Belden Announces Results for Third Quarter 2019, Intent to Divest Grass Valley and Cost Reduction Program

ST. LOUIS--()--Belden Inc. (NYSE: BDC), a leading global supplier of specialty networking solutions, today reported fiscal third quarter 2019 results for the period ended September 29, 2019. The Company also announced two significant outcomes of its comprehensive strategic portfolio review. These include the intent to divest the Live Media business (“Grass Valley”) and a new broad-based cost reduction program that is expected to result in $40 million of annualized savings.

Third Quarter 2019

Revenues for the quarter totaled $620.3 million, decreasing $35.5 million, or 5.4%, compared to $655.8 million in the third quarter 2018. Net loss was $(297.0) million, compared to $85.9 million in the prior-year period. Net loss included a $337.0 million after-tax non-cash impairment charge related to Grass Valley. EPS totaled $(6.70) compared to $1.80 in the third quarter 2018.

Excluding Grass Valley, adjusted revenues totaled $533.1 million, decreasing $20.9 million, or 3.8%, compared to $554.0 million in the third quarter 2018. Excluding Grass Valley, adjusted EPS was $1.18 compared to $1.29 in the third quarter 2018. Adjusted results are non-GAAP measures, and a non-GAAP reconciliation table is provided as an appendix to this release.

John Stroup, President, CEO, and Chairman of Belden Inc., said, “Revenues were near the midpoint of our expected range excluding Grass Valley. Consistent with our expectations, demand trends remained softer in some of our key Industrial markets in the third quarter, but we are encouraged by the improving trends in our Broadband business.”

Intent to Divest Grass Valley

Subsequent to the end of the third quarter, the Company made the decision to pursue the divestiture of Grass Valley. Based on the approval of Belden’s Board of Directors to divest this business and the probability that such divestiture will be consummated, Grass Valley’s financial results will be presented as discontinued operations in our fourth quarter and full year 2019 financial statements and prior periods will be recast for consistency.

Mr. Stroup remarked, “We completed a rigorous strategic review of our portfolio of businesses, and today’s announcement marks an important outcome. We concluded that it is in the best interests of our shareholders, customers, and employees to separate Grass Valley from Belden. This will enable Grass Valley to more effectively execute its strategic plan and pursue growth opportunities. Further, this separation will simplify Belden’s portfolio and improve organic growth and revenue visibility.”

The remaining Belden portfolio will consist of strong businesses in attractive Industrial and Enterprise markets, each aligned with powerful secular trends. These include industrial automation, cybersecurity, broadband & 5G, and smart buildings. This portfolio, while smaller, offers improved predictability and multiple platforms for accelerating organic growth and margin expansion. In addition, we continue to see numerous opportunities for disciplined capital deployment as we invest in compelling inorganic opportunities in these robust markets,” said Mr. Stroup.

Cost Reduction Program

The divestiture of Grass Valley provides an opportunity for a broad-based organizational recalibration. As a result, the Company announced a cost reduction program that is designed to improve performance and enhance margins, delivering a $40 million annualized reduction in selling, general, and administrative expenses. The Company intends to deliver improvements by streamlining the organizational structure and investing in technology to drive productivity. These actions will begin immediately, with some benefit in 2020, and the full benefit in 2021.

Belden has a long track record of substantial growth, margin expansion, and shareholder value creation, but we are not satisfied with our recent performance. We are reaffirming our commitment to our stated financial goals, including a total revenue CAGR of 5-7% and EBITDA margins of 20-22%. The Company will be well-positioned to achieve these goals after executing these actions. Importantly, the expected cost savings will more than offset the free cash flow dilution associated with the divestiture of Grass Valley,” said Mr. Stroup.

Outlook

Near-term demand trends remain challenging, but our simplified portfolio of businesses is aligned with long-term secular trends and positioned for profitable growth. We are updating our expectations of revenue and EPS from continuing operations since Grass Valley will be presented as discontinued operations in our fourth quarter and full year 2019 financial statements,” said Mr. Stroup.

The Company expects fourth quarter 2019 revenues to be $510 - $530 million. For the full year ending December 31, 2019, the Company now expects revenues to be $2.092 - $2.112 billion.

The Company expects fourth quarter 2019 GAAP EPS to be $0.00 - $0.15. For the full year ending December 31, 2019, the Company now expects GAAP EPS of $2.04 - $2.19. This full year 2019 guidance relates to income from continuing operations and excludes Grass Valley, the $337.0 million after-tax non-cash impairment charge related to Grass Valley and an estimated loss of $75 million upon a sale of Grass Valley, primarily related to its accumulated foreign currency translation losses, as these items will be included in income (losses) from discontinued operations.

The Company expects fourth quarter 2019 adjusted EPS to be $1.00 - $1.15. For the full year ending December 31, 2019, the Company now expects adjusted EPS of $4.32 - $4.47.

Earnings Conference Call

Management will host a conference call today at 8:30 am ET to discuss results of the quarter. The listen-only audio of the conference call will be broadcast live via the Internet at http://investor.belden.com. The dial-in number for participants in the U.S. is 888-599-8686; the dial-in number for participants outside the U.S. is 720-543-0302. A replay of this conference call will remain accessible in the investor relations section of the Company’s website for a limited time.

Net Income and Earnings per Share (EPS)

All references to Net Income and EPS within this earnings release refer to net income attributable to Belden and income from continuing operations per diluted share attributable to Belden common stockholders, respectively.

