BELDEN INC. 10-Q

Item 1. Financial Statements BELDEN INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) July 3, 2022 December 31, 2021 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 527,682 $ 641,563 Receivables, net 425,553 383,444 Inventories, net 394,346 345,203 Other current assets 61,268 58,283 Current assets of discontinued operations — 449,402 Total current assets 1,408,849 1,877,895 Property, plant and equipment, less accumulated depreciation 340,610 343,564 Operating lease right-of-use assets 73,225 75,571 Goodwill 861,131 821,448 Intangible assets, less accumulated amortization 256,207 238,155 Deferred income taxes 33,731 31,486 Other long-lived assets 52,264 29,558 $ 3,026,017 $ 3,417,677 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 349,446 $ 377,765 Accrued liabilities 240,891 278,108 Current liabilities of discontinued operations — 99,079 Total current liabilities 590,337 754,952 Long-term debt 1,137,853 1,459,991 Postretirement benefits 107,394 120,997 Deferred income taxes 59,849 49,027 Long-term operating lease liabilities 60,018 61,967 Other long-term liabilities 21,483 14,661 Stockholders’ equity: Common stock 503 503 Additional paid-in capital 820,602 833,627 Retained earnings 595,613 505,717 Accumulated other comprehensive loss ( 14,487 ) ( 70,566 ) Treasury stock ( 354,029 ) ( 313,994 ) Total Belden stockholders’ equity 1,048,202 955,287 Noncontrolling interests 881 795 Total stockholders’ equity 1,049,083 956,082 $ 3,026,017 $ 3,417,677 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. -1- BELDEN INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) Three Months Ended Six Months Ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands, except per share data) Revenues $ 666,551 $ 575,857 $ 1,276,922 $ 1,084,540 Cost of sales ( 444,246 ) ( 384,503 ) ( 845,757 ) ( 724,003 ) Gross profit 222,305 191,354 431,165 360,537 Selling, general and administrative expenses ( 105,203 ) ( 93,570 ) ( 208,269 ) ( 174,205 ) Research and development expenses ( 25,989 ) ( 22,263 ) ( 49,445 ) ( 44,875 ) Amortization of intangibles ( 9,177 ) ( 7,172 ) ( 17,994 ) ( 15,165 ) Asset impairments — — — ( 6,995 ) Operating income 81,936 68,349 155,457 119,297 Interest expense, net ( 11,276 ) ( 14,870 ) ( 25,687 ) ( 30,381 ) Loss on debt extinguishment — — ( 6,392 ) — Non-operating pension benefit 1,070 1,445 2,270 2,129 Income from continuing operations before taxes 71,730 54,924 125,648 91,045 Income tax expense ( 13,088 ) ( 9,578 ) ( 22,910 ) ( 16,634 ) Income from continuing operations 58,642 45,346 102,738 74,411 Loss from discontinued operations, net of tax — ( 1,374 ) ( 3,685 ) ( 1,698 ) Loss on disposal of discontinued operations, net of tax — — ( 4,567 ) — Net income 58,642 43,972 94,486 72,713 Less: Net income attributable to noncontrolling interest 81 208 84 283 Net income attributable to Belden stockholders $ 58,561 $ 43,764 $ 94,402 $ 72,430 Weighted average number of common shares and equivalents: Basic 44,252 44,759 44,535 44,717 Diluted 44,782 45,262 45,179 45,162 Basic income (loss) per share attributable to Belden stockholders: Continuing operations $ 1.32 $ 1.01 $ 2.31 $ 1.66 Discontinued operations — ( 0.03 ) ( 0.08 ) ( 0.04 ) Disposal of discontinued operations — — ( 0.10 ) — Net income $ 1.32 $ 0.98 $ 2.12 $ 1.62 Diluted income (loss) per share attributable to Belden stockholders: Continuing operations $ 1.31 $ 1.00 $ 2.27 $ 1.64 Discontinued operations — ( 0.03 ) ( 0.08 ) ( 0.04 ) Disposal of discontinued operations — — ( 0.10 ) — Net income $ 1.31 $ 0.97 $ 2.09 $ 1.60 Comprehensive income attributable to Belden $ 110,712 $ 22,499 $ 150,481 $ 104,890 Common stock dividends declared per share $ 0.05 $ 0.05 $ 0.10 $ 0.10 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. -2- BELDEN INC. CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (Unaudited) Six Months Ended July 3, 2022 July 4, 2021 (In thousands) Cash flows from operating activities: Net income $ 94,486 $ 72,713 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 42,686 43,272 Loss on debt extinguishment 6,392 — Share-based compensation 10,870 13,513 Asset impairments — 6,995 Changes in operating assets and liabilities, net of the effects of currency exchange rate changes, acquired businesses and disposals: Receivables ( 20,699 ) ( 90,810 ) Inventories ( 47,305 ) ( 50,111 ) Accounts payable ( 23,563 ) 50,158 Accrued liabilities ( 58,525 ) 227 Income taxes 163 1,474 Other assets ( 2,634 ) ( 6,924 ) Other liabilities ( 10,452 ) ( 13,853 ) Net cash provided by (used for) operating activities ( 8,581 ) 26,654 Cash flows from investing activities: Proceeds from disposal of businesses, net of cash sold 338,686 10,798 Proceeds from disposal of tangible assets 1,424 3,249 Capital expenditures ( 31,010 ) ( 30,866 ) Cash used for acquisitions and investments, net of cash acquired ( 104,123 ) ( 73,749 ) Purchase of intangible assets — ( 3,650 ) Net cash provided by (used for) investing activities 204,977 ( 94,218 ) Cash flows from financing activities: Payments under borrowing arrangements ( 230,639 ) ( 1,841 ) Payments under share repurchase program ( 66,559 ) — Withholding tax payments for share-based payment awards ( 5,167 ) ( 2,009 ) Cash dividends paid ( 4,520 ) ( 4,493 ) Payments under financing lease obligations ( 83 ) ( 75 ) Debt issuance costs paid — ( 1,728 ) Proceeds from issuance of common stock 3,717 — Net cash used for financing activities ( 303,251 ) ( 10,146 ) Effect of foreign currency exchange rate changes on cash and cash equivalents ( 9,220 ) ( 993 ) Decrease in cash and cash equivalents ( 116,075 ) ( 78,703 ) Cash and cash equivalents, beginning of period 643,757 501,994 Cash and cash equivalents, end of period $ 527,682 $ 423,291 The Condensed Consolidated Cash Flow Statement includes the results of discontinued operations up to the disposal date, February 22, 2022. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. -3- BELDEN INC. CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENTS (Unaudited) Belden Inc. Stockholders Additional Accumulated Other Non-controlling Common Stock Paid-In Retained Treasury Stock Comprehensive Shares Amount Capital Earnings Shares Amount Income (Loss) Interests Total (In thousands) Balance at December 31, 2021 50,335 $ 503 $ 833,627 $ 505,717 ( 5,360 ) $ ( 313,994 ) $ ( 70,566 ) $ 795 $ 956,082 Net income — — — 35,841 — — — 3 35,844 Other comprehensive income, net of tax — — — — — — 3,928 27 3,955 Retirement Savings Plan stock contributions — — ( 356 ) — 43 2,809 — — 2,453 Exercise of stock options, net of tax withholding forfeitures — — ( 526 ) — 6 375 — — ( 151 ) Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 11,287 ) — 103 7,739 — — ( 3,548 ) Share repurchase program — — — — ( 885 ) ( 50,000 ) — — ( 50,000 ) Share-based compensation — — 5,224 — — — — — 5,224 Common stock dividends ($ 0.05 per share) — — — ( 2,264 ) — — — — ( 2,264 ) Balance at April 3, 2022 50,335 $ 503 $ 826,682 $ 539,294 ( 6,093 ) $ ( 353,071 ) $ ( 66,638 ) $ 825 $ 947,595 Net