BELDEN INC.
10-Ks and 10-Qs
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Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
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, 2010 | ||
|
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
(State or Other Jurisdiction of Incorporation or Organization) |
36-3601505
(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 | The New York Stock Exchange | |
| Preferred Stock Purchase Rights | The New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the
Act:
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.
þ
Indicate by check mark whether the Registrant has submitted
electronically and posted on its corporate website, if any,
every interactive data file required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(section 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes
þ
No
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 July 2, 2010, the aggregate market value of Common Stock
of Belden Inc. held by non-affiliates was $884,527,720 based on
the closing price ($22.33) of such stock on such date.
There were 47,237,570 shares of registrant’s Common
Stock outstanding on February 18, 2011.
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, 2010 (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, enterprise, broadcast, and consumer electronics. We
focus on market segments that require highly differentiated,
high-performance products. We add value through design,
engineering, manufacturing excellence, product quality, and
customer service.
Belden is a Delaware corporation incorporated in 1988. The
Company reports in three segments: the Americas segment, the
Europe, Middle East, and Africa (EMEA) segment, and the Asia
Pacific segment. Financial information about the Company’s
operating segments appears in Note 5 to the Consolidated
Financial Statements.
During 2010, Belden acquired GarrettCom, Inc. and the
Communications Products business of Thomas & Betts.
Belden acquired Trapeze Networks, Inc. in July 2008 and sold it
in December 2010. For more information regarding these
transactions, see Notes 3 and 4 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
and Markets
Belden produces and sells a portfolio of cable, connectivity,
and networking products into a variety of end markets, including
industrial, enterprise, broadcast, and consumer electronics. Our
products provide for the transmission of signals for data,
sound, and video applications.
The main categories of cable products are (1) copper
cables, including shielded and unshielded twisted pair cables,
coaxial cables, and stranded cables, (2) fiber optic
cables, which transmit light signals through glass or plastic
fibers, and (3) composite cables, which are combinations of
multiconductor, coaxial, and fiber optic cables jacketed
together or otherwise joined together to serve complex
applications and provide ease of installation. 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.
For the industrial end market, we supply cable, connectivity,
and networking products for 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 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
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-
1
Table of Contents
moment indicators are sold directly to industrial equipment OEMs
and through a network of distributors and system integrators.
For the enterprise end market, we supply structured cabling
solutions, connectors, and networking products for the
electronic and optical transmission of data, sound, and video
over local- and wide- area networks. Products for this market
include high-performance copper cables including 10-gigabit
Ethernet technologies, 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. End-use customers are
hospitals, financial institutions, governments, service
providers, and data centers. Our systems are installed through a
network of highly trained system integrators and are supplied
through authorized distributors.
For the broadcast end market, we manufacture a variety of
multiconductor and coaxial cable and connector 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. We also
sell directly to music OEMs and the major networks including
ABC, CBS, Fox, and NBC. We also 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. We
manufacture flexible, copper-clad coaxial cable and associated
connector products for the high-speed transmission of data,
sound, and video (broadband) that are used for the
“drop” section of cable television (CATV) systems and
satellite direct broadcast systems. These cables are sold
primarily through distributors.
For the consumer electronics end market, we provide Appliance
Wiring Materials (AWM) 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 under the LTK brand within China to international
and Chinese OEMs and contract manufacturers.
Segments
The Americas segment contributed approximately 57%, 57%, and 52%
of our consolidated revenues in 2010, 2009, and 2008,
respectively. This segment sells the full array of the
Company’s products for the industrial, enterprise, and
broadcast markets.
The EMEA segment contributed approximately 23%, 25%, and 29% of
our consolidated revenues in 2010, 2009, and 2008, respectively.
This segment sells the full array of the Company’s products
for the industrial, enterprise, and broadcast markets.
The Asia Pacific segment contributed approximately 20%, 18%, and
19% of our consolidated revenues in 2010, 2009, and 2008,
respectively. This segment sells the full array of the
Company’s products for the industrial, enterprise,
broadcast, and consumer electronics markets.
Customers
We sell to distributors, end-users, installers, and directly to
OEMs. Sales to the distributor Anixter International Inc.
represented approximately 14% of our consolidated revenues in
2010.
We have supply agreements with distributors and with OEM
customers in the Americas, Europe, the Middle East, 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
2
Table of Contents
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 as well as
the quality and performance characteristics of our products.
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, China, and Mexico as
well as various countries in Europe. During 2010, approximately
57% of Belden’s sales were to 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. 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 5 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 requires continued investment in engineering,
research and development, marketing, and customer service and
support. There can be no assurance 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. See the Consolidated
Statements of Operations for amounts incurred for research and
development.
3
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 by our
operating segments, with pending applications for numerous
others. 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
,
Telecast
tm
,
Snap-N-Seal
®
,
and
GarrettCom
®
.
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. During 2010, copper prices continued to increase with the
price at the end of 2010 approximately 39% greater than at the
beginning of the year. Prices for materials such as PVC and
other plastics derived from petrochemical feedstocks have also
fluctuated. Since Belden utilizes the first in, first out (FIFO)
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.
While we seek to be neutral in our pricing for fluctuations in
commodity prices, 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 typically 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, 2010,
our backlog of orders believed to be firm was $89.7 million
compared with $72.6 million at December 31, 2009. The
majority of the backlog at December 31, 2010 is scheduled
to be shipped in 2011.
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
4
Table of Contents
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 environmental laws and
enforcement policies thereunder, could lead to material costs of
environmental compliance and
clean-up.
Employees
As of December 31, 2010, we had approximately
6,600 employees worldwide. We also utilized about 850
workers under contract manufacturing arrangements. Approximately
900 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 and fiber optic cable 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.
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 the
cost will diminish. We produce and market fiber optic cables and
many customers specify these products in combination with copper
cables.
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 associated with current wireless
technology systems will gradually be overcome, such as
insufficient signal security, susceptibility to interference and
jamming, installation difficulties, and relatively slow
transmission speeds, making the use of wireless technology more
acceptable in many markets, including not only office LANs but
also industrial and broadcast installations.
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 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.
5
Table of Contents
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 web site 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.
Executive
Officers
The following table sets forth certain information with respect
to the persons who were Belden executive officers as of
February 25, 2011. 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
|
44 | President, Chief Executive Officer, and Director | ||||
|
Gray G. Benoist
|
58 | Senior Vice President, Finance, Chief Financial Officer, and Chief Accounting Officer | ||||
|
Steven Biegacki
|
52 | Senior Vice President, Global Sales and Marketing | ||||
|
Kevin L. Bloomfield
|
59 | Senior Vice President, Secretary, and General Counsel | ||||
|
Henk Derksen
|
42 | Vice President, Financial Planning and Analysis, and Treasurer | ||||
|
Christof Gusenleitner
|
46 | Executive Vice President, EMEA Operations and Global Connectivity Products | ||||
|
Naresh Kumra
|
40 | Executive Vice President, Asia Pacific Operations | ||||
|
John S. Norman
|
50 | Vice President, Finance — EMEA | ||||
|
Cathy O. Staples
|
60 | Senior Vice President, Human Resources | ||||
|
Denis Suggs
|
45 | 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 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,
6
Table of Contents
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.
Christoph Gusenleitner joined Belden in April 2010 as Executive
Vice President, EMEA Operations and Global Connectivity
Products. Prior to coming to Belden, Mr. Gusenleitner was a
partner at Bain & Company in its industrial goods and
services practice in Munich. Prior to that, he was General
Manager of KaVo Dental GmbH and Kaltenbach & Voigt
GmbH in Biberach, Germany. KaVo is an affiliate of Danaher
Corporation. During his four-year tenure at KaVo,
Mr. Gusenleitner led the strategic planning process for the
global Danaher Dental Equipment platform and led three business
units and 18 sales subsidiaries in EMEA. He has a degree in
electrical engineering from the University of Technology in
Vienna, Austria and a Master of Science in Industrial Automation
from Carnegie Mellon University.
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
7
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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.
Our
strategic plan includes further acquisitions.
Our strategic plan includes further acquisitions, and the extent
to which appropriate acquisitions are made and integrated can
affect our overall growth, operating results, financial
condition, and cash flows. Our business strategy involves
continued acquisitions to support our growth, product portfolio,
and business plans. Our ability to successfully acquire
businesses may decline if we are unable to appropriately
identify acquisition targets consistent with our strategic plan,
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. Market conditions may prevent us from obtaining
financing when we need it or on terms acceptable to us.
We may
have difficulty integrating the operations of acquired
businesses, which could negatively affect our results of
operations and profitability.
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 may not be able
to successfully or cost-effectively integrate operations, which
could have a negative effect on our results of operations or our
profitability. The process of integrating operations could also
cause some interruption of, or the loss of momentum in, the
activities of acquired businesses.
8
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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. Some multinational competitors have
greater engineering, financial, manufacturing, and marketing
resources than we have. Actions that may be taken by
competitors, including pricing, business alliances, new product
introductions, market penetration, and other actions, could have
a negative effect on our revenue and profitability. Moreover,
during economic downturns, some competitors that are highly
leveraged both financially and operationally could become more
aggressive in their pricing of products.
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. We may not be
able to find qualified replacements for these individuals and
the integration of potential replacements may be disruptive to
our business. More broadly, a key determinant of our success is
our ability to attract, develop and retain talented associates.
While this is one of our strategic priorities, we may not be
able to succeed in this regard.
A
challenging global economic environment or a downturn in the
markets we serve could adversely affect our operating results
and stock price in a material manner.
A challenging global economic environment could 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 could also make it
difficult for our customers, our vendors, and us to accurately
forecast and plan future business activities. Our customers
could also face issues gaining timely access to sufficient
credit, which could have an adverse effect on our results if
such events cause delays in collection or write-offs of
receivables. 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 continue deployment of our Market Delivery System (MDS) so as
to capture market share through end-user engagement, channel
management, outbound marketing, and vertical strategy; improve
our recruitment and development of talented associates; develop
strong global connector and fiber platforms; acquire businesses
that fit our strategic plan; and become a leading Lean company.
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. 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 MDS initiative may not succeed
or we may lose market share due to challenges in choosing the
right products to market or the right customers for these
products, 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, and we may not
achieve our other strategic priorities.
9
Table of Contents
Because
we do business in many countries, our results of operations are
affected by changes in currency exchange rates and are subject
to political, economic, and other uncertainties.
More than half of our sales are outside the United States. Other
than the U.S. 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 Canada, China, 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. A risk associated with our European manufacturing
operations is the higher relative expense and length of time
required to adjust manufacturing employment capacity. Our
performance will also be affected 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.
We may
experience significant variability in our quarterly and annual
effective tax rate which would affect our reported net
income.
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 affect 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 affects 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.
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 14% of our revenue in 2010. 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 affect 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 affect our results of operation as a result of lower
customer sales and write-offs of uncollectible accounts
receivable.
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 few 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
polyvinylchloride (PVC) and other plastics
10
Table of Contents
derived from 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
typically 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, and 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. 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.
Legal
compliance issues could adversely affect our
business.
We have a strong legal compliance and ethics program, including
a code of business conduct and ethics, policies on anti-bribery,
export controls and other legal compliance areas, and periodic
training to relevant associates on these matters. While we
believe that this program should reduce the likelihood of a
legal compliance violation, such a violation could still occur,
disrupting our business through fines, penalties, diversion of
internal resources, and negative publicity.
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, which will require continued
investment in engineering, research and development, marketing,
and customer service and support. 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
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.
If our
goodwill or other intangible assets become 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 if the underlying value of our business
declines. Such a charge would reduce our income without any
change to our underlying cash flow.
11
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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. 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. 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 or those of the third parties upon whom
we rely could have a significant impact on our business. In
addition, we 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 affecting 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 and
changes in enforcement policies thereunder 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. Legislation 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 affect our costs by increasing energy
costs and raw material prices and requiring equipment
modification or replacement.
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.
| Item 1B. | Unresolved Staff Comments |
None.
12
Table of Contents
| 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 through out the world. The
significant facilities as of December 31, 2010, were as
follows.
Used by the Americas operating segment:
|
Primary Character
|
||||
|
(M=Manufacturing,
|
||||
| Number of Properties by Country | W=Warehouse) | Owned or Leased | ||
|
United States-20
|
13 M, 7 W | 9 owned | ||
| 11 leased | ||||
|
Canada-1
|
1 M | 1 owned | ||
|
Mexico-4
|
4 M | 4 leased |
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-2
|
2 M | 1 owned | ||
| 1 leased | ||||
|
Italy-1
|
1 M | 1 owned | ||
|
Denmark-2
|
1 M, 1 W | 2 owned | ||
|
Hungary-1
|
1 M | 1 owned | ||
|
Czech Republic-1
|
1 M | 1 owned | ||
|
Sweden-1
|
1 W | 1 leased |
Used by the Asia Pacific operating segment:
|
Primary Character
|
||||
|
(M=Manufacturing,
|
||||
| Number of Properties by Country | W=Warehouse) | Owned or Leased | ||
|
China-5
|
5 M | 2 owned | ||
| 3 leased | ||||
|
India-1
|
1 W | 1 leased | ||
|
Australia-1
|
1 W | 1 leased | ||
|
Singapore-1
|
1 W | 1 leased |
The total size of all Americas, EMEA, and Asia Pacific operating
segment locations is 3.2 million square feet,
1.1 million square feet, and 1.8 million square feet,
respectively. 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, 82 of which are pending as of
February 7, 2011, 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 7, 2011, we have been dismissed, or reached
agreement to be dismissed, in more than 400 similar cases
without any going to
13
Table of Contents
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 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
Our common stock is traded on the New York Stock Exchange under
the symbol “BDC.”
As of February 21, 2011, there were 518 record holders of
common stock of Belden Inc.
We made no purchases of our common stock during the 2010 fourth
quarter.
We paid a dividend of $0.05 per share in each quarter of 2010
and 2009. We anticipate that comparable cash dividends will
continue to be paid quarterly in the foreseeable future.
Common
Stock Prices and Dividends
| 2010 (By Quarter) | ||||||||||||||||
| 1 | 2 | 3 | 4 | |||||||||||||
|
Dividends per common share
|
$ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | ||||||||
|
Common stock prices:
|
||||||||||||||||
|
High
|
$ | 28.36 | $ | 31.51 | $ | 26.85 | $ | 38.85 | ||||||||
|
Low
|
$ | 20.18 | $ | 21.44 | $ | 21.60 | $ | 25.86 | ||||||||
| 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 | ||||||||
14
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, 2010, 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, 2005, 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 | ||||||||||||||||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
|
Belden Inc
|
61.0 | % | 14.3 | % | −52.8 | % | 6.2 | % | 69.2 | % | ||||||||||
|
S&P 500 Index
|
15.8 | % | 5.5 | % | −37.0 | % | 26.5 | % | 15.1 | % | ||||||||||
|
Dow Jones Electronic & Electrical Equipment
|
13.8 | % | 18.9 | % | −46.6 | % | 47.7 | % | 31.9 | % | ||||||||||
| Indexed Returns | ||||||||||||||||||||||||
| Years Ending December 31, | ||||||||||||||||||||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||||||
|
Belden Inc
|
$ | 100.00 | $ | 160.96 | $ | 183.98 | $ | 86.92 | $ | 92.29 | $ | 156.12 | ||||||||||||
|
S&P 500 Index
|
100.00 | 115.79 | 122.16 | 76.96 | 97.33 | 111.99 | ||||||||||||||||||
|
Dow Jones Electronic & Electrical Equipment
|
100.00 | 113.75 | 135.24 | 72.23 | 106.66 | 140.66 | ||||||||||||||||||
| (1) | This chart and the accompanying data are “furnished,” not “filed,” with the SEC. |
15
Table of Contents
| Item 6. | Selected Financial Data |
| Years Ended December 31, | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||||||
|
Statement of operations data:
|
||||||||||||||||||||
|
Revenues
|
$ | 1,617,090 | $ | 1,362,016 | $ | 1,992,168 | $ | 2,032,841 | $ | 1,495,811 | ||||||||||
|
Operating income (loss)
|
129,189 | 36,370 | (281,545 | ) | 220,736 | 118,478 | ||||||||||||||
|
Income (loss) from continuing operations
|
69,298 | (7,265 | ) | (316,650 | ) | 136,195 | 71,563 | |||||||||||||
|
Basic income (loss) per share from continuing operations
|
1.48 | (0.16 | ) | (7.09 | ) | 3.03 | 1.65 | |||||||||||||
|
Diluted income (loss) per share from continuing operations
|
1.45 | (0.16 | ) | (7.09 | ) | 2.71 | 1.48 | |||||||||||||
|
Balance sheet data:
|
||||||||||||||||||||
|
Total assets
|
1,696,484 | 1,620,578 | 1,658,393 | 2,068,392 | 1,355,968 | |||||||||||||||
|
Long-term debt
|
551,155 | 543,942 | 590,000 | 350,000 | 110,000 | |||||||||||||||
|
Long-term debt, including current maturities
|
551,155 | 590,210 | 590,000 | 458,744 | 172,000 | |||||||||||||||
|
Stockholders’ equity
|
638,515 | 551,048 | 570,868 | 1,072,206 | 843,901 | |||||||||||||||
|
Other data:
|
||||||||||||||||||||
|
Basic weighted average common shares outstanding
|
46,805 | 46,594 | 44,692 | 44,877 | 43,319 | |||||||||||||||
|
Diluted weighted average common shares outstanding
|
47,783 | 46,594 | 44,692 | 50,615 | 50,276 | |||||||||||||||
|
Dividends per common share
|
$ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | ||||||||||
In 2010, we acquired GarrettCom, Inc. and the Communications
Products business of Thomas & Betts during our fiscal
fourth quarter. The results of operations of these entities are
included in our operating results from their respective
acquisition dates. During 2010, we recognized expenses from the
effects of purchase accounting of $6.5 million, severance
expense of $1.1 million, and asset impairment expense of
$16.6 million.
In 2009, we streamlined our manufacturing, sales and
administrative functions worldwide in an effort to reduce costs
and mitigate the weakening demand experienced throughout the
global economy. During 2009, we recognized severance and
employee relocation expenses of $29.6 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 $24.1 million.
In 2008, we recognized goodwill and other asset impairment
charges of $443.7 million, severance expense of
$39.9 million, loss on sale of assets of $3.7 million,
and other charges related to our various restructuring actions
of $4.9 million.
In 2007, we acquired Hirschmann Automation and Control GmbH
(Hirschmann), LTK Wiring Co. Ltd. (LTK), and Lumberg Automation
Components (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.
16
Table of Contents
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Overview
We design, manufacture, and market a portfolio of cable,
connectivity, and networking products in markets including
industrial, enterprise, broadcast, 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 customers in specific 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.
We generated approximately 57% of our sales outside of the
United States in 2010. 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.
We generated
year-over-year
revenue increases in each quarter during 2010 as many of our
served markets began to recover from the broad-based declines in
demand experienced in the second half of 2008 and in 2009. As a
result, consolidated revenues for 2010 increased 18.7% over 2009.
We continue to operate in a highly competitive business
environment in our served markets and geographies. Our
performance will be affected 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 Brazil, 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.
17
Table of Contents
Significant
Trends and Events in 2010
The following trends and events during 2010 have had varying
effects on our financial condition, results of operations, and
cash flows.
Disposition
We sold Trapeze Networks, Inc. (Trapeze) during the 2010 fourth
quarter for $152.1 million in cash. The Trapeze operations
comprised the entirety of our former Wireless segment.
