<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1998
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
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Commission File No. 1-12280
BELDEN INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 76-0412617
(State or Other Jurisdiction of (IRS 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)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Stock, $.01 par value The New York Stock Exchange
Preferred Stock Purchase Rights The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Common Stock held by non-
affiliates of the registrant at March 1, 1999 is $416,528,436.
The number of shares outstanding of the registrant's Common Stock at March 1,
1999 is 24,355,061.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Belden Inc. Proxy Statement for the Annual Meeting of
Stockholders to be held on May 6, 1999 (the "Proxy Statement") (incorporated by
reference into Part III).
Portions of the 1998 Belden Inc. Annual Report to Shareholders (the "1998 Annual
Report") (incorporated by reference into Parts I, II and IV).
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PART I
ITEM 1. BUSINESS
GENERAL
Belden is engaged in the design, manufacture and marketing of wire, cable and
cord products for electronics and electrical applications. It has been in the
business of manufacturing wire and cable for over 95 years. The business was
founded as Belden Manufacturing Company, which began manufacturing silk
insulated wire and insulated magnet wire in Chicago in 1902. In 1980, the
business was acquired by Crouse-Hinds Company and, in 1981, by Cooper
Industries, Inc. ("Cooper") as part of Cooper's acquisition of Crouse-Hinds
Company. From 1981 until July 1993, the business was operated as an
unincorporated division of Cooper. In 1993, the business was transferred to
Belden Wire & Cable Company ("BWC"), a wholly-owned subsidiary of Belden Inc.,
in connection with the October 6, 1993 initial public offering by Cooper of
23,500,000 shares of common stock of Belden Inc. In 1995 and 1996, an additional
2,500,000 shares of common stock, which were originally retained by Cooper, were
sold to the public. For information regarding Belden acquisitions, see "Note 4:
Acquisitions" of Belden's consolidated financial statements in the 1998 Annual
Report, incorporated by reference in Item 8 of this Annual Report on Form 10-K.
Belden Inc. is a Delaware corporation incorporated in 1993. Substantially all of
its operations are conducted through BWC and its other subsidiaries.
The Company's operations are conducted within two business segments: Electronics
and Electrical, and Cord Products. As used herein, unless a business segment is
identified or the context otherwise requires, "Belden" and the "Company" refer
to Belden Inc. and its subsidiaries as a whole and their respective
predecessors, including the Belden Division of Cooper. Financial information
about Belden's two business segments appears in "Note 17: Industry Segments,
Major Customers and Geographic Information" of Belden's consolidated financial
statements in the 1998 Annual Report, incorporated by reference in Item 8 of
this Annual Report on Form 10-K.
MARKETS AND PRODUCTS FOR ELECTRONICS AND ELECTRICAL SEGMENT
The Company's Electronics and Electrical business segment designs, manufactures
and markets wire and cable products that serve the electronics and electrical
markets, more specifically the following major markets:
- Computer networking, computer equipment and telecommunications
- Audio/video including broadcast, entertainment and cable television
- Industrial signal, instrumentation and control
- Electrical equipment, including motor and test apparatus.
Belden's Electronics and Electrical segment meets the demands of these markets
with various product configurations, which include, for the electronics markets,
multiconductor products, coaxial cable, fiber optic cables, heat-shrinkable
tubing and wire management products; and for the electrical markets, lead,
hook-up and other wire. A description of the products of the
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Electronics and Electrical segment follows, including the major end uses and the
methods of distribution.
MULTICONDUCTOR PRODUCTS
A multiconductor cable consists of two or more insulated conductors that are
cabled together, individually twisted into pairs or run in a parallel
configuration as a flat cable. Insulation may be extruded or laminated over bare
conductors, or separately insulated conductors may be bonded or woven together.
A cable may be unshielded, have individually shielded pairs or have an overall
shield. The cable is covered with an overall jacket. Major end uses for these
products include computer networking and computer equipment, as well as various
applications within the industrial signal, instrumentation and control market,
the broadcast market and the telecommunications market. Multiconductor product
sales constituted approximately 58%, 59% and 49% of Belden's consolidated
revenues in 1998, 1997 and 1996, respectively.
Computer Networking. Belden supplies both shielded and unshielded multiconductor
cables for local area network ("LAN") applications. A LAN links together
personal computers and other computer peripheral equipment. Belden's
multiconductor product line for the computer networking market includes plenum
cable, which is jacketed with special flame retardant materials, and its
DataTwist(R) cables for high speed transmission. It also includes MediaTwist(R)
cables, which are multimedia cables supporting diverse applications in video,
data, and voice technologies. Belden's primary channels to the computer
networking market include distributors, computer original equipment
manufacturers ("OEMs") and systems integrators who design and install
multivendor data/voice systems.
Computer Equipment. The computer equipment market requires various
multiconductor and flat cables for use in internal computer component wiring and
to interconnect peripheral pieces of equipment, such as printers, to computers.
Computer hardware manufacturers also use flat cable to interface internal
components such as circuit boards, switching devices and other active
components. Such manufacturers also use heat-shrinkable tubing and wire
management products to protect and harness wire and cable assemblies. Belden
supplies multiconductor and flat cables, as well as heat-shrinkable tubing and
wire management products, for these applications. Belden's primary channels to
this market are direct sales to computer and instrumentation OEMs and sales
through assembly houses and distributors.
Industrial Signal, Instrumentation and Control. The industrial signal,
instrumentation and control market requires a broad range of multiconductor
products for applications involving programmable controllers, robotics, process
control and computer-integrated manufacturing, as well as traffic signal cable
and cable for fire alarm, smoke detection, sprinkler control and security
systems. Many industrial environments require cables with exterior armor or
jacketing materials that can endure exposure to chemicals, extreme temperatures
and outside elements. Belden manufactures and markets products that are designed
for all these applications. Belden also manufactures electrical wire used for
the industrial power markets. Belden sells products to the industrial signal,
instrumentation and control market primarily through wire specialist
distributors and redistributors.
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Broadcast and Entertainment. Belden manufactures a variety of multiconductor
cables which distribute audio and video signals for use in broadcast television
(including digital television and HDTV), broadcast radio, pre- and
post-production facilities, recording studios and public facilities such as
arenas and stadiums. Belden's audio/video multiconductor cables are also used in
connection with microphones, musical instruments, audio mixing consoles, effects
equipment, speakers, paging systems and consumer audio products. Belden's
primary channel to the broadcast and entertainment market is through broadcast
specialty distributions and audio systems installers. Belden also sells directly
to music OEM's and the major networks including NBC, CBS, ABC and FOX.
Telecommunications. The telecommunications market utilizes a broad range of
products that transmit voice and data signals through the public telephone
network. Sophisticated digital network and switching equipment used in many of
the advanced telephone systems require specialty cable. In this
telecommunications market, Belden manufactures and markets multiconductor cables
and sells them to U.S. telephone suppliers and carriers as well as to national
telephone systems in Europe, and to OEMs that manufacture switching equipment
sold throughout the world. Belden has positioned itself to be a supplier of
service and distribution cable for the telecommunication markets' "last mile"
architecture systems.
COAXIAL CABLE
Coaxial cable consists of a central inner conductor surrounded by a concentric
outer conductor or shield. A dielectric material separates the two conductors
and a jacket covers the overall construction. The inner conductor is usually
copper or copper-covered steel, while the outer conductor is usually a metallic
tape or a wire braid. Various insulating and jacketing materials are used. The
primary applications for Belden's coaxial cable are in audio/video markets such
as broadcast, entertainment, security and surveillance and cable television.