Use of Non-GAAP Financial Information

Adjusted results are non-GAAP measures that reflect certain adjustments the Company makes to provide insight into operating results. GAAP to non-GAAP reconciliations accompany the condensed consolidated financial statements included in this release and have been published to the investor relations section of the Company’s website at http://investor.belden.com.

 

BELDEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 29,
2019

 

September 30,
2018

 

September 29,
2019

 

September 30,
2018

 

 

(In thousands, except per share data)

Revenues

 

$

620,318

 

 

$

655,774

 

 

$

1,845,023

 

 

$

1,929,978

 

Cost of sales

 

(384,916

)

 

(394,917

)

 

(1,143,870

)

 

(1,180,931

)

Gross profit

 

235,402

 

 

260,857

 

 

701,153

 

 

749,047

 

Selling, general and administrative expenses

 

(120,169

)

 

(132,716

)

 

(365,439

)

 

(396,430

)

Research and development expenses

 

(31,351

)

 

(33,471

)

 

(100,539

)

 

(107,781

)

Amortization of intangibles

 

(22,243

)

 

(25,533

)

 

(67,952

)

 

(74,990

)

Goodwill and other asset impairment

 

(342,146

)

 

 

 

(342,146

)

 

 

Gain from patent litigation

 

 

 

62,141

 

 

 

 

62,141

 

Operating income (loss)

 

(280,507

)

 

131,278

 

 

(174,923

)

 

231,987

 

Interest expense, net

 

(14,200

)

 

(14,472

)

 

(42,561

)

 

(46,538

)

Non-operating pension benefit

 

489

 

 

1,356

 

 

1,517

 

 

824

 

Loss on debt extinguishment

 

 

 

 

 

 

 

(22,990

)

Income (loss) before taxes

 

(294,218

)

 

118,162

 

 

(215,967

)

 

163,283

 

Income tax expense

 

(2,797

)

 

(32,304

)

 

(13,580

)

 

(46,063

)

Net income (loss)

 

(297,015

)

 

85,858

 

 

(229,547

)

 

117,220

 

Less: Net income (loss) attributable to noncontrolling interests

 

(6

)

 

(23

)

 

60

 

 

(148

)

Net income (loss) attributable to Belden

 

(297,009

)

 

85,881

 

 

(229,607

)

 

117,368

 

Less: Preferred stock dividends

 

971

 

 

8,732

 

 

18,437

 

 

26,198

 

Net income (loss) attributable to Belden common stockholders

 

$

(297,980

)

 

$

77,149

 

 

$

(248,044

)

 

$

91,170

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares and equivalents:

 

 

 

 

 

 

 

 

Basic

 

44,444

 

 

40,510

 

 

41,090

 

 

40,960

 

Diluted

 

44,444

 

 

47,678

 

 

41,090

 

 

41,268

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per share attributable to Belden common stockholders:

 

$

(6.70

)

 

$

1.90

 

 

$

(6.04

)

 

$

2.23

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per share attributable to Belden common stockholders:

 

$

(6.70

)

 

$

1.80

 

 

$

(6.04

)

 

$

2.21

 

 

 

 

 

 

 

 

 

 

Common stock dividends declared per share

 

$

0.05

 

 

$

0.05

 

 

$

0.15

 

 

$

0.15

 

 

BELDEN INC.

OPERATING SEGMENT INFORMATION

(Unaudited)

 

 

Enterprise
Solutions

 

Industrial
Solutions

 

Total
Segments

 

(In thousands, except percentages)

 

 

 

 

 

 

 

For the three months ended September 29, 2019

 

 

 

 

 

 

Segment Revenues

 

$

368,080

 

 

$

252,238

 

 

$

620,318

 

Segment EBITDA

 

56,814

 

 

44,614

 

 

101,428

 

Segment EBITDA margin

 

15.4

%

 

17.7

%

 

16.4

%

Depreciation expense

 

7,381

 

 

4,766

 

 

12,147

 

Amortization of intangibles

 

9,780

 

 

12,463

 

 

22,243

 

Amortization of software development intangible assets

 

1,161

 

 

36

 

 

1,197

 

Severance, restructuring, and acquisition integration costs

 

4,045

 

 

 

 

4,045

 

Purchase accounting effects of acquisitions

 

(186

)

 

 

 

(186

)

Goodwill and other asset impairment

 

342,146

 

 

 

 

342,146

 

 

 

 

 

 

 

 

For the three months ended September 30, 2018

 

 

 

 

 

 

Segment Revenues

 

$

392,080

 

 

$

266,923

 

 

$

659,003

 

Segment EBITDA

 

72,210

 

 

53,750

 

 

125,960

 

Segment EBITDA margin

 

18.4

%

 

20.1

%

 

19.1

%

Depreciation expense

 

7,092

 

 

4,579

 

 

11,671

 

Amortization of intangibles

 

12,322

 

 

13,211

 

 

25,533

 

Amortization of software development intangible assets

 

620

 

 

 

 

620

 

Severance, restructuring, and acquisition integration costs

 

9,528

 

 

2,160

 

 

11,688

 

Purchase accounting effects of acquisitions

 

821

 

 

 

 

821

 

Deferred revenue adjustments

 

3,229

 

 

 

 

3,229

 

 

 

 

 

 

 

 

For the nine months ended September 29, 2019

 

