e10vq
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 2010
Commission File No. 001-12561
 
BELDEN INC.
(Exact name of registrant as specified in its charter)
 
     
Delaware   36-3601505
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
7733 Forsyth Boulevard, Suite 800
St. Louis, Missouri 63105
(Address of principal executive offices)
(314) 854-8000
Registrant’s telephone number, including area code
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No 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
(Do not check if a smaller reporting company)
  Smaller reporting company o 
As of August 9, 2010, the Registrant had 46,812,126 outstanding shares of common stock.
 
 

 


TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosures about Market Risks
Item 4: Controls and Procedures
PART II OTHER INFORMATION
Item 1: Legal Proceedings
Item 1A: Risk Factors
Item 6: Exhibits
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT


Table of Contents

PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BELDEN INC.
CONSOLIDATED BALANCE SHEETS
                 
    July 4,     December 31,  
    2010     2009  
    (Unaudited)          
    (In thousands)  
ASSETS
Current assets:
               
Cash and cash equivalents
  $ 245,615     $ 308,879  
Receivables, net
    291,372       242,145  
Inventories, net
    154,983       151,262  
Deferred income taxes
    26,705       26,996  
Other current assets
    24,104       35,036  
 
           
Total current assets
    742,779       764,318  
 
               
Property, plant and equipment, less accumulated depreciation
    275,119       299,586  
Goodwill
    302,524       313,030  
Intangible assets, less accumulated amortization
    128,458       143,013  
Deferred income taxes
    35,723       37,205  
Other long-lived assets
    69,076       63,426  
 
           
 
               
 
  $ 1,553,679     $ 1,620,578  
 
           
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
Accounts payable
  $ 192,455     $ 169,763  
Accrued liabilities
    126,822       141,922  
Current maturities of long-term debt
          46,268  
 
           
Total current liabilities
    319,277       357,953  
 
               
Long-term debt
    548,769       543,942  
Postretirement benefits
    111,894       121,745  
Other long-term liabilities
    41,039       45,890  
Stockholders’ equity:
               
Preferred stock
           
Common stock
    503       503  
Additional paid-in capital
    595,009       591,917  
Retained earnings
    99,276       72,625  
Accumulated other comprehensive income (loss)
    (36,648 )     14,614  
Treasury stock
    (125,440 )     (128,611 )
 
           
 
               
Total stockholders’ equity
    532,700       551,048  
 
           
 
  $ 1,553,679     $ 1,620,578  
 
           
The accompanying notes are an integral part of these Consolidated Financial Statements

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BELDEN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    July 4, 2010     June 28, 2009     July 4, 2010     June 28, 2009  
    (In thousands, except per share data)  
Revenues
  $ 426,140     $ 343,821     $ 826,489     $ 672,333  
Cost of sales
    (300,343 )     (235,303 )     (582,284 )     (479,622 )
 
                       
Gross profit
    125,797       108,518       244,205       192,711  
Selling, general and administrative expenses
    (74,523 )     (67,579 )     (148,383 )     (144,276 )
Research and development
    (13,400 )     (14,122 )     (28,197 )     (30,677 )
Amortization of intangibles
    (4,140 )     (3,911 )     (8,406 )     (7,776 )
Income from equity method investment
    3,211       695       5,852       1,985  
Asset impairment
          (1,453 )           (26,176 )
Loss on sale of assets
          (17,184 )           (17,184 )
 
                       
Operating income (loss)
    36,945       4,964       65,071       (31,393 )
Interest expense
    (14,187 )     (8,895 )     (27,133 )     (16,218 )
Interest income
    136       238       319       602  
Other income (expense)
    1,465             1,465       (1,541 )
 
                       
Income (loss) from continuing operations before taxes
    24,359       (3,693 )     39,722       (48,550 )
Income tax benefit (expense)
    (4,532 )     (1,193 )     (8,012 )     11,210  
 
                       
Income (loss) from continuing operations
    19,827       (4,886 )     31,710       (37,340 )
Loss from discontinued operations, net of tax
    (155 )           (291 )      
 
                       
Net income (loss)
  $ 19,672     $ (4,886 )   $ 31,419     $ (37,340 )
 
                       
 
                               
Weighted average number of common shares and equivalents:
                               
Basic
    46,779       46,587       46,737       46,557  
Diluted
    47,788       46,587       47,647       46,557  
 
                               
Basic income (loss) per share
                               
Continuing operations
  $ 0.42     $ (0.10 )   $ 0.68     $ (0.80 )
Discontinued operations
                (0.01 )      
 
                       
Net income (loss)
  $ 0.42     $ (0.10 )   $ 0.67     $ (0.80 )
 
                       
 
                               
Diluted income (loss) per share
                               
Continuing operations
  $ 0.41     $ (0.10 )   $ 0.67     $ (0.80 )
Discontinued operations
                (0.01 )      
 
                       
Net income (loss)
  $ 0.41     $ (0.10 )   $ 0.66     $ (0.80 )
 
                       
 
                               
Dividends declared per share
  $ 0.05     $ 0.05     $ 0.10     $ 0.10  
The accompanying notes are an integral part of these Consolidated Financial Statements

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BELDEN INC.
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
                 
    Six Months Ended  
    July 4, 2010     June 28, 2009  
    (In thousands)  
Cash flows from operating activities:
               
Net income (loss)
  $ 31,419     $ (37,340 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
               
Depreciation and amortization
    28,676       26,842  
Asset impairment
          26,176  
Loss on sale of assets
          17,184  
Share-based compensation
    6,588       4,719  
Non-cash loss on derivatives and hedging instruments
    2,749        
Provision for inventory obsolescence
    1,752       4,273  
Tax deficiency related to share-based compensation
    210       1,469  
Amortization of discount on long-term debt
    208        
Income from equity method investment
    (5,852 )     (1,985 )
Pension funding in excess of pension expense
    (2,700 )     (6,452 )
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:
               
Receivables
    (61,382 )     42,655  
Deferred cost of sales
    4,896       35  
Inventories
    (11,326 )     42,161  
Accounts payable
    27,182       (15,669 )
Accrued liabilities
    554       (25,931 )
Deferred revenue
    (11,262 )     782  
Accrued taxes
    (5,267 )     (16,558 )
Other assets
    6,742       3,434  
Other liabilities
    (7,674 )     3,539  
 
           
Net cash provided by operating activities
    5,513       69,334  
Cash flows from investing activities:
               
Capital expenditures
    (12,705 )     (18,342 )
Proceeds from disposal of tangible assets
    2,332       367  
Cash provided by other investing activities
    163        
 
           
Net cash used for investing activities
    (10,210 )     (17,975 )
Cash flows from financing activities:
               
Payments under borrowing arrangements
    (46,268 )      
Cash dividends paid
    (4,712 )     (4,707 )
Debt issuance costs
          (1,541 )
Tax deficiency related to share-based compensation
    (210 )     (1,469 )
Proceeds from exercise of stock options
    634       23  
 
           
Net cash used for financing activities
    (50,556 )     (7,694 )
Effect of foreign currency exchange rate changes on cash and cash equivalents
    (8,011 )     3,562  
 
           
Increase (decrease) in cash and cash equivalents
    (63,264 )     47,227  
Cash and cash equivalents, beginning of period
    308,879       227,413  
 
         
Cash and cash equivalents, end of period
  $ 245,615     $ 274,640  
 
           
The accompanying notes are an integral part of these Consolidated Financial Statements

