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Item 1. Financial Statements

2021-05-10 compared with 2020-11-02 · 241 added, 418 removed, 510 unchanged (56% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 27, 2020 December 31, 2019

April 4, 2021 December 31, 2020

(In thousands)

4 unchanged sentences

Other current assets 59,741 52,289

Current assets of discontinued operations — 375,135

Current assets held for sale 16,279 —

Total current assets 1,064,393 1,098,398

10 unchanged sentences

Accrued liabilities 252,025 276,641

Current liabilities of discontinued operations — 170,279

Current liabilities held for sale 5,555 —

Total current liabilities 508,006 520,761

16 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended Nine Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended

April 4, 2021 March 29, 2020

(In thousands, except per share data)

12 unchanged sentences

Loss from discontinued operations, net of tax — ( 26,110 )

Gain on disposal of discontinued operations, net of tax 2,743 — 2,743 —

Net income (loss) 28,741 ( 11,219 )

Net income (loss) attributable to noncontrolling interest 75 ( 30 )

Net income (loss) attributable to Belden 16,996 ( 297,009 ) ( 62,098 ) ( 229,607 )

Preferred stock dividends — 971 — 18,437

Net income (loss) attributable to Belden common stockholders $ 16,996 $ ( 297,980 ) $ ( 62,098 ) $ ( 248,044 )

Net income (loss) attributable to Belden stockholders $ 28,666 $ ( 11,189 )

Weighted average number of common shares and equivalents:

1 unchanged sentence

Diluted 45,045 45,538

Basic income (loss) per share attributable to Belden common stockholders:

Continuing operations attributable to Belden common stockholders $ 0.46 $ 0.83 $ 0.86 $ 2.16

Discontinued operations attributable to Belden common stockholders ( 0.14 ) ( 7.54 ) ( 2.31 ) ( 8.20 )

Disposal of discontinued operations attributable to Belden common stockholders 0.06 — 0.06 —

Net income (loss) per share attributable to Belden common stockholders $ 0.38 $ ( 6.70 ) $ ( 1.39 ) $ ( 6.04 )

Diluted income (loss) per share attributable to Belden common stockholders:

Continuing operations attributable to Belden common stockholders $ 0.46 $ 0.83 $ 0.86 $ 2.15

Discontinued operations attributable to Belden common stockholders ( 0.14 ) ( 7.54 ) ( 2.31 ) ( 8.20 )

Disposal of discontinued operations attributable to Belden common stockholders 0.06 — 0.06 —

Net income (loss) per share attributable to Belden common stockholders $ 0.38 $ ( 6.70 ) $ ( 1.39 ) $ ( 6.04 )

Comprehensive loss attributable to Belden $ ( 34,921 ) $ ( 263,530 ) $ ( 136,138 ) $ ( 183,811 )

Basic income (loss) per share attributable to Belden stockholders:

Continuing operations $ 0.64 $ 0.33

Discontinued operations — ( 0.58 )

Net income (loss) $ 0.64 $ ( 0.25 )

Diluted income (loss) per share attributable to Belden stockholders:

Continuing operations $ 0.64 $ 0.33

Discontinued operations — ( 0.58 )

Net income (loss) $ 0.64 $ ( 0.25 )

Comprehensive income attributable to Belden $ 82,391 $ 11,134

Common stock dividends declared per share $ 0.05 $ 0.05

1 unchanged sentence

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

Nine Months Ended

September 27, 2020 September 29, 2019

Three Months Ended

April 4, 2021 March 29, 2020

(In thousands)

Cash flows from operating activities:

Net loss $ ( 62,019 ) $ ( 229,547 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Asset impairment of discontinued operations 113,007 342,146

Net income (loss) $ 28,741 $ ( 11,219 )

Adjustments to reconcile net income (loss) to net cash used for operating activities:

Depreciation and amortization 22,196 26,798

Share-based compensation 7,285 3,708

Gain on disposal of business ( 2,743 ) —

Asset impairment 6,995 23,197

Changes in operating assets and liabilities, net of the effects of currency exchange rate changes, acquired businesses and disposals:

6 unchanged sentences

Other liabilities ( 6,885 ) ( 9,501 )

Net cash provided by operating activities 38,689 89,517

Net cash used for operating activities ( 41,495 ) ( 52,052 )

Cash flows from investing activities:

Cash from (used for) business acquisitions, net of cash acquired ( 72,232 ) 590

Capital expenditures ( 11,223 ) ( 20,935 )

Cash from business acquisitions, net of cash acquired 590 ( 50,951 )

Proceeds from disposal of tangible assets 12 2,090

2 unchanged sentences

Cash flows from financing activities:

Borrowings on revolver 190,000 —

Payments under borrowing arrangements ( 190,000 ) —

Payments under share repurchase program ( 35,000 ) ( 50,000 )

Payment of earnout consideration ( 29,300 ) —

Cash dividends paid ( 2,246 ) ( 2,296 )

Payments under borrowing arrangements ( 1,841 ) —

Withholding tax payments for share-based payment awards ( 905 ) ( 1,003 )

Other ( 43 ) ( 58 )

Payments under share repurchase program — ( 21,239 )

Payment of earnout consideration — ( 29,300 )

Net cash used for financing activities ( 5,035 ) ( 53,896 )

3 unchanged sentences

Cash and cash equivalents, end of period $ 370,850 $ 293,735

For all periods presented, the Condensed Consolidated Cash Flow Statement includes the results of the Grass Valley disposal group up to the disposal date, July 2, 2020.

The Condensed Consolidated Cash Flow Statement for the period ended March 29, 2020 includes the results of discontinued operations, which were sold on July 2, 2020.

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

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Shares Amount Capital Earnings Shares Amount Income (Loss) Interests Total

(In thousands)

Balance at December 31, 2020 50,335 $ 503 $ 823,605 $ 450,876 ( 5,692 ) $ ( 332,552 ) $ ( 191,851 ) $ 6,470 $ 757,051

Cumulative effect of change in accounting principle — — — ( 2,916 ) — — — — ( 2,916 )

Net loss — — — ( 11,189 ) — — — ( 30 ) ( 11,219 )

Other comprehensive income (loss), net of tax — — — — — — 22,323 ( 150 ) 22,173

Exercise of stock options, net of tax withholding forfeitures — — ( 542 ) — 7 370 — — ( 172 )

Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 2,631 ) — 29 1,800 — — ( 831 )

Share repurchase program — — — — ( 592 ) ( 21,239 ) — — ( 21,239 )

Share-based compensation — — 3,708 — — — — — 3,708

Common stock dividends ($ 0.05 per share)

— — — ( 2,288 ) — — — — ( 2,288 )

Balance at March 29, 2020 50,335 $ 503 $ 812,490 $ 501,611 ( 5,433 ) $ ( 326,266 ) $ ( 41,095 ) $ 5,792 $ 953,035

Net income (loss) — — — ( 67,905 ) — — — 24 ( 67,881 )

Other comprehensive income (loss), net of tax — — — — — — ( 44,446 ) 147 ( 44,299 )

Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 1,598 ) — 27 1,543 — — ( 55 )

Share repurchase program — — — — ( 384 ) ( 13,761 ) — — ( 13,761 )

Share-based compensation — — 5,090 — — — — — 5,090

Common stock dividends ($ 0.05 per share)

— — — ( 2,247 ) — — — — ( 2,247 )

Balance at June 28, 2020 50,335 $ 503 $ 815,982 $ 431,459 ( 5,790 ) $ ( 338,484 ) $ ( 85,541 ) $ 5,963 $ 829,882

Net income — — — 28,666 — — — 75 28,741

Other comprehensive income (loss), net of tax — — — — — — 53,725 ( 197 ) 53,528

Acquisition of business with noncontrolling interests — — — — — — — 20 20

Retirement Savings Plan stock contributions — — ( 493 ) — 45 2,496 — — 2,003

Exercise of stock options, net of tax withholding forfeitures — — ( 723 ) — 9 541 — — ( 182 )

Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 2,403 ) — 27 1,680 — — ( 723 )

2 unchanged sentences

— — — ( 2,263 ) — — — — ( 2,263 )

Balance at September 27, 2020 50,335 $ 503 $ 818,661 $ 446,198 ( 5,740 ) $ ( 335,508 ) $ ( 137,458 ) $ 6,191 $ 798,587

Mandatory Convertible Additional Accumulated

Balance at April 4, 2021 50,335 $ 503 $ 827,271 $ 477,279 ( 5,611 ) $ ( 327,835 ) $ ( 138,126 ) $ 6,368 $ 845,460

