2020
Annual Report
Dear Fellow Shareholders,
2020 was a truly unprecedented year, with the COVID-19 pandemic disrupting the global economy and
presenting personal and professional challenges that none of us could have foreseen. Belden was
significantly impacted, and once again our business proved to be strong and resilient. I am extremely proud
of the way our global workforce rose to the occasion and maintained a sharp focus on supporting our
customers and executing our strategic plans while ensuring the safest possible working conditions. Our
teams remained highly motivated and energized throughout the pandemic, and as a result of their efforts
we are incredibly well-positioned for success as our markets recover.
Our shareholders can take comfort in the fact that the Company maintained a solid financial position
throughout these difficult economic times. Despite the pandemic, we generated positive free cash flow
during the year, and our cash on hand increased to $502 million at the end of 2020 from $426 million at the
end of 2019. I am pleased to report that we exited the year with a strong balance sheet and renewed
momentum in our business.
Reflecting on 2020, the year was not only highlighted by the initial response to the pandemic, but also the
bold steps we took to position the Company for substantially improved business performance. This includes
the following transformative actions:
(cid:190) Divesting our Live Media business (“Grass Valley”);
(cid:190) Initiating a process to exit undifferentiated product lines;
(cid:190) Streamlining the cost structure; and
(cid:190) Increasing our investments in innovation.
These actions will result in a simplified portfolio that is aligned with favorable secular trends in industrial
automation, cybersecurity, broadband & 5G, and smart buildings. We believe this portfolio will be capable
of delivering superior organic growth, margin expansion and enhanced shareholder returns. I would like to
share some additional details of each of these with you.
Grass Valley divestiture. We made significant portfolio moves during the year, including the completion
of the Grass Valley sale in July. Divesting this business simplified and improved our portfolio. It also
removed a considerable drag on consolidated organic growth, as declines in Grass Valley’s business in
prior years represented a substantial headwind.
Exiting undifferentiated product lines. During the year, we also initiated a process to divest
approximately $200 million in revenues associated with certain undifferentiated copper cable product lines.
We expect to complete these divestitures in 2021. These are primarily stand-alone product lines that are
low-growth and low-margin, and we do not believe they can meet our growth or margin goals in the future.
Importantly, we will retain our most attractive copper cable and fiber product lines, which are more
specialized with superior growth and margin characteristics. Much like Grass Valley, we believe that
exiting these product lines will improve our end market exposure. In this case, we are exiting the oil & gas
markets and reducing our exposure to certain smart buildings markets.
Streamlining the cost structure. Exiting entire business units and product lines obviously reduces the
revenue base of the Company and creates opportunities for optimizing the cost structure. We entered 2020
with a meaningful cost reduction program that was designed to improve performance and deliver $40
million in annualized SG&A savings. We delivered on our commitments by successfully reducing SG&A
costs by $40 million during the year and exiting the year at a $60 million run rate. These savings resulted
from consolidating our internal business unit reporting structure, realigning our sales and marketing
organization, and optimizing headcount across many other functional areas.
Increasing investments in innovation. As we executed these substantial cost reduction plans, we
continued to make strategic investments to accelerate growth and capitalize on the opportunities in our key
markets. As part of our focus on innovation and providing strategic solutions for our customers, R&D
spending increased 14% to $107 million in 2020, with approximately 65% of this investment dedicated to
software development. This includes standalone software and embedded software within various hardware
products. Other targeted investments include those which support growth and innovation in industrial
automation, and further enhance our best-in-class cybersecurity cloud solution. These investments are
important to our customers and our shareholders, as they will further strengthen our product offering and
enhance our competitive advantage.
To summarize, I am extremely pleased with the way Belden associates around the world responded to the
COVID-19 situation and remained focused on successfully executing our strategic initiatives. These
initiatives support the ongoing transformation of Belden into the world’s leading specialty networking
solutions provider and will allow us to achieve our financial objectives.
Full year revenues from continuing operations excluding Grass Valley were $1.86 billion. We also
generated full year EBITDA margins of 13.4% and EPS1 of $2.75. I would now like to share with you some
of the details of our 2020 performance by segment.
Industrial Solutions – Revenues in our Industrial Solutions segment were $990 million in 2020, with
EBITDA margins of 14.9%. Demand softened during the year in response to the global pandemic in each
of our industrial markets – discrete manufacturing, process facilities, energy, and mass transit. Importantly,
demand trends improved notably in the second half of the year and we are encouraged by the prospects for
a robust recovery in 2021 and beyond. We continue to benefit from our integrated product portfolio of
ruggedized networking equipment and cybersecurity software, which supports our customers with essential
interoperability and security of assets.
Enterprise Solutions – Revenues in our Enterprise Solutions segment were $872 million in 2020, with
EBITDA margins of 11.4%. In broadband & 5G, the ever-increasing demand for more bandwidth and faster
speeds is driving increasing investments in network infrastructure by our customers. With our market-
leading connectivity solutions, we are well-positioned to support our MSO cable customers as they upgrade
existing networks and our telecom customers as they build out new 5G infrastructure. We continue to see
robust demand for our fiber optic products, and we are significantly expanding our product offering and
capturing additional market share following the successful integration of our recent acquisitions. As a result,
revenues from our fiber products increased over 80% in total and nearly 30% on an organic basis in 2020.
We continue to cultivate a number of attractive inorganic opportunities in the broadband fiber area that
would allow us to add to our product offering and drive substantial growth.
In smart buildings, integrated building networks with more connected devices are driving demand for our
connectivity solutions, including our innovative fiber and power-over-Ethernet products. We are believers
in the secular tailwinds involving more connected devices and more bandwidth demand in buildings, and
more applications requiring fiber connectivity products. However, this market was heavily impacted by the
global pandemic and the implications for non-residential construction within certain verticals, such as
commercial real estate. The cyclical downturn will likely persist throughout 2021 before the recovery
begins. In the meantime, we are leveraging our strong market position to capture share and position
ourselves in the higher-growth verticals within the market, such as data centers, consumer packaged goods,
e-commerce warehouses and healthcare facilities.
1 Consolidated adjusted results are referenced in this letter. See appendix for reconciliations to comparable GAAP results. All references to EPS
refer to adjusted income from continuing operations per diluted share attributable to Belden common stockholders.
Strategic Financial Goals
Our commitment to delivering for our shareholders is unwavering. Each year, we reflect on our financial
goals to ensure alignment with our strategic plan and our end markets. Our long-term goals are unchanged,
and we believe that achieving them will drive substantial shareholder value creation. However, the next
three years will likely look different in some respects as our markets normalize post-COVID. An update on
each of our financial goals is provided below.
(cid:120) Revenue Growth of 5 - 7%2
Our long-term goal of 5-7% revenue growth represents a combination of market growth, share
capture, and successful acquisition integration. We are aligning our strategic priorities around
attractive markets that have robust secular tailwinds, while removing certain declining or low-
growth businesses from the portfolio. We are focused on driving accelerated organic growth, and
we expect this to result in an improved organic growth CAGR of approximately 4% over the next
three years. We remain an acquisitive company and we continue to cultivate potential inorganic
opportunities in our core markets, such as Fiber Connectivity and Industrial Automation.
(cid:120) EBITDA Margins of 20 - 22%
We have a long track record of margin expansion, and we remain committed to our EBITDA
margin goal of 20-22%. EBITDA margins increased approximately 800 basis points in the post-
recession period after the financial crisis of 2008 and 2009. We see a similar opportunity now to
drive substantial margin expansion, and over the next three years we believe the business is capable
of achieving 20% EBITDA margins. We’ve done it before and we can do it again. We have line of
sight to much of this improvement from the planned exit of low-margin product lines and the
incremental SG&A savings that we expect to realize in 2021 under our $60 million cost reduction
program. In addition, we anticipate making significant margin progress as we leverage accelerating
revenue growth and our teams execute a number of meaningful productivity initiatives.
(cid:120) Free Cash Flow Growth of 13 – 15%
Our long-term goal of 13-15% free cash flow growth reflects our commitment to quality of earnings
and working capital improvements. In 2020, we generated free cash flow of $86 million. We see a
strong recovery off of this temporarily depressed level as our strategic actions and recovering end
2 In constant currency
markets drive substantially improved revenues and margins. This should result in a free cash flow
CAGR of approximately 40% over the next three years, or well above our long-term goal.
(cid:120) Return on Invested Capital of 13 – 15%
Our return on invested capital target of 13-15% requires a disciplined approach to capital allocation.
ROIC was approximately 8% in 2020. Our organic plan is expected to push ROIC back to
approximately 13% over the next three years, and we anticipate making further progress as we
execute our strategic plans.
Environmental, Social and Governance (ESG) at Belden
In all places, and in all situations, Belden is committed to the highest standards of ethics and integrity,
including our dedication to the environment, and our approach to sustainability. We never take professional
or ethical shortcuts, and our interactions with all businesses, communities and individuals follow the high
standards we expect as Belden associates.
In 2020, we formalized Board oversight of ESG matters to demonstrate and implement our commitment to
our stakeholders and our business. As we enhance our strategy and approach to ESG and our reporting on
material topics, we are pleased to share the following highlights from the past year:
(cid:120) Assessed our corporate emissions across the majority of our facilities and locations for 2019 and
2020 using the GHG Protocol Corporate Accounting Standard, reporting a 4% decline in direct
corporate emissions for 2020.
(cid:120) Started to collect and report on our emissions, energy, waste, and water usage for 2019 and 2020
using our ISO corporate Environmental Health and Safety Management System. As we continue
on our ESG journey, we will aim to set targets to reduce our environmental impact and look forward
to communicating our progress over time.
(cid:120)
Implemented standards that require facilities to recycle waste over disposal whenever possible. In
2020, about 87% of waste generated was recycled.
(cid:120) Launched the Connect with Community Program to support communities in impacting the lives of
disadvantaged groups and to provide Covid-19 relief.
(cid:120) Appointed a new, internal Director of Inclusive Culture to further our commitment to diversity and
inclusion and implement a robust diversity, equity and inclusion strategy and approach.
(cid:120) Maintained a 93% Retention Rate in 2020, above average compared to the applicable industry
benchmark, highlighting our focus on creating a people-focused culture.
(cid:120) Achieved occupational incident rates well below industry average. In the spirit of continuous
improvement, we strive towards a zero-incident rate workplace for our employees.
In 2021, we will launch a new ESG webpage on our corporate website as an important resource for all of
our stakeholders.
Outlook
2021 will be a year of recovery in most of our key markets. During the year, we expect to complete the
remaining transformative portfolio actions and turn the focus to accelerating organic growth. As a leading
global specialty networking company primarily serving the Industrial and Enterprise markets, we are ideally
positioned to benefit from a number of favorable secular trends in industrial automation, cybersecurity,
broadband & 5G, and smart buildings. I am confident that we have the talent, strategy, balance sheet, and
proven Lean enterprise system to achieve our goals and provide a compelling long-term return for our
shareholders.
We are thankful for the loyalty of our customers, shareholders, and talented associates 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,
Roel Vestjens
President and Chief Executive Officer
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
In addition to reporting financial results in accordance with accounting principles generally accepted in the
United States, we provide non-GAAP operating results adjusted for certain items, including: asset
impairments; accelerated depreciation expense due to plant consolidation activities; purchase accounting
effects related to acquisitions, such as the adjustment of acquired inventory and deferred revenue to fair
value and transaction costs; severance, restructuring, and acquisition integration costs; gains (losses)
recognized on the disposal of businesses and tangible assets; amortization of intangible assets; gains (losses)
on debt extinguishment; certain revenues and gains (losses) from patent settlements; discontinued
operations; and other costs. We adjust for the items listed above in all periods presented, unless the impact
is clearly immaterial to our financial statements. When we calculate the tax effect of the adjustments, we
include all current and deferred income tax expense commensurate with the adjusted measure of pre-tax
profitability.
We utilize the adjusted results to review our ongoing operations without the effect of these adjustments and
for comparison to budgeted operating results. We believe the adjusted results are useful to investors because
they help them compare our results to previous periods and provide important insights into underlying
trends in the business and how management oversees our business operations on a day-to-day basis. As an
example, we adjust for the purchase accounting effect of recording deferred revenue at fair value in order
to reflect the revenues that would have otherwise been recorded by acquired businesses had they remained
as independent entities. We believe this presentation is useful in evaluating the underlying performance of
acquired companies. Similarly, we adjust for other acquisition-related expenses, such as amortization of
intangibles and other impacts of fair value adjustments because they generally are not related to the acquired
business' core business performance. As an additional example, we exclude the costs of restructuring
programs, which can occur from time to time for our current businesses and/or recently acquired businesses.
We exclude the costs in calculating adjusted results to allow us and investors to evaluate the performance
of the business based upon its expected ongoing operating structure. We believe the adjusted measures,
accompanied by the disclosure of the costs of these programs, provides valuable insight.
Adjusted results should be considered only in conjunction with results reported according to accounting
principles generally accepted in the United States.
GAAP and adjusted revenues
GAAP gross profit
Amortization of software development intangible assets
Severance, restructuring, and acquisition integration costs
Purchase accounting effects related to acquisitions
Adjusted gross profit
GAAP gross profit margin
Adjusted gross profit margin
Twelve Months Ended
December 31, 2020 December 31, 2019
(In thousands, except percentages and
per share amounts)
$
$
$
1,862,716
663,289
1,821
704
125
665,939
$
$
$
35.6 %
35.8 %
2,131,278
793,505
525
3,425
592
798,047
37.2 %
37.4 %
GAAP selling, general and administrative expenses
Severance, restructuring, and acquisition integration costs
Adjusted selling, general and administrative expenses
GAAP and adjusted research and development expenses
GAAP net loss attributable to Belden
Interest expense, net
Loss from discontinued operations, net of tax
Loss on disposal of discontinued operations, net of tax
Income tax expense
Non-operating pension settlement loss
Noncontrolling interest
Total non-operating adjustments
Amortization of intangible assets
Severance, restructuring, and acquisition integration costs
Amortization of software development intangible assets
Purchase accounting effects related to acquisitions
Total operating income adjustments
Depreciation expense
Adjusted EBITDA
GAAP net income (loss) margin
Adjusted EBITDA margin
GAAP net loss attributable to Belden
Operating income adjustments from above
Loss from discontinued operations, net of tax
Loss on disposal of discontinued operations, net of tax
Non-operating pension settlement loss
Tax effect of adjustments above
Adjusted net income attributable to Belden
GAAP net loss attributable to Belden
Loss from discontinued operations, net of tax
Loss on disposal of discontinued operations, net of tax
Less: Preferred stock dividends
GAAP net income from continuing operations attributable to Belden
Adjusted net income attributable to Belden
Less: Preferred stock dividends
Adjusted net income from continuing operations attributable to Belden
GAAP income from continuing operations per diluted share attributable to
Belden common stockholders
Adjusted income from continuing operations per diluted share attributable to
Belden common stockholders
Twelve Months Ended
December 31,
2020
December 31,
2019
(In thousands, except percentages and
per share amounts)
$
(366,188)
11,554
(417,329)
23,119
$
$
$
$
$
$
$
$
$
$
$
$
$
(354,634)
$
(394,210)
$
$
(107,296)
(46,160)
58,888
103,260
946
7,977
3,153
104
174,328
64,395
12,258
1,821
125
78,599
42,470
249,237
$
(2.5) %
13.4 %
(46,160)
78,599
103,260
946
3,153
(16,262)
123,536
(46,160)
103,260
946
—
58,046
123,536
—
123,536
$
$
$
$
$
$
1.29
2.75
$
$
(94,360)
(377,015)
55,814
486,667
—
42,519
—
239
585,239
74,609
26,544
525
592
102,270
40,409
350,903
(17.7) %
16.5 %
(377,015)
102,270
486,667
—
—
(1,948)
209,974
(377,015)
486,667
—
(18,437)
91,215
209,974
(18,437)
191,537
2.15
4.52
GAAP and adjusted diluted weighted average shares
44,937
42,416
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
We define free cash flow, which is a non-GAAP financial measure, as net cash from operating activities
adjusted for capital expenditures net of the proceeds from the disposal of tangible assets. 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
Non-GAAP free cash flow
Twelve Months Ended
December 31,
2020
December 31,
2019
$
$
(In thousands)
173,364 $
276,893
(87,054)
86,310 $
(109,977)
166,916
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:4338) Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934(cid:3)
For the fiscal year ended December 31, 2020
or
(cid:4337) Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934(cid:3)
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)
Title of each class
Common Stock, $0.01 par value per share
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol
BDC
Name of each exchange on which registered
The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes (cid:134) No (cid:59).
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 (cid:134) No (cid:59).
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 (cid:59) No (cid:134).
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 (cid:59) No (cid:134).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:4338)
Accelerated filer (cid:4337)
Non-accelerated filer (cid:4337)
Emerging growth company (cid:4337)
Smaller reporting company (cid:4337)(cid:3)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:4337)
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:0)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes (cid:4337) No (cid:4338).
At June 28, 2020, the aggregate market value of Common Stock of Belden Inc. held by non-affiliates was $1,314,089,562 based
on the closing price ($29.88) of such stock on such date.
As of February 11, 2021, there were 44,657,019 shares of the registrant’s common stock outstanding.
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, 2020 (the “Proxy Statement”). Portions of such proxy statement are incorporated by reference
into Part III.
Name of Item
Page
Business
Form 10-K
Item No.
Part I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
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
Part II
Item 5.
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV.
Item 15. Exhibits and Financial Statement Schedules
Signatures
2
8
16
16
16
17
18
19
20
35
38
84
84
87
87
87
87
87
87
88
92
Part I
Item 1. Business
General
Belden Inc. (the Company, us, we, or our) connects and protects the world with the industry’s most complete suite of end-to-end
specialty networking solutions. Our comprehensive portfolio of solutions enables customers to transmit and secure data, sound,
and video for mission critical applications across complex enterprise and industrial environments. Our business is organized
around two global business platforms, Enterprise Solutions and Industrial Solutions, both of which provide the opportunity to
drive future growth due to favorable secular trends. Each business platform represents a reportable segment. Financial information
about our segments appears in Note 6 to the Consolidated Financial Statements.
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
In 2020, we executed our strategy around three transformative actions. First, we divested Grass Valley in order to simplify our
portfolio and meet our strategic revenue growth goals. Next, we streamlined our cost structure by reducing Selling, General, and
Administrative expenses by approximately $40 million in the year ended December 31, 2020, with an annualized impact of
approximately $60 million. Finally, we initiated processes to divest up to approximately $200 million of low-margin cable product
lines that do not meet our long-term revenue growth and profitability goals. After the completion of these strategic actions, our
portfolio of businesses will be well positioned to meet our long-term goals and deliver shareholder value.
Our portfolio and strategic priorities align with attractive end markets with favorable secular trends. Within Industrial Solutions,
the growing demand for automated production and the ever-increasing need for network security drive demand for our solutions.
Enterprise Solutions benefits from increasing consumer demand for more internet bandwidth and faster speeds, investment in 5G
technology, and trends requiring integrated networks in smart buildings. We are well positioned to benefit from these secular
trends in the form of improved revenue growth and expanded Adjusted EBITDA margins in the future.
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 cash flow. We generated
cash flows from operating activities of $173.4 million, $276.9 million, and $289.2 million in 2020, 2019, and
2018, 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 two segments – Enterprise Solutions and Industrial Solutions. Effective January 1, 2020, we
transferred our West Penn Wire business and multi-conductor product lines from the Enterprise Solutions segment to the Industrial
Solutions segment as a result of a shift in responsibilities among the segments. We have recast the prior period segment
information to conform to the change in the composition of reportable segments. A synopsis of the segments is included below:
2
Enterprise Solutions
The Enterprise Solutions (Enterprise) segment is a leading provider in network infrastructure solutions, as well as cabling and
connectivity solutions for commercial audio/video and security applications. We serve customers in markets such as healthcare,
education, financial, government, corporate enterprises and broadband service providers, as well as end-markets, including sport
venues and academia. Enterprise product lines include copper cable and connectivity solutions, fiber cable and connectivity
solutions, racks and enclosures, and secure, high performance signal extension and matrix switching systems. Our products are
used in applications such as local area networks, data centers, access control, Fiber to the Home 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 up to and including 100G+ Ethernet technologies.
Enterprise’s innovative products can deliver data in addition to power over Ethernet, which meets the higher performance
requirements driven by the increasing number of connections in smart buildings. 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 Solutions
The Industrial Solutions (Industrial) segment is a leading provider of high performance networking and machine connectivity
products. Industrial products include physical network and fieldbus infrastructure components and on-machine connectivity
systems to meet end user and OEM needs. Products are designed to provide reliability and confidence of performance for a wide
range of industrial automation applications. The products are used in markets that include discrete automation, process
automation, energy and mass transit. Applications include network and fieldbus infrastructure; sensor and actuator connectivity;
and power, control, and data transmission. Industrial products include solutions such as industrial Ethernet switches, network
management software, routers, firewalls, gateways, input/output (I/O) connectors/systems, industrial Ethernet cables, optical fiber
industrial Ethernet cables, Fieldbus cables, IP and networking cables, I/O modules, distribution boxes, and customer specific
wiring solutions.
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, insulation, 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 Solutions products are sold directly to industrial equipment OEMs and through a network of industrial distributors,
value-added resellers, and system integrators.
See Note 6 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 enhance our 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 plan targets and our goal for
return on invested capital of 13-15%.
We have completed a number of acquisitions in recent years as part of this strategy. Most recently, in January 2021, we acquired
OTN Systems N.V. (OTN), a leading provider of automation networking infrastructure solutions - refer to Note 28, Subsequent
Events, for further discussion. In December 2019, we acquired substantially all of the assets of Special Product Company (SPC),
a leading designer, manufacturer, and seller of outdoor cabinet products for optical fiber cable installations. In April 2019, we
acquired the FutureLink business from Suttle Inc. as well as Opterna International Corp. (Opterna), which designs and
manufactures complementary fiber connectivity, cabinet, and enclosure products used in optical networks.The results of SPC,
FutureLink, and Opterna have been included in our Consolidated Financial Statements as of their acquisition dates, and are
reported within the Enterprise Solutions segment. In 2018, we acquired Net-Tech Technology, Inc. (NT2), an integrator of optical
passive components and network optimization products used within broadband network applications where optical backhaul is
3
used. The results of NT2 have been included in our Consolidated Financial Statements from the acquisition date, and are reported
within the Enterprise Solutions segment. For more information regarding these transactions, see Note 4 to the Consolidated
Financial Statements.
Customers
We sell to distributors, OEMs, installers, and end-users. On June 22, 2020, WESCO International, Inc (WESCO) acquired Anixter
International, Inc. (Anixter), our largest distributor. References to "WESCO" in the remainder of this report will be inclusive of
Anixter. For the year ended December 31, 2020, sales to WESCO represented approximately 15% of our consolidated revenues.
No other customer accounted for more than 10% of our revenues in 2020.
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, India, Mexico, and St. Kitts, as well as in various countries in Europe. During 2020, 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 6 to the Consolidated Financial Statements.
Competition
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 share across our segments is
significant, ranging 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 our markets on the basis of the breadth of our product portfolio, the quality and
performance characteristics of our products, our customer service, and our technical support.
Research and Development
We conduct research and development on an ongoing basis, including new and existing hardware and software 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. Some of our markets are using workflows and resources in public and private
cloud and showing preference for software products delivered as services. We believe that our future success will depend in part
upon our ability to enhance existing products and to develop, manufacture and deliver new products that meet or anticipate such
changes in our served markets.
In our Enterprise Solutions segment, 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 resulting from 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.
4
In our Industrial Solutions segment, 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 continue to 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. Furthermore, 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. 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.
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 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™, GarrettCom®, Hirschmann®, Lumberg Automation™, Mohawk®, Poliron™, PPC®, ProSoft Technology®,
Thinklogical®, Tofino®, Tripwire® and West Penn Wire™.
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.
Copper spot prices per pound
High
Low
2020
2019
2018
$
$
3.63 $
2.12 $
2.98
2.51
$
$
3.29
2.56
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 rate of inventory turnover.
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
5
after they are announced. Some OEM customer contracts have provisions for passing through raw material cost changes, generally
with a lag of a few weeks to three months.