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BELDEN INC.
CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENT
SIX MONTHS ENDED JULY 4, 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
                            31,419                                       31,419  
Foreign currency translation
                                        (51,262 )           (51,262 )
 
                                                                     
Comprehensive loss
                                                                    (19,843 )
Exercise of stock options, net of tax withholding forfeitures
                (400 )           43       909                   509  
Release of restricted stock, net of tax withholding forfeitures
                (2,902 )           105       2,262                   (640 )
Share-based compensation
                6,378                                     6,378  
Dividends ($0.10 per share)
                16       (4,768 )                             (4,752 )
 
                                                     
Balance at July 4, 2010
    50,335     $ 503     $ 595,009     $ 99,276       (3,527 )   $ (125,440 )   $ 6,798     $ (43,446 )   $ 532,700  
 
                                                     
The accompanying notes are an integral part of these Consolidated Financial Statements

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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 six months ended July 4, 2010 and June 28, 2009 included 185 and 179 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:

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    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 six months ended July 4, 2010 and June 28, 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 six months ended July 4, 2010.
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 July 4, 2010 was $97.9 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 July 4, 2010, we were party to bank guaranties, standby letters of credit, and surety bonds totaling $10.1 million, $9.2 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.

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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 three 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 three years.
Our Wireless segment revenues and operating loss for the three months ended July 4, 2010 would have been $12.3 million and $4.4 million, respectively, prior to the adoption of this new accounting guidance. Our Wireless segment revenues and operating loss for the six months ended July 4, 2010 would have been $24.5 million and $9.7 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 July 4, 2010 and December 31, 2009.

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    July 4,     December 31,  
    2010     2009  
    (in thousands)  
Deferred revenue:
               
Current
  $ 9,280     $ 19,249  
Long-term
    2,188       3,481  
 
           
Total
    11,468       22,730  
 
           
 
               
Deferred cost of sales:
               
Current
    2,727       7,119  
Long-term
    683       1,187  
 
           
Total
    3,410       8,306  
 
           
 
               
Deferred gross profit
               
Current
    6,553       12,130  
Long-term
    1,505       2,294  
 
           
Total
  $ 8,058     $ 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 six month periods ended July 4, 2010, we recognized $0.3 million and $0.5 million of interest expense, respectively ($0.2 million and $0.3 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 six months ended July 4, 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 six months ended June 28, 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.
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.

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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 July 4, 2010
                                       
Total assets
  $ 493,233     $ 396,425     $ 263,908     $ 106,305     $ 1,259,871  
External customer revenues
    236,923       92,193       81,447       15,577       426,140  
Affiliate revenues
    12,133       17,880       62             30,075  
Operating income (loss)
    34,159       19,314       9,927       (2,665 )     60,735  
 
                                       
Three Months Ended June 28, 2009
                                       
Total assets
  $ 526,580     $ 495,276     $ 229,645     $ 123,408     $ 1,374,909  
External customer revenues
    186,734       86,237       57,616       13,234       343,821  
Affiliate revenues
    10,888       13,109                   23,997  
Operating income (loss)
    33,521       (12,685 )     8,262       (7,978 )     21,120  
 
                                       
Six Months Ended July 4, 2010
                                       
Total assets
  $ 493,233     $ 396,425     $ 263,908     $ 106,305     $ 1,259,871  
External customer revenues
    454,852       182,743       157,392       31,502       826,489  
Affiliate revenues
    24,870       32,623       62             57,555  
Operating income (loss)
    65,516       33,894       17,453       (5,834 )     111,029  
 
                                       
Six Months Ended June 28, 2009
                                       
Total assets
  $ 526,580     $ 495,276     $ 229,645     $ 123,408     $ 1,374,909  
External customer revenues
    368,944       174,298       103,854       25,237       672,333  
Affiliate revenues
    18,879       25,582                   44,461  
Operating income (loss)
    58,179       (54,640 )     11,596       (16,300 )     (1,165 )
The following table is a reconciliation of the total of the reportable segments’ operating income (loss) to consolidated income (loss) from continuing operations before taxes.

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    Three Months Ended     Six Months Ended  
    July 4, 2010     June 28, 2009     July 4, 2010     June 28, 2009  
    (In thousands)  
Segment operating income (loss)
  $ 60,735     $ 21,120     $ 111,029     $ (1,165 )
Corporate expenses
    (13,272 )     (9,310 )     (26,176 )     (17,667 )
Eliminations
    (10,518 )     (6,846 )     (19,782 )     (12,561 )
 
                       
Total operating income (loss)
    36,945       4,964       65,071       (31,393 )
Interest expense
    (14,187 )     (8,895 )     (27,133 )     (16,218 )
Interest income
    136       238       319       602  
Other income (expense)
    1,465             1,465       (1,541 )
 
                       
Income (loss) from continuing operations before taxes
  $ 24,359     $ (3,693 )   $ 39,722     $ (48,550 )
 
                       

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Note 3: Income (Loss) per Share
The following table presents the basis for the income (loss) per share computations:
                                 
    Three Months Ended     Six Months Ended  
    July 4, 2010     June 28, 2009     July 4, 2010     June 28, 2009  
    (in thousands, except per share amounts)  
Numerator:
                               
Income (loss) from continuing operations
  $ 19,827     $ (4,886 )   $ 31,710     $ (37,340 )
Loss from discontinued operations, net of tax
    (155 )           (291 )      
 
                       
Net income (loss)
  $ 19,672     $ (4,886 )   $ 31,419     $ (37,340 )
 
                       
 
                               
Denominator:
                               
Weighted average shares outstanding, basic
    46,779       46,587       46,737       46,557  
Effect of dilutive common stock equivalents
    1,009             910        
 
                       
Weighted average shares outstanding, diluted
    47,788       46,587       47,647       46,557  
 
                       
For the three and six months ended July 4, 2010, diluted weighted average shares outstanding do not include outstanding equity awards of 1.6 million and 1.4 million, respectively, because to do so would have been anti-dilutive. For the three and six months ended June 28, 2009, diluted weighted average shares outstanding do not include outstanding equity awards of 3.5 million and 3.2 million, respectively, because to do so would have been anti-dilutive.
Note 4: Inventories
The major classes of inventories were as follows:
                 
    July 4,     December 31,  
    2010     2009  
    (In thousands)  
Raw materials
  $ 55,369     $ 50,973  
Work-in-process
    34,189       31,977  
Finished goods
    81,620       84,689  
Perishable tooling and supplies
    4,063       4,081  
 
           
Gross inventories
    175,241       171,720  
Obsolescence and other reserves
    (20,258 )     (20,458 )
 
           
Net inventories
  $ 154,983     $ 151,262  
 
           
Note 5: Long-Lived Assets
Disposals
During the six months ended July 4, 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 six months ended June 28, 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,

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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 three months ended July 4, 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 six months ended July 4, 2010.
During the six months ended June 28, 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 $9.9 million and $20.3 million in the three and six month periods ended July 4, 2010, respectively. We recognized depreciation expense of $9.7 million and $19.0 million in the three and six month periods ended June 28, 2009, respectively.
We recognized amortization expense related to our intangible assets of $4.1 million and $8.4 million in the three and six month periods ended July 4, 2010, respectively. We recognized amortization expense related to our intangible assets of $3.9 million and $7.8 million in the three and six month periods ended June 28, 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 planned closure of one of our two manufacturing plants in Leominster, Massachusetts. From inception of these restructuring actions through July 4, 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.