Additional Accumulated

Other Non-controlling

Preferred Stock Common Stock Paid-In Retained Treasury Stock Comprehensive

Shares Amount Shares Amount Capital Earnings Shares Amount Income (Loss) Interests Total

Common Stock Paid-In Retained Treasury Stock Comprehensive

Shares Amount Capital Earnings Shares Amount Income (Loss) Interests Total

(In thousands)

Balance at December 31, 2019 50,335 $ 503 $ 811,955 $ 518,004 ( 4,877 ) $ ( 307,197 ) $ ( 63,418 ) $ 5,972 $ 965,819

Net income (loss) — — — — — 25,202 — — — ( 24 ) 25,178

Other comprehensive income, net of tax — — — — — — — — 29,009 1 29,010

Cumulative effect of change in accounting principle — — — ( 2,916 ) — — — — ( 2,916 )

Net loss — — — ( 11,189 ) — — — ( 30 ) ( 11,219 )

Other comprehensive income (loss), net of tax — — — — — — 22,323 ( 150 ) 22,173

Exercise of stock options, net of tax withholding forfeitures — — ( 542 ) — 7 370 — — ( 172 )

Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 2,631 ) — 29 1,800 — — ( 831 )

Share-based compensation — — — — 2,216 — — — — — 2,216

Preferred stock dividends ($ 168.75 per share)

— — — — — ( 8,733 ) — — — — ( 8,733 )

Common stock dividends ($ 0.05 per share)

— — — — — ( 1,990 ) — — — — ( 1,990 )

Balance at March 31, 2019 52 $ 1 50,335 $ 503 $ 1,138,987 $ 936,479 ( 10,880 ) $ ( 599,161 ) $ ( 45,898 ) $ 418 $ 1,431,329

Net income — — — — — 42,200 — — — 90 42,290

Other comprehensive income (loss), net of tax — — — — — — — — ( 16,693 ) 40 ( 16,653 )

Acquisition of business with noncontrolling interest — — — — — — — — — 4,775 4,775

Exercise of stock options, net of tax witholding forfeitures — — — — ( 10 ) — — 2 — — ( 8 )

Conversion of restricted stock units into common stock, net of tax witholding forfeitures — — — — ( 861 ) — 29 807 — — ( 54 )

Share repurchase program — — — — ( 592 ) ( 21,239 ) — — ( 21,239 )

Share-based compensation — — 3,708 — — — — — 3,708

Preferred stock dividends ($ 168.75 per share)

— — — — — ( 8,733 ) — — — — ( 8,733 )

Common stock dividends ($ 0.05 per share)

— — — ( 2,288 ) — — — — ( 2,288 )

Balance at June 30, 2019 52 $ 1 50,335 $ 503 $ 1,143,494 $ 967,970 ( 11,248 ) $ ( 621,167 ) $ ( 62,591 ) $ 5,323 $ 1,433,533

Net income — — — — — ( 297,009 ) — — — ( 6 ) ( 297,015 )

Other comprehensive income, net of tax — — — — — — — — 33,480 373 33,853

Adjustment to acquisition of business with noncontrolling interest — — — — — — — — — 420 420

Exercise of stock options, net of tax witholding forfeitures — — — — ( 25 ) — 1 11 — — ( 14 )

Conversion of restricted stock units into common stock, net of tax witholding forfeitures — — — — ( 115 ) — 2 70 — — ( 45 )

Share repurchase program — — — — — — ( 493 ) ( 27,185 ) — — ( 27,185 )

Share-based compensation — — — — 4,521 — — — — — 4,521

Preferred stock conversion ( 52 ) ( 1 ) — — ( 340,788 ) — 6,857 340,789 — — —

Preferred stock dividends ($ 18.76 per share)

— — — — — ( 971 ) — — — — ( 971 )

Common stock dividends ($ 0.05 per share)

— — — — — ( 2,287 ) — — — — ( 2,287 )

Balance at September 29, 2019 — $ — 50,335 $ 503 $ 807,087 $ 667,703 ( 4,881 ) $ ( 307,482 ) $ ( 29,111 ) $ 6,110 $ 1,144,810

Balance at March 29, 2020 50,335 $ 503 $ 812,490 $ 501,611 ( 5,433 ) $ ( 326,266 ) $ ( 41,095 ) $ 5,792 $ 953,035

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

13 unchanged sentences

Our comprehensive portfolio of solutions enables customers to transmit and secure data, sound, and video for mission critical applications across complex enterprise and industrial environments.

Effective January 1, 2020, we transferred our West Penn Wire business and multi-conductor product lines from the Enterprise Solutions segment to the Industrial Solutions segment as a result of a shift in responsibilities among the segments.

We have recast the prior period segment information to conform to the change in the composition of reportable segments.

Reporting Periods

Our fiscal year and fiscal fourth quarter both end on December 31.

Our fiscal first quarter ends on the Sunday falling closest to 91 days after December 31, which was March 29, 2020, the 89th day of our fiscal year 2020.

Our fiscal first quarter ends on the Sunday falling closest to 91 days after December 31, which was April 4, 2021, the 94th day of our fiscal year 2021.

Our fiscal second and third quarters each have 91 days.

The nine months ended September 27, 2020 and September 29, 2019 included 271 and 272 days, respectively.

The three months ended April 4, 2021 and March 29, 2020 included 94 and 89 days, respectively.

Fair Value Measurement

4 unchanged sentences

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

As of and during the three and nine months ended September 27, 2020 and September 29, 2019, we utilized Level 1 inputs to determine the fair value of cash equivalents, and we utilized Level 2 and Level 3 inputs to determine the fair value of net assets acquired in business combinations (see Note 3) and for impairment testing (see Notes 4 and 10).

We did not have any transfers between Level 1 and Level 2 fair value measurements during the nine months ended September 27, 2020 and September 29, 2019.

As of and during the three months ended April 4, 2021 and March 29, 2020, we utilized Level 1 inputs to determine the fair value of cash equivalents, and we utilized Level 2 and Level 3 inputs to determine the fair value of net assets acquired in business combinations (see Note 3) and for impairment testing (see Notes 4 and 10).

We did not have any transfers between Level 1 and Level 2 fair value measurements during the three months ended April 4, 2021 and March 29, 2020.

Cash and Cash Equivalents

1 unchanged sentence

We periodically have cash equivalents consisting of short-term money market funds and other investments.

As of September 27, 2020, we did not have any such cash equivalents on hand.

As of April 4, 2021, we did not have any such cash equivalents on hand.

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.

During the nine months ended September 27, 2020, we paid the sellers of Snell Advanced Media (SAM) the full earnout consideration of $ 31.4 million in cash in accordance with the purchase agreement.

SAM was acquired on February 8, 2018 and is included in the Grass Valley disposal group.

Due to the initial uncertainties arising from the COVID-19 pandemic and out of an abundance of caution, we borrowed $ 190.0 million on our Revolver at the beginning of the second quarter.

As a result of improving and sufficient cash flow and liquidity throughout the year, we subsequently repaid the entire $ 190.0 million during the nine months ended September 27, 2020;

$ 90.0 million of which was during the three months ended September 27, 2020.

During the three months ended March 29, 2020, we paid the sellers of Snell Advanced Media (SAM) the full earnout consideration of $ 31.4 million in cash in accordance with the purchase agreement.

SAM was acquired on February 8, 2018 and was included in the Grass Valley disposal group.

Contingent Liabilities

4 unchanged sentences

Based on facts currently available, we believe the disposition of the claims that are pending or asserted will not have a material adverse effect on our financial position, results of operations, or cash flow.

As of September 27, 2020, we were party to standby letters of credit, bank guaranties, and surety bonds totaling $ 5.9 million, $ 4.1 million, and $ 3.3 million, respectively.

As of April 4, 2021, we were party to bank guaranties, standby letters of credit, and surety bonds totaling $ 7.1 million, $ 6.0 million, and $ 3.3 million, respectively.

Revenue Recognition

12 unchanged sentences

The results of the joint venture attributable to Hite’s ownership are presented as net income (loss) attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations.

The joint venture is not material to our Condensed Consolidated financial statements as of or for the periods ended September 27, 2020 and September 29, 2019.

Furthermore, certain subsidiaries of our Opterna business, which we acquired in April of 2019 include noncontrolling interests.

The joint venture is not material to our Condensed Consolidated financial statements as of or for the periods ended April 4, 2021 and March 29, 2020.

Furthermore, certain subsidiaries of our Opterna and OTN Systems N.V.

(OTN) businesses, which we acquired in April of 2019 and January 2021, respectively, include noncontrolling interests.

