Belden Inc 10-Q for FY2023 Q3
Belden Inc. (BDC)
10-Q
2023-11-02
For: 2023-10-01
View Original
Added on
April 08, 2026
About this 10-Q
Belden Inc filed this 10-Q on November 2, 2023, covering the quarter ended October 1, 2023 (FY2023 Q3).
Headline figures
Quarter ended October 1, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $626.81M
- down 6.5% from $670.49M a year earlier
- Net income
- $72.35M
- down 26.4% from net income of $98.29M a year earlier
- Diluted EPS
- $1.70
- down 23.8% from $2.23 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________
FORM 10-Q
_________________________________________________
(Mark One)
For the quarterly period ended October 1, 2023
or
For the transition period from _____ to _____.
Commission File No. 001-12561
____________________________________
(Exact name of registrant as specified in its charter)
_____________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices)
(314 ) 854-8000
Registrant’s telephone number, including area code
_________________________________________________
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||||||||||||
As of October 27, 2023, the Registrant had 41,681,610 outstanding shares of common stock.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BELDEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| October 1, 2023 | December 31, 2022 | ||||||||||
| (Unaudited) | |||||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Receivables, net | |||||||||||
| Inventories, net | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, less accumulated depreciation | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, less accumulated amortization | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-lived assets | |||||||||||
| $ | $ | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Postretirement benefits | |||||||||||
| Deferred income taxes | |||||||||||
| Long-term operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Treasury stock | ( | ( | |||||||||
| Total Belden stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total stockholders’ equity | |||||||||||
| $ | $ | ||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
-1-
BELDEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Cost of sales | ( | ( | ( | ( | |||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | ( | ( | ( | ( | |||||||||||||||||||
| Research and development expenses | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of intangibles | ( | ( | ( | ( | |||||||||||||||||||
| Gain on sale of assets | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Non-operating pension benefit | |||||||||||||||||||||||
| Loss on debt extinguishment | ( | ||||||||||||||||||||||
| Income from continuing operations before taxes | |||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ( | |||||||||||||||||||
| Income from continuing operations | |||||||||||||||||||||||
| Loss from discontinued operations, net of tax | ( | ||||||||||||||||||||||
| Loss on disposal of discontinued operations, net of tax | ( | ( | |||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interest | ( | ( | |||||||||||||||||||||
| Net income attributable to Belden stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average number of common shares and equivalents: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Basic income (loss) per share attributable to Belden stockholders: | |||||||||||||||||||||||
| Continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Discontinued operations | ( | ||||||||||||||||||||||
| Disposal of discontinued operations | ( | ( | |||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Diluted income (loss) per share attributable to Belden stockholders: | |||||||||||||||||||||||
| Continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Discontinued operations | ( | ||||||||||||||||||||||
| Disposal of discontinued operations | ( | ( | |||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Comprehensive income attributable to Belden | $ | $ | $ | $ | |||||||||||||||||||
| Common stock dividends declared per share | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
-2-
BELDEN INC.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
| Nine Months Ended | |||||||||||
| October 1, 2023 | October 2, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash from operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation | |||||||||||
| Loss on disposal of discontinued operations | |||||||||||
| Loss on debt extinguishment | |||||||||||
| Gain on sale of assets | ( | ( | |||||||||
| Changes in operating assets and liabilities, net of the effects of currency exchange rate changes, acquired businesses and disposals: | |||||||||||
| Receivables | ( | ( | |||||||||
| Inventories | ( | ||||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued liabilities | ( | ( | |||||||||
| Income taxes | ( | ||||||||||
| Other assets | ( | ||||||||||
| Other liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Cash used for business acquisitions, net of cash acquired | ( | ( | |||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from disposal of tangible assets | |||||||||||
| Proceeds from disposal of businesses, net of cash sold | |||||||||||
| Net cash provided by (used for) investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Payments under share repurchase program | ( | ( | |||||||||
| Withholding tax payments for share-based payment awards | ( | ( | |||||||||
| Cash dividends paid | ( | ( | |||||||||
| Payments under financing lease obligations | ( | ( | |||||||||
| Payments under borrowing arrangements | ( | ||||||||||
| Proceeds from issuance of common stock | |||||||||||
| Net cash used for financing activities | ( | ( | |||||||||
| Effect of foreign currency exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
| Decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
The Condensed Consolidated Cash Flow Statement for the nine months ended October 2, 2022 includes the results of discontinued operations up to the February 22, 2022 disposal date.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
-3-
BELDEN INC.
CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENTS
(Unaudited)
| Belden Inc. Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Accumulated Other | Non-controlling | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Treasury Stock | Comprehensive | |||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Shares | Amount | Income (Loss) | Interests | Total | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Common stock issuance | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Savings Plan stock contributions | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of restricted stock units into common stock, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchase program, net of excise tax | — | — | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($ | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 2, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Sale and deconsolidation of Hite JV | — | — | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Retirement Savings Plan stock contributions | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of restricted stock units into common stock, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchase program, net of excise tax | — | — | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($ | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 2, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issuance | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Savings Plan stock contributions | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of restricted stock units into common stock, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchase program, net of excise tax | — | — | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($ | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at October 1, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
-4-
| Belden Inc. Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Additional | Accumulated Other | Non-controlling | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Treasury Stock | Comprehensive | |||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Shares | Amount | Income (Loss) | Interests | Total | |||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Savings Plan stock contributions | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of restricted stock units into common stock, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchase program | — | — | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($ | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 3, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issuance | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Savings Plan stock contributions | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of restricted stock units into common stock, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchase program | — | — | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($ | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 3, 2022 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Retirement Savings Plan stock contributions | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of restricted stock units into common stock, net of tax withholding forfeitures | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchase program | — | — | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($ | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at October 2, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
-5-
BELDEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements include Belden Inc. and all of its subsidiaries (the Company, us, we, or our). We eliminate all significant affiliate accounts and transactions in consolidation.
The accompanying Condensed Consolidated Financial Statements presented as of any date other than December 31, 2022:
•Are prepared from the books and records without audit, and
•Are prepared in accordance with the instructions for Form 10-Q and do not include all of the information required by accounting principles generally accepted in the United States for complete statements, but
•Include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial statements.
These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Supplementary Data contained in our 2022 Annual Report on Form 10-K.
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;
•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; and
As of and during the three and nine months ended October 1, 2023 and October 2, 2022, we utilized Level 1 inputs to determine the fair value of cash equivalents. We did not have any transfers between Level 1 and Level 2 fair value measurements during the nine months ended October 1, 2023 and October 2, 2022.
-6-
Contingent Liabilities
We have established liabilities for environmental and legal contingencies that are probable of occurrence and reasonably estimable, the amounts of which are currently not material. We accrue environmental remediation costs based on estimates of known environmental remediation exposures developed in consultation with our environmental consultants and legal counsel. We are, from time to time, subject to routine litigation incidental to our business. Historically, these lawsuits have primarily involved claims for damages arising out of the use of our products, allegations of patent or trademark infringement, and litigation and administrative proceedings involving employment matters and commercial disputes. Based on facts currently available, we believe the disposition of the claims that are pending or asserted will not have a material adverse effect on our financial position, results of operations, or cash flow.
As of October 1, 2023, we were party to standby letters of credit, surety bonds, and bank guaranties totaling $8.3 million, $4.7 million, and $4.1 million, respectively.
Revenue Recognition
We recognize revenue consistent with the principles as outlined in the following five step model: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) each performance obligation is satisfied. See Note 2.
Noncontrolling Interest
On April 28, 2023, we sold our 51 % ownership interest in Shanghai Hi-Tech Control System Co, Ltd to (Hite) for $0.9 million and recognized a $0.4 million pretax gain on sale. The sale also includes $0.6 million of potential earnout payments. The joint venture developed and provided certain Industrial Automation Solutions products and integrated solutions to customers in China. The joint venture was determined to not have sufficient equity at risk; therefore, it was considered a variable interest entity. As Belden was the primary beneficiary of the joint venture, due to both our ownership percentage and control over the activities of the joint venture, we consolidated the joint venture in our financial statements and presented the results of the joint venture attributable to Hite’s ownership as net income attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations up to April 28, 2023 when we sold and deconsolidated the entity. The joint venture was not material to our consolidated financial statements during the nine months ended October 1, 2023 and October 2, 2022.
