UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________

FORM 10-Q

_________________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 29, ~~2019~~2020

Commission File No. 001-12561

_________________________________________________

BELDEN INC.

(Exact name of registrant as specified in its charter)

_________________________________________________



Delaware						36-3601505
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1 North Brentwood Boulevard

15th Floor

St. Louis,, Missouri63105

(Address of principal executive offices)

(~~314~~) (314) 854-8000

Registrant’s telephone number, including area code

_________________________________________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐.

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbols

Name of each exchange on which registered

Common stock, $0.01 par value

BDC

New York Stock Exchange

As of ~~October 31, 2019,~~April 30, 2020, the Registrant ~~had 45,457,559 outstanding~~had 44,517,470 outstanding shares of common stock.

PART I FINANCIAL INFORMATION


~~PART I~~	~~FINANCIAL INFORMATION~~

Item 1. Financial Statements

BELDEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 29, 2019			December 31, 2018				March 29, 2020		December 31, 2019
	(Unaudited)							(Unaudited)
	(In thousands)							(In thousands)
ASSETS	ASSETS						ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	296,742		$	420,610		Cash and cash equivalents	$	250,993	$	407,480
Receivables, net	460,044			465,939			Receivables, net	307,064		334,634
Inventories, net	290,995			316,418			Inventories, net	252,921		231,333
Other current assets	74,876			55,757			Other current assets	31,781		29,172
Current assets of discontinued operations							Current assets of discontinued operations	344,212		375,135
Total current assets	1,122,657			1,258,724			Total current assets	$	1,186,971	1,377,754
Property, plant and equipment, less accumulated depreciation	384,183			365,970			Property, plant and equipment, less accumulated depreciation	336,441		345,918
Operating lease right-of-use assets	78,788			—			Operating lease right-of-use assets	58,960		62,251
Goodwill	1,265,006			1,557,653			Goodwill	1,238,837		1,243,669
Intangible assets, less accumulated amortization	471,386			511,093			Intangible assets, less accumulated amortization	323,648		339,505
Deferred income taxes	88,118			56,018			Deferred income taxes	23,758		25,216
Other long-lived assets	31,857			29,863			Other long-lived assets	10,693		12,446
	$	3,441,995		$	3,779,321			$	3,179,308	$	3,406,759

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	275,889		$	352,646		Accounts payable	$	220,195	$	268,466
Accrued liabilities	301,599			364,276			Accrued liabilities	218,568		283,799
Current liabilities of discontinued operations							Current liabilities of discontinued operations	135,455		170,279
Total current liabilities	577,488			716,922			Total current liabilities	574,218		722,544
Long-term debt	1,403,670			1,463,200			Long-term debt	1,385,438		1,439,484
Postretirement benefits	127,090			132,791			Postretirement benefits	124,968		136,227
Deferred income taxes	75,192			39,943			Deferred income taxes	46,796		48,725
Long-term operating lease liabilities	73,436			—			Long-term operating lease liabilities	52,084		55,652
Other long-term liabilities	40,309			38,877			Other long-term liabilities	42,769		38,308
Stockholders’ equity:							Stockholders’ equity:
Preferred stock	—			1
Common stock	503			503			Common stock	503		503
Additional paid-in capital	807,087			1,139,395			Additional paid-in capital	812,490		811,955
Retained earnings	667,703			922,000			Retained earnings	501,611		518,004
Accumulated other comprehensive loss	(29,111		)	(74,907		)	Accumulated other comprehensive loss	(41,095)		(63,418)
Treasury stock	(307,482		)	(599,845		)	Treasury stock	(326,266)		(307,197)
Total Belden stockholders’ equity	1,138,700			1,387,147			Total Belden stockholders’ equity	947,243		959,847
Noncontrolling interests	6,110			441			Noncontrolling interests	5,792		5,972
Total stockholders’ equity	1,144,810			1,387,588			Total stockholders’ equity	953,035		965,819
	$	3,441,995		$	3,779,321			$	3,179,308	$	3,406,759

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						Nine Months Ended							Three Months Ended
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018				March 29, 2020		March 31, 2019

	(In thousands, except per share data)													(In thousands, except per share data)
Revenues	$	620,318		$	655,774		$	1,845,023		$	1,929,978		Revenues	$	463,526	$	500,140
Cost of sales	(384,916		)	(394,917		)	(1,143,870		)	(1,180,931		)	Cost of sales	(293,025)		(313,284)
Gross profit	235,402			260,857			701,153			749,047			Gross profit	170,501		186,856
Selling, general and administrative expenses	(120,169		)	(132,716		)	(365,439		)	(396,430		)	Selling, general and administrative expenses	(98,389)		(97,955)
Research and development expenses	(31,351		)	(33,471		)	(100,539		)	(107,781		)	Research and development expenses	(26,219)		(23,247)
Amortization of intangibles	(22,243		)	(25,533		)	(67,952		)	(74,990		)	Amortization of intangibles	(16,185)		(18,164)
Goodwill and other asset impairment	(342,146		)	—			(342,146		)	—
Gain from patent litigation	—			62,141			—			62,141
Operating income (loss)	(280,507		)	131,278			(174,923		)	231,987

Operating income													Operating income	29,708		47,490
Interest expense, net	(14,200		)	(14,472		)	(42,561		)	(46,538		)	Interest expense, net	(13,324)		(13,988)
Non-operating pension benefit	489			1,356			1,517			824			Non-operating pension benefit	699		603
Loss on debt extinguishment	—			—			—			(22,990		)
Income (loss) before taxes	(294,218		)	118,162			(215,967		)	163,283
Income from continuing operations before taxes													Income from continuing operations before taxes	17,083		34,105
Income tax expense	(2,797		)	(32,304		)	(13,580		)	(46,063		)	Income tax expense	(2,192)		(6,170)
Income from continuing operations													Income from continuing operations	14,891		27,935
Loss from discontinued operations, net of tax													Loss from discontinued operations, net of tax	(26,110)		(2,757)
Net income (loss)	(297,015		)	85,858			(229,547		)	117,220			Net income (loss)	(11,219)		25,178
Less: Net income (loss) attributable to noncontrolling interests	(6		)	(23		)	60			(148		)
Less: Net loss attributable to noncontrolling interests													Less: Net loss attributable to noncontrolling interests	(30)		(24)
Net income (loss) attributable to Belden	(297,009		)	85,881			(229,607		)	117,368			Net income (loss) attributable to Belden	(11,189)		25,202
Less: Preferred stock dividends	971			8,732			18,437			26,198			Less: Preferred stock dividends	—		8,733
Net income (loss) attributable to Belden common stockholders	$	(297,980	)	$	77,149		$	(248,044	)	$	91,170		Net income (loss) attributable to Belden common stockholders	$	(11,189)	$	16,469

Weighted average number of common shares and equivalents:													Weighted average number of common shares and equivalents:
Basic	44,444			40,510			41,090			40,960			Basic	45,390		39,420
Diluted	44,444			47,678			41,090			41,268			Diluted	45,538		39,660

Basic income (loss) per share attributable to Belden common stockholders	$	(6.70	)	$	1.90		$	(6.04	)	$	2.23
Basic income (loss) per share attributable to Belden common stockholders:													Basic income (loss) per share attributable to Belden common stockholders:
Continuing operations attributable to Belden common stockholders													Continuing operations attributable to Belden common stockholders	$	0.33	$	0.48
Discontinued operations attributable to Belden common stockholders													Discontinued operations attributable to Belden common stockholders	(0.58)		(0.07)
Net income (loss) per share attributable to Belden common stockholders													Net income (loss) per share attributable to Belden common stockholders	$	(0.25)	$	0.42

Diluted income (loss) per share attributable to Belden common stockholders	$	(6.70	)	$	1.80		$	(6.04	)	$	2.21
Diluted income (loss) per share attributable to Belden common stockholders:													Diluted income (loss) per share attributable to Belden common stockholders:
Continuing operations attributable to Belden common stockholders													Continuing operations attributable to Belden common stockholders	$	0.33	$	0.48
Discontinued operations attributable to Belden common stockholders													Discontinued operations attributable to Belden common stockholders	(0.58)		(0.07)
Net income (loss) per share attributable to Belden common stockholders													Net income (loss) per share attributable to Belden common stockholders	$	(0.25)	$	0.42

Comprehensive income (loss) attributable to Belden	$	(263,530	)	$	68,620		$	(183,811	)	$	129,727
Comprehensive income attributable to Belden													Comprehensive income attributable to Belden	$	11,134	$	54,211

Common stock dividends declared per share	$	0.05		$	0.05		$	0.15		$	0.15		Common stock dividends declared per share	$	0.05	$	0.05

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

-2-

BELDEN INC.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)


	Nine Months Ended							Three Months Ended
	September 29, 2019			September 30, 2018				March 29, 2020		March 31, 2019

	(In thousands)							(In thousands)
Cash flows from operating activities:							Cash flows from operating activities:
Net income (loss)	$	(229,547	)	$	117,220		Net income (loss)	$	(11,219)	$	25,178
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Goodwill and other asset impairment	342,146			—
Adjustments to reconcile net income (loss) to net cash used for operating activities:							Adjustments to reconcile net income (loss) to net cash used for operating activities:
Depreciation and amortization	108,328			111,896			Depreciation and amortization	26,798		37,001
Asset impairment of discontinued operations							Asset impairment of discontinued operations	23,197		—
Share-based compensation	12,115			14,657			Share-based compensation	3,708		2,216
Loss on debt extinguishment	—			22,990
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:							Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:
Receivables	6,002			(25,338		)	Receivables	43,627		61,388
Inventories	32,261			(16,642		)	Inventories	(29,054)		(9,485)
Accounts payable	(78,346		)	(81,296		)	Accounts payable	(50,827)		(97,450)
Accrued liabilities	(70,368		)	(29,474		)	Accrued liabilities	(38,425)		(70,925)
Income taxes	(19,650		)	4,463			Income taxes	(16,500)		609
Other assets	(9,088		)	(13,267		)	Other assets	6,144		650
Other liabilities	(4,336		)	(4,350		)	Other liabilities	(9,501)		4,758
Net cash provided by operating activities	89,517			100,859
Net cash used for operating activities							Net cash used for operating activities	(52,052)		(46,060)
Cash flows from investing activities:							Cash flows from investing activities:
Capital expenditures	(74,068		)	(63,451		)	Capital expenditures	(20,935)		(23,595)
Cash used to acquire businesses, net of cash acquired	(50,951		)	(84,580		)
Cash from business acquisitions, net of cash acquired							Cash from business acquisitions, net of cash acquired	590		—
Proceeds from disposal of tangible assets	19			1,556			Proceeds from disposal of tangible assets	2,090		10
Proceeds from disposal of business	—			40,171
Net cash used for investing activities	(125,000		)	(106,304		)	Net cash used for investing activities	(18,255)		(23,585)
Cash flows from financing activities:							Cash flows from financing activities:
Payment of earnout consideration							Payment of earnout consideration	(29,300)		—
Payments under share repurchase program	(50,000		)	(125,000		)	Payments under share repurchase program	(21,239)		—
Cash dividends paid	(32,153		)	(32,421		)	Cash dividends paid	(2,296)		(10,725)
Withholding tax payments for share-based payment awards	(2,063		)	(2,004		)	Withholding tax payments for share-based payment awards	(1,003)		(1,940)
Other	(232		)	—			Other	(58)		(70)
Payments under borrowing arrangements	—			(484,757		)
Debt issuance costs paid	—			(7,609		)
Redemption of stockholders' rights agreement	—			(411		)
Borrowings under credit arrangements	—			431,270
Net cash used for financing activities	(84,448		)	(220,932		)	Net cash used for financing activities	(53,896)		(12,735)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(3,937		)	(5,704		)	Effect of foreign currency exchange rate changes on cash and cash equivalents	(7,947)		752
Decrease in cash and cash equivalents	(123,868		)	(232,081		)	Decrease in cash and cash equivalents	(132,150)		(81,628)
Cash and cash equivalents, beginning of period	420,610			561,108			Cash and cash equivalents, beginning of period	425,885		420,610
Cash and cash equivalents, end of period	$	296,742		$	329,027		Cash and cash equivalents, end of period	$	293,735	$	338,982

For all periods presented, the Condensed Consolidated Cash Flow Statement includes the results of the Grass Valley disposal group.

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, 2019		50,335	$	503	$	811,955	$	518,004	(4,877)	$	(307,197)	$	(63,418)	$	5,972	$	965,819
Cumulative effect of change in accounting principle		—	—		—		(2,916)		—	—		—		—		(2,916)
Net loss		—	—		—		(11,189)		—	—		—		(30)		(11,219)
Other comprehensive income (loss), net of tax		—	—		—		—		—	—		22,323		(150)		22,173
Exercise of stock options, net of tax withholding forfeitures		—	—		(542)		—		7	370		—		—		(172)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures		—	—		(2,631)		—		29	1,800		—		—		(831)
Share repurchase program		—	—		—		—		(592)	(21,239)		—		—		(21,239)
Share-based compensation		—	—		3,708		—		—	—		—		—		3,708
Common stock dividends ($0.05 per share)		—	—		—		(2,288)		—	—		—		—		(2,288)
Balance at March 29, 2020		50,335	$	503	$	812,490	$	501,611	(5,433)	$	(326,266)	$	(41,095)	$	5,792	$	953,035


		Belden Inc. Stockholders
	Mandatory Convertible									Additional									Accumulated Other		Non-controlling
	Preferred Stock					Common Stock						Paid-In	Retained		Treasury Stock							Comprehensive
	Shares		Amount		Shares	Amount		Capital		Earnings		Shares	Amount		Income (Loss)		Interests		Total
		(In thousands)
Balance at December 31, 2018	52		$	1	50,335	$	503	$	1,139,395	$	922,000	(10,939)	$	(599,845)	$	(74,907)	$	441	$	1,387,588

Net income (loss)	—		—		—	—		—		25,202		—	—		—		(24)		25,178
Other comprehensive income, net of tax	—		—		—	—		—		—		—	—		29,009		1		29,010
Exercise of stock options, net of tax withholding forfeitures	—		—		—	—		(54)		—		1	16		—		—		(38)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—		—		—	—		(2,570)		—		58	668		—		—		(1,902)

Share-based compensation	—		—		—	—		2,216		—		—	—		—		—		2,216
Preferred stock dividends	—		—		—	—		—		(8,733)		—	—		—		—		(8,733)
Common stock dividends ($0.05 per share)	—		—		—	—		—		(1,990)		—	—		—		—		(1,990)
Balance at March 31, 2019	52		$	1	50,335	$	503	$	1,138,987	$	936,479	(10,880)	$	(599,161)	$	(45,898)	$	418	$	1,431,329

Belden Inc. Stockholders
Mandatory Convertible Additional
Accumulated
Other
Non-controlling
Preferred Stock Common Stock Paid-In Retained Treasury Stock Comprehensive
Shares Amount Shares Amount Capital Earnings Shares Amount Income (Loss) Interests Total
(In thousands)
Balance at December 31, 2018 52
$ 1
50,335
$ 503
$ 1,139,395
$ 922,000
(10,939 ) $ (599,845 ) $ (74,907 ) $ 441
$ 1,387,588
Net income (loss) —
—
—
—
—
25,202
—
—
—
(24 ) 25,178
Other comprehensive income, net of tax —
—
—
—
—
—
—
—
29,009
1
29,010
Exercise of stock options, net of tax withholding forfeitures —
—
—
—
(54 ) —
1
16
—
—
(38 )
Conversion of restricted stock units into common stock, net of tax withholding forfeitures —
—
—
—
(2,570 ) —
58
668
—
—
(1,902 )
Share-based compensation —
—
—
—
2,216
—
—
—
—
—
2,216
Preferred stock dividends ($168.75 per share) —
—
—
—
—
(8,733 ) —
—
—
—
(8,733 )
Common stock dividends ($0.05 per share) —
—
—
—
—
(1,990 ) —
—
—
—
(1,990 )
Balance at March 31, 2019 52
$ 1
50,335
$ 503
$ 1,138,987
$ 936,479
(10,880 ) $ (599,161 ) $ (45,898 ) $ 418
$ 1,431,329
Net income —
—
—
—
—
42,200
—
—
—
90
42,290
Other comprehensive income (loss), net of tax —
—
—
—
—
—
—
—
(16,693 ) 40
(16,653 )
Acquisition of business with noncontrolling interests —
—
—
—
—
—
—
—
—
4,775
4,775
Exercise of stock options, net of tax withholding forfeitures —
—
—
—
(10 ) —
—
2
—
—
(8 )
Conversion of restricted stock units into common stock, net of tax withholding forfeitures —
—
—
—
(861 ) —
29
807
—
—
(54 )
Share repurchase program —
—
—
—
—
—
(397 ) (22,815 ) —
—
(22,815 )
Share-based compensation —
—
—
—
5,378
—
—
—
—
—
5,378
Preferred stock dividends ($168.75 per share) —
—
—
—
—
(8,733 ) —
—
—
—
(8,733 )
Common stock dividends ($0.05 per share) —
—
—
—
—
(1,976 ) —
—
—
—
(1,976 )
Balance at June 30, 2019 52
$ 1
50,335
$ 503
$ 1,143,494
$ 967,970
(11,248 ) $ (621,167 ) $ (62,591 ) $ 5,323
$ 1,433,533
Net loss —
—
—
—
—
(297,009 ) —
—
—
(6 ) (297,015 )
Other comprehensive income, net of tax —
—
—
—
—
—
—
—
33,480
373
33,853
Adjustment to acquisition of business with noncontrolling interests —
—
—
—
—
—
—
—
—
420
420
Exercise of stock options, net of tax withholding forfeitures —
—
—
—
(25 ) —
1
11
—
—
(14 )
Conversion of restricted stock units into common stock, net of tax withoholding forfeitures —
—
—
—
(115 ) —
2
70
—
—
(45 )
Share repurchase program —
—
—
—
—
—
(493 ) (27,185 ) —
—
(27,185 )
Share-based compensation —
—
—
—
4,521
—
—
—
—
—
4,521
Preferred stock conversion (52 ) (1 ) —
—
(340,788 ) —
6,857
340,789
—
—
—
Preferred stock dividends ($18.76 per share) —
—
—
—
—
(971 ) —
—
—
—
(971 )
Common stock dividends ($0.05 per share) —
—
—
—
—
(2,287 ) —
—
—
—
(2,287 )
Balance at September 29, 2019 —