Because we have a controlling financial interest in these subsidiaries, they are consolidated into our financial statements.

The results of these subsidiaries were consolidated into our financial statements as of the acquisition date.

The results that are attributable to the noncontrolling interest holders are presented as net income attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations.

The results of these subsidiaries were consolidated into our financial statements as of the respective acquisition dates.

The results that are attributable to the noncontrolling interest holders are presented as net income (loss) attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations.

An immaterial amount of Opterna's annual revenues are generated from transactions with the noncontrolling interests.

The subsidiaries of Opterna that include noncontrolling interests are not material to our Condensed Consolidated financial statements as of or for the periods ended September 27, 2020 and September 29, 2019.

Current-Year Adoption of Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update No.

2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses .

Under the new standard, we are required to recognize estimated credit losses expected to occur over the estimated life or remaining contractual life of an asset (which includes losses that may be incurred in future periods) using a broader range of information including past events, current conditions, and reasonable and supportable forecasts about future economic conditions.

We adopted ASU 2016-13 on January 1, 2020, which resulted in an increase to our allowance for doubtful accounts for continuing operations of $ 1.0 million, and an increase for discontinued operations of $ 1.9 million.

See further discussion as well as adjustments to the allowance for doubtful accounts under the new credit loss model in Note 7.

The subsidiaries of Opterna and OTN that include noncontrolling interests are not material to our Condensed Consolidated financial statements as of or for the periods ended April 4, 2021 and March 29, 2020.

Revenues are recognized when control of the promised goods or services is transferred to our customers and in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

2 unchanged sentences

Broadband & 5G Cyber-security Industrial Automation Smart Buildings Total

Three Months Ended September 27, 2020 (In thousands)

Enterprise Solutions $ 115,149 $ — $ — $ 113,948 $ 229,097

Industrial Solutions — 27,384 219,358 — 246,742

Total $ 115,149 $ 27,384 $ 219,358 $ 113,948 $ 475,839

Three Months Ended September 29, 2019

Enterprise Solutions $ 107,067 $ — $ — $ 140,169 $ 247,236

Industrial Solutions — 29,760 256,102 — 285,862

Total $ 107,067 $ 29,760 $ 256,102 $ 140,169 $ 533,098

Nine Months Ended September 27, 2020

Three Months Ended April 4, 2021 (In thousands)

Enterprise Solutions $ 105,091 $ — $ — $ 121,264 $ 226,355

1 unchanged sentence

Total $ 105,091 $ 27,705 $ 282,321 $ 121,264 $ 536,381

Nine Months Ended September 29, 2019

Three Months Ended March 29, 2020

Enterprise Solutions $ 96,103 $ — $ — $ 116,110 $ 212,213

3 unchanged sentences

Americas EMEA APAC Total Revenues

Three Months Ended September 27, 2020 (In thousands)

Enterprise Solutions $ 170,734 $ 30,185 $ 28,178 $ 229,097

Industrial Solutions 148,421 59,180 39,141 246,742

Total $ 319,155 $ 89,365 $ 67,319 $ 475,839

Three Months Ended September 29, 2019

Enterprise Solutions $ 183,183 $ 36,065 $ 27,988 $ 247,236

Industrial Solutions 175,869 68,386 41,607 285,862

Total $ 359,052 $ 104,451 $ 69,595 $ 533,098

Nine Months Ended September 27, 2020

Three Months Ended April 4, 2021 (In thousands)

Enterprise Solutions $ 162,676 $ 37,936 $ 25,743 $ 226,355

1 unchanged sentence

Total $ 347,824 $ 119,216 $ 69,341 $ 536,381

Nine Months Ended September 29, 2019

Three Months Ended March 29, 2020

Enterprise Solutions $ 155,429 $ 35,862 $ 20,922 $ 212,213

11 unchanged sentences

We adjust our estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed.

Adjustments to revenue for performance obligations satisfied in prior periods were not significant during the three and nine months ended September 27, 2020 and September 29, 2019.

Adjustments to revenue for performance obligations satisfied in prior periods were not significant during the three months ended April 4, 2021 nor March 29, 2020.

The following table presents estimated and accrued variable consideration:

September 27, 2020 September 29, 2019

April 4, 2021 March 29, 2020

(in thousands)

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Consideration allocated to professional services is typically recognized when or as the services are performed depending on the terms of the arrangement.

As of September 27, 2020, total deferred revenue was $ 70.2 million, and of this amount, $ 46.1 million is expected to be recognized within the next twelve months, and the remaining $ 24.1 million is long-term and is expected to be recognized over a period greater than twelve months.

As of April 4, 2021, total deferred revenue was $ 83.8 million, and of this amount, $ 58.0 million is expected to be recognized within the next twelve months, and the remaining $ 25.8 million is long-term and is expected to be recognized over a period greater than twelve months.

The following table presents deferred revenue activity:

Three Months Ended

April 4, 2021 March 29, 2020

(In thousands)

1 unchanged sentence

New deferrals 24,505 23,830

Revenue recognized ( 24,415 ) ( 32,168 )

Balance at March 29, 2020 69,485 66,223

New deferrals 21,322 21,892

Revenue recognized ( 22,200 ) ( 24,807 )

Balance at June 28, 2020 68,607 63,308

New deferrals 22,243 21,937

Acquisition of OTN 5,997 —

Revenue recognized ( 24,387 ) ( 24,415 )

Balance at September 27, 2020 $ 70,201 $ 60,182

Ending balance $ 83,763 $ 69,485

Service-type warranties represent $ 10.9 million of the deferred revenue balance at April 4, 2021, and of this amount $ 3.9 million is expected to be recognized in the next twelve months, and the remaining $ 7.0 million is long-term and will be recognized over a period greater than twelve months.

We expense sales commissions as incurred when the duration of the related revenue arrangement is one year or less.

We capitalize sales commissions in other current and long-lived assets on our balance sheet when the original duration of the related revenue arrangement is longer than one year, and we amortize it over the related revenue arrangement period.

Total capitalized sales commissions was $ 4.6 million as of September 27, 2020 and $ 3.0 million as of September 29, 2019.

Total capitalized sales commissions was $ 6.1 million as of April 4, 2021 and $ 3.0 million as of March 29, 2020.

The following table presents sales commissions that are recorded within selling, general and administrative expenses:

Three Months ended Nine Months ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months ended

April 4, 2021 March 29, 2020

(In thousands)

Sales commissions $ 3,877 $ 4,175

Special Product Company

On December 6, 2019, we purchased substantially all the assets, and assumed certain specified liabilities of Special Product Company (SPC) for a preliminary purchase price of $ 22.5 million.

SPC, based in Kansas City, Kansas, is a leading designer, manufacturer, and seller of outdoor cabinet products for optical fiber cable installations.

The results of SPC have been included in our Condensed Consolidated Financial Statements from December 6, 2019, and are reported within the Enterprise Solutions segment.

The acquisition of SPC was not material to our financial position or results of operations.

Opterna International Corp.

We acquired 100 % of the shares of Opterna International Corp.

(Opterna) on April 15, 2019 for a purchase price, net of cash acquired, of $ 51.7 million.

Of the $ 51.7 million purchase price, $ 45.9 million was paid with cash on hand.

The acquisition included a potential earnout, which is based upon future Opterna financial targets through April 15, 2021.

The maximum earnout consideration is $ 25.0 million, but based upon a third party valuation specialist using certain assumptions in a discounted cash flow model, the estimated fair value of the earnout included in the purchase price is $ 5.8 million.

Opterna is an international fiber optics solutions business based in Sterling, Virginia, which designs and manufactures a range of complementary fiber connectivity, cabinet, and enclosure products used in optical networks.

The results of Opterna have been included in our Condensed Consolidated Financial Statements from April 15, 2019, and are reported within the Enterprise Solutions segment.

Certain subsidiaries of Opterna include noncontrolling interests.

Because Opterna has a controlling financial interest in these subsidiaries, they are consolidated into our financial statements.

The results that are attributable to the noncontrolling interest holders are presented as net income attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations.

An immaterial amount of Opterna's annual revenues are generated from transactions with the noncontrolling interests.

On October 25, 2019, we purchased the noncontrolling interest of one subsidiary for a purchase price of $ 0.8 million;

of which $ 0.4 million was paid at closing and the remaining $ 0.4 million will be paid in 2021.

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed as of April 15, 2019 (in thousands):

OTN Systems N.V.

We acquired 100 % of the shares of OTN on January 29, 2021 for a preliminary purchase price, net of cash acquired, of $ 73.3 million.