-7-
Note 2: Revenues
Revenues are recognized when control of the promised goods or services is transferred to our customers and in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Taxes collected from customers and remitted to governmental authorities are not included in our revenues.
The following tables present our revenues disaggregated by major product category.
| Broadband Solutions | Industrial Automation | Smart Buildings | Total Revenues | |||||||||||||||||||||||
| Three Months Ended October 1, 2023 | (In thousands) | |||||||||||||||||||||||||
| Enterprise Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Industrial Automation Solutions | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Three Months Ended October 2, 2022 | ||||||||||||||||||||||||||
| Enterprise Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Industrial Automation Solutions | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Nine Months Ended October 1, 2023 | ||||||||||||||||||||||||||
| Enterprise Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Industrial Automation Solutions | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Nine Months Ended October 2, 2022 | ||||||||||||||||||||||||||
| Enterprise Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Industrial Automation Solutions | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
The following tables present our revenues disaggregated by geography, based on the location of the customer purchasing the product.
| Americas | EMEA | APAC | Total Revenues | |||||||||||||||||||||||
| Three Months Ended October 1, 2023 | (In thousands) | |||||||||||||||||||||||||
| Enterprise Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Industrial Automation Solutions | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Three Months Ended October 2, 2022 | ||||||||||||||||||||||||||
| Enterprise Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Industrial Automation Solutions | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Nine Months Ended October 1, 2023 | ||||||||||||||||||||||||||
| Enterprise Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Industrial Automation Solutions | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| Nine Months Ended October 2, 2022 | ||||||||||||||||||||||||||
| Enterprise Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Industrial Automation Solutions | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
-8-
We generate revenues primarily by selling products that support communication, infrastructure, and delivery solutions that make the digital journey simpler, smarter, and secure. We also generate revenues from providing support and professional services. We sell our products to distributors, end-users, installers, and directly to original equipment manufacturers. At times, we enter into arrangements that involve the delivery of multiple performance obligations. For these arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price and recognized when or as each performance obligation is satisfied. Generally, we determine relative standalone selling price using the prices charged separately to customers on a standalone basis. Most of our performance obligations related to the sale of products are satisfied at a point in time when control of the product is transferred based on the shipping terms of the arrangement. Typically, payments are due after control transfers, which is less than one year from satisfaction of the performance obligation.
The amount of consideration we receive and revenue we recognize varies due to rebates, returns, and price adjustments. We estimate the expected rebates, returns, and price adjustments based on an analysis of historical experience, anticipated sales demand, and trends in product pricing. We adjust our estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed. Adjustments to revenue for performance obligations satisfied in prior periods were not significant during the three and nine months ended October 1, 2023 and October 2, 2022.
The following table presents estimated and accrued variable consideration:
| October 1, 2023 | December 31, 2022 | |||||||||||||
| (in thousands) | ||||||||||||||
| Accrued rebates included in accrued liabilities | $ | $ | ||||||||||||
| Accrued returns included in accrued liabilities | ||||||||||||||
| Price adjustments recognized against gross accounts receivable | ||||||||||||||
Depending on the terms of an arrangement, we may defer the recognition of some or all of the consideration received because we have to satisfy a future obligation. Consideration allocated to support services under a support and maintenance contract is recognized ratably over the term of the service. Consideration allocated to professional services is typically recognized when or as the services are performed depending on the terms of the arrangement. Our contract terms for support, maintenance, and professional services typically require payment within one year or less of when the services will be provided. As of October 1, 2023, total deferred revenue was $27.7 million, and of this amount, $21.5 million is expected to be recognized within the next twelve months, and the remaining $6.2 million is long-term and is expected to be recognized over a period greater than twelve months. The following table presents deferred revenue activity during the three and nine months ended October 1, 2023 and October 2, 2022, respectively:
| 2023 | 2022 | |||||||||||||
| (In thousands) | ||||||||||||||
| Beginning balance at January 1 | $ | $ | ||||||||||||
| New deferrals | ||||||||||||||
| Acquisitions | ||||||||||||||
| Revenue recognized | ( | ( | ||||||||||||
| Balance at the end of Q1 | $ | $ | ||||||||||||
| New deferrals | ||||||||||||||
| Revenue recognized | ( | ( | ||||||||||||
| Balance at the end of Q2 | $ | $ | ||||||||||||
| New deferrals | ||||||||||||||
| Acquisitions | ||||||||||||||
| Revenue recognized | ( | ( | ||||||||||||
| Balance at the end of Q3 | $ | $ | ||||||||||||
-9-
Service-type warranties represent $9.9 million of the deferred revenue balance at October 1, 2023, and of this amount $6.1 million is expected to be recognized in the next twelve months, and the remaining $3.8 million is long-term and will be recognized over a period greater than twelve months. As of October 1, 2023 and December 31, 2022, we did not have any material contract assets recorded in the Condensed Consolidated Balance Sheets.
We expense sales commissions as incurred when the duration of the related revenue arrangement is one year or less. We capitalize sales commissions when the original duration of the related revenue arrangement is longer than one year, and we amortize it over the related revenue arrangement period. We did not have any capitalized sales commissions on our balance sheet as of October 1, 2023 and December 31, 2022. The following table presents sales commissions that are recorded within selling, general and administrative expenses:
| Three Months Ended | Nine Months ended | |||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Sales commissions | $ | $ | $ | $ | ||||||||||||||||||||||
Note 3: Acquisitions
On August 31, 2023, we acquired CloudRail GmbH (CloudRail) with cash on hand for $9.2 million, net of cash acquired. CloudRail, based in Mannheim, Germany, specializes in sensor to cloud data solutions allowing end users to quickly connect sensors on their machinery to cloud providers to drive business insights and improve outcomes. The results of CloudRail have been included in our Condensed Consolidated Financial Statements from August 31, 2023 and are reported within the Industrial Automation Solutions segment. The CloudRail acquisition was not material to our financial position or results of operations.
On April 17, 2023, we acquired Berthold Sichert GmbH (Sichert) with cash on hand for $97.5 million, net of cash acquired. Sichert, based in Berlin, Germany, designs and manufactures a portfolio of polycarbonate street cabinets utilized in outside plant passive optical networks (“PON”) and 5G networks. Sichert is reported within the Enterprise Solutions segment. The Sichert acquisition was not material to our results of operations. The following table summarizes the estimated, preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):
| Receivables | $ | |||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| Property, plant and equipment | ||||||||
| Intangible assets | ||||||||
| Goodwill | ||||||||
| Other long-lived assets | ||||||||
| Total assets acquired | $ | |||||||
| Accounts payable | $ | |||||||
| Accrued liabilities | ||||||||
| Deferred income taxes | ||||||||
| Total liabilities assumed | $ | |||||||
| Net assets | $ | |||||||
The above purchase price allocation is preliminary and subject to revision as additional information about the fair value of individual assets and liabilities becomes available. The preliminary measurement of receivables, intangible assets, deferred income taxes, and other assets and liabilities are subject to change. A change in the estimated fair value of the net assets acquired will change the amount of the purchase price allocable to goodwill.
The preliminary fair value of acquired receivables is $6.0 million, which is equivalent to its gross contractual amount. 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 preliminary fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations.
-10-
For purposes of the above allocation, we based our preliminary estimate of the fair values for intangible assets on valuation studies performed by a third party valuation firm. We used various valuation methods including discounted cash flows, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets (Level 3 valuation). Goodwill and other intangible assets reflected above were determined to meet the criteria for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to the expansion of broadband product offerings in end-to-end solutions. Our tax basis in the acquired goodwill is zero .
