BELDEN INC. - Quarter Report: 2010 October (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission File No. 001-12561

BELDEN INC.

(Exact name of registrant as specified in its charter)

Delaware		36-3601505
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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

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

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

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

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

As of November 8, 2010, the Registrant had 46,937,599 outstanding shares of common stock.

 

 

PART I FINANCIAL INFORMATION

Item 1.		Financial Statements

BELDEN INC.
CONSOLIDATED BALANCE SHEETS

		October 3,				December 31,
		2010				2009
		(Unaudited)
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	296,081			$	308,879
Receivables, net			291,132				242,145
Inventories, net			167,483				151,262
Deferred income taxes			26,854				26,996
Other current assets			18,077				35,036
Total current assets			799,627				764,318
Property, plant and equipment, less accumulated depreciation			282,517				299,586
Goodwill			308,864				313,030
Intangible assets, less accumulated amortization			128,014				143,013
Deferred income taxes			36,376				37,205
Other long-lived assets			70,261				63,426
		$	1,625,659			$	1,620,578
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	203,835			$	169,763
Accrued liabilities			140,602				141,922
Current maturities of long-term debt			—				46,268
Total current liabilities			344,437				357,953
Long-term debt			551,247				543,942
Postretirement benefits			115,642				121,745
Other long-term liabilities			31,050				45,890
Stockholders’ equity:
Preferred stock			—				—
Common stock			503				503
Additional paid-in capital			597,777				591,917
Retained earnings			117,508				72,625
Accumulated other comprehensive income (loss)			(7,258	)			14,614
Treasury stock			(125,247	)			(128,611	)
Total stockholders’ equity			583,283				551,048
		$	1,625,659			$	1,620,578

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

BELDEN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended								Nine Months Ended
		October 3, 2010				September 27, 2009				October 3, 2010				September 27, 2009
		(In thousands, except per share data)
Revenues		$	411,472			$	355,159			$	1,237,961			$	1,027,492
Cost of sales			(285,777	)			(247,086	)			(868,061	)			(726,708	)
Gross profit			125,695				108,073				369,900				300,784
Selling, general and administrative expenses			(71,392	)			(71,489	)			(219,775	)			(215,765	)
Research and development			(14,794	)			(14,161	)			(42,991	)			(44,838	)
Amortization of intangibles			(4,152	)			(3,983	)			(12,558	)			(11,759	)
Income from equity method investment			3,053				2,418				8,905				4,403
Asset impairment			—				—				—				(26,176	)
Loss on sale of assets			—				—				—				(17,184	)
Operating income (loss)			38,410				20,858				103,481				(10,535	)
Interest expense			(11,779	)			(12,575	)			(38,912	)			(28,793	)
Interest income			127				199				446				801
Other income (expense)			—				—				1,465				(1,541	)
Income (loss) from continuing operations before taxes			26,758				8,482				66,480				(40,068	)
Income tax expense			(6,002	)			(15,958	)			(14,014	)			(4,748	)
Income (loss) from continuing operations			20,756				(7,476	)			52,466				(44,816	)
Loss from discontinued operations, net of tax			(151	)			—				(442	)			—
Net income (loss)		$	20,605			$	(7,476	)		$	52,024			$	(44,816	)
Weighted average number of common shares and equivalents:
Basic			46,813				46,607				46,762				46,574
Diluted			47,721				46,607				47,665				46,574
Basic income (loss) per share
Continuing operations		$	0.44			$	(0.16	)		$	1.12			$	(0.96	)
Discontinued operations			—				—				(0.01	)			—
Net Income (loss)		$	0.44			$	(0.16	)		$	1.11			$	(0.96	)
Diluted income (loss) per share
Continuing operations		$	0.43			$	(0.16	)		$	1.10			$	(0.96	)
Discontinued operations			—				—				(0.01	)			—
Net Income (loss)		$	0.43			$	(0.16	)		$	1.09			$	(0.96	)
Dividends declared per share		$	0.05			$	0.05			$	0.15			$	0.15

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

BELDEN INC.
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)

