2015
Annual Report
Dear Fellow Shareholders,
Despite having to weather the unpleasant impact of declining oil prices and a stronger U.S. dollar, there
were many outstanding achievements in 2015. Share capture was exceptional across the majority of our
businesses and our continued margin expansion is quite unique. Gross profit margins, EBITDA margins
and EPS are all at record highs, the latter growing at 17.7%1, something not often seen in the current
environment. Additionally, our commitment to, and proficiency with, Lean Enterprise is consistently
driving productivity in all areas of the business. Our attractive portfolio, robust business system and
dedicated global team provide the framework for sustained financial success. I would like to share with
you a number of significant actions that have driven this success.
Addition of Network Security to our portfolio – The acquisition of Tripwire led to the creation of our
fifth business platform, Network Security. As our customers deploy Internet Protocol systems and enjoy
the substantial productivity benefits, the risks of operational disruption, intellectual property loss, brand
damage and fraud from cyber-attacks increase. Tripwire reduces the risks, delivering highly specialized
and proven software to prevent, detect and respond to these attacks. In Tripwire’s first year, we saw
geographical expansion, industry diversification and product synergies, reflective of the increasing
strategic importance of cybersecurity in many verticals. We are already embarking on commercial
opportunities to leverage Tripwire’s products into our markets and applications in which Belden is well
positioned, including the industrial factory floor. Looking forward, we’re excited about this prospect.
Share Capture – 2015 was a standout year for share capture at Belden. We exceeded our annual target
and all of our platforms contributed. Given that we experienced some end-market softness, this fact may
not have been obvious or broadly understood. Investments in product innovation, improvements in our
Market Delivery System and customer satisfaction programs all contributed to us outperforming in our
served markets. In light of this success, I think it is important to remember that share capture provides the
foundation for sustained organic growth.
Lean Enterprise – In a volatile and uncertain market environment, we demonstrated how agile our
organization has become. In response to macroeconomic challenges, we have taken swift and appropriate
strategic actions to preserve profit margins for our shareholders. The productivity programs in Broadcast
have already produced impressive results. Despite a revenue decline in this platform of 3%, its EBITDA
dollars grew 1.5% from the prior year, highlighting the agility and focus within our business model.
1 Consolidated adjusted results are used throughout this letter. See appendix for reconciliation to comparable
GAAP results.
1
Accelerated productivity programs were also identified within our Industrial segments. In the fourth
quarter, we began execution of these new initiatives, which will continue through 2016.
Capital Allocation – In 2015, we made a number of capital allocation decisions. We continued our share
repurchase program, returning $39 million to our shareholders, or greater than one-fifth of our free cash
flow. On a combined program-to-date basis, we have repurchased approximately 16% of the company at
an average price of $47.43. Additionally, $150 million of debt was repaid during the fourth quarter,
allowing us to enter 2016 with lower financial leverage while preserving flexibility and capacity.
In summary, I am extremely proud of our ability to consistently deliver strong financial results for our
shareholders. I am also encouraged by our proactive approach to current and future market challenges.
These strategic actions have already begun yielding results, and in 2016, I expect us to share this
continued success.
In addition to each of the actions taken above, I am excited to share a number of new performance records
for the Company in 2015.
Achieved revenues of $2.36 billion, an increase of 7.4% year-over-year in constant
currency;
Expanded gross profit margins to a record 41.6% an increase of 460 basis points from the
prior year;
Generated record EBITDA of $400.7M, an improvement of 11.5% year-over-year,
representing 17.0% of revenue; and
Increased EPS by 17.7% to a record $4.98 per share.
The records above are a function of successes across all segments. Solid execution, margin expansion and
attractive secular trends are recurrent themes across our segments, which I would like to share with you.
A detailed review can be found below.
Broadcast Solutions – Our Broadcast Solutions segment generated revenues of $900.6 million in 2015,
decreasing 3% from the prior year. Although a stronger US dollar and lower oil prices impacted
investment plans by our international customers, we capitalized on a number of secular trends. Significant
demand for increased bandwidth in the U.S. grew our market-leading broadband connectivity business,
and in Grass Valley our product portfolio continued to evolve as broadcasters transition to IP. Notably,
Grass Valley booked seven sales of new IP systems and helped establish an industry alliance, generating
buy-in for IP. Consequently, we are in an enviable competitive position as the market evolves towards an
IP platform. Our segment margin results were attractive too, as our Lean Enterprise initiatives succeeded
2
by all accounts, as EBITDA margins expanded in a year in which revenue declined. Looking forward to
2016, we are excited by the continued demand for increased bandwidth and a number of high-profile
events that will likely stimulate investment, including the US presidential cycle, Summer Olympics and
transition to IP technologies.
Enterprise Connectivity – The Enterprise Connectivity segment grew 6.2% on an organic basis to
$445.2 million, and EBITDA margins expanded 160 basis points to 16.1%. Not long ago, many
considered the prospect of Enterprise achieving annual EBITDA margins above the low-teens as
unrealistic. However, the bold strategic actions undertaken prior to 2015 are paying off and producing
gratifying results for our shareholders. We saw significant share capture and an improved product mix, as
the team continued their focus on end-to-end solutions to support our customers. Additionally, the long-
awaited recovery of U.S. non-residential construction provided a helpful tailwind for our Enterprise
segment.
Industrial Connectivity – Revenues in our Industrial Connectivity segment were $603.4 million in 2015.
Falling oil prices and a stronger U.S. dollar made for tough market conditions that impacted Belden and
our peers. However, the team was quite successful in gaining share in 2015. Additionally, margin
expansion was encouraging for the segment. EBITDA margins increased 110 basis points from the prior
year to 16.6%.
Industrial IT – Revenues within our Industrial IT segment decreased 1.1% on an organic basis to $244.3
million. Currency movements also had implications on the geographical trends, benefitting European
manufacturers. Consequently, our team saw double-digit growth within the region. Our expansion in
transportation in China was also productive, as the team won a number of important projects. Although
challenges existed, I think it is important to remember the number of attractive trends emerging within the
industrial environments. The Internet of Things, Smart Grid and industrial automation all yield
tremendous resource and process optimization opportunities for our customers. We have the expertise and
innovative product portfolio to help our customers realize these efficiencies.
Network Security – In 2015, Network Security exceeded our revenue expectations and contributed to our
record margins. Revenues within Network Security were $167.1 million and EBITDA margins were
26.7%. The segment saw strength within the utilities sector through strong execution and the ability to
assist our customers in complying with regulatory requirements, which will continue to be important in
today’s operating landscape. Additionally, we saw industry diversification and a deepening presence in
EMEA and APAC, which is reflective of the proliferating global demand for enterprise-class security
solutions.
3
New Strategic Financial Goals
Each year, we reflect on our strategic financial goals. It is important that our goals make sense relative to
our strategic plan and the markets we serve. As we consider the progress made over the prior year, I am
pleased with our track record of achieving our financial goals. The global macroeconomic environment,
however, seems to have settled into a period of extended low growth. In light of this, we have updated our
revenue growth goal.
Total Revenue Growth of 5 - 7%2
Our long-term goal of 5-7% revenue growth is a combination of our end-market
growth, continued share capture and integration of attractive companies. The
combination reflects our confidence in acquiring businesses and achieving organic
growth, an essential element of business vitality. In 2015, we achieved our target.
Constant currency revenue growth was 7.4% as we captured share and Tripwire
enjoyed a successful first year as part of the Belden family.
EBITDA Margins of 18 - 20%
EBITDA margins allow us to benchmark ourselves against best-in-class peers and are
closely aligned to a company’s valuation. In 2015, we made significant progress
towards attaining our three-year goal, as EBITDA margins increased to 17.0%. This
achievement represents a 150 basis point improvement from the prior year and 850
basis points from when we started our transformation in 2005. A truly gratifying
result. We anticipate further progress toward the low end of our goal throughout
2016.
Free Cash Flow in Excess of Net Income
2014 was the 10th consecutive year where we achieved free cash flow in excess of net
income from continuing operations, indicative of the earnings quality and attention to
asset management at Belden. In 2015, we narrowly missed this target as our decision
to allocate capital to productivity improvement programs took precedence. We are
already seeing material improvements from this and look forward to once again
achieving this important goal in 2016.
2 In constant currency
4
Return on Invested Capital of 13 – 15%
No change has been made to our commitment of return on invested capital of 13-
15%, as this goal keeps us disciplined in how we allocate capital. ROIC was 12% in
2015, slightly below our long-term goal as we deployed capital to the acquisition of
Tripwire. Since 2012, we have achieved an average of 13% and continue to aim to
increase our ROIC over the next few years.
Outlook
In 2016, we remain cautious regarding the speed and magnitude of an industrial recovery. However, we
are ideally positioned to benefit from a number of tailwinds in many of our end markets. Video
consumption, industrial automation, connected enterprises and security risks all continue to be top of
mind for our customers as we evolve into a smarter, more interconnected world. Our transformation will
continue to rely upon a broad and innovative product portfolio, application expertise and unyielding focus
on customer satisfaction. We are thankful for the loyalty of our customers, shareholders and talented
employees who make Belden a world-class company. We are grateful for your support, and we look
forward to sharing in Belden’s continued success together.
Sincerely,
John Stroup
President and Chief Executive Officer
5
BELDEN INC.
CONSOLIDATED 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 and deferred revenue to fair value and transaction costs; revenue and cost of sales deferrals for certain
acquired product lines subject to software revenue recognition accounting requirements; severance, restructuring, and
acquisition integration costs; gains (losses) recognized on the disposal of businesses and tangible assets; amortization of
intangible assets; gains (losses) on debt extinguishment; discontinued operations; 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.
Years Ended
December 31, 2015
December 31, 2014
(In thousands, except percentages and per share amounts)
GAAP revenues
Deferred revenue adjustments
Adjusted revenues
GAAP gross profit
Deferred gross profit adjustments
Severance, restructuring, and acquisition integration costs
Accelerated depreciation
Purchase accounting effects related to acquisitions
Adjusted gross profit
GAAP gross profit margin
Adjusted gross profit margin
GAAP operating income
Amortization of intangible assets
Severance, restructuring, and acquisition integration costs
Deferred gross profit adjustments
Purchase accounting effects related to acquisitions
Accelerated depreciation
Total operating income adjustments
Depreciation expense
Adjusted EBITDA
GAAP operating income margin
Adjusted EBITDA margin
GAAP income from continuing operations
Operating income adjustments from above
Tax effect of adjustments
Adjusted income from continuing operations
GAAP income from continuing operations
Less: Net loss attributable to noncontrolling interest
GAAP income from continuing operations attributable to Belden stockholders
Adjusted income from continuing operations
Less: Net loss attributable to noncontrolling interest
Less: Amortization expense attributable to noncontrolling interest, net of tax
Adjusted income from continuing operations attributable to Belden stockholders
$
$
$
$
$
$
$
$
39.8%
41.6%
35.5%
37.0%
$
$
$
$
6.1%
17.0%
7.1%
15.5%
$
$
$
$
$
$
$
$
$
$
$
$
2,309,222
51,361
2,360,583
918,173
52,876
9,364
225
267
980,905
140,553
103,791
47,170
52,876
9,747
388
213,972
46,163
400,688
66,508
213,972
(66,777)
213,703
66,508
(24)
66,532
213,703
(24)
5
213,722
2,308,265
11,954
2,320,219
819,449
10,777
20,665
255
8,433
859,579
163,119
58,426
70,827
10,777
12,540
1,074
153,644
42,662
359,425
74,432
153,644
(41,909)
186,167
74,432
-
74,432
186,167
-
-
186,167
GAAP income from continuing operations per diluted share attributable to Belden stockholders
Adjusted income from continuing operations per diluted share attributable to Belden stockholders
$
$
1.55
4.98
$
$
1.69
4.23
GAAP and Adjusted diluted weighted average shares
42,953
43,997
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
FREE CASH FLOW
(Unaudited)
We define free cash flow, which is a non-GAAP financial measure, as net cash provided
by operating activities adjusted for capital expenditures net of the proceeds from the
disposal of tangible assets and certain cash payments for severance and other costs for the
integration of our 2014 acquisition of Grass Valley. 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
Cash paid for severance and other costs for the
integration of our acquisition of Grass Valley
Non-GAAP free cash flow
Years Ended
December 31, 2015
December 31, 2014
(In thousands)
$
236,410
$
194,028
(54,436)
(43,575)
$
-
181,974
$
37,720
188,173
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, 2015
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, $0.01 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 28, 2015, the aggregate market value of Common Stock of Belden Inc. held by non-affiliates was $3,125,920,926
based on the closing price ($84.25) of such stock on such date.
There were 41,987,913 shares of registrant’s Common Stock outstanding on February 23, 2016.
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, 2015 (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
2
12
18
18
18
19
19
22
25
45
48
100
100
102
102
102
102
102
102
103
108
PART I
Item 1. Business
General
Belden Inc. (Belden, the Company, us, we, or our) is an innovative signal transmission solutions company
built around five global business platforms – Broadcast Solutions, Enterprise Connectivity Solutions, Industrial
Connectivity Solutions, Industrial IT Solutions, and Network Security Solutions. Each of the global business
platforms represents a reportable segment. Financial information about our segments appears in Note 5 to the
Consolidated Financial Statements.
Our comprehensive portfolio of signal transmission solutions provides industry leading secure and reliable
transmission of data, sound, and video for mission critical applications. We sell our products to distributors,
end-users, installers, and directly to original equipment manufacturers (OEMs). Belden Inc. is a Delaware
corporation incorporated in 1988, but the Company’s roots date back to its founding by Joseph Belden in 1902.
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.
Strategy and Business Model
Our business model is designed to generate shareholder value:
Operational Excellence—The core of our business model is operational excellence and the execution of
our Belden Business System. The Belden Business System has three areas of focus. First, we demonstrate
a commitment to Lean enterprise initiatives, which improve not only the quality and efficiency of the
manufacturing environment, but our business processes on a company-wide basis. Second, we utilize our
Market Delivery System (MDS), a go-to-market model that provides the foundation for organic growth.
We believe that organic growth, resulting from both market growth and share capture, is essential to our
success. Finally, our Talent Management System supports the development of our associates at all levels,
which preserves the culture necessary to operate our business consistently and sustainably.
Cash Generation—Our pursuit of operational excellence results in the generation of significant cash
flow. We generated cash flows from operating activities of $236.4 million, $194.0 million, and $164.6
million in 2015, 2014, and 2013, respectively.
Portfolio Improvement—We utilize the cash flow generated by our business to fuel our continued
transformation and generate shareholder value. We continuously improve our portfolio to ensure we
provide the most complete, end-to-end solutions to our customers. Our portfolio is designed with balance
across end markets and geographies to ensure we can meet our goals in most economic environments. We
have a disciplined acquisition cultivation, execution, and integration system that allows us to invest in
outstanding companies that strengthen our capabilities and enhance our ability to serve our customers.
Segments
We operate our business under the following segments:
2
Broadcast
The Broadcast Solutions (Broadcast) segment is a leading provider of 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, in-home
network 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, content management, playout, and delivery. Many of our broadcast
infrastructure solutions are designed for live content creation, which is viewed as a growth opportunity for the
segment. 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. Our
portfolio of broadband distribution products is well positioned for growth opportunities as broadband
consumption continues to increase both in developed and emerging markets. 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 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; directly to OEMs; and other distributors.
Enterprise
The Enterprise Connectivity Solutions (Enterprise) segment provides network infrastructure solutions for
3
201520142013Broadcast Solutions 38.2%40.0%32.6%Enterprise Connectivity Solutions18.9%19.6%23.7%Industrial Connectivity Solutions25.6%29.4%32.7%Industrial IT Solutions10.3%11.0%11.0%Network Security Solutions7.0%n/an/aPercentage of Segment Revenues (1) (1) See Note 5 to the Consolidated Financial Statements for additional information regarding our segment measures.
enterprise customers. We serve customers in markets such as healthcare, education, financial, and
government. Enterprise product lines include copper cable and connectivity solutions, fiber cable and
connectivity solutions, and racks and enclosures. Our products are used in applications such as data centers,
local area networks, access control, and building automation. Enterprise provides true end-to-end copper and
fiber network systems to include cable, assemblies, interconnect panels, and enclosures. Our high-
performance solutions support all networking protocols to include 100G+ Ethernet technologies. Enterprise
products also include intelligent power, cooling, and airflow management for mission-critical data center
operations. The Enterprise product portfolio is designed to support Internet Protocol convergence, the
increased use of wireless communications, and cloud-based data 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 is a leading provider of high
performance networking components and machine connectivity products. Industrial Connectivity products
include physical network and fieldbus infrastructure components and on-machine connectivity systems
customized to end user and OEM needs. Products are designed to provide reliability and confidence of
performance for a wide range of industrial automation applications. We target end-use customers in markets
such as discrete automation, process automation, oil and gas, power generation, power transmission and
distribution, and mobile automation. Our products are used in applications such as network and fieldbus
infrastructure; sensor and actuator connectivity; power, control, and data transmission; and mobile machines.
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, ruggedized controls and sensors,
customer specific wiring solutions, and load-moment indicator systems as well as controllers and sensors 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 primarily used as sensor and actuator connections in
factory automation supporting various fieldbus protocols as well as power connections in building automation.
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 Solutions (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 discrete automation, process automation, energy, and transportation systems, 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-
4
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.
Network Security Solutions
The Network Security Solutions (Network Security) segment provides advanced threat protection, security,
and compliance solutions for mission-critical networks. Network Security delivers highly specialized and
proven software and services to prevent, detect, and respond to critical business cyber-threats. We target end-
use customers in markets such as utilities and energy, retail and consumer, healthcare, financial services and
insurance, government, and media and telecommunications. Network Security products are based on high-
fidelity asset visibility and deep endpoint intelligence combined with business-context, and enable security
automation through enterprise integration. The Network Security product portfolio of enterprise-class security
solutions includes configuration and policy management, file integrity monitoring, vulnerability management
and log intelligence.
Network Security products are sold directly to end-use customers.
See Note 5 to the Consolidated Financial Statements for additional information regarding our segments.
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 and cultural analyses to make certain that
they meet both our strategic plans and our goals for return on invested capital.
We have completed a number of acquisitions in recent years as part of this strategy. Most recently, on January
7, 2016, we acquired M2FX Limited (M2FX), a manufacturer of fiber optic cable and fiber protection
solutions for broadband and telecommunications networks. The results of M2FX will be included in our
Broadcast segment.
In January 2015, we acquired Tripwire, Inc. (Tripwire), a leading global provider of advanced threat, security,
and compliance solutions, creating a new platform, Network Security Solutions. Tripwire’s solutions enable
enterprises, service providers, manufacturers, and government agencies to detect, prevent, and respond to
growing security threats.
In November 2014, we acquired Coast Wire and Plastic Tech., LLC (Coast), a leading manufacturer of custom
wire and cable solutions used in high-end medical device, military and defense, and industrial applications. In
June 2014, we acquired ProSoft Technology, Inc. (ProSoft), a leading manufacturer of industrial networking
products that translate between disparate automation systems, including the various protocols used by different
automation vendors. In March 2014, we acquired Grass Valley USA, LLC and GVBB Holdings S.a.r.l.,
(collectively, Grass Valley), leading providers of innovative technologies for the broadcast industry, including
production switchers, cameras, servers, and editing solutions.
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.
For more information regarding these transactions, see Notes 3 and 25 to the Consolidated Financial
Statements.
5
Customers
We sell to distributors, OEMs, installers, and end-users. Sales to the distributor Anixter International Inc.
represented approximately 12% of our consolidated revenues in 2015. No other customer accounted for more
than 10% of our revenues in 2015.
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. We believe that our relationships with our customers and distributors are good and that they are loyal to
Belden products 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, among other reasons.
International Operations
In addition to manufacturing facilities in the United States (U.S.), we have manufacturing and other operating
facilities in Brazil, Canada, China, Japan, Mexico, and St. Kitts, as well as in various countries in Europe.
During 2015, approximately 45% 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.
Financial information for Belden by country 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 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. Based on available data for our served markets, we estimate
that our market shares range from approximately 5%—20%. A substantial acquisition in one of our served
markets would be necessary to meaningfully change our estimated market share percentage
The principal competitive factors in all our product markets are technical features, quality, availability, price,
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.
Research and Development
6
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. 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.
Our most significant investments in research and development occur in our Broadcast, Network Security, and
Industrial IT platforms. The research and development investments for these platforms include a focus on the
following developments:
In the broadcast market, the trend towards increasingly complex broadcast production, management,
and distribution environments continues to evolve. Our end-use customers need to increase efficiency
and enhance 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 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.
For network security products, there is a compelling need among global enterprises, service providers
and government agencies to detect, prevent and respond to cyber security threats. This is a long-
standing need within corporate networks, but we believe the rapid proliferation of new devices in the
“internet of things” will cause this need to broaden and accelerate. Additionally, cyber-attacks are
moving beyond traditional targets into critical infrastructure, which will further amplify the
importance of our work in network security.
Part of our research and development is focused on creating scalable, efficient technologies to provide
real-time instrumentation and analytics across entire networks. This includes delivering high-fidelity
visibility and deep intelligence about networked systems, their vulnerabilities, and providing
actionable information about how to effectively secure them. Additionally, we have highly-skilled and
active research teams who analyze current and anticipated threats, and provide offerings to the market
to enable customers to quickly detect and resolve cybersecurity threats.
In the industrial networking market, there is a growing trend toward adoption of industrial Ethernet
technology, bringing to the critical infrastructure the advantages of digital communication and the
ability to network devices made by different manufacturers and integrate them with enterprise
systems. While the adoption of this technology is at a more advanced stage in certain regions of the
world, we believe that the trend will globalize. This trend will also lead to a rising need for wireless
systems for some applications and for cybersecurity to protect this critical infrastructure.
Our research and development efforts are also focused on fiber optic technology, which 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 comparatively
high, we expect that in future years the cost difference versus traditional copper networks will diminish. We
7
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-based systems. Part of our research and development efforts focus on
expanding our fiber-optic based product portfolio.
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. We consider our patents and trademarks
to be valuable assets. Our most prominent trademarks are: Belden®, Alpha Wire™, Mohawk®, West Penn
Wire™, Hirschmann®, Lumberg Automation™, SignalTight®, GarrettCom®, Poliron™, Tofino®, PPC®,
Grass Valley®, ProSoft Technology®, and Tripwire®.
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
8
201520142013Copper spot prices per poundHigh2.95$ 3.43$ 3.78$ Low2.02$ 2.54$ 3.03$
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, 2015, our backlog of orders believed to be firm was $184.8 million. The majority of the backlog
at December 31, 2015 is scheduled to be shipped in 2016.
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.
Employees
As of December 31, 2015, we had approximately 8,200 employees worldwide. We also utilized approximately
500 workers under contract manufacturing arrangements. Approximately 1,800 employees are covered by
collective bargaining agreements at various locations around the world. We believe our relationship with our
employees is generally good.
