<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number 1-12280
BELDEN INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 76-0412617
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7701 Forsyth Boulevard, Suite 800
St. Louis, Missouri 63105
(Address of Principal Executive Offices and Zip Code)
(314) 854-8000
(Registrant's Telephone Number, Including Area Code)
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 requirement for the past 90 days.
Yes X No
Number of shares outstanding of the issuer's Common Stock, par value
$.01 per share, as of May 5, 1997: 26,128,999 shares
Page 1 of 10 <PAGE>
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PART I FINANCIAL INFORMATION
Item 1: Financial Statements
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited)
(in thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 753 $ 1,795
Receivables 111,065 106,514
Inventories 91,019 73,785
Deferred income taxes 4,633 6,287
Other 2,968 2,552
Total current assets 210,438 190,933
Property, plant and equipment, less
accumulated depreciation 158,424 151,934
Intangibles, less accumulated amortization 72,718 28,712
Other assets 90 66
$441,670 $371,645
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 68,568 $ 78,086
Income taxes payable 11,774 4,649
Total current liabilities 80,342 82,735
Long-term debt 132,346 71,630
Postretirement benefits other than pensions 17,102 17,430
Deferred income taxes 10,181 10,592
Other long-term liabilities 10,186 9,551
Stockholders' equity:
Preferred stock - -
Common stock 261 261
Additional paid-in capital 50,965 51,443
Retained earnings 146,309 133,739
Translation component (5,739) (4,460)
Treasury stock, at cost (283) (1,276)
Total stockholders' equity 191,513 179,707
$441,670 $371,645
</TABLE>
See accompanying notes.
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<PAGE>
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
(in thousands, except per share data)
<S> <C> <C>
Revenues $175,974 $169,275
Cost of sales 129,916 127,863
Gross profit 46,058 41,412
Selling, general and administrative expenses 21,118 19,630
Amortization of goodwill 441 108
Operating earnings 24,499 21,674
Interest expense 1,643 983
Income before income taxes 22,856 20,691
Income taxes 8,971 8,121
Net income $ 13,885 $ 12,570
Net income per share $ .53 $ .48
See accompanying notes.
</TABLE>
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<PAGE>
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,885 $ 12,570
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 4,419 3,904
Amortization 614 399
Deferred income taxes 1,243 379
Changes in operating assets and liabilities(*):
Receivables (1,266) (2,500)
Inventories (3,838) (8,699)
Accounts payable and accrued liabilities (8,281) (358)
Income taxes payable 7,460 5,645
Other assets and liabilities, net 1,965 1,945
Net cash provided by operating activities 16,201 13,285
Cash flows from investing activities:
Capital expenditures (6,275) (5,267)
Cash paid for acquired business (73,332) -
Proceeds from sales of property, plant and equipment 28 35
Net cash used for investing activities (79,579) (5,232)
Cash flows from financing activities:
Net borrowings (repayments) under long-term credit
facility and credit agreements 63,129 (3,479)
Purchase of treasury stock - (2,425)
Exercise of stock options 515 319
Cash dividends paid (1,315) (1,302)
Net cash provided by (used for) financing activities 62,329 (6,887)
Effect of exchange rate changes on cash and cash equivalents 7 49
Increase (decrease) in cash and cash equivalents (1,042) 1,215
Cash and cash equivalents, beginning of period 1,795 750
Cash and cash equivalents, end of period $ 753 $ 1,965
(*) Net of the effects of exchange rate changes and acquired business.
See accompanying notes.
</TABLE>
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Consolidated Financial Statements include Belden and all
of its subsidiaries. All significant intercompany accounts and transactions
are eliminated in consolidation. The financial information presented as of
any date other than December 31, 1996 has been prepared from the books and
records without audit. The accompanying Consolidated Financial Statements
have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and the footnotes required by generally
accepted accounting principles for complete statements. In the opinion of
management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such financial statements
have been included. These Consolidated Financial Statements should be read
in conjunction with the Consolidated Financial Statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
Note 2: Acquisitions
On January 8, 1997, the Company purchased substantially all of the assets
of the Alpha Wire Division (Alpha) of Alpha Wire Corporation for cash of
approximately $70 million. The Company financed the acquisition utilizing
funds available under its existing credit agreement. Alpha designs and
markets specialty wire and cable for a variety of markets, including the
computer interconnect, industrial and electrical markets. Alpha, located
in Elizabeth, New Jersey, had revenues in 1996 of approximately $51
million. The acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price was allocated to the net
assets acquired based on their estimated fair market value. The Company
recorded approximately $44 million of goodwill with respect to the Alpha
acquisition that will be amortized over 40 years using the straight-line
method. Alpha's operating results have been included in the Company's
consolidated results since
January 9, 1997.
Note 3: Supplemental Cash Flow Information
Cash payments for income taxes during the first three months of 1997 and
1996 amounted to $600,000 and $2,130,000, respectively.
Total interest paid, net of amounts capitalized, during the first three
months of 1997 and 1996 amounted to $1,401,000 and $1,050,000,
respectively.