Backlog
Our business is characterized generally by short-term order and shipment schedules. Our backlog consists of product orders for
which we have received a customer purchase order or purchase commitment and which have not yet been shipped. Orders are
generally subject to cancellation or rescheduling by the customer. As of December 31, 2020, our backlog of orders believed to be
firm was $223.0 million. The majority of the backlog at December 31, 2020 is scheduled to ship in the first quarter of 2021.
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; the Resource Conservation and Recovery Act; and similar laws in the other countries in which we operate. While we
believe that our existing environmental control procedures are adequate, we will continue to evaluate and update our procedures
as needed to address new or changing aspects of environmental matters.
Human Capital Resources
As of December 31, 2020, we had approximately 6,200 and 200 full-time and contractor employees, respectively, worldwide, of
which approximately 65%, 20% and 15% were in North and South America, EMEA, and APAC, respectively. Approximately
1,700 employees are covered by collective bargaining agreements at various locations around the world. We believe our
relationship with our employees is generally positive, and we measure and monitor the workforce's sustainable engagement,
among other metrics, to ensure this remains the case.
Our culture and principles enable us to attract, retain, motivate and develop our workforce as well as drive employee engagement.
We believe an engaged workforce leads to a more innovative, productive and profitable company. Our employees around the
world live our Belden Values every day and work to ensure that our products and services connect and protect our customers
critical infrastructure. Reflective of our corporate value "We Invest in Talent," our employees are highly engaged, scoring 88%
positive in our most recent employee survey. Furthermore, we were recognized by Great Place to Work in Germany, Brazil and
India, where we were also recognized as a Great Place to Work for Women.
The ethnic and gender diversity of our senior leadership team has increased with new strategic hires from outside the Company
alongside internal promotions. The number of women serving as independent directors on our board of directors has further
increased to 33%. During 2020, we also appointed a new Director of Inclusive Culture and continue to partner with organizations
as we look to identify further opportunities to improve diversity, inclusion and belonging across our company.
During 2020, we launched our Connect with Community program, which enables Belden employees to take a week’s paid time
away from work to volunteer in their local communities. As a result, a broad range of communities around the world have
benefited from the efforts of our team members who have worked with food banks, environmental organizations, education
establishments and community development charities across the world. During the year ended December 31, 2020, we also
introduced our voluntary flex-time program, which enables most of our employees outside of direct production to take time off
to deal with personal and family matters, resulting from the COVID-19 pandemic or otherwise, and receive 25% of their pay
during such period.
We continually evolve our Early Career Leadership program. This 3-year rotational program enables talented graduates to work
around the world in challenging roles within their chosen business function and prepares them to be the leaders of the future. As
of December 31, 2020, the Early Career Leadership program had an exceptional retention rate of 100% and comprised over 80
participants, of which 46% were female.
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. These
electronic SEC filings are available on the SEC's web site at 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.
6
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.
Information about our Executive Officers
The following table sets forth certain information with respect to the persons who were Belden executive officers as of
February 15, 2021. 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
Roel Vestjens
Brian Anderson
Ashish Chand
Henk Derksen
Dean McKenna
Anshu Mehrotra
Doug Zink
Age Position
Executive Chairman
54
46 President and Chief Executive Officer
46 Senior Vice President, Legal, General Counsel and Corporate Secretary
46 Executive Vice President, Industrial Automation
52 Senior Vice President, Finance, and Chief Financial Officer
52 Senior Vice President, Human Resources
50 Senior Vice President, Sales and Marketing
45 Vice President and Chief Accounting Officer
John Stroup was appointed Executive Chairman of the Company on May 21, 2020. Prior to that, he served as President, Chief
Executive Officer, and a member of the Board since October 2005. He was also elected as Chairman of the Board on November
30, 2016. From 2000 to October 2005, 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.
Roel Vestjens was appointed President and Chief Executive Officer on May 21, 2020. Prior to that, he was the Chief Operating
Officer since July 2019; Executive Vice President, Industrial Solutions from February 2018 to July 2019; Executive Vice
President, Industrial Solutions and Broadcast IT Solutions from January 2017 to February 2018; and the Executive Vice President,
Broadcast Solutions from March 2014 to January 2017. 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 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.
Brian Anderson has been Senior Vice President, Legal, General Counsel and Corporate Secretary since 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.
Ashish Chand was appointed Executive Vice President, Industrial Automation in July 2019. Prior to that, he served as Managing
Director, Industrial Solutions, for the Company’s APAC division from August 2017 to June 2019. Mr. Chand joined the Company
in 2002 and has assumed positions of increasing responsibility in sales and marketing, operations, business development and
general management since that time. Prior to joining Belden, Mr. Chand had experience in the oil and gas and non-ferrous metals
segments. Mr. Chand holds a doctoral degree in Business from the City University of Hong Kong, an M.B.A. from XLRI
Jamshedpur, India and a B.A. from Loyola College Chennai, India.
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.
7
Dean McKenna has been Senior Vice President, Human Resources since 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 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.
Anshu Mehrotra was appointed Senior Vice President, Sales and Marketing in January 2021. Prior to joining Belden, he was
Group President for Welding at Illinois Tool Works (ITW), leading the global Industrial Welding platform. Prior to ITW, he has
had a number of leadership roles in general management and sales at Ingersoll Rand, Allegion and Johnson Controls. He has a
B.S. in Electronics Engineering from Delhi University, an M.S. in Industrial Engineering from Northern Illinois University and
an M.B.A. from Northwestern University at Kellogg School of Management.
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,” “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.
The effects of the COVID-19 pandemic materially affected how we and our customers operated our businesses in 2020, and
the duration and extent to which this or future epidemics or pandemics will impact our future results of operations and overall
financial performance remains uncertain.
In December 2019, a novel coronavirus disease (“COVID-19”) was first reported and on March 11, 2020, the World Health
Organization characterized COVID-19 as a pandemic. The widespread health crisis is adversely affecting the broader economies,
financial markets and overall demand environment for many of our products.
Our operations and the operations of our suppliers, channel partners and customers were disrupted to varying degrees by a range
of external factors related to the COVID-19 pandemic, some of which are not within our control. Many governments imposed,
and may yet impose, a wide range of restrictions on the physical movement of people in order to limit the spread of COVID-19.
The COVID-19 pandemic has had, and likely will continue to have, an impact on the attendance and productivity of our
employees, and those of our channel partners or customers, resulting in negative impacts to our results of operations and overall
financial performance. Additionally, COVID-19 has resulted, and likely will continue to result, in delays in non-residential
construction, non-crisis-related IT purchases and project completion schedules in general, all of which can negatively impact our
results in both current and future periods.
8
The duration and extent of the impact from the COVID-19 pandemic or any future epidemic or pandemic depends on future
developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent
and effectiveness of containment actions, the effects of measures enacted by policy makers and central banks around the globe,
and the impact of these and other factors on our employees, customers, channel partners and suppliers. If we are not able to
respond to and manage the impact of such events effectively, our business will be affected.
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 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 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.
Potential cyber security incidents could interfere with our business and operations.
Computer hacking, malware, phishing, and spamming attacks against online networking platforms have become more prevalent.
Though it is difficult to determine what, if any, harm may directly result from any specific attack or interruption, such events
could also be expensive to remedy, harm our reputation or brands, and/or lead users to lose trust and confidence in our business.
We, and others on our behalf, also store “personally identifiable information” (“PII”) 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 in the future, as occurred in November 2020. Based upon this occurrence or any future
occurrence, in addition to having to take potentially costly remedial action, we may also be subject to fines, penalties, lawsuits,
and reputational damage.
Furthermore, 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. 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.
Changes in tax laws may adversely affect our financial position.
We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is
required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions
on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct
our business, it is possible that these positions may be contested or overturned by jurisdictional tax authorities, which may have
a significant impact on our global provision for income taxes.
9
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The
U.S. recently enacted significant tax reform, and certain provisions of the new law may adversely affect us. In addition,
governmental tax authorities are increasingly scrutinizing the tax positions of companies. 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 possible such
changes could adversely impact our financial results.
We may experience significant variability in our quarterly and annual effective tax rate which would affect our reported net
income.
We have a complex tax profile due to the global nature of our operations, which encompass multiple taxing jurisdictions.
Variability in the mix and profitability of domestic and international activities, identification and resolution of various tax
uncertainties, changes in tax laws and rates, and the extent to which we are able to realize net operating loss and other
carryforwards included in deferred tax assets and avoid potential adverse outcomes included in deferred tax liabilities, among
other matters, may significantly affect our effective income tax rate in the future.
Our effective income tax rate is the result of the income tax rates in the various countries in which we do business. Our mix of
income and losses in these jurisdictions affects our effective tax rate. For example, relatively more income in higher tax rate
jurisdictions would increase our effective tax rate and thus lower our net income. Similarly, if we generate losses in tax
jurisdictions for which no benefits are available; our effective income tax rate will increase. Our effective income tax rate may
also be impacted by the recognition of discrete income tax items, such as required adjustments to our liabilities for uncertain tax
positions or our deferred tax asset valuation allowance. A significant increase in our effective income tax rate could have a material
adverse impact on our earnings.
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 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. Especially during periods of inflation, if we are unable to raise
prices timely and 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, 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.
Future operating results depend upon the Company’s ability to obtain components in sufficient quantities on commercially
reasonable terms.
Because the Company currently obtains certain components from single or limited sources, the Company is subject to significant
supply and pricing risks. Many components, including those that are available from multiple sources, are at times subject to
industry-wide shortages that could materially adversely affect the Company’s financial condition and operating results. While the
Company has entered into agreements for the supply of many components, there can be no assurance that the Company will be
able to extend or renew these agreements on similar terms, or at all. Component suppliers may suffer from poor financial
conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting the
Company’s ability to obtain sufficient quantities of components on commercially reasonable terms. A regional health crises, like
the Coronavirus, could lead to quarantines or labor shortages, thus impacting the output of key suppliers. If the Company’s supply
of components for a new or existing product were delayed or constrained, or if an outsourcing partner delayed shipments of
completed products to the Company, the Company’s financial condition and operating results could be materially adversely
affected. The Company’s business and financial performance could also be materially adversely affected depending on the time
required to obtain sufficient quantities from the original source, or to identify and obtain sufficient quantities from an alternative
source.
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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 technical features, quality, availability, price, customer support, and distribution coverage. 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, intellectual property advantages,
market penetration, and other actions, could have a negative effect on our revenues and profitability. Moreover, some competitors
that are highly leveraged both financially and operationally could become more aggressive in their pricing of products.
Our revenue for any particular period can be difficult to forecast.
Our revenue for any particular period can be difficult to forecast, especially in light of the challenging and inconsistent global
macroeconomic environment and related market uncertainty. Our revenue may grow at a slower rate than in past periods or even
decline on a year-over-year basis. Changes in market growth rates can have a significant effect on our operating results.
The timing of orders for customer projects can also have a significant effect on our operating results in the period in which the
products are shipped and recognized as revenue. The timing of such projects is difficult to predict, and the timing of revenue
recognition from such projects may affect period to period changes in revenue. As a result, our operating results could vary
materially from quarter to quarter based on the receipt of such orders and their ultimate recognition as revenue. Similarly, we are
often informed by our customers well in advance that such customer intends to place an order related to a specific project in a
given quarter. Such a customer’s timeline for execution of the project, and the resulting purchase order, may be unexpectedly
delayed to a future quarter, or cancelled. The frequency of such delays can be difficult to predict. As a result, it is difficult to
precisely forecast revenue and operating results for future quarters.
In addition, our revenue can be difficult to forecast due to unexpected changes in the level of our products 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. As our channel partners and customers change
the level of Belden products owned and held in their inventory, our revenue is impacted. As we are dependent upon our channel
partners and customers to provide us with information regarding the amount of our products that they own and hold in their
inventory, unexpected changes can occur and impact our revenue forecast.
The presence of substitute products in the marketplace may reduce demand for our products and negatively impact our
business.
Fiber optic systems are increasingly substitutable for copper based cable systems. Customers may shift demand to fiber optic
systems with greater capabilities than copper based cable systems, leading to a reduction in demand for copper based cable. We
may not be able to offset the effects of a reduction in demand for our copper-based cable systems with an increase in demand for
our existing fiber optic systems. Further, the supply chain in the fiber market is highly constrained, with a small number of
vertically integrated firms controlling critical inputs and the related intellectual property. Similarly, in our non-cable businesses,
customers could rapidly shift the methods by which they capture and transmit signals in ways that could lead to decreased demand
for our current or future products. These factors, either together or in isolation, may negatively impact revenue and profitability.
The increased prevalence of cloud computing and other disruptive business models may negatively impact certain aspects of
our business.
The nature in which many of our products are purchased or used is evolving with the increasing prevalence of cloud computing
and other methods of off-premises computing and data storage. This may negatively impact one or more of our businesses in a
number of ways, including:
• Consolidation of procurement power leading to the commoditization of IT products;
• Reduction in the demand for infrastructure products previously used to support on-site data centers;
• Lowering barriers to entry for certain markets, leading to new market entrants and enhanced competition; and
• Preferences for software as a service billing and pricing models may reduce demand for non-cloud “packaged”
software.
11
Our future success depends in part on our ability to develop and introduce new products and respond to changes in customer
preferences.
Our markets are characterized by the introduction of products with increasing technological capabilities. Our success depends in
part on our ability to anticipate and offer products that appeal to the changing needs and preferences of our customers in the
various markets we serve. Developing new products and adapting existing products to meet evolving customer expectations
requires high levels of innovation, and the development process may be lengthy and costly. If we are not able to timely anticipate,
identify, develop and market products that respond to rapidly changing customer preferences, demand for our products could
decline.
The relative costs and merits of our solutions could change in the future as various competing technologies address the market
opportunities. We believe that our future success will depend in part upon our ability to enhance existing products and to develop
and manufacture new products that meet or anticipate 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. See the discussion above in Part I, Item 1, under Research and Development.
The increased influence of chief information officers and similar high-level executives may negatively impact demand for our
products.
As a result of the increasing interconnectivity of a wide variety of systems, chief information officers and similar executives are
more heavily involved in operation areas that have not historically been associated with information technology. As a result, CIOs
and IT departments are exercising influence over the procurement and purchasing process at the expense of engineers, plant
managers and operation personnel that have historically driven demand for many of our products. When making purchasing
decisions, CIO’s often value interoperability, standardization, cloud-readiness and security over domain expertise and niche
application knowledge. As a result of the influences of CIOs and IT departments, we may face increased competition from IT-
industry companies that have not traditionally had major presences in the markets in which we operate. Further, the variance in
considerations that drive purchasing decisions between CIOs and those with niche application expertise may result in increased
competition based on price and a reduction in demand for our products.
Alterations to our product mix and go-to-market strategies designed to respond to the changes in the marketplace presented by
cloud computing may be disruptive to our business and lead to increase expenses, which may result in lower revenues and
profitability. Further, if a competitor is able to more quickly or efficiently adapt, or if cloud computing results in significantly
lower barriers to entry and new competitors enter our markets, demand for our products may be reduced.
We may be unable to achieve our goals related to growth.
In order to meet the goals in our strategic plan, we must execute our Market Delivery System ("MDS") and grow our business,
both organically and through acquisitions. We may be unable to achieve our goals due to a failure to identify growth opportunities,
such as trends and technological changes in our end markets. The 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.
We may be unable to implement our strategic plan successfully.
Our strategic plan is designed to continually enhance shareholder value by improving revenues and profitability, reducing costs,
and improving working capital management. To achieve these goals, our strategic priorities are reliant on our Belden Business
System, which includes continuing deployment of our MDS 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 continuing to be a
leading Lean company. 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.
12
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.
We must complete acquisitions and divestitures in order to achieve our strategic plan.
In order to meet the goals in our strategic plan, we must complete acquisitions and divestitures. 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 would like to acquire.
Additionally, our strategic plan includes the planned divestiture of certain low-margin cable businesses representing up to $200
million in annual revenues. The inability to find a suitable buyer(s) with acceptable terms could have an adverse effect on our
operating results.
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, compliance with the Sarbanes-Oxley Act of 2002, financial reporting that is not in
compliance with U.S. generally accepted accounting principles, disparate company policies and practices, customer relationship
issues, and retention of key personnel. In addition, management may be required to devote a considerable amount of time to the
integration process, which could decrease the amount of time we have to manage the other businesses. We may not be able to
integrate operations successfully or cost-effectively, which could have a negative 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.
Our results of operations are subject to foreign and domestic political, social, 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, India, Mexico, St. Kitts, and several European countries. We rely on suppliers in many countries, including
China. Our foreign operations are subject to economic, social, and political risks inherent in maintaining operations abroad such
as economic and political destabilization, land use risks, international conflicts, pandemics and other health-related crises,
restrictive actions by foreign governments, and adverse foreign tax laws. In addition to economic and political risk, 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 legislative, regulatory or executive changes in fiscal or monetary policy
and other foreign and domestic government policies, including, but not limited to, trade policies and import/export policies.
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 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.
13
Changes in global tariffs and trade agreements may have a negative impact on global economic conditions, markets and our
business.
Like most multinational companies, we have supply chains and sales channels that extend beyond national borders. Purchasing
and production decisions in some cases are largely influenced by the trade agreements and the tax and tariff structures in place.
Disruption in those structures can create significant market uncertainty. While the impact of Brexit and the U.S. and Chinese tariff
actions are not currently material to us, unanticipated complications in the free movement of goods in Europe, an escalation of
tariff activity anywhere in the world or changes to existing free trade agreements could materially impact our financial results. In
addition to the potential direct impacts of free trade restrictions, longer term macroeconomic consequences could result, including
slower growth, inflation, higher interest rates and unfavorable impacts to currency exchange rates. Any of these factors could
have a material adverse effect on our business, financial condition and 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.
Actions of activists could cause us to incur substantial costs, divert management’s attention and resources, and have an
adverse effect on our business.
From time to time, we may be subject to proposals by activists urging us to take certain actions. If activist activities ensue, our
business could be adversely affected because responding and reacting to actions by activists can be costly and time-consuming,
disrupt our operations and divert the attention of management and our employees. For example, we may be required to retain the
services of various professionals to advise us on activist matters, including legal, financial and communications advisors, the
costs of which may negatively impact our future financial results. In addition, perceived uncertainties as to our future direction,
strategy or leadership created as a consequence of activist initiatives may result in the loss of potential business opportunities,
harm our ability to attract new investors, customers, employees, and joint venture partners, and cause our stock price to experience
periods of volatility.
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 incident or policy non-compliance event. As
a result, the occurrence of a high profile security incident, 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.
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.
Our revenue and profits would likely decline, at least temporarily, if we were to lose a key distributor.
We rely on several key distributors in marketing our products. Distributors purchase the products of our competitors along with
our products. Our largest distributor, WESCO, accounted for approximately 15% of our revenue in 2020 and our top six
distributors, including WESCO, accounted for a total of 26% of our revenue in 2020. If we were to lose one of these key
distributors, our revenue and profits would likely decline, 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
14
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.
Consolidation of our distributors 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.
If we are unable to retain key employees, our business operations could be adversely affected.
The loss of any of key employees could have an adverse effect on us. We may not be able to find qualified replacements for these
individuals and the integration of potential replacements may be disruptive to our business. More broadly, a key determinant of
our success is our ability to attract, develop, and retain talented associates. While this is one of our strategic priorities, we may
not be able to succeed in this regard.
We 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.
We are subject to laws and regulations worldwide, changes to which could increase our costs and individually or in the
aggregate adversely affect our business.
We are subject to laws and regulations affecting our domestic and international operations in a number of areas. These U.S. and
foreign laws and regulations affect our activities including, but not limited to, in areas of labor, advertising, real estate, billing, e-
commerce, promotions, quality of services, property ownership and infringement, tax, import and export requirements, anti-
corruption, foreign exchange controls and cash repatriation restrictions, data privacy requirements, anti-competition,
environmental, health and safety.
Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent
from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business. Any such costs, which may rise in
the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate
make our products and services less attractive to our customers, delay the introduction of new products in one or more regions,
or cause us to change or limit our business practices. We have implemented policies and procedures designed to ensure compliance
with applicable laws and regulations, but there can be no assurance that our employees, contractors, or agents will not violate
such laws and regulations or our policies and procedures.
Specifically with respect to data privacy, new data protection regulations have been adopted or are being considered for most of
the developed world. Most notable are the European Commission’s adoption of the General Data Protection Regulation (GDPR),
which became effective in May 2018 and the California Consumer Privacy Act (CCPA), which became law on January 1, 2020.
The GDPR and CCPA include operational requirements for companies that receive or process personal data of residents of their
respective jurisdictions and include significant penalties for non-compliance. In addition, some countries are considering or have
passed legislation implementing data protection requirements or requiring local storage and processing of data or similar
requirements that could increase the cost and complexity of delivering our services.
If our goodwill or other intangible assets become impaired, we would be required to recognize charges that would reduce our
income.
Under accounting principles generally accepted in the U.S., goodwill and certain other intangible assets are not amortized but
must be reviewed for possible impairment annually or more often in certain circumstances if events indicate that the asset values
may not be recoverable. We have incurred significant charges for the impairment of goodwill and other intangible assets in the
past, and we may be required to do so again in future periods if the underlying value of our business declines. Such a charge
would reduce our income without any change to our underlying cash flows.
15
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 2021 through 2035.
The table below summarizes the geographic locations of our manufacturing and other operating facilities utilized by our segments
as of December 31, 2020.
Enterprise
Solutions
Industrial
Solutions
Both
Segments
Total
Brazil
Canada
China
Czech Republic
Denmark
Germany
Hungary
India
Italy
Mexico
Netherlands
St. Kitts
United Kingdom
United States
Total
—
—
2
—
1
1
—
1
—
—
—
1
1
4
11
1
1
—
1
—
1
—
—
—
—
—
—
—
3
7
—
—
1
—
—
—
1
1
1
3
1
—
—
1
9
1
1
3
1
1
2
1
2
1
3
1
1
1
8
27
In addition to the manufacturing and other operating facilities summarized above, our business operations also utilize
approximately 6 warehouses worldwide. As of December 31, 2020, we owned or leased a total of approximately 5 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
As disclosed in our Current Report on Form 8-K filed with the SEC on December 3, 2018, we fully cooperated with an SEC
investigation related to the material weakness in internal controls over financial reporting as of December 31, 2017 disclosed in
our 2017 Form 10-K. The investigation is closed as we reached a settlement with the SEC during the year ended December 31,
2020, which did not have a material effect on our results of operations.
On November 24, 2020, the Company announced a data incident involving unauthorized access and copying of some current and
former employee data, as well as limited company information regarding some business partners. In January 2021, Anand Edke
filed a putative class action lawsuit against the Company in the Circuit Court of Cook County, Illinois, Case No. 2021 CH 47. In
February 2021, Kia Mackey filed a separate putative class action lawsuit against the Company in the U.S District Court for the
Eastern District of Missouri, Case No. 4:21-CV-00149. The plaintiffs have each asked for injunctive relief, unspecified damages,
and unspecified legal fees. It is premature to estimate the potential exposure to the Company associated with the litigation. The
Company intends to vigorously defend the lawsuits.
16
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.
17
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 11, 2021, there were
235 record holders of common stock of Belden Inc.
On November 29, 2018, our Board of Directors authorized a share repurchase program, which allowed us to purchase up to
$300.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance
with applicable securities laws and other restrictions. This program was funded with cash on hand and cash flows from operating
activities. During 2020, we repurchased 1.0 million shares of our common stock under the share repurchase program for an
aggregate cost of $35.0 million at an average price per share of $35.83. Since the inception of this program, we have repurchased
a total of 1.9 million shares of our common stock under the program for an aggregate cost of $85.0 million and an average price
per share of $45.54.
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, 2020, 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, 2015, 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.
18
Total Return To Shareholders
(Includes reinvestment of dividends)
Company Name / Index
Belden Inc.
S&P 500 Index
S&P 1500 Industrials Index
2016
57.3 %
12.0 %
20.4 %
ANNUAL RETURN PERCENTAGE
Years Ended December 31,
2018
2017
2019
3.5 %
21.8 %
21.1 %
(45.7) %
(4.4) %
(13.4) %
32.1 %
31.5 %
29.8 %
INDEXED RETURNS
Years Ended December 31,
2020
(23.4) %
18.4 %
11.7 %
Company Name / Index
Belden Inc.
S&P 500 Index
S&P 1500 Industrials Index
$
Base Period
2015
100.00 $
100.00
100.00
2016
157.30
111.96
120.41
$
2017
162.78
136.40
145.77
$
2018
88.39
130.42
126.27
$
2019
116.81 $
171.49
163.90
2020
89.48
203.04
183.06
Item 6. Selected Financial Data
Not applicable.