 

 

 

 

 

Segment Revenues

 

$

1,064,469

 

 

$

780,554

 

 

$

1,845,023

 

Segment EBITDA

 

149,855

 

 

139,531

 

 

289,386

 

Segment EBITDA margin

 

14.1

%

 

17.9

%

 

15.7

%

Depreciation expense

 

22,655

 

 

14,515

 

 

37,170

 

Amortization of intangibles

 

29,270

 

 

38,682

 

 

67,952

 

Amortization of software development intangible assets

 

3,119

 

 

87

 

 

3,206

 

Severance, restructuring, and acquisition integration costs

 

10,904

 

 

 

 

10,904

 

Purchase accounting effects of acquisitions

 

1,845

 

 

 

 

1,845

 

Goodwill and other asset impairment

 

342,146

 

 

 

 

342,146

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2018

 

 

 

 

 

 

Segment Revenues

 

$

1,142,765

 

 

$

795,102

 

 

$

1,937,867

 

Segment EBITDA

 

199,943

 

 

153,401

 

 

353,344

 

Segment EBITDA margin

 

17.5

%

 

19.3

%

 

18.2

%

Depreciation expense

 

21,465

 

 

14,097

 

 

35,562

 

Amortization of intangibles

 

35,301

 

 

39,689

 

 

74,990

 

Amortization of software development intangible assets

 

1,344

 

 

 

 

1,344

 

Severance, restructuring, and acquisition integration costs

 

46,949

 

 

10,061

 

 

57,010

 

Purchase accounting effects of acquisitions

 

2,359

 

 

 

 

2,359

 

Deferred revenue adjustments

7,889

7,889

 
BELDEN INC.

OPERATING SEGMENT RECONCILIATION TO CONSOLIDATED RESULTS

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 29,
2019

 

September 30,
2018

 

September 29,
2019

 

September 30,
2018

 

 

(In thousands)

Total Segment Revenues

 

$

620,318

 

 

$

659,003

 

 

$

1,845,023

 

 

$

1,937,867

 

Deferred revenue adjustments

 

 

 

(3,229

)

 

 

 

(7,889

)

Consolidated Revenues

 

$

620,318

 

 

$

655,774

 

 

$

1,845,023

 

 

$

1,929,978

 

 

 

 

 

 

 

 

 

 

Total Segment EBITDA

 

$

101,428

 

 

$

125,960

 

 

$

289,386

 

 

$

353,344

 

Eliminations

 

(343

)

 

(627

)

 

(1,086

)

 

(1,616

)

Total non-operating pension benefit

 

489

 

 

1,356

 

 

1,517

 

 

824

 

Consolidated Adjusted EBITDA (1)

 

101,574

 

 

126,689

 

 

289,817

 

 

352,552

 

Goodwill and other asset impairment

 

(342,146

)

 

 

 

(342,146

)

 

 

Amortization of intangibles

 

(22,243

)

 

(25,533

)

 

(67,952

)

 

(74,990

)

Interest expense, net

 

(14,200

)

 

(14,472

)

 

(42,561

)

 

(46,538

)

Depreciation expense

 

(12,147

)

 

(11,671

)

 

(37,170

)

 

(35,562

)

Severance, restructuring, and acquisition integration costs

 

(4,045

)

 

(11,688

)

 

(10,904

)

 

(57,010

)

Amortization of software development intangible assets

 

(1,197

)

 

(620

)

 

(3,206

)

 

(1,344

)

Purchase accounting effects related to acquisitions

 

186

 

 

(821

)

 

(1,845

)

 

(2,359

)

Loss on debt extinguishment

 

 

 

 

 

 

 

(22,990

)

Deferred revenue adjustments

 

 

 

(3,229

)

 

 

 

(7,889

)

Loss on sale of assets

 

 

 

 

 

 

 

(94

)

Gain from patent litigation

 

 

 

62,141

 

 

 

 

62,141

 

Costs related to patent litigation

 

 

 

(2,634

)

 

 

 

(2,634

)

Consolidated income (loss) before taxes

 

$

(294,218

)

 

$

118,162

 

 

$

(215,967

)

 

$

163,283

 

(1) 

Consolidated Adjusted EBITDA is a non-GAAP measure. See Reconciliation of Non-GAAP Measures for additional information.

 

BELDEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

September 29,
2019

 

December 31,
2018

 

 

(Unaudited)

 

 

 

 

(In thousands)

ASSETS

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

296,742

 

 

$

420,610

 

Receivables, net

 

460,044

 

 

465,939

 

Inventories, net

 

290,995

 

 

316,418

 

Other current assets

 

74,876

 

 

55,757

 

Total current assets

 

1,122,657

 

 

1,258,724

 

Property, plant and equipment, less accumulated depreciation

 

384,183

 

 

365,970

 

Operating lease right-of-use assets

 

78,788

 

 

 

Goodwill

 

1,265,006

 

 

1,557,653

 

Intangible assets, less accumulated amortization

 

471,386

 

 

511,093

 

Deferred income taxes

 

88,118

 

 

56,018

 

Other long-lived assets

 

31,857

 

 

29,863

 

 

 

$

3,441,995

 

 

$

3,779,321

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

 

 

Accounts payable

 

$

275,889

 

 

$

352,646

 

Accrued liabilities

 

301,599

 

 

364,276

 

Total current liabilities

 

577,488

 

 