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,
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 25, 2016. 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 Stroup
Brian Anderson
Age
Position
49
41
President, Chief Executive Officer and Director
Senior Vice President, Legal, General Counsel and
Corporate Secretary
9
Name
Henk Derksen
Christoph Gusenleitner
Dean McKenna
Glenn Pennycook
Ross Rosenberg
Dhrupad Trivedi
Roel Vestjens
Doug Zink
Age
Position
47
51
47
53
46
49
41
40
Senior Vice President, Finance, and Chief Financial
Officer
Executive Vice President, Industrial Connectivity
Solutions
Senior Vice President, Human Resources
Executive Vice President, Enterprise Connectivity
Solutions
Senior Vice President, Strategy and Corporate
Development
Executive Vice President, Industrial IT Solutions
Executive Vice President, Broadcast Solutions
Vice President and Chief Accounting Officer
John Stroup has been President, Chief Executive Officer and a member of the Board since 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.
Brian Anderson was appointed Senior Vice President, Legal, General Counsel and Corporate Secretary in
April 2015. Prior to that, he served as Corporate Attorney for the Company from May 2008 through
March 2015. Prior to joining Belden, Mr. Anderson was in private practice at the law firm Lewis Rice.
Mr. Anderson has a B.S.B. in Accounting and an M.B.A. from Eastern Illinois University and holds a J.D.
from Washington University in St. Louis.
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
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.
Dean McKenna was appointed Senior Vice President, Human Resources in May 2015. Prior to joining
Belden, he was Vice President of Human Resources for the international business of SC Johnson. Prior to SC
Johnson, he worked in various senior international human resource, organizational development and talent
10
positions at Ingredion, Akzo Nobel and ICI Group PLC. He received his degree in Strategic Human Resource
Management at the Nottingham Business School in the United Kingdom.
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.
Ross Rosenberg has been Senior Vice President of Strategy & Corporate Development at the Company in
February 2013, and became an executive officer in May 2014. Prior to joining the Company, he led corporate
development and global marketing at First Solar, the world’s largest provider of utility-scale solar power plant
solutions. Prior to First Solar, Mr. Rosenberg ran a division of Danaher, a large diversified industrial
technology company. At Danaher, he held several executive management roles, as well as vice president,
marketing for a division and group vice president, strategy and business development. Mr. Rosenberg holds a
B.S. in Accounting from University of Illinois, an M.B.A. from The Wharton School at the University of
Pennsylvania and is a Certified Public Accountant.
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.
Roel Vestjens has been Executive Vice President, Broadcast Solutions since March 2014. Mr. Vestjens joined
Belden in 2006 as Director of Marketing for the EMEA region. In April 2008, Mr. Vestjens was promoted to
Director of Sales and Marketing for the Industrial Connectivity Solutions business, and in January 2009, he
was appointed General Manager of Belden’s Wire and Cable Systems business in EMEA. Mr. Vestjens
relocated to Asia in November 2010, and became President of the APAC OEM business, followed by
President of all APAC Operations in May 2012. Mr. Vestjens joined Belden from Royal Philips Electronics
where he held various European sales and marketing positions. Mr. Vestjens holds a bachelor degree in
Electrical Engineering and a Master of Science and Management degree from Nyenrode Business University
in the Netherlands.
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.
Cautionary Information Regarding Forward-Looking Statements
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
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,” “forecast,” “guide,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,”
11
“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 in the following section 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.
Item 1A. Risk Factors
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.
Changes in foreign currency rates and commodity prices can impact the buying power of our customers. For
example, a strengthened U.S. dollar can result in relative price increases for our products for customers outside
of the U.S., which can have a negative impact on our revenues and results of operations. Furthermore,
customers’ ability to invest in capital expenditures, such as our products, can depend upon proceeds from
commodities, such as oil and gas markets. A decline in energy prices, therefore, can have a negative impact on
our revenues and results of operations.
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 could decline. If we raise our prices but competitors
raise their prices less, we may lose sales, and our earnings could decline. If the price of copper were to decline,
12
we may be compelled to reduce prices to remain competitive, which could have a negative effect on revenues.
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 markets in which we operate 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 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
competitors along with our products. Our largest distributor, Anixter International Inc., accounted for 12% of
our revenue in 2015. If we were to lose a key distributor, our revenue and profits would likely be reduced, at
least temporarily. Changes in the inventory levels of our products owned and held by our distributors can
result in significant variability in our revenues. 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.
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. 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.
We may be unable to achieve our goals related to growth.
In order to meet the goals in our strategic plan, we must grow our business, both organically and through
acquisitions. Our goal is to generate total revenue growth of 5-7% per year in constant currency. We may be
unable to achieve this desired growth due to a failure to identify growth opportunities, such as trends and
technological changes in our end markets. We may ineffectively execute our Market Delivery System, which
is designed to identify and capture growth opportunities. The broadcast, enterprise, and industrial end markets
we serve may not experience the growth we expect. Further, those markets may be unable to sustain growth
on a long-term basis, particularly in emerging markets. If we are unable to achieve our goals related to growth,
it could have a material adverse effect on our results of operations, financial position, and cash flows.
13
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 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
developing or 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 fail to identify growth opportunities. 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 must complete further acquisitions in order to achieve our strategic plan.
In order to meet the goals in our strategic plan, we must complete further acquisitions. 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, the
cost of acquiring suitable businesses becomes too expensive, or we lack sufficient sources of capital. 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.
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. The
relative costs and merits of our solutions could change in the future as various competing technologies address
the market opportunities. In addition, the products sold by our recently acquired businesses generally have
shorter life cycles than our legacy product portfolio. 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 technological 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.
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.
14
Our use of open source software could negatively impact our ability to sell our products and may subject us
to unanticipated obligations.
The products, services, or technologies we acquire, license, provide, or develop may incorporate or use open
source software. We monitor and restrict our use of open source software in an effort to avoid unintended
consequences, such as reciprocal license grants, patent retaliation clauses, and the requirement to license our
products at no cost. Nevertheless, we may be subject to unanticipated obligations regarding our products which
incorporate or use open source software.
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.
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 storing proprietary company information
about our products and intellectual property, as well as for processing customer orders, manufacturing and
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 provide additional capabilities and functionality. The implementation of new information systems
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.
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, lawsuits, and reputational
damage.
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 and other operating facilities in the U.S., we have manufacturing and other
operating facilities in Brazil, Canada, China, Japan, 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.
15
Approximately 45% 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 Japanese yen, 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 any realignment of our manufacturing capacity among our
global facilities could 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 revenues and
earnings.
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.
Changes in U.S. or international tax laws could materially affect our financial position and results of
operations. Many countries in the European Union, as well as a number of other countries and organizations
such as the Organization for Economic Cooperation and Development, are actively considering changes to
existing tax laws. If tax laws and related regulations change, our financial results could be materially
impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very
difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or
negative for our earnings and cash flow, but it is possible such changes could adversely impact our financial
results.
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 $216.8 million cash and cash equivalents balance as of December 31, 2015, $114.7 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.
We may have difficulty integrating the operations of acquired businesses, which could negatively affect our
results of operations and profitability.
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
16
manage the other businesses. We may not be able to integrate operations successfully or cost-effectively,
which could have a negative impact 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.
Perceived failure of our signal transmission solutions to provide expected results may result in negative
publicity and harm our business and operating results.
Our customers use our signal transmission solutions in a wide variety of IT systems and application
environments in order to help reduce security vulnerabilities and demonstrate compliance. Despite our efforts
to make clear in our marketing materials and customer agreements the capabilities and limitations of these
products, some customers may incorrectly view the deployment of such products in their IT infrastructure as a
guarantee that there will be no security breach or policy non-compliance event. As a result, the occurrence of a
high profile security breach, or a failure by one of our customers to pass a regulatory compliance IT audit,
could result in public and customer perception that our solutions are not effective and harm our business and
operating results, even if the occurrence is unrelated to the use of such products or if the failure is the result of
actions or inactions on the part of the customer.
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. Emerging markets may not meet
our growth expectations, and we may be unable to maintain such growth or to balance such growth with
financial goals and compliance requirements. 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 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.
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.
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, environmental, and other legal compliance areas, a robust reporting
hotline, 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.
17
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.
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 2016 through 2026.
The table below summarizes the geographic locations of our manufacturing and other operating facilities
utilized by our segments as of December 31, 2015.
In addition to the manufacturing and other operating facilities summarized above, our segments also utilize
approximately 32 warehouses worldwide. As of December 31, 2015, we owned or leased a total of
approximately 8 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
PPC Broadband, Inc. v. Corning Optical Communications RF, LLC (U.S. Dist. Ct., N.D.N.Y. Civil Action No.
5:11-cv-00761-GLS-DEP)—On July 5, 2011, the Company’s wholly-owned subsidiary, PPC Broadband, Inc.
(f/k/a John Mezzalingua Associates, Inc., d/b/a PPC) (“PPC”), filed an action for patent infringement in the
U.S. District Court for the Northern District of New York against Corning Optical Communications RF LLC
(f/k/a Corning Gilbert, Inc.) (“Corning”). The Complaint alleged that Corning infringed two of PPC’s patents
– U.S. Patent Nos. 6,558,194 and 6,848,940 – each entitled “Connector and Method of Operation.” On
July 23, 2015, a jury found that Corning willfully infringed both patents. We have not recorded any amounts
18
Broadcast SolutionsEnterprise Connectivity SolutionsIndustrial Connectivity SolutionsIndustrial IT SolutionsNetwork Security SolutionsUtilized by Multiple SegmentsTotalBrazil- - 1 - - - 1 Canada1 - 1 - - - 2 China1 - - - - 1 2 Czech Republic- - 1 - - - 1 Denmark1 1 - - - - 2 Germany- - 2 2 - - 4 Hungary- - - - - 1 1 Italy- - - - - 1 1 Japan1 - - - - - 1 Mexico1 - - - - 2 3 Netherlands1 - 1 - - - 2 St. Kitts1 - - - - - 1 United Kingdom1 - - - - - 1 United States3 - 3 1 2 5 14 Total11 1 9 3 2 10 36
in our consolidated financial statements related to this matter, as the court has not entered judgment and is
considering post-trial motions filed by the parties.
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 23, 2016, there were 307 record holders of common stock of Belden Inc.
We declared a dividend of $0.05 per share in each quarter of 2015 and 2014. 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 allowed 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 allowed us to purchase up to an
additional $200.0 million of our common stock. This program was funded by cash on hand and cash flows
from operating activities. The program did not have an expiration date and could have been suspended at any
time at the discretion of the Company.
From inception of the program to December 31, 2015, we repurchased 7.4 million shares of our common stock
under the program for an aggregate cost of $350.0 million and an average price of $47.43. In 2015, we
19
Common Stock Prices and Dividends2015 (By Quarter)1234Dividends per common share0.05$ 0.05$ 0.05$ 0.05$ Common stock prices:High92.81$ 95.56$ 84.00$ 65.00$ Low77.67$ 83.00$ 46.83$ 44.37$ 2014 (By Quarter)1234Dividends per common share0.05$ 0.05$ 0.05$ 0.05$ Common stock prices:High75.23$ 79.20$ 79.30$ 82.90$ Low61.81$ 67.15$ 64.69$ 58.06$
repurchased 0.7 million shares of our common stock under the share repurchase program for an aggregate cost
of $39.1 million and an average price per share of $55.95. The repurchase activities in 2015 utilized all
remaining authorized amounts under the share repurchase program. We did not repurchase any shares during
the three month period ended December 31, 2015. In 2014, we repurchased 1.3 million shares of our common
stock under the program for an aggregate cost of $92.2 million and an average price of $73.06 per share. In
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 per share.
20
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, 2015, with the cumulative total return during such period of the
Standard and Poor’s 500 Stock Index and the Standard and Poor’s 1500 Industrials Index. The
comparison assumes $100 was invested on December 31, 2010, in Belden’s common stock and in each of
the foregoing indices and assumes reinvestment of dividends. The stock performance shown on the graph
below represents historical stock performance and is not necessarily indicative of future stock price
performance.
(1) The chart above and the accompanying data are “furnished,” not “filed,” with the SEC.
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Company Name / Index20112012201320142015Belden Inc.-9.1%35.9%57.1%12.2%-39.5%S&P 500 Index2.1%16.0%32.4%13.7%1.4%S&P 1500 Industrials Index-0.9%16.5%41.2%8.5%-2.7%Base PeriodCompany Name / Index201020112012201320142015Belden Inc.100.00$ 90.92$ 123.56$ 194.15$ 217.79$ 132.20$ S&P 500 Index100.00 102.11 118.45 156.82 178.29 180.75 S&P 1500 Industrials Index100.00 99.12 115.44 162.99 176.81 172.01 Years Ending December 31,ANNUAL RETURN PERCENTAGE Years Ending December 31, INDEXED RETURNS (Includes reinvestment of dividends) Total Return To Shareholders
Item 6. Selected Financial Data
Consolidated Results
Since 2011, we have grown our revenues by 22.7%, from $1.9 billion in 2011 to $2.3 billion in 2015,
representing a 4.2% compounded annual growth rate for that period. The majority of our revenue growth has
been the result of our inorganic initiatives, described below, as we have been operating in a period of low to
modest end market growth rates.
The trends in our operating income and income from continuing operations from 2011-2015 have been
impacted by a number of acquisitions, dispositions, productivity improvement programs, and other matters, as
follows:
During 2015, we recognized severance, restructuring, and acquisition integration costs of $47.2
million related to a number of productivity improvement programs. In addition, we acquired Tripwire
in our fiscal first quarter. We also recognized $9.2 million of compensation expense related to the
accelerated vesting of acquiree stock based compensation awards related to our acquisition of
Tripwire.
During 2014, we recognized severance, restructuring, and acquisition integration costs of $70.8
million related to the integration of acquired businesses and a productivity improvement program. In
2014, we acquired Grass Valley, ProSoft, and Coast. We recognized purchase accounting effects
related to acquisitions, including the adjustment of acquired inventory to fair value, of $8.4 million.
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 $6.6 million. In 2013, we acquired Softel in our fiscal first
quarter.
22
Years Ended December 31,20152014201320122011Statement of operations data:Revenues2,309,222$ 2,308,265$ 2,069,193$ 1,840,739$ 1,882,187$ Operating income140,553 163,119 201,262 108,497 165,206 Operating income margin6.1%7.1%9.7%5.9%8.8%Income from continuing operations 66,508 74,432 104,734 43,236 101,308 Basic income per share from continuing operations attributable to Belden stockholders 1.57 1.72 2.39 0.96 2.15 Diluted income per share from continuing operations attributable to Belden stockholders 1.55 1.69 2.34 0.94 2.11 Balance sheet data:Total assets3,315,841 3,260,670 2,751,753 2,584,583 1,788,120 Long-term debt1,750,521 1,765,422 1,364,536 1,135,527 550,926 Long-term debt, including current maturities 1,753,021 1,767,922 1,367,036 1,151,205 550,926 Total stockholders' equity825,523 807,186 836,541 811,860 694,549 Other data:Basic weighted average common shares outstanding 42,390 43,273 43,871 45,097 47,109 Diluted weighted average common shares outstanding 42,953 43,997 44,737 45,942 48,104 Dividends per common share0.20$ 0.20$ 0.20$ 0.20$ 0.20$ Adjusted results:Adjusted revenues2,360,583 2,320,219 2,084,490 1,847,011 1,882,187 Adjusted EBITDA400,688 359,425 327,210 239,671 220,806 Adjusted EBITDA margin17.0%15.5%15.7%13.0%11.7%(In thousands, except per share amounts and percentages)
In 2012, we acquired Miranda Technologies Inc. in our fiscal third quarter and PPC Broadband, Inc.
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.
See further discussion of our acquisitions and productivity improvement programs in Notes 3 and 12 to the
Consolidated Financial Statements.
Adjusted Results
Since 2011, we have grown our Adjusted Revenues by 25.4%, from $1.9 billion in 2011 to $2.4 billion in
2015, representing a 4.6% compounded annual growth rate for that period. The majority of our Adjusted
Revenue growth has been the result of our inorganic initiatives, described above, as we have been operating in
a period of low to modest end market growth rates.
We have grown our Adjusted EBITDA by 81.5%, from $220.8 million in 2011 to $400.7 million in 2015,
representing a 12.7% compounded annual growth rate for that period. Adjusted EBITDA has grown due to the
results of our inorganic initiatives, described above, which have transformed our product portfolio.
Importantly, however, our Adjusted EBITDA has also grown due to the impact of productivity improvement
programs, as we are committed to continuously improving our cost structure in a low organic growth
environment. Furthermore, our Adjusted EBITDA has improved as Lean enterprise techniques have been
applied at our acquired companies. These factors have all led to the improvement in Adjusted EBITDA
margins from 11.7% in 2011 to 17.0% in 2015.
Use of Non-GAAP Financial Information
Adjusted Revenues, Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures. In
addition to reporting financial results in accordance with accounting principles generally accepted in the
United States, we provide these non-GAAP results adjusted for certain items, including: asset impairments;
accelerated depreciation expense due to plant consolidation activities; purchase accounting effects related to
acquisitions, such as the adjustment of acquired inventory and deferred revenue to fair value and transaction
costs; revenue and cost of sales deferrals for certain acquired product lines subject to software revenue
recognition accounting requirements; severance, restructuring, and acquisition integration costs; gains (losses)
recognized on the disposal of businesses and tangible assets; amortization of intangible assets; depreciation
expense; gains (losses) on debt extinguishment; discontinued operations; 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 and may not be comparable to similarly titled measures presented by other companies. The
following tables reconcile our GAAP results to our non-GAAP financial measures:
23
24
December 31, 2015December 31, 2014December 31, 2013December 31, 2012December 31, 2011GAAP revenues2,309,222$ 2,308,265$ 2,069,193$ 1,840,739$ 1,882,187$ Deferred revenue adjustments (1)51,361 11,954 15,297 6,272 - Adjusted revenues2,360,583$ 2,320,219$ 2,084,490$ 1,847,011$ 1,882,187$ GAAP operating income 140,553$ 163,119$ 201,262$ 108,497$ 165,206$ Amortization of intangible assets103,791 58,426 50,803 22,792 13,149 Deferred gross profit adjustments (1)52,876 10,777 11,337 2,902 - Depreciation expense46,551 43,736 43,648 35,095 34,964 Severance, restructuring, and acquisition integration costs (2)47,170 70,827 14,888 17,927 4,938 Purchase accounting effects related to acquisitions (3)9,747 12,540 6,550 18,782 - Asset impairment and loss on sale of assets- - - 33,676 2,549 Gain on sale of assets- - (1,278) - - Adjusted EBITDA400,688$ 359,425$ 327,210$ 239,671$ 220,806$ GAAP operating income margin6.1%7.1%9.7%5.9%8.8%Adjusted EBITDA margin17.0%15.5%15.7%13.0%11.7%Years Ended(In thousands, except percentages)(1)BothourconsolidatedrevenuesandgrossprofitwerenegativelyimpactedbythereductionoftheacquireddeferredrevenuebalancetofairvalueassociatedwithouracquisitionofTripwireonJanuary 2, 2015, Grass Valley on March 31, 2014, and Miranda Technologies on July 27, 2012. See Note 3 to the Consolidated Financial Statements, Acquisitions.(3)In2015,werecognized$9.2millionofcompensationexpenserelatedtotheacceleratedvestingofacquireestockbasedcompensationawardsassociatedwithouracquisitionofTripwire.Inaddition,werecognized$0.3millionofcostofsalesrelatedtotheadjustmentofacquiredinventorytofairvaluerelatedtoouracquisitionofCoastand$0.3millionofacquisitionrelatedtransactioncosts.In2014,werecognized$8.4millionofcostofsalesrelatedtotheadjustmentofacquiredinventorytofairvalueforouracquisitionsofGrassValley,ProSoft,andCoast,aswellas$4.1millionofacquisitionrelatedtransactioncosts.In2013,werecognized$6.6millionofcostofsalesrelatedtotheadjustmentofacquiredinventorytofairvalueforouracquisitionofPPCBroadband.SeeNote3totheConsolidatedFinancialStatements,Acquisitions.In2012,werecognized$18.8millionofcostsrelatedtotheadjustmentofacquiredinventorytofairvalueandtransactioncostsforouracquisitions of PPC Broadband and Miranda Technologies. (2) See Note 12 to the Consolidated Financial Statements, Severance, Restructuring, and Acquisition Integration Activities, for details.
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 five global business platforms –
Broadcast Solutions, Enterprise Connectivity Solutions, Industrial Connectivity Solutions, Industrial IT
Solutions, and Network Security 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 which
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 margin profile
present a unique value proposition that increases shareholder value.
We consider Adjusted revenue growth on a constant currency basis, Adjusted EBITDA margin, free cash
flows, and return on invested capital to be our key operating performance indicators. Our business goals are
to:
Grow Adjusted Revenues on a constant currency basis by 5-7% per year, from a combination of end
market growth, market share capture, and contributions from acquisitions;
Achieve Adjusted EBITDA margins in the range of 18-20%;
Realize return on invested capital of 13-15%; and
Generate free cash flow in excess of Adjusted Net Income.
Significant Trends and Events in 2015
The following trends and events during 2015 had varying effects on our financial condition, results of
operations, and cash flows.
Foreign currency
Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S.
dollar and the euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Japanese yen, Mexican peso, Australian
dollar, British pound, and Brazilian real. Generally, as the U.S. dollar strengthens against these foreign
25
currencies, our revenues and earnings are negatively impacted as our foreign denominated revenues and
earnings are translated into U.S. dollars at a lower rate. Conversely, as the U.S. dollar weakens against foreign
currencies, our revenues and earnings are positively impacted.
In addition to the translation impact described above, currency rate fluctuations have an economic impact on
our financial results. As the U.S. dollar strengthens or weakens against foreign currencies, it results in a
relative price increase or decrease for certain of our products that are priced in U.S. dollars in a foreign
location.
Commodity Prices
Our operating results can be affected by changes in prices of commodities, primarily copper and compounds,
which are components in some of the products we sell. Generally, as the costs of inventory purchases increase
due to higher commodity prices, we raise selling prices to customers to cover the increase in costs, resulting in
higher sales revenue but a lower gross profit percentage. Conversely, a decrease in commodity prices would
result in lower sales revenue but a higher gross profit percentage. Selling prices of our products are affected
by many factors, including end market demand, capacity utilization, overall economic conditions, and
commodity prices. Importantly, however, there is no exact measure of the effect of changing commodity
prices, as there are thousands of transactions in any given quarter, each of which has various factors involved
in the individual pricing decisions. Therefore, all references to the effect of copper prices or other commodity
prices are estimates.
Channel Inventory
Our operating results also can be affected by the levels of Belden products purchased and held as inventory by
our channel partners and customers. Our channel partners and customers purchase and hold 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. We are dependent upon our channel partners to provide us with information regarding
the amount of our products that they own and hold in their inventory. As such, all references to the effect of
channel inventory changes are estimates.
Market Growth and Market Share
The markets in which we operate can generally be characterized as highly competitive and highly fragmented,
with many players. Based on available data for our served markets, we estimate that our market shares range
from approximately 5%—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.