19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a global supplier of specialty networking solutions built around two global business platforms – Enterprise Solutions and
Industrial Solutions. Our comprehensive portfolio of signal transmission solutions provides industry leading secure and reliable
transmission of data, sound, and video for mission critical applications. Effective January 1, 2020, we transferred our West Penn
Wire business and multi-conductor product lines from the Enterprise Solutions segment to the Industrial Solutions segment as a
result of a shift in responsibilities among the segments. We have recast the prior period segment information to conform to the
change in the composition of reportable segments.
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 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 for our
shareholders.
We consider adjusted revenue growth on a constant currency basis, adjusted EBITDA margin, free cash flow, and return on
invested capital to be our key operating performance indicators. Our current 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 20-22%;
Achieve free cash flow growth in the range of 13-15%; and
Realize return on invested capital of 13-15%.
Significant Trends and Events in 2020
The following trends and events during 2020 had varying effects on our financial condition, results of operations, and cash flows.
Global Pandemic
On March 11, 2020, the World Health Organization (WHO) declared the outbreak of the novel coronavirus (COVID-19) a
pandemic. We expect the outbreak of COVID-19 will continue to result in significant economic disruption and will continue to
adversely affect our business in the future. As compared to the year ago period, we expect to continue to experience reductions
in customer demand in several of our end-markets. We expect that the social distancing measures, the reduced operational status
of some of our suppliers and reductions in production at certain facilities will continue to have an adverse impact on our
operations, and general business uncertainty will continue to negatively impact demand in several of our end-markets in the near
future.
20
Our foremost focus has been on the health and safety of our employees and customers. In response to the outbreak, we have
modified practices at our manufacturing locations and offices to adhere to guidance from the WHO, the U.S. Centers for Disease
Control and Prevention and other local health and governmental authorities with respect to social distancing, physical separation,
personal protective equipment and sanitization. We are approaching our response to this outbreak with a recognition that we
provide essential and important products and services upon which our customers rely upon daily to support critical functions.
Therefore, most, but not all, of our U.S. and global facilities have remained substantially operational during the outbreak while
implementing enhanced safety protocols designed to protect the well-being of our employees.
The extent of the impact of the COVID-19 outbreak on our operational and financial performance will depend on certain
developments, including the duration and spread of the outbreak, its impact on our customers and suppliers and the range of
governmental and community reactions to the pandemic, which are uncertain and cannot be fully predicted at this time. We will
continue to proactively respond to the situation and may take further actions that alter our business operations as may be required
by governmental authorities, or that we determine are in the best interests of our employees and customers.
Data Security Incident
In November 2020, our information technology network was impacted by a data incident. We took immediate steps to contain
the incident as well as notified law enforcement and cybersecurity experts. This matter did not impact production at our
manufacturing plants nor shipping and quality control. The personal information of current and former employees, as well as
limited company information of some of our business partners was accessed. We timely notified the impacted individuals and
companies in addition to the appropriate governmental data privacy authorities. Impacted individuals were offered credit
monitoring and/or identity protection services, where available, at no charge. We do not believe that the incident will have a
material impact on our business or financial condition. Security, in all forms, remains a critical priority, and we will continue to
take all appropriate measures to further safeguard the integrity of our information technology infrastructure.
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, Mexican peso, Australian dollar, British pound, Indian rupee, and Brazilian
real. Generally, as the U.S. dollar strengthens against these foreign currencies, our revenues and earnings are negatively impacted
as our foreign denominated revenues and earnings are translated into U.S. dollars at a lower rate. Conversely, as the U.S. dollar
weakens against foreign currencies, our revenues and earnings are positively impacted. Because all of our senior subordinated
notes are denominated in euros, interest expense on the notes is affected by exchange rate movements between the U.S. dollar
and the euro.
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.
21
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 share across our segments is significant, ranging
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 generally 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.
Grass Valley Disposal
During the fourth quarter of 2019, we committed to a plan to sell Grass Valley, and at such time, met all of the criteria to classify
the assets and liabilities of this business as held for sale. As a result, the Grass Valley disposal group, which was included in our
Enterprise Solutions segment, has been reported within discontinued operations as of such time, and the comparable prior period
information has been recast accordingly to exclude the Grass Valley disposal group from continuing operations, with the exception
of the Consolidated Cash Flow Statements. The Grass Valley disposal group excludes certain Grass Valley pension plans retained
by Belden. Prior to the divestiture, we wrote down the carrying value of Grass Valley and recognized asset impairments totaling
$113.0 million during 2020. We completed the sale of Grass Valley to Black Dragon Capital on July 2, 2020 and recognized a
loss of $9.9 million, net of $7.5 million income tax expense. The terms of the sale included gross cash consideration of $120.0
million, approximately $56.2 million net of cash delivered with the business. The sale also included deferred consideration
consisting of a $175.0 million seller’s note that is set to mature in 2025, up to $88 million in PIK (payment-in-kind) interest on
the seller’s note, and $178.0 million in potential earnout payments. The seller’s note accrues PIK interest at an annual rate of
8.5%. During the year ended December 31, 2020, the seller’s note accrued interest of $7.8 million, which we reserved for based
on our expected loss allowance methodology. Based upon a third party valuation specialist using certain assumptions in a Monte
Carlo analysis, the estimated fair value of the seller’s note is $34.9 million, which we recorded in Other Long-Lived Assets. As
part of the transaction, we also invested $3.0 million for a 9% equity interest in Grass Valley with the right to put the equity back
to Black Dragon Capital. We exercised our right during the fourth quarter of 2020 and sold our 9% equity interest in Grass Valley
to Black Dragon Capital for $2.7 million. We deconsolidated Grass Valley as of July 2, 2020 and accounted for our equity interest
under the cost method for the period that we owned a 9% interest in Grass Valley. We are performing certain services for Grass
Valley under a transition services agreement. During 2020, the amount of transition services totaled $2.0 million, which we expect
to collect in 2021. As of December 31, 2020, we do not own any interest in Grass Valley. Grass Valley's operating results for
periods after July 2, 2020 are not included in our Consolidated Financial Statements. See Note 5.
Earnout Consideration Payment
During the year ended December 31, 2020 and prior to the Grass Valley disposal, we paid the sellers of Snell Advanced Media
(SAM) the full earnout consideration of $31.4 million in cash in accordance with the purchase agreement. SAM was acquired on
February 8, 2018 and was included in the Grass Valley disposal group. See Notes 1 and 5.
Segment Transfer
Effective January 1, 2020, we transferred our West Penn Wire business and multi-conductor product lines from the Enterprise
Solutions segment to the Industrial Solutions segment as a result of a shift in responsibilities among the segments. We have recast
the prior period segment information to conform to the change in the composition of reportable segments. See Note 6.
Cost Reduction Program
During 2019, we began a cost reduction program to improve performance and enhance margins by streamlining the organizational
structure and investing in technology to drive productivity. We recognized $4.0 million of severance and other restructuring costs
for this program during 2020. These costs were incurred by both the Enterprise Solutions and Industrial Solutions segments. The
cost reduction program is expected to deliver an estimated $60 million reduction in selling, general, and administrative expenses
on an annual basis; approximately $40 million of which was realized in 2020, and the full benefit is expected to be materialized
in 2021. We also expect to incur incremental costs of approximately $8 million for this program in 2021. See Note 15.
22
FutureLink, Opterna, and SPC Integration Program
In 2019, we began a restructuring program to integrate FutureLink, Opterna, and SPC with our existing businesses. The
restructuring and integration activities were focused on achieving desired cost savings by consolidating existing and acquired
facilities and other support functions. We recognized $4.9 million of severance and other restructuring costs for this program
during 2020. These costs were incurred by the Enterprise Solutions segment. We expect to incur incremental costs of
approximately $1 million for this program in 2021. See Note 15.
Revolving Credit Agreement
Due to the initial uncertainties arising from the COVID-19 pandemic and out of an abundance of caution, in April 2020 we
borrowed $190.0 million on our Revolver, which we fully repaid by December 31, 2020 as a result of improved and sufficient
liquidity and cash flow. Our Revolving Credit Agreement provides a $400.0 million multi-currency asset-based revolving credit
facility and matures on May 16, 2022. Interest on outstanding borrowings is variable, based upon LIBOR or other similar indices
in foreign jurisdictions, plus a spread that ranges from 1.25%-1.75%, depending upon our leverage position. As of December 31,
2020, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $230.2 million. See Note
16.
Share Repurchase Program
In 2018, our Board of Directors authorized a share repurchase program, which allows us to purchase up to $300.0 million of our
common stock through open market repurchases, negotiated transactions, or other means, in accordance with applicable securities
laws and other restrictions. This program is funded with cash on hand and cash flows from operating activities. During the year
ended December 31, 2020, we repurchased 1.0 million shares of our common stock under the share repurchase program for an
aggregate cost of $35.0 million at an average price per share of $35.83. See Note 24.
23
Results of Operations
Consolidated Income from Continuing Operations before Taxes
Years Ended December 31,
2020
2019
2018
Percentage Change
2020 vs. 2019 2019 vs. 2018
Revenues
Gross profit
Selling, general and administrative expenses
Research and development expenses
Amortization of intangibles
Gain from patent litigation
Operating income
Interest expense, net
Non-operating pension benefit (cost)
Loss on debt extinguishment
Income from continuing operations before
taxes
$ 1,862,716 $ 2,131,278 $ 2,165,702
829,911
411,352
91,552
75,140
62,141
314,008
60,839
(99)
22,990
(In thousands, except percentages)
(12.6) %
(16.4) %
(12.3) %
13.7 %
(13.7) %
n/a
(39.5) %
5.5 %
(138.8) %
n/a
793,505
417,329
94,360
74,609
—
207,207
55,814
1,017
—
663,289
366,188
107,296
64,395
—
125,410
58,888
(395)
—
(1.6)%
(4.4)%
1.5 %
3.1 %
(0.7)%
(100.0)%
(34.0)%
(8.3)%
1,127.3 %
(100.0)%
66,127
152,410
230,080
(56.6) %
(33.8)%
2020 Compared to 2019
Revenues decreased $268.6 million from 2019 to 2020 due to the following factors:
•
•
•
•
Lower sales volume, including the impact of changes in channel inventory, contributed $302.7 million to the
decrease in revenues.
Currency translation had a $1.9 million unfavorable impact on revenues.
Acquisitions increased revenues by $34.3 million.
Copper prices had a $1.7 million favorable impact on revenues.
Gross profit decreased $130.2 million from 2019 to 2020 due to the decreases in revenues discussed above as well as unfavorable
mix; partially offset by the impact of acquisitions.
Selling, general and administrative expenses decreased $51.1 million from 2019 to 2020. Benefits realized from our Cost
Reduction Program coupled with productivity improvement initiatives contributed an estimated $43.1 million decline in selling,
general and administrative expenses. A decrease in severance, restructuring and acquisition integration costs; decreases in
commission costs; and currency translation contributed an estimated $11.6 million; $3.5 million; and $0.5 million decline in
selling, general and administrative expenses, respectively. These decreases were partially offset by a $7.6 million increase from
acquisitions.
Research and development expenses increased $12.9 million from 2019 to 2020 primarily due to increased investments in R&D
projects as we continue our commitment to growth initiatives.
Amortization of intangibles decreased $10.2 million from 2019 to 2020 primarily due to certain intangible assets becoming fully
amortized.
Operating income decreased $81.8 million from 2019 to 2020 primarily as a result of the decline in gross profit discussed above.
Net interest expense increased $3.1 million from 2019 to 2020. The increase is primarily the result of interest accrued on the
Revolver borrowings during 2020 coupled with currency translation. During 2020, we borrowed $190.0 million on our Revolver,
which we fully repaid by December 31, 2020. See Note 16.
Income from continuing operations before taxes decreased $86.3 million from 2019 to 2020 primarily due to the decline in
operating income discussed above.
24
2019 Compared to 2018
Revenues decreased $34.4 million from 2018 to 2019 due to the following factors:
•
•
•
•
Currency translation had a $28.0 million unfavorable impact on revenues.
Lower sales volume, including the impact of changes in channel inventory and weaker industrial markets,
resulted in a $21.6 million decrease in revenues.
Lower copper costs resulted in a $17.2 million decrease in revenues.
Acquisitions increased revenues by $32.4 million.
Gross profit decreased $36.4 million from 2018 to 2019. The decrease in gross profit is primarily attributable to the decrease in
revenues discussed above as well as unfavorable product mix and the impact of lower production volumes. Gross profit for 2019
included $3.4 million of severance, restructuring, and acquisition integration costs; $0.6 million of cost of sales arising from the
adjustment of inventory to fair value related to acquisitions; and $0.5 million for the amortization of software development
intangible assets. Gross profit for 2018 included $18.0 million of severance, restructuring, and acquisition integration costs and
$0.1 million for the amortization of software development intangible assets.
Selling, general and administrative expenses increased $6.0 million from 2018 to 2019 primarily due to an $18.5 million increase
in severance, restructuring, and acquisition integration costs and a $5.4 million increase from acquisitions. These increases were
partially offset by the impact of productivity improvement initiatives, currency translation, decrease in costs related to patent
litigation, and purchase accounting effects of acquisitions, which attributed to a decline in selling, general and administrative
expenses of $9.5 million, $4.1 million, $2.6 million, and $1.7 million, respectively.
Research and development expenses increased $2.8 million from 2018 to 2019 primarily due to investments in research and
development as well as acquisitions, which contributed $3.9 million and $0.3 million, respectively. These increases were partially
offset by currency translation of $1.4 million.
Amortization of intangibles decreased $0.5 million from 2018 to 2019 primarily due to certain intangible assets becoming fully
amortized, partially offset by the amortization expense for intangible assets from the acquisitions of SPC and Opterna. See Note
4.
The $62.1 million gain from patent litigation in 2018 is for judgments received in 2018 from the patent infringement case filed
in 2011 by our wholly-owned subsidiary, PPC, against Corning alleging they willfully infringed upon two patents. After years of
post-trial motions and appeals, the District Court ruled in favor of PPC and required Corning to pay judgments of $62.1 million
in 2018 to PPC. See Note 2.
Operating income decreased $106.8 million from 2018 to 2019 primarily due to the gain from the patent litigation in 2018,
decrease in gross profit discussed above, and changes in operating expenses discussed above.
Net interest expense decreased $5.0 million from 2018 to 2019 as a result of our debt refinancing during 2018. In March 2018,
we issued €350.0 million aggregate principal amount of new senior subordinated notes due 2028 at an interest rate of 3.875%,
and used the net proceeds of this offering and cash on hand to repurchase all of our outstanding €200.0 million 5.5% senior
subordinated notes due 2023 as well as all of our outstanding $200.0 million 5.25% senior subordinated notes due 2024.
The loss on debt extinguishment recognized in 2018 represents the premium paid to the bond holders to retire the 2023 and 2024
notes as well as the unamortized debt issuance costs that were written-off.
Income from continuing operations before taxes decreased $77.7 million from 2018 to 2019 primarily due to the decrease in
operating income, partially offset by the decrease in interest expense and loss on debt extinguishment discussed above.
Income Taxes
2020
2019
2018
(In thousands, except percentages)
Percentage Change
2020 vs. 2019 2019 vs. 2018
Income from continuing operations before taxes $
Income tax expense
Effective tax rate
66,127 $ 152,410 $ 230,080
(62,936)
(42,519)
(11,724)
27.4 %
27.9 %
17.7 %
(56.6)%
(72.4)%
(33.8)%
(32.4)%
25
2020
We recognized income tax expense of $11.7 million in 2020, representing an effective tax rate of 17.7%. The effective tax rate
was impacted by foreign tax rate differences, which resulted in an income tax benefit of $25.3 million in 2020. Additionally, in
2020, our income tax expense was reduced by $4.0 million due to a tax holiday for our operations in St. Kitts. The tax holiday in
St. Kitts is scheduled to expire in 2022. Partially offsetting these benefits, we recognized income tax expense of $22.4 million in
2020 from domestic permanent differences and tax credits primarily associated with our foreign income inclusions.
In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law in the United States.
The Company generated a loss in the U.S. which will be carried back to prior years, as permitted by the CARES Act. The net
impact to the tax provision as a result of the net operating loss carry back was a benefit of $1.2 million, primarily associated with
the re-rate of the net operating loss carry back period.
If we were to repatriate 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. However, it is our intent to permanently reinvest the earnings of our
non-U.S. subsidiaries in those operations and for continued non-U.S. growth opportunities. As a result, as of December 31, 2020,
we have not made a provision for U.S. or additional foreign withholding taxes. See Note 18
2019
We recognized income tax expense of $42.5 million in 2019, representing an effective tax rate of 27.9%. The effective tax rate
was primarily impacted by a change in valuation allowance on certain deferred tax assets and foreign tax rate differences. During
the fourth quarter of 2019, the United States Treasury issued final and proposed regulations with respect to certain aspects related
to the Tax Cuts and Jobs Act of 2017 (the “Act”). Additional guidance provided in these regulations resulted in a tax adjustment
in the fourth quarter of 2019. Our income tax expense was also impacted by foreign tax rate differences, which reduced our
income tax expense by approximately $13.1 million in 2019.
As of December 31, 2019, we maintained a valuation allowance on our deferred tax assets of $50.4 million. Of this amount,
approximately $43.0 million relates to deferred tax assets for certain U.S foreign tax credits and U.S. state net operating losses
and tax credits. The $33.9 million valuation allowance on the foreign tax credits is a direct result of the regulations issued by the
United States Treasury in the fourth quarter of 2019, the Act and the impact of classifying a business as discontinued operations.
The remaining $9.1 million valuation allowance primarily relates to state net operating losses and tax credits. While we have
positive evidence in the form of projected sources of income, we determined that these state carryforward assets were not
realizable as of December 31, 2019 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.
2018
We recognized income tax expense of $62.9 million in 2018, representing an effective tax rate of 27.4%. The effective tax rate
was impacted by the Act, Staff Accounting Bulletin No. 118 (“SAB 118”), and foreign tax rate differences. On December 22,
2018, the measurement period ended for SAB 118, which was issued to address the application of U.S. GAAP in situations where
a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail
to complete the accounting for certain income tax effects of the Act resulting in additional SAB 118 tax expense of $10.0 million
for the year ended December 31, 2018.
The total tax expense for the year ended December 31, 2018 included $8.0 million of tax expense associated with an increase in
the valuation allowance against foreign tax credit carryovers that we no longer expected to be able to realize based upon the new
tax law, a $2.4 million benefit from foreign tax rate differences, a $1.3 million tax expense adjustment to the transition tax on the
deemed repatriation of cumulative foreign earnings, $1.1 million of tax expense resulting from a valuation allowance established
on the deferred tax assets associated with stock options of covered employees, and a $0.4 million income tax benefit associated
with a remeasurement adjustment of certain deferred tax assets and liabilities.
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.
26
Consolidated Adjusted EBITDA
GAAP and adjusted revenues
GAAP net income (loss)
Loss from discontinued operations, net of tax
Loss on disposal of discontinued operations, net of tax
Amortization of intangible assets
Amortization of software development intangible assets
Depreciation expense
Interest expense, net
Severance, restructuring, and acquisition integration costs (1)
Income tax expense
Non-operating pension settlement loss
Purchase accounting effects related to acquisitions (2)
Loss on debt extinguishment
Costs related to patent litigation
Loss on sale of assets (3)
Gain from patent litigation
Adjusted EBITDA
GAAP net income (loss) margin
Adjusted EBITDA margin
2020
Years Ended December 31,
2019
(In thousands, except percentages)
$ 1,862,716 $ 2,131,278 $ 2,165,702
2018
$
$ (376,776)
486,667
(55,058)
99,513
9,948
64,395
1,821
42,470
58,888
12,258
11,724
3,153
125
—
—
—
—
$ 160,711
6,433
—
75,140
79
38,309
60,839
22,625
62,936
1,342
1,690
22,990
2,634
94
(62,141)
—
74,609
525
40,409
55,814
26,544
42,519
—
592
—
—
—
—
$ 249,237 $ 350,903 $ 393,681
(3.0) %
13.4 %
(17.7)%
16.5 %
7.4 %
18.2 %
(1)
(2)
(3)
See Note 15, Severance, Restructuring, and Acquisition Integration Activities, for details.
In 2020 and 2019, we collectively recognized $0.1 million and $0.6 million, respectively, of cost of sales related to purchase
accounting adjustments of acquired inventory to fair value for both our SPC and Opterna acquisitions. In 2018, we made a $1.7
million adjustment to increase the earn-out liability associated with an acquisition.
In 2018, we recognized a $0.1 million loss on sale of assets for the sale of our MCS business and Hirschmann JV. See Note 2.
Use of Non-GAAP Financial Information
Adjusted Revenues, Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow are non-GAAP financial measures. In
addition to reporting financial results in accordance with accounting principles generally accepted in the United States, we provide
non-GAAP operating results adjusted for certain items, including: asset impairments; accelerated depreciation expense due to
plant consolidation activities; purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory
and deferred revenue to fair value, and transaction costs; severance, restructuring, and acquisition integration costs; gains (losses)
recognized on the disposal of businesses and tangible assets; amortization of intangible assets; gains (losses) on debt
extinguishment; certain revenues and gains (losses) from patent settlements; discontinued operations; and other costs. We adjust
for the items listed above in all periods presented, unless the impact is clearly immaterial to our financial statements. When we
calculate the tax effect of the adjustments, we include all current and deferred income tax expense commensurate with the adjusted
measure of pre-tax profitability.
We utilize the adjusted results to review our ongoing operations without the effect of these adjustments and for comparison to
budgeted operating results. We believe the adjusted results are useful to investors because they help them compare our results to
previous periods and provide important insights into underlying trends in the business and how management oversees our business
operations on a day-to-day basis. As an example, we adjust for the purchase accounting effect of recording deferred revenue at
fair value in order to reflect the revenues that would have otherwise been recorded by acquired businesses had they remained as
independent entities. We believe this presentation is useful in evaluating the underlying performance of acquired companies.
Similarly, we adjust for other acquisition-related expenses, such as amortization of intangibles and other impacts of fair value
adjustments because they generally are not related to the acquired businesses' core business performance. As an additional
27
example, we exclude the costs of restructuring programs, which can occur from time to time for our current businesses and/or
recently acquired businesses. We exclude the costs in calculating adjusted results to allow us and investors to evaluate the
performance of the business based upon its expected ongoing operating structure. We believe the adjusted measures, accompanied
by the disclosure of the costs of these programs, provides valuable insight. Adjusted results should be considered only in
conjunction with results reported according to accounting principles generally accepted in the United States.
Adjusted Revenues
Adjusted EBITDA
2020
$ 1,862,716
249,237
2019
2018
(In thousands, except percentages)
$ 2,165,702
393,681
$ 2,131,278
350,903
(12.6) %
(29.0) %
(1.6)%
(10.9)%
Percentage Change
2020 vs. 2019 2019 vs. 2018
as a percent of adjusted revenues
13.4 %
16.5 %
18.2 %
2020 Compared to 2019
Revenues decreased $268.6 million from 2019 to 2020 due to the following factors:
•
•
•
•
Lower sales volume, including the impact of changes in channel inventory, contributed $302.7 million to the
decrease in revenues.
Currency translation had a $1.9 million unfavorable impact on revenues.
Acquisitions increased revenues by $34.3 million.
Copper prices had a $1.7 million favorable impact on revenues.
Adjusted EBITDA decreased $101.7 million in 2020 from 2019 primarily due to the decrease in revenues discussed above,
partially offset by the benefits realized from our SG&A Cost Reduction Program.
2019 Compared to 2018
Revenues decreased $34.4 million from 2018 to 2019 due to the following factors:
•
•
•
•
Currency translation had a $28.0 million unfavorable impact on revenues.
Lower sales volume, including the impact of changes in channel inventory and weaker industrial markets,
resulted in a $21.6 million decrease in revenues.
Lower copper costs resulted in a $17.2 million decrease in revenues.
Acquisitions increased revenues by $32.4 million.
Adjusted EBITDA decreased $42.8 million in 2019 from 2018 primarily due to the decrease in revenues discussed above as well
as unfavorable product mix and the impact of lower production volumes.
Segment Results of Operations
For additional information regarding our segment measures, see Note 6 to the Consolidated Financial Statements.