		Nine Months Ended
		October 3, 2010				September 27, 2009
		(In thousands)
Cash flows from operating activities:
Net income (loss)		$	52,024			$	(44,816	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			41,525				40,630
Share-based compensation			9,539				8,373
Provision for inventory obsolescence			2,924				4,912
Non-cash loss on derivatives and hedging instruments			2,893				—
Tax deficiency related to share-based compensation			239				1,507
Amortization of discount on long-term debt			195				103
Asset impairment			—				26,176
Loss on sale of assets			—				17,184
Pension funding in excess of pension expense			(5,753	)			(7,000	)
Income from equity method investment			(8,905	)			(4,403	)
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:
Receivables			(51,874	)			40,784
Inventories			(20,898	)			49,631
Deferred cost of sales			6,479				(514	)
Accounts payable			34,288				2,517
Accrued liabilities			10,252				(23,543	)
Deferred revenue			(14,771	)			843
Accrued taxes			(1,295	)			1,996
Other assets			9,755				6,390
Other liabilities			(11,206	)			(834	)
Net cash provided by operating activities			55,411				119,936
Cash flows from investing activities:
Capital expenditures			(19,198	)			(26,178	)
Proceeds from disposal of tangible assets			2,332				367
Cash provided by other investing activities			163				—
Net cash used for investing activities			(16,703	)			(25,811	)
Cash flows from financing activities:
Borrowings under credit arrangements			—				193,732
Payments under borrowing arrangements			(46,268	)			(193,732	)
Debt issuance costs			—				(11,810	)
Cash dividends paid			(7,052	)			(7,037	)
Tax deficiency related to share-based compensation			(239	)			(1,507	)
Proceeds from exercise of stock options			720				23
Cash received upon termination of derivative instruments			4,217				—
Net cash used for financing activities			(48,622	)			(20,331	)
Effect of foreign currency exchange rate changes on cash and cash equivalents			(2,884	)			10,585
Increase (decrease) in cash and cash equivalents			(12,798	)			84,379
Cash and cash equivalents, beginning of period			308,879				227,413
Cash and cash equivalents, end of period		$	296,081			$	311,792

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

BELDEN INC.
CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENT
NINE MONTHS ENDED OCTOBER 3, 2010
(Unaudited)

																										Accumulated Other
																										Comprehensive Income (Loss)
										Additional																Translation				Pension and
		Common Stock								Paid-In				Retained				Treasury Stock								Component				Postretirement
		Shares				Amount				Capital				Earnings				Shares				Amount				of Equity				Liability				Total
																		(In thousands)
Balance at December 31, 2009			50,335			$	503			$	591,917			$	72,625				(3,675	)		$	(128,611	)		$	58,060			$	(43,446	)		$	551,048
Net income															52,024																				52,024
Foreign currency translation			—				—				—				—				—				—				(21,872	)			—				(21,872	)
Comprehensive income																																			30,152
Exercise of stock options, net of tax withholding forfeitures			—				—				(564	)			—				51				1,105				—				—				541
Release of restricted stock, net of tax withholding forfeitures			—				—				(2,900	)			—				105				2,259				—				—				(641	)
Share-based compensation			—				—				9,300				—				—				—				—				—				9,300
Dividends ($0.15 per share)			—				—				24				(7,141	)			—				—				—				—				(7,117	)
Balance at October 3, 2010			50,335			$	503			$	597,777			$	117,508				(3,519	)		$	(125,247	)		$	36,188			$	(43,446	)		$	583,283

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

BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying 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 Consolidated Financial Statements presented as of any date other than December 31, 2009:

•

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 Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Supplementary Data contained in our 2009 Annual Report on Form 10-K.

Business Description

We design, manufacture, and market cable, connectivity, and networking products in markets including industrial automation, enterprise, transportation, infrastructure, and consumer electronics.

Reporting Periods

Historically, our fiscal first, second and third quarters each ended on the last Sunday falling on or before their respective calendar quarter-end. Beginning in 2010, our fiscal first quarter ends on the Sunday falling closest to 91 days after December 31. Our fiscal second and third quarters continue to fall on the Sunday which is 91 days after the preceding quarter-end. Our fiscal year and fiscal fourth quarter continue to both end on December 31.

The nine months ended October 3, 2010 and September 27, 2009 included 276 and 270 calendar days, respectively.

Reclassifications

We have made certain reclassifications to the 2009 Consolidated Financial Statements with no impact to reported net income (loss) in order to conform to the 2010 presentation.

Fair Value Measurement

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

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

•

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

•

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

•

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

As of and during the three and nine months ended October 3, 2010 and September 27, 2009, we utilized Level 1 inputs to determine the fair value of cash equivalents, and we utilized Level 2 inputs to determine the fair value of certain long-lived assets (see Note 5) and derivatives and hedging instruments (see Note 8). We did not have any transfers between Level 1 and Level 2 fair value measurements during the three and nine months ended October 3, 2010 and September 27, 2009.

Cash and Cash Equivalents

We classify cash on hand and deposits in banks, including commercial paper, money market accounts, and other investments with an original maturity of three months or less, that we hold from time to time, as cash and cash equivalents. We periodically have cash equivalents consisting of short-term money market funds and other investments. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations. We do not enter into investments for trading or speculative purposes. The fair value of these cash equivalents as of October 3, 2010 was $87.6 million and is based on quoted market prices in active markets (i.e., Level 1 valuation).