Belden's coaxial cable is also used in some computer networking, computer
equipment and factory floor automation applications. Coaxial cable sales
constituted approximately 18%, 19% and 22% of Belden's consolidated revenues in
1998, 1997 and 1996, respectively.
Broadcast and Entertainment. Belden's broadcast coaxial cables are used to
distribute audio and video signals for the television, music and other
entertainment industries, for the same applications as are described in the
multiconductor products section above. Belden primarily markets its broadcast
cables through broadcast specialty distributors and audio systems installers. In
addition, Belden sells coaxial cables used in connection with wireless
communication applications, such as cellular, PCS, PCN and GPS, primarily
through distributors. Belden primarily markets its security and surveillance
cables through distributors.
Cable Television. Belden manufactures flexible, copper-clad coaxial cable used
for the "drop" section of a cable television (CATV) system and Direct Broadcast
Satellite (DBS) system. The drop cable section distributes the signal from the
"trunk" portion of the CATV system or the satellite dish in a DBS system into
the home. Belden has acquired a composite cable capability for a combination of
CATV and telephone pair to meet the changing needs of the converging CATV and
telecommunication markets. Belden also manufactures a copper base trunk
distribution cable widely used throughout Europe meeting local specifications
within the region.
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The CATV drop cable market includes both new cable installations and the repair
and replacement of existing cable. Belden's CATV coaxial cable is sold directly
to multiple systems operators (MSO's) who operate CATV systems throughout the
world and through CATV and electronic distributors.
Computer Networking, Computer Equipment and Factory Floor Automation. Computer
coaxial cable is used in some LAN and factory floor automation applications and
is also used to connect computer terminals to mainframes. Belden's channel to
this market is primarily through distributors.
FIBER OPTICS
Fiber optic cables transmit light signals through glass or plastic fibers. The
principal application of Belden's fiber optic cable is premises and factory
floor automation data distribution systems using multimode fiber. In these
systems, fiber optic cables are used to provide data communications between
buildings in close proximity or to provide a "backbone" to carry information
between floors within a building. Belden's channels to this market include
distributors and systems integrators. Belden also manufactures and sells fiber
optic single mode cable for applications in CATV and telecommunication markets.
These products are used to transmit voice, data, and video signals to a
subscriber network within an area serviced either by the local telephone company
or a CATV system operator. These sales are primarily made both through direct
relationships with the system operators and through multiple distribution
channels in the market.
LEAD, HOOK-UP AND OTHER WIRE PRODUCTS
Lead and hook-up wire consists of single conductor wire that is used for
electrical leads in motors, internal wiring and test equipment. Belden sells
these products primarily to OEMs that manufacture motors, transformers, ballasts
and lighting, electronic equipment and coil winders. Belden also markets these
products through electrical apparatus parts distributors, wire specialist
distributors and electrical wholesalers. In Europe, Belden manufactures enamel
coated wire used exclusively in the manufacture of precision deflection coils
that are used with computer video screens and television monitors. These
products are sold directly to OEMs. Belden also fabricates wire for components
used in the production of active and passive electronic components which provide
the circuitry connections for electronic data equipment. These products are sold
directly to the OEM market. Sales of lead, hook-up and other wire products
constituted approximately 14%, 11% and 13% of Belden's consolidated revenues in
1998, 1997 and 1996, respectively.
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MARKETS AND PRODUCTS FOR CORD PRODUCTS SEGMENT
The Company's Cord Products business segment designs, manufactures and markets
cord products for the power cord market, which is part of the electrical market
and includes appliances, power tools, floor care products, computers, printers
and peripherals, and other power supply requirements. Belden's Cord Products
segment meets the demands of this market with various cord products, which
generally consist of a two or three-conductor cable with a molded plug on one or
both ends and are used to transmit electrical energy to power equipment or
electrical devices. Most of Belden's cords are sold directly to OEMs for
incorporation into the equipment. Cord products are also marketed through
distributors and appliance wholesalers. Cord sales constituted approximately 9%,
9% and 12% of Belden's consolidated revenues in 1998, 1997 and 1996,
respectively.
CUSTOMERS
Belden sells through distributors and directly to OEMs and installers of
equipment and systems. Sales to several business units of Anixter International
Inc. represented approximately 17% of total sales in 1998, 16% in 1997 and 17%
in 1996. Product is sold to this customer by both business segments. In general,
Belden's customers are not contractually obligated to buy the Belden product
line exclusively or for a significant period of time. They could purchase
products that compete with Belden's products in lieu of purchasing products from
Belden, and the loss of one or more large customers could, at least in the
short-term, have an adverse effect on the Company's results of operations.
However, the Company believes that its relationships with its customers are
satisfactory and that the customers choose Belden products due to, among other
reasons, the breadth of Belden's product offering and the quality and
performance characteristics of its products.
Apart from this, Belden's ongoing relationship with its distributors raises
other potential risks. For example, adjustments to inventory levels maintained
by distributors (which adjustments may be accelerated through consolidation
among distributors) may adversely affect sales on a short-term basis. Further,
certain distributors have been and may in the future be allowed to return
inventory at the distributor's 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. The Company has recorded a liability for the estimated impact of
this return policy.
INTERNATIONAL OPERATIONS
Belden's international sales consist primarily of multiconductor and coaxial
cable products sold by the Electronics and Electrical business segment, for
applications including computer networking, computer equipment,
telecommunications, CATV, broadcast, and industrial signal, instrumentation and
control. Belden's primary channels to international markets are through
distributors and direct sales to end users.
Changes in the relative value of currencies take place from time to time and
their effects on the Company's results of operations may be favorable or
unfavorable. Belden sometimes engages in
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foreign currency hedging transactions to mitigate these effects. For more
information about Belden's foreign currency exposure management, See "Note 2:
Summary of Significant Accounting Policies" of Belden's consolidated financial
statements in the 1998 Annual Report, incorporated by reference in Item 8 of
this Annual Report on Form 10-K.
As Belden continues to expand internationally, the increased opportunities are
accompanied by increased risks arising from economic and political
considerations in the countries served. For example, the current economic
difficulties in the Asia/Pacific region and South America will likely adversely
affect sales in those areas.
Financial information about Belden's geographic areas is shown in "Note 17:
Industry Segments, Major Customers and Geographic Information" of Belden's
consolidated financial statements in the 1998 Annual Report, incorporated by
reference in Item 8 of this Annual Report on Form 10-K.
COMPETITION
Belden faces substantial competition in its major markets. The number and size
of Belden's competitors varies depending on the product line. However,
competition can be generally categorized as highly competitive with many
players. Primary competition is either global in scope with competitors that
have substantial financial, engineering, manufacturing and marketing resources,
or regional in scope with competitors that have more limited product offerings
with price as the differentiating feature. In recent years, competition has been
further stimulated by the addition of several large wire and cable companies to
the public marketplace through initial public offerings.
The principal competitive factors in all product markets are availability,
customer support, distribution coverage, price and product features. The
relative importance of each of these factors varies depending on the specific
product category.
Some of the Company's competitors have greater financial, engineering,
manufacturing and other resources than the Company. The Company's competitors
can be expected to continue to improve the design and performance of their
products and to introduce new products with competitive price and performance
characteristics. Although the Company believes that it has certain technological
and other advantages over its competitors, realizing and maintaining such
advantages will require continued investment by the Company in engineering,
research and development, marketing and customer service and support. There can
be no assurance that the Company will continue to make such investments or that
the Company will be successful in maintaining such advantages.