Acquisitions
We completed two acquisitions during the 2010 fourth quarter. We
acquired the Communications Products business of
Thomas & Betts (Communications Business) for cash of
$76.9 million on November 19, 2010. The Communications
Business provides drop and hard line connectors, hardware and
grounding products, and telecom enclosures and connectors for
the broadband/CATV markets. This acquisition improves our
position as an
end-to-end
solution provider in the broadcast end markets, including
broadband/CATV, security and surveillance, and professional
broadcasting. We acquired GarrettCom, Inc. (GarrettCom) for cash
of $56.8 million on December 5, 2010. GarrettCom
provides advanced industrial networking products and smart grid
solutions, including industrial grade switches, routers,
converters, serial communications, and security software to the
power utility, surveillance, transportation, specialty
industrial automation, and telecommunications markets. The
acquisition complements our existing portfolio of industrial
networking solutions and will enable us to provide a more
diverse set of end market applications. The results of
operations of both the Communications Business and GarrettCom
have been included in our results of operations from their
respective acquisition dates and are reported within the
Americas segment.
Commodity
prices
Our operating results can be affected by changes in prices of
commodities, primarily copper and compounds, which are
components in some of the products we sell. Generally, as the
costs of inventory purchases increase due to higher commodity
prices, we raise selling prices to customers to cover the
increase in costs, resulting in higher sales revenue but a lower
gross profit percentage. Conversely, a decrease in commodity
prices would result in lower sales revenue but a higher gross
profit percentage. Selling prices of our products are affected
by many factors, including end market demand, capacity
utilization, overall economic conditions, and commodity prices.
Importantly, however, there is no exact measure of the effect of
changing copper prices, as there are thousands of transactions
in any given quarter, each of which has various factors involved
in the individual pricing decisions. Therefore, all references
to the effect of copper prices are estimates.
Global
Restructuring Activities
During 2010, we completed the restructuring activities
originally initiated in the 2008 fourth quarter to streamline
our manufacturing, sales, and administrative functions. We
recognized severance costs primarily in the Americas segment
totaling $1.1 million related to these restructuring
activities and the closure of one of our two manufacturing
plants in Leominster, Massachusetts. We do not expect to
recognize any additional severance costs related to these
restructuring activities.
Share-Based
Compensation
We provide certain employees and non-employee directors with
share-based compensation in the form of stock options, stock
appreciation rights, restricted stock units with service vesting
conditions, and restricted stock units with performance vesting
conditions. At December 31, 2010, the total unrecognized
compensation cost related to all nonvested awards was
$14.7 million. That cost is expected to be recognized over
a weighted-average period of 2.0 years.
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Results
of Operations
Consolidated
Continuing Operations
| Percentage Change | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 vs. 2009 | 2009 vs. 2008 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Revenues
|
$ | 1,617,090 | $ | 1,362,016 | $ | 1,992,168 | 18.7 | % | −31.6 | % | ||||||||||
|
Gross profit
|
467,294 | 387,685 | 558,899 | 20.5 | % | −30.6 | % | |||||||||||||
|
Selling, general and administrative expenses
|
279,677 | 262,473 | 347,665 | 6.6 | % | −24.5 | % | |||||||||||||
|
Research and development
|
42,605 | 40,441 | 41,820 | 5.4 | % | −3.3 | % | |||||||||||||
|
Operating income (loss)
|
129,189 | 36,370 | (281,545 | ) | 255.2 | % | 112.9 | % | ||||||||||||
|
Income (loss) from continuing operations
|
||||||||||||||||||||
|
before taxes
|
82,012 | (6,090 | ) | (314,168 | ) | 1446.7 | % | 98.1 | % | |||||||||||
|
Income (loss) from continuing operations
|
69,298 | (7,265 | ) | (316,650 | ) | 1053.9 | % | 97.7 | % | |||||||||||
2010
Compared to 2009
Revenues increased in 2010 compared to 2009 primarily for the
following reasons:
| • | An increase in unit sales volume due to the recovery of demand and increased market share in many of the Company’s served markets resulted in a revenue increase of $159.1 million. | |
| • | An increase in copper prices resulted in estimated sales price increases totaling $75.4 million. | |
| • | An increase in revenues of $14.7 million from the full year inclusion of the Company’s 2009 acquisition. |
Gross profit increased in 2010 compared to 2009 due to the
increase in revenue as discussed above and decreases in
severance and other restructuring costs. In 2009, cost of sales
included $37.8 million of severance and other restructuring
costs related primarily to global restructuring actions to
streamline our manufacturing functions worldwide in an effort to
reduce costs and mitigate the weakening demand experienced in
2009 throughout the global economy. Other restructuring costs
include equipment transfer costs, contract termination costs,
employee relocation costs, and other restructuring related
charges. In 2010, cost of sales included $11.7 million of
such severance and other restructuring costs.
Selling, general and administrative (SG&A) expenses
increased in 2010 compared to 2009. This increase was primarily
due to higher payroll costs associated with our sales and
administrative employees and higher discretionary spending for
items such as travel and consulting as demand in our end markets
improved.
The increase in research and development costs in 2010 compared
to 2009 was primarily due to higher payroll costs associated
with the employees engaged in our research and development
activities.
During 2010, we recognized asset impairment losses totaling
$16.6 million. We recognized impairment losses of
$1.3 million and $5.8 million, respectively, related
to real estate in the Americas segment and in connection with
real estate leased to the purchaser of a German cable business
we sold in 2009. We also recognized an impairment loss of
$0.6 million related to a trademark we are no longer using.
In addition, we recognized an impairment loss of
$8.9 million in connection with our decision to abandon the
use of certain customer relationship management tools and
enterprise technology system assets.
Income from continuing operations increased in 2010 compared to
2009 primarily related to the substantial improvement in
operating income offset minimally by higher interest expense
associated with a full year of interest on our senior
subordinated notes issued in June 2009 and the results of our
hedging activities.
Our annual effective tax rate was 15.5% in 2010 compared to
-19.3% in 2009. While the Company recorded a tax expense on a
pre-tax loss in 2009 primarily due to an increase in the
valuation allowances recorded against
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deferred tax assets established with respect to net operating
loss carryforwards, the Company recorded a tax expense on
pre-tax income at a 15.5% rate in 2010 due primarily to the
lower income tax rates on income earned in foreign jurisdictions.
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 estimated 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 revenues from the disposal of two businesses in Europe resulted in a decrease of $56.7 million. |
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.
Selling, general and administrative (SG&A) expenses
decreased in 2009 compared to 2008. This decrease was 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
$4.4 million less severance and other restructuring costs
compared to 2008.
The decrease in research and development costs in 2009 compared
to 2008 was primarily due to lower payroll costs associated with
a reduction in the number of employees engaged in our research
and development activities.
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. Also, 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 $404.2 million. In addition, the carrying amounts of
certain trademarks exceeded their respective fair values
resulting in a trademark impairment charge of
$19.1 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 -19.3% in 2009 compared to
-0.8% in 2008. While the Company recorded a tax expense on a
pre-tax loss in 2008 primarily due to the non-deductibility for
tax purposes of the goodwill impairment charges recognized
during the year, it recorded a tax expense on a pre-tax loss in
2009 primarily due to an increase in the valuation allowances
recorded against deferred tax assets established with respect to
net operating loss carryforwards.
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Americas
Segment
| Percentage Change | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 vs. 2009 | 2009 vs. 2008 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total revenues
|
$ | 984,718 | $ | 810,058 | $ | 1,102,815 | 21.6 | % | −26.5 | % | ||||||||||
|
Operating income
|
133,984 | 117,324 | 106,893 | 14.2 | % | 9.8 | % | |||||||||||||
|
as a percent of total revenues
|
13.6 | % | 14.5 | % | 9.7 | % | ||||||||||||||
Americas total revenues, which include affiliate revenues,
increased $88.8 million in 2010 over 2009 due to increased
market share and higher unit sales volume as demand in the
segment’s North American markets recovered from their
weakness during 2009. An increase in copper prices resulted in
higher selling prices that contributed an estimated
$44.0 million to the increase in revenues. The remaining
increase in revenues was the result of favorable currency
translation as the Canadian dollar strengthened against the
U.S. dollar and from the full year inclusion of the
Company’s 2009 acquisition.
Operating income increased in 2010 over 2009 primarily due to
the increase in gross profit associated with the increase in
revenue discussed above. In addition, in 2010 the segment
recognized $12.0 million in severance, other restructuring
charges, and asset impairment charges as well as
$6.6 million of costs associated with the segment’s
two acquisitions during 2010 compared to $21.5 million of
such costs in 2009.
Americas total revenues decreased in 2009 from 2008 due to lower
unit sales volume of $219.8 million. Lower demand in the
Americas contributed to lower volume across all vertical
markets. 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 an estimated
$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 over 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.
EMEA
Segment
| Percentage Change | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 vs. 2009 | 2009 vs. 2008 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total revenues
|
$ | 442,281 | $ | 400,453 | $ | 663,311 | 10.4 | % | −39.6 | % | ||||||||||
|
Operating income (loss)
|
63,969 | (36,828 | ) | (212,053 | ) | 273.7 | % | 82.6 | % | |||||||||||
|
as a percent of total revenues
|
14.5 | % | −9.2 | % | −32.0 | % | ||||||||||||||
EMEA total revenues, which include affiliate revenues, increased
$52.8 million in 2010 over 2009 due to increased market
share and higher unit sales volume as demand in the
segment’s served markets strengthened and due to higher
affiliate sales of $21.2 million. These increases were
partially offset by unfavorable currency translation of
$17.9 million primarily from the U.S. dollar
strengthening against the euro and by lost revenues of
$17.7 million from the disposition of a German cable
business in 2009.
Operating income increased in 2010 over 2009 primarily due to
the increase in revenues discussed above and a decrease in
impairment charges and other restructuring costs. In 2010, the
segment recognized $2.4 million and $5.8 million in
restructuring costs and impairment charges, respectively, while
in 2009 it recognized $77.3 million in restructuring costs,
impairment charges, and loss on the sale of assets.
21
Table of Contents
EMEA total revenues decreased in 2009 from 2008 due to lower
unit sales volume of $142.5 million. The broad-based market
declines in Europe resulted 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.
Asia
Pacific Segment
| Percentage Change | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 vs. 2009 | 2009 vs. 2008 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total revenues
|
$ | 315,537 | $ | 250,250 | $ | 373,360 | 26.1 | % | −33.0 | % | ||||||||||
|
Operating income (loss)
|
40,147 | 28,794 | (66,093 | ) | 39.4 | % | 143.6 | % | ||||||||||||
|
as a percent of total revenues
|
12.7 | % | 11.5 | % | −17.7 | % | ||||||||||||||
Asia Pacific total revenues, which include affiliate revenues,
increased in 2010 over 2009, due to higher unit sales volume of
$34.4 million as demand in the segment’s served
markets recovered and an estimated $31.1 million in higher
sales from the impact of higher copper prices during 2010.
Operating income increased in 2010 over 2009 primarily due to
the increase in revenues discussed above.
Asia Pacific total revenues decreased in 2009 from 2008 due to
lower unit sales volume of $98.0 million. The broad-based
market decline beginning in the second half of 2008 continued in
Asia during 2009 resulting in lower volume across most vertical
markets. A decrease in copper prices resulted in lower selling
prices that contributed an estimated $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.
Corporate
Expenses
| Percentage Change | ||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 vs. 2009 | 2009 vs. 2008 | ||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||
|
Total corporate expenses
|
$ | 62,821 | $ | 41,378 | $ | 74,889 | 51.8 | % | −44.7 | % | ||||||||||
Corporate expenses include administrative and other costs that
are not allocated to the operating segments. These expenses
increased in 2010 over 2009 primarily due to a $9.9 million
increase in payroll, travel, and purchased services and an
$8.7 million impairment charge with respect to customer
relationship management tools and enterprise resource technology
assets.
Total corporate expenses decreased in 2009 from 2008 primarily
due to $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. 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
22
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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.
Discontinued
Operations
During 2010, we sold Trapeze for $152.1 million in cash. We
acquired Trapeze in 2008. The sale of Trapeze generated an after
tax gain of $44.8 million, which is included in
discontinued operations. The results of operations for Trapeze
have also been included in 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. Beginning in
2009, we recognized interest expense associated with these
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.
See Note 4 to the Consolidated Financial Statements for
more information about these matters.
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 2011 and believe our sources of liquidity
are sufficient to fund current working capital requirements,
capital expenditures, contributions to our retirement plans,
quarterly dividend payments, 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, | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Net cash provided by (used for):
|
||||||||
|
Operating activities
|
$ | 111,549 | $ | 151,810 | ||||
|
Investing activities
|
(8,352 | ) | (59,049 | ) | ||||
|
Financing activities
|
(48,415 | ) | (22,048 | ) | ||||
|
Effects of currency exchange rate changes on cash and cash
equivalents
|
(5,008 | ) | 10,753 | |||||
|
Increase in cash and cash equivalents
|
49,774 | 81,466 | ||||||
|
Cash and cash equivalents, beginning of year
|
308,879 | 227,413 | ||||||
|
Cash and cash equivalents, end of year
|
$ | 358,653 | $ | 308,879 | ||||
Net cash provided by operating activities decreased by
$40.3 million in 2010 from 2009. There was a
$133.4 million change in net income from 2009 to 2010, as
the Company moved from a loss of $24.9 million in 2009 to
income of $108.5 million in 2010. The change in net income
was offset by a change in operating assets and liabilities. The
change in operating assets and liabilities was
$111.3 million as the change in operating assets and
liabilities for 2010 was a use of cash of $14.5 million
compared to a source of cash of $96.9 million for 2009. An
increase in accounts receivable and inventories represented the
largest change in operating assets and liabilities. Accounts
receivable were a use of cash for the period due to the 18.7%
increase in revenues
year-over-year
and an increase in our days’ sales outstanding from
59 days at the end of 2009 to 62 days at the end of
2010. We calculate days’ sales outstanding by dividing
accounts receivable as of the end of the quarter by the average
daily revenues recognized during the quarter. Inventories were a
use of cash for the period as well due to the increase in
inventory necessary to support our higher revenues and a
decrease in our inventory turns from 7.3 turns at the end of
2009 to
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6.9 turns at the end of 2010. We calculate inventory turns by
dividing annualized cost of sales for the quarter by the
inventory balance at the end of the quarter. These increases in
accounts receivable and inventories were partially offset by
increases in accounts payable and accrued liabilities.
Net cash used for investing activities decreased by
$50.7 million in 2010 from 2009. This decrease was due to
an increase in the proceeds from the disposal of tangible assets
and a decrease in capital expenditures partially offset by an
increase in the cash used to acquire businesses. The
$136.9 million increase in 2010 over 2009 in the proceeds
from the disposal of tangible assets results from the
$136.9 million received in 2010 from our sale of Trapeze.
The $12.2 million decrease in capital expenditures in 2010
compared to 2009 primarily resulted from a reduced level of
spending on our enterprise resource planning software. We
anticipate that future capital expenditures will be funded with
available cash. The increase in cash used to acquire businesses
resulted from the use of cash in 2010 to acquire GarrettCom and
the Communications Products business of Thomas & Betts
compared to the use of cash in 2009 to acquire Telecast.
Net cash used for financing activities increased by
$26.4 million in 2010 over 2009. This change is primarily
due to the repayment of $46.3 million of outstanding
borrowings under our revolving credit facility during 2010. This
change was partially offset by the receipt of $4.2 million
of cash upon the termination of our derivative instruments in
2010, a $2.5 million difference in the proceeds received
upon the exercise of stock options in 2010 over 2009, and the
payment of $11.8 million of non-recurring debt issuance
costs during 2009.
Our outstanding debt obligations as of December 31, 2010,
consisted of $350.0 million aggregate principal of
7.0% senior subordinated notes due 2017 and
$200.0 million aggregate principal of 9.25% senior
subordinated notes due 2019. As of December 31, 2010, there
were no outstanding borrowings under our senior secured credit
facility, and we had $220.2 million in available borrowing
capacity. We were in compliance with all of the amended
covenants of the facility as of December 31, 2010.
Note 13 to the Consolidated Financial Statements contains
an additional discussion regarding our various borrowing
arrangements.
Contractual obligations outstanding at December 31, 2010,
have the following scheduled maturities:
|
Less than
|
1-3
|
4-5
|
More than
|
|||||||||||||||||
| Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Long-term debt obligations(1)(2)
|
$ | 551,155 | $ | — | $ | — | $ | — | $ | 551,155 | ||||||||||
|
Interest payments on long-term debt obligations
|
316,500 | 43,000 | 86,000 | 86,000 | 101,500 | |||||||||||||||
|
Operating lease obligations(3)
|
68,308 | 13,317 | 21,306 | 13,036 | 20,649 | |||||||||||||||
|
Purchase obligations(4)
|
13,238 | 13,238 | — | — | — | |||||||||||||||
|
Other commitments(5)
|
24,122 | 4,286 | 18,671 | 1,165 | — | |||||||||||||||
|
Pension and other postemployment obligations
|
169,549 | 11,323 | 36,040 | 41,156 | 81,030 | |||||||||||||||
|
Total
|
$ | 1,142,872 | $ | 85,164 | $ | 162,017 | $ | 141,357 | $ | 754,334 | ||||||||||
| (1) | As described in Note 13 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) | As described in Note 19 to the Consolidated Financial Statements. | |
| (4) | 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. | |
| (5) | Represents obligations for uncertain tax positions (see Note 15 to the Consolidated Financial Statements). |
24
Table of Contents
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
|
$ | 12,438 | $ | 8,397 | $ | 4,019 | $ | 22 | $ | — | ||||||||||
|
Bank guarantees
|
6,876 | 6,876 | — | — | — | |||||||||||||||
|
Surety bonds
|
1,729 | 1,692 | 37 | — | — | |||||||||||||||
|
Total
|
$ | 21,043 | $ | 16,965 | $ | 4,056 | $ | 22 | $ | — | ||||||||||
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.
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.
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 Adjustments) through individual customer records, we
estimate the amount of outstanding Adjustments and recognize
them by reducing revenues and accounts receivable. 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
25
Table of Contents
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 to record a deferred tax asset valuation allowance for
part or all of a deferred tax asset.
We consider the weight of all available evidence, both positive
and negative, in assessing the realizability of the deferred tax
assets associated with net operating losses. We consider the
reversals of existing taxable temporary differences as well as
projections of future taxable income. We consider the future
reversals of existing taxable temporary differences to the
extent they were of the same character as the temporary
differences giving rise to the deferred tax assets. We also
consider whether the future reversals of existing taxable
temporary differences will occur in the same period and
jurisdiction as the temporary differences giving rise to the
deferred tax assets. The assumptions utilized to estimate our
future taxable income are consistent with those assumptions
utilized for purposes of testing goodwill for impairment.
We also 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
utilize these tax credits. Furthermore, in 2011 we expect to
continue implementation of 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 we believe that the full amount
of the associated tax benefit may not be realized. To the extent
we were to prevail in
26
Table of Contents
matters for which accruals have been established or would 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, our foreign
subsidiaries’ undistributed income is 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 affect 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.
For purposes of impairment testing of long-lived assets, we have
identified asset groups at the lowest level for which
identifiable cash flows are largely independent of the cash
flows of other assets and liabilities.
We do not amortize goodwill, but test it annually for impairment
at the reporting unit level. A reporting unit is an operating
segment, or a business unit one level below an operating segment
(the component level) if discrete financial information for that
business is prepared and regularly reviewed by segment
management. However, components within an operating segment are
aggregated as a single reporting unit if they have similar
economic characteristics. We determined that each of our
reportable segments (Americas, EMEA, and Asia Pacific)
represents an operating segment. Within those operating
segments, we have identified reporting units based on whether
there is discrete financial information prepared that is
regularly reviewed by segment management. As a result of this
evaluation, we have identified five reporting units within
Americas, four reporting units within EMEA, and three reporting
units within Asia Pacific.
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 2010 goodwill
impairment analysis, the discount rates for our reporting units
ranged from 10% to 16% 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
27
Table of Contents
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 16 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.