$ —

50,335

$ 503

$ 807,087

$ 667,703

(4,881 )
$ (307,482 )
$ (29,111 )
$ 6,110

$ 1,144,810

Belden Inc. Stockholders
Mandatory Convertible Additional
Accumulated
Other
Non-controlling
Preferred Stock Common Stock Paid-In Retained Treasury Stock Comprehensive
Shares Amount Shares Amount Capital Earnings Shares Amount Income (Loss) Interests Total
(In thousands)
Balance at December 31, 2017 52
$ 1
50,335
$ 503
$ 1,123,832
$ 833,610
(8,316 ) $ (425,685 ) $ (98,026 ) $ 631
$ 1,434,866
Cumulative effect of change in accounting principles —
—
—
—
—
(29,041 ) —
—
—
—
(29,041 )
Net income (loss) —
—
—
—
—
2,618
—
—
—
(48 ) 2,570
Other comprehensive income (loss), net of tax —
—
—
—
—
—
—
—
(31,408 ) 16
(31,392 )
Exercise of stock options, net of tax withholding forfeitures —
—
—
—
(352 ) —
7
(9 ) —
—
(361 )
Conversion of restricted stock units into common stock, net of tax withholding forfeitures —
—
—
—
(1,242 ) —
27
100
—
—
(1,142 )
Share repurchase program —
—
—
—
—
—
(1,050 ) (75,270 ) —
—
(75,270 )
Share-based compensation —
—
—
—
3,126
—
—
—
—
—
3,126
Redemption of stockholders' rights agreement —
—
—
—
—
(411 ) —
—
—
—
(411 )
Preferred stock dividends ($168.75 per share) —
—
—
—
—
(8,733 ) —
—
—
—
(8,733 )
Common stock dividends ($0.05 per share) —
—
—
—
—
(2,066 ) —
—
—
—
(2,066 )
Balance at April 1, 2018 52
$ 1
50,335
$ 503
$ 1,125,364
$ 795,977
(9,332 ) $ (500,864 ) $ (129,434 ) $ 599
$ 1,292,146
Net income (loss) —
—
—
—
—
28,869
—
—
—
(77 ) 28,792
Other comprehensive income (loss), net of tax —
—
—
—
—
—
—
—
61,028
(17 ) 61,011
Exercise of stock options, net of tax withholding forfeitures —
—
—
—
(64 ) —
2
20
—
—
(44 )
Conversion of restricted stock units into common stock, net of tax withholding forfeitures —
—
—
—
(552 ) —
19
520
—
—
(32 )
Share repurchase program —
—
—
—
—
—
(388 ) (24,730 ) —
—
(24,730 )
Share-based compensation —
—
—
—
4,742
—
—
—
—
—
4,742
Preferred stock dividends ($168.75 per share) —
—
—
—
—
(8,733 ) —
—
—
—
(8,733 )
Common stock dividends ($0.05 per share) —
—
—
—
—
(2,042 ) —
—
—
—
(2,042 )
Balance at July 1, 2018 52
$ 1
50,335
$ 503
$ 1,129,490
$ 814,071
(9,699 ) $ (525,054 ) $ (68,406 ) $ 505
$ 1,351,110
Net income (loss) —
—
—
—
—
85,881
—
—
—
(23 ) 85,858
Other comprehensive income (loss), net of tax —
—
—
—
—
—
—
—
(17,261 ) (6 ) (17,267 )
Exercise of stock options, net of tax withholding forfeitures —
—
—
—
(467 ) —
11
107
—
—
(360 )
Conversion of restricted stock units into common stock, net of tax withholding forfeitures —
—
—
—
(113 ) —
2
48
—
—
(65 )
Share repurchase program —
—
—
—
—
—
(344 ) (25,000 ) —
—
(25,000 )
Share-based compensation —
—
—
—
6,789
—
—
—
—
—
6,789
Preferred stock dividends ($168.75 per share) —
—
—
—
—
(8,732 ) —
—
—
—
(8,732 )
Common stock dividends ($0.05 per share) —
—
—
—
—
(2,031 ) —
—
—
—
(2,031 )
Balance at Balance at September 30, 2018 52

$ 1

50,335

$ 503

$ 1,135,699

$ 889,189

(10,030 )
$ (549,899 )
$ (85,667 )
$ 476

$ 1,390,302

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

-4-

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, ~~2018:~~2019:

•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 ~~2018~~2019 Annual Report on Form 10-K.

Business Description

We are a global supplier of specialty networking solutions built around 2 global business platforms - Enterprise Solutions and Industrial 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.

Effective January 1, 2020, we transferred our West Penn Wire business and multi-conductor product lines from the Enterprise Solutions segment to the Industrial Solutions segment as a result of a shift in responsibilities among the segments. We have recast the prior period segment information to conform to the change in the composition of reportable segments.

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 March ~~31, 2019,~~29, 2020, the ~~90th~~89th day of our fiscal year ~~2019.~~2020. Our fiscal second and third quarters each have 91 days. The ~~nine~~three months ended ~~September~~March 29, 2020 and March 31, 2019 included 89 and ~~September 30, 2018 included 272 and 273~~90 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 nine~~ months ended ~~September~~March 29, ~~2019~~2020 and ~~September 30, 2018,~~March 31, 2019, 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 10). We did not have any transfers between Level 1 and Level 2 fair value measurements during the ~~nine~~three months ended ~~September~~March 29, ~~2019~~2020 and ~~September 30, 2018.~~March 31, 2019.

-5-

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 ~~September~~March 29, ~~2019,~~2020, 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.

During the three months ended March 29, 2020, we paid the sellers of Snell Advanced Media (SAM) the full earnout consideration of $31.4 million in cash as per the purchase agreement. SAM was acquired on February 8, 2018 and is included in the Grass Valley disposal group.

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. These lawsuits primarily involve 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 materially adverse effect on our financial position, results of operations, or cash flow.

As of ~~September~~March 29, ~~2019,~~2020, we were party to standby letters of credit, bank guaranties, and surety bonds totaling ~~$9.7~~$7.2 million, ~~$3.9~~$4.2 million, and $3.3 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. See Note ~~17.~~19.

~~Current-Year Adoption~~Noncontrolling Interest

We have a 51% ownership percentage in a joint venture with Shanghai Hi-Tech Control System Co, Ltd (Hite). The purpose of ~~Accounting Pronouncements~~

~~In February 2016,~~ the ~~FASB issued Accounting Standards Update No. 2016-02,~~ ~~Leases~~ ~~("ASU 2016-02"),~~joint venture is to develop and provide certain Industrial 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 ~~leasing standard for~~variable interest entity. We have determined that Belden is the primary beneficiary of the joint venture, due to both ~~lessees~~our ownership percentage and ~~lessors~~our control over the activities of the joint venture that ~~supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840, "Leases." Under~~most significantly impact its ~~core principle, a lessee will recognize a right-of-use (ROU) asset and lease liability~~economic performance based on the balance sheet for nearly all leased assets, and additional disclosures are required to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Lessor accounting remains largely consistent with existing U.S. generally accepted accounting principles. We adopted ASU 2016-02 on January 1, 2019 using the permitted transition method issued in July 2018, under ASU No. 2018-11 (“ASU 2018-11”), ~~Leases: Targeted Improvements~~, which provides an additional (and optional) transition method for adopting the new lease standard. Furthermore, we elected the following practical expedients and accounting policy elections upon adoption: (i) the package of practical expedients as defined in ASU 2016-02, (ii) the short-term lease accounting policy election, (iii) the practical expedient to not separate non-lease components from lease components, and (iv) the easement practical expedient, which permits an entity to continue applying its current policy for accounting for land easements that existed asterms of the ~~effective date~~joint venture agreement with Hite. Because Belden is the primary beneficiary of ~~ASU 2016-02.~~the joint venture, we have consolidated the joint venture in our financial statements. The ~~adoption~~results of ~~ASU 2016-02 on January 1, 2019 resulted~~the joint venture attributable to Hite’s ownership are presented as net income (loss) attributable to noncontrolling interest in the recognition of right-of-use assets of approximately $90.5 million and lease liabilities for operating leases of approximately $103.4 million on the Condensed Consolidated Balance Sheet, with no material impact to the Condensed Consolidated Statements of ~~Operations or~~Operations. The joint venture is not material to our Condensed Consolidated ~~Cash Flow Statement.~~financial statements as of or for the periods ended March 29, 2020 and March 31, 2019.

Furthermore, certain subsidiaries of our Opterna business, which we acquired in April of 2019 include noncontrolling interests. Because we have a controlling financial interest in these subsidiaries, they are consolidated into our financial statements. The ~~difference between the initial lease liabilities and the ROU assets is related primarily to previously existing lease liabilities. See Note 7 for further information regarding the impact~~results of these subsidiaries were consolidated into our financial statements as of the ~~adoption of ASU 2016-02 on~~acquisition date. The results that are attributable to the ~~Company's financial statements.~~

~~In August 2017, the FASB issued Accounting Standards Update No. ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements~~noncontrolling interest holders are presented as net income attributable to ~~Accounting for Hedging Activities~~ (“ASU 2017-12”). The new guidance better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The new guidance also makes certain targeted improvements to simplify the application of hedge accounting guidance and ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. The standard is effective for fiscal years beginning after December 15, 2018. We adopted ASU 2017-12 effective January 1, 2019. The adoption had no impact on our results of operations.

~~In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”),~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~. ASU 2018-02 provides an option to allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The new guidance is effective for annual and interim periods beginning after December 15, 2018. We adopted ASU 2018-02 effective January 1, 2019, and elected to not reclassify the income tax effects of the Act from accumulated other comprehensive income to retained earnings. The adoption had no impact on our results of operations.

~~In June 2018, the FASB issued ASU No. 2018-07 (“ASU 2018-07”),~~ ~~Improvements to Nonemployee Share-Based Payment Accounting~~. The amendments in ASU 2018-07 expand the scope of Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from non-employees, and provide that non-employee share-based payment awards be measured at their grant-date fair value and the probability of satisfying performance conditions be taken into account when non-employee share-based payment awards contain such conditions. The standard is effective for fiscal years beginning after December 15, 2018. We adopted ASU 2018-07 effective January 1, 2019. The adoption had no impact on our results of operations.

~~In August 2018, the Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532,~~ ~~Disclosure Update and Simplification~~, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. Additionally, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presentednoncontrolling interests in the ~~balance sheet must be provided in a note~~Condensed Consolidated Statements of Operations. An immaterial amount of Opterna's annual revenues are generated from transactions with the noncontrolling interests. The subsidiaries of Opterna that include noncontrolling interests are not material to our Condensed Consolidated financial statements as of or ~~separate statement. The analysis should present a reconciliation of~~for the ~~beginning balance to the ending balance of each~~ period ~~presented. This final rule was effective on November 5, 2018. We implemented SEC Release No. 33-10532 effective January 1, 2019, which had no impact on our results of operations.~~ended March 29, 2020.

~~Pending~~

-6-

Current-Year Adoption of ~~Recent~~ Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses. ~~The main provisions~~Under the new standard, we are required to recognize estimated credit losses expected to occur over the estimated life or remaining contractual life of an asset (which includes losses that may be incurred in future periods) using a broader range of information including past events, current conditions, and reasonable and supportable forecasts about future economic conditions. We adopted ASU 2016-13 ~~provide financial statement users with more decision-useful information about the expected credit losses~~ on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date, and require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The new standard will be effective for us beginning January 1, ~~2020. Early adoption is permitted. We are currently evaluating~~2020, which resulted in an increase to our allowance for doubtful accounts for continuing operations of $1.0 million, and an increase for discontinued operations of $1.9 million. As of March 29, 2020, there have been no material adjustments, individually or in the ~~impact this update will have on our consolidated financial statements and related disclosures.~~aggregate, to the allowance for doubtful accounts under the new credit loss model other than the $2.9 million transition adjustment.

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. The following tables present our revenues disaggregated by major product category.

Cable & Connectivity Networking, Software & Security Total Revenues

Three Months Ended September 29, 2019 (In thousands)
Enterprise Solutions $ 263,857
$ 104,223
$ 368,080
Industrial Solutions 149,537
102,701
252,238
Total $ 413,394
$ 206,924
$ 620,318

Three Months Ended September 30, 2018
Enterprise Solutions $ 271,928
$ 116,923
$ 388,851
Industrial Solutions 162,460
104,463
266,923
Total $ 434,388
$ 221,386
$ 655,774

Nine Months Ended September 29, 2019
Enterprise Solutions $ 765,909
$ 298,560
$ 1,064,469
Industrial Solutions 475,166
305,388
780,554
Total $ 1,241,075
$ 603,948
$ 1,845,023

Nine Months Ended September 30, 2018
Enterprise Solutions $ 785,970
$ 348,906
$ 1,134,876
Industrial Solutions 498,062
297,040
795,102
Total $ 1,284,032
$ 645,946
$ 1,929,978


	Cable & Connectivity		Networking, Software & Security		Total Revenues

Three Months Ended March 29, 2020	(In thousands)
Enterprise Solutions	$	204,836	$	7,377	$	212,213
Industrial Solutions	167,052		84,261		251,313
Total	$	371,888	$	91,638	$	463,526

Three Months Ended March 31, 2019
Enterprise Solutions	$	201,262	$	5,821	$	207,083
Industrial Solutions	190,917		102,140		293,057
Total	$	392,179	$	107,961	$	500,140

The following tables present our revenues disaggregated by geography, based on the location of the customer purchasing the product.


										Americas		EMEA		APAC		Total Revenues
	Americas		EMEA		APAC		Total Revenues

Three Months Ended September 29, 2019	(In thousands)
Three Months Ended March 29, 2020									Three Months Ended March 29, 2020	(In thousands)
Enterprise Solutions	$	250,382	$	70,949	$	46,749	$	368,080	Enterprise Solutions	$	155,429	$	35,862	$	20,922	$	212,213
Industrial Solutions	147,940		62,701		41,597		252,238		Industrial Solutions	156,400		65,966		28,947		251,313
Total	$	398,322	$	133,650	$	88,346	$	620,318	Total	$	311,829	$	101,828	$	49,869	$	463,526

Three Months Ended September 30, 2018
Three Months Ended March 31, 2019									Three Months Ended March 31, 2019
Enterprise Solutions	$	254,320	$	72,467	$	62,064	$	388,851	Enterprise Solutions	$	146,821	$	34,136	$	26,126	$	207,083
Industrial Solutions	156,334		71,280		39,309		266,923		Industrial Solutions	184,983		73,315		34,759		293,057
Total	$	410,654	$	143,747	$	101,373	$	655,774	Total	$	331,804	$	107,451	$	60,885	$	500,140

Nine Months Ended September 29, 2019
Enterprise Solutions	$	706,291	$	211,226	$	146,952	$	1,064,469
Industrial Solutions	454,773		207,740		118,041		780,554
Total	$	1,161,064	$	418,966	$	264,993	$	1,845,023

Nine Months Ended September 30, 2018
Enterprise Solutions	$	735,794	$	228,394	$	170,688	$	1,134,876
Industrial Solutions	461,667		217,851		115,584		795,102
Total	$	1,197,461	$	446,245	$	286,272	$	1,929,978

The following tables present our revenues disaggregated by products, including software products, and support and services.


	Products		Support & Services		Total Revenues

Three Months Ended March 29, 2020	(In thousands)
Enterprise Solutions	$	212,213	$	—	$	212,213
Industrial Solutions	232,103		19,210		251,313
Total	$	444,316	$	19,210	$	463,526

Three Months Ended March 31, 2019
Enterprise Solutions	$	207,083	$	—	$	207,083
Industrial Solutions	271,113		21,944		293,057
Total	$	478,196	$	21,944	$	500,140

Products Support & Services Total Revenues

Three Months Ended September 29, 2019 (In thousands)
Enterprise Solutions $ 346,501
$ 21,579
$ 368,080
Industrial Solutions 231,223
21,015
252,238
Total $ 577,724
$ 42,594
$ 620,318

Three Months Ended September 30, 2018
Enterprise Solutions $ 368,389
$ 20,462
$ 388,851
Industrial Solutions 243,578
23,345
266,923
Total $ 611,967
$ 43,807
$ 655,774

Nine Months Ended September 29, 2019
Enterprise Solutions $ 1,004,631
$ 59,838
$ 1,064,469
Industrial Solutions 715,367
65,187
780,554
Total $ 1,719,998
$ 125,025
$ 1,845,023

Nine Months Ended September 30, 2018
Enterprise Solutions $ 1,080,549
$ 54,327
$ 1,134,876
Industrial Solutions 723,653
71,449
795,102
Total $ 1,804,202
$ 125,776
$ 1,929,978

-7-

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 selling price and recognized when or as each performance obligation is satisfied. 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. Generally, we determine relative selling price using the prices charged to customers on a standalone basis.

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 nine~~ months ended ~~September~~March 29, ~~2019~~2020 and ~~September 30, 2018.~~March 31, 2019.

The following table presents estimated and accrued variable consideration:

September 29, 2019 September 30, 2018

(in thousands)
Accrued rebates $ 29,468
$ 30,089
Accrued returns 14,304
9,265
Price adjustments recognized against gross accounts receivable 30,454
28,963


	March 29, 2020		March 31, 2019

	(in thousands)
Accrued rebates	$	17,672	$	17,704
Accrued returns	10,491		8,148
Price adjustments recognized against gross accounts receivable	26,837		25,572

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 when or as the services are performed depending on the terms of the arrangement. As of ~~September~~March 29, ~~2019,~~2020, total deferred revenue was ~~$99.2~~$69.5 million, and of this amount, ~~$86.5~~$51.0 million is expected to be recognized within the next twelve months, and the remaining ~~$12.7~~$18.5 million is long-term and is expected to be recognized over a period greater than twelve months.

The following table presents deferred revenue activity:

Nine Months Ended
September 29, 2019 September 30, 2018

(In thousands)
Beginning balance $ 113,347
$ 104,412
New deferrals 141,263
135,827
Revenue recognized (155,400 ) (149,400 )
Ending balance $ 99,210
$ 90,839


	Three Months Ended
	March 29, 2020		March 31, 2019

	(In thousands)
Beginning balance	$	70,070	$	72,358
New deferrals	23,830		26,033
Revenue recognized	(24,415)		(32,168)
Ending balance	$	69,485	$	66,223

We expense sales commissions as incurred when the duration of the related revenue arrangement is one year or less. We capitalize sales commissions in other current and long-lived assets on our balance sheet when the original duration of the related revenue arrangement is longer than one year, and we amortize it over the related revenue arrangement period.