716,922

 

Long-term debt

 

1,403,670

 

 

1,463,200

 

Postretirement benefits

 

127,090

 

 

132,791

 

Deferred income taxes

 

75,192

 

 

39,943

 

Long-term operating lease liabilities

 

73,436

 

 

 

Other long-term liabilities

 

40,309

 

 

38,877

 

Stockholders’ equity:

 

 

 

 

Preferred stock

 

 

 

1

 

Common stock

 

503

 

 

503

 

Additional paid-in capital

 

807,087

 

 

1,139,395

 

Retained earnings

 

667,703

 

 

922,000

 

Accumulated other comprehensive loss

 

(29,111

)

 

(74,907

)

Treasury stock

 

(307,482

)

 

(599,845

)

Total Belden stockholders’ equity

 

1,138,700

 

 

1,387,147

 

Noncontrolling interests

 

6,110

 

 

441

 

Total stockholders’ equity

 

1,144,810

 

 

1,387,588

 

 

 

$

3,441,995

 

 

$

3,779,321

 

 

BELDEN INC.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)

 

 

Nine Months Ended

 

 

September 29,
2019

 

September 30,
2018

 

 

(In thousands)

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

(229,547

)

 

117,220

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Goodwill and other asset impairment

 

342,146

 

 

 

Depreciation and amortization

 

108,328

 

 

111,896

 

Share-based compensation

 

12,115

 

 

14,657

 

Loss on debt extinguishment

 

 

 

22,990

 

Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:

 

 

 

 

Receivables

 

6,002

 

 

(25,338

)

Inventories

 

32,261

 

 

(16,642

)

Accounts payable

 

(78,346

)

 

(81,296

)

Accrued liabilities

 

(70,368

)

 

(29,474

)

Income taxes

 

(19,650

)

 

4,463

 

Other assets

 

(9,088

)

 

(13,267

)

Other liabilities

 

(4,336

)

 

(4,350

)

Net cash provided by operating activities

 

89,517

 

 

100,859

 

Cash flows from investing activities:

 

 

 

 

Capital expenditures

 

(74,068

)

 

(63,451

)

Cash used to acquire businesses, net of cash acquired

 

(50,951

)

 

(84,580

)

Proceeds from disposal of tangible assets

 

19

 

 

1,556

 

Proceeds from disposal of business

 

 

 

40,171

 

Net cash used for investing activities

 

(125,000

)

 

(106,304

)

Cash flows from financing activities:

 

 

 

 

Payments under share repurchase program

 

(50,000

)

 

(125,000

)

Cash dividends paid

 

(32,153

)

 

(32,421

)

Withholding tax payments for share-based payment awards

 

(2,063

)

 

(2,004

)

Other

 

(232

)

 

 

Payments under borrowing arrangements

 

 

 

(484,757

)

Debt issuance costs paid

 

 

 

(7,609

)

Redemption of stockholders' rights agreement

 

 

 

(411

)

Borrowings under credit arrangements

 

 

 

431,270

 

Net cash used for financing activities

 

(84,448

)

 

(220,932

)

Effect of foreign currency exchange rate changes on cash and cash equivalents

 

(3,937

)

 

(5,704

)

Decrease in cash and cash equivalents

 

(123,868

)

 

(232,081

)

Cash and cash equivalents, beginning of period

 

420,610

 

 

561,108

 

Cash and cash equivalents, end of period

 

$

296,742

 

 

$

329,027

 

 

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.

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 29,
2019

 

September 30,
2018

 

September 29,
2019

 

September 30,
2018

 

 

(In thousands, except percentages and per share amounts)

GAAP revenues

 

$

620,318

 

 

$

655,774

 

 

$

1,845,023

 

 

$

1,929,978

 

Deferred revenue adjustments

 

 

 

3,229

 

 

 

 

7,889

 

Adjusted revenues

 

$

620,318

 

 

$

659,003

 

 

$

1,845,023

 

 

$

1,937,867

 

 

 

 

 

 

 

 

 

 

Less: Grass Valley adjusted revenue

 

87,221

 

 

104,966

 

 

263,434

 

 

324,217

 

Adjusted revenues excluding Grass Valley

 

$

533,097

 

 

$

554,037

 

 

$

1,581,589

 

 

$

1,613,650

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

235,402

 

 

$

260,857

 

 

$

701,153

 

 

$

749,047

 

Amortization of software development intangible assets

 

1,197

 

 

620

 

 

3,206

 

 

1,344

 

Severance, restructuring, and acquisition integration costs

 

792

 

 

4,820

 

 

1,777

 

 

21,482

 

Deferred revenue adjustments

 

 

 

3,229

 

 

 

 

7,889

 

Purchase accounting effects related to acquisitions

 

(186

)

 

558

 

 

532

 

 

1,833

 

Adjusted gross profit

 

$

237,205

 

 

$

270,084

 

 

$

706,668

 

 

$

781,595

 

 

 

 

 

 

 

 

 

 

Less: Grass Valley adjusted gross profit

 

37,709

 

 

51,409

 

 

114,105

 

 

152,624

 

Adjusted gross profit excluding Grass Valley

 

$

199,496

 

 

$

218,675

 

 

$

592,563

 

 

$

628,971

 

 

 

 

 

 

 

 

 

 

GAAP gross profit margin

 

37.9

%

 

39.8

%

 

38.0

%

 