Acquisitions
We completed the acquisitions of Tripwire Inc. (Tripwire) on January 2, 2015; Coast Wire & Plastic Tech.,
LLC (Coast) on November 20, 2014; ProSoft Technology, Inc. (ProSoft) on June 11, 2014; and Grass Valley
USA, LLC and GVBB Holdings S.a.r.l. (collectively, Grass Valley), on March 31, 2014. The results of
Tripwire, Coast, ProSoft, and Grass Valley have been included in our Consolidated Financial Statements from
26
their respective acquisition dates and are reported in the Network Security, Industrial Connectivity, Industrial
IT, and Broadcast segments, respectively.
Productivity Improvement Programs
Industrial Restructuring Program: 2015
Both our Industrial Connectivity and Industrial IT segments have been negatively impacted by a decline in sales
volume. Global demand for industrial products has been negatively impacted by the strengthened U.S. dollar and
lower energy prices. Our customers have reduced capital spending in response to these conditions, and we expect
these conditions to continue to impact our industrial segments. In response to these current industrial market
conditions, we began to execute a restructuring program in the fourth fiscal quarter of 2015 to further reduce our
cost structure. We recognized $3.3 million of severance and other restructuring costs for this program during
2015. We expect to incur approximately $9 million of additional severance and other restructuring costs for this
program, the majority of which will be incurred in the first fiscal quarter of 2016. We expect the restructuring
program to generate approximately $18 million of savings on an annualized basis, which we expect to begin to
realize in the first fiscal quarter of 2016.
Grass Valley Restructuring Program: 2015
Our Broadcast segment has been negatively impacted by a decline in sales volume for our broadcast technology
infrastructure products sold by our Grass Valley brand. Outside of the U.S., demand for these products has been
impacted by the relative price increase of our products due to the strengthened U.S. dollar as well as the impact of
weaker economic conditions which have resulted in lower capital spending. Within the U.S., demand for these
products has been impacted by deferred capital spending. Also, we believe broadcast customers have deferred
their capital spending as they navigate through a number of important industry transitions and a changing media
landscape. In response to these current broadcast market conditions, we began to execute a restructuring program
beginning in the third fiscal quarter of 2015 to further reduce our cost structure. We recognized $25.4 million of
severance and other restructuring costs for this program during 2015. We expect to incur approximately $4
million of additional severance and other restructuring costs for this program, the majority of which will be
incurred in the first fiscal quarter of 2016. We expect the restructuring program to generate approximately $30
million of savings on an annualized basis, which we began to realize in the fourth fiscal quarter of 2015.
Productivity Improvement Program and Acquisition Integration: 2014-2015
In 2014, we began a productivity improvement program and the integration of our acquisition of Grass Valley.
The productivity improvement program focused on improving the productivity of our sales, marketing,
finance, and human resources functions relative to our peers. The majority of the costs for the productivity
improvement program related to the Industrial Connectivity, Enterprise, and Industrial IT segments. We
expected the productivity improvement program to reduce our operating expenses by approximately $18
million on an annualized basis, and we are substantially realizing such benefits. The restructuring and
integration activities related to our acquisition of Grass Valley focused on achieving desired cost savings by
consolidating existing and acquired operating facilities and other support functions. The Grass Valley costs
related to our Broadcast segment. We substantially completed the productivity improvement program and the
integration activities in the second fiscal quarter of 2015.
In 2015, we recorded severance, restructuring, and integration costs of $18.5 million related to these two
significant programs, as well as other cost reduction actions and the integration of our acquisitions of ProSoft,
Coast, and Tripwire. We recorded $70.8 million of such costs in 2014. The other restructuring and integration
costs primarily consisted of costs of integrating manufacturing operations, such as relocating inventory on a
global basis, retention bonuses, relocation, travel, reserves for inventory obsolescence as a result of product
line integration, costs to consolidate operating and support facilities, and other costs.
27
Other Programs: 2013
In 2013, we recorded $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 for our 2012 acquisition of PPC Broadband, Inc. (PPC).
The severance and other restructuring costs were paid in 2013. We expected the results of these activities to
generate annualized cost savings of approximately $8 - $10 million beginning in 2014, and we have substantially
realized those 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 modest, 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
2015 Compared to 2014
Revenues were approximately flat in 2015 compared to 2014 due to the following factors:
Acquisitions contributed $203.8 million of revenues.
Unfavorable currency translation, primarily due to the strengthened U.S. dollar compared to the euro and the
Canadian dollar, resulted in a revenue decrease of $132.1 million.
Lower copper costs resulted in a revenue decrease of $40.6 million.
Decreases in unit sales volume resulted in a decrease in revenues of $30.1 million. Soft demand for our
broadcast infrastructure and industrial products was partially offset by strong demand for our enterprise and
broadband connectivity products. From a geographic perspective, weakness in China, Europe, and Latin
America was partially offset by strength in the U.S. and Canada.
Gross profit for 2015 included $9.4 million of severance, restructuring, and acquisition integration costs and $0.3
million of cost of sales arising from the adjustment of inventory to fair value related to our acquisition of Coast.
Gross profit for 2014 included $20.7 million of severance, restructuring, and integration costs, and $8.4 million of
cost of sales arising from the adjustment of inventory to fair value related to our acquisitions of Grass Valley,
ProSoft, and Coast.
Excluding these costs, gross profit for 2015 increased by $79.3 million from 2014, primarily due to acquisitions.
Acquisitions contributed $136.3 million of gross profit in 2015. The gross profit from acquisitions was partially
28
2015201420132015 vs. 20142014 vs. 2013Revenues2,309,222$ 2,308,265$ 2,069,193$ 0.0%11.6%Gross profit918,173 819,449 704,429 12.0%16.3%Selling, general and administrative expenses527,288 487,945 378,009 8.1%29.1%Research and development148,311 113,914 83,277 30.2%36.8%Amortization of intangibles103,791 58,426 50,803 77.6%15.0%Operating income 140,553 163,119 201,262 -13.8%-19.0%Interest expense, net100,613 81,573 72,601 23.3%12.4%Income from continuing operations before taxes39,940 81,546 127,049 -51.0%-35.8%Percentage Change(In thousands, except percentages)
offset by the impact of the decline in sales volume and unfavorable product mix, particularly in the Broadcast
segment. Additionally, unfavorable currency translation reduced gross profit by $47.3 million.
Selling, general and administrative expenses increased by $39.3 million in 2015 from 2014 primarily due to our
acquisitions. Acquisitions contributed $90.2 million of selling, general and administrative expenses in 2015. We
also recognized $9.2 million of compensation expense as a result of accelerating the vesting of certain acquiree
equity awards at the closing of the Tripwire acquisition in 2015. These increases were partially offset by a
decrease in severance, restructuring, and acquisition integration costs of $14.8 million. In addition, selling,
general and administrative expenses decreased due to favorable currency translation of $25.7 million and
improved productivity of $15.0 million.
Research and development expenses increased by $34.4 million in 2015 from 2014 primarily due to our
acquisitions. Acquisitions contributed $42.7 million of research and development expenses in 2015. This
increase was partially offset by favorable currency translation of $8.3 million. Research and development
expenses also decreased due to improved productivity as a result of completed restructuring actions.
Amortization of intangibles increased in 2015 from 2014 primarily due to the definite-lived intangible assets
recorded from our 2015 acquisition of Tripwire. The impact of acquisitions contributed $49.8 million of
amortization of intangibles in 2015. The increase was partially offset by favorable currency translation.
Operating income decreased in 2015 from 2014 due to the increases in selling, general and administrative
expenses, research and development expenses, and amortization of intangibles discussed above, partially offset
by the increase in gross profit.
Interest expense increased in 2015 from 2014 due to our recent financing activities. We borrowed $200.0 million
under our Revolver in January 2015, we issued €200.0 million 5.5% senior subordinated notes in November
2014, and we issued $200.0 million 5.25% senior subordinated notes in June 2014. While we repaid $150.0
million under our Revolver prior to December 31, 2015, the net impact of these financing activities led to the
increase in interest expense for the year.
Income from continuing operations before taxes decreased in 2015 from 2014 due to the decrease in operating
income and increase in interest expense discussed above.
2014 Compared to 2013
Revenues increased in 2014 from 2013 due to the following factors:
The acquisitions of Grass Valley, ProSoft, and Coast contributed $229.6 million of the increase in revenues
in 2014.
An increase in unit sales volume resulted in an increase in revenues of $42.2 million. We experienced an
increase in sales volume in our Broadcast and Industrial segments, which offset lower sales volume in our
Enterprise segment. Sales volume in the Enterprise segment decreased due to product portfolio decisions to
emphasize higher value solutions rather than lower margin cable products. In addition, revenues in 2014
were negatively impacted by a decrease in channel inventory. The decrease in channel inventory resulted in
part from shorter lead times stemming from our Lean enterprise initiatives, which allow our channel partners
to maintain lower levels of Belden products in their inventory. From a geographic perspective, the increase
in volume was the strongest in the Europe, Middle East, and Africa (EMEA) region, emerging markets, the
U.S., and Mexico, whereas volume decreased in the Asia Pacific region.
A decrease in sales prices primarily due to lower copper costs resulted in a revenue decrease of $16.7
million.
Unfavorable currency translation resulted in a decrease in revenue of $16.0 million in 2014. The unfavorable
currency translation was primarily related to the strengthening U.S. dollar compared to the euro and the
Canadian dollar.
29
Gross profit in 2014 included $20.7 million of severance, restructuring, and integration costs, and $8.4 million of
cost of sales arising from the adjustment of inventory to fair value related to our acquisitions of Grass Valley,
ProSoft, and Coast. Gross profit in 2013 included $12.0 million of severance, restructuring, accelerated
depreciation, and integration costs and $6.6 million of cost of sales arising from the adjustment of inventory to
fair value related to the 2012 acquisition of PPC.
Excluding these costs, gross profit in 2014 increased by $125.6 million from 2013. The most significant factor
was the impact of our acquisitions of Grass Valley, ProSoft, and Coast which contributed approximately $109.8
million of gross profit in 2014. The remainder of the increase was due to leveraging the increase in revenues
discussed above and improved productivity as a result of our completed restructuring actions.
Selling, general and administrative expenses increased in 2014 primarily due to our acquisitions. Grass Valley,
ProSoft, and Coast recognized $72.0 million of selling, general and administrative expenses in 2014. In addition,
selling, general and administrative expenses increased in 2014 due to an increase in severance, restructuring, and
integration costs of $40.0 million. These increases were partially offset by improved productivity as a result of
our completed restructuring actions.
Research and development expenses increased in 2014 primarily due to our acquisitions. Grass Valley and
ProSoft recognized $31.7 million of research and development expenses in 2014.
Operating income in 2014 included $70.8 million of severance, restructuring, and integration costs, $58.4 million
of amortization of intangibles and $8.4 million of cost of sales arising from the adjustment of inventory to fair
value related to our acquisitions of Grass Valley, ProSoft, and Coast. Operating income in 2013 included $50.8
million of amortization of intangibles, $14.9 million of severance, restructuring, and integration 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. Excluding these costs, operating income increased by
$22.4 million due to leveraging the increase in revenues, improved productivity as a result of our completed
restructuring actions, and the contribution of approximately $7.4 million of combined operating income from the
acquisitions of Grass Valley, ProSoft, and Coast.
Interest expense increased by $9.1 million in 2014 from 2013 due to the issuance of $200.0 million 5.25% senior
subordinated notes in June 2014, the issuance of €200.0 million 5.5% senior subordinated notes in November
2014, and our 2013 refinancing activities. Our long-term debt balance as of December 31, 2014 was $1.8 billion,
compared to $1.4 billion as of December 31, 2013.
Income from continuing operations before taxes decreased in 2014 from 2013 primarily due to the increase in
severance, restructuring, and integration costs and the increase in interest expense discussed above.
Income Taxes
2015 Compared to 2014
We recognized an income tax benefit of $26.6 million in 2015, representing an effective tax rate for 2015 of
(66.5%). Our full year effective tax rate on full year pre-tax income is a negative rate (an income tax benefit)
as a result of implemented tax planning strategies, described below.
30
2015201420132015 vs. 20142014 vs. 2013Income from continuing operations before taxes39,940$ 81,546$ 127,049$ -51.0%-35.8%Income tax expense (benefit)(26,568) 7,114 22,315 -473.5%-68.1%Effective tax rate-66.5%8.7%17.6%Percentage Change(In thousands, except percentages)
In 2015, the most significant difference between the U.S. federal statutory tax rate and our effective tax rate
was the impact of domestic permanent differences and tax credits. We recognized a total income tax benefit
from domestic permanent differences and tax credits of $23.0 million in 2015. Approximately $18.0 million
of that benefit stems from being able to recognize a significant balance of foreign tax credits related to one of
our foreign jurisdictions as a result of implementing a tax planning strategy, net of the U.S. income tax
consequences. We were also able to recognize other foreign tax credits and research and development tax
credits in 2015, which represented the remaining $5.0 million of tax benefit from domestic permanent
differences and tax credits.
An additional significant factor impacting the income tax benefit for 2015 was the reduction of a deferred tax
valuation allowance related to certain net operating loss carryforwards in one of our foreign jurisdictions.
Based on implemented tax planning strategies, the net operating loss carryforwards have become fully
realizable, and we realized a net tax benefit of $11.4 million related to changes in the valuation allowance.
Our income tax benefit was also impacted by foreign tax rate differences. 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 relative to the statutory U.S. tax rate by approximately $3.4
million and $14.4 million in 2015 and 2014, respectively.
As of December 31, 2015, we maintained a valuation allowance on our deferred tax assets of $117.1 million.
Of this amount, approximately $104.7 million relates to net operating loss deferred tax assets for certain of our
Grass Valley entities. Certain Grass Valley entities have a history of significant tax losses in their various
jurisdictions. While our restructuring activities have begun to improve the taxable income generated by the
Grass Valley entities, we do not currently have sufficient history of taxable income in the relevant jurisdictions
to support the realizability of the net operating losses.
The remaining $12.4 million of valuation allowance primarily relates to 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, 2015 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.
2014 Compared to 2013
We recognized income tax expense of $7.1 million in 2014, representing an effective tax rate for 2014 of
8.7%. Our income tax expense in 2014 included certain significant discrete items. First, our income tax
expense in 2014 included a benefit of $5.8 million for the reduction of uncertain tax position liabilities,
primarily due to favorable developments with a foreign tax audit and transfer pricing matters. In addition, our
2014 income tax expense included $3.8 million of net expense to record valuation allowances against certain
deferred tax assets related to net operating losses generated in 2014. The valuation allowances were recorded
due to a history of tax losses in certain jurisdictions.
Our income tax expense in 2013 included $4.8 million of tax expense for uncertain tax positions liabilities,
primarily related to a foreign tax audit.
Our income tax expense was also impacted by foreign tax rate differences. 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
31
Netherlands, which have statutory tax rates of approximately 28%, 26%, and 25%, respectively. Foreign tax
rate differences reduced our income tax expense relative to the statutory U.S. tax rate by approximately $14.4
million and $15.4 million in 2014 and 2013, respectively.
Our income tax expense also was impacted by domestic permanent differences and tax credits. In 2014, our
income tax expense included a benefit of $5.8 million from domestic permanent differences and tax credits,
compared to a benefit of $12.7 million in 2013. In general, our significant domestic permanent differences and
tax credits stem from foreign income that is taxable in the U.S., 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, 2014, we maintained a valuation allowance on our deferred tax assets of $157.3 million.
Of this amount, approximately $143.5 million relates to net operating loss deferred tax assets acquired from
Grass Valley, and an additional $4.3 million relates to net operating losses generated by Grass Valley
subsequent to the acquisition date. Grass Valley has a history of significant tax losses, both in the U.S. and in
its various foreign jurisdictions. We do not currently have forecasted sources of taxable income in Grass
Valley’s jurisdictions that would be sufficient to utilize their net operating losses.
The remaining $9.5 million of valuation allowance relates to 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, 2014 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.
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.”
Consolidated Adjusted Revenues and Adjusted EBITDA
2015 Compared to 2014
Adjusted Revenues increased in 2015 from 2014 due to the following factors:
Acquisitions contributed $256.6 million of revenues.
Unfavorable currency translation, primarily due to the strengthening U.S. dollar compared to the euro and the
Canadian dollar, resulted in a revenue decrease of $132.1 million.
Decreases in unit sales volume resulted in a decrease in revenues of $43.5 million. Soft demand for our
broadcast infrastructure and industrial products was partially offset by strong demand for our enterprise and
broadband connectivity products. From a geographic perspective, weakness in China, Europe, and Latin
America was partially offset by strength in the U.S. and Canada.
Lower copper costs resulted in a revenue decrease of $40.6 million.
Adjusted EBITDA increased in 2015 from 2014 primarily due to acquisitions, which contributed $64.0 million of
Adjusted EBITDA. In addition, Adjusted EBITDA increased due to improved productivity as a result of our
recently completed restructuring activities. These factors were partially offset by the impact of the declines in
32
2015201420132015 vs. 20142014 vs. 2013Adjusted Revenues2,360,583$ 2,320,219$ 2,084,490$ 1.7%11.3%Adjusted EBITDA400,688 359,425 327,210 11.5%9.8% as a percent of adjusted revenues17.0%15.5%15.7%Percentage Change(In thousands, except percentages)
unit sales volume discussed above, as well as unfavorable product mix. Further, unfavorable currency translation
resulted in a decrease in Adjusted EBITDA of $16.1 million.
2014 Compared to 2013
Adjusted Revenues increased in 2014 from 2013 due to the following factors:
Acquisitions contributed $237.5 million of revenues.
Unfavorable currency translation, primarily due to the strengthening U.S. dollar compared to the euro and the
Canadian dollar, resulted in a revenue decrease of $16.0 million.
An increase in unit sales volume resulted in an increase in revenues of $30.9 million. We experienced an
increase in sales volume in our Broadcast and Industrial segments, which offset lower sales volume in our
Enterprise segment. Sales volume in the Enterprise segment decreased due to product portfolio decisions to
emphasize higher value solutions rather than lower margin cable products. In addition, revenues in 2014
were negatively impacted by a decrease in channel inventory. The decrease in channel inventory resulted in
part from shorter lead times stemming from our Lean enterprise initiatives, which allow our channel partners
to maintain lower levels of Belden products in their inventory. From a geographic perspective, the increase
in volume was the strongest in the Europe, Middle East, and Africa (EMEA) region, emerging markets, the
U.S., and Mexico, whereas volume decreased in the Asia Pacific region.
Lower copper costs resulted in a revenue decrease of $16.7 million.
Adjusted EBITDA increased in 2014 from 2013 primarily due to acquisitions, which contributed $18.4 million of
Adjusted EBITDA. In addition, Adjusted EBITDA increased due to leveraging higher sales volume and
improved productivity as a result of our recently completed restructuring activities. Unfavorable currency
translation resulted in a decrease in Adjusted EBITDA of $1.3 million.
Use of Non-GAAP Financial Information
Adjusted Revenues, Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures. In
addition to reporting financial results in accordance with accounting principles generally accepted in the United
States, we provide these non-GAAP results adjusted for certain items, including: asset impairments; accelerated
depreciation expense due to plant consolidation activities; purchase accounting effects related to acquisitions,
such as the adjustment of acquired inventory and deferred revenue to fair value and transaction costs; revenue and
cost of sales deferrals for certain acquired product lines subject to software revenue recognition accounting
requirements; severance, restructuring, and acquisition integration costs; gains (losses) recognized on the disposal
of businesses and tangible assets; amortization of intangible assets; depreciation expense; gains (losses) on debt
extinguishment; discontinued operations; 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 and may not be comparable to
similarly titled measures presented by other companies. See Item 6, Selected Financial Data, for the tables that
reconcile our GAAP results to our non-GAAP financial measures.
Segment Results of Operations
For additional information regarding our segment measures, see Note 5 to the Consolidated Financial Statements.
33
Broadcast Solutions
2015 Compared to 2014
Broadcast revenues decreased by $27.9 million from 2014 to 2015. Unfavorable currency translation and
lower copper costs resulted in decreases in revenues of $34.3 million and $5.7 million, respectively.
Additionally, revenues declined due to decreases in unit sales volume of $41.2 million. The decrease in
volume occurred outside of the U.S., primarily due to the relative price increase of our products from the
strengthened U.S. dollar as well as the impact of weaker economic conditions, which have resulted in lower
capital spending. The volume decrease outside of the U.S. primarily related to our broadcast technology
infrastructure products. Sales volume increases within the U.S. partially offset the decline in sales volume
outside of the U.S. Within the U.S., strong demand for our broadband connectivity products was partially
offset by a decline in volume for our broadcast technology infrastructure products. Volume for broadcast
technology infrastructure products was negatively impacted by deferred capital spending. We believe
broadcast customers have deferred their capital spending as they navigate through a number of important
industry transitions and a changing media landscape. These decreases in revenues were partially offset by
$53.3 million of incremental revenues in 2015 from the acquisition of Grass Valley.
Broadcast EBITDA increased in 2015 from 2014 primarily due to improved productivity as a result of our
recently completed restructuring and acquisition integration activities, primarily related to Grass Valley. The
impact of improved productivity was partially offset by the decline in revenues, as discussed above, as well as
unfavorable product mix.
2014 Compared to 2013
Broadcast revenues increased in 2014 from 2013 primarily due to the acquisition of Grass Valley, which
contributed $204.2 million of revenues in 2014. An increase in unit sales volume resulted in an increase in
revenues of $49.9 million. We believe sales volume benefited from market share gains due to the execution of
our Market Delivery System, particularly in our broadband connectivity business. Geographically, the volume
increase was the strongest in EMEA, emerging markets, and the U.S. Unfavorable currency translation and lower
copper costs resulted in decreases in revenues of $2.4 million and $2.3 million, respectively.
Broadcast EBITDA increased in 2014 from 2013 primarily due to leveraging the increase in revenues
discussed above and improved productivity due to our completed restructuring and acquisition integration
activities. Additionally, the acquisition of Grass Valley contributed $13.3 million of EBITDA in 2014. These
factors were partially offset by unfavorable currency translation of $2.9 million.
Enterprise Connectivity Solutions
2015 Compared to 2014
34
2015201420132015 vs. 20142014 vs. 2013Segment Revenues900,637$ 928,586$ 679,197$ -3.0%36.7%Segment EBITDA142,428 140,367 109,541 1.5%28.1% as a percent of segment revenues15.8%15.1%16.1%Percentage Change(In thousands, except percentages)2015201420132015 vs. 20142014 vs. 2013Segment Revenues445,243$ 455,795$ 493,129$ -2.3%-7.6%Segment EBITDA71,508 66,035 62,165 8.3%6.2% as a percent of segment revenues16.1%14.5%12.6%Percentage Change(In thousands, except percentages)
The decrease in Enterprise Connectivity revenues in 2015 from 2014 was primarily due to unfavorable
currency translation of $25.3 million and lower copper costs of $13.6 million. Increases in unit sales volume
resulted in an increase in revenues of $28.3 million. The increase in unit sales volume was most notable in the
U.S., where sales volume benefited from improved non-residential construction spending.