The intangible assets related to the acquisition consisted of the following:
| Fair Value | Amortization Period | |||||||||||||
| (In thousands) | (In years) | |||||||||||||
| Intangible assets subject to amortization: | ||||||||||||||
| Customer relationships | $ | |||||||||||||
| Trademarks | ||||||||||||||
| Sales backlog | ||||||||||||||
| Total intangible assets subject to amortization | $ | |||||||||||||
| Intangible assets not subject to amortization: | ||||||||||||||
| Goodwill | $ | n/a | ||||||||||||
| Total intangible assets not subject to amortization | $ | |||||||||||||
| Total intangible assets | $ | |||||||||||||
| Weighted average amortization period | ||||||||||||||
Note 4: Discontinued Operations
On February 22, 2022, we sold Tripwire for gross cash consideration of $350 million. The divestiture of Tripwire represented a strategic shift impacting our operations and financial results. As a result, the Tripwire disposal group, which was included in our Industrial Automation Solutions segment, is reported within discontinued operations. We recognized a loss on disposal of discontinued operations, net of tax of $5.4 million and $9.9 million during the three and nine months ended October 2, 2022, respectively. The following table summarizes the operating results of the Tripwire disposal group from January 1, 2022 to the February 22, 2022 disposal date (in thousands):
| Revenues | $ | |||||||
| Cost of sales | ( | |||||||
| Gross profit | ||||||||
| Selling, general and administrative expenses | ( | |||||||
| Research and development expenses | ( | |||||||
| Amortization of intangible assets | ( | |||||||
| Loss before taxes | $ | ( | ||||||
Note 5: Reportable Segments
-11-
accounting effects related to acquisitions, such as the adjustment of acquired inventory to fair value; and other costs. We allocate corporate expenses to the segments for purposes of measuring Segment EBITDA. Corporate expenses are allocated on the basis of each segment’s relative EBITDA prior to the allocation.
Our measure of segment assets does not include cash, goodwill, intangible assets, deferred tax assets, or corporate assets. All goodwill is allocated to reporting units of our segments for purposes of impairment testing. Inter-company revenues between our segments is not material.
| Enterprise Solutions | Industrial Automation Solutions | Total Segments | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| As of and for the three months ended October 1, 2023 | ||||||||||||||||||||
| Segment Revenues | $ | $ | $ | |||||||||||||||||
| Segment EBITDA | ||||||||||||||||||||
| Depreciation expense | ||||||||||||||||||||
| Amortization of intangibles | ||||||||||||||||||||
| Amortization of software development intangible assets | ||||||||||||||||||||
| Severance, restructuring, and acquisition integration costs | ||||||||||||||||||||
| Adjustments related to acquisitions and divestitures | ||||||||||||||||||||
| Segment assets | ||||||||||||||||||||
| As of and for the three months ended October 2, 2022 | ||||||||||||||||||||
| Segment Revenues | $ | $ | $ | |||||||||||||||||
| Segment EBITDA | ||||||||||||||||||||
| Depreciation expense | ||||||||||||||||||||
| Amortization of intangibles | ||||||||||||||||||||
| Amortization of software development intangible assets | ||||||||||||||||||||
| Severance, restructuring, and acquisition integration costs | ||||||||||||||||||||
| Adjustments related to acquisitions and divestitures | ( | ( | ||||||||||||||||||
| Segment assets | ||||||||||||||||||||
| As of and for the nine months ended October 1, 2023 | ||||||||||||||||||||
| Segment revenues | $ | $ | $ | |||||||||||||||||
| Segment EBITDA | ||||||||||||||||||||
| Depreciation expense | ||||||||||||||||||||
| Amortization of intangibles | ||||||||||||||||||||
| Amortization of software development intangible assets | ||||||||||||||||||||
| Severance, restructuring, and acquisition integration costs | ||||||||||||||||||||
| Adjustments related to acquisitions and divestitures | ||||||||||||||||||||
| Segment assets | ||||||||||||||||||||
| As of and for the nine months ended October 2, 2022 | ||||||||||||||||||||
| Segment Revenues | $ | $ | $ | |||||||||||||||||
| Segment EBITDA | ||||||||||||||||||||
| Depreciation expense | ||||||||||||||||||||
| Amortization of intangibles | ||||||||||||||||||||
| Amortization of software development intangible assets | ||||||||||||||||||||
| Severance, restructuring, and acquisition integration costs | ||||||||||||||||||||
| Adjustments related to acquisitions and divestitures | ( | ( | ||||||||||||||||||
| Segment assets | ||||||||||||||||||||
-12-
The following table is a reconciliation of the total of the reportable segments’ Revenues and EBITDA to consolidated revenues and consolidated income from continuing operations before taxes, respectively.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Total Segment and Consolidated Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Total Segment EBITDA | $ | $ | $ | $ | |||||||||||||||||||
| Gain on sale of asset | |||||||||||||||||||||||
| Depreciation expense | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of intangibles | ( | ( | ( | ( | |||||||||||||||||||
| Severance, restructuring, and acquisition integration costs (1) | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of software development intangible assets | ( | ( | ( | ( | |||||||||||||||||||
| Adjustments related to acquisitions and divestitures (2) | ( | ( | |||||||||||||||||||||
| Eliminations | ( | ( | ( | ( | |||||||||||||||||||
| Consolidated operating income | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Loss on debt extinguishment | ( | ||||||||||||||||||||||
| Total non-operating pension benefit | |||||||||||||||||||||||
| Consolidated income from continuing operations before taxes | $ | $ | $ | $ | |||||||||||||||||||
(1) Severance, restructuring, and acquisition integration costs for the three and nine months ended October 1, 2023 and October 2, 2022 included costs related to our Acquisition Integration Program. See Note 11.
Note 6: Income (loss) per Share
The following table presents the basis for the income (loss) per share computations:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Income from continuing operations | $ | $ | $ | $ | |||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interest | ( | ( | |||||||||||||||||||||
| Income from continuing operations attributable to Belden stockholders | |||||||||||||||||||||||
| Add: Loss from discontinued operations, net of tax | ( | ||||||||||||||||||||||
| Add: Loss on disposal of discontinued operations, net of tax | ( | ( | |||||||||||||||||||||
| Net income attributable to Belden stockholders | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average shares outstanding, basic | |||||||||||||||||||||||
| Effect of dilutive common stock equivalents | |||||||||||||||||||||||
| Weighted average shares outstanding, diluted | |||||||||||||||||||||||
-13-
For the three and nine months ended October 1, 2023, diluted weighted average shares outstanding excluded outstanding equity awards of 0.1 million and 0.2 million, respectively, as they were anti-dilutive. In addition, for the three and nine months ended October 1, 2023, diluted weighted average shares outstanding did not include outstanding equity awards of 0.2 million and 0.3 million because the related performance conditions have not been satisfied.
For the three and nine months ended October 2, 2022, diluted weighted average shares outstanding exclude outstanding equity awards of 0.7 million and 0.9 million as they are anti-dilutive. In addition, for the three and nine months ended October 2, 2022, diluted weighted average shares outstanding do not include outstanding equity awards of 0.0 million and 0.1 million, respectively, because the related performance conditions have not been satisfied.
For purposes of calculating basic earnings per share, unvested restricted stock units are not included in the calculation of basic weighted average shares outstanding until all necessary conditions have been satisfied and issuance of the shares underlying the restricted stock units is no longer contingent. Necessary conditions are not satisfied until the vesting date, at which time holders of our restricted stock units receive shares of our common stock. For purposes of calculating diluted earnings per share, unvested restricted stock units are included to the extent that they are dilutive. In determining whether unvested restricted stock units are dilutive, each issuance of restricted stock units is considered separately. Once a restricted stock unit has vested, it is included in the calculation of both basic and diluted weighted average shares outstanding.
Note 7: Credit Losses
We are exposed to credit losses primarily through sales of products and services. Our expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. Provisions and recoveries are included in selling, general and administrative expenses. The following table presents the activity in the trade receivables allowance for doubtful accounts for our continuing operations for the three and nine months ended October 1, 2023 and October 2, 2022, respectively:
| 2023 | 2022 | |||||||||||||
| (In thousands) | ||||||||||||||
| Beginning balance at January 1 | $ | $ | ||||||||||||
| Current period provision | ||||||||||||||
| Acquisitions | ||||||||||||||
| Recoveries collected | ( | |||||||||||||
| Write-offs | ( | ( | ||||||||||||
| Fx impact | ( | ( | ||||||||||||
| Q1 ending balance | $ | $ | ||||||||||||
| Current period provision | ||||||||||||||
| Acquisitions | ||||||||||||||
| Fx impact | ( | |||||||||||||
| Write-offs | ( | |||||||||||||
| Recoveries collected | ( | ( | ||||||||||||
| Q2 ending balance | $ | $ | ||||||||||||
| Current period provision | ||||||||||||||
| Write-offs | ( | ( | ||||||||||||
| Recoveries collected | ( | ( | ||||||||||||
| Fx impact | ( | ( | ||||||||||||
| Q3 ending balance | $ | $ | ||||||||||||
-14-
Note 8: Inventories
The following table presents the major classes of inventories as of October 1, 2023 and December 31, 2022, respectively:
| October 1, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Gross inventories | |||||||||||
| Excess and obsolete reserves | ( | ( | |||||||||
| Net inventories | $ | $ | |||||||||
Note 9: Leases
We have operating and finance leases for properties, including manufacturing facilities, warehouses, and office space; as well as vehicles and equipment. We make certain judgments in determining whether a contract contains a lease in accordance with ASU 2016-02. Our leases have remaining lease terms within 1 to 15 years; some of which include extension and termination options. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably certain as of the commencement date of the lease. We have a few short-term operating leases with terms less than twelve months - these leases are not recorded on our balance sheet and the overall rent expense is not material.