Share-Based
Compensation
We compensate certain employees and non-employee directors 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 17 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 inventories, 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.
| 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, 2010.
28
Table of Contents
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
$258.3 million and $312.9 million at December 31,
2010 and 2009, respectively. We estimate a one percent change of
the United States dollar relative to foreign currencies would
have changed 2010 pre-tax income (loss) of our foreign
operations by approximately $0.5 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.
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, 2010.
The following table presents unconditional copper purchase
obligations outstanding at December 31, 2010. The
unconditional copper purchase obligations will settle during
2011.
|
Purchase
|
Fair
|
|||||||
| Amount | Value | |||||||
| (In thousands, except average price) | ||||||||
|
Unconditional copper purchase obligations:
|
||||||||
|
Commitment volume in pounds
|
2,387 | |||||||
|
Weighted average price per pound
|
$ | 3.90 | ||||||
|
Commitment amounts
|
$ | 9,302 | $ | 10,601 | ||||
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 is 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. During 2010, we entered into and exited from interest
rate derivative instruments. See Note 14 to the
Consolidated Financial Statements. We were not a party to any
interest rate derivative instruments at December 31, 2010.
29
Table of Contents
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, 2010.
| Principal Amount by Expected Maturity |
Fair
|
|||||||||||||||
| 2011 | Thereafter | Total | Value | |||||||||||||
| (In thousands, except interest rates) | ||||||||||||||||
|
Fixed-rate senior subordinated notes
|
$ | — | $ | 350,000 | $ | 350,000 | $ | 354,375 | ||||||||
|
Average interest rate
|
7.00 | % | ||||||||||||||
|
Fixed-rate senior subordinated notes
|
$ | — | $ | 200,000 | $ | 200,000 | $ | 219,250 | ||||||||
|
Average interest rate
|
9.75 | % | ||||||||||||||
|
Total
|
$ | 550,000 | $ | 573,625 | ||||||||||||
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, 2010, we had $28.5 million in accounts
receivable outstanding from Anixter International Inc.
(Anixter). This represented approximately 10% of our total
accounts receivable outstanding at December 31, 2010.
Anixter generally pays all outstanding receivables within thirty
to sixty days of invoice receipt.
30
Table of Contents
| Item 8. | Financial Statements and Supplementary Data |
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Belden Inc.
We have audited the accompanying consolidated balance sheets of
Belden Inc. (the Company) as of December 31, 2010 and 2009,
and the related consolidated statements of operations,
stockholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2010. 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, 2010 and
2009, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2010, 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.
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, 2010, 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 25, 2011
expressed an unqualified opinion thereon.
/s/ Ernst &
Young LLP
St. Louis, Missouri
February 25, 2011
31
Table of Contents
Consolidated Balance Sheets
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (In thousands, except par value) | ||||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 358,653 | $ | 308,879 | ||||
|
Receivables, net
|
298,266 | 230,360 | ||||||
|
Inventories, net
|
175,659 | 144,189 | ||||||
|
Deferred income taxes
|
9,473 | 28,115 | ||||||
|
Other current assets
|
18,804 | 14,966 | ||||||
|
Current assets of discontinued operations
|
— | 133,329 | ||||||
|
Total current assets
|
860,855 | 859,838 | ||||||
|
Property, plant and equipment, less accumulated depreciation
|
278,866 | 298,258 | ||||||
|
Goodwill
|
322,556 | 273,126 | ||||||
|
Intangible assets, less accumulated amortization
|
143,820 | 116,592 | ||||||
|
Deferred income taxes
|
27,565 | 10,809 | ||||||
|
Other long-lived assets
|
62,822 | 61,955 | ||||||
| $ | 1,696,484 | $ | 1,620,578 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 212,084 | $ | 166,723 | ||||
|
Accrued liabilities
|
145,840 | 117,206 | ||||||
|
Current maturities of long-term debt
|
— | 46,268 | ||||||
|
Current liabilities of discontinued operations
|
— | 31,237 | ||||||
|
Total current liabilities
|
357,924 | 361,434 | ||||||
|
Long-term debt
|
551,155 | 543,942 | ||||||
|
Postretirement benefits
|
112,426 | 121,745 | ||||||
|
Other long-term liabilities
|
36,464 | 42,409 | ||||||
|
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;
47,045 and 46,660 shares outstanding at 2010 and 2009,
respectively
|
503 | 503 | ||||||
|
Additional paid-in capital
|
595,519 | 591,917 | ||||||
|
Retained earnings
|
171,568 | 72,625 | ||||||
|
Accumulated other comprehensive income (loss)
|
(8,919 | ) | 14,614 | |||||
|
Treasury stock, at cost— 3,290 and 3,675 shares
at 2010 and 2009, respectively
|
(120,156 | ) | (128,611 | ) | ||||
|
Total stockholders’ equity
|
638,515 | 551,048 | ||||||
| $ | 1,696,484 | $ | 1,620,578 | |||||
The accompanying notes are an integral part of these
Consolidated Financial Statements
32
Table of Contents
Consolidated Statements of Operations
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands, except per share amounts) | ||||||||||||
|
Revenues
|
$ | 1,617,090 | $ | 1,362,016 | $ | 1,992,168 | ||||||
|
Cost of sales
|
(1,149,796 | ) | (974,331 | ) | (1,433,269 | ) | ||||||
|
Gross profit
|
467,294 | 387,685 | 558,899 | |||||||||
|
Selling, general and administrative expenses
|
(279,677 | ) | (262,473 | ) | (347,665 | ) | ||||||
|
Research and development
|
(42,605 | ) | (40,441 | ) | (41,820 | ) | ||||||
|
Amortization of intangibles
|
(11,189 | ) | (9,871 | ) | (9,874 | ) | ||||||
|
Income from equity method investment
|
11,940 | 6,405 | 6,326 | |||||||||
|
Goodwill impairment
|
— | — | (404,196 | ) | ||||||||
|
Other asset impairment
|
(16,574 | ) | (27,751 | ) | (39,488 | ) | ||||||
|
Loss on sale of assets
|
— | (17,184 | ) | (3,727 | ) | |||||||
|
Operating income (loss)
|
129,189 | 36,370 | (281,545 | ) | ||||||||
|
Interest expense
|
(49,826 | ) | (41,962 | ) | (37,908 | ) | ||||||
|
Interest income
|
1,184 | 1,043 | 5,285 | |||||||||
|
Other income (expense)
|
1,465 | (1,541 | ) | — | ||||||||
|
Income (loss) from continuing operations before taxes
|
82,012 | (6,090 | ) | (314,168 | ) | |||||||
|
Income tax expense
|
(12,714 | ) | (1,175 | ) | (2,482 | ) | ||||||
|
Income (loss) from continuing operations
|
69,298 | (7,265 | ) | (316,650 | ) | |||||||
|
Loss from discontinued operations, net of tax
|
(5,686 | ) | (17,636 | ) | (45,176 | ) | ||||||
|
Gain from disposal of discontinued operations, net of tax
|
44,847 | — | — | |||||||||
|
Net income (loss)
|
$ | 108,459 | $ | (24,901 | ) | $ | (361,826 | ) | ||||
|
Weighted average number of common shares and equivalents:
|
||||||||||||
|
Basic
|
46,805 | 46,594 | 44,692 | |||||||||
|
Diluted
|
47,783 | 46,594 | 44,692 | |||||||||
|
Basic income (loss) per share:
|
||||||||||||
|
Continuing operations
|
$ | 1.48 | $ | (0.16 | ) | $ | (7.09 | ) | ||||
|
Discontinued operations
|
$ | (0.11 | ) | $ | (0.37 | ) | $ | (1.01 | ) | |||
|
Disposal of discontinued operations
|
0.95 | — | — | |||||||||
|
Net income (loss)
|
$ | 2.32 | $ | (0.53 | ) | $ | (8.10 | ) | ||||
|
Diluted income (loss) per share:
|
||||||||||||
|
Continuing operations
|
$ | 1.45 | $ | (0.16 | ) | $ | (7.09 | ) | ||||
|
Discontinued operations
|
$ | (0.11 | ) | $ | (0.37 | ) | $ | (1.01 | ) | |||
|
Disposal of discontinued operations
|
0.93 | — | — | |||||||||
|
Net income (loss)
|
$ | 2.27 | $ | (0.53 | ) | $ | (8.10 | ) | ||||
The accompanying notes are an integral part of these
Consolidated Financial Statements
33
Table of Contents
Belden
Inc.
Consolidated
Cash Flow Statements
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net income (loss)
|
$ | 108,459 | $ | (24,901 | ) | $ | (361,826 | ) | ||||
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
55,279 | 55,857 | 56,836 | |||||||||
|
Goodwill impairment
|
— | — | 433,737 | |||||||||
|
Other asset impairment
|
16,574 | 27,751 | 42,755 | |||||||||
|
Share-based compensation expense
|
12,177 | 11,748 | 13,568 | |||||||||
|
Provision for inventory obsolescence
|
3,210 | 4,550 | 12,994 | |||||||||
|
Non-cash loss on derivatives and hedging instruments
|
2,893 | — | — | |||||||||
|
Tax deficiency (benefit) related to share-based compensation
|
110 | 1,564 | (1,279 | ) | ||||||||
|
Loss (gain) on disposal of tangible assets
|
(44,847 | ) | 17,184 | 3,727 | ||||||||
|
Income from equity method investment
|
(11,940 | ) | (6,405 | ) | (6,326 | ) | ||||||
|
Deferred income tax benefit
|
(11,577 | ) | (23,421 | ) | (37,803 | ) | ||||||
|
Pension funding in excess of pension expense
|
(4,289 | ) | (8,973 | ) | (6,917 | ) | ||||||
|
Changes in operating assets and liabilities, net of the effects
of currency exchange rate changes and acquired businesses:
|
||||||||||||
|
Receivables
|
(39,458 | ) | 52,369 | 73,526 | ||||||||
|
Inventories
|
(14,031 | ) | 50,645 | 28,188 | ||||||||
|
Deferred cost of sales
|
7,003 | (1,036 | ) | (7,270 | ) | |||||||
|
Accounts payable
|
38,513 | 9,728 | (35,666 | ) | ||||||||
|
Accrued liabilities
|
7,569 | (33,483 | ) | (14,042 | ) | |||||||
|
Deferred revenue
|
(15,772 | ) | 2,564 | 18,266 | ||||||||
|
Accrued taxes
|
(3,793 | ) | 7,597 | (31,562 | ) | |||||||
|
Other assets
|
20,206 | 11,665 | 4,793 | |||||||||
|
Other liabilities
|
(14,737 | ) | (3,193 | ) | (11,825 | ) | ||||||
|
Net cash provided by operating activities
|
111,549 | 151,810 | 173,874 | |||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Proceeds from disposal of tangible assets
|
138,952 | 2,031 | 40,898 | |||||||||
|
Cash used to acquire businesses, net of cash acquired
|
(119,110 | ) | (20,703 | ) | (147,384 | ) | ||||||
|
Capital expenditures
|
(28,194 | ) | (40,377 | ) | (53,561 | ) | ||||||
|
Net cash used for investing activities
|
(8,352 | ) | (59,049 | ) | (160,047 | ) | ||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Borrowings under credit arrangements
|
— | 193,732 | 240,000 | |||||||||
|
Payments under borrowing arrangements
|
(46,268 | ) | (193,732 | ) | (110,000 | ) | ||||||
|
Debt issuance costs paid
|
— | (11,810 | ) | — | ||||||||
|
Cash dividends paid
|
(9,412 | ) | (9,373 | ) | (8,926 | ) | ||||||
|
Tax benefit (deficiency) related to share-based compensation
|
(110 | ) | (1,564 | ) | 1,279 | |||||||
|
Proceeds from exercises of stock options
|
3,158 | 699 | 6,103 | |||||||||
|
Cash received upon termination of derivative instruments
|
4,217 | — | — | |||||||||
|
Payments under share repurchase program
|
— | — | (68,336 | ) | ||||||||
|
Net cash provided by (used for) financing activities
|
(48,415 | ) | (22,048 | ) | 60,120 | |||||||
|
Effect of currency exchange rate changes on cash and cash
equivalents
|
(5,008 | ) | 10,753 | (6,498 | ) | |||||||
|
Increase in cash and cash equivalents
|
49,774 | 81,466 | 67,449 | |||||||||
|
Cash and cash equivalents, beginning of year
|
308,879 | 227,413 | 159,964 | |||||||||
|
Cash and cash equivalents, end of year
|
$ | 358,653 | $ | 308,879 | $ | 227,413 | ||||||
The accompanying notes are an integral part of these
Consolidated Financial Statements
34
Table of Contents
Belden
Inc.
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, 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
|
— | — | — | — | — | — | — | (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
|
— | — | — | — | — | — | — | (7,998 | ) | (7,998 | ) | |||||||||||||||||||||||||
|
Comprehensive loss
|
(20,514 | ) | ||||||||||||||||||||||||||||||||||
|
Exercise of stock options, net of tax withholding forfeitures
|
— | — | 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 | ||||||||||||||||||||||||
|
Net income
|
— | — | — | 108,459 | — | — | — | — | 108,459 | |||||||||||||||||||||||||||
|
Foreign currency translation
|
— | — | — | — | — | — | (25,965 | ) | — | (25,965 | ) | |||||||||||||||||||||||||
|
Adjustments to pension and postretirement liability, net of
$1.0 million tax
|
— | — | — | — | — | — | — | 2,432 | 2,432 | |||||||||||||||||||||||||||
|
Comprehensive income
|
84,926 | |||||||||||||||||||||||||||||||||||
|
Exercise of stock options, net of tax withholding forfeitures
|
— | — | (1,322 | ) | — | 177 | 4,020 | — | — | 2,698 | ||||||||||||||||||||||||||
|
Release of restricted stock, net of tax withholding forfeitures
|
— | — | (7,166 | ) | — | 208 | 4,435 | — | — | (2,731 | ) | |||||||||||||||||||||||||
|
Share-based compensation
|
— | — | 12,067 | — | — | — | — | — | 12,067 | |||||||||||||||||||||||||||
|
Dividends ($0.20 per share)
|
— | — | 23 | (9,516 | ) | — | — | — | — | (9,493 | ) | |||||||||||||||||||||||||
|
Balance at December 31, 2010
|
50,335 | $ | 503 | $ | 595,519 | $ | 171,568 | (3,290 | ) | $ | (120,156 | ) | $ | 32,095 | $ | (41,014 | ) | $ | 638,515 | |||||||||||||||||
35
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 a portfolio of cable, connectivity,
and networking products in markets including industrial,
enterprise, broadcast, and consumer electronics. Our products
provide for the transmission of signals for data, sound, and
video applications.
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. Our fiscal first, second, and third quarters
have historically each ended on the last Sunday falling on or
before their respective calendar quarter-end. Beginning in 2010,
our fiscal first quarter ends on the Sunday falling closest to
91 days after December 31. Our fiscal second and third
quarters each have 91 days. Our fiscal fourth quarter
continues to 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 with respect
to the collectability of receivables, the valuation of
inventory, the realization of deferred tax assets, the valuation
of goodwill and other long-lived assets, the valuation of
contingent liabilities, the calculation of share-based
compensation, the calculation of pension and other
postretirement benefits expense, and the valuation of acquired
businesses.
Reclassifications
We have made certain reclassifications to the 2009 and 2008
Consolidated Financial Statements with no impact to reported net
income (loss) in order to conform to the 2010 presentation,
including reclassifications associated with a discontinued
operation.
| Note 2: | Summary of Significant Accounting Policies |
Fair
Value Measurement
Accounting guidance for fair value measurements specifies a
hierarchy of valuation techniques based upon whether the inputs
to those valuation techniques reflect assumptions other market
participants would use based upon market data obtained from
independent sources or reflect our own assumptions of market
participant valuation. The hierarchy is broken down into three
levels based on the reliability of the inputs as follows:
| • | Level 1 — Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; |
36
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| • | 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 years ended December 31, 2010 and
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 9, 10, and 11) and derivatives and hedging
instruments (see Note 14). We did not have any transfers
between Level 1 and Level 2 fair value measurements
during the year.
Cash
and Cash Equivalents
We classify cash on hand and deposits in banks, including
commercial paper, money market accounts, and other investments
with an original maturity of three months or less, that we hold
from time to time, as cash and cash equivalents. We periodically
have cash equivalents consisting of short-term money market
funds and other investments. The primary objective of our
investment activities is to preserve our capital for the purpose
of funding operations. We do not enter into investments for
trading or speculative purposes. The fair values of these cash
equivalents as of December 31, 2010 and 2009 were
$148.1 million and $134.1 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 by reducing revenues and accounts receivable. 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 Adjustments
recognized against our gross accounts receivable balance at
December 31, 2010 and 2009 totaled $12.7 million and
$12.9 million, respectively.
We evaluate the collectability 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
$0.9 million, $1.4 million and $2.8 million in
2010, 2009, and 2008, respectively. The allowance for doubtful
accounts at December 31, 2010 and 2009 totaled
$2.7 million and $3.4 million, respectively.
37
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
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 sales and reduce the inventory to its net
realizable value. The allowances for excess and obsolete
inventories at December 31, 2010 and 2009 totaled
$22.3 million and $18.2 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. Depreciation expense is
included in costs of sales, selling, general and administrative
expenses, and research and development expenses in the
Consolidated Statement of Operations based on the specific
categorization and use of the underlying assets being
depreciated.
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 9).
Intangible
Assets
Our intangible assets consist of (a) definite-lived assets
subject to amortization such as developed technology, customer
relations, 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 25 years for certain of our customer relations.
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 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
38
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
recognized goodwill impairment charges totaling
$404.2 million. We did not recognize any goodwill
impairment charges in either 2009 or 2010. See Note 10 for
further discussion.
We also evaluate indefinite lived 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 2010, 2009, and 2008 we recognized trademark impairment
charges totaling $0.6 million, $2.7 million, and
$19.1 million respectively. See Note 10 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 2010 and 2008. See
Note 9 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, 2010 and
2009 totaled $32.1 million and $19.0 million,
respectively.
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 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
39
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Notes to
Consolidated Financial
Statements — (Continued)
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 inventories, 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) collectability is reasonably assured, and
(4) delivery has occurred. Delivery occurs in the period in
which the customer takes title and assumes the risks and rewards
of ownership of the products specified in the customer’s
purchase order or sales agreement. We record revenue net of
estimated rebates, price allowances, invoicing adjustments, and
product returns. We record revisions to these estimates in the
period in which the facts that give rise to each revision become
known.
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.
Research
and Development Costs
Research and development costs are expensed as incurred.
Advertising
Costs
Advertising costs are expensed as incurred. Advertising costs
were $15.6 million, $12.9 million, and
$18.6 million for 2010, 2009, and 2008, respectively.
Share-Based
Compensation
We compensate certain employees and non-employee directors 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
40
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Notes to
Consolidated Financial
Statements — (Continued)
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
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 on our financial statements. 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 we believe 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 would 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.