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    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  
 
     
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 July 4, 2010, the carrying value of the notes was $198.8 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

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coverage ratio covenant when the total leverage ratio is in excess of certain levels. As of July 4, 2010, we were in compliance with all of the amended covenants of the facility.
As of July 4, 2010, there were no outstanding borrowings under the facility, and we had $171.9 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 July 4, 2010 was approximately $543.7 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. We use interest rate agreements to manage our costs and reduce our exposure to interest rate risk. We manage our exposure to interest rate risk by maintaining a mix of fixed and variable rate debt. During the quarter ended July 4, 2010, we entered into $200.0 million notional amount of interest rate swap agreements that expire in 2019. The interest rate swaps are 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 caps the variable rate that we are 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, expose us to credit risk to the extent that the counterparties to our interest rate agreements may be unable to meet the terms of the agreements. We seek to mitigate such risks by limiting the counterparties to major financial institutions and by executing our agreements across multiple counterparties.
The interest rate swaps have been formally designated and qualify as fair value hedges. We perform a quarterly assessment of the effectiveness of the hedge relationship, and we measure and recognize any hedge ineffectiveness in earnings. The interest rate swaps have been 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 are recognized in interest expense in the Consolidated Statements of Operations.
The interest rate cap has not been designated as a hedging instrument. It has been recorded at fair value in the Consolidated Balance Sheets, and changes in fair value of the interest rate cap are recognized in interest expense in the Consolidated Statements of Operations.
All cash flows associated with derivatives are classified as operating cash flows in the Consolidated Statements of Cash Flows.
The fair value of our derivatives designated as hedging instruments as of July 4, 2010 was $3.6 million, classified within other non-current assets within the Consolidated Balance Sheets. The fair value of our derivatives without hedging designation as of July 4, 2010 was $1.8 million, classified within other non-current liabilities within the Consolidated Balance Sheets. There were no outstanding derivatives as of December 31, 2009.

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The gains (losses) for the three and six month periods ended July 4, 2010 attributed to our derivatives designated as hedging instruments are summarized in the table below:
                 
Income Statement   Gain/(loss) on interest      
   Classification   rate swaps   Gain/(loss) on borrowings
                 (in thousands)  
         
Interest Expense
  $ 3,625     $ (4,619 )
         
The difference between the gain on the interest rate swaps and the loss on borrowings represents hedge ineffectiveness of $1.0 million.
The loss for the three and six month periods ended July 4, 2010 attributed to our interest rate cap, our derivative without hedging designation, was $1.8 million, 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 six month periods ended June 28, 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.
Note 9: Income Taxes
Income tax expense was $4.5 million and $8.0 million for the three and six month periods ended July 4, 2010. The effective rate reflected in the provision for income taxes on income from continuing operations before taxes is 18.6% and 20.2% for the three and six month periods ended July 4, 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:

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    Pension Obligations     Other Postretirement Obligations  
    July 4, 2010     June 28, 2009     July 4, 2010     June 28, 2009  
    (In thousands)  
Three Months Ended
                               
Service cost
  $ 1,304     $ 751     $ 25     $ 17  
Interest cost
    3,031       2,608       632       733  
Expected return on plan assets
    (2,974 )     (2,143 )            
Amortization of prior service cost
    4       18       (54 )     (74 )
Net loss recognition
    574       744       58       44  
 
                       
Net periodic benefit cost
  $ 1,939     $ 1,978     $ 661     $ 720  
 
                       
 
                               
Six Months Ended
                               
Service cost
  $ 3,164     $ 2,577     $ 50     $ 47  
Interest cost
    7,257       6,348       1,258       1,295  
Expected return on plan assets
    (7,298 )     (6,207 )            
Amortization of prior service cost
    20       46       (107 )     (122 )
Net loss recognition
    1,518       1,286       116       214  
 
                       
Net periodic benefit cost
  $ 4,661     $ 4,050     $ 1,317     $ 1,434  
 
                       
Note 11: Comprehensive Income (Loss)
The following table summarizes total comprehensive income (loss):
                                 
    Three Months Ended     Six Months Ended  
    July 4, 2010     June 28, 2009     July 4, 2010     June 28, 2009  
    (In thousands)  
Net income (loss)
  $ 19,672     $ (4,886 )   $ 31,419     $ (37,340 )
Foreign currency translation gain (loss)
    (29,156 )     24,010       (51,262 )     5,880  
 
                       
Total comprehensive income (loss)
  $ (9,484 )   $ 19,124     $ (19,843 )   $ (31,460 )
 
                       
Note 12: Supplemental Guarantor Information
As of July 4, 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.

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Supplemental Condensed Consolidating Balance Sheets
                                         
    July 4, 2010  
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Total  
    (In thousands)  
ASSETS
Current assets:
                                       
Cash and cash equivalents
  $ 79,585     $ 17,365     $ 148,665     $     $ 245,615  
Receivables, net
    3       88,795       202,574             291,372  
Inventories, net
          93,005       61,978             154,983  
Deferred income taxes
          22,188       4,517             26,705  
Other current assets
    4,408       10,882       8,814             24,104  
 
                             
Total current assets
    83,996       232,235       426,548             742,779  
Property, plant and equipment, less accumulated depreciation
          115,775       159,344             275,119  
Goodwill
          242,620       59,904             302,524  
Intangible assets, less accumulated amortization
          77,538       50,920             128,458  
Deferred income taxes
          16,436       19,287             35,723  
Other long-lived assets
    16,192       2,088       50,796             69,076  
Investment in subsidiaries
    899,334       268,632             (1,167,966 )      
 
                             
 
  $ 999,522     $ 955,324     $ 766,799     $ (1,167,966 )   $ 1,553,679  
 
                             
 
                                       
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
                                       
Accounts payable
  $     $ 78,049     $ 114,406     $     $ 192,455  
Accrued liabilities
    16,366       47,740       62,716             126,822  
 
                             
Total current liabilities
    16,366       125,789       177,122             319,277  
Long-term debt
    548,769                         548,769  
Postretirement benefits
          34,137       77,757             111,894  
Other long-term liabilities
    29,464       4,999       6,576             41,039  
Intercompany accounts
    329,819       (602,043 )     272,224              
Total stockholders’ equity
    75,104       1,392,442       233,120       (1,167,966 )     532,700  
 
                             
 
  $ 999,522     $ 955,324     $ 766,799     $ (1,167,966 )   $ 1,553,679  
 
                             

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    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  
 
                             

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Supplemental Condensed Consolidating Statements of Operations
                                         
    Three Months Ended July 4, 2010  
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Total  
    (In thousands)  
Revenues
  $     $ 219,838     $ 243,812     $ (37,510 )   $ 426,140  
Cost of sales
          (153,804 )     (184,049 )     37,510       (300,343 )
 
                             
Gross profit
          66,034       59,763             125,797  
Selling, general and administrative expenses
    (126 )     (44,101 )     (30,296 )           (74,523 )
Research and development
          (6,092 )     (7,308 )           (13,400 )
Amortization of intangibles
          (2,280 )     (1,860 )           (4,140 )
Income from equity method investment
                3,211             3,211  
 
                             
Operating income (loss)
    (126 )     13,561       23,510             36,945  
Interest expense
    (14,530 )     86       257             (14,187 )
Interest income
    28       2       106             136  
Other income (expense)
                1,465             1,465  
Intercompany income (expense)
    2,660       (3,669 )     1,009              
Income (loss) from equity investment in subsidiaries
    28,054       20,834             (48,888 )      
 
