October 2, 2016
Delaware | 36-3601505 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
PART I | FINANCIAL INFORMATION |
Item 1. | Financial Statements |
September 27, 2015 | December 31, 2014 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 241,897 | $ | 741,162 | ||||
Receivables, net | 403,436 | 379,777 | ||||||
Inventories, net | 210,088 | 228,398 | ||||||
Deferred income taxes | 20,727 | 22,157 | ||||||
Other current assets | 77,227 | 42,656 | ||||||
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Total current assets | 953,375 | 1,414,150 | ||||||
Property, plant and equipment, less accumulated depreciation | 311,338 | 316,385 | ||||||
Goodwill | 1,406,593 | 943,374 | ||||||
Intangible assets, less accumulated amortization | 684,147 | 461,292 | ||||||
Deferred income taxes | 23,447 | 40,652 | ||||||
Other long-lived assets | 80,463 | 86,974 | ||||||
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$ | 3,459,363 | $ | 3,262,827 | |||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 209,656 | $ | 272,439 | ||||
Accrued liabilities | 298,053 | 250,420 | ||||||
Current maturities of long-term debt | 2,500 | 2,500 | ||||||
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Total current liabilities | 510,209 | 525,359 | ||||||
Long-term debt | 1,914,083 | 1,765,422 | ||||||
Postretirement benefits | 114,543 | 122,627 | ||||||
Deferred income taxes | 111,974 | 10,824 | ||||||
Other long-term liabilities | 35,400 | 31,409 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock | - | - | ||||||
Common stock | 503 | 503 | ||||||
Additional paid-in capital | 601,914 | 595,389 | ||||||
Retained earnings | 632,044 | 621,896 | ||||||
Accumulated other comprehensive loss | (58,519) | (46,031) | ||||||
Treasury stock | (402,788) | (364,571) | ||||||
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Total stockholders’ equity | 773,154 | 807,186 | ||||||
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$ | 3,459,363 | $ | 3,262,827 | |||||
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October 2, 2016 | December 31, 2015 | ||||||
(Unaudited) | |||||||
(In thousands) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 748,305 | $ | 216,751 | |||
Receivables, net | 400,528 | 387,386 | |||||
Inventories, net | 193,500 | 195,942 | |||||
Other current assets | 55,345 | 37,079 | |||||
Total current assets | 1,397,678 | 837,158 | |||||
Property, plant and equipment, less accumulated depreciation | 323,110 | 310,629 | |||||
Goodwill | 1,399,847 | 1,385,115 | |||||
Intangible assets, less accumulated amortization | 590,785 | 655,871 | |||||
Deferred income taxes | 30,596 | 34,295 | |||||
Other long-lived assets | 69,947 | 67,534 | |||||
$ | 3,811,963 | $ | 3,290,602 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 220,827 | $ | 223,514 | |||
Accrued liabilities | 294,209 | 323,249 | |||||
Current maturities of long-term debt | 2,500 | 2,500 | |||||
Total current liabilities | 517,536 | 549,263 | |||||
Long-term debt | 1,690,932 | 1,725,282 | |||||
Postretirement benefits | 106,779 | 105,230 | |||||
Deferred income taxes | 45,381 | 46,034 | |||||
Other long-term liabilities | 38,283 | 39,270 | |||||
Stockholders’ equity: | |||||||
Preferred stock | 1 | — | |||||
Common stock | 503 | 503 | |||||
Additional paid-in capital | 1,114,348 | 605,660 | |||||
Retained earnings | 760,688 | 679,716 | |||||
Accumulated other comprehensive loss | (62,876 | ) | (58,987 | ) | |||
Treasury stock | (400,718 | ) | (402,793 | ) | |||
Total Belden stockholders’ equity | 1,411,946 | 824,099 | |||||
Noncontrolling interest | 1,106 | 1,424 | |||||
Total stockholders’ equity | 1,413,052 | 825,523 | |||||
$ | 3,811,963 | $ | 3,290,602 |
-1-
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2015 | September 28, 2014 | September 27, 2015 | September 28, 2014 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Revenues | $ | 579,266 | $ | 610,774 | $ | 1,711,978 | $ | 1,699,355 | ||||||||
Cost of sales | (353,135) | (389,042) | (1,043,922) | (1,097,521) | ||||||||||||
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Gross profit | 226,131 | 221,732 | 668,056 | 601,834 | ||||||||||||
Selling, general and administrative expenses | (128,140) | (119,104) | (396,883) | (359,854) | ||||||||||||
Research and development | (38,168) | (30,444) | (110,999) | (82,633) | ||||||||||||
Amortization of intangibles | (25,669) | (15,203) | (78,090) | (42,739) | ||||||||||||
Income from equity method investment | 348 | 1,030 | 1,459 | 3,240 | ||||||||||||
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Operating income | 34,502 | 58,011 | 83,543 | 119,848 | ||||||||||||
Interest expense, net | (25,416) | (21,497) | (74,031) | (58,259) | ||||||||||||
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Income from continuing operations before taxes | 9,086 | 36,514 | 9,512 | 61,589 | ||||||||||||
Income tax benefit (expense) | 5,725 | (2,667) | 7,340 | (2,571) | ||||||||||||
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Income from continuing operations | 14,811 | 33,847 | 16,852 | 59,018 | ||||||||||||
Loss from discontinued operations, net of tax | (242) | - | (242) | - | ||||||||||||
Loss from disposal of discontinued operations, net of tax | - | - | (86) | (562) | ||||||||||||
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Net income | $ | 14,569 | $ | 33,847 | $ | 16,524 | $ | 58,456 | ||||||||
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Weighted average number of common shares and equivalents: | ||||||||||||||||
Basic | 42,417 | 43,201 | 42,536 | 43,439 | ||||||||||||
Diluted | 42,908 | 43,910 | 43,117 | 44,164 | ||||||||||||
Basic income (loss) per share: | ||||||||||||||||
Continuing operations | $ | 0.35 | $ | 0.78 | $ | 0.40 | $ | 1.36 | ||||||||
Discontinued operations | (0.01) | - | (0.01) | - | ||||||||||||
Disposal of discontinued operations | - | - | - | (0.01) | ||||||||||||
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Net income | $ | 0.34 | $ | 0.78 | $ | 0.39 | $ | 1.35 | ||||||||
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Diluted income (loss) per share: | ||||||||||||||||
Continuing operations | $ | 0.35 | $ | 0.77 | $ | 0.39 | $ | 1.33 | ||||||||
Discontinued operations | (0.01) | - | (0.01) | - | ||||||||||||
Disposal of discontinued operations | - | - | - | (0.01) | ||||||||||||
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Net income | $ | 0.34 | $ | 0.77 | $ | 0.38 | $ | 1.32 | ||||||||
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Comprehensive income (loss) | $ | (9,803) | $ | 30,783 | $ | 4,036 | $ | 57,958 | ||||||||
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Dividends declared per share | $ | 0.05 | $ | 0.05 | $ | 0.15 | $ | 0.15 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenues | $ | 601,109 | $ | 579,266 | $ | 1,744,237 | $ | 1,711,978 | |||||||
Cost of sales | (355,147 | ) | (353,135 | ) | (1,025,027 | ) | (1,043,922 | ) | |||||||
Gross profit | 245,962 | 226,131 | 719,210 | 668,056 | |||||||||||
Selling, general and administrative expenses | (126,662 | ) | (127,792 | ) | (372,125 | ) | (395,424 | ) | |||||||
Research and development | (33,512 | ) | (38,168 | ) | (106,297 | ) | (110,999 | ) | |||||||
Amortization of intangibles | (23,808 | ) | (25,669 | ) | (75,603 | ) | (78,090 | ) | |||||||
Operating income | 61,980 | 34,502 | 165,185 | 83,543 | |||||||||||
Interest expense, net | (23,513 | ) | (25,416 | ) | (71,958 | ) | (74,031 | ) | |||||||
Income from continuing operations before taxes | 38,467 | 9,086 | 93,227 | 9,512 | |||||||||||
Income tax benefit (expense) | (2,902 | ) | 5,725 | 513 | 7,340 | ||||||||||
Income from continuing operations | 35,565 | 14,811 | 93,740 | 16,852 | |||||||||||
Loss from discontinued operations, net of tax | — | (242 | ) | — | (242 | ) | |||||||||
Loss from disposal of discontinued operations, net of tax | — | — | — | (86 | ) | ||||||||||
Net income | 35,565 | 14,569 | 93,740 | 16,524 | |||||||||||
Less: Net loss attributable to noncontrolling interest | (88 | ) | — | (286 | ) | — | |||||||||
Net income attributable to Belden | 35,653 | 14,569 | 94,026 | 16,524 | |||||||||||
Less: Preferred stock dividends | 6,695 | — | 6,695 | — | |||||||||||
Net income attributable to Belden common stockholders | $ | 28,958 | $ | 14,569 | $ | 87,331 | $ | 16,524 | |||||||
Weighted average number of common shares and equivalents: | |||||||||||||||
Basic | 42,126 | 42,417 | 42,073 | 42,536 | |||||||||||
Diluted | 42,601 | 42,908 | 42,532 | 43,117 | |||||||||||
Basic income (loss) per share attributable to Belden common stockholders: | |||||||||||||||
Continuing operations | $ | 0.69 | $ | 0.35 | $ | 2.08 | $ | 0.40 | |||||||
Discontinued operations | — | (0.01 | ) | — | (0.01 | ) | |||||||||
Disposal of discontinued operations | — | — | — | — | |||||||||||
Net income | $ | 0.69 | $ | 0.34 | $ | 2.08 | $ | 0.39 | |||||||
Diluted income (loss) per share attributable to Belden common stockholders: | |||||||||||||||
Continuing operations | $ | 0.68 | $ | 0.35 | $ | 2.05 | $ | 0.39 | |||||||
Discontinued operations | — | (0.01 | ) | — | (0.01 | ) | |||||||||
Disposal of discontinued operations | — | — | — | — | |||||||||||
Net income | $ | 0.68 | $ | 0.34 | $ | 2.05 | $ | 0.38 | |||||||
Comprehensive income (loss) attributable to Belden | $ | 31,846 | $ | (9,803 | ) | $ | 90,137 | $ | 4,036 | ||||||
Common stock dividends declared per share | $ | 0.05 | $ | 0.05 | $ | 0.15 | $ | 0.15 |
-2-
Nine Months Ended | ||||||||
September 27, 2015 | September 28, 2014 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 16,524 | $ | 58,456 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 113,141 | 74,382 | ||||||
Share-based compensation | 13,814 | 14,236 | ||||||
Income from equity method investment | (1,459) | (3,240) | ||||||
Tax benefit related to share-based compensation | (5,064) | (4,939) | ||||||
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses: | ||||||||
Receivables | (6,532) | (44,583) | ||||||
Inventories | 7,979 | 4,188 | ||||||
Accounts payable | (55,973) | (7,613) | ||||||
Accrued liabilities | 29,354 | (24,414) | ||||||
Accrued taxes | (23,884) | (13,818) | ||||||
Other assets | 3,394 | 8,856 | ||||||
Other liabilities | 687 | 3,255 | ||||||
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Net cash provided by operating activities | 91,981 | 64,766 | ||||||
Cash flows from investing activities: | ||||||||
Cash used to acquire businesses, net of cash acquired | (695,345) | (313,065) | ||||||
Capital expenditures | (39,106) | (31,057) | ||||||
Proceeds from disposal of tangible assets | 145 | 1,773 | ||||||
Proceeds from (payments for) disposal of business | 3,527 | (956) | ||||||
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Net cash used for investing activities | (730,779) | (343,305) | ||||||
Cash flows from financing activities: | ||||||||
Borrowings under credit arrangements | 200,000 | 200,000 | ||||||
Tax benefit related to share-based compensation | 5,064 | 4,939 | ||||||
Debt issuance costs paid | (643) | (6,572) | ||||||
Payments under borrowing arrangements | (1,250) | (1,250) | ||||||
Cash dividends paid | (6,386) | (6,540) | ||||||
Proceeds (payments) from exercise of stock options, net of withholding tax payments | (11,517) | (7,996) | ||||||
Payments under share repurchase program | (39,053) | (62,197) | ||||||
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Net cash provided by financing activities | 146,215 | 120,384 | ||||||
Effect of foreign currency exchange rate changes on cash and cash equivalents | (6,682) | (6,047) | ||||||
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Decrease in cash and cash equivalents | (499,265) | (164,202) | ||||||
Cash and cash equivalents, beginning of period | 741,162 | 613,304 | ||||||
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Cash and cash equivalents, end of period | $ | 241,897 | $ | 449,102 | ||||
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Nine Months Ended | |||||||
October 2, 2016 | September 27, 2015 | ||||||
(In thousands) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 93,740 | $ | 16,524 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 110,857 | 113,141 | |||||
Share-based compensation | 13,943 | 13,814 | |||||
Tax benefit related to share-based compensation | (623 | ) | (5,064 | ) | |||
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses: | |||||||
Receivables | (9,843 | ) | (6,532 | ) | |||
Inventories | 5,626 | 7,979 | |||||
Accounts payable | (3,889 | ) | (55,973 | ) | |||
Accrued liabilities | (43,594 | ) | 29,354 | ||||
Accrued taxes | (16,752 | ) | (23,884 | ) | |||
Other assets | 2,798 | 1,935 | |||||
Other liabilities | (5,457 | ) | 687 | ||||
Net cash provided by operating activities | 146,806 | 91,981 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (36,057 | ) | (39,106 | ) | |||
Cash used to acquire businesses, net of cash acquired | (17,848 | ) | (695,345 | ) | |||
Proceeds from disposal of tangible assets | 282 | 145 | |||||
Proceeds from disposable of business | — | 3,527 | |||||
Other | (971 | ) | — | ||||
Net cash used for investing activities | (54,594 | ) | (730,779 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from issuance of preferred stock, net | 501,498 | — | |||||
Tax benefit related to share-based compensation | 623 | 5,064 | |||||