Current-Year
Adoption of Accounting Pronouncements
On January 1, 2010, we adopted changes issued by the
Financial Accounting Standards Board (FASB) with regard to the
disclosures of fair value measurements. This new guidance
requires disclosures about transfers into and out of
Level 1 and 2 fair value measurements, as well as separate
disclosures about purchases, sales, issuances, and settlements
relating to recurring Level 3 fair value measurements. It
also clarifies existing fair value disclosures about the level
of disaggregation and about inputs and valuation techniques used
to measure fair value. The adoption of this guidance did not
have a material impact on our disclosures.
| Note 3: | Acquisitions |
We acquired all of the assets and liabilities of the
Communications Products business of Thomas & Betts
(Communications Business) for cash of $76.9 million on
November 19, 2010. The Communications Business provides
drop and hard line connectors, hardware and grounding products,
and telecom enclosures and connectors for the broadband/CATV
markets. This acquisition improves our position as an
end-to-end
solution provider in the broadcast end market, including
broadband/CATV, security and surveillance, and professional
broadcasting. The results of operations of the Communications
Business have been included in our results of operations from
November 19, 2010, and are reported within the Americas
segment. The Communications Business acquisition was not
material to our financial position or results of operations
reported as of and for the year ended December 31,
41
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
2010. The following table summarizes the estimated fair value of
the assets acquired and the liabilities assumed as of
November 19, 2010 (in thousands).
|
Receivables
|
$ | 6,740 | ||
|
Inventories
|
10,882 | |||
|
Other current assets
|
227 | |||
|
Property, plant and equipment
|
15,773 | |||
|
Goodwill
|
28,986 | |||
|
Other intangible assets
|
22,900 | |||
|
Total assets
|
$ | 85,508 | ||
|
Accounts payable
|
$ | 6,546 | ||
|
Accrued liabilities
|
1,195 | |||
|
Other long-term liabilities
|
877 | |||
|
Total liabilities
|
8,618 | |||
|
Net assets
|
$ | 76,890 | ||
The above purchase price allocation has been determined
provisionally, and is subject to revision as additional
information about the fair value of individual assets and
liabilities becomes available. The Company is in the process of
finalizing the application of its accounting policies to the
acquired assets and third party valuations of certain tangible
and intangible assets. The provisional measurement of
inventories, property, plant, and equipment, intangible assets,
goodwill, and deferred income taxes are subject to change. Any
change in the acquisition date fair value of the acquired net
assets will change the amount of the purchase price allocable to
goodwill.
The fair value of acquired receivables is $6.8 million,
with a gross contractual amount of $7.0 million. The
Company does not expect to collect $0.2 million of the
acquired receivables.
A single estimate of fair value results from a complex series of
judgments about future events and uncertainties and relies
heavily on estimates and assumptions. The judgments we have used
in estimating the fair values assigned to each class of acquired
assets and assumed liabilities could materially affect the
results of our operations.
For purposes of the above allocation, the Company has estimated
a fair value adjustment for inventories based on the estimated
selling price of the
work-in-process
and finished goods acquired at the closing date less the sum of
the costs to complete the
work-in-process,
the costs of disposal, and a reasonable profit allowance for our
post acquisition selling efforts. We based our estimate of the
fair value for the acquired property, plant, and equipment on a
valuation study performed by a third party valuation firm. We
used an analysis utilizing various valuation methods including
discounted cash flows to estimate the fair value of the
identifiable intangible assets.
42
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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. The goodwill
related to the Communications Business is deductible for tax
purposes, and is primarily attributable to expected synergies
and the assembled workforce of the Communications Business.
Intangible assets related to the acquisition consisted of the
following:
|
Estimated
|
Amortization
|
|||||||
| Fair Value | Period | |||||||
| (In thousands) | (In years) | |||||||
|
Intangible assets subject to amortization:
|
||||||||
|
Customer relations
|
$ | 15,600 | 15.0 | |||||
|
Developed technologies
|
1,500 | 5.0 | ||||||
|
Backlog
|
200 | 0.1 | ||||||
|
Total intangible assets subject to amortization
|
17,300 | |||||||
|
Intangible assets not subject to amortization:
|
||||||||
|
Goodwill
|
28,986 | |||||||
|
Trademarks
|
5,600 | |||||||
|
Total intangible assets not subject to amortization
|
34,586 | |||||||
|
Total intangible assets
|
$ | 51,886 | ||||||
|
Weighted average amortization period
|
14.0 | |||||||
We acquired 100% of the outstanding shares of GarrettCom, Inc.
(GarrettCom) for cash of $56.8 million on December 5,
2010. We paid $47.3 million at closing and will pay the
remaining $9.5 million in increments of $2.6 million,
$1.7 million, and $5.2 million over the fifteen month
period after closing. None of these payments is contingent.
GarrettCom provides advanced industrial networking products and
smart grid solutions, including industrial grade switches,
routers, converters, serial communications, and security
software to the power utility, surveillance and security,
transportation, specialty industrial automation, and
telecommunications markets. The acquisition complements our
existing portfolio of industrial networking products and will
enable us to provide a more diverse set of end market solutions.
The results of operations of GarrettCom have been included in
our results of operations from December 5, 2010, and are
reported within the Americas segment. The GarrettCom acquisition
was not material to our financial position or results of
operations reported as of and for the year ended
December 31,
43
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
2010. The following table summarizes the fair value of the
assets acquired and the liabilities assumed as of
December 5, 2010 (in thousands).
|
Cash
|
$ | 6,143 | ||
|
Receivables
|
5,126 | |||
|
Inventories
|
7,428 | |||
|
Other current assets
|
1,059 | |||
|
Property, plant and equipment
|
523 | |||
|
Goodwill
|
26,391 | |||
|
Other intangible assets
|
19,200 | |||
|
Other noncurrent assets
|
2,767 | |||
|
Total assets
|
$ | 68,637 | ||
|
Accounts payable
|
$ | 1,176 | ||
|
Accrued liabilities
|
2,327 | |||
|
Current and deferred taxes
|
8,314 | |||
|
Total liabilities
|
11,817 | |||
|
Net assets
|
$ | 56,820 | ||
The above purchase price allocation has been determined
provisionally, and is subject to revision as additional
information about the fair value of individual assets and
liabilities becomes available. The Company is in the process of
finalizing the application of its accounting policies to the
acquired assets and third party valuations of certain tangible
and intangible assets. The provisional measurement of
inventories, intangible assets, goodwill, and deferred income
taxes are subject to change. Any change in the acquisition date
fair value of the acquired net assets will change the amount of
the purchase price allocable to goodwill.
The fair value of acquired receivables is $5.1 million,
with a gross contractual amount of $5.3 million. The
Company does not expect to collect $0.2 million of the
acquired receivables.
For purposes of the above allocation, the Company has estimated
a fair value adjustment for inventory based on the estimated
selling price of the
work-in-process
and finished goods acquired at the closing date less the sum of
the costs to complete the
work-in-process,
the costs of disposal, and a reasonable profit allowance for our
post acquisition selling efforts. We used an analysis utilizing
various valuation methods including discounted cash flows to
estimate the fair value of the identifiable intangible assets.
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 GarrettCom
44
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Notes to
Consolidated Financial
Statements — (Continued)
acquisition is deductible for tax purposes, and is primarily
attributable to expected synergies and the assembled workforce.
Intangible assets related to the acquisition consisted of the
following:
|
Estimated
|
Amortization
|
|||||||
| Fair Value | Period | |||||||
| (In thousands) | (In years) | |||||||
|
Intangible assets subject to amortization:
|
||||||||
|
Customer relations
|
$ | 11,800 | 15.0 | |||||
|
Developed technologies
|
3,400 | 4.0 | ||||||
|
Backlog
|
100 | 0.1 | ||||||
|
Total intangible assets subject to amortization
|
15,300 | |||||||
|
Intangible assets not subject to amortization:
|
||||||||
|
Goodwill
|
26,391 | |||||||
|
Trademarks
|
3,900 | |||||||
|
Total intangible assets not subject to amortization
|
30,291 | |||||||
|
Total intangible assets
|
$ | 45,591 | ||||||
|
Weighted average amortization period
|
12.5 | |||||||
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
acquisition was not material to our financial position or
results of operations reported as of and for the year ended
December 31, 2009.
| Note 4: | Discontinued Operations |
On December 16, 2010, we sold Trapeze for
$152.1 million, and recognized a pre-tax gain of
$88.3 million ($44.8 million after-tax). At the time
the transaction closed, the Company received $136.9 million
in cash with the remaining $15.2 million placed in escrow
as partial security for the Company’s indemnity obligations
under the transaction’s purchase and sale agreement. The
escrow arrangement terminates in December 2011. The Trapeze
operations comprised the entirety of the Wireless segment. We
have reported the gain from the sale of Trapeze as well as the
results of its operations in discontinued operations.
We acquired Trapeze on July 16, 2008, for cash of
$136.1 million. We financed the total purchase price with
borrowings under our revolving credit facility. In 2008, we
recognized impairment losses with respect to the goodwill and
other intangibles of $29.5 million and $3.3 million,
respectively.
During 2005, we completed the sale of our discontinued
communications cable operation in Phoenix, Arizona
(Communications). In connection with this sale and related tax
deductions, we established a reserve for uncertain tax
positions. We recognized interest expense of $1.0 million
($0.6 million net of tax) and $2.1 million
($1.4 million net of tax) in 2010 and 2009, respectively,
related to these uncertain tax positions. We have reported these
amounts 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.
45
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Operating results from discontinued operations for 2010, 2009,
and 2008 include the following revenues and loss before taxes.
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
|
Loss
|
Loss
|
Loss
|
||||||||||||||||||||||
|
before
|
before
|
before
|
||||||||||||||||||||||
| Revenues | Taxes | Revenues | Taxes | Revenues | Taxes | |||||||||||||||||||
|
Trapeze
|
$ | 57,339 | $ | (10,791 | ) | $ | 53,247 | $ | (28,324 | ) | $ | 14,020 | $ | (54,302 | ) | |||||||||
|
Communications
|
— | (978 | ) | — | (2,055 | ) | — | — | ||||||||||||||||
|
Total
|
$ | 57,339 | $ | (11,769 | ) | $ | 53,247 | $ | (30,379 | ) | $ | 14,020 | $ | (54,302 | ) | |||||||||
Listed below are the major classes of assets and liabilities
belonging to the discontinued operations of the Company at
December 31, 2009.
|
Assets:
|
||||
|
Receivables
|
$ | 11,785 | ||
|
Inventories
|
7,073 | |||
|
Other current assets
|
7,645 | |||
|
Property, plant and equipment, net
|
1,328 | |||
|
Intangible Assets
|
26,421 | |||
|
Goodwill
|
39,949 | |||
|
Tax assets
|
23,556 | |||
|
Other long-lived assets
|
15,572 | |||
|
Total assets
|
$ | 133,329 | ||
|
Liabilities:
|
||||
|
Accounts payable and accrued liabilities
|
$ | 8,507 | ||
|
Current deferred revenue
|
19,249 | |||
|
Other long term liabilities
|
3,481 | |||
|
Total liabilities
|
$ | 31,237 | ||
| Note 5: | Operating Segments and Geographic Information |
We have organized the enterprise around geographic areas. We
conduct our operations through three reported operating
segments — Americas, EMEA, and Asia Pacific. A fourth
segment — Wireless — has been retroactively
eliminated as a result of the reporting of the disposition of
Trapeze as a discontinued operation.
The segments design, manufacture, and market a portfolio of
cable, connectivity, and networking products in a variety of end
markets including industrial, enterprise, broadcast, and
consumer electronics. We sell the products manufactured by our
segments principally through distributors or directly to systems
integrators, original equipment manufacturers (OEMs), end-users,
and installers.
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.
46
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Operating
Segment Information
|
Asia
|
Total
|
|||||||||||||||
| Year Ended December 31, 2010 | Americas | EMEA | Pacific | Segments | ||||||||||||
| (In thousands) | ||||||||||||||||
|
External customer revenues
|
$ | 935,819 | $ | 365,796 | $ | 315,475 | $ | 1,617,090 | ||||||||
|
Affiliate revenues
|
48,899 | 76,485 | 62 | 125,446 | ||||||||||||
|
Total revenues
|
984,718 | 442,281 | 315,537 | 1,742,536 | ||||||||||||
|
Depreciation and amortization
|
(22,487 | ) | (15,692 | ) | (9,454 | ) | (47,633 | ) | ||||||||
|
Asset impairment
|
(2,029 | ) | (5,782 | ) | (27 | ) | (7,838 | ) | ||||||||
|
Operating income
|
133,984 | 63,969 | 40,147 | 238,100 | ||||||||||||
|
Total assets
|
620,284 | 422,990 | 285,431 | 1,328,705 | ||||||||||||
|
Acquisition of property, plant and equipment
|
13,421 | 8,482 | 2,460 | 24,363 | ||||||||||||
|
Asia
|
Total
|
|||||||||||||||
| Year Ended December 31, 2009 | Americas | EMEA | Pacific | Segments | ||||||||||||
| (In thousands) | ||||||||||||||||
|
External customer revenues
|
$ | 766,569 | $ | 345,197 | $ | 250,250 | $ | 1,362,016 | ||||||||
|
Affiliate revenues
|
43,489 | 55,256 | — | 98,745 | ||||||||||||
|
Total revenues
|
810,058 | 400,453 | 250,250 | 1,460,761 | ||||||||||||
|
Depreciation and amortization
|
(20,331 | ) | (18,115 | ) | (9,259 | ) | (47,705 | ) | ||||||||
|
Asset impairment
|
(3,691 | ) | (23,020 | ) | (1,040 | ) | (27,751 | ) | ||||||||
|
Operating income (loss)
|
117,324 | (36,828 | ) | 28,794 | 109,290 | |||||||||||
|
Total assets
|
516,372 | 461,503 | 258,325 | 1,236,200 | ||||||||||||
|
Acquisition of property, plant and equipment
|
14,501 | 9,364 | 7,891 | 31,756 | ||||||||||||
|
Asia
|
Total
|
|||||||||||||||
| Year Ended December 31, 2008 | Americas | EMEA | Pacific | Segments | ||||||||||||
| (In thousands) | ||||||||||||||||
|
External customer revenues
|
$ | 1,041,247 | $ | 577,672 | $ | 373,249 | $ | 1,992,168 | ||||||||
|
Affiliate revenues
|
61,568 | 85,639 | 111 | 147,318 | ||||||||||||
|
Total revenues
|
1,102,815 | 663,311 | 373,360 | 2,139,486 | ||||||||||||
|
Depreciation and amortization
|
(21,794 | ) | (19,748 | ) | (9,080 | ) | (50,622 | ) | ||||||||
|
Goodwill impairment
|
(35,509 | ) | (243,460 | ) | (102,774 | ) | (381,743 | ) | ||||||||
|
Other asset impairment
|
(15,314 | ) | (9,901 | ) | (9,273 | ) | (34,488 | ) | ||||||||
|
Operating income (loss)
|
106,893 | (212,053 | ) | (66,093 | ) | (171,253 | ) | |||||||||
|
Total assets
|
425,895 | 526,727 | 273,543 | 1,226,165 | ||||||||||||
|
Acquisition of property, plant and equipment
|
11,243 | 10,693 | 20,702 | 42,638 | ||||||||||||
47
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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Total segment operating income (loss)
|
$ | 238,100 | $ | 109,290 | $ | (171,253 | ) | |||||
|
Corporate expenses
|
(62,821 | ) | (41,378 | ) | (74,889 | ) | ||||||
|
Eliminations
|
(46,090 | ) | (31,542 | ) | (35,403 | ) | ||||||
|
Total operating income (loss)
|
129,189 | 36,370 | (281,545 | ) | ||||||||
|
Interest expense
|
(49,826 | ) | (41,962 | ) | (37,908 | ) | ||||||
|
Interest income
|
1,184 | 1,043 | 5,285 | |||||||||
|
Other income (expense)
|
1,465 | (1,541 | ) | — | ||||||||
|
Income tax expense
|
(12,714 | ) | (1,175 | ) | (2,482 | ) | ||||||
|
Income (loss) from continuing operations
|
69,298 | (7,265 | ) | (316,650 | ) | |||||||
|
Loss from discontinued operations, net of tax
|
(5,686 | ) | (17,636 | ) | (45,176 | ) | ||||||
|
Gain from disposal of discontinued operations, net of tax
|
44,847 | — | — | |||||||||
|
Net income (loss)
|
$ | 108,459 | $ | (24,901 | ) | $ | (361,826 | ) | ||||
Below are reconciliations of other segment measures to the
consolidated totals.
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Total segment depreciation and amortization
|
$ | (47,633 | ) | $ | (47,705 | ) | $ | (50,622 | ) | |||
|
Corporate depreciation and amortization
|
(1,159 | ) | (1,114 | ) | (702 | ) | ||||||
|
Total depreciation and amortization
|
$ | (48,792 | ) | $ | (48,819 | ) | $ | (51,324 | ) | |||
|
Total segment goodwill impairment
|
$ | — | $ | — | $ | (381,743 | ) | |||||
|
Corporate goodwill impairment
|
— | — | (22,453 | ) | ||||||||
|
Total goodwill impairment
|
$ | — | $ | — | $ | (404,196 | ) | |||||
|
Total segment other asset impairment
|
$ | (7,838 | ) | $ | (27,751 | ) | $ | (34,488 | ) | |||
|
Corporate other asset impairment
|
(8,736 | ) | — | (5,000 | ) | |||||||
|
Total other asset impairment
|
$ | (16,574 | ) | $ | (27,751 | ) | $ | (39,488 | ) | |||
|
Total segment assets
|
$ | 1,328,705 | $ | 1,236,200 | $ | 1,226,165 | ||||||
|
Corporate assets
|
367,779 | 251,049 | 304,992 | |||||||||
|
Discontinued operations
|
— | 133,329 | 127,231 | |||||||||
|
Total assets
|
$ | 1,696,484 | $ | 1,620,578 | $ | 1,658,388 | ||||||
|
Total segment acquisition of property, plant and equipment
|
$ | 24,363 | $ | 31,756 | $ | 42,638 | ||||||
|
Corporate acquisition of property, plant and equipment
|
3,655 | 8,110 | 10,857 | |||||||||
|
Discontinued operations acquisition of property, plant and
equipment
|
176 | 511 | 66 | |||||||||
|
Total acquisition of property, plant and equipment
|
$ | 28,194 | $ | 40,377 | $ | 53,561 | ||||||
48
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Product
Group Information
Revenues by major product group were as follows:
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Cable products
|
$ | 1,220,415 | $ | 1,039,541 | $ | 1,518,044 | ||||||
|
Networking products
|
196,674 | 178,714 | 251,158 | |||||||||
|
Connectivity products
|
200,001 | 143,761 | 222,966 | |||||||||
|
Total revenues
|
$ | 1,617,090 | $ | 1,362,016 | $ | 1,992,168 | ||||||
The main categories of cable products are (1) copper
cables, including shielded and unshielded twisted pair cables,
coaxial cables, and stranded cables, (2) fiber optic
cables, which transmit light signals through glass or plastic
fibers, and (3) composite cables, which are combinations of
multiconductor, coaxial, and fiber optic cables jacketed
together or otherwise joined together to serve complex
applications and provide ease of installation. 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.
Geographic
Information
The following table identifies by region of the world revenues
based on the location of the customer and long-lived assets
based on physical location.
|
United
|
Canada &
|
Europe, Africa
|
Asia
|
|||||||||||||||||
| States | Latin America | & Middle East | Pacific | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Year ended December 31, 2010
|
||||||||||||||||||||
|
Revenues
|
$ | 703,836 | $ | 208,694 | $ | 371,933 | $ | 332,627 | $ | 1,617,090 | ||||||||||
|
Percent of total revenues
|
43 | % | 13 | % | 23 | % | 21 | % | 100 | % | ||||||||||
|
Long-lived assets
|
$ | 133,864 | $ | 17,858 | $ | 125,762 | $ | 64,204 | $ | 341,688 | ||||||||||
|
Year ended December 31, 2009
|
||||||||||||||||||||
|
Revenues
|
$ | 587,580 | $ | 166,907 | $ | 342,045 | $ | 265,484 | $ | 1,362,016 | ||||||||||
|
Percent of total revenues
|
43 | % | 12 | % | 26 | % | 19 | % | 100 | % | ||||||||||
|
Long-lived assets
|
$ | 131,098 | $ | 20,121 | $ | 140,430 | $ | 68,564 | $ | 360,213 | ||||||||||
|
Year ended December 31, 2008
|
||||||||||||||||||||
|
Revenues
|
$ | 835,084 | $ | 192,474 | $ | 564,446 | $ | 400,164 | $ | 1,992,168 | ||||||||||
|
Percent of total revenues
|
42 | % | 10 | % | 28 | % | 20 | % | 100 | % | ||||||||||
|
Long-lived assets
|
$ | 133,472 | $ | 16,223 | $ | 154,224 | $ | 73,460 | $ | 377,419 | ||||||||||
Major
Customer
Revenues generated from sales to Anixter International Inc.,
primarily in the Americas segment, were $229.0 million (14%
of revenue), $239.7 million (18% of revenue), and
$329.3 million (17% of revenues) for 2010, 2009, and 2008
respectively.