Total capitalized sales commissions was $3.0 million as of ~~September~~March 29, ~~2019~~2020 and ~~$2.3~~$3.4 million as of ~~September 30, 2018.~~March 31, 2019. The following table presents sales commissions that are recorded within selling, general and administrative expenses:


	Three Months ended
	March 29, 2020		March 31, 2019

	(In thousands)
Sales commissions	$	4,175	$	5,033

Three Months ended Nine Months Ended
September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018

(In thousands)
Sales commissions $ 5,112
$ 5,931
$ 15,881
$ 18,392

-8-

Note 3: Acquisitions

Special Product Company

On December 6, 2019, we purchased substantially all the assets, and assumed certain specified liabilities of Special Product Company (SPC) for a preliminary purchase price of $22.5 million. SPC, based in Kansas City, Kansas, is a leading designer, manufacturer, and seller of outdoor cabinet products for optical fiber cable installations. The results of SPC have been included in our Condensed Consolidated Financial Statements from December 6, 2019, and are reported within the Enterprise Solutions segment. The acquisition of SPC was not material to our financial position or results of operations.

Opterna International Corp.

We acquired 100% of the shares of Opterna International Corp. (Opterna) on April 15, 2019 for a ~~preliminary~~ purchase price, net of cash acquired, of $51.7 million. Of the $51.7 million purchase price, ~~$45.5 million and $0.4~~$45.9 million was paid ~~on April 15, 2019 and September 25, 2019, respectively,~~ with cash on hand. The acquisition included a potential earnout, which is based upon future Opterna financial targets through April 15, 2021. The maximum earnout consideration is $25.0 million, but based upon a third party valuation specialist using certain assumptions in a discounted cash flow model, the estimated fair value of the earnout included

in the purchase price is $5.8 million. Opterna is an international fiber optics solutions business based in Sterling, Virginia, which designs and manufactures a range of complementary fiber connectivity, cabinet, and enclosure products used in optical networks. The results of Opterna have been included in our Condensed Consolidated Financial Statements from April 15, 2019, and are reported within the Enterprise Solutions segment. Certain subsidiaries of Opterna include noncontrolling interests. Because Opterna has a controlling financial interest in these subsidiaries, they are consolidated into our financial statements. The results that are attributable to the noncontrolling interest holders are presented as net income attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations. An immaterial amount of Opterna's annual revenues are generated from transactions with the noncontrolling interests. On October 25, 2019, we purchased the noncontrolling interest of one subsidiary for a purchase price of $0.8 million; of which $0.4 million was paid at closing and the remaining $0.4 million will be paid in 2021.

The following table summarizes the estimated, ~~preliminary~~ fair values of the assets acquired and the liabilities assumed as of April 15, 2019 (in thousands):


Receivables	$	5,308
Inventory	7,359
Prepaid and other current assets	566
Property, plant, and equipment	1,328
Intangible assets	28,000
Goodwill	35,012
Deferred income taxes	151
Operating lease right-to-use assets	2,204
Other long-lived assets	2,070
Total assets acquired	$	81,998

Accounts payable	$	4,847
Accrued liabilities	4,325
Long-term deferred tax liability	6,815
Long-term operating lease liability	1,923
Other long-term liabilities	7,152
Total liabilities assumed	$	25,062
Net assets	56,936

Noncontrolling interests	5,195

Net assets attributable to Belden	$	51,741

Receivables $ 5,308
Inventory 7,470
Prepaid and other current assets 566
Property, plant, and equipment 1,328
Intangible assets 28,000
Goodwill 35,565
Deferred income taxes 36
Operating lease right-to-use assets 2,204
Other long-lived assets 2,070
Total assets acquired $ 82,547

Accounts payable $ 4,847
Accrued liabilities 4,346
Long-term deferred tax liability 7,342
Long-term operating lease liability 1,923
Other long-term liabilities 7,153
Total liabilities assumed $ 25,611
Net assets 56,936

Noncontrolling interests 5,195

Net assets attributable to Belden $ 51,741

The above purchase price allocation is preliminary, and is subject to revision as additional information about the fair value of individual assets and liabilities becomes available. The preliminary measurement of receivables, inventories, intangible assets, goodwill, deferred income taxes, other assets and liabilities, and noncontrolling interests are subject to change. A changeWe did not record any material measurement-period adjustments in the ~~estimated fair value~~first quarter of ~~the net assets acquired or noncontrolling interests will change the amount of the purchase price allocable to goodwill.~~2020.

During the third quarter 2019, we recorded measurement-period adjustments that decreased goodwill by approximately $9.4 million primarily for changes in the fair value of the earnout. The impact of these adjustments to the consolidated statement of operations was immaterial.

-9-

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.

The ~~preliminary~~ fair value of acquired receivables is $5.3 million, which is equivalent to its gross contractual amount.

For purposes of the above allocation, we based our ~~preliminary~~ estimate of the fair values for the acquired inventory, intangible assets, and noncontrolling interests on valuation studies performed by a third party valuation firm. We have estimated a ~~preliminary~~ fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post acquisition selling efforts. 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).

Our preliminary estimate of the fair values for the noncontrolling interests were based on the comparable EBITDA multiple valuation technique (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 expansion of product offerings in the optical fiber market. Our tax basis in the acquired goodwill is 0. The intangible assets related to the acquisition consisted of the following:

Fair Value Amortization Period
(In thousands) (In years)
Intangible assets subject to amortization:
Developed technologies $ 3,400
5.0
Customer relationships 22,800
15.0
Sales backlog 1,300
0.5
Trademarks 500
2.0
Total intangible assets subject to amortization $ 28,000

Intangible assets not subject to amortization:
Goodwill $ 35,565
n/a
Total intangible assets not subject to amortization $ 35,565

Total intangible assets $ 63,565

Weighted average amortization period 12.9


	Fair Value		Amortization Period
	(In thousands)		(In years)
Intangible assets subject to amortization:
Developed technologies	$	3,400	5.0
Customer relationships	22,800		15.0
Sales backlog	1,300		0.5
Trademarks	500		2.0
Total intangible assets subject to amortization	$	28,000

Intangible assets not subject to amortization:
Goodwill	$	35,012	n/a
Total intangible assets not subject to amortization	$	35,012

Total intangible assets	$	63,012
Weighted average amortization period			12.9

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 of the backlog intangible asset was based on our estimate of when the ordered items would ship and control of the items transfers. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks.

Our consolidated revenues for the three and nine months ended September 29, 2019 included $9.1 million and $17.9 million, respectively, from Opterna. Our consolidated loss before taxes for the three and nine months ended September 29, 2019 included $(0.2) million and $(0.3) million, respectively, from Opterna. For the three months ended September 29, 2019, the loss before taxes included $3.1 million of severance and other restructuring costs, $1.4 million of amortization of intangible assets, and $(0.1) million of cost of sales related to the adjustment of acquired inventory to fair value. For the nine months ended September 29, 2019, the loss before taxes included $5.6 million of severance and other restructuring costs, $2.3 million of amortization of intangible assets, and $0.5 million of cost of sales related to the adjustment of acquired inventory to fair value. Our consolidated loss for the three and nine months ended September 29, 2019 included $0.0 million and $0.1 million, respectively, of net income attributable to noncontrolling interests of Opterna.

The following table illustrates the unaudited pro forma effect on operating results as if the Opterna acquisition had been completed as of January 1, 2018.


	Three Months Ended
	March 31, 2019

	(In thousands, except per share data)
	(Unaudited)
Revenues	$	508,756
Net income from continuing operations attributable to Belden common stockholders	19,243
Diluted income from continuing operations per share attributable to Belden common stockholders	$	0.49

Three Months Ended Nine Months Ended
September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018

(In thousands, except per share data)
(Unaudited)
Revenues $ 620,318
$ 666,048
$ 1,853,639
$ 1,957,512
Net income (loss) attributable to Belden common stockholders (295,312 ) 77,417
(242,579 ) 87,250
Diluted income (loss) per share attributable to Belden common stockholders $ (6.64 ) $ 1.62
$ (5.90 ) $ 2.11

-10-

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

FutureLink

We acquired the FutureLink product line and related assets from Suttle, Inc. on April 5, 2019 for a purchase price of $5.0 million, which was funded with cash on hand. The acquisition of FutureLink allows us to offer a more complete set of fiber product offerings. The results from the acquisition of FutureLink have been included in our Condensed Consolidated Financial Statements from April 5, 2019, and are reported within the Enterprise Solutions segment. The acquisition of FutureLink was not material to our financial position or results of operations.

~~Net-Tech Technology, Inc.~~

Note 4: Discontinued Operations

We ~~acquired 100% of~~classify assets and liabilities as held for sale (disposal group) when management, having the ~~shares of Net-Tech Technology, Inc. (NT2) on April 25, 2018~~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 ~~purchase~~buyer has been initiated, whether the disposal group is marketed actively for sale at a price ~~of $8.5 million, which was funded with cash on hand. NT2~~that is ~~an integrator of optical passive components and network optimization products used within broadband network applications where optical backhaul is used. NT2 is located~~reasonable in the United States. The results of NT2 have been included in our Consolidated Financial Statements from April 25, 2018, and are reported within the Enterprise Solutions segment. The NT2 acquisition was not materialrelation to ~~our financial position or results of operations.~~

~~Snell Advanced Media~~

We acquired 100% of the outstanding ownership interest in Snell Advanced Media (SAM) on February 8, 2018 for a purchase price, net of cash acquired, of $104.6 million. Of the $104.6 million purchase price, $75.2 million was paid on February 8, 2018 and was funded with cash on hand. The acquisition included a potential earnout, which is based upon future combined earnings of SAM and Grass Valley through December 31, 2019. The maximum earnout consideration is $31.4 million, but based upon a third party valuation specialist using certain assumptions in a discounted cash flow model, the estimatedits current fair value, ofand whether actions required to complete the ~~earnout included in~~plan indicate that it is unlikely that significant changes to the ~~purchase price was $29.3 million. We assumed debt of $19.3 million and paid it off during~~plan will be made or that the ~~first quarter of 2018.~~ plan will be withdrawn.

During the ~~first~~fourth quarter of 2019, we ~~signed~~committed to a ~~settlement agreement with the sellers of SAM for claims arising over the timing~~plan to sell Grass Valley, and at such time, met all of the ~~earnout consideration outlined in~~criteria to classify the ~~purchase agreement,~~assets and liabilities of this business as ~~part~~held for sale. Furthermore, we determined a divestiture of Grass Valley represents a strategic shift that is expected to have a major impact on our operations and financial results. As a result, the settlement, the parties agreed that the maximum earnout consideration of $31.4 million would be payable during the first quarter 2020, unless earlier payment is required as per the terms of the purchase agreement. SAM designs, manufactures, and sells innovative content production and distribution systems for the broadcast and media markets. SAM is located in the United Kingdom. The results of SAM have beenGrass Valley disposal group, which was included in our ~~Consolidated Financial Statements from February 8, 2018, and are~~Enterprise Solutions segment, is reported within discontinued operations. The Grass Valley disposal group excludes certain Grass Valley pension liabilities that we expect to retain. We also ceased depreciating and amortizing the ~~Enterprise Solutions segment.~~ assets of the disposal group once they met the held for sale criteria during the fourth quarter of 2019. We intend to complete the sale of the Grass Valley disposal group during 2020.

We wrote down the carrying value of Grass Valley and recognized asset impairments totaling $23.2 million in the three months ended March 29, 2020. We determined the estimated fair values of the assets and of the reporting unit by calculating the present values of their estimated future cash flows.

The following table summarizes the ~~estimated fair value~~operating results of the ~~assets acquired and the liabilities assumed as of February 8, 2018 (in thousands):~~

Receivables $ 16,551
Inventory 15,084
Prepaid and other current assets 3,799
Property, plant, and equipment 7,716
Intangible assets 51,000
Goodwill 103,466
Deferred income taxes 1,388
Other long-lived assets 3,046
Total assets acquired $ 202,050

Accounts payable $ 11,825
Accrued liabilities 25,135
Deferred revenue 8,860
Long-term debt 19,315
Postretirement benefits 31,774
Other long-term liabilities 591
Total liabilities assumed $ 97,500

Net assets $ 104,550

~~During 2019, we did not record any significant measurement-period adjustments.~~

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 fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations.

~~The fair value of acquired receivables is $16.6 million, which is equivalent to its gross contractual amount.~~

For purposes of the above allocation, we based our estimate of the fair values for the acquired inventory; property, plant, and equipment; intangible assets; and deferred revenue on valuation studies performed by a third party valuation firm. We have estimated a fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal and a reasonable profit allowance for our post acquisition selling efforts. To determine the value of the acquired property, plant, and equipment, we used various valuation methods, including both the market approach, which considers sales prices of similar assets in similar conditions (Level 2 valuation), and the cost approach, which considers the cost to replace the asset adjusted for depreciation (Level 3 valuation). We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the fair value of the identifiable intangible assets and deferred revenue (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 expected synergies and the assembled workforce. The expected synergies for the SAM acquisition may be gained from helping broadcast and media content creators, aggregators and distributors significantly improve their effectiveness and efficiency during a period of rapid change in technology, viewer and advertiser behavior and business models. Our tax basis in the acquired goodwill is 0. The intangible assets related to the acquisition consisted of the following:

Fair Value Amortization Period
(In thousands) (In years)
Intangible assets subject to amortization:
Developed technologies $ 36,500
5.0
Customer relationships 11,000
12.0
Sales backlog 1,900
0.3
Trademarks 1,600
0.9
Total intangible assets subject to amortization $ 51,000

Intangible assets not subject to amortization:
Goodwill $ 103,466
n/a
Total intangible assets not subject to amortization $ 103,466

Total intangible assets $ 154,466

Weighted average amortization period 6.2 years

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 of the backlog intangible asset was based on our estimate of when the ordered items would ship. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks.

SAM is included in our Grass Valley reporting unit, and as discussed further in Note 8, during the three and nine months ended September 29, 2019, we recognized a total goodwill and other asset impairment charge of $342.1 million for the Grass Valley reporting unit.

Our consolidated revenues for the three and nine months ended September 30, 2018 included an estimated $25.3 million and $77.2 million, respectively, from SAM. Due to the integration of SAM into our existing business, we are unable to reasonably estimate the amount of income before taxes from SAM included in our consolidated financial statements. Our consolidated income before

~~taxes~~group for the three months ended ~~September 30, 2018 included $7.1~~ended March 29, 2020 and March 31, 2019:


	Three Months Ended
	March 29, 2020		March 31, 2019

	(In thousands)
Revenues	$	51,049	$	87,035
Cost of sales	(35,202)		(49,163)
Gross profit	15,847		37,872
Selling, general and administrative expenses	(17,519)		(24,831)
Research and development expenses	(8,499)		(10,907)
Amortization of intangibles	—		(5,178)
Asset impairment of discontinued operations	(23,197)		—
Interest expense, net	(206)		(206)
Non-operating pension income (cost)	(85)		(56)
Loss before taxes	$	(33,659)	$	(3,306)

-11-

The disposal group also had capital expenditures of approximately $7.9 million ~~of severance and other restructuring costs, $3.7 million of amortization of intangible assets, and $0.6 million of cost of sales related to~~and $5.8 million during the ~~adjustment of acquired inventory to fair value from SAM. Our consolidated income before taxes for the nine~~three months ended ~~September 30, 2018 included $36.6~~March 29, 2020 and March 31, 2019, respectively. Furthermore, the disposal group incurred stock-based compensation expense (income) of ($0.9 million) and $0.3 million ~~of severance~~during the three months ended March 29, 2020 and ~~other restructuring costs, $8.7 million of amortization of intangible assets, and $1.8 million of cost of sales related to~~March 31, 2019, respectively. The disposal group did not have any significant non-cash charges for investing activities during the ~~adjustment of acquired inventory to fair value from SAM.~~three months ended March 29, 2020 or March 31, 2019.

The following table ~~illustrates~~provides the ~~unaudited pro forma effect on operating results as if~~major classes of assets and liabilities of the ~~SAM acquisition had been completed~~disposal group as of ~~January 1, 2017.~~March 29, 2020 and December 31, 2019:

Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2018

(In thousands, except per share data)
(Unaudited)
Revenues $ 659,003
$ 1,944,628
Net income attributable to Belden common stockholders 92,769
126,937
Diluted income per share attributable to Belden common stockholders $ 2.13
$ 3.08


	March 29, 2020		December 31, 2019

	(In thousands)
Assets:
Cash and cash equivalents	$	42,742	$	18,405
Receivables, net	88,895		117,386
Inventories, net	53,635		55,002
Other current assets	46,659		35,187
Plant, property, and equipment, less accumulated depreciation	59,200		61,233
Operating lease right-of-use assets	15,050		16,902
Goodwill	25,306		26,707
Intangible assets, less accumulated depreciation	139,055		143,459
Deferred income taxes	57,868		59,560
Other long-lived assets	19,357		21,652
Impairment of disposal group	(203,555)		(180,358)
Total Assets of discontinued operations	$	344,212	$	375,135
Liabilities:
Accounts payable	$	42,683	$	52,425
Accrued liabilities	63,838		83,349
Postretirement benefits	5,310		6,224
Deferred income taxes	3,925		2,740
Long-term operating lease liabilities	18,357		20,459
Other long-term liabilities	1,342		5,082
Total Liabilities of discontinued operations	$	135,455	$	170,279

The ~~above unaudited pro forma financial information is presented for informational purposes only~~disposal group also had $30.3 million and ~~does not purport to represent what our results~~$42.3 million of ~~operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative~~accumulated other comprehensive losses as of ~~the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.~~March 29, 2020 and December 31, 2019, respectively.

Note 4:5: Reportable Segments

We are organized around 2 global business platforms: Enterprise Solutions and Industrial Solutions. Each of the global business platforms represents a reportable segment.