Enterprise Solutions
Segment Revenues
Segment EBITDA
2020
$ 872,415
99,333
Percentage Change
2020 vs. 2019 2019 vs. 2018
2019
2018
(In thousands, except percentages)
$ 957,501
156,790
$ 946,041
126,925
(7.8) %
(21.7) %
(1.2) %
(19.0) %
as a percent of segment revenues
11.4 %
13.4 %
16.4 %
2020 Compared to 2019
Enterprise revenues decreased $73.6 million in 2020 as compared to 2019. Decreases in volume, including changes in channel
inventory, and unfavorable currency translation contributed $108.1 million and $0.3 million, respectively, to the decline in
revenues; partially offset by acquisitions and higher copper prices which grew revenues by $34.3 million and $0.5 million,
respectively.
28
Enterprise EBITDA decreased $27.6 million in 2020 as compared to 2019 primarily due to the decreases in revenues discussed
above, partially offset by the benefits realized from our SG&A Cost Reduction Program.
2019 Compared to 2018
Enterprise revenues decreased $11.5 million in 2019 as compared to 2018 primarily due to decreases in volume, including changes
in channel inventory; lower copper prices; and unfavorable currency translation, which contributed $28.5 million, $8.4 million,
and $7.0 million, respectively, to the decrease in revenues over the year ago period; partially offset by the impact of acquisitions
which grew revenues $32.4 million.
Enterprise EBITDA decreased $29.9 million in 2019 as compared to 2018 primarily due to the decreases in revenues discussed
above as well as the impact of lower production volumes.
Industrial Solutions
2020
2019
2018
2020 vs. 2019 2019 vs. 2018
Percentage Change
Segment Revenues
Segment EBITDA
$ 990,301
147,626
(In thousands, except percentages)
$ 1,208,201
237,870
$ 1,185,237
226,110
(16.4) %
(34.7) %
(1.9)%
(4.9)%
as a percent of segment revenues
14.9 %
19.1 %
19.7 %
2020 Compared to 2019
Industrial Solutions revenues decreased $194.9 million in 2020 as compared to 2019 primarily due to decreases in volume,
including changes in channel inventory, and unfavorable currency translation, which contributed $194.5 million and $1.6 million,
respectively, to the decrease in revenues; partially offset by increases in copper prices, which grew revenues $1.2 million.
Industrial EBITDA decreased $78.5 million in 2020 as compared to 2019 primarily as a result of the decline in revenues discussed
above and increased investments in R&D projects as we continue our commitment to growth initiatives, partially offset by the
benefits realized from our SG&A Cost Reduction Program.
2019 Compared to 2018
Industrial Solutions revenues decreased $22.9 million in 2019 as compared to 2018 primarily due to unfavorable currency
translation and lower copper prices, which contributed $21.0 million and $8.8 million, respectively, to the decrease in revenues
over the year ago period; partially offset by increases in volume, which grew revenues $6.9 million year-over-year.
Industrial EBITDA decreased $11.8 million in 2019 as compared to 2018 primarily due to the decline in revenues discussed
above and the impact of lower production volumes.
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 2021 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 offerings, and commodities pricing.
29
The following table is derived from our Consolidated Cash Flow Statements and includes the results and cash flow activity of
Grass Valley through the disposal date of July 2, 2020 consistent with the Consolidated Cash Flow Statements:
Net cash provided by (used for):
Operating activities
Investing activities
Financing activities
Effects of currency exchange rate changes on cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Years Ended December 31,
2020
2019
(In thousands)
$
$
173,364 $
(31,643)
(74,911)
9,299
76,109
425,885
501,994 $
276,893
(184,369)
(86,948)
(301)
5,275
420,610
425,885
Net cash provided by operating activities totaled $173.4 million for 2020 compared to $276.9 million for 2019. Operating cash
flows declined $103.5 million compared to the prior year primarily due to the decreases in revenues and income discussed above.
Changes in receivables generated $70.7 million of cash in 2020 compared to $22.9 million in 2019 as days sales outstanding
improved from 51.8 days in the fourth quarter of 2019 to 49.6 days in the fourth quarter of 2020. The improvement in receivables
was offset by changes in inventory, which was a use of cash of $8.5 million in 2020 compared to a source of cash of $44.5 million
in 2019.
Net cash used for investing activities totaled $31.6 million for 2020 compared to $184.4 million for 2019. Investing activities for
2020 included capital expenditures of $90.2 million and proceeds of $54.8 million, $3.2 million, and $0.6 million from the sale
of the Grass Valley disposal group, the sale of tangible property, and a working capital adjustment related to the SPC acquisition,
respectively. Investing activities for 2019 included capital expenditures of $110.0 million and payments, net of cash acquired, for
acquisitions of $74.4 million.
Net cash flows used for financing activities totaled $74.9 million for 2020 compared to $86.9 million for 2019. Financing
activities for 2020 included payments under our share repurchase program of $35.0 million, acquisition earnout consideration
payments of $29.3 million, cash dividend payments of $9.0 million, and net payments related to share based compensation
activities of $1.4 million. Financing activities for 2019 included payments under our share repurchase program of $50.0 million;
cash dividend payments of $34.4 million, net payments related to share based compensation activities of $2.1 million; and interest
payments on our financing leases of $0.4 million.
Our cash and cash equivalents balance was $502.0 million as of December 31, 2020. Of this amount, $214.1 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. See Note 18, Income Taxes in the accompanying notes to
our consolidated financial statements.
Our outstanding debt obligations as of December 31, 2020 consisted of $1.6 billion of senior subordinated notes. As of
December 31, 2020, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $230.2
million. Additional discussion regarding our various borrowing arrangements is included in Note 16 to the Consolidated Financial
Statements.
30
Contractual obligations outstanding at December 31, 2020, have the following scheduled maturities:
Total
Less than
1 Year
1-3
Years
(In thousands)
— $
— $
4-5
Years
More than
5 Years
367,110 $ 1,223,700
Long-term debt payment obligations (1)(2) $ 1,590,810 $
Interest payments on long-term debt
obligations
Operating lease obligations (3)
Purchase obligations (4)
Other commitments (5)
Pension and other postemployment
obligations
Total
349,309
75,958
16,007
8,574
$ 2,120,623 $
79,965
55,831
19,557
16,007
1,675
111,663
29,204
—
5,594
109,024
18,296
—
1,305
72,791
8,901
—
—
12,902
105,972 $
22,479
168,940 $
26,745
17,839
513,574 $ 1,332,137
(1)
(2)
(3)
(4)
(5)
As described in Note 16 to the Consolidated Financial Statements.
Amounts do not include accrued and unpaid interest. Accrued and unpaid interest related to long-term debt obligations is reflected
on the line entitled, "Interest payments on long-term debt obligations" in the table.
As described in Note 12 to the Consolidated Financial Statements.
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 the transaction.
Does not include accounts payable reflected in the financial statements. Includes obligations for uncertain tax positions (see
Notes 18 to the Consolidated Financial Statements).
Our commercial commitments expire or mature as follows:
Standby financial letters of credit
Bank guarantees
Surety bonds
Total
Total
Less than
1 Year
1-3
Years
(In thousands)
$
$
8,486 $
4,071
3,311
15,868 $
7,853 $
2,738
3,311
13,902 $
633 $
1,333
—
1,966 $
3-5
Years
More than
5 Years
— $
—
—
— $
—
—
—
—
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.
31
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 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 consistent with the principles as outlined in the following five step model: (1) identify the contract with
the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the
transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) each performance
obligation is satisfied. See Note 3.
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. 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 adjust other current assets 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, 2020 would have affected net income by approximately $2 million in 2020.
At times, we enter into arrangements that involve the delivery of multiple promised goods or services. For these arrangements,
when the promised goods or services can be separated, the revenue is allocated to each distinct good or service based on that
performance obligation’s relative standalone selling price and recognized based upon transfer of control for each performance
obligation. Generally, we determine standalone selling price using the adjusted market assessment approach. For software licenses
with highly variable standalone selling prices sold with either support or professional services, we generally determine the
standalone selling price of the software license using the residual approach.
Revenue allocated to support services under our support contracts is typically recognized ratably over the term of the service.
Revenue allocated to distinct professional services is recognized when (or as) the performance obligation is satisfied depending
on the terms of the arrangement. When professional services are not distinct from goods, the professional services and goods are
combined into one performance obligation, and revenue allocated to that performance obligation is recognized when (or as) the
performance obligation is satisfied.
32
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.
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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes
(“ASU 2019-12”) which removes certain exceptions for investments, intraperiod allocations and interim tax calculations, and
adds guidance to reduce the complexity in accounting for income taxes. ASU 2019-12 is effective for annual periods beginning
after December 15, 2020, with early adoption permitted. The various amendments in ASU 2019-12 are applied on a retrospective
basis, modified retrospective basis and prospective basis, depending upon the amendment. The Company did not early adopt this
pronouncement and is in the process of evaluating the impact of this amendment on our consolidated financial statements;
however, it is not anticipated to be material.
See Note 18, Income Taxes, to the consolidated financial statements for further information regarding income taxes.
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 (Enterprise Solutions and Industrial
Solutions) represents an operating segment. Within those operating segments, we have identified reporting units based on whether
there is discrete financial information prepared that is regularly reviewed by segment management. As a result of this evaluation,
we have identified from our continuing operations, three reporting units within Enterprise Solutions and seven reporting units
within Industrial Solutions 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 2020, we did not perform a
qualitative assessment over any of our reporting units.
33
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 record an impairment charge based on that difference. In
addition to the income approach, we calculate the fair value of our reporting units under a market approach. The market approach
measures the fair value of a reporting unit through analysis of financial multiples of comparable businesses. Consideration is
given to the financial conditions and operating performance of the reporting unit being valued relative to those publicly-traded
companies operating in the same or similar lines of business.
For our annual impairment test in 2020, we performed a quantitative assessment for all ten of our reporting units included in
continuing operations, none of which proved to be impaired during 2020. Based on our annual goodwill impairment test, the
excess of the fair values over the carrying values of our ten reporting units tested under a quantitative income approach ranged
from 4% - 345%. 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 12.2%, the 2021 to
2030 compounded annual revenue growth rates ranged from 2.5% to 5.8%, and the revenue growth rates beyond 2030 ranged
from 2.0% to 3.0%. By their nature, these assumptions involve risks and uncertainties. Furthermore, uncertainties associated with
current market conditions increase the inherent risk associated with using an income approach to estimate fair values. While we
have adjusted our key assumptions to reflect the current economic conditions, we have also assumed that economic conditions
will improve. If current conditions persist and actual results are different from our estimates or assumptions, we may have to
recognize an impairment charge that could be material.
We 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 2020. Rather, we performed a quantitative assessment for
each of our indefinite-lived trademarks in 2020. 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 2020. Significant assumptions to determine fair value included sales growth, royalty
rates, and discount rates.
As noted above, we also test our goodwill and other indefinite-lived intangible assets not subject to amortization for impairment
when indicators of impairment exist. Due to its overall financial performance and discontinued operations classification, we
performed impairment tests on the Grass Valley disposal group which resulted in total asset impairments of $113.0 million in
2020. We completed the sale of Grass Valley to Black Dragon Capital on July 2, 2020. The operating results of Grass Valley are
not included in our Consolidated Financial Statements after the July 2, 2020 disposal date. As of December 31, 2020, we do not
own any interest in Grass Valley. See Note 5.
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 18 to the
Consolidated Financial Statements. Actual results that differ from our assumptions are accumulated and, if in excess of the lesser
of 10% of the projected benefit obligation or the fair market value of plan assets, amortized over the estimated future working
life of the plan participants.
As a sensitivity measure, the effect of a 50 basis point decline in the assumed discount rate would have resulted in an increase in
the 2020 net periodic benefit cost and projected benefit obligations as of December 31, 2020 of approximately $0.7 million and
$41.4 million, respectively. A 50 basis point decline in the expected return on plan assets would have resulted in an increase in
the 2020 net periodic benefit cost of approximately $1.7 million.
34
Conversely, the effect of a 50 basis point increase in the assumed discount rate would have resulted in an increase in the 2020 net
periodic benefit cost of approximately $0.1 million and a decrease in the projected benefit obligation of approximately $36.6
million as of December 31, 2020. A 50 basis point increase in the expected return on plan assets would have resulted in a decrease
in the 2020 net periodic benefit cost of approximately $1.7 million.
Business Combination Accounting
We allocate the consideration of an acquired business to its identifiable assets and liabilities based on estimated fair values. The
excess of the consideration 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 acquisition accounting, as necessary, typically up to one year after the acquisition closing date as we obtain more
information regarding asset valuations and liabilities assumed.
Our acquisition accounting methodology contains uncertainties because it requires management to make assumptions and to
apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and
liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques,
including discounted cash flows and market multiple analyses. Unanticipated events or circumstances may occur which could
affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies.
If actual results are materially different than the assumptions we used to determine fair value of the assets and liabilities acquired
through a business combination, it is possible that adjustments to the carrying values of such assets and liabilities will have an
impact on our net earnings.
See Note 4 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. However, we designated euro debt issued in 2018, 2017 and 2016 by
Belden Inc., a USD functional currency entity, as a net investment hedge of certain international subsidiaries. See Note 16 for
further discussion.
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 2020, we recorded approximately $7.9 million of net foreign currency transaction gains. In 2019, we recorded approximately
$1.5 million of net foreign currency transaction losses.
35
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, 2020.
Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S. dollar and the euro,
Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso, Australian dollar, British pound, Indian rupee, and Brazilian
real.
Commodity Price Risk
Certain raw materials used by us are subject to price volatility caused by supply conditions, political and economic variables, and
other unpredictable factors. The primary purpose of our commodity price management activities is to manage the volatility
associated with purchases of commodities in the normal course of business. We do not speculate on commodity prices.
We are exposed to price risk related to our purchase of copper used in our products, although we are generally able to raise selling
prices to customers to cover the increase in copper costs. Our copper price management strategy involves the use of natural
techniques, where possible, such as purchasing copper for future delivery at fixed prices. We do not generally use commodity
price derivatives and did not have any outstanding at December 31, 2020 or 2019.
The following table presents unconditional commodity purchase obligations outstanding as of December 31, 2020. The
unconditional purchase obligations will settle during 2021.
Unconditional copper purchase obligations:
Commitment volume in pounds
Weighted average price per pound
Commitment amounts
Purchase
Amount
Fair
Value
(In thousands, except average price)
1,910
3.16
6,036 $
$
$
6,711
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, 2020 or 2019.
36
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, 2020.
€350.0 million fixed-rate senior subordinated notes due 2028
Average interest rate
€450.0 million fixed-rate senior subordinated notes due 2027
Average interest rate
€200.0 million fixed-rate senior subordinated notes due 2026
Average interest rate
€300.0 million fixed-rate senior subordinated notes due 2025
Average interest rate
Total
$
$
$
$
Concentrations of Credit Risk
Principal Amount by Expected Maturity
Total
Thereafter
2021
Fair
Value
(In thousands, except interest rates)
— $
428,295 $ 428,295 $ 446,720
3.875 %
— $
550,665 $ 550,665 $ 564,426
3.375 %
— $
244,740 $ 244,740 $ 252,672
— $
4.125 %
367,110 $
2.875 %
367,110 $ 369,926
$ 1,590,810 $ 1,633,744
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, 2020, we had $17.5
million in accounts receivable outstanding from WESCO. This represented approximately 6% of our total accounts receivable
outstanding at December 31, 2020. WESCO generally pays all outstanding receivables within thirty to sixty days of invoice
receipt.
37
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Belden Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Belden Inc. (the Company) as of December 31, 2020 and
2019, 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, 2020, and the related notes and the financial statement schedule listed in the
Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2020, 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 16, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
38
Description of
the Matter
Valuation of Goodwill for Certain Reporting Units
At December 31, 2020, the Company had goodwill on its balance sheet aggregating $1.3 billion.
As more fully described in Notes 2 and 12 to the Company’s consolidated financial statements,
goodwill is tested for impairment at least annually at the reporting unit level. The Company’s
goodwill is initially assigned to reporting units as of the respective acquisition dates. The
Company performed a quantitative assessment for all of its reporting units and determined that
the fair values of these reporting units were in excess of the carrying values. Therefore, the
Company did not record any goodwill impairment for any of its reporting units.
Auditing the Company’s annual goodwill impairment test for certain reporting units under the
quantitative assessment was complex due to the judgments and estimation required in
determining the fair values of the reporting units. In particular, the fair value estimates are
sensitive to significant assumptions such as discount rates, revenue growth rates, projected
operating margins, and terminal growth rates, which are sensitive to and affected by expectations
about future market or economic conditions and company-specific qualitative factors.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s preparation and review of the goodwill impairment tests, significant
assumptions discussed above, as used in each of the models, and the completeness and accuracy
of the data used in the models.
Description of
the Matter
Our audit procedures included, among others, involving our specialists to assist us in assessing
methodologies, and testing the significant assumptions discussed above and the underlying data
used by the Company in its analyses, and reviewing the methodology and market support used
to determine the discount rate. We compared the significant assumptions used by the Company
to current industry and future economic trends, changes to the Company’s business model,
customer base or product mix and other relevant factors. We assessed the historical accuracy of
the Company’s estimates and performed sensitivity analyses of significant assumptions to
evaluate the changes in the fair values of the reporting units that would result from changes in
the assumptions. We tested the Company’s reconciliation of the aggregate fair value of the
reporting units to the market capitalization of the Company. We also evaluated whether any
changes in the composition of the reporting units reflected significant changes in the
organizational structure or segments.
Revenue recognition - allocating consideration to performance obligations and estimating
variable consideration
As described in Notes 2 and 3 to the consolidated financial statements, the Company has
contractual arrangements that include software, support, and service revenues. The Company
estimated the selling prices of those contractual arrangements to determine the allocation of
consideration to each of the performance obligations. The objective was to determine the price
at which the Company would transact a sale if the product, support or service was sold on a
standalone basis. Generally, the Company determines standalone selling price using the adjusted
market assessment approach. For software licenses with highly variable standalone selling prices
sold with either support or professional services, the Company generally determines the
standalone selling price of the software license using the residual approach. The Company
estimated the standalone selling prices of each of the performance obligations and projected cash
flows over the term of each contractual arrangement to determine the amount of total
consideration allocated to each of the performance obligations. The Company also enters into
sales contracts that provide certain distributors with price concessions, product return rights,
refunds, and stock rotations, which all result in variable consideration. At the time of sale, the
Company establishes an estimated reserve for the variable consideration and recognizes it by
reducing revenues. Estimates are based on a percentage of revenues and the average time period
between the original sale and the issuance of the adjustments. As of December 31, 2020, the
Company recorded $25.5 million in unprocessed changes that were recognized as a reduction of
revenues and accounts receivable and $13.0 million in unprocessed changes recognized as
accrued liabilities.
39
How We
Addressed the
Matter in Our
Audit
Auditing the Company’s allocation of consideration expected to be received under its contractual
arrangements was complex and involved a high degree of subjective auditor judgment because
of the management judgment required to develop the estimates of standalone selling prices for
the highly variable pricing of software licenses. Auditing the Company's measurement of variable
consideration under the distributor contracts involved especially challenging judgment because
the calculation involves subjective management assumptions, including historical adjustments as
a percentage of revenues and the estimated period of time between the original sale and the
issuance of the adjustment, all used in the estimates of unprocessed changes and pricing
concessions. The estimates developed by the Company are also dependent on anticipated sales
demand, trends in product pricing, and historical and anticipated adjustment patterns.
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company's processes to determine the estimated standalone selling price of
each of the performance obligations, the allocation of total consideration to be received over the
contractual term to all performance obligations based on their relative standalone selling price
and to calculate the variable consideration, including the process to determine and evaluate the
underlying assumptions about estimates of expected unprocessed changes and pricing
concessions.
We performed audit procedures related to the estimated standalone selling prices and allocation
to the performance obligations over the term of the contractual arrangement, including the
following, among others. To test the calculation of the amount of consideration allocated to each
performance obligation, we evaluated the accuracy and completeness of the underlying data used
in the Company’s calculation of the ranges of each standalone selling price and recalculated the
established range for the standalone selling price used. We analyzed transaction level detail, such
as invoices and price lists, to test that, if necessary, the transaction price was reallocated to bring
the amount allocated to the performance obligation within the established range. We evaluated
the appropriateness of the methodology used to determine the standalone selling price by
comparing such prices to historical analysis and practices observed in the industry. In addition,
we performed detailed testing of the underlying transactions in the calculation by agreeing the
amounts recognized to source documents and performed an analysis to recalculate the allocation
of revenue between performance obligations as part of our overall testing of revenue transactions.
Our audit procedures related to the Company’s estimates of variable consideration included,
among others, evaluating the significant assumptions and the accuracy and completeness of the
underlying data used in the Company's calculation. This included testing the Company's estimate
of historical adjustments as a percentage of revenues and the average time period between the
original sale and the issuance of the adjustment memo. In addition, we inspected the results of
the Company's retrospective review of adjustments reserved compared to actual adjustments
issued, evaluated the estimates made based on historical experience and performed sensitivity
analyses to evaluate the changes in variable consideration that would result from changes in the
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1993.
St. Louis, Missouri
February 16, 2021
40
Belden Inc.
Consolidated Balance Sheets
December 31,
2020
2019
ASSETS
(In thousands, except par value)
Current assets:
Cash and cash equivalents
Receivables, net
Inventories, net
Other current assets
Current assets of discontinued operations
Total current assets
Property, plant and equipment, less accumulated depreciation
Operating lease right-of-use assets
Goodwill
Intangible assets, less accumulated amortization
Deferred income taxes
Other long-lived assets
$
501,994 $
296,817
247,298
52,289
—
1,098,398
368,620
54,787
1,251,938
287,071
29,536
49,384
407,480
334,634
231,333
29,172
375,135
1,377,754
345,918
62,251
1,243,669
339,505
25,216
12,446
$ 3,139,734 $ 3,406,759
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued liabilities
Current liabilities of discontinued operations
Total current liabilities
Long-term debt
Postretirement benefits
Deferred income taxes
Long-term operating lease liabilities
Other long-term liabilities
Stockholders’ equity:
Common stock, par value $0.01 per share— 200,000 shares authorized; 50,335
shares issued; 44,643 and 45,458 shares outstanding at 2020 and 2019, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost— 5,692 and 4,877 shares at 2020 and 2019, respectively
Total Belden stockholders’ equity
Noncontrolling interest
Total stockholders’ equity
$
244,120 $
276,641
—
520,761
1,573,726
160,400
38,400
46,398
42,998
268,466
283,799
170,279
722,544
1,439,484
136,227
48,725
55,652
38,308
503
823,605
450,876
(191,851)
(332,552)
750,581
6,470
757,051
503
811,955
518,004
(63,418)
(307,197)
959,847
5,972
965,819
$ 3,139,734 $ 3,406,759
The accompanying notes are an integral part of these Consolidated Financial Statements.
41
Belden Inc.
Consolidated Statements of Operations
$
Revenues
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development expenses
Amortization of intangibles
Gain from patent litigation
Operating income
Interest expense, net
Non-operating pension benefit (cost)
Loss on debt extinguishment
Income from continuing operations before taxes
Income tax expense
Income from continuing operations
Loss from discontinued operations, net of tax
Loss from disposal of discontinued operations, net of tax
Net income (loss)
Less: Net income (loss) attributable to noncontrolling interest
Net income (loss) attributable to Belden
Less: Preferred stock dividends
Net income (loss) attributable to Belden common stockholders
$
Weighted average number of common shares and equivalents:
Years Ended December 31,
2020
2018
2019
(In thousands, except per share amounts)
1,862,716 $
(1,199,427)
663,289
(366,188)
(107,296)
(64,395)
—
125,410
(58,888)
(395)
—
66,127
(11,724)
54,403
(99,513)
(9,948)
(55,058)
104
(55,162)
—
(55,162) $
2,131,278 $
(1,337,773)
793,505
(417,329)
(94,360)
(74,609)
—
207,207
(55,814)
1,017
—
152,410
(42,519)
109,891
(486,667)
—
(376,776)
239
(377,015)
18,437
(395,452) $
2,165,702
(1,335,791)
829,911
(411,352)
(91,552)
(75,140)
62,141
314,008
(60,839)
(99)
(22,990)
230,080
(62,936)
167,144
(6,433)
—
160,711
(183)
160,894
34,931
125,963
Basic
Diluted
44,778
44,937
42,203
42,416
40,675
40,956
Basic income (loss) per share attributable to Belden common
stockholders:
Continuing operations attributable to Belden common stockholders
Discontinued operations attributable to Belden common stockholders
Disposal of discontinued operations attributable to Belden common
stockholders
Net income (loss) attributable to Belden common stockholders
Diluted income (loss) per share attributable to Belden common
stockholders:
Continuing operations attributable to Belden common stockholders
Discontinued operations attributable to Belden common stockholders
Disposal of discontinued operations attributable to Belden common
stockholders
Net income (loss) attributable to Belden common stockholders
$
$
$
$
1.21 $
(2.22)
(0.22)
(1.23) $
1.21 $
(2.22)
(0.22)
(1.23) $
2.16 $
(11.53)
—
(9.37) $
2.15 $
(11.53)
—
(9.37) $
3.25
(0.16)
—
3.10
3.23
(0.16)
—
3.08
The accompanying notes are an integral part of these Consolidated Financial Statements.