income — — — 58,561 — — — 81 58,642 Other comprehensive income (loss), net of tax — — — — — — 52,151 ( 25 ) 52,126 Common stock issuance — — ( 2,775 ) — 82 6,492 — — 3,717 Retirement Savings Plan stock contributions — — ( 730 ) — 30 2,355 — — 1,625 Exercise of stock options, net of tax withholding forfeitures — — ( 173 ) — 2 133 — — ( 40 ) Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 8,048 ) — 75 6,621 — — ( 1,427 ) Share repurchase program — — — — ( 320 ) ( 16,559 ) — — ( 16,559 ) Share-based compensation — — 5,646 — — — — — 5,646 Common stock dividends ($ 0.05 per share) — — — ( 2,242 ) — — — — ( 2,242 ) Balance at July 3, 2022 50,335 $ 503 $ 820,602 $ 595,613 ( 6,224 ) $ ( 354,029 ) $ ( 14,487 ) $ 881 $ 1,049,083 -4- Belden Inc. Stockholders Additional Accumulated Other Non-controlling Common Stock Paid-In Retained Treasury Stock Comprehensive Shares Amount Capital Earnings Shares Amount Income (Loss) Interests Total (In thousands) Balance at December 31, 2020 50,335 $ 503 $ 823,605 $ 450,876 ( 5,692 ) $ ( 332,552 ) $ ( 191,851 ) $ 6,470 $ 757,051 Net income — — — 28,666 — — — 75 28,741 Other comprehensive income (loss), net of tax — — — — — — 53,725 ( 197 ) 53,528 Acquisition of business with noncontrolling interests — — — — — — — 20 20 Retirement Savings Plan stock contributions — — ( 493 ) — 45 2,496 — — 2,003 Exercise of stock options, net of tax withholding forfeitures — — ( 723 ) — 9 541 — — ( 182 ) Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 2,403 ) — 27 1,680 — — ( 723 ) Share-based compensation — — 7,285 — — — — — 7,285 Common stock dividends $ 0.05 per share) — — — ( 2,263 ) — — — — ( 2,263 ) Balance at April 4, 2021 50,335 $ 503 $ 827,271 $ 477,279 ( 5,611 ) $ ( 327,835 ) $ ( 138,126 ) $ 6,368 $ 845,460 Net income — — — 43,764 — — — 208 43,972 Other comprehensive loss, net of tax — — — — — — ( 21,265 ) ( 229 ) ( 21,494 ) Retirement Savings Plan stock contributions — — ( 418 ) — 34 3,723 — — 3,305 Exercise of stock options, net of tax withholding forfeitures — — ( 147 ) — 2 100 — — ( 47 ) Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 5,795 ) — 83 4,738 — — ( 1,057 ) Share-based compensation — — 6,228 — — — — — 6,228 Common stock dividends ($ 0.05 per share) — — — ( 2,269 ) — — — — ( 2,269 ) Balance at July 4, 2021 50,335 $ 503 $ 827,139 $ 518,774 ( 5,492 ) $ ( 319,274 ) $ ( 159,391 ) $ 6,347 $ 874,098 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. -5- BELDEN INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1: Summary of Significant Accounting Policies Basis of Presentation The accompanying Condensed Consolidated Financial Statements include Belden Inc. and all of its subsidiaries (the Company, us, we, or our). We eliminate all significant affiliate accounts and transactions in consolidation. The accompanying Condensed Consolidated Financial Statements presented as of any date other than December 31, 2021: • Are prepared from the books and records without audit, and • Are prepared in accordance with the instructions for Form 10-Q and do not include all of the information required by accounting principles generally accepted in the United States for complete statements, but • Include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial statements. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Supplementary Data contained in our 2021 Annual Report on Form 10-K. Business Description We are 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. Reporting Periods Our fiscal year and fiscal fourth quarter both end on December 31. Our fiscal first quarter ends on the Sunday falling closest to 91 days after December 31, which was April 3, 2022, the 93rd day of our fiscal year 2022. Our fiscal second and third quarters each have 91 days. The six months ended July 3, 2022 and July 4, 2021 included 184 days and 185 days, respectively. Fair Value Measurement Accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources or reflect our own assumptions of market participant valuation. The hierarchy is broken down into three levels based on the reliability of the inputs as follows: • Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; • Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets, or financial instruments for which significant inputs are observable, either directly or indirectly; and • Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. As of and during the three and six months ended July 3, 2022 and July 4, 2021, we utilized Level 1 inputs to determine the fair value of cash equivalents, and we utilized Level 2 and Level 3 inputs to determine the fair value of net assets acquired in business combinations (see Note 3) and for impairment testing (see Notes 4 and 11). We did not have any transfers between Level 1 and Level 2 fair value measurements during the six months ended July 3, 2022 and July 4, 2021. Cash and Cash Equivalents We classify cash on hand and deposits in banks, including commercial paper, money market accounts, and other investments with an original maturity of three months or less, that we hold from time to time, as cash and cash equivalents. We periodically have cash equivalents consisting of short-term money market funds and other investments. As of July 3, 2022, we did not have any such cash equivalents on hand. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations. We do not enter into investments for trading or speculative purposes. -6- Contingent Liabilities We have established liabilities for environmental and legal contingencies that are probable of occurrence and reasonably estimable, the amounts of which are currently not material. We accrue environmental remediation costs based on estimates of known environmental remediation exposures developed in consultation with our environmental consultants and legal counsel. We are, from time to time, subject to routine litigation incidental to our business. Historically, these lawsuits have primarily involved claims for damages arising out of the use of our products, allegations of patent or trademark infringement, and litigation and administrative proceedings involving employment matters and commercial disputes. Based on facts currently available, we believe the disposition of the claims that are pending or asserted will not have a material adverse effect on our financial position, results of operations, or cash flow. As of July 3, 2022, we were party to standby letters of credit, bank guaranties, and surety bonds totaling $ 7.1 million, $ 5.2 million, and $ 3.8 million, respectively. Revenue Recognition We recognize revenue consistent with the principles as outlined in the following five step model: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) each performance obligation is satisfied. See Note 2. Subsequent Events We evaluated subsequent events after the balance sheet date through the financial statement issuance date for appropriate accounting and disclosure. Equity Method Investment During the second quarter of 2022, we invested $ 20.0 million in Litmus Automation, Inc. (Litmus) for