The key measures of segment profit or loss are Segment Revenues and Segment EBITDA. Segment Revenues represent non-affiliate revenues and include revenues that would have otherwise been recorded by acquired businesses as independent entities but were not recognized in our Condensed Consolidated Statements of Operations and Comprehensive Income due to the effects of purchase accounting and the associated write-down of acquired deferred revenue to fair value. 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 and deferred revenue 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.

Enterprise
Solutions

Industrial
Solutions

Total
Segments

(In thousands)
As of and for the three months ended September 29, 2019
Segment revenues $ 368,080
$ 252,238
$ 620,318
Affiliate revenues 927
2
929
Segment EBITDA 56,814
44,614
101,428
Depreciation expense 7,381
4,766
12,147
Amortization of intangibles 9,780
12,463
22,243
Amortization of software development intangible assets 1,161
36
1,197
Severance, restructuring, and acquisition integration costs 4,045
—
4,045
Purchase accounting effects of acquisitions (186 ) —
(186 )
Goodwill and other asset impairment 342,146
—
342,146
Segment assets 836,540
455,470
1,292,010
As of and for the three months ended September 30, 2018
Segment revenues $ 392,080
$ 266,923
$ 659,003
Affiliate revenues 1,776
15
1,791
Segment EBITDA 72,210
53,750
125,960
Depreciation expense 7,092
4,579
11,671
Amortization of intangibles 12,322
13,211
25,533
Amortization of software development intangible assets 620
—
620
Severance, restructuring, and acquisition integration costs 9,528
2,160
11,688
Purchase accounting effects of acquisitions 821
—
821
Deferred revenue adjustments 3,229
—
3,229
Segment assets 766,505
448,626
1,215,131
As of and for the nine months ended September 29, 2019
Segment revenues $ 1,064,469
$ 780,554
$ 1,845,023
Affiliate revenues 3,190
13
3,203
Segment EBITDA 149,855
139,531
289,386
Depreciation expense 22,655
14,515
37,170
Amortization of intangibles 29,270
38,682
67,952
Amortization of software development intangible assets 3,119
87
3,206
Severance, restructuring, and acquisition integration costs 10,904
—
10,904
Purchase accounting effects of acquisitions 1,845
—
1,845
Goodwill and other asset impairment 342,146
—
342,146
Segment assets 836,540
455,470
1,292,010
As of and for the nine months ended September 30, 2018
Segment revenues $ 1,142,765
$ 795,102
$ 1,937,867
Affiliate revenues 4,318
61
4,379
Segment EBITDA 199,943
153,401
353,344
Depreciation expense 21,465
14,097
35,562
Amortization of intangibles 35,301
39,689
74,990
Amortization of software development intangible assets 1,344
—
1,344
Severance, restructuring, and acquisition integration costs 46,949
10,061
57,010
Purchase accounting effects of acquisitions 2,359
—
2,359
Deferred revenue adjustments 7,889
—
7,889
Segment assets 766,505
448,626
1,215,131


	Enterprise Solutions		Industrial Solutions		Total Segments

	(In thousands)
As of and for the three months ended March 29, 2020
Segment revenues	$	212,213	$	251,313	$	463,526
Affiliate revenues	224		6		230
Segment EBITDA	24,712		35,527		60,239
Depreciation expense	5,081		5,201		10,282
Amortization of intangibles	5,504		10,681		16,185
Amortization of software development intangible assets	55		275		330
Severance, restructuring, and acquisition integration costs	2,550		1,069		3,619
Purchase accounting effects of acquisitions	20		—		20

Segment assets	503,658		468,600		972,258
As of and for the three months ended March 31, 2019
Segment revenues	$	207,083	$	293,057	$	500,140
Affiliate revenues	1,544		17		1,561
Segment EBITDA	21,635		54,664		76,299
Depreciation expense	4,805		5,298		10,103
Amortization of intangibles	4,699		13,465		18,164
Amortization of software development intangible assets	36		23		59
Segment assets	447,707		531,440		979,147

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 Nine Months Ended
September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018

(In thousands)
Total Segment Revenues $ 620,318
$ 659,003
$ 1,845,023
$ 1,937,867
Deferred revenue adjustments (1) —
(3,229 ) —
(7,889 )
Consolidated Revenues $ 620,318
$ 655,774
$ 1,845,023
$ 1,929,978

Total Segment EBITDA $ 101,428
$ 125,960
$ 289,386
$ 353,344
Goodwill and other asset impairment (2) (342,146 ) —
(342,146 ) —
Amortization of intangibles (22,243 ) (25,533 ) (67,952 ) (74,990 )
Depreciation expense (12,147 ) (11,671 ) (37,170 ) (35,562 )
Severance, restructuring, and acquisition integration costs (3) (4,045 ) (11,688 ) (10,904 ) (57,010 )
Amortization of software development intangible assets (1,197 ) (620 ) (3,206 ) (1,344 )
Purchase accounting effects related to acquisitions (4) 186
(821 ) (1,845 ) (2,359 )
Deferred revenue adjustments (1) —
(3,229 ) —
(7,889 )
Loss on sale of assets —
—
—
(94 )
Costs related to patent litigation —
(2,634 ) —
(2,634 )
Gain from patent litigation —
62,141
—
62,141
Eliminations (343 ) (627 ) (1,086 ) (1,616 )
Consolidated operating income (loss) (280,507 ) 131,278
(174,923 ) 231,987
Interest expense, net (14,200 ) (14,472 ) (42,561 ) (46,538 )
Non-operating pension benefit 489
1,356
1,517
824
Loss on debt extinguishment —
—
—
(22,990 )
Consolidated income (loss) before taxes $ (294,218 ) $ 118,162
$ (215,967 ) $ 163,283


	Three Months Ended
	March 29, 2020		March 31, 2019

	(In thousands)
Total Segment and Consolidated Revenues	$	463,526	$	500,140



Total Segment EBITDA	$	60,239	$	76,299
Amortization of intangibles	(16,185)		(18,164)
Depreciation expense	(10,282)		(10,103)
Severance, restructuring, and acquisition integration costs (1)	(3,619)		—
Amortization of software development intangible assets	(330)		(59)
Purchase accounting effects related to acquisitions (2)	(20)		—
Eliminations	(95)		(483)
Consolidated operating income	29,708		47,490
Interest expense, net	(13,324)		(13,988)
Total non-operating pension benefit	699		603
Consolidated income from continuing operations before taxes	$	17,083	$	34,105

(1) Our segment results include revenues that would have been recorded by acquired businesses had they remained as independent entities. Our consolidated results do not include these revenues due to the purchase accounting effect of recording deferred revenue at fair value. See Note 3, ~~Acquisitions, for details.~~

~~(2) For the three and nine months ended September 29, 2019, we recognized a $342.1 million goodwill and other asset impairment charge for our Grass Valley reporting unit. See Note 8,~~ ~~Long-Lived Assets,~~ ~~for details~~.

~~(3) See Note 9,~~ 11, Severance, Restructuring, and Acquisition Integration Activities, for ~~details~~.details.

~~(4) For~~(2) During the ~~nine~~three months ended ~~September~~March 29, ~~2019, we recognized expenses related to the earnout consideration for the SAM acquisition. For the three and nine months ended September 29, 2019,~~2020, we recognized cost of sales ~~for the adjustment~~related to purchase accounting adjustments of acquired inventory to fair value ~~related to the Opterna and FutureLink acquisitions. For the three and nine months ended September 30, 2018, we recognized cost of sales~~ for the ~~adjustment of acquired inventory to fair value related to the SAM and NT2 acquisitions.~~SPC acquisition.

-13-

Note 5:6: Income per Share

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


	Three Months Ended						Nine Months Ended							Three Months Ended
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018				March 29, 2020		March 31, 2019

	(In thousands)													(In thousands)
Numerator:													Numerator:
Net income (loss)	$	(297,015	)	$	85,858		$	(229,547	)	$	117,220
Less: Net income (loss) attributable to noncontrolling interests	(6		)	(23		)	60			(148		)
Income from continuing operations													Income from continuing operations	$	14,891	$	27,935
Less: Net loss attributable to noncontrolling interest													Less: Net loss attributable to noncontrolling interest	(30)		(24)
Less: Preferred stock dividends	971			8,732			18,437			26,198			Less: Preferred stock dividends	—		8,733
Net income (loss) attributable to Belden common stockholders, basic	(297,980		)	77,149			(248,044		)	91,170
Plus Preferred stock dividends	—			8,732			—			—
Net income (loss) attributable to Belden common stockholders, diluted	$	(297,980	)	$	85,881		$	(248,044	)	$	91,170
Income from continuing operations attributable to Belden common stockholders													Income from continuing operations attributable to Belden common stockholders	14,921		19,226
Add: Loss from discontinued operations, net of tax													Add: Loss from discontinued operations, net of tax	(26,110)		(2,757)
Net income (loss) attributable to Belden common stockholders													Net income (loss) attributable to Belden common stockholders	$	(11,189)	$	16,469

Denominator:													Denominator:
Weighted average shares outstanding, basic	44,444			40,510			41,090			40,960			Weighted average shares outstanding, basic	45,390		39,420
Assumed conversion of preferred stock into common stock	—			6,857			—			—
Effect of dilutive common stock equivalents	—			311			—			308			Effect of dilutive common stock equivalents	148		240
Weighted average shares outstanding, diluted	44,444			47,678			41,090			41,268			Weighted average shares outstanding, diluted	45,538		39,660

For the three ~~and nine~~ months ended ~~September~~March 29, ~~2019,~~2020, diluted weighted average shares outstanding exclude outstanding equity awards of 1.4 million which are anti-dilutive. In addition, for the three months ended March 29, 2020, diluted weighted average shares outstanding do not include outstanding equity awards of ~~1.4~~0.3 million ~~and 1.2~~because the related performance conditions have not been satisfied.

For the three months ended March 31, 2019, diluted weighted average shares outstanding exclude outstanding equity awards of 1.0 million ~~respectively, because to do so would have been~~which are anti-dilutive. In addition, for ~~both~~ the three ~~and nine~~ months ended ~~September 29,~~March 31, 2019, diluted weighted average shares outstanding do not include outstanding equity awards of 0.3 million because the related performance conditions have not been satisfied. Furthermore, for the three ~~and nine~~ months ended ~~September 29,~~March 31, 2019, diluted weighted average shares outstanding do not include the weighted average impact of 1.1 million and 4.9 million shares, respectively, related to converting preferred shares into common shares because deducting the preferred stock dividends from net income was more dilutive.

For the three and nine months ended September 30, 2018, diluted weighted average shares outstanding do not include outstanding equity awards of 0.9 million and 0.8 million, respectively, because to do so would have been anti-dilutive. In addition, for the three and nine months ended September 30, 2018, diluted weighted average shares outstanding do not include outstanding equity awards of 0.3 million and 0.2 million, respectively, because the related performance conditions have not been satisfied. Furthermore, for the nine months ended September 30, 2018, diluted weighted average shares outstanding do not include the impact of preferred shares that were converted into 6.9 million common shares, because deducting the preferred stock dividends from net income was more dilutive.

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 6:7: Credit Losses

Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. Upon adoption, we recorded a noncash cumulative effect adjustment to retained earnings of $2.9 million. Of this amount, $1.0 million related to our continuing operations and $1.9 million related to our discontinued operations.

-14-

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 estimate of 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.

Estimates are used to determine the allowance, which is based on an assessment of anticipated payment and all other historical, current and future information that is reasonably available. The allowance for doubtful accounts for our continuing operations was $3.5 million and $2.6 million as of March 29, 2020 and December 31, 2019, respectively. There were no material adjustments to the allowance for doubtful accounts during the three months ended March 29, 2020 other than the transition adjustment from adopting ASU 2016-13.

Note 8: Inventories

The major classes of inventories were as follows:


	March 29, 2020		December 31, 2019

	(In thousands)
Raw materials	$	113,310	$	98,530
Work-in-process	34,898		34,717
Finished goods	126,826		119,331
Gross inventories	275,034		252,578
Excess and obsolete reserves	(22,113)		(21,245)
Net inventories	$	252,921	$	231,333

September 29, 2019 December 31, 2018

(In thousands)
Raw materials $ 137,687
$ 146,803
Work-in-process 43,602
45,939
Finished goods 136,559
152,572
Gross inventories 317,848
345,314
Excess and obsolete reserves (26,853 ) (28,896 )
Net inventories $ 290,995
$ 316,418

Note 7:9: 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 16 years, some of which include options to extend the lease for a period of up to 15 years and some include options to terminate the leases within 1 year. 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 nine~~ months ended ~~September~~March 29, ~~2019,~~2020, 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 ~~lease~~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.

-15-

The components of lease expense were as follows:


	Three Months Ended
	March 29, 2020		March 31, 2019

	(In thousands)
Operating lease cost	$	3,597	$	4,873

Finance lease cost
Amortization of right-of-use asset	$	33	$	26
Interest on lease liabilities	5		4
Total finance lease cost	$	38	$	30

Three Months Ended Nine Months Ended
September 29, 2019

(In thousands)
Operating lease cost $ (4,505 ) $ (14,247 )

Finance lease cost
Amortization of right-of-use asset $ (43 ) $ (111 )
Interest on lease liabilities (6 ) (16 )
Total finance lease cost $ (49 ) $ (127 )

Supplemental cash flow information related to leases was as follows:


	Three Months Ended
	March 29, 2020		March 31, 2019

	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,791	$	5,088
Operating cash flows from finance leases	5		9
Financing cash flows from finance leases	46		70

Three Months Ended Nine Months Ended
September 29, 2019

(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ (4,842 ) $ (14,978 )
Operating cash flows from finance leases (8 ) (24 )
Financing cash flows from finance leases (59 ) (232 )

Supplemental balance sheet information related to leases was as follows:


	March 29, 2020		December 31, 2019

	(In thousands, except lease term and discount rate)
Operating leases:
Total operating lease right-of-use assets	$	58,960	$	62,251

Accrued liabilities	$	13,626	$	13,900
Long-term operating lease liabilities	52,084		55,652
Total operating lease liabilities	$	65,710	$	69,552

Finance leases:
Other long-lived assets, at cost	$	748	$	823
Accumulated depreciation	(392)		(391)
Other long-lived assets, net	$	356	$	432

September 29, 2019

(In thousands, except lease term and discount rate)
Operating leases:
Total operating lease right-of-use assets $ 78,788

Accrued liabilities $ 16,981
Long-term operating lease liabilities 73,436
Total operating lease liabilities $ 90,417

Finance leases:
Other long-lived assets, at cost $ 723
Accumulated depreciation (592 )
Other long-lived assets, net $ 131


Weighted Average Remaining Lease Term
Operating leases	5 years		6 years
Finance leases	3 years		3 years

Weighted Average Discount Rate
Operating leases	6.8	%	6.9	%
Finance leases	6.2	%	6.2	%



~~Weighted Average Remaining Lease Term~~
~~Operating leases~~	~~7 years~~
~~Finance leases~~	~~2 years~~

~~Weighted Average Discount Rate~~
~~Operating leases~~	~~6.9~~	%
~~Finance leases~~	~~5.9~~	%

-16-

~~Maturities~~The following table summarizes maturities of lease liabilities as of ~~September~~March 29, ~~2019 were as follows:~~2020 (in thousands):


2020	$	14,579
2021	17,866
2022	15,067
2023	11,854
2024	9,032
Thereafter	16,573
Total	$	84,971

Operating Leases Finance Leases

(In thousands)
2019 $ 6,045
$ 68
2020 23,051
229
2021 19,742
131
2022 16,107
59
2023 13,382
34
Thereafter 41,896
11
Total $ 120,223
$ 532

The following table summarizes maturities of lease liabilities as of December 31, 2019 (in thousands):


2020	$	19,086
2021	16,988
2022	14,128
2023	11,598
2024	9,032
Thereafter	16,655
Total	$	87,487

Note 8:10: Long-Lived Assets

Depreciation and Amortization Expense

We recognized depreciation expense of ~~$12.1~~$10.3 million and ~~$37.2~~$10.1 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively. We recognized depreciation expense of $11.7 million~~2020 and ~~$35.6 million in the three and nine months ended September 30, 2018,~~March 31, 2019, respectively.

We recognized amortization expense related to our intangible assets of ~~$23.4~~$16.5 million and ~~$71.2~~$18.2 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019. We recognized amortization expense related to our intangible assets of $26.2 million~~2020 and ~~$76.3 million in the three and nine months ended September 30, 2018,~~March 31, 2019, respectively.

Interim Impairment Test

Due to ~~its overall financial performance~~equity market conditions during the ~~fiscal third quarter~~three months ended March 29, 2020, we conducted an interim impairment test. We determined that the carrying values of our definite-lived assets were recoverable; therefore, we did not record any impairment charges related to these assets. Goodwill is tested for impairment at the reporting unit level, and we conducted an interim impairment test for all of our reporting units. A reporting unit is an operating segment, or a ~~potential divestiture~~business unit one level below an operating segment if discrete financial information for that business is prepared and regularly reviewed by segment management. However, components within an operating segment are aggregated as a single reporting unit if they have similar economic characteristics. We determined that each of our reportable segments (Enterprise Solutions and Industrial Solutions) represents an operating segment. Within those operating segments, we have identified reporting units based on whether there is discrete financial information prepared that is regularly reviewed by segment management.

When we evaluate goodwill for impairment using a quantitative assessment, we compare the fair value of each reporting unit to its carrying value. We determine the fair value using an income approach. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows using growth rates and discount rates that are consistent with current market conditions in our industry. If the fair value of the reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then we ~~performed~~record an impairment charge based on that difference. In addition to the income approach, we calculate the fair value of our reporting units under a market approach. The market approach measures the fair value of a reporting unit through analysis of financial multiples of comparable businesses. Consideration is given to the financial conditions and operating performance of the reporting unit being valued relative to those publicly-traded companies operating in the same or similar lines of business. Significant judgment is required when applying the market approach as there is a range of financial multiples of comparable businesses.