Contingent Liabilities

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

As of October 3, 2010, we were party to bank guaranties, standby letters of credit, and surety bonds totaling $10.1 million, $10.1 million, and $1.6 million, respectively.

Revenue Recognition

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

product returns. We charge revisions to these estimates to accounts receivable and revenue in the period in which the facts that give rise to each revision become known.

In October 2009, the Financial Accounting Standards Board (FASB) issued updates to existing guidance on revenue recognition that we adopted on a prospective basis on January 1, 2010. Under the new guidance, sales of tangible products that have software components that are essential to the functionality of the tangible product are no longer within the scope of the software revenue recognition guidance and are now subject to other relevant revenue recognition guidance. Additionally, the FASB issued an update to existing guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when Vendor Specific Objective Evidence (VSOE) or Third Party Evidence (TPE) of the selling price for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method.

Sales from our Wireless segment often involve multiple elements, principally hardware, software, hardware and software maintenance, and other support services (maintenance and other support services referred to as post-contract customer support). As a result of the adoption of the new accounting guidance, our Wireless segment’s sales of hardware that include software components are no longer subject to software revenue recognition requirements. In addition, the timing of revenue recognition and amount of revenue to be recognized for each deliverable changed such that less revenue is deferred on arrangements with multiple deliverables for which VSOE has not been established than prior to the adoption of this accounting guidance. For hardware deliverables, revenue is recognized upon delivery. For software deliverables, revenue is recognized upon delivery, unless post-contract customer support is included, in which case the revenue is deferred and recognized over the period of the post-contract customer support. For post-contract customer support, revenue is recognized ratably over the maintenance or support period. The recognition period for the majority of our arrangements is one year. However, the recognition period can range up to five years in some instances. The allocation of the total revenue among the delivered items is based on the estimated selling price of the deliverables, as we have not established VSOE or TPE of selling price. The best estimate of the selling price for each deliverable is determined based on an analysis of the historical average price of such deliverable when sold on a stand-alone basis.

For fiscal years ending December 31, 2009 and prior, when a sale involved multiple elements, we allocated the proceeds from the arrangement to each respective element based on its VSOE of fair value, if established, and recognized revenue when each element’s revenue recognition criteria was met. VSOE of fair value for each element is established based on the price charged when the same element is sold separately. If VSOE of fair value could not be established, the proceeds from the arrangement were deferred and recognized ratably over the period related to the last delivered element. Through December 31, 2009, our Wireless segment could not establish VSOE of fair value of hardware, software, and post-contract customer support. As a result, the proceeds and related cost of sales from multiple-element revenue transactions involving these elements were deferred and recognized ratably over the post-contract customer support period, ranging from one to five years.

Our Wireless segment revenues and operating loss for the three months ended October 3, 2010 would have been $10.3 million and $5.3 million, respectively, prior to the adoption of this new accounting guidance. Our Wireless segment revenues and operating loss for the nine months ended October 3, 2010 would have been $34.8 million and $15.0 million, respectively, prior to the adoption of this new accounting guidance. See Note 2 for actual operating results.

The following table shows the amount of deferred revenue and cost of sales related to our Wireless segment as of October 3, 2010 and December 31, 2009.

		October 3,				December 31,
		2010				2009
		(In thousands)
Deferred revenue
Current		$	6,356			$	19,249
Long-term			1,603				3,481
Total			7,959				22,730
Deferred cost of sales
Current			1,377				7,119
Long-term			450				1,187
Total			1,827				8,306
Deferred gross profit
Current			4,979				12,130
Long-term			1,153				2,294
Total		$	6,132			$	14,424

Discontinued Operations

During 2005, we completed the sale of our discontinued communications cable operation in Phoenix, Arizona. In connection with this sale and the related tax deductions, we established a reserve for uncertain tax positions. In the three and nine months ended October 3, 2010, we recognized $0.2 million and $0.7 million of interest expense, respectively ($0.1 million and $0.4 million net of tax, respectively) related to the uncertain tax positions, which is included in discontinued operations. Due to the utilization of other net operating loss carryforwards, we did not recognize interest expense related to this reserve in the comparable periods of 2009.

Other Income (Expense)

During the nine months ended October 3, 2010, we recorded $1.5 million of other income related to an escrow settlement. The escrow settlement related to indemnification for certain tax matters arising from a previous acquisition. During the nine months ended September 27, 2009, we recorded $1.5 million of other expense due to fees incurred related to an amendment of our senior secured credit facility, as discussed in Note 7.