a noncontrolling ownership interest. Litmus provides the critical data connectivity needed to monitor, visualize, analyze, and integrate industrial data. We account for this investment using the equity method of accounting. The carrying value of our investment is included in Other Long-Lived Assets in the Condensed Consolidated Balance Sheets. The results of our investment in Litmus were not material to our consolidated financial statements for the three months ended July 3, 2022. Noncontrolling Interest We have a 51 % ownership percentage in a joint venture with Shanghai Hi-Tech Control System Co, Ltd (Hite). The purpose of the joint venture is to develop and provide certain Industrial Automation Solutions products and integrated solutions to customers in China. Belden and Hite are committed to fund $ 1.53 million and $ 1.47 million, respectively, to the joint venture in the future. The joint venture is determined to not have sufficient equity at risk; therefore, it is considered a variable interest entity. We have determined that Belden is the primary beneficiary of the joint venture, due to both our ownership percentage and our control over the activities of the joint venture that most significantly impact its economic performance based on the terms of the joint venture agreement with Hite. Because Belden is the primary beneficiary of the joint venture, we have consolidated the joint venture in our financial statements. The results of the joint venture attributable to Hite’s ownership are presented as net income attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations. The joint venture is not material to our consolidated financial statements as of or for the periods ended July 3, 2022 and July 4, 2021. Certain Belden subsidiaries include a noncontrolling interest as of or for the periods ended July 3, 2022 and July 4, 2021 . The results attributable to the noncontrolling interest holders are not material to our consolidated financial statements , and are presented as net income attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations. During the fourth quarter of 2021, we purchased a noncontrolling interest for a purchase price of $ 2.3 million. Note 2: Revenues Revenues are recognized when control of the promised goods or services is transferred to our customers and in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Taxes collected from customers and remitted to governmental authorities are not included in our revenues. -7- The following tables present our revenues disaggregated by major product category. Broadband & 5G Industrial Automation Smart Buildings Total Revenues Three Months Ended July 3, 2022 (In thousands) Enterprise Solutions $ 146,771 $ — $ 160,673 $ 307,444 Industrial Automation Solutions — 359,107 — 359,107 Total $ 146,771 $ 359,107 $ 160,673 $ 666,551 Three Months Ended July 4, 2021 Enterprise Solutions $ 124,760 $ — $ 142,768 $ 267,528 Industrial Automation Solutions — 308,329 — 308,329 Total $ 124,760 $ 308,329 $ 142,768 $ 575,857 Six Months Ended July 3, 2022 Enterprise Solutions $ 268,576 $ — $ 307,298 $ 575,874 Industrial Automation Solutions — 701,048 — 701,048 Total $ 268,576 $ 701,048 $ 307,298 $ 1,276,922 Six Months Ended July 4, 2021 Enterprise Solutions $ 229,851 $ — $ 264,032 $ 493,883 Industrial Automation Solutions — 590,657 — 590,657 Total $ 229,851 $ 590,657 $ 264,032 $ 1,084,540 The following tables present our revenues disaggregated by geography, based on the location of the customer purchasing the product. Americas EMEA APAC Total Revenues Three Months Ended July 3, 2022 (In thousands) Enterprise Solutions $ 233,501 $ 36,497 $ 37,446 $ 307,444 Industrial Automation Solutions 214,045 91,765 53,297 359,107 Total $ 447,546 $ 128,262 $ 90,743 $ 666,551 Three Months Ended July 4, 2021 Enterprise Solutions $ 192,138 $ 40,468 $ 34,922 $ 267,528 Industrial Automation Solutions 176,264 83,090 48,975 308,329 Total $ 368,402 $ 123,558 $ 83,897 $ 575,857 Six Months Ended July 3, 2022 Enterprise Solutions $ 437,887 $ 75,886 $ 62,101 $ 575,874 Industrial Automation Solutions 418,355 182,216 100,477 701,048 Total $ 856,242 $ 258,102 $ 162,578 $ 1,276,922 Six Months Ended July 4, 2021 Enterprise Solutions $ 354,813 $ 78,404 $ 60,666 $ 493,883 Industrial Automation Solutions 342,487 158,186 89,984 590,657 Total $ 697,300 $ 236,590 $ 150,650 $ 1,084,540 We generate revenues primarily by selling products that provide secure and reliable transmission of data, sound, and video for mission critical applications. We also generate revenues from providing support and professional services. We sell our products to distributors, end-users, installers, and directly to original equipment manufacturers. At times, we enter into arrangements that involve the delivery of multiple performance obligations. For these arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price and recognized when or as each performance obligation is satisfied. -8- Generally, we determine relative standalone selling price using the prices charged separately to a customers on a standalone basis. Most of our performance obligations related to the sale of products are satisfied at a point in time when control of the product is transferred based on the shipping terms of the arrangement. Typically, payments are due after control transfers, which is less than one year from satisfaction of the performance obligation. The amount of consideration we receive and revenue we recognize varies due to rebates, returns, and price adjustments. We estimate the expected rebates, returns, and price adjustments based on an analysis of historical experience, anticipated sales demand, and trends in product pricing. We adjust our estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed. Adjustments to revenue for performance obligations satisfied in prior periods were not significant during the three and six months ended July 3, 2022 and July 4, 2021 . The following table presents estimated and accrued variable consideration: July 3, 2022 December 31, 2021 (in thousands) Accrued rebates included in accrued liabilities $ 43,249 $ 55,520 Accrued returns included in accrued liabilities 10,212 12,500 Price adjustments recognized against gross accounts receivable 26,205 23,035 Depending on the terms of an arrangement, we may defer the recognition of some or all of the consideration received because we have to satisfy a future obligation. Consideration allocated to support services under a support and maintenance contract is typically paid in advance and recognized ratably over the term of the service. Consideration allocated to professional services is typically recognized wh en or as the services are performed depending on the terms of the arrangement. As of July 3, 2022, total deferred revenue was $ 26.8 million, and of this amount, $ 19.8 million is expected to be recognized within the next twelve months, and the remaining $ 7.0 million is long- term and is expected to be recognized over a period greater than twelve months. The following table presents deferred revenue activity during the three and six months ended July 3, 2022 and July 4, 2021, respectively: 2022 2021 (In thousands) Beginning balance at January 1 $ 19,390 $ 11,130 New deferrals 8,857 3,751 Acquisitions 6,567 5,997 Revenue recognized ( 3,365 ) ( 1,272 ) Balance at the end of Q1 31,449 19,606 New deferrals 4,265 4,127 Acquisitions — ( 2,740 ) Revenue recognized ( 8,880 ) ( 83 ) Balance at the end of Q2 $ 26,834 $ 20,910 Service-type warranties represent $ 8.2 million of the deferred revenue balance at July 3, 2022, and of this amount $ 3.7 million is expected to be recognized in the next twelve months, and the remaining $ 4.5 million is long-term and will be recognized over a period greater than twelve months. As of July 3, 2022 and December 31, 2021, we did not have any material contract assets recorded in the Condensed Consolidated Balance Sheets. We expense sales commissions as incurred when the duration of the related revenue arrangement is one year or less. We capitalize sales commissions when the original duration of the related revenue arrangement is longer than one year, and we amortize it over the related revenue arrangement period. We did not have any capitalized sales commissions on our balance sheet as of July 3, 2022 and December 31, 2021. -9- The following table presents sales commissions that are recorded within selling, general and administrative expenses: Three Months Ended Six Months ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Sales commissions $ 6,131 $ 4,653 $ 11,354 $ 8,435 Note 3: Acquisitions During the six months ended July 3, 2022, we completed three acquisitions. On January 17, 2022, we acquired macmon secure GmbH (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 AG (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 Communication Associates, Inc. (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 consolidated 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. The following table summarizes the estimated, preliminary fair values of the assets acquired and liabilities assumed for all three acquisitions in total as of their respective acquisition dates (in thousands): Receivables $ 6,527 Inventory 8,278 Other current assets 369 Property, plant and equipment 1,375 Intangible assets 38,709 Goodwill 52,823 Operating lease right-of-use assets 6,167 Total assets acquired $ 114,248 Accounts payable $ 2,497 Accrued liabilities 6,716 Long-term debt 2,440 Deferred income taxes 9,610 Long-term operating lease liabilities 2,926 Other long-term liabilities 5,936 Total liabilities assumed $ 30,125 Net assets $ 84,123 The above purchase price allocation is preliminary and subject to revision as additional information about the fair value of individual assets and liabilities becomes available. The preliminary measurement of receivables, intangible assets, goodwill, deferred income taxes, and other assets and liabilities are subject to change. A change in the estimated fair value of the net assets acquired will change the amount of the purchase price allocable to goodwill. The preliminary fair value of acquired receivables is $ 6.5 million, which is equivalent to its gross contractual amount. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments we have used in estimating the preliminary fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations. -10- For purposes of the above allocation, we based our preliminary estimate of the fair values for intangible assets on valuation studies performed by a third party valuation firm. We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets (Level 3 valuation). Goodwill and other intangible assets reflected above were determined to meet the criteria for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to the expansion of industrial automation and broadband & 5G product offerings in end-to-end solutions. Our tax basis in the acquired goodwill is zero . The intangible assets related to the three acquisitions consisted of the following: Fair Value Amortization Period (In thousands) (In years) Intangible assets subject to amortization: Developed technologies $ 30,726 4.2 Customer relationships 4,677 15.0 Trademarks 2,806 2.0 Sales backlog 200 0.9 Non-compete agreements 300 4.0 Total intangible assets subject to amortization $ 38,709 Intangible assets not subject to amortization: Goodwill $ 52,823 n/a Total intangible assets not subject to amortization $ 52,823 Total intangible assets $ 91,532 Weighted average amortization period 5.3 The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the developed technology intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period and pattern of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of estimated sales from recurring customers. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks. Opterna International Corp. Our acquisition of Opterna International Corp. (Opterna) in 2019 included potential earn-out consideration. As of the acquisition date, we estimated the fair value of the earn-out to be $ 5.8 million. The earn-out period ended in 2021, and the financial targets tied to the earn-out were not achieved. We reduced the earn-out liability to zero and recognized a $ 5.8 million benefit in Selling, General and Administrative Expenses in the six months ended July 4, 2021. This benefit was excluded from Segment EBITDA of our Enterprise Solutions segment. Note 4: Disposals We classify assets and liabilities as held for sale (disposal group) when management, having the authority to approve the action, commits to a plan to sell the disposal group, the sale is probable within one year, and the disposal group is available for immediate sale in its present condition. We also consider whether an active program to locate a buyer has been initiated, whether the disposal group is marketed actively for sale at a price that is reasonable in relation to its current fair value, and whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When we classify a disposal group as held for sale, we test for impairment. An impairment charge is recognized when the carrying value of the disposal group exceeds the estimated fair value, less costs to sell. We also cease depreciation and amortization for assets classified as held for sale. During the first quarter of 2021, we committed to a plan to sell our oil and gas cable business in Brazil that met all of the criteria to classify the assets and liabilities of this business, formerly part of the Industrial Automation Solutions segment, 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 equal to this amount in the first quarter of 2021. The impairment charge was excluded from Segment EBITDA of our Industrial Automation 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. -11- Note 5: Discontinued Operations On February 22, 2022, we sold Tripwire for gross cash consideration of $ 350 million. T he divestiture of Tripwire represents a strategic shift impacting our operations and financial results. As a result, the Tripwire disposal group, which was included in our Industrial Automation Solutions segment, is reported within discontinued operations. We recognized a loss on disposal of discontinued operations, net of tax of $ 4.6 million during the six months ended July 3, 2022. The following table summarizes the operating results of the Tripwire disposal group up to the February 22, 2022 disposal date: Three Months Ended Six Months Ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Revenues $ — $ 26,117 $ 12,067 $ 53,815 Cost of sales — ( 5,936 ) ( 3,256 ) ( 11,473 ) Gross profit — 20,181 8,811 42,342 Selling, general and administrative expenses — ( 11,984 ) ( 8,185 ) ( 22,803 ) Research and development expenses — ( 8,659 ) ( 5,528 ) ( 17,547 ) Amortization of intangible assets — ( 1,930 ) ( 638 ) ( 3,884 ) Loss before taxes $ — $ ( 2,392 ) $ ( 5,540 ) $ ( 1,892 ) During the six months ended July 3, 2022, th e Tripwire disposal group had capital expenditures of approximately $ 0.0 million and recognized share-based compensation expense of $ 0.2 million. During the three and six months ended July 4, 2021, th e Tripwire disposal group had capital expenditu res of approximately $ 1.6 million and $ 2.3 million, respectively, and recognized share-based compensation expense of $ 0.7 million and $ 1.4 million, res pectively. The disposal group did not have any significant non-cash charges for investing activities during the three and six months ended July 3, 2022 and July 4, 2021 . The following table provides the major classes of assets and liabilities of the disposal group as of December 31, 2021: December 31, 2021 (In thousands) Assets: Cash and cash equivalents $ 2,194 Receivables, net 28,773 Inventories, net 150 Other current assets 7,418 Property, plant and equipment, less accumulated depreciation 6,250 Operating lease right-of-use assets 3,893 Goodwill 331,024 Intangible assets, less accumulated amortization 63,541 Deferred income taxes 834 Other long-lived assets 5,325 Total assets of Tripwire disposal group $ 449,402 Liabilities: Accounts payable $ 6,458 Accrued liabilities 56,208 Deferred income taxes 10,964 Long-term operating lease liabilities 5,257 Other long-term liabilities 20,192 Total liabilities of Tripwire disposal group $ 99,079 -12- The Tripwire disposal group also had $ 3.4 million of accumulated other comprehensive income as of December 31, 2021. Note 6: Reportable Segments We are organized around two global businesses: Enterprise Solutions and Industrial Automation Solutions. Each of the global businesses represents a reportable segment. In conjunction with the Tripwire divestiture during the first quarter of 2022, we changed the name of our former Industrial Solutions segment to Industrial Automation Solutions. The composition of the segment did not change as a result of this name change. The key measures of segment profit or loss are Segment Revenues and Segment EBITDA. Segment Revenues represent non-affiliate revenues. Segment EBITDA excludes certain items, including depreciation expense; amortization of intangibles; asset impairment; severance, restructuring, and acquisition integration costs; purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory to fair value; and other costs. We allocate corporate expenses to the segments for purposes of measuring Segment EBITDA. Corporate expenses are allocated on the basis of each segment’s relative EBITDA prior to the allocation. Our measure of segment assets does not include cash, goodwill, intangible assets, deferred tax assets, or corporate assets. All goodwill is allocated to reporting units of our segments for purposes of impairment testing. Inter-company revenues between our segments is not material. -13- Enterprise Solutions Industrial Automation Solutions Total Segments (In thousands) As of and for the three months ended July 3, 2022 Segment Revenues $ 307,444 $ 359,107 $ 666,551 Segment EBITDA 41,887 68,060 109,947 Depreciation expense 5,768 5,602 11,370 Amortization of intangibles 4,442 4,735 9,177 Amortization of software development intangible assets 22 959 981 Severance, restructuring, and acquisition integration costs 4,575 1,282 5,857 Adjustments related to acquisitions and divestitures ( 558 ) 1,134 576 Segment assets 607,386 649,595 1,256,981 As of and for the three months ended July 4, 2021 Segment Revenues $ 267,528 $ 309,178 $ 576,706 Segment EBITDA 36,001 55,464 91,465 Depreciation expense 5,372 5,286 10,658 Amortization of intangibles 4,439 2,733 7,172 Amortization of software development intangible assets 20 302 322 Severance, restructuring, and acquisition integration costs 2,464 576 3,040 Adjustments related to acquisitions and divestitures ( 32 ) 1,944 1,912 Segment assets 522,635 580,653 1,103,288 As of and for the six months ended July 3, 2022 Segment revenues $ 575,874 $ 701,048 $ 1,276,922 Segment EBITDA 72,708 135,588 208,296 Depreciation expense 11,194 11,402 22,596 Amortization of intangibles 8,539 9,455 17,994 Amortization of software development intangible assets 44 1,944 1,988 Severance, restructuring, and acquisition integration costs 4,903 4,677 9,580 Adjustments related to acquisitions and divestitures ( 558 ) 1,134 576 Segment assets 607,386 649,595 1,256,981 As of and for the six months ended July 4, 2021 Segment Revenues $ 493,883 $ 591,506 $ 1,085,389 Segment EBITDA 64,292 103,075 167,367 Depreciation expense 10,735 10,650 21,385 Amortization of intangibles 8,775 6,390 15,165 Amortization of software development intangible assets 52 679 731 Severance, restructuring, and acquisition integration costs 4,416 3,795 8,211 Adjustments related to acquisitions and divestitures ( 6,339 ) 1,877 ( 4,462 ) Asset impairments — 6,995 6,995 Segment assets 522,635 580,653 1,103,288 -14- The following table is a reconciliation of the total of the reportable segments’ Revenues and EBITDA to consolidated revenues and consolidated income from continuing operations before taxes, respectively. Three Months Ended Six Months Ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Total segment revenues $ 666,551 $ 576,706 $ 1,276,922 $ 1,085,389 Adjustments related to acquisitions — ( 849 ) — ( 849 ) Consolidated revenues $ 666,551 $ 575,857 $ 1,276,922 $ 1,084,540 Total Segment EBITDA $ 109,947 $ 91,465 $ 208,296 $ 167,367 Depreciation expense ( 11,370 ) ( 10,658 ) ( 22,596 ) ( 21,385 ) Amortization of intangibles ( 9,177 ) ( 7,172 ) ( 17,994 ) ( 15,165 ) Amortization of software development intangible assets ( 981 ) ( 322 ) ( 1,988 ) ( 731 ) Severance, restructuring, and acquisition integration costs (1) ( 5,857 ) ( 3,040 ) ( 9,580 ) ( 8,211 ) Adjustments related to acquisitions and divestitures (2) ( 576 ) ( 1,912 ) ( 576 ) 4,462 Asset impairments (3) — — — ( 6,995 ) Eliminations ( 50 ) ( 12 ) ( 105 ) ( 45 ) Consolidated operating income 81,936 68,349 155,457 119,297 Interest expense, net ( 11,276 ) ( 14,870 ) ( 25,687 ) ( 30,381 ) Loss on debt extinguishment — — ( 6,392 ) — Total non-operating pension benefit 1,070 1,445 2,270 2,129 Consolidated income from continuing operations before taxes $ 71,730 $ 54,924 $ 125,648 $ 91,045 (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. See Note 12. (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 . See Note 11. -15- Note 7: Income (loss) per Share The following table presents the basis for the income (loss) per share computations: Three Months Ended Six Months Ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Numerator: Income from continuing operations $ 58,642 $ 45,346 $ 102,738 $ 74,411 Less: Net income attributable to noncontrolling interest 81 208 84 283 Income from continuing operations attributable to Belden stockholders 58,561 45,138 102,654 74,128 Add: Loss from discontinued operations, net of tax — ( 1,374 ) ( 3,685 ) ( 1,698 ) Add: Loss on disposal of discontinued operations, net of tax — — ( 4,567 ) — Net income attributable to Belden stockholders $ 58,561 $ 43,764 $ 94,402 $ 72,430 Denominator: Weighted average shares outstanding, basic 44,252 44,759 44,535 44,717 Effect of dilutive common stock equivalents 530 503 644 445 Weighted average shares outstanding, diluted 44,782 45,262 45,179 45,162 For both the three and six months ended July 3, 2022, diluted weighted average shares outstanding exclude outstanding equity awards of 1.1 million as they are anti-dilutive. In addition, for the three and six months ended July 3, 2022, diluted weighted average shares outstanding do not include outstanding equity a wards of 0.2 million and 0.3 million, respectively, becau se the related performance conditions have not been satisfied. For both the three and six months ended July 4, 2021, diluted weighted average shares outstanding exclude outstanding equity awards of 1.3 million as they are anti-dilutive. In addition, for both the three and six months ended July 4, 2021, diluted weighted average shares outstanding do not include outstanding equity a wards of 0.4 million becau se the related performance conditions have not been satisfied. For purposes of calculating basic earnings per share, unvested restricted stock units are not included in the calculation of basic weighted average shares outstanding until all necessary conditions have been satisfied and issuance of the shares underlying the restricted stock units is no longer contingent. Necessary conditions are not satisfied until the vesting date, at which time holders of our restricted stock units receive shares of our common stock. For purposes of calculating diluted earnings per share, unvested restricted stock units are included to the extent that they are dilutive. In determining whether unvested restricted stock units are dilutive, each issuance of restricted stock units is considered separately. Once a restricted stock unit has vested, it is included in the calculation of both basic and diluted weighted average shares outstanding. Note 8: Credit Losses We are exposed to credit losses primarily through sales of products and services. Our expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. -16- Estimates are used to determine the allowance, which is based upon an assessment of anticipated payments as well as other information that is reasonably available. The following table presents the activity in the trade receivables allowance for doubtful accounts for our continuing operations for the three and six months ended July 3, 2022 and July 4, 2021, respectively: 2022 2021 (In thousands) Beginning balance at January 1 $ 4,864 $ 5,085 Current period provision 846 52 Acquisitions 319 — Write-offs ( 667 ) ( 47 ) Recoveries collected ( 50 ) ( 23 ) Fx impact ( 19 ) ( 17 ) Q1 ending balance $ 5,293 $ 5,050 Current period provision 656 224 Acquisitions — ( 192 ) Write-offs ( 64 ) — Recoveries collected ( 12 ) ( 36 ) Fx impact ( 81 ) ( 24 ) Q2 ending balance $ 5,792 $ 5,022 Note 9: Inventories The following table presents the major classes of inventories as of July 3, 2022 and December 31, 2021, respectively: July 3, 2022 December 31, 2021 (In thousands) Raw materials $ 180,808 $ 157,315 Work-in-process 41,850 43,644 Finished goods 214,681 189,907 Gross inventories 437,339 390,866 Excess and obsolete reserves ( 42,993 ) ( 45,663 ) Net inventories $ 394,346 $ 345,203 Note 10: Leases We have operating and finance leases for properties, including manufacturing facilities, warehouses, and office space; as well as vehicles and certain equipment. We make certain judgments in determining whether a contract contains a lease in accordance with ASU 2016-02. Our leases have remaining lease terms of less than 1 year to 17 years; some of which include extension and termination options for an additional 15 years or within 1 year, respectively. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably certain as of the commencement date of the lease. Our lease agreements do not contain any material residual value guarantees or material variable lease payments. We have entered into various short-term operating leases with an initial term of twelve months or less. These leases are not recorded on our balance sheet, and for the three and six months ended July 3, 2022 and July 4, 2021, the rent expense for short-term leases was not material. We have certain property and equipment lease contracts that may contain lease and non-lease components, and we have elected to utilize the practical expedient to account for these components together as a single combined lease component. As the rate implicit in most of our leases is not readily determinable, we use the incremental borrowing rate to determine the present value of the lease payments, which is unique to each leased asset, and is based upon the term of the lease, commencement date of the lease, local currency of the leased asset, and the credit rating of the legal entity leasing the asset. -17- We are party to a lease guarantee, whereby Belden has covenanted the lease payments for one of Grass Valley's property leases through its 2035 expiration date. This lease guarantee was retained by Belden and not transferred to Black Dragon Capital as part of the sale of Grass Valley . Belden would be required to make lease payments only if the primary obligor, Black Dragon Capital, fails to make the payments. As of July 3, 2022, the lease had approximately $ 17.3 million of lease payments remaining. We have not recorded a liability associated with this guarantee. The components of lease expense were as follows: Three Months Ended Six Months Ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Operating lease cost $ 5,365 $ 4,556 $ 10,793 $ 8,986 Finance lease cost Amortization of right-of-use asset $ 446 $ 23 $ 734 $ 55 Interest on lease liabilities 122 2 128 5 Total finance lease cost $ 568 $ 25 $ 862 $ 60 Supplemental cash flow information related to leases was as follows: Three Months Ended Six Months Ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 4,561 $ 3,731 $ 9,337 $ 7,402 Cash paid for finance leases was not material during the three and six months ended July 3, 2022 and July 4, 2021. Supplemental balance sheet information related to leases was as follows: July 3, 2022 December 31, 2021 (In thousands, except lease term and discount rate) Operating leases: Total operating lease right-of-use assets $ 73,225 $ 75,571 Accrued liabilities $ 15,658 $ 16,377 Long-term operating lease liabilities 60,018 61,967 Total operating lease liabilities $ 75,676 $ 78,344 Finance leases: Other long-lived assets, at cost $ 6,321 $ 3,650 Accumulated depreciation ( 451 ) ( 557 ) Other long-lived assets, net $ 5,870 $ 3,093 Weighted Average Remaining Lease Term Operating leases 6 years 6 years Finance leases 10 years 4 years Weighted Average Discount Rate Operating leases 5.0 % 4.8 % Finance leases 4.2 % 4.4 % -18- The following table summarizes maturities of lease liabilities as of July 3, 2022 and December 31, 2021, respectively: July 3, 2022 December 31, 2021 (In thousands) 2022 $ 10,288 $ 20,691 2023 18,136 16,853 2024 15,088 13,662 2025 13,779 12,348 2026 11,966 10,466 Thereafter 28,140 17,967 Total $ 97,397 $ 91,987 Note 11: Long-Lived Assets Depreciation and Amortization Expense We recognized depreciation expense in income from continuing operations of $ 11.4 million and $ 22.6 million in the three and six months ended July 3, 2022, respectively. We recognized depreciation expense in income from continuing operations of $ 10.7 million and $ 21.4 million in the three and six months ended July 4, 2021, respectively. We recognized amortization expense in income from continuing operations of $ 10.2 million and $ 20.0 million in the three and six months ended July 3, 2022, respectively. We recognized amortization expense in income from continuing operations of $ 7.5 million and $ 15.9 million in the three and six months ended July 4, 2021, respectively. Asset Impairment During the six months ended July 4, 2021, we sold our oil and gas cable business in Brazil and recognized an impairment charge of $ 3.4 million . See Note 4. Also during the six months ended July 4, 2021, we performed a recoverability test over certain held and used long-lived assets in our Industrial Automation Solutions segment. We determined that the carrying values of the assets were not recoverable and recognized a $ 3.6 million impairment charge to write them down to fair value. This impairment charge was excluded from Segment EBITDA of our Industrial Automation Solutions segment. Note 12: Severance, Restructuring, and Acquisition Integration Activities Manufacturing Footprint Program We are consolidating our manufacturing footprint in the Americas region. We recognized $ 4.0 million and $ 5.9 million of severance and other restructuring costs for this program during the three and six months ended July 3, 2022 , respectively. The costs were incurred by both the Enterprise Solutions and Industrial Automation Solutions segments. We expect to incur approximately $ 5 million of incremental costs for this program in 2022. Acquisition Integration Program We are integrating our recent acquisitions with our existing businesses to achieve desired cost savings, which are primarily focused on consolidating existing and acquired facilities as well as other support functions. The Enterprise Solutions segment incurred $ 1.0 million of restructuring and integration co sts during the three and six months ended July 3, 2022 related to the CAI acquisition, and the Industrial Automation Solutions segment incurred $ 0.1 million and $ 3.1 million of restructuring and integration costs during the three and six months ended July 3, 2022, respectively, related to the Macmon, NetModule and OTN Systems acquisitions. We expect to incur approximately $ 5 million of incremental costs for this program in 2022. The Enterprise Solutions and Industrial Automation Solutions segments recognized $ 0.6 million and $ 2.4 million of severance and other restructuring and integration costs during the three and six months ended July 4, 2021, respectively related to the OTN Systems and Opterna acquisitions. -19- The restructuring and integration costs incurred during 2022 and 2021 primarily consisted of equipment transfer, costs to consolidate operating and support facilities, retention bonuses, relocation, travel, legal, and other costs. The majority of the restructuring and integration costs related to these actions were paid as incurred or are payable within the next 60 days. Furthermore, t here were no significant severance accrual balances as of July 3, 2022 or December 31, 2021. The following table summarizes the severance and other restructuring and integration costs of the Acquisition Integration Program and Manufacturing Footprint Program described above by financial statement line item in the Condensed Consolidated Statement of Operations: Three Months Ended Six Months Ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Cost of sales $ 4,700 $ — $ 6,064 $ — Selling, general and administrative expenses 422 648 3,933 2,416 Total $ 5,122 $ 648 $ 9,997 $ 2,416 Note 13: Long-Term Debt and Other Borrowing Arrangements The carrying values of our long-term debt were as follows: July 3, 2022 December 31, 2021 (In thousands) Revolving credit agreement due 2026 $ — $ — Senior subordinated notes: 4.125 % Senior subordinated notes due 2026 — 227,240 3.375 % Senior subordinated notes due 2027 471,240 511,290 3.875 % Senior subordinated notes due 2028 366,520 397,670 3.375 % Senior subordinated notes due 2031 314,160 340,860 Total senior subordinated notes 1,151,920 1,477,060 Less unamortized debt issuance costs ( 14,067 ) ( 17,069 ) Long-term debt $ 1,137,853 $ 1,459,991 Revolving Credit Agreement due 2026 On June 2, 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; inventory; 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. Outstanding borrowings in the U.S. and Canada may also, at our election, be priced on a base rate plus a spread that ranges from 0.25 % — 0.75 %, depending on our leverage position. We pay a commitment fee on the total commitments of 0.25 %. In the event that we borrow more than 90 % of our combined borrowing base or our borrowing base availability is less than $ 20.0 million, we are subject to a fixed charge coverage ratio covenant. We paid approximately $ 2.3 million of fees associated with the amended Revolver, which will be amortized over its term using the effective interest method. As of July 3, 2022, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $ 292.8 million. Senior Subordinated Notes We had outstanding € 200.0 million aggregate principal amount of 4.125 % senior subordinated notes due 2026 (the 2026 Notes). During the six months ended July 3, 2022, we repurchased the full € 200.0 million 2026 Notes outstanding for cash consideration of € 204.1 million ($ 227.9 million), including a redemption premium, and recognized a $ 6.4 million loss on debt extinguishment including the write-off of unamortized debt issuance costs. -20- We have outstanding € 450.0 million aggregate principal amount of 3.375 % senior subordinated notes due 2027 (the 2027 Notes). The carrying value of