Enterprise Connectivity EBITDA increased in 2015 from 2014 due to the increases in units sales volume
discussed above, improved product mix as a result of increased focus on the sale of end-to-end solutions, and
improved productivity. Accordingly, EBITDA margins improved from 14.5% in 2014 to 16.1% in 2015.
2014 Compared to 2013
Enterprise Connectivity revenues decreased in 2014 compared to 2013 due to a decrease in unit sales volume of
$26.6 million. The decrease in volume was due to product portfolio decisions to emphasize higher value solutions
rather than lower margin cable products. The decrease in volume was most notable in the U.S., Canada, and
China. Additionally, sales volume declined in 2014 due to a decrease in channel inventory. A decrease in sales
prices primarily due to lower copper costs and unfavorable currency translation resulted in revenue decreases of
$5.7 million and $5.0 million, respectively.
While revenues decreased from 2013 to 2014, EBITDA increased by $3.9 million, due to improved product mix
resulting from our product portfolio initiatives discussed above. Accordingly, EBITDA margins expanded from
12.6% in 2013 to 14.5% in 2014.
Industrial Connectivity Solutions
2015 Compared to 2014
The decrease in Industrial Connectivity revenues in 2015 from 2014 was primarily due to unfavorable currency
translation of $43.6 million and lower copper costs of $21.3 million. Decreases in unit sales volume resulted
in a revenue decrease of $27.8 million. Sales volume declines resulted primarily from the impact of lower
energy prices, which result in lower capital spending for industrial projects, and the unfavorable impact of a
strengthened U.S. dollar. The acquisition of Coast in November 2014 contributed $13.7 million in incremental
revenues for 2015.
Industrial Connectivity EBITDA decreased in 2015 from 2014 by $6.2 million. EBITDA was negatively
impacted by unfavorable currency translation of $4.8 million. The decreases in revenues discussed above also
contributed to the decreases in EBITDA. The decreases in EBITDA were partially offset by the acquisition of
Coast, which contributed EBITDA of $5.3 million, favorable product mix, and improved productivity due to
our recently completed restructuring activities. Despite the decrease in revenues, EBITDA margins expanded
from 15.5% in 2014 to 16.6% in 2015 due to improved product mix and lower input costs.
2014 Compared to 2013
Industrial Connectivity revenues increased in 2014 from 2013, primarily due to an increase in unit sales volume
of $16.9 million. Sales volume benefited from market share gains in 2014, as well as an increase in channel
inventory. The increase in volume was strongest in the U.S., Mexico, and Europe, offset by decreased volume in
emerging markets, including Brazil and China. Additionally, the acquisition of Coast in November 2014
35
2015201420132015 vs. 20142014 vs. 2013Segment Revenues603,350$ 682,374$ 680,643$ -11.6%0.3%Segment EBITDA99,941 106,097 104,655 -5.8%1.4% as a percent of segment revenues16.6%15.5%15.4%(In thousands, except percentages)Percentage Change
contributed $1.6 million of revenues in 2014. A decrease in sales prices due to lower copper costs and
unfavorable currency translation resulted in revenue decreases of $8.5 million and $8.3 million, respectively.
Industrial Connectivity EBITDA increased in 2014 from 2013 by $1.4 million, primarily due to the increase in
sales volume discussed above. The acquisition of Coast contributed $0.4 million of EBITDA in 2014. These
factors were partially offset by unfavorable product mix.
Industrial IT Solutions
2015 Compared to 2014
Industrial IT revenues decreased in 2015 from 2014, primarily due to unfavorable currency translation of $28.9
million. In addition, decreases in unit sales volume resulted in a decrease in revenues of $2.9 million. Sales
volume decreases in 2015 were most notable within the United States and Canada. The acquisition of ProSoft
in June 2014 contributed $22.6 million in incremental revenues for 2015.
Industrial IT EBITDA decreased in 2015 from 2014 by $4.7 million. EBITDA was negatively impacted by
unfavorable currency translation of $11.8 million. This decrease was partially offset by the acquisition of
ProSoft, which contributed $4.8 million of EBITDA in 2015, and improved productivity as a result of our
recently completed restructuring activities.
2014 Compared to 2013
Industrial IT revenues increased in 2014 from 2013 primarily due to the acquisition of ProSoft, which contributed
$31.7 million of revenues in 2014. This increase was partially offset by a decrease in revenues due to lower unit
sales volume of $9.4 million. The decrease in sales volume was experienced across all geographic regions. In
addition, sales volume in the prior year benefited from several non-recurring projects. Unfavorable currency
translation resulted in a decrease in revenues of $0.4 million.
Industrial IT EBITDA increased in 2014 from 2013 by $2.2 million. The acquisition of ProSoft contributed
$4.7 million of EBITDA in 2014. EBITDA also benefited from improved productivity as a result of our
recently completed restructuring activities. These factors were partially offset by the impact of the decline in
sales volume discussed above.
Network Security Solutions
Network Security consists of the Tripwire business acquired on January 2, 2015. Tripwire is a leading global
provider of advanced threat, security and compliance solutions. The Network Security Solutions’ EBITDA
margin for 2015 of 26.7% is reflective of the margins for software solutions, which are higher than margins on
product lines in our other global platforms.
36
2015201420132015 vs. 20142014 vs. 2013Segment Revenues244,303$ 253,464$ 231,521$ -3.6%9.5%Segment EBITDA43,253 47,927 45,719 -9.8%4.8% as a percent of segment revenues17.7%18.9%19.7%Percentage Change(In thousands, except percentages)2015201420132015 vs. 20142014 vs. 2013Segment Revenues167,050$ -$ -$ n/an/aSegment EBITDA44,620 - - n/an/a as a percent of segment revenues26.7%n/an/aPercentage Change(In thousands, except percentages)
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 net of tax). At the time the transaction closed, we received $265.6
million in cash, subject to a working capital adjustment. In 2014, we recognized a $0.9 million ($0.6 million
net of tax) loss from disposal of discontinued operations related to this business as a result of settling the
working capital adjustment and other matters. 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
obligations under the sale agreement. During 2013, we collected a partial settlement of $4.2 million from the
escrow. During 2015, we agreed to a final settlement with the buyer of Trapeze regarding the escrow, and
collected $3.5 million of the escrow receivable and recognized a $0.2 million ($0.1 million net of tax) loss
from disposal of discontinued operations. Additionally, we recognized a $0.2 million net loss from
discontinued operations for income tax expense related to this disposed business in 2015. In 2014, we
recognized $0.6 million of income from discontinued operations due to the reversal of an uncertain tax position
liability related to this disposed business.
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 2016 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 $236.4 million for 2015 compared to $194.0 million 2014.
The most significant factor impacting the increase in cash provided by operating activities was the change in
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20152014Net cash provided by (used for):Operating activities236,410$ 194,028$ Investing activities(746,254) (392,348) Financing activities(6,019) 337,218 Effects of currency exchange rate changes on cash and cash equivalents(8,548) (11,040) Increase (decrease) in cash and cash equivalents(524,411) 127,858 Cash and cash equivalents, beginning of year741,162 613,304 Cash and cash equivalents, end of year216,751$ 741,162$ (In thousands)December 31,Years Ended
operating assets and liabilities. In 2015, changes in operating assets and liabilities were a source of cash of
$54.6 million, compared to $27.2 million in 2014. This increase stemmed primarily from an improvement in
accrued liabilities.
Accrued liabilities were a source of cash of $59.2 million for 2015, compared to a use of cash of $5.6 million
for 2014. The source of cash for accrued liabilities improved primarily as a result of the increase in deferred
revenue for our acquired Network Security segment.
Net cash used for investing activities totaled $746.3 million for 2015 compared to $392.3 million for 2014.
Investing activities for 2015 included payments for acquisitions, net of cash acquired, of $695.3 million and
capital expenditures of $55.0 million. Investing activities for 2014 included payments for acquisitions, net of
cash acquired, of $347.8 million and capital expenditures of $45.5 million.
Net cash used for financing activities for 2015 totaled $6.0 million, compared to net cash provided by
financing activities of $337.2 million for 2014. Financing activities for 2015 included borrowings of $200.0
million to partially fund the acquisition of Tripwire, repayments of borrowings of $152.5 million, payments
under our share repurchase program of $39.1 million, cash dividend payments of $8.4 million, and net
payments related to share based compensation activities of $6.6 million. Financing activities in 2014 included
the issuance of $200.0 million of 5.25% senior subordinated notes due 2024, the issuance of $256.2 million of
5.5% senior subordinated notes due 2023, and payments under our share repurchase program of $92.2 million.
Our cash and cash equivalents balance was $216.8 million as of December 31, 2015. Of this amount, $114.7
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, 2015 consisted of $1.5 billion of senior subordinated
notes, $244.0 million of term loan borrowings, and $50.0 million of borrowings under our Revolver.
Additional discussion regarding our various borrowing arrangements is included in Note 13 to the
Consolidated Financial Statements. As of December 31, 2015, we had $242.5 million in available borrowing
capacity under our Revolver.
Contractual obligations outstanding at December 31, 2015, have the following scheduled maturities:
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Our commercial commitments expire or mature as follows:
Standby financial letters of credit, bank guarantees, and surety bonds are generally issued to secure obligations
we have for a variety of commercial reasons such as workers compensation self-insurance programs in several
states and the importation and exportation of product. We expect to replace most of these when they expire or
mature.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect
on our financial condition, results of operations, or cash flows that are or would be considered material to
investors.
Current-Year Adoption of Recent Accounting Pronouncements
Discussion regarding our adoption of accounting pronouncements is included in Note 2 to the Consolidated
Financial Statements.
Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the U.S. (GAAP). In connection with the preparation of our financial statements, we are required
to make assumptions and estimates about future events, and apply judgments that affect the reported amounts
of assets, liabilities, revenues, expenses, and the related disclosures. We base our assumptions, estimates, and
judgments on historical experience, current trends, and other factors that management believes to be relevant at
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Less than1-34-5More thanTotal1 YearYearsYears5 YearsLong-term debt payment obligations (1)(2)1,753,021$ 2,500$ 55,000$ 241,686$ 1,453,835$ Interest payments on long-term debt obligations 651,647 88,938 177,632 174,694 210,383 Operating lease obligations (3)93,474 24,331 30,850 19,335 18,958 Purchase obligations (4)17,490 17,313 177 - - Other commitments (5)7,293 2,719 3,545 1,029 - Pension and other postemployment obligations67,197 7,312 14,571 12,115 33,199 Total2,590,122$ 143,113$ 281,775$ 448,859$ 1,716,375$ (1) As described in Note 13 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 credit8,223$ 7,520$ 703$ -$ -$ Bank guarantees3,018 3,018 - - - Surety bonds2,436 2,436 - - - Total13,677$ 12,974$ 703$ -$ -$ (In thousands)
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 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 functionality 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
Changes) through individual customer records, we estimate the amount of outstanding Changes and recognize
them by reducing revenues and accounts receivable. We determine our estimate based on our historical
Changes as a percentage of revenues and the average time period between the original sale and the issuance of
the Changes. 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 Changes 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 Changes. 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 Changes as of
December 31, 2015 would have affected net income by less than $1 million in 2015.
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 oftentimes do not have vendor
specific objective evidence or third party evidence of fair value for such arrangements.
We have certain products subject to the accounting guidance on software revenue recognition. For such
products, software license revenue is recognized when persuasive evidence of an arrangement exists, delivery
of the product has occurred, the fee is fixed or determinable, collection is probable and vendor-
specific objective evidence (VSOE) of the fair value of undelivered elements exists. As substantially all of the
software licenses are sold in multiple-element arrangements that include either support and maintenance or
both support and maintenance and professional services, we use the residual method to determine the amount
of software license revenue to be recognized. Under the residual method, consideration is allocated to
undelivered elements based upon VSOE of the fair value of those elements, with the residual of the
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arrangement fee allocated to and recognized as software license revenue. In our Network Security Solutions
segment, we have established VSOE of the fair value of support and maintenance, subscription-based software
licenses, and professional services. Software license revenue is generally recognized upon delivery of the
software if all revenue recognition criteria are met.
Revenue allocated to support services under our Network Security Solutions support and maintenance
contracts is paid in advance and recognized ratably over the term of the service. Revenue allocated to
subscription-based software and remote ongoing operational services is also paid in advance and recognized
ratably over the term of the service. Revenue allocated to professional services, including remote
implementation services, is recognized as the services are performed.
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
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, as well as with our
budgeting and strategic planning processes.
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 2016 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.
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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, Industrial IT, and Network
Security) 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, one reporting unit within
Industrial IT, and one reporting unit within Network Security for purposes of goodwill impairment testing.
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. In 2015, we performed a qualitative assessment for six
of our reporting units, which collectively represented approximately $636 million of our consolidated goodwill
balance. For those reporting units for which we performed a qualitative assessment, we determined that it was
more likely than not that the fair value was greater than the carrying value, and therefore, we did not perform
the calculation of fair value for these reporting units as described in the paragraph below.
When we evaluate goodwill for impairment using a quantitative assessment, we compare the fair value of each
reporting unit to its carrying value. We determine the fair value using an income approach. Under the income
approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash
flows using growth rates and discount rates that are consistent with current market conditions in our industry.
If the fair value of the reporting unit exceeds the carrying value of the net assets including goodwill assigned to
that unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill
exceeds the fair value of the reporting unit, then we 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 2015. The fair values of our four reporting
units tested under a quantitative approach 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. In our quantitative assessments, the discount rates ranged from 10.0% to 10.3%
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and the long-term growth rates ranged from 3% to 4%. 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 2015. Rather, we performed a quantitative assessment for each of our trademarks
in 2015. 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 2015. 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.
Definite-lived Intangible Assets
The carrying value of our definite-lived intangible assets as of December 31, 2015 was $515.9 million.
Customer relationships and developed technology are the most significant definite-lived intangible assets
recorded, with carrying values of $247.9 million and $246.2 million, respectively, and weighted average
amortization periods of 18.8 years and 5.3 years, respectively, as of December 31, 2015. We also have
recorded definite-lived intangible assets for certain trademarks, certain in-service research and development
projects, and backlog. The assignment of useful lives and the determination of the method of amortization for
our definite-lived intangible assets require significant judgments and the use of estimates.
We record amortization of the definite-lived intangible assets over their estimated useful lives. If an intangible
asset has a finite useful life, but the precise length of that life is not known, the asset is amortized over the best
estimate of its useful life. We estimate the useful life based on all relevant information available to us
regarding the assets, including information utilized to determine the value of the definite-lived intangible asset.
For example, for our customer relationships, we consider historical and projected sales data and related
customer attrition rates in order to estimate a useful life. For our developed technology, we give consideration
to the product life cycle in order to estimate a useful life.
We determine the amortization method for our definite-lived intangible assets based on the pattern in which
the economic benefits of the intangible asset are consumed. In the event we cannot reliably determine that
pattern, we utilize a straight-line amortization method. In order to determine the amortization method, we
evaluate all relevant information available to us regarding the assets, including information utilized to
determine the value of the definite-lived intangible asset. For example, for customer relationships, we consider
historical and projected sales data, customer attrition rates, and our historical experience with key customers of
past acquisitions to determine if a pattern of consumption can be derived. If the data examined does not
provide a reliably determinable pattern of consumption, then we utilize a straight-line amortization method.
The determinations of useful lives and amortization methods require a significant use of judgment by
management. We believe the useful lives assigned and the amortization methods applied are reasonable based
on the data available to us. For our existing and prior definite-lived intangible assets, we have not experienced
significant differences between our estimates and actual results. We do not believe there is a reasonable
likelihood that there will be a material change in the future of the estimates or assumptions we used to develop
the useful lives and amortization methods. However, if actual results are significantly different from our
estimates or assumptions, we may have to recognize an impairment charge, shorten the useful life assigned to
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one or more of our definite-lived intangible assets, or change the amortization method assigned to one or more
of our definite-lived intangible assets, which could have a material impact on our results. This could occur, for
example, if we were to experience significant customer losses or attrition in excess of our estimates or if our
product lives were significantly shortened due to technological developments or obsolescence.
As a sensitivity measure, the effect of a 10% change in the estimated useful life of our definite-lived intangible
assets for customer relationships and developed technology would have resulted in a change in 2015
amortization expense of approximately $2.0 million and $9.2 million, respectively.
In addition, the testing of definite-lived assets for impairment also requires significant use of judgment and
assumptions, particularly as it relates to the identification of asset groups and the determination of fair market
value. We test our definite-lived intangible assets for impairment when indicators of impairment exist. 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,
however, a combination of plants or operating facilities may be considered the asset group due to
interdependence of operational activities and cash flows.
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, mortality tables, 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 change in the assumed discount rate would have resulted
in a change in 2015 net periodic benefit cost of approximately $1.0 million and a change in the projected
benefit obligations as of December 31, 2015 of approximately $17.9 million. A 50 basis point change in the
expected return on plan assets would have resulted in a change in 2015 net periodic benefit cost of
approximately $1.0 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
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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.
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.
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.
In 2015, we recorded approximately $2.9 million of net foreign currency transaction gains.
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. However, we re-evaluate our strategy as the foreign currency environment changes, and
it is possible that we could utilize derivative financial instruments to manage this risk in the future. We did not
have any foreign currency derivatives outstanding as of December 31, 2015.
Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S.
dollar and the euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Japanese yen, Mexican peso, Australian
dollar, British pound, and Brazilian real.
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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, 2015 or 2014.
following
The
December 31, 2015. The unconditional purchase obligations will settle during 2016 and early 2017.
table presents unconditional commodity purchase obligations outstanding as of
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, 2015 or 2014.
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, 2015.
46
PurchaseFairAmountValueUnconditional copper purchase obligations:Commitment volume in pounds2,427 Weighted average price per pound2.29$ Commitment amounts5,558$ 5,170$ Unconditional aluminum purchase obligations:Commitment volume in pounds450 Weighted average price per pound0.78$ Commitment amounts351$ 339$ Total unconditional purchase obligations5,909$ 5,509$ (In thousands, except average price)
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, 2015, we had $31.1 million in accounts receivable
outstanding from Anixter International Inc. This represented approximately 8% of our total accounts receivable
outstanding at December 31, 2015. Anixter generally pays all outstanding receivables within thirty to sixty days
of invoice receipt.
47
Fair2016ThereafterTotalValueRevolving credit agreement due 2018-$ 50,000$ 50,000$ 50,000$ Average interest rate2.13%Variable-rate term loan due 20202,500$ 241,465$ 243,965$ 243,965$ Average interest rate3.25%3.25%Fixed-rate senior subordinated notes due 2022-$ 700,000$ 700,000$ 678,125$ Average interest rate5.50%Fixed-rate senior subordinated notes due 2023-$ 553,835$ 553,835$ 549,765$ Average interest rate5.50%Fixed-rate senior subordinated notes due 2024-$ 200,000$ 200,000$ 183,500$ Average interest rate5.25%Fixed-rate senior subordinated notes due 2019-$ 5,221$ 5,221$ 5,221$ Average interest rate9.25%Total1,753,021$ 1,710,576$ Principal Amount by Expected Maturity(In thousands, except interest rates)
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, 2015 and 2014, and the related consolidated statements of operations, comprehensive income,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. 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, 2015 and 2014, and the consolidated results of
its operations and its cash flows for each of the three years in the period ended December 31, 2015, 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, 2015, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2016,
expressed an unqualified opinion thereon.
St. Louis, Missouri
February 25, 2016
/s/ Ernst & Young LLP
48
Belden Inc.
Consolidated Balance Sheets
49
20152014Current assets:Cash and cash equivalents $ 216,751 $ 741,162 Receivables, net 387,386 379,777 Inventories, net 195,942 228,398 Other current assets 43,085 42,656 Total current assets 843,164 1,391,993 Property, plant and equipment, less accumulated depreciation 310,629 316,385 Goodwill 1,385,115 943,374 Intangible assets, less accumulated amortization 655,871 461,292 Deferred income taxes 34,295 60,652 Other long-lived assets 86,767 86,974 $ 3,315,841 $3,260,670 Current liabilities:Accounts payable $ 223,514 $ 272,439 Accrued liabilities 323,249 248,072 Current maturities of long-term debt 2,500 2,500 Total current liabilities549,263 523,011 - - Long-term debt1,750,521 1,765,422 Postretirement benefits105,230 122,627 Deferred income taxes46,034 11,015 Other long-term liabilities39,270 31,409 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; 41,981 and 42,464 shares outstanding at 2015 and 2014, respectively 503 503 Additional paid-in capital605,660 595,389 Retained earnings679,716 621,896 Accumulated other comprehensive loss(58,987) (46,031) Treasury stock, at cost— 8,354 and 7,871 shares at 2015 and 2014, respectively (402,793) (364,571) - - Total Belden stockholders’ equity 824,099 807,186 Noncontrolling interest1,424 - Total stockholders’ equity 825,523 807,186 $ 3,315,841 $3,260,670 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
50
201520142013Revenues $ 2,309,222 $ 2,308,265 $ 2,069,193 Cost of sales (1,391,049) (1,488,816) (1,364,764)Gross profit918,173 819,449 704,429 Selling, general and administrative expenses (527,288) (487,945) (378,009)Research and development (148,311) (113,914) (83,277)Amortization of intangibles (103,791) (58,426) (50,803)Income from equity method investment 1,770 3,955 8,922 Operating income 140,553 163,119 201,262 Interest expense, net (100,613) (81,573) (72,601)Loss on debt extinguishment - - (1,612)Income from continuing operations before taxes 39,940 81,546 127,049 Income tax benefit (expense) 26,568 (7,114) (22,315)Income from continuing operations 66,508 74,432 104,734 Income (loss) from discontinued operations, net of tax (242) 579 (1,421)Loss from disposal of discontinued operations, net of tax (86) (562) - Net income 66,180 74,449 103,313 Less: Net loss attributable to noncontrolling interest (24) - - Net income attributable to Belden stockholders $ 66,204 $ 74,449 $ 103,313 Weighted average number of common shares and equivalents:Basic 42,390 43,273 43,871 Diluted 42,953 43,997 44,737 Basic income (loss) per share attributable to Belden stockholders:Continuing operations $ 1.57 $ 1.72 $ 2.39 Discontinued operations (0.01) 0.01 (0.03)Disposal of discontinued operations - (0.01) - Net income $ 1.56 $ 1.72 $ 2.36 Diluted income (loss) per share attributable to Belden stockholders:Continuing operations $ 1.55 $ 1.69 $ 2.34 Discontinued operations (0.01) 0.01 (0.03)Disposal of discontinued operations - (0.01) - Net income $ 1.54 $ 1.69 $ 2.31 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
51
201520142013Net income $ 66,180 $ 74,449 $ 103,313 Foreign currency translation, net of tax of $1.3 million, $1.8 million, and $2.2 million, respectively(20,842) (10,387) (20,720) Adjustments to pension and postretirement liability, net of tax of $3.1 million, $3.6 million, and $14.0 million, respectively7,864 (6,463) 22,104 Other comprehensive income (loss), net of tax(12,978) (16,850) 1,384 Comprehensive income 53,202 57,599 104,697 Less: Comprehensive loss attributable to noncontrolling interest(46) - - Comprehensive income attributable to Belden stockholders53,248$ 57,599$ 104,697$ Years Ended December 31,(In thousands)The accompanying notes are an integral part of these Consolidated Financial Statements
Belden Inc.