Borrowings under credit arrangements | — | 200,000 | |||||
Payments under borrowing arrangements | (51,875 | ) | (1,250 | ) | |||
Dividends paid on common stock | (6,307 | ) | (6,386 | ) | |||
Withholding tax payments for share-based payment awards, net of proceeds from the exercise of stock options | (5,302 | ) | (11,517 | ) | |||
Debt issuance costs paid | — | (643 | ) | ||||
Payments under share repurchase program | — | (39,053 | ) | ||||
Net cash provided by financing activities | 438,637 | 146,215 | |||||
Effect of foreign currency exchange rate changes on cash and cash equivalents | 705 | (6,682 | ) | ||||
Increase (decrease) in cash and cash equivalents | 531,554 | (499,265 | ) | ||||
Cash and cash equivalents, beginning of period | 216,751 | 741,162 | |||||
Cash and cash equivalents, end of period | $ | 748,305 | $ | 241,897 |
-3-
OCTOBER 2, 2016
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Common Stock | Paid-In | Retained | Treasury Stock | Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Shares | Amount | Income (Loss) | Total | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2014 | 50,335 | $ | 503 | $ | 595,389 | $ | 621,896 | (7,871) | $ | (364,571) | $ | (46,031) | $ | 807,186 | ||||||||||||||||||
Net income | - | - | - | 16,524 | - | - | - | 16,524 | ||||||||||||||||||||||||
Foreign currency translation | - | - | - | - | - | - | (15,056) | (15,056) | ||||||||||||||||||||||||
Adjustment to pension and postretirement liability, net of $1.6 million tax | - | - | - | - | - | - | 2,568 | 2,568 | ||||||||||||||||||||||||
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Other comprehensive loss, net of tax | (12,488) | |||||||||||||||||||||||||||||||
Exercise of stock options, net of tax withholding forfeitures | - | - | (5,947) | - | 93 | (101) | - | (6,048) | ||||||||||||||||||||||||
Conversion of restricted stock units into common stock, net of tax withholding forfeitures | - | - | (6,406) | - | 113 | 937 | - | (5,469) | ||||||||||||||||||||||||
Share repurchase program | - | - | - | - | (698) | (39,053) | - | (39,053) | ||||||||||||||||||||||||
Share-based compensation | - | - | 18,878 | - | - | - | - | 18,878 | ||||||||||||||||||||||||
Dividends ($0.15 per share) | - | - | - | (6,376) | - | - | - | (6,376) | ||||||||||||||||||||||||
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Balance at September 27, 2015 | 50,335 | $ | 503 | $ | 601,914 | $ | 632,044 | (8,363) | $ | (402,788) | $ | (58,519) | $ | 773,154 | ||||||||||||||||||
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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) | Interest | Total | ||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2015 | — | $ | — | 50,335 | $ | 503 | $ | 605,660 | $ | 679,716 | (8,354 | ) | $ | (402,793 | ) | $ | (58,987 | ) | $ | 1,424 | $ | 825,523 | ||||||||||||||||||
Net income (loss) | — | — | — | — | — | 94,026 | — | — | — | (286 | ) | 93,740 | ||||||||||||||||||||||||||||
Foreign currency translation, net of $1.5 million tax | — | — | — | — | — | — | — | — | (9,823 | ) | (32 | ) | (9,855 | ) | ||||||||||||||||||||||||||
Adjustments to pension and postretirement liability, net of $3.7 million tax | — | — | — | — | — | — | — | — | 5,934 | — | 5,934 | |||||||||||||||||||||||||||||
Other comprehensive loss, net of tax | (3,921 | ) | ||||||||||||||||||||||||||||||||||||||
Preferred stock issuance, net | 52 | 1 | — | — | 501,497 | — | — | — | — | — | 501,498 | |||||||||||||||||||||||||||||
Exercise of stock options, net of tax withholding forfeitures | — | — | — | — | (2,388 | ) | — | 42 | 327 | — | — | (2,061 | ) | |||||||||||||||||||||||||||
Conversion of restricted stock units into common stock, net of tax withholding forfeitures | — | — | — | — | (4,987 | ) | — | 121 | 1,748 | — | — | (3,239 | ) | |||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | 14,566 | — | — | — | — | — | 14,566 | |||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | (6,695 | ) | — | — | — | — | (6,695 | ) | |||||||||||||||||||||||||||
Common stock dividends ($0.15 per share) | — | — | — | — | — | (6,359 | ) | — | — | — | — | (6,359 | ) | |||||||||||||||||||||||||||
Balance at October 2, 2016 | 52 | $ | 1 | 50,335 | $ | 503 | $ | 1,114,348 | $ | 760,688 | (8,191 | ) | $ | (400,718 | ) | $ | (62,876 | ) | $ | 1,106 | $ | 1,413,052 |
-4-
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.
10-K and Current Report on Form 8-K filed with the Securities and Exchange Commission on May 31, 2016.
Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
-5-
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.
2015.
equivalents.
-6-
In 2010, we completed the sale of Trapeze Networks, Inc. (Trapeze) for $152.1 million and recognized a pre-tax gain of $88.3 million ($44.8 million after-tax). At the time the transaction closed, we received $136.9 million in cash, and the remaining $15.2 million was placed in escrow as partial security for our indemnity obligations under the sale agreement. During 2013, we collected a partial settlement of $4.2 million from the escrow. During 2015, we agreed to a final settlement with the buyer of Trapeze regarding the escrow.
In 2012, we sold our Thermax and Raydex cable business for $265.6 million in cash and recognized a pre-tax gain of $211.6 million ($124.7 million net of tax). At the time the transaction closed, we received $265.6 million in cash, subject to a working capital adjustment. In the nine months ended September 28, 2014, we recognized a $0.9 million ($0.6 million net of tax) loss from disposal of discontinued operations related to this business as a result of settling the working capital adjustment and other matters.
See Note 13.
-7-
Our initial assessment indicates that the overall impact of adopting ASU 2014-09 is expected to be minimal. Any significant impact is expected to be limited to a software product line within our Broadcast segment that generates an immaterial amount of annual revenues.
Tripwire
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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. We are in the process of ensuring our accounting policies are applied at Tripwire. The preliminary measurement of receivables; inventories; property, plant and equipment; goodwill; deferred income taxes; and other assets and liabilities are subject to change. A change in the estimated fair value of the net assets acquired will change the amount of the purchase price allocable to goodwill.
The fair value of acquired receivables is $37.8 million, with a gross contractual amount of $38.0 million. We do not expect to collect $0.2 million of the acquired receivables.
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.
-8-
For purposes of the above allocation, we based our estimate of the fair value for the acquired intangible assets, property, plant and equipment, and deferred revenue on a valuation study performed by a third party valuation firm. We used various valuation methods including discounted cash flows to estimate the fair value of the identifiable intangible assets and deferred revenue (Level 3 valuation). 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).
Goodwill and other intangible assets reflected above were determined to meet the criterion 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 Tripwire acquisition primarily consist of an expanded product portfolio with network security solutions that can be marketed to our existing broadcast, enterprise, and industrial customers. We do not have tax basis in the goodwill, and therefore, the goodwill is not deductible for tax purposes. The intangible assets related to the acquisition consisted of the following:
Estimated Fair Value | Amortization Period | |||||||
(In thousands) | (In years) | |||||||
Intangible assets subject to amortization: | ||||||||
Developed technology | $ | 210,000 | 5.8 | |||||
Customer relationships | 56,000 | 15.0 | ||||||
Backlog | 3,000 | 1.0 | ||||||
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Total intangible assets subject to amortization | 269,000 | |||||||
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Intangible assets not subject to amortization: | ||||||||
Goodwill | 478,000 | |||||||
Trademarks | 31,000 | |||||||
In-process research and development | 6,000 | |||||||
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Total intangible assets not subject to amortization | 515,000 | |||||||
|
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Total intangible assets | $ | 784,000 | ||||||
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Weighted average amortization period | 7.7 | |||||||
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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 of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of customer turnover. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship.
Trademarks have been determined by us to have indefinite lives and are not being amortized, based on our expectation that the trademarked products will generate cash flows for us for an indefinite period. We expect to maintain use of trademarks on existing products and introduce new products in the future that will also display the trademarks, thus extending their lives indefinitely. In-process research and development assets are considered indefinite-lived intangible assets until the completion or abandonment of the associated research and development efforts. Upon completion of the development process, we will make a determination of the useful life of the asset and begin amortizing the assets over that period. If the project is abandoned, we will write-off the asset at such time.
-9-
Our consolidated revenues and consolidated income from continuing operations before taxes for the three months ended September 27, 2015 included $30.5 million of revenues and a $10.6 million loss from continuing operations before taxes from Tripwire. Our consolidated revenues and consolidated income from continuing operations before taxes for the nine months ended September 27, 2015 included $74.5 million of revenues and a $46.3 million loss from continuing operations before taxes from Tripwire. Consolidated revenues in the three and nine months ended September 27, 2015 were negatively impacted by approximately $10.9 million and $43.6 million, respectively, due to the reduction of the acquired deferred revenue balance to fair value. Our consolidated income from continuing operations before taxes for the three months ended September 27, 2015 included $10.6 million of amortization of intangible assets. Our consolidated income from continuing operations before taxes for the nine months ended September 27, 2015 included $32.6 million of amortization of intangible assets and $9.2 million of compensation expense related to the accelerated vesting of acquiree stock based compensation awards.
The following table illustrates the unaudited pro forma effect on operating results as if the Tripwire acquisition had been completed as of January 1, 2014.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2015 | September 28, 2014 | September 27, 2015 | September 28, 2014 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Revenues | $ | 588,986 | $ | 638,353 | $ | 1,751,090 | $ | 1,760,018 | ||||||||
Income from continuing operations | 21,032 | 20,855 | 38,763 | 12,250 | ||||||||||||
Diluted income per share from continuing operations | $ | 0.49 | $ | 0.47 | $ | 0.90 | $ | 0.28 |
For purposes of the pro forma disclosures, the three months ended September 28, 2014 includes nonrecurring expenses from the effects of purchase accounting, including amortization of the sales backlog intangible asset of $0.5 million. In addition, for purposes of the pro forma disclosures, the nine months ended September 28, 2014 includes nonrecurring expenses from the effects of purchase accounting, including the compensation expense from the accelerated vesting of acquiree stock compensation awards of $9.2 million and amortization of the sales backlog intangible asset of $2.5 million.
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.
Coast Wire and Plastic Tech
We acquired 100% of the outstanding ownership interest in Coast Wire and Plastic Tech., LLC (Coast) on November 20, 2014 for cash of $36.0 million. Coast is a developer and manufacturer of customized wire and cable solutions used in high-end medical device, military and defense, and industrial applications. Coast is located in Carson, California. The results of Coast have been included in our Consolidated Financial Statements from November 20, 2014,7, 2016, and are reported within the Industrial ConnectivityBroadcast segment. The CoastM2FX acquisition was not material to our financial position or results of operations.
ProSoft Technology, Inc.
We acquired 100% of the outstanding shares of ProSoft Technology, Inc. (ProSoft) on June 11, 2014 for cash of $104.1 million. ProSoft is a leading manufacturer of industrial networking products that translate between disparate automation systems, including the various protocols used by different automation vendors. The results of ProSoft have been included in our Consolidated Financial Statements from June 11, 2014, and are reported within the Industrial IT segment. ProSoft is headquartered in Bakersfield, California. The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed as of June 11, 2014 (in thousands).