the 2027 Notes as of July 3, 2022 is $ 471.2 million. The 2027 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2027 Notes rank equal in right of payment with our senior subordinated notes due 2031 and 2028 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on January 15 and July 15 of each year. We have outstanding € 350.0 million aggregate principal amount of 3.875 % senior subordinated notes due 2028 (the 2028 Notes). The carrying value of the 2028 Notes as of July 3, 2022 is $ 366.5 million. The 2028 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2028 Notes rank equal in right of payment with our senior subordinated notes due 2031 and 2027 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on March 15 and September 15 of each year. We have outstanding € 300.0 million aggregate principal amount of 3.375 % senior subordinated notes due 2031 (the 2031 Notes). The carrying value of the 2031 Notes as of July 3, 2022 is $ 314.2 million. The 2031 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2031 Notes rank equal in right of payment with our senior subordinated notes due 2028 and 2027 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantor s, including our Revolver. Interest is payable semiannually on January 15 and July 15 of each year. Fair Value of Long-Term Debt The fair value of our senior subordinated notes as of July 3, 2022 was approximately $ 948.9 million based on quoted prices of the debt instruments in inactive markets (Level 2 valuation). This amount represents the fair value of our senior subordinated notes with a carrying value of $ 1,151.9 million as of July 3, 2022. Note 14: Net Investment Hedge All of our euro denominated notes were issued by Belden Inc., a USD functional currency entity. As of July 3, 2022, € 567.8 million o f our outstanding foreign denominated debt is designated as a net investment hedge on the foreign currency risk of our net investment in our euro foreign operations. The objective of the hedge is to protect the net investment in the foreign operation against adverse changes in the euro exchange rate. The transaction gain or loss is reported in the translation adjustment section of other comprehensive income. For the six months ended July 3, 2022 and July 4, 2021, the transaction gain associated with the net investment hedge reported in other comprehensive income was $ 53.5 million and $ 28.8 million, respectively. During the six months ended July 3, 2022, we de-designated € 200.0 million of our outstanding debt that was previously designated as a net investment hedge. After the de-designation, transaction gains or losses associated with this € 200.0 million of debt are reported in income from continuing operations. Note 15: Income Taxes 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 % 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 six months ended July 4, 2021 , we recognized income tax expense of $ 9.6 million and $ 16.6 million, respectively, representing an effective tax rate of 17.4 % and 18.3 %, respectively. The effective tax rates were primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits. Note 16: Pension and Other Postretirement Obligations The following table provides the components of net periodic benefit costs for our pension and other postretirement benefit plans: -21- Pension Obligations Other Postretirement Obligations July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Three Months Ended Service cost $ 819 $ 1,155 $ 6 $ 9 Interest cost 2,287 1,897 193 186 Expected return on plan assets ( 3,798 ) ( 4,527 ) — — Amortization of prior service cost 44 28 — — Actuarial losses (gains) 224 976 ( 20 ) ( 5 ) Net periodic benefit cost (income) $ ( 424 ) $ ( 471 ) $ 179 $ 190 Six Months Ended Service cost $ 1,730 $ 2,041 $ 12 $ 18 Interest cost 4,592 3,703 388 363 Expected return on plan assets ( 7,761 ) ( 8,195 ) — — Amortization of prior service cost 91 56 — — Actuarial losses (gains) 460 1,955 ( 40 ) ( 11 ) Net periodic benefit cost (income) $ ( 888 ) $ ( 440 ) $ 360 $ 370 Note 17: Comprehensive Income and Accumulated Other Comprehensive Income (Loss) The following table summarizes total comprehensive income (losses): Three Months Ended Six Months Ended July 3, 2022 July 4, 2021 July 3, 2022 July 4, 2021 (In thousands) Net income $ 58,642 $ 43,972 $ 94,486 $ 72,713 Foreign currency translation adjustments, net of tax 51,945 ( 22,257 ) 55,707 30,507 Adjustments to pension and postretirement liability, net of tax 181 763 374 1,527 Total comprehensive income 110,768 22,478 150,567 104,747 Less: Comprehensive income (loss) attributable to noncontrolling interests 56 ( 21 ) 86 ( 143 ) Comprehensive income attributable to Belden $ 110,712 $ 22,499 $ 150,481 $ 104,890 The tax impacts of the foreign currency translation adjustments and pension liability adjustments in the table above are not material. The accumulated balances related to each component of other comprehensive income (loss), net of tax, are as follows: Foreign Currency Translation Component Pension and Other Postretirement Benefit Plans Accumulated Other Comprehensive Income (Loss) (In thousands) Balance at December 31, 2021 $ ( 41,468 ) $ ( 29,098 ) $ ( 70,566 ) Other comprehensive income attributable to Belden before reclassifications 58,712 — 58,712 Amounts reclassified from accumulated other comprehensive income (loss) ( 3,007 ) 374 ( 2,633 ) Net current period other comprehensive income attributable to Belden 55,705 374 56,079 Balance at July 3, 2022 $ 14,237 $ ( 28,724 ) $ ( 14,487 ) -22- The following table summarizes the effects of reclassifications from accumulated other comprehensive income (loss) for the six months ended July 3, 2022: Amount Reclassified from Accumulated Other Comprehensive Income (2) Affected Line Item in the Consolidated Statements of Operations and Comprehensive Income (In thousands) Amortization of pension and other postretirement benefit plan items: Actuarial losses $ 420 (1) Prior service cost 91 (1) Total before tax 511 Tax benefit ( 137 ) Total net of tax $ 374 (1) The amortization of these accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit costs (see Note 16). (2) In addition, we reclassified $ 3.0 million of accumulated foreign currency translation gains associated with the sale of Tripwire. Note 18: Share Repurchase In 2018, our Board of Directors authorized a share repurchase program, which allows us to purchase up to $ 300.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance with applicable securities laws and other restrictions. This program is funded with cash on hand and cash flows from operating activities. 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 . Subsequent to July 3, 2022, we repurchased 0.6 million shares of our common stock for an aggregate cost of $ 33.4 million at an average price per share of $ 55.74 . As of the date of this filing, we had $ 115.0 million of authorizations remaining under the program. During the three and six months ended July 4, 2021, we did no t repurchase any stock. -23-