What changed in this filing

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Item 1A. Risk Factors

2022-02-15 compared with 2021-02-16 · 111 added, 113 removed, 141 unchanged (61% of the section changed)

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There may be additional risks that impact our business that we currently do not recognize as, or that are not currently, material to our business.

The effects of the COVID-19 pandemic materially affected how we and our customers operated our businesses in 2020, and the duration and extent to which this or future epidemics or pandemics will impact our future results of operations and overall financial performance remains uncertain.

In December 2019, a novel coronavirus disease (“COVID-19”) was first reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic.

The widespread health crisis is adversely affecting the broader economies, financial markets and overall demand environment for many of our products.

Our operations and the operations of our suppliers, channel partners and customers were disrupted to varying degrees by a range of external factors related to the COVID-19 pandemic, some of which are not within our control.

Many governments imposed, and may yet impose, a wide range of restrictions on the physical movement of people in order to limit the spread of COVID-19.

Supply chain issues, including scarcity of raw materials or other components necessary to produce the products we manufacture, could increase costs or cause a delay in our ability to fulfill orders, and could adversely affect our future results of operations and our overall financial performance.

The Company relies on an extended supply chain and the availability of certain raw materials, including but not limited to copper, to produce a significant amount of our products.

A reduction or interruption in supply, including interruptions due to COVID-19 or geopolitical unrest beyond the Company’s control, an inability to procure quality raw materials in a cost effective manner and constrain volatile materials costs, a failure to monitor contract compliance to ensure and sustain sourcing savings, a failure to procure adequate inventory or raw materials from our suppliers, or regulatory changes may lead to delays in manufacturing and increases in costs.

Many components, including those that are available from multiple sources, are at times subject to industry-wide shortages that could materially adversely affect the Company’s financial condition and operating results.

While the Company has entered into agreements for the supply of many components, there can be no assurance that the Company will be able to extend or renew these agreements on similar terms, or at all.

Component suppliers may suffer from poor financial conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting the Company’s ability to obtain sufficient quantities of components on commercially reasonable terms.

Health crises, like the Covid-19 pandemic, could lead to quarantines or labor shortages, thus impacting the output of key suppliers.

If the Company’s supply of components for a new or existing product were delayed or constrained, or if an outsourcing partner delayed shipments of completed products to the Company, the Company’s financial condition and operating results could be materially adversely affected.

The Company’s business and financial performance could also be materially adversely affected depending on the time required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative source.

Similarly, if the Company’s customers experience production challenges due to the inability to obtain certain components, this may negatively impact the customers’ ordering patterns from the Company.

The effects of the COVID-19 pandemic continued to materially affect how we and our customers operated our businesses in 2021, and the duration and extent to which this or future epidemics, pandemics or other major disasters will impact our future results of operations and overall financial performance remains uncertain.

In December 2019, a novel coronavirus disease (“COVID-19”) was first reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic that has yet to fully recede.

The widespread health crisis is adversely affecting the broader economies, financial markets and may adversely affect the overall demand environment for many of our products.

Our operations and the operations of our suppliers, channel partners and customers were and continue to be disrupted to varying degrees by a range of external factors related to the COVID-19 pandemic, some of which are not within our control.

Many governments imposed, and may yet impose or may re-impose, a wide range of restrictions on the physical movement or congregation of people in order to limit the spread of COVID-19.

The COVID-19 pandemic has had, and likely will continue to have, an impact on the attendance and productivity of our employees, and those of our channel partners or customers, resulting in negative impacts to our results of operations and overall financial performance.

Additionally, COVID-19 has resulted, and likely will continue to result, in delays in non-residential construction, non-crisis-related IT purchases and project completion schedules in general, all of which can negatively impact our results in both current and future periods.

The duration and extent of the impact from the COVID-19 pandemic or any future epidemic or pandemic depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the effects of measures enacted by policy makers and central banks around the globe, and the impact of these and other factors on our employees, customers, channel partners and suppliers.

Additionally, COVID-19 has resulted, and may result in future periods, in delays in non-residential construction, non-crisis-related IT purchases and project completion schedules in general, all of which can negatively impact our results in both current and future periods.