-10-
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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. There were no significant changes to the final purchase price allocation presented in the table above as compared to the preliminary purchase price allocation as of December 31, 2014.
The fair value of acquired receivables is $5.9 million, with a gross contractual amount of $6.2 million. We do not expect to collect $0.3 million of the acquired receivables.
For purposes of the above allocation, we based our estimate of the fair value of the acquired inventory and intangible assets on a valuation study 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. We used various valuation methods including discounted cash flows to estimate the fair value of the identifiable intangible assets (Level 3 valuation).
Goodwill and other intangible assets reflected above were determined to meet the criterion 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 ProSoft acquisition primarily consist of expanded access to the Industrial IT market and channel partners. Our tax basis in the acquired goodwill is $56.9 million. The goodwill balance we recorded is deductible for tax purposes over a period of 15 years up to the amount of the tax basis. The intangible assets related to the acquisition consisted of the following:
-11-
Fair Value | Amortization Period | |||||||
(In thousands) | (In years) | |||||||
Intangible assets subject to amortization: | ||||||||
Customer relationships | $ | 26,600 | 20.0 | |||||
Developed technologies | 9,000 | 5.0 | ||||||
Trademarks | 5,000 | 5.0 | ||||||
Backlog | 200 | 0.3 | ||||||
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Total intangible assets subject to amortization | 40,800 | |||||||
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Intangible assets not subject to amortization: | ||||||||
Goodwill | 56,923 | |||||||
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Total intangible assets not subject to amortization | 56,923 | |||||||
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Total intangible assets | $ | 97,723 | ||||||
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Weighted average amortization period | 14.8 | |||||||
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The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the developed technologies intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of customer turnover. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship.
Our consolidated revenues and consolidated income from continuing operations before taxes for the three months ended September 27, 2015 included $9.8 million and $0.4 million, respectively, from ProSoft. Our consolidated revenues and consolidated income from continuing operations before taxes for the nine months ended September 27, 2015 included $29.6 million and $4.6 million, respectively, from ProSoft. Included in our consolidated income from continuing operations before taxes for the three and nine months ended September 27, 2015 are $1.0 million and $3.1 million, respectively, of amortization of intangible assets.
Grass Valley
We acquired 100% of the outstanding ownership interest in Grass Valley USA, LLC and GVBB Holdings S.a.r.l., (collectively, Grass Valley) on March 31, 2014 for cash of $218.2 million. Grass Valley is a leading provider of innovative technologies for the broadcast industry, including production switchers, cameras, servers, and editing solutions. Grass Valley is headquartered in Hillsboro, Oregon, with significant locations throughout the United States, Europe, and Asia. The results of Grass Valley have been included in our Consolidated Financial Statements from March 31, 2014, and are reported within the Broadcast segment. The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed as of March 31, 2014 (in thousands).
-12-
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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. There were no significant changes to the final purchase price allocation presented in the table above as compared to the preliminary purchase price allocation as of December 31, 2014.
The fair value of acquired receivables is $67.4 million, with a gross contractual amount of $77.2 million. We do not expect to collect $9.8 million of the acquired receivables.
For purposes of the above allocation, we based our estimate of the fair value of the acquired inventory, property, plant, and equipment, intangible assets, and deferred revenue on a valuation study 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 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 criterion 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 Grass Valley acquisition primarily consist of cost savings from the ability to consolidate existing and acquired operating facilities and other support functions, as well as expanded access to the Broadcast market. Our estimated tax basis in the acquired goodwill is not significant. The intangible assets related to the acquisition consisted of the following:
-13-
Fair Value | Amortization Period | |||||||
(In thousands) | (In years) | |||||||
Intangible assets subject to amortization: | ||||||||
Developed technologies | $ | 37,000 | 5.0 | |||||
Customer relationships | 27,000 | 15.0 | ||||||
Backlog | 1,500 | 0.3 | ||||||
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Total intangible assets subject to amortization | 65,500 | |||||||
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Intangible assets not subject to amortization: | ||||||||
Goodwill | 131,070 | |||||||
Trademarks | 22,000 | |||||||
In-process research and development | 8,000 | |||||||
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Total intangible assets not subject to amortization | 161,070 | |||||||
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Total intangible assets | $ | 226,570 | ||||||
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Weighted average amortization period | 9.0 | |||||||
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The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the developed technologies intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of customer turnover. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship.
Trademarks have been determined by us to have indefinite lives and are not being amortized, based on our expectation that the trademarked products will generate cash flows for us for an indefinite period. We expect to maintain use of trademarks on existing products and introduce new products in the future that will also display the trademarks, thus extending their lives indefinitely. In-process research and development assets are considered indefinite-lived intangible assets until the completion or abandonment of the associated research and development efforts. Upon completion of the development process, we will make a determination of the useful life of the asset and begin amortizing the assets over that period. If the project is abandoned, we will write-off the asset at such time.
Our consolidated revenues and consolidated income from continuing operations before taxes for the three months ended September 27, 2015 included revenues of $70.1 million and income from continuing operations before taxes of $7.0 million from Grass Valley. Our consolidated revenues and consolidated income from continuing operations before taxes for the nine months ended September 27, 2015 included revenues of $164.6 million and a loss from continuing operations before taxes of $15.2 million, respectively, from Grass Valley. Included in our consolidated income from continuing operations before taxes for the three and nine months ended September 27, 2015 are $2.5 million and $7.6 million, respectively, of amortization of intangible assets. We also recognized certain severance, restructuring, and acquisition integration costs in the three and nine months ended September 27, 2015 related to Grass Valley. See Note 7.
The following table illustrates the unaudited pro forma effect on operating results as if the Grass Valley and ProSoft acquisitions had been completed as of January 1, 2013.
-14-
Three Months Ended | Nine Months Ended | |||||||
September 28, 2014 | September 28, 2014 | |||||||
(In thousands, except per share data) | ||||||||
(Unaudited) | ||||||||
Revenues | $ | 612,617 | $ | 1,790,876 | ||||
Income from continuing operations | 36,036 | 49,645 | ||||||
Diluted income per share from continuing operations | $ | 0.82 | $ | 1.12 |
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 acquisitions 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.
Effective
-15-
Broadcast Solutions | Enterprise Connectivity Solutions | Industrial Connectivity Solutions | Industrial IT Solutions | Network Security Solutions | Total Segments | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
As of and for the three months ended September 27, 2015 | ||||||||||||||||||||||||
Segment revenues | $ | 228,097 | $ | 113,773 | $ | 147,702 | $ | 59,184 | $ | 41,359 | $ | 590,115 | ||||||||||||
Affiliate revenues | 338 | 1,337 | 355 | 37 | - | 2,067 | ||||||||||||||||||
Segment EBITDA | 34,880 | 18,232 | 23,225 | 10,466 | 11,240 | 98,043 | ||||||||||||||||||
Depreciation expense | 4,261 | 2,922 | 2,810 | 570 | 1,255 | 11,818 | ||||||||||||||||||
Amortization of intangibles | 12,647 | 136 | 799 | 1,480 | 10,607 | 25,669 | ||||||||||||||||||
Severance, restructuring, and acquisition integration costs | 13,722 | 192 | 118 | 54 | 57 | 14,143 | ||||||||||||||||||
Deferred gross profit adjustments | 419 | - | - | - | 10,909 | 11,328 | ||||||||||||||||||
Segment assets | 401,405 | 211,114 | 250,622 | 61,441 | 41,520 | 966,102 | ||||||||||||||||||
As of and for the three months ended September 28, 2014 | ||||||||||||||||||||||||
Segment revenues | $ | 256,587 | $ | 115,349 | $ | 171,105 | $ | 70,090 | $ | - | $ | 613,131 | ||||||||||||
Affiliate revenues | 318 | 2,147 | 397 | 10 | - | 2,872 | ||||||||||||||||||
Segment EBITDA | 38,450 | 17,730 | 26,487 | 13,618 | - | 96,285 | ||||||||||||||||||
Depreciation expense | 3,856 | 3,134 | 3,150 | 606 | - | 10,746 | ||||||||||||||||||
Amortization of intangibles | 13,020 | 162 | 266 | 1,755 | - | 15,203 | ||||||||||||||||||
Severance, restructuring, and acquisition integration costs | 5,794 | 226 | 2,106 | 1,032 | - | 9,158 | ||||||||||||||||||
Purchase accounting effects of acquisitions | - | - | - | 858 | - | 858 | ||||||||||||||||||
Deferred gross profit adjustments | 2,357 | - | - | - | - | 2,357 | ||||||||||||||||||
Segment assets | 433,063 | 223,726 | 270,078 | 64,757 | - | 991,624 | ||||||||||||||||||
As of and for the nine months ended September 27, 2015 | ||||||||||||||||||||||||
Segment revenues | $ | 661,098 | $ | 335,803 | $ | 461,549 | $ | 181,527 | $ | 118,102 | $ | 1,758,079 | ||||||||||||
Affiliate revenues | 1,059 | 4,287 | 1,086 | 68 | 8 | 6,508 | ||||||||||||||||||
Segment EBITDA | 95,726 | 53,214 | 76,078 | 31,731 | 29,913 | 286,662 | ||||||||||||||||||
Depreciation expense | 12,819 | 8,871 | 8,530 | 1,713 | 3,118 | 35,051 | ||||||||||||||||||
Amortization of intangibles | 38,256 | 409 | 2,429 | 4,369 | 32,627 | 78,090 | ||||||||||||||||||
Severance, restructuring, and acquisition integration costs | 28,543 | 832 | 3,054 | 2 | 1,102 | 33,533 | ||||||||||||||||||
Purchase accounting effects of acquisitions | - | - | 267 | - | 9,155 | 9,422 | ||||||||||||||||||
Deferred gross profit adjustments | 2,789 | - | - | - | 43,637 | 46,426 | ||||||||||||||||||
Segment assets | 401,405 | 211,114 | 250,622 | 61,441 | 41,520 | 966,102 | ||||||||||||||||||
As of and for the nine months ended September 28, 2014 | ||||||||||||||||||||||||
Segment revenues | $ | 675,350 | $ | 345,015 | $ | 508,667 | $ | 177,460 | $ | - | $ | 1,706,492 | ||||||||||||
Affiliate revenues | 601 | 5,852 | 2,237 | 18 | - | 8,708 | ||||||||||||||||||
Segment EBITDA | 95,939 | 51,572 | 79,631 | 32,012 | - | 259,154 | ||||||||||||||||||
Depreciation expense | 11,346 | 10,633 | 7,992 | 1,672 | - | 31,643 | ||||||||||||||||||
Amortization of intangibles | 37,963 | 497 | 802 | 3,477 | - | 42,739 | ||||||||||||||||||
Severance, restructuring, and acquisition integration costs | 34,761 | 2,047 | 10,250 | 1,751 | - | 48,809 | ||||||||||||||||||
Purchase accounting effects of acquisitions | 7,458 | 286 | 533 | 1,596 | - | 9,873 | ||||||||||||||||||
Deferred gross profit adjustments | 6,722 | - | - | - | - | 6,722 | ||||||||||||||||||
