2013
Annual Report
Dear Fellow Shareholders:
2013 was an extremely important year for Belden. As demonstrated by our total shareholder
return, we are being rewarded for our strong and predictable results. The significant
investments made in our portfolio, processes, and people are clearly being recognized by the
market. Moreover, our nearly seamless organization design change from a legacy regional
structure to a global business platform provides the framework for accelerated revenue
growth, margin expansion and free cash flow generation.
The success of the business transformation is best illustrated by our “best-in-class” gross
margins, which expanded 310 basis points year-over-year to 35.2%*. Operating profit margins
increased to 13.8%, up 270 basis points from 2012, and within reach of our stated goal of 14%
to 16%. Net income from continuing operations per diluted share increased 31.8% in 2013 to
$3.69 per diluted share, up from $2.80 in 2012, on revenues of $2.08 billion, compared to $1.85
billion a year ago.
Our ability to increase margins and earnings faster than revenue illustrates the considerable
leverage in our business model and points to a bright future. Operationally, we will continue to
benefit from scale. By relentlessly applying our Belden Business System, we will grow
organically, expand margins, and generate free cash flow in excess of net income. This is our
primary source for strategic acquisitions which hurdle our ROIC goal, and like a flywheel,
provide opportunities for further scale and incremental cash flow.
2013 Achievements
2013 signaled a new beginning for Belden. After years of enriching our business portfolio with
the essential products of a signal transmission system, the time had come to realign our
organization to simplify execution.
___________________________
* See attached appendix for reconciliation of adjusted measures to GAAP measures.
1
Our new operating structure is comprised of four global
Belden’s Four Operating Segments
platforms
--
Industrial Connectivity,
Industrial
IT,
Enterprise Connectivity and Broadcast. [See sidebar.]
To allow these four global businesses to scale and grow,
we implemented a significant change in our global
Industrial Connectivity Solutions
High-performance industrial cable and
connector products that transport
mission-critical signals enabling reliable
organizational structure in 2013. Instead of deploying a
network communication and machine-to-
product-focused sales force to sell across a range of
machine connectivity for industrial
applications and end-markets, we created end-market
experts who help our customers solve business
problems on a local, regional or global basis.
We believe the knowledge and expertise of our sales
organization creates a significant competitive advantage
automation, machine building and
automotive production applications.
Industrial IT Solutions
High-performance, reliable and secure
hardware and software systems that
address the mission-critical networking
for us, allowing us to develop even deeper customer
demands of discrete and process
relationships as we better meet their most critical
automation industries worldwide.
needs.
I’m pleased with how our associates executed these
organizational changes throughout the year. I am
equally proud of the strong financial results we
Enterprise Connectivity Solutions
Efficient network infrastructure systems
that transport voice, video and high-
speed data in enterprise IT applications
for data centers, healthcare, finance and
delivered during this period of transition, especially
education markets.
given a weak macroeconomic environment.
Demand weakness was more than offset by share
Broadcast Solutions -- Advanced
hardware, software and connectivity
capture. As we had predicted, share capture for the year
systems for television broadcast, cable,
exceeded 2% of our revenue. It’s a wonderful indicator
of the overall health of our products, services and
people.
satellite, and IPTV industries to create,
manage and deliver high-quality content
around the world.
2
Growth by design
We attribute Belden’s strong 2013 results and improving financial performance to the following
five principal factors:
1. Our proven Belden Business System – We are reaping returns on the investments we
made over the past eight years to build business processes that are flexible, scalable and
sustainable. We put great energy into building a strong foundation that would support the
scale with the business, and we are pleased with the consistent results it continues to yield.
The Belden Business System, which is integral to the operation of our four global platforms,
begins with our Market Delivery System, a go-to-market model that we use to improve and
capture share. It also includes an effective application of LEAN enterprise techniques and a
disciplined Acquisition Cultivation & Integration System, both of which contribute to our
ability to expand operating profit margins and grow earnings. Our Talent Management
System supports the development of our associates at all levels, which preserves the culture
necessary to operate our business system consistently and sustainably.
2. Our disciplined approach to growth – The balance we have built across end-markets and
geographies is designed to provide a level of consistency and predictability. In a world with
such poor visibility and great variability, I believe our balance is a great source of strength.
Our new operating structure clearly shows our strong presence in enterprise, broadcast and
industrial end-markets. Each market contains numerous positive secular trends with upside
potential for growth and share capture.
3. Product Innovation – Because the mission-critical applications our solutions address are
ever-evolving, our products, too, require consistent innovation. For the year, we invested
4% of our revenue in research and development. The cumulative results include more than
1,000 patents and the most complete portfolio in our industry. This investment gives us a
competitive advantage and enables us to develop deep and lasting customer relationships,
both of which are critical ingredients to customer satisfaction and organic growth.
3
This past December, The Patent Board recognized our R&D contributions by naming Belden
the top innovator in its Industrial Components rankings. Belden received the highest score
for technology strength – a measure that indicates the overall vitality of the company’s
innovation and patent portfolio.
4. An Improving Business Portfolio – We continue to enrich our business portfolio to address
higher growth and higher margin opportunities identified in our strategic plan. Over the
past eight years, we have developed a strong track record of cultivating, acquiring, and
integrating businesses that enhance our strategic relevance.
Our disciplined approach is focused on delivering value over the long-term. We seek to buy
leading companies that fit
into our strategic framework, and have experienced
management teams, innovative products and opportunities for meaningful synergy. When
we identify potential candidates, we conduct rigorous financial analysis to make certain that
they meet not only our strategic plans, but also our stringent goals for cash return on
invested capital.
While 2013 was a quiet year for Belden when measured by the number of acquisitions
closed, our team was busier than ever. We have a robust funnel of potential transactions.
And although timing is difficult to predict, please be assured that we go about our business
in a rigorous and consistent fashion. Additionally, the strength of our balance sheet gives us
the flexibility required to act quickly when those opportunities arise.
5. Consistent Financial Performance – Our business transformation continues to yield
consistent improvement toward our long-term financial goals. Perhaps the clearest
evidence is in our operating profit margin expansion. Three of our four platforms are
already operating at or above our stated long-term goal of 14% to 16%, and another is
executing the plan to get there soon.
We are pleased with the progress made toward our goal; however, our strong gross margins
provide the opportunity for significant further expansion in operating margins.
4
A quick review of individual platform results underscores the importance of these five
performance-driving factors.
Broadcast – Broadcast revenues totaled $679.2 million in 2013, up 87% from $362.6 million in
2012. Operating profit margins increased to 14.1%, up 600 basis points from 8.1% in 2012.
2012 included both Miranda and PPC for a limited time. Given exploding global demand for
video creation, delivery and consumption, the market favors innovators who can deliver
superior quality and reliability.
Enterprise Connectivity -- In 2013, our Enterprise Connectivity segment delivered revenues of
$493.1 million and an operating profit margin of 10.1%, compared to $496.9 million and 9.3%,
respectively, the prior year. Despite continued softness in non-residential spending, this
platform’s revenues have remained consistent in recent years as we shift our mix toward
connectivity solutions that support data centers, building automation and other positive secular
growth trends.
Industrial Connectivity -- Revenues in our Industrial Connectivity segment grew to $680.6
million in 2013, compared to $670.1 million in 2012. The platform’s operating profit margin
reached 13.9%, compared to 12.9% in 2012, an improvement of 100 basis points. Providing
approximately 33% of Belden’s revenue, this platform develops solutions for markets that
include the smart factories and oil and gas.
Industrial IT -- Opportunity abounds for our Industrial IT segment as well, which had revenues
of $231.5 million in 2013, compared to $219.7 million a year ago. With a 2013 operating profit
margin of 18.7%, up from 16.9% in 2012, our Industrial IT platform is already operating above
our corporate long-term goal of 14% to 16%. Ethernet adoption on the factory floor is a strong
secular growth trend for this platform. When paired with the need for secure, scalable critical
infrastructure, there exists a great opportunity for us to establish deep relationships with
customers who value reliable and innovative solutions.
5
2014 Financial Goals
Entering 2014, our business portfolio has never been more robust. While we expect global
market economic growth to be modest, we will continue along the same strategic road we have
traveled the past eight years. The three-year financial goals we set a year ago also remain
unchanged:
• Organic revenue growth of 4% to 6%
A challenging macroeconomic environment provided notable headwinds in 2013,
resulting in organic revenue up slightly from the year-ago period. While our markets
contracted, we continue to identify pockets of growth by application, market and
geography. As we have the two past years, we expect share capture will equal 2% of
revenue.
• Operating profit margins of 14% to 16%
Belden’s operating profit margin reached 13.8% in 2013, up 270 basis points from last
year’s 11.1%. While we’re very pleased with the significant progress made toward our
goal, more opportunity remains. We will continue to expand margins through leverage,
mix and productivity improvements.
• Free Cash Flow in Excess of Net Income
In 2013, we generated almost $200 million in free cash flow, and 50% of that was
returned to our shareholders. In 2013, we repurchased a total of 1.7 million shares of
Belden common stock for $93.75 million. With free cash flow at 121% of net income,
this marks the ninth year in a row that our free cash flow has exceeded our income from
continuing operations. Our commitment to this metric remains steadfast, as it is a
testament to the quality of our earnings and our focus on working capital and fixed
asset efficiency.
6
• Return on Invested Capital of 13-15%
At 10.6%, our return on invested capital in 2013 was below our goal. We attribute this
largely to timing, as the amount of cash held on our balance sheet at year-end impacted
the measure. Additionally, we took advantage of attractive debt markets and
significantly improved our balance sheet by reducing our weighted cost of debt to 5.7%,
extending maturities, and creating a Euro based liability to better match our assets and
cash flows in that currency. This cash is designed to fund our strategic plan, including
attractive acquisitions and our continued share repurchase program. When the excess
cash is excluded from our balance sheet, our return on invested capital improves to
12.6%, just shy of the low end of our goal. We expect our return on invested capital to
improve through our disciplined capital deployment strategy. In the meantime, our
return on invested capital remains in excess of our weighted average cost of capital.
2014 Outlook
It’s never easy to make significant structural changes to a global organization. But knowing that
our future growth depends on it, our team has worked hard to build a strong foundation that
delivers the consistent financial performance we seek. With much of the heavy lifting now
behind us, creating value for our shareholders becomes just a little easier.
We are grateful for the success we enjoyed in 2013 and for the loyalty of our customers. We
are especially thankful for the talented and hard-working employees who make Belden such a
great place to work. We remain dedicated to providing superior returns to our shareholders
and again thank you for your confidence and support.
Sincerely,
John Stroup
President and Chief Executive Officer
7
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
In addition to reporting financial results in accordance with accounting principles generally accepted in the United States, we provide non-GAAP operating results adjusted
for certain items, including: asset impairments; accelerated depreciation expense due to plant consolidation activities; purchase accounting effects related to acquisitions,
such as the adjustment of acquired inventory to fair value; acquisition and divestiture transaction costs; revenue and cost of sales deferrals for acquired product lines subject
to software revenue recognition accounting requirements; severance and other restructuring costs; gains (losses) recognized on the disposal of businesses and tangible
assets; amortization of intangible assets; gains (losses) on debt extinguishment; non-recurring tax benefits related to the settlement of a tax sharing agreement; and other
costs. We utilize the adjusted results to review our ongoing operations without the effect of these adjustments and for comparison to budgeted operating results. We believe
the adjusted results are useful to investors because they help them compare our results to previous periods and provide important insights into underlying trends in the
business and how management oversees our business operations on a day-to-day basis. Adjusted results should be considered only in conjunction with results reported
according to accounting principles generally accepted in the United States.
GAAP revenues
Deferred revenue adjustments
Adjusted revenues
GAAP gross profit
Deferred gross profit adjustments
Severance and other restructuring costs
Purchase accounting effects related to acquisitions
Accelerated depreciation
Adjusted gross profit
Adjusted gross profit margin
GAAP operating income
Amortization of intangible assets
Severance and other restructuring costs
Deferred gross profit adjustments
Purchase accounting effects related to acquisitions
Accelerated depreciation
Asset impairment and loss on sale of assets
Gain on sale of assets
Total operating income adjustments
Adjusted operating income
Adjusted operating income margin
GAAP income from continuing operations
Operating income adjustments from above
Loss on debt extinguishment
Tax benefit from Cooper tax sharing agreement
Tax effect of adjustments
Adjusted income from continuing operations
Twelve Months Ended
December 31, 2013
December 31, 2012
(In thousands, except percentages and per share amounts)
$
2,069,193
$
1,840,739
$
2,084,490
$
1,847,011
15,297
6,272
$
704,429
$
566,597
11,337
7,124
6,550
4,861
2,902
6,482
16,048
-
$
734,301
$
592,029
35.2%
32.1%
$
201,262
$
108,497
50,803
14,888
11,337
6,550
4,861
-
(1,278)
87,161
22,792
17,927
2,902
18,782
-
33,676
-
96,079
$
288,423
$
204,576
13.8%
11.1%
$
104,734
$
43,236
87,161
1,612
-
(28,368)
96,079
52,450
(21,043)
(42,092)
$
165,139
$
128,630
GAAP income from continuing operations per diluted share
Adjusted income from continuing operations per diluted share
$
2.34
$
0.94
$
3.69
$
2.80
GAAP and Adjusted diluted weighted average shares
44,737
45,942
We define free cash flow, which is a non-GAAP financial measure, as net cash provided by operating activities adjusted for acquisition and divestiture transaction costs,
capital expenditures net of the proceeds from the disposal of tangible assets, non-recurring payments related to divestitures, and non-recurring tax payments related to the
settlement of a tax sharing agreement. We believe free cash flow provides useful information to investors regarding our ability to generate cash from business operations
that is available for acquisitions and other investments, service of debt principal, dividends, and share repurchases. We use free cash flow, as defined, as one financial
measure to monitor and evaluate performance and liquidity. Non-GAAP financial measures should be considered only in conjunction with financial measures reported
according to accounting principles generally accepted in the United States. Our definition of free cash flow may differ from definitions used by other companies.
GAAP net cash provided by operating activities
Capital expenditures, net of proceeds from
the disposal of tangible assets
Working capital settlement in connection with the
sale of consumer electronics assets
Acquisition and divestiture transaction costs
Non-recurring tax payments made for gain on 2012 sale of
Thermax and Raydex cable business
Non-recurring tax payments made in settlement of tax
sharing agreement with Cooper Industries
Non-GAAP free cash flow
Twelve Months Ended
December 31, 2013
December 31, 2012
(In thousands)
$
164,601
$
139,388
(37,040)
-
-
41,808
30,000
(31,435)
32,333
4,928
-
-
$
199,369
$
145,214
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
In addition to reporting financial results in accordance with accounting principles generally accepted in the United States, we provide non-GAAP operating results adjusted for certain items, including: asset impairments;
accelerated depreciation expense due to plant consolidation activities; purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory to fair value; acquisition and divestiture transaction costs;
revenue and cost of sales deferrals for acquired product lines subject to software revenue recognition accounting requirements; severance and other restructuring costs; gains (losses) recognized on the disposal of businesses
and tangible assets; amortization of intangible assets; and other costs. We utilize the adjusted results to review our ongoing operations without the effect of these adjustments and for comparison to budgeted operating results.
We believe the adjusted results are useful to investors because they help them compare our results to previous periods and provide important insights into underlying trends in the business and how management oversees our
business operations on a day-to-day basis. Adjusted results should be considered only in conjunction with results reported according to accounting principles generally accepted in the United States.
Broadcast
Solutions
Enterprise
Connectivity
Solutions
Industrial
Connectivity
Solutions
Industrial IT
Solutions
All Other
Total Segments
Eliminations
Income from
equity method
investment
Consolidated
Twelve Months Ended December 31, 2013
(In thousands, except percentages)
GAAP revenues
Deferred revenue adjustments
Adjusted revenues
$
663,900
$
493,129
$
680,643
$
231,521
$
-
$
2,069,193
$
-
$
-
$
2,069,193
15,297
-
-
-
-
15,297
-
-
15,297
$
679,197
$
493,129
$
680,643
$
231,521
$
-
$
2,084,490
$
-
$
-
$
2,084,490
GAAP operating income
$
15,099
$
48,753
$
92,562
$
38,440
$
1,278
$
196,132
$
(3,792)
$
8,922
$
201,262
Amortization of intangible assets
Severance and other restructuring costs
Deferred gross profit adjustments
Purchase accounting effects related to acquisitions
Accelerated depreciation
Gain on sale of assets
Total operating income adjustments
Adjusted operating income
Adjusted operating income margin
46,005
12,128
11,337
6,550
4,861
-
80,881
543
400
-
-
-
-
1,085
700
-
-
-
-
3,170
1,660
-
-
-
-
943
1,785
4,830
-
-
-
-
(1,278)
(1,278)
50,803
14,888
11,337
6,550
4,861
(1,278)
87,161
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,803
14,888
11,337
6,550
4,861
(1,278)
87,161
$
95,980
$
49,696
$
94,347
$
43,270
$
-
$
283,293
$
(3,792)
$
8,922
$
288,423
14.1%
10.1%
13.9%
18.7%
13.6%
13.8%
GAAP revenues
Deferred revenue adjustments
Adjusted revenues
GAAP operating income (loss)
Amortization of intangible assets
Purchase accounting effects related to acquisitions
Severance and other restructuring costs
Deferred gross profit adjustments
Asset impairment and loss on sale of assets
Total operating income adjustments
Adjusted operating income (loss)
Adjusted operating income margin
Broadcast
Solutions
Enterprise
Connectivity
Solutions
Industrial
Connectivity
Solutions
Industrial IT
Solutions
All Other
Total Segments
Eliminations
Income from
equity method
investment
Consolidated
Twelve Months Ended December 31, 2012
$
356,320
$
496,857
$
670,112
$
219,679
$
97,771
$
1,840,739
$
-
$
-
$
1,840,739
6,272
-
-
-
-
6,272
-
-
6,272
$
362,592
$
496,857
$
670,112
$
219,679
$
97,771
$
1,847,011
$
-
$
-
$
1,847,011
(In thousands, except percentages)
$
(11,657)
$
40,056
$
72,366
$
32,807
$
(32,640)
$
100,932
$
(2,139)
$
9,704
$
108,497
16,823
16,484
4,878
2,902
-
41,087
586
775
3,217
-
1,468
6,046
1,665
984
9,150
-
2,435
14,234
3,165
539
515
-
-
4,219
553
-
167
-
29,773
30,493
22,792
18,782
17,927
2,902
33,676
96,079
-
-
-
-
-
-
-
-
-
-
-
-
22,792
18,782
17,927
2,902
33,676
96,079
$
29,430
$
46,102
$
86,600
$
37,026
$
(2,147)
$
197,011
$
(2,139)
$
9,704
$
204,576
8.1%
9.3%
12.9%
16.9%
-2.2%
10.7%
11.1%
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2013
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to ___________
Commission File No. 001-12561
BELDEN INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
36-3601505
(IRS Employer
Identification No.)
1 North Brentwood Boulevard
15th Floor
St. Louis, Missouri 63105
(Address of Principal Executive Offices and Zip Code)
(314) 854-8000
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.01 par value
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Name of Each Exchange
on Which Registered
The New York Stock Exchange
The New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
.
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No .
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any,
every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b2 of the Exchange Act. (Check one):
Large accelerated filer Accelerated filer
Smaller reporting company
Non-accelerated filer
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No .
At June 30, 2013, the aggregate market value of Common Stock of Belden Inc. held by non-affiliates was $1,885,395,596
based on the closing price ($49.93) of such stock on such date.
There were 43,474,784 shares of registrant’s Common Stock outstanding on February 18, 2014.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive proxy statement for its annual meeting of stockholders within 120 days of the end
of the fiscal year ended December 31, 2013 (the “Proxy Statement”). Portions of such proxy statement are incorporated by
reference into Part III.
TABLE OF CONTENTS
Name of Item
Page
Form 10-K
Item No.
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity and Related Shareholder
Matters
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director
Item 14.
Principal Accountant Fees and Services
Independence
Part IV.
Item 15.
Exhibits and Financial Statement Schedules
Signatures
Index to Exhibits
2
10
16
16
17
17
17
20
21
37
41
88
88
90
90
90
90
90
90
91
95
96
PART I
Item 1. Business
General
Belden Inc. (the Company, Belden, we, us, or our) is an innovative signal transmission solutions provider built
around four global business platforms – Broadcast Solutions, Enterprise Connectivity Solutions, Industrial
Connectivity Solutions, and Industrial IT Solutions. Belden’s comprehensive portfolio of signal transmission
solutions provides industry leading secure and reliable transmission of data, sound and video for mission
critical applications.
Belden is a Delaware corporation incorporated in 1988. In 2013, we re-organized the Company around four
global business platforms: Broadcast, Enterprise Connectivity, Industrial Connectivity, and Industrial IT.
Previously, we were organized around geographic regions. The re-organization was executed as a result of our
transformation from a regional cable company into a global provider of comprehensive signal transmission
solutions. We believe the new organization will allow us to better capitalize on market opportunities and meet
customer demands. We have determined each of the global business platforms represents a reportable
segment. Financial information about our segments appears in Note 5 to the Consolidated Financial
Statements.
In 2013, we acquired Softel Limited (Softel), a key technology supplier to the media sector with a portfolio of
technologies well aligned with broadcast industry trends and growing demand.
In 2012, we acquired Miranda Technologies Inc. (Miranda), a leading provider of hardware and software
solutions for the broadcast infrastructure industry, and PPC Broadband, Inc. (PPC), a leading manufacturer and
developer of advanced connectivity technologies for the broadband market. In 2012, we also sold our
Thermax and Raydex cable business and certain net assets of our Chinese cable business which conducted
business primarily in the consumer electronics end market.
In 2011, we acquired ICM Corp. (ICM), Poliron Cabos Electricos Especiais Ltda (Poliron) and Byres Security,
Inc. (Byres Security).
For more information regarding these transactions, see Notes 3, 4, and 9 to the Consolidated Financial
Statements.
In February 2014, we submitted a binding offer to purchase Grass Valley for approximately $220 million.
Grass Valley is a leading provider of innovative technologies for the broadcast industry, including production
switchers, cameras, servers, and editing solutions. The binding offer is subject to consultation with Grass
Valley’s foreign labor works council, after which we plan to enter into a definitive agreement. We expect to
close the transaction in the first quarter of 2014, and it is subject to regulatory approvals, the completion of
audited financial statements, and other customary closing conditions.
As used herein, unless an operating segment is identified or the context otherwise requires, “Belden,” the
“Company”, and “we” refer to Belden Inc. and its subsidiaries as a whole.
Segments
We operate our business under the following segments:
2
Broadcast
The Broadcast Solutions (Broadcast) segment provides production, distribution, and connectivity systems for
television broadcast, cable, satellite, and IPTV industries. We target end-use customers in markets such as
outside broadcast, sport venues, broadcast studios, and cable, broadband, satellite, and telecommunications
service providers. Our products are used in a variety of applications, including live production signal
management, program playout for broadcasters, monitoring for pay-TV operators, and broadband connectivity.
Broadcast products and solutions include camera mounted fiber solutions, interfaces and routers, broadcast and
audio-visual cable solutions, monitoring systems, playout systems, outside plant connectivity products, and
other cable and connectivity products.
Our hardware and software solutions for the broadcast infrastructure industry span the full breadth of television
operations, including production, playout and delivery. For the broadband distribution industry, we
manufacture flexible, copper-clad coaxial cable and associated connector products for the high-speed
transmission of data, sound, and video (broadband) that are used for the “drop” section of cable television
(CATV) systems and satellite direct broadcast systems. Our connectivity solutions include several major
product categories: coax connector products that allow for connections from the provider network to the
subscribers’ devices; hardline connectors that allow service providers to distribute their services within a city,
a town, or a neighborhood; entry devices that serve to manage and remove network signal noise that could
impair performance for the subscriber; and traps and filtering devices that allow service providers to control
the signals that are transmitted to the subscriber. The Broadcast segment also manufactures a variety of
multiconductor and coaxial cable and connector products, which distribute audio and video signals for use in
broadcast television including digital television and high definition television, broadcast radio, pre- and post-
production facilities, recording studios, and public facilities such as casinos, arenas, and stadiums. Our
audio/video cables are also used in connection with microphones, musical instruments, audio mixing consoles,
effects equipment, speakers, paging systems, and consumer audio products. We also provide specialized
cables for security applications such as video surveillance systems, airport baggage screening, building access
control, motion detection, public address systems, and advanced fire alarm systems.
Broadcast products are sold through a variety of channels, including: broadcast specialty distributors; audio
systems installers; directly to music OEMs and the major television networks including ABC, CBS, Fox, and
NBC; directly to broadband service providers, including Comcast, DirectTV, and Time Warner; directly to
specialty system integrators; and other distributors.
Enterprise
The Enterprise Connectivity Solutions (Enterprise) segment provides infrastructure and connectivity solutions
for enterprise customers. We target end-use customers in markets such as data hosting, healthcare, education,
financial, and government, and our products are used in applications such as data centers, local area networks,
access control and building automation. Enterprise products include solutions such as fiber and copper
connectivity products; fiber optic and copper cable products; and wiring racks, panels, and enclosures. Our
cable products include high-performance copper cables including 10-gigabit Ethernet technologies and fiber
optic cables. Enterprise products also include interconnecting hardware, intelligent patching devices, and
cable management solutions for complete end-to-end network structured wiring systems. The Enterprise
product portfolio is designed to support the increased use of wireless communications and cloud-based data
3
201320122011Broadcast Solutions 32.1%19.4%16.7%Enterprise Connectivity Solutions23.8%27.0%29.1%Industrial Connectivity Solutions32.9%36.4%35.3%Industrial IT Solutions11.2%11.9%12.3%All Other0.0%5.3%6.6%Percentage of Consolidated Revenues
centers by our customers.
Our systems are installed through a network of highly trained system integrators and are supplied through
authorized distributors.
Industrial Connectivity
The Industrial Connectivity Solutions (Industrial Connectivity) segment provides infrastructure components
and connectivity systems for a wide range of industrial automation applications. We target end-use customers
in markets such as automotive production, machine building, power generation, and oil and gas. Our products
are used in applications such as network and fieldbus infrastructure; sensor and actuator connectivity; and
power, control, and data transmission. Industrial Connectivity products include solutions such as industrial
and input/output (I/O) connectors, industrial cables, IP and networking cables, I/O modules, distribution boxes,
customer specific wiring solutions, and load-moment indicators for the mobile crane market.
Our industrial cable products are used in discrete manufacturing and process operations involving the
connection of computers, programmable controllers, robots, operator interfaces, motor drives, sensors, printers,
and other devices. Many industrial environments, such as petrochemical and other harsh-environment
operations, require cables with exterior armor or jacketing that can endure physical abuse and exposure to
chemicals, extreme temperatures, and outside elements. Other applications require conductors, insulating, and
jacketing materials that can withstand repeated flexing. In addition to cable product configurations for these
applications, we supply heat-shrinkable tubing and wire management products to protect and organize wire and
cable assemblies. Our industrial connector products are used for sensors and actuators, cord-sets, distribution
boxes, and fieldbus communications. These products are used both as components of manufacturing
equipment and in the installation and networking of such equipment.
Industrial Connectivity products are sold directly to industrial equipment OEMs and through a network of
industrial distributors, value-added resellers, and system integrators.
Industrial IT
The Industrial IT segment provides mission-critical networking systems that provide the end-users with the
highest confidence of reliability, availability and security. We target end-use customers in markets such as
energy, automotive, transportation systems, and automation suppliers, and our products are used in such
applications as network infrastructure, wireless, and security. Industrial IT products include security devices,
Ethernet switches and related equipment, routers and gateways, network management software, and wireless
systems. Our industrial Ethernet switches and related equipment can be both rail-mounted and rack-mounted,
and are used for factory automation, power generation and distribution, process automation, and large-scale
infrastructure projects such as bridges, wind farms, and airport runways. Rail-mounted switches are designed
to withstand harsh conditions including electronic interference and mechanical stresses. The Industrial IT
product portfolio supports the continued deployment of industrial Ethernet technology throughout industrial
manufacturing processes.
Industrial IT products are sold directly to end-use customers, directly to OEMs, and through distributors.
All Other
The All Other segment represents the financial results of our cable operations that primarily conducted
business in the consumer electronics end market, which we sold in December 2012.
4
Customers
We sell to distributors, OEMs, installers, and end-users. Sales to the distributor Anixter International Inc.
represented approximately 14% of our consolidated revenues in 2013. No other customer accounted for more
than 10% of our revenues in 2013.
We have supply agreements with distributors and OEM customers. In general, our customers are not
contractually obligated to buy our products exclusively, in minimum amounts, or for a significant period of
time. The loss of one or more large customers or distributors could result in lower total revenues and profits.
However, we believe that our relationships with our customers and distributors are good and that they choose
Belden products, among other reasons, as a result of our reputation, the breadth of our product portfolio, the
quality and performance characteristics of our products, and our customer service and technical support.
There are potential risks in our relationships with distributors. Changes in the inventory levels of our products
owned and held by our distributors can result in significant variability in our revenues. Adjustments to
inventory levels may be accelerated through consolidation among distributors. In addition, if the costs of
materials used in our products fall and competitive conditions make it necessary for us to reduce our list prices,
we may be required, according to the terms of contracts with certain of our distributors, to reimburse them for
a portion of the price they paid for our products in their inventory. Further, certain distributors are allowed to
return certain inventory in exchange for an order of equal or greater value. We have recorded reserves for the
estimated impact of these inventory policies.
International Operations
In addition to manufacturing facilities in the United States (U.S.), we have manufacturing facilities in Brazil,
Canada, China, Mexico, and St. Kitts, as well as in various countries in Europe. During 2013, approximately
50% of Belden’s sales were to customers outside the U.S. Our primary channels to international markets
include both distributors and direct sales to end users and OEMs.
The effect of changes in the relative value of currencies impacts our results of operations. However, our
revenues and costs are typically in the same currency, reducing our overall currency risk.
A risk associated with our European manufacturing operations is the higher relative expense and length of time
required to reduce manufacturing employment. In addition, some of our foreign operations are subject to
economic and political risks inherent in maintaining operations abroad, such as economic and political
destabilization, international conflicts, restrictive actions by foreign governments, and unfavorable foreign tax
laws.
Financial information for Belden by geographic area is shown in Note 5 to the Consolidated Financial
Statements.
Competition
We face substantial competition in our major markets. The number and size of our competitors vary depending
on the product line and segment. Some multinational competitors have greater financial, engineering,
manufacturing, and marketing resources than we have. There are also many regional competitors that have
more limited product offerings.
The broadcast, enterprise, and industrial markets in which we operate can be generally categorized as highly
competitive with many players. In order to maximize our competitive advantages, we manage our product
portfolio to capitalize on secular trends and high-growth applications in those markets.
The principal competitive factors in all our product markets are technical features, quality, availability, price,
5
customer support, and distribution coverage. The relative importance of each of these factors varies depending
on the customer. Some products are manufactured to meet published industry specifications and are less
differentiated on the basis of product characteristics. We believe that Belden stands out in many of its markets
on the basis of our reputation, the breadth of our product portfolio, the quality and performance characteristics
of our products, our customer service, and our technical support.
Although we believe that we have certain technological and other advantages over our competitors, realizing
and maintaining such advantages requires continued investment in engineering, research and development,
capital equipment, marketing, customer service, and technical support. There can be no assurance that we will
be successful in maintaining such advantages.