38.8

%

Adjusted gross profit margin

 

38.2

%

 

41.0

%

 

38.3

%

 

40.3

%

Adjusted gross profit margin excluding Grass Valley

 

37.4

%

 

39.5

%

 

37.5

%

 

39.0

%

 

 

 

 

 

 

 

 

 

GAAP selling, general and administrative expenses

 

$

(120,169

)

 

$

(132,716

)

 

$

(365,439

)

 

$

(396,430

)

Severance, restructuring, and acquisition integration costs

 

3,253

 

 

6,341

 

 

8,364

 

 

30,287

 

Costs related to patent litigation

 

 

 

2,634

 

 

 

 

2,634

 

Purchase accounting effects related to acquisitions

 

 

 

263

 

 

1,313

 

 

526

 

Loss on sale of assets

 

 

 

 

 

 

 

94

 

Adjusted selling, general and administrative expenses

 

$

(116,916

)

 

$

(123,478

)

 

$

(355,762

)

 

$

(362,889

)

 

 

 

 

 

 

 

 

 

GAAP research and development expenses

 

$

(31,351

)

 

$

(33,471

)

 

$

(100,539

)

 

$

(107,781

)

Severance, restructuring, and acquisition integration costs

 

 

 

527

 

 

763

 

 

5,241

 

Adjusted research and development expenses

 

$

(31,351

)

 

$

(32,944

)

 

$

(99,776

)

 

$

(102,540

)

 

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to Belden

 

$

(297,009

)

 

$

85,881

 

 

$

(229,607

)

 

$

117,368

 

Interest expense, net

 

14,200

 

 

14,472

 

 

42,561

 

 

46,538

 

Income tax expense

 

2,797

 

 

32,304

 

 

13,580

 

 

46,063

 

Loss on debt extinguishment

 

 

 

 

 

 

 

22,990

 

Non-controlling interests

 

(6

)

 

(23

)

 

60

 

 

(148

)

Total non-operating adjustments

 

16,991

 

 

46,753

 

 

56,201

 

 

115,443

 

 

 

 

 

 

 

 

 

 

Goodwill and other asset impairment

 

342,146

 

 

 

 

342,146

 

 

 

Amortization of intangible assets

 

22,243

 

 

25,533

 

 

67,952

 

 

74,990

 

Severance, restructuring, and acquisition integration costs

 

4,045

 

 

11,688

 

 

10,904

 

 

57,010

 

Amortization of software development intangible assets

 

1,197

 

 

620

 

 

3,206

 

 

1,344

 

Purchase accounting effects related to acquisitions

 

(186

)

 

821

 

 

1,845

 

 

2,359

 

Deferred revenue adjustments

 

 

 

3,229

 

 

 

 

7,889

 

Costs related to patent litigation

 

 

 

2,634

 

 

 

 

2,634

 

Loss on sale of assets

 

 

 

 

 

 

 

94

 

Gain from patent litigation

 

 

 

(62,141

)

 

 

 

(62,141

)

Total operating income adjustments

 

369,445

 

 

(17,616

)

 

426,053

 

 

84,179

 

Depreciation expense

 

12,147

 

 

11,671

 

 

37,170

 

 

35,562

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

101,574

 

 

$

126,689

 

 

$

289,817

 

 

$

352,552

 

 

 

 

 

 

 

 

 

 

Less: Grass Valley adjusted EBITDA

 

12,228

 

 

24,260

 

 

33,894

 

 

63,676

 

Adjusted EBITDA excluding Grass Valley

 

$

89,346

 

 

$

102,429

 

 

$

255,923

 

 

$

288,876

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) margin

 

(47.9

)%

 

13.1

%

 

(12.4

)%

 

6.1

%

Adjusted EBITDA margin

 

16.4

%

 

19.2

%

 

15.7

%

 

18.2

%

Adjusted EBITDA margin excluding Grass Valley

 

16.8

%

 

18.5

%

 

16.2

%

 

17.9

%

 

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to Belden

 

$

(297,009

)

 

$

85,881

 

 

$

(229,607

)

 

$

117,368

 

Operating income adjustments from above

 

369,445

 

 

(17,616

)

 

426,053

 

 

84,179

 

Loss on debt extinguishment

 

 

 

 

 

 

 

22,990

 

Tax effect of adjustments above

 

(11,385

)

 

8,776

 

 

(22,857

)

 

(17,859

)

Impact of Tax Cuts and Jobs Act enactment

 

 

 

4,835

 

 

 

 

5,308

 

Amortization expense attributable to noncontrolling interest, net of tax

 

 

 

(17

)

 

 

 

(50

)

Adjusted net income attributable to Belden

 

$

61,051

 

 

$

81,859

 

 

$

173,589

 

 

$

211,936

 

Less: Grass Valley adjusted net income

 

7,227

 

 

20,224

 

 

20,196

 

 

45,799

 

Adjusted net income attributable to Belden excluding Grass Valley

 

$

53,824

 

 

$

61,635

 

 

$

153,393

 

 

$

166,137

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to Belden

 

$

(297,009

)

 

$

85,881

 

 

$

(229,607

)

 

$

117,368

 

Less: Preferred stock dividends

 

971

 

 

 

 

18,437

 

 

26,198

 

GAAP net income (loss) attributable to Belden common stockholders

 

$

(297,980

)

 

$

85,881

 

 

$

(248,044

)

 

$

91,170

 

 