The duration and extent of the impact from the COVID-19 pandemic or any future epidemic, pandemic or major disaster depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus (including variant mutations of the virus), the extent and effectiveness of containment actions, treatments and vaccinations, the effects of measures enacted by policy makers and central banks around the globe, and the impact of these and other factors on our employees, customers, channel partners and suppliers.

If we are not able to respond to and manage the impact of such events effectively, our business will be affected.

Our results of operations are subject to foreign and domestic political, social, economic, and other uncertainties and are affected by changes in currency exchange rates.

In addition to manufacturing and other operating facilities in the U.S., we have manufacturing and other operating facilities in Canada, China, India, Mexico, St.

Kitts, and several European countries.

We rely on suppliers in many countries, including China.

Our foreign operations are subject to economic, social, and political risks inherent in maintaining operations abroad such as economic and political destabilization, land use risks, international conflicts, pandemics and other health-related crises, restrictive actions by foreign governments, and adverse foreign tax laws.

In addition to economic and political risk, a risk associated with our European manufacturing operations is the higher relative expense and length of time required to adjust manufacturing employment capacity.

We also face political risks in the U.S., including tax or regulatory risks or potential adverse impacts from legislative impasses over, or significant legislative, regulatory or executive changes in fiscal or monetary policy and other foreign and domestic government policies, including, but not limited to, trade policies and import/export policies.

Approximately 47% of our sales are outside the U.S.

Other than the U.S.

dollar, the principal currencies to which we are exposed through our manufacturing operations, sales, and related cash holdings are the euro, the Canadian dollar, the Hong Kong dollar, the Chinese yuan, the Mexican peso, the Australian dollar, the British pound and Indian rupee.

Generally, we have revenues and costs in the same currency, thereby reducing our overall currency risk, although any realignment of our manufacturing capacity among our global facilities could alter this balance.

When the U.S.

dollar strengthens against other currencies, the results of our non-U.S.

operations are translated at a lower exchange rate and thus into lower reported revenues and earnings.

A challenging global economic environment or a downturn in the markets we serve could adversely affect our operating results and stock price in a material manner.

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A decline in energy prices, therefore, can have a negative impact on our revenues and results of operations.

Potential cyber security incidents could interfere with our business and operations.

We may have difficulty integrating the operations of acquired businesses, which could negatively affect our results of operations, profitability, and achievement of our strategic plan.

As part of our strategic plan initiatives, we periodically execute acquisitions and divestitures.

The extent to which appropriate acquisitions are made will affect our overall growth, operating results, financial condition, and cash flows.

Our ability to acquire businesses successfully will decline if we are unable to identify appropriate acquisition targets, competition among potential buyers increases, the cost of acquiring suitable businesses becomes too expensive, or we lack sufficient sources of capital.

As a result, we may be unable to make acquisitions or be forced to pay more or agree to less advantageous acquisition terms for companies we would like to acquire.

We may also have difficulty integrating acquired businesses or future acquisitions may be unable to meet our performance expectations.

Some of the integration challenges we might face include differences in corporate culture and management styles, additional or conflicting governmental regulations, compliance with the Sarbanes-Oxley Act of 2002, financial reporting that is not in compliance with U.S.

generally accepted accounting principles, disparate company policies and practices, customer relationship issues, and retention of key personnel.

Furthermore, we may be unable to integrate operations successfully or cost-effectively, which could have an adverse impact on our results of operations or our profitability.

Our revenue for any particular period can be difficult to forecast.

Our revenue for any particular period can be difficult to forecast, especially in light of the challenging and inconsistent global macroeconomic environment and related market uncertainty.

Our revenue may grow at a slower rate than in past periods or even decline on a year-over-year basis.

Changes in market growth rates can have a significant effect on our operating results.

The timing of orders for customer projects can also have a significant effect on our operating results in the period in which the products are shipped and recognized as revenue.

The timing of such projects is difficult to predict, and the timing of revenue recognition from such projects may affect period to period changes in revenue.

As a result, our operating results could vary materially from quarter to quarter based on the receipt of such orders and their ultimate recognition as revenue.

Similarly, we are often informed by our customers well in advance that such customer intends to place an order related to a specific project in a given quarter.

Such a customer’s timeline for execution of the project, and the resulting purchase order, may be unexpectedly delayed to a future quarter, or cancelled.