Research and Development
We conduct research and development on an ongoing basis, including new and existing product development,
testing and analysis, and process and equipment development and testing. See the Consolidated Statements of
Operations for amounts incurred for research and development.
Many of the markets we serve are characterized by advances in information processing and communications
capabilities, including advances driven by the expansion of digital technology, which require increased
transmission speeds and greater bandwidth. Our markets are also subject to increasing requirements for
mobility, information security, and transmission reliability. The relative costs and merits of copper-based and
fiber optic solutions could change in the future as various competing technologies address the market
opportunities. We believe that our future success will depend in part upon our ability to enhance existing
products and to develop and manufacture new products that meet or anticipate such changes in our served
markets.
Fiber optic technology presents a potential substitute for certain of the copper-based products that comprise a
portion of our revenues. Fiber optic cables have certain advantages over copper-based cables in applications
where large amounts of information must travel significant distances and where high levels of information
security are required. While the cost to interface electronic and optical light signals and to terminate and
connect optical fiber remains high, we expect that in future years the cost difference will diminish. We sell
fiber optic infrastructure, and many customers specify these products in combination with copper-based
infrastructure.
The final stage of most networks remains almost exclusively copper-based, and we expect that it will continue
to be copper for the foreseeable future. However, if a significant decrease in the cost of fiber optic systems
relative to the cost of copper-based systems were to occur, such systems could become superior on a
price/performance basis to copper systems. Part of our research and development efforts focus on expanding
our fiber-optic based product portfolio.
In the industrial automation market, there is a growing trend toward adoption of industrial Ethernet
technology, bringing to the factory floor the advantages of digital communication and the ability to network
devices made by different manufacturers and then link them to enterprise systems. Adoption of this
technology is at a more advanced stage among European manufacturers than those in the U.S. and Asia, but we
believe that the trend will globalize.
In the broadcast market, the trend towards increasingly complex broadcast production, management, and
distribution environments continues to evolve. Our end-use customers need to add efficiency and improve
workflow through systems and infrastructure. Our broadcast products allow content producers, broadcasters,
and service providers to manage the increasingly complex broadcast signals throughout their operations.
In order to support the demand for additional bandwidth and to improve service integrity, broadband service
providers are investing in their networks to enhance delivery capabilities to customers for the foreseeable
6
future. Additional bandwidth requirements as a result of increased traffic expose weak points in the network,
which are often connectivity related, causing broadband service operators to improve and upgrade residential
networks with higher performing connectivity products.
Patents and Trademarks
We have a policy of seeking patents when appropriate on inventions concerning new products, product
improvements, and advances in equipment and processes as part of our ongoing research, development, and
manufacturing activities. We own many patents and registered trademarks worldwide that are used by our
operating segments, with pending applications for numerous others. While we consider our patents and
trademarks to be valuable assets, we do not believe that our competitive position is dependent on patent or
trademark protection or that our operations are dependent on any individual patent or trademark. Our most
prominent trademarks are: Belden®, Alpha Wire™, Mohawk®, West Penn Wire™, Hirschmann®, Lumberg
Automation™, Telecast™, SignalTight®, GarrettCom®, Poliron™, Tofino®, Miranda™, and PPC®.
Raw Materials
The principal raw material used in many of our cable products is copper. Other materials we purchase in large
quantities include fluorinated ethylene-propylene (FEP), polyvinyl chloride (PVC), polyethylene, aluminum-
clad steel and copper-clad steel conductors, aluminum, brass, other metals, optical fiber, printed circuit boards,
and electronic components. With respect to all major raw materials used by us, we generally have either
alternative sources of supply or access to alternative materials. Supplies of these materials are generally
adequate and are expected to remain so for the foreseeable future.
Over the past three years, the prices of metals, particularly copper, have been highly volatile. The chart below
illustrates the high and low spot prices per pound of copper over the last three years.
Prices for materials such as PVC and other plastics derived from petrochemical feedstocks have also
fluctuated. Since Belden utilizes the first in, first out (FIFO) inventory costing methodology, the impact of
copper and other raw material cost changes on our cost of goods sold is delayed by approximately two months
based on our inventory turns.
While we generally are able to adjust our pricing for fluctuations in commodity prices, we can experience
short-term favorable or unfavorable variances. When the cost of raw materials increases, we are generally able
to recover these costs through higher pricing of our finished products. The majority of our products are sold
through distribution, and we manage the pricing of these products through published price lists, which we
update from time to time, with new prices typically taking effect a few weeks after they are announced. Some
OEM customer contracts have provisions for passing through raw material cost changes, generally with a lag
of a few weeks to three months.
Backlog
Our business is characterized generally by short-term order and shipment schedules. Our backlog consists of
product orders for which we have received a customer purchase order or purchase commitment and which
have not yet been shipped. Orders are subject to cancellation or rescheduling by the customer. As of
December 31, 2013, our backlog of orders believed to be firm was $150.4 million. The majority of the backlog
at December 31, 2013 is scheduled to be shipped in 2014.
7
201320122011Copper spot prices per poundHigh3.78$ 3.97$ 4.62$ Low3.03$ 3.28$ 3.05$
Environmental Matters
We are subject to numerous federal, state, provincial, local and foreign laws and regulations relating to the
storage, handling, emission, and discharge of materials into the environment, including the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water Act, the Clean Air Act, the
Emergency Planning and Community Right-To-Know Act, and the Resource Conservation and Recovery Act.
We believe that our existing environmental control procedures and accrued liabilities are adequate, and we
have no current plans for substantial capital expenditures in this area.
We do not currently anticipate any material adverse effect on our results of operations, financial condition,
cash flow, or competitive position as a result of compliance with federal, state, provincial, local or foreign
environmental laws or regulations, including clean-up costs. However, some risk of environmental liability and
other costs is inherent in the nature of our business, and there can be no assurance that material environmental
costs will not arise. Moreover, it is possible that future developments, such as increasingly strict requirements
of environmental laws and enforcement policies thereunder, could lead to material costs of environmental
compliance and clean-up.
Employees
As of December 31, 2013, we had approximately 7,200 employees worldwide. We also utilized approximately
400 workers under contract manufacturing arrangements. Approximately 1,700 employees are covered by
collective bargaining agreements at various locations around the world. We believe our relationship with our
employees is generally good.
Acquisitions
A key part of our business strategy includes acquiring companies to support our growth and product portfolio.
Our acquisition strategy is based upon targeting leading companies that offer innovative products and strong
brands. We utilize a disciplined approach to acquisitions based on product and market opportunities. When
we identify acquisition candidates, we conduct rigorous financial analysis to make certain that they meet both
our strategic plans and our goals for return on invested capital.
In February 2014, we submitted a binding offer to purchase Grass Valley for approximately $220 million. For
additional information regarding this potential acquisition, see Note 25 to the Consolidated Financial
Statements.
Available Information
We file annual, quarterly, and current reports, proxy statements and other information with the Securities and
Exchange Commission (SEC). These reports, proxy statements, and other information contain additional
information about us. You may read and copy these materials at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information about the
operation of the Public Reference Room. The SEC also maintains a web site that contains reports, proxy and
information statements, and other information about issuers who file electronically with the SEC. The Internet
address of the site is www.sec.gov.
Belden maintains an Internet web site at www.belden.com where our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and all amendments to those reports
and statements are available without charge, as soon as reasonably practicable following the time they are filed
with or furnished to the SEC.
We will provide upon written request and without charge a printed copy of our Annual Report on Form 10-K.
To obtain such a copy, please write to the Corporate Secretary, Belden Inc., 1 North Brentwood Boulevard,
8
15th Floor, St. Louis, MO 63105.
Executive Officers
The following table sets forth certain information with respect to the persons who were Belden executive
officers as of February 27, 2014. All executive officers are elected to terms that expire at the organizational
meeting of the Board of Directors following the Annual Meeting of Shareholders.
Name
John S. Stroup
Steven Biegacki
Kevin L. Bloomfield
Henk Derksen
Christoph Gusenleitner
John S. Norman
Glenn Pennycook
Dhrupad Trivedi
Doug Zink
Age
Position
47
55
62
45
49
53
51
47
38
President, Chief Executive Officer and Director
Senior Vice President, Global Sales and Marketing
Senior Vice President, Secretary and General Counsel
Senior Vice President, Finance, and Chief Financial
Officer
Executive Vice President, Industrial Connectivity
Solutions
Vice President, Finance, Acquisition Due Diligence
and Integration
Executive Vice President, Enterprise Connectivity
Solutions
Executive Vice President, Industrial IT Solutions
Vice President and Chief Accounting Officer
John S. Stroup was appointed President, Chief Executive Officer and member of the Board in October 2005.
From 2000 to the date of his appointment with the Company, he was employed by Danaher Corporation, a
manufacturer of professional instrumentation, industrial technologies, and tools and components. At Danaher,
he initially served as Vice President, Business Development. He was promoted to President of a division of
Danaher’s Motion Group and later to Group Executive of the Motion Group. Earlier, he was Vice President of
Marketing and General Manager with Scientific Technologies Inc. He has a B.S. in Mechanical Engineering
from Northwestern University and an M.B.A. from the University of California at Berkeley Haas School of
Business.
Steven Biegacki was appointed Vice President, Global Sales and Marketing (title subsequently changed as
reflected in the above table) in March 2008. Prior to joining the Company, he was Vice President, Marketing
for Rockwell Automation. At Rockwell, he initially served as DeviceNet Program Manager, was promoted to
Business Manager, Automation Networks in 1997, Vice President, Integrated Architecture Commercial
Marketing in 1999, and Vice President, Components and Power Control Commercial Marketing in 2005.
Previously, he was an Automation Systems Architecture Marketing Manager for Allen-Bradley Company. He
has a B.S. in Electrical Engineering Technology from ETI Technical College in Cleveland, Ohio.
Kevin L. Bloomfield has been Vice President, Secretary and General Counsel of the Company (title
subsequently changed as reflected in the above table) since July 2004. From August 1993 until July 2004, Mr.
Bloomfield was Vice President, Secretary and General Counsel of Belden 1993 Inc. He was Senior Counsel
for Cooper Industries from February 1987 to July 1993, and had been in Cooper's Law Department from 1981
to 1993. He has a B.A. in Economics and a J.D. from the University of Cincinnati and an M.B.A. from The
Ohio State University.
Henk Derksen has been Senior Vice President, Finance, and Chief Financial Officer since January 2012. Prior
to that, he served as Vice President, Corporate Finance from July 2011 to December 2011 and Treasurer and
Vice President, Financial Planning and Analysis of the Company from January 2010 to July 2011. In August
9
of 2003, he became Vice President, Finance for the Company’s EMEA division, after joining the Company at
the end of 2000. Prior to joining the Company, he was Vice President and Controller of Plukon Poultry, a food
processing company from 1998 to 2000, and has 5 years’ experience in public accounting with Price
Waterhouse and Baker Tilly. Mr. Derksen has a M.A. in Accounting from the University of Arnhem in the
Netherlands and holds a doctoral degree in Business Economics in addition to an Executive Master of Finance
& Control from Tias Business School in the Netherlands.
Christoph Gusenleitner has been Executive Vice President, Industrial Connectivity Solutions since April 2013.
Prior to that, he served as Executive Vice President, EMEA Operations and Global Connectivity Products
since joining Belden in April 2010. Prior to joining the Company, he was a partner at Bain & Company in its
industrial goods and services practice in Munich. Prior to that, he was General Manager of KaVo Dental
GmbH and Kaltenbach & Voigt GmbH in Biberach, Germany. KaVo is an affiliate of Danaher Corporation.
During his four-year tenure at KaVo, Mr. Gusenleitner led the strategic planning process for the global
Danaher Dental Equipment platform and led three business units and 18 sales subsidiaries in EMEA. He has a
degree in electrical engineering from the University of Technology in Vienna, Austria and a Master of Science
in Industrial Automation from Carnegie Mellon University.
John S. Norman has been Vice President, Finance, Acquisition Due Diligence and Integration since February
2014. Prior to that, he served as Vice President, Finance, Broadcast Solutions from September 2013 to January
2014; Vice President, Controller, and Chief Accounting Officer from July 2011 to August 2013; and Vice
President, Finance for the Company’s EMEA division from January 2010 to June 2011. In February 2009, he
was named Vice President of Belden, after joining Belden in May 2005 as Controller, and named Chief
Accounting Officer in November 2005. Prior to joining the Company, he was vice president and controller of
Graphic Packaging International Corporation, a paperboard packaging manufacturing company, from 1999 to
2003, and has 17 years’ experience in public accounting with PricewaterhouseCoopers, LLP. Mr. Norman has
a B.S. in Accounting from the University of Missouri and is a Certified Public Accountant.
Glenn Pennycook has been Executive Vice President, Enterprise Connectivity Solutions since May 2013. Prior
to that, he was President of the Enterprise Solutions Division, after joining Belden in November 2008. Prior to
joining the Company, he spent 5 years with Pregis Corporation as Director of Operations for Protective
Packaging Europe, and was promoted to Managing Director for Western Europe in 2005. He has a degree in
Chemical Engineering from McMaster University, Hamilton Ontario, Canada.
Dhrupad Trivedi has been Executive Vice President, Industrial IT Solutions since April 2013. Prior to that, he
was responsible for the Corporate Development and Strategy function since joining Belden in January 2010.
Earlier, he was President, Trapeze Networks. Prior to joining the Company, he was responsible for General
Management and Corporate Development roles at JDS Uniphase. He has 18 years of experience in the
Networking and Communications industry. Dhrupad has an MBA from Duke University and a Ph.D. in
Electrical Engineering from University of Massachusetts, Amherst.
Doug Zink has been Vice President and Chief Accounting Officer since September 2013. Prior to that, he has
served as the Company’s Vice President, Internal Audit; Corporate Controller; and Director of Financial
Reporting, after joining Belden in May 2007. Prior to joining the Company, he was a Financial Reporting
Manager at TLC Vision Corporation, an eye care service company, from 2004 to 2007, and has five years of
experience in public accounting with KPMG LLP and Arthur Andersen LLP. He holds Bachelor’s and
Master’s Degrees in Accounting from Texas Christian University and is a Certified Public Accountant.
Item 1A. Risk Factors
We make forward-looking statements in this Annual Report on Form 10-K, in other materials we file with the
SEC or otherwise release to the public, and on our website. In addition, our senior management might make
forward-looking statements orally to investors, analysts, the media, and others. Statements concerning our
future operations, prospects, strategies, financial condition, future economic performance (including growth
10
and earnings) and demand for our products and services, and other statements of our plans, beliefs, or
expectations, including the statements contained in Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” that are not historical facts, are forward-looking statements. In
some cases these statements are identifiable through the use of words such as “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would,”
and similar expressions. The forward-looking statements we make are not guarantees of future performance
and are subject to various assumptions, risks, and other factors that could cause actual results to differ
materially from those suggested by these forward-looking statements. These factors include, among others,
those set forth below and in the other documents that we file with the SEC.
We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise, except as required by law. Following is a discussion of some of
the more significant risks that could materially impact our business. There may be additional risks that impact
our business that we currently do not recognize as, or that are not currently, material to our business.
A challenging global economic environment or a downturn in the markets we serve could adversely affect
our operating results and stock price in a material manner.
A challenging global economic environment could cause substantial reductions in our revenue and results of
operations as a result of weaker demand by the end users of our products and price erosion. Price erosion may
occur through competitors becoming more aggressive in pricing practices. A challenging global economy
could also make it difficult for our customers, our vendors, and us to accurately forecast and plan future
business activities. Our customers could also face issues gaining timely access to sufficient credit, which
could have an adverse effect on our results if such events cause reductions in revenues, delays in collection or
write-offs of receivables. Further, the demand for many of our products is economically sensitive and will
vary with general economic activity, trends in nonresidential construction, investment in manufacturing
facilities and automation, demand for information and broadcast technology equipment, and other economic
factors.
Global economic uncertainty could result in a significant decline in the value of foreign currencies relative to
the U.S. dollar, which could result in a significant adverse effect on our revenues and results of operations;
could make it extremely difficult for our customers and us to accurately forecast and plan future business
activities; and could cause our customers to slow or reduce spending on our products and services. Economic
uncertainty could also arise from fiscal policy changes in the countries in which we operate.
Our strategic plan includes further acquisitions.
Our strategic plan includes further acquisitions, and the extent to which appropriate acquisitions are made will
affect our overall growth, operating results, financial condition, and cash flows. Our ability to acquire
businesses successfully will decline if we are unable to identify appropriate acquisition targets consistent with
our strategic plan, the competition among potential buyers increases, or the cost of acquiring suitable
businesses becomes too expensive. As a result, we may be unable to make acquisitions or be forced to pay
more or agree to less advantageous acquisition terms for the companies that we are able to acquire.
In February 2014, we submitted a binding offer to purchase Grass Valley for approximately $220 million. The
binding offer is subject to consultation with Grass Valley’s foreign labor works council, after which we plan to
enter into a definitive agreement. While we expect to close the transaction in the first quarter of 2014, it
remains subject to regulatory approvals, the completion of audited financial statements, and other customary
closing conditions, and as such, there can be no assurance that this acquisition or other future acquisitions will
occur, or that those that do occur will be successful.
We may have difficulty integrating the operations of acquired businesses, which could negatively affect our
results of operations and profitability.
11
We may have difficulty integrating acquired businesses and future acquisitions might not meet our
performance expectations. Some of the integration challenges we might face include differences in corporate
culture and management styles, additional or conflicting governmental regulations, preparation of the acquired
operations for compliance with the Sarbanes-Oxley Act of 2002, financial reporting that is not in compliance
with U.S. generally accepted accounting principles, disparate company policies and practices, customer
relationship issues, and retention of key personnel. In addition, management may be required to devote a
considerable amount of time to the integration process, which could decrease the amount of time we have to
manage the other businesses. We may not be able to integrate operations successfully or cost-effectively,
which could have a negative effect on our results of operations or our profitability. The process of integrating
operations could also cause some interruption of, or the loss of momentum in, the activities of acquired
businesses.
Because we do business in many countries, our results of operations are subject to political, economic, and
other uncertainties and are affected by changes in currency exchange rates.
In addition to manufacturing facilities in the U.S., we have manufacturing facilities in Brazil, Canada, China,
Mexico, St. Kitts, and several European countries. We rely on suppliers in many countries, including China.
Our foreign operations are subject to economic and political risks inherent in maintaining operations abroad
such as economic and political destabilization, land use risks, international conflicts, restrictive actions by
foreign governments, and adverse foreign tax laws. A risk associated with our European manufacturing
operations is the higher relative expense and length of time required to adjust manufacturing employment
capacity. We also face political risks in the U.S., including tax or regulatory risks or potential adverse impacts
from legislative impasses over, or significant changes in, fiscal or monetary policy.
Approximately 50% of our sales are outside the U.S. Other than the U.S. dollar, the principal currencies to
which we are exposed through our manufacturing operations, sales, and related cash holdings are the euro, the
Canadian dollar, the Hong Kong dollar, the Chinese yuan, the Mexican peso, the Australian dollar, the British
pound, and the Brazilian real. Generally, we have revenues and costs in the same currency, thereby reducing
our overall currency risk, although the realignment of our manufacturing capacity among our global facilities
may alter this balance. When the U.S. dollar strengthens against other currencies, the results of our non-U.S.
operations are translated at a lower exchange rate and thus into lower reported earnings.
If we are unable to retain senior management and key employees, our business operations could be
adversely affected.
Our success has been largely dependent on the skills, experience, and efforts of our senior management and
key employees. The loss of any of our senior management or other key employees, including due to
acquisitions or restructuring activities, could have an adverse effect on us. We may not be able to find qualified
replacements for these individuals and the integration of potential replacements may be disruptive to our
business. More broadly, a key determinant of our success is our ability to attract, develop and retain talented
associates. While this is one of our strategic priorities, we may not be able to succeed in this regard.
We may be unable to achieve our strategic priorities in emerging markets.
Emerging markets are a significant focus of our strategic plan. The developing nature of these markets
presents a number of risks. We may be unable to attract, develop, and retain appropriate talent to manage our
businesses in emerging markets. Deterioration of social, political, labor, or economic conditions in a specific
country or region may adversely affect our operations or financial results. Among the risks in emerging
market countries are bureaucratic intrusions and delays, contract compliance failures, engrained business
partners that do not comply with local or U.S. law, such as the Foreign Corrupt Practices Act, fluctuating
currencies and interest rates, limitations on the amount and nature of investments, restrictions on permissible
forms and structures of investment, unreliable legal and financial infrastructure, regime disruption and
political unrest, uncontrolled inflation and commodity prices, fierce local competition by companies with
12
better political connections, and corruption. In addition, the costs of compliance with local laws and
regulations in emerging markets may negatively impact our competitive position as compared to locally owned
manufacturers.
Our future success depends in part on our ability to develop and introduce new products.
Our markets are characterized by the introduction of products with increasing technological capabilities,
including fiber optic and wireless signal transmission solutions that compete with the copper cable solutions
that comprise a significant portion of our revenues. The relative costs and merits of copper cable solutions,
fiber optic cable solutions, and wireless solutions, as well as alternatives to our non-cable product offerings,
could change in the future as various competing technologies address the market opportunities. We believe that
our future success will depend in part upon our ability to enhance existing products and to develop and
manufacture new products that meet or anticipate such changes, which will require continued investment in
engineering, research and development, capital equipment, marketing, customer service, and technical support.
We have long been successful in introducing successive generations of more capable products, but if we were
to fail to keep pace with technology or with the products of competitors, we might lose market share and harm
our reputation and position as a technology leader in our markets. Competing technologies could cause the
obsolescence of many of our products. See the discussion above in Part I, Item 1, under Research and
Development.
Legal compliance issues could adversely affect our business.
We have a strong legal compliance and ethics program, including a code of business conduct and ethics,
policies on anti-bribery, export controls and other legal compliance areas, and periodic training to relevant
associates on these matters. While we believe that this program should reduce the likelihood of a legal
compliance violation, such a violation could still occur, disrupting our business through fines, penalties,
diversion of internal resources, and negative publicity.
We may experience significant variability in our quarterly and annual effective tax rate which would affect
our reported net income.
We have a complex tax profile due to the global nature of our operations, which encompass multiple taxing
jurisdictions. Variability in the mix and profitability of domestic and international activities, identification and
resolution of various tax uncertainties, changes in tax laws and rates, and the extent to which we are able to
realize net operating loss and other carryforwards included in deferred tax assets and avoid potential adverse
outcomes included in deferred tax liabilities, among other matters, may significantly affect our effective
income tax rate in the future.
Our effective income tax rate is the result of the income tax rates in the various countries in which we do
business. Our mix of income and losses in these jurisdictions affects our effective tax rate. For example,
relatively more income in higher tax rate jurisdictions would increase our effective tax rate and thus lower our
net income. Similarly, if we generate losses in tax jurisdictions for which no benefits are available, our
effective income tax rate will increase. Our effective income tax rate may also be impacted by the recognition
of discrete income tax items, such as required adjustments to our liabilities for uncertain tax positions or our
deferred tax asset valuation allowance. A significant increase in our effective income tax rate could have a
material adverse impact on our earnings.
Of our $613.3 million cash and cash equivalents balance as of December 31, 2013, $226.2 million was held
outside of the U.S. in our foreign operations. If we were to repatriate the foreign cash to the U.S., we would be
required to accrue and pay U.S. taxes in accordance with applicable U.S. tax rules and regulations.
13
Changes in the price and availability of raw materials we use could be detrimental to our profitability.
Copper is a significant component of the cost of most of our cable products. Over the past few years, the prices
of metals, particularly copper, have been highly volatile. Prices of other materials we use, such as
polyvinylchloride (PVC) and other plastics derived from petrochemical feedstocks, have also been volatile.
Generally, we have recovered much of the higher cost of raw materials through higher pricing of our finished
products. The majority of our products are sold through distribution, and we manage the pricing of these
products through published price lists which we update from time to time, with new prices typically taking
effect a few weeks after they are announced. Some OEM contracts have provisions for passing through raw
material cost changes, generally with a lag of a few weeks to three months. If we are unable to raise prices
sufficiently to recover our material costs, our earnings will be reduced. If we raise our prices but competitors
raise their prices less, we may lose sales, and our earnings will be reduced. If the price of copper were to
decline, we may be compelled to reduce prices to remain competitive, which could have a negative effect on
revenues, and we may be required, according to the terms of contracts with certain of our distributors, to
reimburse them for a portion of the price they paid for our products in their inventory. While we generally
believe the supply of raw materials (copper, plastics, and other materials) is adequate, we have experienced
instances of limited supply of certain raw materials, resulting in extended lead times and higher prices. If a
supply interruption or shortage of materials were to occur (including due to labor or political disputes), this
could have a negative effect on revenues and earnings.
The global broadcast, enterprise, and industrial markets are highly competitive.
We face competition from other manufacturers for each of our global business platforms and in each of our
geographic regions. These companies compete on price, reputation and quality, product technology and
characteristics, and terms. Some multinational competitors have greater engineering, financial, manufacturing,
and marketing resources than we have. Actions that may be taken by competitors, including pricing, business
alliances, new product introductions, market penetration, and other actions, could have a negative effect on our
revenues and profitability. Moreover, during economic downturns, some competitors that are highly leveraged
both financially and operationally could become more aggressive in their pricing of products.
We may be unable to implement our strategic plan successfully.
Our strategic plan is designed to improve revenues and profitability, reduce costs, and improve working capital
management. To achieve these goals, our strategic priorities are reliant on our Belden Business System, which
includes continuing deployment of our Market Delivery System (MDS) so as to capture market share through
end-user engagement, channel management, outbound marketing, and careful vertical market selection;
improving our recruitment and development of talented associates; developing strong global business
platforms; acquiring businesses that fit our strategic plan; and becoming a leading Lean company. Lean refers
to a business management system that strives to create value for customers and deliver that value to the right
place, at the right time, and in the right quantities while reducing or eliminating waste from all processes. We
have a disciplined process for deploying this strategic plan through our associates. There is a risk that we may
not be successful in executing these measures to achieve the expected results for a variety of reasons, including
market developments, economic conditions, shortcomings in establishing appropriate action plans, or
challenges with executing multiple initiatives simultaneously. For example, our MDS initiative may not
succeed or we may lose market share due to challenges in choosing the right products to market or the right
customers for these products, integrating products of acquired companies into our sales and marketing strategy,
or strategically bidding against OEM partners. We may not be able to acquire businesses that fit our strategic
plan on acceptable business terms, and we may not achieve our other strategic priorities.
We rely on several key distributors in marketing our products.
The majority of our sales are through distributors. These distributors purchase and carry the products of our
14
competitors along with our products. Our largest distributor, Anixter International Inc., accounted for 14% of
our revenue in 2013. If we were to lose a key distributor, our revenue and profits would likely be reduced, at
least temporarily.
In the past, distributors have consolidated. Further consolidation of our distributors, particularly where the
survivor relies more heavily on our competitors, could adversely impact our revenues and earnings. It could
also result in consolidation of distributor inventory, which would temporarily depress our revenues. In
addition, changes in the inventory levels of our products purchased and held by our distributors can result in
significant variability in our revenues. We have also experienced financial failure of distributors from time to
time, resulting in our inability to collect accounts receivable in full. A global economic downturn could cause
financial difficulties (including bankruptcy) for our distributors and other customers, which would adversely
affect our results of operations.
Volatility of credit markets could adversely affect our business.
Uncertainty in U.S. and global financial and equity markets could make it more expensive for us to conduct
our operations and more difficult for our customers to buy our products. Additionally, market volatility or
uncertainty may cause us to be unable to pursue or complete acquisitions. Our ability to implement our
business strategy and grow our business, particularly through acquisitions, may depend on our ability to raise
capital by selling equity or debt securities or obtaining additional debt financing. Market conditions may
prevent us from obtaining financing when we need it or on terms acceptable to us.
Potential problems with our information systems could interfere with our business and operations.
We rely on our information systems and those of third parties for processing customer orders, shipping
products, billing our customers, tracking inventory, supporting accounting functions and financial statement
preparation, paying our employees, and otherwise running our business. Any disruption, whether from hackers
or other sources, in our information systems or those of the third parties upon whom we rely could have a
significant impact on our business. In addition, we may need to enhance our information systems to
information systems
provide additional capabilities and
and enhancements is frequently disruptive to the underlying business of an enterprise. Any disruptions
affecting our ability to accurately report our financial performance on a timely basis could adversely affect our
business in a number of respects. If we are unable to successfully implement potential future information
systems enhancements, our financial position, results of operations, and cash flows could be negatively
impacted.
implementation of new
functionality. The
We, and others on our behalf, store “personally identifiable information” with respect to employees, vendors,
customers and others. While we have implemented safeguards to protect the privacy of this information, it is
possible that hackers or others might obtain this information. If that occurs, in addition to having to take
potentially costly remedial action, we also may be subject to fines, penalties and reputational damage.
If our goodwill or other intangible assets become impaired, we would be required to recognize charges that
would reduce our income.
Under accounting principles generally accepted in the U.S., goodwill and certain other intangible assets are not
amortized but must be reviewed for possible impairment annually or more often in certain circumstances if
events indicate that the asset values may not be recoverable. We have incurred significant charges for the
impairment of goodwill and other intangible assets in the past, and we may be required to do so again in future
periods if the underlying value of our business declines. Such a charge would reduce our income without any
change to our underlying cash flows.
15
We might have difficulty protecting our intellectual property from use by competitors, or competitors might
accuse us of violating their intellectual property rights.
Disagreements about patents and other intellectual property rights occur in the markets we serve. Third parties
have asserted and may in the future assert claims of infringement of intellectual property rights against us or
against our customers or channel partners for which we may be liable. Furthermore, a successful claimant
could secure a judgment that requires us to pay substantial damages or prevents us from distributing certain
products or performing certain services. We may encounter difficulty enforcing our own intellectual property
rights against third parties, which could result in price erosion or loss of market share.
Some of our employees are members of collective bargaining groups, and we might be subject to labor
actions that would interrupt our business.
Some of our employees, primarily outside the U.S., are members of collective bargaining groups. We believe
that our relations with employees are generally good. However, if there were a dispute with one of these
bargaining groups, the affected operations could be interrupted resulting in lost revenues, lost profit
contribution, and customer dissatisfaction.
We are subject to current environmental and other laws and regulations, including the risks associated with
possible climate change legislation.
We are subject to the environmental laws and regulations in each jurisdiction where we do business. We may
be held responsible for remedial investigations and clean-up costs of certain sites damaged by the discharge of
hazardous substances, including sites that have never been owned or operated by us but with respect to which
we have been identified as a potentially responsible party under federal and state environmental laws. Changes
in environmental and other laws and regulations in both domestic and foreign jurisdictions and changes in
enforcement policies thereunder could adversely affect our operations due to increased costs of compliance
and potential liability for noncompliance.
Greenhouse gas emissions and their possible impact on climate change are the subject of increasing public
scrutiny. Executive action related to climate change may be pursued by the President of the United States, and
legislation related to greenhouse gas emissions is repeatedly introduced by Congress. Future regulation of
greenhouse gas also could occur pursuant to future U.S. treaty obligations or regulatory changes under existing
environmental laws. In addition, our foreign operations could be subject to climate change regulation
promulgated by the European Union or the countries in which we have facilities or otherwise conduct business.