Subsequent Events

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

Current-Year Adoption of Accounting Pronouncements

On January 1, 2010, we adopted changes issued by the FASB with regard to the disclosures of fair value measurements. This new guidance requires disclosures about transfers into and out of Level 1 and 2 fair value measurements, as well as separate disclosures about purchases, sales, issuances, and settlements relating to recurring Level 3 fair value measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The adoption of this guidance did not have a material impact on our disclosures.

Refer to the discussion above under Revenue Recognition for an analysis of the adoption of other new accounting guidance.

Note 2: Operating Segments

We conduct our operations through four reported operating segments—Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; and Wireless.

										Asia								Total
		Americas				EMEA				Pacific				Wireless				Segments
										(In thousands)
Three Months Ended October 3, 2010
Total assets		$	499,874			$	458,216			$	273,859			$	102,821			$	1,334,770
External customer revenues			232,133				90,397				74,397				14,545				411,472
Affiliate revenues			11,735				20,707				—				—				32,442
Operating income (loss)			37,708				18,346				10,693				(2,727	)			64,020
Three Months Ended September 27, 2009
Total assets		$	533,672			$	505,314			$	249,431			$	124,094			$	1,412,511
External customer revenues			192,135				81,012				67,102				14,910				355,159
Affiliate revenues			12,994				13,099				—				—				26,093
Operating income (loss)			31,153				8,014				6,700				(6,644	)			39,223
Nine Months Ended October 3, 2010
Total assets		$	499,874			$	458,216			$	273,859			$	102,821			$	1,334,770
External customer revenues			686,985				273,140				231,789				46,047				1,237,961
Affiliate revenues			36,605				53,330				62				—				89,997
Operating income (loss)			103,224				52,240				28,146				(8,561	)			175,049
Nine Months Ended September 27, 2009
Total assets		$	533,672			$	505,314			$	249,431			$	124,094			$	1,412,511
External customer revenues			561,079				255,310				170,956				40,147				1,027,492
Affiliate revenues			31,873				38,681				—				—				70,554
Operating income (loss)			89,332				(46,626	)			18,296				(22,944	)			38,058

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

		Three Months Ended								Nine Months Ended
		October 3, 2010				September 27, 2009				October 3, 2010				September 27, 2009
						(In thousands)
Segment operating income		$	64,020			$	39,223			$	175,049			$	38,058
Corporate expenses			(13,245	)			(10,141	)			(39,421	)			(27,808	)
Eliminations			(12,365	)			(8,224	)			(32,147	)			(20,785	)
Total operating income (loss)			38,410				20,858				103,481				(10,535	)
Interest expense			(11,779	)			(12,575	)			(38,912	)			(28,793	)
Interest income			127				199				446				801
Other income (expense)			—				—				1,465				(1,541	)
Income (loss) from continuing operations before taxes		$	26,758			$	8,482			$	66,480			$	(40,068	)
Note 3: Income (Loss) per Share
The following table presents the basis for the income (loss) per share computations:
		Three Months Ended								Nine Months Ended
		October 3, 2010				September 27, 2009				October 3, 2010				September 27, 2009
						(In thousands)
Numerator:
Income (loss) from continuing operations		$	20,756			$	(7,476	)		$	52,466			$	(44,816	)
Loss from discontinued operations, net of tax			(151	)			—				(442	)			—
Net income (loss)		$	20,605			$	(7,476	)		$	52,024			$	(44,816	)
Denominator:
Weighted average shares outstanding, basic			46,813				46,607				46,762				46,574
Effect of dilutive common stock equivalents			908				—				903				—
Weighted average shares outstanding, diluted			47,721				46,607				47,665				46,574

For the three and nine months ended October 3, 2010, diluted weighted average shares outstanding do not include outstanding equity awards of 1.7 million and 1.5 million, respectively, because to do so would have been anti-dilutive. For the three and nine months ended September 27, 2009, diluted weighted average shares outstanding do not include outstanding equity awards of 3.7 million and 3.4 million, respectively, because to do so would have been anti-dilutive.

Note 4: Inventories

The major classes of inventories were as follows:

		October 3,				December 31,
		2010				2009
		(In thousands)
Raw materials		$	53,693			$	50,973
Work-in-process			38,733				31,977
Finished goods			91,093				84,689
Perishable tooling and supplies			3,954				4,081
Gross inventories			187,473				171,720
Obsolescence and other reserves			(19,990	)			(20,458	)
Net inventories		$	167,483			$	151,262

Note 5: Long-Lived Assets

Disposals

During the nine months ended October 3, 2010, we sold certain real estate of the EMEA segment for $1.8 million. There was no gain or loss recognized on the sale.