Segment assets | 433,063 | 223,726 | 270,078 | 64,757 | - | 991,624 |
Broadcast Solutions | Enterprise Connectivity Solutions | Industrial Connectivity Solutions | Industrial IT Solutions | Network Security Solutions | Total Segments | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
As of and for the three months ended October 2, 2016 | ||||||||||||||||||||||||
Segment revenues | $ | 196,173 | $ | 156,658 | $ | 149,847 | $ | 60,168 | $ | 39,622 | $ | 602,468 | ||||||||||||
Affiliate revenues | 46 | 1,587 | 511 | 13 | — | 2,157 | ||||||||||||||||||
Segment EBITDA | 36,545 | 27,294 | 23,649 | 12,771 | 11,677 | 111,936 | ||||||||||||||||||
Depreciation expense | 4,063 | 3,210 | 2,738 | 565 | 1,027 | 11,603 | ||||||||||||||||||
Amortization expense | 10,955 | 431 | 604 | 1,501 | 10,317 | 23,808 | ||||||||||||||||||
Severance, restructuring, and acquisition integration costs | 174 | 5,573 | 4,746 | 2,302 | — | 12,795 | ||||||||||||||||||
Deferred gross profit adjustments | 283 | — | — | — | 1,076 | 1,359 | ||||||||||||||||||
Segment assets | 314,020 | 265,085 | 261,923 | 62,828 | 43,110 | 946,966 | ||||||||||||||||||
As of and for the three months ended September 27, 2015 | ||||||||||||||||||||||||
Segment revenues | $ | 186,722 | $ | 155,148 | $ | 147,702 | $ | 59,184 | $ | 41,359 | $ | 590,115 | ||||||||||||
Affiliate revenues | 42 | 1,630 | 355 | 37 | — | 2,064 | ||||||||||||||||||
Segment EBITDA | 27,369 | 25,705 | 23,225 | 10,466 | 11,240 | 98,005 | ||||||||||||||||||
Depreciation expense | 4,027 | 3,156 | 2,810 | 570 | 1,255 | 11,818 | ||||||||||||||||||
Amortization expense | 12,354 | 429 | 799 | 1,480 | 10,607 | 25,669 | ||||||||||||||||||
Severance, restructuring, and acquisition integration costs | 13,722 | 192 | 118 | 54 | 57 | 14,143 | ||||||||||||||||||
Deferred gross profit adjustments | 419 | — | — | — | 10,909 | 11,328 | ||||||||||||||||||
Segment assets | 346,271 | 266,248 | 250,622 | 61,441 | 41,520 | 966,102 | ||||||||||||||||||
As of and for the nine months ended October 2, 2016 | ||||||||||||||||||||||||
Segment revenues | $ | 560,966 | $ | 452,951 | $ | 438,746 | $ | 176,560 | $ | 120,426 | $ | 1,749,649 | ||||||||||||
Affiliate revenues | 644 | 4,615 | 906 | 44 | — | 6,209 | ||||||||||||||||||
Segment EBITDA | 89,317 | 80,605 | 73,700 | 34,056 | 32,659 | 310,337 | ||||||||||||||||||
Depreciation expense | 12,086 | 10,028 | 8,165 | 1,749 | 3,225 | 35,253 | ||||||||||||||||||
Amortization expense | 37,306 | 1,292 | 1,796 | 4,517 | 30,692 | 75,603 | ||||||||||||||||||
Severance, restructuring, and acquisition integration costs | 5,871 | 7,280 | 7,982 | 5,910 | 29 | 27,072 | ||||||||||||||||||
Purchase accounting effects of acquisitions | 195 | — | — | — | — | 195 | ||||||||||||||||||
Deferred gross profit adjustments | 1,391 | — | — | — | 4,021 | 5,412 | ||||||||||||||||||
Segment assets | 314,020 | 265,085 | 261,923 | 62,828 | 43,110 | 946,966 | ||||||||||||||||||
As of and for the nine months ended September 27, 2015 | ||||||||||||||||||||||||
Segment revenues | $ | 538,145 | $ | 458,756 | $ | 461,549 | $ | 181,527 | $ | 118,102 | $ | 1,758,079 | ||||||||||||
Affiliate revenues | 24 | 5,328 | 1,086 | 68 | 8 | 6,514 | ||||||||||||||||||
Segment EBITDA | 73,374 | 75,506 | 76,078 | 31,731 | 29,913 | 286,602 | ||||||||||||||||||
Depreciation expense | 12,140 | 9,550 | 8,530 | 1,713 | 3,118 | 35,051 | ||||||||||||||||||
Amortization expense | 37,375 | 1,290 | 2,429 | 4,369 | 32,627 | 78,090 | ||||||||||||||||||
Severance, restructuring, and acquisition integration costs | 28,532 | 843 | 3,054 | 2 | 1,102 | 33,533 | ||||||||||||||||||
Purchase accounting effects of acquisitions | — | — | 267 | — | 9,155 | 9,422 | ||||||||||||||||||
Deferred gross profit adjustments | 2,789 | — | — | — | 43,637 | 46,426 | ||||||||||||||||||
Segment assets | 346,271 | 266,248 | 250,622 | 61,441 | 41,520 | 966,102 |
-16-
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2015 | September 28, 2014 | September 27, 2015 | September 28, 2014 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Total Segment Revenues | $ | 590,115 | $ | 613,131 | $ | 1,758,079 | $ | 1,706,492 | ||||||||
Deferred revenue adjustments (1) | (10,849) | (2,357) | (46,101) | (7,137) | ||||||||||||
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Consolidated Revenues | $ | 579,266 | $ | 610,774 | $ | 1,711,978 | $ | 1,699,355 | ||||||||
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Total Segment EBITDA | $ | 98,043 | $ | 96,285 | $ | 286,662 | $ | 259,154 | ||||||||
Amortization of intangibles | (25,669) | (15,203) | (78,090) | (42,739) | ||||||||||||
Deferred gross profit adjustments (1) | (11,328) | (2,357) | (46,426) | (6,722) | ||||||||||||
Severance, restructuring, and acquisition integration costs (2) | (14,143) | (9,158) | (33,533) | (48,809) | ||||||||||||
Depreciation expense | (11,818) | (10,746) | (35,051) | (31,643) | ||||||||||||
Purchase accounting effects related to acquisitions (3) | - | (858) | (9,422) | (9,873) | ||||||||||||
Income from equity method investment | 348 | 1,030 | 1,459 | 3,240 | ||||||||||||
Eliminations | (931) | (982) | (2,056) | (2,760) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Consolidated operating income | 34,502 | 58,011 | 83,543 | 119,848 | ||||||||||||
Interest expense, net | (25,416) | (21,497) | (74,031) | (58,259) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Consolidated income from continuing operations before taxes | $ | 9,086 | $ | 36,514 | $ | 9,512 | $ | 61,589 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended | Nine Months Ended | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
(In thousands) | (In thousands) | ||||||||||||||
Total Segment Revenues | $ | 602,468 | $ | 590,115 | $ | 1,749,649 | $ | 1,758,079 | |||||||
Deferred revenue adjustments (1) | (1,359 | ) | (10,849 | ) | (5,412 | ) | (46,101 | ) | |||||||
Consolidated Revenues | $ | 601,109 | $ | 579,266 | $ | 1,744,237 | $ | 1,711,978 | |||||||
Total Segment EBITDA | $ | 111,936 | $ | 98,005 | $ | 310,337 | $ | 286,602 | |||||||
Amortization of intangibles | (23,808 | ) | (25,669 | ) | (75,603 | ) | (78,090 | ) | |||||||
Deferred gross profit adjustments (1) | (1,359 | ) | (11,328 | ) | (5,412 | ) | (46,426 | ) | |||||||
Severance, restructuring, and acquisition integration costs (2) | (12,795 | ) | (14,143 | ) | (27,072 | ) | (33,533 | ) | |||||||
Depreciation expense | (11,603 | ) | (11,818 | ) | (35,253 | ) | (35,051 | ) | |||||||
Purchase accounting effects related to acquisitions (3) | — | — | (195 | ) | (9,422 | ) | |||||||||
Income from equity method investment | 586 | 348 | 1,077 | 1,459 | |||||||||||
Eliminations | (977 | ) | (893 | ) | (2,694 | ) | (1,996 | ) | |||||||
Consolidated operating income | 61,980 | 34,502 | 165,185 | 83,543 | |||||||||||
Interest expense, net | (23,513 | ) | (25,416 | ) | (71,958 | ) | (74,031 | ) | |||||||
Consolidated income from continuing operations before taxes | $ | 38,467 | $ | 9,086 | $ | 93,227 | $ | 9,512 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2015 | September 28, 2014 | September 27, 2015 | September 28, 2014 | |||||||||||||
(In thousands) | ||||||||||||||||
Numerator: | ||||||||||||||||
Income from continuing operations | $ | 14,811 | $ | 33,847 | $ | 16,852 | $ | 59,018 | ||||||||
Loss from discontinued operations, net of tax | (242) | - | (242) | - | ||||||||||||
Loss from disposal of discontinued operations, net of tax | - | - | (86) | (562) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | $ | 14,569 | $ | 33,847 | $ | 16,524 | $ | 58,456 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Denominator: | ||||||||||||||||
Weighted average shares outstanding, basic | 42,417 | 43,201 | 42,536 | 43,439 | ||||||||||||
Effect of dilutive common stock equivalents | 491 | 709 | 581 | 725 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average shares outstanding, diluted | 42,908 | 43,910 | 43,117 | 44,164 | ||||||||||||
|
|
|
|
|
|
|
|
Three Months Ended | Nine Months Ended | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
(In thousands) | |||||||||||||||
Numerator: | |||||||||||||||
Income from continuing operations | $ | 35,565 | $ | 14,811 | $ | 93,740 | $ | 16,852 | |||||||
Less: Net loss attributable to noncontrolling interest | (88 | ) | — | (286 | ) | — | |||||||||
Less: Preferred stock dividends | 6,695 | — | 6,695 | — | |||||||||||
Income from continuing operations attributable to Belden common stockholders | 28,958 | 14,811 | 87,331 | 16,852 | |||||||||||
Loss from discontinued operations, net of tax, attributable to Belden common stockholders | — | (242 | ) | — | (242 | ) | |||||||||
Loss from disposal of discontinued operations, net of tax, attributable to Belden common stockholders | — | — | — | (86 | ) | ||||||||||
Net income attributable to Belden common stockholders | $ | 28,958 | $ | 14,569 | $ | 87,331 | $ | 16,524 | |||||||
Denominator: | |||||||||||||||
Weighted average shares outstanding, basic | 42,126 | 42,417 | 42,073 | 42,536 | |||||||||||
Effect of dilutive common stock equivalents | 475 | 491 | 459 | 581 | |||||||||||
Weighted average shares outstanding, diluted | 42,601 | 42,908 | 42,532 | 43,117 |
-17-
September 27, 2015 | December 31, 2014 | |||||||
(In thousands) | ||||||||
Raw materials | $ | 97,829 | $ | 106,955 | ||||
Work-in-process | 30,172 | 31,611 | ||||||
Finished goods | 107,095 | 121,655 | ||||||
|
|
|
| |||||
Gross inventories | 235,096 | 260,221 | ||||||
Excess and obsolete reserves | (25,008) | (31,823) | ||||||
|
|
|
| |||||
Net inventories | $ | 210,088 | $ | 228,398 | ||||
|
|
|
|
October 2, 2016 | December 31, 2015 | ||||||
(In thousands) | |||||||
Raw materials | $ | 94,789 | $ | 92,929 | |||
Work-in-process | 24,627 | 27,730 | |||||
Finished goods | 99,477 | 97,814 | |||||
Gross inventories | 218,893 | 218,473 | |||||
Excess and obsolete reserves | (25,393 | ) | (22,531 | ) | |||
Net inventories | $ | 193,500 | $ | 195,942 |
Disposals
During
Depreciation and Amortization Expense
October 2, 2016, respectively. We recognized depreciation expense of $11.8 million and $35.1 million in the three and nine months ended September 27, 2015, respectively.
We recognized amortization expense related to our intangible assets of $25.7 million and $78.1 million in the three and nine months ended September 27, 2015, respectively. We recognized amortization expense related to our intangible assets of $15.2 million and $42.7 million in the three and nine months ended September 28, 2014, respectively.
In the three and nine months ended September 27, 2015, and September 28, 2014, we recorded severance, restructuring, and integration costs of $0.1 million and $9.2$19.5 million, respectively, related to these two significant programs, as well as other cost reduction actions and the integration of our acquisitions of ProSoft, Coast, and Tripwire. We recorded $19.5 million and $48.8 million of such costs in the nine months ended September 27, 2015 and September 28, 2014, respectively.
-18-
Grass Valley Restructuring Program
Our Broadcast segment has been negatively impacted by a decline in sales volume for our broadcast technology infrastructure products sold by our Grass Valley brand. Outside of the U.S., demand for these products has been impacted by the relative price increase of our products due to the strengthened U.S. dollar as well as the impact of lower energy prices, which result in lower capital spending. Within the U.S., demand for these products has been impacted by deferred capital spending. We believe broadcast customers have deferred their capital spending as they navigate through a number of important industry transitions and a changing media landscape. In response to these current broadcast market conditions, we began to execute a restructuring program beginning in the third fiscal quarter of 2015 to further reduce our cost structure. We recognized approximately $14.0 million of severance and other restructuring costs for this program for both the three and nine months ended September 27, 2015. We expect to incur approximately $16October 2, 2016, we recognized $0.1 million and $1.1 million of additional severance and other restructuring costs, for this program, the majorityrespectively, primarily related to our 2016 acquisition of which will be incurred in the fourth fiscal quarter of 2015. We expect the restructuring program to generate approximately $30 million of savings on an annualized basis, which we will begin to realize in the fourth fiscal quarter of 2015.
M2FX.