Additional climate change regulation may adversely affect our costs by increasing energy costs and raw
material prices and requiring equipment modification or replacement.
There may be additional risks that impact our business that we currently do not recognize as, or that are not
currently, material to our business.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Belden owns and leases manufacturing, warehousing, sales and administrative space in locations around the
world. We also have a corporate office that we lease in St. Louis, Missouri. The leases are of varying terms,
expiring from 2014 through 2024.
The table below summarizes the geographic locations of our manufacturing facilities utilized by our segments
as of December 31, 2013.
16
In addition to the manufacturing facilities summarized above, our segments also utilize approximately 21
warehouses worldwide. As of December 31, 2013, we owned or leased a total of approximately 6 million
square feet of facility space worldwide. We believe that our production facilities are suitable for their present
and intended purposes and adequate for our current level of operations.
Item 3. Legal Proceedings
We are a former owner of a property located in Kingston, Canada. The Ontario, Canada Ministry of the
Environment is seeking to require current and former owners of the Kingston property to delineate and
remediate soil and groundwater contamination at the site, which we believe was caused by Nortel (a former
owner of the site). We are in the process of assessing whether we have any liability for the site, as well as the
scope of contamination, cost of remediation, allocation of costs among the parties, and the other parties’
financial viability. Based on our current information, we do not believe this matter should have a material
adverse effect on our financial condition, operating results, or cash flows. However, since the outcome of this
matter is uncertain, we cannot give absolute assurance regarding its future resolution, or that such matter may
not become material in the future.
We are also a party to various legal proceedings and administrative actions that are incidental to our
operations. In our opinion, the proceedings and actions in which we are involved should not, individually or in
the aggregate, have a material adverse effect on our financial condition, operating results, or cash flows.
However, since the trends and outcome of this litigation are inherently uncertain, we cannot give absolute
assurance regarding the future resolution of such litigation, or that such litigation may not become material in
the future.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities
Our common stock is traded on the New York Stock Exchange under the symbol "BDC."
As of February 18, 2014, there were 357 record holders of common stock of Belden Inc.
17
Broadcast SolutionsEnterprise Connectivity SolutionsIndustrial Connectivity SolutionsIndustrial IT SolutionsUtilized by Multiple SegmentsTotalBrazil- - 1 - - 1 Canada1 - 1 - - 2 China1 - - - 1 2 Denmark1 1 - - - 2 Germany- - - 1 - 1 Hungary- - - - 1 1 Italy- 1 - - - 1 Mexico1 - - - 2 3 Netherlands- - 1 - - 1 St. Kitts1 - - - - 1 United States5 1 3 2 3 14 Total10 3 6 3 7 29
We declared a dividend of $0.05 per share in each quarter of 2013 and 2012. We anticipate that comparable
cash dividends will continue to be paid quarterly in the foreseeable future.
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. 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. This program is funded by cash on hand and free cash flow.
The program does not have an expiration date and may be suspended at any time at the discretion of the
Company.
From inception of the program to December 31, 2013, we have repurchased 5.4 million shares of our common
stock under the program for an aggregate cost of $218.8 million and an average price of $40.37. For the year
ended December 31, 2013, we repurchased 1.7 million shares of our common stock under the program for an
aggregate cost of $93.8 million and an average price of $54.76. Set forth below is information regarding our
stock repurchases for the three months ended December 31, 2013.
18
Common Stock Prices and Dividends2013 (By Quarter)1234Dividends per common share0.05$ 0.05$ 0.05$ 0.05$ Common stock prices:High53.24$ 55.69$ 66.13$ 72.07$ Low45.00$ 45.06$ 50.10$ 62.50$ 2012 (By Quarter)1234Dividends per common share0.05$ 0.05$ 0.05$ 0.05$ Common stock prices:High41.43$ 38.39$ 39.96$ 45.00$ Low34.30$ 29.65$ 30.93$ 33.76$ Period:Total Number of Shares RepurchasedAverage Price Paid per ShareTotal Number of Shares Repurchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs September 30, 2013 through November 3, 2013 262,511 $ 60.71 262,511 $ 131,250,000 November 4, 2013 through December 1, 2013 - - - 131,250,000 December 2, 2013 through December 31, 2013 - - - 131,250,000 Total 262,511 $ 60.71 262,511 $ 131,250,000
Stock Performance Graph
The following graph compares the cumulative total shareholder return on Belden’s common stock over
the five-year period ended December 31, 2013, with the cumulative total return during such period of the
Standard and Poor’s 500 Stock Index and the Dow Jones Electronic & Electrical Equipment Index. The
comparison assumes $100 was invested on December 31, 2008, in Belden’s common stock and in each of
the foregoing indices and assumes reinvestment of dividends. The stock performance shown on the graph
below represents historical stock performance and is not necessarily indicative of future stock price
performance.
(1) This chart and the accompanying data are “furnished,” not “filed,” with the SEC.
19
Company Name / Index20092010201120122013Belden Inc.6.2%69.2%-9.1%35.9%57.1%S&P 500 Index26.5%15.1%2.1%16.0%32.4%Dow Jones Electronic & Electrical Equipment Index47.7%31.9%-9.5%22.6%35.3%Base PeriodCompany Name / Index200820092010201120122013Belden Inc.100.00$ 106.19$ 179.62$ 163.30$ 221.93$ 348.73$ S&P 500 Index100.00 126.46 145.51 148.59 172.37 228.19 Dow Jones Electronic & Electrical Equipment Index100.00 147.68 194.75 176.19 216.06 292.43 (Includes reinvestment of dividends) Total Return To ShareholdersYears Ended December 31,Years Ended December 31,INDEXED RETURNS ANNUAL RETURN PERCENTAGE
Item 6. Selected Financial Data
In 2013, we re-organized the Company around four global business platforms: Broadcast, Enterprise
Connectivity, Industrial Connectivity, and Industrial IT. See Note 5 to the Consolidated Financial Statements.
In 2013, we also acquired Softel in our fiscal first quarter. During 2013, we recognized severance and other
restructuring costs, including accelerated depreciation expense, of $19.8 million, primarily related to plant
consolidation activities in our Broadcast segment, and purchase accounting effects related to acquisitions,
including the adjustment of acquired inventory to fair value, of $6.6 million.
In 2012, we acquired Miranda in our fiscal third quarter and PPC in our fiscal fourth quarter. We sold certain
assets of our Chinese cable operations that conducted business primarily in the consumer electronics end
market at the end of our fiscal fourth quarter. We sold our Thermax and Raydex cable business in 2012, which
has been treated as a discontinued operation. During 2012, we also recognized a loss on debt extinguishment
of $52.5 million, asset impairment and loss on sale of assets of $33.7 million, purchase accounting effects
related to acquisitions, including the adjustment of acquired inventory to fair value, of $18.8 million, and
severance and other restructuring costs of $17.9 million.
In 2011, we acquired ICM, Poliron, and Byres Security. During 2011, we also recognized severance expense
of $4.9 million and asset impairment charges of $2.5 million.
In 2010, we acquired GarrettCom and the Communications Products business of Thomas & Betts. During
2010, we also recognized expenses from the effects of purchase accounting of $6.5 million, severance expense
of $1.1 million, and asset impairment charges of $16.6 million.
In 2009, we streamlined our manufacturing, sales and administrative functions worldwide in an effort to reduce
costs and mitigate the weakening demand experienced throughout the global economy. During 2009, we
recognized severance and employee relocation expenses of $29.6 million, asset impairment charges of $27.8
million, loss on sale of assets of $17.2 million, accelerated depreciation expense of $2.6 million, and other
charges related to our global restructuring actions of $24.1 million.
20
Years Ended December 31,20132012201120102009Statement of operations data:Revenues2,069,193$ 1,840,739$ 1,882,187$ 1,543,386$ 1,304,088$ Operating income201,262 108,497 165,206 116,639 31,065 Income (loss) from continuing operations 104,734 43,236 101,308 61,276 (10,221) Basic income (loss) per share from continuing operations 2.39 0.96 2.15 1.31 (0.22) Diluted income (loss) per share from continuing operations 2.34 0.94 2.11 1.28 (0.22) Balance sheet data:Total assets2,751,753 2,584,583 1,788,120 1,696,484 1,620,578 Long-term debt1,364,536 1,135,527 550,926 551,155 543,942 Long-term debt, including current maturities 1,367,036 1,151,205 550,926 551,155 590,210 Stockholders' equity836,541 811,860 694,549 638,515 551,048 Other data:Basic weighted average common shares outstanding 43,871 45,097 47,109 46,805 46,594 Diluted weighted average common shares outstanding 44,737 45,942 48,104 47,783 46,594 Dividends per common share0.20$ 0.20$ 0.20$ 0.20$ 0.20$ (In thousands, except per share amounts)
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are an innovative signal transmission solutions company built around four global business platforms –
Broadcast Solutions, Enterprise Connectivity Solutions, Industrial Connectivity Solutions, and Industrial IT
Solutions. Our comprehensive portfolio of signal transmission solutions provides industry leading secure and
reliable transmission of data, sound and video for mission critical applications.
We strive to create shareholder value by:
Delivering highly engineered signal transmission solutions for mission-critical applications in a
diverse set of global markets;
Maintaining a balanced product portfolio across end markets, applications, and geographies that
allows for a disciplined approach to growth;
Capturing additional market share by using our Market Delivery System to improve channel and end-
user relationships and to concentrate sales efforts on customers in higher growth geographies and
vertical end-markets;
Managing our product portfolio to provide innovative and complete end-to-end solutions for our
customers in applications for which we have operational expertise and can drive customer loyalty;
Acquiring leading companies, with innovative product portfolios and opportunities for synergies, that
fit within our strategic framework;
Continuously improving our people, processes, and systems through scalable, flexible, and sustainable
business systems for talent management, Lean enterprise, and acquisition cultivation and integration;
and
Protecting and enhancing the value of the Belden brands.
We believe our business system, balance across markets and geographies, systematic go-to-market approach,
extensive portfolio of innovative solutions, commitment to Lean principles, and improving margins present a
unique value proposition that increases shareholder value.
To accomplish these goals, we use a set of tools and processes that are designed to continuously improve
business performance in the critical areas of quality, delivery, cost, and innovation. We consider revenue
growth, operating margin, free cash flows, and return on invested capital to be our key operating performance
indicators. We also seek to acquire businesses that we believe can help us achieve these objectives. The extent
to which appropriate acquisitions are made and integrated can affect our overall growth, operating results,
financial condition, and cash flows.
We generated approximately 50% of our sales outside of the U.S. in 2013. As a global business, our operations
are affected by worldwide, regional, and industry economic and political factors. We continue to operate in a
highly competitive business environment in our served markets and geographies. Our market and geographic
diversity limits the impact of any one market or the economy of any single country on our consolidated
operating results. Our individual businesses monitor key competitors and customers, including to the extent
possible their sales, to gauge relative performance and the outlook for the future. In addition, we use indices
for general economic trends to predict our outlook for the future given the broad range of products
manufactured and end markets served.
We use the U.S. dollar as our reporting currency, although a substantial portion of our assets, liabilities, operating
results, and cash flows reside in or are derived from countries other than the U.S. These assets, liabilities,
operating results, and cash flows are translated from local currencies into the U.S. dollar using exchange rates
effective during the applicable period. We have generally accepted the exposure to currency exchange rate
movements without using derivative financial instruments to manage this risk. Both positive and negative
movements in currency exchange rates relative to the U.S. dollar will continue to affect the reported amount of
21
assets, liabilities, operating results, and cash flows in our Consolidated Financial Statements.
Significant Trends and Events in 2013
The following trends and events during 2013 had varying effects on our financial condition, results of
operations, and cash flows.
Change in Segments
In 2013, we re-organized the Company around four global business platforms: Broadcast, Enterprise
Connectivity, Industrial Connectivity, and Industrial IT. The re-organization was executed as a result of our
transformation into a global provider of comprehensive signal transmission solutions. We have determined that
each of the global business platforms represents a reportable segment. We have revised the prior period
segment information to conform to the change in the composition of our reportable segments.
Commodity Prices
Our operating results can be affected by changes in prices of commodities, primarily copper, silver, and
compounds, which are components in some of the products we sell. Generally, as the costs of raw materials
increase due to higher commodity prices, we raise selling prices to customers to cover the increase in costs,
resulting in higher sales revenue but a lower gross profit percentage. Conversely, a decrease in commodity
prices would result in lower sales revenue but a higher gross profit percentage. Selling prices of our products
are affected by many factors, including end market demand, capacity utilization, overall economic conditions,
and commodity prices. Importantly, however, there is no exact measure of the effect of changing commodity
prices, as there are thousands of transactions in any given quarter, each of which has various factors involved
in the individual pricing decisions. Therefore, all references to the effect of copper prices or other commodity
prices are estimates.
Channel Inventory
Our operating results also can be affected by the levels of Belden products purchased and held as inventory by
our channel partners and customers. Our channel partners and customers purchase and hold our products in
their inventory in order to meet the service and on-time delivery requirements of their customers. Generally,
as our channel partners and customers change the level of Belden products owned and held in their inventory,
it impacts our revenues. Comparisons of our results between periods can be impacted by changes in the levels
of channel inventory.
Market Growth and Market Share
The broadcast, enterprise, and industrial markets in which we operate can generally be characterized as highly
competitive and highly fragmented, with many players. Based on available data for our served markets, we
estimate that our market share ranges from approximately 15% - 20%. A substantial acquisition in one of our
served markets would be necessary to meaningfully change our estimated market share percentage. We
monitor available data regarding market growth, including independent market research reports, publicly
available indices, and the financial results of our direct and indirect peer companies, in order to estimate the
extent to which our served markets grew or contracted during a particular period. We expect that our unit sales
volume will increase or decrease consistently with the market growth rate. Our strategic goal is to utilize our
Market Delivery System to target faster growing geographies, applications, and trends within our end markets,
in order to achieve growth that is higher than the general market growth rate. To the extent that we exceed the
market growth rates, we consider it to be the result of capturing market share.
22
Acquisitions and Divestiture
We completed the acquisitions of Miranda Technologies Inc. (Miranda) in July 2012, PPC Broadband, Inc.
(PPC) in December 2012, and Softel Limited (Softel) in January 2013. The results of Miranda, PPC, and Softel
have been included in our Consolidated Financial Statements from their respective acquisition dates and are
reported within the Broadcast segment. We sold our cable operations that primarily conducted business in the
consumer electronics end market on December 31, 2012.
Restructuring Activities
As a result of the recently completed acquisition of PPC, we consolidated certain operating facilities. In 2013,
we recognized $14.9 million of severance and other restructuring costs, such as relocation and equipment
transfer costs, and $4.9 million of accelerated depreciation expense, primarily as a result of facility
consolidation in New York and other acquisition integration activities. We expect to incur minimal additional
severance and other restructuring costs in 2014 as a result of these activities. These activities were
contemplated as part of the decision to acquire PPC, and we expect the results of these activities to generate
annualized cost savings of approximately $8-10 million beginning in 2014.
In 2012, in response to uncertain economic conditions, we implemented certain restructuring actions and
recognized severance and other restructuring costs of $17.9 million. The actions included reducing headcount
and renegotiating procurement related contracts in order to reduce our cost structure. We expected the results
of these activities to generate annualized cost savings of approximately $20 million beginning in 2013, and we
believe we have substantially achieved these cost savings.
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.
Results of Operations
Consolidated Income from Continuing Operations before Taxes
2013 Compared to 2012
Revenues increased in 2013 from 2012 primarily due to acquisitions, which contributed $329.7 million of the
increase.
Revenues were also impacted by the following factors:
23
2013201220112013 vs. 20122012 vs. 2011Revenues2,069,193$ 1,840,739$ 1,882,187$ 12.4%-2.2%Gross profit704,429 566,597 541,521 24.3%4.6%Selling, general and administrative expenses378,009 345,926 319,034 9.3%8.4%Research and development83,277 65,410 54,752 27.3%19.5%Operating income 201,262 108,497 165,206 85.5%-34.3%Income from continuing operationsbefore taxes127,049 5,042 118,099 2,419.8%-95.7%Percentage Change(In thousands, except percentages)
An increase in unit sales volume, including changes in channel inventory, resulted in approximately an $8.0
million increase in revenues. Our balanced portfolio across end markets and geographies allowed us to
generate an increase in volume, despite challenging economic conditions in various markets and geographies
throughout the year. For example, we believe market share gains in industrial end markets partially
mitigated the impact of uncertain economic conditions in enterprise end markets, including weak spending
on non-residential construction and information technology projects.
Favorable currency translation resulted in a $3.6 million increase in revenues.
The disposal of our cable operations that primarily conducted business in the consumer electronics end
market in 2012 resulted in a decrease in revenues of $97.8 million.
Lower copper costs resulted in an estimated revenue decrease of approximately $15 million.
Gross profit for 2013 included $7.1 million of severance and other restructuring costs, $6.6 million of cost of
sales arising from the adjustment of inventory to fair value related to our acquisition of PPC, and $4.9 million of
accelerated depreciation expense. The severance and other restructuring costs and accelerated depreciation
expense primarily resulted from our decision to consolidate manufacturing facilities as we integrate PPC. Gross
profit for 2012 included $16.0 million of purchase accounting effects of acquisitions, including increased cost of
sales arising from the adjustment of inventory to fair value related to our acquisitions of Miranda and PPC, and
$6.5 million of severance and other restructuring costs. The $3.9 million decrease in these costs from 2012 to
2013 contributed to the increase in gross profit from 2012 to 2013.
Excluding the costs described above, our gross profit increased by $133.9 million from 2012 to 2013. The most
significant factor was the impact of our acquisitions of Miranda and PPC, which contributed approximately
$132.4 million of gross profit. The remainder of the increase was due to the increase in revenues and improved
product mix, partially offset by the disposal of our cable operations that primarily conducted business in the
consumer electronics end market in 2012.
Selling, general and administrative expenses increased in 2013 from 2012. Selling, general and administrative
expenses for 2013 included $6.5 million of severance and other restructuring costs, compared to $10.0 million of
severance and other restructuring costs for 2012. Excluding the impact of the severance and other restructuring
costs, the increase in selling, general and administrative expenses was primarily due to the impact of our
acquisitions completed in 2012, which contributed $52.6 million of the increase. Excluding the impact of the
costs discussed above and the selling, general and administrative costs of the companies acquired in 2012, our
selling, general and administrative expenses decreased by approximately $17.0 million due to improved
productivity and our previously completed restructuring activities.
The increase in research and development costs in 2013 from 2012 was primarily due to our recent technology
intensive acquisitions, which contributed approximately $19.0 million of the increase. Excluding the impact of
the research and development costs of the companies acquired in 2012, our research and development costs
decreased by approximately $1.0 million due to improved productivity and our previously completed
restructuring activities.
Amortization of intangibles increased by $28.0 million due to the impact of our acquisitions completed in 2012.
Operating income for 2013 included $50.8 million of amortization of intangibles, $14.9 million of severance and
other restructuring costs, $6.6 million of cost of sales arising from the adjustment of inventory to fair value
related to our acquisition of PPC, and $4.9 million of accelerated depreciation expense. Operating income for
2012 included $33.7 million of asset impairment and loss on sale of assets, $22.8 million of amortization of
intangibles, $17.9 million of severance and other restructuring costs, and $18.8 million of expenses due to the
effects of purchase accounting, primarily for cost of sales arising from the adjustment of inventory to fair value
related to our acquisitions of Miranda and PPC. The $16.0 million decrease in these costs from 2012 to 2013
contributed to the increase in operating income.
Excluding the costs described above, operating income increased by $76.7 million from 2012 to 2013. The most
24
significant factor was the impact of our acquisitions of Miranda and PPC, which contributed approximately $60.9
million of operating income. The remainder of the increase was due to an improved business portfolio, improved
end-market mix, improved productivity as a result of the successful execution of our Lean Enterprise strategies
and our previously completed restructuring activities, and leverage on the increase in revenues.
Interest expense increased in 2013 from 2012 due to our increase in total debt incurred to finance our 2012
acquisitions. Our effective interest rate on outstanding borrowings as of December 31, 2013 was 5.1%. Interest
expense for 2013 includes $1.7 million of interest expense associated with an uncertain tax positions.
Income from continuing operations before taxes increased in 2013 from 2012 due to the increases in operating
income discussed above. In addition, 2012 included a loss on debt extinguishment of $52.5 million in income
(loss) from continuing operations before taxes, compared to $1.6 million in 2013. In 2012, we completed a
tender offer and repurchased all of our senior subordinated notes due 2017 and $194.8 million of our senior
subordinated notes due 2019, which resulted in the loss on extinguishment of debt of $52.5 million.
2012 Compared to 2011
Revenues decreased in 2012 compared to 2011 primarily for the following reasons:
A decrease in unit sales volume primarily due to weak demand and inventory reductions by our channel
partners and customers resulted in a decrease in revenues of approximately $50 million.
Lower copper costs resulted in an estimated decrease in revenues of approximately $50 million.
Unfavorable currency translation resulted in a decrease in revenues of approximately $35 million. The
unfavorable currency translation was primarily due to the euro and Brazilian real weakening against the U.S.
dollar.
These decreases were partially offset by acquisitions during 2012 and 2011, which contributed an approximate
$94 million increase in revenues.
Gross profit in 2012 included $22.5 million of costs, which are described further above. Gross profit in 2011
included $2.9 million of severance and other restructuring costs. Excluding the impact of these costs, gross profit
increased by $44.7 million from 2011 to 2012. The most significant factor was the impact of our acquisitions
completed in 2012 and 2011, which contributed approximately $55.2 million of gross profit. The remainder of
the change was due to the decline in revenues discussed above, partially offset by improved productivity due to
our Lean Enterprise initiatives and previously completed restructuring activities and favorable product mix.
Selling, general and administrative expenses increased in 2012 from 2011. Selling, general and administrative
expenses for 2012 included $10.0 million of severance and other restructuring costs, compared to $2.0 million of
severance and other restructuring costs for 2011. Excluding the impact of the severance and other restructuring
costs, the increase in selling, general and administrative expenses was primarily due to the impact of our
acquisitions completed in 2012, which contributed $22.3 million of the increase. Excluding the impact of the
costs discussed above and the selling, general and administrative costs of the companies acquired in 2012, our
selling, general and administrative expenses decreased by approximately $3.4 million due to improved
productivity and our previously completed restructuring activities.
The increase in research and development costs in 2012 from 2011 was primarily due to our recent technology
intensive acquisitions, which contributed approximately $9.7 million of the increase. The remainder of the
increase is due to investments in new product development.
Operating income in 2012 included $93.2 million of costs, which are described above. Operating income in 2011
included $13.1 million of amortization of intangibles, $4.9 million of severance and other restructuring costs, and
$2.5 million of asset impairment. Excluding the impact of these costs, operating income increased by $16.0
million from 2011 to 2012. The most significant factor was the impact of our acquisitions completed in 2012 and
25
2011, which contributed approximately $18.3 million of operating income. The remainder of the change was due
to the decline in revenues discussed above, partially offset by improved productivity due to our Lean Enterprise
initiatives and previously completed restructuring activities and favorable product mix.
Income from continuing operations before taxes decreased in 2012 compared to 2011 due to the decrease in
operating income discussed above, as well as the loss on debt extinguishment of $52.5 million described above.
Income Taxes
2013 Compared to 2012
We recognized income tax expense of $22.3 million in 2013, representing an effective tax rate for 2013 of 17.6%.
Our income tax expense in 2013 included several significant discrete items. We recognized $4.8 million of tax
expense for uncertain tax position liabilities, primarily related to a foreign tax audit. Income tax expense for 2013
also included a net $4.2 million tax benefit due to the impact of tax law changes, primarily for tax law changes in
the U.S. regarding the portion of our foreign income that is taxable in the U.S. In 2012, as a result of recognizing
two significant discrete items, we recognized income tax benefit of $38.2 million. The significant discrete items
from 2012 are discussed further below.
Our income tax expense was impacted by several other factors. The statutory tax rates associated with our
foreign earnings generally are lower than the statutory U.S. tax rate of 35%. This had the greatest impact on
our income from continuing operations before taxes that is generated in Germany, Canada, and the
Netherlands, which have statutory tax rates of approximately 28%, 26%, and 25%, respectively. Foreign tax
rate differences reduced our income tax expense by approximately $15.4 million and $14.0 million for 2013
and 2012, respectively.
Our income tax expense also was impacted by domestic permanent differences and tax credits. In 2013, our
income tax expense included a benefit of $8.5 million from domestic permanent differences and tax credits,
compared to expense in 2012 of $4.9 million. The change from 2012 to 2013 was caused primarily by changes
in certain tax laws in the U.S. that decreased the portion of our foreign income that was taxable in the U.S. in
2013 compared to 2012. In general, our significant domestic permanent differences and tax credits stem from
foreign income that is taxable in the U.S., deductions available for domestic manufacturing activities, credits
for taxes paid in foreign jurisdictions on income that is also taxable in the U.S., and credits for research and
development activities.
As of December 31, 2013, we maintained a valuation allowance on our deferred tax assets of $10.2 million.
The most significant component of the valuation allowance was $7.1 million of deferred tax assets for certain
U.S. state net operating losses and tax credits. While we have positive evidence in the form of projected
sources of income, we determined that these assets were not realizable as of December 31, 2013 due to a
history of net operating losses and tax credits expiring without being utilized in certain states and because the
current forecast of income is not sufficient to utilize all of these state net operating losses and tax credits prior
to expiration.
26
201320122011Income from continuing operationsbefore taxes127,049$ 5,042$ 118,099$ Income tax expense (benefit)22,315 (38,194) 16,791 Effective tax rate17.6%-757.5%14.2%(In thousands, except percentages)
2012 Compared to 2011
We recognized an income tax benefit of $38.2 million in 2012, compared to income tax expense of $16.8
million in 2011. Our income tax benefit in 2012 included two significant discrete items. First, we recorded a
$21.0 million tax benefit related to the settlement of a tax sharing agreement with Cooper Industries. Second,
we recorded a $9.5 million tax benefit due to the net changes in deferred tax asset valuation allowances,
primarily in foreign jurisdictions. See further discussion below. Income tax expense for 2011 also included
two significant discrete items, an $8.0 million tax benefit due to the net changes in deferred tax asset valuation
allowances, primarily in foreign jurisdictions, and a $1.3 million tax benefit due to the reduction of our reserve
for uncertain tax positions, primarily due to the settlement of a foreign tax audit.
Our income tax expense was impacted by several other factors. The statutory tax rates associated with our
foreign earnings generally are lower than the statutory U.S. tax rate of 35%. This had the greatest impact on
our income from continuing operations before taxes that is generated in Germany, Canada, and the
Netherlands, which have statutory tax rates of approximately 28%, 26%, and 25%, respectively. Foreign tax
rate differences reduced our income tax expense by approximately $14.0 million and $8.0 million for 2012 and
2011, respectively.
Our income tax expense also was impacted by domestic permanent differences and tax credits. In 2012 our
income tax expense was negatively impacted by $4.9 million from domestic permanent differences and tax
credits, compared to a benefit in 2011 of $8.1 million. The change from 2011 to 2012 was caused primarily by
an expiration of certain tax laws in the U.S. that increased the portion of our foreign income that was taxable in
the U.S. in 2012 compared to 2011. In general, our significant domestic permanent differences and tax credits
stem from foreign income that is taxable in the U.S., deductions available for domestic manufacturing
activities, credits for taxes paid in foreign jurisdictions on income that is also taxable in the U.S., and credits
for research and development activities.
In 2012, we recorded a net income tax benefit of $9.5 million due to changes in valuation allowances in
foreign and domestic jurisdictions. The most significant change was a reduction of the valuation allowance
related to deferred tax assets for net operating losses in the Netherlands of $11.7 million. We reduced the
valuation allowance in the Netherlands because the weight of evidence regarding the future realizability of the
deferred tax assets had become predominately positive and realization of the deferred tax assets was more
likely than not. The positive evidence considered in our assessment of the realizability of the deferred tax
assets included: 1) the generation by the business of income in 2011 and 2012, with a significant increase year-
over-year, due in part to operational changes in the business that improved profitability, such as headcount and
other cost reductions, improvements in logistics and procurement processes, and on-going productivity
initiatives; 2) the implementation of tax planning strategies surrounding acquisition financing that will
generate increased future income in the Netherlands; and 3) the implementation of other tax planning strategies
surrounding intercompany activities that will generate additional income in the Netherlands in future years.
The negative evidence considered included historical losses in the Netherlands in 2010 and certain prior years.
During 2012, we also reduced valuation allowances related to deferred tax assets for net operating losses in the
U.S. of $1.2 million and Canada of $0.5 million, and we recorded valuation allowances of $3.9 million related
to deferred tax assets for net operating losses in Asia, primarily China and Hong Kong. These changes to our
valuation allowances were made based on our assessments of the realizability of those deferred tax assets,
giving consideration to all available evidence, including all future sources of income in the applicable
jurisdictions.
As of December 31, 2012, we maintained a valuation allowance on our deferred tax assets of $7.5 million.
The most significant component of the valuation allowance was $4.7 million of deferred tax assets for certain
U.S. state net operating losses and tax credits. While we have positive evidence in the form of projected
sources of income, we determined that these assets were not realizable as of December 31, 2012 due to a
history of net operating losses and tax credits expiring without being utilized and because the current forecast
of income was not sufficient to utilize all of these net operating losses and tax credits prior to expiration.
27
Our income tax expense and effective tax rate in future periods may be impacted by many factors, including
our geographic mix of income and changes in tax laws. See further discussion in Part 1, Item 1A, Risk
Factors, under “We may experience significant variability in our quarterly and annual effective tax rate which
would affect our reported net income.”
Broadcast Solutions
Broadcast revenues increased in 2013 from 2012 primarily due to acquisitions, which contributed $329.7 million
to the increase in revenues. The increase in revenues was partially offset by a decrease in unit sales volume,
including the impact of changes in channel inventory, of approximately $19.1 million. The decrease in volume
was due in part to the favorable impact of the Olympics and the U.S. presidential election cycle in 2012. Lower
copper costs resulted in an estimated revenue decrease of approximately $3 million.
Operating income for 2013 included $46.0 million of amortization of intangibles, $12.1 million of severance and
other restructuring costs, $6.6 million of cost of sales arising from the adjustment of inventory to fair value
related to our acquisition of PPC, and $4.9 million of accelerated depreciation expense. Operating loss for 2012
included $16.8 million of amortization of intangibles, $4.9 million of severance and other restructuring costs, and
$16.5 million of expenses due to the effects of purchase accounting, primarily for cost of sales arising from the
adjustment of inventory to fair value related to our acquisitions of Miranda and PPC.
Excluding the costs described above, operating income increased by $58.2 million from 2012 to 2013. The most
significant factor was the impact of our acquisitions of Miranda and PPC, which contributed approximately $60.9
million of operating income. The increase in operating income due to acquisitions was partially offset by a
decrease in operating income due to the decline in sales volume.
Broadcast revenues increased in 2012 from 2011 primarily due to acquisitions, which contributed $89.6 million
to the increase in revenues. The increase in revenues was partially offset by a decrease in unit sales volume,
including the impact of changes in channel inventory, of approximately $44.2 million. Lower copper costs and
unfavorable currency translation resulted in an estimated revenue decrease of approximately $2 million and $1.8
million, respectively.