RESEARCH AND DEVELOPMENT
The Company engages in a continuing research and development program, including
new and existing product development, testing and analysis; process and
equipment development and testing; and compound materials development and
testing. For information about the amount spent on research and development, see
"Note 2: Summary of Significant Accounting Policies" of Belden's consolidated
financial statements in the 1998 Annual Report, incorporated by reference in
Item 8 of this Annual Report on Form 10-K.
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PATENTS AND TRADEMARKS
The Company has a policy of seeking patents when appropriate on inventions
concerning new products, product improvements and process and equipment
development as part of its ongoing research, development and manufacturing
activities. The Company owns numerous patents and registered trademarks
worldwide, with numerous others for which applications are pending. Although in
the aggregate its patents and trademarks are of considerable importance to the
manufacturing and marketing of many of its products, the Company does not
consider any single patent or trademark or group of patents or trademarks to be
material to its business as a whole, except for the Belden(R) trademark. The
Company has the right to use the Belden(R) trademark in connection with all of
its current products. The Company, however, granted to Cooper, around the time
of the Company's initial public offering, the exclusive royalty-free right to
use the Belden(R) trademark for wire and cable products in the automotive
markets and certain other markets in which the Company does not currently
compete. Other important trademarks used by Belden include DataTwist(R),
MediaTwist(R), Flamarrest(R), UnReel(R), Duobond(R), Beldfoil(R),
Conformable(R), Pope(R), Alpha(R), FIT(R), XTRA GUARD(R) and New Generation(R).
Belden's patents and trademarks are primarily used by the Electronics and
Electrical business segment.
RAW MATERIALS
The principal raw material used in many of Belden's products is copper. The
Company has a copper hedging policy that attempts to match the period of the
futures contract with the estimated time required to reflect the change in
copper cost in the sales price of the Company's products. For additional
information, see "Note 2: Summary of Significant Accounting Policies" and "Note
14: Commitments" of Belden's consolidated financial statements in the 1998
Annual Report, incorporated by reference in Item 8 of this Annual Report on Form
10-K.
Other raw materials used by Belden include, for the Electronics and Electrical
business segment, Teflon(R) FEP and other insulating materials such as plastic
and rubber, shielding tape, plywood reels, corrugated cartons, aluminum and
optical fiber; and for the Cord Products business segment, plastic, rubber,
brass terminations, yarn, tape, plywood reels and corrugated cartons. With
respect to all major raw materials used by the Company, Belden generally has
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.
Belden sources a minor percentage of its finished products from a network of
manufacturers under private label agreements, and resells these products under
various names, especially Alpha Wire Company.
BACKLOG
The Company's business is characterized by short-term order and shipment
schedules rather than volume purchase contracts. Accordingly, the Company does
not consider backlog at any given date to be indicative of future sales. The
Company's backlog consists of product orders for which a customer purchase order
has been received or a customer purchase order number has been
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communicated and which are scheduled for shipment within six months. Orders are
subject to cancellation or rescheduling by the customer, generally with a
cancellation charge. At December 31, 1998, the Company's backlog of orders
believed to be firm was $48.9 million compared to $67.8 million at December 31,
1997. The Company believes that all such backlog will be filled in 1999.
ENVIRONMENTAL MATTERS
The Company is subject to numerous federal, state, 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 ("CERCLA"), the Clean Water Act, the
Clean Air Act (including the 1990 amendments) and the Resource Conservation and
Recovery Act. The Company believes that its existing environmental control
procedures are adequate and it has no current plans for substantial capital
expenditures in this area.
A former Belden facility in Shrewsbury, Massachusetts was sold to a third party
in 1992, but Belden has agreed to indemnify the buyer for certain preexisting
environmental liabilities, principally caused by a former owner. Soil and
groundwater contamination has been identified, and the groundwater contamination
extends to the property line in one direction. Additional investigation as well
as soil and groundwater remediation will be necessary. The Company has recorded
a liability for the remaining costs.
The facility in Venlo, The Netherlands was acquired in 1995 from Philips
Electronics N.V. Soil and goundwater contamination were identified on the site
as a result of material handling and past storage practices. Various soil and
groundwater assessments are being performed, and some form of remediation will
be necessary. The Company has recorded a liability for the costs.
The Company has been identified as a potentially responsible party ("PRP") with
respect to five sites designated for cleanup under CERCLA or similar state laws,
which impose liability for cleanup of certain waste sites and for related
natural resource damages without regard to fault or the legality of waste
generation or disposal. Persons liable for such costs and damages generally
include the site owner or operator and persons that disposed or arranged for the
disposal of hazardous substances found at those sites. Although CERCLA imposes
joint and several liability on all PRPs, in application, the PRPs typically
allocate the investigation and cleanup costs based upon the volume of waste
contributed by each PRP. Settlements can often be achieved through negotiations
with the appropriate environmental agency or the other PRPs. PRPs that
contributed less than 1% of the waste are often given the opportunity to settle
as "de minimis" parties, resolving their liability for a particular site. The
number of sites with respect to which the Company has been identified as a PRP
has decreased in part as a result of "de minimis" settlements.
Belden does not own or operate any of the five waste sites with respect to which
it has been identified as a PRP. In each case, Belden is identified as a party
that disposed of waste at the site. With respect to four of the sites, Belden's
share of the waste volume is estimated to be less than 1%. At the fifth site,
Belden contributed less than 10% of the waste. Although no estimates of cleanup
costs have yet been completed for most of these sites, the Company believes,
based on its
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preliminary review and other factors, including its estimated share of the waste
volume at the sites, that the costs to the Company relating to these sites will
not have a material adverse effect on its results of operations or financial
condition. The Company has an accrued liability on its balance sheet to the
extent such costs are known and estimable for such sites.
The Company does not currently anticipate any material adverse effect on its
results of operations, financial condition or competitive position as a result
of compliance with federal, state, local or foreign environmental laws or
regulations, or cleanup costs at the facilities and sites discussed above.
However, some risk of environmental liability and other costs is inherent in the
nature of the Company's business, and there can be no assurance that material
environmental costs will not arise. Moreover, it is possible that future
developments, such as increasingly strict requirements of environmental laws and
enforcement policies thereunder, could lead to material costs of environmental
compliance and cleanup by the Company.
EMPLOYEES
As of December 31, 1998, the Company had approximately 4,700 full-time
employees.
IMPORTANCE OF NEW PRODUCTS AND PRODUCT IMPROVEMENTS;
IMPACT OF TECHNOLOGICAL CHANGE; IMPACT OF ACQUISITIONS
Many of the markets that Belden serves 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. These trends require ongoing
improvements in the capabilities of wire and cable products. The Company
believes that its future success will depend in part upon its ability to enhance
existing products and to develop and manufacture new products that meet or
anticipate such changes. The failure to introduce successfully new or enhanced
products on a timely and cost-competitive basis could have an adverse impact on
the Company's operations and financial condition.