                             
Income (loss) from continuing operations before taxes
    16,086       30,814       26,347       (48,888 )     24,359  
Income tax benefit (expense)
    3,741       (2,760 )     (5,513 )           (4,532 )
 
                             
Income (loss) from continuing operations
    19,827       28,054       20,834       (48,888 )     19,827  
Loss from discontinued operations, net of tax
    (155 )                       (155 )
Net income (loss)
  $ 19,672     $ 28,054     $ 20,834     $ (48,888 )   $ 19,672  
 
                             

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Table of Contents

                                         
    Three Months Ended June 28, 2009  
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Total  
    (In thousands)  
Revenues
  $     $ 181,854     $ 202,556     $ (40,589 )   $ 343,821  
Cost of sales
          (122,483 )     (153,409 )     40,589       (235,303 )
 
                             
Gross profit
          59,371       49,147             108,518  
Selling, general and administrative expenses
    (140 )     (37,031 )     (30,408 )           (67,579 )
Research and development
          (7,238 )     (6,884 )           (14,122 )
Amortization of intangibles
          (2,026 )     (1,885 )           (3,911 )
Income from equity method investment
                695             695  
Asset impairment
          (737 )     (716 )           (1,453 )
Loss on sale of assets
                (17,184 )           (17,184 )
 
                             
Operating income (loss)
    (140 )     12,339       (7,235 )           4,964  
Interest expense
    (8,871 )     (5 )     (19 )           (8,895 )
Interest income
    51       5       182             238  
Intercompany income (expense)
    3,042       (8,925 )     5,883              
Income (loss) from equity investment in subsidiaries
    (1,194 )     (4,789 )           5,983        
 
                             
Income (loss) before taxes
    (7,112 )     (1,375 )     (1,189 )     5,983       (3,693 )
Income tax benefit (expense)
    2,226       181       (3,600 )           (1,193 )
 
                             
Net income (loss)
  $ (4,886 )   $ (1,194 )   $ (4,789 )   $ 5,983     $ (4,886 )
 
                             
                                         
    Six Months Ended July 4, 2010  
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Total  
    (In thousands)  
Revenues
  $     $ 428,204     $ 473,498     $ (75,213 )   $ 826,489  
Cost of sales
          (299,097 )     (358,400 )     75,213       (582,284 )
 
                             
Gross profit
          129,107       115,098             244,205  
Selling, general and administrative expenses
    (382 )     (85,794 )     (62,207 )           (148,383 )
Research and development
          (13,264 )     (14,933 )           (28,197 )
Amortization of intangibles
          (4,571 )     (3,835 )           (8,406 )
Income from equity method investment
                5,852             5,852  
 
                             
Operating income (loss)
    (382 )     25,478       39,975             65,071  
Interest expense
    (27,291 )     65       93             (27,133 )
Interest income
    74       6       239             319  
Other income (expense)
                1,465             1,465  
Intercompany income (expense)
    5,666       (5,972 )     306              
Income (loss) from equity investment in subsidiaries
    45,942       32,279             (78,221 )      
 
                             
Income (loss) from continuing operations before taxes
    24,009       51,856       42,078       (78,221 )     39,722  
Income tax benefit (expense)
    7,701       (5,914 )     (9,799 )           (8,012 )
 
                             
Income (loss) from continuing operations
    31,710       45,942       32,279       (78,221 )     31,710  
Loss from discontinued operations, net of tax
    (291 )                       (291 )
Net income (loss)
  $ 31,419     $ 45,942     $ 32,279     $ (78,221 )   $ 31,419  
 
                             

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Table of Contents

                                         
    Six Months Ended June 28, 2009  
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Total  
    (In thousands)  
Revenues
  $     $ 353,812     $ 390,323     $ (71,802 )   $ 672,333  
Cost of sales
          (240,078 )     (311,346 )     71,802       (479,622 )
 
                             
Gross profit
          113,734       78,977             192,711  
Selling, general and administrative expenses
    (164 )     (71,685 )     (72,427 )           (144,276 )
Research and development
          (14,641 )     (16,036 )           (30,677 )
Amortization of intangibles
          (4,050 )     (3,726 )           (7,776 )
Income from equity method investment
                1,985             1,985  
Asset impairment
          (4,040 )     (22,136 )           (26,176 )
Loss on sale of assets
                (17,184 )           (17,184 )
 
                             
Operating income (loss)
    (164 )     19,318       (50,547 )           (31,393 )
Interest expense
    (16,190 )     71       (99 )           (16,218 )
Interest income
    56       85       461             602  
Other income (expense)
    (1,541 )                       (1,541 )
Intercompany income (expense)
    5,984       (12,178 )     6,194              
Income (loss) from equity investment in subsidiaries
    (29,789 )     (36,122 )           65,911        
 
                             
Income (loss) before taxes
    (41,644 )     (28,826 )     (43,991 )     65,911       (48,550 )
Income tax benefit (expense)
    4,304       (963 )     7,869             11,210  
 
                             
Net income (loss)
  $ (37,340 )   $ (29,789 )   $ (36,122 )   $ 65,911     $ (37,340 )
 
                             

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Table of Contents

Supplemental Condensed Consolidating Statements of Cash Flows
                                 
    Six Months Ended July 4, 2010  
                    Non-        
            Guarantor     Guarantor        
    Issuer     Subsidiaries     Subsidiaries     Total  
    (In thousands)  
Net cash provided by (used for) operating activities
  $ 79,937     $ 13,895     $ (88,319 )   $ 5,513  
Cash flows from investing activities:
                               
Capital expenditures
          (7,658 )     (5,047 )     (12,705 )
Proceeds from disposal of tangible assets
          2,314       18       2,332  
Cash provided by other investing activities
    163                   163  
 
                       
Net cash provided by (used for) investing activities
    163       (5,344 )     (5,029 )     (10,210 )
 
                               
Cash flows from financing activities:
                               
Payments under borrowing arrangements
    (46,268 )                 (46,268 )
Cash dividends paid
    (4,712 )                 (4,712 )
Tax deficiency related to share-based compensation
    (210 )                 (210 )
Proceeds from exercises of stock options
    634                   634  
Intercompany capital contributions
    163       (163 )            
 
                       
Net cash used for financing activities
    (50,393 )     (163 )           (50,556 )
 
                               
Effect of currency exchange rate changes on cash and cash equivalents
                (8,011 )     (8,011 )
 
                       
Increase (decrease) in cash and cash equivalents
    29,707       8,388       (101,359 )     (63,264 )
Cash and cash equivalents, beginning of period
    49,878       8,977       250,024       308,879  
 
                       
Cash and cash equivalents, end of period
  $ 79,585     $ 17,365     $ 148,665     $ 245,615  
 
                       

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Table of Contents

                                 
    Six Months Ended June 28, 2009  
                    Non-        
            Guarantor     Guarantor        
    Issuer     Subsidiaries     Subsidiaries     Total  
    (In thousands)  
Net cash provided by (used for) operating activities
  $ 67,103     $ (35,736 )   $ 37,967     $ 69,334  
 
Cash flows from investing activities:
                               
Capital expenditures
          (10,462 )     (7,880 )     (18,342 )
Proceeds from disposal of tangible assets
          (18 )     385       367  
 
                       
Net cash used for investing activities
          (10,480 )     (7,495 )     (17,975 )
 
                               
Cash flows from financing activities:
                               
Cash dividends paid
    (4,707 )                 (4,707 )
Debt issuance costs
    (1,541 )                 (1,541 )
Tax deficiency related to share-based compensation
    (1,469 )                 (1,469 )
Proceeds from exercises of stock options
    23                   23  
 
