What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-08 · 96 added, 141 removed, 145 unchanged (62% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(the Company, us, we, or our) is a global supplier of specialty networking solutions built around two global businesses - Enterprise Solutions and Industrial Solutions.

(the Company, us, we, or our) is a global supplier of specialty networking solutions built around two global businesses - Enterprise Solutions and Industrial Automation Solutions.

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.

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Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S.

dollar and the Euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso, Australian dollar, British pound, and Indian rupee.

dollar and the euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso, Australian dollar, British pound, Indian rupee and Swiss franc.

Generally, as the U.S.

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dollar weakens against foreign currencies, our revenues and earnings are positively impacted.

Approximately 45% of our consolidated revenues during the quarter ended October 3, 2021 were to customers outside of the U.S.

Approximately 45% of our consolidated revenues during the quarter ended April 3, 2022 were to customers outside of the U.S.

In addition to the translation impact described above, currency rate fluctuations have an economic impact on our financial results.

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We are mindful of ongoing inflationary pressures and as a result, proactively implement selling price increases and cost control measures.

Importantly, however, there is no exact measure of the effect of changing commodity prices, as there are thousands of transactions in any given quarter, each of which has various factors involved in the individual pricing decisions.

T here is no exact measure of the effect of changing commodity prices, as there are thousands of transactions in any given quarter, each of which has various factors involved in the individual pricing decisions.

Therefore, all references to the effect of copper prices or other commodity prices are estimates.

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To the extent that we exceed the market growth rates, we consider it to be the result of capturing market share.

Amended Revolving Credit Agreement

During the second quarter of 2021, we entered into an amended and restated Revolving Credit Agreement that provides a $300.0 million multi-currency asset-based revolving credit facility (the Revolver).

The maturity date of the Revolver is June 2, 2026.

The borrowing base under the Revolver includes eligible accounts receivable;

and property, plant and equipment of certain of our subsidiaries in the United States, Canada, Germany, the United Kingdom and the Netherlands.

Interest on outstanding borrowings is variable, based upon LIBOR or other similar indices in foreign jurisdictions, plus a spread that ranges from 1.25%-1.75%, depending upon our leverage position.

We paid approximately $2.2 million of fees associated with the amended Revolver, which are being amortized over its term using the effective interest method.

As of October 3, 2021, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $293.9 million.

Debt Refinancing

During the three and nine months ended October 3, 2021, we completed an offering for €300.0 million aggregate principal amount of 3.375% senior subordinated notes due 2031.

With the proceeds from this offering and cash on hand, we repurchased all of the €300.0 million aggregate principal amount of 2.875% senior subordinated notes previously due 2025.

Tripwire Divestiture

On February 7, 2022, we signed a definitive agreement to divest Tripwire for $350 million in cash, and completed the transaction on February 22, 2022.

We recognized a loss on disposal of discontinued operations, net of tax of $4.6 million during the three months ended April 3, 2022.

Debt Repurchase

During the three months ended April 3, 2022, we repurchased all of the €200.0 million aggregate principal amount of 4.125% senior subordinated notes previously due 2026.

We recognized a $6.4 million loss on debt extinguishment for the premiums paid to the bond holders to retire the 2026 Notes and for the unamortized debt issuance costs on the 2026 Notes that we were required to write-off.

OTN Systems Acquisition

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

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

Sale-Leaseback

During the three and nine months ended October 3, 2021, we entered into an agreement to sell and lease back certain property in Germany.

The closing of the sale and the commencement of the lease is expected to occur during the fourth quarter of 2021.

During the third quarter of 2021, we performed a recoverability test on the assets and determined that the carrying values of the assets were not recoverable and recognized a $2.3 million impairment charge in Selling, General and Administrative Expenses to write them down to fair value.

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

We completed the sale of our oil and gas cable business in Brazil during the second quarter of 2021 for $10.9 million, net of cash delivered with the business.

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

At such time, 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 was excluded from Segment EBITDA of our Industrial Solutions segment.