Operating loss in 2012 included $38.2 million of costs, which are described above. Operating income in 2011
included $4.4 million of amortization of intangibles. Excluding the impact of these costs, operating income
increased by $0.6 million from 2011 to 2012. The most significant factor was the impact of our acquisitions
completed in 2012 and 2011, which contributed approximately $18.7 million of operating income. The impact of
our acquisitions was offset by the decline in sales volume discussed above and unfavorable product mix.
Enterprise Connectivity Solutions
28
2013201220112013 vs. 20122012 vs. 2011Revenues663,900$ 356,320$ 314,733$ 86.3%13.2%Operating income (loss)15,099 (11,657) 21,523 229.5%-154.2% as a percent of revenues2.3%-3.3%6.8%Percentage Change(In thousands, except percentages)2013201220112013 vs. 20122012 vs. 2011Revenues493,129$ 496,857$ 546,800$ -0.8%-9.1%Operating income 48,753 40,056 41,750 21.7%-4.1% as a percent of revenues9.9%8.1%7.6%Percentage Change(In thousands, except percentages)
Enterprise Connectivity revenues decreased in 2013 from 2012 due to lower copper costs, which resulted in an
estimated decrease in revenues of approximately $5 million. The decrease was partially offset by an increase in
unit sales volume of approximately $1.1 million. An increase in channel inventory partially mitigated a decrease
in volume due to challenging economic conditions, including weak spending on non-residential construction and
information technology projects. Favorable currency translation resulted in a revenue increase of approximately
$0.2 million.
Operating income increased in 2013 from 2012. Operating income in 2012 included $3.2 million of severance
and other restructuring costs and $1.5 million of asset impairment. There were no significant severance and other
restructuring costs or asset impairment in 2013. The $4.7 million decrease in these costs above contributed to the
increase in operating income in 2013 from 2012. The remainder of the increase in operating income was due to
the timing of favorable input costs and leverage on the increase in unit sales volume noted above.
Enterprise Connectivity revenues decreased in 2012 from 2011 primarily due to a $21.4 million decrease in unit
sales volume resulting from inventory reductions by our channel partners. In addition, lower copper costs and
unfavorable currency translation resulted in an estimated decrease in revenues of approximately $19 million and
$9.5 million, respectively.
Operating income decreased in 2012 from 2011 due to the impact of the $4.7 million of costs noted above,
including severance and other restructuring costs and asset impairment. There were no significant severance and
other restructuring costs or asset impairment in 2011. Excluding the impact of these costs, operating income
increased due to favorable input costs and improved productivity due to our Lean Enterprise initiatives, partially
offset by the impact of the decrease in revenues.
Industrial Connectivity Solutions
Industrial Connectivity revenues increased in 2013 from 2012 due to an increase in unit sales volume,
including changes in channel inventory, of approximately $19.1 million. We believe sales volume benefited
from gains in market share due to the execution of our Market Delivery System. Lower copper costs partially
offset the increase in revenues by an estimated $7 million. Unfavorable currency translation resulted in a
decrease in revenues of approximately $1.6 million.
Operating income in 2012 included $9.2 million of severance and other restructuring costs and $2.4 million of
asset impairment. There were no significant severance and other restructuring costs or asset impairment in
2013. The decrease in these costs contributed to the increase in operating income in 2013 from 2012. The
remainder of the increase in operating income from 2012 to 2013 was primarily due to improved productivity
due to our Lean Enterprise initiatives and leveraging the increase in revenues discussed above.
Industrial Connectivity revenues increased in 2012 from 2011 due to an increase in unit sales volume, net of
the effects of inventory reductions by our channel partners, of approximately $28.5 million. Revenues also
increased by approximately $9.6 million due to acquisitions. Lower copper costs and unfavorable currency
translation partially offset the increase in revenues by an estimated $21 million and $12.0 million, respectively.
Operating income in 2012 included the $11.6 million of costs noted above, including severance and other
restructuring costs and asset impairment. In 2011, operating income included approximately $3.0 million of
such costs, primarily for severance and other restructuring activities. Excluding the impact of these costs,
29
2013201220112013 vs. 20122012 vs. 2011Revenues680,643$ 670,112$ 665,035$ 1.6%0.8%Operating income 92,562 72,366 69,200 27.9%4.6% as a percent of revenues13.6%10.8%10.4%(In thousands, except percentages)Percentage Change
operating income increased primarily due to leveraging the increase in revenues discussed above. In addition,
operating income increased due to improved productivity and favorable product mix.
Industrial IT Solutions
Industrial IT revenues increased in 2013 from 2012 due to an increase in unit sales volume, including changes in
channel inventory, of approximately $6.9 million. We believe sales volume benefited from gains in market share
due to the execution of our Market Delivery System. Revenues also increased by approximately $4.9 million due
to favorable currency translation.
Operating income increased in 2013 from 2012 primarily due to leveraging the increase in revenues discussed
above and improved productivity due to our Lean Enterprise initiatives. Operating income in 2013 included $1.7
million of severance and other restructuring costs, compared to $0.5 million in 2012.
Industrial IT revenues decreased in 2012 from 2011 due to unfavorable currency translation of approximately
$10.0 million. In addition, a decrease in unit sales volume, including the effects of inventory reductions by our
channel partners, resulted in a $2.6 million decrease in revenues. Acquisitions contributed approximately $0.9
million of revenues.
Operating income increased from 2011 to 2012 due to the benefits of favorable product mix and improved
productivity due to our Lean Enterprise initiatives, which more than offset the impact of decreases in revenues.
All Other
All Other includes the results of our cable operations that conducted business primarily in the consumer
electronics end market in China, which we sold in 2012. In 2013, we recorded $1.3 million of operating
income due to a favorable resolution with the buyer of those assets regarding the closing date working capital.
In 2012, operating loss includes asset impairment and loss on sale of assets of approximately $29.8 million.
Discontinued Operations
In 2012, we sold our Thermax and Raydex cable business for $265.6 million and recognized a pre-tax gain of
$211.6 million ($124.7 million after-tax). At the time the transaction closed, we received $265.6 million in cash,
subject to a working capital adjustment. In 2013, we recognized a $1.4 million loss from discontinued
operations for income tax expense related to this disposed business.
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 $15.2 million was placed in escrow as partial security for our indemnity
30
2013201220112013 vs. 20122012 vs. 2011Revenues231,521$ 219,679$ 231,374$ 5.4%-5.1%Operating income 38,440 32,807 31,992 17.2%2.5% as a percent of revenues16.6%14.9%13.8%Percentage Change(In thousands, except percentages)2013201220112013 vs. 20122012 vs. 2011Revenues-$ 97,771$ 124,245$ -100.0%-21.3%Operating income (loss)1,278 (32,640) (6,168) 103.9%-429.2% as a percent of revenuesn/a-33.4%-5.0%Percentage Change(In thousands, except percentages)
obligations under the sale agreement. As of December 31, 2013, we have collected a partial settlement of $4.2
million from the escrow, and we remain in negotiations with the buyer of Trapeze regarding the status of the
escrow and certain claims raised by the buyer. Based on the current status of the negotiations, the amount of
the escrow receivable on our Condensed Consolidated Balance Sheet is $3.8 million, which is our best
estimate of the remaining amount to be collected.
During 2005, we completed the sale of our discontinued communications cable operation in Phoenix, Arizona.
In connection with this sale and related tax deductions, we established a reserve for uncertain tax positions.
The statute of limitations associated with the tax positions expired during our fiscal third quarter of 2012. In
2012, we recognized a net gain of $14.1 million due to the reversal of the uncertain tax positions, which is
included in our gain from disposal of discontinued operations. In 2012, we recognized a gain of $4.0 million
($2.6 million net of tax) due to the reversal of the accrued interest and penalties, which is included in our
income (loss) from discontinued operations.
See Note 4 to the Consolidated Financial Statements for more information about these matters.
Liquidity and Capital Resources
Significant factors affecting our cash liquidity include (1) cash provided by operating activities, (2) disposals
of businesses and tangible assets, (3) cash used for acquisitions, restructuring actions, capital expenditures,
share repurchases, dividends, and senior subordinated note repurchases, and (4) our available credit facilities
and other borrowing arrangements. We expect our operating activities to generate cash in 2014 and believe our
sources of liquidity are sufficient to fund current working capital requirements, capital expenditures,
contributions to our retirement plans, share repurchases, senior subordinated note repurchases, quarterly
dividend payments, and our short-term operating strategies. However, we may require external financing were
we to complete a significant acquisition. Our ability to continue to fund our future needs from business
operations could be affected by many factors, including, but not limited to: economic conditions worldwide,
customer demand, competitive market forces, customer acceptance of our product mix, and commodities
pricing.
The following table is derived from our Consolidated Cash Flow Statements:
Net cash provided by operating activities totaled $164.6 million in 2013 compared to $139.4 million in 2012.
The significant increase in income from continuing operations contributed to the increase in cash provided by
operating activities. The impact from an increase in income from continuing operations was partially offset by
an increase in the usage of cash due to changes in operating assets and liabilities. In 2013, changes in
operating assets and liabilities were a use of cash of $42.9 million, compared to $27.6 million in 2012.
31
20132012Net cash provided by (used for):Operating activities164,601$ 139,388$ Investing activities(43,284) (591,940) Financing activities92,763 464,762 Effects of currency exchange rate changes on cash and cash equivalents4,129 333 Increase in cash and cash equivalents218,209 12,543 Cash and cash equivalents, beginning of year395,095 382,552 Cash and cash equivalents, end of year613,304$ 395,095$ (In thousands)December 31,Years Ended
The most significant use of cash for operating activities in 2013 related to taxes. Accrued taxes were a use of
cash of $89.4 million in 2013, compared to $10.8 million in 2012. The primary reason for the increase in cash
used for taxes in 2013 was the planned payments of two significant tax items. First, in 2013, we paid $41.8
million of our estimated tax liability related to the 2012 sale of the Thermax and Raydex cable business. We
recognized a $211.6 million pre-tax gain on the sale of this business in 2012. Second, in 2013, we paid $30.0
million to settle a tax sharing agreement dispute with Cooper Industries. We reached the settlement and
recognized a $21.0 million tax benefit in 2012.
Net cash used for investing activities totaled $43.3 million in 2013 compared to $591.9 million in 2012.
Investing activities in 2013 included capital expenditures of $40.2 million, payments for acquisitions, net of
cash acquired, of $10.0 million, the receipt of proceeds from previously disposed businesses of $3.7 million,
and the receipt of $3.2 million of proceeds from the sale of tangible assets, primarily real estate in the
Broadcast and Enterprise Connectivity segments. The most significant investing activities in 2012 were
payments, net of cash acquired, for the acquisitions of Miranda and PPC totaling $860.4 million. Other
investing activities in 2012 included the receipt of proceeds from the disposal of our Thermax and Raydex
cable business and consumer electronics assets of $299.8 million, capital expenditures of $41.0 million, and
the receipt of $9.6 million of proceeds from the sale of tangible assets.
Net cash provided by financing activities in 2013 totaled $92.8 million compared to $464.8 million in 2012.
The most significant financing activities in 2013 were the issuance of $388.2 million of 5.5% senior
subordinated notes due 2023, the raising of $249.4 million of proceeds under a new term loan due 2020, and
the repayments of $434.7 million of borrowings outstanding under the revolving credit component and
Canadian term loan of our senior secured credit facility. Financing activities in 2013 also included payments
under our share repurchase program of $93.8 million and payments of debt issuance costs of $17.4 million.
The most significant financing activities in 2012 were borrowings of $1,150.0 million, debt repayments of
$593.9 million, payments under our share repurchase program of $75.0 million, and payments of debt issuance
costs of $15.4 million.
Our cash and cash equivalents balance was $613.3 million as of December 31, 2013. Of this amount, $226.2
million was held outside of the U.S. in our foreign operations. Substantially all of the foreign cash and cash
equivalents are readily convertible into U.S. dollars or other foreign currencies. Our strategic plan does not
require the repatriation of foreign cash in order to fund our operations in the U.S., and it is our current intention
to permanently reinvest the foreign cash and cash equivalents outside of the U.S. If we were to repatriate the
foreign cash to the U.S., we may be required to accrue and pay U.S. taxes in accordance with applicable U.S.
tax rules and regulations as a result of the repatriation.
Our outstanding debt obligations as of December 31, 2013 consisted of $700.0 million aggregate principal of
5.5% senior subordinated notes due 2022, $413.0 million aggregate principal of 5.5% senior subordinated
notes due 2023, $248.8 million of term loan borrowings due 2020, and $5.2 million aggregate principal of
9.25% senior subordinated notes due 2019. Additional discussion regarding our various borrowing
arrangements is included in Note 12 to the Condensed Consolidated Financial Statements. As of December
31, 2013, there were no outstanding borrowings under our revolver, and we had $325.0 million in available
borrowing capacity.
Contractual obligations outstanding at December 31, 2013, have the following scheduled maturities:
32
Our commercial commitments expire or mature as follows:
Standby financial letters of credit, bank guarantees, and surety bonds are generally issued to secure obligations
we have for a variety of commercial reasons such as workers compensation self-insurance programs in several
states and the importation and exportation of product. We expect to replace most of these when they expire or
mature.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect
on our financial condition, results of operations, or cash flows that are or would be considered material to
investors.
Current-Year Adoption of Recent Accounting Pronouncements
Discussion regarding our adoption of accounting pronouncements is included in Note 2 to the Consolidated
Financial Statements.
Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the U.S. (GAAP). In connection with the preparation of our financial statements, we are required
to make assumptions and estimates about future events, and apply judgments that affect the reported amounts
of assets, liabilities, revenues, expenses, and the related disclosures. We base our assumptions, estimates, and
33
Less than1-34-5More thanTotal1 YearYearsYears5 YearsLong-term debt obligations (1)(2)1,367,036$ 2,500$ 5,000$ 5,000$ 1,354,536$ Interest payments on long-term debt obligations 592,827 69,754 139,264 138,939 244,870 Operating lease obligations (3)74,168 17,664 23,448 11,933 21,123 Purchase obligations (4)10,270 10,270 - - - Other commitments (5)18,639 7,211 7,359 4,069 - Pension and other postemployment obligations109,991 11,562 23,503 21,719 53,207 Total2,172,931$ 118,961$ 198,574$ 181,660$ 1,673,736$ (1) As described in Note 12 to the Consolidated Financial Statements.(2) Amounts do not include accrued and unpaid interest. Accrued and unpaid interest related to long-term debt obligations is reflected on aseparate line in the table.(3) As described in Note 20 to the Consolidated Financial Statements.(4) Includes agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms,including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of thetransaction.(In thousands)(5) Does not include accounts payable reflected in the financial statements. Includes obligations for uncertain tax positions (see Note 14 to the Consolidated Financial Statements). Less than1-33-5More thanTotal1 YearYearsYears5 YearsStandby financial letters of credit6,817$ 6,807$ 10$ -$ -$ Bank guarantees4,845 4,845 - - - Surety bonds1,715 1,715 - - - Total13,377$ 13,367$ 10$ -$ -$ (In thousands)
judgments on historical experience, current trends, and other factors that management believes to be relevant at
the time our consolidated financial statements are prepared. On a regular basis, we review the accounting
policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and
in accordance with GAAP. However, because future events and their effects cannot be determined with
certainty, actual results could differ from our assumptions and estimates, and such differences could be
material.
Our significant accounting policies are discussed in Note 2 of our Consolidated Financial Statements. We
believe that the following accounting estimates are the most critical to aid in fully understanding and
evaluating our reported financial results, and they require our most difficult, subjective, or complex judgments,
resulting from the need to make estimates about the effect of matters that are inherently uncertain.
Revenue Recognition
We recognize revenue when all of the following circumstances are satisfied: (1) persuasive evidence of an
arrangement exists, (2) price is fixed or determinable, (3) collectability is reasonably assured, and (4) delivery has
occurred. Delivery occurs in the period in which the customer takes title and assumes the risks and rewards of
ownership of the products specified in the customer’s purchase order or sales agreement. At times, we enter into
arrangements that involve the delivery of multiple elements. For these arrangements, when the elements can be
separated, the revenue is allocated to each deliverable based on that element’s relative selling price and
recognized based on the period of delivery for each element. Generally, we determine relative selling price using
our best estimate of selling price, as we do not have vendor specific objective evidence or third party evidence of
fair value for such arrangements.
At the time of sale, we establish an estimated reserve for trade, promotion, and other special price reductions
such as contract pricing, discounts to meet competitor pricing, and on-time payment discounts. We also reserve
for, among other things, correction of billing errors, incorrect shipments, and settlement of customer disputes.
Customers are allowed to return inventory if and when certain conditions regarding the physical state of the
inventory and our approval of the return are met. Certain distribution customers are allowed to return inventory
at original cost, in an amount not to exceed three percent of the prior year’s purchases, in exchange for an
order of equal or greater value. Until we can process these reductions, corrections, and returns (together, the
Adjustments) through individual customer records, we estimate the amount of outstanding Adjustments and
recognize them by reducing revenues and accounts receivable. We determine our estimate based on our
historical Adjustments as a percentage of revenues and the average time period between the original sale and
the issuance of the Adjustments. We also adjust inventory and cost of sales for the estimated level of returns.
We base these estimates on historical and anticipated sales demand, trends in product pricing, and historical
and anticipated Adjustments patterns. We make revisions to these estimates in the period in which the facts
that give rise to each revision become known. Future market conditions and product transitions might require
us to take actions to further reduce prices and increase customer return authorizations. We do not believe there
is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to
measure the Adjustments. However, if actual results are not consistent with our estimates or assumptions, we
may be exposed to losses or gains that could be material. A 10% change in our sales reserve for such
Adjustments as of December 31, 2013 would have affected net income by less than $1 million in 2013.
Income Taxes
We recognize deferred tax assets resulting from tax credit carryforwards, net operating loss carryforwards, and
deductible temporary differences between taxable income on our income tax returns and income before taxes
under GAAP. Deferred tax assets generally represent future tax benefits to be received when these
carryforwards can be applied against future taxable income or when expenses previously reported in our
Consolidated Financial Statements become deductible for income tax purposes. A deferred tax asset valuation
allowance is required when some portion or all of the deferred tax assets may not be realized. We are required
34
to estimate taxable income in future years or develop tax strategies that would enable tax asset realization in
each taxing jurisdiction and use judgment to determine whether to record a deferred tax asset valuation
allowance for part or all of a deferred tax asset.
We consider the weight of all available evidence, both positive and negative, in assessing the realizability of
the deferred tax assets associated with net operating losses. We consider the reversals of existing taxable
temporary differences as well as projections of future taxable income. We consider the future reversals of
existing taxable temporary differences to the extent they were of the same character as the temporary
differences giving rise to the deferred tax assets. We also consider whether the future reversals of existing
taxable temporary differences will occur in the same period and jurisdiction as the temporary differences
giving rise to the deferred tax assets. The assumptions utilized to estimate our future taxable income are
consistent with those assumptions utilized for purposes of testing goodwill for impairment.
We have significant tax credit carryforwards in the U.S. on which we have not recorded a valuation allowance.
The utilization of these credits is dependent upon the recognition of both U.S. taxable income as well as
income characterized as foreign source under the U.S. tax laws. We expect to generate enough taxable income
in the future to utilize these tax credits. Furthermore, in 2014 we expect to continue implementation of tax
planning strategies that will help generate additional foreign source income in the carryforward period. In
addition, we have significant research and development related tax credit carryforwards in Canada on which
we have not recorded a valuation allowance. The utilization of these credits is dependent upon the recognition
of Canadian taxable income, and we expect to generate enough taxable income in the future to utilize these tax
credits.
Significant judgment is required in evaluating our uncertain tax positions. We establish accruals for uncertain tax
positions when we believe that the full amount of the associated tax benefit may not be realized. In the future,
if we prevail in matters for which accruals have been established previously or pay amounts in excess of
reserves, there could be a material effect on our income tax provisions in the period in which such
determination is made. In addition, our foreign subsidiaries’ undistributed income is considered to be indefinitely
reinvested and, accordingly, we do not record a provision for U.S. federal and state income taxes on this foreign
income. If this income was not considered to be indefinitely reinvested, it would be subject to U.S. federal and
state income taxes and could materially affect our income tax provision.
Goodwill and Indefinite-Lived Intangible Assets
We test our goodwill and other indefinite-lived intangible assets not subject to amortization for impairment on
an annual basis during the fourth quarter or when indicators of impairment exist. We base our estimates on
assumptions we believe to be reasonable, but which are not predictable with precision and therefore are
inherently uncertain. Actual future results could differ from these estimates.
We test goodwill annually for impairment at the reporting unit level. A reporting unit is an operating segment,
or a business unit one level below an operating segment if discrete financial information for that business is
prepared and regularly reviewed by segment management. However, components within an operating segment
are aggregated as a single reporting unit if they have similar economic characteristics. We determined that
each of our reportable segments (Broadcast, Enterprise, Industrial Connectivity, and Industrial IT) represents
an operating segment. Within those operating segments, we have identified reporting units based on whether
there is discrete financial information prepared that is regularly reviewed by segment management. As a result
of this evaluation, we have identified three reporting units within Broadcast, one reporting unit within
Enterprise, four reporting units within Industrial Connectivity, and one reporting unit within Industrial IT for
purposes of goodwill impairment testing. As a result of our change in segments in 2013, we were required to
reassign the carrying amount of goodwill to our new reporting units based on the relative fair value assigned as
of the effective date of the change in segments. There was no goodwill impairment at the time of the change in
segments.
35
The accounting guidance related to goodwill impairment testing allows for the performance of an optional
qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its
carrying value. Such an evaluation is made based on the weight of all available evidence and the significance
of all identified events and circumstances that may influence the fair value of a reporting unit. If it is more
likely than not that the fair value is less than the carrying value, then a quantitative assessment is required for
the reporting unit, as described in the paragraph below.
For our annual impairment test in 2013, we performed a quantitative assessment for each of our reporting
units. Under a quantitative assessment, we compare the fair value of each reporting unit to its carrying value.
We determine the fair value using an income approach. Under the income approach, we calculate the fair value
of a reporting unit based on the present value of estimated future cash flows using growth rates and discount
rates that are consistent with current market conditions in our industry. For example, in our 2013 quantitative
goodwill impairment analyses performed, the discount rates for our reporting units ranged from 9.6% to 12.7%
and the long-term growth rates ranged from 3% to 6%. If the fair value of the reporting unit exceeds the
carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the
carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit,
then we determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting
unit’s goodwill exceeds its implied fair value, then an impairment of goodwill has occurred and we recognize
an impairment loss for the difference between the carrying amount and the implied fair value of goodwill as a
component of operating income. In addition to the income approach, we calculate the fair value of our
reporting units under a market approach. The market approach measures the fair value of a reporting unit
through analysis of financial multiples (revenues or EBITDA) of comparable businesses. Consideration is
given to the financial conditions and operating performance of the reporting unit being valued relative to those
publicly-traded companies operating in the same or similar lines of business.
We determined that none of our goodwill was impaired during 2013. The fair values of our reporting units
were substantially in excess of the carrying values as of our most recent impairment testing date. The
assumptions used to estimate fair values were based on the past performance of the reporting unit as well as the
projections incorporated in our strategic plan. Significant assumptions included sales growth, profitability, and
related cash flows, along with cash flows associated with taxes and capital spending. The discount rate used to
estimate fair value was risk adjusted in consideration of the economic conditions in effect at the time of the
impairment test. We also considered assumptions that market participants may use. By their nature, these
assumptions involve risks and uncertainties, with the primary factor that could have an adverse effect being our
assumptions relating to growing revenues consistent with our strategic plan.
We test our indefinite-lived intangible assets, which consist primarily of trademarks, for impairment on an
annual basis during the fourth quarter. The accounting guidance related to impairment testing for such
intangible assets allows for the performance of an optional qualitative assessment, similar to that described
above for goodwill. We did not perform any qualitative assessments as part of our indefinite-lived intangible
asset impairment testing for 2013. Rather, we performed a quantitative assessment for each of our trademarks
in 2013. Under the quantitative assessments, we determined the fair value of each trademark using a relief
from royalty methodology and compared the fair value to the carrying value. We determined that none of our
trademarks were impaired during 2013. Significant assumptions to determine fair value included sales growth,
royalty rates, and discount rates.
We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or
assumptions we used to test for impairment losses on goodwill and other intangible assets. However, if actual
results are significantly different from our estimates or assumptions, we may have to recognize an impairment
charge that could be material.
Pension and Other Postretirement Benefits
Our pension and other postretirement benefit costs and obligations are dependent on the various actuarial
36
assumptions used in calculating such amounts. These assumptions relate to discount rates, salary growth, long-
term return on plan assets, health care cost trend rates, and other factors. We base the discount rate
assumptions on current investment yields on high-quality corporate long-term bonds. The salary growth
assumptions reflect our long-term actual experience and future or near-term outlook. Long-term return on plan
assets is determined based on historical portfolio results and management’s expectation of the future economic
environment. Our health care cost trend assumptions are developed based on historical cost data, the near-term
outlook, and an assessment of likely long-term trends. Our key assumptions are described in further detail in
Note 15 to the Consolidated Financial Statements. Actual results that differ from our assumptions are
accumulated and, if in excess of the lesser of 10% of the projected benefit obligation or the fair market value of
plan assets, amortized over the estimated future working life of the plan participants.
As a sensitivity measure, the effect of a 50 basis point decline in the assumed discount rate would have
resulted in an increase in 2013 net periodic benefit cost of approximately $0.8 million and an increase in the
projected benefit obligations as of December 31, 2013 of approximately $18.0 million. A 50 basis point
decline in the expected return on plan assets would have resulted in an increase in 2013 net periodic benefit
cost of approximately $0.8 million.
Business Combination Accounting
We allocate the purchase price of an acquired business to its identifiable assets and liabilities based on
estimated fair values. The excess of the purchase price over the amount allocated to the assets and liabilities, if
any, is recorded to goodwill. We use all available information to estimate fair values. We typically engage
third party valuation specialists to assist in the fair value determination of inventories, tangible long-lived
assets, and intangible assets other than goodwill. The carrying values of acquired receivables and accounts
payable have historically approximated their fair values as of the business combination date. As necessary, we
may engage third party specialists to assist in the estimation of fair value for certain liabilities. We adjust the
preliminary purchase price allocation, as necessary, typically up to one year after the acquisition closing date
as we obtain more information regarding asset valuations and liabilities assumed.
Our purchase price allocation methodology contains uncertainties because it requires management to make
assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. Management
estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the
acquired assets and widely accepted valuation techniques, including discounted cash flows and market
multiple analyses. Unanticipated events or circumstances may occur which could affect the accuracy of our
fair value estimates, including assumptions regarding industry economic factors and business strategies.
If actual results are materially different than the assumptions we used to determine fair value of the assets and
liabilities acquired through a business combination, it is possible that adjustments to the carrying values of
such assets and liabilities will have an impact on our net earnings. As of December 31, 2013, the measurement
period for the purchase price allocation of all prior acquisitions is complete.
See Note 3 to the Consolidated Financial Statements for the acquisition-related information associated with
significant acquisitions completed in the last three fiscal years.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risks relating to our operations result primarily from currency exchange rates, certain commodity
prices, interest rates, and credit extended to customers. Each of these risks is discussed below.
37
Currency Exchange Rate Risk
We are exposed to foreign currency risks that arise from normal business operations. These risks include the
translation of local currency balances of foreign subsidiaries and transactions denominated in currencies other
than a location’s functional currency.
Our investments in certain foreign subsidiaries are recorded in currencies other than the U.S. dollar. As these
foreign currency denominated investments are translated at the end of each period during consolidation using
period-end exchange rates, fluctuations of exchange rates between the foreign currency and the U.S. dollar
increase or decrease the value of those investments. These fluctuations and the results of operations for foreign
subsidiaries, where the functional currency is not the U.S. dollar, are translated into U.S. dollars using the average
exchange rates during the year, while the assets and liabilities are translated using period end exchange rates. The
assets and liabilities-related translation adjustments are recorded as a separate component of accumulated other
comprehensive income (loss) in our Consolidated Balance Sheets. We generally view our investments in
international subsidiaries with functional currencies other than the U.S. dollar as long-term. As a result, we do not
generally use derivatives to manage these net investments.
Transactions denominated in currencies other than a location’s functional currency may produce receivables or
payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in
exchange rates between the functional currency and the currency in which a transaction is denominated
increases or decreases the expected amount of functional currency cash flows upon settlement of the
transaction. That increase or decrease in expected functional currency cash flows is a foreign exchange
transaction gain or loss that is included in our operating income in the Consolidated Statements of Operations.
Generally, the currency in which we sell our products is the same as the currency in which we incur the costs
to manufacture our products, resulting in a natural hedge. Our currency exchange rate management strategy
primarily involves the use of natural techniques, where possible, such as the offsetting or netting of like-
currency cash flows. We did not have any foreign currency derivatives outstanding as of December 31, 2013.
Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S.
dollar and the euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso, Australian dollar,
British pound, and Brazilian real.
Commodity Price Risk
Certain raw materials used by us are subject to price volatility caused by supply conditions, political and
economic variables, and other unpredictable factors. The primary purpose of our commodity price
management activities is to manage the volatility associated with purchases of commodities in the normal
course of business. We do not speculate on commodity prices.
We are exposed to price risk related to our purchase of copper used in our products, although we are generally
able to raise selling prices to customers to cover the increase in copper costs. Our copper price management
strategy involves the use of natural techniques, where possible, such as purchasing copper for future delivery at
fixed prices. We do not generally use commodity price derivatives and did not have any outstanding at
December 31, 2013 or 2012.
following
The
December 31, 2013. The unconditional purchase obligations will settle during 2014.
table presents unconditional commodity purchase obligations outstanding as of
38
We are also exposed to price risk related to our purchase of selected commodities derived from petrochemical
feedstocks used in our products. We generally purchase these commodities based upon market prices established
with the vendors as part of the purchase process. Pricing of these commodities is volatile as they tend to fluctuate
with the price of oil. Historically, we have not used commodity financial instruments to hedge prices for
commodities derived from petrochemical feedstocks.
Interest Rate Risk
We have occasionally managed our debt portfolio by using interest rate derivative instruments, such as swap
agreements, to achieve an overall desired position of fixed and floating rates. We were not a party to any
interest rate derivative instruments as of or for the years ended December 31, 2013 or 2012. See Note 13 to the
Consolidated Financial Statements.
The following table provides information about our financial instruments that are sensitive to changes in
interest rates. The table presents principal amounts by expected maturity dates and fair values as of
December 31, 2013.
39
PurchaseFairAmountValueUnconditional copper purchase obligations:Commitment volume in pounds1,624 Weighted average price per pound3.30$ Commitment amounts5,362$ 5,586$ Unconditional aluminum purchase obligations:Commitment volume in pounds350 Weighted average price per pound0.97$ Commitment amounts340$ 330$ Total unconditional purchase obligations5,702$ 5,916$ (In thousands, except average price)Fair2014ThereafterTotalValueVariable-rate term loan due 20202,500$ 246,275$ 248,775$ 248,775$ Average interest rate3.25%3.25%Fixed-rate senior subordinated notes due 2022-$ 700,000$ 700,000$ 688,191$ Average interest rate5.50%Fixed-rate senior subordinated notes due 2023-$ 413,040$ 413,040$ 404,779$ Average interest rate5.50%Fixed-rate senior subordinated notes due 2019-$ 5,221$ 5,221$ 5,645$ Average interest rate9.25%Total1,367,036$ 1,347,390$ Principal Amount by Expected Maturity(In thousands, except interest rates)
Concentrations of Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and
cash equivalents and accounts receivable. We are exposed to credit losses in the event of nonperformance by
counterparties to these financial instruments. We place cash and cash equivalents with various high-quality
financial institutions throughout the world, and exposure is limited at any one financial institution. Although we
do not obtain collateral or other security to support these financial instruments, we evaluate the credit standing of
the counterparty financial institutions. As of December 31, 2013, we had $48.3 million in accounts receivable
outstanding from Anixter International Inc. This represented approximately 16% of our total accounts receivable
outstanding at December 31, 2013. Anixter generally pays all outstanding receivables within thirty to sixty days
of invoice receipt.