49
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 6: | Equity Method Investment |
The Company has a 50% ownership interest in Xuzhou Hirschmann
Electronics Co., Ltd. (Hirschmann JV), which we acquired in
connection with our 2007 acquisition of Hirschmann Automation
and Control GmbH. The Hirschmann JV is an entity located in
China and supplies load-moment indicators to the industrial
crane market as does one of the business units of the EMEA
segment. We account for this investment using the equity method
of accounting. The results of our investment in the Hirschmann
JV are included in the EMEA segment.
Summary financial information for the Hirschmann JV is as
follows:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Current assets
|
$ | 45,417 | $ | 36,789 | $ | 26,362 | ||||||
|
Noncurrent assets
|
3,683 | 3,799 | 2,796 | |||||||||
|
Current liabilities
|
18,048 | 18,890 | 11,770 | |||||||||
|
Noncurrent liabilities
|
197 | 192 | — | |||||||||
|
Revenues
|
61,881 | 47,919 | 41,111 | |||||||||
|
Gross profit
|
30,513 | 19,931 | 17,095 | |||||||||
|
Operating income
|
24,863 | 15,947 | 13,857 | |||||||||
|
Net income
|
23,982 | 15,318 | 13,857 | |||||||||
|
Net income attributable to the Company after certain adjustments
|
$ | 11,940 | $ | 6,405 | $ | 6,326 | ||||||
The carrying value recorded in “Other long-lived
assets” on the Company’s consolidated balance sheet of
its investment in the Hirschmann JV is $36.8 million. The
difference between this carrying value and the Company’s
share of the Hirschmann JV’s net assets is primarily
attributable to goodwill.
The Company had sales of $11.9 million, $9.2 million,
and $15.7 million to the Hirschmann JV in 2010, 2009, and
2008, respectively. The Company received $11.9 million,
$6.2 million, and $3.1 million in dividends from the
Hirschmann JV in 2010, 2009, and 2008, respectively. The Company
had receivables from the Hirschmann JV at December 31, 2010
and 2009 of $1.3 million and $1.2 million,
respectively.
| Note 7: | Income (Loss) Per Share |
The following table presents the basis of the income (loss) per
share computation:
| For The Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Numerator for basic and diluted income (loss) per share:
|
||||||||||||
|
Income (loss) from continuing operations
|
$ | 69,298 | $ | (7,265 | ) | $ | (316,650 | ) | ||||
|
Loss from discontinued operations, net of tax
|
$ | (5,686 | ) | $ | (17,636 | ) | $ | (45,176 | ) | |||
|
Gain from disposal of discontinued operations, net of tax
|
44,847 | — | — | |||||||||
|
Net income (loss)
|
$ | 108,459 | $ | (24,901 | ) | $ | (361,826 | ) | ||||
|
Denominator:
|
||||||||||||
|
Denominator for basic income (loss) per share —
weighted average shares
|
46,805 | 46,594 | 44,692 | |||||||||
|
Effect of dilutive common stock equivalents
|
978 | — | — | |||||||||
|
Denominator for diluted income (loss) per share —
adjusted weighted average shares
|
47,783 | 46,594 | 44,692 | |||||||||
50
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
For the years ended December 31, 2010, 2009 and 2008,
diluted weighted average shares outstanding do not include
outstanding equity awards of 1.3 million, 3.4 million,
and 2.8 million, respectively, because to do so would have
been anti-dilutive.
| Note 8: | Inventories |
The major classes of inventories were as follows:
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Raw materials
|
$ | 64,146 | $ | 51,079 | ||||
|
Work-in-process
|
42,193 | 32,174 | ||||||
|
Finished goods
|
87,982 | 75,080 | ||||||
|
Perishable tooling and supplies
|
3,615 | 4,081 | ||||||
|
Gross inventories
|
197,936 | 162,414 | ||||||
|
Obsolescence and other reserves
|
(22,277 | ) | (18,225 | ) | ||||
|
Net inventories
|
$ | 175,659 | $ | 144,189 | ||||
| Note 9: | Property, Plant and Equipment |
The carrying values of property, plant and equipment were as
follows:
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Land and land improvements
|
$ | 34,794 | $ | 37,351 | ||||
|
Buildings and leasehold improvements
|
150,133 | 135,562 | ||||||
|
Machinery and equipment
|
375,784 | 385,604 | ||||||
|
Computer equipment and software
|
61,988 | 55,731 | ||||||
|
Construction in process
|
25,702 | 32,521 | ||||||
|
Gross property, plant and equipment
|
648,401 | 646,769 | ||||||
|
Accumulated depreciation
|
(369,535 | ) | (348,511 | ) | ||||
|
Net property, plant and equipment
|
$ | 278,866 | $ | 298,258 | ||||
Disposals
During 2010, we sold our wireless networking business that
comprised the entirety of our former Wireless segment. See
Note 4. We also sold certain real estate of the EMEA
segment for $1.8 million. There was no gain or loss
recognized on the sale.
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 2010, we sold the remaining 5%
interest in the business for less than $0.1 million. There
was no gain or loss recognized on the sale.
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.
51
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
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.
Impairment
During 2010, we recognized an impairment loss on property, plant
and equipment of $1.0 million in the operating results of
our Americas segment due to the decision to close one of our
manufacturing facilities in Leominster, Massachusetts. We also
determined that certain long-lived assets were impaired and
recognized impairment losses on property, plant and equipment of
$0.3 million and $5.8 million in the Americas and EMEA
segments, respectively. The impairment loss recognized in the
EMEA segment was with respect to real estate retained from the
German cable business sold in 2009 and leased to the purchasers.
We estimated the fair values of these assets based upon quoted
prices in active markets or quoted prices for similar assets.
We also recognized during 2010 impairment losses of
$0.2 million and $8.7 million in the Americas segment
and as a corporate expense, respectively, in connection with our
decision to alter our approach with respect to customer
relationship management tools and our overall enterprise
technology systems and to abandon the use of these assets.
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 our decisions to consolidate capacity and
dispose of excess machinery and equipment. We estimated the fair
values of these assets 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.
Depreciation
Expense
We recognized depreciation expense in income from continuing
operations of $37.6 million, $38.9 million, and
$41.4 million, in 2010, 2009, and 2008, respectively.
52
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 10: | Intangible Assets |
The carrying values of intangible assets were as follows:
| December 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
|
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
| Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Goodwill
|
$ | 322,556 | $ | — | $ | 322,556 | $ | 273,126 | $ | — | $ | 273,126 | ||||||||||||
|
Intangible assets subject to amortization:
|
||||||||||||||||||||||||
|
Customer relations
|
$ | 107,503 | (19,711 | ) | $ | 87,792 | $ | 81,746 | (16,096 | ) | $ | 65,650 | ||||||||||||
|
Developed technology
|
36,508 | (20,647 | ) | 15,861 | 32,970 | (14,730 | ) | 18,240 | ||||||||||||||||
|
Backlog
|
2,983 | (2,983 | ) | — | 2,888 | (2,857 | ) | 31 | ||||||||||||||||
|
Total intangible assets subject to amortization
|
146,994 | (43,341 | ) | 103,653 | 117,604 | (33,683 | ) | 83,921 | ||||||||||||||||
|
Trademarks
|
40,167 | — | 40,167 | 32,671 | — | 32,671 | ||||||||||||||||||
|
Intangible assets
|
$ | 187,161 | $ | (43,341 | ) | $ | 143,820 | $ | 150,275 | $ | (33,683 | ) | $ | 116,592 | ||||||||||
Segment
Allocation of Goodwill and Trademarks
The changes in the carrying amount of goodwill are as follows:
|
Asia
|
||||||||||||||||||||
| Americas | EMEA | Pacific | Corporate | Consolidated | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Balance at December 31, 2008
|
$ | 61,693 | $ | 75,323 | $ | — | $ | 129,815 | $ | 266,831 | ||||||||||
|
Acquisitions and purchase accounting adjustments
|
11,287 | (6,130 | ) | — | — | $ | 5,157 | |||||||||||||
|
Translation impact
|
— | 1,138 | — | — | 1,138 | |||||||||||||||
|
Balance at December 31, 2009
|
72,980 | 70,331 | — | 129,815 | 273,126 | |||||||||||||||
|
Acquisitions and purchase accounting adjustments
|
55,299 | — | — | — | 55,299 | |||||||||||||||
|
Translation impact
|
— | (5,869 | ) | — | — | (5,869 | ) | |||||||||||||
|
Balance at December 31, 2010
|
$ | 128,279 | $ | 64,462 | $ | — | $ | 129,815 | $ | 322,556 | ||||||||||
We believe that corporate goodwill benefits the entire Company
because it represents acquirer-specific synergies unique to a
previous acquisition.
53
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
The changes in the carrying amount of trademarks are as follows:
|
Asia
|
||||||||||||||||
| Americas | EMEA | Pacific | Consolidated | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Balance at December 31, 2008
|
$ | 8,994 | $ | 19,610 | $ | 5,239 | $ | 33,843 | ||||||||
|
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 | 32,671 | ||||||||||||
|
Acquisitions
|
9,500 | — | — | 9,500 | ||||||||||||
|
Impairment
|
(570 | ) | — | — | (570 | ) | ||||||||||
|
Translation impact
|
— | (1,414 | ) | (20 | ) | (1,434 | ) | |||||||||
|
Balance at December 31, 2010
|
$ | 19,424 | $ | 15,524 | $ | 5,219 | $ | 40,167 | ||||||||
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
$404.2 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 2010 or 2009. As of December 31,
2010, the estimated fair values of all reporting units with
goodwill were substantially in excess of their respective
carrying values.
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 2010, 2009 and 2008, the carrying
amounts of certain trademarks exceeded their respective fair
values resulting in trademark impairment charges of
$0.6 million, $2.7 million and $19.1 million,
respectively. As of December 31, 2010, the estimated fair
values of the remaining trademarks were substantially in excess
of their respective carrying values.
Amortization
Expense
We recognized amortization expense in income from continuing
operations of $11.2 million, $9.9 million, and
$9.9 million in 2010, 2009, and 2008, respectively. We
expect to recognize annual amortization expense of
$11.6 million in 2011, $9.2 million in 2012,
$7.7 million in 2013, $6.9 million in 2014, and
$6.0 million in 2015.
| Note 11: | 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, 2010 and 2009.
54
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 12: | Accrued Liabilities |
The carrying value of accrued liabilities was as follows:
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Wages, severance and related taxes
|
$ | 40,133 | $ | 44,771 | ||||
|
Employee benefits
|
17,390 | 16,363 | ||||||
|
Accrued rebates
|
32,138 | 19,045 | ||||||
|
Other (individual items less than 5% of total current
liabilities)
|
56,179 | 37,027 | ||||||
|
Accrued liabilities
|
$ | 145,840 | $ | 117,206 | ||||
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 selling, general and administrative
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 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, and
$1.7 million in research and development). During 2010, we
continued to implement our plan to streamline these functions
and recognized severance costs primarily in the Americas segment
totaling $1.1 million (recorded in cost of sales) related
to these restructuring activities and the closure of one of our
two manufacturing plants in Leominster, Massachusetts. We do not
expect to recognize any additional severance costs related to
these restructuring activities.
55
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.
|
Global
|
||||
| Restructuring | ||||
| (In thousands) | ||||
|
Balance at December 31, 2007
|
$ | — | ||
|
New charges:
|
||||
|
Ongoing benefits arrangement
|
26,290 | |||
|
Cash payments
|
(2,304 | ) | ||
|
Foreign currency translation
|
1,124 | |||
|
Other adjustments
|
(153 | ) | ||
|
Balance at December 31, 2008
|
24,957 | |||
|
New charges:
|
||||
|
Ongoing benefits arrangement
|
28,389 | |||
|
Cash payments
|
(43,268 | ) | ||
|
Foreign currency translation
|
2,795 | |||
|
Other adjustments
|
(613 | ) | ||
|
Balance at December 31, 2009
|
12,260 | |||
|
New charges:
|
||||
|
Ongoing benefits arrangement
|
1,104 | |||
|
Cash payments
|
(10,734 | ) | ||
|
Foreign currency translation
|
(1,003 | ) | ||
|
Other adjustments
|
(888 | ) | ||
|
Balance at December 31, 2010
|
$ | 739 | ||
We continue to review our business strategies and evaluate
further restructuring actions. This could result in additional
severance and other charges in future periods.
| Note 13: |
|
The carrying values of long-term debt and other borrowing
arrangements were as follows:
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (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%
|
201,155 | 193,942 | ||||||
|
Senior secured credit facility, matures in 2013, interest based
on
|
||||||||
|
LIBOR or the prime rate
|
— | 46,268 | ||||||
|
Total debt and other borrowing arrangements
|
551,155 | 590,210 | ||||||
|
Less current maturities
|
— | (46,268 | ) | |||||
|
Long-term debt and other borrowing arrangements
|
$ | 551,155 | $ | 543,942 | ||||
56
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Senior
Subordinated Notes
In the third quarter of 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 semi-annually on June 15 and
December 15. We used the $193.7 million in proceeds of
this debt offering to repay amounts drawn under our senior
secured credit facility. See Note 14 for a discussion of
changes to the carrying value of the notes due to hedge
accounting.
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 semi-annually 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 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. The amendment
also alters the level of the total leverage ratio covenant,
increases the cost of borrowing under the facility, and inserts
an asset coverage ratio covenant when the total leverage ratio
is in excess of certain levels. As of December 31, 2010, we
were in compliance with all of the amended covenants of the
facility.
As of December 31, 2010, there were no outstanding
borrowings under the facility, and we had $220.2 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.
Maturities
Maturities on outstanding long-term debt and other borrowings
during each of the five years subsequent to December 31,
2010 are as follows (in thousands):
|
2011
|
$ | — | ||
|
2012
|
— | |||
|
2013
|
— | |||
|
2014
|
— | |||
|
2015
|
— | |||
|
Thereafter
|
551,155 | |||
| $ | 551,155 | |||
| Note 14: | Derivatives and Hedging Activities |
We are exposed to various market risks, including fluctuations
in interest rates. At various times, we use interest rate
agreements to manage our costs and reduce our exposure to
interest rate risk. During 2010, we entered into
$200.0 million notional amount of interest rate swap
agreements that were scheduled to expire in 2019. The interest
rate swaps were receive-fixed, pay-variable rate, and they
allowed us to adjust our relative proportion of fixed and
floating rate debt. We also entered into a separate
$200.0 million notional amount interest rate cap
57
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
agreement, which capped the variable rate that we were exposed
to in the interest rate swaps. We do not hold or issue any
derivative instrument for trading or speculative purposes.
These agreements, which represent our derivative instruments,
exposed us to credit risk to the extent that the counterparties
to our interest rate agreements would have been unable to meet
the terms of the agreements. We sought to mitigate such risks by
limiting the counterparties to major financial institutions and
by executing our agreements across multiple counterparties.
The interest rate swaps were formally designated and qualified
as fair value hedges. We performed a quarterly assessment of the
effectiveness of the hedge relationship, and we measured and
recognized any hedge ineffectiveness in earnings. The interest
rate swaps were recorded at fair value in the Consolidated
Balance Sheets. Gains and losses due to changes in fair value of
the interest rate swaps substantially offset changes in the fair
value of the hedged portion of the underlying debt. Changes in
fair value of both the interest rate swaps and the hedged
portion of the underlying debt were recognized in interest
expense in the Consolidated Statements of Operations.
The interest rate cap was not designated as a hedging
instrument. It was recorded at fair value in the Consolidated
Balance Sheets, and changes in fair value of the interest rate
cap were recognized in interest expense in the Consolidated
Statements of Operations.
The gains (losses) for the year ended December 31, 2010
attributed to our derivatives designated as hedging instruments
are summarized in the table below:
|
Year Ended
|
||||||||
| December 31, 2010 | ||||||||
|
Income Statement
|
Gain on interest
|
Loss on
|
||||||
| Classification | rate swaps | borrowings | ||||||
| (In thousands) | ||||||||
|
Interest Expense
|
$ | 8,522 | $ | (7,109 | ) | |||
The difference between the gain on the interest rate swaps and
the loss on borrowings represents hedge ineffectiveness of
$1.4 million for the year ended December 31, 2010.
The loss for the year ended December 31, 2010 attributed to
our interest rate cap, our derivative without hedging
designation, was $2.9 million, classified within interest
expense within the Consolidated Statements of Operations.
There were no gains (losses) related to derivatives and hedging
instruments for the years ended December 31, 2009 and 2008,
as there were no instruments in place.
Interest rate derivatives are valued using a present value
calculation based on an implied
3-month
forward LIBOR curve (adjusted for non-performance risk) and are
classified within level 2 of the fair value hierarchy.
During 2010, we terminated all of the interest rate swap
agreements and the interest rate cap. We recognized a loss on
the termination of our derivative instruments of
$1.4 million. We received cash of $4.2 million related
to the termination of our derivative instruments, which is
presented as a financing activity in the Consolidated Statements
of Cash Flows. As a result of the termination, there were no
outstanding derivatives as of December 31, 2010. There were
also no outstanding derivatives as of December 31, 2009.
The $7.1 million adjustment recorded to increase the
carrying value of the underlying debt as a result of hedge
accounting will be amortized as a reduction of interest expense
over the remaining life of the underlying debt using the
effective interest method.
The net effect of the gains and losses on our derivative
instruments and the termination of our derivative instruments
during 2010 was a loss of $2.9 million, which was
recognized in interest expense.
58
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 15: | Income Taxes |
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Income (loss) from continuing operations before taxes:
|
||||||||||||
|
United States operations
|
$ | 26,162 | $ | (161 | ) | $ | (41,978 | ) | ||||
|
Foreign operations
|
55,850 | (5,929 | ) | (272,190 | ) | |||||||
| $ | 82,012 | $ | (6,090 | ) | $ | (314,168 | ) | |||||
|
Income tax expense (benefit):
|
||||||||||||
|
Currently payable:
|
||||||||||||
|
United States federal
|
$ | — | $ | 9,316 | $ | 6,461 | ||||||
|
United States state and local
|
1,135 | 2,932 | 3,379 | |||||||||
|
Foreign
|
17,719 | 5,881 | 19,627 | |||||||||
| 18,854 | 18,129 | 29,467 | ||||||||||
|
Deferred:
|
||||||||||||
|
United States federal
|
(5,882 | ) | (7,308 | ) | (3,769 | ) | ||||||
|
United States state and local
|
(341 | ) | (558 | ) | (944 | ) | ||||||
|
Foreign
|
83 | (9,088 | ) | (22,272 | ) | |||||||
| (6,140 | ) | (16,954 | ) | (26,985 | ) | |||||||
|
Total income tax expense
|
$ | 12,714 | $ | 1,175 | $ | 2,482 | ||||||
In addition to the above income tax expense associated with
continuing operations, the Company also recorded income tax
expense (benefit) associated with discontinued operations of
$37.8 million, $(12.8) million, and
$(9.1) million in 2010, 2009, and 2008, respectively.