Three Months Ended September 27, 2015 | Severance | Other Restructuring and Integration Costs | Total Costs | |||||||||
(In thousands) | ||||||||||||
Broadcast Solutions | $ | 11,978 | $ | 1,744 | $ | 13,722 | ||||||
Enterprise Connectivity Solutions | 99 | 93 | 192 | |||||||||
Industrial Connectivity Solutions | - | 118 | 118 | |||||||||
Industrial IT Solutions | - | 54 | 54 | |||||||||
Network Security Solutions | - | 57 | 57 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 12,077 | $ | 2,066 | $ | 14,143 | ||||||
|
|
|
|
|
| |||||||
Three Months Ended September 28, 2014 | ||||||||||||
Broadcast Solutions | $ | 54 | $ | 5,740 | $ | 5,794 | ||||||
Enterprise Connectivity Solutions | (347) | 573 | 226 | |||||||||
Industrial Connectivity Solutions | 1,282 | 824 | 2,106 | |||||||||
Industrial IT Solutions | 823 | 209 | 1,032 | |||||||||
Network Security Solutions | - | - | - | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 1,812 | $ | 7,346 | $ | 9,158 | ||||||
|
|
|
|
|
| |||||||
Nine Months Ended September 27, 2015 | ||||||||||||
Broadcast Solutions | $ | 12,691 | $ | 15,852 | $ | 28,543 | ||||||
Enterprise Connectivity Solutions | 171 | 661 | 832 | |||||||||
Industrial Connectivity Solutions | 967 | 2,087 | 3,054 | |||||||||
Industrial IT Solutions | (740) | 742 | 2 | |||||||||
Network Security Solutions | - | 1,102 | 1,102 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 13,089 | $ | 20,444 | $ | 33,533 | ||||||
|
|
|
|
|
| |||||||
Nine Months Ended September 28, 2014 | ||||||||||||
Broadcast Solutions | $ | 18,156 | $ | 16,605 | $ | 34,761 | ||||||
Enterprise Connectivity Solutions | 1,245 | 802 | 2,047 | |||||||||
Industrial Connectivity Solutions | 9,393 | 857 | 10,250 | |||||||||
Industrial IT Solutions | 1,409 | 342 | 1,751 | |||||||||
Network Security Solutions | - | - | - | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 30,203 | $ | 18,606 | $ | 48,809 |
| |||||
|
|
|
|
|
|
-19-
Three Months Ended October 2, 2016 | Severance | Other Restructuring and Integration Costs | Total Costs | |||||||||
(In thousands) | ||||||||||||
Broadcast Solutions | $ | (114 | ) | $ | 288 | $ | 174 | |||||
Enterprise Connectivity Solutions | (21 | ) | 5,594 | 5,573 | ||||||||
Industrial Connectivity Solutions | 184 | 4,562 | 4,746 | |||||||||
Industrial IT Solutions | 1,103 | 1,199 | 2,302 | |||||||||
Network Security Solutions | — | — | — | |||||||||
Total | $ | 1,152 | $ | 11,643 | $ | 12,795 | ||||||
Three Months Ended September 27, 2015 | ||||||||||||
Broadcast Solutions | $ | 11,978 | $ | 1,744 | $ | 13,722 | ||||||
Enterprise Connectivity Solutions | 99 | 93 | 192 | |||||||||
Industrial Connectivity Solutions | — | 118 | 118 | |||||||||
Industrial IT Solutions | — | 54 | 54 | |||||||||
Network Security Solutions | — | 57 | 57 | |||||||||
Total | $ | 12,077 | $ | 2,066 | $ | 14,143 | ||||||
Nine Months Ended October 2, 2016 | ||||||||||||
Broadcast Solutions | $ | (865 | ) | $ | 6,736 | $ | 5,871 | |||||
Enterprise Connectivity Solutions | 55 | 7,225 | 7,280 | |||||||||
Industrial Connectivity Solutions | 1,961 | 6,021 | 7,982 | |||||||||
Industrial IT Solutions | 3,734 | 2,176 | 5,910 | |||||||||
Network Security Solutions | — | 29 | 29 | |||||||||
Total | $ | 4,885 | $ | 22,187 | $ | 27,072 | ||||||
Nine Months Ended September 27, 2015 | ||||||||||||
Broadcast Solutions | $ | 12,691 | $ | 15,852 | $ | 28,543 | ||||||
Enterprise Connectivity Solutions | 171 | 661 | 832 | |||||||||
Industrial Connectivity Solutions | 967 | 2,087 | 3,054 | |||||||||
Industrial IT Solutions | (740 | ) | 742 | 2 | ||||||||
Network Security Solutions | — | 1,102 | 1,102 | |||||||||
Total | $ | 13,089 | $ | 20,444 | $ | 33,533 |
Of the total severance, restructuring, and acquisition integration costs recognized in the nine months ended September 27, 2015, $6.3 million, $23.8 million, and $3.4 million were included in cost of sales; selling, general and administrative expenses; and research and development, respectively. Of the total severance, restructuring, and acquisition integration costs recognized for the nine months ended September 28, 2014, $13.3 million, $32.6 million, and $2.9 million were included in cost of sales; selling, general and administrative expenses; and research and development, respectively.
We continue to review our business strategies and evaluate potential new restructuring actions. This could result in additional restructuring costs in future periods.
Productivity Improvement Program | Grass Valley Integration | Grass Valley Restructuring | ||||||||||
(In thousands) | ||||||||||||
Balance at December 31, 2014 | $ | 7,141 | $ | 5,579 | $ | - | ||||||
New charges | 887 | 2,165 | - | |||||||||
Cash payments | (1,455) | (2,370) | - | |||||||||
Foreign currency translation | (408) | (302) | - | |||||||||
Other adjustments | (170) | - | - | |||||||||
|
|
|
|
|
| |||||||
Balance at March 29, 2015 | $ | 5,995 | $ | 5,072 | $ | - | ||||||
|
|
|
|
|
| |||||||
New charges | 22 | - | - | |||||||||
Cash payments | (1,268) | (1,709) | - | |||||||||
Foreign currency translation | 97 | 10 | - | |||||||||
Other adjustments | - | (1,590) | - | |||||||||
|
|
|
|
|
| |||||||
Balance at June 28, 2015 | $ | 4,846 | $ | 1,783 | $ | - | ||||||
|
|
|
|
|
| |||||||
New charges | 99 | - | 11,978 | |||||||||
Cash payments | (987) | (946) | (755) | |||||||||
Foreign currency translation | (29) | - | - | |||||||||
|
|
|
|
|
| |||||||
Balance at September 27, 2015 | $ | 3,929 | $ | 837 | $ | 11,223 | ||||||
|
|
|
|
|
|
Grass Valley Restructuring | Industrial Restructuring | ||||||
(In thousands) | |||||||
Balance at December 31, 2015 | $ | 12,076 | $ | 2,947 | |||
New charges | 886 | 2,919 | |||||
Cash payments | (4,404 | ) | (1,967 | ) | |||
Foreign currency translation | 167 | 94 | |||||
Other adjustments | (1,528 | ) | — | ||||
Balance at April 3, 2016 | $ | 7,197 | $ | 3,993 | |||
New charges | 251 | 1,489 | |||||
Cash payments | (3,356 | ) | (1,685 | ) | |||
Foreign currency translation | (13 | ) | (42 | ) | |||
Other adjustments | (360 | ) | — | ||||
Balance at July 3, 2016 | $ | 3,719 | $ | 3,755 | |||
New charges | 148 | 1,287 | |||||
Cash payments | (1,945 | ) | (743 | ) | |||
Foreign currency translation | 32 | 51 | |||||
Other adjustments | (262 | ) | — | ||||
Balance at October 2, 2016 | $ | 1,692 | $ | 4,350 |
-20-
September 27, 2015 | December 31, 2014 | |||||||
(In thousands) | ||||||||
Revolving credit agreement due 2018 | $ | 200,000 | $ | - | ||||
Variable rate term loan due 2020 | 245,155 | 246,375 | ||||||
Senior subordinated notes: | ||||||||
5.25% Senior subordinated notes due 2024 | 200,000 | 200,000 | ||||||
5.50% Senior subordinated notes due 2023 | 566,207 | 616,326 | ||||||
5.50% Senior subordinated notes due 2022 | 700,000 | 700,000 | ||||||
9.25% Senior subordinated notes due 2019 | 5,221 | 5,221 | ||||||
|
|
|
| |||||
Total senior subordinated notes | 1,471,428 | 1,521,547 | ||||||
|
|
|
| |||||
Total debt and other borrowing arrangements | 1,916,583 | 1,767,922 | ||||||
Less current maturities of Term Loan | (2,500) | (2,500) | ||||||
|
|
|
| |||||
Long-term debt | $ | 1,914,083 | $ | 1,765,422 | ||||
|
|
|
|
October 2, 2016 | December 31, 2015 | ||||||
(In thousands) | |||||||
Revolving credit agreement due 2018 | $ | — | $ | 50,000 | |||
Variable rate term loan due 2020 | 242,152 | 243,965 | |||||
Senior subordinated notes: | |||||||
5.25% Senior subordinated notes due 2024 | 200,000 | 200,000 | |||||
5.50% Senior subordinated notes due 2023 | 568,449 | 553,835 | |||||
5.50% Senior subordinated notes due 2022 | 700,000 | 700,000 | |||||
9.25% Senior subordinated notes due 2019 | 5,221 | 5,221 | |||||
Total senior subordinated notes | 1,473,670 | 1,459,056 | |||||
Total gross debt and other borrowing arrangements | 1,715,822 | 1,753,021 | |||||
Less unamortized debt issuance costs | (22,390 | ) | (25,239 | ) | |||
Total net debt and other borrowing arrangements | 1,693,432 | 1,727,782 | |||||
Less current maturities of Term Loan | (2,500 | ) | (2,500 | ) | |||
Long-term debt | $ | 1,690,932 | $ | 1,725,282 |
2016. See Note 13 for further discussion.
In June 2014, we issued
-21-
semiannually on January 15 and July 15 of each year.
In March 2013, we issued €300.0 million ($388.2 million at issuance) aggregate principal amount of 5.5% senior subordinated notes due 2023 (the 2023 Notes). In November 2014, we issued an additional €200.0 million ($247.5 million at issuance) aggregate principal amount of 2023 Notes. The carrying value of the 2023 Notes as of September 27, 2015October 2, 2016 is $566.2$568.4 million. The 2023 Notes are guaranteed on a senior subordinated basis by certain of our subsidiaries. The notes rank equal in right of payment with our senior subordinated notes due 2024, 2022, and 2019 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 Term Loan and Revolver. Interest is payable semiannually on April 15 and October 15 of each year. We paid $12.7 million of fees associated with the issuance of the 2023 Notes, which are being amortized over the life of the notes using the effective interest method. We used the net proceeds from the transactions to repay amounts outstanding under the revolving credit component of our previously outstanding Senior Secured Facility and for general corporate purposes.
value.