-17-

Based on our interim goodwill impairment test, onwe determined that the Grass Valley reporting unit, which resulted in a total goodwill and other asset impairment charge of $342.1 million for the three and nine months ended September 29, 2019. The Grass Valley reporting unit is part of our Enterprise Solutions Segment. The impairment charge consisted of impairments to goodwill, customer relationships, and trademarks of $326.1 million, $14.4 million, and $1.6 million, respectively. We determined the estimated fair values of the ~~assets and~~reporting units were in excess of the ~~reporting unit by calculating~~carrying values; therefore, we did not record any goodwill impairment. The excess of the ~~present~~fair values over the carrying values of our reporting units ranged from 2% - 269%. The significant assumptions used to estimate fair values included sales growth, profitability, and related cash flows, along with cash flows associated with taxes and capital spending. The discount rate used to estimate fair value was risk adjusted in consideration of the economic conditions in effect at the time of the impairment test. We also considered assumptions that market participants may use. In our quantitative assessments, the discount rates ranged from 9.0% to 17.0%, the 2020 to 2029 compounded annual revenue growth rates ranged from 2.0% to 8.0%, and the long-term revenue growth rates ranged from 2.0% to 3.0%. By their ~~estimated future cash flows.~~nature, these assumptions involve risks and uncertainties. Furthermore, uncertainties associated with current market conditions increase the inherent risk associated with using an income approach to estimate fair values. While we have adjusted our key assumptions to reflect the current economic conditions, we have also assumed that economic conditions will improve beyond 2020. If current conditions persist and actual results are different from our estimates or assumptions, we may have to recognize an impairment charge that could be material.

We also tested our indefinite-lived intangible assets, which consist primarily of trademarks, for impairment during the quarter ended March 29, 2020. We performed a quantitative assessment for each of our indefinite-lived trademarks using a relief from royalty methodology and compared the fair value to the carrying value. We determined that none of our trademarks were impaired as of March 29, 2020. Significant assumptions to determine fair value included sales growth, royalty rates, and discount rates.

Note 9:11: Severance, Restructuring, and Acquisition Integration Activities

Cost Reduction Program: 2019

During the fourth quarter of 2019, we began a cost reduction program to improve performance and enhance margins by streamlining the organizational structure and investing in technology to drive productivity. We recognized an immaterial amount associated with this program during the three months ended March 29, 2020. The cost reduction program is expected to deliver an estimated $60.0 million reduction in selling, general, and administrative expenses on an annual basis, of which $40.0 million is expected to be realized in 2020, with the full benefit materializing in 2021. We expect to incur incremental costs of approximately $20.0 million of costs for this program in 2020.

SPC, Opterna and FutureLink Integration ~~program:~~Program: 2019

In 2019, we began a restructuring program to integrate SPC, Opterna and FutureLink with our existing businesses. The restructuring and integration activities were focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions. We recognized ~~$3.1 million and $5.6~~$2.2 million of severance and other restructuring costs for this program during the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively.~~2020. These costs were incurred by the Enterprise Solutions segment. We ~~do not~~ expect to incur ~~any more~~incremental costs ~~for this program.~~

~~Grass Valley and SAM Integration Program: 2018 - 2019~~

In 2018, we began a restructuring program to integrate SAM with Grass Valley. The restructuring and integration activities were focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions. We did 0t recognize severance and other restructuring costsof approximately $2.5 million for this program during the three months ended September 29, 2019, and we recognized $3.0 million of severance and other restructuring costs for this program during the nine months ended September 29, 2019. We recognized $7.1 million and $36.6 million of severance and other restructuring costs for this program during the three and nine months ended September 30, 2018, respectively. The costs were incurred by the Enterprise Solutions segment. The integration of these businesses is complete, and thus, we do not expect to incur any more costs for this program.

~~Industrial Manufacturing Footprint Program: 2016 - 2018~~

In 2016, we began a program to consolidate our manufacturing footprint. The manufacturing consolidation was complete as of December 31, 2018. We recognized $4.3 million and $15.8 million of severance and other restructuring costs for this program during the three and nine months ended September 30, 2018. The costs were incurred by the Enterprise Solutions and Industrial Solutions segments, as the manufacturing locations involved in ~~the program serve both platforms.~~ 2020.

The following table summarizes the costs by segment of the ~~various~~ programs described above as well as other immaterial programs and acquisition integration ~~activities:~~activities during the three months ended March 29, 2020:


	Severance		Other Restructuring and Integration Costs		Total Costs

Three Months Ended March 29, 2020	(In thousands)
Enterprise Solutions	$	(632)	$	3,182	$	2,550
Industrial Solutions	(955)		2,024		1,069
Total	$	(1,587)	$	5,206	$	3,619

The severance costs incurred during the three months ended March 29, 2020 were offset by adjustments made during the quarter for changes in estimates primarily stemming from voluntary turnover. The other restructuring and integration costs primarily consisted of equipment transfer, costs to consolidate operating and support facilities, retention bonuses, relocation, travel, legal, and other costs. The majority of the other restructuring and integration costs related to these actions were paid as incurred or are payable within the next 60 days.

There were no material severance and restructuring costs incurred during the three months ended March 31, 2019.

Severance
Other
Restructuring and
Integration Costs
Total Costs

Three Months Ended September 29, 2019 (In thousands)
Enterprise Solutions $ 269
$ 3,776
$ 4,045
Industrial Solutions —
—
—
Total $ 269
$ 3,776
$ 4,045

Three Months Ended September 30, 2018
Enterprise Solutions $ (1,283 ) $ 10,811
$ 9,528
Industrial Solutions 136
2,024
2,160
Total $ (1,147 ) $ 12,835
$ 11,688

Nine Months Ended September 29, 2019
Enterprise Solutions $ 489
$ 10,415
$ 10,904
Industrial Solutions —
—
—
Total $ 489
$ 10,415
$ 10,904

Nine Months Ended September 30, 2018
Enterprise Solutions $ 10,097
$ 36,852
$ 46,949
Industrial Solutions 378
9,683
10,061
Total $ 10,475
$ 46,535
$ 57,010

-18-

The following table summarizes the costs of the various programs described above as well as other immaterial programs and acquisition integration activities by financial statement line item in the Condensed Consolidated Statement of ~~Operations:~~Operations for the three months ended March 29, 2020 (in thousands):


Cost of sales	$	45
Selling, general and administrative expenses	3,574

Total	$	3,619

Three Months ended Nine Months Ended
September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018

(In thousands)
Cost of sales $ 792
$ 4,820
$ 1,777
$ 21,482
Selling, general and administrative expenses 3,253
6,341
8,364
30,287
Research and development expenses —
527
763
5,241
Total $ 4,045
$ 11,688
$ 10,904
$ 57,010
Accrued Severance

The table below sets forth severance activity that occurred for the Cost Reduction Program described above. We did not incur any significant severance costs for the SPC, Opterna and FutureLink Integration Program. The balances below are included in accrued liabilities.


	Cost Reduction Program
	(In thousands)

Balance at December 31, 2019	$	19,575
New charges	2,529
Cash payments	(4,483)
Foreign currency translation	(89)
Other adjustments	(4,147)
Balance at March 29, 2020	$	13,385

The other ~~restructuring~~adjustments were the result of changes in estimates. We experienced higher than expected voluntary turnover, and integration costs primarily consisted of equipment transfer, costs to consolidate operating and support facilities, retention bonuses, relocation, travel, legal, and other costs. The majority of the other restructuring and integration costs related to theseas a result, certain approved severance actions were ~~paid as incurred or are payable within the next 60 days.~~ not taken.

~~There were no significant severance accrual balances as of September 29, 2019 or December 31, 2018.~~

Note ~~10:~~12: Long-Term Debt and Other Borrowing Arrangements

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

September 29, 2019 December 31, 2018

(In thousands)
Revolving credit agreement due 2022 $ —
$ —
Senior subordinated notes:
3.875% Senior subordinated notes due 2028 383,460
400,050
3.375% Senior subordinated notes due 2027 493,020
514,350
4.125% Senior subordinated notes due 2026 219,120
228,600
2.875% Senior subordinated notes due 2025 328,680
342,900
Total senior subordinated notes 1,424,280
1,485,900
Less unamortized debt issuance costs (20,610 ) (22,700 )
Long-term debt $ 1,403,670
$ 1,463,200


	March 29, 2020		December 31, 2019

	(In thousands)
Revolving credit agreement due 2022	$	—	$	—
Senior subordinated notes:
3.875% Senior subordinated notes due 2028	378,175		392,910
3.375% Senior subordinated notes due 2027	486,225		505,170
4.125% Senior subordinated notes due 2026	216,100		224,520
2.875% Senior subordinated notes due 2025	324,150		336,780
Total senior subordinated notes	1,404,650		1,459,380
Less unamortized debt issuance costs	(19,212)		(19,896)
Long-term debt	$	1,385,438	$	1,439,484

Revolving Credit Agreement due 2022

Our Revolving Credit Agreement provides a $400.0 million multi-currency asset-based revolving credit facility (the Revolver). The borrowing base under the Revolver includes eligible accounts receivable; inventory; and property, plant and equipment of certain of our subsidiaries in the U.S., Canada, Germany, and the Netherlands. The maturity date of the Revolver is May 16, 2022. Interest on outstanding borrowings is variable, based upon LIBOR or other similar indices in foreign jurisdictions, plus a spread that ranges from 1.25%-1.75%, depending upon our leverage position. We pay a commitment fee on our available borrowing capacity of 0.25%. In the event we borrow more than 90% of our borrowing base, we are subject to a fixed charge coverage ratio covenant.

-19-

As of ~~September~~March 29, ~~2019,~~2020, we had 0 borrowings outstanding on the Revolver, and our available borrowing capacity was ~~$287.0 million.~~$303.4 million, but at the beginning of the second quarter, we borrowed $190.0 million under our Revolver out of an abundance of caution due to the uncertainties arising from the COVID-19 pandemic. See Note 19.

Senior Subordinated Notes

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 ~~September~~March 29, ~~2019~~2020 is ~~$383.5~~$378.2 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 2027, 2026, and 2025 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 €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 ~~September~~March 29, ~~2019~~2020 is ~~$493.0~~$486.2 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 2028, 2026, and 2025 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 €200.0 million aggregate principal amount of 4.125% senior subordinated notes due 2026 (the 2026 Notes). The carrying value of the 2026 Notes as of ~~September~~March 29, ~~2019~~2020 is ~~$219.1~~$216.1 million. The 2026 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2026 Notes rank equal in right of payment with our senior subordinated notes due 2028, 2027, and 2025 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 April 15 and October 15 of each year.

We have outstanding €300.0 million aggregate principal amount of 2.875% senior subordinated notes due 2025 (the 2025 Notes). The carrying value of the 2025 Notes as of ~~September~~March 29, ~~2019~~2020 is ~~$328.7~~$324.2 million. The 2025 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2025 Notes rank equal in right of payment with our senior subordinated notes due 2028, 2027, and 2026 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.

Fair Value of Long-Term Debt

The fair value of our senior subordinated notes as of ~~September~~March 29, ~~2019~~2020 was approximately ~~$1,494.8~~$1,227.6 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 ~~$1,424.3~~$1,404.7 million as of ~~September~~March 29, ~~2019.~~2020.

Note ~~11:~~13: Net Investment Hedge

All of our euro denominated notes were issued by Belden Inc., a USD functional currency entity. As of ~~September~~March 29, ~~2019, all~~2020, €767.8 million of 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 ~~nine~~three months ended ~~September~~March 29, ~~2019~~2020 and ~~September 30, 2018,~~March 31, 2019, the transaction gain associated with ~~these notes~~the net investment hedge that was reported in other comprehensive income was ~~$62.1~~$54.7 million and ~~$46.3~~$23.6 million, respectively. During the three months ended March 29, 2020, we de-designated €532.2 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 €532.2 million of debt are reported in income from continuing operations.

Note ~~12:~~14: Income Taxes

For the three ~~and nine~~ months ended ~~September~~March 29, 2020, we recognized income tax expense of $2.2 million, representing an effective tax rate of 12.8%. The effective tax rate was impacted by a $1.1 million income tax benefit for certain foreign tax credits.

In March 2020, the Coronavirus Relief and Economic Security Act (CARES Act) was signed into law in the United States. We are still analyzing the provisions of the CARES Act to determine if there will be any impact to our income tax provision for the year.

-20-

For the three months ended March 31, 2019, we recognized income tax expense of ~~$2.8~~$6.2 million, ~~and $13.6 million, respectively,~~ representing an effective tax rate of ~~(1.0%) and (6.3%), respectively.~~18.1%. The effective tax ~~rates were~~rate was impacted by an $0.8 million income tax benefit ~~of $5.7 million as~~resulting from a ~~result of changes~~change in our ~~estimated~~ valuation allowance ~~requirement related to~~on foreign tax credits due to the restructuring of certain foreign operations. These effective rates are also reflective of the impact of more favorable statutory tax rates applied to the earnings of these foreign operations due to the restructuring efforts. The income tax expense for the three and nine months ended September 29, 2019 was also impacted by a $5.1 million income tax benefit for the partial deductibility of the goodwill and other asset impairment charge during the period.

For the three and nine months ended September 30, 2018, we recognized income tax expense of $32.3 million and $46.1 million, respectively, representing an effective tax rate of 27.3% and 28.2%, respectively. The effective tax rate was impacted by the following significant factors:

We recognized income tax expense of $3.8 million and $4.3 million, respectively, in the three and nine months ended September 30, 2018 as a result of changes in our valuation allowance for the “Tax Cuts and Jobs Act” (the Act).

We recognized income tax expense of $1.8 million in the nine months ended September 30, 2018 as a result of a change in our valuation allowance on foreign tax credits associated with our euro debt refinancing.

~~We recognized an income tax benefit of $3.3 million and $4.4 million, respectively, in the three and nine months ended September 30, 2018 primarily related to certain foreign tax credits.~~

We recognized an income tax benefit of $1.2 million in the nine months ended September 30, 2018 due to a decrease in reserves for uncertain tax positions of prior years.Our income tax expense and effective tax rate in future periods may be impacted by many factors, including our geographic mix of income and changes in tax laws.

Note ~~13:~~15: Pension and Other Postretirement Obligations

The following table provides the components of net periodic benefit costs for our pension and other postretirement benefit plans:


	Pension Obligations						Other Postretirement Obligations
	March 29, 2020		March 31, 2019		March 29, 2020		March 31, 2019

	(In thousands)
Three Months Ended
Service cost	$	932	$	1,007	$	8	$	10
Interest cost	2,337		2,960		202		272
Expected return on plan assets	(3,940)		(4,116)		—		—
Amortization of prior service cost (credit)	44		(14)		—		—
Actuarial losses (gains)	677		321		(19)		(26)
Net periodic benefit cost	$	50	$	158	$	191	$	256

Pension Obligations Other Postretirement Obligations
September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018

(In thousands)
Three Months Ended
Service cost $ 1,058
$ 1,717
$ 10
$ 14
Interest cost 2,921
2,011
273
257
Expected return on plan assets (3,842 ) (4,660 ) —
—
Amortization of prior service credit (143 ) (37 ) —
—
Actuarial losses (gains) 327
1,073
(25 ) —
Net periodic benefit cost $ 321
$ 104
$ 258
$ 271

Nine Months Ended
Service cost $ 3,164
$ 3,792
$ 29
$ 40
Interest cost 8,869
5,792
815
781
Expected return on plan assets (11,977 ) (9,688 ) —
—
Amortization of prior service credit (117 ) (59 ) —
—
Actuarial losses (gains) 969
2,350
(76 ) —
Net periodic benefit cost $ 908
$ 2,187
$ 768
$ 821

Note ~~14:~~16: Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

The following table summarizes total comprehensive income:

Three Months Ended Nine Months Ended
September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018

(In thousands)
Net income (loss) $ (297,015 ) $ 85,858
$ (229,547 ) $ 117,220
Foreign currency translation gain (loss), net of $0.2 million, $0.5 million, $0.6 million, and $0.7 million tax, respectively 33,732
(17,904 ) 45,619
10,943
Adjustments to pension and postretirement liability, net of $0.0 million, $0.4 million, $0.2 million, and $0.9 million tax, respectively 120
637
591
1,409
Total comprehensive income (loss) (263,163 ) 68,591
(183,337 ) 129,572
Less: Comprehensive income (loss) attributable to noncontrolling interests 367
(29 ) 474
(155 )
Comprehensive income (loss) attributable to Belden $ (263,530 ) $ 68,620
$ (183,811 ) $ 129,727


	Three Months Ended
	March 29, 2020		March 31, 2019

	(In thousands)
Net income (loss)	$	(11,219)	$	25,178
Foreign currency translation gain, net of $1.0 million and $0.4 million tax, respectively	21,790		28,791
Adjustments to pension and postretirement liability, net of $0.1 million and $0.1 million tax, respectively	383		219
Total comprehensive income	10,954		54,188
Less: Comprehensive loss attributable to noncontrolling interests	(180)		(23)
Comprehensive income attributable to Belden	$	11,134	$	54,211

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, 2019	$	(18,225)	$	(45,193)	$	(63,418)
Other comprehensive income attributable to Belden before reclassifications	21,940		—		21,940
Amounts reclassified from accumulated other comprehensive income	—		383		383
Net current period other comprehensive gain attributable to Belden	21,940		383		22,323
Balance at March 29, 2020	$	3,715	$	(44,810)	$	(41,095)

Foreign
Currency
Translation
Component

Pension and
Other
Postretirement
Benefit Plans

Accumulated
Other
Comprehensive
Income (Loss)

(In thousands)
Balance at December 31, 2018 $ (41,882 ) $ (33,025 ) $ (74,907 )
Other comprehensive income attributable to Belden before reclassifications 45,205
—
45,205
Amounts reclassified from accumulated other comprehensive income —
591
591
Net current period other comprehensive gain attributable to Belden 45,205
591
45,796
Balance at September 29, 2019 $ 3,323
$ (32,434 ) $ (29,111 )

-21-

The following table summarizes the effects of reclassifications from accumulated other comprehensive income (loss) for the ~~nine~~three months ended ~~September~~March 29, ~~2019:~~2020:


	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Operations and Comprehensive Income		Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statements of Operations and Comprehensive Income

	(In thousands)					(In thousands)
Amortization of pension and other postretirement benefit plan items:					Amortization of pension and other postretirement benefit plan items:
Actuarial losses	$	893		(1)	Actuarial losses	$	477	(1)
Prior service credit	(117		)	(1)
Prior service cost					Prior service cost	25		(1)
Total before tax	776				Total before tax	502
Tax benefit	(185		)		Tax benefit	(119)
Total net of tax	$	591			Total net of tax	$	383

(1) The amortization of these accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit costs (see Note ~~13)~~15).