 

 

 

 

 

 

 

 

Adjusted net income attributable to Belden excluding Grass Valley

 

$

53,824

 

 

$

61,635

 

 

$

153,393

 

 

$

166,137

 

Less: Preferred stock dividends

 

 

 

 

 

18,437

 

 

26,198

 

Adjusted net income attributable to Belden common stockholders excluding Grass Valley

 

$

53,824

 

 

$

61,635

 

 

$

134,956

 

 

$

139,939

 

 

 

 

 

 

 

 

 

 

GAAP income (loss) per diluted share attributable to Belden common stockholders

 

$

(6.70

)

 

$

1.80

 

 

$

(6.04

)

 

$

2.21

 

Adjusted income per diluted share attributable to Belden common stockholders excluding Grass Valley

 

$

1.18

 

 

$

1.29

 

 

$

3.27

 

 

$

3.39

 

 

 

 

 

 

 

 

 

 

GAAP diluted weighted average shares

 

44,444

 

 

47,678

 

 

41,090

 

 

41,268

 

Adjustment for assumed conversion of preferred stock into common stock

 

1,130

 

 

 

 

 

 

 

Adjustment for anti-dilutive shares that are dilutive under adjusted measures

 

166

 

 

 

 

209

 

 

 

Adjusted diluted weighted average shares

 

45,740

 

 

47,678

 

 

41,299

 

 

41,268

 

 

BELDEN INC.

RECONCILIATION OF NON-GAAP MEASURES

(Unaudited)

 

 

Three Months Ended

 

Year Ended

 

Three Months Ended

 

 

April 1,
2018

July 1,
2018

September 30,
2018

December 31,
2018

 

December 31,
2018

 

March 31,
2019

June 30,
2019

September 29,
2019

 

 

(In thousands, except percentages)

GAAP revenues

 

$

605,565

 

$

668,639

 

$

655,774

 

$

655,390

 

 

$

2,585,368

 

 

$

587,175

 

$

637,530

 

$

620,318

 

Deferred revenue adjustments

 

1,858

 

2,802

 

3,229

 

(1,277

)

 

6,612

 

 

 

 

 

Less: Grass Valley adjusted revenues

 

108,708

 

110,543

 

104,966

 

102,061

 

 

426,278

 

 

87,035

 

89,178

 

87,221

 

Adjusted revenues excluding Grass Valley

 

$

498,715

 

$

560,898

 

$

554,037

 

$

552,052

 

 

$

2,165,702

 

 

$

500,140

 

$

548,352

 

$

533,097

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

230,594

 

$

257,596

 

$

260,857

 

$

259,365

 

 

$

1,008,412

 

 

$

224,728

 

$

241,023

 

$

235,402

 

Amortization of software development intangible assets

 

236

 

488

 

620

 

844

 

 

2,188

 

 

937

 

1,072

 

1,197

 

Severance, restructuring, and acquisition integration costs

 

9,431

 

7,231

 

4,820

 

6,648

 

 

28,130

 

 

562

 

423

 

792

 

Deferred revenue adjustments

 

1,858

 

2,802

 

3,229

 

(1,277

)

 

6,612

 

 

 

 

 

Purchase accounting effects related to acquisitions

 

502

 

773

 

558

 

 

 

1,833

 

 

 

718

 

(186

)

Less: Grass Valley adjusted gross profit

 

48,496

 

52,718

 

51,409

 

46,565

 

 

199,188

 

 

39,313

 

37,083

 

37,709

 

Adjusted gross profit excluding Grass Valley

 

$

194,125

 

$

216,172

 

$

218,675

 

$

219,015

 

 

$

847,987

 

 

$

186,914

 

$

206,153

 

$

199,496

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit margin

 

38.1%

38.5%

39.8%

39.6%

 

39.0%

 

38.3%

37.8%

37.9%

Adjusted gross profit margin excluding Grass Valley

 

38.9%

38.5%

39.5%

39.7%

 

39.2%

 

37.4%

37.6%

37.4%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to Belden

 

$

2,618

 

$

28,869

 

$

85,881

 

$

43,526

 

 

$

160,894

 

 

$

25,202

 

$

42,200

 

$

(297,009

)

Interest expense, net

 

16,978

 

15,088

 

14,472

 

15,021

 

 

61,559

 

 

14,193

 

14,168

 

14,200

 

Income tax expense

 

4,420

 

9,339

 

32,304

 

13,556

 

 

59,619

 

 

5,621

 

5,162

 

2,797

 

Loss on debt extinguishment

 

19,960

 

3,030

 

 

 

 

22,990

 

 

 

 

 

Non-controlling interest

 

(48

)

(77

)

(23

)

(35

)

 

(183

)

 

(24

)

90

 

(6

)

Total non-operating adjustments

 

41,310

 

27,380

 

46,753

 

28,542

 

 

143,985

 

 

19,790

 

19,420

 

16,991

 

Goodwill and other asset impairment

 

 

 

 

 

 

 

 

 

 

342,146

 

Amortization of intangible assets

 

24,418

 

25,039

 

25,533

 

23,839

 

 

98,829

 

 

23,341

 

22,368

 

22,243

 

Severance, restructuring, and acquisition integration costs

 

20,394

 

24,928

 

11,688

 

11,603

 

 

68,613

 

 

3,775

 

3,082

 

4,045

 

Deferred revenue adjustments

 

1,858

 