                       
Net cash used for financing activities
    (7,694 )                 (7,694 )
 
                               
Effect of currency exchange rate changes on cash and cash equivalents
                3,562       3,562  
 
                       
Increase (decrease) in cash and cash equivalents
    59,409       (46,216 )     34,034       47,227  
Cash and cash equivalents, beginning of period
    130       57,522       169,761       227,413  
 
                       
Cash and cash equivalents, end of period
  $ 59,539     $ 11,306     $ 203,795     $ 274,640  
 
                       

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Table of Contents

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We design, manufacture, and market cable, connectivity, and networking products in markets including industrial automation, enterprise, transportation, infrastructure, and consumer electronics.
We consider revenue growth, operating margin, cash flows, return on invested capital, and working capital management metrics to be our key operating performance indicators.
Trends and Events
The following trends and events during 2010 have had varying effects on our financial condition, results of operations, and cash flows.
Global Restructuring Activities
During 2010, we continued to implement our plan to streamline our manufacturing, sales, and administrative functions. We recognized severance costs primarily in the Americas segment totaling $0.8 million and $1.1 million in the three and six month periods ended July 4, 2010, respectively, related to these restructuring activities and the planned closure of one of our two manufacturing plants in Leominster, Massachusetts. We do not expect to recognize any additional severance costs related to these restructuring activities.
Derivatives and hedging activities
During the quarter ended July 4, 2010, we entered into $200.0 million notional amount of interest rate swap agreements that expire in 2019. The interest rate swaps are 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 caps the variable rate that we are exposed to in the interest rate swaps. The interest rate swaps have been designated and accounted for as fair value hedges, and the interest rate cap has been accounted for at fair value. We recorded a $2.7 million net loss on these instruments for the three and six month periods ended July 4, 2010, which is included in interest expense in the Consolidated Statements of Operations. See Note 8 for further discussion.
Share-Based Compensation
We provide certain employees with share-based compensation in the form of stock options, stock appreciation rights, restricted stock units with service vesting conditions, and restricted stock units with performance vesting conditions. At July 4, 2010, the total unrecognized compensation cost related to all nonvested awards was $23.5 million. That cost is expected to be recognized over a weighted-average period of 2.6 years.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition, results of operations, or cash flows.

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Table of Contents

Recent Accounting Pronouncements
Discussion regarding recent accounting pronouncements is included in Note 1 to the Consolidated Financial Statements.
Critical Accounting Policies
During the six months ended July 4, 2010:
  Our critical accounting policy regarding revenue recognition was updated as a result of the adoption of new accounting guidance, as discussed in Note 1 to the Consolidated Financial Statements. We also added a new critical accounting policy regarding derivatives and hedging activities, as discussed below. We did not change any of our other existing critical accounting policies from those listed in our 2009 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.
We are exposed to various market risks, including fluctuations in interest rates. We use interest rate agreements to manage our costs and reduce our exposure to interest rate risk. We manage our exposure to interest rate risk by maintaining a mix of fixed and variable rate debt. During the quarter ended July 4, 2010, we entered into $200.0 million notional amount of interest rate swap agreements that expire in 2019. The interest rate swaps are 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 caps the variable rate that we are exposed to in the interest rate swaps. We do not hold or issue any derivative instrument for trading or speculative purposes.
We report all derivative financial instruments on the balance sheet at fair value. Derivative instruments, such as our interest rate swaps, may be designated as a hedge of the exposure to changes in the fair value of an asset or liability if the hedging relationship is expected to be highly effective in offsetting changes in fair value attributable to the hedged risk during the period of designation. If a derivative is designated as a fair value hedge, the gain or loss on the derivative and the offsetting loss or gain on the hedged asset, liability or firm commitment are recognized in earnings. Gains or losses on derivative instruments recognized in earnings are reported in the same line item as the associated hedged transaction in the Consolidated Statements of Operations. If a derivative has not been designated as part of a hedging relationship, such as our interest rate cap, it is recorded at fair value with changes in fair value recognized in earnings.

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Table of Contents

Results of Operations
Consolidated Continuing Operations
                                                 
    Three Months Ended   %   Six Months Ended   %
    July 4, 2010   June 28, 2009   Change   July 4, 2010   June 28, 2009   Change
    (in thousands, except percentages)
Revenues
  $ 426,140     $ 343,821       23.9 %   $ 826,489     $ 672,333       22.9 %
Gross profit
    125,797       108,518       15.9 %     244,205       192,711       26.7 %
Selling, general and administrative expenses
    74,523       67,579       10.3 %     148,383       144,276       2.8 %
Research and development
    13,400       14,122       -5.1 %     28,197       30,677       -8.1 %
Income from equity method investment
    3,211       695       362.0 %     5,852       1,985       194.8 %
Operating income (loss)
    36,945       4,964       644.3 %     65,071       (31,393 )     307.3 %
Income (loss) from continuing operations before taxes
    24,359       (3,693 )     759.6 %     39,722       (48,550 )     181.8 %
Net income (loss)
    19,672       (4,886 )     502.6 %     31,419       (37,340 )     184.1 %
Revenues increased in the three and six month periods ended July 4, 2010 for the following reasons:
  An increase in unit sales volume due to broad-based market improvements resulted in a revenue increase of $60.3 million and $101.7 million, respectively.
 
  An increase in sales prices, primarily attributable to an increase in copper prices, resulted in a revenue increase of $20.0 million and $39.8 million, respectively.
 
  Acquisitions contributed $3.7 million and $7.0 million of revenue, respectively.
 
  The recognition of previously deferred revenue associated with the Wireless segment resulted in a revenue increase of $6.1 million and $12.2 million, respectively.
The positive impact that the factors listed above had on the revenue comparison was partially offset by $6.5 million and $17.7 million, respectively, of lost sales due to dispositions in Europe during 2009. Foreign currency translation was unfavorable for the three month period ended July 4, 2010, and resulted in a $1.3 million decrease in revenues. Foreign currency translation was favorable for the six month period ended July 4, 2010, and resulted in an $11.2 million increase in revenue.
Gross profit increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009 due to the increases in revenue as discussed above and decreases in severance and other restructuring costs. In the three and six month periods ended July 4, 2010, cost of sales included $4.8 million and $9.8 million, respectively, of severance and other restructuring costs compared to $4.8 million and $22.7 million, respectively, in the comparable periods of 2009. These costs were due to global restructuring actions to streamline our manufacturing functions worldwide in an effort to reduce costs and mitigate the weakening demand experienced throughout the global economy.
Selling, general and administrative expenses increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009. These increases are primarily due to higher payroll and incentive compensation costs, as well as higher discretionary spending for items such as consulting fees, travel costs, and advertising.
The decrease in research and development costs in the three month period ended July 4, 2010 is primarily due to lower payroll and incentive compensation costs, due to lower headcount as a result of global restructuring actions previously taken. The decrease in research and development costs in the six month period ended July 4, 2010 is primarily due to lower severance costs. In the six month period ended June 28, 2009, research and development included $1.7 million of severance costs. Research and development costs did not include any severance costs during the six month period ended July 4, 2010.