Note ~~15:~~17: Preferred Stock

In 2016, we issued 5.2 million depositary shares, each of which represents 1/100th interest in a share of 6.75% Series B Mandatory Convertible Preferred Stock (the Preferred Stock), for an offering price of $100 per depositary share. We received approximately $501 million of net proceeds from this offering, which were used for general corporate purposes. On July 15, 2019, all outstanding Preferred Stock was automatically converted into shares of Belden common stock at the conversion rate of 132.50, resulting in the issuance of approximately 6.9 million shares of Belden common stock. Upon conversion, the Preferred Stock was automatically extinguished and discharged, is no longer deemed outstanding for all purposes, and delisted from trading on the New York Stock Exchange. During the three ~~and nine~~ months ended ~~September 29,~~March 31, 2019, dividends on the Preferred Stock were ~~$1.0 million and $18.4 million, respectively. During the three and nine months ended September 30, 2018, dividends on the Preferred Stock were~~ $8.7 ~~million and $26.2 million, respectively.~~million.

Note ~~16:~~18: Share Repurchase

On November 29, 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. ~~The program does not have an expiration date and may be suspended at any time at the discretion of the Company.~~ During the three months ended ~~September~~March 29, ~~2019,~~2020, we repurchased ~~0.5~~0.6 million shares of our common stock under the share repurchase program for an aggregate cost of ~~$27.2~~$21.2 million and an average price per share of $55.17. During the nine months ended September 29, 2019, we repurchased 0.9 million shares of our common stock under the share repurchase program for an aggregate cost of $50.0 million and an average price per share of $56.19. During the three months ended September 30, 2018, we repurchased 0.3 million shares of our common stock under a previous share repurchase program for an aggregate cost of $25.0 million and an average price per share of $72.62. During the nine months ended September 30, 2018, we repurchased 1.8 million shares of our common stock under a previous share repurchase program for an aggregate cost of $125.0 million and an average price per share of $70.13.$35.85.

Note ~~17:~~19: Subsequent Events

~~Assets Held for Sale~~

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 changesDue to the ~~plan will be made~~uncertainties arising from the COVID-19 pandemic, out of an abundance of caution, at the beginning of the second quarter we borrowed $190.0 million under our Revolving Credit Agreement, which provides a $400.0 million multi-currency asset-based revolving credit facility. The maturity date of the Revolver is May 16, 2022. Interest on outstanding borrowings is variable, based upon LIBOR or other similar indices in foreign jurisdictions, plus a spread that ~~the plan will be withdrawn.~~ranges from 1.25%-1.75%, depending upon our leverage position. See Note 12.

During 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 ~~fourth~~fiscal second quarter, we repurchased 0.4 million shares of ~~2019, we committed to a plan to sell Grass Valley, and at such time, met all~~our common stock under the share repurchase program for an aggregate cost of the criteria to classify the assets and liabilities of this business as held for sale. As a result, the Grass Valley disposal group, which is currently part of the Enterprise Solutions segment, will be included in discontinued operations commencing in the fourth quarter. We also ceased

depreciating and amortizing the assets of the disposal group once they met the held for sale criteria in the fourth quarter. We intend to complete the sale of the Grass Valley disposal group during the next twelve months. As discussed in Note 8, we recognized an impairment charge for the disposal group of $342.1 million during the third quarter of 2019, which consisted of impairments to goodwill, customer relationships, and trademarks of $326.1 million, $14.4$13.8 million and ~~$1.6 million, respectively. As~~an average price per share of ~~September 29, 2019, Grass Valley had total assets and total liabilities of $491.8 million and $194.0 million, respectively, and accumulated other comprehensive losses of $73.2 million.~~$35.80.

~~Cost Reduction Program~~

During the fourth quarter, we announced a cost reduction program designed to improve performance and enhance margins by streamlining the organizational structure and investing in technology to drive productivity. The cost reduction program is expected to deliver an estimated $40.0 million annualized reduction in selling, general, and administrative expenses, with some benefit in 2020, and the full benefit realized in 2021. We expect to incur severance and other related costs as part of this program but the timing and amounts of such costs are not yet known.

-22-

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

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

We strive for operational excellence through the execution of our Belden Business System, which includes three areas of focus: Lean enterprise initiatives, our Market Delivery System, and our Talent Management System. Through operational excellence we generate free cash flow on an annual basis. We utilize the cash flow generated by our business to fuel our continued transformation and generate shareholder value. We believe our business system, balance across markets and geographies, systematic go-to-market approach, extensive portfolio of innovative solutions, commitment to Lean principles, and improving margins present a unique value proposition for shareholders.

We use a set of tools and processes that are designed to continuously improve business performance in the critical areas of quality, delivery, cost, and innovation. We consider revenue growth, Adjusted EBITDA margin, free cash flows, and return on invested capital to be our key operating performance indicators. We also seek to acquire businesses that we believe can help us achieve these objectives.

Trends and Events

The following trends and events during ~~2019~~2020 have had varying effects on our financial condition, results of operations, and cash flows.

Global Pandemic

On March 11, 2020, the World Health Organization (WHO) declared the outbreak of the novel coronavirus (COVID-19) a pandemic. The recent outbreak of COVID-19 has resulted and will continue to result in significant economic disruption and has affected and will adversely affect our business in the future. We have experienced and expect to continue to experience reductions in customer demand in several of our end-markets. We expect that the social distancing measures, the reduced operational status of some of our suppliers and reductions in production at certain facilities will more meaningfully impact our operations in the second quarter, and general business uncertainty will continue to negatively impact demand in several of our end-markets in the second quarter, and possibly beyond.

Our foremost focus has been on the health and safety of our employees and customers. In response to the outbreak, we have modified practices at our manufacturing locations and offices to adhere to guidance from the WHO, the U.S. Centers for Disease Control and Prevention and other local health and governmental authorities with respect to social distancing, physical separation, personal protective equipment and sanitization. We are approaching our response to this outbreak with a recognition that we provide essential and important products and services upon which our customers rely upon daily to support critical functions. Therefore, most of our U.S. and global facilities have remained substantially operational during the outbreak while implementing enhanced safety protocols designed to protect the well-being of our employees. Operations at the facilities in countries with broad-based mandated shutdowns (e.g., India and Brazil) were suspended for a portion of the first quarter.

The extent of the impact of the COVID-19 outbreak on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, its impact on our customers and suppliers and the range of governmental and community reactions to the pandemic, which are uncertain and cannot be fully predicted at this time. Unlike typical seasonal patterns in our business, we expect revenues to be down in the second quarter compared to the first quarter 2020. We will continue to proactively respond to the situation and may take further actions that alter our business operations as may be required by governmental authorities, or that we determine are in the best interests of our employees and customers.

Foreign currency

Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S. dollar and the euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Japanese yen, Mexican peso, Australian dollar, British pound, Indian rupee, and Brazilian real. Generally, as the U.S. dollar strengthens against these foreign currencies, our revenues and earnings are negatively impacted as our foreign denominated revenues and earnings are translated into U.S. dollars at a lower rate. Conversely, as the U.S. dollar weakens against foreign currencies, our revenues and earnings are positively impacted.

-23-

During the three ~~and nine~~ months ended ~~September~~March 29, ~~2019,~~2020, approximately ~~48%~~45% of our consolidated revenues were to customers outside of the U.S.

In addition to the translation impact described above, currency rate fluctuations have an economic impact on our financial results. As the U.S. dollar strengthens or weakens against foreign currencies, it results in a relative price increase or decrease for certain of our products that are priced in U.S. dollars in a foreign location.

Commodity prices

Our operating results can be affected by changes in prices of commodities, primarily copper and compounds, which are components in some of the products we sell. Generally, as the costs of inventory purchases increase due to higher commodity prices, we raise selling prices to customers to cover the increase in costs, resulting in higher sales revenue but a lower gross profit percentage. Conversely, a decrease in commodity prices would result in lower sales revenue but a higher gross profit percentage. Selling prices of our products are affected by many factors, including end market demand, capacity utilization, overall economic conditions, and commodity prices. Importantly, however, there is no exact measure of the effect of changing commodity prices, as there are thousands of transactions in any given quarter, each of which has various factors involved in the individual pricing decisions. Therefore, all references to the effect of copper prices or other commodity prices are estimates.

Channel Inventory

Our operating results also can be affected by the levels of Belden products purchased and held as inventory by our channel partners and customers. Our channel partners and customers purchase and hold the products they bought from us in their inventory in order to meet the service and on-time delivery requirements of their customers. Generally, as our channel partners and customers change the level of products they buy from us and hold in their inventory, it impacts our revenues. Comparisons of our results between periods can be impacted by changes in the levels of channel inventory. We use information provided to us by our channel partners and make certain assumptions based on our sales to them to determine the amount of products they bought from us and hold in their inventory. As such, all references to the effect of channel inventory changes are estimates.

Market Growth and Market Share

The markets in which we operate can generally be characterized as highly competitive and highly fragmented, with many players. We monitor available data regarding market growth, including independent market research reports, publicly available indices, and the financial results of our direct and indirect peer companies, in order to estimate the extent to which our served markets grew or contracted during a particular period. We expect that our unit sales volume will increase or decrease consistently with the market growth rate. Our strategic goal is to utilize our Market Delivery System to target faster growing geographies, applications, and trends within our end markets, in order to achieve growth that is higher than the general market growth rate. To the extent that we exceed the market growth rates, we consider it to be the result of capturing market share.

~~Acquisitions~~Earnout Consideration Payment

We completed the acquisitions of Opterna International Corp. (Opterna) on April 15, 2019 and FutureLink on April 5, 2019. The results of Opterna and FutureLink have been included in our Condensed Consolidated Financial Statements from the acquisition dates and are reported in the Enterprise Solutions segment. See Note 3.

~~Goodwill and Other Asset Impairment~~

We performed an interim impairment test on our Grass Valley reporting unit, which resulted in a total goodwill and other asset impairment charge of $342.1 million for the three and nine months ended September 29, 2019. See Note 8.

~~Opterna and FutureLink Integration Program~~

In 2019, we began a restructuring program to integrate Opterna and FutureLink with our existing businesses. The restructuring and integration activities are focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions. We recognized $3.1 million and $5.6 million of severance and other restructuring costs for this program during the three and nine months ended September 29, 2019, respectively. The costs were incurred by the Enterprise Solutions segment. We do not expect to incur any more costs for this program.

~~Grass Valley and SAM Integration Program~~

In 2018, we began a restructuring program to integrate SAM with Grass Valley. The restructuring and integration activities are focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions. We recognized $3.0 million of severance and other restructuring costs for this program during the nine months ended September 29, 2019. The costs were incurred by the Enterprise Solutions segment. The integration of these businesses is complete, and thus, we do not expect to incur any more costs for this program.

~~Preferred Stock Conversion~~

On July 15, 2019, all outstanding Preferred Stock was automatically converted into shares of Belden common stock at the conversion rate of 132.50, resulting in the issuance of approximately 6.9 million shares of Belden common stock. Upon conversion, the Preferred Stock was automatically extinguished and discharged, is no longer deemed outstanding for all purposes, and delisted from trading on the New York Stock Exchange. During the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, dividends~~2020, we paid the sellers of Snell Advanced Media (SAM) the full earnout consideration of $31.4 million in cash as per the purchase agreement. SAM was acquired on February 8, 2018 and is included in the ~~Preferred Stock were $1.0 million and $18.4 million, respectively.~~Grass Valley disposal group. See Note ~~15.~~1.

~~Subsequent Events~~Discontinued Operations Treatment of the Grass Valley Disposal Group and Impairment Charge

During the fourth quarter of 2019, we committed to a plan to sell Grass Valley, and at such time, met all of the criteria to classify the assets and liabilities of this business as held for sale. Furthermore, we determined a divestiture of Grass Valley represents a strategic shift that is expected to have a major impact on our operations and financial results. As a result, the Grass Valley disposal group, which ~~is currently part of the~~was included in our Enterprise Solutions segment, ~~will be included in~~is now reported within discontinued ~~operations commencing in the fourth quarter. We intend~~operations. As such, comparable prior period information has been recast to ~~complete the sale of~~exclude the Grass Valley disposal group ~~during~~from continuing operations, with the ~~next twelve months.~~exception of the Condensed Consolidated Cash Flow Statements. The Grass Valley disposal group excludes certain Grass Valley pension plans that we will retain. During the three months ended March 29, 2020, we wrote down the carrying value of the disposal group and recognized asset impairments totaling $23.2 million. See Note 4.

Segment Transfer

-24-

Cost Reduction Program

During the fourth quarter of 2019, we ~~announced~~began a cost reduction program ~~designed~~ to improve performance and enhance margins by streamlining the organizational structure and investing in technology to drive productivity. We recognized an immaterial amount associated with this program during the three months ended March 29, 2020. The cost reduction program is expected to deliver an estimated ~~$40.0~~$60.0 million ~~annualized~~ reduction in selling, general, and administrative expenses ~~with some benefit~~on an annual basis, of which $40.0 million is expected to be realized in 2020, ~~and~~with the full benefit ~~realized~~materializing in 2021. We expect to incur incremental costs of approximately $20.0 million for this program in 2020. See Note 11.

SPC, Opterna and FutureLink Integration Program

In 2019, we began a restructuring program to integrate SPC, Opterna and FutureLink with our existing businesses. The restructuring and integration activities are focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions. We recognized $2.2 million of severance and other ~~related~~restructuring costs ~~as part of~~for this program ~~but~~during the ~~timing~~three months ended March 29, 2020. These costs were incurred by the Enterprise Solutions segment. We expect to incur incremental costs of approximately $2.5 million for this program in 2020. See Note 11.

Share Repurchase Program

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 ~~amounts~~other restrictions. This program is funded with cash on hand and cash flows from operating activities. The program does not have an expiration date and may be suspended at any time at the discretion of ~~such costs are not yet known.~~the Company. During the three months ended March 29, 2020, we repurchased 0.6 million shares of our common stock under the share repurchase program for an aggregate cost of $21.2 million and an average price per share of $35.85. See Note 18.

Subsequent Events

During the fiscal second quarter, we repurchased 0.4 million shares of our common stock under the share repurchase program for an aggregate cost of $13.8 million and an average price per share of $35.80. Year-to-date, we have repurchased 1.0 million shares of our common stock under the share repurchase program for an aggregate cost of $35.0 million and an average price per share of $35.83. See Notes 18 and 19.

Due to the uncertainties arising from the COVID-19 pandemic, out of an abundance of caution, at the beginning of the second quarter we borrowed $190.0 million under our Revolving Credit Agreement, which provides a $400.0 million multi-currency asset-based revolving credit facility. The maturity date of the Revolver is May 16, 2022. 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. See Notes 12 and 19.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows that are or would be considered material to investors.

Critical Accounting Policies

During the ~~nine~~three months ended ~~September~~March 29, ~~2019:~~2020:

•We did not change any of our existing critical accounting policies from those listed in our ~~2018~~2019 Annual Report on Form 10-K other than updating our ~~lease~~ accounting policies for the adoption of ASU ~~2016-02;~~2016-13;

•No existing accounting policies became critical accounting policies because of an increase in the materiality of associated transactions or changes in the circumstances to which associated judgments and estimates relate; and

•There were no significant changes in the manner in which critical accounting policies were applied or in which related judgments and estimates were developed.

-25-

Results of Operations

Consolidated Income before Taxes


	Three Months Ended
	March 29, 2020		March 31, 2019		% Change

	(In thousands, except percentages)
Revenues	$	463,526	$	500,140	(7.3)	%
Gross profit	170,501		186,856		(8.8)	%
Selling, general and administrative expenses	(98,389)		(97,955)		0.4	%
Research and development expenses	(26,219)		(23,247)		12.8	%
Amortization of intangibles	(16,185)		(18,164)		(10.9)	%
Operating income	29,708		47,490		(37.4)	%
Interest expense, net	(13,324)		(13,988)		(4.7)	%
Non-operating pension benefit	699		603		15.9	%
Income from continuing operations before taxes	17,083		34,105		(49.9)	%

Three Months Ended Nine Months Ended
September 29, 2019 September 30, 2018
%
Change
September 29, 2019 September 30, 2018
%
Change

(In thousands, except percentages)
Revenues $ 620,318
$ 655,774
(5.4 )% $ 1,845,023
$ 1,929,978
(4.4 )%
Gross profit 235,402
260,857
(9.8 )% 701,153
749,047
(6.4 )%
Selling, general and administrative expenses (120,169 ) (132,716 ) (9.5 )% (365,439 ) (396,430 ) (7.8 )%
Research and development expenses (31,351 ) (33,471 ) (6.3 )% (100,539 ) (107,781 ) (6.7 )%
Amortization of intangibles (22,243 ) (25,533 ) (12.9 )% (67,952 ) (74,990 ) (9.4 )%
Goodwill and other asset impairment (342,146 ) —
n/a
(342,146 ) —
n/a
Gain from patent litigation —
62,141
(100.0 )% —
62,141
(100.0 )%
Operating income (loss) (280,507 ) 131,278
(313.7 )% (174,923 ) 231,987
(175.4 )%
Interest expense, net (14,200 ) (14,472 ) (1.9 )% (42,561 ) (46,538 ) (8.5 )%
Non-operating pension benefit 489
1,356
(63.9 )% 1,517
824
84.1 %
Loss on debt extinguishment —
—
n/a
—
(22,990 ) (100.0 )%
Income (loss) before taxes (294,218 ) 118,162
(349.0 )% (215,967 ) 163,283
(232.3 )%

Revenues decreased ~~$35.5 million and $85.0~~$36.6 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable ~~periods~~period of ~~2018~~2019 due to the following ~~factors:~~factors:

•Lower sales volume due in part to changes in channel inventory levels resulted in a ~~$36.5 million and $72.9~~$45.4 million decrease in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively.~~2020.

~~Currency translation~~•Copper prices had a ~~$7.1 million and $31.9~~$4.4 million unfavorable impact on revenues in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively.~~2020.

~~Copper prices~~•Currency translation had a ~~$5.6 million and $17.0~~$3.8 million unfavorable impact on revenues in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively.~~2020.

•Acquisitions contributed an estimated ~~$7.3 million and $36.8~~$17.0 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively.~~2020.