Because of patents owned by others and high capital requirements, the Company
does not currently manufacture its own optical fibers, but purchases its
requirements from others for further manufacturing, and has only been a fiber
optic cable supplier in niche, specialty markets since 1976. Fiber optic
technology presents a potential substitute for the copper-based products that
comprise the vast majority of Belden's sales. Fiber optic cables have not to
date significantly penetrated the markets served by Belden due to the high
relative cost required to interface electronic and light signals and the high
cost of fiber termination and connection. At the same time, advances in data
transmission equipment and copper cable technologies have increased the relative
performance of copper solutions. For example, asynchronous transfer mode (ATM)
technology using copper cable may further improve the attractiveness of
copper-based solutions. However, a significant decrease in the cost of fiber
optic systems relative to the cost of copper-based systems could make such
systems superior on a price/performance basis to copper systems. Such a
significant relative decrease in the cost of fiber optic systems could have an
adverse effect on the Company.
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Wireless communications technology may represent a threat to both copper and
fiber optic-based systems by reducing the need for premise wiring. Belden
believes that the reduced signal security and the relatively slow transmission
speeds of current systems restrict the use of wireless systems in many data
communications markets. However, there are no assurances that future advances in
wireless technology may not have an adverse effect on the Company's business.
The Company does not presently anticipate that the commercialization of video
delivery technology -- direct broadcast technology ("DBS") -- will have a
material adverse effect on its CATV drop cable business. With DBS, a small
satellite dish antenna is placed on the roof of a subscriber's facility. DBS
does not require wiring from a central location to each subscriber, as does a
CATV system. The Company sells cables that meet the requirements of a DBS
system, specifically the cable that connects the DBS satellite dish antenna with
a subscriber's home or business television set.
The telecommunications legislation enacted in recent years presents
uncertainties and opportunities in the broadcast and CATV area. The Company
believes that this legislation and uncertainties regarding telecommunication
network architectures resulted in a delay in spending by broadcast and CATV
product end users during 1998.
Continued strategic acquisitions are an announced part of Belden's future
strategy, and as discussed in "Note 4: Acquisitions" to Belden's consolidated
financial statements in the 1998 Annual Report (incorporated by reference in
Item 8 of this Annual Report on Form 10-K), the Company completed five
acquisitions in 1996, 1997 and 1998. However, there can be no assurance that
future acquisitions will occur or that those that do occur will be successful.
In particular, the addition of several large wire and cable companies to the
public marketplace in recent years through initial public offerings has
increased competition for acquisition candidates.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to Belden's executive
officers. All executive officers are elected to terms which expire at the
organizational meeting of the Board of Directors following the Annual Meeting of
Shareholders.
<TABLE>
<CAPTION>
NAME AGE POSITION
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<S> <C> <C>
C. Baker Cunningham 57 Chairman of the Board, President, Chief Executive
Officer and Director
Richard K. Reece 43 Vice President, Finance, Treasurer and Chief
Financial Officer
Peter J. Wickman 50 Vice President, Operations
Kevin L. Bloomfield 47 Vice President, Secretary and General Counsel
Cathy O. Staples 48 Vice President, Human Resources
</TABLE>
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C. Baker Cunningham has been Chairman of the Board, President, Chief Executive
Officer and Director of the Company since 1993. From February 1982 until July
1993, he was an Executive Vice President, Operations of Cooper, a manufacturer
of electrical equipment and tools and hardware. Mr. Cunningham has a B.S. degree
in civil engineering from Washington University, an M.S. degree in civil
engineering from Georgia Tech and an M.B.A. from the Harvard Business School.
Richard K. Reece has been Vice President, Finance, Treasurer and Chief Financial
Officer of the Company since August 1, 1993. He was associated with the public
accounting firm of Ernst & Young LLP from 1978 until June 1993 and was a
partner with that firm since 1989. He has a B.S. degree in accounting from
Auburn University and is a Certified Public Accountant.
Peter J. Wickman has been Vice President, Operations of the Company since 1993.
He was Vice President, Finance and Planning for the Belden Division of Cooper
from 1989 to July 1993. He was Controller of Cooper's Bussmann Division from
1983 to 1989. Mr. Wickman has a B.S. degree in accounting from Walton School of
Commerce and is a Certified Public Accountant.
Kevin L. Bloomfield has been Vice President, Secretary and General Counsel of
the Company since August 1, 1993. He was Senior Counsel for Cooper from February
1987 to July 1993, and had been in Cooper's Law Department from 1981 to 1993. He
has a B.A. degree in economics and a J.D. degree from the University of
Cincinnati and an M.B.A. from Ohio State University.
Cathy Odom Staples has been Vice President, Human Resources of the Company since
May 1997. She was Vice President, Human Resources for the Electronic Products
Division of the Company from May 1992 to May 1997. Ms. Staples has a B.S.B.A
degree in human resources from Drake University.
ITEM 2. PROPERTIES
Belden has an executive office and various manufacturing plants, distribution
centers and sales offices. The significant facilities are as follows:
1. Used by Belden generally:
<TABLE>
<CAPTION>
OWNED
LOCATION FACILITY TYPE SQUARE OR
FEET LEASED
<S> <C> <C> <C>
St. Louis, Missouri Executive Office 7,466 Leased
</TABLE>
-12-
<PAGE> 13
2. Used by the Electronics and Electrical business segment:
<TABLE>
<CAPTION>
OWNED
LOCATION FACILITY TYPE SQUARE OR
FEET LEASED
- -------------------------------- ------------------------------------------ ------------- ------------
<S> <C> <C> <C>
Richmond, Indiana Sales and Administrative Office 53,575 Owned
Richmond, Indiana Engineering Center 70,000 Owned
Richmond, Indiana Manufacturing - electronics wire & cable 693,372 Owned
Richmond, Indiana Distribution Center 145,000 Owned
Monticello, Kentucky Manufacturing - electronics wire & cable 222,800 Owned
Tompkinsville, Kentucky Manufacturing - CATV and flat cable 228,800 Owned
Hudson, Massachusetts Manufacturing - electronics wire & cable (1) 215,000 Leased
Leominster, Massachusetts Manufacturing - electronics wire & cable 61,200 Leased
Elizabeth, New Jersey Sales and Administration Office 7,064 Owned
Elizabeth, New Jersey Distribution Center 197,250 Owned
Charlotte, North Carolina Manufacturing - electronics wire & 96,000 Leased
cable and fiber optics cable(1)
Fort Mill, South Carolina Manufacturing - electronics wire & cable 240,000 Owned
and fiber optics cable
Essex Junction, Vermont Manufacturing - high temperature 77,400 Owned
electronics wire & cable
Cobourg, Ontario, Canada Manufacturing - electrical and 215,000 Owned
electronics wire & cable; Sales and
Administrative Office and Distribution
Center
Tottenham, Victoria, Australia Manufacturing - electrical and
electronics wire & cable; Sales and 140,000 Leased
Administrative Office and Distribution
Center
Villingen-Schwenningen, Germany Manufacturing - electrical and 125,000 Owned
electronics wire & cable; Sales and
Administrative Office and Distribution
Center
Venlo, The Netherlands Manufacturing - electrical and 585,000 Owned
electronics wire & cable and fiber
optics cable; Distribution Center; and
Sales and Administrative Office
</TABLE>
- ---------------------
(1) In the process of being shut down, which process should be completed by the
end of 1999.