42
Belden Inc.
Consolidated Statements of Comprehensive Income
2020
Years Ended December 31,
2019
(In thousands)
2018
$
(55,058) $
(376,776) $
160,711
(112,562)
24,121
27,802
(15,477)
(128,039)
(183,097)
(12,168)
11,953
(364,823)
(4,690)
23,112
183,823
(190)
184,013
Net income (loss)
Foreign currency translation, net of tax of $1.0 million, $1.0 million, and
$1.7 million, respectively
Adjustments to pension and postretirement liability, net of tax of $1.7
million, $1.1 million, and $1.0 million, respectively
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
Less: Comprehensive income (loss) attributable to noncontrolling
interest
Comprehensive income (loss) attributable to Belden
498
(183,595) $
703
(365,526) $
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
43
Belden Inc.
Consolidated Cash Flow Statements
2020
Years Ended December 31,
2019
(In thousands)
2018
$
(55,058) $
(376,776) $
160,711
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Asset impairment of discontinued operations
Depreciation and amortization
Share-based compensation
Loss on disposal of business
Loss on debt extinguishment
Deferred income tax expense (benefit)
Changes in operating assets and liabilities, net of the effects of exchange
rate changes, acquired businesses, and disposals:
Receivables
Inventories
Accounts payable
Accrued liabilities
Income taxes
Other assets
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Cash from (used for) business acquisitions, net of cash acquired
Proceeds from disposal of tangible assets
Proceeds from disposal of business, net of cash sold
Net cash used for investing activities
Cash flows from financing activities:
Payments under borrowing arrangements
Payments under share repurchase program
Payment of earnout consideration
Cash dividends paid
Withholding tax payments for share based-payment awards
Other
Debt issuance costs paid
Redemption of stockholders' rights agreement
Borrowings under credit arrangements
Net cash used for financing activities
Effect of foreign currency exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
113,007
108,687
20,030
946
—
(19,410)
70,707
(8,507)
(43,567)
7,374
(22,823)
2,018
(40)
173,364
(90,215)
590
3,161
54,821
(31,643)
521,441
139,259
17,751
—
—
(23,540)
22,926
44,477
(41,527)
(17,654)
5,497
(16,118)
1,157
276,893
(110,002)
(74,392)
25
—
(184,369)
(190,000)
(35,000)
(29,300)
(9,029)
(1,388)
(194)
—
—
190,000
(74,911)
9,299
76,109
425,885
501,994 $
—
(50,000)
—
(34,439)
(2,149)
(360)
—
—
—
(86,948)
(301)
5,275
420,610
425,885 $
—
148,632
18,497
—
22,990
11,300
(21,748)
(14,779)
(29,401)
17,238
(4,390)
(18,748)
(1,082)
289,220
(97,847)
(84,580)
1,580
40,171
(140,676)
(484,757)
(175,000)
—
(43,169)
(2,094)
—
(7,609)
(411)
431,270
(281,770)
(7,272)
(140,498)
561,108
420,610
For all periods presented, the Consolidated Cash Flow Statement includes the results of the Grass Valley disposal group up to
the disposal date, July 2, 2020.
The accompanying notes are an integral part of these Consolidated Financial Statements.
44
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T
Notes to Consolidated Financial Statements
Note 1: Basis of Presentation
Business Description
Belden Inc. (the Company, us, we, or our) is a global supplier of specialty networking solutions built around two global business
platforms – Enterprise Solutions and Industrial Solutions. Our comprehensive portfolio of solutions enables customers to transmit
and secure data, sound, and video for mission critical applications across complex enterprise and industrial environments.
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 2019 and 2018 Consolidated Financial Statements, primarily as a result of the West
Penn Wire business and multi-conductor product line transfer from the Enterprise Solutions segment to the Industrial Solutions
segment in 2020. See Note 6.
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.
46
During 2020, 2019, and 2018 we utilized Level 1 inputs to determine the fair value of cash equivalents and Level 2 and Level 3
inputs to determine the fair value of net assets acquired in business combinations (see Note 4) and for impairment testing (see
Notes 5 and 13). We did not have any transfers between Level 1 and Level 2 fair value measurements during 2020.
Cash and Cash Equivalents
We classify cash on hand and deposits in banks, including commercial paper, money market accounts, and other investments with
an original maturity of three months or less, that we hold from time to time, as cash and cash equivalents. We periodically have
cash equivalents consisting of short-term money market funds and other investments. As of December 31, 2020 and 2019, we did
not have any such cash equivalents on hand. The primary objective of our investment activities is to preserve our capital for the
purpose of funding operations. We do not enter into investments for trading or speculative purposes.
Accounts Receivable and Revenue Reserves
We classify amounts owed to us and due within twelve months, arising from the sale of goods or services and from other business
activities, 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. 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 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, 2020 and 2019 totaled $25.5 million and $29.5 million, respectively. Unprocessed Changes recognized as accrued
liabilities at December 31, 2020 and 2019 totaled $13.0 million and $11.0 million, respectively.
We are exposed to credit losses primarily through sales of products and services. Our expected loss allowance methodology for
accounts receivable is developed using historical collection experience, current and future economic and market conditions and
a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the
estimate of amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and
the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision
for customers that have a higher probability of default. Our monitoring activities include timely account reconciliation, dispute
resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are
written off when determined to be uncollectible. As of December 31, 2020 and 2019, the allowance for doubtful accounts totaled
$5.1 million and $2.6 million, respectively. We also recognized bad debt expense, net of recoveries, of $2.4 million, $0.1 million,
and $0.2 million in 2020, 2019, and 2018, respectively.
Inventories and Related Reserves
Inventories are stated at the lower of cost or net realizable value. 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, 2020 and 2019 totaled
$32.3 million and $21.2 million, respectively.
47
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 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, backlog, and capitalized software intangible assets,
and (b) indefinite-lived assets not subject to amortization such as goodwill, certain trademarks, and certain in-process research
and development intangible assets. 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 as
of our fiscal November month-end 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 2020, we did not perform a
qualitative assessment over any of our reporting units.
For our annual impairment test in 2020, we performed a quantitative assessment for all ten of our reporting units included in
continuing operations. 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 record an
impairment charge based on that difference. In addition to the income approach, we calculate the fair value of our reporting units
under a market approach. The market approach measures the fair value of a reporting unit through analysis of financial multiples
of comparable businesses. Consideration is given to the financial conditions and operating performance of the reporting unit being
valued relative to those publicly-traded companies operating in the same or similar lines of business. Based on our annual goodwill
impairment test, the excess of the fair values over the carrying values of our ten reporting units tested under a quantitative income
approach ranged from 4% - 345%. As a result, the goodwill balances for our continuing operations reporting units were not
impaired in 2020. Furthermore, we did not recognize any goodwill impairment from continuing operations in 2019 or 2018. See
Note 13 for further discussion.
48
We also evaluate indefinite lived intangible assets for impairment annually or at other times if events have occurred or
circumstances exist that indicate the carrying values of those assets may no longer be recoverable. We compare the fair value of
the asset with its carrying amount. If the carrying amount of the asset exceeds its fair value, we recognize an impairment loss in
an amount equal to that excess. We did not recognize impairment charges for our indefinite lived intangible assets from continuing
operations in 2020, 2019, or 2018. See Note 13 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 from continuing operations in 2020, 2019, or 2018.
Due to its overall financial performance and discontinued operations classification, we performed impairment tests on the Grass
Valley disposal group, which resulted in total asset impairments of $113.0 million and $521.4 million in 2020 and 2019,
respectively. The 2019 impairment charge consisted of impairments to goodwill, customer relationships, and trademarks of $326.1
million, $14.4 million, and $1.6 million, respectively, as well as an impairment of the disposal group of $179.3 million ($180.4
million translated at year-end exchange rates). We determined the estimated fair values of the assets and of the reporting unit by
calculating the present values of their estimated future cash flows.
Disposals
During 2020, we sold a previously closed operating facility for net proceeds of $2.1 million and recognized a $0.4 million gain
on the sale as well as completed the sale of Grass Valley to Black Dragon Capital - See Note 5.
During 2018, we sold a previously closed operating facility for net proceeds of $1.5 million and recognized a $0.6 million gain
on the sale.
During 2017, we sold our MCS business and a 50% ownership interest in Xuzhou Hirschmann Electronics Co. Ltd (the
Hirschmann JV) for a total purchase price of $40.2 million. The $40.2 million of proceeds from the sale was collected during
2018.
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, 2020 and 2019 totaled $32.2 million
and $37.2 million, respectively.
Contingent Liabilities
We have established liabilities for environmental and legal contingencies that are probable of occurrence and reasonably
estimable, the amounts of which are currently not material. A significant amount of judgment and use of estimates is required to
quantify our ultimate exposure in these matters. We review the valuation of these liabilities on a quarterly basis, and we adjust
the balances to account for changes in circumstances for ongoing and emerging issues.
49
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 consideration of an acquired business to its identifiable assets and liabilities based on estimated fair values. The
excess of the consideration 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 acquisition accounting, 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 consistent with the principles as outlined in the following five step model: (1) identify the contract with
the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the
transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) each performance
obligation is satisfied. See Note 3.
Gain from Patent Litigation
In 2011, the Company’s wholly-owned subsidiary, PPC, filed an action for patent infringement against Corning alleging that
Corning infringed two of PPC’s patents. In 2015, a jury found that Corning willfully infringed both patents. Following a series
of appeals, we received a pre-tax amount of approximately $62.1 million from Corning in 2018. We recorded the $62.1 million of
cash received as a pre-tax gain from patent litigation during 2018.
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.
50
Research and Development Costs
Research and development costs are expensed as incurred.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $11.6 million, $14.7 million, and $17.0 million for 2020,
2019, and 2018, 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 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 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. At December 31, 2020 the valuation allowance of $84.3 million was primarily related to net operating losses, capital
losses and foreign tax credits that we do not expect to realize.
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.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes
(“ASU 2019-12”) which removes certain exceptions for investments, intra-period allocations and interim tax calculations, and
adds guidance to reduce the complexity in accounting for income taxes. ASU 2019-12 is effective for annual periods beginning
after December 15, 2020, with early adoption permitted. The various amendments in ASU 2019-12 are applied on a retrospective
basis, modified retrospective basis and prospective basis, depending upon the amendment. The Company did not early adopt this
pronouncement and is in the process of evaluating the impact of this amendment on our consolidated financial statements;
however, it is not anticipated to be material.
See Note 18, Income Taxes, in the accompanying notes to our consolidated financial statements.
51
Current-Year Adoption of Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (“ASU 2016-13”), Financial Instruments - Credit
Losses. Under the new standard, we are required to recognize estimated credit losses expected to occur over the estimated life or
remaining contractual life of an asset (which includes losses that may be incurred in future periods) using a broader range of
information including past events, current conditions, and reasonable and supportable forecasts about future economic conditions.
We adopted ASU 2016-13 on January 1, 2020, which resulted in an increase to our allowance for doubtful accounts for continuing
operations of $1.0 million, and an increase for discontinued operations of $1.9 million. See further discussion as well as
adjustments to the allowance for doubtful accounts under the new credit loss model in Note 9.
Note 3: Revenues
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606)
using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. We recorded
a net increase to retained earnings of $2.6 million as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with
the impact primarily related to sales commissions and software revenues within our Industrial Solutions segment.
Revenues are recognized when control of the promised goods or services is transferred to our customers and in an amount that
reflects the consideration we expect to be entitled to in exchange for those goods or services. Taxes collected from customers and
remitted to governmental authorities are not included in our revenues. We do not evaluate a contract for a significant financing
component when the time between cash collection and performance is less than one year.
The following table presents our revenues disaggregated by major product category (in thousands).
Broadband
and 5G
Cyber-
Security
Industrial
Automation
Smart
Buildings
Total
Revenues
Year Ended December 31, 2020
Enterprise Solutions
Industrial Solutions
Total
Year Ended December 31, 2019
Enterprise Solutions
Industrial Solutions
Total
Year Ended December 31, 2018
Enterprise Solutions
Industrial Solutions
Total
$
$
$
$
$
$
432,262 $
—
432,262 $
— $
110,524
110,524 $
— $
879,775
879,775 $
440,155 $
—
872,417
990,299
440,155 $ 1,862,716
544,626 $
—
544,626
946,041
1,185,237
$ 2,131,278
568,255 $
—
568,255
957,501
1,208,201
$ 2,165,702
401,415 $
—
401,415 $
389,246 $
—
389,246 $
— $
— $
133,039
1,052,198
133,039 $ 1,052,198
$
— $
— $
136,648
1,071,553
136,648 $ 1,071,553
$
52
The following tables present our revenues disaggregated by geography, based on the location of the customer purchasing the
product (in thousands).
Americas
EMEA
APAC
Total Revenues
Year Ended December 31, 2020
Enterprise Solutions
Industrial Solutions
Total
Year Ended December 31, 2019
Enterprise Solutions
Industrial Solutions
Total
Year Ended December 31, 2018
Enterprise Solutions
Industrial Solutions
Total
$
$
$
$
$
$
636,492 $
577,929
1,214,421 $
130,982 $
256,673
387,655 $
104,943 $
155,697
260,640 $
872,417
990,299
1,862,716
695,008 $
742,563
1,437,571 $
135,732 $
274,030
409,762 $
115,301 $
168,644
283,945 $
946,041
1,185,237
2,131,278
700,499 $
758,165
1,458,664 $
135,217 $
290,562
425,779 $
121,785 $
159,474
281,259 $
957,501
1,208,201
2,165,702
We generate revenues primarily by selling products that provide secure and reliable transmission of data, sound, and video for
mission critical applications. We also generate revenues from providing support and professional services. We sell our products
to distributors, end-users, installers, and directly to original equipment manufacturers. At times, we enter into arrangements that
involve the delivery of multiple performance obligations. For these arrangements, revenue is allocated to each performance
obligation based on its relative standalone selling price and recognized when or as each performance obligation is satisfied. Most
of our performance obligations related to the sale of products are satisfied at a point in time when control of the product is
transferred based on the shipping terms of the arrangement. Generally, we determine standalone selling price using the prices
charged to customers on a standalone basis. Typically, payments are due after control transfers, which is less than one year from
satisfaction of the performance obligation.
The amount of consideration we receive and revenue we recognize varies due to rebates, returns, and price adjustments. We
estimate the expected rebates, returns, and price adjustments based on an analysis of historical experience, anticipated sales
demand, and trends in product pricing. We adjust our estimate of revenue at the earlier of when the most likely amount of
consideration we expect to receive changes or when the consideration becomes fixed. Adjustments to revenue for performance
obligations satisfied in prior periods was not significant during the year ended December 31, 2020.
The following table presents estimated and accrued variable consideration:
December 31, 2020
December 31, 2019
Accrued rebates
Accrued returns
Price adjustment recognized against gross accounts receivable
$
(in thousands)
32,192 $
13,016
25,244
37,170
10,974
28,672
Depending on the terms of an arrangement, we may defer the recognition of a portion of the consideration received because we
have to satisfy a future obligation. Consideration allocated to support services under a support and maintenance contract is
typically paid in advance and recognized ratably over the term of the service. The typical use of a time-elapsed unit of measure
for support and maintenance contracts reflects the benefit and same pattern of transfer the customer receives from our services
under this arrangement over the term of the contract. Consideration allocated to professional services is recognized when or as
the services are performed depending on the terms of the arrangement. As of December 31, 2020, total deferred revenue was
$77.6 million, and of this amount, $53.4 million is expected to be recognized within the next twelve months, and the remaining
$24.2 million is long-term and will be recognized over a period greater than twelve months.
53
The following table presents deferred revenue activity (in thousands):
Balance at December 31, 2018
New deferrals
Revenue recognized
Balance at December 31, 2019
New deferrals
Revenue recognized
Balance at December 31, 2020
$
$
$
72,358
111,812
(114,100)
70,070
101,066
(93,488)
77,648
Service-type warranties represent $10.4 million of the deferred revenue balance at December 31, 2020, and of this amount
$3.6 million is expected to be recognized in the next twelve months, and the remaining $6.8 million is long-term and will be
recognized over a period greater than twelve months.
We expense sales commissions as incurred when the duration of the related revenue arrangement is one year or less. We capitalize
sales commissions in other current and long-lived assets on our balance sheet when the duration of the related revenue
arrangement is longer than one year, and we amortize it over the related revenue arrangement period. Total capitalized sales
commissions were $5.8 million, $3.4 million, and $2.9 million as of December 31, 2020, 2019, and 2018, respectively. For the
years ended December 31, 2020, 2019 and 2018, we recognized $16.3 million, $19.0 million, and $20.3 million of sales
commissions expense in selling, general, and administrative expenses, respectively.
Note 4: Acquisitions
Special Product Company
On December 6, 2019, we purchased and assumed substantially all the assets, and certain specified liabilities of Special Product
Company (SPC) for a purchase price of $22.5 million. SPC, based in Kansas City, Kansas, is a leading designer, manufacturer,
and seller of outdoor cabinet products for optical fiber cable installations. The results of SPC have been included in our
Consolidated Financial Statements from December 6, 2019, and are reported within the Enterprise Solutions segment. The
acquisition of SPC was not material to our financial position or results of operations.
Opterna
We acquired 100% of the shares of Opterna International Corp. (Opterna) on April 15, 2019 for a purchase price, net of cash
acquired, of $51.7 million. Of the $51.7 million purchase price, $45.9 million was paid in 2019 with cash on hand. The acquisition
included a potential earnout, which is based upon future Opterna financial targets through April 15, 2021. The maximum earnout
consideration is $25.0 million, but based upon a third party valuation specialist using certain assumptions in a discounted cash
flow model, the estimated fair value of the earnout included in the purchase price is $5.8 million. Opterna is an international fiber
optics solution business formerly based in Sterling, Virginia which designs and manufactures a range of complementary fiber
connectivity, cabinet, and enclosure products used in optical networks. The results of Opterna have been included in our
Consolidated Financial Statements from April 15, 2019, and are reported within the Enterprise Solutions segment. Certain
subsidiaries of Opterna include noncontrolling interests. Because Opterna has a controlling financial interest in these subsidiaries,
they are consolidated into our financial statements. The results that are attributable to the noncontrolling interest holders are
presented as net income attributable to noncontrolling interests in the Consolidated Statements of Operations. An immaterial
amount of Opterna's annual revenues are generated from transactions with the noncontrolling interests. On October 25, 2019, we
purchased the noncontrolling interest of one subsidiary for a purchase price of $0.8 million; of which $0.4 million was paid at
closing and the remaining $0.4 million is to be paid in 2021. The following table summarizes the estimated fair values of the
assets acquired and the liabilities assumed as of April 15, 2019 (in thousands):
54
Receivables
Inventory
Prepaid and other current assets
Property, plant, and equipment
Intangible assets
Goodwill
Deferred income taxes
Operating lease right-of-use assets
Other long-lived assets
Total assets acquired
Accounts payable
Accrued liabilities
Long-term deferred tax liability
Long-term operating lease liability
Other long-term liabilities
Total liabilities assumed
Net assets
Noncontrolling interest
Net assets attributable to Belden
$
$
$
$
$
$
5,308
7,359
566
1,328
28,000
35,057
80
2,204
2,070
81,972
4,847
4,301
6,813
1,923
7,152
25,036
56,936
5,195
51,741
The fair value of acquired receivables is $5.3 million, which is equivalent to its gross contractual amount.
A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily
on estimates and assumptions. The judgments we have used in estimating the preliminary fair value assigned to each class of
acquired assets and assumed liabilities could materially affect the results of our operations. We did not record any material
measurement-period adjustments during 2020.
For the purpose of the above allocation, we based our estimate of fair value for the acquired inventory, intangible assets, and
noncontrolling interests on valuation studies performed by a third party valuation firm. We have estimated a fair value adjustment
for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less
the sum of the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for post acquisition
selling efforts. We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from
royalty to estimate the fair value of the identifiable intangible assets (Level 3 valuation).
Goodwill and other intangible assets reflected above were determined to meet the criteria for recognition apart from tangible
assets acquired and liabilities assumed. The goodwill is primarily attributable to expansion of product offerings in the optical
fiber market. Our tax basis in the acquired goodwill is zero. The intangible assets related to the acquisition consisted of the
following:
55
Intangible assets subject to amortization
Developed technologies
Customer relationships
Sales backlog
Trademarks
Total intangible assets subject to amortization
Intangible assets not subject to amortization:
Goodwill
Total intangible assets not subject to amortization
Total intangible assets
Weighed average amortization period
Fair Value
(In thousands)
Amortization Period
(In years)
$
$
$
$
$
3,400
22,800
1,300
500
28,000
35,057
35,057
63,057
5
15
0.5
2.0
12.9
The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the
developed technology intangible asset was based on the estimated time that the technology provides us with a competitive
advantage and thus approximates the period and pattern of consumption of the intangible asset. The useful life for the customer
relationship intangible asset was based on our forecasts of estimated sales from recurring customers. The useful life of the backlog
intangible asset was based on our estimate of when the ordered items would ship and control of the items transfers. The useful
life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks.
The following table illustrates the unaudited pro forma effect on operating results as if the Opterna acquisition had been completed
January 1, 2018.
Revenues
Net income (loss) attributable to Belden common stockholders
Diluted income (loss) per share attributable to Belden common stockholders
Years Ended December 31,
2018
2019
(In thousands, except per share data)
(Unaudited)
$
$
2,139,894 $
(389,957)
(9.24) $
2,213,781
123,546
3.02
For purposes of the pro forma disclosures, the year ended December 31, 2018 includes expenses related to the acquisition,
including severance, restructuring, and acquisition costs; amortization of intangible assets; and cost of sales arising from the
adjustment of inventory to fair value of $5.5 million, $3.8 million, and $0.5 million, respectively.
The above unaudited pro forma information is presented for information purposes only and does not purport to represent what
our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative
of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting
from the acquisition.
FutureLink
We acquired the FutureLink product line and related assets from Suttle, Inc. on April 5, 2019 for a purchase price of $5.0 million,
which was funded with cash on hand. The acquisition of FutureLink allows us to offer a more complete set of fiber product
offerings. The results from the acquisition of FutureLink have been included in our Condensed Consolidated Financial Statements
from April 5, 2019, and are reported within the Enterprise Solutions segment. The acquisition of FutureLink was not material to
our financial position or results of operations.
56
Note 5: Discontinued Operations
We classify assets and liabilities as held for sale (disposal group) when management, having the authority to approve the action,
commits to a plan to sell the disposal group, the sale is probable within one year, and the disposal group is available for immediate
sale in its present condition. We also consider whether an active program to locate a buyer has been initiated, whether the disposal
group is marketed actively for sale at a price that is reasonable in relation to its current fair value, and whether actions required
to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
During the fourth quarter of 2019, we committed to a plan to sell Grass Valley, and at such time, met all of the criteria to classify
the assets and liabilities of this business as held for sale. Furthermore, we determined a divestiture of Grass Valley represents a
strategic shift that is expected to have a major impact on our operations and financial results. As a result, the Grass Valley disposal
group, which was included in our Enterprise Solutions segment, is reported within discontinued operations. The Grass Valley
disposal group excludes certain Grass Valley pension liabilities that Belden retained. We also ceased depreciating and amortizing
the assets of the disposal group once they met the held for sale criteria in the fourth quarter of 2019.