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Income from our equity method investment increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009 due to overall improved performance of a joint venture in China associated with our EMEA segment.
During the first six months of 2009, we recognized asset impairment losses totaling $26.2 million primarily related to a German cable business that we sold in the second quarter of 2009. We did not recognize any asset impairment losses during the first six months of 2010.
During the first six months of 2009, we sold a 95% ownership interest in a German cable business. The sales price was $0.4 million, and we recognized a loss of $17.2 million on the transaction. We did not have any significant gains or losses on the sale of assets during the first six months of 2010.
Operating income increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009 due to the increase in revenues and gross profit and the decrease in severance and other restructuring costs, asset impairment losses, and losses on the sale of assets as discussed above. Operating income also increased due to the benefits of our restructuring actions and the successful execution of our regional manufacturing and Lean enterprise strategies.
Income from continuing operations before income taxes increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009 due to the increases in operating income, as discussed above. In addition, we recognized $1.5 million of other income during the three and six month periods ended July 4, 2010 due to an escrow settlement related to a prior acquisition. We recognized $1.5 million of other expense in the six month period ended June 28, 2009 due to fees paid related to an amendment of our senior secured credit facility. In addition, we recognized $2.7 million of net losses on derivatives and hedging instruments recognized within interest expense for the three and six month periods ended July 4, 2010.
We recognized income tax expense of $4.5 million and $8.0 million for the three and six month periods ended July 4, 2010. Our effective tax rate for the six month period ended July 4, 2010 was 20.2% expense compared to a benefit of 23.1% in 2009. This change is primarily attributable to the increase in income before taxes as well as the impact of the income tax benefit associated with the loss on sale of a German cable business in 2009.
Americas Segment
                                                 
    Three Months Ended   %   Six Months Ended   %
    July 4, 2010   June 28, 2009   Change   July 4, 2010   June 28, 2009   Change
    (in thousands, except percentages)
Total revenues
  $ 249,056     $ 197,622       26.0 %   $ 479,722     $ 387,823       23.7 %
Operating income
    34,159       33,521       1.9 %     65,516       58,179       12.6 %
as a percent of total revenues
    13.7 %     17.0 %             13.7 %     15.0 %        
Americas total revenues, which include affiliate revenues, increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009 due to higher unit sales volume of $28.7 million and $46.8 million, respectively. Higher selling prices, primarily associated with an increase in copper prices, contributed $12.5 million and $20.8 million, respectively, to the increase in revenues. The increase in revenues was also due to favorable currency translation of $5.3 million and $11.4 million, respectively, resulting primarily from the Canadian dollar strengthening against the U.S. dollar. Higher affiliate sales contributed $1.2 million and $5.9 million, respectively, of the increase in revenues. Acquisitions contributed $3.7 million and $7.0 million, respectively, of the increase in revenues.

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Operating income increased in the three and six month periods ended July 4, 2010 due to the increase in revenues as discussed above. However, operating income does not benefit from an increase in revenues due to higher copper prices. In addition, the impact of the increase in revenue was partially offset by higher investment in selling, general, and administrative expenses and research and development expenses in the periods. Furthermore, operating margin decreased due to competitive market pressures that resulted in lower pricing, exclusive of pricing changes due to copper prices.
Operating income also increased due to the reduction in asset impairment losses. In the three and six months ended June 28, 2009, the segment recognized $0.7 million and $3.6 million of asset impairment losses, respectively. The segment did not recognize any asset impairment charges in the three and six months ended July 4, 2010. These increases in operating income were partially offset by increases in severance and other restructuring costs. In the three and six months ended July 4, 2010, the segment recognized severance and other restructuring charges of $4.3 million and $8.7 million, respectively, primarily related to the anticipated closure of one of our two manufacturing plants in Leominster, Massachusetts. In the three and six months ended June 28, 2009, the segment recognized $4.0 million and $6.2 million of severance and other restructuring charges, respectively, primarily related to our global restructuring actions.
EMEA Segment
                                                 
    Three Months Ended   %   Six Months Ended   %
    July 4, 2010   June 28, 2009   Change   July 4, 2010   June 28, 2009   Change
    (in thousands, except percentages)
Total revenues
  $ 110,073     $ 99,346       10.8 %   $ 215,366     $ 199,880       7.7 %
Operating income (loss)
    19,314       (12,685 )     252.3 %     33,894       (54,640 )     162.0 %
as a percent of total revenues
    17.5 %     -12.8 %             15.7 %     -27.3 %        
EMEA total revenues, which include affiliate revenues, increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009 due to higher unit sales volume of $19.2 million and $27.0 million, respectively. Higher affiliate sales contributed $4.8 million and $7.1 million, respectively, of the increase in revenues. The increases in revenues were partially offset by decreases in revenues due to asset divestitures, foreign currency translation, and changes in prices. Revenue decreased by $6.5 million and $17.7 million, respectively, due to lost sales due to asset dispositions in 2009. Revenue decreased by $6.2 million and $0.7 million, respectively, due to the impact of unfavorable currency translation, primarily from the U.S. dollar strengthening against the euro. Changes in selling prices resulted in a decrease in revenues of $0.6 million and $0.2 million, respectively.
Operating income increased in the three and six month periods ended July 4, 2010 due to the increase in revenues as discussed above. Operating income also increased due to reductions in asset impairment losses, losses on the sale of assets, and severance and other restructuring costs. In the three and six month periods ended June 28, 2009, the segment recognized asset impairment losses of $0.7 million and $21.6 million, respectively. There were no asset impairment losses recorded in the three and six month periods ended July 4, 2010. In the three and six month periods ended June 28, 2009, the segment recognized losses on the sale of a German cable business of $17.2 million. There were no losses on the sale of assets in the three and six month periods ended July 4, 2010. In the three and six month periods ended June 28, 2009, the segment recognized severance and other restructuring costs of $2.6 million and $27.5 million, respectively, primarily related to our global restructuring actions. In the three and six month periods ended July 4, 2010, the segment recognized severance and restructuring costs of $0.6 million and $1.5 million, respectively, related to our global restructuring actions.

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Asia Pacific Segment
                                                 
    Three Months Ended   %   Six Months Ended   %
    July 4, 2010   June 28, 2009   Change   July 4, 2010   June 28, 2009   Change
    (in thousands, except percentages)
Total revenues
  $ 81,509     $ 57,616       41.5 %   $ 157,454     $ 103,854       51.6 %
Operating income
    9,927       8,262       20.2 %     17,453       11,596       50.5 %
as a percent of total revenues
    12.2 %     14.3 %             11.1 %     11.2 %        
Asia Pacific total revenues, which include affiliate revenues, increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009 due to higher unit sales volume of $16.6 million and $33.6 million, respectively. Higher selling prices, due primarily to increases in copper prices, resulted in revenue increases of $7.7 million and $19.4 million, respectively. The remaining fluctuations in revenue were due to foreign currency translation.
Operating income increased in the three and six month periods ended July 4, 2010 due to the increase in revenues as discussed above. Operating income also increased due to reductions in asset impairment losses. In the six month period ended June 28, 2009, the segment recognized asset impairment losses of $1.0 million. There were no asset impairment losses recorded in the three and six month periods ended July 4, 2010.
Wireless Segment
                                                 