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Effective income tax rate reconciliation from continuing
operations:
|
||||||||||||
|
United States federal statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
State and local income taxes
|
0.9 | % | (22.3 | )% | (0.9 | )% | ||||||
|
Impact of change in deferred tax asset valuation allowance
|
(1.1 | )% | (81.1 | )% | 1.3 | % | ||||||
|
Impact of change in tax contingencies
|
0.7 | % | (33.9 | )% | (0.3 | )% | ||||||
|
Foreign income tax rate differences
|
(15.6 | )% | 138.3 | % | (30.9 | )% | ||||||
|
Domestic permanent differences & tax credits
|
(4.4 | )% | (55.3 | )% | (5.0 | )% | ||||||
| 15.5 | % | (19.3 | )% | (0.8 | )% | |||||||
Deferred income taxes have been established for differences in
the basis of assets and liabilities for financial statement and
tax reporting purposes as adjusted for the tax sharing agreement
with Cooper Industries Ltd.. This agreement requires us to pay
Cooper most of the tax benefits resulting from basis adjustments
arising from the initial public offering of our stock 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 2010, 2009, and 2008 by
$0.0 million, $0.0 million, and $1.5 million,
respectively. Included in taxes paid for 2010, 2009, and 2008
were $0.0 million, $0.0 million, and
$1.3 million, respectively, paid to Cooper in accordance
with the tax agreement.
59
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Components of deferred income tax balances:
|
||||||||
|
Deferred income tax liabilities:
|
||||||||
|
Plant, equipment and intangibles
|
$ | (49,394 | ) | $ | (46,096 | ) | ||
|
Deferred income tax assets:
|
||||||||
|
Postretirement, pensions, and stock compensation
|
24,311 | 23,154 | ||||||
|
Reserves and accruals
|
11,463 | 19,682 | ||||||
|
Net operating loss and tax credit carryforwards
|
71,708 | 54,543 | ||||||
|
Valuation allowances
|
(21,050 | ) | (22,007 | ) | ||||
| 86,432 | 75,372 | |||||||
|
Net deferred income tax asset
|
$ | 37,038 | $ | 29,276 | ||||
In 2010, the change in deferred income tax assets stems
primarily from the utilization of net operating losses as a
result of the disposition of Trapeze in December 2010 (see
Note 4).
As of December 31, 2010, we had $221.9 million of net
operating loss carryforwards and $69.2 million of tax
credit carryforwards. Unless otherwise utilized, net operating
loss carryforwards will expire as follows: $1.3 million in
2011, $17.4 million in 2012, $72.4 million between
2013 and 2015, and $69.9 million between 2016 and 2029. Net
operating losses with an indefinite carryforward period total
$60.9 million. The net operating loss carryforwards
expiring in 2011 and 2012 will not have a significant impact on
the effective tax rate primarily because of deferred tax asset
valuation allowances recorded for those loss carryforwards. Of
the remaining $203.2 million in net operating loss
carryforwards, we have determined, based on the weight of all
available evidence, both positive and negative, that we will
utilize $142.1 million of these net operating loss
carryforwards within their respective expiration periods.
Unless otherwise utilized, tax credit carryforwards of
$67.5 million will expire between 2016 and 2020. Tax credit
carryforwards with an indefinite carryforward period total
$1.7 million. We have determined, based on the weight of
all available evidence, both positive and negative, that we will
utilize all of these tax credit carryforwards.
In general, it is the practice and the intention of the Company
to reinvest the earnings of its
non-U.S. subsidiaries
in those operations. As a result, as of December 31, 2010,
the Company has not made a provision for U.S. or additional
foreign withholding taxes on approximately $291.7 million
of the excess of the amount for financial reporting over the tax
basis of investments in foreign subsidiaries that are
essentially permanent in duration. Generally, such amounts
become subject to U.S. taxation upon the remittance of
dividends and under certain other circumstances. It is not
practical to estimate the amount of the deferred tax liability
related to investments in these foreign subsidiaries.
In 2010, we recognized a $3.7 million decrease to reserves
for uncertain tax positions. A reconciliation of the beginning
and ending gross amount of unrecognized tax benefits is as
follows (in thousands):
| 2010 | 2009 | |||||||
|
Balance at beginning of year
|
$ | 27,778 | $ | 24,657 | ||||
|
Additions based on tax positions related to the current year
|
78 | 786 | ||||||
|
Additions for tax positions of prior years
|
4,119 | 4,331 | ||||||
|
Reductions for tax positions of prior years —
Settlement
|
(6,486 | ) | (1,529 | ) | ||||
|
Reductions for tax positions of prior years — Statute
of limitations
|
(1,367 | ) | (467 | ) | ||||
|
Balance at end of year
|
$ | 24,122 | $ | 27,778 | ||||
60
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
The balance of $24.1 million at December 31, 2010,
includes tax positions in the amount of $24.1 million that,
if recognized, would affect the effective tax rate.
As of December 31, 2010, we believe it is reasonably
possible that the total amount of unrecognized tax benefits may
significantly change within the next twelve months, primarily
attributable to the settlement of a foreign income tax audit and
the expiration of several statutes of limitations. We estimate
the range of reasonably possible changes to our uncertain tax
positions to be reduction of up to $4.3 million.
Our practice is to recognize interest accrued related to
uncertain tax positions in interest expense and penalties in
operating expenses. During 2010, 2009, and 2008 we recognized
approximately $(0.6) million, $2.8 million, and
$1.2 million, respectively, in interest expense (income)
and penalties. We have approximately $3.8 million,
$4.6 million, and $1.8 million for the payment of
interest and penalties accrued at December 31, 2010, 2009,
and 2008, respectively.
Our federal, state, and foreign income tax returns for the tax
years 2004 and later remain subject to examination by the
Internal Revenue Service and by various state and foreign taxing
authorities.
| Note 16: | 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 were 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.
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 2010, 2009, and
2008 was $8.1 million, $6.8 million, and
$9.1 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.
61
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
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, | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Change in benefit obligation:
|
||||||||||||||||
|
Benefit obligation, beginning of year
|
$ | (222,948 | ) | $ | (197,070 | ) | $ | (44,232 | ) | $ | (36,599 | ) | ||||
|
Service cost
|
(4,994 | ) | (4,949 | ) | (142 | ) | (91 | ) | ||||||||
|
Interest cost
|
(11,508 | ) | (12,163 | ) | (2,305 | ) | (2,330 | ) | ||||||||
|
Participant contributions
|
(125 | ) | (130 | ) | (12 | ) | (17 | ) | ||||||||
|
Plan amendments
|
— | 1,272 | — | — | ||||||||||||
|
Actuarial loss
|
(7,637 | ) | (19,157 | ) | (553 | ) | (3,772 | ) | ||||||||
|
Other
|
— | — | (138 | ) | — | |||||||||||
|
Special termination benefits
|
(20 | ) | — | — | — | |||||||||||
|
Foreign currency exchange rate changes
|
4,934 | (5,788 | ) | (1,304 | ) | (3,980 | ) | |||||||||
|
Benefits paid
|
15,492 | 15,037 | 2,769 | 2,557 | ||||||||||||
|
Benefit obligation, end of year
|
$ | (226,805 | ) | $ | (222,948 | ) | $ | (45,916 | ) | $ | (44,232 | ) | ||||
| Pension Benefits | Other Benefits | |||||||||||||||
| Years Ended December 31, | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Change in Plan Assets:
|
||||||||||||||||
|
Fair value of plan assets, beginning of year
|
$ | 143,491 | $ | 114,051 | $ | — | $ | — | ||||||||
|
Actual return on plan assets
|
18,628 | 22,361 | — | — | ||||||||||||
|
Employer contributions
|
14,317 | 17,077 | 2,619 | 2,540 | ||||||||||||
|
Plan participant contributions
|
125 | 130 | 12 | 17 | ||||||||||||
|
Other
|
— | — | 138 | — | ||||||||||||
|
Foreign currency exchange rate changes
|
(705 | ) | 4,909 | — | — | |||||||||||
|
Benefits paid
|
(15,492 | ) | (15,037 | ) | (2,769 | ) | (2,557 | ) | ||||||||
|
Fair value of plan assets, end of year
|
$ | 160,364 | $ | 143,491 | $ | — | $ | — | ||||||||
|
Funded status, end of year
|
$ | (66,441 | ) | $ | (79,457 | ) | $ | (45,917 | ) | $ | (44,232 | ) | ||||
| Pension Benefits | Other Benefits | |||||||||||||||
| Years Ended December 31, | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Amounts recongized in the balance sheets:
|
||||||||||||||||
|
Prepaid benefit cost
|
$ | 6,920 | $ | 5,411 | $ | — | $ | — | ||||||||
|
Accrued benefit liability (current)
|
(4,022 | ) | (4,411 | ) | (2,830 | ) | (2,944 | ) | ||||||||
|
Accrued benefit liability (noncurrent)
|
(69,339 | ) | (80,457 | ) | (43,087 | ) | (41,288 | ) | ||||||||
|
Net funded status
|
$ | (66,441 | ) | $ | (79,457 | ) | $ | (45,917 | ) | $ | (44,232 | ) | ||||
The accumulated benefit obligation for all defined benefit
pension plans was $222.7 million and $218.2 million at
December 31, 2010 and 2009, 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 $189.6 million, $185.9 million, and
62
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
$116.2 million, respectively, as of December 31, 2010
and $185.9 million, $181.4 million, and
$101.0 million, respectively, as of December 31, 2009.
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
$37.2 million, $36.8 million, and $44.1 million,
respectively, as of December 31, 2010, and were
$37.1 million, $36.8 million, and $42.5 million,
respectively, as of December 31, 2009.
The following table provides the components of net periodic
benefit costs for the plans.
| Pension Benefits | Other Benefits | |||||||||||||||||||||||
| Years Ended December 31, | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Components of net periodic benefit cost:
|
||||||||||||||||||||||||
|
Service cost
|
$ | 4,994 | $ | 4,949 | $ | 5,577 | $ | 142 | $ | 91 | $ | 134 | ||||||||||||
|
Interest cost
|
11,508 | 12,163 | 12,444 | 2,305 | 2,330 | 2,494 | ||||||||||||||||||
|
Expected return on plan assets
|
(11,436 | ) | (11,455 | ) | (12,150 | ) | — | — | — | |||||||||||||||
|
Amortization of prior service cost
|
(129 | ) | 20 | 14 | (195 | ) | (203 | ) | (210 | ) | ||||||||||||||
|
Curtailment loss
|
— | — | 1,674 | — | — | — | ||||||||||||||||||
|
Special termination benefits
|
13 | — | — | — | — | — | ||||||||||||||||||
|
Net loss recognition
|
4,775 | 2,293 | 1,378 | 424 | 248 | 685 | ||||||||||||||||||
|
Net periodic benefit cost
|
$ | 9,725 | $ | 7,970 | $ | 8,937 | $ | 2,676 | $ | 2,466 | $ | 3,103 | ||||||||||||
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, | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Weighted average assumptions for benefit obligations at year end:
|
||||||||||||||||
|
Discount rate
|
5.1 | % | 5.4 | % | 5.2 | % | 5.3 | % | ||||||||
|
Salary increase
|
4.0 | % | 4.0 | % | N/A | N/A | ||||||||||
|
Weighted average assumptions for net periodic cost for the year:
|
||||||||||||||||
|
Discount rate
|
5.4 | % | 6.3 | % | 5.3 | % | 6.8 | % | ||||||||
|
Salary increase
|
4.0 | % | 4.0 | % | N/A | N/A | ||||||||||
|
Expected return on assets
|
7.5 | % | 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 | 8.2 | % | 8.8 | % | ||||||||||
|
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 | ||||||||||||
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 2010 expense and
year-end liabilities.
| 1% Increase | 1% Decrease | |||||||
| (In thousands) | ||||||||
|
Effect on total of service and interest cost components
|
$ | 248 | $ | (207 | ) | |||
|
Effect on postretirement benefit obligation
|
$ | 4,808 | $ | (4,019 | ) | |||
63
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
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
|
||||||||||||||||
|
in Active
|
||||||||||||||||
|
Fair Market
|
Markets for
|
Significant
|
Significant
|
|||||||||||||
|
Value at
|
Identical
|
Observable
|
Unobservable
|
|||||||||||||
|
December 31,
|
Assets
|
Inputs
|
Inputs
|
|||||||||||||
| 2010 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Asset Category:
|
||||||||||||||||
|
Equity securities(a)
|
||||||||||||||||
|
Large-cap fund
|
$ | 82,650 | $ | — | $ | 82,650 | $ | — | ||||||||
|
Mid-cap fund
|
11,101 | — | 11,101 | — | ||||||||||||
|
Small-cap fund
|
8,499 | — | 8,499 | — | ||||||||||||
|
Debt securities(b)
|
||||||||||||||||
|
Government bond fund
|
20,131 | 20,131 | ||||||||||||||
|
Corporate bond fund
|
16,976 | 16,976 | ||||||||||||||
|
Fixed income fund(c)
|
20,975 | — | 20,975 | — | ||||||||||||
|
Cash & equivalents
|
32 | 32 | — | — | ||||||||||||
|
Total
|
$ | 160,364 | $ | 32 | $ | 160,332 | $ | — | ||||||||
| (a) | This category includes investments in actively managed and indexed investment funds that invest in a diversified pool of equity securities of companies located in the United States, Canada, Western Europe 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 national, state and local 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 guaranteed insurance contracts. |
The plans do not invest in individual securities. All
investments are through well diversified investment funds. As a
result, there are no significant concentrations of risk within
the plan assets.
64
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
The following table reflects the benefits as of
December 31, 2010 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) | ||||||||||||
|
2011
|
15,218 | 3,121 | 219 | |||||||||
|
2012
|
16,444 | 3,165 | 213 | |||||||||
|
2013
|
15,448 | 3,163 | 204 | |||||||||
|
2014
|
15,585 | 3,087 | 192 | |||||||||
|
2015
|
15,489 | 3,090 | 180 | |||||||||
|
2016-2020
|
87,765 | 14,808 | 687 | |||||||||
|
Total
|
$ | 165,949 | $ | 30,433 | $ | 1,695 | ||||||
We anticipate contributing $8.1 million and
$2.9 million to our pension and other postretirement plans,
respectively, during 2011.
The amounts in accumulated other comprehensive income that have
not yet been recognized as components of net periodic benefits
cost at December 31, 2010, the changes in these amounts
during the year ended December 31, 2010, and the expected
amortization of these amounts as components of net periodic
benefit cost for the year ended December 31, 2011 are as
follows.
|
Pension
|
Other
|
|||||||
| Benefits | Benefits | |||||||
| (In thousands) | ||||||||
|
Components of accumulated other comprehensive income:
|
||||||||
|
Net actuarial loss
|
$ | 58,915 | $ | 8,117 | ||||
|
Net prior service credit
|
(679 | ) | (608 | ) | ||||
| $ | 58,235 | $ | 7,509 | |||||
|
Pension
|
Other
|
|||||||
| Benefits | Benefits | |||||||
| (In thousands) | ||||||||
|
Changes in accumulated other comprehensive income:
|
||||||||
|
Net actuarial loss, beginning of year
|
$ | 62,917 | $ | 7,879 | ||||
|
Amortization cost
|
(4,775 | ) | (424 | ) | ||||
|
Liability loss
|
7,637 | 553 | ||||||
|
Asset gain
|
(7,192 | ) | — | |||||
|
Currency impact
|
328 | 108 | ||||||
|
Net actuarial loss, end of year
|
$ | 58,915 | $ | 8,117 | ||||
|
Prior service cost, beginning of year
|
$ | (810 | ) | $ | (777 | ) | ||
|
Amortization cost
|
129 | 195 | ||||||
|
Plan amendment
|
— | — | ||||||
|
Currency impact
|
1 | (26 | ) | |||||
|
Prior service cost, end of year
|
$ | (679 | ) | $ | (608 | ) | ||
65
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
|
Pension
|
Other
|
|||||||
| Benefits | Benefits | |||||||
| (In thousands) | ||||||||
|
Expected 2011 amortization:
|
||||||||
|
Amortization of prior service cost
|
$ | (88 | ) | $ | (114 | ) | ||
|
Amortization of net losses
|
6,139 | 429 | ||||||
| $ | 6,051 | $ | 316 | |||||
| Note 17: | 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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Total share-based compensation cost
|
$ | 12,177 | $ | 11,748 | $ | 13,568 | ||||||
|
Income tax benefit
|
4,736 | 3,536 | 4,803 | |||||||||
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
three 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
generally 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 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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands, except weighted average fair value and assumptions) | ||||||||||||
|
Weighted-average fair value of SARs and options granted
|
$ | 10.47 | $ | 6.38 | $ | 15.56 | ||||||
|
Total intrinsic value of SARs converted and options exercised
|
2,947 | 128 | 3,377 | |||||||||
|
Cash received for options exercised
|
3,158 | 699 | 6,103 | |||||||||
|
Tax benefit (deficiency) related to share-based compensation
|
(110 | ) | (1,564 | ) | 1,279 | |||||||
|
Weighted-average fair value of restricted stock shares and units
granted
|
22.34 | 13.80 | 33.10 | |||||||||
|
Total fair value of restricted stock shares and units vested
|
7,611 | 7,318 | 3,541 | |||||||||
|
Expected volatility
|
50.89 | % | 48.44 | % | 37.21 | % | ||||||
|
Expected term (in years)
|
6.1 | 6.1 | 6.1 | |||||||||
|
Risk-free rate
|
2.89 | % | 2.21 | % | 3.11 | % | ||||||
|
Dividend yield
|
0.91 | % | 1.50 | % | 0.51 | % | ||||||
66
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| 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, 2010
|
2,778 | $ | 25.22 | 734 | $ | 21.11 | ||||||||||||||||||
|
Granted
|
808 | 22.04 | 448 | 22.34 | ||||||||||||||||||||
|
Exercised or converted
|
(244 | ) | 19.40 | (316 | ) | 24.16 | ||||||||||||||||||
|
Forfeited or expired
|
(299 | ) | 20.91 | (143 | ) | 18.99 | ||||||||||||||||||
|
Outstanding at December 31, 2010
|
3,043 | $ | 25.26 | 6.9 | $ | 39,794 | 723 | $ | 20.96 | |||||||||||||||
|
Vested or expected to vest at December 31, 2010
|
2,982 | $ | 25.69 | 6.9 | $ | 38,945 | ||||||||||||||||||
|
Exercisable or convertible at December 31, 2010
|
1,600 | 27.92 | 5.5 | 18,432 | ||||||||||||||||||||
At December 31, 2010, the total unrecognized compensation
cost related to all nonvested awards was $14.7 million.
That cost is expected to be recognized over a weighted-average
period of 2.0 years.
Historically, we have issued treasury shares, if available, to
satisfy award conversions and exercises.
| Note 18: | 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 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 19: | Operating Leases |
Operating lease expense incurred primarily for manufacturing and
office space, machinery and equipment was $20.4 million,
$21.0 million, and $26.3 million in 2010, 2009, and
2008, respectively.
67
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Minimum annual lease payments for noncancelable operating leases
in effect at December 31, 2010 are as follows (in
thousands):
|
2011
|
$ | 13,317 | ||
|
2012
|
11,977 | |||
|
2013
|
9,329 | |||
|
2014
|
7,352 | |||
|
2015
|
5,684 | |||
|
Thereafter
|
20,649 | |||
| $ | 68,308 | |||
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 20: | 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 30%, 35%, and 32% of revenues in
2010, 2009, and 2008, respectively.
Unconditional
Copper Purchase Obligations
At December 31, 2010, we were committed to purchase
approximately 2.4 million pounds of copper at an aggregate
cost of $9.3 million. At December 31, 2010, the fixed
cost of this purchase was $1.3 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 2011.
Labor
Approximately 13% of our labor force is covered by collective
bargaining agreements at various locations around the world.
