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Item 1. Financial Statements

2023-08-03 compared with 2023-05-08 · 223 added, 115 removed, 496 unchanged (41% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

(In thousands)

34 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands, except per share data)

34 unchanged sentences

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

Three Months Ended

April 2, 2023 April 3, 2022

Six Months Ended

July 2, 2023 July 3, 2022

(In thousands)

13 unchanged sentences

Other liabilities 3,805 ( 10,452 )

Net cash used for operating activities ( 31,872 ) ( 57,955 )

Net cash provided by (used for) operating activities 54,715 ( 8,581 )

Cash flows from investing activities:

Capital expenditures ( 13,844 ) ( 10,963 )

Cash used for business acquisitions, net of cash acquired ( 97,585 ) ( 104,123 )

Capital expenditures ( 32,729 ) ( 31,010 )

Proceeds from disposal of tangible assets 9 1,424

13 unchanged sentences

Cash and cash equivalents, end of period $ 514,767 $ 527,682

The Condensed Consolidated Cash Flow Statement for the three months ended April 3, 2022 includes the results of discontinued operations up to the February 22, 2022 disposal date.

The Condensed Consolidated Cash Flow Statement for the six months ended July 3, 2022 includes the results of discontinued operations up to the February 22, 2022 disposal date.

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

17 unchanged sentences

Balance at April 2, 2023 50,335 $ 503 $ 809,596 $ 812,564 ( 7,788 ) $ ( 465,969 ) $ ( 23,171 ) $ 694 $ 1,134,217

Net income — — — 68,753 — — — 22 68,775

Other comprehensive income (loss), net of tax — — — — — — ( 4,863 ) 2 ( 4,861 )

Sale and deconsolidation of Hite JV — — — — — — ( 139 ) ( 695 ) ( 834 )

Retirement Savings Plan stock contributions — — 663 — 24 1,379 — — 2,042

Exercise of stock options, net of tax withholding forfeitures — — ( 2,698 ) — 27 767 — — ( 1,931 )

Conversion of restricted stock units into common stock, net of tax withholding forfeitures — — ( 4,130 ) — 55 2,413 — — ( 1,717 )

Share repurchase program, net of excise tax — — — — ( 394 ) ( 36,463 ) — — ( 36,463 )

Share-based compensation — — 5,901 — — — — — 5,901

Common stock dividends ($ 0.05 per share)

— — — ( 2,138 ) — — — — ( 2,138 )

Balance at July 2, 2023 50,335 $ 503 $ 809,332 $ 879,179 ( 8,076 ) $ ( 497,873 ) $ ( 28,173 ) $ 23 $ 1,162,991

Additional Accumulated

14 unchanged sentences

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

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

17 unchanged sentences

Our fiscal second and third quarters each have 91 days.

The three months ended April 3, 2022 included 93 days.

The six months ended July 2, 2023 and July 3, 2022 included 183 and 184 days, respectively.

Fair Value Measurement

4 unchanged sentences

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

As of and during the three months ended April 2, 2023 and April 3, 2022, we utilized Level 1 inputs to determine the fair value of cash equivalents.

We did not have any transfers between Level 1 and Level 2 fair value measurements during the three months ended April 2, 2023 and April 3, 2022.

As of and during the three and six months ended July 2, 2023 and July 3, 2022, we utilized Level 1 inputs to determine the fair value of cash equivalents.

We did not have any transfers between Level 1 and Level 2 fair value measurements during the six months ended July 2, 2023 and July 3, 2022.

Cash and Cash Equivalents

1 unchanged sentence

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

As of April 2, 2023, we did not have any such cash equivalents on hand.

As of July 2, 2023, we had an immaterial amount of cash equivalents.

The primary objective of our investment activities is to preserve our capital for the purpose of funding operations.

6 unchanged sentences

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

As of April 2, 2023, we were party to standby letters of credit, bank guaranties, and surety bonds totaling $ 8.7 million, $ 4.4 million, and $ 3.8 million, respectively.