OTN, based in Olen, Belgium, is a leading provider of easy to use and highly-reliable network solutions tailored for specific applications in harsh, mission-critical environments.

The acquisition of OTN supports one of our key strategic priorities related to the growing demand for industrial automation by adding proprietary technology and mission-critical hardware and software products for more complete end-to-end solutions.

The results of OTN have been included in our Condensed Consolidated Financial Statements from January 29, 2021, and are reported within the Industrial Solutions segment.

Belden assumed $ 1.8 million of OTN's debt as part of the transaction, which was subsequently paid on the acquisition date.

A subsidiary of OTN includes a noncontrolling interest.

Because OTN has a controlling financial interest in the subsidiary, it is consolidated into our financial statements.

The results that are attributable to the noncontrolling interest holder are presented as net income (loss) attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations.

The following table summarizes the estimated, preliminary fair values of the assets acquired and the liabilities assumed as of January 29, 2021 (in thousands):

Receivables $ 7,617

Inventory 7,359

Prepaid and other current assets 566

Inventories 12,805

Other current assets 5,240

Property, plant and equipment 602

1 unchanged sentence

Goodwill 39,337

Deferred income taxes 80

Operating lease right-to-use assets 2,204

Operating lease right-of-use assets 2,250

Other long-lived assets 706

2 unchanged sentences

Accrued liabilities 9,991

Long-term deferred tax liability 6,813

Long-term operating lease liability 1,923

Long-term debt 1,841

Post retirement benefits 2,917

Deferred income taxes 5,372

Long-term operating lease liabilities 1,870

Other long-term liabilities 771

3 unchanged sentences

Net assets attributable to Belden $ 73,344

We did not record any material measurement-period adjustments in the nine months ended September 27, 2020.

The above purchase price allocation is preliminary, and is subject to revision as additional information about the fair value of individual assets and liabilities becomes available.

The preliminary measurement of receivables, inventories, intangible assets, goodwill, deferred income taxes, other assets and liabilities, and noncontrolling interests are subject to change.

A change in the estimated fair value of the net assets acquired or noncontrolling interests will change the amount of the purchase price allocable to goodwill.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions.

The judgments we have used in estimating the fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations.

The fair value of acquired receivables is $ 5.3 million, which is equivalent to its gross contractual amount.

For purposes of the above allocation, we based our estimate of the fair values for the acquired inventory, intangible assets, and noncontrolling interests on valuation studies performed by a third party valuation firm.

We have estimated a fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post acquisition selling efforts.

We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the fair value of the identifiable intangible assets (Level 3 valuation).

Our estimate of the fair values for the noncontrolling interests were based on the comparable EBITDA multiple valuation technique (Level 3 valuation).

The judgments we have used in estimating the preliminary fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations.

The preliminary fair value of acquired receivables is $ 7.6 million, which is equivalent to its gross contractual amount.

For purposes of the above allocation, we based our preliminary estimate of the fair values for the acquired inventory, intangible assets, and noncontrolling interests on valuation studies performed by a third party valuation firm.

We have estimated a preliminary fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post acquisition selling efforts.

We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets (Level 3 valuation).

Goodwill and other intangible assets reflected above were determined to meet the criteria for recognition apart from tangible assets acquired and liabilities assumed.

The goodwill is primarily attributable to expansion of product offerings in the optical fiber market.

The goodwill is primarily attributable to the expansion of industrial automation product offerings in complete end-to-end solutions.

Our tax basis in the acquired goodwill is zero .

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Sales backlog

Non-compete agreements 1,000 2.0

Total intangible assets subject to amortization $ 33,500

Intangible assets not subject to amortization:

Goodwill $ 39,337 n/a

Total intangible assets not subject to amortization $ 39,337

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The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks.

The following table illustrates the unaudited pro forma effect on operating results as if the Opterna acquisition had been completed as of January 1, 2018.

Three Months Ended Nine Months Ended

September 29, 2019 September 29, 2019

The useful life of the non-compete agreements was based on the term of the agreements.

Our consolidated revenues and income before taxes for the three months ended April 4, 2021 included $ 4.1 million and ($ 3.4 million), respectively, from OTN.

For the three months ended April 4, 2021, income before taxes included $ 0.3 million of severance and other restructuring costs, $ 1.6 million of amortization of intangible assets, and $ 0.8 million of cost of sales related to the adjustment of acquired inventory to fair value.

The following table illustrates the unaudited pro forma effect on operating results as if the OTN acquisition had been completed as of January 1, 2020.

Three Months Ended Three Months Ended

April 4, 2021 March 29, 2020

(In thousands, except per share data)

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Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

We acquired the FutureLink product line and related assets from Suttle, Inc.

on April 5, 2019 for a purchase price of $ 5.0 million, which was funded with cash on hand.

The acquisition of FutureLink allows us to offer a more complete set of fiber product offerings.

The results from the acquisition of FutureLink have been included in our Condensed Consolidated Financial Statements from April 5, 2019, and are reported within the Enterprise Solutions segment.

The acquisition of FutureLink was not material to our financial position or results of operations.

Discontinued Operations

Opterna International Corp.

Our acquisition of Opterna International Corp.

(Opterna) in 2019 included potential earn-out consideration.

As of the acquisition date, we estimated the fair value of the earn-out to be $ 5.8 million.

As of April 4, 2021, the financial targets tied to the earn-out were not expected to be achieved.

We reduced the earn-out liability to zero and recognized a $ 5.8 million benefit in Selling, General and Administrative Expenses in the three months ended April 4, 2021.

This benefit was excluded from Segment EBITDA of our Enterprise Solutions segment.

Assets Held for Sale

We classify assets and liabilities as held for sale (disposal group) when management, having the authority to approve the action, commits to a plan to sell the disposal group, the sale is probable within one year, and the disposal group is available for immediate sale in its present condition.

We also consider whether an active program to locate a buyer has been initiated, whether the disposal group is marketed actively for sale at a price that is reasonable in relation to its current fair value, and whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

When we classify a disposal group as held for sale, we test for impairment.

An impairment charge is recognized when the carrying value of the disposal group exceeds the estimated fair value, less costs to sell.

We also cease depreciation and amortization for assets classified as held for sale.

During the first quarter of 2021, we committed to a plan to sell an oil and gas cable business and determined that we met all of the criteria to classify the assets and liabilities of this business as held for sale.

The business is part of the Industrial Solutions segment.

The carrying value of the disposal group exceeded the fair value less costs to sell, which we determined based upon the expected sale price, by $ 3.4 million.

Therefore, we recognized an impairment charge in Selling, General and Administrative Expenses equal to this amount in the first quarter of 2021.

The impairment charge is excluded from Segment EBITDA of our Industrial Solutions segment.

The following table provides the major classes of assets and liabilities classified as held for sale.

In addition, the disposal group had $ 0.9 million of accumulated other comprehensive income at April 4, 2021.

Receivables 7,660

Inventories 2,033

Other current assets 3,189

Property, plant and equipment 2,487

Other long-lived assets 612

Total assets held for sale $ 16,279

Accounts payable $ 659

Accrued liabilities 4,896

Total liabilities held for sale $ 5,555

Net assets $ 10,724

Discontinued Operations

During the fourth quarter of 2019, we committed to a plan to sell Grass Valley, and at such time, met all of the criteria to classify the assets and liabilities of this business as held for sale.

Furthermore, we determined a divestiture of Grass Valley represented a strategic shift that is expected to have a major impact on our operations and financial results.

As a result, the Grass Valley disposal group, which was included in our Enterprise Solutions segment, is reported within discontinued operations.

The Grass Valley disposal group excludes certain Grass Valley pension liabilities that we retained.

As a result, the Grass Valley disposal group, which was included in our Enterprise Solutions segment, was reported within discontinued operations.

The Grass Valley disposal group excluded certain Grass Valley pension liabilities that we retained.

We also ceased depreciating and amortizing the assets of the disposal group once they met the held for sale criteria during the fourth quarter of 2019.

We wrote down the carrying value of Grass Valley and recognized asset impairments totaling $ 113.0 million and $ 342.1 million in the nine months e nded September 27, 2020 and September 29, 2019, respectively.

We determined the estimated fair values of the assets and of the reporting unit by calculating the present values of their estimated future cash flows.

We completed the sale of Grass Valley to Black Dragon Capital on July 2, 2020 and recognized a gain of $ 2.7 million, net of a $ 2.0 million income tax benefit.

The terms of the sale included gross cash consideration of $ 120.0 million, or approximately $ 59.5 million net of cash delivered with the business and certain preliminary working capital adjustments.