    Three Months Ended   %   Six Months Ended   %
    July 4, 2010   June 28, 2009   Change   July 4, 2010   June 28, 2009   Change
    (in thousands, except percentages)
Total revenues
  $ 15,577     $ 13,234       17.7 %   $ 31,502     $ 25,237       24.8 %
Operating loss
    (2,665 )     (7,978 )     66.6 %     (5,834 )     (16,300 )     64.2 %
as a percent of total revenues
    -17.1 %     -60.3 %             -18.5 %     -64.6 %        
Sales transactions from our Wireless segment often involve multiple elements in which a portion of the sales proceeds are deferred and recognized ratably over the period related to the last delivered element. As discussed in Note 1, effective January 1, 2010 we adopted new accounting guidance regarding revenue recognition for multiple element arrangements which results in less deferred revenue for the Wireless segment. As of July 4, 2010, total deferred revenue and deferred cost of sales were $11.5 million and $3.4 million, respectively. The deferred revenue and deferred cost of sales are expected to be amortized over various periods ranging from one to three years.
The changes in the deferred revenue and deferred cost of sales balances are as follows (in thousands):
                         
    Deferred     Deferred Cost     Deferred Gross  
    Revenue     of Sales     Profit  
Balance, December 31, 2009
  $ 22,730     $ 8,306     $ 14,424  
Balance, July 4, 2010
    11,468       3,410       8,058  
 
                 
Decrease
  $ (11,262 )   $ (4,896 )   $ (6,366 )
 
                 
 
                       
Balance, December 31, 2008
  $ 20,166     $ 7,270     $ 12,896  
Balance, June 28, 2009
    20,948       7,235       13,713  
 
                 
Increase (decrease)
  $ 782     $ (35 )   $ 817  
 
                 

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Wireless total revenues increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009. The deferred revenue balance decreased by $5.4 million and $11.3 million compared to April 4, 2010 and December 31, 2009. This increase in revenue and decrease in deferred revenue was due to the recognition of previously deferred revenue in excess of new deferred revenue transactions during the quarter. New deferred revenue transactions decreased as a result of the adoption of the new accounting guidance referred to above. The increase in revenue was partially offset by a $3.1 million and $5.0 million decrease in revenues as a result of lower unit sales volume.
Operating loss improved in the three and six month periods ended July 4, 2010 due to the increase in revenues, as discussed above, and a reduction in operating costs. The adoption of the new accounting guidance resulted in $1.7 million and $3.8 million of the improvement in operating loss, respectively. In addition, selling, general, and administrative expenses, and research and development expenses decreased by $2.1 million and $5.1 million, respectively, from the comparable periods in 2009 due to the benefit of cost savings initiatives.
We expect that the Wireless segment operating loss will continue to be positively impacted by the adoption of the new revenue recognition guidance for the remainder of fiscal year 2010. We expect the positive impact for our fiscal third and fourth quarters to be similar to the impact experienced in the first two quarters of 2010. We do not expect that the impact of the new revenue recognition guidance will be significant in periods beyond 2010. The recognition period of our deferred revenue and deferred cost of sales for the majority of our arrangements is one year. However, the recognition period can range up to three years in some instances.

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Corporate Expenses
                                                 
    Three Months Ended   %   Six Months Ended   %
    July 4, 2010   June 28, 2009   Change   July 4, 2010   June 28, 2009   Change
    (in thousands, except percentages)
Total corporate expenses
  $ 13,272     $ 9,310       42.6 %     $ 26,176   $ 17,667       48.2 %
Corporate expenses include administrative and other costs that are not allocated to the segments. These expenses increased in the three and six month periods ended July 4, 2010 from the comparable periods in 2009 due to higher payroll and incentive compensation costs, and other discretionary items such as consulting fees, advertising, travel, and training costs.
Discontinued Operations
During 2005, we completed the sale of our discontinued communications cable operation in Phoenix, Arizona. In connection with this sale and related tax deductions, we established a reserve for uncertain tax positions. In the three and six month periods ended July 4, 2010, we recognized $0.3 million and $0.5 million of interest expense, respectively ($0.2 million and $0.3 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.
Liquidity and Capital Resources
Significant factors that have affected or may affect our cash liquidity include: (1) cash provided by operating activities; (2) disposals of tangible assets; (3) exercises of stock options; (4) cash used for business acquisitions, restructuring actions, capital expenditures, share repurchases and dividends; and (5) our available credit facilities and other borrowing arrangements. We expect our operating activities to generate cash throughout 2010 and believe our sources of liquidity are sufficient to fund current working capital requirements, capital expenditures, contributions for our retirement plans, quarterly dividend payments, severance payments from our restructuring actions, and our short-term operating strategies. Economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product mix, and commodities pricing could affect our ability to continue to fund our future needs from business operations.
The following table is derived from our Consolidated Cash Flow Statements:

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    Six Months Ended  
    July 4, 2010     June 28, 2009  
    (In thousands)  
Net cash provided by (used for):
               
Operating activities
  $ 5,513     $ 69,334  
Investing activities
    (10,210 )     (17,975 )
Financing activities
    (50,556 )     (7,694 )
Effects of currency exchange rate changes on cash and cash equivalents
    (8,011 )     3,562  
 
           
Increase (decrease) in cash and cash equivalents
    (63,264 )     47,227  
Cash and cash equivalents, beginning of period
    308,879       227,413  
 
           
Cash and cash equivalents, end of period
  $ 245,615     $ 274,640  
 
           
Net cash provided by operating activities, a key source of our liquidity, decreased by $63.8 million in the six month period ended July 4, 2010 from the comparable period in 2009. The most significant factor impacting the decrease was the change in operating assets and liabilities. For the six month period ended July 4, 2010, changes in operating assets and liabilities were a use of cash of $57.5 million, as compared to a source of cash of $34.4 million in the comparable period of 2009. An increase in accounts receivable represented the largest unfavorable change in operating assets and liabilities compared to the prior year. Accounts receivable were a use of cash for the period due to the 23% increase in revenues year-over-year. While accounts receivable increased consistent with the revenue growth, our days’ sales outstanding improved from 65 days’ sales outstanding as of June 28, 2009 to 62 days’ sales outstanding as of July 4, 2010. We calculate days’ sales outstanding by dividing accounts receivable as of the end of the quarter by the average daily revenues recognized during the quarter. We also experienced an unfavorable change in inventories compared to the prior year. While inventories were a use of cash for the period due to the increase in revenues year-over-year, our inventory turns improved from 6.1 turns as of June 28, 2009 to 7.8 turns as of July 4, 2010. We calculate inventory turns by dividing annualized cost of sales for the quarter by the inventory balance at the end of the quarter. The impact of the unfavorable change in operating assets and liabilities was partially offset by the increase in net income from the prior year.
Net cash used for investing activities totaled $10.2 million in the first six months of 2010 compared to $18.0 million in the first six months of 2009. Investing activities in the first six months of 2010 primarily related to expenditures for capacity enhancements and relocations pursuant to our regional manufacturing initiatives as well as enterprise resource planning software. Capital expenditures in the first six months of 2010 were partially offset by the receipt of proceeds from the sale of certain real estate in the EMEA segment. Investing activities in the first six months of 2009 primarily related to capital expenditures for enterprise resource planning software and capacity enhancements at certain locations. We anticipate that future capital expenditures will be funded with available cash.
Net cash used for financing activities in the first six months of 2010 totaled $50.6 million compared to $7.7 million in the first six months of 2009. This change is primarily due to the repayment of $46.3 million of outstanding borrowings under our revolving credit facility during the first six months of 2010.
Our outstanding debt obligations as of July 4, 2010 consisted of $350.0 million aggregate principal of 7.0% senior subordinated notes due 2017 and $200.0 million aggregate principal of 9.25% senior subordinated notes due 2019. As of July 4, 2010, there were no outstanding borrowings under our senior secured credit facility, and we had $171.9 million in available borrowing capacity. We were in compliance with all of the amended covenants of the facility as of July 4, 2010. Additional discussion

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regarding our various borrowing arrangements is included in Note 7 to the Consolidated Financial Statements.