During the nine months ended September 27, 2009, we sold a 95% ownership interest in a German cable business that sells primarily to the automotive industry. The sales price was $0.4 million, and we recognized a loss of $17.2 million on the transaction. In addition to retaining a 5% interest in the business, we retained the associated land and building, which we are leasing to the buyer. The lease term is 15 years with a lessee option to renew up to an additional 10 years. During the nine months ended October 3, 2010, we sold the remaining 5% interest in the business for less than $0.1 million. There was no gain or loss recognized on the sale of the remaining 5% interest.

Impairments

We did not record any asset impairment losses during the three and nine months ended October 3, 2010.

During the nine months ended September 27, 2009, we determined that certain long-lived assets of the German cable business we sold during that period were impaired. We estimated the fair market value of those assets based upon the terms of the sales agreement and recognized an impairment loss of $20.4 million in the operating results of the EMEA segment. Of this total impairment loss, $14.1 million related to machinery and equipment and $2.7 million, $2.3 million, and $1.3 million related to trademarks, developed technology, and customer relations intangible assets, respectively. We also recognized impairment losses on property, plant and equipment of $3.6 million, $1.2 million, and $1.0 million in the Americas, EMEA, and Asia Pacific segments, respectively, primarily related to our decisions to consolidate capacity and dispose of excess machinery and equipment. The fair values of those assets were based upon quoted prices for identical assets (i.e., Level 2 valuation).

Depreciation and Amortization Expense

We recognized depreciation expense of $8.6 million and $28.9 million in the three and nine months ended October 3, 2010, respectively. We recognized depreciation expense of $9.8 million and $28.8 million in the three and nine months ended September 27, 2009, respectively.

We recognized amortization expense related to our intangible assets of $4.2 million and $12.6 million in the three and nine months ended October 3, 2010, respectively. We recognized amortization expense related to our intangible assets of $4.0 million and $11.8 million in the three and nine months ended September 27, 2009, respectively.

Note 6: Restructuring Activities

Global Restructuring

In the fourth quarter of 2008, we announced our decision to streamline our manufacturing, sales, and administrative functions worldwide in an effort to reduce costs and mitigate the impact of the weakening demand experienced throughout the global economy. During 2010, we continued to implement our plan to streamline these functions and recognized severance costs primarily in the Americas segment totaling $1.1 million (recorded in Cost of Sales) related to these restructuring activities and the closure of one of our two manufacturing plants in Leominster, Massachusetts. From inception of these restructuring

actions through October 3, 2010, we have recognized severance costs totaling $55.8 million. We do not expect to recognize any additional severance costs related to these restructuring activities.

The table below sets forth severance activity that occurred during 2010. The balances are included in accrued liabilities.

		Global
		Restructuring
		(in thousands)
Balance at December 31, 2009		$	12,260
New charges			321
Cash payments			(5,373	)
Foreign currency translation			(629	)
Other adjustments			(83	)
Balance at April 4, 2010			6,496
New charges			783
Cash payments			(2,227	)
Foreign currency translation			(630	)
Other adjustments			(585	)
Balance at July 4, 2010			3,837
New charges			—
Cash payments			(2,203	)
Foreign currency translation			340
Other adjustments			(149	)
Balance at October 3, 2010		$	1,825

We continue to review our business strategies and evaluate potential new restructuring actions. This could result in additional restructuring costs in future periods.

Note 7: Long-Term Debt and Other Borrowing Arrangements

Senior Subordinated Notes

In the third quarter of 2009, we issued $200.0 million in senior subordinated notes due 2019 with a coupon interest rate of 9.25% and an effective interest rate of 9.75%. The notes are guaranteed on a senior subordinated basis by certain of our domestic subsidiaries. The notes rank equal in right of payment with our senior subordinated notes due 2017 and with any future senior subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our senior secured credit facility. Interest is payable semi-annually on June 15 and December 15. We used the $193.7 million in proceeds of this debt offering to repay amounts drawn under our senior secured credit facility. As of October 3, 2010, the carrying value of the notes was $201.2 million. See Note 8 for a discussion of changes to the carrying value of the notes due to hedge accounting.

We also have outstanding $350.0 million aggregate principal amount of 7.0% senior subordinated notes due 2017. The notes are guaranteed on a senior subordinated basis by certain of our domestic subsidiaries. The notes rank equal in right of payment with our senior subordinated notes due 2019 and with any future senior subordinated debt. They are subordinated to all of our senior debt and the senior debt of our

subsidiary guarantors, including our senior secured credit facility. Interest is payable semi-annually on March 15 and September 15.