The frequency of such delays can be difficult to predict.

As a result, it is difficult to precisely forecast revenue and operating results for future quarters.

In addition, our revenue can be difficult to forecast due to unexpected changes in the level of our products held as inventory by our channel partners and customers.

Our channel partners and customers purchase and hold our products in their inventory in order to meet the service and on-time delivery requirements of their customers.

As our channel partners and customers change the level of Belden products owned and held in their inventory, our revenue is impacted.

As we are dependent upon our channel partners and customers to provide us with information regarding the amount of our products that they own and hold in their inventory, unexpected changes can occur and impact our revenue forecast.

Inflation and changes in the price and availability of raw materials may lead to higher input and labor costs in a way that could be detrimental to our profitability.

As a result, of increased inflation, costs of raw materials and labor may increase in a way that we are unable to offset in a timely manner through higher prices for finished goods.

Copper is a significant component of the cost of most of our cable products.

Over the past few years, and in particular in 2021, the prices of metals, particularly copper, have been volatile.

Prices of other materials we use, such as PVC and other plastics derived from petrochemical feedstocks, have also been volatile.

Generally, we have recovered much of the higher cost of raw materials through higher pricing of our finished products.

The majority of our products are sold through distribution, and we manage the pricing of these products through published price lists which we update from time to time, with new prices typically taking effect a few weeks after they are announced.

Some OEM contracts have provisions for passing through raw material cost changes, generally with a lag of a few weeks to three months.

Especially during periods of inflation, if we are unable to raise prices timely and sufficiently to recover our material costs or increases in the cost of internal or external labor, our earnings and margins could decline.

If we raise our prices but competitors raise their prices less, we may lose sales, and our earnings could decline.

If the price of copper were to decline, we may be compelled to reduce prices to remain competitive, which could have a negative effect on revenues.

While we generally believe the supply of raw materials (copper, plastics, and other materials) is adequate, we have experienced instances of limited supply of certain raw materials, resulting in extended lead times and higher prices.

If a supply interruption or shortage of materials were to occur (including due to labor or political disputes), this could have a negative effect on revenues and earnings.

Similarly, if we raise employee wages in a manner sufficient to offset inflation, it may erode our profitability.

Conversely, if we fail to raise employee wages in a manner sufficient to offset inflation, associates could leave the Company resulting in capacity constraints which could have a negative effect on revenues and earnings.

We may be unable to achieve our goals related to growth.

In order to meet the goals in our strategic plan, we must execute our Market Delivery System ("MDS") and grow our business, both organically and through acquisitions.

We may be unable to achieve our goals due to a failure to identify growth opportunities, such as trends and technological changes in our end markets.

The enterprise and industrial end markets we serve may not experience the growth we expect.

Further, those markets may be unable to sustain growth on a long-term basis, particularly in emerging markets.

If we are unable to achieve our goals related to growth, it could have a material adverse effect on our results of operations, financial position, and cash flows.

We may be unable to implement our strategic plan successfully.

Our strategic plan is designed to continually enhance shareholder value by improving revenues and profitability, reducing costs, and improving working capital management.

To achieve these goals, our strategic priorities are reliant on our Belden Business System, which includes continuing deployment of our MDS to capture market share through end-user engagement, channel management, outbound marketing, and careful vertical market selection;

improving our recruitment and development of talented associates;

developing strong global business platforms;

acquiring businesses that fit our strategic plan;

and continuing to be a leading Lean company.

We have a disciplined process for deploying this strategic plan through our associates.

There is a risk that we may not be successful in developing or executing these measures to achieve the expected results for a variety of reasons, including market developments, economic conditions, shortcomings in establishing appropriate action plans, or challenges with executing multiple initiatives simultaneously.

For example, our MDS initiative may not succeed or we may lose market share due to challenges in choosing the right products to market or the right customers for these products, integrating products of acquired companies into our sales and marketing strategy, or strategically bidding against OEM partners.

We may fail to identify growth opportunities.

We may not be able to acquire businesses that fit our strategic plan on acceptable business terms, and we may not achieve our other strategic priorities.

If we are unable to retain key employees, our business operations could be adversely affected.

The loss of key employees could have an adverse effect on us.

We may not be able to find qualified replacements for these individuals and the integration of potential replacements may be disruptive to our business.