The sale also included deferred consideration consisting of a $ 175.0 million seller’s note that matures in 2025, up to $ 88 million in PIK (payment-in-kind) interest on the seller’s note, and $ 178.0 million in potential earnout payments.

We completed the sale of Grass Valley to Black Dragon Capital on July 2, 2020 for gross cash consideration of $ 120.0 million, or approximately $ 56.2 million net of cash delivered with the business.

The sale also included deferred consideration consisting of a $ 175.0 million seller’s note that is expected to mature in 2025, up to $ 88 million in PIK (payment-in-kind) interest on the seller’s note, and $ 178.0 million in potential earnout payments.

The seller’s note accrues PIK interest at an annual rate of 8.5 %.

During the three months ended April 4, 2021, the seller's note accrued interest of $ 3.7 million, which we reserved for based on our expected loss allowance methodology.

Based upon a third party valuation specialist using certain assumptions in a Monte Carlo analysis, the estimated fair value of the seller’s note is $ 34.9 million, which we recorded in Other Long-Lived Assets.

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Any subsequent recognition of an earnout will be based on the gain contingency guidance.

As part of the transaction, we also invested $ 3.0 million for a 9 % equity interest in Grass Valley with the right to put the equity back to Black Dragon Capital at any time on or before October 31, 2020.

On October 23, 2020, we notified Black Dragon Capital that we are exercising our right to put the equity back to them.

We expect to finalize the sale of our equity interest during the fourth quarter of 2020.

We deconsolidated Grass Valley as of July 2, 2020 and are accounting for our equity interest under the cost method.

Our equity interest is recorded in Other Long-Lived Assets.

The seller’s note accrues PIK interest at an annual rate of 8.5 %.

During the three months ended September 27, 2020, the seller’s note accrued interest of $ 3.6 million, which we reserved for based on our expected loss allowance methodology.

We are performing certain services for Grass Valley under a transition services agreement.

During the three months ended September 27, 2020, the amount of transition services totaled $ 1.0 million, which we expect to collect in 2021.

The following table summarizes the operating results of the disposal group up to the July 2, 2020 disposal date for the three and nine months ended September 27, 2020 and September 29, 2019, respectively:

Three Months Ended Nine Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

(In thousands)

As part of the transaction, we also invested $ 3.0 million for a 9 % equity interest in Grass Valley with the right to put the equity back to Black Dragon Capital.

We exercised our right during the fourth quarter of 2020 and sold our 9 % equity interest in Grass Valley to Black Dragon Capital for $ 2.7 million.

We deconsolidated Grass Valley as of July 2, 2020 and accounted for our equity interest under the cost method for the period that we owned a 9 % interest in Grass Valley.

Grass Valley's operating results for periods after July 2, 2020 are not included in our Consolidated Financial Statements.

The following table summarizes the operating results of the disposal group for the three months ended March 29, 2020 (in thousands):

Revenues $ 51,049

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Research and development expenses ( 8,499 )

Amortization of intangibles — ( 3,218 ) — ( 11,695 )

Asset impairment of discontinued operations ( 23,197 )

Interest expense, net ( 206 )

Non-operating pension benefit (cost) 27 ( 55 ) ( 169 ) ( 166 )

Non-operating pension cost ( 85 )

Loss before taxes $ ( 33,659 )

The disposal group had capital expenditures of approximately $ 0.3 million and $ 16.7 million during the three and nine months ended September 27, 2020, respectively;

and $ 8.3 million and $ 22.8 million during the three and nine months ended September 29, 2019, respectively.

The disposal group recognized credits to stock-based compensation of $ 0.0 million and $ 0.9 million during the three and nine months ended September 27, 2020, respectively.

The disposal group incurred stock based compensation expense of $ 0.2 million and $ 0.8 million during the three and nine months ended September 29, 2019, respectively.

The disposal group did not have any significant non-cash charges for investing activities during the three and nine months ended September 27, 2020 or September 29, 2019 .

The following table provides the major classes of assets and liabilities of the disposal group as of December 31, 2019:

December 31, 2019

(In thousands)

Cash and cash equivalents $ 18,405

Receivables, net 117,386

Inventories, net 55,002

Other current assets 35,187

Plant, property, and equipment, less accumulated depreciation 61,233

Operating lease right-of-use assets 16,902

Goodwill 26,707

Intangible assets, less accumulated depreciation 143,459

Deferred income taxes 59,560

Other long-lived assets 21,652

Impairment of disposal group ( 180,358 )

Total Assets of discontinued operations $ 375,135

Accounts payable $ 52,425

Accrued liabilities 83,349

Postretirement benefits 6,224

Deferred income taxes 2,740

Long-term operating lease liabilities 20,459

Other long-term liabilities 5,082

Total Liabilities of discontinued operations $ 170,279

The disposal group also had $ 42.3 million of accumulated other comprehensive losses as of December 31, 2019.

We wrote down the carrying value of Grass Valley and recognized asset impairments totaling $ 23.2 million in the three months e nded March 29, 2020.

We determined the estimated fair values of the assets and of the reporting unit by calculating the present values of their estimated future cash flows.

The Grass Valley disposal group had capital expenditures of approximately $ 7.9 million and incurred stock-based compensation income of $ 0.9 million during the three months ended March 29, 2020.

The disposal group did not have any significant non-cash charges for investing activities during the three months ended March 29 , 2020 .

Reportable Segments

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Each of the global business platforms represents a reportable segment.

We have recast the prior period segment information to conform to the change in the composition of reportable segments.

The key measures of segment profit or loss are Segment Revenues and Segment EBITDA.

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(In thousands)

As of and for the three months ended September 27, 2020

Segment revenues $ 229,097 $ 246,742 $ 475,839

Affiliate revenues 231 10 241

Segment EBITDA 26,250 38,391 64,641

Depreciation expense 5,005 5,450 10,455

Amortization of intangibles 5,408 10,696 16,104

Amortization of software development intangible assets 73 456 529

Severance, restructuring, and acquisition integration costs 1,337 20 1,357

Segment assets 519,142 486,110 1,005,252

As of and for the three months ended September 29, 2019

Segment revenues $ 247,236 $ 285,862 $ 533,098

Affiliate revenues 753 2 755

Segment EBITDA 35,868 54,849 90,717

Depreciation expense 4,919 5,060 9,979

Amortization of intangibles 6,269 12,757 19,026

Amortization of software development intangible assets 49 36 85

Severance, restructuring, and acquisition integration costs 3,047 — 3,047

Purchase accounting effects of acquisitions ( 186 ) — ( 186 )

Segment assets 517,448 501,278 1,018,726

As of and for the nine months ended September 27, 2020

As of and for the three months ended April 4, 2021

Segment revenues $ 226,355 $ 310,026 $ 536,381

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Severance, restructuring, and acquisition integration costs 1,915 3,256 5,171

Purchase accounting effects of acquisitions 125 — 125

Adjustments related to acquisitions and divestitures ( 6,286 ) 6,907 621

Segment assets 476,742 582,585 1,059,327

As of and for the nine months ended September 29, 2019

As of and for the three months ended March 29, 2020

Segment revenues $ 212,213 $ 251,313 $ 463,526

5 unchanged sentences

Severance, restructuring, and acquisition integration costs 2,550 1,069 3,619

Purchase accounting effects of acquisitions 532 — 532

Adjustments related to acquisitions and divestitures 20 — 20

Segment assets 503,658 468,600 972,258

The following table is a reconciliation of the total of the reportable segments’ Revenues and EBITDA to consolidated revenues and consolidated income from continuing operations before taxes, respectively.

Three Months Ended Nine Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended

April 4, 2021 March 29, 2020

(In thousands)

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Amortization of software development intangible assets ( 689 ) ( 330 )

Purchase accounting effects related to acquisitions (2) — 186 ( 125 ) ( 532 )

Adjustments related to acquisitions and divestitures (2) ( 621 ) ( 20 )

Eliminations ( 33 ) ( 95 )

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(1) See Note 12, Severance, Restructuring, and Acquisition Integration Activities, for details.

(2) During the nine months ended September 27, 2020, we recognized cost of sales related to purchase accounting adjustments of acquired inventory to fair value for the SPC acquisition.

For the three and nine months ended September 29, 2019, we recognized cost of sales for the adjustment of acquired inventory to fair value related to the Opterna and FutureLink acquisitions.

(2) During the three months ended April 4, 2021, we reduced the Opterna earn-out liability by $ 5.8 million, recognized a $ 3.6 million impairment on assets held and used, recognized a $ 3.4 million impairment on assets held for sale, collected $ 1.4 million of receivables associated with the sale of Grass Valley that were previously written off, and recognized cost of sales of $ 0.8 million related to purchase accounting adjustments of acquired inventory to fair value for the OTN acquisition.