Senior Secured Credit Facility

In the first quarter of 2009, we amended our senior secured credit facility and changed the definition of EBITDA used in the computation of the debt-to-EBITDA leverage ratio covenant. The amendment also increased the cost of borrowings under the facility by 100 basis points and we incurred $1.5 million of fees that are included in other expense in the Consolidated Statements of Operations. In the third quarter of 2009, we further amended the facility to extend the term from January 2011 to January 2013 and to reduce the size from $350.0 million to $250.0 million through January 2011. In January 2011, the size of the facility reduces from $250.0 million to $230.0 million. The amendment also alters the level of the total leverage ratio covenant, increases the cost of borrowing under the facility, and inserts an asset coverage ratio covenant when the total leverage ratio is in excess of certain levels. As of October 3, 2010, we were in compliance with all of the amended covenants of the facility.

As of October 3, 2010, there were no outstanding borrowings under the facility, and we had $204.6 million in available borrowing capacity. The facility has a variable interest rate based on LIBOR or the prime rate and is secured by our overall cash flow and certain of our assets in the United States.

Fair Value of Long-Term Debt

The fair value of our debt instruments at October 3, 2010 was approximately $573.3 million based on sales prices of the debt instruments from recent trading activity. This amount represents the fair value of our senior subordinated notes with an aggregate principal amount of $550.0 million.

Note 8: Derivatives and Hedging Activities

We are exposed to various market risks, including fluctuations in interest rates. At various times, we use interest rate agreements to manage our costs and reduce our exposure to interest rate risk. During the nine months ended October 3, 2010, we entered into $200.0 million notional amount of interest rate swap agreements that were scheduled to expire in 2019. The interest rate swaps were receive-fixed, pay-variable rate, and they allowed us to adjust our relative proportion of fixed and floating rate debt. We also entered into a separate $200.0 million notional amount interest rate cap agreement, which capped the variable rate that we were exposed to in the interest rate swaps. We do not hold or issue any derivative instrument for trading or speculative purposes.

These agreements, which represent our derivative instruments, exposed us to credit risk to the extent that the counterparties to our interest rate agreements would have been unable to meet the terms of the agreements. We sought to mitigate such risks by limiting the counterparties to major financial institutions and by executing our agreements across multiple counterparties.

The interest rate swaps were formally designated and qualified as fair value hedges. We performed a quarterly assessment of the effectiveness of the hedge relationship, and we measured and recognized any hedge ineffectiveness in earnings. The interest rate swaps were recorded at fair value in the Consolidated Balance Sheets. Gains and losses due to changes in fair value of the interest rate swaps substantially offset changes in the fair value of the hedged portion of the underlying debt. Changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt both were recognized in interest expense in the Consolidated Statements of Operations.

The interest rate cap was not designated as a hedging instrument. It was recorded at fair value in the Consolidated Balance Sheets, and changes in fair value of the interest rate cap were recognized in interest expense in the Consolidated Statements of Operations.

The gains (losses) for the three and nine months ended October 3, 2010 attributed to our derivatives designated as hedging instruments are summarized in the table below:

Three Months Ended

Nine Months Ended

October 3, 2010

October 3, 2010

Income Statement

Gain/(loss) on

Gain/(loss) on

Gain/(loss) on

Gain/(loss) on

Classification

interest rate swaps

borrowings

interest rate swaps

borrowings

(In thousands)

| | |

|

Interest Expense

$

4,898

$

(2,490

)

$

8,522

$

(7,109

)

The difference between the gain on the interest rate swaps and the loss on borrowings represents hedge ineffectiveness of $2.4 million and $1.4 million for the three and nine months ended October 3, 2010, respectively.

The loss for the three and nine months ended October 3, 2010 attributed to our interest rate cap, our derivative without hedging designation, was $1.2 million and $2.9 million, respectively, classified within interest expense within the Consolidated Statements of Operations.

There were no gains (losses) related to derivatives and hedging instruments for the three and nine months ended September 27, 2009.

Interest rate derivatives are valued using a present value calculation based on an implied 3-month forward LIBOR curve (adjusted for non-performance risk) and are classified within level 2 of the fair value hierarchy.

During the three months ended October 3, 2010, we terminated all of the interest rate swap agreements and the interest rate cap. We recognized a loss on the termination of our derivative instruments of $1.4 million. We received cash of $4.2 million related to the termination of our derivative instruments, which is presented as a financing activity in the Consolidated Statements of Cash Flows. As a result of the termination, there were no outstanding derivatives as of October 3, 2010. There were also no outstanding derivatives as of December 31, 2009. The $7.1 million adjustment recorded to increase the carrying value of the underlying debt as a result of hedge accounting will be amortized as a reduction of interest expense over the remaining life of the underlying debt using the effective interest method.