Consolidated Cash Flow Statements
52
201520142013Cash flows from operating activities: Net income $ 66,180 $ 74,449 $ 103,313 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 150,342 102,162 94,451 Share-based compensation 17,745 18,858 14,854 Loss on debt extinguishment - - 1,612 Income from equity method investment (1,770) (3,955) (8,922) Tax benefit related to share-based compensation (5,050) (6,859) (10,734) Deferred income tax expense (benefit) (45,674) (17,796) 5,457 Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses: Receivables 6,066 (15,810) (18,132) Inventories 19,204 (2,260) 6,872 Accounts payable (38,907) 28,120 12,994 Accrued liabilities 59,214 (5,598) 31,690 Accrued taxes 11,981 9,058 (89,427) Other assets (3,070) 10,223 4,542 Other liabilities 149 3,436 16,031 Net cash provided by operating activities 236,410 194,028 164,601 Cash flows from investing activities: Cash used to acquire businesses, net of cash acquired (695,345) (347,817) (9,979) Capital expenditures (54,969) (45,459) (40,209) Proceeds from disposal of tangible assets 533 1,884 3,169 Proceeds from (payments for) disposal of business 3,527 (956) 3,735 Net cash used for investing activities (746,254) (392,348) (43,284)Cash flows from financing activities: Borrowings under credit arrangements 200,000 456,163 637,595 Tax benefit related to share-based compensation 5,050 6,859 10,734 Contribution from noncontrolling interest 1,470 - - Debt issuance costs paid (898) (10,700) (17,376) Cash dividends paid (8,395) (8,699) (6,678) Withholding tax payments for share based payment awards, net of proceeds from the exercise of stock options (11,693) (11,708) (3,019) Payments under share repurchase program (39,053) (92,197) (93,750) Payments under borrowing arrangements (152,500) (2,500) (434,743) Net cash provided by (used for) financing activities (6,019) 337,218 92,763 Effect of foreign currency exchange rate changes on cash and cash equivalents (8,548) (11,040) 4,129 Increase (decrease) in cash and cash equivalents (524,411) 127,858 218,209 Cash and cash equivalents, beginning of period 741,162 613,304 395,095 Cash and cash equivalents, end of period $ 216,751 $ 741,162 $ 613,304 Years Ended December 31, (In thousands)The accompanying notes are an integral part of these Consolidated Financial Statements
Belden Inc.
Consolidated Stockholders’ Equity Statements
53
AdditionalOtherPaid-InRetainedComprehensiveNoncontrollingSharesAmountCapitalEarningsSharesAmountIncome (Loss)InterestTotalBalance 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$ Net income- - - 74,449 - - - - 74,449 Foreign currency translation, net of $1.8 million tax- - - - - - (10,387) - (10,387) Adjustments to pension and postretirementliability, net of $3.6 million tax - - - - - - (6,463) - (6,463) Other comprehensive loss, net of tax(16,850) Exercise of stock options, net of tax withholding forfeitures- - (12,123) - 194 2,395 - - (9,728) Conversion of restricted stock units into common stock, netof tax withholding forfeitures- - (3,958) - 77 1,979 - - (1,979) Share repurchase program- - - - (1,262) (92,197) - - (92,197) Share-based compensation- - 25,717 - - - - - 25,717 Dividends ($0.20 per share)- - - (8,767) - - - - (8,767) Balance at December 31, 201450,335 503$ 595,389$ 621,896$ (7,871) (364,571)$ (46,031)$ -$ 807,186$ Contribution from noncontrolling interest- - - - - - - 1,470 1,470 Net income- - - 66,204 - - - (24) 66,180 Foreign currency translation, net of $1.3 million tax- - - - - - (20,820) (22) (20,842) Adjustments to pension and postretirementliability, net of $3.1 million tax - - - - - - 7,864 - 7,864 Other comprehensive loss, net of tax(12,978) Exercise of stock options, net of tax withholding forfeitures- - (6,070) - 100 (96) - - (6,166) Conversion of restricted stock units into common stock, netof tax withholding forfeitures- - (6,454) - 115 927 - - (5,527) Share repurchase program- - - - (698) (39,053) - - (39,053) Share-based compensation- - 22,795 - - - - - 22,795 Dividends ($0.20 per share)- - - (8,384) - - - - (8,384) Balance at December 31, 201550,335 503$ 605,660$ 679,716$ (8,354) (402,793)$ (58,987)$ 1,424$ 825,523$ AccumulatedThe accompanying notes are an integral part of these Consolidated Financial StatementsCommon StockTreasury Stock(In thousands)Belden Inc. Stockholders
Notes to Consolidated Financial Statements
Note 1: Basis of Presentation
Business Description
Belden Inc. (the Company, us, we, or our) is an innovative signal transmission solutions company built around
five global business platforms – Broadcast Solutions, Enterprise Connectivity Solutions, Industrial
Connectivity Solutions, Industrial IT Solutions, and Network Security 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 sell our products to distributors, end-users, installers, and directly
to original equipment manufacturers (OEMs).
Consolidation
The accompanying Consolidated Financial Statements include Belden Inc. and all of its subsidiaries, including
variable interest entities for which we are the primary beneficiary. 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 and valuation 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 2014 and 2013 Consolidated Financial Statements with no
impact to reported net income in order to conform to the 2015 presentation.
54
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, 2015 and 2014, we utilized Level 1 inputs to determine the fair value of cash
equivalents. During 2015, 2014, and 2013, we utilized Level 3 inputs to determine the fair value of net
assets acquired in business combinations (see Note 3) and for our annual impairment testing (see Note
10). We did not have any transfers between Level 1 and Level 2 fair value measurements during 2015.
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. As of December 31, 2015, we did not have any such cash equivalents on hand. The fair value
of these cash equivalents as of December 31, 2014 was $1.2 million, which was based on quoted market
prices in active markets (i.e., Level 1 valuation).
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 Changes) through individual customer records, we estimate the amount
of outstanding Changes 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 Changes patterns. We make
revisions to these estimates in the period in which the facts that give rise to each revision become known.
55
Future market conditions might require us to take actions to further reduce prices and increase customer return
authorizations. Unprocessed Changes recognized against our gross accounts receivable balance at December
31, 2015 and 2014 totaled $19.1 million and $17.6 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, net of
recoveries, of ($1.8 million), $0.3 million, and $0.2 million in 2015, 2014, and 2013, respectively. In 2015, we
recovered approximately $2.7 million of accounts receivable from one significant customer. The allowance for
doubtful accounts at December 31, 2015 and 2014 totaled $8.3 million and $11.5 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, 2015 and 2014 totaled $22.5
million and $31.8 million, respectively. The decrease in the allowance for excess and obsolete inventories was
primarily due to physical disposal of inventory for which an allowance had been recorded previously.
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 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.
For purposes of impairment testing of long-lived assets, we have identified asset groups at the lowest level for
56
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,
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-service 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 record amortization of the definite-lived intangible assets over the
estimated useful lives of the related assets, which generally range from one year or less for backlog to more
than 25 years for certain of our customer relationships. We determine the amortization method for our
definite-lived intangible assets based on the pattern in which the economic benefits of the intangible asset are
consumed. In the event we cannot reliably determine that pattern, we utilize a straight-line amortization
method.
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. In 2015, we performed a qualitative assessment for six
of our reporting units, which collectively represented approximately $636 million of our consolidated goodwill
balance. For those reporting units for which we performed a qualitative assessment, we determined that it was
more likely than not that the fair value was greater than the carrying value, and therefore, we did not perform
the calculation of fair value for these reporting units as described in the paragraph below.
For our annual impairment test in 2015, we performed a quantitative assessment for four of our reporting units.
Under a quantitative assessment for goodwill impairment, we determine the fair value using the income
approach (using Level 3 inputs) 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. The fair values of the four reporting units tested under a quantitative
approach were substantially in excess of the carrying values as of the impairment testing date.
We did not recognize any goodwill impairment in 2015, 2014, or 2013. See Note 10 for further discussion.
We also evaluate indefinite lived intangible assets for impairment annually or at other times if events have
57
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 2015, 2014, or 2013. 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 2015,
2014, or 2013.
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 mobile crane market.
We account for this investment using the equity method of accounting. The carrying value included in other
long-lived assets on our Consolidated Balance Sheets of our investment in the Hirschmann JV as of December
31, 2015 and 2014 is $29.5 million and $33.4 million, respectively.
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, mortality tables, 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, are 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,
2015 and 2014 totaled $30.0 million and $31.5 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
58
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 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
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, such as deferred
revenue or postretirement benefit 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.
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, unless we have established vendor specific objective evidence (VSOE) or third
party evidence of fair value exists 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.
We have certain products subject to the accounting guidance on software revenue recognition. For such products,
software license revenue is recognized when persuasive evidence of an arrangement exists, delivery of the
product has occurred, the fee is fixed or determinable, collection is probable and VSOE of the fair value of
undelivered elements exists. As substantially all of
in multiple-
element arrangements that include either support and maintenance or both support and maintenance and
licenses are sold
the software
59
professional services, we use the residual method to determine the amount of software license revenue to be
recognized. Under the residual method, consideration is allocated to undelivered elements based upon VSOE of
the fair value of those elements, with the residual of the arrangement fee allocated to and recognized as software
license revenue. In our Network Security Solutions segment, we have established VSOE of the fair value of
support and maintenance, subscription-based software licenses, and professional services. Software license
revenue is generally recognized upon delivery of the software if all revenue recognition criteria are met.
Revenue allocated to support services under our Network Security Solutions support and maintenance contracts is
paid in advance and recognized ratably over the term of the service. Revenue allocated to subscription-
based software and remote ongoing operational services is also paid in advance and recognized ratably over the
term of the service. Revenue allocated to professional services, including remote implementation services, is
recognized as the services are performed.
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. Cost of sales also includes the costs to provide maintenance and support and other professional
services.
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.
Research and Development Costs
Research and development costs are expensed as incurred.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $27.5 million, $21.8 million, and $17.8
million for 2015, 2014, and 2013, 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, primarily stock appreciation rights (SARs), 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
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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. We estimate the fair value of certain restricted stock units with service vesting conditions and
performance vesting conditions based on the grant date stock price. We estimate the fair value of certain
restricted stock units with market conditions using a Monte Carlo simulation valuation model with the
assistance of a third party valuation firm.
After calculating the aggregate fair value of an award, we use an estimated forfeiture rate to discount the
amount of share-based compensation cost expected 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.
Current-Year Adoption of Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
No. 2015-17, Balance Sheet Classification of Deferred Taxes (ASU 2015-17), which requires that all deferred
tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The standard
is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting
period. Early adoption is permitted for any interim and annual financial statements that have not yet been
issued. We early adopted ASU 2015-17 effective December 31, 2015, retrospectively. Adoption resulted in a
$22.1 million decrease in total current assets, a $20.0 million increase in non-current deferred tax assets, a $2.3
million decrease in accrued liabilities, and a $0.2 million increase in non-current deferred tax liabilities in our
Consolidated Balance Sheet as of December 31, 2014 compared to the prior period presentation. Adoption had
no impact on our results of operations.
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Pending Adoption of Recent Accounting Pronouncements
In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of
Debt Issuance Costs (ASU 2015-03), and during August 2015, the FASB issued Accounting Standards Update
No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-
Credit Arrangements (ASU 2015-15). ASU 2015-03 requires that debt issuance costs related to a recognized
debt liability are presented as a direct reduction from the carrying amount of that debt liability. ASU 2015-15
clarifies that an entity may continue to present debt issuance costs related to a line-of-credit arrangement as an
asset and amortize the debt issuance costs ratably over the terms of the line-of-credit arrangement, regardless
of whether there are any outstanding borrowings on the line-of-credit arrangement. The new guidance will be
effective for us for the year ending December 31, 2016. We do not expect the new guidance to have a material
effect on our Consolidated Financial Statements.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with
Customers (ASU 2014-09), which will replace most existing revenue recognition guidance in U.S. GAAP. The
core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal
to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 requires
additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from
customer contracts, including significant judgments and changes in judgments. ASU 2014-09 will be effective
for us beginning January 1, 2018, and allows for both retrospective and modified retrospective methods of
adoption. Early adoption beginning January 1, 2017 is permitted. We are in the process of determining the
method and timing of adoption and assessing the impact of ASU 2014-09 on our Consolidated Financial
Statements.
In August 2014, the FASB issued disclosure guidance that requires us to evaluate, at each annual and interim
period, whether substantial doubt exists about our ability to continue as a going concern, and if applicable, to
provide related disclosures. The new guidance will be effective for us for the year ending December 31, 2016.
This guidance is not currently expected to have a material effect on our financial statement disclosures upon
adoption, although the ultimate impact will be dependent on our financial condition and expected operating
outlook at such time.
Note 3: Acquisitions
Tripwire
We acquired 100% of the outstanding ownership interest in Tripwire, Inc. (Tripwire) on January 2, 2015 for a
purchase price of $703.2 million. The purchase price was funded with cash on hand and $200.0 million of
borrowings under our revolving credit agreement (see Note 13). Tripwire is a leading global provider of
advanced threat, security and compliance solutions. Tripwire’s solutions enable enterprises, service providers,
manufacturers, and government agencies to detect, prevent, and respond to growing security threats. Tripwire
is headquartered in Portland, Oregon. The results of Tripwire have been included in our Consolidated
Financial Statements from January 2, 2015. We have determined that Tripwire is a reportable segment,
Network Security Solutions. The following table summarizes the estimated fair value of the assets acquired
and the liabilities assumed as of January 2, 2015 (in thousands).
62
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 most significant change to the final purchase price allocation presented in the table above as
compared to the preliminary purchase price allocation as of September 27, 2015 was a reduction of goodwill of
approximately $15.8 million, primarily due to a reduction in the estimated fair value of acquired deferred tax
liabilities.
The fair value of acquired receivables is $37.8 million, with a gross contractual amount of $38.0 million. We
do not expect to collect $0.2 million of the acquired receivables.
For purposes of the above allocation, we based our estimate of the fair value for the acquired intangible assets,
property, plant and equipment, and deferred revenue on a valuation study performed by a third party valuation
firm. We used various valuation methods including discounted cash flows to estimate the fair value of the
identifiable intangible assets and deferred revenue (Level 3 valuation). To determine the value of the acquired
property, plant, and equipment, we used various valuation methods, including both the market approach, which
considers sales prices of similar assets in similar conditions (Level 2 valuation), and the cost approach, which
considers the cost to replace the asset adjusted for depreciation (Level 3 valuation).
Goodwill and other intangible assets reflected above were determined to meet the criterion for recognition
apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to expected
synergies and the assembled workforce. The expected synergies for the Tripwire acquisition primarily consist
of an expanded product portfolio with network security solutions that can be marketed to our existing
broadcast, enterprise, and industrial customers. We do not have tax basis in the goodwill, and therefore, the
goodwill is not deductible for tax purposes. The intangible assets related to the acquisition consisted of the
following:
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Cash2,364$ Receivables37,792 Inventories603 Other current assets2,453 Property, plant and equipment10,021 Goodwill462,215 Intangible assets306,000 Other non-current assets659 Total assets822,107$ Accounts payable3,142$ Accrued liabilities12,142 Deferred revenue8,000 Deferred income taxes95,074 Other non-current liabilities540 Total liabilities118,898$ Net assets703,209$
The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The
useful life for the developed technology intangible asset was based on the estimated time that the technology
provides us with a competitive advantage and thus approximates the period of consumption of the intangible
asset. The useful life for the customer relationship intangible asset was based on our forecasts of customer
turnover. The useful life of the backlog intangible asset was based on our estimate of when the ordered items
would ship.
Trademarks have been determined by us to have indefinite lives and are not being amortized, based on our
expectation that the trademarked products will generate cash flows for us for an indefinite period. We expect to
maintain use of trademarks on existing products and introduce new products in the future that will also display
the trademarks, thus extending their lives indefinitely. In-process research and development assets are
considered indefinite-lived intangible assets until the completion or abandonment of the associated research
and development efforts. Upon completion of the development process, we will make a determination of the
useful life of the asset and begin amortizing the assets over that period. If the project is abandoned, we will
write-off the asset at such time.
Our consolidated revenues and consolidated income from continuing operations before taxes for the year
ended December 31, 2015 included $116.6 million of revenues and a $47.8 million loss from continuing
operations before taxes from Tripwire. Consolidated revenues in the year ended December 31, 2015 were
negatively impacted by approximately $50.4 million due to the reduction of the acquired deferred revenue
balance to fair value. Our consolidated income from continuing operations before taxes for the year ended
December 31, 2015 included $43.2 million of amortization of intangible assets and $9.2 million of
compensation expense related to the accelerated vesting of acquiree stock based compensation awards.
The following table illustrates the unaudited pro forma effect on operating results as if the Tripwire acquisition
had been completed as of January 1, 2014.
64
Estimated Fair ValueAmortization Period(In thousands)(In years)Intangible assets subject to amortization:Developed technology210,000$ 5.8 Customer relationships56,000 15.0 Backlog3,000 1.0 Total intangible assets subject to amortization269,000 Intangible assets not subject to amortization:Goodwill462,215 Trademarks31,000 In-process research and development6,000 Total intangible assets not subject to amortization499,215 Total intangible assets768,215$ Weighted average amortization period7.7
For purposes of the pro forma disclosures, the year ended December 31, 2014 includes nonrecurring expenses
from the effects of purchase accounting, including the compensation expense from the accelerated vesting of
acquiree stock compensation awards of $9.2 million and amortization of the sales backlog intangible asset of
$3.0 million.
The above unaudited pro forma financial information is presented for informational purposes only and does not
purport to represent what our results of operations would have been had we completed the acquisition on the
date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma
adjustments exclude cost savings from any synergies resulting from the acquisition.
Coast Wire and Plastic Tech
We acquired 100% of the outstanding ownership interest in Coast Wire and Plastic Tech., LLC (Coast) on
November 20, 2014 for cash of $36.0 million. Coast is a developer and manufacturer of customized wire and
cable solutions used in high-end medical device, military and defense, and industrial applications. Coast is
located in Carson, California. The results of Coast have been included in our Consolidated Financial
Statements from November 20, 2014, and are reported within the Industrial Connectivity segment. The Coast
acquisition was not material to our financial position or results of operations reported as of and for the year
ended December 31, 2014.
ProSoft Technology, Inc.
We acquired 100% of the outstanding shares of ProSoft Technology, Inc. (ProSoft) on June 11, 2014 for cash
of $104.1 million. ProSoft is a leading manufacturer of industrial networking products that translate between
disparate automation systems, including the various protocols used by different automation vendors. The
results of ProSoft have been included in our Consolidated Financial Statements from June 11, 2014, and are
reported within the Industrial IT segment. ProSoft is headquartered in Bakersfield, California. The following
table summarizes the estimated fair value of the assets acquired and the liabilities assumed as of June 11, 2014
(in thousands).
65
December 31, 2015December 31, 2014Revenues $ 2,354,191 $ 2,405,198 Income from continuing operations 92,104 23,302 Diluted income per share from continuing operations attributable to Belden stockholders $ 2.14 $ 0.53 (In thousands, except per share data)(Unaudited)Years Ended
A single estimate of fair value results from a complex series of judgments about future events and uncertainties
and relies heavily on estimates and assumptions. The judgments we have used in estimating the fair values
assigned to each class of acquired assets and assumed liabilities could materially affect the results of our
operations. There were no significant changes to the final purchase price allocation presented in the table
above as compared to the preliminary purchase price allocation of December 31, 2014.
The fair value of acquired receivables is $5.9 million, with a gross contractual amount of $6.2 million. We do
not expect to collect $0.3 million of the acquired receivables.
For purposes of the above allocation, we based our estimate of the fair value of the acquired inventory and
intangible assets on a valuation study performed by a third party valuation firm. We have estimated a fair
value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods
acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal,
and a reasonable profit allowance for our post acquisition selling efforts. We used various valuation methods
including discounted cash flows to estimate the fair value of the identifiable intangible assets (Level 3
valuation).
Goodwill and other intangible assets reflected above were determined to meet the criterion for recognition
apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to expected
synergies and the assembled workforce. The expected synergies for the ProSoft acquisition primarily consist
of expanded access to the Industrial IT market and channel partners. Our tax basis in the acquired goodwill is
$56.9 million. The goodwill balance we recorded is deductible for tax purposes over a period of 15 years up to
the amount of the tax basis. The intangible assets related to the acquisition consisted of the following:
66
Cash2,517$ Receivables5,894 Inventories2,731 Other current assets332 Property, plant and equipment767 Goodwill56,923 Intangible assets40,800 Other non-current assets622 Total assets110,586$ Accounts payable2,544$ Accrued liabilities2,807 Other non-current liabilities1,132 Total liabilities6,483$ Net assets104,103$
The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The
useful life for the developed technologies intangible asset was based on the estimated time that the technology
provides us with a competitive advantage and thus approximates the period of consumption of the intangible
asset. The useful life for the customer relationship intangible asset was based on our forecasts of customer
turnover. The useful life for the trademarks was based on the period of time we expect to continue to go to
market using the trademarks. The useful life of the backlog intangible asset was based on our estimate of
when the ordered items would ship.
Our consolidated revenues and consolidated income (loss) from continuing operations before taxes for the year
ended December 31, 2014 included $31.7 million and ($2.5) million, respectively, from ProSoft. Our
consolidated income from continuing operations before taxes for the year ended December 31, 2014 included
$2.4 million of amortization of intangible assets and $1.4 million of cost of sales related to the adjustment of
acquired inventory to fair value.
Grass Valley
We acquired 100% of the outstanding ownership interest in Grass Valley USA, LLC and GVBB Holdings
S.a.r.l., (collectively, Grass Valley) on March 31, 2014 for cash of $218.2 million. Grass Valley is a leading
provider of innovative technologies for the broadcast industry, including production switchers, cameras,
servers, and editing solutions. Grass Valley is headquartered in Hillsboro, Oregon, with significant locations
throughout the United States, Europe, and Asia. The results of Grass Valley have been included in our
Consolidated Financial Statements from March 31, 2014, and are reported within the Broadcast segment. The
following table summarizes the estimated fair value of the assets acquired and the liabilities assumed as of
March 31, 2014 (in thousands):
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Fair ValueAmortization Period(In thousands)(In years)Intangible assets subject to amortization:Customer relationships26,600$ 20.0 Developed technologies9,000 5.0 Trademarks5,000 5.0 Backlog200 0.3 Total intangible assets subject to amortization40,800 Intangible assets not subject to amortization:Goodwill56,923 Total intangible assets not subject to amortization56,923 Total intangible assets97,723$ Weighted average amortization period14.8
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 most significant change to the final purchase price allocation presented in the table above as
compared to the preliminary purchase price allocation as of December 31, 2014 was an increase of goodwill of
$11.5 million, primarily due to an increase in the estimated fair value of acquired accrued liabilities and
deferred tax liabilities.