We also have certain lease contracts that contain both lease and non-lease components. We have elected the practical expedient to account for these components together as a single, combined lease component. The rate implicit in most of our leases is not readily determinable. As a result, we utilize the incremental borrowing rate to determine the present value of the lease payments, which is unique to each leased asset, and is based upon the term of the lease, commencement date of the lease, local currency of the leased asset, and the credit rating of the legal entity leasing the asset.
Our lease agreements do not contain material residual value guarantees. Our variable lease expense was approximately $0.8 million and $2.4 million for the three and nine months ended October 1, 2023, respectively. Our variable lease expense was approximately $0.7 million and $2.2 million for the three and nine months ended October 2, 2022, respectively.
The components of lease expense were as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Finance lease cost | ||||||||||||||||||||||||||
| Amortization of right-of-use asset | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest on lease liabilities | ||||||||||||||||||||||||||
| Total finance lease cost | $ | $ | $ | $ | ||||||||||||||||||||||
Supplemental cash flow information related to leases was as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | $ | ||||||||||||||||||||||
-15-
Operating cash flows from finance leases were not material during the three and nine months ended October 1, 2023 and October 2, 2022.
Supplemental balance sheet information related to leases was as follows:
| October 1, 2023 | December 31, 2022 | |||||||||||||
| (In thousands, except lease term and discount rate) | ||||||||||||||
| Operating leases: | ||||||||||||||
Total operating lease right-of-use assets | $ | $ | ||||||||||||
| $ | $ | |||||||||||||
| Long-term operating lease liabilities | ||||||||||||||
| Total operating lease liabilities | $ | $ | ||||||||||||
| Finance leases: | ||||||||||||||
| $ | $ | |||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
| Other long-lived assets, net | $ | $ | ||||||||||||
| $ | $ | |||||||||||||
| Total finance lease liabilities | $ | $ | ||||||||||||
| October 1, 2023 | December 31, 2022 | |||||||||||||
| (In thousands, except lease term and discount rate) | ||||||||||||||
| Weighted Average Remaining Lease Term | ||||||||||||||
| Operating leases | ||||||||||||||
| Finance leases | ||||||||||||||
| Weighted Average Discount Rate | ||||||||||||||
| Operating leases | % | % | ||||||||||||
| Finance leases | % | % | ||||||||||||
The following table summarizes maturities of lease liabilities as of October 1, 2023 and December 31, 2022, respectively:
| October 1, 2023 | December 31, 2022 | |||||||||||||
| (In thousands) | ||||||||||||||
| 2023 | $ | $ | ||||||||||||
| 2024 | ||||||||||||||
| 2025 | ||||||||||||||
| 2026 | ||||||||||||||
| 2027 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total | $ | $ | ||||||||||||
In addition, we covenanted the lease payments for certain Grass Valley property leases which include expiration dates through 2035, and collectively have approximately $22 million of fixed lease payments remaining. These lease guarantees were retained by Belden and not transferred to the buyer of Grass Valley. During 2022, Grass Valley defaulted on two property leases. As of October 1, 2023, we have a liability for expected, future payments of $7.4 million. The liability is based on certain assumptions, such as receiving a level of sublease income, that we will reassess on an ongoing basis. We will update the estimated liability balance for changes in assumptions as needed.
-16-
Note 10: Long-Lived Assets
Depreciation and Amortization Expense
We recognized depreciation expense in income from continuing operations of $13.4 million and $38.5 million in the three and nine months ended October 1, 2023, respectively. We recognized depreciation expense in income from continuing operations of $11.8 million and $34.4 million in the three and nine months ended October 2, 2022, respectively.
We recognized amortization expense in income from continuing operations of $11.5 million and $35.5 million in the three and nine months ended October 1, 2023, respectively. We recognized amortization expense in income from continuing operations of $11.0 million and $31.0 million in the three and nine months ended October 2, 2022, respectively.
Gain on Sale of Assets
During the three and nine months ended October 1, 2023, we sold our property in Ontario, Canada as part of a sale and leaseback transaction for $13.8 12.1
During the three and nine months ended October 2, 2022, we sold certain real estate in the United States for $42.2 37.9
Note 11: Severance, Restructuring, and Acquisition Integration Activities
Acquisition Integration Program
We are integrating our recent acquisitions with our existing businesses to achieve desired cost savings, which are primarily focused on consolidating existing and acquired facilities as well as other support functions. The Enterprise Solutions segment incurred $3.2 million and $4.5 million of restructuring and integration costs during the three and nine months ended October 1, 2023, and the Industrial Automation Solutions segment incurred $1.6 million and $2.4 million of restructuring and integration costs during the three and nine months ended October 1, 2023, respectively. The Enterprise Solutions segment incurred $3.7 million and $4.7 million of restructuring and integration costs during the three and nine months ended October 2, 2022, and the Industrial Automation Solutions segment incurred $0.1 million and $3.2 million of restructuring and integration costs during the three and nine months ended October 2, 2022, respectively.
The restructuring and integration costs incurred during 2023 and 2022 primarily consisted of equipment transfer, costs to consolidate operating and support facilities, retention bonuses, relocation, travel, legal, and other costs. The majority of the restructuring and integration costs related to these actions were paid as incurred or are payable within the next 60
The following table summarizes the severance and other restructuring and integration costs of the Acquisition Integration Program described above by financial statement line item in the Condensed Consolidated Statement of Operations:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Cost of sales | $ | $ | $ | $ | ||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| Research and development expenses | ( | |||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
-17-
Note 12: Long-Term Debt and Other Borrowing Arrangements
The carrying values of our long-term debt were as follows:
| October 1, 2023 | December 31, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Revolving credit agreement due 2026 | $ | $ | |||||||||
| Senior subordinated notes: | |||||||||||
| Total senior subordinated notes | |||||||||||
| Less unamortized debt issuance costs | ( | ( | |||||||||
| Long-term debt | $ | $ | |||||||||
Revolving Credit Agreement due 2026
We have a $300.0 million multi-currency asset-based revolving credit facility (the Revolver). The maturity date of the Revolver is June 2, 2026. The borrowing base under the Revolver includes eligible accounts receivable; inventory; and property, plant and equipment of certain of our subsidiaries in the United States, Canada, Germany, the United Kingdom and the Netherlands. Interest on outstanding borrowings is variable, based upon SOFR or other similar indices in foreign jurisdictions, plus a spread that ranges from 1.25 %-1.75 %, depending upon our leverage position. Outstanding borrowings in the U.S. and Canada may also, at our election, be priced on a base rate plus a spread that ranges from 0.25 % — 0.75 %, depending on our leverage position. We pay a commitment fee on the total commitments of 0.25 %. In the event that we borrow more than 90 % of our combined borrowing base or our borrowing base availability is less than $20.0 million, we are subject to a fixed charge coverage ratio covenant. As of October 1, 2023, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $291.9 million.
Senior Subordinated Notes
We had outstanding €200.0 million aggregate principal amount of 4.125 % senior subordinated notes due 2026 (the 2026 Notes). During the nine months ended October 2, 2022, we repurchased the full €200.0 million 2026 Notes outstanding for cash consideration of €204.1 million ($227.9 million), including a redemption premium, and recognized a $6.4 million loss on debt extinguishment including the write-off of unamortized debt issuance costs.
We have outstanding €450.0 million aggregate principal amount of 3.375 % senior subordinated notes due 2027 (the 2027 Notes). The carrying value of the 2027 Notes as of October 1, 2023 is $473.4 million. The 2027 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2027 Notes rank equal in right of payment with our senior subordinated notes due 2031 and 2028 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on January 15 and July 15 of each year.
We have outstanding €350.0 million aggregate principal amount of 3.875 % senior subordinated notes due 2028 (the 2028 Notes). The carrying value of the 2028 Notes as of October 1, 2023 is $368.2 million. The 2028 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2028 Notes rank equal in right of payment with our senior subordinated notes due 2031 and 2027 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on March 15 and September 15 of each year.