-22-
Pension Obligations | Other Postretirement Obligations | |||||||||||||||
Three Months Ended | September 27, 2015 | September 28, 2014 | September 27, 2015 | September 28, 2014 | ||||||||||||
(In thousands) | ||||||||||||||||
Service cost | $ | 1,344 | $ | 1,506 | $ | 11 | $ | (13) | ||||||||
Interest cost | 2,164 | 1,863 | 274 | (152) | ||||||||||||
Expected return on plan assets | (3,202) | (2,499) | - | - | ||||||||||||
Amortization of prior service cost (credit) | (15) | - | (16) | 18 | ||||||||||||
Actuarial losses | 1,349 | 1,718 | 107 | 72 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net periodic benefit cost | $ | 1,640 | $ | 2,588 | $ | 376 | $ | (75) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Nine Months Ended | ||||||||||||||||
Service cost | $ | 4,562 | $ | 5,086 | $ | 43 | $ | 48 | ||||||||
Interest cost | 6,909 | 7,266 | 1,076 | 924 | ||||||||||||
Expected return on plan assets | (9,515) | (9,440) | - | - | ||||||||||||
Amortization of prior service cost (credit) | (41) | 1 | (66) | (35) | ||||||||||||
Actuarial losses | 3,923 | 5,164 | 359 | 425 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net periodic benefit cost | $ | 5,838 | $ | 8,077 | $ | 1,412 | $ | 1,362 | ||||||||
|
|
|
|
|
|
|
|
Pension Obligations | Other Postretirement Obligations | |||||||||||||||
Three Months Ended | October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
(In thousands) | ||||||||||||||||
Service cost | $ | 1,282 | $ | 1,344 | $ | 11 | $ | 11 | ||||||||
Interest cost | 2,202 | 2,164 | 305 | 274 | ||||||||||||
Expected return on plan assets | (2,931 | ) | (3,202 | ) | — | — | ||||||||||
Amortization of prior service credit | (11 | ) | (15 | ) | (11 | ) | (16 | ) | ||||||||
Actuarial losses | 659 | 1,349 | 29 | 107 | ||||||||||||
Settlement loss | 7,385 | — | — | — | ||||||||||||
Net periodic benefit cost | $ | 8,586 | $ | 1,640 | $ | 334 | $ | 376 | ||||||||
Nine Months Ended | ||||||||||||||||
Service cost | $ | 4,118 | $ | 4,562 | $ | 40 | $ | 43 | ||||||||
Interest cost | 7,020 | 6,909 | 1,152 | 1,076 | ||||||||||||
Expected return on plan assets | (9,339 | ) | (9,515 | ) | — | — | ||||||||||
Amortization of prior service credit | (29 | ) | (41 | ) | (33 | ) | (66 | ) | ||||||||
Actuarial losses | 2,067 | 3,923 | 260 | 359 | ||||||||||||
Settlement loss | 7,385 | — | — | — | ||||||||||||
Net periodic benefit cost | $ | 11,222 | $ | 5,838 | $ | 1,419 | $ | 1,412 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2015 | September 28, 2014 | September 27, 2015 | September 28, 2014 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income | $ | 14,569 | $ | 33,847 | $ | 16,524 | $ | 58,456 | ||||||||
Foreign currency translation loss, net of $2.1 million, $0.3 million, $0.0 million, and $0.5 million tax, respectively | (25,249) | (4,175) | (15,056) | (3,914) | ||||||||||||
Adjustments to pension and postretirement liability, net of $0.5 million, $0.7 million, $1.6 million, and $2.1 million tax, respectively | 877 | 1,111 | 2,568 | 3,416 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total comprehensive income (loss) | $ | (9,803) | $ | 30,783 | $ | 4,036 | $ | 57,958 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended | Nine Months Ended | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
(In thousands) | |||||||||||||||
Net income | $ | 35,565 | $ | 14,569 | $ | 93,740 | $ | 16,524 | |||||||
Foreign currency translation loss, net of $0.4 million, $2.1 million, $1.5 million, and $0.0 million tax, respectively | (8,762 | ) | (25,249 | ) | (9,855 | ) | (15,056 | ) | |||||||
Adjustments to pension and postretirement liability, net of $3.1 million, $0.5 million, $3.7 million, and $1.6 million tax, respectively | 4,952 | 877 | 5,934 | 2,568 | |||||||||||
Total comprehensive income (loss) | $ | 31,755 | $ | (9,803 | ) | $ | 89,819 | $ | 4,036 | ||||||
Less: Comprehensive loss attributable to noncontrolling interest | (91 | ) | — | (318 | ) | — | |||||||||
Comprehensive income (loss) attributable to Belden | $ | 31,846 | $ | (9,803 | ) | $ | 90,137 | $ | 4,036 |
Foreign Currency Translation Component | Pension and Other Postretirement Benefit Plans | Accumulated Other Comprehensive Income (Loss) | ||||||||||
(In thousands) | ||||||||||||
Balance at December 31, 2014 | $ | (2,591) | $ | (43,440) | $ | (46,031) | ||||||
Other comprehensive loss before reclassifications | (15,056) | - | (15,056) | |||||||||
Amounts reclassified from accumulated other comprehensive income | - | 2,568 | 2,568 | |||||||||
|
|
|
|
|
| |||||||
Net current period other comprehensive income (loss) | (15,056) | 2,568 | (12,488) | |||||||||
|
|
|
|
|
| |||||||
Balance at September 27, 2015 | $ | (17,647) | $ | (40,872) | $ | (58,519) | ||||||
|
|
|
|
|
|
-23-
Foreign Currency Translation Component | Pension and Other Postretirement Benefit Plans | Accumulated Other Comprehensive Income (Loss) | |||||||||
(In thousands) | |||||||||||
Balance at December 31, 2015 | $ | (23,411 | ) | $ | (35,576 | ) | $ | (58,987 | ) | ||
Other comprehensive loss attributable to Belden before reclassifications | (9,823 | ) | — | (9,823 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | 5,934 | 5,934 | ||||||||
Net current period other comprehensive loss attributable to Belden | (9,823 | ) | 5,934 | (3,889 | ) | ||||||
Balance at October 2, 2016 | $ | (33,234 | ) | $ | (29,642 | ) | $ | (62,876 | ) |
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line Item in the Consolidated Statements of Operations and Comprehensive Income | |||||
(In thousands) | ||||||
Amortization of pension and other postretirement benefit plan items: | ||||||
Actuarial losses | $ | 4,282 | (1) | |||
Prior service credit | (107) | (1) | ||||
|
| |||||
Total before tax | 4,175 | |||||
Tax benefit | (1,607) | |||||
|
| |||||
Net of tax | $ | 2,568 | ||||
|
|
October 2, 2016:
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line Item in the Consolidated Statements of Operations and Comprehensive Income | ||||
(In thousands) | |||||
Amortization of pension and other postretirement benefit plan items: | |||||
Settlement loss | $ | 7,385 | (1) | ||
Actuarial losses | 2,327 | (1) | |||
Prior service credit | (62 | ) | (1) | ||
Total before tax | 9,650 | ||||
Tax benefit | (3,716 | ) | |||
Net of tax | $ | 5,934 |
InPreferred Stock
Preferred Stock will be determined based upon the volume-weighted average price of Belden’s common stock over the 20 day trading period beginning on, and including, the 22nd scheduled trading day prior to July 15, 2019. The net proceeds from this offering were approximately $501 million. We intend to use the proceeds for general corporate purposes. During both the three and nine months ended September 27, 2015, we repurchased 0.7October 2, 2016, the Preferred Stock accrued $6.7 million shares of dividends. With respect to dividend and liquidation rights, the Preferred Stock ranks senior to our common stock underand junior to all of our existing and future indebtedness.
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We expect to incur approximately $1 million of additional severance and other restructuring costs for this program in the fourth quarter of 2016. We expect the restructuring program to generate approximately $30 million of savings on an annualized basis, which we began to realize in the fourth quarter of 2015.
In the three and nine months ended September 27, 2015, and September 28, 2014, we recorded severance, restructuring, and integration costs of $0.1 million and $9.2$19.5 million, respectively, related to these two significant programs, as well as other cost reduction actions and the integration of our acquisitions of ProSoft, Coast, and Tripwire. We recorded $19.5 million and $48.8 million of such costs in the nine months ended September 27, 2015 and September 28, 2014, respectively. The other restructuring and integration costs primarily consisted of costs of integrating manufacturing operations, such as relocating inventory on a global basis, retention bonuses, relocation, travel, reserves for inventory obsolescence as a result of product line integration, costs to consolidate operating and support facilities, and other costs.
Grass Valley Restructuring Program
Our Broadcast segment has been negatively impacted by a decline in sales volume for our broadcast technology infrastructure products sold by our Grass Valley brand. Outside of the U.S., demand for these products has been impacted by the relative price increase of our products due to the strengthened U.S. dollar as well as the impact of lower energy prices, which result in lower capital spending. Within the U.S., demand for these products has been impacted by deferred capital spending. We believe broadcast customers have deferred their capital spending as they navigate through a number of important industry transitions and a changing media landscape. In response to these current broadcast market conditions, we began to execute a restructuring program in the third fiscal quarter of 2015 to further reduce our cost structure. We recognized
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approximately $14.0 million of severance and other restructuring costs for this program for both the three and nine months ended September 27, 2015. We expect to incur approximately $16October 2, 2016, we recognized $0.1 million and $1.1 million of additional severancecosts, respectively, primarily related to our 2016 acquisition of M2FX.
We continuously review our business strategies. In order to remain competitive, our goal is to improve productivity on an annual basis. To the extent that market growth rates are low, we may need to restructure aspects of our business in order to meet our annual productivity targets. This could result in additional restructuring costs in future periods. The magnitude of restructuring costs in the future could be influenced by statutory requirements in the countries in which we operate and our internal policies with regard to providing severance benefits in the absence of statutory requirements.
2016.
Our critical accounting policy regarding revenue recognition was updated as a result of the acquisition of Tripwire, as discussed below. We did not change any of our other existing critical accounting policies from those listed in our 20142015 Annual Report on Form 10-K;
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.
We have certain products subject to the accounting guidance on software revenue recognition. For such products, software license revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred, the fee is fixed or determinable, collection is probable and vendor-specific objective evidence (VSOE) of the fair value of undelivered elements exists. As substantially all of the software licenses are sold in multiple-element arrangements that include either support and maintenance or both support and maintenance and professional services, we use the residual method to determine the amount of software license revenue to be recognized. Under the residual method, consideration is allocated to undelivered elements based upon VSOE of the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as software license revenue. In our Network Security Solutions segment, we have established VSOE of the fair value of support and maintenance, subscription-based software licenses and professional services. Software license revenue is generally recognized upon delivery of the software if all revenue recognition criteria are met.
Revenue allocated to support services under our Network Security Solutions support and maintenance contracts is paid in advance and recognized ratably over the term of the service. Revenue allocated to subscription-based software and remote ongoing operational services is also paid in advance and recognized ratably over the term of the service. Revenue allocated to professional services, including remote implementation services, is recognized as the services are performed.
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Three Months Ended | % | Nine Months Ended | % | |||||||||||||||||||||
September 27, 2015 | September 28, 2014 | Change | September 27, 2015 | September 28, 2014 | Change | |||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||
Revenues | $ | 579,266 | $ | 610,774 | -5.2% | $ | 1,711,978 | $ | 1,699,355 | 0.7% | ||||||||||||||
Gross profit | 226,131 | 221,732 | 2.0% | 668,056 | 601,834 | 11.0% | ||||||||||||||||||
Selling, general and administrative expenses | 128,140 | 119,104 | 7.6% | 396,883 | 359,854 | 10.3% | ||||||||||||||||||
Research and development | 38,168 | 30,444 | 25.4% | 110,999 | 82,633 | 34.3% | ||||||||||||||||||
Amortization of intangibles | 25,669 | 15,203 | 68.8% | 78,090 | 42,739 | 82.7% | ||||||||||||||||||
Operating income | 34,502 | 58,011 | -40.5% | 83,543 | 119,848 | -30.3% | ||||||||||||||||||
Interest expense, net | 25,416 | 21,497 | 18.2% | 74,031 | 58,259 | 27.1% | ||||||||||||||||||
Income from continuing operations before taxes | 9,086 | 36,514 | -75.1% | 9,512 | 61,589 | -84.6% |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 2, 2016 | September 27, 2015 | % Change | October 2, 2016 | September 27, 2015 | % Change | ||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||
Revenues | $ | 601,109 | $ | 579,266 | 3.8 | % | $ | 1,744,237 | $ | 1,711,978 | 1.9 | % | |||||||||
Gross profit | 245,962 | 226,131 | 8.8 | % | 719,210 | 668,056 | 7.7 | % | |||||||||||||
Selling, general and administrative expenses | (126,662 | ) | (127,792 | ) | (0.9 | )% | (372,125 | ) | (395,424 | ) | (5.9 | )% | |||||||||
Research and development | (33,512 | ) | (38,168 | ) | (12.2 | )% | (106,297 | ) | (110,999 | ) | (4.2 | )% | |||||||||
Amortization of intangibles | (23,808 | ) | (25,669 | ) | (7.2 | )% | (75,603 | ) | (78,090 | ) | (3.2 | )% | |||||||||
Operating income | 61,980 | 34,502 | 79.6 | % | 165,185 | 83,543 | 97.7 | % | |||||||||||||
Interest expense, net | (23,513 | ) | (25,416 | ) | (7.5 | )% | (71,958 | ) | (74,031 | ) | (2.8 | )% | |||||||||
Income from continuing operations before taxes | 38,467 | 9,086 | 323.4 | % | 93,227 | 9,512 | 880.1 | % |
Acquisitions contributed $34.9 million and $159.8 million of revenues, respectively.
Unfavorable currency translation, primarily due to the strengthened U.S. dollar compared to the euro and the Canadian dollar, resulted in revenue decreases of $36.5 million and $103.2 million, respectively.
DecreasesIncreases in unit sales volume resulted in decreasesincreases in revenues of $16.5$25.0 million and $16.0$66.0 million, respectively. Soft demand forVolume growth was the strongest in our broadcast infrastructure and industrial products was partially offset by strong demand for our enterprise markets.
Lower copper costs resulted in revenue decreases of $13.4$4.1 million and $28.0$26.1 million, respectively.
Gross profit for the three and nine months ended September 27, 2015 included $3.2 million and $6.3 million, respectively,
Excluding these costs, grossrespectively.
Enterprise segments.
costs.
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 2, 2016 | September 27, 2015 | % Change | October 2, 2016 | September 27, 2015 | % Change | ||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||
Income from continuing operations before taxes | $ | 38,467 | $ | 9,086 | 323.4 | % | $ | 93,227 | $ | 9,512 | 880.1 | % | |||||||||
Income tax benefit (expense) | (2,902 | ) | 5,725 | (150.7 | )% | 513 | 7,340 | (93.0 | )% | ||||||||||||
Effective tax rate | 7.5 | % | (63.0 | )% | (0.6 | )% | (77.2 | )% |
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Research and development expenses increasedtax benefit in the three and nine months ended September 27, 2015October 2, 2016, respectively, as the result of securing a significant tax deduction for a foreign currency loss by implementing several transactions related to our international tax structure.
