaxesNote 14: Pension and Other Postretirement BenefitsNote 15: Share-based CompensationNote 16: Stockholder Rights PlanNote 17: Operating LeasesNote 18: Market Concentrations and RisksNote 19: Contingent LiabilitiesNote 20: Supplemental Cash Flow InformationNote 21: Share RepurchasesNote 22: Quarterly Operating Results (unaudited)Note 23: Subsequent EventNote 24: Supplemental Guarantor InformationItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement Schedules