Gross profit decreased ~~$25.5 million and $47.9~~$16.4 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable ~~periods~~period of ~~2018. Gross profit for the three months ended September 29,~~ 2019 ~~decreased~~ due to the decreases in ~~revenue~~revenues discussed above as well as unfavorable mix; partially offset by ~~decreases in severance, restructuring, and acquisition integration costs~~the impact of $4.0 million from the comparable period of 2018. Gross profit for the nine months ended September 29, 2019 decreased due to the decreases in revenue discussed above as well as unfavorable mix; partially offset by decreases in severance, restructuring, and acquisition integration costs of $19.7 million from the comparable period of 2018.acquisitions.

Selling, general and administrative expenses ~~decreased $12.5 million and $31.0~~increased $0.4 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable ~~periods~~period of ~~2018. Improved productivity; a decline~~2019. Acquisitions and increases in ~~severance,~~ restructuring ~~and acquisition integration costs; and currency translation~~costs each contributed ~~$10.0~~$3.6 million ~~$3.0 million, and $1.2 million, respectively,~~ to the ~~decrease~~increase in selling, general and administrative expenses ~~for the three months ended September 29, 2019 as compared to~~over the year ago ~~period;~~period. These increases were partially offset by the ~~impact of acquisitions,~~benefits realized from our Cost Reduction Program, productivity improvement initiatives, and currency translations, which ~~increased~~contributed to a decline in selling, general and administrative expenses ~~by $1.7 million. A decline in severance, restructuring, and acquisition integration costs; improved productivity; and currency translation contributed $21.9~~of approximately $5.0 million, ~~$14.3~~$1.3 million, and ~~$3.9 million, respectively, to the decrease in selling, general~~

and administrative expenses for the nine months ended September 29, 2019 as compared to the year ago period; partially offset by the impact of acquisitions, which increased selling, general and administrative expenses by $9.1 million. The improved productivity stems from successful cost saving measures implemented during the current year.

Research and development expenses decreased $2.1 million and $7.2 million in the three and nine months ended September 29, 2019, respectively, from the comparable periods of 2018. Productivity improvement initiatives contributed $1.4 million and $3.2 million to the decline in research and development expenses in the three and nine months ended September 29, 2019, respectively, from the comparable periods of 2018. Decreases in severance, restructuring, and acquisition integration costs of $0.5 million, and $4.4 million also contributed to the decline in research and development expenses in the three and nine months ended September 29, 2019, respectively, over the year ago period. Currency translation contributed $0.3 million and $1.1 million to the decline in research and development expenses in the three and nine months ended September 29, 2019, respectively, as compared to the year ago period. The above decreases were partially offset by the impact of acquisitions, which increased research and development expenses by $0.1 million and 1.5 million in the three and nine months ended September 29, 2019, respectively, as compared to the year ago period.

Research and development expenses increased $3.0 million in the three months ended March 29, 2020 from the comparable period of 2019 primarily due to increased investments in R&D projects as well as acquisitions.

Amortization of intangibles decreased ~~$3.3 million and $7.0~~$2.0 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable ~~periods~~period of ~~2018~~2019 primarily due to certain intangible assets becoming fully amortized.

~~Goodwill and other asset impairment increased $342.1~~Operating income decreased $17.8 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019~~2020 from the comparable ~~periods~~period of 2018. We performed an interim impairment test on our Grass Valley reporting unit, which resulted in a total goodwill and other asset impairment charge of $342.1 million for the three and nine months ended September 29, 2019.

~~Gain from patent litigation decreased $62.1 million in the three and nine months ended September 29,~~ 2019 from the comparable periods of 2018. In 2011, our wholly-owned subsidiary, PPC, filed an action for patent infringement against Corning alleging they willfully infringed upon two of their patents, and after years of post-trial motions and appeals, the District Court ruled that Corning shall pay judgments of $62.1 million, which we received in July 2018 and recorded as a gain from patent litigation for the three and nine months ended September 30, 2018.

~~Operating income decreased $411.8 million and $406.9 million in the three and nine months ended September 29, 2019, respectively, from the comparable periods of 2018~~ primarily as a result of the ~~$342.1~~$16.4 million goodwill and other asset impairment charge recognized during the three and nine months ended September 29, 2019, the $62.1 million gain from patent litigation during the nine months ended September 30, 2018, and the decline in gross profit discussed above.

Net interest expense remained relatively flat year-over-year, with a decrease of $0.7 million, or 4.7%, in the three months ended March 29, 2020 from the comparable period of 2019 primarily as a result of currency translation.

Income from continuing operations before taxes decreased ~~$0.3 million and $4.0~~$17.0 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable ~~periods~~period of ~~2018 as a result of our debt transactions during 2018. In March 2018, we issued €350.0 million aggregate principal amount of new senior subordinated notes~~2019 primarily due 2028 at an interest rate of 3.875%, and used the net proceeds of this offering and cash on hand to repurchase all of our outstanding €200.0 million 5.5% senior subordinated notes due 2023 as well as all of our outstanding $200.0 million 5.25% senior subordinated notes due 2024.

~~The loss on debt extinguishment recognized in 2018 represents the premium paid~~ to the ~~bond holders to retire a portion of the 2023 and 2024 notes and the unamortized debt issuance costs written-off.~~decline in operating income discussed above.

Income (loss) before taxes decreased $412.4 million and $379.3 million in the three and nine months ended September 29, 2019, respectively, from the comparable periods of 2018. The decrease is primarily a result of the operating loss during the three and nine months ended September 29, 2019; partially offset by the loss on debt extinguishment in the nine months ended September 30, 2018.

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Income Taxes

Three Months Ended Nine Months Ended
September 29, 2019 September 30, 2018
%
Change
September 29, 2019 September 30, 2018
%
Change

(In thousands, except percentages)
Income (loss) before taxes $ (294,218 ) $ 118,162
(349.0 )% $ (215,967 ) $ 163,283
(232.3 )%
Income tax expense 2,797
32,304
(91.3 )% 13,580
46,063
(70.5 )%
Effective tax rate (1.0 )% 27.3 % (6.3 )% 28.2 %


	Three Months Ended
	March 29, 2020			March 31, 2019			% Change

	(In thousands, except percentages)
Income before taxes	$	17,083		$	34,105		(49.9)	%
Income tax expense	2,192			6,170			(64.5)	%
Effective tax rate	12.8		%	18.1		%

For the three ~~and nine~~ months ended ~~September~~March 29, 2020, we recognized income tax expense of $2.2 million, representing an effective tax rate of 12.8%, which was impacted by a $1.1 million income tax benefit for certain foreign tax credits. For the three months ended March 31, 2019, we recognized income tax expense of ~~$2.8~~$6.2 million, ~~and $13.6 million, respectively,~~ representing an effective tax rate of ~~(1.0)% and (6.3)%~~18.1%, ~~respectively. The effective tax rates were~~which was impacted by an $0.8 million income tax benefit ~~of $5.7 million as~~resulting from a ~~result of changes~~change in our ~~estimated~~ valuation allowance ~~requirement related to~~on foreign tax credits due to the restructuring of certain foreign operations. ~~These effective rates~~

In March 2020, the Coronavirus Relief and Economic Security Act (CARES Act) was signed into law in the United States. We are ~~also reflective~~still analyzing the provisions of the CARES Act to determine if there will be any impact ~~of more favorable statutory tax rates applied~~ to ~~the earnings of these foreign operations due to the restructuring efforts. The~~our income tax ~~expense~~provision for the ~~three and nine months ended September 29, 2019 was also impacted by a $5.1 million income tax benefit for the partial deductibility of the goodwill and other asset impairment charge during the period.~~

~~We recognized an income tax benefit of $3.3 million and $4.4 million, respectively, in the three and nine months ended September 30, 2018 primarily related to certain foreign tax credits.~~

~~We recognized an income tax benefit of $1.2 million in the nine months ended September 30, 2018 due to a decrease in reserves for uncertain tax positions of prior years.~~

~~Our income tax expense and effective tax rate in future periods may be impacted by many factors, including our geographic mix of income and changes in tax laws.~~year.

Consolidated Adjusted Revenues and Adjusted EBITDA


	Three Months Ended
	March 29, 2020			March 31, 2019			% Change

	(In thousands, except percentages)
Adjusted Revenues	$	463,526		$	500,140		(7.3)	%
Adjusted EBITDA	60,843			76,419			(20.4)	%
as a percent of adjusted revenues	13.1		%	15.3		%

Three Months Ended Nine Months Ended
September 29, 2019 September 30, 2018
%
Change
September 29, 2019 September 30, 2018
%
Change

(In thousands, except percentages)
Adjusted Revenues $ 620,318
$ 659,003
(5.9 )% $ 1,845,023
$ 1,937,867
(4.8 )%
Adjusted EBITDA 101,574
126,689
(19.8 )% 289,817
352,552
(17.8 )%
as a percent of adjusted revenues 16.4 % 19.2 % 15.7 % 18.2 %

Adjusted revenues decreased ~~$38.7 million and $92.9~~$36.6 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable periods of ~~2018~~2019 due to the following ~~factors:~~factors:

•Acquisitions contributed an estimated ~~$10.5 million and $28.9~~$17.0 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively.~~2020.

Adjusted EBITDA decreased ~~$25.1 million and $62.7~~$15.6 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable ~~periods~~period of ~~2018. Adjusted EBITDA for both~~2019 primarily as a result of the ~~three and nine months ended September 29, 2019 decreased due to the decreases~~decrease in Adjusted Revenues discussed ~~above as well as unfavorable mix as compared to the year ago period of 2018.~~above.

Use of Non-GAAP Financial Information

Adjusted Revenues, Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow are non-GAAP financial measures. In addition to reporting financial results in accordance with accounting principles generally accepted in the United States, we provide non-GAAP operating results adjusted for certain items, including: asset impairments; accelerated depreciation expense due to plant consolidation activities; purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory and deferred revenue to fair value, and transaction costs; severance, restructuring, and acquisition integration costs; gains (losses) recognized on the disposal of businesses and tangible assets; amortization of intangible assets; gains (losses) on debt extinguishment; certain revenues and gains (losses) from patent settlements; discontinued operations; and other costs. We adjust for the items listed

above in all periods presented, unless the impact is clearly immaterial to our financial statements. When we calculate the tax effect of the adjustments, we include all current and deferred income tax expense commensurate with the adjusted measure of pre-tax profitability.

We utilize the adjusted results to review our ongoing operations without the effect of these adjustments and for comparison to budgeted operating results. We believe the adjusted results are useful to investors because they help them compare our results to previous periods and provide important insights into underlying trends in the business and how management oversees our business operations on a day-to-day basis. As an example, we adjust for the purchase accounting effect of recording deferred revenue at fair value in order to reflect the revenues that would have otherwise been recorded by acquired businesses had they

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remained as independent entities. We believe this presentation is useful in evaluating the underlying performance of acquired companies. Similarly, we adjust for other acquisition-related expenses, such as amortization of intangibles and other impacts of fair value adjustments because they generally are not related to the acquired business' core business performance. As an additional example, we exclude the costs of restructuring programs, which can occur from time to time for our current businesses and/or recently acquired businesses. We exclude the costs in calculating adjusted results to allow us and investors to evaluate the performance of the business based upon its expected ongoing operating structure. We believe the adjusted measures, accompanied by the disclosure of the costs of these programs, provides valuable insight.

Adjusted results should be considered only in conjunction with results reported according to accounting principles generally accepted in the United States. The following tables reconcile our GAAP results to our non-GAAP financial measures:

Three Months Ended Nine Months Ended
September 29, 2019 September 30, 2018 September 29, 2019 September 30, 2018

(In thousands, except percentages)
GAAP revenues $ 620,318
$ 655,774
$ 1,845,023
$ 1,929,978
Deferred revenue adjustments (1) —
3,229
—
7,889
Adjusted revenues $ 620,318
$ 659,003
$ 1,845,023
$ 1,937,867

GAAP net income (loss) $ (297,015 ) $ 85,858
$ (229,547 ) $ 117,220
Goodwill and other asset impairment (2) 342,146
—
342,146
—
Amortization of intangible assets 22,243
25,533
67,952
74,990
Interest expense, net 14,200
14,472
42,561
46,538
Depreciation expense 12,147
11,671
37,170
35,562
Income tax expense 2,797
32,304
13,580
46,063
Severance, restructuring, and acquisition integration costs (3) 4,045
11,688
10,904
57,010
Amortization of software development intangible assets 1,197
620
3,206
1,344
Purchase accounting effects related to acquisitions (4) (186 ) 821
1,845
2,359
Loss on debt extinguishment —
—
—
22,990
Deferred revenue adjustments (1) —
3,229
—
7,889
Costs related to patent litigation —
2,634
—
2,634
Gain from patent litigation —
(62,141 ) —
(62,141 )
Loss on sale of assets —
—
—
94
Adjusted EBITDA $ 101,574
$ 126,689
$ 289,817
$ 352,552

GAAP net income (loss) margin (47.9 )% 13.1 % (12.4 )% 6.1 %
Adjusted EBITDA margin 16.4 % 19.2 % 15.7 % 18.2 %


	Three Months Ended
	March 29, 2020			March 31, 2019

	(In thousands, except percentages)
GAAP and adjusted revenues	$	463,526		$	500,140



GAAP net income (loss)	$	(11,219)		$	25,178
Loss from discontinued operations, net of tax	26,110			2,757
Amortization of intangible assets	16,185			18,164
Interest expense, net	13,324			13,988
Depreciation expense	10,282			10,103
Severance, restructuring, and acquisition integration costs (1)	3,619			—
Income tax expense	2,192			6,170
Amortization of software development intangible assets	330			59
Purchase accounting effects related to acquisitions (2)	20			—
Adjusted EBITDA	$	60,843		$	76,419

GAAP net income (loss) margin	(2.4)		%	5.0		%
Adjusted EBITDA margin	13.1		%	15.3		%

~~(3) See Note 9,~~ 11, Severance, Restructuring, and Acquisition Integration Activities, for ~~details~~.details.

~~to the Opterna and FutureLink acquisitions. For the three and nine months ended September 30, 2018, we recognized cost of sales~~ for the ~~adjustment of acquired inventory to fair value related to the SAM and NT2 acquisitions.~~SPC acquisition.

Segment Results of Operations

For additional information regarding our segment measures, see Note 45 to the Condensed Consolidated Financial Statements.

Enterprise Solutions


	Three Months Ended								Nine Months Ended									Three Months Ended
	September 29, 2019			September 30, 2018			% Change		September 29, 2019			September 30, 2018			% Change			March 29, 2020			March 31, 2019			% Change

	(In thousands, except percentages)																	(In thousands, except percentages)
Segment Revenues	$	368,080		$	392,080		(6.1	)%	$	1,064,469		$	1,142,765		(6.9	)%	Segment Revenues	$	212,213		$	207,083		2.5	%
Segment EBITDA	56,814			72,210			(21.3	)%	149,855			199,943			(25.1	)%	Segment EBITDA	24,712			21,635			14.2	%
as a percent of segment revenues	15.4		%	18.4		%			14.1		%	17.5		%			as a percent of segment revenues	11.6		%	10.4		%

Enterprise Solutions revenues ~~decreased $24.0 million and $78.3~~increased $5.1 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable ~~periods~~period of ~~2018. For the three months ended September 29,~~ 2019 ~~decreases~~due to acquisitions, which attributed a $17.0 million increase in revenues. This increase was partially offset by a decline in volume, lower copper prices, and unfavorable currency translation, ~~and lower copper prices~~which contributed an estimated ~~$28.2~~$9.1 million, ~~$3.5~~$2.0 million, and ~~$2.8~~$0.8 million to the decline in revenues, respectively; partially offset by the impact of acquisitions, which contributed an estimated $10.5 million increase in revenues. For the nine months ended September 29, 2019, decreases in volume, unfavorable currency translation, and lower copper prices contributed an estimated $86.5 million, $13.9 million, and $6.7 million to the decline in revenues, respectively, partially offset by the impact of acquisitions, which contributed an estimated $28.8 million increase in revenues.respectively. The decrease in ~~revenues~~volume was ~~most notable~~due in ~~Asia, and partially offset by continued growth and share capture~~part to declines in the ~~Americas region.~~levels of inventory at our channel partners.

Enterprise Solutions EBITDA ~~decreased $15.4 million and $50.1~~increased $3.1 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 compared to the year ago ~~periods~~period primarily as a result of the ~~decline~~increase in revenues discussed ~~above.~~above as well as improved productivity.

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Industrial Solutions


	Three Months Ended								Nine Months Ended									Three Months Ended
	September 29, 2019			September 30, 2018			% Change		September 29, 2019			September 30, 2018			% Change			March 29, 2020			March 31, 2019			% Change

	(In thousands, except percentages)																	(In thousands, except percentages)
Segment Revenues	$	252,238		$	266,923		(5.5	)%	$	780,554		$	795,102		(1.8	)%	Segment Revenues	$	251,313		$	293,057		(14.2)	%
Segment EBITDA	44,614			53,750			(17.0	)%	139,531			153,401			(9.0	)%	Segment EBITDA	35,527			54,664			(35.0)	%
as a percent of segment revenues	17.7		%	20.1		%			17.9		%	19.3		%			as a percent of segment revenues	14.1		%	18.7		%

Industrial Solutions revenues decreased ~~$14.7 million and $14.5~~$41.7 million in the three ~~and nine~~ months ended ~~September~~March 29, ~~2019, respectively,~~2020 from the comparable period of ~~2018.~~2019. The decrease in revenues in the three months ended ~~September~~March 29, ~~2019~~2020 from the comparable period of ~~2018~~2019 was primarily due to ~~decrease~~decreases in volume, unfavorable currency translation, and lower copper prices, which had an estimated impact of ~~$8.3~~$36.3 million, ~~$3.6~~$3.0 million, and ~~$2.8~~$2.4 million, respectively. The decrease in volume was ~~primarily~~ due in part to ~~changes in channel inventory levels. The decrease in revenues~~declines in the ~~nine~~levels of inventory at our channel partners.

Industrial Solutions EBITDA decreased $19.1 million in the three months ended ~~September~~March 29, ~~2019~~2020 from the comparable period of 2018 was primarily due to unfavorable currency translation and lower copper prices, which had an estimated impact of $18.0 million and $8.8 million, respectively; partially offset by an increase in volume, which increased revenues $12.3 million over the year ago period.