As of July 2, 2023, we were party to standby letters of credit, surety bonds, and bank guaranties totaling $ 8.7 million, $ 4.7 million, and $ 4.3 million, respectively.

Revenue Recognition

3 unchanged sentences

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 April 2, 2023.

Noncontrolling Interest

We had a 51 % ownership percentage in a joint venture with Shanghai Hi-Tech Control System Co, Ltd (Hite).

The joint venture develops and provides certain Industrial Automation Solutions products and integrated solutions to customers in China.

On April 28, 2023, we sold our 51 % ownership interest in Shanghai Hi-Tech Control System Co, Ltd to (Hite) for $ 0.9 million and recognized a $ 0.4 million pretax gain on sale.

The sale also includes $ 0.6 million of potential earnout payments.

The joint venture developed and provided certain Industrial Automation Solutions products and integrated solutions to customers in China.

The joint venture was determined to not have sufficient equity at risk;

therefore, it was considered a variable interest entity.

We determined that Belden was 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 was the primary beneficiary of the joint venture, we 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 was not material to our consolidated financial statements as of or for the periods ended April 2, 2023 and April 3, 2022.

On April 28, 2023, we sold our 51 % ownership percentage to Hite for $ 0.9 million.

The sale also includes $ 0.6 million of potential earnout payments.

We deconsolidated the joint venture as of April 28, 2023.

Certain Belden subsidiaries include a noncontrolling interest as of and for the periods ended April 2, 2023 and April 3, 2022 .

As Belden was the primary beneficiary of the joint venture, due to both our ownership percentage and control over the activities of the joint venture, we consolidated the joint venture in our financial statements and presented the results of the joint venture attributable to Hite’s ownership as net income attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations up to April 28, 2023 when we sold and deconsolidated the entity.

The joint venture was not material to our consolidated financial statements during the six months ended July 2, 2023 and July 3, 2022.

A Belden subsidiary includes a noncontrolling interest as of and for the periods ended July 2, 2023 and July 3, 2022 .

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.

5 unchanged sentences

Solutions Industrial Automation Smart Buildings Total

Three Months Ended April 2, 2023 (In thousands)

Three Months Ended July 2, 2023 (In thousands)

Enterprise Solutions $ 159,332 $ — $ 153,197 $ 312,529

1 unchanged sentence

Total $ 159,332 $ 379,716 $ 153,197 $ 692,245

Three Months Ended April 3, 2022

Three Months Ended July 3, 2022

Enterprise Solutions $ 146,771 $ — $ 160,673 $ 307,444

1 unchanged sentence

Total $ 146,771 $ 359,107 $ 160,673 $ 666,551

Six Months Ended July 2, 2023

Enterprise Solutions $ 290,887 $ — $ 296,985 $ 587,872

Industrial Automation Solutions — 746,162 — 746,162

Total $ 290,887 $ 746,162 $ 296,985 $ 1,334,034

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

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 April 2, 2023 (In thousands)

Three Months Ended July 2, 2023 (In thousands)

Enterprise Solutions $ 246,471 $ 36,671 $ 29,387 $ 312,529

1 unchanged sentence

Total $ 460,323 $ 145,726 $ 86,196 $ 692,245

Three Months Ended April 3, 2022

Three Months Ended July 3, 2022

Enterprise Solutions $ 233,501 $ 36,497 $ 37,446 $ 307,444

1 unchanged sentence

Total $ 447,546 $ 128,262 $ 90,743 $ 666,551

Six Months Ended July 2, 2023

Enterprise Solutions $ 460,358 $ 74,119 $ 53,395 $ 587,872

Industrial Automation Solutions 429,065 210,976 106,121 746,162

Total $ 889,423 $ 285,095 $ 159,516 $ 1,334,034

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

We generate revenues primarily by selling products that support communication, infrastructure, and delivery solutions that make the digital journey simpler, smarter, and more secure.