The fair value of acquired receivables is $67.4 million, with a gross contractual amount of $77.2 million. We
do not expect to collect $9.8 million of the acquired receivables.
For purposes of the above allocation, we based our estimate of the fair value of the acquired inventory,
property, plant, and equipment, intangible assets, and deferred revenue on a valuation study performed by a
third party valuation firm. We have estimated a fair value adjustment for inventories based on the estimated
selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to
complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post acquisition
selling efforts. To determine the value of the acquired property, plant, and equipment, we used various
valuation methods, including both the market approach, which considers sales prices of similar assets in
similar conditions (Level 2 valuation), and the cost approach, which considers the cost to replace the asset
adjusted for depreciation (Level 3 valuation). We used various valuation methods including discounted cash
flows to estimate the fair value of the identifiable intangible assets and deferred revenue (Level 3 valuation).
Goodwill and other intangible assets reflected above were determined to meet the criterion for recognition
apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to expected
synergies and the assembled workforce. The expected synergies for the Grass Valley acquisition primarily
consist of cost savings from the ability to consolidate existing and acquired operating facilities and other
support functions, as well as expanded access to the Broadcast market. Our estimated tax basis in the acquired
goodwill is not significant. The intangible assets related to the acquisition consisted of the following:
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Cash9,451$ Receivables67,354 Inventories18,593 Other current assets4,172 Property, plant and equipment22,460 Goodwill131,070 Intangible assets95,500 Other non-current assets17,101 Total assets365,701$ Accounts payable51,276$ Accrued liabilities62,672 Deferred revenue14,000 Postretirement benefits16,538 Deferred income taxes1,827 Other non-current liabilities1,199 Total liabilities147,512$ Net assets218,189$
The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The
useful life for the developed technologies intangible asset was based on the estimated time that the technology
provides us with a competitive advantage and thus approximates the period of consumption of the intangible
asset. The useful life for the customer relationship intangible asset was based on our forecasts of customer
turnover. The useful life of the backlog intangible asset was based on our estimate of when the ordered items
would ship.
Trademarks have been determined by us to have indefinite lives and are not being amortized, based on our
expectation that the trademarked products will generate cash flows for us for an indefinite period. We expect to
maintain use of trademarks on existing products and introduce new products in the future that will also display
the trademarks, thus extending their lives indefinitely. In-process research and development assets are
considered indefinite-lived intangible assets until the completion or abandonment of the associated research
and development efforts. Upon completion of the development process, we will make a determination of the
useful life of the asset and begin amortizing the assets over that period. If the project is abandoned, we will
write-off the asset at such time.
Our consolidated revenues and consolidated income (loss) from continuing operations before taxes for the year
ended December 31, 2014 included $196.2 million and ($58.5) million, respectively, from Grass Valley. Our
consolidated income from continuing operations before taxes for the year ended December 31, 2014 included
$8.6 million of amortization of intangible assets and $6.9 million of cost of sales related to the adjustment of
acquired inventory to fair value. We also recognized certain severance, restructuring, and acquisition
integration costs in the 2014 related to Grass Valley. See Note 12.
The following table illustrates the unaudited pro forma effect on operating results as if the Grass Valley and
ProSoft acquisitions had been completed as of January 1, 2013.
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Fair ValueAmortization Period(In thousands)(In years)Intangible assets subject to amortization:Developed technologies37,000$ 5.0 Customer relationships27,000 15.0 Backlog1,500 0.3 Total intangible assets subject to amortization65,500 Intangible assets not subject to amortization:Goodwill131,070 Trademarks22,000 In-process research and development8,000 Total intangible assets not subject to amortization161,070 Total intangible assets226,570$ Weighted average amortization period9.0
For purposes of the pro forma disclosures, the year ended December 31, 2013 includes nonrecurring expenses
from the effects of purchase accounting, including the cost of sales arising from the adjustments of inventory
to fair value of $8.3 million, amortization of the sales backlog intangible assets of $1.7 million, and Belden’s
transaction costs of $1.6 million.
The above unaudited pro forma financial information is presented for informational purposes only and does not
purport to represent what our results of operations would have been had we completed the acquisition on the
date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma
adjustments exclude cost savings from any synergies resulting from the acquisition.
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.
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 net of tax). At the time the transaction closed, we received $265.6
million in cash, subject to a working capital adjustment. In 2014, we recognized a $0.9 million ($0.6 million
net of tax) loss from disposal of discontinued operations related to this business as a result of settling the
working capital adjustment and other matters. 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
obligations under the sale agreement. During 2013, we collected a partial settlement of $4.2 million from the
escrow. During 2015, we agreed to a final settlement with the buyer of Trapeze regarding the escrow, and
collected $3.5 million of the escrow receivable and recognized a $0.2 million ($0.1 million net of tax) loss
from disposal of discontinued operations. Additionally, we recognized a $0.2 million net loss from
discontinued operations for income tax expense related to this disposed business in 2015. In 2014, we
recognized $0.6 million of income from discontinued operations due to the reversal of an uncertain tax position
liability related to this disposed business.
Note 5: Operating Segments and Geographic Information
We are organized around five global business platforms: Broadcast, Enterprise Connectivity, Industrial
Connectivity, Industrial IT, and Network Security. The Network Security platform was formed with our
70
20142013Revenues $ 2,401,200 $ 2,420,099 Income from continuing operations 67,956 66,874 Diluted income per share from continuing operations attributable to Belden stockholders $ 1.54 $ 1.49 Years ended December 31, (In thousands, except per share data)(Unaudited)
acquisition of Tripwire in January 2015. We have determined that each of the global business platforms
represents a reportable segment.
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.
Effective January 1, 2015, the key measures of segment profit or loss reviewed by our chief operating decision
maker are Segment Revenues and Segment EBITDA. Segment Revenues represent non-affiliate revenues and
include revenues that would have otherwise been recorded by acquired businesses as independent entities but
were not recognized in our Consolidated Statements of Operations due to the effects of purchase accounting and
the associated write-down of acquired deferred revenue to fair value. Segment EBITDA excludes certain items,
including depreciation expense; amortization of intangibles; asset impairment; severance, restructuring, and
acquisition integration costs; purchase accounting effects related to acquisitions, such as the adjustment of
acquired inventory and deferred revenue to fair value; and other costs. We allocate corporate expenses to the
segments for purposes of measuring Segment EBITDA. Corporate expenses are allocated on the basis of each
segment’s relative EBITDA prior to the allocation. The prior period presentation has been updated accordingly.
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 the Hirschmann JV are analyzed separately from the results of our
operating segments, and they are not included in the corporate expense allocation.
Operating Segment Information
71
Broadcast Solutions201520142013Segment revenues900,637$ 928,586$ 679,197$ Affiliate revenues1,371 1,381 933 Segment EBITDA142,428 140,367 109,541 Depreciation expense17,103 16,553 18,422 Amortization of intangibles50,989 50,739 46,005 Severance, restructuring, and acquisition integration costs39,078 48,557 12,128 Purchase accounting effects of acquisitions132 8,574 6,550 Deferred gross profit adjustments2,446 10,777 11,337 Acquisition of property, plant and equipment27,900 17,912 10,526 Segment assets394,197 430,991 294,454 (In thousands)Years ended December 31,
72
Enterprise Connectivity Solutions201520142013Segment revenues445,243$ 455,795$ 493,129$ Affiliate revenues5,322 8,467 9,823 Segment EBITDA71,508 66,035 62,165 Depreciation expense11,783 13,744 12,469 Amortization of intangibles543 650 543 Severance, restructuring, and acquisition integration costs723 3,318 400 Purchase accounting effects of acquisitions52 608 - Acquisition of property, plant and equipment9,788 12,574 11,749 Segment assets190,298 206,377 223,073 Years ended December 31,(In thousands)Industrial Connectivity Solutions201520142013Segment revenues603,350$ 682,374$ 680,643$ Affiliate revenues1,613 2,927 1,901 Segment EBITDA99,941 106,097 104,655 Depreciation expense11,235 11,145 10,308 Amortization of intangibles3,154 1,236 1,085 Severance, restructuring, and acquisition integration costs6,228 11,953 700 Purchase accounting effects of acquisitions334 1,328 - Acquisition of property, plant and equipment8,836 10,053 14,496 Segment assets231,265 255,997 259,400 Years ended December 31,(In thousands)Industrial IT Solutions201520142013Segment revenues244,303$ 253,464$ 231,521$ Affiliate revenues70 54 208 Segment EBITDA43,253 47,927 45,719 Depreciation expense2,293 2,294 2,449 Amortization of intangibles5,859 5,801 3,170 Severance, restructuring, and acquisition integration costs169 6,999 1,660 Purchase accounting effects of acquisitions32 2,030 - Acquisition of property, plant and equipment2,039 1,903 2,020 Segment assets55,285 67,417 56,658 Years ended December 31,(In thousands)
The following table is a reconciliation of the total of the reportable segments’ Revenues and EBITDA to
consolidated revenues and consolidated income from continuing operations before taxes, respectively.
73
Network Security Solutions201520142013Segment revenues167,050$ -$ -$ Affiliate revenues8 - - Segment EBITDA44,620 - - Depreciation expense4,137 - - Amortization of intangibles43,246 - - Severance, restructuring, and acquisition integration costs972 - - Purchase accounting effects of acquisitions9,197 - - Deferred gross profit adjustments50,430 - - Acquisition of property, plant and equipment5,009 - - Segment assets63,235 - - Years ended December 31,(In thousands)Total Segments201520142013Segment revenues2,360,583$ 2,320,219$ 2,084,490$ Affiliate revenues8,384 12,829 12,865 Segment EBITDA401,750 360,426 322,080 Depreciation expense46,551 43,736 43,648 Amortization of intangibles103,791 58,426 50,803 Severance, restructuring, and acquisition integration costs47,170 70,827 14,888 Purchase accounting effects of acquisitions9,747 12,540 6,550 Deferred gross profit adjustments52,876 10,777 11,337 Acquisition of property, plant and equipment53,572 42,442 38,791 Segment assets934,280 960,782 833,585 (In thousands)Years ended December 31,
Below are reconciliations of other segment measures to the consolidated totals.
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, 2015, 2014 and 2013 for
74
201520142013Total Segment Revenues $ 2,360,583 $ 2,320,219 $ 2,084,490 Deferred revenue adjustments (1) (51,361) (11,954) (15,297)Consolidated Revenues $ 2,309,222 $ 2,308,265 $ 2,069,193 Total Segment EBITDA $ 401,750 $ 360,426 $ 322,080 Amortization of intangibles (103,791) (58,426) (50,803)Deferred gross profit adjustments (1) (52,876) (10,777) (11,337)Severance, restructuring, and acquisition integration costs (2) (47,170) (70,827) (14,888)Depreciation expense (46,551) (43,736) (43,648)Purchase accounting effects related to acquisitions (3) (9,747) (12,540) (6,550)Income from equity method investment 1,770 3,955 8,922 Gain on sale of assets - - 1,278 Eliminations (2,832) (4,956) (3,792)Consolidated operating income 140,553 163,119 201,262 Interest expense, net (100,613) (81,573) (72,601)Loss on debt extinguishment - - (1,612)Consolidated income from continuing operations before taxes $ 39,940 $ 81,546 $ 127,049 (1)FortheyearendedDecember31,2015,bothourconsolidatedrevenuesandgrossprofitwerenegativelyimpactedbythereductionoftheacquired deferred revenue balance to fair value associated with our acquisition of Tripwire. See Note 3, Acquisitions.(3)FortheyearendedDecember31,2015,werecognized$9.2millionofcompensationexpenserelatedtotheacceleratedvestingofacquireestockbasedcompensationawardsassociatedwithouracquisitionofTripwire.Inaddition,werecognized$0.3millionofcostofsalesrelatedtotheadjustmentofacquiredinventorytofairvaluerelatedtoouracquisitionofCoast.FortheyearendedDecember31,2014,werecognized$8.3 million of cost of sales related to the adjustment of acquired inventory to fair value for our acquisitions of Grass Valley and ProSoft. (2) See Note 12, Severance, Restructuring, and Acquisition Integration Activities, for details.Years Ended December 31, (In thousands)Years Ended December 31, 201520142013Total segment assets934,280$ 960,782$ 833,585$ Cash and cash equivalents216,751 741,162 613,304 Goodwill1,385,115 943,374 773,048 Intangible assets, less accumulated amortization655,871 461,292 376,976 Deferred income taxes34,295 60,652 54,801 Income tax receivable3,787 4,953 12,169 Corporate assets85,742 88,455 87,870 Total assets3,315,841$ 3,260,670$ 2,751,753$ Total segment acquisition of property, plant and equipment53,572$ 42,442$ 38,791$ Corporate acquisition of property, plant and equipment1,397 3,017 1,418 Total acquisition of property, plant and equipment54,969$ 45,459$ 40,209$ (In thousands)
the following countries: the U.S., Canada, China, and Germany. 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 Connectivity segments, were $281.9 million (12% of revenues), $290.5 million
(13% of revenues), and $289.9 million (14% of revenues) for 2015, 2014, and 2013, respectively. At
December 31, 2015, we had $31.1 million in accounts receivable outstanding from Anixter International Inc.
This represented approximately 8% of our total accounts receivable outstanding at December 31, 2015.
Note 6: Noncontrolling Interest
In 2015, we entered into a joint venture agreement with Shanghai Hi-Tech Control System Co, Ltd (Hite). The
purpose of the joint venture is to develop and provide certain Industrial IT products and integrated solutions to
customers in China. Belden and Hite contributed $1.53 million and $1.47 million, respectively, to the joint
venture in 2015, reflecting ownership percentages of 51% and 49%, respectively. Belden and Hite are
committed to fund an additional $1.53 million and $1.47 million to the joint venture in the future. The joint
venture is determined to not have sufficient equity at risk; therefore, it is considered a variable interest entity.
We have determined that Belden is the primary beneficiary of the joint venture, due to both our ownership
percentage and our control over the activities of the joint venture that most significantly impact its economic
performance based on the terms of the joint venture agreement with Hite. Because Belden is the primary
beneficiary of the joint venture, we have consolidated the joint venture in our financial statements. The results
of the joint venture attributable to Hite’s ownership are presented as net loss attributable to noncontrolling
interest in the consolidated statements of operations. The joint venture is not material to our consolidated
financial statements as of or for the year ended December 31, 2015.
Note 7: Income Per Share
The following table presents the basis of the income per share computation:
75
United StatesCanadaChinaGermanyAll OtherTotal Year ended December 31, 2015Revenues1,270,467$ 170,522$ 114,863$ 103,106$ 650,264$ 2,309,222$ Percent of total revenues55%7%5%4%29%100%Long-lived assets207,265$ 27,315$ 62,794$ 35,588$ 64,434$ 397,396$ Year ended December 31, 2014Revenues1,134,721$ 194,149$ 132,330$ 120,297$ 726,768$ 2,308,265$ Percent of total revenues49%8%6%5%32%100%Long-lived assets191,728$ 29,773$ 70,574$ 40,557$ 70,727$ 403,359$ Year ended December 31, 2013Revenues1,032,190$ 195,387$ 126,461$ 108,745$ 606,410$ 2,069,193$ Percent of total revenues50%9%6%5%30%100%Long-lived assets170,813$ 27,458$ 76,949$ 45,702$ 59,275$ 380,197$ (In thousands, except percentages)
For the years ended December 31, 2015, 2014, and 2013, diluted weighted average shares outstanding do not
include outstanding equity awards of 0.4 million, 0.2 million, and 0.2 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:
76
Years Ended December 31,201520142013(In thousands)Numerator for basic and diluted income per share:Income from continuing operations $ 66,508 $ 74,432 $ 104,734 Less: Net loss attributable to noncontrolling interest (24) - - Income from continuing operations attribuable to Belden stockholders 66,532 74,432 104,734 Income (loss) from discontinued operations, net of tax, attributable to Belden stockholders (242) 579 (1,421)Loss from disposal of discontinued operations, net of tax, attributable to Belden stockholders (86) (562) - Net income attributable to Belden stockholders $ 66,204 $ 74,449 $ 103,313 Denominator:Weighted average shares outstanding, basic 42,390 43,273 43,871 Effect of dilutive common stock equivalents 563 724 866 Weighted average shares outstanding, diluted 42,953 43,997 44,737 December 31,20152014(In thousands)Raw materials $ 92,929 $ 106,955 Work-in-process 27,730 31,611 Finished goods 97,814 121,655 Gross inventories 218,473 260,221 Excess and obsolete reserves (22,531) (31,823)Net inventories $ 195,942 $ 228,398
Disposals
During 2015, we sold certain property, plant and equipment of the Industrial Connectivity segment for $0.4
million and recognized a $0.3 million loss on the sale.
During 2014, we sold certain property, plant and equipment of the Broadcast segment for $1.9 million. There
was no gain or loss on the sale.
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.
Impairment
We did not recognize any impairment losses in 2015, 2014, or 2013.
Depreciation Expense
We recognized depreciation expense in income from continuing operations of $46.6 million, $43.7 million,
and $43.6 million in 2015, 2014, and 2013, respectively.
Note 10: Intangible Assets
The carrying values of intangible assets were as follows:
77
20152014(In thousands)Land and land improvements29,235$ 31,879$ Buildings and leasehold improvements135,154 131,534 Machinery and equipment483,773 472,543 Computer equipment and software112,888 96,546 Construction in process28,274 33,726 Gross property, plant and equipment789,324 766,228 Accumulated depreciation(478,695) (449,843) Net property, plant and equipment310,629$ 316,385$ December 31,GrossNetGrossNetCarryingAccumulatedCarryingCarryingAccumulatedCarryingAmountAmortizationAmountAmountAmortizationAmount(In thousands)(In thousands)Goodwill1,385,115$ -$ 1,385,115$ 943,374$ -$ 943,374$ Definite-lived intangible assets subject to amortization:Customer relationships309,573$ (61,641)$ 247,932$ 261,914$ (46,457)$ 215,457$ Developed technology416,817 (170,576) 246,241 213,017 (102,996) 110,021 Trademarks19,417 (7,255) 12,162 19,438 (3,687) 15,751 Backlog12,559 (12,559) - 10,406 (9,627) 779 In-service research and development14,238 (4,723) 9,515 10,340 (2,777) 7,563 Total intangible assets subject to amortization772,604 (256,754) 515,850 515,115 (165,544) 349,571 Indefinite-lived intangible assets not subject to amortization:Trademarks129,671 - 129,671 103,040 - 103,040 In-process research and development10,350 - 10,350 8,681 - 8,681 Total intangible assets not subject to amortization140,021 - 140,021 111,721 - 111,721 Intangible assets912,625$ (256,754)$ 655,871$ 626,836$ (165,544)$ 461,292$ December 31, 2015December 31, 2014
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:
The changes in the carrying amount of indefinite-lived trademarks are as follows:
Impairment
The annual measurement date for our goodwill and indefinite-lived intangible assets impairment test is our
fiscal November month-end. For our 2015 goodwill impairment test, we performed a quantitative assessment
for four 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 the reporting units
were substantially in excess of the carrying values; therefore, we did not record any goodwill impairment for
the four reporting units. We performed a qualitative assessment for the remaining six of our reporting units,
and we determined that it was more likely than not that the fair value was greater than the carrying value.
Therefore, we did not record any goodwill impairment for the six reporting units. We also did not recognize
any goodwill impairment in 2014 or 2013 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 indefinite-
lived trademarks by calculating the present values of the estimated cash flows (using Level 3 inputs)
78
IndustrialIndustrialNetworkBroadcastEnterpriseConnectivityITSecurityConsolidatedBalance at December 31, 2013466,375$ 50,136$ 187,975$ 68,562$ -$ 773,048$ Acquisitions and purchase accounting adjustments119,918 - 16,442 56,194 - 192,554 Translation impact(12,789) - (4,364) (5,075) - (22,228) Balance at December 31, 2014573,504$ 50,136$ 200,053$ 119,681$ -$ 943,374$ Acquisitions and purchase accounting adjustments11,481 - 1,614 730 462,215 476,040 Translation impact(25,455) - (4,948) (3,896) - (34,299) Balance at December 31, 2015559,530$ 50,136$ 196,719$ 116,515$ 462,215$ 1,385,115$ (In thousands)IndustrialIndustrialNetworkBroadcastEnterpriseConnectivityITSecurityConsolidatedBalance at December 31, 201370,127$ -$ 12,193$ 9,690$ -$ 92,010$ Reclassify to definite-lived(2,700) - - (3,900) - (6,600) Acquisitions and purchase accounting adjustments22,000 - - - - 22,000 Translation impact(2,244) - (1,449) (677) - (4,370) Balance at December 31, 201487,183$ -$ 10,744$ 5,113$ -$ 103,040$ Acquisitions and purchase accounting adjustments- - - - 31,000 31,000 Translation impact(2,198) - (1,654) (517) - (4,369) Balance at December 31, 201584,985$ -$ 9,090$ 4,596$ 31,000$ 129,671$ (In thousands)
attributable to the respective trademarks. We did not recognize any trademark impairment charges in 2015,
2014, or 2013.
Amortization Expense
We recognized amortization expense in income from continuing operations of $103.8 million, $58.4 million,
and $50.8 million in 2015, 2014, and 2013, respectively. We expect to recognize annual amortization expense
of $95.1 million in 2016, $86.2 million in 2017, $71.0 million in 2018, $62.5 million in 2019, and $47.1
million in 2020 related to our intangible assets balance as of December 31, 2015.
The weighted-average amortization period for our customer relationships, developed technology, trademarks,
and in-service research and development is 18.8 years, 5.3 years, 5.0 years, and 4.6 years, respectively.
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, 2015 and 2014 included $11.8 million and $14.7 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.
See further discussion of the accrued severance balance in Note 12 below.
Note 12: Severance, Restructuring, and Acquisition Integration Activities
Industrial Restructuring Program: 2015
Both our Industrial Connectivity and Industrial IT segments have been negatively impacted by a decline in sales
volume. Global demand for industrial products has been negatively impacted by the strengthened U.S. dollar and
lower energy prices. Our customers have reduced capital spending in response to these conditions, and we expect
these conditions to continue to impact our industrial segments. In response to these current industrial market
conditions, we began to execute a restructuring program in the fourth fiscal quarter of 2015 to further reduce our
cost structure. We recognized approximately $3.3 million of severance and other restructuring costs for this
program during 2015. We expect to incur approximately $9 million of additional severance and other
restructuring costs for this program, the majority of which will be incurred in the first fiscal quarter of 2016. We
expect the restructuring program to generate approximately $18 million of savings on an annualized basis, which
we expect to begin to realize in the first fiscal quarter of 2016.