-13-
<PAGE> 14
3. Used by the Cord Products business segment:
<TABLE>
<CAPTION>
OWNED
LOCATION FACILITY TYPE SQUARE OR
FEET LEASED
- ----------------------------- ------------------------------------------- ------------- -----------
<S> <C> <C> <C>
Clinton, Arkansas Manufacturing - electrical cords 133,000 Owned
Nogales, Arizona Distribution Center 27,000 Leased
Carmel, Indiana Sales and Administrative Office 11,077 Leased
Franklin, North Carolina Manufacturing - electrical cords(2) 101,800 Owned
Hermosillo, Mexico Manufacturing - electrical cords and 119,000 Leased
Warehouse
</TABLE>
The Company believes its physical facilities are suitable for their present and
intended purposes and adequate for the Company's current level of operations.
ITEM 3. LEGAL PROCEEDINGS
In connection with its public offering in 1993, the Company made an election
under Section 338(h)(10) of the Internal Revenue Code, with the effect that the
tax basis in the Company's assets was increased to the deemed purchase price of
the assets. This election resulted in an increase in the Company's tax basis
and available income tax deductions. Pursuant to a Tax Sharing and Separation
Agreement (the "Tax Agreement") entered into by the Company and Cooper in
connection with the offering, the Company agreed to pay to Cooper the amount of
the benefit realized with respect to the increase in its tax basis (retaining
10% of the tax benefit relating to the amortization of capitalized costs of
certain intangibles, such as goodwill), as realized on a quarterly basis.
Following an audit of the Company's tax years for 1993 through 1995, the IRS
issued a deficiency disallowing the increase in the Company's tax basis for
intangibles, and the related amortization deductions claimed by the Company.
The Company believes this deficiency is contrary to tax law and in January
1999, filed a petition in the United States Tax Court requesting a
redetermination. Under the Tax Agreement, Cooper would be responsible for 90%
of any amount which is finally determined to be owed by the Company and would
be contractually obligated to defend the Company against such matters. While
neither the timing nor the amount of the ultimate liability associated with
this matter can be determined with certainty, based on information currently
available to the Company and the current status of the litigation, the Company
presently believes that it is unlikely that the outcome of this matter will
have a material adverse effect on the Company.
Apart from the above, the Company is a party to various legal proceedings and
administrative actions which are incidental to the operations of the Company. In
the opinion of the Company's management, such proceedings and actions should
not, individually or in the aggregate, have a material adverse effect on the
Company's results of operations or financial condition.
See "Item 1. Business -- Environmental Matters" regarding certain proceedings
arising under environmental laws.
- -------------
(2) In the process of being shut down, which process should be completed by the
end of 1999.
-14-
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no matters
were submitted to a vote of security holders of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
At March 1, 1999, there were 1,183 record holders of Common Stock of Belden Inc.
The additional information required by Item 5 is incorporated herein by
reference to page 54 of the 1998 Annual Report. The Company anticipates that
comparable cash dividends will continue to be paid in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference to page 25 of the 1998 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated herein by reference to pages 26 through 34 of the 1998 Annual
Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated herein by reference to pages 33 and 34 of the 1998 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference to pages 36 through 53 of the 1998 Annual
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-15-
<PAGE> 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is incorporated herein by reference to "Matters
to Come Before the Meeting," pages 4 through 7 of the Proxy Statement.
Information regarding executive officers is set forth in Part I at pages 11-
12 herein under the heading "Executive Officers."
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to "Compensation of Directors", "Executive
Compensation" and "Stock Price Performance Graph", pages 13-20 of the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to "Stock Ownership of Management and Certain
Beneficial Owners," pages 11-12 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to "Other Matters", page 20 of the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS (located on the pages in the 1998 Annual Report
shown below).
<TABLE>
<CAPTION>
PAGE NO.
1998 ANNUAL REPORT
<S> <C>
Report of Independent Auditors............................................................35
Consolidated Balance Sheets as of December 31, 1998
and December 31, 1997................................................................36
Consolidated Income Statements for Each of the Three Years
in the Period Ended December 31, 1998................................................37
Consolidated Cash Flow Statements for Each of the Three Years
in the Period Ended December 31, 1998................................................38
Consolidated Stockholders' Equity Statements for Each of the
Three Years in the Period Ended December 31, 1998....................................39
Notes to Consolidated Financial Statements...............................................40-53
</TABLE>
With the exception of the financial statements and other financial data and
other information listed above or incorporated by reference under other Items of
this Annual Report on Form 10-K, the 1998
-16-
<PAGE> 17
Annual Report is not filed as part of this Annual Report. Financial statement
schedules not included in this Annual Report on Form 10-K have been omitted
because they are not applicable or the required information is shown in the
financial statements or notes thereto.
3. EXHIBITS. The following exhibits are filed herewith or incorporated
herein by reference. DOCUMENTS INDICATED BY AN ASTERISK (*) ARE FILED HEREWITH;
DOCUMENTS INDICATED BY A DOUBLE ASTERISK IDENTIFY EACH MANAGEMENT CONTRACT OR
COMPENSATORY PLAN. Documents not indicated by an asterisk are incorporated
herein by reference to the document indicated. References to (i) the
"Registration Statement" are to the Belden Inc. Registration Statement on Form
S-1, File Number 33-66830, (ii) the "Form 10-Q" are to the Belden Inc. Quarterly
Report on Form 10-Q for the Quarter ended September 30, 1993, File Number
1-12280, (iii) the "Form 10-Q, Second Quarter, 1994" are to the Belden Inc.
Quarterly Report on Form 10-Q for the Quarter ended June 30, 1994, File Number
1-12280, (iv) the "Form 8-K" are to the Belden Inc. Report on Form 8-K, filed
with the Commission on April 17, 1995, File Number 1-12280, (v) the "Form 8-A"
are to the Belden Inc. Registration Statement on Form 8-A filed with the
Commission and effective on July 25, 1995, (vi) the "Amendment to Form S-8" are
to the Belden Inc. Post-Effective Amendment No. 1 of Form S-8 Registration
Statement, filed with the Commission on October 23, 1995, File Number 33-66830,
(vii) the "Form 10-K 1995" are to the Belden Inc. Report on Form 10-K for 1995,
File Number 1-12280, (viii) the "Form 10-Q, Third Quarter, 1996" are to the
Belden Inc. Quarterly Report on Form 10-Q for the Quarter ended September 30,
1996, File Number 1-12280, (ix) the "Form S-8" are to the Belden Inc.
Registration Statement on Form S-8, filed in connection with the Belden Inc.
Non-Employee Director Stock Plan, File Number 333-11071, (x) the "Form 8-K,
January 1997" are to the Belden Inc. Report on Form 8-K, filed with the
Commission on January 23, 1997, File Number 1-12280, (xi) the "Form 10-K 1996"
are to the Belden Inc. Report on Form 10-K for 1996, File Number 1-12280, (xii)
the "Form 10-K 1997" are to the Belden Inc. Report on Form 10-K for 1997, File
Number 1-12280, (xiii) the "Form 10-Q, First Quarter, 1998" are to the Belden
Inc. Quarterly Report on Form 10-Q for the Quarter ended March 31, 1998, File
Number 1-12280 and (xiv) the "1999 Form S-8" are to the Belden Inc. Registration
Statement on Form S-8, filed in connection with the Belden Inc. Long-Term
Incentive Plan, File Number 333-74923.