2,802

 

3,229

 

(1,277

)

 

6,612

 

 

 

 

 

Purchase accounting effects related to acquisitions

 

502

 

1,036

 

821

 

1,138

 

 

3,497

 

 

1,313

 

718

 

(186

)

Amortization of software development intangible assets

 

236

 

488

 

620

 

844

 

 

2,188

 

 

937

 

1,072

 

1,197

 

Loss on sale of assets

 

94

 

 

 

 

 

94

 

 

 

 

 

Non-operating pension settlement loss

 

 

 

 

1,342

 

 

1,342

 

 

 

 

 

Costs related to patent litigation

 

 

 

2,634

 

 

 

2,634

 

 

 

 

 

Gain from patent litigation

 

 

 

(62,141

)

 

 

(62,141

)

 

 

 

 

Total operating income adjustments

 

47,502

 

54,293

 

(17,616

)

37,489

 

 

121,668

 

 

29,366

 

27,240

 

369,445

 

Depreciation expense

 

11,865

 

12,026

 

11,671

 

12,053

 

 

47,615

 

 

12,723

 

12,301

 

12,147

 

Less: Grass Valley adjusted EBITDA

 

18,803

 

20,613

 

24,260

 

18,804

 

 

82,480

 

 

11,415

 

10,251

 

12,228

 

Adjusted EBITDA excluding Grass Valley

 

$

84,492

 

$

101,955

 

$

102,429

 

$

102,806

 

 

$

391,682

 

 

$

75,666

 

$

90,910

 

$

89,346

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income margin

 

0.4%

4.3%

13.1%

6.6%

 

6.2%

 

4.3%

6.6%

-47.9%

Adjusted EBITDA margin excluding Grass Valley

 

16.9%

18.2%

18.5%

18.6%

 

18.1%

 

15.1%

16.6%

16.8%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to Belden

 

$

2,618

 

$

28,869

 

$

85,881

 

$

43,526

 

 

$

160,894

 

 

$

25,202

 

$

42,200

 

$

(297,009

)

Operating income adjustments from above

 

47,502

 

54,293

 

(17,616

)

37,489

 

 

121,668

 

 

29,366

 

27,240

 

369,445

 

Loss on debt extinguishment

 

19,960

 

3,030

 

 

 

 

22,990

 

 

 

 

 

Tax effect of adjustments above

 

(12,112

)

(13,577

)

8,776

 

(7,979

)

 

(25,838

)

 

(6,419

)

(5,053

)

(11,385

)

Impact of Tax Cuts and Jobs Act enactment

 

(473

)

 

4,835

 

4,689

 

 

9,997

 

 

 

 

 

Amortization expense attributable to noncontrolling interests, net of tax

 

(17

)

(16

)

(17

)

(16

)

 

(66

)

 

 

 

 

Less: Grass Valley adjusted net income

 

12,578

 

12,997

 

20,224

 

19,105

 

 

64,904

 

 

6,761

 

6,208

 

7,227

 

Adjusted net income attributable to Belden excluding Grass Valley

 

$

44,900

 

$

59,602

 

$

61,635

 

$

58,604

 

 

$

224,741

 

 

$

41,388

 

$

58,179

 

$

53,824

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to Belden

 

$

2,618

 

$

28,869

 

$

85,881

 

$

43,526

 

 

$

160,894

 

 

$

25,202

 

$

42,200

 

$

(297,009

)

Less: Preferred stock dividends

 

8,733

 

8,733

 

 

8,733

 

 

34,931

 

 

8,733

 

8,733

 

971

 

GAAP net income (loss) attributable to Belden common stockholders

 

$

(6,115

)

$

20,136

 

$

85,881

 

$

34,793

 

 

$

125,963

 

 

$

16,469

 

$

33,467

 

$

(297,980

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income attributable to Belden excluding Grass Valley

 

$

44,900

 

$

59,602

 

$

61,635

 

$

58,604

 

 

$

224,741

 

 

$

41,388

 

$

58,179

 

$

53,824

 

Less: Preferred stock dividends

 

8,733

 

8,733

 

 

 

 

34,931

 

 

8,733

 

 

 

Adjusted net income attributable to Belden common stockholders excluding Grass Valley

 

$

36,167

 

$

50,869

 

$

61,635

 

$

58,604

 

 

$

189,810

 

 

$

32,655

 

$

58,179

 

$

53,824

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP income (loss) per diluted share attributable to Belden common stockholders

 

$

(0.15

)

$

0.49

 

$

1.80

 

$

0.87

 

 

$

3.08

 

 

$

0.42

 

$

0.84

 

$

(6.70

)

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted income excluding Grass Valley per diluted share attributable to Belden common stockholders

 

$

0.86

 

$

1.24

 

$

1.29

 

$

1.25

 

 

$

4.63

 

 

$

0.82

 

$

1.25

 

$

1.18

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted weighted average shares

 

41,633

 

40,974

 

47,678

 

40,031

 

 

40,956

 

 

39,660

 

39,611

 

44,444

 

Adjustment for assumed conversion of preferred stock into common stock

 

 

 

 

6,857

 

 

 

 

 

6,857

 

1,130

 

Adjustment for anti-dilutive shares that are dilutive under adjusted measures

 

377

 

 

 

 

 

 

 

 

 

166

 

Adjusted diluted weighted average shares

 

42,010

 

40,974

 

47,678

 

46,888

 

 

40,956

 

 

39,660

 

46,468

 

45,740

 

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.