Amortization of intangibles increased in the three and nine months ended September 27, 2015 from the comparable periods of 2014 due to our acquisitions. Acquisitions contributed $11.2 million and $38.8 million of amortization of intangibles in the three and nine months ended September 27, 2015, respectively. The increases were partially offset by favorable currency translation.
Operating income decreased in the three and nine months ended September 27, 2015 from the comparable periods of 2014 due to the increases in selling, general, and administrative expenses, research and development expenses, and amortization of intangibles discussed above, partially offset by the increases in gross profit.
Interest expense increased in the three and nine months ended September 27, 2015 from the comparable periods of 2014 due to the increase in our long-term debt balance as compared to the prior year.
Income from continuing operations before taxes decreased in the three and nine months ended September 27, 2015 from the comparable periods of 2014 due to the decreases in operating income and increases in interest expense discussed above.
Income Taxes
Three Months Ended | % | Nine Months Ended | % | |||||||||||||||||||||
September 27, 2015 | September 28, 2014 | Change | September 27, 2015 | September 28, 2014 | Change | |||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||
Income from continuing operations before taxes | $ | 9,086 | $ | 36,514 | -75.1% | $ | 9,512 | $ | 61,589 | -84.6% | ||||||||||||||
Income tax benefit (expense) | 5,725 | (2,667) | -314.7% | 7,340 | (2,571) | -385.5% | ||||||||||||||||||
Effective tax rate | -63.0% | 7.3% | -77.2% | 4.2% |
foreign jurisdictions.
In addition, our effective tax rate in 2015 benefited from a tax planning strategy that allowed us to recognize a significant balance of foreign tax credits related to one of our foreign jurisdictions.
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Three Months Ended | % | Nine Months Ended | % | |||||||||||||||||||||
September 27, 2015 | September 28, 2014 | Change | September 27, 2015 | September 28, 2014 | Change | |||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||
Adjusted Revenues | $ | 590,115 | $ | 613,131 | -3.8% | $ | 1,758,079 | $ | 1,706,492 | 3.0% | ||||||||||||||
Adjusted EBITDA | 97,460 | 96,333 | 1.2% | 286,065 | 259,634 | 10.2% | ||||||||||||||||||
as a percent of adjusted revenues | 16.5% | 15.7% | 16.3% | 15.2% |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 2, 2016 | September 27, 2015 | % Change | October 2, 2016 | September 27, 2015 | % Change | ||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||
Adjusted Revenues | $ | 602,468 | $ | 590,115 | 2.1 | % | $ | 1,749,649 | $ | 1,758,079 | (0.5 | )% | |||||||||
Adjusted EBITDA | 111,545 | 97,460 | 14.5 | % | 308,720 | 286,065 | 7.9 | % | |||||||||||||
as a percent of adjusted revenues | 18.5 | % | 16.5 | % | 17.6 | % | 16.3 | % |
Acquisitions contributed $45.8 million and $205.8 million of revenues, respectively.
Unfavorable currency translation, primarily due to the strengthening U.S. dollar compared to the euro and the Canadian dollar, resulted in revenue decreases of $36.5 million and $103.2 million, respectively.
DecreasesIncreases in unit sales volume resulted in decreasesincreases in revenues of $18.9$15.6 million and $23.0$25.4 million, respectively. Soft demand forVolume growth was the strongest in our broadcast infrastructure and industrial products was partially offset by strong demand for our enterprise markets.
Lower copper costs resulted in revenue decreases of $13.4$4.1 million and $28.0$26.1 million, respectively.
Accordingly, EBITDA margins for the three and nine months ended October 2, 2016 expanded to 18.5% and 17.6%, respectively.
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Three Months Ended | Nine Months Ended | |||||||||||||||
September 27, 2015 | September 28, 2014 | September 27, 2015 | September 28, 2014 | |||||||||||||
(In thousands, except percentages) | ||||||||||||||||
GAAP revenues | $ | 579,266 | $ | 610,774 | $ | 1,711,978 | $ | 1,699,355 | ||||||||
Deferred revenue adjustments (1) | 10,849 | 2,357 | 46,101 | 7,137 | ||||||||||||
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Adjusted revenues | $ | 590,115 | $ | 613,131 | $ | 1,758,079 | $ | 1,706,492 | ||||||||
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GAAP operating income | $ | 34,502 | $ | 58,011 | $ | 83,543 | $ | 119,848 | ||||||||
Amortization of intangible assets | 25,669 | 15,203 | 78,090 | 42,739 | ||||||||||||
Severance, restructuring, and acquisition integration costs (2) | 14,143 | 9,158 | 33,533 | 48,809 | ||||||||||||
Deferred gross profit adjustments (1) | 11,328 | 2,357 | 46,426 | 6,722 | ||||||||||||
Purchase accounting effects related to acquisitions (3) | - | 858 | 9,422 | 9,873 | ||||||||||||
Depreciation expense | 11,818 | 10,746 | 35,051 | 31,643 | ||||||||||||
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Adjusted EBITDA | $ | 97,460 | $ | 96,333 | $ | 286,065 | $ | 259,634 | ||||||||
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GAAP operating income margin | 6.0% | 9.5% | 4.9% | 7.1% | ||||||||||||
Adjusted EBITDA margin | 16.5% | 15.7% | 16.3% | 15.2% |
measures:
Three Months Ended | Nine Months Ended | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
(In thousands, except percentages) | |||||||||||||||
GAAP revenues | $ | 601,109 | $ | 579,266 | $ | 1,744,237 | $ | 1,711,978 | |||||||
Deferred revenue adjustments (1) | 1,359 | 10,849 | 5,412 | 46,101 | |||||||||||
Adjusted revenues | $ | 602,468 | $ | 590,115 | $ | 1,749,649 | $ | 1,758,079 | |||||||
GAAP net income attributable to Belden | $ | 35,653 | $ | 14,569 | $ | 94,026 | $ | 16,524 | |||||||
Interest expense, net | 23,513 | 25,416 | 71,958 | 74,031 | |||||||||||
Loss from discontinued operations | — | 242 | — | 242 | |||||||||||
Loss from disposal of discontinued operations | — | — | — | 86 | |||||||||||
Noncontrolling interest | (88 | ) | — | (286 | ) | — | |||||||||
Income tax expense (benefit) | 2,902 | (5,725 | ) | (513 | ) | (7,340 | ) | ||||||||
Amortization of intangible assets | 23,808 | 25,669 | 75,603 | 78,090 | |||||||||||
Deferred gross profit adjustments (1) | 1,359 | 11,328 | 5,412 | 46,426 | |||||||||||
Severance, restructuring, and acquisition integration costs (2) | 12,795 | 14,143 | 27,072 | 33,533 | |||||||||||
Purchase accounting effects related to acquisitions (3) | — | — | 195 | 9,422 | |||||||||||
Depreciation expense | 11,603 | 11,818 | 35,253 | 35,051 | |||||||||||
Adjusted EBITDA | $ | 111,545 | $ | 97,460 | $ | 308,720 | $ | 286,065 | |||||||
GAAP net income margin | 5.9 | % | 2.5 | % | 5.4 | % | 1.0 | % | |||||||
Adjusted EBITDA margin | 18.5 | % | 16.5 | % | 17.6 | % | 16.3 | % |
Three Months Ended | % | Nine Months Ended | % | |||||||||||||||||||||
September 27, 2015 | September 28, 2014 | Change | September 27, 2015 | September 28, 2014 | Change | |||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||
Segment Revenues | $ | 228,097 | $ | 256,587 | -11.1% | $ | 661,098 | $ | 675,350 | -2.1% | ||||||||||||||
Segment EBITDA | 34,880 | 38,450 | -9.3% | 95,726 | 95,939 | -0.2% | ||||||||||||||||||
as a percent of segment revenues | 15.3% | 15.0% | 14.5% | 14.2% |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 2, 2016 | September 27, 2015 | % Change | October 2, 2016 | September 27, 2015 | % Change | ||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||
Segment Revenues | $ | 196,173 | $ | 186,722 | 5.1 | % | $ | 560,966 | $ | 538,145 | 4.2 | % | |||||||||
Segment EBITDA | 36,545 | 27,369 | 33.5 | % | 89,317 | 73,374 | 21.7 | % | |||||||||||||
as a percent of segment revenues | 18.6 | % | 14.7 | % | 15.9 | % | 13.6 | % |
Broadcast EBITDA decreased in the three and nine months ended September 27, 2015 from the comparable periods of 2014 primarily due to leverage on the declinesincreases in revenues as discussed above. In addition, BroadcastAdditionally, EBITDA decreasedincreased due to unfavorable product mix. These factors were partially offset by improved productivity as a result of our recently completed restructuring actions and acquisition integration activities. Accordingly, Broadcast EBITDA margins increased to 15.3%18.6% and 14.5%15.9% for the three and nine months ended September 27, 2015,October 2, 2016, respectively.
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Three Months Ended | % | Nine Months Ended | % | |||||||||||||||||||||
September 27, 2015 | September 28, 2014 | Change | September 27, 2015 | September 28, 2014 | Change | |||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||
Segment Revenues | $ | 113,773 | $ | 115,349 | -1.4% | $ | 335,803 | $ | 345,015 | -2.7% | ||||||||||||||
Segment EBITDA | 18,232 | 17,730 | 2.8% | 53,214 | 51,572 | 3.2% | ||||||||||||||||||
as a percent of segment revenues | 16.0% | 15.4% | 15.8% | 14.9% |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 2, 2016 | September 27, 2015 | % Change | October 2, 2016 | September 27, 2015 | % Change | ||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||
Segment Revenues | $ | 156,658 | $ | 155,148 | 1.0 | % | $ | 452,951 | $ | 458,756 | (1.3 | )% | |||||||||
Segment EBITDA | 27,294 | 25,705 | 6.2 | % | 80,605 | 75,506 | 6.8 | % | |||||||||||||
as a percent of segment revenues | 17.4 | % | 16.6 | % | 17.8 | % | 16.5 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 2, 2016 | September 27, 2015 | % Change | October 2, 2016 | September 27, 2015 | % Change | ||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||
Segment Revenues | $ | 149,847 | $ | 147,702 | 1.5 | % | $ | 438,746 | $ | 461,549 | (4.9 | )% | |||||||||
Segment EBITDA | 23,649 | 23,225 | 1.8 | % | 73,700 | 76,078 | (3.1 | )% | |||||||||||||
as a percent of segment revenues | 15.8 | % | 15.7 | % | 16.8 | % | 16.5 | % |
Enterprise Connectivity EBITDA increased in the three and nine months ended September 27, 2015 from the comparable periods of 2014 due to the increases in units sales volume discussed above and improved product mix as a result of increased focus on the sale of end-to-end solutions. Accordingly, EBITDA margins improved to 16.0% and 15.8% for the three and nine months ended September 27, 2015, respectively.
Industrial Connectivity Solutions
Three Months Ended | % | Nine Months Ended | % | |||||||||||||||||||||
September 27, 2015 | September 28, 2014 | Change | September 27, 2015 | September 28, 2014 | Change | |||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||
Segment Revenues | $ | 147,702 | $ | 171,105 | -13.7% | $ | 461,549 | $ | 508,667 | -9.3% | ||||||||||||||
Segment EBITDA | 23,225 | 26,487 | -12.3% | 76,078 | 79,631 | -4.5% | ||||||||||||||||||
as a percent of segment revenues | 15.7% | 15.5% | 16.5% | 15.7% |
revenues.
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 2, 2016 | September 27, 2015 | % Change | October 2, 2016 | September 27, 2015 | % Change | ||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||
Segment Revenues | $ | 60,168 | $ | 59,184 | 1.7 | % | $ | 176,560 | $ | 181,527 | (2.7 | )% | |||||||||
Segment EBITDA | 12,771 | 10,466 | 22.0 | % | 34,056 | 31,731 | 7.3 | % | |||||||||||||
as a percent of segment revenues | 21.2 | % | 17.7 | % | 19.3 | % | 17.5 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 2, 2016 | September 27, 2015 | % Change | October 2, 2016 | September 27, 2015 | % Change | ||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||
Segment Revenues | $ | 39,622 | $ | 41,359 | (4.2 | )% | $ | 120,426 | $ | 118,102 | 2.0 | % | |||||||||
Segment EBITDA | 11,677 | 11,240 | 3.9 | % | 32,659 | 29,913 | 9.2 | % | |||||||||||||
as a percent of segment revenues | 29.5 | % | 27.2 | % | 27.1 | % | 25.3 | % |
Industrial Connectivity EBITDA decreased in the three and nine months ended September 27, 2015 from the comparable periods of the prior year by $3.3 million and $3.6 million, respectively. EBITDA was negatively impacted by unfavorable currency translation of $1.3 million and $3.9 million, respectively. The decreases in revenues discussed above also contributed to the decreases in EBITDA. The decreases in EBITDA were partially offset by the acquisition of Coast, which contributed EBITDA of $1.7 million and $4.1 million, respectively, favorable product mix, and improved productivity due to our recently completed restructuring activities.