During the three months ended March 29, 2020, we recognized cost of sales related to purchase accounting adjustments of acquired inventory to fair value for the SPC acquisition.

Income (loss) per Share

The following table presents the basis for the income (loss) per share computations:

Three Months Ended Nine Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended

April 4, 2021 March 29, 2020

(In thousands)

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Net income (loss) attributable to noncontrolling interest 75 ( 30 )

Preferred stock dividends — 971 — 18,437

Income from continuing operations attributable to Belden common stockholders 20,484 37,066 38,554 88,864

Income from continuing operations attributable to Belden stockholders 28,666 14,921

Loss from discontinued operations, net of tax — ( 26,110 )

Gain on disposal of discontinued operations, net of tax 2,743 — 2,743 —

Net income (loss) attributable to Belden common stockholders $ 16,996 $ ( 297,980 ) $ ( 62,098 ) $ ( 248,044 )

Net income (loss) attributable to Belden stockholders $ 28,666 $ ( 11,189 )

Weighted average shares outstanding, basic 44,679 45,390

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Weighted average shares outstanding, diluted 45,045 45,538

For the three and nine months ended September 27, 2020, diluted weighted average shares outstanding exclude outstanding equity awards of 1.6 million and 1.5 million, respectively, which are anti-dilutive.

In addition, for both the three and nine months ended September 27, 2020, diluted weighted average shares outstanding do not include outstanding equity awards of 0.4 million because the related performance conditions have not been satisfied.

For the three and nine months ended September 29, 2019, diluted weighted average shares outstanding exclude outstanding equity awards of 1.4 million and 1.2 million, respectively, which are anti-dilutive.

In addition, for both the three and nine months ended September 29, 2019, diluted weighted average shares outstanding do not include outstanding equity awards of 0.3 million because the related performance conditions have not been satisfied.

Furthermore, for the three and nine months ended September 29, 2019, diluted weighted average shares outstanding do not include the impact of preferred shares that were converted into 1.1 million and 4.9 million common shares, because deducting the preferred stock dividends from net income was more dilutive.

For the three months ended April 4, 2021 and March 29, 2020, diluted weighted average shares outstanding exclude outstanding equity awards of 1.3 million and 1.4 million, respectively, which are anti-dilutive.

In addition, for the three months ended April 4, 2021 and March 29, 2020, diluted weighted average shares outstanding do not include outstanding equity awards of 0.4 million and 0.3 million, respectively, because the related performance conditions have not been satisfied.

For purposes of calculating basic earnings per share, unvested restricted stock units are not included in the calculation of basic weighted average shares outstanding until all necessary conditions have been satisfied and issuance of the shares underlying the restricted stock units is no longer contingent.

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Our expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables.

Due to the short-term nature of such receivables, the estimate of amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers.

Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers.

Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

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Estimates are used to determine the allowance, which is based upon an assessment of anticipated payments as well as other historical, current and future information that is reasonably available.

The following table presents the activity in the allowance for doubtful accounts for our continuing operations for the three and nine months ended September 27, 2020 (in thousands).

Balance at December 31, 2019 $ 2,569

The following table presents the activity in the trade receivables allowance for doubtful accounts for our continuing operations for the three months ended April 4, 2021 and March 29, 2020, respectively:

Three Months ended

April 4, 2021 March 29, 2020

(In thousands)

Beginning balance $ 5,150 $ 2,569

Adoption adjustment — 1,011

Current period provision 82 ( 172 )

Write-offs ( 57 ) —

Recoveries collected ( 23 ) ( 9 )

Fx impact ( 17 ) ( 213 )

Balance at March 29, 2020 $ 3,186

Current period provision 2,621

Writeoffs ( 52 )

Recoveries collected ( 100 )

Balance at June 28, 2020 $ 5,692

Current period provision ( 108 )

Writeoffs ( 76 )

Balance at September 27, 2020 $ 5,537

The major classes of inventories were as follows:

September 27, 2020 December 31, 2019

Ending balance $ 5,135 $ 3,186

The following table presents the major classes of inventories as of April 4, 2021 and December 31, 2020, respectively:

April 4, 2021 December 31, 2020

(In thousands)

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We have entered into various short-term operating leases with an initial term of twelve months or less.

These leases are not recorded on our balance sheet, and for the three and nine months ended September 27, 2020 and September 29, 2019, the rent expense for short-term leases was not material.

These leases are not recorded on our balance sheet, and for the three months ended April 4, 2021 and March 29, 2020, the rent expense for short-term leases was not material.

We have certain property and equipment lease contracts that may contain lease and non-lease components, and we have elected to utilize the practical expedient to account for these components together as a single combined lease component.

As the rate implicit in most of our leases is not readily determinable, we use the incremental borrowing rate to determine the present value of the lease payments, which is unique to each leased asset, and is based upon the term of the lease, commencement date of the lease, local currency of the leased asset, and the credit rating of the legal entity leasing the asset.

We are party to a lease guarantee, whereby Belden has covenanted the lease payments for one of Snell Advanced Media's (SAM) property leases through its 2035 expiration date.

The lease guarantee was executed in 2018 following the acquisition of SAM, which we subsequently sold on July 2, 2020 as part of the Grass Valley disposal group (see Note 5).

This lease guarantee was retained by Belden and not transferred to Black Dragon Capital as part of the sale of Grass Valley .

Belden would be required to make lease payments only if the primary obligor, Black Dragon Capital, fails to make the payments.

As of April 4, 2021, the SAM lease has approximately $ 21.5 million of lease payments remaining, but we do not believe that it is probable that we have incurred a liability from the guarantee.

The components of lease expense were as follows:

Three Months Ended Nine Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended

April 4, 2021 March 29, 2020

(In thousands)

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Supplemental cash flow information related to leases was as follows:

Three Months Ended Nine Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended

April 4, 2021 March 29, 2020

(In thousands)

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Supplemental balance sheet information related to leases was as follows:

September 27, 2020 December 31, 2019

April 4, 2021 December 31, 2020

(In thousands, except lease term and discount rate)

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Finance leases 4.7 % 4.9 %

The following table summarizes maturities of lease liabilities as of September 27, 2020 (in thousands):

Thereafter 17,433

Total $ 79,744

The following table summarizes maturities of lease liabilities as of December 31, 2019 (in thousands):

The following table summarizes maturities of lease liabilities as of April 4, 2021 and December 31, 2020, respectively:

April 4, 2021 December 31, 2020

(In thousands)

2021 $ 15,011 $ 19,250

2022 17,317 16,305

2023 13,299 12,552

2024 10,240 9,516

2025 9,158 8,718

Thereafter 9,062 8,901

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Depreciation and Amortization Expense

We recognized depreciation expense of $ 10.5 million and $ 31.1 million in the three and nine months ended September 27, 2020, respectively.

We recognized depreciation expense of $ 10.0 million and $ 30.0 million in the three and nine ended September 29, 2019, respectively.

We recognized amortization expense related to our intangible assets of $ 16.6 million and $ 49.6 million in the three and nine months ended September 27, 2020, respectively.

We recognized amortization expense related to our intangible assets of $ 19.1 million and $ 56.5 million in the three and nine ended September 29, 2019, respectively.

We recognized depreciation expense of $ 11.6 million and $ 10.3 million in the three months ended April 4, 2021 and March 29, 2020, respectively.

We recognized amortization expense related to our intangible assets of $ 10.6 million and $ 16.5 million in the three months ended April 4, 2021 and March 29, 2020, respectively.

Interim Impairment Test

Due to equity market conditions during the nine months ended September 27, 2020, we conducted an interim impairment test.

We determined that the carrying values of our definite-lived assets were recoverable;

therefore, we did not record any impairment charges related to these assets.

Goodwill is tested for impairment at the reporting unit level, and we conducted a quantitative interim impairment test for one of our reporting units.

A reporting unit is an operating segment, or a business unit one level below an operating segment if discrete financial information for that business is prepared and regularly reviewed by segment management.

However, components within an operating segment are aggregated as a single reporting unit if they have similar economic characteristics.

We determined that each of our reportable segments (Enterprise Solutions and Industrial Solutions) represents an operating segment.

Within those operating segments, we have identified reporting units based on whether there is discrete financial information prepared that is regularly reviewed by segment management.

When we evaluate goodwill for impairment using a quantitative assessment, we compare the fair value of each reporting unit to its carrying value.

We determine the fair value using an income approach.

Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows using growth rates and discount rates that are consistent with current market conditions in our industry.

If the fair value of the reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired.

If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then we record an impairment charge based on that difference.

In addition to the income approach, we calculate the fair value of our reporting units under a market approach.

The market approach measures the fair value of a reporting unit through analysis of financial multiples of comparable businesses.

Consideration is given to the financial conditions and operating performance of the reporting unit being valued relative to those publicly-traded companies operating in the same or similar lines of business.

Significant judgment is required when applying the market approach as there is a range of financial multiples of comparable businesses.

Based on our interim goodwill impairment test, we determined that the fair value of the reporting unit was in excess of its carrying value by approximately 2 %;

therefore, we did not record any goodwill impairment.

The significant assumptions used to estimate fair value included sales growth, profitability, and related cash flows, along with cash flows associated with taxes and capital spending.

To estimate the fair value, we used a 10.5 % discount rate that reflected the economic conditions in effect at the time of the impairment test.

We also considered assumptions that market participants may use.

In our quantitative assessment, the 2020 to 2029 compounded annual revenue growth rate was 6.0 % and the revenue growth rate beyond 2029 was 3.0 %.

By their nature, these assumptions involve risks and uncertainties.

Furthermore, uncertainties associated with current market conditions increase the inherent risk associated with using an income approach to estimate fair values.

While we have adjusted our key assumptions to reflect the current economic conditions, we have also assumed that economic conditions will improve beyond 2020.

If current conditions persist and actual results are different from our estimates or assumptions, we may have to recognize an impairment charge that could be material.

During the first quarter of 2021, we committed to a plan to sell an oil and gas cable business, and recognized an impairment charge of $ 3.4 million.

During the first quarter of 2021, we also performed a recoverability test on certain held and used long-lived assets in our Industrial Solutions segment due to the presence of impairment indicators stemming from the increased probability of selling the assets.

We determined that the carrying values of the assets were not recoverable and recognized a $ 3.6 million impairment charge in Selling, General and Administrative Expenses to write them down to fair value.

This impairment charge is excluded from Segment EBITDA of our Industrial Solutions segment.

Severance, Restructuring, and Acquisition Integration Activities

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During the fourth quarter of 2019, we began a cost reduction program to improve performance and enhance margins by streamlining the organizational structure and investing in technology to drive productivity.

We recognized $ 0.2 million and $ 3.2 million of severance and other restructuring costs for this program during the three and nine months ended September 27, 2020, respectively.

We recognized $ 2.3 million of severance and other restructuring costs for this program during the three months ended April 4, 2021 and an immaterial amount during the three months ended March 29, 2020.

These costs were incurred by both the Enterprise Solutions and Industrial Solutions segments.

The cost reduction program is expected to deliver an estimated $ 60.0 million reduction in selling, general, and administrative expenses on an annual basis, of which $ 40.0 million is expected to be realized in 2020, with the full benefit materializing in 2021.

We expect to incur incremental costs of approximately $ 9.6 million for this program.

SPC, Opterna and FutureLink Integration Program:

In 2019, we began a restructuring program to integrate SPC, Opterna and FutureLink with our existing businesses.

The cost reduction program is expected to deliver an estimated $ 60 million reduction in selling, general, and administrative expenses on an annual basis.

We expect to incur incremental costs of approximately $ 6 million for this program in 2021.

Acquisition Integration Program

We are integrating our recent acquisitions such as OTN, SPC, and Opterna with our existing businesses.

The restructuring and integration activities were focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions.

We recognized $ 0.9 million and $ 4.0 million of severance and other restructuring costs for this program during the three and nine months ended September 27, 2020, respectively.

We recognized $ 3.1 million and $ 5.6 million of severance and other restructuring costs for this program during the three and nine months ended September 29, 2019.

We recognized $ 1.8 million and $ 2.2 million of severance and other restructuring costs for this program during the three months ended April 4, 2021 and March 29, 2020, respectively.

These costs were incurred by the Enterprise Solutions segment.

We expect to incur incremental costs of approximately $ 0.6 million for this program.

The following table summarizes the costs by segment of the programs described above as well as other immaterial programs and acquisition integration activities during the three and nine months ended September 27, 2020 and September 29, 2019:

We expect to incur incremental costs of approximately $ 2.4 million for this program in 2021.

Severance Other

1 unchanged sentence

Integration Costs Total Costs

Three Months Ended September 27, 2020 (In thousands)

Enterprise Solutions $ 327 $ 1,010 $ 1,337

Industrial Solutions 314 ( 294 ) 20

Total $ 641 $ 716 $ 1,357

Three Months Ended September 29, 2019

Enterprise Solutions $ 269 $ 2,778 $ 3,047

Industrial Solutions — — —

Total $ 269 $ 2,778 $ 3,047

Nine Months Ended September 27, 2020

Three Months Ended April 4, 2021 (In thousands)

Enterprise Solutions $ 1,044 $ 871 $ 1,915

1 unchanged sentence

Total $ 2,411 $ 2,760 $ 5,171

Nine Months Ended September 29, 2019

Three Months Ended March 29, 2020

Enterprise Solutions $ ( 632 ) $ 3,182 $ 2,550

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The following table summarizes the costs of the various programs described above as well as other immaterial programs and acquisition integration activities by financial statement line item in the Condensed Consolidated Statement of Operations:

Three Months Ended Nine Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended

April 4, 2021 March 29, 2020

(In Thousands)

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Accrued Severance

The table below sets forth severance activity that occurred for the Cost Reduction Program as well as the SPC, Opterna and FutureLink Integration Program described above.

The balances below are included in accrued liabilities (in thousands).

Balance at December 31, 2019 $ 19,575

New charges 2,529

Cash payments ( 4,483 )

Foreign currency translation ( 89 )

Other adjustments ( 4,147 )

Balance at March 29, 2020 13,385

New charges 4,660

Cash payments ( 4,795 )

Foreign currency translation ( 132 )

Other adjustments ( 1,420 )

Balance at June 28, 2020 11,698

The table below sets forth severance activity that occurred for the Cost Reduction Program as well as the Acquisition Integration Program described above.

The balances below are included in accrued liabilities.

Three Months ended

April 4, 2021 March 29, 2020

(In thousands)

Beginning balance $ 7,085 $ 19,575

New charges 2,060 2,529

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Other adjustments — ( 4,147 )

Balance at September 27, 2020 $ 8,093

Ending balance $ 7,396 $ 13,385

The other adjustments were the result of changes in estimates.

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The carrying values of our long-term debt were as follows:

September 27, 2020 December 31, 2019

April 4, 2021 December 31, 2020

(In thousands)

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In the event we borrow more than 90 % of our borrowing base, we are subject to a fixed charge coverage ratio covenant.

Due to the initial uncertainties arising from the COVID-19 pandemic and out of an abundance of caution, we borrowed $ 190.0 million on our Revolver at the beginning of the second quarter.

As a result of improving and sufficient cash flow and liquidity throughout the year, we subsequently repaid $ 100.0 million and the remaining $ 90.0 million during the second and third quarter, respectively.

As of September 27, 2020, our available borrowing capacity was $ 265.2 million.

As of April 4, 2021, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $ 269.2 million.

Senior Subordinated Notes

We have outstanding € 350.0 million aggregate principal amount of 3.875 % senior subordinated notes due 2028 (the 2028 Notes).

The carrying value of the 2028 Notes as of September 27, 2020 is $ 408.8 million.

The carrying value of the 2028 Notes as of April 4, 2021 is $ 410.9 million.

The 2028 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries.

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We have outstanding € 450.0 million aggregate principal amount of 3.375 % senior subordinated notes due 2027 (the 2027 Notes).

The carrying value of the 2027 Notes as of September 27, 2020 is $ 525.6 million.

The carrying value of the 2027 Notes as of April 4, 2021 is $ 528.3 million.

The 2027 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries.

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We have outstanding € 200.0 million aggregate principal amount of 4.125 % senior subordinated notes due 2026 (the 2026 Notes).

The carrying value of the 2026 Notes as of September 27, 2020 is $ 233.6 million.

The carrying value of the 2026 Notes as of April 4, 2021 is $ 234.8 million.

The 2026 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries.

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We have outstanding € 300.0 million aggregate principal amount of 2.875 % senior subordinated notes due 2025 (the 2025 Notes).

The carrying value of the 2025 Notes as of September 27, 2020 is $ 350.4 million.

The carrying value of the 2025 Notes as of April 4, 2021 is $ 352.2 million.

The 2025 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries.