We wrote down the carrying value of Grass Valley and recognized asset impairments totaling $113.0 million and $521.4 million
in 2020 and 2019, respectively. The 2019 impairment charge consisted of impairments to goodwill, customer relationships, and
trademarks of $326.1 million, $14.4 million, and $1.6 million, respectively, as well as an impairment of the disposal group of
$179.3 million ($180.4 million translated at year-end exchange rates). We determined the estimated fair values of the assets and
of the reporting unit by calculating the present values of their estimated future cash flows.
We completed the sale of Grass Valley to Black Dragon Capital on July 2, 2020 and recognized a loss of $9.9 million, net of
$7.5 million income tax expense. The terms of the sale included gross cash consideration of $120.0 million, or approximately
$56.2 million net of cash delivered with the business. The sale also included deferred consideration consisting of a $175.0 million
seller’s note that is expected to mature in 2025, up to $88 million in PIK (payment-in-kind) interest on the seller’s note, and
$178.0 million in potential earnout payments. Based upon a third party valuation specialist using certain assumptions in a Monte
Carlo analysis, the estimated fair value of the seller’s note is $34.9 million, which we recorded in Other Long-Lived Assets. We
accounted for the earnout under a loss recovery approach and did not record an asset as of the disposal date. Any subsequent
recognition of an earnout will be based on the gain contingency guidance.
As part of the transaction, we also invested $3.0 million for a 9% equity interest in Grass Valley with the right to put the equity
back to Black Dragon Capital. We exercised our right during the fourth quarter of 2020 and sold our 9% equity interest in Grass
Valley to Black Dragon Capital for $2.7 million. We deconsolidated Grass Valley as of July 2, 2020 and accounted for our equity
interest under the cost method for the period that we owned a 9% interest in Grass Valley. As of December 31, 2020, we do not
own any interest in Grass Valley. Grass Valley's operating results for periods after July 2, 2020 are not included in our Consolidated
Financial Statements.
The seller’s note accrues PIK interest at an annual rate of 8.5%. During the year ended December 31, 2020, the seller’s note
accrued interest of $7.8 million, which we reserved for based on our expected loss allowance methodology.
We are performing certain services for Grass Valley under a transition services agreement. During 2020, the amount of transition
services totaled $2.0 million, which we expect to collect in 2021.
The following table summarizes the operating results of the disposal group up to the July 2, 2020 disposal date for the years ended
December 31, 2020, 2019 and 2018, respectively:
Revenues
Cost of sales
Gross profit
Selling, general and administrative expenses
Research and development expenses
Amortization of intangibles
Asset impairment of discontinued operations
Interest expense, net
Non-operating pension cost
Loss before taxes
2020
Years Ended December 31,
2019
(In thousands)
2018
109,195 $
(70,199)
38,996
(39,947)
(15,083)
—
(113,007)
(432)
(169)
(129,642) $
360,496 $
(208,173)
152,323
(93,796)
(37,172)
(12,782)
(521,441)
(819)
(221)
(513,908) $
419,666
(241,164)
178,502
(114,567)
(49,033)
(23,689)
—
(720)
(243)
(9,750)
$
$
57
The disposal group recognized depreciation and amortization expense of approximately $0.0 million, $23.7 million, and $35.1
million during the years ended December 31, 2020, 2019, and 2018, respectively. The disposal group also had capital expenditures
of approximately $16.7 million, $29.4 million, and $22.6 million during the years ended December 31, 2020, 2019, and 2018,
respectively. Furthermore, the disposal group incurred stock-based compensation expense/(credits) of $(0.9) million, $0.9
million, and $1.4 million during the years ended December 31, 2020, 2019, and 2018, respectively. The disposal group did not
have any significant non-cash charges for investing activities during the years ended December 31, 2020, 2019, and 2018.
The following table provides the major classes of assets and liabilities of the disposal group as of December 31, 2019 (in
thousands):
Assets:
Cash and cash equivalents
Receivables, net
Inventories, net
Other current assets
Property, plant and equipment, less accumulated depreciation
Operating lease right-of-use assets
Goodwill
Intangible assets, less accumulated amortization
Deferred income taxes
Other long-lived assets
Impairment of disposal group
Total assets of discontinued operations
Liabilities:
Accounts payable
Accrued liabilities
Postretirement benefits
Deferred income taxes
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities of discontinued operations
$
$
$
$
18,405
117,386
55,002
35,187
61,233
16,902
26,707
143,459
59,560
21,652
(180,358)
375,135
52,425
83,349
6,224
2,740
20,459
5,082
170,279
The disposal group also had $42.3 million of accumulated other comprehensive losses as of December 31, 2019.
Note 6: Operating Segments and Geographic Information
We are organized around two global business platforms: Enterprise Solutions and Industrial Solutions. Each of the global business
platforms represents a reportable segment. Effective January 1, 2020, we transferred our West Penn Wire business and multi-
conductor product lines from the Enterprise Solutions segment to the Industrial Solutions segment as a result of a shift in
responsibilities among the segments. We have recast the prior period segment information to conform to the change in the
composition of reportable segments.
The segments design, manufacture, and market a portfolio of signal transmission solutions for mission critical applications used
in a variety of end markets. We sell the products manufactured by our segments through distributors or directly to systems
integrators, original equipment manufacturers (OEMs), end-users, and installers.
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
58
and deferred revenue to fair value; and other costs. We allocate corporate expenses to the segments for purposes of measuring
Segment EBITDA. Corporate expenses are allocated on the basis of each segment’s relative EBITDA prior to the allocation.
Our measure of segment assets does not include cash, goodwill, intangible assets, deferred tax assets, or corporate assets. All
goodwill is allocated to reporting units of our segments for purposes of impairment testing.
Operating Segment Information
Enterprise Solutions
Segment revenues
Affiliate revenues
Segment EBITDA
Depreciation expense
Amortization of intangibles
Amortization of software development intangible assets
Severance, restructuring, and acquisition integration costs
Purchase accounting effects of acquisitions
Acquisition of property, plant and equipment
Segment assets
Industrial Solutions
Segment revenues
Affiliate revenues
Segment EBITDA
Depreciation expense
Amortization of intangibles
Amortization of software development intangible assets
Severance, restructuring, and acquisition integration costs
Acquisition of property, plant and equipment
Segment assets
Total Segments
Segment revenues
Affiliate revenues
Segment EBITDA
Depreciation expense
Amortization of intangibles
Amortization of software development intangible assets
Severance, restructuring, and acquisition integration costs
Purchase accounting effects of acquisitions
Acquisition of property, plant and equipment
Segment assets
59
$
$
2020
Years ended December 31,
2019
(In thousands)
2018
872,415 $
1,289
99,333
20,655
21,662
245
7,720
125
25,223
462,615
946,041 $
4,162
126,925
19,771
22,324
175
10,808
592
42,289
487,125
957,501
6,105
156,790
18,490
21,076
71
14,863
1,690
42,624
430,128
2020
Years ended December 31,
2019
(In thousands)
2018
990,301 $ 1,185,237 $ 1,208,201
80
237,870
19,819
54,064
8
7,762
29,529
508,843
11
226,110
20,638
52,285
350
15,736
35,189
504,482
60
147,626
21,815
42,733
1,576
4,538
44,675
522,637
2018
2020
Years ended December 31,
2019
(In thousands)
$ 1,862,716 $ 2,131,278 $ 2,165,702
6,185
394,660
38,309
75,140
79
22,625
1,690
72,153
938,971
4,173
353,035
40,409
74,609
525
26,544
592
77,478
991,607
1,349
246,959
42,470
64,395
1,821
12,258
125
69,898
985,252
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.
Total Segment Revenues
Deferred revenue adjustments
Consolidated Revenues
Total Segment EBITDA
Amortization of intangibles
Depreciation expense
Severance, restructuring, and acquisition integration costs (1)
Purchase accounting effects related to acquisitions (2)
Amortization of software development intangible assets
Loss on sale of assets (3)
Costs related to patent litigation
Gain from patent litigation
Eliminations
Consolidated operating income
Interest expense, net
Non-operating pension benefit (cost)
Loss on debt extinguishment
2020
Years Ended December 31,
2019
(In thousands)
$ 1,862,716 $ 2,131,278 $ 2,165,702
—
$ 1,862,716 $ 2,131,278 $ 2,165,702
—
—
2018
$
246,959 $
(64,395)
(42,470)
(12,258)
(125)
(1,821)
—
—
—
(480)
125,410
(58,888)
(395)
—
66,127 $
353,035 $
(74,609)
(40,409)
(26,544)
(592)
(525)
—
—
—
(3,149)
207,207
(55,814)
1,017
—
152,410 $
394,660
(75,140)
(38,309)
(22,625)
(1,690)
(79)
(94)
(2,634)
62,141
(2,222)
314,008
(60,839)
(99)
(22,990)
230,080
Consolidated income from continuing operations before taxes
$
(1)
(2)
(3)
See Note 15, Severance, Restructuring, and Acquisition Integration Activities, for details.
In 2020 and 2019, we collectively recognized $0.1 million and $0.6 million, respectively, of cost of sales related to purchase
accounting adjustments of acquired inventory to fair value for both our SPC and Opterna acquisitions. In 2018, we made a $1.7
million adjustment to increase the earn-out liability associated with an acquisition.
In 2018, we recognized a $0.1 million loss on sale of assets for the sale of our MCS business and Hirschmann JV. See Note 2.
Below are reconciliations of other segment measures to the consolidated totals.
2020
Years Ended December 31,
2019
(In thousands)
2018
Total segment assets
Cash and cash equivalents
Goodwill
Intangible assets, less accumulated amortization
Deferred income taxes
Corporate assets
Assets of discontinued operations
Total assets
$
985,252 $
501,994
1,251,938
287,071
29,536
83,943
—
938,971
407,454
1,206,877
359,931
26,459
16,786
822,843
$ 3,139,734 $ 3,406,759 $ 3,779,321
991,607 $
407,480
1,243,669
339,505
25,216
24,147
375,135
Total segment acquisition of property, plant and equipment
Discontinued operations acquisition of property, plant and equipment
Corporate acquisition of property, plant and equipment
Total acquisition of property, plant and equipment
$
$
69,898 $
16,712
3,605
90,215 $
77,478 $
29,414
3,110
110,002 $
72,153
22,681
3,013
97,847
60
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, 2020, 2019 and 2018 for 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.
United
States
Canada
China
Germany
All Other
Total
(In thousands, except percentages)
Year ended December 31, 2020
Revenues
Percent of total revenues
Long-lived assets
$ 1,015,340 $ 119,700
$ 111,835 $
55 %
6 %
$ 163,731 $
32,063
$
6 %
44,824 $
Year ended December 31, 2019
Revenues
Percent of total revenues
Long-lived assets
$ 1,167,033 $ 162,975
$ 109,522 $
55 %
8 %
$ 152,214 $
16,452
$
5 %
40,247 $
Year ended December 31, 2018
91,187 $ 524,654 $ 1,862,716
100 %
63,100 $ 114,286 $ 418,004
28 %
5 %
92,913 $ 598,835 $ 2,131,278
100 %
48,272 $ 101,179 $ 358,364
28 %
4 %
Revenues
Percent of total revenues
Long-lived assets
Major Customer
$ 1,206,401 $ 166,669
56 %
$ 170,368 $
13,352
8 %
$ 107,582 $ 100,691 $ 584,359 $ 2,165,702
100 %
63,776 $ 324,209
4 %
39,724 $
5 %
36,989 $
27 %
$
Revenues generated in both the Enterprise Solutions and Industrial Solutions segments from sales to WESCO were approximately
$271.6 million (15% of revenues), $328.2 million (15% of revenues), and $361.7 million (17% of revenues) for 2020, 2019, and
2018, respectively. At December 31, 2020, we had $17.5 million in accounts receivable outstanding from WESCO, which
represented approximately 6% of our total accounts receivable outstanding at December 31, 2020.
Note 7: Noncontrolling Interest
We have a 51% ownership percentage in a joint venture with Shanghai Hi-Tech Control System Co, Ltd (Hite). The purpose of
the joint venture is to develop and provide certain Industrial Solutions products and integrated solutions to customers in China.
Belden and Hite are committed to fund $1.53 million and $1.47 million, respectively, to the joint venture in the future. The joint
venture is determined to not have sufficient equity at risk; therefore, it is considered a 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 income (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 years ended December 31, 2020, 2019, or 2018.
We acquired Opterna in April 2019. Certain subsidiaries of Opterna include noncontrolling interests. Because we have a
controlling financial interest in these subsidiaries, they are consolidated into our financial statements. The results of these
subsidiaries were consolidated into our financial statements as of the acquisition date. The results that are attributable to the
noncontrolling interest holders are presented as net income (loss) attributable to noncontrolling interests in the Consolidated
Statements of Operations. An immaterial amount of Opterna's annual revenues are generated from transactions with the
noncontrolling interests. On October 25, 2019, we purchased the noncontrolling interest of one subsidiary for a purchase price of
$0.8 million; of which $0.4 million was paid at closing and the remaining $0.4 million will be paid in 2021. The subsidiaries of
Opterna that include noncontrolling interests are not material to our consolidated financial statements as of or for the years ended
December 31, 2020, 2019 or 2018.
61
Note 8: Income Per Share
The following table presents the basis of the income per share computations:
2020
Years Ended December 31,
2019
(In thousands)
2018
Numerator:
Income from continuing operations
Less: Net income (loss) attributable to noncontrolling interest
Less: Preferred stock dividends
$
54,403 $
104
—
109,891 $
239
18,437
Income from continuing operations attributable to Belden common
stockholders
Add: Loss from discontinued operations, net of tax
Add: Loss on disposal of discontinued operations, net of tax
Net income (loss) attributable to Belden common stockholders
$
54,299
(99,513)
(9,948)
(55,162) $
91,215
(486,667)
—
(395,452) $
Denominator:
Weighted average shares outstanding, basic
Effect of dilutive common stock equivalents
Weighted average shares outstanding, diluted
44,778
159
44,937
42,203
213
42,416
167,144
(183)
34,931
132,396
(6,433)
—
125,963
40,675
281
40,956
Basic weighted average shares outstanding is used to calculate diluted loss per share when the numerator is a loss because using
diluted weighted average shares outstanding would be anti-dilutive.
For the years ended December 31, 2020, 2019, and 2018, diluted weighted average shares outstanding exclude outstanding equity
awards of 1.5 million, 1.2 million, and 0.9 million, respectively, which are anti-dilutive. In addition, for the years ended
December 31, 2020, 2019, and 2018, diluted weighted average shares outstanding do not include outstanding equity awards of
0.4 million, 0.3 million, and 0.3 million, respectively, because the related performance conditions have not been satisfied.
Furthermore, for the years ended December 31, 2019, and 2018, diluted weighted average shares outstanding do not include the
weighted average impact of preferred shares that were convertible into 3.7 million and 6.9 million common shares, respectively,
because deducting the preferred stock dividends from net income was more dilutive.
For purposes of calculating basic earnings per share, unvested restricted stock units are not included in the calculation of basic
weighted average shares outstanding until all necessary conditions have been satisfied and issuance of the shares underlying the
restricted stock units is no longer contingent. Necessary conditions are not satisfied until the vesting date, at which time holders
of our restricted stock units receive shares of our common stock.
For purposes of calculating diluted earnings per share, unvested restricted stock units are included to the extent that they are
dilutive. In determining whether unvested restricted stock units are dilutive, each issuance of restricted stock units is considered
separately.
Once a restricted stock unit has vested, it is included in the calculation of both basic and diluted weighted average shares
outstanding.
Note 9: Credit Losses
Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments prospectively. This ASU replaces the incurred loss impairment model with an expected credit
loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider
forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are
current or not yet due, which were not considered under the previous accounting guidance. Upon adoption, we recorded a noncash
cumulative effect adjustment to retained earnings of $2.9 million. Of this amount, $1.0 million related to our continuing
operations and $1.9 million related to our discontinued operations.
62
We are exposed to credit losses primarily through sales of products and services. Our expected loss allowance methodology for
accounts receivable is developed using historical collection experience, current and future economic and market conditions and
a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the
estimate of accounts receivable that may not be collected is based upon the aging of accounts receivable balances and the financial
condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers
that have a higher probability of default. Our monitoring activities include timely account reconciliation, dispute resolution,
payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off
when determined to be uncollectible.
Estimates are used to determine the allowance, which is based upon an assessment of anticipated payments as well as other
historical, current and future information that is reasonably available. The following table presents the activity in the allowance
for doubtful accounts for our continuing operations for the year ended December 31, 2020 (in thousands).
Balance at December 31, 2019
Adoption adjustment
Current period provision
Recoveries collected
Write-offs
Currency impact
Balance at December 31, 2020
Note 10: Inventories
The major classes of inventories were as follows:
Raw materials
Work-in-process
Finished goods
Gross inventories
Excess and obsolete reserves
Net inventories
Note 11: Property, Plant and Equipment
The carrying values of property, plant and equipment were as follows:
Land and land improvements
Buildings and leasehold improvements
Machinery and equipment
Computer equipment and software
Construction in process
Gross property, plant and equipment
Accumulated depreciation
Net property, plant and equipment
63
$
$
$
$
$
$
2,569
1,011
2,282
(637)
(114)
39
5,150
December 31,
2020
2019
(In thousands)
106,514 $
32,011
141,042
279,567
(32,269)
247,298 $
98,530
34,717
119,331
252,578
(21,245)
231,333
December 31,
2020
2019
(In thousands)
29,321 $
136,427
608,618
137,512
63,589
975,467
(606,847)
368,620 $
27,502
126,580
558,639
119,533
70,993
903,247
(557,329)
345,918
Depreciation Expense
We recognized depreciation expense in income from continuing operations of $42.5 million, $40.4 million, and $38.3 million in
2020, 2019, and 2018, respectively.
Note 12: Leases
We have operating and finance leases for properties, including manufacturing facilities, warehouses, and office space; as well as
vehicles and certain equipment. We make certain judgments in determining whether a contract contains a lease in accordance
with ASU 2016-02. Our leases have remaining lease terms of less than 1 year to 15 years, some of which include options to extend
the lease for a period of up to 15 years and some include options to terminate the leases within 1 year. We do not assume renewals
in our determination of the lease term unless the renewals are deemed to be reasonably certain as of the commencement date of
the lease. Our lease agreements do not contain any material residual value guarantees or material variable lease payments.
We have entered into various short-term operating leases with an initial term of twelve months or less. These leases are not
recorded on our balance sheet as of December 31, 2020 or 2019, and the rent expense for short-term leases was not material.
We have certain property and equipment lease contracts that may contain lease and non-lease components, and we have elected
to utilize the practical expedient to account for these components together as a single combined lease component.
As the rate implicit in most of our leases is not readily determinable, we use the incremental borrowing rate to determine the
present value of the lease payments, which is unique to each leased asset, and is based upon the term of the lease, commencement
date of the lease, local currency of the leased asset, and the credit rating of the legal entity leasing the asset.
The components of lease expense were as follows:
Operating lease cost
Finance lease cost
Amortization of right-of-use asset
Interest on lease liabilities
Total finance lease cost
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Years Ended December 31,
2020
2019
(In thousands)
14,348 $
14,622
133 $
17
150 $
142
22
164
Years Ended December 31,
2020
2019
(In thousands)
15,489 $
16
158
14,594
25
258
$
$
$
$
64
Supplemental balance sheet information related to leases was as follows:
December 31,
2020
2019
(In thousands, except lease term
and discount rate)
Operating leases:
Total operating lease right-of-use assets
Accrued liabilities
Long-term operating lease liabilities
Total operating lease liabilities
Finance leases:
Other long-lived assets, at cost
Accumulated depreciation
Other long-lived assets, net
Weighted Average Remaining Lease Term
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
$
$
$
$
$
54,787 $
14,742 $
46,398
61,140 $
764 $
(483)
281 $
5 years
3 years
6.6%
4.9%
The following table summarizes maturities of lease liabilities as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
$
$
The following table summarizes maturities of lease liabilities as of December 31, 2019 (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
$
$
65
62,251
13,900
55,652
69,552
823
(391)
432
6 years
3 years
6.9 %
6.2 %
19,250
16,305
12,552
9,516
8,718
8,901
75,242
19,086
16,988
14,128
11,598
9,032
16,655
87,487
Note 13: Intangible Assets
The carrying values of intangible assets were as follows:
Gross
Carrying
Amount
December 31, 2020
Accumulated
Amortization
(In thousands)
Net
Carrying
Amount
Gross
Carrying
Amount
December 31, 2019
Accumulated
Amortization
(In thousands)
Net
Carrying
Amount
Goodwill
$ 1,251,938 $
— $ 1,251,938 $ 1,243,669 $
— $ 1,243,669
Definite-lived intangible assets subject to
amortization:
Developed technology
Customer relationships
Trademarks
In-service research and development
Backlog
Total intangible assets subject to
amortization
Indefinite-lived intangible assets not subject
to amortization:
Trademarks
In-process research and development
Total intangible assets not subject
to amortization
Intangible assets
$ 428,187 $ (369,849) $
295,382
65,861
11,536
11,421
(128,796)
(36,539)
(9,774)
(11,421)
58,338 $ 413,310 $ (331,696) $
166,586
29,322
1,762
—
(110,732)
(30,213)
(7,160)
(10,935)
297,595
56,393
10,702
11,335
81,614
186,863
26,180
3,542
400
812,387
(556,379)
256,008
789,335
(490,736)
298,599
31,063
—
—
—
31,063
—
40,106
800
—
—
40,106
800
31,063
40,906
$ 843,450 $ (556,379) $ 287,071 $ 830,241 $ (490,736) $ 339,505
40,906
31,063
—
—
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:
Balance at December 31, 2018
Acquisitions and purchase accounting adjustments
Translation impact
Balance at December 31, 2019
Acquisitions and purchase accounting adjustments
Translation impact
Balance at December 31, 2020
Enterprise Solutions Industrial Solutions
Consolidated
(In thousands)
$
$
$
432,082 $
38,209
(260)
470,031 $
2,420
2,296
474,747 $
774,795 $
—
(1,157)
773,638 $
—
3,553
777,191 $
1,206,877
38,209
(1,417)
1,243,669
2,420
5,849
1,251,938
The changes in the carrying amount of indefinite-lived trademarks are as follows:
Enterprise Solutions Industrial Solutions
Consolidated
(In thousands)
Balance at December 31, 2018
Translation impact
Balance at December 31, 2019
Reclassify to definite-lived
Balance at December 31, 2020
27,000 $
—
27,000 $
—
27,000 $
13,270 $
(164)
13,106 $
(9,043)
4,063 $
40,270
(164)
40,106
(9,043)
31,063
$
$
$
66
Annual Impairment Test
The annual measurement date for our goodwill and indefinite-lived intangible assets impairment test is our fiscal November
month-end. For our 2020 goodwill impairment test, we performed a quantitative assessment for all ten 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
using Level 3 inputs. We did not perform a qualitative assessment over our reporting units. We determined that the fair values of
the reporting units were in excess of the carrying values; therefore, we did not record any goodwill impairment for the ten
reporting units. We also did not recognize any goodwill impairment from continuing operations in 2019 or 2018 based upon the
results of our annual goodwill impairment testing.
For our annual impairment test in 2020, the excess of the fair values over the carrying values of our ten reporting units tested
under a quantitative income approach ranged from 4% - 345%. 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 12.2%, the 2021 to 2030 compounded annual revenue growth rates ranged from 2.5% to 5.8%, and
the revenue growth rates beyond 2030 ranged from 2.0% to 3.0%. By their nature, these assumptions involve risks and
uncertainties. Furthermore, uncertainties associated with current market conditions increase the inherent risk associated with
using an income approach to estimate fair values. While we have adjusted our key assumptions to reflect the current economic
conditions, we have also assumed that economic conditions will improve. If current conditions persist and actual results are
different from our estimates or assumptions, we may have to recognize an impairment charge that could be material.
We 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 2020. Rather, we performed a quantitative assessment for
each of our indefinite-lived trademarks in 2020. 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. Significant assumptions to
determine fair value included sales growth, royalty rates, and discount rates. We did not recognize any trademark impairment
charges from continuing operations in 2020, 2019, or 2018.