EXHIBIT NO. DESCRIPTION
2.1 Stock Purchase Agreement, dated April 3, 1995, among PCW
Beheermaatschappij B.V., Philips Electronics N.V., Belden Inc.
and Belden Europe B.V. for the purchase of Pope Cable and Wire
B.V. (Exhibit 2 to Form 8-K)
2.2 Asset Purchase Agreement, dated October 21, 1996, between Belden
Wire & Cable Company and Intech Cable, Inc. (Exhibit 10.1 to Form
10-Q, Third Quarter, 1996)
2.3 Asset Purchase Agreement, dated November 21, 1996, between Belden
Wire & Cable Company and Alpha Wire Corporation, and Asset
Purchase Agreement/U.K. Assets dated January 7, 1997 between
Belden U.K. Limited and Alpha Wire Limited (Exhibits 2.1 and 2.2
to Form 8-K, January 1997)
3.1 Certificate of Incorporation of the Company (Exhibit 3.1 to
Registration Statement)
3.2 Bylaws of the Company (Exhibit 3.2 to Registration Statement)
4.1 Specimen Common Stock Certificate (Exhibit 4.1 to Form 10-K 1995)
4.2 Amendment to Specimen Common Stock Certificate (Exhibit 4.2 to
Form 10-K 1997)
4.3 Rights Agreement, dated as of July 6, 1995, between Belden Inc.
and First Chicago Trust Company of New York, as Rights Agent;
ChaseMellon Shareholder Services, L.L.C. has
-17-
<PAGE> 18
superseded First Chicago Trust Company of New York as Rights
Agent (Exhibit 1 to Form 8-A)
4.4 Note Purchase Agreement, dated as of August 1, 1997, providing
for up to $200,000,000 aggregate principal amount of Senior Notes
issuable in series, with an initial series of Senior Notes in the
aggregate principal amount of $75,000,000, between Belden Inc. as
issuer and, as purchasers, Aid Association for Lutherans; Mutual
of Omaha Insurance Company; United of Omaha Life Insurance
Company; Nationwide Mutual Insurance Company; State Farm Life
Insurance Company; Principal Mutual Life Insurance Company;
Nippon Life Insurance Company of America; and Berkshire Life
Insurance Company (Exhibit 4.4 to Form 10-K 1997)
4.5 Guaranty of Belden Wire & Cable Company, the form of which is
included as Exhibit 1.1-B to the Note Purchase Agreement listed
above as Exhibit 4.4 (Exhibit 4.5 to Form 10-K 1997)
10.1 Asset Transfer Agreement by and between Cooper Industries, Inc.
and Belden Wire & Cable Company, with schedules and exhibits
thereto (Exhibit 10.1 to Form 10-Q)
10.2 Canadian Asset Transfer Agreement by and between Cooper
Industries (Canada) Inc. and Belden (Canada) Inc. (Exhibit 10.11
to Form 10-Q)
10.3 Trademark License Agreement by and between Belden Wire & Cable
Company and Cooper Industries, Inc. (Exhibit 10.2 to Form 10-Q)
10.4 Stock Agreement by and between Cooper Industries, Inc. and Belden
Inc. (Exhibit 10.4 to Form 10-Q)
10.5 Tax Sharing and Separation Agreement by and among Belden Inc.,
Cooper Industries, Inc., and Belden Wire & Cable Company (Exhibit
10.6 to Form 10-Q)
** 10.6 Non-Employee Director Stock Plan (Exhibit 4.5 to Form S-8)
** 10.7 Change of Control Employment Agreements, dated as of August 16,
1996, between Belden Inc. and each of C. Baker Cunningham,
Richard K. Reece, Peter J. Wickman and Kevin L. Bloomfield
(Exhibit 10.3 to Form 10-Q, Third Quarter, 1996)
** 10.8 Trust Agreement ("Rabbi Trust"), dated January 1, 1998 , between
Belden Wire & Cable Company and Bankers Trust Company (Exhibit
10.8 to Form 10-K 1997)
** 10.9 Belden Inc. Long-Term Incentive Plan, as amended (Exhibit 4.6 to
1999 Form S-8)
** 10.10 Belden Inc. Employee Stock Purchase Plan, as restated as of
August 4, 1995 (Exhibit 99.1 to Amendment to Form S-8)
** 10.11 Belden Wire & Cable Company Supplemental Excess Defined Benefit
Plan (Exhibit 10.11 to Registration Statement)
** 10.12 Belden Wire & Cable Company Supplemental Excess Defined
Contribution Plan (Exhibit 10.15 to Registration Statement)
** 10.13 Indemnification Agreements entered into between Belden Inc. and
each of its directors and executive officers as of October 6,
1993 (Exhibit 10.10 to Form 10-Q)
** 10.14 Indemnification Agreements entered into between Belden Inc. and
each of Christopher I. Byrnes, Bernard G. Rethore and John R.
DallePezze dated November 14, 1995, February 27, 1997 and May 1,
1997, respectively (Exhibit 10.15 to Form 10-K 1997)
** 10.15 Change of Control Employment Agreement, dated as of August 16,
1997, between Belden Inc. and Cathy O. Staples (Exhibit 10.1 to
Form 10-Q, First Quarter, 1998)
** 10.16 Indemnification Agreement dated as of August 16, 1997, entered
into between Belden Inc. and Cathy O. Staples (Exhibit 10.2 to
Form 10-Q, First Quarter, 1998)
10.17 Credit Agreement, dated as of November 18, 1996, among Belden
Wire & Cable Company, Bank of America National Trust and Savings
Association, Royal Bank of
-18-
<PAGE> 19
Canada, Wachovia Bank of Georgia, N.A., ING Bank Nederland, The
Northern Trust Company and Commerzbank Aktiengesellschaft,
Grand Cayman Branch (Exhibit 10.14 to 10-K 1996)
10.18 Guaranty of Belden Inc., the form of which is included as Exhibit
D to the Credit Agreement listed above as Exhibit 10.16 (Exhibit
10.15 to 10-K 1996)
* 13.1 Belden Inc. 1998 Annual Report to Shareholders (to the extent
incorporated herein by reference)
* 21.1 List of Subsidiaries of Belden Inc.
* 23.1 Consent of Ernst & Young LLP
* 24.1 Powers of Attorney from Members of the Board of Directors of
Belden Inc.
* 27.1 Financial Data Schedule
* 99.1 Proxy Statement for the Annual Meeting of Stockholders to be held
on May 6, 1999
Copies of the above Exhibits are available to shareholders at a charge of $.25
per page, minimum order of $10.00. Direct requests to:
Belden Inc., Attention: Secretary
7701 Forsyth Boulevard, Suite 800
St. Louis, Missouri 63105
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the last
quarter of 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BELDEN INC.