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Industrial IT Solutions
Three Months Ended | % | Nine Months Ended | % | |||||||||||||||||||||
September 27, 2015 | September 28, 2014 | Change | September 27, 2015 | September 28, 2014 | Change | |||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||
Segment Revenues | $ | 59,184 | $ | 70,090 | -15.6% | $ | 181,527 | $ | 177,460 | 2.3% | ||||||||||||||
Segment EBITDA | 10,466 | 13,618 | -23.1% | 31,731 | 32,012 | -0.9% | ||||||||||||||||||
as a percent of segment revenues | 17.7% | 19.4% | 17.5% | 18.0% |
Industrial IT revenues decreased in the three months ended September 27, 2015 from the comparable period of 2014, primarily due to unfavorable currency translation of $7.1 million. In addition, decreases in unit sales volume resulted in a decrease in revenues of $3.8 million. Sales volume decreases in the three months ended September 27, 2015 were most notable within the United States and Canada.
Industrial IT revenues increased in the nine months ended September 27, 2015 from the comparable period of 2014, primarily due to the acquisition of ProSoft, which contributed $22.6 million of revenues. Increases in unit sales volume resulted in an increase in revenues of $4.7 million. Unfavorable currency translation of $23.2 million partially offset the increases in revenues.
Industrial IT EBITDA decreased in the three months ended September 27, 2015 from the comparable period of 2014, primarily due to the decrease in revenues discussed above. Additionally, unfavorable currency translation resulted in a decrease in EBITDA of $2.7 million. These factors were partially offset by improved productivity as a result of our recently completed restructuring activities.
Industrial IT EBITDA decreased in the nine months ended September 27, 2015 from the comparable period of 2014, primarily due to unfavorable currency translation of approximately $9.7 million. This decrease was partially offset by the acquisition of ProSoft, which contributed $4.8 million of EBITDA in the nine months ended September 27, 2015, and improved productivity as a result of our recently completed restructuring activities.
Network Security Solutions
Three Months Ended | % | Nine Months Ended | % | |||||||||||||||||||||
September 27, 2015 | September 28, 2014 | Change | September 27, 2015 | September 28, 2014 | Change | |||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||
Segment Revenues | $ | 41,359 | $ | - | n/a | $ | 118,102 | $ | - | n/a | ||||||||||||||
Segment EBITDA | 11,240 | - | n/a | 29,913 | - | n/a | ||||||||||||||||||
as a percent of segment revenues | 27.2% | n/a | 25.3% | n/a |
Network Security consists of the Tripwire business acquired on January 2, 2015. Tripwire is a leading global provider of advanced threat, security and compliance solutions. The Network Security Solutions’ EBITDA margins for the three and nine months ended September 27, 2015 of 27.2% and 25.3%, respectively, are reflective of the margins for software solutions, which are higher than margins on product lines in our other global platforms.
In 2010, we completed the sale of Trapeze Networks, Inc. (Trapeze) for $152.1 million and recognized a pre-tax gain of $88.3 million ($44.8 million after-tax). At the time the transaction closed, we received $136.9 million in cash, and the remaining $15.2 million was placed in escrow as partial security for our indemnity obligations under the sale agreement. During 2013, we collected a partial settlement of $4.2 million from the escrow. During 2015, we agreed to a final settlement with the buyer of Trapeze regarding the escrow.
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In 2012, we sold our Thermax and Raydex cable business for $265.6 million in cash and recognized a pre-tax gain of $211.6 million ($124.7 million net of tax). At the time the transaction closed, we received $265.6 million in cash, subject to a working capital adjustment. In the nine months ended September 28, 2014, we recognized a $0.9 million ($0.6 million net of tax) loss from disposal of discontinued operations related to this business as a result of settling the working capital adjustment and other matters.
Nine Months Ended | ||||||||
September 27, 2015 | September 28, 2014 | |||||||
(In thousands) | ||||||||
Net cash provided by (used for): | ||||||||
Operating activities | $ | 91,981 | $ | 64,766 | ||||
Investing activities | (730,779) | (343,305) | ||||||
Financing activities | 146,215 | 120,384 | ||||||
Effects of currency exchange rate changes on cash and cash equivalents | (6,682) | (6,047) | ||||||
�� |
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Decrease in cash and cash equivalents | (499,265) | (164,202) | ||||||
Cash and cash equivalents, beginning of period | 741,162 | 613,304 | ||||||
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| |||||
Cash and cash equivalents, end of period | $ | 241,897 | $ | 449,102 | ||||
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Nine Months Ended | |||||||
October 2, 2016 | September 27, 2015 | ||||||
(In thousands) | |||||||
Net cash provided by (used for): | |||||||
Operating activities | $ | 146,806 | $ | 91,981 | |||
Investing activities | (54,594 | ) | (730,779 | ) | |||
Financing activities | 438,637 | 146,215 | |||||
Effects of currency exchange rate changes on cash and cash equivalents | 705 | (6,682 | ) | ||||
Increase (decrease) in cash and cash equivalents | 531,554 | (499,265 | ) | ||||
Cash and cash equivalents, beginning of period | 216,751 | 741,162 | |||||
Cash and cash equivalents, end of period | $ | 748,305 | $ | 241,897 |
Receivables were a use of cash of $6.5 million for the nine months ended September 27, 2015, compared to a use of cash of $44.6 million for the nine months ended September 28, 2014. The use of cash for receivables improved as a result of the declinedecrease in sales volume compared to the prior year.
Inventories were a source of cash of $8.0 million for the nine months ended September 27, 2015, while inventories were a source of cash of $4.2 million for the comparable period of 2014. Inventories improved as a source of cash due to our Lean enterprise initiatives as well as the decline in sales volume compared to the prior year.
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Accounts payable were a use of cash of $56.0 million for the nine months ended September 27, 2015, compared to a use of cash of $7.6 million for the nine months ended September 28, 2014. The use of cash for accounts payable increased primarily due to the timing of payments.
Accrued liabilities were a source of cash of $29.4 million for the nine months ended September 27, 2015, compared to a use of cash of $24.4 million for the nine months ended September 28, 2014. The source of cash for accrued liabilities improved primarily as a result of the increase in deferred revenue for our acquired Network Security segment.
liabilities.
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Company’s strategic plan; the inability of the Company to develop and introduce new products and competitive responses to our products; assertions that the Company violates the intellectual property of others and the ownership of intellectual property by competitors and others that prevents the use of that intellectual property by the Company; risks related to the use of open source software; the inability to retain senior management and key employees; disruptions in the Company’s information systems including due to cyber-attacks; variability in the Company’s quarterly and annual effective tax rates; perceived or actual product failures; political and economic uncertainties in the countries where the Company conducts business, including emerging markets; the impairment of goodwill and other intangible assets and the resulting impact on financial performance; the impact of regulatory requirements and other legal compliance issues; disruptions in the Company’s information systems including due to cyber-attacks; perceived or actual product failures; risks related to the use of open source software; disruptions and increased costs attendant to collective bargaining groups and other labor matters; and other factors.
Principal Amount by Expected Maturity | Fair Value | |||||||||||||||
2015 | Thereafter | Total | ||||||||||||||
(In thousands, except interest rates) | ||||||||||||||||
Revolving credit agreement due 2018 | $ | - | $ | 200,000 | $ | 200,000 | $ | 200,000 | ||||||||
Average interest rate | 1.94% | |||||||||||||||
Variable-rate term loan due 2020 | $ | 1,250 | $ | 243,905 | $ | 245,155 | $ | 245,155 | ||||||||
Average interest rate | 3.25% | 3.25% | ||||||||||||||
Fixed-rate senior subordinated notes due 2022 | $ | - | $ | 700,000 | $ | 700,000 | $ | 691,250 | ||||||||
Average interest rate | 5.50% | |||||||||||||||
Fixed-rate senior subordinated notes due 2023 | $ | - | $ | 566,207 | $ | 566,207 | $ | 537,600 | ||||||||
Average interest rate | 5.50% | |||||||||||||||
Fixed-rate senior subordinated notes due 2024 | $ | - | $ | 200,000 | $ | 200,000 | $ | 188,500 | ||||||||
Average interest rate | 5.25% | |||||||||||||||
Fixed-rate senior subordinated notes due 2019 | $ | - | $ | 5,221 | $ | 5,221 | $ | 5,221 | ||||||||
Average interest rate | 9.25% | |||||||||||||||
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| |||||||||||||
Total | $ | 1,916,583 | $ | 1,867,726 | ||||||||||||
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|
October 2, 2016.
Principal Amount by Expected Maturity | Fair | ||||||||||||||
2016 | Thereafter | Total | Value | ||||||||||||
(In thousands, except interest rates) | |||||||||||||||
Variable-rate term loan due 2020 | $ | 625 | $ | 241,527 | $ | 242,152 | $ | 242,152 | |||||||
Average interest rate | 5.00 | % | 5.00 | % | |||||||||||
Fixed-rate senior subordinated notes due 2022 | $ | — | $ | 700,000 | $ | 700,000 | $ | 729,750 | |||||||
Average interest rate | 5.50 | % | |||||||||||||
Fixed-rate senior subordinated notes due 2023 | $ | — | $ | 568,449 | $ | 568,449 | $ | 586,689 | |||||||
Average interest rate | 5.50 | % | |||||||||||||
Fixed-rate senior subordinated notes due 2024 | $ | — | $ | 200,000 | $ | 200,000 | $ | 203,000 | |||||||
Average interest rate | 5.25 | % | |||||||||||||
Fixed-rate senior subordinated notes due 2019 | $ | — | $ | 5,221 | $ | 5,221 | $ | 5,221 | |||||||
Average interest rate | 9.25 | % | |||||||||||||
Total | $ | 1,715,822 | $ | 1,766,812 |
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ruling.patents.patents and awarded damages in the amount of $23.9 million. On November 3, 2016, following a series of post-trial motions, the trial judge issued a ruling granting us enhanced damages of $47.7 million plus a yet-to-be-determined amount of pre-judgment interest. We have not recorded any amounts in our consolidated financial statements related to this matter, as Corning may appeal the court has not entered judgment and is considering post-trial motions filed by the parties.Item 1A:Risk Factors
Set forth below is information regarding our stock repurchases for the three months ended September 27, 2015.
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 | ||||||||||||
June 29, 2015 through August 2, 2015 | - | $ | - | - | $ | 39,053,228 | ||||||||||
August 3, 2015 through August 30, 2015 | 697,945 | 55.95 | 697,945 | - | ||||||||||||
August 31, 2015 through September 27, 2015 | - | - | - | - | ||||||||||||
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| |||||||||
Total | 697,945 | $ | 55.95 | 697,945 | $ | - | ||||||||||
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(1) In July 2011, our Board of Directors authorized a share repurchase program, which allows us to purchase up to $150.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance with applicable securities laws and other restrictions. The program does not have an expiration date and may be suspended at any time at the discretion of the Company. In November 2012, our Board of Directors authorized an extension of the share repurchase program, which allows us to purchase up to an additional $200.0 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 was funded by cash on hand and free cash flow. The repurchase activities in the three months ended September 27, 2015 utilized all remaining authorized amounts under the share repurchase program. On a cumulative basis since inception of the program in 2011, we have repurchased 7.4 million shares of our common stock under the program for an aggregate cost of $350.0 million and an average price of $47.43.
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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.INS | XBRL Instance Document | |
Exhibit 101.SCH | XBRL Taxonomy Extension Schema | |
Exhibit 101.CAL | XBRL Taxonomy Extension Calculation | |
Exhibit 101.DEF | XBRL Taxonomy Extension Definition | |
Exhibit 101.LAB | XBRL Taxonomy Extension Label | |
Exhibit 101.PRE | XBRL Taxonomy Extension Presentation |
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BELDEN INC. | |||||||
Date: | November | 7, 2016 | By: | /s/ John S. Stroup | |||
John S. Stroup | |||||||
President, Chief Executive Officer and Director | |||||||
Date: | November | 7, 2016 | By: | /s/ Henk Derksen | |||
Henk Derksen | |||||||
Senior Vice President, Finance, and Chief Financial Officer | |||||||
Date: | November | 7, 2016 | By: | /s/ Douglas R. Zink | |||
Douglas R. Zink | |||||||
Vice President and Chief Accounting Officer |
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