9 unchanged sentences

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

Adjustments to revenue for performance obligations satisfied in prior periods were not significant during the three months ended April 2, 2023 and April 3, 2022 .

Adjustments to revenue for performance obligations satisfied in prior periods were not significant during the three and six months ended July 2, 2023 and July 3, 2022 .

The following table presents estimated and accrued variable consideration:

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

(in thousands)

5 unchanged sentences

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 April 2, 2023, total deferred revenue was $ 29.3 million, and of this amount, $ 22.6 million is expected to be recognized within the next twelve months, and the remaining $ 6.7 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 months ended April 2, 2023 and April 3, 2022, respectively:

As of July 2, 2023, total deferred revenue was $ 29.7 million, and of this amount, $ 22.7 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 2, 2023 and July 3, 2022, respectively:

(In thousands)

4 unchanged sentences

Balance at the end of Q1 $ 29,295 $ 31,449

Service-type warranties represent $ 8.2 million of the deferred revenue balance at April 2, 2023, and of this amount $ 3.9 million is expected to be recognized in the next twelve months, and the remaining $ 4.3 million is long-term and will be recognized over a period greater than twelve months.

As of April 2, 2023 and December 31, 2022, we did not have any material contract assets recorded in the Condensed Consolidated Balance Sheets.

New deferrals 6,900 4,265

Revenue recognized ( 6,528 ) ( 8,880 )

Balance at the end of Q2 $ 29,667 $ 26,834

Service-type warranties represent $ 9.5 million of the deferred revenue balance at July 2, 2023, and of this amount $ 4.9 million is expected to be recognized in the next twelve months, and the remaining $ 4.6 million is long-term and will be recognized over a period greater than twelve months.

As of July 2, 2023 and December 31, 2022, 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 April 2, 2023 and December 31, 2022.

We did not have any capitalized sales commissions on our balance sheet as of July 2, 2023 and December 31, 2022.

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

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands)

Sales commissions $ 6,316 $ 6,131 $ 12,089 $ 11,354

On April 17, 2023, we acquired Berthold Sichert GmbH (Sichert) with cash on hand for $ 97.5 million, net of cash acquired.

Sichert, based in Berlin, Germany, designs and manufactures a portfolio of polycarbonate street cabinets utilized in outside plant passive optical networks (“PON”) and 5G networks.

Sichert is reported within the Enterprise Solutions segment.

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

Receivables $ 6,781

Inventory 13,061

Other current assets 1,840

Property, plant and equipment 7,057

Intangible assets 52,597

Goodwill 27,831

Other long-lived assets 1,303

Total assets acquired $ 110,470

Accounts payable $ 2,423

Accrued liabilities 1,884

Deferred income taxes 8,659

Total liabilities assumed $ 12,966

Net assets $ 97,504

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, 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 $ 6.8 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.

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 broadband & 5G product offerings in end-to-end solutions.

Our tax basis in the acquired goodwill is zero .

The intangible assets related to the acquisition consisted of the following:

Fair Value Amortization Period

(In thousands) (In years)

Intangible assets subject to amortization:

Customer relationships $ 49,131 15.0

Trademarks 2,456 2.0

Sales backlog 1,010 0.2

Total intangible assets subject to amortization $ 52,597

Intangible assets not subject to amortization:

Goodwill $ 27,831 n/a

Total intangible assets not subject to amortization $ 27,831

Total intangible assets $ 80,428

Weighted average amortization period 14.1

The amortizable intangible assets reflected in the table above were determined by us to have finite lives.

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.

Discontinued Operations

2 unchanged sentences

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 three months ended April 3, 2022.

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 from January 1, 2022 to the February 22, 2022 disposal date (in thousands):

6 unchanged sentences

Loss before taxes $ ( 5,540 )

During the three months ended April 3, 2022, th e Tripwire disposal group did not have any capital expenditures and recognized share-based compensation expense of $ 0.2 million.