By: /s/ C. BAKER CUNNINGHAM
--------------------------
C. Baker Cunningham
Chairman of the Board, President,
Date: March 25, 1999 Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
<TABLE>
<S> <C> <C>
/s/ C. BAKER CUNNINGHAM President, Chairman of the Board March 25, 1999
- --------------------------- Chief Executive Officer and Director
C. Baker Cunningham
/s/ RICHARD K. REECE Vice President, Finance, Treasurer March 25, 1999
- -------------------------- and Chief Financial Officer
Richard K. Reece (Mr. Reece also is the Company's
Chief Accounting Officer)
/s/ LORNE D. BAIN* Director March 25, 1999
- --------------------------
Lorne D. Bain
</TABLE>
-19-
<PAGE> 20
<TABLE>
<S> <C> <C>
/s/ JOSEPH R. COPPOLA* Director March 25, 1999
- --------------------------
Joseph R. Coppola
/s/ ALAN E. RIEDEL* Director March 25, 1999
- --------------------------
Alan E. Riedel
/s/ BERNARD G. RETHORE* Director March 25, 1999
- --------------------------
Bernard G. Rethore
/s/ JOHN R. DALLEPEZZE* Director March 25, 1999
- --------------------------
John R. DallePezze
/s/ C. BAKER CUNNINGHAM
- -----------------------------------------
*By C. Baker Cunningham, Attorney-in-fact
</TABLE>
-20-
<PAGE> 21
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Pages
2.1 Stock Purchase Agreement, dated April 3, 1995, among PCW
Beheermaatschappij B.V., Philips Electronics N.V., Belden Inc.
and Belden Europe B.V. for the purchase of Pope Cable and Wire
B.V. (Exhibit 2 to Form 8-K)
2.2 Asset Purchase Agreement, dated October 21, 1996, between Belden
Wire & Cable Company and Intech Cable, Inc. (Exhibit 10.1 to Form
10-Q, Third Quarter, 1996)
2.3 Asset Purchase Agreement, dated November 21, 1996, between Belden
Wire & Cable Company and Alpha Wire Corporation, and Asset
Purchase Agreement/U.K. Assets dated January 7, 1997 between
Belden U.K. Limited and Alpha Wire Limited (Exhibits 2.1 and 2.2
to Form 8-K, January 1997)
3.1 Certificate of Incorporation of the Company (Exhibit 3.1 to
Registration Statement)
3.2 Bylaws of the Company (Exhibit 3.2 to Registration Statement)
4.1 Specimen Common Stock Certificate (Exhibit 4.1 to Form 10-K 1995)
4.2 Amendment to Specimen Common Stock Certificate (Exhibit 4.2 to
Form 10-K 1997)
4.3 Rights Agreement, dated as of July 6, 1995, between Belden Inc.
and First Chicago Trust Company of New York, as Rights Agent;
ChaseMellon Shareholder Services, L.L.C. has superseded First
Chicago Trust Company of New York as Rights Agent (Exhibit 1 to
Form 8-A)
4.4 Note Purchase Agreement, dated as of August 1, 1997, providing
for up to $200,000,000 aggregate principal amount of Senior Notes
issuable in series, with an initial series of Senior Notes in the
aggregate principal amount of $75,000,000, between Belden Inc. as
issuer and, as purchasers, Aid Association for Lutherans; Mutual
of Omaha Insurance Company; United of Omaha Life Insurance
Company; Nationwide Mutual Insurance Company; State Farm Life
Insurance Company; Principal Mutual Life Insurance Company;
Nippon Life Insurance Company of America; and Berkshire Life
Insurance Company (Exhibit 4.4 to Form 10-K 1997)
4.5 Guaranty of Belden Wire & Cable Company, the form of which is
included as Exhibit 1.1-B to the Note Purchase Agreement listed
above as Exhibit 4.4 (Exhibit 4.5 to Form 10-K 1997)
10.1 Asset Transfer Agreement by and between Cooper Industries, Inc.
and Belden Wire & Cable Company, with schedules and exhibits
thereto (Exhibit 10.1 to Form 10-Q)
10.2 Canadian Asset Transfer Agreement by and between Cooper
Industries (Canada) Inc. and Belden (Canada) Inc. (Exhibit 10.11
to Form 10-Q)
10.3 Trademark License Agreement by and between Belden Wire & Cable
Company and Cooper Industries, Inc. (Exhibit 10.2 to Form 10-Q)
10.4 Stock Agreement by and between Cooper Industries, Inc. and Belden
Inc. (Exhibit 10.4 to Form 10-Q)
10.5 Tax Sharing and Separation Agreement by and among Belden Inc.,
Cooper Industries, Inc., and Belden Wire & Cable Company (Exhibit
10.6 to Form 10-Q)
** 10.6 Non-Employee Director Stock Plan (Exhibit 4.5 to Form S-8)
21
<PAGE> 22
** 10.7 Change of Control Employment Agreements, dated as of August 16,
1996, between Belden Inc. and each of C. Baker Cunningham,
Richard K. Reece, Peter J. Wickman and Kevin L. Bloomfield
(Exhibit 10.3 to Form 10-Q, Third Quarter, 1996)
** 10.8 Trust Agreement ("Rabbi Trust"), dated January 1, 1998, between
Belden Wire & Cable Company and Bankers Trust Company (Exhibit
10.8 to Form 10-K 1997)
** 10.9 Belden Inc. Long-Term Incentive Plan, as amended (Exhibit 4.6 to
1999 Form S-8)
** 10.10 Belden Inc. Employee Stock Purchase Plan, as restated as of
August 4, 1995 (Exhibit 99.1 to Amendment to Form S-8)
** 10.11 Belden Wire & Cable Company Supplemental Excess Defined Benefit
Plan (Exhibit 10.11 to Registration Statement)
** 10.12 Belden Wire & Cable Company Supplemental Excess Defined
Contribution Plan (Exhibit 10.15 to Registration Statement)
** 10.13 Indemnification Agreements entered into between Belden Inc. and
each of its directors and executive officers as of October 6,
1993 (Exhibit 10.10 to Form 10-Q)
** 10.14 Indemnification Agreements entered into between Belden Inc. and
each of Christopher I. Byrnes, Bernard G. Rethore and John R.
DallePezze dated November 14, 1995, February 27, 1997 and May 1,
1997, respectively (Exhibit 10.15 to Form 10-K 1997)
** 10.15 Change of Control Employment Agreement, dated as of August 16,
1997, between Belden Inc. and Cathy O. Staples (Exhibit 10.1 to
Form 10-Q, First Quarter, 1998)
** 10.16 Indemnification Agreement dated as of August 16, 1997, entered
into between Belden Inc. and Cathy O. Staples (Exhibit 10.2 to
Form 10-Q, First Quarter, 1998)
10.17 Credit Agreement, dated as of November 18, 1996, among Belden
Wire & Cable Company, Bank of America National Trust and Savings
Association, Royal Bank of Canada, Wachovia Bank of Georgia,
N.A., ING Bank Nederland, The Northern Trust Company and
Commerzbank Aktiengesellschaft, Grand Cayman Branch (Exhibit
10.14 to 10-K 1996)
10.18 Guaranty of Belden Inc., the form of which is included as Exhibit
D to the Credit Agreement listed above as Exhibit 10.16 (Exhibit
10.15 to 10-K 1996)
* 13.1 Belden Inc. 1998 Annual Report to Shareholders (to the extent
incorporated herein by reference)
* 21.1 List of Subsidiaries of Belden Inc.
* 23.1 Consent of Ernst & Young LLP
* 24.1 Powers of Attorney from Members of the Board of Directors of
Belden Inc.
* 27.1 Financial Data Schedule
* 99.1 Proxy Statement for the Annual Meeting of Stockholders to be
held on May 6, 1999
*Filed herewith. Documents not indicated by an asterisk (*) are incorporated
herein by reference.
22
<PAGE> 1
25
Belden Inc.