40
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Belden Inc.
We have audited the accompanying consolidated balance sheets of Belden Inc. (the Company) as of December
31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity, comprehensive
income and cash flows for each of the three years in the period ended December 31, 2013. Our audits also
included the financial statement schedule listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Belden Inc. at December 31, 2013 and 2012, and the consolidated results of
its operations and its cash flows for each of the three years in the period ended December 31, 2013, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Belden Inc.’s internal control over financial reporting as of December 31, 2013, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (1992 framework), and our report dated February 27, 2014,
expressed an unqualified opinion thereon.
St. Louis, Missouri
February 27, 2014
/s/ Ernst & Young LLP
41
Belden Inc.
Consolidated Balance Sheets
42
20132012Current assets:Cash and cash equivalents $ 613,304 $ 395,095 Receivables, net 304,204 300,864 Inventories, net 207,980 215,282 Deferred income taxes 28,767 19,885 Other current assets 41,243 28,456 Total current assets 1,195,498 959,582 Property, plant and equipment, less accumulated depreciation 300,835 307,048 Goodwill 773,048 778,708 Intangible assets, less accumulated amortization 376,976 428,273 Deferred income taxes 26,034 46,970 Other long-lived assets 79,362 64,002 $ 2,751,753 $2,584,583 Current liabilities:Accounts payable $ 199,897 $ 183,672 Accrued liabilities 199,169 166,272 Current maturities of long-term debt 2,500 15,678 Current liabilities of discontinued operations - 86,860 Total current liabilities401,566 452,482 - - Long-term debt1,364,536 1,135,527 Postretirement benefits105,924 144,320 Other long-term liabilities43,186 40,394 Stockholders’ equity:Preferred stock, par value $0.01 per share— 2,000 shares authorized;no shares outstanding - - Common stock, par value $0.01 per share— 200,000 shares authorized;50,335 shares issued; 43,455 and 44,168 shares outstanding at 2013 and 2012, respectively 503 503 Additional paid-in capital585,753 598,180 Retained earnings556,214 461,756 Accumulated other comprehensive loss(29,181) (30,565) Treasury stock, at cost— 6,880 and 6,167 shares at 2013 and 2012, respectively (276,748) (218,014) - Total stockholders’ equity 836,541 811,860 $ 2,751,753 $2,584,583 The accompanying notes are an integral part of these Consolidated Financial Statements(In thousands, except par value)ASSETSLIABILITIES AND STOCKHOLDERS’ EQUITYDecember 31,
Belden Inc.
Consolidated Statements of Operations
43
201320122011Revenues $ 2,069,193 $ 1,840,739 $ 1,882,187 Cost of sales (1,364,764) (1,274,142) (1,340,666)Gross profit704,429 566,597 541,521 Selling, general and administrative expenses (378,009) (345,926) (319,034)Research and development (83,277) (65,410) (54,752)Amortization of intangibles (50,803) (22,792) (13,149)Income from equity method investment 8,922 9,704 13,169 Asset impairment and loss on sale of assets - (33,676) (2,549)Operating income 201,262 108,497 165,206 Interest expense (73,095) (52,038) (48,118)Interest income 494 1,033 1,011 Loss on debt extinguishment (1,612) (52,450) - Income from continuing operations before taxes 127,049 5,042 118,099 Income tax benefit (expense) (22,315) 38,194 (16,791)Income from continuing operations 104,734 43,236 101,308 Income (loss) from discontinued operations, net of tax (1,421) 16,774 13,037 Gain from disposal of discontinued operations, net of tax - 134,480 - Net income $ 103,313 $ 194,490 $ 114,345 Weighted average number of common shares and equivalents:Basic 43,871 45,097 47,109 Diluted 44,737 45,942 48,104 Basic income (loss) per share:Continuing operations $ 2.39 $ 0.96 $ 2.15 Discontinued operations (0.03) 0.37 0.28 Disposal of discontinued operations - 2.98 - Net income $ 2.36 $ 4.31 $ 2.43 Diluted income (loss) per share:Continuing operations $ 2.34 $ 0.94 $ 2.11 Discontinued operations (0.03) 0.36 0.27 Disposal of discontinued operations - 2.93 - Net income $ 2.31 $ 4.23 $ 2.38 Years Ended December 31,(In thousands, except per share amounts)The accompanying notes are an integral part of these Consolidated Financial Statements
Belden Inc.
Consolidated Statements of Comprehensive Income
44
201320122011Net income $ 103,313 $ 194,490 $ 114,345 Foreign currency translation, net of tax of $2.2 million, $0.0 million, and $0.0 million, respectively(20,720) (1,414) (4,632) Foreign currency hedging instruments, net of tax of $0.0 million, $1.6 million, and $0.0 million, respectively- 2,467 - Adjustments to pension and postretirement liability, net of tax of $14.0 million, $3.2 million, and $4.8 million, respectively22,104 (8,909) (9,158) Other comprehensive income (loss), net of tax1,384 (7,856) (13,790) Comprehensive income 104,697$ 186,634$ 100,555$ Years Ended December 31,(In thousands)The accompanying notes are an integral part of these Consolidated Financial Statements
Belden Inc.
Consolidated Cash Flow Statements
45
201320122011Cash flows from operating activities: Net income $ 103,313 $ 194,490 $ 114,345 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 94,451 59,355 50,174 Share-based compensation 14,854 12,374 11,241 Deferred income tax expense (benefit) 5,457 (42,750) 2,294 Provision for inventory obsolescence 4,623 5,085 1,160 Pension funding less than pension expense 2,833 593 3,812 Loss on debt extinguishment 1,612 52,450 - Asset impairment and loss on sale of assets - 33,676 2,549 Gain on sale of businesses and tangible assets - (134,480) - Income from equity method investment (8,922) (9,704) (13,169) Tax benefit related to share-based compensation (10,734) (4,119) (1,790) Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses: Receivables (18,132) 5,628 4,680 Inventories 2,249 31,706 (22,873) Accounts payable 12,994 (55,166) 9,281 Accrued liabilities 31,690 (681) 12,317 Accrued taxes (89,427) (10,760) (55) Other assets 4,542 968 12,219 Other liabilities 13,198 723 (1,622) Net cash provided by operating activities 164,601 139,388 184,563 Cash flows from investing activities: Capital expenditures (40,209) (41,010) (40,053) Cash used to acquire businesses, net of cash acquired (9,979) (860,353) (60,519) Proceeds from disposal of business 3,735 299,848 - Proceeds from disposal of tangible assets 3,169 9,575 1,213 Net cash used for investing activities (43,284) (591,940) (99,359)Cash flows from financing activities: Borrowings under credit arrangements 637,595 1,149,966 - Payments under borrowing arrangements (434,743) (593,864) - Tax benefit related to share-based compensation 10,734 4,119 1,790 Proceeds from settlement of derivatives - 4,024 - Proceeds from exercise of stock options, net of withholding tax payments (3,019) 2,372 4,599 Cash dividends paid (6,678) (11,441) (9,410) Debt issuance costs paid (17,376) (15,414) (3,296) Payments under share repurchase program (93,750) (75,000) (50,000) Net cash provided by (used for) financing activities 92,763 464,762 (56,317)Effect of foreign currency exchange rate changes on cash and cash equivalents 4,129 333 (4,988)Increase in cash and cash equivalents 218,209 12,543 23,899 Cash and cash equivalents, beginning of period 395,095 382,552 358,653 Cash and cash equivalents, end of period $ 613,304 $ 395,095 $ 382,552 Years Ended December 31, (In thousands)The accompanying notes are an integral part of these Consolidated Financial Statements
Belden Inc.
Consolidated Stockholders’ Equity Statements
46
OtherPaid-InRetainedComprehensiveSharesAmountCapitalEarningsSharesAmountIncome (Loss)TotalBalance at December 31, 201050,335 503$ 595,519$ 171,568$ (3,290) (120,156)$ (8,919)$ 638,515$ Net income- - - 114,345 - - - 114,345 Foreign currency translation- - - - - - (4,632) (4,632) Adjustments to pension and postretirementliability, net of $4.8 million tax - - - - - - (9,158) (9,158) Other comprehensive loss, net of tax(13,790) Exercise of stock options, net of tax withholding forfeitures- - (2,214) - 264 6,076 - 3,862 Conversion of restricted stock units into common stock, netof tax withholding forfeitures- - (4,852) - 151 2,988 - (1,864) Share repurchase program- - - - (1,635) (50,000) - (50,000) Share-based compensation- - 13,031 - - - - 13,031 Dividends ($0.20 per share)- - - (9,550) - - - (9,550) Balance at December 31, 201150,335 503$ 601,484$ 276,363$ (4,510) (161,092)$ (22,709)$ 694,549$ Net income- - - 194,490 - - - 194,490 Foreign currency translation- - - - - - 1,053 1,053 Adjustments to pension and postretirementliability, net of $3.2 million tax - - - - - - (8,909) (8,909) Other comprehensive loss, net of tax(7,856) Exercise of stock options, net of tax withholding forfeitures- - (8,694) - 243 9,431 - 737 Conversion of restricted stock units into common stock, netof tax withholding forfeitures- - (11,103) - 172 8,647 - (2,456) Share repurchase program- - - - (2,072) (75,000) - (75,000) Share-based compensation- - 16,493 - - - - 16,493 Dividends ($0.20 per share)- - - (9,097) - - - (9,097) Balance at December 31, 201250,335 503$ 598,180$ 461,756$ (6,167) (218,014)$ (30,565)$ 811,860$ Net income- - - 103,313 - - - 103,313 Foreign currency translation, net of $2.2 million tax- - - - - - (20,720) (20,720) Adjustments to pension and postretirementliability, net of $14.0 million tax - - - - - - 22,104 22,104 Other comprehensive income, net of tax1,384 Exercise of stock options, net of tax withholding forfeitures- - (31,003) - 879 30,819 - (184) Conversion of restricted stock units into common stock, netof tax withholding forfeitures- - (7,012) - 120 4,197 - (2,815) Share repurchase program- - - - (1,712) (93,750) - (93,750) Share-based compensation- - 25,588 - - - - 25,588 Dividends ($0.20 per share)- - - (8,855) - - - (8,855) Balance at December 31, 201350,335 503$ 585,753$ 556,214$ (6,880) (276,748)$ (29,181)$ 836,541$ AccumulatedThe accompanying notes are an integral part of these Consolidated Financial StatementsCommon StockTreasury Stock(In thousands)
Notes to Consolidated Financial Statements
Note 1: Basis of Presentation
Business Description
Belden Inc. (the Company, Belden, we, us, or our) is an innovative signal transmission solutions provider built
around four global business platforms – Broadcast Solutions, Enterprise Connectivity Solutions, Industrial
Connectivity Solutions, and Industrial IT Solutions. Belden’s comprehensive portfolio of signal transmission
solutions provides industry leading secure and reliable transmission of data, sound and video for mission
critical applications.
Consolidation
The accompanying Consolidated Financial Statements include Belden Inc. and all of its subsidiaries. We
eliminate all significant affiliate accounts and transactions in consolidation.
Foreign Currency
For international operations with functional currencies other than the United States (U.S.) dollar, we translate
assets and liabilities at current exchange rates; we translate income and expenses using average exchange rates.
We report the resulting translation adjustments, as well as gains and losses from certain affiliate transactions,
in accumulated other comprehensive income (loss), a separate component of stockholders’ equity. We include
exchange gains and losses on transactions in operating income.
We determine the functional currency of our foreign subsidiaries based upon the currency of the primary
economic environment in which each subsidiary operates. Typically, that is determined by the currency in which
the subsidiary primarily generates and expends cash. We have concluded that the local currency is the functional
currency for all of our material subsidiaries.
Reporting Periods
Our fiscal year and fiscal fourth quarter both end on December 31. Our fiscal first quarter ends on the Sunday
falling closest to 91 days after December 31. Our fiscal second and third quarters each have 91 days.
Use of Estimates in the Preparation of the Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.
requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, and
operating results and the disclosure of contingencies. Actual results could differ from those estimates. We
make significant estimates with respect to the collectability of receivables, the valuation of inventory, the
realization of deferred tax assets, the valuation of goodwill and indefinite-lived intangible assets, the valuation
of contingent liabilities, the calculation of share-based compensation, the calculation of pension and other
postretirement benefits expense, and the valuation of acquired businesses.
Reclassifications
We have made certain reclassifications to the 2012 and 2011 Consolidated Financial Statements with no
impact to reported net income in order to conform to the 2013 presentation.
47
Note 2: Summary of Significant Accounting Policies
Fair Value Measurement
Accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based
upon whether the inputs to those valuation techniques reflect assumptions other market participants would
use based upon market data obtained from independent sources or reflect our own assumptions of market
participant valuation. The hierarchy is broken down into three levels based on the reliability of the inputs
as follows:
Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement
date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted
prices for similar assets and liabilities in active markets, or financial instruments for which
significant inputs are observable, either directly or indirectly; and
Level 3 – Prices or valuations that require inputs that are both significant to the fair value
measurement and unobservable.
As of December 31, 2013 and 2012, we utilized Level 1 inputs to determine the fair value of cash
equivalents. During 2012, we utilized Level 2 inputs to determine the fair value of certain long-lived
assets (see Notes 9 and 10) and derivatives and hedging instruments (see Note 13). We did not have any
transfers between Level 1 and Level 2 fair value measurements during 2013.
Cash and Cash Equivalents
We classify cash on hand and deposits in banks, including commercial paper, money market accounts,
and other investments with an original maturity of three months or less, that we hold from time to time, as
cash and cash equivalents. We periodically have cash equivalents consisting of short-term money market
funds and other investments. The primary objective of our investment activities is to preserve our capital
for the purpose of funding operations. We do not enter into investments for trading or speculative
purposes. The fair values of these cash equivalents as of December 31, 2013 and 2012 were $361.2
million and $134.6 million, respectively, and are based on quoted market prices in active markets.
Accounts Receivable
We classify amounts owed to us and due within twelve months, arising from the sale of goods or services in
the normal course of business, as current receivables. We classify receivables due after twelve months as other
long-lived assets.
At the time of sale, we establish an estimated reserve for trade, promotion, and other special price reductions
such as contract pricing, discounts to meet competitor pricing, and on-time payment discounts. We also adjust
receivable balances for, among other things, correction of billing errors, incorrect shipments, and settlement of
customer disputes. Customers are allowed to return inventory if and when certain conditions regarding the
physical state of the inventory and our approval of the return are met. Certain distribution customers are
allowed to return inventory at original cost, in an amount not to exceed three percent of the prior year’s
purchases, in exchange for an order of equal or greater value. Until we can process these reductions,
corrections, and returns (together, the Adjustments) through individual customer records, we estimate the
amount of outstanding Adjustments and recognize them by reducing revenues and accounts receivable. We
also adjust inventory and cost of sales for the estimated level of returns. We base these estimates on historical
and anticipated sales demand, trends in product pricing, and historical and anticipated Adjustments patterns.
We make revisions to these estimates in the period in which the facts that give rise to each revision become
known. Future market conditions might require us to take actions to further reduce prices and increase
48
customer return authorizations. Unprocessed Adjustments recognized against our gross accounts receivable
balance at December 31, 2013 and 2012 totaled $18.2 million and $16.1 million, respectively.
We evaluate the collectability of accounts receivable based on the specific identification method. A
considerable amount of judgment is required in assessing the realizability of accounts receivable, including the
current creditworthiness of each customer and related aging of the past due balances. We perform ongoing
credit evaluations of our customers’ financial condition. Through these evaluations, we may become aware of
a situation where a customer may not be able to meet its financial obligations due to deterioration of its
financial viability, credit ratings, or bankruptcy. We record a specific reserve for bad debts against amounts
due to reduce the receivable to its estimated collectible balance. We recognized bad debt expense of $0.2
million, $1.9 million, and $1.1 million in 2013, 2012, and 2011, respectively. The allowance for doubtful
accounts at December 31, 2013 and 2012 totaled $3.4 million and $4.2 million, respectively.
Inventories and Related Reserves
Inventories are stated at the lower of cost or market. We determine the cost of all raw materials, work-in-
process, and finished goods inventories by the first in, first out method. Cost components of inventories
include direct labor, applicable production overhead, and amounts paid to suppliers of materials and products
as well as freight costs and, when applicable, duty costs to import the materials and products.
We evaluate the realizability of our inventory on a product-by-product basis in light of historical and
anticipated sales demand, technological changes, product life cycle, component cost trends, product pricing,
and inventory condition. In circumstances where inventory levels are in excess of anticipated market demand,
where inventory is deemed technologically obsolete or not saleable due to condition, or where inventory cost
exceeds net realizable value, we record a charge to cost of sales and reduce the inventory to its net realizable
value. The allowances for excess and obsolete inventories at December 31, 2013 and 2012 totaled $21.3
million and $24.0 million, respectively.
Property, Plant and Equipment
We record property, plant and equipment at cost. We calculate depreciation on a straight-line basis over the
estimated useful lives of the related assets ranging from 10 to 40 years for buildings, 5 to 12 years for
machinery and equipment, and 5 to 10 years for computer equipment and software. Construction in process
reflects amounts incurred for the configuration and build-out of property, plant and equipment and for
property, plant and equipment not yet placed into service. We charge maintenance and repairs—both planned
major activities and less-costly, ongoing activities—to expense as incurred. We capitalize interest costs
associated with the construction of capital assets and amortize the costs over the assets’ useful lives.
Depreciation expense is included in costs of sales, selling, general and administrative expenses, and research
and development expenses in the Consolidated Statements of Operations based on the specific categorization
and use of the underlying assets being depreciated.
We review property, plant and equipment to determine whether an event or change in circumstances indicates
the carrying values of the assets may not be recoverable. We base our evaluation on such impairment
indicators as the nature of the assets, the future economic benefit of the assets, and any historical or future
profitability measurements, as well as other external market conditions or factors that may be present. If such
impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may
not be recoverable, we determine whether impairment has occurred through the use of an undiscounted cash
flow analysis. If impairment has occurred, we recognize a loss for the difference between the carrying amount
and the fair value of the asset (see Note 9).
For purposes of impairment testing of long-lived assets, we have identified asset groups at the lowest level for
which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
Generally, our asset groups are based on an individual plant or operating facility level. In some circumstances,
49
however, a combination of plants or operating facilities may be considered the asset group due to
interdependence of operational activities and cash flows.
Goodwill and Intangible Assets
Our intangible assets consist of (a) definite-lived assets subject to amortization such as developed technology,
customer relationships, certain in-process research and development, certain trademarks, and backlog, and (b)
indefinite-lived assets not subject to amortization such as goodwill, certain in-process research and
development, and certain trademarks. We calculate amortization of the definite-lived intangible assets on a
straight-line basis over the estimated useful lives of the related assets ranging from less than one year for
backlog to in excess of 25 years for certain of our customer relationships.
We test our goodwill and other indefinite-lived intangible assets not subject to amortization for impairment on
an annual basis during the fourth quarter or when indicators of impairment exist. We base our estimates on
assumptions we believe to be reasonable, but which are not predictable with precision and therefore are
inherently uncertain. Actual future results could differ from these estimates.
The accounting guidance related to goodwill impairment testing allows for the performance of an optional
qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its
carrying value. Such an evaluation is made based on the weight of all available evidence and the significance
of all identified events and circumstances that may influence the fair value of a reporting unit. If it is more
likely than not that the fair value is less than the carrying value, then a quantitative assessment is required for
the reporting unit, as described in the paragraph below.
For our annual impairment test in 2013, we performed a quantitative assessment for each of our reporting
units. Under a quantitative assessment for goodwill impairment, we determine the fair value using the income
approach as reconciled to our aggregate market capitalization. Under the income approach, we calculate the
fair value of a reporting unit based on the present value of estimated future cash flows. If the fair value of the
reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is
not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value
of the reporting unit, then we determine the implied fair value of the reporting unit’s goodwill. If the carrying
value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment of goodwill has
occurred and we recognize an impairment loss for the difference between the carrying amount and the implied
fair value of goodwill as a component of operating income. In addition to the income approach, we calculate
the fair value of our reporting units under a market approach. The market approach measures the fair value of
a reporting unit through analysis of financial multiples (revenues or EBITDA) of comparable businesses.
Consideration is given to the financial conditions and operating performance of the reporting unit being valued
relative to those publicly-traded companies operating in the same or similar lines of business.
We did not recognize any goodwill impairment in 2013, 2012, or 2011. See Note 10 for further discussion.
We also evaluate indefinite lived intangible assets for impairment annually or at other times if events have
occurred or circumstances exist that indicate the carrying values of those assets may no longer be recoverable.
We compare the fair value of the asset with its carrying amount. If the carrying amount of the asset exceeds its
fair value, we recognize an impairment loss in an amount equal to that excess. We did not recognize
impairment charges for our indefinite lived intangible assets in 2013 or 2011. During 2012, we recognized an
impairment charge of $5.2 million on trademarks related to our Chinese consumer electronics end market
which we disposed of in 2012. See Note 10 for further discussion.
We review intangible assets subject to amortization whenever an event or change in circumstances indicates
the carrying values of the assets may not be recoverable. We test intangible assets subject to amortization for
impairment and estimate their fair values using the same assumptions and techniques we employ on property,
plant and equipment. We did not recognize any impairment charges for amortizable intangible assets in 2013
50
or in 2011. During 2012, we recognized an impairment charge of $6.8 million on customer relationships
related to our Chinese consumer electronics end market which we disposed of in 2012.
Pension and Other Postretirement Benefits
Our pension and other postretirement benefit costs and obligations are dependent on the various actuarial
assumptions used in calculating such amounts. These assumptions relate to discount rates, salary growth, long-
term return on plan assets, health care cost trend rates, and other factors. We base the discount rate
assumptions on current investment yields on high-quality corporate long-term bonds. The salary growth
assumptions reflect our long-term actual experience and future or near-term outlook. We determine the long-
term return on plan assets based on historical portfolio results and management’s expectation of the future
economic environment. Our health care cost trend assumptions are developed based on historical cost data, the
near-term outlook, and an assessment of likely long-term trends. Actual results that differ from our
assumptions are accumulated and, if in excess of the lesser of 10% of the projected benefit obligation or the
fair market value of plan assets, amortized over the estimated future working life of the plan participants.
Accrued Sales Rebates
We grant incentive rebates to participating customers as part of our sales programs. The rebates are determined
based on certain targeted sales volumes. Rebates are paid quarterly or annually in either cash or receivables
credits. Until we can process these rebates through individual customer records, we estimate the amount of
outstanding rebates and recognize them as accrued liabilities and reductions in our gross revenues. We base
our estimates on both historical and anticipated sales demand and rebate program participation. We charge
revisions to these estimates back to accrued liabilities and revenues in the period in which the facts that give
rise to each revision become known. Future market conditions and product transitions might require us to take
actions to increase sales rebates offered, possibly resulting in an incremental increase in accrued liabilities and
an incremental reduction in revenues at the time the rebate is offered. Accrued sales rebates at December 31,
2013 and 2012 totaled $34.3 million and $28.0 million, respectively.
Contingent Liabilities
We have established liabilities for environmental and legal contingencies that are probable of occurrence and
reasonably estimable, the amounts of which are currently not material. A significant amount of judgment and
use of estimates is required to quantify our ultimate exposure in these matters. We review the valuation of
these liabilities on a quarterly basis, and we adjust the balances to account for changes in circumstances for
ongoing and emerging issues.
We accrue environmental remediation costs based on estimates of known environmental remediation
exposures developed in consultation with our environmental consultants and legal counsel, the amounts of
which are not currently material. We expense environmental compliance costs, which include maintenance and
operating costs with respect to ongoing monitoring programs, as incurred. We generally depreciate capitalized
environmental costs over a 15-year life. We evaluate the range of potential costs to remediate environmental
sites. The ultimate cost of site clean-up is difficult to predict given the uncertainties of our involvement in
certain sites, uncertainties regarding the extent of the required clean-up, the availability of alternative clean-up
methods, variations in the interpretation of applicable laws and regulations, the possibility of insurance
recoveries with respect to certain sites, and other factors.
We are, from time to time, subject to routine litigation incidental to our business. These lawsuits primarily
involve claims for damages arising out of the use of our products, allegations of patent or trademark
infringement, and litigation and administrative proceedings involving employment matters and commercial
disputes. Assessments regarding the ultimate cost of lawsuits require judgments concerning matters such as the
anticipated outcome of negotiations, the number and cost of pending and future claims, and the impact of
evidentiary requirements. Based on facts currently available, we believe the disposition of the claims that are
51
pending or asserted will not have a materially adverse effect on our financial position, results of operations or
cash flow.
Business Combination Accounting
We allocate the purchase price of an acquired business to its identifiable assets and liabilities based on
estimated fair values. The excess of the purchase price over the amount allocated to the assets and liabilities, if
any, is recorded to goodwill. We use all available information to estimate fair values. We typically engage
third party valuation specialists to assist in the fair value determination of inventories, tangible long-lived
assets, and intangible assets other than goodwill. The carrying values of acquired receivables and accounts
payable have historically approximated their fair values as of the business combination date. As necessary, we
may engage third party specialists to assist in the estimation of fair value for certain liabilities. We adjust the
preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we
obtain more information regarding asset valuations and liabilities assumed.
Revenue Recognition
We recognize revenue when all of the following circumstances are satisfied: (1) persuasive evidence of an
arrangement exists, (2) price is fixed or determinable, (3) collectability is reasonably assured, and (4) delivery has
occurred. Delivery occurs in the period in which the customer takes title and assumes the risks and rewards of
ownership of the products specified in the customer’s purchase order or sales agreement. At times, we enter into
arrangements that involve the delivery of multiple elements. For these arrangements, when the elements can be
separated, the revenue is allocated to each deliverable based on that element’s relative selling price and
recognized based on the period of delivery for each element. Generally, we determine relative selling price using
our best estimate of selling price, as we do not have vendor specific objective evidence or third party evidence of
fair value for such arrangements.
We record revenue net of estimated rebates, price allowances, invoicing adjustments, and product returns. We
record revisions to these estimates in the period in which the facts that give rise to each revision become known.
Cost of Sales
Cost of sales includes our total cost of inventory sold during the period, including material, labor, production
overhead costs, variable manufacturing costs, and fixed manufacturing costs. Production overhead costs
include operating supplies, applicable utility expenses, maintenance costs, and scrap. Variable manufacturing
costs include inbound, interplant, and outbound freight, inventory shrinkage, and charges for excess and
obsolete inventory. Fixed manufacturing costs include the costs associated with our purchasing, receiving,
inspection, warehousing, distribution centers, production and inventory control, and manufacturing
management.
Shipping and Handling Costs
We recognize fees earned on the shipment of product to customers as revenues and recognize costs incurred on
the shipment of product to customers as a cost of sales.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses include expenses not directly related to the production of
inventory. They include all expenses related to selling and marketing our products, as well as the salary and
benefit costs of associates performing the selling and marketing functions. Selling, general, and administrative
expenses also include salary and benefit costs, purchased services, and other costs related to our executive and
administrative functions.
52
Research and Development Costs
Research and development costs are expensed as incurred.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $17.8 million, $16.3 million, and $15.9
million for 2013, 2012, and 2011, respectively.
Share-Based Compensation
We compensate certain employees and non-employee directors with various forms of share-based payment
awards and recognize compensation costs for these awards based on their fair values. We estimate the fair
values of certain awards on the grant date using the Black-Scholes-Merton option-pricing formula, which
incorporates certain assumptions regarding the expected term of an award and expected stock price volatility.
We develop the expected term assumption based on the vesting period and contractual term of an award, our
historical exercise and cancellation experience, our stock price history, plan provisions that require exercise or
cancellation of awards after employees terminate, and the extent to which currently available information
indicates that the future is reasonably expected to differ from past experience. We develop the expected
volatility assumption based on historical price data for our common stock. After calculating the aggregate fair
value of an award, we use an estimated forfeiture rate to discount the amount of share-based compensation cost
to be recognized in our operating results over the service period of the award. We develop the forfeiture
assumption based on our historical pre-vesting cancellation experience.
Income Taxes
Income taxes are provided based on earnings reported for financial statement purposes. The provision for
income taxes differs from the amounts currently payable to taxing authorities because of the recognition of
revenues and expenses in different periods for income tax purposes than for financial statement purposes.
Income taxes are provided as if operations in all countries, including the U.S., were stand-alone businesses
filing separate tax returns. We have determined that all undistributed earnings from our international
subsidiaries will not be remitted to the U.S. in the foreseeable future and, therefore, no additional provision for
U.S. taxes has been made on foreign earnings.
We recognize deferred tax assets resulting from tax credit carryforwards, net operating loss carryforwards, and
deductible temporary differences between taxable income on our income tax returns and pretax income on our
financial statements. Deferred tax assets generally represent future tax benefits to be received when these
carryforwards can be applied against future taxable income or when expenses previously reported in our
Consolidated Financial Statements become deductible for income tax purposes. A deferred tax asset valuation
allowance is required when some portion or all of the deferred tax assets may not be realized.
Our effective tax rate is based on expected income, statutory tax rates, and tax planning opportunities available
to us in the various jurisdictions in which we operate. Significant judgment is required in determining our
effective tax rate and in evaluating our tax positions. We establish accruals for uncertain tax positions when we
believe that the full amount of the associated tax benefit may not be realized. To the extent we were to prevail
in matters for which accruals have been established or would be required to pay amounts in excess of reserves,
there could be a material effect on our income tax provisions in the period in which such determination is
made.
Derivatives and Hedging Activities
We are exposed to various market risks, including fluctuations in foreign currency exchange rates. From time
to time, we manage a portion of this risk through the use of derivative financial instruments to reduce our
53
exposure to foreign currency risk. We do not hold or issue any derivative instrument for trading or speculative
purposes.
We report all derivative financial instruments on the balance sheet at fair value. Foreign currency derivative
instruments may be designated as a hedge of our net investment in certain foreign operations. If a derivative is
designated as a net investment hedge, the effective portion of the gain or loss on the derivative is reported in
accumulated other comprehensive income as part of the cumulative translation component of equity. Any
ineffectiveness is recognized in the Condensed Consolidated Statements of Operations. We had no
outstanding derivatives as of December 31, 2013 and 2012.
Current-Year Adoption of Accounting Pronouncements
On January 1, 2013, we adopted new accounting guidance issued by the FASB with regard to the presentation
and disclosure of changes in accumulated other comprehensive income (loss). The adoption of this guidance
did not have a material impact on our financial statements.
Pending Adoption of Recent Accounting Pronouncements
In July 2013, the FASB issued guidance which requires the presentation of unrecognized tax benefits net of
deferred tax assets for net operating loss carryforwards, similar tax losses, or tax credit carryforwards in cases
where these carryforwards and losses are available at the balance sheet date. When carryforwards or losses are
not available at the balance sheet date, an entity must present the liability separately, rather than on a net basis
with deferred tax assets. The new guidance is effective for annual and interim periods beginning after
December 15, 2013. We do not expect the adoption of this guidance to have a material impact on our financial
statements.