Approximately 4% of our labor force is covered by collective
bargaining agreements that we expect to renegotiate during 2011.
International
Operations
The carrying amounts of net assets belonging to our
international operations were as follows:
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Canada and Latin America
|
$ | 6,735 | $ | 85,239 | ||||
|
Europe, Africa and Middle East
|
23,530 | 19,759 | ||||||
|
Asia Pacific
|
228,018 | 207,863 | ||||||
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, 2010
are considered representative of their respective fair values.
The carrying amount of our debt instruments at December 31,
2010 was $551.2 million. The fair value of our debt
instruments at December 31, 2010
68
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
was approximately $573.6 million based on sales prices of
the debt instruments from recent trading activity. Included in
this amount are estimated fair values of $354.4 million and
$219.2 million of senior subordinated notes with respective
face values of $350.0 million and $200.0 million.
| Note 21: | 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, 2010, we were party to unused standby
letters of credit and unused bank guarantees totaling
$12.4 million and $6.9 million, respectively. We also
maintain bonds totaling $1.7 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 22: | Supplemental Cash Flow Information |
Supplemental cash flow information is as follows:
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Income tax refunds received
|
$ | 18,842 | $ | 6,840 | $ | 1,997 | ||||||
|
Income taxes paid
|
(30,556 | ) | (11,227 | ) | (54,025 | ) | ||||||
|
Interest paid, net of amount capitalized
|
(44,781 | ) | (37,923 | ) | (32,281 | ) | ||||||
| Note 23: | 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.
69
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Note 24: | Quarterly Operating Results (Unaudited) |
| 2010 | 1 st | 2 nd | 3 rd | 4 th | Year | |||||||||||||||
| (In thousands, except days and per share amounts) | ||||||||||||||||||||
|
Number of days in quarter
|
94 | 91 | 91 | 89 | 365 | |||||||||||||||
|
Revenues
|
$ | 384,424 | $ | 410,563 | $ | 396,927 | $ | 425,176 | $ | 1,617,090 | ||||||||||
|
Gross profit
|
110,410 | 117,304 | 118,184 | 121,396 | 467,294 | |||||||||||||||
|
Operating income
|
31,295 | 39,610 | 41,586 | 16,698 | 129,189 | |||||||||||||||
|
Income from continuing operations
|
14,330 | 21,585 | 22,644 | 10,739 | 69,298 | |||||||||||||||
|
Gain (loss) from discontinued operations, net of tax
|
(2,583 | ) | (1,913 | ) | (2,039 | ) | 849 | (5,686 | ) | |||||||||||
|
Gain on disposal of discontinued operations, net of tax
|
— | — | — | 44,847 | 44,847 | |||||||||||||||
|
Net income
|
11,747 | 19,672 | 20,605 | 56,435 | 108,459 | |||||||||||||||
|
Basic income (loss) per share
|
||||||||||||||||||||
|
Continuing operations
|
$ | 0.31 | $ | 0.46 | $ | 0.48 | $ | 0.23 | $ | 1.48 | ||||||||||
|
Discontinued operations
|
(0.06 | ) | (0.04 | ) | (0.04 | ) | 0.02 | (0.11 | ) | |||||||||||
|
Disposal of discontinued operations
|
— | — | — | 0.95 | 0.95 | |||||||||||||||
|
Net income
|
$ | 0.25 | $ | 0.42 | $ | 0.44 | $ | 1.20 | $ | 2.32 | ||||||||||
|
Diluted income (loss) per share
|
||||||||||||||||||||
|
Continuing operations
|
$ | 0.30 | $ | 0.45 | $ | 0.48 | $ | 0.22 | $ | 1.45 | ||||||||||
|
Discontinued operations
|
(0.05 | ) | (0.04 | ) | (0.04 | ) | 0.02 | (0.11 | ) | |||||||||||
|
Disposal of discontinued operations
|
— | — | — | 0.93 | 0.93 | |||||||||||||||
|
Net income
|
$ | 0.25 | $ | 0.41 | $ | 0.44 | $ | 1.17 | $ | 2.27 | ||||||||||
| 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
|
$ | 316,509 | $ | 330,587 | $ | 340,250 | $ | 374,670 | $ | 1,362,016 | ||||||||||
|
Gross profit
|
78,348 | 103,226 | 100,879 | 105,232 | 387,685 | |||||||||||||||
|
Operating income (loss)
|
(28,036 | ) | 12,942 | 27,503 | 23,961 | 36,370 | ||||||||||||||
|
Income (loss) from continuing operations
|
(25,630 | ) | 1,121 | 6,387 | 10,857 | (7,265 | ) | |||||||||||||
|
Gain (loss) from discontinued operations, net of tax
|
(6,824 | ) | (6,006 | ) | (13,864 | ) | 9,058 | (17,636 | ) | |||||||||||
|
Net income (loss)
|
(32,454 | ) | (4,886 | ) | (7,476 | ) | 19,915 | (24,901 | ) | |||||||||||
|
Basic income (loss) per share
|
||||||||||||||||||||
|
Continuing operations
|
$ | (0.55 | ) | $ | 0.02 | $ | 0.14 | $ | 0.23 | $ | (0.16 | ) | ||||||||
|
Discontinued operations
|
(0.15 | ) | (0.13 | ) | (0.30 | ) | 0.20 | (0.37 | ) | |||||||||||
|
Net income (loss)
|
$ | (0.70 | ) | $ | (0.11 | ) | $ | (0.16 | ) | $ | 0.43 | $ | (0.53 | ) | ||||||
|
Diluted income (loss) per share
|
||||||||||||||||||||
|
Continuing operations
|
$ | (0.55 | ) | $ | 0.02 | $ | 0.14 | $ | 0.23 | $ | (0.16 | ) | ||||||||
|
Discontinued operations
|
(0.15 | ) | (0.13 | ) | (0.30 | ) | 0.19 | (0.37 | ) | |||||||||||
|
Net income (loss)
|
$ | (0.70 | ) | $ | (0.11 | ) | $ | (0.16 | ) | $ | 0.42 | $ | (0.53 | ) | ||||||
70
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Included in the fourth quarter of 2010 are asset impairment
charges of $16.6 million. Included in the first quarter,
third quarter, and fourth quarter of 2009 are asset impairment
charges of $24.7 million, $1.5 million, and
$1.6 million, respectively.
| Note 25: | Subsequent Event |
There were no subsequent events following the balance sheet date
for which accounting and disclosure in these financial
statements is required.
| Note 26: | Supplemental Guarantor Information |
As of December 31, 2010, 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.
71
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Supplemental
Condensed Consolidating Balance Sheets
| December 31, 2010 | ||||||||||||||||||||
|
Non-
|
||||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
Current assets:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 139,895 | $ | 33,804 | $ | 184,954 | $ | — | $ | 358,653 | ||||||||||
|
Receivables, net
|
17,354 | 99,949 | 180,963 | — | 298,266 | |||||||||||||||
|
Inventories, net
|
— | 109,127 | 66,532 | — | 175,659 | |||||||||||||||
|
Deferred income taxes
|
(3,421 | ) | 9,011 | 3,883 | — | 9,473 | ||||||||||||||
|
Other current assets
|
2,581 | 7,618 | 8,605 | — | 18,804 | |||||||||||||||
|
Total current assets
|
156,409 | 259,509 | 444,937 | — | 860,855 | |||||||||||||||
|
Property, plant and equipment, less accumulated depreciation
|
— | 120,857 | 158,009 | — | 278,866 | |||||||||||||||
|
Goodwill
|
— | 258,094 | 64,462 | — | 322,556 | |||||||||||||||
|
Intangible assets, less accumulated amortization
|
— | 93,695 | 50,125 | — | 143,820 | |||||||||||||||
|
Deferred income taxes
|
17,704 | (8,362 | ) | 18,223 | — | 27,565 | ||||||||||||||
|
Other long-lived assets
|
11,047 | 1,724 | 50,051 | — | 62,822 | |||||||||||||||
|
Investment in subsidiaries
|
941,412 | 286,547 | — | (1,227,959 | ) | — | ||||||||||||||
| $ | 1,126,572 | $ | 1,012,064 | $ | 785,807 | $ | (1,227,959 | ) | $ | 1,696,484 | ||||||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||
|
Accounts payable
|
$ | 5,200 | $ | 87,796 | $ | 119,088 | $ | — | $ | 212,084 | ||||||||||
|
Accrued liabilities
|
32,195 | 45,818 | 67,827 | — | 145,840 | |||||||||||||||
|
Total current liabilities
|
37,395 | 133,614 | 186,915 | — | 357,924 | |||||||||||||||
|
Long-term debt
|
551,155 | — | — | — | 551,155 | |||||||||||||||
|
Postretirement benefits
|
— | 27,949 | 84,477 | — | 112,426 | |||||||||||||||
|
Other long-term liabilities
|
26,495 | 3,552 | 6,417 | — | 36,464 | |||||||||||||||
|
Intercompany accounts
|
398,804 | (647,855 | ) | 249,051 | — | — | ||||||||||||||
|
Total stockholders’ equity
|
112,723 | 1,494,804 | 258,947 | (1,227,959 | ) | 638,515 | ||||||||||||||
| $ | 1,126,572 | $ | 1,012,064 | $ | 785,807 | $ | (1,227,959 | ) | $ | 1,696,484 | ||||||||||
72
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| 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 | 57,659 | 172,680 | — | 230,360 | |||||||||||||||
|
Inventories, net
|
— | 79,887 | 64,302 | — | 144,189 | |||||||||||||||
|
Deferred income taxes
|
— | 23,307 | 4,808 | — | 28,115 | |||||||||||||||
|
Other current assets
|
5,179 | (6,245 | ) | 16,032 | — | 14,966 | ||||||||||||||
|
Current assets of discontinued operations
|
— | 133,329 | — | — | 133,329 | |||||||||||||||
|
Total current assets
|
55,078 | 296,914 | 507,846 | — | 859,838 | |||||||||||||||
|
Property, plant and equipment, less accumulated depreciation
|
— | 119,327 | 178,931 | — | 298,258 | |||||||||||||||
|
Goodwill
|
— | 202,795 | 70,331 | — | 273,126 | |||||||||||||||
|
Intangible assets, less accumulated amortization
|
— | 55,708 | 60,884 | — | 116,592 | |||||||||||||||
|
Deferred income taxes
|
— | (9,960 | ) | 20,769 | — | 10,809 | ||||||||||||||
|
Other long-lived assets
|
14,154 | 1,583 | 46,218 | — | 61,955 | |||||||||||||||
|
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
|
$ | — | $ | 56,806 | $ | 109,917 | $ | — | $ | 166,723 | ||||||||||
|
Accrued liabilities
|
15,552 | 32,707 | 68,947 | — | 117,206 | |||||||||||||||
|
Current maturities of long-term debt
|
46,268 | — | — | — | 46,268 | |||||||||||||||
|
Current liabilities of discontinued operations
|
— | 31,237 | — | — | 31,237 | |||||||||||||||
|
Total current liabilities
|
61,820 | 120,750 | 178,864 | — | 361,434 | |||||||||||||||
|
Long-term debt
|
543,942 | — | — | — | 543,942 | |||||||||||||||
|
Postretirement benefits
|
— | 35,000 | 86,745 | — | 121,745 | |||||||||||||||
|
Other long-term liabilities
|
27,636 | 6,100 | 8,673 | — | 42,409 | |||||||||||||||
|
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 | ||||||||||
73
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Supplemental
Condensed Consolidating Statements of Operations
| Year Ended December 31, 2010 | ||||||||||||||||||||
|
Non-
|
||||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Revenues
|
$ | — | $ | 874,866 | $ | 916,504 | $ | (174,280 | ) | $ | 1,617,090 | |||||||||
|
Cost of sales
|
— | (616,401 | ) | (707,675 | ) | 174,280 | (1,149,796 | ) | ||||||||||||
|
Gross profit
|
— | 258,465 | 208,829 | — | 467,294 | |||||||||||||||
|
Selling, general and administrative expenses
|
(391 | ) | (161,284 | ) | (118,002 | ) | — | (279,677 | ) | |||||||||||
|
Research and development
|
— | (11,915 | ) | (30,690 | ) | — | (42,605 | ) | ||||||||||||
|
Amortization of intangibles
|
— | (3,523 | ) | (7,666 | ) | — | (11,189 | ) | ||||||||||||
|
Income from equity method investment
|
— | — | 11,940 | — | 11,940 | |||||||||||||||
|
Asset impairment
|
— | (10,790 | ) | (5,784 | ) | — | (16,574 | ) | ||||||||||||
|
Operating income (loss)
|
(391 | ) | 70,953 | 58,627 | — | 129,189 | ||||||||||||||
|
Interest expense
|
(49,211 | ) | 382 | (997 | ) | — | (49,826 | ) | ||||||||||||
|
Interest income
|
151 | 8 | 1,025 | — | 1,184 | |||||||||||||||
|
Other income
|
— | — | 1,465 | — | 1,465 | |||||||||||||||
|
Intercompany income (expense)
|
9,486 | (17,362 | ) | 7,876 | — | — | ||||||||||||||
|
Income (loss) from equity investment in subsidiaries
|
88,020 | 50,194 | — | (138,214 | ) | — | ||||||||||||||
|
Income (loss) from continuing operations before taxes
|
48,055 | 104,175 | 67,996 | (138,214 | ) | 82,012 | ||||||||||||||
|
Income tax benefit (expense)
|
15,819 | (10,731 | ) | (17,802 | ) | — | (12,714 | ) | ||||||||||||
|
Income (loss) from continuing operations
|
63,874 | 93,444 | 50,194 | (138,214 | ) | 69,298 | ||||||||||||||
|
Loss from discontinued operations, net of tax
|
(612 | ) | (5,074 | ) | — | — | (5,686 | ) | ||||||||||||
|
Gain from disposal of discontinued operations, net of tax
|
45,197 | (350 | ) | — | — | 44,847 | ||||||||||||||
|
Net income (loss)
|
$ | 108,459 | $ | 88,020 | $ | 50,194 | $ | (138,214 | ) | $ | 108,459 | |||||||||
74
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Year Ended December 31, 2009 | ||||||||||||||||||||
|
Non-
|
||||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Revenues
|
$ | — | $ | 681,997 | $ | 835,322 | $ | (155,303 | ) | $ | 1,362,016 | |||||||||
|
Cost of sales
|
— | (480,650 | ) | (648,984 | ) | 155,303 | (974,331 | ) | ||||||||||||
|
Gross profit
|
— | 201,347 | 186,338 | — | 387,685 | |||||||||||||||
|
Selling, general and administrative expenses
|
(385 | ) | (124,125 | ) | (137,963 | ) | — | (262,473 | ) | |||||||||||
|
Research and development
|
— | (9,623 | ) | (30,818 | ) | — | (40,441 | ) | ||||||||||||
|
Amortization of intangibles
|
— | (2,008 | ) | (7,863 | ) | — | (9,871 | ) | ||||||||||||
|
Income from equity method investment
|
— | — | 6,405 | — | 6,405 | |||||||||||||||
|
Goodwill impairment
|
— | — | — | — | — | |||||||||||||||
|
Asset impairment
|
— | (4,343 | ) | (23,408 | ) | — | (27,751 | ) | ||||||||||||
|
Loss on sale of assets
|
— | — | (17,184 | ) | — | (17,184 | ) | |||||||||||||
|
Operating income (loss)
|
(385 | ) | 61,248 | (24,493 | ) | — | 36,370 | |||||||||||||
|
Interest expense
|
(41,684 | ) | 196 | (474 | ) | — | (41,962 | ) | ||||||||||||
|
Interest income
|
137 | 117 | 789 | — | 1,043 | |||||||||||||||
|
Other income
|
(1,541 | ) | — | — | — | (1,541 | ) | |||||||||||||
|
Intercompany income (expense)
|
12,203 | (12,115 | ) | (88 | ) | — | — | |||||||||||||
|
Income (loss) from equity investment in subsidiaries
|
(4,305 | ) | (21,059 | ) | — | 25,364 | — | |||||||||||||
|
Income (loss) from continuing operations before taxes
|
(35,575 | ) | 28,387 | (24,266 | ) | 25,364 | (6,090 | ) | ||||||||||||
|
Income tax benefit (expense)
|
12,070 | (16,452 | ) | 3,207 | — | (1,175 | ) | |||||||||||||
|
Income (loss) from continuing operations
|
(23,505 | ) | 11,935 | (21,059 | ) | 25,364 | (7,265 | ) | ||||||||||||
|
Loss from discontinued operations, net of tax
|
(1,396 | ) | (16,240 | ) | — | — | (17,636 | ) | ||||||||||||
|
Net income (loss)
|
$ | (24,901 | ) | $ | (4,305 | ) | $ | (21,059 | ) | $ | 25,364 | $ | (24,901 | ) | ||||||
75
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
|
$ | — | $ | 959,533 | $ | 1,239,693 | $ | (207,058 | ) | $ | 1,992,168 | |||||||||
|
Cost of sales
|
— | (702,562 | ) | (937,765 | ) | 207,058 | (1,433,269 | ) | ||||||||||||
|
Gross profit
|
— | 256,971 | 301,928 | — | 558,899 | |||||||||||||||
|
Selling, general and administrative expenses
|
(267 | ) | (145,390 | ) | (202,008 | ) | — | (347,665 | ) | |||||||||||
|
Research and development
|
— | (7,163 | ) | (34,657 | ) | — | (41,820 | ) | ||||||||||||
|
Amortization of intangibles
|
— | (1,947 | ) | (7,927 | ) | — | (9,874 | ) | ||||||||||||
|
Income from equity method investment
|
— | — | 6,326 | — | 6,326 | |||||||||||||||
|
Goodwill impairment
|
— | (57,963 | ) | (346,233 | ) | — | (404,196 | ) | ||||||||||||
|
Asset impairment
|
— | (26,537 | ) | (12,951 | ) | — | (39,488 | ) | ||||||||||||
|
Loss on sale of assets
|
— | — | (3,727 | ) | — | (3,727 | ) | |||||||||||||
|
Operating income (loss)
|
(267 | ) | 17,971 | (299,249 | ) | — | (281,545 | ) | ||||||||||||
|
Interest expense
|
(34,825 | ) | (1,219 | ) | (1,864 | ) | — | (37,908 | ) | |||||||||||
|
Interest income
|
— | 430 | 4,855 | — | 5,285 | |||||||||||||||
|
Other income
|
— | — | — | — | — | |||||||||||||||
|
Intercompany income (expense)
|
13,037 | (20,054 | ) | 7,017 | — | — | ||||||||||||||
|
Income (loss) from equity investment in subsidiaries
|
(349,007 | ) | (286,596 | ) | — | 635,603 | — | |||||||||||||
|
Income (loss) from continuing operations before taxes
|
(371,062 | ) | (289,468 | ) | (289,241 | ) | 635,603 | (314,168 | ) | |||||||||||
|
Income tax benefit (expense)
|
9,236 | (14,363 | ) | 2,645 | — | (2,482 | ) | |||||||||||||
|
Income (loss) from continuing operations
|
(361,826 | ) | (303,831 | ) | (286,596 | ) | 635,603 | (316,650 | ) | |||||||||||
|
Loss from discontinued operations, net of tax
|
— | (45,176 | ) | — | — | (45,176 | ) | |||||||||||||
|
Net income (loss)
|
$ | (361,826 | ) | $ | (349,007 | ) | $ | (286,596 | ) | $ | 635,603 | $ | (361,826 | ) | ||||||
76
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
Supplemental
Condensed Consolidating Cash Flow Statements
| Year Ended December 31, 2010 | ||||||||||||||||
|
Non-
|
||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Net cash provided by (used for) operating activities
|
$ | 121,015 | $ | (11,165 | ) | $ | 1,699 | $ | 111,549 | |||||||
|
Cash flows from investing activities:
|
||||||||||||||||
|
Cash used to acquire business, net of cash acquired
|
(119,110 | ) | — | — | (119,110 | ) | ||||||||||
|
Proceeds from disposal of tangible assets
|
136,527 | 2,407 | 18 | 138,952 | ||||||||||||
|
Capital expenditures
|
— | (16,056 | ) | (12,138 | ) | (28,194 | ) | |||||||||
|
Net cash provided by (used for) investing activities
|
17,417 | (13,649 | ) | (12,120 | ) | (8,352 | ) | |||||||||
|
Cash flows from financing activities:
|
||||||||||||||||
|
Payments under borrowing arrangements
|
(46,268 | ) | — | — | (46,268 | ) | ||||||||||
|
Cash dividends paid
|
(9,412 | ) | — | — | (9,412 | ) | ||||||||||
|
Tax deficiency related to share-based compensation
|
(110 | ) | — | — | (110 | ) | ||||||||||
|
Proceeds from exercises of stock options
|
3,158 | — | — | 3,158 | ||||||||||||
|
Intercompany capital contributions and dividends
|
— | 49,641 | (49,641 | ) | — | |||||||||||
|
Cash received upon termination of derivative instruments
|
4,217 | — | — | 4,217 | ||||||||||||
|
Net cash used for financing activities
|
(48,415 | ) | 49,641 | (49,641 | ) | (48,415 | ) | |||||||||
|
Effect of currency exchange rate changes on cash and cash
equivalents
|
— | — | (5,008 | ) | (5,008 | ) | ||||||||||
|
Increase (decrease) in cash and cash equivalents
|
90,017 | 24,827 | (65,070 | ) | 49,774 | |||||||||||
|
Cash and cash equivalents, beginning of period
|
49,878 | 8,977 | 250,024 | 308,879 | ||||||||||||
|
Cash and cash equivalents, end of period
|
$ | 139,895 | $ | 33,804 | $ | 184,954 | $ | 358,653 | ||||||||
77
Table of Contents
Notes to
Consolidated Financial
Statements — (Continued)
| Year Ended December 31, 2009 | ||||||||||||||||
|
Non-
|
||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||
| Issuer | Subsidiaries | Subsidiaries | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Net cash provided by (used for) operating activities
|
$ | 91,906 | $ | (28,730 | ) | $ | 88,634 | $ | 151,810 | |||||||
|
Cash flows from investing activities:
|
||||||||||||||||
|
Capital expenditures
|
— | (20,725 | ) | (19,652 | ) | (40,377 | ) | |||||||||
|
Cash used to acquire businesses, net of cash acquired
|
(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 | ||||||||||||
|
Net cash provided by (used for) financing activities
|
(22,048 | ) | — | — | (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 | ||||||||
78
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
|
$ | 76,042 | $ | 65,512 | $ | 32,320 | $ | 173,874 | ||||||||
|
Cash flows from investing activities:
|
||||||||||||||||
|
Cash used to acquire businesses, net of cash acquired
|
(136,032 | ) | (3,009 | ) | (8,343 | ) | (147,384 | ) | ||||||||
|
Capital expenditures
|
— | (19,607 | ) | (33,954 | ) | (53,561 | ) | |||||||||
|
Proceeds from disposal of tangible assets
|
— | 679 | 40,219 | 40,898 | ||||||||||||
|
Net cash provided by (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 | ) | ||||||||||
|
Payments under share repurchase program
|
(68,336 | ) | — | — | (68,336 | ) | ||||||||||
|
Cash dividends paid
|
(8,926 | ) | — | — | (8,926 | ) | ||||||||||
|
Proceeds from exercises of stock options
|
6,103 | — | — | 6,103 | ||||||||||||
|
Excess tax benefits related to share-based payments
|
1,279 | — | — | 1,279 | ||||||||||||
|
Net cash provided by (used for) financing activities
|
60,120 | — | — | 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 | ||||||||
79
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, 2010. 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, 2010.