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 29,
2019

 

September 30,
2018

 

September 29,
2019

 

September 30,
2018

 

 

(In thousands)

GAAP net cash provided by operating activities

 

$

67,872

 

 

$

130,221

 

 

89,517

 

 

$

100,859

 

Capital expenditures, net of proceeds from the disposal of tangible assets

 

(23,299

)

 

(23,919

)

 

(74,049

)

 

(61,895

)

Non-GAAP free cash flow

 

$

44,573

 

 

$

106,302

 

 

$

15,468

 

 

$

38,964

 

 
 

BELDEN INC.

RECONCILIATION OF NON-GAAP MEASURES

2019 EARNINGS GUIDANCE

 

 

Year Ended
December 31, 2019

 

Three Months Ended
December 31, 2019

 

 

 

 

 

Adjusted income per diluted share attributable to Belden common stockholders

 

$4.32 - $4.47

 

$1.00 - $1.15

Amortization of intangible assets

 

(1.69)

 

(0.48)

Severance, restructuring, and acquisition integration costs

 

(0.58)

 

(0.52)

Purchase accounting effects of acquisitions

 

(0.01)

 

GAAP income per diluted share attributable to Belden common stockholders

 

$2.04 - $2.19

 

$0.00 - $0.15

Our guidance for income per diluted share attributable to Belden common stockholders is based upon information currently available regarding events and conditions that will impact our future operating results. In particular, our results are subject to the factors listed under "Forward-Looking Statements" in this release. In addition, our actual results are likely to be impacted by other additional events for which information is not available, such as asset impairments, purchase accounting effects related to acquisitions, severance, restructuring, and acquisition integration costs, gains (losses) recognized on the disposal of tangible assets, gains (losses) on debt extinguishment, discontinued operations, and other gains (losses) related to events or conditions that are not yet known.

Forward-Looking Statements

This release and any statements made by us concerning the release may contain forward-looking statements including our expectations for the fourth quarter and full-year 2019, the Grass Valley divestment plan and the results of our restructuring program. Forward-looking statements include statements regarding future financial performance (including revenues, expenses, earnings, margins, cash flows, dividends, capital expenditures and financial condition), plans and objectives, and related assumptions. 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. Forward-looking statements reflect management’s current beliefs and expectations and are not guarantees of future performance. Actual results may differ materially from those suggested by any forward-looking statements for a number of reasons, including, without limitation: the inability to execute and realize the expected benefits from strategic initiatives (including revenue growth, cost control, and productivity improvement programs); the inability to achieve our strategic priorities in emerging markets; the increased influence of chief information officers and similar high-level executives; the presence of substitute products in the marketplace; the inability of the Company to develop and introduce new products and competitive responses to our products; the increased prevalence of cloud computing; the inability to successfully complete and integrate acquisitions in furtherance of the Company’s strategic plan; the impact of changes in global tariffs and trade agreements; difficulty in forecasting revenue due to the unpredictable timing of orders related to customer projects; foreign and domestic political, economic and other uncertainties, including changes in currency exchange rates; changes in tax laws and variability in the Company’s quarterly and annual effective tax rates; the impact of a challenging global economy or a downturn in served markets; the competitiveness of the global markets in which we operate; volatility in credit and foreign exchange markets; the cost and availability of raw materials including copper, plastic compounds, electronic components, and other materials; the inability to obtain components in sufficient quantities on commercially reasonable terms; disruptions in the Company’s information systems including due to cyber-attacks; perceived or actual product failures; risks related to the use of open source software; disruption of, or changes in, the Company’s key distribution channels; the inability to retain senior management and key employees; assertions that the Company violates the intellectual property of others and the ownership of intellectual property by competitors and others that prevents the use of that intellectual property by the Company; the impact of regulatory requirements and other legal compliance issues; the impairment of goodwill and other intangible assets and the resulting impact on financial performance; disruptions and increased costs attendant to collective bargaining groups and other labor matters; and other factors.

For a more complete discussion of risk factors, please see our Annual Report on Form 10-K for the quarter ended December 31, 2018, filed with the SEC on February 20, 2019. Although the content of this release represents our best judgment as of the date of this report based on information currently available and reasonable assumptions, we give no assurances that the expectations will prove to be accurate. Deviations from the expectations may be material. For these reasons, Belden cautions readers to not place undue reliance on these forward-looking statements, which speak only as of the date made. Belden disclaims any duty to update any forward-looking statements as a result of new information, future developments, or otherwise, except as required by law.

About Belden

Belden Inc. delivers a comprehensive product portfolio designed to meet the mission-critical network infrastructure needs of industrial and enterprise markets. With innovative solutions targeted at reliable and secure transmission of rapidly growing amounts of data, audio and video needed for today's applications, Belden is at the center of the global transformation to a connected world. Founded in 1902, the company is headquartered in St. Louis and has manufacturing capabilities in North and South America, Europe and Asia. For more information, visit us at www.belden.com or follow us on Twitter @BeldenInc.

Contacts

Belden Investor Relations
314-854-8054
Investor.Relations@Belden.com

Release Summary

Belden Announces Results for Third Quarter 2019, Intent to Divest Grass Valley and Cost Reduction Program

Contacts

Belden Investor Relations
314-854-8054
Investor.Relations@Belden.com