Note 3: Acquisitions
Softel Limited
We acquired Softel Limited (Softel) for $9.1 million, net of cash acquired, on January 25, 2013. Softel is a
key technology supplier to the media sector with a portfolio of technologies well aligned with industry trends
and growing demand. Softel is located in the United Kingdom. The results of Softel have been included in
our Consolidated Financial Statements from January 25, 2013, and are reported within the Broadcast segment.
The Softel acquisition was not material to our financial position or results of operations reported as of and for
the year ended December 31, 2013.
PPC Broadband, Inc.
We acquired 100% of the outstanding shares of PPC Broadband, Inc. (PPC) in exchange for cash of $522.4
million on December 10, 2012. PPC is a leading manufacturer and developer of advanced connectivity
technologies for the broadband market and expands our solution offerings in the broadband end-market. PPC
is headquartered in Syracuse, New York. PPC’s strong brands and technology enhance our portfolio of
broadband products. The results of PPC have been included in our Consolidated Financial Statements from
December 10, 2012, 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 December 10, 2012 (in thousands).
54
A single estimate of fair value results from a complex series of judgments about future events and uncertainties
and relies heavily on estimates and assumptions. The judgments we have used in estimating the fair values
assigned to each class of acquired assets and assumed liabilities could materially affect the results of our
operations.
The fair value of acquired receivables is $26.6 million, with a gross contractual amount of $27.7 million. We
do not expect to collect $1.1 million of the acquired receivables.
For purposes of the above allocation, 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 based our estimate of the fair value for the acquired property, plant, and
equipment 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.
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 PPC acquisition primarily consist of
cost savings from the ability to consolidate existing and acquired operating facilities and other support
functions. Our tax basis in the acquired goodwill is $277.1 million. The goodwill balance we recorded is
deductible for tax purposes up to the amount of the tax basis. Intangible assets related to the PPC acquisition
consisted of the following:
55
Cash $ 6,874 Receivables 26,612 Inventories 45,465 Other current assets 868 Property, plant and equipment 26,856 Goodwill 277,091 Intangible assets 164,500 Other non-current assets 1,308 Total assets $ 549,574 Accounts payable $ 22,499 Accrued liabilities 4,104 Other long-term liabilities 579 Total liabilities $ 27,182 Net assets $ 522,392
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.
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.
Miranda Technologies Inc.
We acquired 97.37% of the shares of Miranda Technologies Inc. (Miranda) for cash of $364.8 million on July
27, 2012, and we acquired the remaining 2.63% of shares of Miranda for cash of $9.9 million on July 30, 2012.
Miranda is a leading provider of hardware and software solutions for the broadcast infrastructure industry and
expands our solution offerings in the broadcast end-market. Miranda is headquartered in Montreal, Quebec,
Canada. Miranda’s strong brands and technology enhance our portfolio of broadcast products. The results of
Miranda have been included in our Consolidated Financial Statements from July 27, 2012, and are reported
within the Broadcast segment. The impact of the noncontrolling interest from July 27, 2012 to July 30, 2012
was not material to our financial position or results of operations. The following table summarizes the
estimated fair value of the assets acquired and the liabilities assumed as of July 27, 2012 (in thousands).
56
Estimated Fair ValueAmortization Period(In thousands)(In years)Intangible assets subject to amortization:Developed technologies76,000$ 5.0 Customer relationships55,000 20.0 Backlog1,5000.5 Total intangible assets subject to amortization132,500 Intangible assets not subject to amortization:Goodwill277,091In-process research and development5,000 Trademarks27,000Total intangible assets not subject to amortization309,091 Total intangible assets441,591$ Weighted average amortization period11.2
A single estimate of fair value results from a complex series of judgments about future events and uncertainties
and relies heavily on estimates and assumptions. The judgments we have used in estimating the fair values
assigned to each class of acquired assets and assumed liabilities could materially affect the results of our
operations.
The fair value of acquired receivables is $27.6 million, with a gross contractual amount of $28.3 million. We
do not expect to collect $0.7 million of the acquired receivables.
For purposes of the above allocation, we have estimated a fair value adjustment for inventories based on the
estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of
the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post
acquisition selling efforts. We based our estimate of the fair value for the acquired property, plant, and
equipment on a valuation study performed by a third party valuation firm. We used various valuation methods
including discounted cash flows to estimate the fair value of the identifiable intangible assets.
Goodwill and other intangible assets reflected above were determined to meet the criterion for recognition
apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to expected
synergies and the assembled workforce. The primary expected synergy for the Miranda acquisition is due to
expanded access to the broadcast market, which we expect will generate significant opportunities to sell our
existing product lines to Miranda’s existing customers. None of the goodwill related to the Miranda
acquisition is deductible for tax purposes. Intangible assets related to the acquisition consisted of the
following:
57
Cash33,324$ Receivables27,592 Inventories31,109 Other current assets1,924 Property, plant and equipment23,930 Goodwill161,206 Intangible assets159,991 Total assets439,076$ Accounts payable23,917$ Accrued liabilities5,730 Current deferred tax liabilities844 Other long-term liabilities8,699 Non-current deferred tax liabilities25,207 Total liabilities64,397$ Net assets374,679$
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.
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.
Pro forma – PPC and Miranda
The following table illustrates the unaudited pro forma effect on operating results as if the Miranda and PPC
acquisitions had been completed as of January 1, 2011.
For purposes of the unaudited pro forma disclosures, the year ended December 31, 2011 includes nonrecurring
expenses from the effects of purchase accounting, including inventory cost step-up of $19.2 million,
58
Estimated Fair ValueAmortization Period(In thousands)(In years)Intangible assets subject to amortization:Developed technologies69,132$ 4.0 Customer relationships44,442 20.0 Backlog3,950 1.0 Total intangible assets subject to amortization117,524Intangible assets not subject to amortization:Goodwill161,206 Trademarks35,554 In-process research and development6,913 Total intangible assets not subject to amortization203,673Total intangible assets321,197$ Weighted average amortization period9.920122011Revenues $ 2,163,302 $ 2,280,189 Income from continuing operations 78,827 108,117 Diluted income per share from continuing operations $ 1.72 $ 2.25 Years Ended December 31,(Unaudited)(In thousands, except per share data)
amortization of sales backlog intangible assets of $6.7 million, and Belden’s transaction costs of $3.5 million.
For both years ended December 31, 2012 and 2011, the pro forma information above also reflects interest
expense from the term loan borrowed to finance the acquisition of Miranda and from the borrowings under our
senior secured credit facility to finance the acquisition of PPC.
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 acquisitions.
ICM Corp.
We acquired 100% of the outstanding shares of ICM Corp. (ICM) for cash of $21.8 million on January 7,
2011. ICM is a broadcast connectivity product manufacturer, and its strong brands and technology enhance
our portfolio of broadcast products. The results of ICM have been included in our Consolidated Financial
Statements from the acquisition date and are reported within the Broadcast segment.
Poliron Cabos Electricos Especiais Ltda
We acquired Poliron Cabos Electricos Especiais Ltda (Poliron) for cash of $28.7 million on April 1, 2011.
Poliron is an industrial cable manufacturer located in Sao Paulo, Brazil. The acquisition of Poliron expands
our presence in emerging markets. The results of Poliron have been included in our Consolidated Financial
Statements from the acquisition date and are reported within the Industrial Connectivity segment.
Byres Security, Inc.
We acquired Byres Security, Inc. (Byres Security) for cash of $7.2 million on August 31, 2011. Byres Security
is an industrial network security company located in Vancouver, Canada. The acquisition of Byres Security
expands our industrial networking product capabilities. The results of Byres Security have been included in our
Consolidated Financial Statements from the acquisition date and are reported within the Industrial IT segment.
The acquisitions of ICM, Poliron, and Byres Security are not material to our financial position or results of
operations reported as of and for the year ended December 31, 2011. During the year ended December 31,
2011, we recorded $27.8 million and $21.3 million of goodwill and intangible assets, respectively, due to the
ICM, Poliron, and Byres Security acquisitions.
Note 4: Discontinued Operations
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 after-tax). At the time the transaction closed, we received $265.6 million
in cash, subject to a working capital adjustment. In 2013, we recognized a $1.4 million loss from discontinued
operations for income tax expense related to this disposed business. As of December 31, 2012, we had a net
current liability of discontinued operations on our consolidated balance sheet of $86.9 million related to our tax
obligations from the gain on disposal of Thermax and Raydex.
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. In 2012, based on the status of negotiations with the buyer regarding the
amounts in escrow, we recognized a loss of $7.0 million ($4.3 million net of tax) due to a reduction of the
carrying value of our escrow receivable. The loss is included in our gain (loss) from disposal of discontinued
operations. As of December 31, 2013, we have collected a partial settlement of $4.2 million from the escrow,
and we remain in negotiations with the buyer of Trapeze regarding the status of the escrow and certain claims
raised by the buyer. Based on the current status of the negotiations, the amount of the escrow receivable on
our Condensed Consolidated Balance Sheet is $3.8 million, which is our best estimate of the remaining amount
to be collected.
59
During 2005, we completed the sale of our discontinued communications cable operation in Phoenix, Arizona.
In connection with this sale and related tax deductions, we established a reserve for uncertain tax positions.
The statute of limitations associated with the tax positions expired during our fiscal third quarter of 2012. In
2012, we recognized a net gain of $14.1 million due to the reversal of the uncertain tax positions, which is
included in our gain from disposal of discontinued operations. In 2012, we recognized a gain of $4.0 million
($2.6 million net of tax) due to the reversal of the accrued interest and penalties, which is included in our
income (loss) from discontinued operations.
Operating results from discontinued operations for 2012 and 2011 included the following revenues and income
(loss) before taxes:
Note 5: Operating Segments and Geographic Information
In 2013, we re-organized the Company around four global business platforms: Broadcast, Enterprise
Connectivity, Industrial Connectivity, and Industrial IT. Previously, we were organized around geographic
regions. The re-organization was executed as a result of our transformation into a global provider of
comprehensive signal transmission solutions. We believe the new organization will allow us to better capitalize
on market opportunities and meet customer demands. We have determined that each of the global business
platforms represents a reportable segment. We have revised the prior period segment information to conform to
the change in the composition of our reportable segments. The All Other segment represents the financial results
of our cable operations that primarily conducted business in the consumer electronics end market, which we sold
in December 2012.
The segments design, manufacture, and market a portfolio of signal transmission solutions for mission critical
applications used in a variety of end markets, including broadcast, enterprise, and industrial. We sell the products
manufactured by our segments principally through distributors or directly to systems integrators, original
equipment manufacturers (OEMs), end-users, and installers.
We evaluate segment performance based on operating income, working capital, and organic growth. Operating
income of the segments includes all the ongoing costs of operations, but excludes interest and income taxes.
Transactions between the segments are conducted on an arms-length basis. We allocate corporate expenses to the
segments for purposes of measuring segment operating income. Corporate expenses are allocated on the basis of
each segment’s relative operating income prior to the allocation, adjusted for certain items including asset
impairment, severance and other restructuring costs, purchase accounting effects related to acquisitions,
accelerated depreciation, amortization of intangible assets, and other costs.
Our measure of segment assets does not include cash, goodwill, intangible assets, deferred tax assets, or corporate
assets. All goodwill is allocated to reporting units of our segments for purposes of impairment testing.
The results of our equity method investment in Xuzhou Hirschmann Electronics Co. Ltd. (the Hirschmann JV)
are analyzed separately from the results of our operating segments, and they are not included in the corporate
expense allocation.
60
RevenuesIncome (Loss) before TaxesRevenuesIncome (Loss) before TaxesThermax and Raydex95,668$ 21,479$ 99,766$ 21,792$ Trapeze- - - (196) Phoenix Communications- 3,980 - (949) Total95,668$ 25,459$ 99,766$ 20,647$ 20122011(In thousands)
Operating Segment Information
61
Broadcast Solutions201320122011External customer revenues663,900$ 356,320$ 314,733$ Affiliate revenues933 691 616 Total revenues664,833 357,011 315,349 Depreciation and amortization (64,420) (23,184) (8,318) Asset impairment and loss on sale of assets- - (366) Operating income (loss)15,099 (11,657) 21,523 Total assets294,454 272,520 101,351 Acquisition of property, plant and equipment10,526 8,844 4,735 Years Ended December 31, (In thousands)Enterprise Connectivity Solutions201320122011External customer revenues493,129$ 496,857$ 546,800$ Affiliate revenues9,823 6,467 5,660 Total revenues502,952 503,324 552,460 Depreciation and amortization (12,988) (16,057) (15,840) Asset impairment and loss on sale of assets- (1,468) (607) Operating income48,753 40,056 41,750 Total assets223,073 234,882 240,589 Acquisition of property, plant and equipment11,749 13,013 11,181 Years Ended December 31, (In thousands)Industrial Connectivity Solutions201320122011External customer revenues680,643$ 670,112$ 665,035$ Affiliate revenues1,901 1,129 1,322 Total revenues682,544 671,241 666,357 Depreciation and amortization (11,408) (10,970) (13,890) Asset impairment and loss on sale of assets- (2,435) (1,067) Operating income92,562 72,366 69,200 Total assets259,400 263,293 301,535 Acquisition of property, plant and equipment14,496 13,077 8,979 Years Ended December 31, (In thousands)Industrial IT Solutions201320122011External customer revenues231,521$ 219,679$ 231,374$ Affiliate revenues208 286 47 Total revenues231,729 219,965 231,421 Depreciation and amortization (5,635) (4,848) (4,543) Asset impairment and loss on sale of assets- - (509) Operating income38,440 32,807 31,992 Total assets56,658 54,428 56,432 Acquisition of property, plant and equipment2,020 4,597 2,674 Years Ended December 31, (In thousands)
Total segment operating income differs from net income reported in the Consolidated Financial Statements as
follows:
Below are reconciliations of other segment measures to the consolidated totals.
62
All Other201320122011External customer revenues-$ 97,771$ 124,245$ Affiliate revenues- - - Total revenues- 97,771 124,245 Depreciation and amortization - (2,828) (5,521) Asset impairment and loss on sale of assets- (29,773) - Operating income (loss)1,278 (32,640) (6,168) Total assets- - 76,604 Acquisition of property, plant and equipment- 348 881 Years Ended December 31, (In thousands)Total Segments201320122011External customer revenues2,069,193$ 1,840,739$ 1,882,187$ Affiliate revenues12,865 8,573 7,645 Total revenues2,082,058 1,849,312 1,889,832 Depreciation and amortization (94,451) (57,887) (48,113) Asset impairment and loss on sale of assets- (33,676) (2,549) Operating income196,132 100,932 158,297 Total assets833,585 825,123 776,511 Acquisition of property, plant and equipment38,791 39,879 28,450 (In thousands)Years Ended December 31, Years Ended December 31, 201320122011(In thousands)Total segment operating income 196,132$ 100,932$ 158,297$ Income from equity method investment8,922 9,704 13,169 Eliminations(3,792) (2,139) (6,260) Total operating income 201,262 108,497 165,206 Interest expense(73,095) (52,038) (48,118) Interest income494 1,033 1,011 Loss on debt extinguishment(1,612) (52,450) - Income tax benefit (expense)(22,315) 38,194 (16,791) Income from continuing operations104,734 43,236 101,308 Income (loss) from discontinued operations, net of tax(1,421) 16,774 13,037 Gain from disposal of discontinued operations, net of tax- 134,480 - Net income 103,313$ 194,490$ 114,345$
Geographic Information
The Company attributes foreign sales based on the location of the customer purchasing the product. The table
below summarizes net sales and long-lived assets for the years ended December 31, 2013, 2012 and 2011 for
the following countries: the U.S., Canada, Germany and China. No other individual foreign country’s net sales
or long-lived assets are material to the Company.
Major Customer
Revenues generated from sales to the distributor Anixter International Inc., primarily in the Industrial
Connectivity and Enterprise segments, were $289.9 million (14% of revenues), $300.4 million (16% of
revenues), and $288.3 million (15% of revenues) for 2013, 2012, and 2011, respectively. At December 31,
2013, we had $48.3 million in accounts receivable outstanding from Anixter International Inc. This represented
approximately 16% of our total accounts receivable outstanding at December 31, 2013.
63
Years Ended December 31, 201320122011Total segment assets833,585$ 825,123$ 776,511$ Cash and cash equivalents613,304 395,095 382,552 Goodwill773,048 778,708 336,591 Intangible assets, less accumulated depreciation376,976 428,273 139,515 Deferred income taxes54,801 66,855 30,697 Income tax receivable12,169 8,432 - Corporate assets87,870 82,097 61,770 Discontinued operations assets- - 60,484 Total assets2,751,753$ 2,584,583$ 1,788,120$ Total segment acquisition of property, plant and equipment38,791$ 39,879$ 28,450$ Corporate acquisition of property, plant and equipment1,418 336 10,483 Discontinued operations acquisition of property, plant and equipment- 795 1,120 Total acquisition of property, plant and equipment40,209$ 41,010$ 40,053$ Total segment depreciation and amortization(94,451)$ (57,887)$ (48,113)$ Discontinued operations depreciation and amortization- (1,468) (2,061) Total depreciation and amortization(94,451)$ (59,355)$ (50,174)$ (In thousands)United StatesCanadaChinaGermanyAll OtherTotal Year ended December 31, 2013Revenues$1,032,190$195,387$126,461$108,745$606,410$2,069,193Percent of total revenues50%9%6%5%30%100%Long-lived assets$170,813$27,458$76,949$45,702$59,275$380,197Year ended December 31, 2012Revenues$825,437$196,761$193,082$105,377$520,082$1,840,739Percent of total revenues45%11%10%6%28%100%Long-lived assets$164,619$31,610$72,556$42,411$59,854$371,050Year ended December 31, 2011Revenues$832,681$192,184$246,866$117,088$493,368$1,882,187Percent of total revenues44%10%13%6%27%100%Long-lived assets$137,597$9,196$98,211$46,729$52,212$343,945 (In thousands, except percentages)
Note 6: Equity Method Investment
We have a 50% ownership interest in Xuzhou Hirschmann Electronics Co., Ltd. (the Hirschmann JV),
which we acquired in connection with our 2007 acquisition of Hirschmann Automation and Control GmbH.
The Hirschmann JV is an entity located in China that supplies load-moment indicators to the industrial crane
market. We account for this investment using the equity method of accounting. The results of our equity
method investment in the Hirschmann JV are analyzed separately from the results of our operating segments, and
they are not included in the corporate expense allocation.
Summary financial information for the Hirschmann JV is as follows:
The carrying value recorded in other long-lived assets on our Consolidated Balance Sheets of our investment
in the Hirschmann JV as of December 31, 2013 and 2012 is $38.3 million and $35.4 million, respectively. The
difference between this carrying value and our share of the Hirschmann JV’s net assets is primarily attributable
to goodwill.
We had sales of $3.6 million, $5.7 million, and $19.4 million to the Hirschmann JV in 2013, 2012, and 2011,
respectively. We received $8.1 million, $12.5 million, and $10.9 million in dividends from the Hirschmann JV
in 2013, 2012, and 2011, respectively. We had receivables from the Hirschmann JV as of December 31, 2013
and 2012 of $0.3 million and $2.4 million, respectively.
Note 7: Income Per Share
The following table presents the basis of the income per share computation:
64
201320122011Current assets49,408$ 46,042$ 63,879$ Noncurrent assets3,801 4,107 4,020 Current liabilities21,524 13,132 26,914 Noncurrent liabilities447 207 205 201320122011Revenues41,257$ 56,564$ 69,431$ Gross profit27,332 29,067 34,100 Operating income19,821 22,317 27,771 Net income17,844 19,408 26,338 Net income attributable to Belden8,922 9,704 13,169 (In thousands)December 31,Years Ended December 31,(In thousands)
For the years ended December 31, 2013, 2012, and 2011, diluted weighted average shares outstanding do not
include outstanding equity awards of 0.2 million, 0.9 million, and 0.8 million, respectively, because to do so
would have been anti-dilutive.
For purposes of calculating basic earnings per share, unvested restricted stock units are not included in the
calculation of basic weighted average shares outstanding until all necessary conditions have been satisfied and
issuance of the shares underlying the restricted stock units is no longer contingent. Necessary conditions are
not satisfied until the vesting date, at which time holders of our restricted stock units receive shares of our
common stock.
For purposes of calculating diluted earnings per share, unvested restricted stock units are included to the extent
that they are dilutive. In determining whether unvested restricted stock units are dilutive, each issuance of
restricted stock units is considered separately.
Once a restricted stock unit has vested, it is included in the calculation of both basic and diluted weighted
average shares outstanding.
Note 8: Inventories
The major classes of inventories were as follows:
Note 9: Property, Plant and Equipment
The carrying values of property, plant and equipment were as follows:
65
Years Ended December 31,201320122011(In thousands)Numerator for basic and diluted income per share:Income from continuing operations $ 104,734 $ 43,236 $ 101,308 Income (loss) from discontinued operations, net of tax (1,421) 16,774 13,037 Gain from disposal of discontinued operations, net of tax - 134,480 - Net income $ 103,313 $ 194,490 $ 114,345 Denominator:Weighted average shares outstanding, basic 43,871 45,097 47,109 Effect of dilutive common stock equivalents 866 845 995 Weighted average shares outstanding, diluted 44,737 45,942 48,104 December 31,20132012(In thousands)Raw materials $ 85,379 $ 92,072 Work-in-process 34,671 34,391 Finished goods 107,091 110,280 Perishable tooling and supplies 2,156 2,493 Gross inventories 229,297 239,236 Excess and obsolete reserves (21,317) (23,954)Net inventories $ 207,980 $ 215,282
Disposals
During 2013, we sold certain real estate of the Broadcast segment for $1.0 million and recognized a $0.3
million loss on the sale. We also sold certain real estate of the Enterprise Connectivity segment for $2.1
million. There was no gain or loss on the sale.
During 2012, we sold certain net assets of our cable operations within the All Other segment for $40.0 million
that primarily conduct business in the consumer electronics end market in China (the Disposal Group). We
had previously evaluated a number of strategic alternatives related to the Disposal Group, and we determined
that the characteristics of the end market in which they conduct business were not in line with our strategic
plan. The cash flows related to the Disposal Group were not separately identifiable and independent of the
other cash flows of our Chinese cable operations, and therefore, we have not reported the operating results of
the Disposal Group as discontinued operations. We recognized an asset impairment and loss on sale of the
Disposal Group in 2012 of $29.8 million. In 2013, we recorded a $1.3 million gain on the sale due to a
favorable resolution with the buyer of those assets regarding the closing date working capital. See further
discussion below.
During 2012, we also sold certain real estate of the Enterprise Connectivity and Industrial Connectivity
segments for $0.8 million and $8.6 million, respectively. There was no gain or loss recognized on the sale.
During 2011, we sold certain real estate that supported multiple segments for $1.1 million. There was no gain
or loss recognized on the sale.
Impairment
In 2013, we did not recognize any impairment losses.
In 2012, we recognized a $29.8 million asset impairment and loss on sale of certain net assets of our cable
operations that primarily conducted business in the consumer electronics end market in China. The loss is
included in the operating results of the All Other segment. Of the total loss, $10.6 million, $6.8 million, and
$5.2 million related to impairment of property, plant and equipment, customer relationships, and trademarks,
respectively. We estimated the fair market value of these assets based upon the purchase price per the terms of
the sale agreement. The remainder of the loss was due to the accrual of estimated costs to sell, including such
items as investment banker fees, legal fees, and other closing costs.
In 2012, we recognized impairment losses on property, plant and equipment of $2.4 million and $1.5 million in
the operating results of our Industrial Connectivity and Enterprise Connectivity segments, respectively. Of the
total impairment loss, approximately $1.5 million related to real estate retained by us from a German cable
business we sold in 2009 and leased to the purchasers, $1.4 million related to manufacturing equipment, and
$1.0 million related to other property, plant and equipment. We estimated the fair value of these assets based
66
20132012(In thousands)Land and land improvements34,846$ 35,010$ Buildings and leasehold improvements124,688 136,751 Machinery and equipment441,933 438,928 Computer equipment and software89,919 92,946 Construction in process36,388 27,135 Gross property, plant and equipment727,774 730,770 Accumulated depreciation(426,939) (423,722) Net property, plant and equipment300,835$ 307,048$ December 31,
upon bids received from third parties to potentially buy the assets, quoted prices in active markets or quoted
prices for similar assets.
In 2011, we recognized an impairment loss of $2.5 million in connection with our decision to alter our
approach with respect to certain enterprise resource planning technology system assets and to abandon the use
of these assets. The impairment loss was recognized in our corporate expenses, which are allocated to our
segments as discussed in Note 5.
Depreciation Expense
We recognized depreciation expense in income from continuing operations of $43.6 million, $35.1 million,
and $35.0 million in 2013, 2012, and 2011, respectively.
Note 10: Intangible Assets
The carrying values of intangible assets were as follows:
Segment Allocation of Goodwill and Trademarks
The changes in the carrying amount of goodwill assigned to reporting units in our reportable segments are as
follows:
67
GrossNetGrossNetCarryingAccumulatedCarryingCarryingAccumulatedCarryingAmountAmortizationAmountAmountAmortizationAmount(In thousands)(In thousands)Goodwill773,048$ -$ 773,048$ 778,708$ -$ 778,708$ Definite-lived intangible assets subject to amortization:Customer relationships198,522$ (35,981)$ 162,541$ 195,021$ (25,632)$ 169,389$ Developed technology174,106 (68,233) 105,873 170,747 (32,713) 138,034 Trademarks7,151 (1,033) 6,118 401 (176) 225 Backlog8,434 (8,421) 13 9,252 (5,997) 3,255 In-process research and development6,549 (1,124) 5,425 - - - Total intangible assets subject to amortization394,762 (114,792) 279,970 375,421 (64,518) 310,903 Indefinite-lived intangible assets not subject to amortizationTrademarks92,010 - 92,010 103,347 - 103,347 In-process research and development4,996 - 4,996 14,023 - 14,023 Total intangible assets not subject to amortization97,006 - 97,006 117,370 - 117,370 Intangible assets491,768$ (114,792)$ 376,976$ 492,791$ (64,518)$ 428,273$ December 31, 2013December 31, 2012
In 2013, as a result of our change in segments, we reassigned the carrying amount of goodwill to our new
reporting units in our new segments based on relative fair value. There was no goodwill impairment at the
time of our change in segments.
The changes in the carrying amount of indefinite-lived trademarks are as follows:
Impairment
The annual measurement date for our goodwill and trademarks impairment test is our fiscal November month-
end. For our 2013 goodwill impairment test, we performed a quantitative assessment for each of our reporting
units and determined the estimated fair values of our reporting units by calculating the present values of their
estimated future cash flows. We determined that the fair values of our reporting units were substantially in
excess of the carrying values; therefore, we did not recognize any goodwill impairment in 2013. We also did
not recognize any goodwill impairment in 2012 or 2011 based on the results of our annual goodwill
impairment testing.
Similar to the quantitative goodwill impairment test, we determined the estimated fair values of our trademarks
by calculating the present values of the estimated cash flows attributable to the respective trademarks. We did
not recognize any trademark impairment charges in 2013 or 2011. In 2012, we recognized a $5.2 million and
$6.8 million impairment loss on trademarks and customer relationships, respectively, related to our Chinese
68
AsiaIndustrialIndustrialAmericasEMEAPacificBroadcastEnterpriseConnectivityITConsolidated(In thousands)Balance at December 31, 2011249,319$ 69,470$ 17,802$ -$ -$ -$ -$ 336,591$ Acquisitions and purchase accounting adjustments439,696 - - - - - - 439,696 Translation impact1,563 858 - - - - - 2,421 Balance at December 31, 2012 690,578$ 70,328$ 17,802$ -$ -$ -$ -$ 778,708$ Reassignment of goodwill(690,578) (70,328) (17,802) 473,029 50,136 188,201 67,342 - Acquisitions and purchase accounting adjustments- - - 4,986 - - - 4,986 Translation impact- - - (11,640) - (226) 1,220 (10,646) Balance at December 31, 2013-$ -$ -$ 466,375$ 50,136$ 187,975$ 68,562$ 773,048$ Prior SegmentsCurrent SegmentsIndustrialIndustrialAllBroadcastEnterpriseConnectivityITOtherConsolidatedBalance at December 31, 201112,187$ 1,284$ 12,545$ 9,396$ 5,223$ 40,635$ Impairment- - - - (5,239) (5,239) Acquisitions and purchase accounting adjustments67,554 - - - - 67,554 Translation impact569 15 (266) 63 16 397 Balance at December 31, 2012 80,310$ 1,299$ 12,279$ 9,459$ -$ 103,347$ Reclassify to definite-lived(5,424) (1,353) - - - (6,777) Acquisitions and purchase accounting adjustments(4,918) - - - - (4,918) Translation impact159 54 (86) 231 - 358 Balance at December 31, 201370,127$ -$ 12,193$ 9,690$ -$ 92,010$
cable operations within the All Other segment which we disposed of during 2012. The total asset impairment
and loss on sale of the consumer electronics assets in 2012 was $29.8 million. See Note 9.
Amortization Expense
We recognized amortization expense in income from continuing operations of $50.8 million, $22.8 million,
and $13.1 million in 2013, 2012, and 2011, respectively. We expect to recognize annual amortization expense
of $47.3 million in 2014, $46.4 million in 2015, $39.2 million in 2016, $27.4 million in 2017, and
$12.0 million in 2018.
Note 11: Accounts Payable and Accrued Liabilities
The carrying values of accounts payable and accrued liabilities were as follows:
The majority of our accounts payable balance is due to trade creditors. Our accounts payable balance as of
December 31, 2013 and 2012 included $16.1 million and $21.3 million, respectively, of amounts due to banks
under a commercial acceptance draft program. All accounts payable outstanding under the commercial
acceptance draft program are expected to be settled within one year.
During 2013, we recorded severance and other restructuring costs of $14.9 million. The majority of these
costs were recorded in our Broadcast segment, which recognized $12.1 million of severance and other
restructuring costs for the year ended December 31, 2013. The other restructuring costs included relocation,
equipment transfer, and other costs. These costs were incurred primarily as a result of facility consolidation in
New York for recently acquired locations and other acquisition integration activities. These activities were
contemplated as part of the decision to acquire PPC. The Industrial IT segment also recognized $1.7 million of
severance expense in the year ended December 31, 2013.
Of the total severance and other restructuring costs recognized in the year ended December 31, 2013, $7.1
million, $6.5 million, and $1.3 million were included in cost of sales, selling, general and administrative
expenses, and research and development, respectively.
We do not expect to recognize any additional significant severance or other restructuring costs related to these
restructuring actions, and the majority of the costs related to these actions were paid in 2013. As of December
31, 2013, our accrued liabilities balance included $1.0 million of accrued severance related to these actions,
which is expected to be paid in 2014.