Long-Lived Asset Impairment

During the nine months ended October 3, 2021, we performed a recoverability test on certain held and used long-lived assets in our Industrial Solutions segment.

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 was excluded from Segment EBITDA of our Industrial Solutions segment.

Opterna Earn-Out

Our acquisition of Opterna in 2019 included potential earn-out consideration, which as of the acquisition date, had an estimated fair value of $5.8 million.

As the financial targets tied to the earn-out were not achieved within the contractual timeframe, we reduced the earn-out liability to zero and recognized a $5.8 million benefit in Selling, General and Administrative Expenses during the nine months ended October 3, 2021.

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

Cost Reduction Program

We have executed a cost reduction program to streamline the organizational structure and invest in technology to drive productivity.

We recognized $0.0 million and $3.5 million of severance and other restructuring costs for this program during the three and nine months ended October 3, 2021, respectively.

The cost reduction program is substantially complete and has delivered a reduction in selling, general, and administrative expenses of approximately $60 million on an annual basis.

We expect to recognize costs of approximately $5 million for this program during the fourth quarter of 2021.

Acquisition Integration Program

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

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

We recognized $0.8 million and $3.2 million of severance and other restructuring costs for this program during the three and nine months ended October 3, 2021, respectively.

We do not expect to incur significant incremental costs for this program in 2021.

Macmon and NetModule Acquisitions

On January 17, 2022, we acquired Macmon, a leading provider of products and services that secure network infrastructures in a variety of mission critical industries , for approximately $42.4 million, net of cash acquired.

Headquartered in Berlin, Germany, Macmon brings proven products and technologies that protect network infrastructure and extend our offerings in the areas of segmentation, zoning and access control.

The results of Macmon have been included in our Condensed Consolidated Financial Statements from January 17, 2022, and are reported within the Industrial Automation Solutions segment.

On March 3, 2022, we acquired NetModule, a leading provider of reli able, fast and secure wireless network infrastructures through advanced capabilities in 5G and WiFi6 technologies in a variety of mission critical industries with a strong focus on mass transit and intelligent traffic systems within the transportation vertical for approximately $23.5 million, net of cash acquired.

Headquartered in Bern, Switzerland, NetModule contributes to Belden’s Industrial Automation strategic plan to accelerate our capabilities within wireless technology and to expand applications we serve to meet the growing solution requirements of our customers.

The results of NetModule have been included in our Condensed Consolidated Financial Statements from March 3, 2022, and are reported within the Industrial Automation Solutions segment.

Share Repurchase Program

During the three months ended April 3, 2022, we repurchased 0.9 million shares of our common stock with cash on hand for an aggregate cost of $50.0 million at an average price per share of $56.51 as part of our share repurchase program approved in 2018 by our Board of Director s.

Off-Balance Sheet Arrangements

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Critical Accounting Policies

During the nine months ended October 3, 2021:

During the three months ended April 3, 2022:

• We did not change any of our existing critical accounting policies from those listed in our 2021 Annual Report on Form 10-K;

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Consolidated Income before Taxes

Three Months Ended % Change Nine Months Ended % Change

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Three Months Ended % Change

April 3, 2022 April 4, 2021

(In thousands, except percentages)

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Amortization of intangibles (8,817) (7,993) 10.3 %

Asset impairments — (6,995) (100.0) %

Operating income 73,521 50,948 44.3 %

Interest expense, net (14,411) (15,511) (7.1) %

Loss on debt extinguishment (5,715) — n/a (5,715) — n/a

Loss on debt extinguishment (6,392) — n/a

Non-operating pension benefit 1,200 684 75.4 %

Income from continuing operations before taxes 53,918 36,121 49.3 %

Revenues increased $155.0 million and $405.0 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 due to the following factors:

• Higher sales volume from industrial automation, smart buildings, and broadband & 5G products resulted in a $115.7 million and $270.1 million increase in revenues, respectively.

• Copper prices had a $30.4 million and $91.2 million favorable impact on revenues, respectively.

• Currency translation had a $4.6 million and $27.5 million favorable impact on revenues, respectively.

• Acquisitions contributed an estimated $8.2 million and $21.2 million in revenues, respectively.

• Divestitures had a $3.9 million and $5.0 million unfavorable impact on revenues, respectively.

Gross profit increased $55.7 million and $138.1 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 due to the increases in revenues discussed above.

Selling, general and administrative expenses increased $24.9 million and $38.8 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020.

The increase in selling, general and administrative expenses is primarily attributable to strategic investments to enhance our solution selling capabilities as well as increases from incentive compensation, acquisitions, and the impact of currency translation.

Research and development expenses increased $2.1 million and $13.2 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to increased investments in R&D projects as we continue our commitment to growth initiatives.

Amortization of intangibles decreased $6.4 million and $19.6 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to certain intangible assets becoming fully amortized.

Operating income increased $35.0 million and $105.6 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily as a result of the increase in gross profit discussed above.

Net interest expense increased $0.6 million and $3.5 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to currency translation.

Loss on debt extinguishment increased $5.7 million in both the three and nine months ended October 3, 2021 from the comparable periods of 2020 due to the debt refinancing that took place during the third quarter of 2021.

Revenues increased $101.7 million in the three months ended April 3, 2022 from the comparable period of 2021 due to the following factors:

• Higher sales volume and favorable pricing from industrial automation, smart buildings, and broadband & 5G products resulted in a $97.4 million increase in revenues.

• Higher copper pass-through pricing had a $13.9 million favorable impact on revenues.

• Acquisitions contributed an estimated $3.2 million in revenues.

• The divestiture of our oil and gas cable business in 2021 had a $5.5 million unfavorable impact on revenues.

• Currency translation had a $7.3 million unfavorable impact on revenues.

Gross profit increased $39.7 million in the three months ended April 3, 2022 from the comparable period of 2021 due to the increases in revenues discussed above.

Selling, general and administrative expenses increased $22.4 million in the three months ended April 3, 2022 from the comparable period of 2021.

Research and development expenses increased $0.8 million in the three months ended April 3, 2022 from the comparable period of 2021 primarily due to increased investments in R&D projects as we continue our commitment to growth initiatives.

Amortization of intangibles increased $0.8 million in the three months ended April 3, 2022 from the comparable period of 2021 primarily due to acquisitions.

Asset impairments decreased $7.0 million in the three months ended April 3, 2022 from the comparable period of 2021 as a result of the impairments on assets held and used and assets held for sale of $3.6 million and $3.4 million, respectively, during the three months ended April 4, 2021 .

Operating income increased $22.6 million in the three months ended April 3, 2022 from the comparable period of 2021 primarily as a result of the increase in gross profit discussed above.

Net interest expense decreased $1.1 million in the three months ended April 3, 2022 from the comparable period of 2021 primarily due to currency translation.

Loss on debt extinguishment increased $6.4 million in the three months ended April 3, 2022 from the comparable period of 2021 due to the redemption of the 2026 Notes during the first quarter of 2022.

The $6.4 million loss on debt extinguishment represents the premium paid to the bond holders to retire the 2026 Notes and for the unamortized debt issuance costs on the 2026 Notes that we were required to write-off.

Income from continuing operations before taxes increased $29.0 million and $97.5 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to the increase in operating income discussed above.

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 % Change October 3, 2021 September 27, 2020 % Change

Income from continuing operations before taxes increased $17.8 million in the three months ended April 3, 2022 from the comparable period of 2021 primarily due to the increase in operating income discussed above.

Three Months Ended % Change

April 3, 2022 April 4, 2021

(In thousands, except percentages)

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Effective tax rate 18.2 % 19.5 %

For the three and nine months ended October 3, 2021, we recognized income tax expense of $8.9 million and $25.3 million, representing an effective tax rate of 17.7% and 18.2%, respectively.

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

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.

Consolidated Adjusted Revenues and Adjusted EBITDA

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 % Change October 3, 2021 September 27, 2020 % Change

For the three months ended April 3, 2022, we recognized income tax expense of $9.8 million, representing an effective tax rate of 18.2%.

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

Consolidated Adjusted EBITDA

Three Months Ended % Change

April 3, 2022 April 4, 2021

(In thousands, except percentages)

Adjusted Revenues $ 631,338 $ 475,839 32.7 % $ 1,770,542 $ 1,364,176 29.8 %

GAAP and adjusted revenues $ 610,371 $ 508,683 20.0 %

Adjusted EBITDA 99,494 76,553 30.0 %

as a percent of adjusted revenues 16.0 % 13.7 % 15.5 % 12.8 %

Adjusted Revenues increased $155.5 million and $406.4 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 due to the following factors:

• Higher sales volume from industrial automation, smart buildings, and broadband & 5G products resulted in a $115.7 million and $270.1 million increase in revenues, respectively.

• Copper prices had a $30.4 million and $91.2 million favorable impact on revenues, respectively.

• Currency translation had a $4.6 million and $27.5 million favorable impact on revenues, respectively.

• Acquisitions contributed an estimated $8.7 million and $22.6 million in revenues, respectively.

• Divestitures had a $3.9 million and $5.0 million unfavorable impact on revenues, respectively.

Adjusted EBITDA increased $35.5 million and $99.0 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to leverage on higher sales volume, as discussed above.

Accordingly, Adjusted EBITDA margins in the three and nine months ended October 3, 2021 expanded to 16.0% and 15.5% from 13.7% and 12.8% in the comparable periods of 2020, respectively.

as a percent of revenues 16.3 % 15.0 %

Revenues increased $101.7 million in the three months ended April 3, 2022 from the comparable period of 2021 due to the following factors:

• Higher sales volume and favorable pricing from industrial automation, smart buildings, and broadband & 5G products resulted in a $97.4 million increase in revenues.

• Higher copper pass-through pricing had a $13.9 million favorable impact on revenues.

• Acquisitions contributed an estimated $3.2 million in revenues.

• The divestiture of our oil and gas cable business in Brazil in 2021 had a $5.5 million unfavorable impact on revenues.

• Currency translation had a $7.3 million unfavorable impact on revenues.

Adjusted EBITDA increased $22.9 million in the three months ended April 3, 2022 from the comparable period of 2021 primarily due to leverage on higher sales volume, as discussed above.

Accordingly, Adjusted EBITDA margins in the three months ended April 3, 2022 expanded to 16.3% from 15.0% in the comparable period of 2021.

Use of Non-GAAP Financial Information

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accelerated depreciation expense due to plant consolidation activities;

purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory and deferred revenue to fair value, and transaction costs;

purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory to fair value, and transaction costs;

severance, restructuring, and acquisition integration costs;

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gains (losses) on debt extinguishment;

certain revenues and gains (losses) from patent settlements;

certain gains (losses) from patent settlements;

discontinued operations;

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We believe the adjusted results are useful to investors because they help them compare our results to previous periods and provide important insights into underlying trends in the business and how management oversees our business operations on a day-to-day basis.

As an example, we adjust for the purchase accounting effect of recording deferred revenue at fair value in order to reflect the revenues that would have otherwise been recorded by acquired businesses had they remained as independent entities.

We believe this presentation is useful in evaluating the underlying performance of acquired companies.

Similarly, we adjust for other acquisition-related expenses, such as amortization of intangibles and other impacts of fair value adjustments because they generally are not related to the acquired business' core business performance.

As an example, we adjust for acquisition-related expenses, such as amortization of intangibles and impacts of fair value adjustments because they generally are not related to the acquired business' core business performance.

As an additional example, we exclude the costs of restructuring programs, which can occur from time to time for our current businesses and/or recently acquired businesses.

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The following tables reconcile our GAAP results to our non-GAAP financial measures:

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 October 3, 2021 September 27, 2020

Three Months Ended

April 3, 2022 April 4, 2021

(In thousands, except percentages)

GAAP revenues $ 630,835 $ 475,839 $ 1,769,190 $ 1,364,176

Adjustments related to acquisitions 503 — 1,352 —

Adjusted revenues $ 631,338 $ 475,839 $ 1,770,542 $ 1,364,176

GAAP and adjusted revenues $ 610,371 $ 508,683

GAAP income from continuing operations $ 44,096 $ 29,065

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Depreciation expense 11,226 10,727

Amortization of intangible assets 9,696 16,104 28,745 48,306

Income tax expense 9,822 7,056

Severance, restructuring, and acquisition integration costs (1) 4,328 1,357 12,539 9,448

Amortization of intangible assets 8,817 7,993

Loss on debt extinguishment 6,392 —

Adjustments related to acquisitions and divestitures (2) 2,464 — 4,997 125

Severance, restructuring, and acquisition integration costs (1) 3,723 5,171

Asset impairments (2) — 6,995

Amortization of software development intangible assets 1,007 409

Adjustments related to acquisitions and divestitures (3) — (6,374)

Adjusted EBITDA $ 99,494 $ 76,553

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Adjusted EBITDA margin 16.3 % 15.0 %

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

(2) During the three months ended October 3, 2021, we recognized a $2.3 million impairment on assets held for sale, collected $0.7 million of receivables associated with the sale of Grass Valley and acquisition of SPC that were previously written off, included $0.5 million in Segment EBITDA for the purchase accounting effect of recording deferred revenue at fair value for the OTN Systems acquisition, and recognized cost of sales of $0.4 million related to purchase accounting ad justments of acquired inventory to fair value for the OTN Systems acquisition.

During the nine months ended October 3, 2021, we reduced the Opterna earn-out liability by $5.8 million, recognized a $5.7 million impairment on assets held for sale, recognized a $3.6 million impairment on assets held and used, recognized cost of sales of $2.4 million related to purchase accounting adjustments of acquired inventory to fair value for the OTN Systems acquisition, collected $2.2 million of receivables associated with the sale of Grass Valley and acquisition of SPC that were previously written off, and included $1.3 million in Segment EBITDA for the purchase accounting effect of recording deferred revenue at fair value for the OTN Systems acquisition.

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.

(1) Severance, restructuring, and acquisition integration costs for the three months ended April 3, 2022 primarily relate to our Acquisition Integration Program.

Costs for the three months ended April 4, 2021 primarily relate to our Acquisition Integration Program and completed Cost Reduction Program.

(2) During the three months ended April 4, 2021, we recognized a $3.6 million impairment on assets held and used and a $3.4 million impairment on assets held for sale .

(3) During the three months ended April 4, 2021, we reduced the Opterna earn-out liability by $5.8 million , 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 Systems acquisition.

Segment Results of Operations

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Enterprise Solutions

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 % Change October 3, 2021 September 27, 2020 % Change

Three Months Ended % Change

April 3, 2022 April 4, 2021

(In thousands, except percentages)

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as a percent of segment revenues 11.5 % 12.5 %

Enterprise Solutions revenues increased $57.1 million and $135.4 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020.

As compared to the year ago period, for the three months ended October 3, 2021, increases in volume, higher copper prices, and favorable currency translation contributed $41.6 million, $13.9 million, and $1.6 million, respectively.

As compared to the year ago period, for the nine months ended October 3, 2021, increases in volume, higher copper prices, and favorable currency translation contributed $90.5 million, $37.4 million, and $7.5 million, respectively.

Enterprise Solutions EBITDA increased $13.9 million and $30.3 million in the three and nine months ended October 3, 2021, respectively, compared to the year ago periods primarily as a result of the increase in revenues discussed above.

Industrial Solutions

Three Months Ended Nine Months Ended

October 3, 2021 September 27, 2020 % Change October 3, 2021 September 27, 2020 % Change

Enterprise Solutions revenues increased $42.1 million in the three months ended April 3, 2022 from the comparable period of 2021.

The increase in revenues in the three months ended April 3, 2022 was primarily due to increases in volume and favorable pricing as well as higher copper pass-through pricing of $37.5 million and $5.4 million, respectively, partially offset by unfavorable currency translation of $0.8 million.

Enterprise Solutions EBITDA increased $2.5 million in the three months ended April 3, 2022 compared to the year ago period primarily as a result of the increase in revenues discussed above.

Industrial Automation Solutions

Three Months Ended % Change

April 3, 2022 April 4, 2021

(In thousands, except percentages)

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as a percent of segment revenues 19.7 % 16.9 %

Industrial Solutions revenues increased $98.4 million and $270.9 million in the three and nine months ended October 3, 2021 from the comparable periods of 2020.

The increase in revenues in the three months ended October 3, 2021 was primarily due to increases in volume;

higher copper prices;

favorable currency translation;

and acquisitions, net of disposals of $74.6 million, $16.5 million, $3.0 million, and $4.3 million, respectively.

The increase in revenues in the nine months ended October 3, 2021 was primarily due to increases in volume;

higher copper prices;

favorable currency translation;

and acquisitions, net of disposals of $180.0 million, $53.8 million, $20.0 million, and $17.1 million, respectively.

Industrial Solutions EBITDA increased $21.2 million and $67.3 million in the three and nine months ended October 3, 2021 from the comparable periods of 2020 primarily as a result of the increase in revenues discussed above, partially offset by an increase in incentive compensation and increased investments in R&D projects as we continue our commitment to growth initiatives.

Industrial Automation Solutions revenues increased $59.6 million in the three months ended April 3, 2022 from the comparable period of 2021.

The increase in revenues in the three months ended April 3, 2022 was primarily due to increases in volume and favorable pricing, higher copper pass-through pricing, and acquisitions of $59.9 million, $8.5 million, and $3.2 million, respectively, partially offset by unfavorable currency translation and a divestiture of $6.5 million and $5.5 million, respectively.

Industrial Automation Solutions EBITDA increased $19.9 million in the three months ended April 3, 2022 from the comparable period of 2021 primarily due to leverage on higher sales volume, as discussed above.

Accordingly, Adjusted EBITDA margins expanded to 19.7% from 16.9% in the year ago period.

Liquidity and Capital Resources

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economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product mix, and commodities pricing.

The following table is derived from our Condensed Consolidated Cash Flow Statements, and for the period ended September 27, 2020, includes the results of discontinued operations up to the July 2, 2020 disposal date of Grass Valley:

Nine Months Ended

October 3, 2021 September 27, 2020

The following table is derived from our Condensed Consolidated Cash Flow Statements and includes the results and cash flow activity of discontinued operations up to the February 22, 2022 disposal date:

Three Months Ended

April 3, 2022 April 4, 2021

(In thousands)

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Cash and cash equivalents, end of period $ 559,582 $ 370,850

Operating cash flows were a source of cash of $101.9 million in the nine months ended October 3, 2021 compared to $38.7 million in the nine months ended September 27, 2020.

Operating cash flow improved $63.2 million compared to the prior year primarily due to an increase in earnings.

In 2021, changes in operating assets and liabilities included an unfavorable change in receivables partially offset by a favorable change in accounts payable.

For the nine months ended October 3, 2021, receivables were a use of cash of $129.0 million compared to a source of cash of $35.6 million in the year ago period.

The increase in receivables was primarily due to the increase in revenues discussed above.

Accounts payable was a source of cash of $73.7 million in the nine months ended October 3, 2021 compared to a use of cash of $69.6 million in the year ago period.

Net cash used for investing activities totaled $118.9 million in the nine months ended October 3, 2021, compared to $3.1 million in the prior year.

Investing activities for the nine months ended October 3, 2021 included capital expenditures of $55.6 million compared to $56.8 million in the comparable period of 2020.

The nine months ended October 3, 2021 also included payments of $73.7 million primarily for the acquisition of OTN Systems , partially offset by cash receipts of $10.8 million primarily for the sale of our oil and gas cable business in Brazil.

The nine months ended September 27, 2020 also included proceeds of $50.1 million, $3.1 million, and $0.6 million from the sale of the Grass Valley disposal group, the sale of tangible property, and a working capital adjustment related to the SPC acquisition.

Net cash from financing activities was a use of cash of $24.0 million for the nine months ended October 3, 2021, compared to $72.6 million in the prior year.

Financing activities for the nine months ended October 3, 2021 included repayments of debt obligations of $360.3 million, debt issuance costs of $7.8 million, cash dividend payments of $6.7 million, financing lease payments of $3.1 million, net payments related to share based compensation activities of $2.1 million, and borrowings under credit arrangements of $356.0 million.

During the nine months ended October 3, 2021, we completed an offering for €300.0 million aggregate principal amount of 3.375% senior subordinated notes due 2031, repurchased the €300.0 million 2025 Notes, and refinanced the Revolver - see Note 13.

Financing activities for the nine months ended September 27, 2020 included borrowings on our revolver of $190.0 million, repayments of our revolver borrowings of $190.0 million, payments under our share repurchase program of $35.0 million, earnout consideration payments of $29.3 million, cash dividend payments of $6.8 million, and net payments related to share based compensation activities of $1.3 million.

Our cash and cash equivalents balance was $457.8 million as of October 3, 2021.

Operating cash flows were a use of cash of $58.0 million in the three months ended April 3, 2022 compared to $41.5 million in the three months ended April 4, 2021.

Operating cash flows declined $16.5 million compared to the prior year primarily due to unfavorable changes in accrued liabilities, accounts payable and inventories, partially offset by favorable changes in receivables.

The use of cash in accrued liabilities was primarily due to higher incentive compensation payments and channel partner rebates, both of which were a direct result of improved company performance during 2021, and the use of cash in inventory was primarily driven by increased demand.

Net cash from investing activities was a source of cash of $261.8 million in the three months ended April 3, 2022, compared to a use of cash of $82.3 million in the prior year.

Investing activities for the three months ended April 3, 2022 included cash receipts of $338.7 million for the Tripwire disposal, partially offset by payments of $65.9 million for the acquisitions of Macmon and NetModule and capital expenditures of $11.0 million.

Investing activities for the three months ended April 4, 2021 included cash payments of $72.2 million for the acquisition of OTN Systems and capital expenditures of $11.2 million, partially offset by cash receipts of $1.1 million associated with the sale of Grass Valley.

Net cash used for financing activities totaled $286.7 million for the three months ended April 3, 2022, compared to $5.0 million in the prior year.

Financing activities for the three months ended April 3, 2022 included payments under borrowing arrangements of $230.6 million, payments under our share repurchase program of $50.0 million, net payments related to share based compensation activities of $3.7 million, and cash dividend payments of $2.3 million.

Financing activities for the three months ended April 4, 2021 included cash dividend payments of $2.2 million, repayments of debt obligations of $1.8 million assumed as part of the OTN Systems acquisition, and net payments related to share based compensation activities of $0.9 million.

Our cash and cash equivalents balance was $559.6 million as of April 3, 2022.

Of this amount, $176.4 million was held outside of the U.S.

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Upon distribution of those earnings in the form of dividends or otherwise, we may be subject to withholding taxes payable to the respective foreign countries.

Our outstanding debt obligations as of October 3, 2021 consisted of $1,510.1 million of senior subordinated notes.

Our outstanding debt obligations as of April 3, 2022 consisted of $1,228.3 million of senior subordinated notes.

Additional discussion regarding our various borrowing arrangements is included in Note 13 to the Condensed Consolidated Financial Statements.

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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 2. Management’s Discussion and Analysis