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<PAGE>
Note 4: Inventories
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(in thousands)
<S> <C> <C>
Raw materials $ 14,774 $ 18,075
Work-in-process 17,707 17,599
Finished goods 71,375 49,029
Perishable tooling and supplies 4,297 3,965
Total 108,153 88,668
Allowances (primarily LIFO reserves) (17,134) (14,883)
Net inventories $ 91,019 $ 73,785
</TABLE>
Note 5: Per Share Information
Earnings per share have been computed based on the weighted average number
of common shares outstanding and common stock options which are dilutive,
using the treasury stock method. The shares used in the computation for the
three months ended March 31, 1997 and 1996 were 26,353,000 and 26,212,000,
respectively.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share,"
which is required to be adopted on December 31, 1997. At that time, the
Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive
effect of stock options will be excluded. The impact of SFAS No. 128 on
the calculation of primary and fully diluted earnings per share is not
expected to be material.
On February 27, 1997, the Company declared a quarterly cash dividend of
$.05 per share payable on April 2, 1997.
Item 2: Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Three Months Ended March 31, 1997 Compared With Three Months Ended
March 31, 1996
Revenues
Revenues for the three months ended March 31, 1997 were $176.0 million
compared with $169.3 million in the same period last year, an increase of
4%, all of which was due to the acquisition of Alpha and Intech Cable, Inc.
(ICI). Revenues decreased 8% over 1996 when including Alpha (acquired
January 8, 1997) and ICI (acquired December 3, 1996) as if they had been
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<PAGE>
acquired at the beginning of the period. The following table shows the
components of the 4% increase in the Company's first quarter 1997 revenues
in each of Belden's four served markets.
<TABLE>
<CAPTION>
% Increase (Decrease)
% of Total in 1997 Revenues
Revenues Compared with 1996
<S> <C> <C>
Computer 34% 3%
Audio/video 23 (6)
Industrial 19 23
Electrical 23 4
</TABLE>
The increase in the computer market revenues was due to the additional
revenues from the acquisition of Alpha and ICI. Excluding the acquisitions,
revenues declined approximately 16% in the first quarter of 1997 compared
with the same period in 1996. The primary contributors to this decline
were reductions in shipments to a significant customer that was adjusting
its inventories, decreased demand for the Company's telephony products sold
in Europe, and competitive price reductions. Management expects the
unfavorable impact of competitive price reductions to continue for the
remainder of 1997. Sales of the Company's computer interconnection
products, which link both personal computers to discrete peripheral devices
and mainframes to terminals, were up slightly compared with the first three
months of 1996.
The revenue decline in the audio/video market was primarily attributable to
delayed spending by domestic CATV providers due to continuing uncertainties
regarding the telecommunication network architecture and the effect of the
telecommunications legislation enacted in early 1996. This delayed
spending not only affected volume growth, but also negatively impacted
selling prices. This trend in domestic CATV revenues is expected to
continue throughout the remainder of the year. Partially offsetting this
decline was strong demand for CATV products sold in Europe, Latin America
and the Pacific Rim. Broadcast revenues were up slightly in the first
three months of 1997 compared with 1996 as revenues continued to benefit
from the strength of this market as technology is converted from analog to
digital.
Continued capital investment by manufacturers and the acquisitions of Alpha
and ICI primarily caused the growth in industrial market revenues.
Excluding acquisitions, industrial market revenues grew 9%. The
acquisitions of Alpha and ICI caused the growth in electrical market
revenues in the first quarter of 1997 compared with 1996. Excluding
acquisitions, revenues declined almost 7%. This decline was attributable
to the conversion of production to more profitable industrial cables,
declines in pricing, weak demand in Europe and decreased demand for the
Company's electrical cords used on power tools, appliances and other
electrical equipment.
Average prices for the Company's products were down in the three months
ended March 31, 1997 compared with 1996. This decline was attributable to
competitive price reductions, primarily on computer networking and CATV
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<PAGE>
products. Management expects action by competitors to continue to influence
selling prices. Revenues were also reduced by approximately $4.5 million
due to the impact of foreign currency exchange rates.
Domestic revenues, which represented approximately 67% of total revenues in
the first quarter of 1997, increased 8% from 1996. Included in domestic
revenues were export sales (primarily to the Pacific Rim and Latin America)
of $14 million, which represented an increase of 1% from 1996. European
revenues decreased 11% in the first quarter of 1997 compared with 1996,
however, increased 1% in local currencies. Canadian revenues increased 17%
in the first quarter of 1997 compared with 1996 due primarily to increased
demand for industrial products sold in Canada. European and Canadian first
quarter revenues represented 19% and 6% of total revenues, respectively.
Costs, Expenses and Earnings
The following table sets forth information regarding the components of
earnings for the first quarter of 1997 compared with the same period in
1996.