During 2012, we implemented certain restructuring actions in response to the uncertain global economic
environment. For the year ended December 31, 2012, we recognized severance and other restructuring costs in
our Broadcast, Enterprise Connectivity, Industrial Connectivity, and Industrial IT segments of $4.9 million,
$3.2 million, $9.2 million, and $0.5 million, respectively. The actions included reducing headcount and
69
20132012Accounts payable199,897$ 183,672$ Wages, severance and related taxes50,540 47,998 Employee benefits17,697 18,550 Accrued rebates34,317 28,002 Accrued interest22,479 15,162 Current deferred revenue31,371 12,220 Other (individual items less than 5% of total current liabilities)42,765 44,340 Accounts payable and accrued liabilities399,066$ 349,944$ December 31,(In thousands)
renegotiating procurement related contracts in order to reduce our cost structure. Of the total costs recognized,
approximately $5.2 million consisted of contract termination costs related to our supply chain.
Of the total severance and other restructuring costs recognized, $6.5 million, $10.0 million, and $1.4 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 further restructuring actions. This could result in
additional restructuring costs in future periods.
Note 12: Long-Term Debt and Other Borrowing Arrangements
The carrying values of our long-term debt and other borrowing arrangements were as follows:
Senior Secured Facility
In 2013, we refinanced our Senior Secured Facility. At the time of the refinancing, there were no outstanding
borrowings under the revolver component of the Senior Secured Facility, and we repaid the $240.0 million
outstanding balance on the variable rate term loan due 2017. We recorded a loss on extinguishment of debt of
$1.6 million, representing the write-off of certain unamortized debt issuance costs related to these instruments.
In 2012, we borrowed the variable rate term loan due 2017 in order to fund a portion of the purchase price for
the acquisition of Miranda (see Note 3), and we paid $1.7 million of fees associated with the borrowings. As
of December 31, 2012, we had 150.0 million euros ($198.3 million) of borrowings outstanding under the
revolving credit component of the Senior Secured Facility, which were used to fund a portion of the purchase
price for the acquisition of PPC (see Note 3). We repaid these borrowings during 2013.
In 2011, we paid $3.3 million of fees associated with the revolver component of the Senior Secured Facility.
70
20132012Senior secured credit facility:Variable rate term loan due 2017 $ - $ 247,714 Revolving credit agreement due 2016 - 198,270 Total senior secured credit facility - 445,984 Revolving credit agreement due 2018 - - Variable rate term loan due 2020 248,775 - Senior subordinated notes:5.5% Senior subordinated notes due 2022 700,000 700,000 5.5% Senior subordinated notes due 2023 413,040 - 9.25% Senior subordinated notes due 2019 5,221 5,221 Total senior subordinated notes 1,118,261 705,221 Total debt and other borrowing arrangements 1,367,036 1,151,205 Less current maturities of Term Loan (2,500) (15,678)Long-term debt $ 1,364,536 $ 1,135,527 (In thousands)December 31,
Variable Rate Term Loan due 2020
In 2013, we borrowed $250.0 million under a new Term Loan Credit Agreement (the Term Loan). The Term
Loan is secured on a second lien basis by the assets securing the Revoling Credit Agreement due 2018
discussed below and on a first lien basis by the stock of certain of our subsidiaries. The borrowings under the
Term Loan are scheduled to mature in 2020 and require quarterly amortization payments. Interest under the
Term Loan is variable, based upon the three-month LIBOR plus an applicable spread. The interest rate as of
December 31, 2013 was 3.25%. We utilized the proceeds from the Term Loan to repay the amounts
outstanding under our Senior Secured Facility, as discussed above. We paid approximately $4.1 million of
fees associated with the Term Loan, which are being amortized over the life of the Term Loan using the
effective interest method.
Revolving Credit Agreement due 2018
In 2013, we entered into a revolving credit agreement that provides a $400 million multi-currency asset-based
revolving credit facility (the Revolver). The borrowing base under the Revolver includes eligible accounts
receivable, inventory, and property, plant, and equipment of certain of our subsidiaries in the U.S., Canada,
Germany, the Netherlands, and the UK. As of December 31, 2013, our borrowing base was $325 million. The
Revolver matures in 2018. Interest on outstanding borrowings is variable, based upon LIBOR or other similar
indices in foreign jurisdictions, plus a spread that ranges from 1.25% - 1.75%, depending upon our leverage
position. We pay a commitment fee on our available borrowing capacity of 0.375%. In the event we borrow
more than 90% of our borrowing base, we are subject to a fixed charge coverage ratio covenant.
We paid approximately $5.4 million of fees associated with the Revolver, which are being amortized over the
life of the Revolver.
Senior Subordinated Notes
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 carrying value of the notes as of December 31, 2013 is $413.0
million. The 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 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. Interest is payable semiannually on April 15 and October 15 of each
year. We paid $7.8 million of fees associated with the issuance of the notes, which are being amortized over
the life of the notes using the effective interest method. We used the net proceeds from the transaction to repay
amounts outstanding under the revolving credit component of our Senior Secured Facility and for general
corporate purposes.
In 2012, we issued $700.0 million aggregate principal amount of 5.5% senior subordinated notes due 2022.
The 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 2019 and 2023 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. Interest is payable semiannually on March 1 and September 1 of each year, beginning March
1, 2013. We paid $13.7 million of fees associated with the issuance of the notes, which are being amortized
over the life of the notes using the effective interest method. We used the net proceeds from the transaction to
fund the repurchase of certain of our senior subordinated notes due 2017 and 2019, as discussed below, and for
general corporate purposes.
During 2012, we repurchased all $350.0 million of our senior subordinated notes due 2017 for cash
consideration of $363.1 million, and $194.8 million of our senior subordinated notes due 2019 for cash
consideration of $226.7 million. We recorded a loss on extinguishment of debt of $52.5 million, including the
write-off of unamortized debt issuance costs related to these instruments.
71
As of December 31, 2013, $5.2 million aggregate principal amount of our senior subordinated notes due 2019
remain outstanding. The senior subordinated notes due 2019 have a coupon interest rate of 9.25% and an
effective interest rate of 9.75%. The interest on the 2019 notes is payable semiannually on June 15 and
December 15. The 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 2022 and 2023 and with any future
senior subordinated debt, and are subordinated to all of our senior debt and the senior debt of our subsidiary
guarantors, including our Term Loan.
The senior subordinated notes due 2019, 2022, and 2023 are redeemable after June 15, 2014, September 1,
2017, and April 15, 2018, respectively, at the following redemption prices as a percentage of the face amount
of the notes:
Fair Value of Long-Term Debt
The fair value of our senior subordinated notes as of December 31, 2013 was approximately $1,098.6 million
based on quoted prices of the debt instruments in inactive markets (Level 2 valuation). This amount represents
the fair values of our senior subordinated notes with a carrying value of $1,118.3 million as of December 31,
2013. We believe the fair value of our Term Loan approximates book value.
Maturities
Maturities on outstanding long-term debt and other borrowings during each of the five years subsequent to
December 31, 2013 are as follows (in thousands):
Note 13: Derivatives and Hedging Activities
We are exposed to various market risks, including fluctuations in foreign currency exchange rates. From time
to time, we manage a portion of this risk through the use of derivative financial instruments to reduce our
exposure to foreign currency risk. We do not hold or issue any derivative instrument for trading or speculative
purposes.
During 2012, we entered into foreign currency forward contracts that were formally designated and qualified
as net investment hedges of our operations in certain European subsidiaries. To the extent that the hedge
relationships were effective, the gains or losses on the forward contracts were reported in Accumulated Other
Comprehensive Income (AOCI) as part of the cumulative translation component of equity. We utilized the
72
YearPercentageYearPercentageYearPercentage2014104.625%2017102.750%2018102.750%2015103.083%2018101.833%2019101.833%2016101.542%2019100.917%2020100.917%2017 and thereafter100.000%2020 and thereafter100.000%2021 and thereafter100.000%Senior Subordinated Notes due 20192022202220232014 $ 2,500 2015 2,500 2016 2,500 2017 2,500 2018 2,500 Thereafter 1,354,536 $ 1,367,036
forward-rate method of assessing hedge ineffectiveness. Any ineffectiveness was recognized in the
Consolidated Statements of Operations.
The forward contracts exposed us to credit risk to the extent that the counterparties to our forward contracts
would have been unable to meet the terms of the agreements. We sought to mitigate such risks by limiting the
counterparties to major financial institutions and by executing our agreements across multiple counterparties.
Additionally, our forward contracts were short-term in duration.
We recognized $4.0 million pre-tax gain in AOCI during 2012. There was no ineffectiveness and no amount
reclassified from AOCI into earnings for 2012. There were no outstanding derivatives as of December 31,
2013 or 2012.
All cash flows associated with derivatives are classified as financing cash flows in the Consolidated Cash Flow
Statements. We collected $4.0 million in proceeds upon the settlement of foreign currency forward contracts
during 2012.
Note 14: Income Taxes
In addition to the above income tax expense (benefit) associated with continuing operations, we also recorded
income tax expense associated with discontinued operations of $1.4 million, $78.7 million, and $7.6 million in
2013, 2012, and 2011, respectively.
In 2013, our income tax expense was reduced by $2.5 million due to a tax holiday for our operations in St.
Kitts. The tax holiday in St. Kitts is scheduled to expire in 2022.
73
201320122011Income (loss) from continuing operations before taxes: United States operations31,678$ (22,533)$ 27,324$ Foreign operations95,371 27,575 90,775 Income from continuing operations before taxes127,049$ 5,042$ 118,099$ Income tax expense (benefit):Currently payableUnited States federal(4,493)$ (6,944)$ (4,741)$ United States state and local(26) (2,519) 1,303 Foreign21,377 14,020 18,572 16,858 4,557 15,134 DeferredUnited States federal3,575 (22,661) (1,276) United States state and local1,593 (424) (799) Foreign289 (19,666) 3,732 5,457 (42,751) 1,657 Income tax expense (benefit)22,315$ (38,194)$ 16,791$ (In thousands)Years ended December 31,
With respect to the effective income tax rate reconciliation for 2012, the individual percentages reflected are
significant due to the dollar value of such items relative to the $5.0 million of consolidated pre-tax income in
2012. The most significant factors impacting the rate and the total income tax benefit of $38.2 million in 2012
include the Cooper Industries tax agreement settlement and the reduction of the deferred tax asset valuation
allowance, both of which are discussed further below.
Deferred income taxes have been established for differences in the basis of assets and liabilities for financial
statement and tax reporting purposes. For 2012 and prior, these amounts included adjustments for a tax
sharing agreement with Cooper Industries (Cooper). This agreement required us to pay Cooper the majority of
the tax benefits resulting from basis adjustments arising from the initial public offering of our stock on
October 6, 1993. The effect of the Cooper tax agreement was to put us in the same financial position we would
have been in had there been no increase in the tax basis of our intangible assets (except for a retained 10%
benefit). The retained 10% benefit had no impact on our consolidated income tax expense for 2011 and 2010,
and we did not pay any taxes to Cooper in accordance with the tax agreement during those years. In 2011,
Cooper sued us in Texas state court for amounts allegedly owed by us under the tax sharing agreement. As a
result of a final settlement reached with Cooper in 2012, the tax sharing agreement has been terminated. We
paid a final settlement amount of $30 million in 2013 and recorded a tax benefit of $21.0 million in our 2012
tax provision.
In 2012, we recorded a $9.5 million tax benefit due to a net reduction in valuation allowances associated with
our ability to realize deferred tax assets related to net operating losses and tax credits in various jurisdictions.
We evaluated and assessed the expected utilization of net operating losses, future book and taxable income,
available tax planning strategies, and our overall deferred tax position to determine the appropriate amount and
timing of valuation allowance adjustments. As a result of changes in our business, available tax planning
strategies, and future taxable income projections, we determined that the weight of evidence regarding the
future realizability of the deferred tax assets had become predominately positive and realization of the deferred
tax assets was more likely than not.
74
201320122011Effective income tax rate reconciliation from continuing operations:United States federal statutory rate35.0%35.0%35.0%State and local income taxes1.5%(10.7%)0.8%Impact of change in deferred tax asset valuation allowance(0.6%)(187.8%)(6.8%)Impact of change in tax contingencies3.8%3.3%(1.1%)Impact of change in United States tax legislation(3.3%)0.0%0.0%Foreign income tax rate differences(12.1%)(278.1%)(6.8%)Federal and state impact of Cooper liability settlement0.0%(416.5%)0.0%Domestic permanent differences & tax credits(6.7%)97.3%(6.9%)17.6%(757.5%)14.2%Years Ended December 31,
The decrease in net deferred income tax assets during 2013 stems primarily from a reduction of deferred tax
assets associated with our pension and postretirement liabilities. The increase in our valuation allowance
during 2013 primarily relates to valuation allowances on net operating loss carryforwards recorded for our
acquisition of Miranda.
As of December 31, 2013, we had $220.6 million of net operating loss carryforwards and $53.0 million of tax
credit carryforwards. Unless otherwise utilized, net operating loss carryforwards will expire as follows: $28.4
million in 2014, $44.4 million in 2015, $35.9 million between 2016 and 2018, and $68.3 million between 2019
and 2033. Net operating losses with an indefinite carryforward period total $43.6 million. Of the $220.6
million in net operating loss carryforwards, we have determined, based on the weight of all available evidence,
both positive and negative, that we will utilize $145.9 million of these net operating loss carryforwards within
their respective expiration periods.
Unless otherwise utilized, tax credit carryforwards of $50.5 million will expire as follows: $31.0 million
between 2018 and 2022 and $19.5 million between 2026 and 2033. Tax credit carryforwards with an indefinite
carryforward period total $2.5 million. We have determined, based on the weight of all available evidence,
both positive and negative, that we will utilize all of these tax credit carryforwards within their respective
expiration periods.
The following tables summarize our net operating loss carryforwards and tax credit carryforwards as of
December 31, 2013 by jurisdiction:
75
20132012Components of deferred income tax balances:Deferred income tax liabilities:Plant, equipment, and intangibles(97,229)$ (89,433)$ Deferred income tax assets:Postretirement, pensions, and stock compensation27,592 44,814 Reserves and accruals33,788 22,042 Net operating loss and tax credit carryforwards88,307 84,716 Valuation allowances(10,165) (7,498) 139,522 144,074 Net deferred income tax asset42,293$ 54,641$ December 31, (In thousands)
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those
operations. As a result, as of December 31, 2013, we have not made a provision for U.S. or additional foreign
withholding taxes on approximately $478.3 million of the undistributed earnings of foreign subsidiaries that
are essentially permanent in duration. Generally, such amounts become subject to U.S. taxation upon the
remittance of dividends and under certain other circumstances. It is not practical to estimate the amount of the
deferred tax liability related to investments in these foreign subsidiaries that would be payable if we were not
indefinitely reinvested.
In 2013, we recognized a net $1.3 million increase to reserves for uncertain tax positions. A reconciliation of
the beginning and ending gross amount of unrecognized tax benefits is as follows:
The majority of the additions for tax positions of prior years relates to income tax audits in foreign
jurisdictions. The balance of $18.6 million at December 31, 2013, reflects tax positions that, if recognized,
would impact our effective tax rate.
As of December 31, 2013, we believe it is reasonably possible that $7.2 million of unrecognized tax benefits
will change within the next twelve months primarily attributable to the expiration of several statutes of
limitations and completion of tax audits in various jurisdictions.
Our practice is to recognize interest and penalties related to uncertain tax positions in interest expense and
operating expenses, respectively. During 2013, 2012, and 2011, we recognized approximately $1.7 million,
$0.1 million, and $1.0 million, respectively, in interest expense. We have approximately $2.8 million and $1.4
million accrued for the payment of interest and penalties as of December 31, 2013 and 2012, respectively.
Our federal, state, and foreign income tax returns for the tax years 2007 and later remain subject to
76
Net Operating Loss Carryforwards(In thousands)United States - various states 120,233$ Netherlands54,900 Australia18,359 Germany16,781 Other 10,313 Total 220,586$ Tax Credit Carryforwards(In thousands)United States 34,172$ Canada18,850 Total 53,022$ 20132012Balance at beginning of year17,377$ 23,199$ Additions based on tax positions related to the current year1,932 1,001 Additions for tax positions of prior years3,761 8,928 Reductions for tax positions of prior years - Settlement(2,490) (640) Reduction for tax positions of prior years - Statute of limitations(1,941) (15,111) Balance at end of year18,639$ 17,377$ (In thousands)
examination by the Internal Revenue Service and by various state and foreign tax authorities.
Note 15: Pension and Other Postretirement Benefits
We sponsor defined benefit pension plans and defined contribution plans that cover substantially all employees in
Canada, the Netherlands, the United Kingdom, the U.S., and certain employees in Germany. We closed the U.S.
defined benefit pension plan to new entrants effective January 1, 2010. Employees who were not active
participants in the U.S. defined benefit pension plan on December 31, 2009, are not eligible to participate in the
plan. Annual contributions to retirement plans equal or exceed the minimum funding requirements of applicable
local regulations. The assets of the funded pension plans we sponsor are maintained in various trusts and are
invested primarily in equity and fixed income securities.
Benefits provided to employees under defined contribution plans include cash contributions by the Company
based on either hours worked by the employee or a percentage of the employee’s compensation. Defined
contribution expense for 2013, 2012, and 2011 was $13.2 million, $10.9 million, and $9.0 million,
respectively. The increase in expense from 2013 to 2012 was primarily due to the impact of our acquisitions
of Miranda and PPC in 2012.
We sponsor unfunded postretirement medical and life insurance benefit plans for certain of our employees in
Canada and the U.S. The medical benefit portion of the U.S. plan is only for employees who retired prior to 1989
as well as certain other employees who were near retirement and elected to receive certain benefits.
The following tables provide a reconciliation of the changes in the plans’ benefit obligations and fair value of
assets as well as a statement of the funded status and balance sheet reporting for these plans.
77
Pension BenefitsOther BenefitsYears Ended December 31,2013201220132012Change in benefit obligation:Benefit obligation, beginning of year(263,876)$ (240,002)$ (51,772)$ (49,118)$ Service cost(5,554) (5,423) (125) (116) Interest cost(9,310) (10,510) (1,910) (2,077) Participant contributions(105) (146) (11) (11) Plan amendments(56) - - - Actuarial gain (loss)8,147 (21,785) 2,096 (1,950) Other- - - (204) Foreign currency exchange rate changes(1,826) (2,542) 2,681 (886) Benefits paid14,157 16,532 2,427 2,590 Benefit obligation, end of year(258,423)$ (263,876)$ (46,614)$ (51,772)$ (In thousands)
The accumulated benefit obligation for all defined benefit pension plans was $254.5 million and $258.9 million at
December 31, 2013 and 2012, respectively.
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension
plans with an accumulated benefit obligation in excess of plan assets were $77.0 million, $75.1 million, and
$11.1 million, respectively, as of December 31, 2013 and $219.4 million, $214.7 million, and $120.0 million,
respectively, as of December 31, 2012. The projected benefit obligation, accumulated benefit obligation, and
fair value of plan assets for pension plans with an accumulated benefit obligation less than plan assets were
$181.4 million, $179.4 million, and $187.2 million, respectively, as of December 31, 2013, and were $44.5
million, $44.2 million, and $53.2 million, respectively, as of December 31, 2012.
The following table provides the components of net periodic benefit costs for the plans.
The following table presents the assumptions used in determining the benefit obligations and the net periodic
benefit cost amounts.
78
Pension BenefitsOther BenefitsYears Ended December 31,2013201220132012Change in plan assets:Fair value of plan assets, beginning of year173,154$ 160,806$ -$ -$ Actual return on plan assets29,416 16,449 - - Employer contributions10,035 10,448 2,416 2,579 Plan participant contributions105 146 11 11 Foreign currency exchange rate changes(186) 1,837 - - Benefits paid(14,157) (16,532) (2,427) (2,590) Fair value of plan assets, end of year198,367$ 173,154$ -$ -$ Funded status, end of year(60,056)$ (90,722)$ (46,614)$ (51,772)$ Amounts recongized in the balance sheets:Prepaid benefit cost5,797$ 8,728$ -$ -$ Accrued benefit liability (current)(3,878) (3,900) (2,665) (3,002) Accrued benefit liability (noncurrent)(61,975) (95,550) (43,949) (48,770) Net funded status(60,056)$ (90,722)$ (46,614)$ (51,772)$ (In thousands)Pension BenefitsOther BenefitsYears Ended December 31,201320122011201320122011(In thousands)Components of net periodic benefit cost:Service cost5,554$ 5,423$ 5,863$ 125$ 116$ 92$ Interest cost9,310 10,510 11,687 1,910 2,077 2,199 Expected return on plan assets(11,066) (11,112) (11,170) - - - Amortization of prior service credit(54) (55) (63) (108) (111) (116) Net loss recognition6,388 5,974 6,030 932 842 386 Net periodic benefit cost10,132$ 10,740$ 12,347$ 2,859$ 2,924$ 2,561$
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan.
A one percentage-point change in the assumed health care cost trend rates would have the following effects on
2013 expense and year-end liabilities.
Plan assets are invested using a total return investment approach whereby a mix of equity securities and fixed
income securities are used to preserve asset values, diversify risk, and achieve our target investment return
benchmark. Investment strategies and asset allocations are based on consideration of the plan liabilities, the
plan’s funded status, and our financial condition. Investment performance and asset allocation are measured
and monitored on an ongoing basis.
Plan assets are managed in a balanced portfolio comprised of two major components: an equity portion and a
fixed income portion. The expected role of equity investments is to maximize the long-term real growth of
assets, while the role of fixed income investments is to generate current income, provide for more stable
periodic returns, and provide some protection against a prolonged decline in the market value of equity
investments.
Absent regulatory or statutory limitations, the target asset allocation for the investment of the assets for our
ongoing pension plans is 30-40% in fixed income securities and 60-70% in equity securities and for our pension
plans where the majority of the participants are in payment or terminated vested status is 75-80% in fixed income
securities and 20-25% in equity securities. Equity securities include U.S. and international equity, primarily
invested through investment funds. Fixed income securities include government securities and investment grade
corporate bonds, primarily invested through investment funds and group insurance contracts. We develop our
expected long-term rate of return assumptions based on the historical rates of returns for equity and fixed income
securities of the type in which our plans invest.
The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the
invested assets and future assets to be invested to provide for the benefits included in the projected benefit
obligation. We use historic plan asset returns combined with current market conditions to estimate the rate of
79
Pension BenefitsOther BenefitsYears Ended December 31,2013201220132012Weighted average assumptions for benefitobligations at year end:Discount rate4.1%3.7%4.4%4.3%Salary increase3.9%3.9%N/AN/AWeighted average assumptions for netperiodic cost for the year:Discount rate3.7%4.5%4.3%4.3%Salary increase3.9%3.9%N/AN/AExpected return on assets6.7%6.9%N/AN/AAssumed health care cost trend rates:Health care cost trend rate assumed for next yearN/AN/A7.3%7.6%Rate that the cost trend rate gradually declines toN/AN/A5.0%5.0%Year that the rate reaches the rate it is assumed to remain atN/AN/A202020201% Increase1% DecreaseEffect on total of service and interest cost components222$ (183)$ Effect on postretirement benefit obligation5,101$ (4,208)$ (In thousands)
return. The expected rate of return on plan assets is a long-term assumption based on an analysis of historical
and forward looking returns considering the plan’s actual and target asset mix.
The following table presents the fair values of the pension plan assets by asset category.
(a) This category includes investments in actively managed and indexed investment funds that invest in a
diversified pool of equity securities of companies located in the U.S., Canada, Western Europe and other
developed countries throughout the world. The funds are valued using the net asset value method in which
an average of the market prices for the underlying investments is used to value the fund.
(b) This category includes investments in investment funds that invest in U.S. treasuries, other national, state
and local government bonds, and corporate bonds of highly rated companies from diversified industries.
The funds are valued using the net asset value method in which an average of the market prices for the
underlying investments is used to value the fund.
(c) This category includes guaranteed insurance contracts.
The plans do not invest in individual securities. All investments are through well diversified investment funds.
As a result, there are no significant concentrations of risk within the plan assets.
The following table reflects the benefits as of December 31, 2013 expected to be paid in each of the next five
years and in the aggregate for the five years thereafter from our pension and other postretirement plans as well
as Medicare subsidy receipts. Because our other postretirement plans are unfunded, the anticipated benefits
with respect to these plans will come from our own assets. Because our pension plans are primarily funded
plans, the anticipated benefits with respect to these plans will come primarily from the trusts established for
these plans.
80
Quoted Prices in Active Markets for Identical AssetsSignificant Observable InputsSignificant Unobservable InputsQuoted Prices in Active Markets for Identical AssetsSignificant Observable InputsSignificant Unobservable Inputs(Level 1)(Level 2)(Level 3)(Level 1)(Level 2)(Level 3)Asset Category:Equity securities(a) Large-cap fund75,306$ -$ 75,306$ -$ 62,151$ -$ 62,151$ -$ Mid-cap fund13,511 - 13,511 - 11,581 - 11,581 - Small-cap fund19,473 - 19,473 - 15,955 - 15,955 - Debt securities(b) Government bond fund25,520 - 25,520 - 24,385 - 24,385 - Corporate bond fund21,679 - 21,679 - 21,819 - 21,819 - Fixed income fund(c)42,847 - 42,847 - 37,231 - 37,231 - Cash & equivalents31 31 - - 32 32 - - Total198,367$ 31$ 198,336$ -$ 173,154$ 32$ 173,122$ -$ December 31, 2013December 31, 2012Fair Market Value at December 31, 2013Fair Market Value at December 31, 2012(In thousands)(In thousands)
We anticipate contributing $8.6 million and $3.0 million to our pension and other postretirement plans,
respectively, during 2014.
The pre-tax amounts in accumulated other comprehensive loss that have not yet been recognized as
components of net periodic benefit cost at December 31, 2013, the changes in these amounts during the year
ended December 31, 2013, and the expected amortization of these amounts as components of net periodic
benefit cost for the year ended December 31, 2014 are as follows.
81
MedicarePensionOther SubsidyPlansPlansReceipts201415,505$ 2,823$ 91$ 201515,752 2,840 85 201617,239 2,779 78 201717,273 2,701 71 201816,796 2,653 64 2019-202390,585 12,890 225 Total173,150$ 26,686$ 614$ (In thousands)PensionOtherBenefitsBenefitsComponents of accumulated other comprehensive loss:Net actuarial loss46,468$ 9,622$ Net prior service credit(107) (259) 46,361$ 9,363$ (In thousands)PensionOtherBenefitsBenefitsChanges in accumulated other comprehensive loss:Net actuarial loss, beginning of year79,370$ 13,116$ Amortization cost(6,388) (932) Actuarial gain(8,147) (2,096) Asset gain(18,350) - Currency impact(17) (466) Net actuarial loss, end of year46,468$ 9,622$ Prior service credit, beginning of year(224)$ (389)$ Amortization credit54 108 Plan amendment56 - Currency impact7 22 Prior service credit, end of year(107)$ (259)$ (In thousands)
Note 16: Comprehensive Income and Accumulated Other Comprehensive Income (Loss)
The following table summarizes total comprehensive income:
The accumulated balances related to each component of other comprehensive income (loss), net of tax,
are as follows:
The following table summarizes the effects of reclassifications from accumulated other comprehensive
income (loss):
82
PensionOtherBenefitsBenefitsExpected 2014 amortization:Amortization of prior service credit(47)$ (104)$ Amortization of net loss4,166 606 4,119$ 502$ (In thousands)201320122011Net income $ 103,313 $ 194,490 $ 114,345 Foreign currency translation loss, net of $2.2 million, $0.0 million, and $0.0 million tax, respectively (20,720) (1,414) (4,632)Foreign currency hedging instruments, net of $0.0 million,$1.6 million, and $0.0 million tax, respectively - 2,467 - Adjustments to pension and postretirement liability, net of $14.0 million, $3.2 million, and $4.8 million tax, respectively 22,104 (8,909) (9,158)Total comprehensive income $ 104,697 $ 186,634 $ 100,555 Years ended December 31, (In thousands)Foreign CurrencyPension and OtherAccumulatedTranslationPostretirementOther ComprehensiveComponentBenefit PlansIncome (Loss)Balance at December 31, 2011 $ 27,463 $ (50,172) $ (22,709)Other comprehensive income (loss)before reclassifications 1,053 (13,144) (12,091)Amounts reclassified from accumulatedother comprehensive income (loss) - 4,235 4,235 Net current period othercomprehensive income (loss) 1,053 (8,909) (7,856)Balance at December 31, 2012 $ 28,516 $ (59,081) $ (30,565)Other comprehensive income (loss)before reclassifications (20,720) 17,570 (3,150)Amounts reclassified from accumulatedother comprehensive income (loss) - 4,534 4,534 Net current period othercomprehensive income (loss) (20,720) 22,104 1,384 Balance at December 31, 2013 $ 7,796 $ (36,977) $ (29,181)(In thousands)
Note 17: Share-Based Compensation
Compensation cost charged against income, primarily SG&A expense, and the income tax benefit recognized
for our share-based compensation arrangements is included below:
We currently have outstanding stock appreciation rights (SARs), stock options, restricted stock units with
service vesting conditions, and restricted stock units with performance vesting conditions. We grant SARs and
stock options with an exercise price equal to the closing market price of our common stock on the grant date.
Generally, SARs and stock options may be converted into shares of our common stock in equal amounts on
each of the first three anniversaries of the grant date and expire 10 years from the grant date. Certain awards
provide for accelerated vesting in certain circumstances, including a change in control of the Company.
Restricted stock units with service conditions generally vest 3-5 years from the grant date. Restricted stock
units issued based on the attainment of the performance conditions generally vest 50% on the second
anniversary of their grant date and 50% on the third anniversary.
We recognize compensation cost for all awards based on their fair values. The fair values for SARs and stock
options are estimated on the grant date using the Black-Scholes-Merton option-pricing formula which
incorporates the assumptions noted in the following table. Expected volatility is based on historical volatility,
and expected term is based on historical exercise patterns of option holders. The fair value of restricted stock
units is the closing market price of our common stock on the date of grant. Compensation costs for awards
with service conditions are amortized to expense using the straight-line method. Compensation costs for
awards with performance conditions are amortized to expense using the graded attribution method.
83
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 otherpostretirement benefit plan items:Actuarial losses $ 7,320 (1)Prior service credit (162)(1)Total before tax 7,158 Tax benefit (2,624)Total net of tax $ 4,534 (1) The amortization of these accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit costs (see Note 15).201320122011(In thousands)Total share-based compensation cost $ 14,854 $ 12,374 $ 11,241 Income tax benefit5,777 4,812 4,372 Years Ended December 31,
At December 31, 2013, the total unrecognized compensation cost related to all nonvested awards was $18.5
million. That cost is expected to be recognized over a weighted-average period of 1.8 years.
Historically, we have issued treasury shares, if available, to satisfy award conversions and exercises.
Note 18: Stockholder Rights Plan
Under our Stockholder Rights Plan, each share of our common stock generally has “attached” to it one
preferred share purchase right. Each right, when exercisable, entitles the holder to purchase 1/1000th of a share
of our Junior Participating Preferred Stock Series A at a purchase price of $150.00 (subject to adjustment).
Each 1/1000th of a share of Series A Junior Participating Preferred Stock will be substantially equivalent to
one share of our common stock and will be entitled to one vote, voting together with the shares of common
stock.