Grass Valley Restructuring Program: 2015
Our Broadcast segment has been negatively impacted by a decline in sales volume for our broadcast technology
79
20152014Accounts payable223,514$ 272,439$ Current deferred revenue101,460 45,139 Wages, severance and related taxes86,389 70,256 Accrued rebates29,997 31,506 Employee benefits27,482 25,158 Accrued interest25,188 26,741 Other (individual items less than 5% of total current liabilities)52,733 49,272 Accounts payable and accrued liabilities546,763$ 520,511$ December 31,(In thousands)
infrastructure products sold by our Grass Valley brand. Outside of the U.S., demand for these products has been
impacted by the relative price increase of our products due to the strengthened U.S. dollar as well as the impact of
weaker economic conditions which have resulted in lower capital spending. Within the U.S., demand for these
products has been impacted by deferred capital spending. We believe broadcast customers have deferred their
capital spending as they navigate through a number of important industry transitions and a changing media
landscape. In response to these current broadcast market conditions, we began to execute a restructuring program
beginning in the third fiscal quarter of 2015 to further reduce our cost structure. We recognized approximately
$25.4 million of severance and other restructuring costs for this program during 2015. We expect to incur
approximately $4 million of additional severance and other restructuring costs for this program, the majority of
which will be incurred in the first fiscal quarter of 2016. We expect the restructuring program to generate
approximately $30 million of savings on an annualized basis, which we began to realize in the fourth fiscal
quarter of 2015.
Productivity Improvement Program and Acquisition Integration: 2014-2015
In 2014, we began a productivity improvement program and the integration of our acquisition of Grass Valley.
The productivity improvement program focused on improving the productivity of our sales, marketing,
finance, and human resources functions relative to our peers. The majority of the costs for the productivity
improvement program related to the Industrial Connectivity, Enterprise, and Industrial IT segments. We
expected the productivity improvement program to reduce our operating expenses by approximately $18
million on an annualized basis, and we are substantially realizing such benefits. The restructuring and
integration activities related to our acquisition of Grass Valley focused on achieving desired cost savings by
consolidating existing and acquired operating facilities and other support functions. The Grass Valley costs
related to our Broadcast segment. We substantially completed the productivity improvement program and the
integration activities in the second fiscal quarter of 2015.
In 2015, we recorded severance, restructuring, and integration costs of $18.5 million related to these two
significant programs, as well as other cost reduction actions and the integration of our acquisitions of ProSoft,
Coast, and Tripwire. We recorded $70.8 million of such costs in 2014.
Other Programs: 2013
During 2013, we recorded severance, restructuring, and acquisition integration costs of $14.9 million. The
majority of these costs were recorded in our Broadcast segment. 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 in connection with our integration activities for the 2012 acquisition of PPC
Broadband, Inc.
The following tables summarize the costs by segment of the various programs described above:
80
Year Ended December 31, 2015SeveranceOther Restructuring and Integration CostsTotal CostsBroadcast Solutions $ 16,694 $ 22,384 $ 39,078 Enterprise Connectivity Solutions (186) 909 723 Industrial Connectivity Solutions 3,309 2,919 6,228 Industrial IT Solutions (728) 897 169 Network Security Solutions 12 960 972 Total $ 19,101 $ 28,069 $ 47,170 (In thousands)
The other restructuring and integration costs in 2015 and 2014 primarily consisted of costs of integrating
manufacturing operations, such as relocating inventory on a global basis, retention bonuses, relocation, travel,
reserves for inventory obsolescence as a result of product line integration, costs to consolidate operating and
support facilities, and other costs. The other restructuring and integration costs in 2013 included relocation,
equipment transfer, and other costs. The majority of the other restructuring and integration costs related to these
actions were paid as incurred or are payable within the next 60 days.
Of the total severance, restructuring, and acquisition integration costs recognized during 2015, $9.4 million,
$31.7 million, and $6.1 million were included in cost of sales; selling, general and administrative expenses;
and research and development, respectively. Of the total severance, restructuring, and acquisition integration
costs recognized during 2014, $20.7 million, $46.5 million, and $3.6 million were included in cost of sales;
selling, general and administrative expenses; and research and development, respectively. Of the total
severance and other restructuring costs recognized during 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 continue to review our business strategies and evaluate potential new restructuring actions. This could result
in additional restructuring costs in future periods.
Accrued Severance
The table below sets forth severance activity that occurred for the four significant programs described above.
The balances are included in accrued liabilities.
81
Year Ended December 31, 2014Broadcast Solutions $ 20,025 $ 28,532 $ 48,557 Enterprise Connectivity Solutions 2,183 1,135 3,318 Industrial Connectivity Solutions 9,732 2,221 11,953 Industrial IT Solutions 5,314 1,685 6,999 Total $ 37,254 $ 33,573 $ 70,827 Year Ended December 31, 2013Broadcast Solutions $ 4,112 $ 8,016 $ 12,128 Enterprise Connectivity Solutions - 400 400 Industrial Connectivity Solutions - 700 700 Industrial IT Solutions 1,318 342 1,660 Total $ 5,430 $ 9,458 $ 14,888
The other adjustments in the three months ended March 29, 2015 and June 28, 2015 were the result of changes
in estimates. We experienced higher than expected voluntary turnover, and as a result, certain approved
severance actions were not taken. The other adjustments in the three months ended December 31, 2015 were
changes in estimates, as actual amounts paid were less than estimated.
We expect the remaining amounts of these liabilities to be paid during 2016.
Note 13: Long-Term Debt and Other Borrowing Arrangements
The carrying values of our long-term debt and other borrowing arrangements were as follows:
82
Productivity GrassGrassImprovement ValleyValleyIndustrialProgramIntegrationRestructuringRestructuring Balance at December 31, 2014 $ 7,141 $ 5,579 $ - $ - New charges 887 2,165 - - Cash payments (1,455) (2,370) - - Foreign currency translation (408) (302) - - Other adjustments (170) - - - Balance at March 29, 2015 $ 5,995 $ 5,072 $ - $ - New charges 22 - - - Cash payments (1,268) (1,709) - - Foreign currency translation 97 10 - - Other adjustments - (1,590) - - Balance at June 28, 2015 $ 4,846 $ 1,783 $ - $ - New charges 99 - 11,978 - Cash payments (987) (946) (755) - Foreign currency translation (29) - - - Balance at September 27, 2015 $ 3,929 $ 837 $ 11,223 $ - New charges - - 3,960 2,728 Cash payments (831) (397) (2,979) (282)Foreign currency translation (64) (27) (119) 15 Other adjustments (818) - - 182 Balance at December 31, 2015 $ 2,216 $ 413 $ 12,085 $ 2,643 (In thousands)
Revolving Credit Agreement due 2018
Our revolving credit agreement 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. In January 2015, we borrowed $200.0 million under the Revolver in order to fund a portion of the
purchase price for the acquisition of Tripwire (see Note 3). In the fourth fiscal quarter, we repaid $150.0
million of the Revolver borrowings, and as of December 31, 2015, we had $50.0 million remaining borrowings
outstanding under the Revolver. As of December 31, 2015, our available borrowing capacity was $242.5
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. The interest rate as of December 31, 2015 was 2.13%. 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.
Variable Rate Term Loan due 2020
In 2013, we borrowed $250.0 million under a Term Loan Credit Agreement (the Term Loan). The Term Loan
is secured on a second lien basis by the assets securing the Revolving Credit Agreement due 2018 discussed
above 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 of approximately $0.6 million.
Interest under the Term Loan is variable, based upon the three-month LIBOR plus an applicable spread. The
interest rate as of December 31, 2015 was 3.25%. We paid approximately $3.9 million of fees associated with
the Term Loan, which are being amortized over the life of the Term Loan using the effective interest method.
Senior Subordinated Notes
In June 2014, we issued $200.0 million aggregate principal amount of 5.25% senior subordinated notes due
2024 (the 2024 Notes). The 2024 Notes are guaranteed on a senior subordinated basis by certain of our
subsidiaries. The 2024 Notes rank equal in right of payment with our senior subordinated notes due 2023,
2022, and 2019 and with any future subordinated debt, and they are subordinated to all of our senior debt and
the senior debt of our subsidiary guarantors, including our Term Loan and Revolver. Interest is payable
83
20152014Revolving credit agreement due 2018 $ 50,000 $ - Variable rate term loan due 2020 243,965 246,375 Senior subordinated notes:5.25% Senior subordinated notes due 2024 200,000 200,000 5.50% Senior subordinated notes due 2023 553,835 616,326 5.50% Senior subordinated notes due 2022 700,000 700,000 9.25% Senior subordinated notes due 2019 5,221 5,221 Total senior subordinated notes 1,459,056 1,521,547 Total debt and other borrowing arrangements 1,753,021 1,767,922 Less current maturities of Term Loan (2,500) (2,500)Long-term debt $ 1,750,521 $ 1,765,422 (In thousands)December 31,
semiannually on January 15 and July 15 of each year. We paid approximately $4.2 million of fees associated
with the issuance of the 2024 Notes, which are being amortized over the life of the 2024 Notes using the
effective interest method. We used the net proceeds from the transaction for general corporate purposes.
In March 2013, we issued €300.0 million ($388.2 million at issuance) aggregate principal amount of 5.5%
senior subordinated notes due 2023 (the 2023 Notes). In November 2014, we issued an additional
€200.0 million ($247.5 million at issuance) aggregate principal amount of 2023 Notes. The carrying value of
the 2023 Notes as of December 31, 2015 is $553.8 million. The 2023 Notes are guaranteed on a senior
subordinated basis by certain of our subsidiaries. The notes rank equal in right of payment with our senior
subordinated notes due 2024, 2022, and 2019 and with any future subordinated debt, and they are subordinated
to all of our senior debt and the senior debt of our subsidiary guarantors, including our Term Loan and
Revolver. Interest is payable semiannually on April 15 and October 15 of each year. We paid $12.7 million of
fees associated with the issuance of the 2023 Notes, which are being amortized over the life of the notes using
the effective interest method. We used the net proceeds from the transactions to repay amounts outstanding
under the revolving credit component of our previously outstanding Senior Secured Facility and for general
corporate purposes.
We have outstanding $700.0 million aggregate principal amount of 5.5% senior subordinated notes due 2022
(the 2022 Notes). The 2022 Notes are guaranteed on a senior subordinated basis by certain of our subsidiaries.
The 2022 Notes rank equal in right of payment with our senior subordinated notes due 2024, 2023, and 2019,
and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of
our subsidiary guarantors, including our Term Loan and Revolver. Interest is payable semiannually on March
1 and September 1 of each year.
We have outstanding $5.2 million aggregate principal amount of our senior subordinated notes due 2019 (the
2019 Notes). The 2019 Notes 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 2019 notes are
guaranteed on a senior subordinated basis by certain of our subsidiaries. The notes rank equal in right of
payment with our senior subordinated notes due 2024, 2023, and 2022, 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 and Revolver.
The senior subordinated notes due 2019, 2022, 2023, and 2024 are redeemable currently and after September
1, 2017, April 15, 2018, and July 15, 2019, 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, 2015 was approximately $1,416.6 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 $1,459.1 million as of December 31,
2015. We believe the fair value of our Term Loan and the balance outstanding under our Revolver
approximate book value.
84
YearPercentageYearPercentageYearPercentageYearPercentage2016101.542%2017102.750%2018102.750%2019102.625%2017 and thereafter100.000%2018101.833%2019101.833%2020101.750%2019100.917%2020100.917%2021100.875%2020 and thereafter100.000%2021 and thereafter100.000%2022 and thereafter100.000%2019202220232024Senior Subordinated Notes due
Maturities
Maturities on outstanding long-term debt and other borrowings during each of the five years subsequent to
December 31, 2015 are as follows (in thousands):
Note 14: Income Taxes
In addition to the above income tax expense (benefit) associated with continuing operations, we also recorded
income tax expense (benefit) associated with discontinued operations of $0.2 million, ($0.9 million), and $1.4
million in 2015, 2014, and 2013, respectively.
85
2016 $ 2,500 2017 2,500 2018 52,500 2019 7,721 2020 233,965 Thereafter 1,453,835 $ 1,753,021 201520142013Income (loss) from continuing operations before taxes: United States operations(6,924)$ 14,042$ 31,678$ Foreign operations46,864 67,504 95,371 Income from continuing operations before taxes39,940$ 81,546$ 127,049$ Income tax expense (benefit):Currently payableUnited States federal-$ 6,701$ (4,493)$ United States state and local1,789 1,617 (26) Foreign17,317 16,592 21,377 19,106 24,910 16,858 DeferredUnited States federal(23,709) (9,662) 3,575 United States state and local(2,257) (746) 1,593 Foreign(19,708) (7,388) 289 (45,674) (17,796) 5,457 Income tax expense (benefit)(26,568)$ 7,114$ 22,315$ (In thousands)Years ended December 31,
In 2015, the most significant difference between the U.S. federal statutory tax rate and our effective tax rate
was the impact of domestic permanent differences and tax credits. We recognized a total income tax benefit
from domestic permanent differences and tax credits of $23.0 million in 2015. Approximately $18.0 million
of that benefit stems from being able to recognize a significant balance of foreign tax credits related to one of
our foreign jurisdictions as a result of implementing a tax planning strategy, net of the U.S. income tax
consequences. We were also able to recognize other foreign tax credits and research and development tax
credits in 2015, which represented the remaining $5.0 million of tax benefit from domestic permanent
differences and tax credits.
An additional significant factor impacting the income tax benefit for 2015 was the reduction of a deferred tax
valuation allowance related to certain net operating loss carryforwards in one of our foreign jurisdictions.
Based on implemented tax planning strategies, the net operating loss carryforwards have become fully
realizable, and we realized a net tax benefit of $11.4 million related to changes in the valuation allowance.
In 2015, 2014, and 2013, a significant difference between the U.S. federal statutory tax rate and our effective
tax rate was the impact of foreign tax rate differences. The statutory tax rates associated with our foreign
earnings are generally lower than the statutory U.S. tax rate of 35%. The foreign tax rate differences are most
significant in Germany, Canada, and the Netherlands, which have statutory tax rates of approximately 28%,
26%, and 25%, respectively. Foreign tax rate differences resulted in an income tax benefit of $3.4 million,
$14.4 million, and $15.4 million in 2015, 2014, and 2013, respectively. Additionally, in 2015 and 2014, our
income tax expense was reduced by $2.5 million and $2.0 million, respectively, due to a tax holiday for our
operations in St. Kitts. The tax holiday in St. Kitts is scheduled to expire in 2022.
The increase in deferred income tax liabilities during 2015 is primarily due to the acquisition of Tripwire; see
further discussion in Note 3. The decrease in our deferred tax valuation allowance is primarily due to certain
net operating loss carryforwards becoming fully realizable, as discussed above, as well as the impact of foreign
86
201520142013Effective income tax rate reconciliation from continuing operations:United States federal statutory rate35.0%35.0%35.0%State and local income taxes(2.6%)0.8%1.5%Impact of change in tax contingencies(4.2%)(7.1%)3.8%Foreign income tax rate differences(8.4%)(17.6%)(12.1%)Impact of change in deferred tax asset valuation allowance(28.6%)4.7%(0.6%)Domestic permanent differences & tax credits(57.7%)(7.1%)(10.0%)(66.5%)8.7%17.6%Years Ended December 31, 20152014Components of deferred income tax balances:Deferred income tax liabilities:Plant, equipment, and intangibles(203,736)$ (90,413)$ Deferred income tax assets:Postretirement, pensions, and stock compensation32,831 34,656 Reserves and accruals44,345 44,809 Net operating loss and tax credit carryforwards231,892 217,902 Valuation allowances(117,071) (157,317) 191,997 140,050 Net deferred income tax asset (liability)(11,739)$ 49,637$ December 31, (In thousands)
currency translation. The deferred tax valuation allowance also decreased due to a reduction in both the
estimated amount of acquired deferred tax assets and the related valuation allowance for our 2014 acquisition
of Grass Valley.
As of December 31, 2015, we had $606.6 million of net operating loss carryforwards and $85.9 million of tax
credit carryforwards. Unless otherwise utilized, net operating loss carryforwards will expire upon the filing of
the tax returns for the following respective years: $24.4 million in 2015, $27.1 million in 2016, $17.0 million
in 2017, $27.6 million between 2018 and 2020, and $169.9 million between 2021 and 2035. Net operating
losses with an indefinite carryforward period total $340.6 million. Of the $606.6 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 $206.8 million of these net operating loss carryforwards within their respective expiration
periods.
Unless otherwise utilized, tax credit carryforwards of $85.9 million will expire as follows: $27.7 million
between 2018 and 2020, and $51.8 million between 2021 and 2035. Tax credit carryforwards with an
indefinite carryforward period total $6.4 million. We have determined, based on the weight of all available
evidence, both positive and negative, that we will utilize $83.6 million 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, 2015 by jurisdiction:
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, 2015, we have not made a provision for U.S. or additional foreign withholding taxes
on approximately $611.1 million of the undistributed earnings of foreign subsidiaries that are considered
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 2015, we recognized a net $2.8 million decrease to reserves for uncertain tax positions. A reconciliation of
the beginning and ending amounts of unrecognized tax benefits is as follows:
87
Net Operating Loss Carryforwards(In thousands)France244,105$ United States - various states 202,985 Germany63,576 Netherlands24,583 Japan24,412 Australia13,027 Other 33,913 Total 606,601$ Tax Credit Carryforwards(In thousands)United States 68,189$ Canada17,679 Total 85,868$
The majority of the reductions for tax positions of prior years relates to the settlement of income tax audits in
both domestic and foreign jurisdictions. The balance of $7.3 million at December 31, 2015, reflects tax
positions that, if recognized, would impact our effective tax rate.
As of December 31, 2015, we believe it is reasonably possible that $2.7 million of unrecognized tax benefits
will change within the next twelve months primarily attributable to the expected completion of tax audits in
foreign jurisdictions.
Our practice is to recognize interest and penalties related to uncertain tax positions in interest expense and
operating expenses, respectively. During 2015, we did not recognize any interest expense related to uncertain
tax positions. During 2014 and 2013, we recognized approximately ($1.1) million and $1.7 million,
respectively, in interest expense (reduction of interest expense). We have approximately $1.4 million and $1.7
million accrued for the payment of interest and penalties as of December 31, 2015 and 2014, respectively.
Our federal, state, and foreign income tax returns for the tax years 2010 and later remain subject to
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. Grass Valley, which
was acquired in 2014, also sponsors defined benefit plans and defined contribution plans that cover substantially
all employees in the U.S., as well as certain employees in France and Japan. 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 2015, 2014, and 2013 was $12.6 million, $11.8 million, and $11.1 million,
respectively.
We sponsor unfunded postretirement medical and life insurance benefit plans for certain of our employees in
Canada and the U.S. The medical benefit portion of the U.S. plan is only for employees who retired prior to 1989
as well as certain other employees who were near retirement and elected to receive certain benefits.
The following tables provide a reconciliation of the changes in the plans’ benefit obligations and fair value of
assets as well as a statement of the funded status and balance sheet reporting for these plans.
88
20152014Balance at beginning of year10,057$ 18,639$ Additions based on tax positions related to the current year544 663 Additions for tax positions of prior years638 73 Reductions for tax positions of prior years - Settlement(3,765) (7,907) Reduction for tax positions of prior years - Statute of limitations(181) (1,411) Balance at end of year7,293$ 10,057$ (In thousands)
The accumulated benefit obligation for all defined benefit pension plans was $272.5 million and $296.4 million at
December 31, 2015 and 2014, 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 $228.3 million, $225.4 million, and
$150.2 million, respectively, as of December 31, 2015, and were $247.5 million, $243.9 million, and $158.2
million, respectively, as of December 31, 2014. 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 $46.9 million, $47.1 million, and $54.1 million, respectively, as of December 31, 2015, and were
$52.8 million, $52.5 million, and $58.5 million, respectively, as of December 31, 2014.
The following table provides the components of net periodic benefit costs for the plans.
89
Pension BenefitsOther BenefitsYears Ended December 31,2015201420152014Change in benefit obligation:Benefit obligation, beginning of year(300,339)$ (258,423)$ (39,169)$ (46,614)$ Service cost(5,505) (5,453) (52) (49) Interest cost(9,116) (10,757) (1,301) (1,647) Participant contributions(109) (109) (5) (7) Actuarial gain (loss)12,108 (28,971) 1,720 4,392 Acquisitions- (25,283) - - Settlements1,579 - - - Curtailments128 359 - - Foreign currency exchange rate changes12,132 13,708 4,691 2,704 Benefits paid13,917 14,590 1,803 2,052 Benefit obligation, end of year(275,205)$ (300,339)$ (32,313)$ (39,169)$ (In thousands)Pension BenefitsOther BenefitsYears Ended December 31,2015201420152014Change in plan assets:Fair value of plan assets, beginning of year216,754$ 198,367$ -$ -$ Actual return on plan assets2,569 20,223 - - Employer contributions5,706 7,992 1,798 2,045 Plan participant contributions109 109 5 7 Acquisitions- 9,360 - - Settlements(1,579) - - - Foreign currency exchange rate changes(5,270) (4,707) - - Benefits paid(13,917) (14,590) (1,803) (2,052) Fair value of plan assets, end of year204,372$ 216,754$ -$ -$ Funded status, end of year(70,833)$ (83,585)$ (32,313)$ (39,169)$ Amounts recongized in the balance sheets:Prepaid benefit cost7,219$ 5,689$ -$ -$ Accrued benefit liability (current)(3,173) (3,628) (1,962) (2,188) Accrued benefit liability (noncurrent)(74,879) (85,646) (30,351) (36,981) Net funded status(70,833)$ (83,585)$ (32,313)$ (39,169)$ (In thousands)
The following table presents the assumptions used in determining the benefit obligations and the net periodic
benefit cost amounts.
A one percentage-point change in the assumed health care cost trend rates would have the following effects on
2015 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.
90
Pension BenefitsOther BenefitsYears Ended December 31,201520142013201520142013(In thousands)Components of net periodic benefit cost:Service cost5,505$ 5,453$ 5,554$ 52$ 49$ 125$ Interest cost9,116 10,757 9,310 1,301 1,647 1,910 Expected return on plan assets(12,518) (12,468) (11,066) - - - Amortization of prior service credit(44) (48) (54) (87) (100) (108) Curtailment gain(128) (359) - - - - Settlement loss128 - - - - - Net loss recognition5,082 4,154 6,388 328 315 932 Net periodic benefit cost7,141$ 7,489$ 10,132$ 1,594$ 1,911$ 2,859$ Pension BenefitsOther BenefitsYears Ended December 31,2015201420152014Weighted average assumptions for benefitobligations at year end:Discount rate3.6%3.2%4.0%3.7%Salary increase3.5%3.3%N/AN/AWeighted average assumptions for netperiodic cost for the year:Discount rate3.2%4.1%3.7%4.4%Salary increase3.5%3.9%N/AN/AExpected return on assets6.7%6.7%N/AN/AAssumed health care cost trend rates:Health care cost trend rate assumed for next yearN/AN/A5.5%5.5%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/A202220161% Increase1% DecreaseEffect on total of service and interest cost components134$ (110)$ Effect on postretirement benefit obligation2,996$ (2,484)$ (In thousands)
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
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 Level 1 funds are valued at fair market value obtained
from quoted market prices in active markets. The Level 2 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 Level 1 funds are valued at fair market value obtained from quoted market prices in active markets.