The net effect of the gains and losses on our derivative instruments and the termination of our derivative instruments during the three and nine months ended October 3, 2010 was a loss of $0.2 million and $2.9 million, respectively, which was recognized in interest expense.

Note 9: Income Taxes

Income tax expense was $6.0 million and $14.0 million for the three and nine months ended October 3, 2010. The effective rate reflected in the provision for income taxes on income from continuing operations before taxes is 22.4% and 21.1% for the three and nine months ended October 3, 2010. The primary factor in the difference between the effective rate and the amount determined by applying the applicable statutory United States tax rate of 35% is the tax rate differential associated with our foreign earnings.

Note 10: Pension and Other Postretirement Obligations

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

		Pension Obligations								Other Postretirement Obligations
		October 3, 2010				September 27, 2009				October 3, 2010				September 27, 2009
						(In thousands)
Three Months Ended
Service cost		$	1,947			$	1,119			$	28			$	19
Interest cost			4,205				2,760				649				416
Expected return on plan assets			(4,337	)			(2,363	)			—				—
Amortization of prior service cost (credit)			29				(27	)			(48	)			(28	)
Net loss (gain) recognition			651				447				(3	)			(25	)
Net periodic benefit cost		$	2,495			$	1,936			$	626			$	382
Nine Months Ended
Service cost		$	5,111			$	3,696			$	80			$	66
Interest cost			11,461				9,108				1,997				1,711
Expected return on plan assets			(11,635	)			(8,570	)			—				—
Amortization of prior service cost (credit)			49				19				(165	)			(150	)
Net loss recognition			2,169				1,733				141				189
Net periodic benefit cost		$	7,155			$	5,986			$	2,053			$	1,816

Note 11: Comprehensive Income (Loss)

The following table summarizes total comprehensive income (loss):

		Three Months Ended								Nine Months Ended
		October 3, 2010				September 27, 2009				October 3, 2010				September 27, 2009
						(In thousands)
Net income (loss)		$	20,605			$	(7,476	)		$	52,024			$	(44,816	)
Foreign currency translation gain (loss)			29,390				18,862				(21,872	)			24,742
Total comprehensive income (loss)		$	49,995			$	11,386			$	30,152			$	(20,074	)

Note 12: Subsequent Events

On October 21, 2010, we entered into a definitive agreement to acquire the LRC Electronics division of Thomas & Betts Corporation for approximately $78.0 million cash, subject to certain adjustments. LRC Electronics is a leading designer, manufacturer, and marketer of communications connectors, hardware, and other components for customers primarily in the broadcast and telecommunications industries. We anticipate that this acquisition will be funded with available cash. The transaction is subject to customary closing conditions and regulatory review, and it is expected to be completed by the end of the calendar year.

Note 13: Supplemental Guarantor Information

As of October 3, 2010, Belden Inc. (the Issuer) has outstanding $550.0 million aggregate principal amount senior subordinated notes. The notes rank equal in right of payment with any of our future senior subordinated debt. The notes are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our senior secured credit facility. Belden Inc. and its current and future material domestic subsidiaries have fully and unconditionally guaranteed the notes on a joint and several basis. The following consolidating financial information presents information about the Issuer, guarantor subsidiaries and non-guarantor subsidiaries. Investments in subsidiaries are accounted for on the equity basis. Intercompany transactions are eliminated.

Supplemental Condensed Consolidating Balance Sheets

		October 3, 2010
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
										(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	87,857			$	21,170			$	187,054			$	—			$	296,081
Receivables, net			80				93,963				197,089				—				291,132
Inventories, net			—				99,485				67,998				—				167,483
Deferred income taxes			—				22,189				4,665				—				26,854
Other current assets			4,396				6,519				7,162				—				18,077
Total current assets			92,333				243,326				463,968				—				799,627
Property, plant and equipment, less accumulated depreciation			—				115,408				167,109				—				282,517
Goodwill			—				242,621				66,243				—				308,864
Intangible assets, less accumulated amortization			—				75,259				52,755				—				128,014
Deferred income taxes			—				16,436				19,940				—				36,376
Other long-lived assets			11,805				1,796				56,660				—				70,261
Investment in subsidiaries			924,369				279,289				—				(1,203,658	)			—
		$	1,028,507			$	974,135			$	826,675			$	(1,203,658	)		$	1,625,659
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	—			$	71,570			$	132,265			$	—			$	203,835
Accrued liabilities			34,242				50,471				55,889				—				140,602
Total current liabilities			34,242				122,041				188,154				—				344,437
Long-term debt			551,247				—				—				—				551,247
Postretirement benefits			—				30,606				85,036				—				115,642
Other long-term liabilities			22,502				3,481				5,067				—				31,050
Intercompany accounts			344,657				(624,419	)			279,762				—				—
Total stockholders’ equity			75,859				1,442,426				268,656				(1,203,658	)			583,283
		$	1,028,507			$	974,135			$	826,675			$	(1,203,658	)		$	1,625,659