Disposal Group Impairment
During the fourth quarter of 2019, we committed to a plan to sell Grass Valley, and at such time, met all of the criteria to classify
the assets and liabilities of this business as held for sale. Furthermore, we determined a divestiture of Grass Valley represents a
strategic shift that is expected to have a major impact on our operations and financial results. As a result, the Grass Valley disposal
group, previously included in our Enterprise Solutions segment, was reported within discontinued operations. We also ceased
depreciating and amortizing the assets of the disposal group once they met the held for sale criteria in the fourth quarter of 2019.
During 2019, we wrote down the carrying value of Grass Valley and recognized asset impairments totaling $521.4 million, which
consisted of impairments to goodwill, customer relationships, and trademarks of $326.1 million, $14.4 million, and $1.6 million,
respectively, as well as an impairment of the disposal group of $179.3 million ($180.4 million translated at year-end exchange
rates). During 2020, we wrote down the carrying value of Grass Valley and recognized asset impairments totaling $113.0 million.
We determined the estimated fair values of the assets and of the reporting unit by calculating the present values of their estimated
future cash flows, which was based in part on the assumed proceeds from a divestiture of Grass Valley.
Amortization Expense
We recognized amortization expense in income from continuing operations of $66.2 million, $74.6 million, and $75.1 million in
2020, 2019, and 2018, respectively. We expect to recognize annual amortization expense of $35.6 million in 2021, $32.9 million
in 2022, $31.2 million in 2023, $29.0 million in 2024, and $24.7 million in 2025 related to our intangible assets balance as of
December 31, 2020.
The weighted-average amortization period for our customer relationships, trademarks, developed technology, and in-service
research and development is 18.2 years, 8.3 years, 6.8 years, and 5.0 years, respectively.
At the beginning of 2020, we re-evaluated the useful lives of certain trademarks in our Industrial Solutions segment and concluded
that indefinite lives for these trademarks was no longer appropriate. We have estimated a useful life of five years and will re-
evaluate this estimate if and when our expected use of the trademarks changes. We began amortizing the trademarks in the first
quarter of 2020, which resulted in amortization expense of $1.8 million for the year ended December 31, 2020. As of December
31, 2020, the net book value of these trademarks totaled $7.8 million.
67
Note 14: Accrued Liabilities
The carrying values of accrued liabilities were as follows:
Wages, severance and related taxes
Current deferred revenue
Accrued rebates
Accrued interest
Employee benefits
Lease liabilities
Other (individual items less than 5% of total current liabilities)
Accrued liabilities
December 31,
2020
2019
(In thousands)
$
$
65,892 $
53,371
32,192
20,610
27,707
14,840
62,029
276,641 $
58,953
54,255
37,170
18,781
17,791
14,072
82,777
283,799
At December 31, 2019, our other accrued liabilities balance included earnout consideration of $31.4 million in accordance with
the purchase agreement for SAM, which was acquired on February 8, 2018 and included in the Grass Valley disposal group.
During our fiscal first quarter of 2020, prior to the Grass Valley disposal, we paid the sellers of SAM the full earnout consideration.
The acquisition-date fair value of the earnout liability was $29.3 million and is reflected as a financing activity in the Consolidated
Cash Flow Statement with the remaining $2.1 million reflected as an operating activity.
Note 15: Severance, Restructuring, and Acquisition Integration Activities
Cost Reduction Program
During 2019, we began a cost reduction program to improve performance and enhance margins by streamlining the organizational
structure and investing in technology to drive productivity. We recognized $4.0 million and $19.6 million of severance and other
restructuring costs for this program during 2020 and 2019, respectively. These costs were incurred by both the Enterprise
Solutions and Industrial Solutions segments. The cost reduction program is expected to deliver an estimated $60 million reduction
in selling, general, and administrative expenses on an annual basis; approximately $40 million of which was realized in 2020,
and the full benefit is expected to be materialized in 2021. We also expect to incur incremental costs of approximately $8 million
for this program in 2021.
FutureLink, Opterna, and SPC Integration Program
In 2019, we began a restructuring program to integrate FutureLink, Opterna, and SPC with our existing businesses. The
restructuring and integration activities were focused on achieving desired cost savings by consolidating existing and acquired
facilities and other support functions. We recognized $4.9 million and $6.1 million of severance and other restructuring costs for
this program during 2020 and 2019, respectively. These costs were incurred by the Enterprise Solutions segment. We expect to
incur incremental costs of approximately $1 million for this program in 2021.
Industrial Manufacturing Footprint Program
In 2016, we began a program to consolidate our manufacturing footprint, which was later completed in 2018. We
recognized severance and other restructuring costs of $17.7 million and $66.1 million for this program during 2018 and
cumulatively, respectively. The costs were incurred by the Enterprise Solutions and Industrial Solutions segments, as the
manufacturing locations involved in the program serve both platforms.
68
The following table summarizes the costs by segment of the programs described above as well as other immaterial programs and
acquisition integration activities:
Year Ended December 31, 2020
Enterprise Solutions
Industrial Solutions
Total
Year Ended December 31, 2019
Enterprise Solutions
Industrial Solutions
Total
Year Ended December 31, 2018
Enterprise Solutions
Industrial Solutions
Total
Severance
Other Restructuring
and Integration Costs
(In thousands)
Total Costs
$
$
$
$
$
$
1,345 $
1,706
3,051 $
5,018 $
15,736
20,754 $
548 $
240
788 $
6,374 $
2,833
9,207 $
5,790 $
—
5,790 $
14,315 $
7,522
21,837 $
7,719
4,539
12,258
10,808
15,736
26,544
14,863
7,762
22,625
The other restructuring and integration costs primarily consisted of equipment transfers, costs to consolidate operating and support
facilities, retention bonuses, relocation, travel, legal, and other costs. The majority of the other restructuring and integration costs
related to these actions were paid as incurred or are payable within the next 60 days.
The following table summarizes the costs of the various programs described above as well as other immaterial programs and
acquisition integration activities by financial statement line item in the Consolidated Statement of Operations:
Cost of sales
Selling, general and administrative expenses
Research and development expenses
Total
Accrued Severance
Years ended December 31,
2019
2018
2020
(In thousands)
$
$
704 $
11,554
—
12,258 $
3,425 $
23,119
—
26,544 $
17,962
4,546
117
22,625
The table below sets forth severance activity that occurred for the Cost Reduction Program and SPC, Opterna and FutureLink
Integration Program described above. The balances below are included in accrued liabilities (in thousands).
69
Balance at December 31, 2019
New charges
Cash payments
Foreign currency translation
Other adjustments
Balance at March 29, 2020
New charges
Cash payments
Foreign currency translation
Other adjustments
Balance at June 28, 2020
New charges
Cash payments
Foreign currency translation
Other adjustments
Balance at September 27, 2020
New charges
Cash payments
Foreign currency translation
Other adjustments
Balance at December 31, 2020
$
$
$
$
$
19,575
2,529
(4,483)
(89)
(4,147)
13,385
4,660
(4,795)
(132)
(1,420)
11,698
2,060
(3,968)
(156)
(1,541)
8,093
992
(1,823)
(95)
(82)
7,085
The other adjustments were the result of changes in estimates. We experienced higher than expected voluntary turnover during
2020, and as a result, certain previously approved severance actions were not taken.
Note 16: Long-Term Debt and Other Borrowing Arrangements
The carrying values of our long-term debt and other borrowing arrangements were as follows:
December 31,
2020
2019
(In thousands)
— $
—
$
428,295
550,665
244,740
367,110
1,590,810
(17,084)
392,910
505,170
224,520
336,780
1,459,380
(19,896)
$ 1,573,726 $ 1,439,484
Revolving credit agreement due 2022
Senior subordinated notes:
3.875% Senior subordinated notes due 2028
3.375% Senior subordinated notes due 2027
4.125% Senior subordinated notes due 2026
2.875% Senior subordinated notes due 2025
Total senior subordinated notes
Less unamortized debt issuance costs
Long-term debt
70
Revolving Credit Agreement due 2022
In 2017, we entered into an Amended and Restated Credit Agreement (the Revolver) to amend and restate our prior Revolving
Credit Agreement. The Revolver provides a $400.0 million multi-currency asset-based revolving credit facility. The borrowing
base under the Revolver includes eligible accounts receivable; inventory; and property, plant and equipment of certain of our
subsidiaries in the U.S., Canada, Germany, and the Netherlands. The maturity date of the Revolver is May 16, 2022. Interest on
outstanding borrowings is variable, based upon LIBOR or other similar indices in foreign jurisdictions, plus a spread that ranges
from 1.25%-1.75%, depending upon our leverage position. We pay a commitment fee on our available borrowing capacity of
0.25%. In the event we borrow more than 90% of our borrowing base, we are subject to a fixed charge coverage ratio covenant.
We paid approximately $2.3 million of fees when we amended the Revolver, which are being amortized over the remaining term
of the Revolver. Due to the initial uncertainties arising from the COVID-19 pandemic and out of an abundance of caution, in
April 2020 we borrowed $190.0 million on our Revolver, which we fully repaid by December 31, 2020 as a result of improved
and sufficient liquidity and cash flow. As of December 31, 2020, we had no borrowings outstanding on the Revolver, and our
available borrowing capacity was $230.2 million.
Senior Subordinated Notes
In March 2018, we completed an offering for €350.0 million ($431.3 million at issuance) aggregate principal amount of 3.875%
senior subordinated notes due 2028 (the 2028 Notes). The carrying value of the 2028 Notes as of December 31, 2020 is $428.3
million. The 2028 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2028
Notes rank equal in right of payment with our senior subordinated notes due 2027, 2026, and 2025 and with any future
subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including
our Revolver. Interest is payable semiannually on March 15 and September 15 of each year, which commenced on September 15,
2018. We paid approximately $7.5 million of fees associated with the issuance of the 2028 Notes, which are being amortized over
the life of the 2028 Notes using the effective interest method. We used the net proceeds from this offering and cash on hand to
repurchase the 2023 and 2024 Notes - see further discussion below.
We have outstanding €450.0 million aggregate principal amount of 3.375% senior subordinated notes due 2027 (the 2027 Notes).
The carrying value of the 2027 Notes as of December 31, 2020 is $550.7 million. The 2027 Notes are guaranteed on a senior
subordinated basis by our current and future domestic subsidiaries. The 2027 Notes rank equal in right of payment with our senior
subordinated notes due 2028, 2026, and 2025 and with any future subordinated debt, and they are subordinated to all of our senior
debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on January 15 and
July 15 of each year.
We have outstanding €200.0 million aggregate principal amount of 4.125% senior subordinated notes due 2026 (the 2026 Notes).
The carrying value of the 2026 Notes as of December 31, 2020 is $244.7 million. The 2026 Notes are guaranteed on a senior
subordinated basis by our current and future domestic subsidiaries. The notes rank equal in right of payment with our senior
subordinated notes due 2028, 2027, and 2025 and with any future subordinated debt, and they are subordinated to all of our senior
debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on April 15 and
October 15 of each year.
We have outstanding €300.0 million aggregate principal amount of 2.875% senior subordinated notes due 2025 (the 2025 Notes).
The carrying value of the 2025 Notes as of December 31, 2020 is $367.1 million. The 2025 Notes are guaranteed on a senior
subordinated basis by our current and future domestic subsidiaries. The 2025 Notes rank equal in right of payment with our senior
subordinated notes due 2028, 2027, and 2026 and with any future subordinated debt, and they are subordinated to all of our senior
debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on March 15 and
September 15 of each year.
We had outstanding $200 million aggregate principal amount of 5.25% senior subordinated notes due 2024 (the 2024 Notes). In
March 2018, we repurchased $188.7 million of the 2024 Notes outstanding for cash consideration of $199.8 million, including a
prepayment penalty and recognized a $13.8 million loss on debt extinguishment including the write-off of unamortized debt
issuance costs. In April 2018, we repurchased the remaining 2024 Notes outstanding for cash consideration of $11.9 million,
including a prepayment penalty, and recognized a $0.8 million loss on debt extinguishment including the write-off of unamortized
debt issuance costs.
We had outstanding €200.0 million aggregate principal amount of 5.5% senior subordinated notes due 2023 (the 2023 Notes). In
March 2018, we repurchased €143.1 million of the €200.0 million 2023 Notes outstanding for cash consideration of
€147.8 million ($182.1 million), including a prepayment penalty and recognized a $6.2 million loss on debt extinguishment
including the write-off of unamortized debt issuance costs. In April 2018, we repurchased the remaining 2023 Notes outstanding
for cash consideration of €58.5 million ($71.6 million), including a prepayment penalty, and recognized a $2.2 million loss on
debt extinguishment including the write-off of unamortized debt issuance costs.
71
The senior subordinated notes due 2025, 2026, 2027 and 2028 are redeemable after September 15, 2020, October 15, 2021, July
15, 2022, and March 15, 2023, respectively, at the following redemption prices as a percentage of the face amount of the notes:
Senior Subordinated Notes due
2025
2026
2027
2028
Year
Percentage
Year
Percentage
Year
Percentage
Year
Percentage
2020
2021
2022 and
thereafter
101.438 % 2021
100.719 % 2022
100.000 % 2023
102.063 % 2022
101.375 % 2023
100.688 % 2024
101.688 % 2023
101.125 % 2024
100.563 % 2025
2024 and
thereafter
100.000 %
2025 and
thereafter
100.000 %
2026 and
thereafter
101.938 %
101.292 %
100.646 %
100.000 %
Fair Value of Long-Term Debt
The fair value of our senior subordinated notes as of December 31, 2020 was approximately $1,633.7 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 $1,590.8 million as of December 31, 2020.
Maturities
Maturities on outstanding long-term debt and other borrowings during each of the five years subsequent to December 31, 2020
are as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
$
—
—
—
—
367,110
1,223,700
$ 1,590,810
Note 17: Net Investment Hedge
All of our euro denominated notes were issued by Belden Inc., a USD functional currency entity. As of December 31, 2020,
€767.8 million of our outstanding foreign denominated debt is designated as a net investment hedge on the foreign currency risk
of our net investment in our euro foreign operations. The objective of the hedge is to protect the net investment in the foreign
operation against adverse changes in the euro exchange rate. The transaction gain or loss is reported in the translation adjustment
section of other comprehensive income. For the years ended December 31, 2020, 2019 and 2018, the transaction gain/(loss)
associated with the net investment hedge reported in other comprehensive income was $(56.2) million, $26.6 million and $87.5
million, respectively. During 2020, we de-designated €532.2 million of our outstanding debt that was previously designated as a
net investment hedge. After the de-designation, transaction gains or losses associated with this €532.2 million of debt are reported
in income from continuing operations.
72
Note 18: Income Taxes
Income (loss) before taxes:
United States operations
Foreign operations
Income before taxes
Income tax expense (benefit):
Currently payable
United States federal
United States state and local
Foreign
Deferred
United States federal
United States state and local
Foreign
Income tax expense
Years ended December 31,
2020
2019
2018
(in thousands)
(117,819) $
183,946
66,127 $
42,833 $
109,577
152,410 $
115,500
114,580
230,080
273 $
91
11,511
11,875
(1,754)
(2,310)
3,913
(151)
11,724 $
21,893 $
3,090
13,859
38,842
7,567
(1,205)
(2,685)
3,677
42,519 $
31,730
3,912
16,968
52,610
7,220
(31)
3,137
10,326
62,936
$
$
$
$
In addition to the above income tax expense associated with continuing operations, we also recorded an income tax benefit
associated with discontinued operations of $22.6 million, $27.2 million, and $3.3 million in 2020, 2019, and 2018, respectively.
Effective income tax rate reconciliation from continuing operations:
United States federal statutory rate
State and local income taxes
Impact of change in tax contingencies
Foreign income tax rate differences
Impact of change in deferred tax asset valuation allowance
Domestic permanent differences and tax credits
Impact of tax reform
Impact of CARES act
Years Ended December 31,
2020
2019
2018
21.0%
(2.6)%
2.3%
(38.2)%
3.1%
33.9%
—%
(1.8)%
17.7%
21.0%
1.2%
—%
(8.6)%
9.2%
5.1%
—%
—%
27.9%
21.0%
1.5%
(0.7)%
(1.0)%
0.3%
1.9%
4.4%
—%
27.4%
In 2020, the most significant difference between the U.S. federal statutory tax rate and our effective tax rate was the impact of
foreign tax rate differences. Foreign tax rate differences resulted in an income tax benefit of $25.3 million, $13.1 million, and
$2.4 million in 2020, 2019, and 2018, respectively. Additionally, in 2020, 2019 and 2018, our income tax expense was reduced
by $4.0 million, $3.9 million, and $3.0 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.
An additional 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 expense from domestic permanent differences
and tax credits of $22.4 million in 2020, primarily associated with our foreign income inclusions.
In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law in the United States.
The Company generated a loss in the U.S. which will be carried back to prior years, as permitted by the CARES Act. The net
impact to the tax provision as a result of the net operating loss carry back was a benefit of $1.2 million, primarily associated with
the re-rate of the net operating loss carry back period.
73
If we were to repatriate 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. However, it is our intent to permanently reinvest the earnings of our
non-U.S. subsidiaries in those operations and for continued non-U.S. growth opportunities. As a result, as of December 31, 2020,
we have not made a provision for U.S. or additional foreign withholding taxes.
Components of deferred income tax balances:
Deferred income tax liabilities:
Plant, equipment, and intangibles
Right of use asset
Deferred income tax assets:
Postretirement, pensions, and stock compensation
Reserves and accruals
Net operating loss, capital loss, and tax credit carryforwards
Lease liability
Valuation allowances
Net deferred income tax liability
December 31,
2020
2019
(In thousands)
$
(92,271) $
(17,610)
(109,881)
(96,254)
(16,906)
(113,160)
35,394
24,388
107,028
18,515
(84,308)
101,017
(8,864) $
28,169
15,395
76,456
17,882
(48,251)
89,651
(23,509)
$
On July 2, 2020, we completed the divestiture of Grass Valley to Black Dragon Capital. The increase in pensions and reserves is
primarily due to the divestiture of Grass Valley. We derived $23.8 million of deferred tax assets in relation to a capital loss in the
U.S. for the divestiture of Grass Valley. The increase in deferred tax valuation allowances is primarily due to the valuation
allowance against the capital loss of $23.8 million that we do not expect to be able to realize prior to expiration and the valuation
allowance against the seller’s note allowance.
As of December 31, 2020, we had $205.4 million of gross net operating loss carryforwards and $57.1 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: $0.9 million in 2020, $19.7 million between 2021 and 2024, and $126.8 million between 2025 and
2040. Net operating loss with an indefinite carryforward period total $58.0 million. Of the $205.4 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
$137.1 million of these net operating loss carryforwards within their respective expiration periods. A valuation allowance has
been recorded on the remaining portion of the net operating loss carryforwards.
Unless otherwise utilized, tax credit carryforwards of $57.1 million will expire as follows: $2.1 million between 2020 and 2024
and $49.6 million between 2025 and 2040. Tax credit carryforwards with an indefinite carryforward period total $5.4 million. We
have determined, based on the weight of all available evidence, both positive and negative, that we will utilize $17.3 million of
these tax credit carryforwards within their respective expiration periods. A valuation allowance has been recorded on the
remaining portion of the tax credit carryforwards.
As of December 31, 2020, we had $100.5 million of gross capital loss carryforwards in the U.S. with a full valuation allowance
as we do not expect to be able to utilize the capital loss prior to expiration.
The following tables summarize our net operating losses carryforwards and tax credit carryforwards as of December 31, 2020 by
jurisdiction:
74
Australia
Germany
Japan
Luxembourg
Netherlands
Other
United Kingdom
United States - Federal and various states
Total
United States
Canada
Total
Net Operating Loss
Carryforwards
(In thousands)
10,546
15,852
653
163
6,578
20,723
10,720
140,117
205,352
$
$
Tax Credit Carryforwards
(In thousands)
$
$
56,617
492
57,109
In 2020, we recognized a net $1.8 million increase to reserves for uncertain tax positions. A reconciliation of the beginning and
ending amounts of unrecognized tax benefits is as follows:
Balance at beginning of year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years - Settlement
Balance at end of year
2020
2019
(In thousands)
6,779 $
548
1,574
(328)
8,573 $
6,591
488
—
(300)
6,779
$
$
The balance of $8.6 million at December 31, 2020, reflects tax positions that, if recognized, would impact our effective tax rate.
As of December 31, 2020, we believe it is reasonably possible that $1.7 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. We have approximately $0.2 million and $0.0 million accrued for the payment of interest and penalties as of
December 31, 2020 and 2019, respectively.
Our federal tax return for the tax years 2017 and later remain subject to examination by the Internal Revenue Service. Our state
and foreign income tax returns for the tax years 2012 and later remain subject to examination by various state and foreign tax
authorities.
Note 19: 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. Certain defined benefit plans in the United
Kingdom are frozen and additional benefits are not being earned by the participants. The U.S. defined benefit pension plan is
closed to new entrants. 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.
75
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 2020, 2019,
and 2018 was $10.0 million, $12.1 million, and $11.8 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.
Years Ended December 31,
Change in benefit obligation:
Benefit obligation, beginning of year
Service cost
Interest cost
Participant contributions
Actuarial loss
Divestitures and acquisitions
Settlements
Curtailments
Plan amendments
Foreign currency exchange rate changes
Benefits paid
Benefit obligation, end of year
Years Ended December 31,
Change in plan assets:
Fair value of plan assets, beginning of year
Actual return on plan assets
Employer contributions
Plan participant contributions
Settlements
Foreign currency exchange rate changes
Benefits paid
Fair value of plan assets, end of year
Funded status, end of year
Amounts recognized in the balance sheets:
Prepaid benefit cost
Accrued benefit liability, current
Accrued benefit liability, noncurrent
Net funded status
Pension Benefits
Other Benefits
2020
2019
2020
(In thousands)
2019
(461,352) $
(3,930)
(9,729)
(73)
(42,284)
(910)
26,970
236
(226)
(15,345)
13,718
(492,925) $
(412,880) $
(3,668)
(12,261)
(86)
(39,329)
—
49
—
(9,890)
16,713
(461,352) $
(29,470) $
(33)
(809)
(5)
(110)
—
—
—
—
(427)
1,356
(29,498) $
(26,143)
(35)
(960)
(4)
(2,374)
—
—
—
(1,260)
1,306
(29,470)
Pension Benefits
Other Benefits
2020
2019
2020
2019
(In thousands)
355,726 $
32,470
6,393
73
(26,945)
7,803
(13,718)
361,802 $
311,509 $
45,896
5,673
86
—
9,275
(16,713)
355,726 $
— $
—
1,351
5
—
—
(1,356)
— $
—
—
1,302
4
—
—
(1,306)
—
(131,123) $
(105,626) $
(29,498) $
(29,470)
4,780 $
(3,558)
(132,345)
(131,123) $
5,542 $
(3,000)
(108,168)
(105,626) $
— $
(1,443)
(28,055)
(29,498) $
—
(1,411)
(28,059)
(29,470)
$
$
$
$
$
$
$
The accumulated benefit obligation for all defined benefit pension plans was $518.4 million and $456.9 million at December 31,
2020 and 2019, respectively.
76
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with a
projected benefit obligation in excess of plan assets were $463.2 million, $459.2 million, and $297.8 million, respectively, as of
December 31, 2020 and were $404.9 million, $400.4 million, and $293.7 million, respectively, as of December 31, 2019.
The accumulated benefit obligation and fair value of plan assets for other postretirement benefit plans with an accumulated benefit
obligation in excess of plan assets were $59.2 million and $64.0 million, respectively, as of December 31, 2020 and were
$29.5 million and $0 million, respectively, as of December 31, 2019.
The following table provides the components of net periodic benefit costs for the plans.
Years Ended December 31,
Components of net periodic benefit cost:
Pension Benefits
2019
2020
2018
2020
(In thousands)
Other Benefits
2019
2018
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credit)
Settlement loss (gain)
Net loss (gain) recognition
Net periodic benefit cost
$
$
3,930 $
9,729
(16,357)
190
3,153
2,930
3,575 $
3,668 $
12,261
(15,699)
169
(7)
1,432
1,824 $
4,579 $
11,480
(16,389)
(42)
1,342
2,775
3,745 $
33 $
809
—
—
—
(59)
783 $
35 $
960
—
—
—
(133)
862 $
47
945
—
—
—
(12)
980
We recorded settlement losses totaling $3.2 million during 2020 and $1.3 million during 2018. The settlement losses were the
result of lump-sum payments to participants that exceeded the sum of the pension plan's respective annual service cost and interest
cost amounts.