<TABLE>
<CAPTION>
Three Months Ended % Increase
March 31, 1997 Compared
1997 1996 With 1996
($ in thousands)
<S> <C> <C> <C>
Gross profit $46,058 $41,412 11.2%
As a % of revenue 26.2% 24.5%
Operating earnings $24,499 $21,674 13.0%
As a % of revenue 13.9% 12.8%
Income before income taxes $22,856 $20,691 10.5%
As a % of revenue 13.0% 12.2%
Net income $13,885 $12,570 10.5%
As a % of revenue 7.9% 7.4%
</TABLE>
The increase in gross profit was primarily due to higher revenues,
improvements in manufacturing efficiency and material cost reductions. The
manufacturing improvements and material cost reductions contributed to the
improvement in gross profit as a percent of revenues from 24.5% in the
first quarter of 1996 to 26.2% in 1997.
Operating earnings increased during the first three months of 1997 compared
with the first three months of 1996 due to greater gross profit. This
increase was partially offset by an increase in selling, general and
administrative costs and goodwill amortization due primarily to the
acquisitions of Alpha and ICI. Operating earnings as a percent of revenues
increased to 13.9% in 1997 from 12.8% in 1996 due to the improvement.
The increase in income before income taxes was due to the increase in
operating earnings, partially offset by higher interest costs for the first
three months of 1997 compared to the same period in 1996. The increase in
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<PAGE>
average debt levels, associated with the Company's acquisitions, and the
increase in average interest rates contributed to the increase in interest
costs. Average debt during the first three months of 1997 and 1996 was $139
million and $86 million, respectively. The Company's average daily interest
rate for the first three months of 1997 was 5.1% compared to 4.9% in 1996.
The Company's effective tax rate was 39.3% and 39.2%, respectively, for the
first quarter of 1997 and 1996.
Financial Condition
Liquidity and Capital Resources
The Company has a $200 million multicurrency variable rate bank revolving
credit agreement ("Credit Agreement") with a group of seven banks. The
Credit Agreement is unsecured and expires in November 2001. At March 31,
1997, the Company had $99 million available under the Credit Agreement. In
addition, as of March 31, 1997, the Company had unsecured, uncommitted
arrangements with four banks under which it may borrow up to $66 million at
prevailing interest rates. At March 31, 1997, the Company had $35 million
available under these arrangements. The Company expects that cash provided
by operations and borrowings available under the Credit Agreement will
provide it with sufficient liquidity to meet its operating needs and fund
its normal dividends and anticipated capital expenditures.
Working Capital
During the first quarter of 1997, operating working capital (defined as
r e ceivables and inventories less payables and accrued liabilities,
excluding the effect of exchange rate changes) increased $5.8 million. The
increase was primarily due to increases in inventories to support current
and future growth and decreases in payables associated with spending on
restructuring projects. These increases were partially offset by an
increase in income taxes payable due to the timing of estimated tax
payments.
Capital Expenditures
For the first three months in 1997, the Company had capital expenditures of
$6.3 million, primarily for modernization and enhancement of machinery and
equipment and the implementation of an integrated business information
system. The Company currently plans on spending approximately $25 million
during the remainder of 1997 primarily on machinery and equipment and the
integrated business information system.
All of the statements in this document other than historical facts are
forward looking statements made in reliance upon the Safe Harbor of the
Private Securities Litigation Reform Act of 1995. There can be no
assurances that the Company's actual results will be materially consistent
with such forward looking information. Developments in technology,
acceptance of the Company's products, changes in raw material costs,
pricing of the Company's products, foreign currency rates and changes in
the economy will have an impact on the Company's actual results. These
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<PAGE>
factors are more specifically described in the Company Annual Report on
Form 10-K for the year ended December 31, 1996.
PART II OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(b) Form 8-K, dated January 8, 1997, reporting the Company's
acquisition of substantially all of the assets of (i) Alpha Wire
Division of Alpha Wire Corporation and (ii) Alpha Wire Limited.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELDEN INC.
Date: May 13, 1997 By: /s/ C. Baker Cunningham
C. Baker Cunningham
Chairman of the Board, President
and Chief Executive Officer
Date: May 13, 1997 By: /s/ Richard K. Reece
Richard K. Reece
Vice President, Finance, Treasurer
and Chief Financial Officer
- 10 - <PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 753
<SECURITIES> 0
<RECEIVABLES> 111831
<ALLOWANCES> 766
<INVENTORY> 91019
<CURRENT-ASSETS> 210438
<PP&E> 295012
<DEPRECIATION> 136588
<TOTAL-ASSETS> 441670
<CURRENT-LIABILITIES> 80342
<BONDS> 0
0
0
<COMMON> 261
<OTHER-SE> 191252
<TOTAL-LIABILITY-AND-EQUITY> 441670
<SALES> 175974
<TOTAL-REVENUES> 175974
<CGS> 129916
<TOTAL-COSTS> 129916
<OTHER-EXPENSES> 21559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1643
<INCOME-PRETAX> 22856
<INCOME-TAX> 8971
<INCOME-CONTINUING> 13885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13885
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