~~Industrial Solutions EBITDA decreased $9.1 million and $13.9 million in the three and nine months ended September 29,~~ 2019 ~~respectively, from the comparable periods of 2018~~ primarily as a result of the changes in revenues discussed above.

Liquidity and Capital Resources

Significant factors affecting our cash liquidity include (1) cash from operating activities, (2) disposals of businesses and tangible assets, (3) cash used for acquisitions, restructuring actions, capital expenditures, share repurchases, dividends, and senior subordinated note repurchases, and (4) our available credit facilities and other borrowing ~~arrangements, and (5) cash proceeds from equity offerings.~~arrangements. We expect our operating activities to generate cash in ~~2019~~2020 and believe our sources of liquidity are sufficient to

fund current working capital requirements, capital expenditures, contributions to our retirement plans, share repurchases, senior subordinated note repurchases, quarterly dividend payments, and our short-term operating strategies. However, we may require external financing in the event we complete a significant acquisition. Our ability to continue to fund our future needs from business operations could be affected by many factors, including, but not limited to: economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product mix, and commodities pricing.

The following table is derived from our Condensed Consolidated Cash Flow Statements:


	Three Months Ended
	March 29, 2020		March 31, 2019

	(In thousands)
Net cash used for:
Operating activities	$	(52,052)	$	(46,060)
Investing activities	(18,255)		(23,585)
Financing activities	(53,896)		(12,735)
Effects of currency exchange rate changes on cash and cash equivalents	(7,947)		752
Decrease in cash and cash equivalents	(132,150)		(81,628)
Cash and cash equivalents, beginning of period	425,885		420,610
Cash and cash equivalents, end of period	$	293,735	$	338,982

Nine Months Ended
September 29, 2019 September 30, 2018

(In thousands)
Net cash provided by (used for):
Operating activities $ 89,517
$ 100,859
Investing activities (125,000 ) (106,304 )
Financing activities (84,448 ) (220,932 )
Effects of currency exchange rate changes on cash and cash equivalents (3,937 ) (5,704 )
Decrease in cash and cash equivalents (123,868 ) (232,081 )
Cash and cash equivalents, beginning of period 420,610
561,108
Cash and cash equivalents, end of period $ 296,742
$ 329,027

Operating cash flows were a ~~source~~use of cash of ~~$89.5~~$52.1 million and ~~$100.9~~$46.1 million in the first quarter of 2020 and 2019, ~~and 2018,~~ respectively. ~~The $11.4~~Operating cash flows declined $6.0 million ~~decline as~~ compared to the prior year is primarily due to the ~~$62 million pre-tax cash proceeds from the Corning patent litigation received~~decrease in ~~2018. Excluding the patent litigation proceeds,~~income. Changes in operating ~~cash flows increased year-over-year due in part to favorable changes in receivables~~assets and ~~inventory. Receivables~~liabilities were a ~~source~~use of cash in the first quarter of ~~$6.0 million compared~~2020 and 2019, primarily as a result of the decline in accounts payable and accrued liabilities stemming from rebate payments to channel partners as well as incentive compensation to employees during the first quarter. Inventories were a use of cash of ~~$25.3~~$29.1 million in the ~~prior year. Inventory was a source~~first quarter of ~~cash of $32.3 million compared~~2020 due in part to ~~a use of cash of $16.6 million in the prior year. The improvements in receivables and inventory are attributable to effective working capital management.~~lower demand.

-29-

Net cash used for investing activities totaled ~~$125.0~~$18.3 million in ~~2019,~~2020, compared to ~~$106.3~~$23.6 million for the comparable period of ~~2018.~~2019. Investing activities for the ~~nine~~three months ended ~~September~~March 29, ~~2019~~2020 included capital expenditures of ~~$74.1~~$20.9 million compared to ~~$63.5~~$23.6 million in the comparable period of ~~2018.~~2019. The ~~increase in capital expenditures of $10.6 million is due in part to the investments we are making in India and software development. The nine~~three months ended ~~September~~March 29, ~~2019~~2020 also included ~~payments, net~~$2.1 million of ~~cash acquired for acquisitions~~proceeds from the sale of ~~$51.0~~tangible property and the receipt of $0.6 million ~~primarily~~related to a working capital adjustment for the acquisition of Opterna, and the nine months ended September 30, 2018 included payments, net of cash acquired for acquisitions of $84.6 million for the acquisitions of SAM and NT2. Additionally, the nine months ended September 30, 2018 included proceeds from the disposal of the MCS business and Hirshmann JV of $40.2 million, which closed on December 31, 2017.SPC.

Net cash used for financing activities for the ~~nine~~three months ended ~~September~~March 29, ~~2019~~2020 totaled ~~$84.4~~$53.9 million, compared to ~~$220.9~~$12.7 million for the comparable period of ~~2018.~~2019. Financing activities for the ~~nine~~three months ended ~~September~~March 29, ~~2019~~2020 included a payment of earnout consideration of which $29.3 million is classified as a financing activity, payments under our share repurchase program of ~~$50.0~~$21.2 million, cash dividend payments of ~~$32.2~~$2.3 million, and net payments related to share based compensation activities of ~~$2.1~~$1.0 million. Financing activities for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 included ~~payments under borrowing arrangements of $484.8 million, payments under our share repurchase program of $125.0 million,~~ cash dividend payments of ~~$32.4~~$10.7 million ~~debt issuance costs of $7.6 million,~~and net payments related to share based compensation activities of ~~$2.0 million, and $431.3 million of cash proceeds from the issuance of the €350.0 million 3.875% Notes due 2028.~~$1.9 million.

Our cash and cash equivalents balance, including discontinued operations, was ~~$296.7~~$293.7 million as of ~~September~~March 29, ~~2019.~~2020. Of this amount, ~~$199.5~~$205.2 million was held outside of the U.S. in our foreign operations. Substantially all of the foreign cash and cash equivalents are readily convertible into U.S. dollars or other foreign currencies. We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and accordingly, no provision for any withholding taxes has been recorded. Upon distribution of those earnings in the form of dividends or otherwise, we may be subject to withholding taxes payable to the respective foreign countries.

Our outstanding debt obligations as of ~~September~~March 29, ~~2019~~2020 consisted of ~~$1,424.3~~$1,404.7 million of senior subordinated notes. Additional discussion regarding our various borrowing arrangements is included in Note 1011 to the Condensed Consolidated Financial Statements. As of ~~September~~March 29, ~~2019,~~2020, we had ~~$287.0~~no borrowings and $303.4 million in available borrowing capacity under our Revolver. At the beginning of the second quarter, we borrowed $190.0 million under our Revolver out of an abundance of caution due to the uncertainties arising from the COVID-19 pandemic. See Notes 12 and 19.

Forward-Looking Statements

Statements in this report other than historical facts are “forward-looking statements” made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding future financial performance (including revenues, expenses, earnings, margins, cash flows, dividends, capital expenditures and financial condition), plans and objectives, and related assumptions. These forward-looking statements reflect management’s current beliefs and expectations and are not guarantees of future performance. Actual results may differ materially from those suggested by any forward-looking statements based on a number of factors. These factors include, among others, those set forth in Part II, Item 1A and in other documents that we file with the SEC.

We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Item 3: Quantitative and Qualitative Disclosures about Market Risks

The following table provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal amounts by expected maturity dates and fair values as of ~~September~~March 29, ~~2019.~~2020.


	Principal Amount by Expected Maturity									Fair
	2020		Thereafter			Total		Value

	(In thousands, except interest rates)
€350.0 million fixed-rate senior subordinated notes due 2028	$	—	$	378,175		$	378,175	$	344,347
Average interest rate			3.875		%
€450.0 million fixed-rate senior subordinated notes due 2027	$	—	$	486,225		$	486,225	$	422,889
Average interest rate			3.375		%
€200.0 million fixed-rate senior subordinated notes due 2026	$	—	$	216,100		$	216,100	$	201,371
Average interest rate			4.125		%
€300.0 million fixed-rate senior subordinated notes due 2025	$	—	$	324,150		$	324,150	$	259,035
Average interest rate			2.875		%
Total						$	1,404,650	$	1,227,642

-30-

Principal Amount by Expected Maturity Fair
2019 Thereafter Total Value

(In thousands, except interest rates)
€350.0 million fixed-rate senior subordinated notes due 2028 $ —
$ 383,460
$ 383,460
$ 405,946
Average interest rate 3.875 %
€450.0 million fixed-rate senior subordinated notes due 2027 $ —
$ 493,020
$ 493,020
$ 518,844
Average interest rate 3.375 %
€200.0 million fixed-rate senior subordinated notes due 2026 $ —
$ 219,120
$ 219,120
$ 233,420
Average interest rate 4.125 %
€300.0 million fixed-rate senior subordinated notes due 2025 $ —
$ 328,680
$ 328,680
$ 336,608
Average interest rate 2.875 %
Total $ 1,424,280
$ 1,494,818

Item 7A of our ~~2018~~2019 Annual Report on Form 10-K provides information as to the practices and instruments that we use to manage market risks. There were no material changes in our exposure to market risks since December 31, ~~2018.~~2019, and our debt is entirely fixed at an average interest rate of 3.5% with no maturities until 2025 to 2028. We have no maintenance covenants on our outstanding debt. Our only covenant is an incurrence covenant, which limits our ability to take on additional debt if EBITDA drops below a certain threshold.

Item 4: Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

-31-

PART II OTHER INFORMATION

Item 1: Legal Proceedings

SEC Investigation - As disclosed in our Current Report on Form 8-K filed with the SEC on December 3, 2018, we are fully cooperating with an SEC investigation related to the material weakness in internal controls over financial reporting as of December 31, 2017 disclosed in our 2017 Form 10-K. We continue to believe that the outcome of the investigation will not have a material adverse effect on the Company.

We are a party to various other legal proceedings and administrative actions that are incidental to our operations. In our opinion, the proceedings and actions in which we are involved should not, individually or in the aggregate, have a material adverse effect on our financial condition, operating results, or cash flows. However, since the trends and outcome of this litigation are inherently uncertain, we cannot give absolute assurance regarding the future resolution of such litigation, or that such litigation may not become material in the future.

Item 1A: Risk Factors

In addition to the risks and uncertainties discussed in this quarterly report on Form 10-Q, particularly those disclosed in Part I, Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations, see “Risk Factors” in the Company’s annual report on Form 10-K for fiscal year ended December 31, 2019. There have been no material changes ~~with respect~~ to ~~risk~~the Risk Factors except as set forth below:

The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

In December 2019, a novel coronavirus disease (“COVID-19”) was first reported and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. The widespread health crisis is adversely affecting the broader economies, financial markets and overall demand environment for many of our products.

Our operations and the operations of our suppliers, channel partners and customers have been disrupted to varying degrees by a range of external factors related to the COVID-19 pandemic, some of which are not within our control. Many governments have imposed, and may yet impose, a wide range of restrictions on the physical movement of people in order to limit the spread of COVID-19. The COVID-19 pandemic has had, and likely will continue to have, a substantial impact on the attendance and productivity of our employees, and those of our channel partners or customers, resulting in negative impacts to our results of operations and overall financial performance. Additionally, COVID-19 has resulted, and likely will continue to result, in delays in non-residential construction, non-crisis-related IT purchases and project completion schedules in general, all of which can negatively impact our results in both current and future periods.

The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as ~~previously disclosed~~the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the effects of measures enacted by policy makers and central banks around the globe, and the impact of these and other factors on our employees, customers, channel partners and suppliers. If we are not able to respond to and manage the impact of such events effectively, our business will continue to be affected.

To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this section and in the “Risk Factors” section of our ~~2018~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2019.

-32-

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Set forth below is information regarding our stock repurchases for the three months ended ~~September~~March 29, ~~2019~~2020 (in thousands, except per share amounts).


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs

Balance at December 31, 2019					$	250,000
January 1, 2020 through February 2, 2020	—	$	—	—	250,000
February 3, 2020 through March 1, 2020	—	—		—	250,000
March 2, 2020 through March 29, 2020	592	35.85		592	228,761
Total	592	$	35.85	592	$	228,761

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs

Balance at June 30, 2019 $ 277,185
July 1, 2019 through August 4, 2019 493
$ 55.17
493
250,000
August 5, 2019 through September 1, 2019 —
—
—
250,000
September 2, 2019 through September 29, 2019 —
—
—
250,000
Total 493
$ 57.47
493
$ 250,000

(1) In November 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 security laws and other regulations. This program is funded with cash on hand and cash flows from operating activities. The program does not have an expiration date and may be suspended at any time at the discretion of the Company. From inception of our program and during the nine months ended September 29, 2019, we have repurchased 0.9 million shares of our common stock under the program for an aggregate cost of $50.0 million and an average price of $56.19.

During the three months ended ~~September~~March 29, ~~2019,~~2020, we repurchased ~~0.5~~0.6 million shares of our common stock under the share repurchase program for an aggregate cost of ~~$27.2~~$21.2 million and an average price per share of ~~$55.17.~~$35.85.

Item 6: Exhibits

Exhibits



Exhibit 31.1						Certificate of the Chief Executive Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2						Certificate of the Chief Financial Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1						Certificate of the Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2						Certificate of the Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101.DEF						Definition Linkbase Document

Exhibit 101.PRE						Presentation Linkbase Document

Exhibit 101.LAB						Labels Linkbase Document

Exhibit 101.CAL						Calculation Linkbase Document

Exhibit 101.SCH						Schema Document

Exhibit 101.INS						Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

-33-

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BELDEN INC.

Date:

May 4, 2020

~~BELDEN INC.~~

By:

~~Date:~~

~~November 4, 2019~~

~~By:~~

/s/ John S. Stroup

John S. Stroup

President, Chief Executive Officer, and Chairman

Date:

~~November~~May 4, ~~2019~~2020

By:

/s/ Henk Derksen

Henk Derksen

Senior Vice President, Finance, and Chief Financial Officer

Date:

~~November~~May 4, ~~2019~~2020

By:

/s/ Douglas R. Zink

Douglas R. Zink

Vice President and Chief Accounting Officer

~~- 40-~~

-34-



Receivables	$	16,551
Inventory	15,084
Prepaid and other current assets	3,799
Property, plant, and equipment	7,716
Intangible assets	51,000
Goodwill	103,466
Deferred income taxes	1,388
Other long-lived assets	3,046
Total assets acquired	$	202,050

Accounts payable	$	11,825
Accrued liabilities	25,135
Deferred revenue	8,860
Long-term debt	19,315
Postretirement benefits	31,774
Other long-term liabilities	591
Total liabilities assumed	$	97,500

Net assets	$	104,550



	Enterprise Solutions			Industrial Solutions		Total Segments

	(In thousands)
As of and for the three months ended September 29, 2019
Segment revenues	$	368,080		$	252,238	$	620,318
Affiliate revenues	927			2		929
Segment EBITDA	56,814			44,614		101,428
Depreciation expense	7,381			4,766		12,147
Amortization of intangibles	9,780			12,463		22,243
Amortization of software development intangible assets	1,161			36		1,197
Severance, restructuring, and acquisition integration costs	4,045			—		4,045
Purchase accounting effects of acquisitions	(186		)	—		(186		)
Goodwill and other asset impairment	342,146			—		342,146
Segment assets	836,540			455,470		1,292,010
As of and for the three months ended September 30, 2018
Segment revenues	$	392,080		$	266,923	$	659,003
Affiliate revenues	1,776			15		1,791
Segment EBITDA	72,210			53,750		125,960
Depreciation expense	7,092			4,579		11,671
Amortization of intangibles	12,322			13,211		25,533
Amortization of software development intangible assets	620			—		620
Severance, restructuring, and acquisition integration costs	9,528			2,160		11,688
Purchase accounting effects of acquisitions	821			—		821
Deferred revenue adjustments	3,229			—		3,229
Segment assets	766,505			448,626		1,215,131
As of and for the nine months ended September 29, 2019
Segment revenues	$	1,064,469		$	780,554	$	1,845,023
Affiliate revenues	3,190			13		3,203
Segment EBITDA	149,855			139,531		289,386
Depreciation expense	22,655			14,515		37,170
Amortization of intangibles	29,270			38,682		67,952
Amortization of software development intangible assets	3,119			87		3,206
Severance, restructuring, and acquisition integration costs	10,904			—		10,904
Purchase accounting effects of acquisitions	1,845			—		1,845
Goodwill and other asset impairment	342,146			—		342,146
Segment assets	836,540			455,470		1,292,010
As of and for the nine months ended September 30, 2018
Segment revenues	$	1,142,765		$	795,102	$	1,937,867
Affiliate revenues	4,318			61		4,379
Segment EBITDA	199,943			153,401		353,344
Depreciation expense	21,465			14,097		35,562
Amortization of intangibles	35,301			39,689		74,990
Amortization of software development intangible assets	1,344			—		1,344
Severance, restructuring, and acquisition integration costs	46,949			10,061		57,010
Purchase accounting effects of acquisitions	2,359			—		2,359
Deferred revenue adjustments	7,889			—		7,889
Segment assets	766,505			448,626		1,215,131



	Foreign Currency Translation Component			Pension and Other Postretirement Benefit Plans			Accumulated Other Comprehensive Income (Loss)

	(In thousands)
Balance at December 31, 2018	$	(41,882	)	$	(33,025	)	$	(74,907	)
Other comprehensive income attributable to Belden before reclassifications	45,205			—			45,205
Amounts reclassified from accumulated other comprehensive income	—			591			591
Net current period other comprehensive gain attributable to Belden	45,205			591			45,796
Balance at September 29, 2019	$	3,323		$	(32,434	)	$	(29,111	)



	Principal Amount by Expected Maturity							Fair
	2019		Thereafter			Total		Value

	(In thousands, except interest rates)
€350.0 million fixed-rate senior subordinated notes due 2028	$	—	$	383,460		$	383,460	$	405,946
Average interest rate			3.875		%
€450.0 million fixed-rate senior subordinated notes due 2027	$	—	$	493,020		$	493,020	$	518,844
Average interest rate			3.375		%
€200.0 million fixed-rate senior subordinated notes due 2026	$	—	$	219,120		$	219,120	$	233,420
Average interest rate			4.125		%
€300.0 million fixed-rate senior subordinated notes due 2025	$	—	$	328,680		$	328,680	$	336,608
Average interest rate			2.875		%
Total						$	1,424,280	$	1,494,818