Our internal control over financial reporting as of
December 31, 2010 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as
stated in their report that follows.
80
Table of Contents
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Belden Inc.
We have audited Belden Inc.’s internal control over
financial reporting as of December 31, 2010, 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, 2010, 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, 2010 and 2009 and the related consolidated
statements of operations, stockholders’ equity, and cash
flows for each of the three years in the period ended
December 31, 2010, of Belden Inc., and our report dated
February 25, 2011 expressed an unqualified opinion thereon.
/s/ Ernst &
Young LLP
St. Louis, Missouri
February 25, 2011
81
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 “Item I — 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,”
“Board Structure and Compensation — Related Party
Transactions and Compensation Committee Interlocks” 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, 2010” 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
Compensation Committee Interlocks” 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 2010 and 2009” and “Board Structure
and Compensation — Audit Committee’s Pre-Approval
Policies and Procedures” as described in the Proxy
Statement.
82
Table of Contents
| Item 15. | Exhibits and Financial Statement Schedules |
(a) Documents filed as part of this Report:
1.
Financial Statements
|
Report of Independent Registered Public Accounting Firm
|
||
|
Consolidated Balance Sheets as of December 31, 2010 and
December 31, 2009
|
||
|
Consolidated Statements of Operations for Each of the Three
Years in the Period Ended December 31, 2010
|
||
|
Consolidated Cash Flow Statements for Each of the Three Years in
the Period Ended December 31, 2010
|
||
|
Consolidated Stockholders’ Equity Statements for Each of
the Three Years in the Period Ended December 31, 2010
|
||
|
Notes to Consolidated 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: |
||||||||||||||||||||||||||||
|
2010
|
$ | 3,412 | $ | 918 | $ | (146 | ) | $ | (1,367 | ) | $ | — | $ | (74 | ) | 2,743 | ||||||||||||
|
2009
|
3,989 | 1,545 | 69 | (2,092 | ) | (151 | ) | 52 | 3,412 | |||||||||||||||||||
|
2008
|
3,893 | 3,143 | — | (2,649 | ) | (304 | ) | (94 | ) | 3,989 | ||||||||||||||||||
|
Inventories — Obsolescence and
Other Valuation Allowances: |
||||||||||||||||||||||||||||
|
2010
|
$ | 18,225 | $ | 2,470 | $ | 1,924 | $ | 330 | $ | — | $ | (672 | ) | $ | 22,277 | |||||||||||||
|
2009
|
22,723 | 4,401 | (865 | ) | (8,306 | ) | — | 272 | 18,225 | |||||||||||||||||||
|
2008
|
19,529 | 12,395 | — | (8,636 | ) | — | (565 | ) | 22,723 | |||||||||||||||||||
|
Deferred Income Tax Asset — Valuation Allowance:
|
||||||||||||||||||||||||||||
|
2010
|
$ | 22,007 | $ | 2,044 | $ | — | $ | (1,670 | ) | $ | (852 | ) | $ | (479 | ) | 21,050 | ||||||||||||
|
2009
|
20,557 | 6,557 | — | (5,173 | ) | (1,279 | ) | 1,345 | 22,007 | |||||||||||||||||||
|
2008
|
12,585 | — | 16,411 | (527 | ) | (8,282 | ) | 370 | 20,557 | |||||||||||||||||||
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; May 20, 2010 Form 8-K | |||
| 4 | .1 | Rights Agreement | December 11, 1996 Form 8-A, Exhibit 1.1 | |||
83
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* | Amendments to CDT Long Term Performance Incentive Plans | November 15, 2004 Form 10-Q, Exhibit 10.61 | |||
| 10 | .8* | CDT 2001 Long-Term Performance Incentive Plan, as amended | April 6, 2009 Proxy Statement, Appendix I | |||
| 10 | .9* | Form of Director Nonqualified Stock Option Grant | March 15, 2001 Form 10-Q, Exhibit 99.2 | |||
| 10 | .10* | Form of Stock Option Grant | May 10, 2005 Form 10-Q, Exhibit 10.1 | |||
| 10 | .11* | 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 | .12* | 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 | .13* | 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 | .14* | Form of Stock Appreciation Rights Award | May 5, 2006 Form 10-Q, Exhibit 10.4 | |||
| 10 | .15* | Belden Inc. Annual Cash Incentive Plan, as amended | February 26, 2010 Form 10-K, Exhibit 10.18 | |||
| 10 | .16* | 2004 Belden CDT Inc. Non-Employee Director Deferred Compensation Plan | December 21, 2004 Form 8-K, Exhibit 10.1 | |||
| 10 | .17* | 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 | |||
84
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 | .18* | 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 | .19* | Trust Agreement, with First Amendment | November 15, 2004 Form 10-Q, Exhibits 10.52 and 10.53 | |||
| 10 | .20* | Trust Agreement, with First Amendment | November 15, 2004 Form 10-Q, Exhibits 10.54 and 10.55 | |||
| 10 | .21* | 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 | .22* | Amended and Restated Executive Employment Agreement with Gray Benoist | December 22, 2008 Form 8-K, Exhibit 10. | |||
| 10 | .23* | Executive Employment Agreement with Richard Kirschner | August 3, 2007 Form 10-Q, Exhibit 10.2 | |||
| 10 | .24* | 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 | .25* | Executive Employment Agreement with Steven Biegacki | May 8, 2008 Form 10-Q, Exhibit 10.1 | |||
| 10 | .26* | Amended and Restated Executive Employment Agreement with Kevin L. Bloomfield | December 22, 2008 Form 8-K, Exhibit 10.2 | |||
| 10 | .27* | Amended and Restated Executive Employment Agreement with Stephen H. Johnson | February 27, 2009 Form 10-K, Exhibit 10.35 | |||
| 10 | .28* | Amended and Restated Executive Employment Agreement with John Norman | February 27, 2009 Form 10-K, Exhibit 10.36 | |||
| 10 | .29* | Amended and Restated Executive Employment Agreement with Louis Pace | February 27, 2009 Form 10-K, Exhibit 10.37 | |||
| 10 | .30* | Amended and Restated Executive Employment Agreement with Cathy O. Staples | February 27, 2009 Form 10-K, Exhibit 10.38 | |||
| 10 | .31* | Amended and Restated Executive Employment Agreement with Denis Suggs, with First Amendment | February 27, 2009 Form 10-K, Exhibit 10.39; August 11, 2010 Form 10-Q, Exhibit 10.2 | |||
| 10 | .32* | Executive Employment Agreement with Naresh Kumra | April 6, 2010 Form 8-K, Exhibit 10.1 | |||
| 10 | .33* | Executive Employment Agreement with Henk Derksen | February 26, 2010 Form 10-K, Exhibit 10.36 | |||
| 10 | .34* | Executive Employment Agreement with Christoph Gusenleitner | August 11, 2010 Form 10-Q, Exhibit 10.1 | |||
| 10 | .35* | Form of Indemnification Agreement with each of the Directors and Gray Benoist, Steven Biegacki, Kevin Bloomfield, Henk Derksen, Christoph Gusenleitner, Stephen Johnson, Naresh Kumra, John Norman, Cathy Staples, John Stroup and Denis Suggs | March 1, 2007 Form 10-K, Exhibit 10.39 | |||
| 10 | .36* | Separation of Employment Agreement with Louis Pace | February 27, 2009 Form 10-K, Exhibit 10.45 | |||
| 10 | .37 | Credit Agreement | January 27, 2006 Form 8-K, Exhibit 10.1; Schedules included August 10, 2010 Form 8-K/A, Exhibit 10.1 | |||
| 10 | .38 | First Amendment to Credit Agreement and Waiver | February 22, 2007 Form 8-K, Exhibit 10.2 | |||
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. | ||||
| 10 | .39 | Second Amendment to Credit Agreement | December 26, 2007 8-K, Exhibit 10.1 | |||
| 10 | .40 | Third Amendment to Credit Agreement | March 30, 2009 Form 8-K, Exhibit 10.1 | |||
| 10 | .41 | Fourth Amendment to Credit Agreement | June 29, 2009 Form 8-K, Exhibit 10.3 | |||
| 10 | .42 | 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 | |||
| Exhibit 101 | .INS | XBRL Instance Document | ||
| Exhibit 101 | .SCH | XBRL Taxonomy Extension Schema | ||
| Exhibit 101 | .CAL | XBRL Taxonomy Extension Calculation | ||
| Exhibit 101 | .DEF | XBRL Taxonomy Extension Definition | ||
| Exhibit 101 | .LAB | XBRL Taxonomy Extension Label | ||
| Exhibit 101 | .PRE | XBRL Taxonomy Extension Presentation |
| * | 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
86
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 25, 2011
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 25, 2011 | ||||
|
/s/
GRAY
G. BENOIST
|
Senior Vice President, Finance, Chief Financial Officer and Chief Accounting Officer | February 25, 2011 | ||||
|
/s/
BRYAN
C. CRESSEY*
|
Chairman of the Board and Director | February 25, 2011 | ||||
|
/s/
DAVID
ALDRICH*
|
Director | February 25 2011 | ||||
|
/s/
LORNE
D. BAIN*
|
Director | February 25, 2011 | ||||
|
/s/
LANCE
BALK*
|
Director | February 25, 2011 | ||||
|
/s/
JUDY
L. BROWN*
|
Director | February 25, 2011 | ||||
|
/s/
GLENN
KALNASY*
|
Director | February 25, 2011 | ||||
|
/s/
MARY
S. MCLEOD*
|
Director | February 25, 2011 | ||||
|
/s/
JOHN
M. MONTER*
|
Director | February 25, 2011 | ||||
|
/s/
BERNARD
G. RETHORE*
|
Director | February 25, 2011 | ||||
|
/s/
JOHN
S. STROUP
|
||||||
87
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; May 20, 2010 Form 8-K | |||
| 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* | Amendments to CDT Long Term Performance Incentive Plans | November 15, 2004 Form 10-Q, Exhibit 10.61 | |||
| 10 | .8* | CDT 2001 Long-Term Performance Incentive Plan, as amended | April 6, 2009 Proxy Statement, Appendix I | |||
| 10 | .9* | Form of Director Nonqualified Stock Option Grant | March 15, 2001 Form 10-Q, Exhibit 99.2 | |||
| 10 | .10* | Form of Stock Option Grant | May 10, 2005 Form 10-Q, Exhibit 10.1 | |||
| 10 | .11* | 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 | .12* | 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 | .13* | 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 | .14* | Form of Stock Appreciation Rights Award | May 5, 2006 Form 10-Q, Exhibit 10.4 | |||
| 10 | .15* | Belden Inc. Annual Cash Incentive Plan, as amended | February 26, 2010 Form 10-K, Exhibit 10.18 | |||
88
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 | .16* | 2004 Belden CDT Inc. Non-Employee Director Deferred Compensation Plan | December 21, 2004 Form 8-K, Exhibit 10.1 | |||
| 10 | .17* | 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 | .18* | 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 | .19* | Trust Agreement, with First Amendment | November 15, 2004 Form 10-Q, Exhibits 10.52 and 10.53 | |||
| 10 | .20* | Trust Agreement, with First Amendment | November 15, 2004 Form 10-Q, Exhibits 10.54 and 10.55 | |||
| 10 | .21* | 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 | .22* | Amended and Restated Executive Employment Agreement with Gray Benoist | December 22, 2008 Form 8-K, Exhibit 10. | |||
| 10 | .23* | Executive Employment Agreement with Richard Kirschner | August 3, 2007 Form 10-Q, Exhibit 10.2 | |||
| 10 | .24* | 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 | .25* | Executive Employment Agreement with Steven Biegacki | May 8, 2008 Form 10-Q, Exhibit 10.1 | |||
| 10 | .26* | Amended and Restated Executive Employment Agreement with Kevin L. Bloomfield | December 22, 2008 Form 8-K, Exhibit 10.2 | |||
| 10 | .27* | Amended and Restated Executive Employment Agreement with Stephen H. Johnson | February 27, 2009 Form 10-K, Exhibit 10.35 | |||
| 10 | .28* | Amended and Restated Executive Employment Agreement with John Norman | February 27, 2009 Form 10-K, Exhibit 10.36 | |||
| 10 | .29* | Amended and Restated Executive Employment Agreement with Louis Pace | February 27, 2009 Form 10-K, Exhibit 10.37 | |||
| 10 | .30* | Amended and Restated Executive Employment Agreement with Cathy O. Staples | February 27, 2009 Form 10-K, Exhibit 10.38 | |||
| 10 | .31* | Amended and Restated Executive Employment Agreement with Denis Suggs, with First Amendment | February 27, 2009 Form 10-K, Exhibit 10.39; August 11, 2010 Form 10-Q, Exhibit 10.2 | |||
| 10 | .32* | Executive Employment Agreement with Naresh Kumra | April 6, 2010 Form 8-K, Exhibit 10.1 | |||
| 10 | .33* | Executive Employment Agreement with Henk Derksen | February 26, 2010 Form 10-K, Exhibit 10.36 | |||
| 10 | .34* | Executive Employment Agreement with Christoph Gusenleitner | August 11, 2010 Form 10-Q, Exhibit 10.1 | |||
| 10 | .35* | Form of Indemnification Agreement with each of the Directors and Gray Benoist, Steven Biegacki, Kevin Bloomfield, Henk Derksen, Christoph Gusenleitner, Stephen Johnson, Naresh Kumra, John Norman, Cathy Staples, John Stroup and Denis Suggs | March 1, 2007 Form 10-K, Exhibit 10.39 | |||
89
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 | .36* | Separation of Employment Agreement with Louis Pace | February 27, 2009 Form 10-K, Exhibit 10.45 | |||
| 10 | .37 | Credit Agreement | January 27, 2006 Form 8-K, Exhibit 10.1; Schedules included August 10, 2010 Form 8-K/A, Exhibit 10.1 | |||
| 10 | .38 | First Amendment to Credit Agreement and Waiver | February 22, 2007 Form 8-K, Exhibit 10.2 | |||
| 10 | .39 | Second Amendment to Credit Agreement | December 26, 2007 8-K, Exhibit 10.1 | |||
| 10 | .40 | Third Amendment to Credit Agreement | March 30, 2009 Form 8-K, Exhibit 10.1 | |||
| 10 | .41 | Fourth Amendment to Credit Agreement | June 29, 2009 Form 8-K, Exhibit 10.3 | |||
| 10 | .42 | 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 | |||
| Exhibit 101 | .INS | XBRL Instance Document | ||
| Exhibit 101 | .SCH | XBRL Taxonomy Extension Schema | ||
| Exhibit 101 | .CAL | XBRL Taxonomy Extension Calculation | ||
| Exhibit 101 | .DEF | XBRL Taxonomy Extension Definition | ||
| Exhibit 101 | .LAB | XBRL Taxonomy Extension Label | ||
| Exhibit 101 | .PRE | XBRL Taxonomy Extension Presentation |
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TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsPart IIItem 5. Market For Registrant S Common Equity, Related Shareholder Matters and Issuer Purchases Of Equity SecuritiesItem 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: Discontinued OperationsNote 5: Operating Segments and Geographic InformationNote 6: Equity Method InvestmentNote 7: Income (loss) Per ShareNote 8: InventoriesNote 9: Property, Plant and EquipmentNote 10: Intangible AssetsNote 11: Other Long-lived AssetsNote 12: Accrued LiabilitiesNote 13: Long-term Debt and Other Borrowing ArrangementsNote 14: Derivatives and Hedging ActivitiesNote 15: Income TaxesNote 16: Pension and Other Postretirement BenefitsNote 17: Share-based CompensationNote 18: Stockholder Rights PlanNote 19: Operating LeasesNote 20: Market Concentrations and RisksNote 21: Contingent LiabilitiesNote 22: Supplemental Cash Flow InformationNote 23: Share RepurchasesNote 24: Quarterly Operating Results (unaudited)Note 25: Subsequent EventNote 26: 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