The following table presents the assumptions used in determining the benefit obligations and the net periodic benefit cost amounts.
Pension Benefits
Years Ended December 31,
2020
2019
Other Benefits
Years Ended December 31,
2020
2019
Weighted average assumptions for benefit obligations at year end:
Discount rate
Salary increase
Cash balance interest credit rate
Weighted average assumptions for net periodic cost for the year:
Discount rate
Salary increase
Cash balance interest credit rate
Expected return on assets
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year
Rate that the cost trend rate gradually declines to
Year that the rate reaches the rate it is assumed to remain at
1.5 %
3.3 %
4.6 %
2.2 %
3.5 %
4.0 %
4.9 %
N/A
N/A
N/A
2.2 %
3.5 %
4.0 %
3.1 %
3.6 %
4.7 %
5.0 %
N/A
N/A
N/A
2.5 %
N/A
N/A
2.9 %
N/A
N/A
N/A
5.5 %
5.0 %
2026
2.9 %
N/A
N/A
3.7 %
N/A
N/A
N/A
5.6 %
5.0 %
2023
77
Plan assets are invested using a total return investment approach whereby a mix of equity securities and fixed income securities
are used to preserve asset values, diversify risk, and achieve our target investment return benchmark. Investment strategies and
asset allocations are based on consideration of the plan liabilities, the plan’s funded status, and our financial condition. Investment
performance and asset allocation are measured and monitored on an ongoing basis.
Plan assets are managed in a balanced portfolio comprised of two major components: an asset growth portion and an asset
protection portion. The expected role of asset growth investments is to maximize the long-term real growth of assets, while the
role of asset protection investments is to generate current income, provide for more stable periodic returns, and provide some
protection against a permanent loss of capital.
Absent regulatory or statutory limitations, the target asset allocation for the investment of the assets for our ongoing pension plans
is 30-50% in asset protection investments and 50-70% in asset growth investments and for our pension plans where the majority
of the participants are in payment or terminated vested status is 50-90% in asset protection investments and 10-50% in asset
growth investments. Asset growth investments include a diversified mix of U.S. and international equity, primarily invested
through investment funds. Asset protection investments 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 securities and instruments 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.
December 31, 2020
December 31, 2019
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Fair Market
Value at
December
31, 2020
Significant
Observable
Inputs
(Level 2)
Investments
Measured at
NAV
Fair Market
Value at
December
31, 2019
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Investments
Measured at
NAV
(In thousands)
(In thousands)
Asset Category:
61,630
Equity securities(a)
U.S. equities fund $ 86,059 $
Non-U.S. equities
fund
Debt securities(b)
Government bond
fund
Corporate bond
fund
Fixed income
fund(c)
Other
investments(d)
Cash & equivalents
98,418
82,434
7,320
17,367
8,574
$ 361,802 $
Total
3,012 $
— $
83,047 $ 131,563 $
2,793 $
— $ 128,770
5,602
—
56,028
54,496
5,949
—
48,547
—
—
—
772
97,646
74,219
12,150
70,284
40,940
—
7,320
35,895
—
3,230
11,844 $ 12,922 $ 337,036 $ 355,726 $
17,367
5,344
9,462
9,151
—
—
—
—
—
745
73,474
9,854
31,086
33,701
2,194
—
167
9,462
—
—
8,984
8,909 $ 44,300 $ 302,517
(a) This category includes investments in actively managed and indexed investment funds that invest in a diversified pool of
equity securities of companies located in the U.S., Canada, Western Europe and other developed countries throughout the
world. The funds are valued using the net asset value method in which an average of the market prices for the underlying
investments is used to value the fund. Equity securities held in separate accounts are valued based on observable quoted
prices on active exchanges. Funds which are valued using the net asset value method are not included in the fair value
hierarchy.
78
(b) This category includes investments in investment funds that invest in U.S. treasuries; other national, state and local
government bonds; and corporate bonds of highly rated companies from diversified industries. The funds are valued using
the net asset value method in which an average of the market prices for the underlying investments is used to value the
fund. Funds valued using the net asset value method are not included in the fair value hierarchy.
(c) This category includes guaranteed insurance contracts and annuity policies.
(d) This category includes investments in hedge funds that pursue multiple strategies in order to provide diversification and
balance risk/return objectives, real estate funds, and private equity funds. Funds valued using the net asset method are not
included in the fair value hierarchy.
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, 2020 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. 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.
2021
2022
2023
2024
2025
2026-2030
Total
Pension
Plans
Other
Plans
(In thousands)
$
$
19,497 $
19,044
20,320
21,247
19,417
99,881
199,406 $
1,460
1,457
1,458
1,463
1,466
7,413
14,717
We anticipate contributing $11.4 million and $1.5 million to our pension and other postretirement plans, respectively, during
2021.
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, 2020 and the changes in these amounts during the year ended December 31, 2020 are as follows.
Components of accumulated other comprehensive loss:
Net actuarial loss (gain)
Net prior service cost
Pension
Benefits
Other
Benefits
(In thousands)
$
$
80,671 $
2,798
83,469 $
(436)
—
(436)
79
Changes in accumulated other comprehensive loss:
Net actuarial loss (gain), beginning of year
Amortization of actuarial gain (loss)
Actuarial loss
Asset gain
Settlement loss recognized
Divestitures and acquisitions
Currency impact
Net actuarial loss (gain), end of year
Prior service cost, beginning of year
Amortization of prior service cost
Prior service cost occurring during the year
Currency impact
Prior service cost, end of year
Pension
Benefits
Other
Benefits
(In thousands)
$
$
$
$
56,746 $
(2,930)
42,048
(16,113)
(3,153)
335
3,738
80,671 $
2,661 $
(190)
226
101
2,798 $
(600)
59
110
—
—
—
(5)
(436)
—
—
—
—
—
Note 20: Comprehensive Income and Accumulated Other Comprehensive Income (Loss)
The accumulated balances related to each component of other comprehensive income (loss), net of tax, are as follows:
Pension and Other
Postretirement
Benefit Plans
(In thousands)
Accumulated
Other Comprehensive
Income (Loss)
(33,025) $
(13,281)
1,113
(12,168)
(45,193) $
(74,907)
10,376
1,113
11,489
(63,418)
(20,800)
(143,901)
5,323
(15,477)
(60,670) $
15,468
(128,433)
(191,851)
Foreign Currency
Translation
Component
Balance at December 31, 2018
Other comprehensive gain (loss) attributable to
Belden before reclassifications
Amounts reclassified from accumulated other
comprehensive income
Net current period other comprehensive gain
(loss) attributable to Belden
Balance at December 31, 2019
Other comprehensive loss attributable to
Belden before reclassifications
Amounts reclassified from accumulated other
comprehensive income
Net current period other comprehensive loss
attributable to Belden
Balance at December 31, 2020
$
$
$
(41,882) $
23,657
—
23,657
(18,225) $
(123,101)
10,145
(112,956)
(131,181) $
80
The following table summarizes the effects of reclassifications from accumulated other comprehensive income (loss):
Amount Reclassified from
Accumulated Other
Comprehensive Income (Loss)
(In thousands)
Affected Line Item in the
Consolidated Statements
of Operations and
Comprehensive Income (Loss)
Amortization of pension and other postretirement benefit plan items:
Settlement loss
Accumulated losses of Grass Valley disposal group
Actuarial losses
Prior service cost
Total before tax
Tax benefit
Total net of tax
$
$
3,153
771
2,871
190
6,985
(1,662)
5,323
(1)
(2)
(1)
(1)
(1) The amortization of these accumulated other comprehensive income (loss) components are included in the computation
of net periodic benefit costs (see Note 19).
(2) In addition, we reclassified $10.1 million of accumulated foreign currency translation losses associated with the Grass
Valley disposal group that are included in the calculation of the loss on disposal of discontinued operations.
Note 21: 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:
Total share-based compensation cost
Income tax benefit
$
19,171
4,563
2020
Years Ended December 31,
2019
(In thousands)
16,802
$
3,999
$
2018
17,143
4,080
We currently have outstanding stock appreciation rights (SARs), restricted stock units with service vesting conditions, restricted
stock units with performance vesting conditions, and restricted stock units with market conditions. We grant SARs with an
exercise price equal to the closing market price of our common stock on the grant date. Generally, SARs 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 on the second or 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 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 SAR 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.
During the year ended December 31, 2020, certain restricted stock units with performance vesting conditions were modified as a
result of approved changes to the performance targets. There were no other changes to the terms of the restricted stock units.
The modification was applicable to all employees who were previously granted the affected restricted stock units. Prior to the
modification, the performance targets were not expected to be achieved. Therefore, we had not recognized any expense for these
restricted stock units on a cumulative basis. As of the modification date, we expect to recognize total incremental compensation
expense as a result of the modification of $4.4 million, of which $1.4 million was recognized in 2020. The remaining expense
will be recognized over the applicable service periods, which extend to 2023.
81
2020
Years Ended December 31,
2019
(In thousands, except weighted average fair
value and assumptions)
$
$
2018
$
Weighted-average fair value of SARs and options granted
Total intrinsic value of SARs converted and options exercised
Tax benefit (expense) related to share-based compensation
Weighted-average fair value of restricted stock shares and units granted
Total fair value of restricted stock shares and units vested
Expected volatility
Expected term (in years)
Risk-free rate
Dividend yield
18.29
545
(560)
41.75
6,600
37.55 %
5.7
1.44 %
0.39 %
22.31
354
(101)
64.61
10,325
35.05 %
5.7
2.56 %
0.32 %
25.19
2,263
113
72.54
5,740
33.16 %
5.6
2.70 %
0.27 %
SARs and Stock Options
Weighted-
Average
Remaining
Contractual
Term
Weighted-
Average
Exercise
Price
Restricted Shares and Units
Aggregate
Intrinsic
Value
Number
Weighted-
Average
Grant-Date
Fair Value
(In thousands, except exercise prices, fair values, and contractual terms)
Number
Outstanding at January 1, 2020
Granted
Exercised or converted
Forfeited or expired
Outstanding at December 31, 2020
Vested or expected to vest at December 31, 2020
Exercisable or convertible at December 31, 2020
1,367 $
149
(38)
(167)
1,311 $
1,266 $
1,021 $
65.04
51.14
38.24
66.42
64.06
64.09
62.62
n/a
n/a
n/a
n/a
5.7 $
5.7 $
5.5 $
n/a
n/a
n/a
n/a
(29,054)
(28,096)
(24,060)
737 $
565
(102)
(247)
953 $
68.31
41.75
64.56
75.07
52.50
At December 31, 2020, the total unrecognized compensation cost related to all nonvested awards was $25.0 million. That cost
is expected to be recognized over a weighted-average period of 1.6 years.
Historically, we have issued treasury shares, if available, to satisfy award conversions and exercises.
Note 22: Preferred Stock
In 2016, we issued 5.2 million depositary shares, each of which represented 1/100th interest in a share of 6.75% Series B
Mandatory Convertible Preferred Stock (the Preferred Stock), for an offering price of $100 per depositary share. We received
approximately $501 million of net proceeds from this offering, which were used for general corporate purposes. On July 15, 2019,
all outstanding Preferred Stock was automatically converted into shares of Belden common stock at the conversion rate of 132.50,
resulting in the issuance of approximately 6.9 million shares of Belden common stock. Upon conversion, the Preferred Stock was
automatically extinguished and discharged, is no longer deemed outstanding for all purposes, and delisted from trading on the
New York Stock Exchange. For the years ended December 31, 2020, 2019, and 2018, dividends on the Preferred Stock were
$0.0 million, $18.4 million, and $34.9 million, respectively.
Note 23: Stockholder Rights Plan
On March 27, 2018, our Board of Directors authorized the redemption of all outstanding preferred share purchase rights issued
pursuant to the then existing Rights Agreement. Under the former Rights Agreement, one right was attached to each outstanding
share of common stock. The rights were redeemed at a redemption price of $0.01 per right, resulting in a total payment of $0.4
million to the holders of the rights as of the close of business on March 27, 2018.
82
Note 24: Share Repurchases
On May 25, 2017, our Board of Directors authorized a share repurchase program, which allowed us to purchase up to $200.0
million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance with
applicable securities laws and other restrictions. This program was funded with cash on hand and cash flows from operating
activities. During 2018, we repurchased 2.7 million shares of our common stock under the program for an aggregate cost of
$175.0 million and an average price per share of $64.94; exhausting the $200.0 million authorized under this share repurchase
program.
On November 29, 2018, our Board of Directors authorized another share repurchase program, which allows us to purchase up to
$300.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance
with applicable securities laws and other restrictions. During 2018, we did not repurchase any shares of our common stock under
this program. During 2019, we repurchased 0.9 million shares of our common stock under the program for an aggregate cost of
$50.0 million and an average price per share of $56.19. During 2020, we repurchased 1.0 million shares of our common stock
under the share repurchase program for an aggregate cost of $35.0 million at an average price per share of $35.83.
Note 25: Market Concentrations and Risks
Concentrations of Credit
We sell our products to many customers in several markets across multiple geographic areas. The ten largest customers, of which
six are distributors, constitute in aggregate approximately 40%, 39%, and 40% of revenues in 2020, 2019, and 2018, respectively.
Unconditional Commodity Purchase Obligations
At December 31, 2020, we were committed to purchase approximately 1.9 million pounds of copper at an aggregate fixed cost
of $6.0 million. At December 31, 2020, this fixed cost was $0.7 million less than the market cost that would be incurred on a spot
purchase of the same amount of copper. The aggregate market cost was based on the current market price of copper obtained
from the New York Mercantile Exchange.
Labor
Approximately 28% of our labor force is covered by collective bargaining agreements at various locations around the world.
Approximately 25% of our labor force is covered by collective bargaining agreements that we expect to renegotiate during 2021.
Fair Value of Financial Instruments
Our financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, and debt instruments.
The carrying amounts of cash and cash equivalents, trade receivables, and trade payables at December 31, 2020 are considered
representative of their respective fair values. The fair value of our senior subordinated notes at December 31, 2020 and 2019 was
approximately $1,633.7 million and $1,532.7 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
$1,590.8 million and $1,459.4 million as of December 31, 2020 and 2019, respectively.
Note 26: 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, 2020, we were party to unused standby letters of credit, bank guarantees, and surety bonds totaling $8.5 million,
$4.1 million, and $3.3 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.
83
Note 27: Supplemental Cash Flow Information
Supplemental cash flow information is as follows:
2020
Income tax refunds received
Income taxes paid
Interest paid
Note 28: Subsequent Events
$
Years Ended December 31,
2019
(In thousands)
4,460 $
4,695 $
(25,259)
(53,029)
(40,760)
(51,160)
2018
3,920
(52,147)
(48,519)
On January 29, 2021, we acquired privately held OTN Systems N.V., a leading provider of automation networking infrastructure
solutions, for approximately $71 million, net of cash acquired. The acquisition was funded with cash on hand. Headquartered in
Olen, Belgium, OTN Systems is a leading provider of easy to use and highly-reliable network solutions tailored for specific
applications in harsh, mission-critical environments. OTN Systems’ value-added technology allows customers to easily build,
maintain, and monitor complex networks in growing industrial markets, such as Process, Power Transmission, and Mass Transit.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In accordance with Securities Exchange Act Rules 13a-15(e) and 15d-15(e), our management, under the supervision of our Chief
Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective as of December 31, 2020.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company.
Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange
Act of 1934, as amended, as a process designed by, or under the supervision of, the company’s principal executive and principal
financial officers and effected by the company’s board of directors, management and other personnel, 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 and includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the company;
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
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. 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 that the degree of compliance with the policies or procedures may deteriorate.
84
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of
its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and
is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also
be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these
inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process
safeguards to reduce, though not eliminate, this risk.
The Company’s management assessed the effectiveness of the Company’s internal controls over financial reporting as of
December 31, 2020. In making this assessment, the Company’s management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO) in Internal Control-Integrated Framework.
Based on that assessment, the Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2020, the
Company’s internal control over financial reporting was effective.
Our internal controls over financial reporting as of December 31, 2020 have been audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report that follows.
Changes to Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the year ended December 31, 2020
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
85
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Belden Inc.
Opinion on Internal Control over Financial Reporting
We have audited Belden Inc.’s internal control over financial reporting as of December 31, 2020, 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). In our opinion, Belden Inc. (the Company) maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of Belden Inc. as of December 31, 2020 and 2019, 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, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a) and our
report dated February 16, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’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 are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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 that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
St. Louis, Missouri
February 16, 2021
86
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 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-Delinquent Section 16(a) Reports,” “Corporate
Governance-Corporate Governance Documents” and “Other Matters-Stockholder Proposals for the 2022 Annual Meeting,” as
described in the Proxy Statement.
Item 11. Executive Compensation
Incorporated herein by reference to “Executive Compensation,” “Corporate Governance-Director Compensation,” “Corporate
Governance-Related Party Transactions and Compensation Committee Interlocks” and “Corporate Governance-Board
Leadership Structure and Role in Risk Oversight” as described in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Incorporated herein by reference to “Ownership Information-Equity Compensation Plan Information on December 31, 2020” 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
2020 and 2019” and “Public Accounting Firm Information-Audit Committee’s Pre-Approval Policies and Procedures” as
described in the Proxy Statement.
87
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, 2020 and December 31, 2019
Consolidated Statements of Operations for Each of the Three Years in the Period Ended December 31, 2020
Consolidated Statements of Comprehensive Income for Each of the Three Years in the Period Ended
December 31, 2020
Consolidated Cash Flow Statements for Each of the Three Years in the Period Ended December 31, 2020
Consolidated Stockholders’ Equity Statements for Each of the Three Years in the Period Ended December 31,
2020
Notes to Consolidated Financial Statements
2.
Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts
Beginning
Balance
ASU 2016-
13 Adoption
Adjustment
Charged to
Costs and
Expenses
Divestitures/
Acquisitions
Charge
Offs
(In thousands)
Recoveries
Currency
Movement
Ending
Balance
$
2,569 $
3,137
3,709
1,011 $
—
—
2,282 $
159
353
— $
368
—
(114) $
(969)
(567)
(637) $
(86)
(176)
39 $
(40)
(182)
5,150
2,569
3,137
$ 21,245 $
17,364
19,887
— $ 15,915 $
—
—
6,403
2,801
— $
452
—
(4,540) $
(2,333)
(2,464)
(597) $
(606)
(2,675)
246 $ 32,269
21,245
(35)
17,364
(185)
Accounts Receivable —
Allowance for Doubtful
Accounts:
2020
2019
2018
Inventories —
Excess and Obsolete
Allowances:
2020
2019
2018
Deferred Income Tax Asset —
Valuation Allowance:
2020
2019
2018
$ 48,251 $
37,235
47,636
— $
—
—
3,142 $ 33,003 $
12,356
13,459
330
(2)
(303) $
—
(22,577)
(114) $
(1,629)
(928)
329 $ 84,308
48,251
(41)
37,235
(353)
All other financial statement schedules not included in this Annual Report on Form 10-K are omitted because they
are not applicable.
88
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.
89
Exhibit
Number
Description of Exhibit
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
10.1
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
Certificate of Incorporation, as amended
February 29, 2008 Form 10-K, Exhibit 3.1
Amended and Restated Bylaws
May 31, 2016 Form 8-K, Exhibit 3.1
Indenture relating to 4.125% Senior Subordinated
Notes due 2026
First Supplemental Indenture relating to 4.125%
Senior Subordinated Notes due 2026
Indenture relating to 3.375% Senior Subordinated
Notes due 2027
Indenture relating to 2.875% Senior Subordinated
Notes due 2025
Indenture relating to 3.875% Senior Subordinated
Notes due 2028
Description of the Registrant's Securities
Registered Under Section 12 of the Securities
Exchange Act of 1934
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
October 11, 2016 Form 8-K, Exhibit 4.1
June 26, 2017 Form 8-K, Exhibit 4.22
July 10, 2017 Form 8-K, Exhibit 4.1
September 22, 2017 Form 8-K, Exhibit 4.1
March 16, 2018 Form 8-K, Exhibit 4.1
August 3, 2020 Form 10-Q, Exhibit 4.1
November 15, 1993 Form 10-Q of Belden 1993
Inc., Exhibit 10.2
April 6, 2009 Proxy Statement, Appendix I
April 6,2016 Proxy Statement, Appendix II
August 3, 2016 Form 10-Q, Exhibit 10.1
Form of Performance Stock Units Award
August 3, 2016 Form 10-Q, Exhibit 10.2
Form of Restricted Stock Units Award
May 6, 2014 Form 10-Q, Exhibit 10.3
Belden Inc. Annual Cash Incentive Plan, as
amended and restated
2004 Belden CDT Inc. Non-Employee Director
Deferred Compensation Plan
Belden Supplemental Excess Defined Benefit Plan
Belden Supplemental Excess Defined Contribution
Plan
Executive Employment Agreement with John
Stroup
Filed herewith
December 21, 2004 Form 8-K, Exhibit 10.1
Filed herewith
Filed herewith
May 22, 2020 Form 8-K, Exhibit 10.1
Executive Severance Plan
July 31, 2020 Form 8-K, Exhibit 10.1
Form of Business Protection Agreement with each
of Brian Anderson, Ashish Chand, Henk Derksen,
Dean McKenna, Anshuman Mehrotra, Roel
Vestjens and Doug Zink
July 31, 2020 Form 8-K, Exhibit 10.3
90
Exhibit
Number
10.14*
10.15
14.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
101
104
Description of Exhibit
Form of Indemnification Agreement with each of
the Directors and Brian Anderson, Ashish Chand,
Henk Derksen, Dean McKenna, Anshuman
Mehrotra, John Stroup, Roel Vestjens and Doug
Zink
The filings referenced for incorporation by
reference are Company (Belden Inc.) filings unless
noted to be those of Belden 1993 Inc.
March 1, 2007 Form 10-K, Exhibit 10.39
Amended and Restated Credit Agreement
May 22, 2017, Form 8-K, Exhibit 10.1
Code of Ethics
August 25, 2020 Form 8-K, Exhibit 14.1
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
List of Subsidiaries of Belden Inc.
Consent of Independent Registered Accounting
Firm
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
The following financial statements from the
Company's Annual Report on Form 10-K for the
year ended December 31, 2020, formatted in Inline
XBRL: (i) Consolidated Balance Sheets, (ii)
Consolidated Statements of Operations, (iii)
Consolidated Statements of Comprehensive
Income, (iv) Consolidated Cash Flow Statements,
(v) Consolidated Statements of Stockholders'
Equity and (vi) Notes to Consolidated Financial
Statements, tagged as blocks of text and including
The cover page from the Company's Annual
Report on Form 10-K for the year ended
December 31, 2020, formatted in Inline XBRL
* Management contract or compensatory plan
Copies of the above Exhibits are available to shareholders at a charge of $0.25 per page, minimum order of $10.00. Direct requests
to:
Belden Inc., Attention: Corporate Secretary
1 North Brentwood Boulevard, 15th Floor
St. Louis, Missouri 63105
91
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.
Date: February 16, 2021
BELDEN INC.
By
/s/ ROEL VESTJENS
Roel Vestjens
President and Chief Executive Officer
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/ ROEL VESTJENS
Roel Vestjens
/s/ HENK DERKSEN
Henk Derksen
/s/ DOUGLAS R. ZINK
Douglas R. Zink
/s/ JOHN S. STROUP*
John S. Stroup
/s/ DAVID ALDRICH*
David Aldrich
/s/ LANCE C. BALK*
Lance C. Balk
/s/ DIANE D. BRINK*
Diane D. Brink
/s/ JUDY L. BROWN*
Judy L. Brown
/s/ NANCY CALDERON*
Nancy Calderon
/s/ BRYAN C. CRESSEY*
Bryan C. Cressey
/s/ JONATHAN KLEIN*
Jonathan Klein
/s/ GEORGE MINNICH*
George Minnich
/s/ ROEL VESTJENS
*By Roel Vestjens, Attorney-in-fact
President and Chief Executive Officer
February 16, 2021
Senior Vice President, Finance, and Chief Financial Officer
February 16, 2021
Vice President and Chief Accounting Officer
February 16, 2021
Executive Chairman
February 16, 2021
Lead Independent Director
February 16, 2021
February 16, 2021
February 16, 2021
February 16, 2021
February 16, 2021
February 16, 2021
February 16, 2021
February 16, 2021
Director
Director
Director
Director
Director
Director
Director
92