The disposal group did not have any significant non-cash charges for investing activities during the three months ended April 3 , 2022 .

During the six months ended July 3, 2022, th e Tripwire disposal group did not have any capital expenditures and recognized share-based compensation expense of $ 0.2 million.

The disposal group did not have any significant non-cash charges for investing activities during the six months ended July 3, 2022 .

Reportable Segments

17 unchanged sentences

(In thousands)

As of and for the three months ended April 2, 2023

As of and for the three months ended July 2, 2023

Segment Revenues $ 312,529 $ 379,716 $ 692,245

6 unchanged sentences

Segment assets 648,344 699,092 1,347,436

As of and for the three months ended April 3, 2022

As of and for the three months ended July 3, 2022

Segment Revenues $ 307,444 $ 359,107 $ 666,551

4 unchanged sentences

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 six months ended July 2, 2023

Segment revenues $ 587,872 $ 746,162 $ 1,334,034

Segment EBITDA 81,161 152,418 233,579

Depreciation expense 12,147 12,889 25,036

Amortization of intangibles 10,703 10,033 20,736

Amortization of software development intangible assets — 3,272 3,272

Severance, restructuring, and acquisition integration costs 1,694 4,077 5,771

Adjustments related to acquisitions and divestitures 325 222 547

Segment assets 648,344 699,092 1,347,436

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

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

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands)

12 unchanged sentences

Consolidated income from continuing operations before taxes $ 84,431 $ 71,730 $ 162,255 $ 125,648

(1) Severance, restructuring, and acquisition integration costs for the three months ended April 2, 2023 and April 3, 2022 primarily related to our Acquisition Integration program.

(2) During the three months ended April 2, 2023, we incurred $ 0.3 million for fair value adjustments of acquired investments.

(1) Severance, restructuring, and acquisition integration costs for the three and six months ended July 2, 2023 and July 3, 2022 included costs related to our Acquisition Integration program.

(2) Adjustments related to acquisitions and divestitures included fair value adjustments of acquired inventory and investments as well as gains associated with the sales of businesses.

Income (loss) per Share

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

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands)

8 unchanged sentences

Weighted average shares outstanding, diluted 43,088 44,782 43,380 45,179

For the three months ended April 2, 2023 and April 3, 2022, diluted weighted average shares outstanding excluded outstanding equity awards of 0.2 million and 1.1 million, respectively, as they were anti-dilutive.

In addition, for both the three months ended April 2, 2023 and April 3, 2022, diluted weighted average shares outstanding did not include outstanding equity a wards of 0.1 million becau se the related performance conditions have not been satisfied.

For both the three and six months ended July 2, 2023, diluted weighted average shares outstanding excluded outstanding equity awards of 0.2 million as they were anti-dilutive.

In addition, for both the three and six months ended July 2, 2023, diluted weighted average shares outstanding did not include outstanding equity a wards of 0.2 million becau se the related performance conditions have not been satisfied.

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 awards of 0.2 million and 0.3 million, respectively, because the related performance conditions have not been satisfied.

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

10 unchanged sentences

Balances are written off when determined to be uncollectible.

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 months ended April 2, 2023 and April 3, 2022, respectively:

Provisions and recoveries are included in selling, general and administrative expenses.

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 2, 2023 and July 3, 2022, respectively:

(In thousands)

6 unchanged sentences

Q1 ending balance $ 11,930 $ 5,293

The following table presents the major classes of inventories as of April 2, 2023 and December 31, 2022 , respectively:

April 2, 2023 December 31, 2022

Current period provision 4,194 656

Acquisitions 19 —

Fx impact 11 ( 81 )

Write-offs — ( 64 )

Recoveries collected ( 8 ) ( 12 )

Q2 ending balance $ 16,146 $ 5,792

The following table presents the major classes of inventories as of July 2, 2023 and December 31, 2022 , respectively:

July 2, 2023 December 31, 2022

(In thousands)

16 unchanged sentences

As a result, we utilize 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.