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Fair Value of Long-Term Debt

The fair value of our senior subordinated notes as of September 27, 2020 was approximately $ 1,500.2 million based on quoted prices of the debt instruments in inactive markets (Level 2 valuation).

This amount represents the fair value of our senior subordinated notes with a carrying value of $ 1,518.5 million as of September 27, 2020.

The fair value of our senior subordinated notes as of April 4, 2021 was approximately $ 1,558.5 million based on quoted prices of the debt instruments in inactive markets (Level 2 valuation).

This amount represents the fair value of our senior subordinated notes with a carrying value of $ 1,526.1 million as of April 4, 2021.

Net Investment Hedge

All of our euro denominated notes were issued by Belden Inc., a USD functional currency entity.

As of September 27, 2020, € 767.8 million of our outstanding foreign denominated debt is designated as a net investment hedge on the foreign currency risk of our net investment in our euro foreign operations.

The objective of the hedge is to protect the net investment in the foreign operation again st adverse changes in the euro exchange rate.

As of April 4, 2021, € 767.8 million of our outstanding foreign denominated debt is designated as a net investment hedge on the foreign currency risk of our net investment in our euro foreign operations.

The objective of the hedge is to protect the net investment in the foreign operation against adverse changes in the euro exchange rate.

The transaction gain or loss is reported in the translation adjustment section of other comprehensive income.

For the nine months ended September 27, 2020 and September 29, 2019, the transaction gain/(loss) associated with the net investment hedge reported in other comprehensive income was $( 13.1 ) million and $ 62.1 million, respectively.

During the nine months ended September 27, 2020, we de-designated € 532.2 million of our outstanding debt that was previously designated as a net investment hedge.

For the three months ended April 4, 2021 and March 29, 2020, the transaction gain associated with the net investment hedge reported in other comprehensive income was $ 38.5 million and $ 54.7 million, respectively.

During the three months ended March 29, 2020, we de-designated € 532.2 million of our outstanding debt that was previously designated as a net investment hedge.

After the de-designation, transaction gains or losses associated with this € 532.2 million of debt are reported in income from continuing operations.

For the three and nine months ended September 27, 2020, we recognized income tax expense of $ 0.6 million and $ 3.2 million, respectively, representing an effective tax rate of 3.0 % and 7.7 %, respectively.

The effective tax rates were impacted by income tax benefits for certain foreign tax credits of $ 0.9 million and $ 2.1 million in the three and nine months ended September 27, 2020, respectively.

In March 2020, the Coronavirus Relief and Economic Security Act (CARES Act) was signed into law in the United States.

We are still analyzing the provisions of the CARES Act to determine if there will be any impact to our income tax provision for the year.

For the three and nine months ended September 29, 2019, we recognized income tax expense of $ 6.1 million and $ 16.2 million, respectively, representing an effective tax rate of 13.7 % and 13.1 %, respectively.

The effective tax rates were impacted by an income tax benefit of $ 5.7 million as a result of changes in our estimated valuation allowance requirement related to foreign tax credits due to the restructuring of certain foreign operations.

These effective rates are also reflective of the impact of more favorable statutory tax rates applied to the earnings of these foreign operations due to the restructuring efforts.

For the three months ended April 4, 2021, we recognized income tax expense of $ 7.9 million, representing an effective tax rate of 21.5 %.

The effective tax rate was primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits.

For the three months ended March 29, 2020, we recognized income tax expense of $ 2.2 million, representing an effective tax rate of 12.8 %.

The effective tax rate was impacted by a $ 1.1 million income tax benefit for certain foreign tax credits in the three months ended March 29, 2020.

Pension and Other Postretirement Obligations

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Pension Obligations Other Postretirement Obligations

Three Months Ended September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended April 4, 2021 March 29, 2020 April 4, 2021 March 29, 2020

(In thousands)

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Expected return on plan assets ( 3,668 ) ( 3,940 ) — —

Amortization of prior service cost (credit) 47 ( 143 ) — —

Actuarial losses (gains) 688 292 ( 19 ) ( 25 )

Net periodic benefit cost

$ 22 $ 187 $ 191 $ 258

Nine Months Ended

Service cost $ 2,709 $ 2,952 $ 24 $ 29

Interest cost 7,240 8,779 599 815

Expected return on plan assets ( 12,035 ) ( 11,978 ) — —

Amortization of prior service cost (credit) 136 ( 117 ) — —

Amortization of prior service cost 28 44 — —

Actuarial losses (gains) 979 677 ( 6 ) ( 19 )

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The following table summarizes total comprehensive income (losses):

Three Months Ended Nine Months Ended

September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019

Three Months Ended

April 4, 2021 March 29, 2020

(In thousands)

Net income (loss) $ 28,741 $ ( 11,219 )

Foreign currency translation adjustments, net of $ 0.0 million, $ 0.2 million, $ 1.0 million, and $ 0.6 million tax, respectively

( 52,910 ) 33,732 ( 75,791 ) 45,619

Adjustments to pension and postretirement liability, net of $ 0.1 million, $ 0.0 million, $ 0.3 million, and $ 0.2 million tax, respectively

Foreign currency translation adjustments, net of $ 0.0 million and $ 1.0 million tax, respectively

52,764 21,790

Total comprehensive loss ( 34,693 ) ( 263,163 ) ( 135,919 ) ( 183,337 )

Comprehensive income attributable to noncontrolling interests 228 367 219 474

Comprehensive loss attributable to Belden $ ( 34,921 ) $ ( 263,530 ) $ ( 136,138 ) $ ( 183,811 )

Adjustments to pension and postretirement liability, net of $ 0.2 million and $ 0.1 million tax, respectively

Total comprehensive income 82,269 10,954

Comprehensive loss attributable to noncontrolling interests ( 122 ) ( 180 )

Comprehensive income attributable to Belden $ 82,391 $ 11,134

The accumulated balances related to each component of other comprehensive income (loss), net of tax, are as follows:

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Net current period other comprehensive gain (loss) attributable to Belden 52,961 764 53,725

Balance at September 27, 2020 $ ( 94,156 ) $ ( 43,302 ) $ ( 137,458 )

The following table summarizes the effects of reclassifications from accumulated other comprehensive income (loss) for the nine months ended September 27, 2020:

Balance at April 4, 2021 $ ( 78,220 ) $ ( 59,906 ) $ ( 138,126 )

The following table summarizes the effects of reclassifications from accumulated other comprehensive income (loss) for the three months ended April 4, 2021:

Amount Reclassified from Accumulated Other

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Actuarial losses $ 973 (1)

Accumulated losses of Grass Valley disposal group 771 (2)

Prior service cost 28 (1)

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(1) The amortization of these accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit costs (see Note 16).

The amounts in the table above include both continuing and discontinued operations.

(2) In addition, we reclassified $ 10.1 million of accumulated foreign currency translation losses associated with the Grass Valley disposal group that are included in the calculation of the gain on disposal of discontinued operations.

Preferred Stock

In 2016, we issued 5.2 million depositary shares, each of which represented 1/100th interest in a share of 6.75 % Series B Mandatory Convertible Preferred Stock (the Preferred Stock), for an offering price of $ 100 per depositary share.

We received approximately $ 501 million of net proceeds from this offering, which were used for general corporate purposes.

On July 15, 2019, all outstanding Preferred Stock was automatically converted into shares of Belden common stock at the conversion rate of 132.50 , resulting in the issuance of approximately 6.9 million shares of Belden common stock.

Upon conversion, the Preferred Stock was automatically extinguished and discharged, is no longer deemed outstanding for all purposes, and delisted from trading on the New York Stock Exchange.

During the three and nine months ended September 29, 2019, dividends on the Preferred Stock were $ 1.0 million and $ 18.4 million, respectively.

Share Repurchase

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This program is funded with cash on hand and cash flows from operating activities.

During the nine months ended September 27, 2020, we repurchased 1.0 million shares of our common stock under the share repurchase program for an aggregate cost of $ 35.0 million at an average price per share of $ 35.83 .

During the three months ended September 29, 2019, we repurchased 0.5 million shares of our common stock under the share repurchase program for an aggregate cost of $ 27.2 million and an average price per share of $ 55.17 .

During the nine months ended September 29, 2019, we repurchased 0.9 million shares of our common stock under the share repurchase program for an aggregate cost of $ 50.0 million and an average price per share of $ 56.19 .

During the three months ended April 4, 2021, we did not repurchase any stock.

During the three months ended March 29, 2020, we repurchased 0.6 million shares of our common stock under the share repurchase program for an aggregate cost of $ 21.2 million at an average price per share of $ 35.85 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements