What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 100 added, 85 removed, 156 unchanged (54% 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 Automation Solutions.

(the Company, us, we, or our) is a leading global supplier of network infrastructure 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.

24 unchanged sentences

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

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

Approximately 44% of our consolidated revenues during the quarter ended July 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.

1 unchanged sentence

dollars in a foreign location.

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

Furthermore, inflation may impact labor and other costs.

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

Commodity Prices

3 unchanged sentences

Selling prices of our products are affected by many factors, including end market demand, capacity utilization, overall economic conditions, and commodity prices.

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

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

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.

14 unchanged sentences

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.

On February 22, 2022, we sold Tripwire for gross cash consideration of $350 million and recognized a loss on disposal of discontinued operations, net of tax of $4.6 million during the six months ended July 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.

During the six months ended July 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.

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.

During the six months ended July 3, 2022, we completed three acquisitions.

On January 17, 2022, we acquired Macmon for $42.4 million, net of cash acquired.

Macmon, based in Berlin, Germany, is a leading provider of products and services that secure network infrastructure in a variety of mission critical industries.

On March 3, 2022, we acquired NetModule for $23.5 million, net of cash acquired.

NetModule, based in Bern, Switzerland, is a leading provider of reliable, 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.

On April 15, 2022, we acquired CAI for $18.7 million, net of cash acquired.

CAI is headquartered in Anniston, Alabama and designs, manufactures, and sells a range of plug-in radio frequency filters used in outside plant hybrid fiber-coax nodes.

The results of operations of each acquisition have been included in our results of operations from their respective acquisition dates.

The three acquisitions were not material to our results of operations.

Macmon and NetModule are included in the Industrial Automation Solutions segment, and CAI is included in the Enterprise Solutions segment.

All three acquisitions were funded with cash on hand.

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.

During the three months ended July 3, 2022, we repurchased 0.3 million shares of our common stock for an aggregate cost of $16.6 million at an average price per share of $51.71.

During the six months ended July 3, 2022, we repurchased 1.2 million shares of our common stock for an aggregate cost of $66.6 million at an average price per share of $55.23.

Equity Method Investment

During the second quarter of 2022, we invested $20.0 million in Litmus for a noncontrolling ownership interest.

Litmus provides critical data connectivity needed to monitor, visualize, analyze, and integrate industrial data.

We account for this investment using the equity method of accounting.

Off-Balance Sheet Arrangements

1 unchanged sentence

Critical Accounting Policies

During the three months ended April 3, 2022:

During the six months ended July 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;

3 unchanged sentences

Consolidated Income before Taxes

Three Months Ended % Change

April 3, 2022 April 4, 2021

Three Months Ended % Change Six Months Ended % Change

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

(In thousands, except percentages)

4 unchanged sentences

Amortization of intangibles (9,177) (7,172) 28.0 % (17,994) (15,165) 18.7 %

Asset impairments — (6,995) (100.0) %

Asset impairments — — n/a — (6,995) (100.0) %

Operating income 81,936 68,349 19.9 % 155,457 119,297 30.3 %

Interest expense, net (11,276) (14,870) (24.2) % (25,687) (30,381) (15.5) %

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

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

Non-operating pension benefit 1,070 1,445 (26.0) % 2,270 2,129 6.6 %

Income from continuing operations before taxes 71,730 54,924 30.6 % 125,648 91,045 38.0 %

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 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.

Revenues increased $90.7 million and $192.4 million in the three and six months ended July 3, 2022, respectively, from the comparable periods 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 $103.7 million and $201.1 million increase in revenues, respectively.

• Higher copper pass-through pricing had a $0.2 million and $14.1 million favorable impact on revenues, respectively.

• Acquisitions contributed an estimated $8.0 million and $11.2 million in revenues, respectively.

• The divestiture of our oil and gas cable business in 2021 had a $4.8 million and $10.3 million unfavorable impact on revenues.

• Currency translation had a $16.4 million and $23.7 million unfavorable impact on revenues.

Gross profit increased $31.0 million and $70.6 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021 due to the increases in revenues discussed above.

Selling, general and administrative expenses increased $11.6 million and $34.1 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021.

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 and acquisitions.

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.

Research and development expenses increased $3.7 million and $4.6 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021 primarily due to increased investments in R&D projects as we continue our commitment to growth initiatives.

Amortization of intangibles increased $2.0 million and $2.8 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021 primarily due to acquisitions.

Asset impairments decreased $7.0 million in the six months ended July 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 six months ended July 4, 2021.

Operating income increased $13.6 million and $36.2 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021 primarily as a result of the increase in gross profit discussed above.

Net interest expense decreased $3.6 million and $4.7 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021 primarily due to the repurchase of senior subordinated notes previously due 2026 and currency translation.

Loss on debt extinguishment increased $6.4 million in the six months ended July 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 $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

Income from continuing operations before taxes increased $16.8 million and $34.6 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021 primarily due to the increase in operating income discussed above.

Three Months Ended % Change Six Months Ended % Change

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

(In thousands, except percentages)

Income before taxes $ 53,918 $ 36,121 49.3 %

Income from continuing operations before taxes $ 71,730 $ 54,924 30.6 % $ 125,648 $ 91,045 38.0 %

Income tax expense 13,088 9,578 36.6 % 22,910 16,634 37.7 %

Effective tax rate 18.2 % 17.4 % 18.2 % 18.3 %

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%.

For the three and six months ended July 3, 2022, we recognized income tax expense of $13.1 million and $22.9 million, respectively, 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

Three Months Ended % Change Six Months Ended % Change

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

(In thousands, except percentages)

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

Adjusted revenues $ 666,551 $ 576,706 15.6 % $ 1,276,922 $ 1,085,389 17.6 %

Adjusted EBITDA 110,967 92,898 19.5 % 210,461 169,451 24.2 %

as a percent of revenues 16.6 % 16.1 % 16.5 % 15.6 %

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.

Adjusted revenues increased $89.8 million and $191.5 million in the three and six months ended July 3, 2022, respectively, from the comparable periods 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 $102.9 million and $200.3 million increase in revenues, respectively.

• Higher copper pass-through pricing had a $0.2 million and $14.1 million favorable impact on revenues, respectively.

• Acquisitions contributed an estimated $8.0 million and $11.2 million in revenues, respectively.

• The divestiture of our oil and gas cable business in 2021 had a $4.8 million and $10.3 million unfavorable impact on revenues.

• Currency translation had a $16.4 million and $23.7 million unfavorable impact on revenues.

Adjusted EBITDA increased $18.1 million and $41.0 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021 primarily due to leverage on higher sales volume, as discussed above.

Accordingly, Adjusted EBITDA margins in the three and six months ended July 3, 2022 expanded to 16.6% from 16.1% and to 16.5% from 15.6%, respectively, in the comparable periods of 2021.

Use of Non-GAAP Financial Information

21 unchanged sentences

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

Three Months Ended

April 3, 2022 April 4, 2021

Three Months Ended Six Months Ended

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

(In thousands, except percentages)

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

GAAP revenues $ 666,551 $ 575,857 $ 1,276,922 $ 1,084,540

Adjustments related to acquisitions — 849 — 849

Adjusted revenues $ 666,551 $ 576,706 $ 1,276,922 $ 1,085,389

GAAP income from continuing operations $ 58,642 $ 45,346 $ 102,738 $ 74,411

Interest expense, net 14,411 15,511

Depreciation expense 11,226 10,727

Income tax expense 13,088 9,578 22,910 16,634

Depreciation expense 11,370 10,658 22,596 21,385

Interest expense, net 11,276 14,870 25,687 30,381

Amortization of intangible assets 9,177 7,172 17,994 15,165

Loss on debt extinguishment 6,392 —

Severance, restructuring, and acquisition integration costs (1) 5,857 3,040 9,580 8,211

Asset impairments (2) — 6,995

Amortization of software development intangible assets 981 322 1,988 731

Adjustments related to acquisitions and divestitures (2) 576 1,912 576 (4,462)

Loss on debt extinguishment — — 6,392 —

Asset impairments (3) — — — 6,995

Adjusted EBITDA $ 110,967 $ 92,898 $ 210,461 $ 169,451

1 unchanged sentence

Adjusted EBITDA margin 16.6 % 16.1 % 16.5 % 15.6 %

(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.

(1) Severance, restructuring, and acquisition integration costs for the three and six months ended July 3, 2022 primarily related to our Manufacturing Footprint and Acquisition Integration programs.

Costs for the three and six months ended July 4, 2021 primarily related to our Acquisition Integration and completed Cost Reduction programs.

(2) During the three and six months ended July 3, 2022, we recognized cost of sales of $1.1 million related to purchase accounting adjustments of acquired inventory to fair value and collected $0.5 million of previously written off receivables associated with the sale of Grass Valley.

During the three months ended July 4, 2021, we recognized cost of sales of $1.2 million related to purchase accounting adjustments of acquired inventory to fair value, recognized $0.8 million for the purchase accounting effect of recording deferred revenue at fair value, and collected $0.1 million of previously written off receivables associated with the sale of Grass Valley.

During the six months ended July 4, 2021, we reduced the Opterna earn-out liability by $5.8 million , recognized cost of sales of $2.0 million related to purchase accounting adjustments of acquired inventory to fair value, collected $1.4 million of previously written off receivables associated with the sale of Grass Valley, and recognized $0.8 million for the purchase accounting effect of recording deferred revenue at fair value.

(3) During the six months ended July 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 .

Segment Results of Operations

1 unchanged sentence

Enterprise Solutions

Three Months Ended % Change

April 3, 2022 April 4, 2021

Three Months Ended % Change Six Months Ended % Change

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

(In thousands, except percentages)

2 unchanged sentences

as a percent of segment revenues 13.6 % 13.5 % 12.6 % 13.0 %

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.

Enterprise Solutions revenues increased $39.9 million and $82.0 million in the three and six months ended July 3, 2022 from the comparable periods of 2021.

The increase in revenues in the three months ended July 3, 2022 was primarily due to increases in volume and favorable pricing, acquisitions, and higher copper pass-through pricing of $40.6 million, $1.4 million, and $1.0 million, respectively, partially offset by unfavorable currency translation of $3.1 million.

The increase in revenues in the six months ended July 3, 2022 was primarily due to increases in volume and favorable pricing, higher copper pass-through pricing, and acquisitions of $78.1 million, $6.4 million, and $1.4 million, respectively, partially offset by unfavorable currency translation of $3.9 million.

Enterprise Solutions EBITDA increased $5.9 million and $8.4 million in the three and six months ended July 3, 2022, respectively, compared to the year ago periods primarily as a result of the increase in revenues discussed above.

Industrial Automation Solutions

Three Months Ended % Change

April 3, 2022 April 4, 2021

Three Months Ended % Change Six Months Ended % Change

July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021

(In thousands, except percentages)

2 unchanged sentences

as a percent of segment revenues 19.0 % 17.9 % 19.3 % 17.4 %

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.

Industrial Automation Solutions revenues increased $49.9 million and $109.5 million in the three and six months ended July 3, 2022, respectively, from the comparable periods of 2021.

The increase in revenues in the three months ended July 3, 2022 was primarily due to increases in volume and favorable pricing of $62.2 million and acquisitions of $6.6 million, partially offset by unfavorable currency translation, a divestiture, and lower copper pass-through pricing of $13.3 million, $4.8 million, and $0.8 million, respectively.

The increase in revenues in the six months ended July 3, 2022 was primarily due to increases in volume and favorable pricing, higher copper pass-through pricing, and acquisitions of $122.1 million, $7.7 million, and $9.8 million, respectively, partially offset by unfavorable currency translation and a divestiture of $19.8 million and $10.3 million, respectively.

Industrial Automation Solutions EBITDA increased $12.6 million and $32.5 million in the three and six months ended July 3, 2022 from the comparable periods of 2021 primarily due to leverage on higher sales volume, as discussed above.

Accordingly, for the three and six months ended July 3, 2022, Adjusted EBITDA margins expanded from 17.9% to 19.0% and from 17.4% to 19.3%, respectively, over the year ago periods.

Liquidity and Capital Resources

5 unchanged sentences

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

Six Months Ended

July 3, 2022 July 4, 2021

(In thousands)

7 unchanged sentences

Cash and cash equivalents, end of period $ 527,682 $ 423,291

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.

Operating cash flows were a use of cash of $8.6 million in the six months ended July 3, 2022 compared to a source of cash of $26.7 million in the prior year.

Operating cash flows declined $35.2 million compared to the prior year primarily due to unfavorable changes in accounts payable and accrued liabilities partially offset by a favorable change in receivables.

The use of cash for accounts payable was due to the timing of payments primarily for purchases of raw materials and the use of cash for accrued liabilities was primarily attributable to higher incentive compensation payments and channel partner rebates, all of which were the direct result of improved company performance and increased demand.

Net cash from investing activities was a source of cash of $205.0 million in the six months ended July 3, 2022, compared to a use of cash of $94.2 million in the prior year.

Investing activities for the six months ended July 3, 2022 included cash receipts of $338.7 million for the Tripwire disposal partially offset by payments of $104.1 million for the investment in Litmus as well as the acquisitions of Macmon, NetModule and CAI and capital expenditures of $31.0 million.

Investing activities for the six months ended July 4, 2021 included cash payments of $73.7 million for the acquisition of OTN Systems and capital expenditures of $30.9 million, partially offset by cash receipts of $10.8 million primarily for the sale of our oil and gas cable business in Brazil.

Net cash used for financing activities totaled $303.3 million for the six months ended July 3, 2022, compared to $10.1 million in the prior year.

Financing activities for the six months ended July 3, 2022 included payments under borrowing arrangements of $230.6 million, payments under our share repurchase program of $66.6 million, net payments related to share based compensation activities of $5.2 million, cash dividend payments of $4.5 million, and proceeds from the issuance of common stock of $3.7 million.

Financing activities for the six months ended July 4, 2021 included cash dividend payments of $4.5 million, net payments related to share based compensation activities of $2.0 million, repayments of debt obligations of $1.8 million assumed as part of the OTN Systems acquisition, and debt issuance costs of $1.7 million.

Our cash and cash equivalents balance was $527.7 million as of July 3, 2022.

Of this amount, $170.3 million was held outside of the U.S.

4 unchanged sentences

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 April 3, 2022 consisted of $1,228.3 million of senior subordinated notes.

Our outstanding debt obligations as of July 3, 2022 consisted of $1,151.9 million of senior subordinated notes.

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

6 unchanged sentences

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