Our lease agreements do not contain material residual value gu arantees.

Our variable lease expense was approximately $ 0.8 million for each the three months ended April 2, 2023 and April 3, 2022.

Our lease agreements do not contain material residual value guarantees.

Our variable lease expense was approximately $ 0.8 million and $ 1.6 million for the three and six months ended July 2, 2023, respectively.

Our variable lease expense was approximately $ 0.7 million and $ 1.5 million for the three and six months ended July 3, 2022, respectively.

The components of lease expense were as follows:

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands)

5 unchanged sentences

Supplemental cash flow information related to leases was as follows:

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands)

1 unchanged sentence

Operating cash flows from operating leases $ 4,625 $ 4,561 $ 9,290 $ 9,337

Operating cash flows from finance leases were not material during the three months ended April 2, 2023 and April 3, 2022.

Operating cash flows from finance leases were not material during the three and six months ended July 2, 2023 and July 3, 2022 .

Supplemental balance sheet information related to leases was as follows:

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

(In thousands, except lease term and discount rate)

12 unchanged sentences

Total finance lease liabilities $ 6,363 $ 6,319

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

(In thousands, except lease term and discount rate)

5 unchanged sentences

Finance leases 4.2 % 4.2 %

The following table summarizes maturities of lease liabilities as of April 2, 2023 and December 31, 2022, respectively:

April 2, 2023 December 31, 2022

The following table summarizes maturities of lease liabilities as of July 2, 2023 and December 31, 2022, respectively:

July 2, 2023 December 31, 2022

(In thousands)

6 unchanged sentences

Total $ 81,305 $ 83,431

In addition, we are party to two lease guarantees.

Belden covenanted the lease payments for two Grass Valley property leases which will expire in 2029 and 2035, and collectively have approximately $ 19 million of fixed lease payments remaining.

In addition, we covenanted the lease payments for certain Grass Valley property leases which include expiration dates through 2035, and collectively have approximately $ 23 million of fixed lease payments remaining.

These lease guarantees were retained by Belden and not transferred to the buyer of Grass Valley.

During 2022, Grass Valley defaulted on both property leases.

As of April 2, 2023, we have a liability for expected, future payments of $ 8.8 million.

During 2022, Grass Valley defaulted on two property leases.

As of July 2, 2023, we have a liability for expected, future payments of $ 8.2 million .

The liability is based on certain assumptions, such as receiving a level of sublease income, that we will reassess on an ongoing basis.

2 unchanged sentences

Depreciation and Amortization Expense

We recognized depreciation expense in income from continuing operations of $ 12.4 million and $ 11.2 million in the three months ended April 2, 2023 and April 3, 2022, respectively.

We recognized amortization expense in income from continuing operations of $ 11.1 million and $ 9.8 million in the three months ended April 2, 2023 and April 3, 2022, respectively.

We recognized depreciation expense in income from continuing operations of $ 12.7 million and $ 25.0 million in the three and six months ended July 2, 2023, respectively.

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 amortization expense in income from continuing operations of $ 12.9 million and $ 24.0 million in the three and six months ended July 2, 2023, 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.

Asset Held for Sale

On January 18, 2023, we entered into an agreement to sell our property in Ontario, Canada as part of a sale and leaseback transaction for $ 17.4 million.

During the six months ended July 2, 2023, we entered into an agreement to sell our property in Ontario, Canada as part of a sale and leaseback transaction for $ 15.6 million.

When the asset met the held for sale criteria, we performed a recoverability test and determined that the carrying value of the property to be disposed of is less than the purchase price less cost to sell;

5 unchanged sentences

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 Industrial Automation Solutions segment incurred $ 0.7 million and $ 3.0 million of restructuring and integration co sts during the three months ended April 2, 2023 and April 3, 2022, respectively.