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Forward Looking Statements
Statements in this report other than historical facts are forward looking statements made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995. Forward looking statements include any statements regarding future revenues, costs and expenses, operating income, earnings per share, margins, cash flows, dividends, and capital expenditures. These forward looking statements are based on forecasts and projections about the industries which we serve and about general economic conditions. They reflect management’s beliefs and expectations. They are not guarantees of future performance and they involve risk and uncertainty. Our actual results may differ materially from these expectations. The current global economic slowdown has adversely affected our results of operations and may continue to do so. Additional factors that may cause actual results to differ from our expectations include: our ability to execute and realize the expected benefits from strategic initiatives (including revenue growth, cost control and productivity improvement programs); our reliance on key distributors in marketing our products; the competitiveness of the global cable, connectivity, networking, and wireless industries; difficulties in realigning manufacturing capacity and capabilities among our global manufacturing facilities; the cost and availability of materials including copper, plastic compounds derived from fossil fuels, and other materials; variability in our quarterly and annual effective tax rates; changes in currency exchange rates and political and economic uncertainties in the countries where we conduct business; our ability to retain senior management and key employees; volatility of credit markets; our ability to integrate successfully acquired businesses; our ability to develop and introduce new products; having to recognize charges that would reduce income as a result of impairing goodwill and other intangible assets; variability associated with derivative and hedging instruments; and other factors.
For a more complete discussion of risk factors, please see our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on February 26, 2010. We disclaim any duty to update any forward looking statements as a result of new information, future developments, or otherwise.
Item 3: Quantitative and Qualitative Disclosures about Market Risks
We are exposed to various market risks, including fluctuations in interest rates. We use interest rate agreements to manage our costs and reduce our exposure to interest rate risk. We manage our exposure to interest rate risk by maintaining a mix of fixed and variable rate debt. During the quarter ended July 4, 2010, we entered into $200.0 million notional amount of interest rate swap agreements that expire in 2019. The interest rate swaps are 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 caps the variable rate that we are exposed to in the interest rate swaps. We do not hold or issue any derivative instrument for trading or speculative purposes.
The following table provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal amounts of long-term debt and notional amounts of derivative instruments by expected maturity dates and fair values as of July 4, 2010.

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    Principal Amount by Expected Maturity   Fair
    2010   Thereafter   Total   Value
Long Term Debt   (In thousands, except interest rates)
Fixed-rate senior subordinated notes
  $  —     $ 350,000     $ 350,000     $ 350,000  
Average interest rate
            7.00 %            
 
                               
Fixed-rate senior subordinated notes
  $  —     $ 200,000     $ 200,000     $ 193,700  
Average interest rate
            9.25 %            
 
                               
Variable-rate senior secured credit facility
  $  —     $     $     $  
                                 
    Notional Amount by Expected Maturity   Fair
    2010   Thereafter   Total   Value
Interest Rate Instruments   (In thousands, except interest rates)
Fixed to variable interest rate swaps (1)
  $  —     $ 200,000     $ 200,000     $ 3,625  
Average receive rate at July 4, 2010
            9.25 %                
Average pay rate at July 4, 2010
            6.59 %                
 
                               
Interest rate cap (1)
  $  —     $ 200,000     $ 200,000     $ 1,755  
Average pay rate at July 4, 2010 (2)
            0.31 %                
 
(1)   As of July 4, 2010, the interest rate swap is in an asset position and the interest rate cap is in a liability position.
 
(2)   Under the interest rate cap, we receive the excess of the 3-month forward LIBOR compared to 8.00%.
Item 7A of our 2009 Annual Report on Form 10-K provides more information as to the practices and instruments that we use to manage market risks. There were no other material changes in our exposure to market risks since December 31, 2009.
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. These proceedings include personal injury cases, 86 of which are pending as of July 26, 2010, in which we are one of many defendants. Electricians have filed a majority of these cases, primarily in Illinois and Pennsylvania, generally seeking compensatory, special, and punitive damages. Typically in these cases, the claimant alleges injury from alleged exposure to a heat-resistant asbestos fiber. Our alleged predecessors had a small number of products that contained the fiber, but ceased production of such products more than 20 years ago. Through July 26, 2010, we have been dismissed, or reached agreement to be dismissed, in more than 370 similar cases without any going to trial, and with only a small number of these involving any payment to the claimant. In our opinion, the proceedings and actions in which we are involved should not, individually or in the aggregate, have a material adverse effect on our financial condition, operating results, or cash flows. However, since the trends and outcome of this litigation are inherently uncertain, we cannot give absolute assurance regarding the future resolution of such litigation, or that such litigation may not become material in the future.
Item 1A: Risk Factors
There have been no material changes with respect to risk factors as previously disclosed in our 2009 Annual Report on Form 10-K, except as noted below. The information below updates, and should be read in conjunction with, the risk factors and information disclosed in our Form 10-K.
We are subject to interest rate risk and counterparty credit risk.
We are exposed to various market risks, including fluctuations in interest rates. We use interest rate agreements to manage our costs and reduce our exposure to interest rate risk. We manage our exposure to interest rate risk by maintaining a mix of fixed and variable rate debt. During the quarter ended July 4, 2010, we entered into $200.0 million notional amount of interest rate swap agreements that expire in 2019. We also entered into a separate $200.0 million notional amount interest rate cap agreement, which caps the variable rate that we are exposed to in the interest rate swaps. We do not expect changes in interest rates to have a material effect on income or cash flows in 2010, although there can be no assurances that interest rates will not significantly change.
These agreements expose us to credit risk to the extent that the counterparties to our interest rate agreements may be unable to meet the terms of the agreements. We seek to mitigate such risks by limiting the counterparties to major financial institutions and by executing our agreements across multiple counterparties. If a counterparty to one of our interest rate swap agreements was unable to perform, it could negatively impact our strategy to maintain a mix of fixed and variable rate debt. If a counterparty to our interest rate cap was unable to perform, it could increase our exposure to interest rate risk.

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Item 6: Exhibits
Exhibits
     
Exhibit 10.1
  Executive Employment Agreement with Christoph Gusenleitner.
 
   
Exhibit 10.2
  First Amendment to Amended and Restated Executive Employment Agreement with Denis Suggs.
 
   
Exhibit 31.1
  Certificate of the Chief Executive Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.
 
   
Exhibit 31.2
  Certificate of the Chief Financial Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.
 
   
Exhibit 32.1
  Certificate of the Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
 
   
Exhibit 32.2
  Certificate of the Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
 
   
Exhibit 101.INS
  XBRL Instance Document
 
   
Exhibit 101.SCH
  XBRL Taxonomy Extension Schema
 
   
Exhibit 101.CAL
  XBRL Taxonomy Extension Calculation
 
   
Exhibit 101.DEF
  XBRL Taxonomy Extension Definition
 
   
Exhibit 101.LAB
  XBRL Taxonomy Extension Label
 
   
Exhibit 101.PRE
  XBRL Taxonomy Extension Presentation

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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: August 11, 2010  By:   /s/ John S. Stroup    
    John S. Stroup   
    President, Chief Executive Officer and Director   
 
     
Date: August 11, 2010  By:   /s/ Gray G. Benoist    
    Gray G. Benoist   
    Senior Vice President, Finance, Chief Financial Officer, and Chief Accounting Officer   
 

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