We have outstanding €300.0 million aggregate principal amount of 3.375 % senior subordinated notes due 2031 (the 2031 Notes). The carrying value of the 2031 Notes as of October 1, 2023 is $315.6 million. The 2031 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2031 Notes rank equal in right of payment with our senior subordinated notes due 2028 and 2027 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on January 15 and July 15 of each year.
-18-
Note 13: Net Investment Hedge
Note 14: Income Taxes
Note 15: Pension and Other Postretirement Obligations
The following table provides the components of net periodic benefit costs for our pension and other postretirement benefit plans:
| Pension Obligations | Other Postretirement Obligations | |||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service cost | ||||||||||||||||||||||||||
| Actuarial losses (gains) | ( | ( | ( | |||||||||||||||||||||||
| Settlement loss | ||||||||||||||||||||||||||
| Net periodic benefit cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service cost | ||||||||||||||||||||||||||
| Actuarial losses (gains) | ( | ( | ( | |||||||||||||||||||||||
| Settlement loss | ||||||||||||||||||||||||||
| Net periodic benefit cost (income) | $ | $ | ( | $ | $ | |||||||||||||||||||||
We recorded a settlement loss of $1.0
-19-
Note 16: Comprehensive Income and Accumulated Other Comprehensive Income (Loss)
The following table summarizes total comprehensive income:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency translation adjustments, net of tax | |||||||||||||||||||||||
| Adjustments to pension and postretirement liability, net of tax | ( | ( | |||||||||||||||||||||
| Total comprehensive income | |||||||||||||||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income attributable to Belden | $ | $ | $ | $ | |||||||||||||||||||
The tax impacts of the foreign currency translation adjustments and pension liability adjustments in the table above are not material.
The accumulated balances related to each component of other comprehensive loss, net of tax, are as follows:
| Foreign Currency Translation Component | Pension and Other Postretirement Benefit Plans | Accumulated Other Comprehensive Loss | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Balance at December 31, 2022 | $ | ( | $ | ( | $ | ( | |||||||||||
| Other comprehensive loss attributable to Belden before reclassifications | |||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ( | ( | ||||||||||||||
| Net current period other comprehensive loss attributable to Belden | ( | ( | |||||||||||||||
| Balance at October 1, 2023 | $ | ( | $ | ( | $ | ( | |||||||||||
The following table summarizes the effects of reclassifications from accumulated other comprehensive loss for the nine months ended October 1, 2023:
| Amounts Reclassified from Accumulated Other Comprehensive Income (2) | Affected Line Item in the Consolidated Statements of Operations and Comprehensive Loss | ||||||||||
| (In thousands) | |||||||||||
| Amortization of pension and other postretirement benefit plan items: | |||||||||||
| Actuarial gains | $ | ( | (1) | ||||||||
| Prior service cost | (1) | ||||||||||
| Total before tax | ( | ||||||||||
| Tax expense | |||||||||||
| Total net of tax | $ | ( | |||||||||
(1) The amortization of these accumulated other comprehensive loss components are included in the computation of net periodic benefit costs (see Note 15).
-20-
Note 17: Share Repurchase
In 2018, our Board of Directors authorized a share repurchase program, which allows us to purchase up to $300.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance with applicable securities laws and other restrictions. On April 24, 2023, our Board of Directors authorized an additional $300.0 million under the share repurchase program. This program is funded with cash on hand and cash flows from operating activities.
During the three months ended October 1, 2023, we repurchased 0.7 million shares of our common stock for an aggregate cost of $63.8 million at an average price per share of $92.46 . During the nine months ended October 1, 2023, we repurchased 1.7 million shares of our common stock for an aggregate cost of $150.0 million at an average price per share of $89.42 . As of October 1, 2023, we had $215.0 million of authorizations remaining under the program. This share repurchase authorization does not have an expiration date.
-21-
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Belden Inc. (the Company, us, we, or our) is a leading global supplier of network infrastructure and digitization solutions built around 2 global businesses - Enterprise Solutions and Industrial Automation Solutions. Our mission is to build the foundation for a digital world that makes the digital journey simpler, smarter and secure.
Belden is moving beyond connectivity, from what we make to what we make possible through a performance-driven portfolio, forward-thinking expertise and purpose-built solutions. We are aligned with attractive secular growth markets, positioned to provide comprehensive solutions that drive customer outcomes, focused on new product innovation and technology leadership, and committed to sustainable ESG practices. Our current business goals are to:
•Drive organic revenue growth in excess of GDP;
•Deliver incremental Adjusted EBITDA margins of approximately 30%;
•Generate free cash flow of approximately $1 billion cumulatively from 2022 through 2025;
•Execute a disciplined capital allocation strategy while maintaining net leverage of approximately 1.5x; and
•Drive Adjusted EPS to at least $8.00 by 2025.
Trends and Events
The following trends and events during 2023 have had varying effects on our financial condition, results of operations, and cash flows.
Foreign Currency
Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S. dollar and the euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso, Australian dollar, British pound, Indian rupee and Swiss franc. Generally, as the U.S. dollar strengthens against these foreign currencies, our revenues and earnings are negatively impacted as our foreign denominated revenues and earnings are translated into U.S. dollars at a lower rate. Conversely, as the U.S. dollar weakens against foreign currencies, our revenues and earnings are positively impacted. Approximately 46% of our consolidated revenues during the quarter ended October 1, 2023 were to customers outside of the U.S.
In addition to the translation impact described above, currency rate fluctuations have an economic impact on our financial results. As the U.S. dollar strengthens or weakens against foreign currencies, it results in a relative price increase or decrease for certain of our products that are priced in U.S. dollars in a foreign location.
Inflation
During periods of inflation, if we are unable to raise prices timely and sufficiently to recover our material costs, our earnings could decline. Furthermore, inflation may impact labor, energy, and other costs. We monitor inflation pressures and proactively implement selling price increases or cost control measures as appropriate.
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. There is no exact measure of the effect of changing commodity prices, as there are thousands of transactions in any given quarter, each of which has various factors involved in the individual pricing decisions. Therefore, all references to the effect of copper prices or other commodity prices are estimates.
Channel Inventory
Our operating results also can be affected by the levels of Belden products purchased and held as inventory by our channel partners and customers. Our channel partners and customers purchase and hold the products they bought from us in their inventory in order to meet the service and on-time delivery requirements of their customers. Generally, as our channel partners and customers change the level of products they buy from us and hold in their inventory, it impacts our revenues. Comparisons of our results between periods can be impacted by changes in the levels of channel inventory. We use information provided to us by our channel partners and make certain assumptions based on our sales to them to determine the amount of products they bought from us and hold in their inventory. As such, all references to the effect of channel inventory changes are estimates.
-22-
Market Growth and Market Share
The markets in which we operate can generally be characterized as highly competitive and highly fragmented, with many players. We monitor available data regarding market growth, including independent market research reports, publicly available indices, and the financial results of our direct and indirect peer companies, in order to estimate the extent to which our served markets grew or contracted during a particular period. We expect that our unit sales volume will increase or decrease consistently with the market growth rate. Our strategic goal is to utilize our Market Delivery System to target faster growing geographies, applications, and trends within our end markets, in order to achieve growth that is higher than the general market growth rate. To the extent that we exceed the market growth rates, we consider it to be the result of capturing market share.
CloudRail Acquisition
On August 31, 2023, we acquired CloudRail with cash on hand for $9.2 million, net of cash acquired. CloudRail, based in Mannheim, Germany, specializes in sensor to cloud data solutions allowing end users to quickly connect sensors on their machinery to cloud providers to drive business insights and improve outcomes. CloudRail is reported within the Industrial Automation Solutions segment. See Note 3.
Sichert Acquisition
On April 17, 2023, we acquired Sichert with cash on hand for $97.5 million, net of cash acquired. Sichert, based in Berlin Germany, designs and manufactures a portfolio of polycarbonate street cabinets utilized in outside plant passive optical networks (“PON”) and 5G networks. Sichert is reported within the Enterprise Solutions segment. See Note 3.
Gain on Sale of Assets
In September 2023, we sold our property in Ontario, Canada as part of a sale and leaseback transaction for $13.8 million and recognized a $12.1 million pre-tax gain on sale. This gain on sale was excluded from Segment EBITDA. See Note 10.