		December 31, 2009
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
										(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	49,878			$	8,977			$	250,024			$	—			$	308,879
Receivables, net			21				69,444				172,680				—				242,145
Inventories, net			—				86,960				64,302				—				151,262
Deferred income taxes			—				22,188				4,808				—				26,996
Other current assets			5,179				13,825				16,032				—				35,036
Total current assets			55,078				201,394				507,846				—				764,318
Property, plant and equipment, less accumulated depreciation			—				120,655				178,931				—				299,586
Goodwill			—				242,699				70,331				—				313,030
Intangible assets, less accumulated amortization			—				82,129				60,884				—				143,013
Deferred income taxes			—				16,436				20,769				—				37,205
Other long-lived assets			14,154				3,054				46,218				—				63,426
Investment in subsidiaries			853,555				321,200				—				(1,174,755	)			—
		$	922,787			$	987,567			$	884,979			$	(1,174,755	)		$	1,620,578
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	—			$	59,846			$	109,917			$	—			$	169,763
Accrued liabilities			15,552				57,423				68,947				—				141,922
Current maturities of long-term debt			46,268				—				—				—				46,268
Total current liabilities			61,820				117,269				178,864				—				357,953
Long-term debt			543,942				—				—				—				543,942
Postretirement benefits			—				35,000				86,745				—				121,745
Other long-term liabilities			27,636				9,581				8,673				—				45,890
Intercompany accounts			238,152				(527,873	)			289,721				—				—
Total stockholders’ equity			51,237				1,353,590				320,976				(1,174,755	)			551,048
		$	922,787			$	987,567			$	884,979			$	(1,174,755	)		$	1,620,578

Supplemental Condensed Consolidating Statements of Operations

		Three Months Ended October 3, 2010
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
										(In thousands)
Revenues		$	—			$	257,339			$	193,624			$	(39,491	)		$	411,472
Cost of sales			—				(175,235	)			(150,033	)			39,491				(285,777	)
Gross profit			—				82,104				43,591				—				125,695
Selling, general and administrative expenses			(83	)			(47,417	)			(23,892	)			—				(71,392	)
Research and development			—				(7,222	)			(7,572	)			—				(14,794	)
Amortization of intangibles			—				(2,279	)			(1,873	)			—				(4,152	)
Income from equity method investment			—				—				3,053				—				3,053
Operating income (loss)			(83	)			25,186				13,307				—				38,410
Interest expense			(11,562	)			110				(327	)			—				(11,779	)
Interest income			44				48				35				—				127
Intercompany income (expense)			2,661				(3,175	)			514				—				—
Income (loss) from equity investment in subsidiaries			25,035				10,658				—				(35,693	)			—
Income (loss) from continuing operations before taxes			16,095				32,827				13,529				(35,693	)			26,758
Income tax benefit (expense)			4,661				(7,792	)			(2,871	)			—				(6,002	)
Income (loss) from continuing operations			20,756				25,035				10,658				(35,693	)			20,756
Loss from discontinued operations, net of tax			(151	)			—				—				—				(151	)
Net income (loss)		$	20,605			$	25,035			$	10,658			$	(35,693	)		$	20,605

		Three Months Ended September 27, 2009
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
										(In thousands)
Revenues		$	—			$	186,779			$	212,051			$	(43,671	)		$	355,159
Cost of sales			—				(128,348	)			(162,409	)			43,671				(247,086	)
Gross profit			—				58,431				49,642				—				108,073
Selling, general and administrative expenses			(123	)			(38,469	)			(32,897	)			—				(71,489	)
Research and development			—				(7,320	)			(6,841	)			—				(14,161	)
Amortization of intangibles			—				(2,026	)			(1,957	)			—				(3,983	)
Income from equity method investment			—				—				2,418				—				2,418
Operating income (loss)			(123	)			10,616				10,365				—				20,858
Interest expense			(12,440	)			154				(289	)			—				(12,575	)
Interest income			48				21				130				—				199
Intercompany income (expense)			3,042				1,647				(4,689	)			—				—
Income (loss) from equity investment in subsidiaries			(1,514	)			(3,801	)			—				5,315				—
Income (loss) before taxes			(10,987	)			8,637				5,517				5,315				8,482
Income tax benefit (expense)			3,511				(10,151	)			(9,318	)			—				(15,958	)
Net income (loss)		$	(7,476	)		$	(1,514	)		$	(3,801	)		$	5,315			$	(7,476	)