The rights will become exercisable only if, without the prior approval of the Board of Directors, a person or
group of persons acquires or announces the intention to acquire 20% or more of our common stock. If we are
acquired through a merger or other business combination transaction, each right will entitle the holder to
purchase $300.00 worth of the surviving company's common stock for $150.00 (subject to adjustment). In
addition, if a person or group of persons acquires 20% or more of our common stock, each right not owned by
the 20% or greater shareholder would permit the holder to purchase $300.00 worth of our common stock for
$150.00 (subject to adjustment). The rights are redeemable, at our option, at $.01 per right at any time prior to
84
201320122011Weighted-average fair value of SARs and options granted $ 24.63 $ 19.53 $ 17.64 Total intrinsic value of SARs converted and options exercised 47,058 8,898 6,183 Cash received for options exercised 14,030 2,372 4,599 Tax benefit related to share-based compensation 10,734 4,119 1,790 Weighted-average fair value of restricted stock shares and units granted 50.38 35.85 35.91 Total fair value of restricted stock shares and units vested 9,032 9,017 4,370 Expected volatility53.94%54.26%52.00%Expected term (in years) 6.1 6.1 6.1 Risk-free rate1.04%1.11%2.49%Dividend yield0.40%0.50%0.56%(In thousands, except weighted average fair value and assumptions)Years Ended December 31,Weighted-Weighted-AverageWeighted-AverageRemainingAggregateAverageExerciseContractualIntrinsicGrant-DateNumberPriceTermValueNumberFair ValueOutstanding at January 1, 2013 3,139 30.40$ 386 26.67$ Granted 342 50.02 275 50.38 Exercised or converted (1,705)27.77 (176) 24.12 Forfeited or expired (108)42.01 (43)38.19 Outstanding at December 31, 2013 1,668 36.37$ 7.2 56,827$ 442 41.32$ Vested or expected to vest at December 31, 2013 1,631 36.22$ 7.1 $ 55,833 Exercisable or convertible at December 31, 2013 891 30.48 6.1 35,599 SARs and Stock OptionsRestricted Shares and Units(In thousands, except exercise prices, fair values, and contractual terms)
an announcement of a beneficial owner of 20% or more of our common stock then outstanding. The rights
expire on December 9, 2016.
Note 19: Share Repurchases
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. 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. This program is funded by cash on hand and free cash flow.
The program does not have an expiration date and may be suspended at any time at the discretion of the
Company.
From inception of the program to December 31, 2013, we have repurchased 5.4 million shares of our common
stock under the program for an aggregate cost of $218.8 million and an average price of $40.37. For the year
ended December 31, 2013, we repurchased 1.7 million shares of our common stock under the program for an
aggregate cost of $93.8 million and an average price of $54.76.
Note 20: Operating Leases
Operating lease expense incurred primarily for manufacturing and office space, machinery, and equipment was
$26.5 million, $23.6 million, and $19.7 million in 2013, 2012, and 2011, respectively.
Minimum annual lease payments for noncancelable operating leases in effect at December 31, 2013 are as
follows (in thousands):
Certain of our operating leases include step rent provisions and rent escalations. We include these step rent
provisions and rent escalations in our minimum lease payments obligations and recognize them as a
component of rental expense on a straight-line basis over the minimum lease term.
Note 21: Market Concentrations and Risks
Concentrations of Credit
We sell our products to many customers in several markets across multiple geographic areas. The ten largest
customers, of which six are distributors, constitute in aggregate approximately 36%, 34%, and 34% of
revenues in 2013, 2012, and 2011, respectively.
Unconditional Commodity Purchase Obligations
At December 31, 2013, we were committed to purchase approximately 1.6 million pounds of copper at an
aggregate fixed cost of $5.4 million. At December 31, 2013, this fixed cost was $0.2 million less than the
market cost that would be incurred on a spot purchase of the same amount of copper. The aggregate market
cost was based on the current market price of copper obtained from the New York Mercantile Exchange. In
85
2014 $ 17,664 2015 12,942 2016 10,506 2017 6,995 2018 4,938 Thereafter 21,123 $ 74,168
addition, at December 31, 2013, we were committed to purchase 0.4 million pounds of aluminum at an
aggregate fixed cost of $0.3 million. At December 31, 2013, this fixed cost approximated the market cost that
would be incurred on a spot purchase of the same amount of aluminum. These commitments will mature in
2014.
Labor
Approximately 23% of our labor force is covered by collective bargaining agreements at various locations
around the world. Approximately 21% of our labor force is covered by collective bargaining agreements that
we expect to renegotiate during 2014.
Fair Value of Financial Instruments
Our financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, and
debt instruments. The carrying amounts of cash and cash equivalents, trade receivables, and trade payables at
December 31, 2013 are considered representative of their respective fair values. The carrying amount of our
debt instruments at December 31, 2013 was $1,367.0 million. The fair value of our senior subordinated notes
at December 31, 2013 and 2012 was approximately $1,098.6 million and $725.2 million, respectively, based
on quoted prices of the debt instruments in inactive markets (Level 2 valuation). This amount represents the
fair values of our senior subordinated notes with a carrying value of $1,118.3 million and $705.2 million as of
December 31, 2013 and 2012, respectively. We believe the fair value of our Term Loan approximates book
value.
Note 22: Contingent Liabilities
General
Various claims are asserted against us in the ordinary course of business including those pertaining to income
tax examinations, product liability, customer, employment, vendor, and patent matters. Based on facts
currently available, management believes that the disposition of the claims that are pending or asserted will not
have a materially adverse effect on our financial position, operating results, or cash flow.
Letters of Credit, Guarantees and Bonds
At December 31, 2013, we were party to unused standby letters of credit, bank guarantees, and surety bonds
totaling $6.8 million, $4.8 million, and $1.7 million, respectively. These commitments are generally issued to
secure obligations we have for a variety of commercial reasons, such as workers compensation self-insurance
programs in several states and the importation and exportation of product.
Note 23: Supplemental Cash Flow Information
Supplemental cash flow information is as follows:
86
201320122011Income tax refunds received11,165$ 8,382$ 8,432$ Income taxes paid(79,778) (34,854) (18,759) Interest paid, net of amount capitalized(60,340) (41,854) (43,980) (In thousands)Years Ended December 31,
Note 24: Quarterly Operating Results (Unaudited)
Included in the first, second, third, and fourth quarters of 2013 are severance and other restructuring costs,
including accelerated depreciation expense, of $0.8 million, $7.7 million, $5.9 million, and $5.4 million,
respectively. The first quarter of 2013 also includes $6.6 million of purchase accounting effects related to
acquisitions, primarily the adjustment of acquired inventory to fair value. The fourth quarter of 2013 includes
a loss on debt extinguishment of $1.6 million.
Included in the third quarter of 2012 are asset impairment charges, severance and other restructuring costs, and
losses on the extinguishment of debt of $30.0 million, $17.4 million, and $50.6 million, respectively. Included
in the fourth quarter of 2012 are asset impairment and loss on sale charges, severance costs, and losses on the
extinguishment of debt of $3.7 million, $0.5 million, and $1.9 million, respectively.
Note 25: Subsequent Events
In February 2014, we submitted a binding offer to purchase Grass Valley for approximately $220 million.
Grass Valley is a leading provider of innovative technologies for the broadcast industry, including production
87
20131st 2nd3rd 4th YearNumber of days in quarter90 91 91 93 365 Revenues507,473$ $ 529,491 $ 522,478 509,751$ 2,069,193$ Gross profit167,353 179,196 182,841 175,039 704,429 Operating income44,240 53,913 53,935 49,174 201,262 Income from continuing operations22,245 29,492 29,068 23,929 104,734 Loss from discontinued operations, net of tax- - - (1,421) (1,421) Net income 22,245 29,492 29,068 22,508 103,313 Basic income (loss) per share Continuing operations0.50$ 0.67$ 0.67$ 0.55$ 2.39$ Discontinued operations- - - (0.03) (0.03) Net income 0.50$ 0.67$ 0.67$ 0.52$ 2.36$ Diluted income (loss) per share Continuing operations0.49$ 0.66$ 0.65$ 0.54$ 2.34$ Discontinued operations- - - (0.03) (0.03) Net income 0.49$ 0.66$ 0.65$ 0.51$ 2.31$ 20121st 2nd3rd 4th YearNumber of days in quarter92 91 91 92 366 Revenues439,600$ $ 458,218 $ 465,234 477,687$ 1,840,739$ Gross profit132,799 144,648 138,813 150,337 566,597 Operating income (loss)37,126 53,037 (13,269) 31,603 108,497 Income (loss) from continuing operations19,739 39,705 (55,686) 39,478 43,236 Income from discontinued operations, net of tax4,536 2,685 7,125 2,428 16,774 Gain on disposal of discontinued operations, net of tax- - 9,783 124,697 134,480 Net income (loss)24,275 42,390 (38,778) 166,603 194,490 Basic income (loss) per share Continuing operations0.43$ 0.87$ (1.24)$ 0.89$ 0.96$ Discontinued operations0.10 0.06 0.15 0.06 0.37 Disposal of discontinued operations- - 0.22 2.82 2.98 Net income (loss)0.53$ 0.93$ (0.87)$ 3.77$ 4.31$ Diluted income (loss) per share Continuing operations0.42$ 0.86$ (1.24)$ 0.88$ 0.94$ Discontinued operations0.10 0.06 0.15 0.05 0.36 Disposal of discontinued operations- - 0.22 2.77 2.93 Net income (loss)0.52$ 0.92$ (0.87)$ 3.70$ 4.23$ (In thousands, except days and per share amounts)(In thousands, except days and per share amounts)
switchers, cameras, servers, and editing solutions. The binding offer is subject to consultation with Grass
Valley’s foreign labor works council, after which we plan to enter into a definitive agreement. We expect to
close the transaction in the first quarter of 2014, and it is subject to regulatory approvals, the completion of
audited financial statements, and other customary closing conditions.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item 9A. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with
the participation of the principal executive officer and principal financial officer, of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act)). Based on this evaluation, the principal executive officer and principal financial
officer concluded that our disclosure controls and procedures were effective as of the end of the period covered
by this report.
There was no change in our internal control over financial reporting during our most recently completed fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Management’s Report on Internal Control over Financial Reporting
The management of Belden is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Belden management conducted an evaluation of the effectiveness of our internal control over financial
reporting as of December 31, 2013. In conducting its evaluation, Belden management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework (1992 framework). Based on that evaluation, Belden management believes
our internal control over financial reporting was effective as of December 31, 2013.
Our internal control over financial reporting as of December 31, 2013 has been audited by Ernst & Young
LLP, an independent registered public accounting firm, as stated in their report that follows.
88
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Belden Inc.
We have audited Belden Inc.’s internal control over financial reporting as of December 31, 2013, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Belden Inc.’s
management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions or because the degree of compliance with
the policies or procedures may deteriorate.
In our opinion, Belden Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Belden Inc. as of December 31, 2013 and 2012, and the
related consolidated statements of operations, stockholders’ equity, comprehensive income and cash flows for
each of the three years in the period ended December 31, 2013, of Belden Inc. and our report dated February
27, 2014, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
St. Louis, Missouri
February 27, 2014
89
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding directors is incorporated herein by reference to “Item I—Election of Nine Directors,” as
described in the Proxy Statement. Information regarding executive officers is set forth in Part I herein under
the heading “Executive Officers.” The additional information required by this Item is incorporated herein by
reference to “Corporate Governance” (opening paragraph and table), “Corporate Governance—Audit
Committee,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance—
Corporate Governance Documents” and “Stockholder Proposals for the 2015 Annual Meeting,” as described in
the Proxy Statement.
Item 11. Executive Compensation
Incorporated herein by reference to “Executive Compensation,” “Director Compensation,” “Corporate
Governance—Related Party Transactions and Compensation Committee Interlocks” and “Corporate
Governance—Board Leadership Structure and Role in Risk Oversight” as described in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters
Incorporated herein by reference to “Equity Compensation Plan Information on December 31, 2013” and
“Stock Ownership of Certain Beneficial Owners and Management” as described in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Incorporated herein by reference to “Corporate Governance—Related Party Transactions and Compensation
Committee Interlocks” and “Corporate Governance” (paragraph following the table) as described in the Proxy
Statement.
Item 14. Principal Accountant Fees and Services
Incorporated herein by reference to “Item II – Ratification of the Appointment of Ernst & Young as the
Company’s Independent Registered Public Accounting Firm—Fees to Independent Registered Public
Accountants for 2013 and 2012” and “Item II – Ratification of the Appointment of Ernst & Young as the
Company’s Independent Registered Public Accounting Firm—Audit Committee’s Pre-Approval Policies and
Procedures” as described in the Proxy Statement.
90
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of this Report:
1. Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2013 and December 31, 2012
Consolidated Statements of Operations for Each of the Three Years
in the Period Ended December 31, 2013
Consolidated Statements of Comprehensive Income for Each of the Three Years
in the Period Ended December 31, 2013
Consolidated Cash Flow Statements for Each of the Three Years
in the Period Ended December 31, 2013
Consolidated Stockholders' Equity Statements for Each of the
Three Years in the Period Ended December 31, 2013
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts
All other financial statement schedules not included in this Annual Report on Form 10-K are omitted
because they are not applicable.
91
Charged toBeginningCosts andDivestitures/ChargeCurrencyEndingBalanceExpensesAcquisitionsOffsRecoveriesMovementBalanceAccounts Receivable—Allowance for Doubtful Accounts:20134,163$ 733$ 448$ (1,391)$ (520)$ (43)$ 3,390$ 20122,640 2,852 1,203 (1,594) (935) (3) 4,163 20112,720 2,036 653 (1,828) (939) (2) 2,640 Inventories—Excess and Obsolete Allowances:201323,954$ 5,632$ -$ (7,211)$ (1,009)$ (49)$ 21,317$ 201217,735 5,381 5,597 (3,679) (1,077) (3) 23,954 201121,767 1,906 889 (5,671) (1,148) (8) 17,735 Deferred Income Tax Asset—Valuation Allowance:20137,498$ 496$ 3,064$ -$ (899)$ 6$ 10,165$ 201223,663 3,659 (4,562) (736) (14,160) (366) 7,498 201131,495 2,608 350 - (10,587) (203) 23,663 (In thousands)
3. Exhibits
The following exhibits are filed herewith or incorporated herein by reference, as indicated. Documents
indicated by an asterisk (*) identify each management contract or compensatory plan.
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
10.1
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
Description of Exhibit
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
Certificate of Incorporation, as amended
February 29, 2008 Form 10-K, Exhibit 3.1
Third Amended and Restated Bylaws, as
amended
Rights Agreement
November 24, 2008 Form 8-K, Exhibit 3.1.; May 22,
2009 Form 8-K, Exhibit 3.1; May 20, 2010 Form 8-K;
March 2, 2011 Form 8-K, Exhibit 3.1; May 19, 2011
Form 8-K, Exhibit 3.1; May 31, 2012 Form 8-K,
Exhibit 3.1; December 4, 2013 Form 8-K, Exhibit 3.1
December 11, 1996 Form 8-A, Exhibit 1.1
Amendment to Rights Agreement
November 15, 2004 Form 10-Q, Exhibit 4.1
Amendment to Rights Agreement
December 8, 2006 Form 8-A/A, Exhibit 4.2(a)
Indenture relating to 9.25% Senior Subordinated
Notes due 2019
Notation of Guarantee relating to 9.25% Senior
Subordinated Notes due 2019
Supplemental Indenture relating to 9.25%
Senior Subordinated Notes due 2019
Supplemental Indenture relating to 9.25%
Senior Subordinated Notes due 2019
Indenture relating to 5.5% Senior Subordinated
Notes due 2022
Supplemental Indenture relating to 5.5% Senior
Subordinated Notes due 2022
Second Supplemental Indenture relating to 5.5%
Senior Subordinated Notes due 2022
Indenture relating to 5.5% Senior Subordinated
Notes due 2023
First Supplemental Indenture relating to 5.5%
Senior Subordinated Notes due 2023
Trademark License Agreement
Belden Inc. 2003 Long-Term Incentive Plan, as
amended
CDT 2001 Long-Term Performance Incentive
Plan, as amended
Belden Inc. 2011 Long Term Incentive Plan, as
amended
Form of Director Nonqualified Stock Option
Grant
Form of Stock Appreciation Rights Award
Form of Performance Stock Units Award
Form of Restricted Stock Units Award
June 29, 2009 Form 8-K, Exhibit 4.1
June 29, 2009 Form 8-K, Exhibit 4.2
August 29, 2012 Form 8-K, Exhibit 4.3
May 8, 2013 Form 10-Q, Exhibit 4.1
August 29, 2012 Form 8-K, Exhibit 4.1
May 8, 2013 Form 10-Q, Exhibit 4.2
November 6, 2013 Form 10-Q, Exhibit 4.1
March 26, 2013 Form 8-K, Exhibit 4.1
November 6, 2013 Form 10-Q, Exhibit 4.2
November 15, 1993 Form 10-Q of Belden 1993 Inc.,
Exhibit 10.2
March 1, 2007 Form 10-K, Exhibit 10.4
April 6, 2009 Proxy Statement, Appendix I
April 6, 2011 Proxy Statement, Appendix I; February
29, 2012 Form 10-K, Exhibit 10.9
March 15, 2001 Form 10-Q, Exhibit 99.2
February 29, 2008 Form 10-K, Exhibit 10.16;
February 27, 2009 Form 10-K, Exhibit 10.16
February 29, 2008 Form 10-K, Exhibit 10.17;
February 27, 2009 Form 10-K, Exhibit 10.17
February 29, 2008 Form 10-K, Exhibit 10.18;
February 27, 2009 Form 10-K, Exhibit 10.18
92
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
February 29, 2012 Form 10-K, Exhibit 10.16
December 21, 2004 Form 8-K, Exhibit 10.1
March 22, 2002 Form 10-K of Belden 1993 Inc.,
Exhibits 10.14 and 10.15; March 14, 2003 Form 10-K
of Belden 1993 Inc., Exhibit 10.21; November 15,
2004 Form 10-Q, Exhibit 10.50
March 22, 2002 Form 10-K of Belden 1993 Inc.,
Exhibits 10.16 and 10.17; March 14, 2003 Form 10-K
of Belden 1993 Inc., Exhibit 10.24; November 15,
2004 Form 10-Q, Exhibit 10.51
November 15, 2004 Form 10-Q, Exhibits 10.52 and
10.53
November 15, 2004 Form 10-Q, Exhibits 10.54 and
10.55
April 7, 2008 Form 8-K, Exhibit 10.1, December 17,
2008 Form 8-K, Exhibit 10.1
May 8, 2008 Form 10-Q, Exhibit 10.1
December 22, 2008 Form 8-K, Exhibit 10.2
February 27, 2009 Form 10-K, Exhibit 10.36
August 11, 2010 Form 10-Q, Exhibit 10.1
January 5, 2012 Form 8-K, Exhibit 10.1
August 8, 2013 Form 10-Q, Exhibit 10.1
August 8, 2013 Form 10-Q, Exhibit 10.2
November 6, 2013 Form 10-Q, Exhibit 10.1
April 5, 2012 Form 8-K, Exhibit 10.1
March 1, 2007 Form 10-K, Exhibit 10.39
August 1, 2012 Form 8-K, Exhibit 10.1
August 17, 2012 Form 8-K, Exhibit 10.1
December 12, 2012 Form 8-K, Exhibit 2.1
Exhibit
Number
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24
10.25*
10.26
10.27
10.28
Description of Exhibit
Belden Inc. Annual Cash Incentive Plan, as
amended and restated
2004 Belden CDT Inc. Non-Employee Director
Deferred Compensation Plan
Belden Wire & Cable Company (BWC)
Supplemental Excess Defined Benefit Plan, with
First, Second and Third Amendments
BWC Supplemental Excess Defined
Contribution Plan, with First, Second and Third
Amendments
Trust Agreement, with First Amendment
Trust Agreement, with First Amendment
Amended and Restated Executive Employment
Agreement with John Stroup, with First
Amendment
Executive Employment Agreement with Steven
Biegacki
Amended and Restated Executive Employment
Agreement with Kevin L. Bloomfield
Amended and Restated Executive Employment
Agreement with John Norman
Executive Employment Agreement with
Christoph Gusenleitner
Amended and Restated Executive Employment
Agreement with Henk Derksen
Executive Employment Agreement with Glenn
Pennycook
Executive Employment Agreement with
Dhrupad Trivedi
Executive Employment Agreement with Doug
Zink
Separation Agreement between Belden Inc. and
Naresh Kumra
Form of Indemnification Agreement with each
of the Directors and Steven Biegacki, Kevin
Bloomfield, Henk Derksen, Christoph
Gusenleitner, John Norman, Glenn Pennycook,
John Stroup, Dhrupad Trivedi and Doug Zink
Support Agreement among Belden Inc., Belden
CDT (Canada) Inc. and Miranda Technologies
Inc.
Purchase Agreement by and among Belden Inc.,
the Guarantors named therein and Wells Fargo
Securities, LLC
Stock Purchase Agreement by and among the
Stockholders of each of PPC Broadband, Inc.
93
Exhibit
Number
10.29
10.30
10.31
12.1
14.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Description of Exhibit
and SKT International Holdings B.V., as
Sellers, Belden Inc., as Buyer, and JM
Representatives, LLC, as the Seller
Representative
Purchase and Sale Agreement by and among
Belden Inc., Carlisle Interconnect Technologies,
Inc. and Carlisle Companies Incorporated
ABL Credit Agreement
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
December 21, 2012 Form 8-K, Exhibit 2.1
October 9, 2013 Form 8-K, Exhibit 10.1
Term Loan Credit Agreement
October 9, 2013 Form 8-K, Exhibit 10.2
Computation of Ratio of Earnings to Fixed
Charges
Code of Ethics
List of Subsidiaries of Belden Inc.
Consent of Ernst & Young LLP
Powers of Attorney from Members of the Board
of Directors
Rule 13a-14(a)/15d-14(a) Certification of the
Chief Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of the
Chief Financial Officer
Section 1350 Certification of the Chief
Executive Officer
Section 1350 Certification of the Chief
Financial Officer
Filed herewith
May 31, 2012 Form 8-K, Exhibit 14.1
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
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
_______________
*Management contract or compensatory plan
Copies of the above Exhibits are available to shareholders at a charge of $0.25 per page, minimum order of
$10.00. Direct requests to:
Belden Inc., Attention: Secretary
1 North Brentwood Boulevard, 15th Floor
St. Louis, Missouri 63105
94
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BELDEN INC.
By /s/ JOHN S. STROUP
John S. Stroup
President, Chief Executive Officer and
Date: February 27, 2014
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the date indicated.
/s/ JOHN S. STROUP
John S. Stroup
/s/ HENK DERKSEN
Henk Derksen
/s/ DOUGLAS R. ZINK
Douglas R. Zink
/s/ BRYAN C. CRESSEY*
Bryan C. Cressey
/s/ DAVID ALDRICH*
David Aldrich
/s/ LANCE C. BALK*
Lance C. Balk
/s/ JUDY L. BROWN*
Judy L. Brown
/s/ GLENN KALNASY*
Glenn Kalnasy
/s/ GEORGE MINNICH*
George Minnich
/s/ JOHN MONTER*
John Monter
/s/ DEAN YOOST*
Dean Yoost
/s/ JOHN S. STROUP
*By John S. Stroup, Attorney-in-fact
President, Chief Executive Officer and Director
February 27, 2014
Senior Vice President, Finance, and Chief Financial Officer
February 27, 2014
Vice President and Chief Accounting Officer
February 27, 2014
Chairman of the Board and Director
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
February 27, 2014
Director
Director
Director
Director
Director
Director
Director
95
Index to Exhibits
The following exhibits are filed herewith or incorporated herein by reference, as indicated. Documents
indicated by an asterisk (*) identify each management contract or compensatory plan.
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
10.1
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
Description of Exhibit
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
Certificate of Incorporation, as amended
February 29, 2008 Form 10-K, Exhibit 3.1
Third Amended and Restated Bylaws, as
amended
Rights Agreement
November 24, 2008 Form 8-K, Exhibit 3.1.; May 22,
2009 Form 8-K, Exhibit 3.1; May 20, 2010 Form 8-K;
March 2, 2011 Form 8-K, Exhibit 3.1; May 19, 2011
Form 8-K, Exhibit 3.1; May 31, 2012 Form 8-K,
Exhibit 3.1; December 4, 2013 Form 8-K, Exhibit 3.1
December 11, 1996 Form 8-A, Exhibit 1.1
Amendment to Rights Agreement
November 15, 2004 Form 10-Q, Exhibit 4.1
Amendment to Rights Agreement
December 8, 2006 Form 8-A/A, Exhibit 4.2(a)
Indenture relating to 9.25% Senior Subordinated
Notes due 2019
Notation of Guarantee relating to 9.25% Senior
Subordinated Notes due 2019
Supplemental Indenture relating to 9.25%
Senior Subordinated Notes due 2019
Supplemental Indenture relating to 9.25%
Senior Subordinated Notes due 2019
Indenture relating to 5.5% Senior Subordinated
Notes due 2022
Supplemental Indenture relating to 5.5% Senior
Subordinated Notes due 2022
Second Supplemental Indenture relating to 5.5%
Senior Subordinated Notes due 2022
Indenture relating to 5.5% Senior Subordinated
Notes due 2023
First Supplemental Indenture relating to 5.5%
Senior Subordinated Notes due 2023
Trademark License Agreement
Belden Inc. 2003 Long-Term Incentive Plan, as
amended
CDT 2001 Long-Term Performance Incentive
Plan, as amended
Belden Inc. 2011 Long Term Incentive Plan, as
amended
Form of Director Nonqualified Stock Option
Grant
Form of Stock Appreciation Rights Award
Form of Performance Stock Units Award
June 29, 2009 Form 8-K, Exhibit 4.1
June 29, 2009 Form 8-K, Exhibit 4.2
August 29, 2012 Form 8-K, Exhibit 4.3
May 8, 2013 Form 10-Q, Exhibit 4.1
August 29, 2012 Form 8-K, Exhibit 4.1
May 8, 2013 Form 10-Q, Exhibit 4.2
November 6, 2013 Form 10-Q, Exhibit 4.1
March 26, 2013 Form 8-K, Exhibit 4.1
November 6, 2013 Form 10-Q, Exhibit 4.2
November 15, 1993 Form 10-Q of Belden 1993 Inc.,
Exhibit 10.2
March 1, 2007 Form 10-K, Exhibit 10.4
April 6, 2009 Proxy Statement, Appendix I
April 6, 2011 Proxy Statement, Appendix I; February
29, 2012 Form 10-K, Exhibit 10.9
March 15, 2001 Form 10-Q, Exhibit 99.2
February 29, 2008 Form 10-K, Exhibit 10.16;
February 27, 2009 Form 10-K, Exhibit 10.16
February 29, 2008 Form 10-K, Exhibit 10.17;
February 27, 2009 Form 10-K, Exhibit 10.17
96
Exhibit
Number
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24
10.25*
10.26
10.27
Description of Exhibit
Form of Restricted Stock Units Award
Belden Inc. Annual Cash Incentive Plan, as
amended and restated
2004 Belden CDT Inc. Non-Employee Director
Deferred Compensation Plan
Belden Wire & Cable Company (BWC)
Supplemental Excess Defined Benefit Plan, with
First, Second and Third Amendments
BWC Supplemental Excess Defined
Contribution Plan, with First, Second and Third
Amendments
Trust Agreement, with First Amendment
Trust Agreement, with First Amendment
Amended and Restated Executive Employment
Agreement with John Stroup, with First
Amendment
Executive Employment Agreement with Steven
Biegacki
Amended and Restated Executive Employment
Agreement with Kevin L. Bloomfield
Amended and Restated Executive Employment
Agreement with John Norman
Executive Employment Agreement with
Christoph Gusenleitner
Amended and Restated Executive Employment
Agreement with Henk Derksen
Executive Employment Agreement with Glenn
Pennycook
Executive Employment Agreement with
Dhrupad Trivedi
Executive Employment Agreement with Doug
Zink
Separation Agreement between Belden Inc. and
Naresh Kumra
Form of Indemnification Agreement with each
of the Directors and Steven Biegacki, Kevin
Bloomfield, Henk Derksen, Christoph
Gusenleitner, John Norman, Glenn Pennycook,
John Stroup, Dhrupad Trivedi and Doug Zink
Support Agreement among Belden Inc., Belden
CDT (Canada) Inc. and Miranda Technologies
Inc.
Purchase Agreement by and among Belden Inc.,
the Guarantors named therein and Wells Fargo
Securities, LLC
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
February 29, 2008 Form 10-K, Exhibit 10.18;
February 27, 2009 Form 10-K, Exhibit 10.18
February 29, 2012 Form 10-K, Exhibit 10.16
December 21, 2004 Form 8-K, Exhibit 10.1
March 22, 2002 Form 10-K of Belden 1993 Inc.,
Exhibits 10.14 and 10.15; March 14, 2003 Form 10-K
of Belden 1993 Inc., Exhibit 10.21; November 15,
2004 Form 10-Q, Exhibit 10.50
March 22, 2002 Form 10-K of Belden 1993 Inc.,
Exhibits 10.16 and 10.17; March 14, 2003 Form 10-K
of Belden 1993 Inc., Exhibit 10.24; November 15,
2004 Form 10-Q, Exhibit 10.51
November 15, 2004 Form 10-Q, Exhibits 10.52 and
10.53
November 15, 2004 Form 10-Q, Exhibits 10.54 and
10.55
April 7, 2008 Form 8-K, Exhibit 10.1, December 17,
2008 Form 8-K, Exhibit 10.1
May 8, 2008 Form 10-Q, Exhibit 10.1
December 22, 2008 Form 8-K, Exhibit 10.2
February 27, 2009 Form 10-K, Exhibit 10.36
August 11, 2010 Form 10-Q, Exhibit 10.1
January 5, 2012 Form 8-K, Exhibit 10.1
August 8, 2013 Form 10-Q, Exhibit 10.1
August 8, 2013 Form 10-Q, Exhibit 10.2
November 6, 2013 Form 10-Q, Exhibit 10.1
April 5, 2012 Form 8-K, Exhibit 10.1
March 1, 2007 Form 10-K, Exhibit 10.39
August 1, 2012 Form 8-K, Exhibit 10.1
August 17, 2012 Form 8-K, Exhibit 10.1
97
Exhibit
Number
10.28
10.29
10.30
10.31
12.1
14.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Description of Exhibit
Stock Purchase Agreement by and among the
Stockholders of each of PPC Broadband, Inc.
and SKT International Holdings B.V., as
Sellers, Belden Inc., as Buyer, and JM
Representatives, LLC, as the Seller
Representative
Purchase and Sale Agreement by and among
Belden Inc., Carlisle Interconnect Technologies,
Inc. and Carlisle Companies Incorporated
ABL Credit Agreement
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
December 12, 2012 Form 8-K, Exhibit 2.1
December 21, 2012 Form 8-K, Exhibit 2.1
October 9, 2013 Form 8-K, Exhibit 10.1
Term Loan Credit Agreement
October 9, 2013 Form 8-K, Exhibit 10.2
Computation of Ratio of Earnings to Fixed
Charges
Code of Ethics
List of Subsidiaries of Belden Inc.
Consent of Ernst & Young LLP
Powers of Attorney from Members of the Board
of Directors
Rule 13a-14(a)/15d-14(a) Certification of the
Chief Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of the
Chief Financial Officer
Section 1350 Certification of the Chief
Executive Officer
Section 1350 Certification of the Chief
Financial Officer
Filed herewith
May 31, 2012 Form 8-K, Exhibit 14.1
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
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
98