Share Repurchase Program
During the three months ended October 1, 2023, we repurchased 0.7 million shares of our common stock for an aggregate cost of $63.8 million at an average price per share of $92.46. During the nine months ended October 1, 2023, we repurchased 1.7 million shares of our common stock for an aggregate cost of $150.0 million at an average price per share of $89.42. See Note 17.
Sale and Deconsolidation of Hite
On April 28, 2023, we sold our 51% ownership interest in Shanghai Hi-Tech Control System Co, Ltd to (Hite) for $0.9 million and recognized a $0.4 million pretax gain on sale. The sale also includes $0.6 million of potential earnout payments. The joint venture developed and provided certain Industrial Automation Solutions products and integrated solutions to customers in China. As Belden was the primary beneficiary of the joint venture, due to both our ownership percentage and control over the activities of the joint venture, we consolidated the joint venture in our financial statements and presented the results of the joint venture attributable to Hite’s ownership as net income attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations up to the disposal date when we sold and deconsolidated the entity. See Note 1.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows that are or would be considered material to investors.
Critical Accounting Policies
During the nine months ended October 1, 2023:
•We did not change any of our existing critical accounting policies from those listed in our 2022 Annual Report on Form 10-K;
•No existing accounting policies became critical accounting policies because of an increase in the materiality of associated transactions or changes in the circumstances to which associated judgments and estimates relate; and
•There were no significant changes in the manner in which critical accounting policies were applied or in which related judgments and estimates were developed.
-23-
Results of Operations
Consolidated Income before Taxes
| Three Months Ended | % Change | Nine Months Ended | % Change | ||||||||||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Revenues | $ | 626,807 | $ | 670,491 | (6.5) | % | $ | 1,960,841 | $ | 1,947,413 | 0.7 | % | |||||||||||||||||||||||
| Gross profit | 241,168 | 238,646 | 1.1 | % | 748,601 | 669,811 | 11.8 | % | |||||||||||||||||||||||||||
| Selling, general and administrative expenses | (118,079) | (110,478) | 6.9 | % | (366,288) | (318,747) | 14.9 | % | |||||||||||||||||||||||||||
| Research and development expenses | (30,190) | (26,306) | 14.8 | % | (90,544) | (75,751) | 19.5 | % | |||||||||||||||||||||||||||
| Amortization of intangibles | (9,526) | (10,105) | (5.7) | % | (30,262) | (28,099) | 7.7 | % | |||||||||||||||||||||||||||
| Gain on sale of assets | 12,056 | 37,891 | (68.2) | % | 12,056 | 37,891 | (68.2) | % | |||||||||||||||||||||||||||
| Operating income | 95,429 | 129,648 | (26.4) | % | 273,563 | 285,105 | (4.0) | % | |||||||||||||||||||||||||||
| Interest expense, net | (8,580) | (9,883) | (13.2) | % | (25,593) | (35,570) | (28.0) | % | |||||||||||||||||||||||||||
| Non-operating pension benefit | 328 | 26 | 1,161.5 | % | 1,462 | 2,296 | (36.3) | % | |||||||||||||||||||||||||||
| Loss on debt extinguishment | — | — | n/a | — | (6,392) | (100.0) | % | ||||||||||||||||||||||||||||
| Income from continuing operations before taxes | 87,177 | 119,791 | (27.2) | % | 249,432 | 245,439 | 1.6 | % | |||||||||||||||||||||||||||
Revenues decreased $43.7 million and increased $13.4 million in the three and nine months ended October 1, 2023, respectively, from the comparable periods of 2022 due to the following factors:
•Sales volume resulted in a $60.1 million decline and $12.1 million increase in revenues, respectively.
•Acquisitions, net of divestitures contributed an estimated $12.7 million and $27.6 million in revenues, respectively.
•Copper pass-through pricing had a $0.7 million favorable and $19.4 million unfavorable impact on revenues, respectively.
•Currency translation had a $3.0 million favorable and $6.9 million unfavorable impact on revenues, respectively.
Gross profit increased $2.5 million and $78.8 million in the three and nine months ended October 1, 2023, respectively, from the comparable periods of 2022 primarily due to favorable product mix and pricing. Gross profit margins were robust, expanding 290 and 380 basis points to 38.5% and 38.2% in the three and nine months ended October 1, 2023 from 35.6% and 34.4% in the comparable periods of 2022, respectively.
Selling, general and administrative expenses increased $7.6 million and $47.5 million in the three and nine months ended October 1, 2023, respectively, from the comparable periods of 2022. The increase in selling, general and administrative expenses is primarily attributable to strategic investments to enhance our solution selling capabilities as well as increases from acquisitions.
Research and development expenses increased $3.9 million and $14.8 million in the three and nine months ended October 1, 2023, respectively, from the comparable periods of 2022 primarily due to increased investments as we further strengthen our product offering and continue our commitment to growth initiatives.
Amortization of intangibles decreased $0.6 million and increased $2.2 million in the three and nine months ended October 1, 2023, respectively, from the comparable periods of 2022 primarily due to acquisitions. The decrease in the three months ended October 1, 2023 was primarily due to fair value adjustments during the quarter related to intangible assets from the Sichert acquisition.
The $12.1 million and $37.9 million pre-tax gain on sale of assets in 2023 and 2022, respectively, represents the gain on certain real estate sold in Canada and the United States for $13.8 million and $42.2 million, respectively. See Note 10.
Operating income decreased $34.2 million and increased $11.5 million in the three and nine ended October 1, 2023 from the comparable periods of 2022 primarily due to the changes in revenues as discussed above.
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Net interest expense decreased $1.3 million and $10.0 million in the three and nine months ended October 1, 2023, respectively, from the comparable periods of 2022 due to the retirement of the 2026 Notes during 2022 and an increase in interest income. See further discussion below.
The $6.4 million loss on debt extinguishment in the nine months ended October 2, 2022 represents the premium paid to the bond holders to retire the 2026 Notes and the write-off of the unamortized debt issuance costs associated with the 2026 Notes. See Note 12.
Income from continuing operations before taxes decreased $32.6 million and increased $4.0 million in the three and nine months ended October 1, 2023, respectively, from the comparable periods of 2022 primarily due to the changes in operating income and decrease in debt costs as discussed above.
Income Taxes
| Three Months Ended | % Change | Nine Months Ended | % Change | ||||||||||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Income from continuing operations before taxes | $ | 87,177 | $ | 119,791 | (27.2) | % | $ | 249,432 | $ | 245,439 | 1.6 | % | |||||||||||||||||||||||
| Income tax expense | 14,850 | 16,104 | (7.8) | % | 45,385 | 39,014 | 16.3 | % | |||||||||||||||||||||||||||
| Effective tax rate | 17.0 | % | 13.4 | % | 18.2 | % | 15.9 | % | |||||||||||||||||||||||||||
For the three and nine months ended October 1, 2023, we recognized income tax expense of $14.9 million and $45.4 million, representing an effective tax rate of 17.0% and 18.2%, respectively. The effective tax rate was primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits. See Note 14.
Consolidated Adjusted EBITDA
| Three Months Ended | % Change | Nine Months Ended | % Change | ||||||||||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Revenues | $ | 626,807 | $ | 670,491 | (6.5) | % | $ | 1,960,841 | $ | 1,947,413 | 0.7 | % | |||||||||||||||||||||||
| Adjusted EBITDA | 115,202 | 118,094 | (2.4) | % | 349,832 | 328,555 | 6.5 | % | |||||||||||||||||||||||||||
| as a percent of revenues | 18.4 | % | 17.6 | % | 17.8 | % | 16.9 | % | |||||||||||||||||||||||||||
Adjusted EBITDA decreased $2.9 million and increased $21.3 million in the three and nine months ended October 1, 2023, respectively, from the comparable periods of 2022 primarilly due to the fluctuations in revenues as discussed above. Furthermore, Adjusted EBITDA margins in the three and nine months ended October 1, 2023 expanded to 18.4% and 17.8% from 17.6% and 16.9% in the comparable periods of 2022, respectively, due to favorable product mix.
Use of Non-GAAP Financial Information
Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow are non-GAAP financial measures. In addition to reporting financial results in accordance with accounting principles generally accepted in the United States, we provide non-GAAP operating results adjusted for certain items, including: asset impairments; accelerated depreciation expense due to plant consolidation activities; acquisition-related expenses, such as the adjustment of acquired inventory to fair value, and transaction costs; severance, restructuring, and acquisition integration costs; gains (losses) recognized on the disposal of businesses and assets; amortization of intangible assets; gains (losses) on debt extinguishment; certain gains (losses) from patent settlements; discontinued operations; and other costs. We adjust for the items listed above in all periods presented, unless the impact is clearly immaterial to our financial statements. When we calculate the tax effect of the adjustments, we include all current and deferred income tax expense commensurate with the adjusted measure of pre-tax profitability.