The Level 2 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.
91
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 fund77,618$ 3,266$ 74,352$ -$ 82,816$ 3,414$ 79,402$ -$ Mid-cap fund14,427 957 13,470 - 15,276 1,448 13,828 - Small-cap fund19,260 461 18,799 - 19,952 312 19,640 - Debt securities(b) Government bond fund26,827 1,387 25,440 - 29,121 1,244 27,877 - Corporate bond fund24,975 3,194 21,781 - 27,485 3,815 23,670 - Fixed income fund(c)40,989 - 40,989 - 41,975 - 41,975 - Cash & equivalents276 276 - - 129 129 - - Total204,372$ 9,541$ 194,831$ -$ 216,754$ 10,362$ 206,392$ -$ December 31, 2015December 31, 2014Fair Market Value at December 31, 2015Fair Market Value at December 31, 2014(In thousands)(In thousands)
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, 2015 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.
We anticipate contributing $5.2 million and $2.0 million to our pension and other postretirement plans,
respectively, during 2016.
The pre-tax amounts in accumulated other comprehensive loss that have not yet been recognized as
components of net periodic benefit cost at December 31, 2015, the changes in these amounts during the year
ended December 31, 2015, and the expected amortization of these amounts as components of net periodic
benefit cost for the year ended December 31, 2016 are as follows.
92
MedicarePensionOther SubsidyPlansPlansReceipts201616,173$ 2,097$ 87$ 201717,795 2,044 80 201817,886 1,970 72 201918,816 1,890 65 202017,170 1,827 57 2021-202594,434 8,569 188 Total182,274$ 18,397$ 549$ (In thousands)PensionOtherBenefitsBenefitsComponents of accumulated other comprehensive loss:Net actuarial loss51,720$ 2,515$ Net prior service credit(81) (40) 51,639$ 2,475$ (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:
93
PensionOtherBenefitsBenefitsChanges in accumulated other comprehensive loss:Net actuarial loss, beginning of year61,333$ 4,679$ Amortization cost(5,082) (328) Curtailment gain recognized128 - Settlement loss recognized(128) - Actuarial gain(12,236) (1,720) Asset loss9,949 - Currency impact(2,244) (116) Net actuarial loss, end of year51,720$ 2,515$ Prior service credit, beginning of year(94)$ (143)$ Amortization credit44 87 Currency impact(31) 16 Prior service credit, end of year(81)$ (40)$ (In thousands)PensionOtherBenefitsBenefitsExpected 2016 amortization:Amortization of prior service credit(43)$ (40)$ Amortization of net loss2,709 220 2,666$ 180$ (In thousands)201520142013Net income $ 66,180 $ 74,449 $ 103,313 Foreign currency translation loss, net of $1.3 million, $1.8 million, and $2.2 million tax, respectively (20,842) (10,387) (20,720)Adjustments to pension and postretirement liability, net of $3.1 million, $3.6 million, and $14.0 million tax, respectively 7,864 (6,463) 22,104 Total comprehensive income 53,202 57,599 104,697 Less: Comprehensive loss attributable to noncontrolling interest(46) - - Comprehensive income attributable to Belden stockholders53,248$ 57,599$ 104,697$ Years ended December 31, (In thousands)
The following table summarizes the effects of reclassifications from accumulated other comprehensive
income (loss):
Note 17: Share-Based Compensation
Compensation cost charged against income, primarily selling, general and administrative expense, and the
income tax benefit recognized for our share-based compensation arrangements is included below:
94
Foreign CurrencyPension and OtherAccumulatedTranslationPostretirementOther ComprehensiveComponentBenefit PlansIncome (Loss)Balance at December 31, 2013 $ 7,796 $ (36,977) $ (29,181)Other comprehensive lossbefore reclassifications (10,387) (9,120) (19,507)Amounts reclassified from accumulatedother comprehensive income (loss) - 2,657 2,657 Net current period othercomprehensive loss (10,387) (6,463) (16,850)Balance at December 31, 2014 (2,591) (43,440) (46,031)Other comprehensive loss attributable to Beldenstockholders before reclassifications (20,820) 4,434 (16,386)Amounts reclassified from accumulatedother comprehensive income (loss) - 3,430 3,430 Net current period other comprehensive lossattributable to Belden stockholders (20,820) 7,864 (12,956)Balance at December 31, 2015 $ (23,411) $ (35,576) $ (58,987)(In thousands)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 $ 5,410 (1)Prior service credit (131)(1)Total before tax 5,279 Tax benefit (1,849)Total net of tax $ 3,430 (1) The amortization of these accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit costs (see Note 15).201520142013(In thousands)Total share-based compensation cost $ 17,745 $ 18,858 $ 14,854 Income tax benefit6,867 7,334 5,777 Years Ended December 31,
We currently have outstanding stock appreciation rights (SARs), stock options, restricted stock units with
service vesting conditions, restricted stock units with performance vesting conditions, and restricted stock units
with market 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
following 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 as follows: 1) 50% on the second anniversary of their grant date and 50% on the
third anniversary, or 2) 100% on the third anniversary of their grant date. Restricted stock units issued
based on the attainment of market conditions generally vest on the third anniversary of their grant date.
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 with service vesting conditions or performance vesting conditions is the closing market price of our
common stock on the date of grant. We estimate the fair value of certain restricted stock units with market
conditions using a Monte Carlo simulation valuation model with the assistance of a third party valuation firm.
Compensation costs for awards with service conditions are amortized to expense using the straight-line
method. Compensation costs for awards with performance conditions and graded vesting are amortized to
expense using the graded attribution method.
95
201520142013Weighted-average fair value of SARs and options granted $ 31.22 $ 35.46 $ 24.63 Total intrinsic value of SARs converted and options exercised 14,697 24,023 47,058 Cash received for options exercised 30 48 14,030 Tax benefit related to share-based compensation 5,050 6,859 10,734 Weighted-average fair value of restricted stock shares and units granted 96.52 72.46 50.38 Total fair value of restricted stock shares and units vested 7,696 7,888 9,032 Expected volatility35.66%52.63%53.94%Expected term (in years) 5.7 5.8 6.1 Risk-free rate1.59%1.79%1.04%Dividend yield0.22%0.28%0.40%(In thousands, except weighted average fair value and assumptions)Years Ended December 31,
At December 31, 2015, the total unrecognized compensation cost related to all nonvested awards was $22.6
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 $0.01 per right at any time prior to
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 allowed 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 allowed us to purchase up to an
additional $200.0 million of our common stock. This program was funded by cash on hand and cash flows
from operating activities. The program did not have an expiration date and could have been suspended at any
time at the discretion of the Company.
From inception of the program to December 31, 2015, we repurchased 7.4 million shares of our common stock
under the program for an aggregate cost of $350.0 million and an average price of $47.43. In 2015, we
repurchased 0.7 million shares of our common stock under the share repurchase program for an aggregate cost
of $39.1 million and an average price per share of $55.95. The repurchase activities in 2015 utilized all
remaining authorized amounts under the share repurchase program. In 2014, we repurchased 1.3 million
96
Weighted-Weighted-AverageWeighted-AverageRemainingAggregateAverageExerciseContractualIntrinsicGrant-DateNumberPriceTermValueNumberFair ValueOutstanding at January 1, 2015 1,305 44.60$ 493 54.76$ Granted 236 88.79 183 96.52 Exercised or converted(320) 40.03 (178) 43.11 Forfeited or expired (32)73.60 (34)70.99 Outstanding at December 31, 2015 1,189 53.80$ 7.0 (7,280)$ 464 74.50$ Vested or expected to vest at December 31, 2015 1,169 53.51$ 7.0 $ (6,811)Exercisable or convertible at December 31, 2015 730 41.06 6.0 4,831 SARs and Stock OptionsRestricted Shares and Units(In thousands, except exercise prices, fair values, and contractual terms)
shares of our common stock under the program for an aggregate cost of $92.2 million and an average price of
$73.06 per share. In 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 per share.
Note 20: Operating Leases
Operating lease expense incurred primarily for manufacturing and office space, machinery, and equipment was
$40.6 million, $32.8 million, and $26.5 million in 2015, 2014, and 2013, respectively.
Minimum annual lease payments for noncancelable operating leases in effect at December 31, 2015 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 five are distributors, constitute in aggregate approximately 33%, 33%, and 36% of
revenues in 2015, 2014, and 2013, respectively.
Unconditional Commodity Purchase Obligations
At December 31, 2015, we were committed to purchase approximately 2.4 million pounds of copper at an
aggregate fixed cost of $5.6 million. At December 31, 2015, this fixed cost was $0.4 million more 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
addition, at December 31, 2015, we were committed to purchase 0.5 million pounds of aluminum at an
aggregate fixed cost of $0.4 million. At December 31, 2015, 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
2016 and early 2017.
Labor
Approximately 22% of our labor force is covered by collective bargaining agreements at various locations
around the world. Approximately 19% of our labor force is covered by collective bargaining agreements that
we expect to renegotiate during 2016.
Fair Value of Financial Instruments
Our financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, and
97
2016 $ 24,331 2017 17,270 2018 13,580 2019 10,845 2020 8,490 Thereafter 18,958 $ 93,474
debt instruments. The carrying amounts of cash and cash equivalents, trade receivables, and trade payables at
December 31, 2015 are considered representative of their respective fair values. The carrying amount of our
debt instruments at December 31, 2015 and 2014 was $1,753.0 million and $1,767.9 million, respectively. The
fair value of our senior subordinated notes at December 31, 2015 and 2014 was approximately $1,416.6
million and $1,529.4 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 $1,459.1 million and $1,521.5 million as of December 31, 2015 and 2014, respectively. We believe
the fair value of our Term Loan and the balance outstanding under our Revolver approximate 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, 2015, we were party to unused standby letters of credit, bank guarantees, and surety bonds
totaling $8.2 million, $3.0 million, and $2.4 million, respectively. These commitments are generally issued to
secure obligations we have for a variety of commercial reasons, such as workers compensation self-insurance
programs in several states and the importation and exportation of product.
Note 23: Supplemental Cash Flow Information
Supplemental cash flow information is as follows:
98
201520142013Income tax refunds received4,068$ 12,681$ 11,165$ Income taxes paid(24,960) (25,308) (79,778) Interest paid, net of amount capitalized(91,496) (70,915) (60,340) (In thousands)Years Ended December 31,
Note 24: Quarterly Operating Results (Unaudited)
Included in the first, second, third, and fourth quarters of 2015 are severance, restructuring, and integration
costs of $14.6 million, $4.9 million, $14.1 million, and $13.6 million, respectively. In addition, the first
quarter of 2015 includes $9.2 million of compensation expense related to the accelerated vesting of acquiree
stock based compensation awards related to our acquisition of Tripwire.
Included in the first, second, third, and fourth quarters of 2014 are severance, restructuring, and integration
costs of $1.4 million, $38.2 million, $9.2 million, and $22.0 million, respectively. The second quarter of 2014
also includes $7.4 million of purchase accounting effects related to acquisitions, primarily the adjustment of
99
20151st 2nd3rd 4th YearNumber of days in quarter88 91 91 95 365 Revenues546,957$ $ 585,755 $ 579,266 597,244$ 2,309,222$ Gross profit207,649 234,276 226,131 250,117 918,173 Operating income4,898 44,143 34,502 57,010 140,553 Income (loss) from continuing operations(19,636) 21,677 14,811 49,656 66,508 Loss from discontinued operations, net of tax- - (242) - (242) Loss from disposal of discontinued operations, net of tax- (86) - - (86) Less: Net loss attributable to noncontrolling interest- - - (24) (24) Net income (loss) attributable to Belden stockholders(19,636) 21,591 14,569 49,680 66,204 Basic income (loss) per share attributable to Belden stockholders: Continuing operations(0.46)$ 0.51$ 0.35$ 1.18$ 1.57$ Discontinued operations- - (0.01) - (0.01) Disposal of discontinued operations- - - - - Net income (0.46)$ 0.51$ 0.34$ 1.18$ 1.56$ Diluted income (loss) per share attributable to Belden stockholders: Continuing operations(0.46)$ 0.50$ 0.35$ 1.17$ 1.55$ Discontinued operations- - (0.01) - (0.01) Disposal of discontinued operations- - - - - Net income (0.46)$ 0.50$ 0.34$ 1.17$ 1.54$ 20141st 2nd3rd 4th YearNumber of days in quarter89 91 91 94 365 Revenues487,690$ $ 600,891 $ 610,774 608,910$ 2,308,265$ Gross profit175,717 204,385 221,732 217,615 819,449 Operating income49,511 12,326 58,011 43,271 163,119 Income from continuing operations25,156 15 33,847 15,414 74,432 Income from discontinued operations, net of tax- - - 579 579 Loss from disposal of discontinued operations, net of tax(562) - - - (562) Net income attributable to Belden stockholders24,594 15 33,847 15,993 74,449 Basic income (loss) per share attributable to Belden stockholders: Continuing operations0.58$ -$ 0.78$ 0.36$ 1.72$ Discontinued operations- - - 0.01 0.01 Disposal of discontinued operations(0.01) - - - (0.01) Net income 0.57$ -$ 0.78$ 0.37$ 1.72$ Diluted income (loss) per share attributable to Belden stockholders: Continuing operations0.57$ -$ 0.77$ 0.35$ 1.69$ Discontinued operations- - - 0.01 0.01 Disposal of discontinued operations(0.01) - - - (0.01) Net income 0.56$ -$ 0.77$ 0.36$ 1.69$ (In thousands, except days and per share amounts)(In thousands, except days and per share amounts)
acquired inventory to fair value.
Note 25: Subsequent Events
On January 7, 2016, we acquired 100% of the outstanding shares of M2FX Limited (M2FX), a leading
manufacturer of fiber optic cable and fiber protection solutions. M2FX’s fiber based solutions will enhance the
product portfolio of our broadband connectivity business. The initial cash paid for M2FX was approximately $16
million. The purchase price remains preliminary in nature and subject to additional consideration of up to $9
million.
We are in the preliminary phase of the purchase accounting process, including obtaining third party valuations of
certain tangible and intangible assets acquired. As such, the purchase accounting process is incomplete and we
cannot provide the required disclosures of the estimated fair value of the assets and liabilities acquired for this
business combination. We do not expect the M2FX acquisition to be material to our financial position or results
of operations.
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, 2015. As permitted, that evaluation excluded the business operations of
Tripwire, Inc., which was acquired in 2015. The acquired business operations excluded from our evaluation
constituted $790.1 million of our total assets as of December 31, 2015 and $116.6 million of our revenues for
the year ended December 31, 2015. The operations of the acquired business will be included in our 2016
evaluation. 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
(2013 framework). Based on that evaluation, Belden management believes our internal control over financial
reporting was effective as of December 31, 2015.
Our internal control over financial reporting as of December 31, 2015 has been audited by Ernst & Young
LLP, an independent registered public accounting firm, as stated in their report that follows.
100
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Belden Inc.
We have audited Belden Inc.’s internal control over financial reporting as of December 31, 2015, based on
criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 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.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting
did not include the internal controls of Tripwire, Inc. (Tripwire), which is included in the 2015 consolidated
financial statements of Belden Inc. and constituted $790.1 million of total assets as of December 31, 2015, and
$116.6 million of revenues for the year then ended. Our audit of internal control over financial reporting of the
Company also did not include an evaluation of the internal control over financial reporting of Tripwire.
In our opinion, Belden Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2015, 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, 2015 and 2014, and the
related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for
each of the three years in the period ended December 31, 2015, of Belden Inc. and our report dated February
25, 2016, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
101
St. Louis, Missouri
February 25, 2016
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,” “Ownership Information—Section 16(a) Beneficial Ownership Reporting Compliance,”
“Corporate Governance—Corporate Governance Documents” and “Other Matters—Stockholder Proposals for
the 2017 Annual Meeting,” as described in the Proxy Statement.
Item 11. Executive Compensation
to “Executive Compensation,” “Corporate Governance—Director
Incorporated herein by reference
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 “Ownership Information—Equity Compensation Plan Information on
December 31, 2015” and “Ownership Information—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 “Public Accounting Firm Information—Fees to Independent Registered
Public Accountants for 2015 and 2014” and “Public Accounting Firm Information—Audit Committee’s Pre-
Approval Policies and Procedures” as described in the Proxy Statement.
102
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, 2015 and December 31, 2014
Consolidated Statements of Operations for Each of the Three Years
in the Period Ended December 31, 2015
Consolidated Statements of Comprehensive Income for Each of the Three Years
in the Period Ended December 31, 2015
Consolidated Cash Flow Statements for Each of the Three Years
in the Period Ended December 31, 2015
Consolidated Stockholders' Equity Statements for Each of the
Three Years in the Period Ended December 31, 2015
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.
103
Charged toBeginningCosts andDivestitures/ChargeCurrencyEndingBalanceExpensesAcquisitionsOffsRecoveriesMovementBalanceAccounts Receivable—Allowance for Doubtful Accounts:201511,503$ 2,561$ 40$ (803)$ (4,353)$ (667)$ 8,281$ 20143,390 1,184 9,845 (1,867) (889) (160) 11,503 20134,163 733 448 (1,391) (520) (43) 3,390 Inventories—Excess and Obsolete Allowances:201531,823$ 3,001$ 2,755$ (12,744)$ (1,407)$ (897)$ 22,531$ 201421,317 7,994 14,167 (10,908) (1,413) 666 31,823 201323,954 5,632 - (7,211) (1,009) (49) 21,317 Deferred Income Tax Asset—Valuation Allowance:2015157,317$ 2,840$ (14,425)$ (1,823)$ (13,988)$ (12,850)$ 117,071$ 201410,165 4,252 143,513 - (415) (198) 157,317 20137,498 496 3,064 - (899) 6 10,165 (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
4.13
4.14
4.15
4.16
4.17
4.18
4.19
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;
May 29, 2014 Form 8-K, Exhibit 3.1; August 26,
2015 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
Indenture relating to 5.25% Senior Subordinated
Notes due 2024
Third Supplemental Indenture relating to 5.5%
Senior Subordinated Notes due 2022
Second Supplemental Indenture relating to 5.5%
Senior Subordinated Notes due 2023
First Supplemental Indenture relating to 5.25%
Senior Subordinated Notes due 2024
Fourth Supplemental Indenture relating to 5.5%
Senior Subordinated Notes due 2022
Third Supplemental Indenture relating to 5.5%
Senior Subordinated Notes due 2023
Second Supplemental Indenture relating to
5.25% Senior Subordinated Notes due 2024
104
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
June 30, 2014 Form 8-K, Exhibit 4.1
November 4, 2014 Form 10-Q, Exhibit 4.1
November 4, 2014 Form 10-Q, Exhibit 4.2
November 4, 2014 Form 10-Q, Exhibit 4.3
May 5, 2015 Form 10-Q, Exhibit 4.1
May 5, 2015 Form 10-Q, Exhibit 4.2
May 5, 2015 Form 10-Q, Exhibit 4.3
Exhibit
Number
10.1
10.2*
10.3*
10.4*
Description of Exhibit
Trademark License Agreement
CDT 2001 Long-Term Performance Incentive
Plan, as amended
Belden Inc. 2011 Long Term Incentive Plan, as
amended
Form of Stock Appreciation Rights Award
10.5*
Form of Performance Stock Units Award
10.6*
10.7*
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*
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
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
Executive Employment Agreement with Ross
Rosenberg
Executive Employment Agreement with Roel
Vestjens
Executive Employment Agreement with Brian
Anderson
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
November 15, 1993 Form 10-Q of Belden 1993 Inc.,
Exhibit 10.2
April 6, 2009 Proxy Statement, Appendix I
April 6, 2011 Proxy Statement, Appendix I; February
29, 2012 Form 10-K, Exhibit 10.9
February 29, 2008 Form 10-K, Exhibit 10.16;
February 27, 2009 Form 10-K, Exhibit 10.16; May 6,
2014 Form 10-Q, Exhibit 10.1
February 29, 2008 Form 10-K, Exhibit 10.17;
February 27, 2009 Form 10-K, Exhibit 10.17; May 6,
2014 Form 10-Q, Exhibit 10.2
February 29, 2008 Form 10-K, Exhibit 10.18;
February 27, 2009 Form 10-K, Exhibit 10.18; May 6,
2014 Form 10-Q, Exhibit 10.3
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
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
August 5, 2014 Form 10-Q, Exhibit 10.1
August 5, 2014 Form 10-Q, Exhibit 10.2
May 5, 2015 Form 10-Q, Exhibit 10.1
105
Exhibit
Number
10.22*
10.23*
10.24
10.25
10.26
10.27
10.28
10.29
10.30
12.1
14.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Description of Exhibit
Executive Employment Agreement with Dean
McKenna
Form of Indemnification Agreement with each
of the Directors and Brian Anderson, Henk
Derksen, Christoph Gusenleitner, Dean
McKenna, Glenn Pennycook, Ross Rosenberg,
John Stroup, Dhrupad Trivedi, Roel Vestjens,
and Doug Zink
ABL Credit Agreement
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
August 4, 2015 Form 10-Q Exhibit 10.1
March 1, 2007 Form 10-K, Exhibit 10.39
October 9, 2013 Form 8-K, Exhibit 10.1
Term Loan Credit Agreement
October 9, 2013 Form 8-K, Exhibit 10.2
Purchase Agreement by and among Belden Inc.,
the Guarantors named therein and Wells Fargo
Securities, LLC
Amendment No. 1 to Credit Agreement
June 30, 2014 Form 8-K, Exhibit 10.1
August 17, 2015 Form 8-K, Exhibit 10.1
Amendment No. 1 to Term Loan Agreement
August 17, 2015 Form 8-K, Exhibit 10.2
Purchase Agreement by and among Belden Inc.,
the Guarantors named therein and Deutsche
Bank AG
Agreement and Plan of Merge by and among
VIA Holdings I, Inc., Belden Inc., Tahoe
MergerSub, Inc. and Thoma Bravo, LLC, as
Representative of the Stockholders and
Optionholders
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
November 25, 2014 Form 8-K, Exhibit 10.1
December 12, 2014 Form 8-K, Exhibit 2.1
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
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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: Corporate Secretary
1 North Brentwood Boulevard, 15th Floor
St. Louis, Missouri 63105
107
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 25, 2016
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/ STEVEN BERGLUND*
Steven Berglund
/s/ JUDY L. BROWN*
Judy L. Brown
/s/ GLENN KALNASY*
Glenn Kalnasy
/s/ JONATHAN KLEIN*
Jonathan Klein
/s/ GEORGE MINNICH*
George Minnich
/s/ JOHN MONTER*
John Monter
/s/ JOHN S. STROUP
*By John S. Stroup, Attorney-in-fact
President, Chief Executive Officer and Director
February 25, 2016
Senior Vice President, Finance, and Chief Financial Officer
February 25, 2016
Vice President and Chief Accounting Officer
February 25, 2016
Chairman of the Board and Director
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
Director
Director
Director
Director
Director
Director
Director
Director
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