The Enterprise Solutions segment incurred $ 1.3 million of restructuring and integration costs during the three and six months ended July 2, 2023, and the Industrial Automation Solutions segment incurred $ 0.1 million and $ 0.8 million of restructuring and integration co sts during the three and six months ended July 2, 2023, respectively.

The Enterprise Solutions segment incurred $ 1.0 million of restructuring and integration costs during the three and six months ended July 3, 2022, 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.

The restructuring and integration costs incurred during 2023 and 2022 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 April 2, 2023 or December 31, 2022.

Furthermore, t here were no significant severance accrual balances as of July 2, 2023 or December 31, 2022.

The following table summarizes the severance and other restructuring and integration costs of the Acquisition Integration Program described above by financial statement line item in the Condensed Consolidated Statement of Operations:

Three Months Ended

April 2, 2023 April 3, 2022

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands)

1 unchanged sentence

Selling, general and administrative expenses 1,323 647 1,997 3,258

Research and development expenses 94 — 94 —

Total $ 1,417 $ 1,167 $ 2,091 $ 4,150

1 unchanged sentence

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

April 2, 2023 December 31, 2022

July 2, 2023 December 31, 2022

(In thousands)

20 unchanged sentences

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.

As of April 2, 2023, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $ 291.9 million.

As of July 2, 2023, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $ 291.2 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 three months ended April 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.

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.

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 April 2, 2023 is $ 487.4 million.

The carrying value of the 2027 Notes as of July 2, 2023 is $ 490.5 million.

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

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We have outstanding € 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 April 2, 2023 is $ 379.1 million.

The carrying value of the 2028 Notes as of July 2, 2023 is $ 381.5 million.

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

2 unchanged sentences

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 April 2, 2023 is $ 324.9 million.

The carrying value of the 2031 Notes as of July 2, 2023 is $ 327.0 million.

The 2031 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries.

2 unchanged sentences

Fair Value of Long-Term Debt

The fair value of our senior subordinated notes as of April 2, 2023 was approximately $ 1,073.2 million based on quoted prices of the debt instruments in inactive markets (Level 2 valuation).

This amount represents the fair value of our senior subordinated notes with a carrying value of $ 1,191.4 million as of April 2, 2023.

The fair value of our senior subordinated notes as of July 2, 2023 was approximately $ 1,099.5 million based on quoted prices of the debt instruments in inactive markets (Level 2 valuation).

This amount represents the fair value of our senior subordinated notes with a carrying value of $ 1,199.0 million as of July 2, 2023.

Net Investment Hedge

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

As of April 2, 2023, € 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.

As of July 2, 2023, € 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 three months ended April 2, 2023 and April 3, 2022, the transaction gain (loss) associated with the net investment hedge reported in other comprehensive income was $( 9.1 ) million and $ 13.7 million, respectively.

For the six months ended July 2, 2023 and July 3, 2022, the transaction gain (loss) associated with the net investment hedge reported in other comprehensive income was $( 13.0 ) million and $ 53.5 million, respectively.

In 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.

For the three months ended April 2, 2023 and April 3, 2022, we recognized income tax expense of $ 14.9 million and $ 9.8 million, respectively, representing an effective tax rate of 19.1 % and 18.2 %, respectively.

For the three and six months ended July 2, 2023, we recognized income tax expense of $ 15.7 million and $ 30.5 million, respectively, representing an effective tax rate of 18.5 % and 18.8 %, respectively.

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

1 unchanged sentence

None of the tax provisions of the Act are expected to have a material impact to our consolidated financial statements and related disclosures.

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 % for each period.

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

Pension and Other Postretirement Obligations

1 unchanged sentence

Pension Obligations Other Postretirement Obligations

April 2, 2023 April 3, 2022 April 2, 2023 April 3, 2022

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands)

6 unchanged sentences

Net periodic benefit cost (income) $ 137 $ ( 424 ) $ 64 $ 179

Six Months Ended

Service cost $ 1,534 $ 1,730 $ 6 $ 12

Interest cost 7,554 4,592 503 388

Expected return on plan assets ( 8,438 ) ( 7,761 ) — —

Amortization of prior service cost 87 91 — —

Actuarial losses (gains) ( 458 ) 460 ( 382 ) ( 40 )

Net periodic benefit cost (income) $ 279 $ ( 888 ) $ 127 $ 360

Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

The following table summarizes total comprehensive income (losses):

Three Months Ended

April 2, 2023 April 3, 2022

The following table summarizes total comprehensive income:

Three Months Ended Six Months Ended

July 2, 2023 July 3, 2022 July 2, 2023 July 3, 2022

(In thousands)

6 unchanged sentences

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, net of tax, are as follows:

Foreign Currency Translation Component Pension and Other

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

Currency Translation Component Pension and

Postretirement

4 unchanged sentences

Other comprehensive loss attributable to Belden before reclassifications ( 21,599 ) — ( 21,599 )

Amounts reclassified from accumulated other comprehensive income (loss) — ( 280 ) ( 280 )

Amounts reclassified from accumulated other comprehensive loss ( 139 ) ( 564 ) ( 703 )

Net current period other comprehensive loss attributable to Belden ( 21,738 ) ( 564 ) ( 22,302 )

Balance at April 2, 2023 $ ( 18,964 ) $ ( 4,207 ) $ ( 23,171 )

The following table summarizes the effects of reclassifications from accumulated other comprehensive income (loss) for the three months ended April 2, 2023:

Balance at July 2, 2023 $ ( 23,682 ) $ ( 4,491 ) $ ( 28,173 )

The following table summarizes the effects of reclassifications from accumulated other comprehensive loss for the six months ended July 2, 2023:

Reclassified from Accumulated Other Comprehensive Income (2) Affected Line Item in the Consolidated Statements of Operations and Comprehensive Loss

7 unchanged sentences

(1) The amortization of these accumulated other comprehensive loss components are included in the computation of net periodic benefit costs (see Note 15).

(2) In addition, we reclassified $ 0.1 million of accumulated foreign currency translation gains associated with the sale of the Hite JV.

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 April 2, 2023 , we repurchased 0.6 million shares of our common stock for an aggregate cost of $ 50.0 million at an average price per share of $ 84.18 .

As of April 2, 2023, we had $ 15.0 million of authorizations remaining under the program.

On April 24, 2023, our Board of Directors authorized an additional $ 300.0 million under the share repurchase program.

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

During the three months ended July 2, 2023 , we repurchased 0.4 million shares of our common stock for an aggregate cost of $ 36.2 million at an average price per share of $ 92.01 .

During the six months ended July 2, 2023 , we repurchased 1.0 million shares of our common stock for an aggregate cost of $ 86.2 million at an average price per share of $ 87.30 .

As of July 2, 2023, we had $ 278.8 million of authorizations remaining under the program.

This share repurchase authorization does not have an expiration date.

As of the date of this filing, we had $ 315.0 million of authorizations remaining under the program.

During the three months ended April 3, 2022 , we repurchased 0.9 million shares of our common stock for an aggregate cost of $ 50.0 million at an average price per share of $ 56.51 .

Subsequent Events

On April 17, 2023, we acquired Berthold Sichert GmbH (Sichert) for approximately $ 98 million, which we funded with cash on hand.

Sichert, based in Berlin Germany, designs and manufactures a portfolio of polycarbonate street cabinets utilized in outside plant passive optical networks (“PON”) and 5G networks.

Sichert will be reported within the Enterprise Solutions segment.

On April 24, 2023, our Board of Directors authorized an additional $ 300.0 million under the share repurchase program.

On April 28, 2023, we sold our 51 % ownership interest in Shanghai Hi-Tech Control System Co, Ltd to Hite for $ 0.9 million.

The sale also includes $ 0.6 million of potential earnout payments.

We deconsolidated the joint venture as of April 28, 2023.

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 .

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

What changed 10-Q

Item 1. Financial Statements