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We utilize the adjusted results to review our ongoing operations without the effect of these adjustments and for comparison to budgeted operating results. We believe the adjusted results are useful to investors because they help them compare our results to previous periods and provide important insights into underlying trends in the business and how management oversees our business operations on a day-to-day basis. As an example, we adjust for acquisition-related expenses, such as amortization of intangibles and impacts of fair value adjustments because they generally are not related to the acquired business' core operating performance. As an additional example, we exclude the costs of restructuring programs, which can occur from time to time for our current businesses and/or recently acquired businesses. We exclude the costs in calculating adjusted results to allow us and investors to evaluate the performance of the business based upon its expected ongoing operating structure. We believe the adjusted measures, accompanied by the disclosure of the costs of these programs, provides valuable insight.
Adjusted results should be considered only in conjunction with results reported according to accounting principles generally accepted in the United States. The following tables reconcile our GAAP results to our non-GAAP financial measures:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||||||||
| Revenues | $ | 626,807 | $ | 670,491 | $ | 1,960,841 | $ | 1,947,413 | |||||||||||||||
| GAAP income from continuing operations | $ | 72,327 | $ | 103,687 | $ | 204,047 | $ | 206,425 | |||||||||||||||
| Income tax expense | 14,850 | 16,104 | 45,385 | 39,014 | |||||||||||||||||||
| Depreciation expense | 13,442 | 11,847 | 38,478 | 34,443 | |||||||||||||||||||
| Amortization of intangible assets | 9,526 | 10,105 | 30,262 | 28,099 | |||||||||||||||||||
| Interest expense, net | 8,580 | 9,883 | 25,593 | 35,570 | |||||||||||||||||||
| Severance, restructuring, and acquisition integration costs (1) | 6,075 | 4,560 | 11,846 | 14,140 | |||||||||||||||||||
| Loss on debt extinguishment | — | — | — | 6,392 | |||||||||||||||||||
| Amortization of software development intangible assets | 1,963 | 868 | 5,235 | 2,856 | |||||||||||||||||||
| Non-operating pension settlement loss | — | 954 | — | 954 | |||||||||||||||||||
| Adjustments related to acquisitions and divestitures (2) | 495 | (2,023) | 1,042 | (1,447) | |||||||||||||||||||
| Gain on sale of assets | (12,056) | (37,891) | (12,056) | (37,891) | |||||||||||||||||||
| Adjusted EBITDA | $ | 115,202 | $ | 118,094 | $ | 349,832 | $ | 328,555 | |||||||||||||||
| GAAP income from continuing operations margin | 11.5 | % | 15.5 | % | 10.4 | % | 10.6 | % | |||||||||||||||
| Adjusted EBITDA margin | 18.4 | % | 17.6 | % | 17.8 | % | 16.9 | % | |||||||||||||||
(1) Severance, restructuring, and acquisition integration costs for the three and nine months ended October 1, 2023 and October 2, 2022 included costs related to our Acquisition Integration program. See Note 11.
(2) Adjustments related to acquisitions and divestitures included fair value adjustments of acquired inventory and investments as well as gains associated with the sales of businesses.
Segment Results of Operations
For additional information regarding our segment measures, see Note 5 to the Condensed Consolidated Financial Statements.
Enterprise Solutions
| Three Months Ended | % Change | Nine Months Ended | % Change | ||||||||||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Segment Revenues | $ | 283,905 | $ | 319,201 | (11.1) | % | $ | 871,777 | $ | 895,075 | (2.6) | % | |||||||||||||||||||||||
| Segment EBITDA | 37,693 | 46,110 | (18.3) | % | 118,854 | 118,818 | — | % | |||||||||||||||||||||||||||
| as a percent of segment revenues | 13.3 | % | 14.4 | % | 13.6 | % | 13.3 | % | |||||||||||||||||||||||||||
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Enterprise Solutions revenues decreased $35.3 million and $23.3 million in the three and nine months ended October 1, 2023 from the comparable periods of 2022, respectively. The decrease in revenues in the three months ended October 1, 2023 was primarily due to decreases in volume, lower copper pass-through pricing, and unfavorable currency translation of $46.1 million, $2.0 million, and $0.4 million, respectively, partially offset by $13.2 million from acquisitions. The decrease in revenues in the nine months ended October 1, 2023 was primarily due to decreases in volume, lower copper pass-through pricing, and unfavorable currency translation of $33.8 million, $8.9 million, and $5.0 million, respectively, partially offset by acquisitions of $24.4 million.
Enterprise Solutions EBITDA decreased $8.4 million in the three months ended October 1, 2023 from the comparable period of 2022 primarily as a result of the decrease in revenues discussed above and remained relatively flat in the nine months ended October 1, 2023 from the comparable period of 2022.
Industrial Automation Solutions
| Three Months Ended | % Change | Nine Months Ended | % Change | ||||||||||||||||||||||||||||||||
| October 1, 2023 | October 2, 2022 | October 1, 2023 | October 2, 2022 | ||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | |||||||||||||||||||||||||||||||||||
| Segment Revenues | $ | 342,902 | $ | 351,290 | (2.4) | % | $ | 1,089,064 | $ | 1,052,338 | 3.5 | % | |||||||||||||||||||||||
| Segment EBITDA | 77,244 | 71,055 | 8.7 | % | 229,662 | 206,643 | 11.1 | % | |||||||||||||||||||||||||||
| as a percent of segment revenues | 22.5 | % | 20.2 | % | 21.1 | % | 19.6 | % | |||||||||||||||||||||||||||
Industrial Automation Solutions revenues decreased $8.4 million in the three months ended October 1, 2023 from the comparable period of 2022 and increased $36.7 million in the nine months ended October 1, 2023 from the comparable period of 2022. The decrease in revenues in the three months ended October 1, 2023 was primarily due to decreases in volume of $14.0 million and divestitures, net of acquisitions of $0.5 million, partially offset by favorable currency translation and higher copper pass-through pricing of $3.4 million and $2.7 million, respectively. The increase in revenues in the nine months ended October 1, 2023 was primarily due to increases in volume and favorable pricing of $45.9 million and acquisitions, net of divestitures of $3.2 million, partially offset by lower copper pass-through pricing and unfavorable currency translation of $10.5 million and $1.9 million, respectively.
Industrial Automation Solutions EBITDA increased $6.2 million and $23.0 million in the three and nine months ended October 1, 2023 from the comparable periods of 2022, respectively, primarily as a result of favorable product mix. Accordingly, for the three and nine months ended October 1, 2023, Segment EBITDA margins expanded to 22.5% and 21.1% from 20.2% and 19.6% over the year ago periods, respectively.
Liquidity and Capital Resources
Significant factors affecting our cash liquidity include (1) cash from operating activities, (2) disposals of businesses and tangible assets, (3) cash used for acquisitions, restructuring actions, capital expenditures, share repurchases, dividends, and senior subordinated note repurchases, and (4) our available credit facilities and other borrowing arrangements. We expect our operating activities to generate cash in 2023 and believe our sources of liquidity are sufficient to fund current working capital requirements, capital expenditures, contributions to our retirement plans, share repurchases, senior subordinated note repurchases, quarterly dividend payments, and our short-term operating strategies. However, we may require external financing in the event we complete a significant acquisition. Our ability to continue to fund our future needs from business operations could be affected by many factors, including, but not limited to: economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product mix, and commodities pricing.
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The following table is derived from our Condensed Consolidated Cash Flow Statements and includes the results of discontinued operations up to the February 22, 2022 disposal date:
| Nine Months Ended | |||||||||||
| October 1, 2023 | October 2, 2022 | ||||||||||
| (In thousands) | |||||||||||
| Net cash provided by (used for): | |||||||||||
| Operating activities | $ | 159,993 | $ | 78,800 | |||||||
| Investing activities | (145,497) | 223,377 | |||||||||
| Financing activities | (167,403) | (376,677) | |||||||||
| Effects of currency exchange rate changes on cash and cash equivalents | (3,798) | (21,791) | |||||||||
| Decrease in cash and cash equivalents | (156,705) | (96,291) | |||||||||
| Cash and cash equivalents, beginning of period | 687,676 | 643,757 | |||||||||
| Cash and cash equivalents, end of period | $ | 530,971 | $ | 547,466 | |||||||
Net cash provided by operating activities totaled $160.0 million in the nine months ended October 1, 2023, compared to $78.8 million in the prior year. Operating cash flows improved $81.2 million compared to the prior year primarily due to an $11.2 million increase in net income and a $55.8 million improvement in operating assets and liabilities. Inventories experienced the biggest improvement as we continue to reduce the outstanding backlog.