More broadly, a key determinant of our success is our ability to attract, develop, and retain talented associates.

While this is one of our strategic priorities, we may not be able to succeed in this regard.

The increased influence of chief information officers and similar high-level executives may negatively impact demand for our products.

As a result of the increasing interconnectivity of a wide variety of systems, chief information officers and similar executives are more heavily involved in operation areas that have not historically been associated with information technology.

As a result, CIOs and IT departments are exercising influence over the procurement and purchasing process at the expense of engineers, plant managers and operation personnel that have historically driven demand for many of our products.

When making purchasing decisions, CIO’s often value interoperability, standardization, cloud-readiness and security over domain expertise and niche application knowledge.

As a result of the influences of CIOs and IT departments, we may face increased competition from IT-industry companies that have not traditionally had major presences in the markets in which we operate.

Further, the variance in considerations that drive purchasing decisions between CIOs and those with niche application expertise may result in increased competition based on price and a reduction in demand for our products.

Alterations to our product mix and go-to-market strategies designed to respond to the changes in the marketplace presented by cloud computing may be disruptive to our business and lead to increase expenses, which may result in lower revenues and profitability.

Further, if a competitor is able to more quickly or efficiently adapt, or if cloud computing results in significantly lower barriers to entry and new competitors enter our markets, demand for our products may be reduced.

Cyber security incidents have and could in the future interfere with our business and operations.

Computer hacking, malware, phishing, and spamming attacks against online networking platforms have become more prevalent.

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We, and others on our behalf, also store “personally identifiable information” (“PII”) with respect to employees, vendors, customers, and others.

While we have implemented safeguards to protect the privacy of this information, it is possible that hackers or others might obtain this information in the future, as occurred in November 2020.

Based upon this occurrence or any future occurrence, in addition to having to take potentially costly remedial action, we may also be subject to fines, penalties, lawsuits, and reputational damage.

While we have implemented safeguards to protect the privacy of this information, it is possible that hackers or others might obtain this information in the future, as occurred in 2020.

Based on this occurrence or any future occurrence, in addition to having to take potentially costly remedial action, we may also be subject to fines, penalties, lawsuits, and reputational damage.

Furthermore, we rely on our information systems and those of third parties for storing proprietary company information about our products and intellectual property, as well as for processing customer orders, manufacturing and shipping products, billing our customers, tracking inventory, supporting accounting functions and financial statement preparation, paying our employees, and otherwise running our business.

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Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied.

recently enacted significant tax reform, and certain provisions of the new law may adversely affect us.

In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies.

Many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws.

Governmental tax authorities are increasingly scrutinizing the tax positions of companies.

federal and state governments, countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws.

If tax laws and related regulations change, our financial results could be materially impacted.

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A significant increase in our effective income tax rate could have a material adverse impact on our earnings.

Changes in the price and availability of raw materials we use could be detrimental to our profitability.

Copper is a significant component of the cost of most of our cable products.

Over the past few years, the prices of metals, particularly copper, have been volatile.

Prices of other materials we use, such as polyvinylchloride (PVC) and other plastics derived from petrochemical feedstocks, have also been volatile.

Generally, we have recovered much of the higher cost of raw materials through higher pricing of our finished products.

Some OEM contracts have provisions for passing through raw material cost changes, generally with a lag of a few weeks to three months.

Especially during periods of inflation, if we are unable to raise prices timely and sufficiently to recover our material costs, our earnings could decline.

If we raise our prices but competitors raise their prices less, we may lose sales, and our earnings could decline.

If the price of copper were to decline, we may be compelled to reduce prices to remain competitive, which could have a negative effect on revenues.

If a supply interruption or shortage of materials were to occur (including due to labor or political disputes), this could have a negative effect on revenues and earnings.

Future operating results depend upon the Company’s ability to obtain components in sufficient quantities on commercially reasonable terms.

Because the Company currently obtains certain components from single or limited sources, the Company is subject to significant supply and pricing risks.

A regional health crises, like the Coronavirus, could lead to quarantines or labor shortages, thus impacting the output of key suppliers.

The global markets in which we operate are highly competitive.

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Moreover, some competitors that are highly leveraged both financially and operationally could become more aggressive in their pricing of products.