Net cash from investing activities was a use of cash of $145.5 million in the nine months ended October 1, 2023, compared to a source of cash of $223.4 million in the prior year. Investing activities for the nine months ended October 1, 2023 included $106.7 million primarily for the acquisitions of Sichert and Cloudrail and $61.9 million for capital expenditures, partially offset by $13.8 million for asset sales and $9.3 million received from the disposals of businesses. Investing activities for the nine months ended October 2, 2022 included cash receipts of $334.6 million primarily for the Tripwire disposal and $43.5 million for asset sales, partially offset by payments of $104.5 million for acquisitions and $50.3 million for capital expenditures.
Net cash used for financing activities totaled $167.4 million for the nine months ended October 1, 2023, compared to $376.7 million in the prior year. Financing activities for the nine months ended October 1, 2023 included payments under our share repurchase program of $150.0 million, payments related to share based compensation activities of $17.3 million, cash dividend payments of $6.4 million, financing lease payments of $0.3 million, and proceeds from the issuance of common stock of $6.6 million. Financing activities for the nine months ended October 2, 2022 included payments under borrowing arrangements of $230.6 million, payments under our share repurchase program of $136.3 million, cash dividend payments of $6.8 million, net payments related to share based compensation activities of $6.5 million, and proceeds from the issuance of common stock of $3.7 million.
Our cash and cash equivalents balance was $531.0 million as of October 1, 2023. Of this amount, $237.6 million was held outside of the U.S. in our foreign operations. Substantially all of the foreign cash and cash equivalents are readily convertible into U.S. dollars or other foreign currencies. We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and accordingly, no provision for any withholding taxes has been recorded. Upon distribution of those earnings in the form of dividends or otherwise, we may be subject to withholding taxes payable to the respective foreign countries.
Our outstanding debt obligations as of October 1, 2023 consisted of $1,157.1 million of senior subordinated notes. Additional discussion regarding our various borrowing arrangements is included in Note 12 to the Condensed Consolidated Financial Statements.
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Forward-Looking Statements
Statements in this report other than historical facts are “forward-looking statements.” Forward-looking statements include statements regarding future financial performance (including revenues, expenses, earnings, margins, cash flows, dividends, capital expenditures and financial condition), plans and objectives, and related assumptions. These forward-looking statements reflect management’s current beliefs and expectations and are not guarantees of future performance. Actual results may differ materially from those suggested by any forward-looking statements based on a number of factors. These factors include, among others, those set forth in Part II, Item 1A and in 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.
Item 3: Quantitative and Qualitative Disclosures about Market Risks
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 October 1, 2023.
| Principal Amount by Expected Maturity | Fair | ||||||||||||||||||||||
| 2023 | Thereafter | Total | Value | ||||||||||||||||||||
| (In thousands, except interest rates) | |||||||||||||||||||||||
| €450.0 million fixed-rate senior subordinated notes due 2027 | $ | — | $ | 473,355 | $ | 473,355 | $ | 434,895 | |||||||||||||||
| Average interest rate | 3.375 | % | |||||||||||||||||||||
| €350.0 million fixed-rate senior subordinated notes due 2028 | $ | — | $ | 368,165 | $ | 368,165 | $ | 341,933 | |||||||||||||||
| Average interest rate | 3.875 | % | |||||||||||||||||||||
| €300.0 million fixed-rate senior subordinated notes due 2031 | $ | — | 315,570 | $ | 315,570 | $ | 265,473 | ||||||||||||||||
| Average interest rate | 3.375 | % | |||||||||||||||||||||
| Total | $ | 1,157,090 | $ | 1,042,301 | |||||||||||||||||||
Item 7A of our 2022 Annual Report on Form 10-K provides information as to the practices and instruments that we use to manage market risks. There were no material changes in our exposure to market risks since December 31, 2022.
Item 4: Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
Item 1: Legal Proceedings
We are a party to various legal proceedings and administrative actions that are incidental to our operations. 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 1A: Risk Factors
There have been no material changes with respect to risk factors as previously disclosed in our Form 10-K filed on February 24, 2023. There may be additional risks that impact our business that we currently do not recognize as, or that are not currently, material to our business.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Set forth below is information regarding our stock repurchases for the three months ended October 1, 2023 (in thousands, except per share amounts).
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of shares Repurchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| Balance at July 2, 2023 | $ | 278,776 | ||||||||||||||||||||||||
| July 3, 2023 through August 6, 2023 | 62 | $ | 94.72 | 62 | 272,948 | |||||||||||||||||||||
| August 7, 2023 through September 3, 2023 | 327 | 88.98 | 327 | 243,869 | ||||||||||||||||||||||
| September 4, 2023 through October 1, 2023 | 301 | 95.76 | 301 | 215,000 | ||||||||||||||||||||||
| Total | 690 | $ | 92.46 | 690 | $ | 215,000 | ||||||||||||||||||||
(1) In November 2018, our Board of Directors authorized a share repurchase program, which allows us to purchase up to $300.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance with applicable security laws and other regulations. In April 2023, our Board of Directors authorized an additional $300.0 million under the share repurchase program. This program is funded with cash on hand and cash flows from operating activities. The program does not have an expiration date and may be suspended at any time at the discretion of the Company. During the three months ended October 1, 2023, we repurchased 0.7 million shares of our common stock for an aggregate cost of $63.8 million at an average price per share of $92.46. From inception of our program to the date of this filing, we have repurchased 6.1 million shares of our common stock for an aggregate cost of $385.0 million and an average price per share of $62.78. See Note 17. As of the date of this filing, we had $215.0 million of authorizations remaining under the program.
Item 5: Other Information
None of the Company’s directors or officers adopted terminated
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Item 6: Exhibits
Exhibits
| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32.1 | ||||||||
| Exhibit 32.2 | ||||||||
| Exhibit 101.SCH | Schema Document | |||||||
| Exhibit 101.CAL | Calculation Linkbase Document | |||||||
| Exhibit 101.DEF | Definition Linkbase Document | |||||||
| Exhibit 101.LAB | Labels Linkbase Document | |||||||
| Exhibit 101.PRE | Presentation Linkbase Document | |||||||
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BELDEN INC. | |||||||||||||||||
| Date: | November 2, 2023 | By: | /s/ Ashish Chand | ||||||||||||||
| Ashish Chand | |||||||||||||||||
| President and Chief Executive Officer | |||||||||||||||||
| Date: | November 2, 2023 | By: | /s/ Jeremy Parks | ||||||||||||||
| Jeremy Parks | |||||||||||||||||
| Senior Vice President, Finance, and Chief Financial Officer | |||||||||||||||||
| Date: | November 2, 2023 | By: | /s/ Douglas R. Zink | ||||||||||||||
| Douglas R. Zink | |||||||||||||||||
| Vice President and Chief Accounting Officer | |||||||||||||||||
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Exhibit 31.1
CERTIFICATE PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Ashish Chand, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Belden Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which the statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
November 2, 2023
| /s/ Ashish Chand | ||
| Ashish Chand | ||
| President and Chief Executive Officer | ||
Exhibit 31.2
CERTIFICATE PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Jeremy Parks, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Belden Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which the statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
November 2, 2023
| /s/ Jeremy Parks | |||||
Jeremy Parks | |||||
| Senior Vice President, Finance, and Chief Financial Officer | |||||
Exhibit 32.1
CERTIFICATE PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Belden Inc. (the “Company”) on Form 10-Q for the period ended October 1, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ashish Chand, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Ashish Chand
Ashish Chand
President and Chief Executive Officer
November 2, 2023
Exhibit 32.2
CERTIFICATE PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Belden Inc. (the “Company”) on Form 10-Q for the period ended October 1, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeremy Parks, Senior Vice President, Finance, and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Jeremy Parks
Jeremy Parks
Senior Vice President, Finance, and Chief Financial Officer
November 2, 2023