Selected Historical Financial Data
(in thousands, except per share amounts and number of employees)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income statement data:
Revenues $723,625 $747,207 $667,425 $608,608 $439,699
Operating earnings 64,071 105,983 94,417 79,602 65,318
Net income 34,504 60,653 55,234 46,227 38,126
Diluted earnings per share 1.35 2.30 2.11 1.76 1.46
- ------------------------------------------------------------------------------------------------------------------
Balance sheet data:
Total assets $506,031 $475,129 $371,645 $332,787 $203,809
Long-term debt 162,850 124,047 71,630 81,458 37,277
Other long-term obligations 44,155 39,051 37,573 36,181 27,224
Stockholders' equity 219,667 228,954 179,707 131,902 93,601
- ------------------------------------------------------------------------------------------------------------------
Other data:
Average number of employees 4,600 4,500 4,200 3,800 2,800
Dividends per common share $ .20 $ .20 $ .20 $ .20 $ .20
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
26
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS:
1998 COMPARED WITH 1997
Revenues
Belden's revenues for the year ended December 31, 1998 were $723.6 million
compared with $747.2 million in 1997, a decrease of 3%. Revenues were
approximately $24 million, or 3% lower in 1998 compared with 1997 due to the
pass-through of lower copper costs. Since changes in the cost of copper are
generally passed through in the price of the Company's products containing
copper, further changes in the cost of copper are likely to continue to affect
the Company's revenues. Revenues also were reduced in 1998 by approximately $5
million, or less than 1%, due to the impact of foreign currency exchange rates.
Conversely, revenues were higher in 1998 compared with 1997 by approximately $20
million, or 3% due to the inclusion of Olex Communications Cable (Olex), which
was acquired February 28, 1998, and ABB Elektro-Isolierwerke GmbH (EIW), which
was acquired November 30, 1998. The following table shows the components of the
reported 3% decrease in the Company's 1998 revenues compared with 1997 in each
of Belden's four served markets.
<TABLE>
<CAPTION>
% Increase/(Decrease)
% of Total In 1998 Revenues
1998 Revenues Compared with 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Computer 41% 7%
Audio/video 20 (10)
Industrial 20 (4)
Electrical 19 (13)
</TABLE>
The revenue growth in the computer market was primarily due to the inclusion of
Olex and the increase in demand for the Company's computer networking and
telecommunication products. This growth in demand was fueled by the continued
networking of computers, workstations, and servers; upgrades of existing
computer networks; increased use of the internet; and growing numbers of
telephone lines. While revenues for computer networking products increased in
1998 compared with 1997, the Company experienced sales declines in the second
half of 1998 compared with 1997 primarily due to distribution customers reducing
their inventories of Belden products. Sales of the Company's computer
interconnect products declined in 1998. The demand for computer interconnect
products decreased as newer technologies displaced certain of these products
with new computer networking and industrial cable supplied by the Company.
Additionally, as the manufacturing of certain electronic equipment shifted to
contract manufacturers in lower cost international markets, the Company lost
business to local competitors.
The revenue decline in the audio/video market reflects weakness during 1998 in
the cable television (CATV) and professional broadcast markets. Demand was down
for CATV cable in Europe as well as the export markets of Asia/Pacific and Latin
America and was only partially offset by a modest increase in the United States.
Revenues from products serving the broadcast market were down in 1998 primarily
due to broadcasters' continued delay of spending related to indecisions about
alternative digital formats.
Industrial market revenues declined 4% in 1998 compared with 1997. This decrease
was due primarily to lower prices, principally from the pass-through of lower
copper costs. In addition, the drop in prices for many commodities such as
metals and petroleum, and the slowed capital spending partially due to the
impact of declining Asian demand, reduced demand for certain of the Company's
products. Offsetting some of the decline in revenues for industrial products was
the inclusion of EIW.
Electrical market revenues declined 13% in 1998 versus 1997. The electrical
market revenues include the Cord Products segment. Cord Products accounts for
43% of 1998 electrical market
REVENUES
Percent increase/(decrease) in revenues compared with the prior year
[Bar Charts reflecting revenues compared with prior year]
<PAGE> 3
27
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
revenues. Revenues for the Cord Products segment declined 15% in 1998 compared
with 1997 primarily due to lower prices partially from the pass-through of lower
copper costs and business lost to competitors principally from Asia. The
remaining revenues for the electrical market, which principally consist of
electrical cordage and lead and hookup wire, are included in the Electronic and
Electrical segment. These revenues declined 11% due to lower prices primarily
from the pass-through of lower copper costs, lost business as certain electronic
and electrical equipment manufacturers moved their production to lower cost
international markets and economic slowdown in certain of the Company's served
markets.
Average prices for the Company's products were down in 1998 compared with 1997.
This decline was primarily attributable to the decline in 1998 copper costs
compared with 1997. Additionally, prices for computer networking products, which
increased late in 1997 and early 1998, fell in late 1998. Pricing pressure on
these products is continuing and it is likely that the Company will have
unfavorable price comparisons on its computer networking products at least
through the first half of 1999.
United States revenues, which represented approximately 68% of 1998 total
revenues, declined 2% from 1997. Revenues from the Asia/Pacific, Latin America,
and other export regions represented approximately 10% of 1998 total revenues
and increased 1% from 1997. Without the 1998 acquisition of Olex, revenues to
these regions would have decreased by 23% primarily due to the Asia/Pacific
region. European revenues decreased 4% from 1997, and decreased 2% in terms of
local currency. Without the acquisition of EIW late in 1998, European revenues
would have decreased 6%. Canadian revenues decreased 15% from 1997 with currency
translation accounting for almost 40% of this decline. This decrease is the
result of lower capital spending by manufacturers in the natural resource sector
due primarily to lower commodity prices and weak export demand. Revenues from
European and Canadian customers represented 16% and 6% of 1998 total revenues,
respectively.
Costs, Expenses and Earnings
The following table sets forth information comparing the 1998 components of
earnings with 1997.
<TABLE>
<CAPTION>
% (Decrease)
1998 Compared
Years Ended December 31, 1998* 1997** with 1997
- -------------------------------------------------------------------------------------------------------------------
(in thousands, except % data)
<S> <C> <C> <C>
Gross profit $ 169,501 $ 197,309 (14.1)%
As a percent of revenues 23.4% 26.4%
Operating earnings $ 74,671 $ 107,583 (30.6)%
As a percent of revenues 10.3% 14.4%
Income before income taxes $ 66,933 $ 100,625 (33.5)%
As a percent of revenues 9.2% 13.5%
Net income $ 40,996 $ 61,633 (33.5)%
As a percent of revenues 5.7% 8.2%
</TABLE>
* 1998 results exclude the impact of the $6,492 ($10,600 pretax) nonrecurring
charges related to employee separation, plant consolidations, discontinued
product lines, and costs related to a failed Asia/Pacific distributor.
** 1997 results exclude the impact of the $980 ($1,600 pretax) nonrecurring
charge taken in the third quarter relating to plant consolidation and
workforce reductions pursuant to a plan adopted in the third quarter. These
costs relate to employee severance and plant closure expenditures.
REVENUES BY GEOGRAPHIC REGION
(In millions of dollars)
[Bar Charts reflecting revenues by geographic region]
<PAGE> 4
28
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The decrease in the gross profit amount was due to lower revenues and reduced
profitability. Profitability declined primarily due to the impact of lower
average prices in excess of the pass-through of lower copper costs and the
"deleveraging" of certain production costs. The deleveraging resulted from
making production declines at a greater rate than cost reductions. In addition,
the impact of the inclusion in 1998 of the currently less profitable Olex and
EIW acquisitions and the need early in 1998 to outsource production of certain
computer networking cable due to capacity constraints contributed to the decline
in gross profit and gross profit as a percent of revenues.
The decrease in gross profit led to lower operating earnings during the year.
Also contributing to this decrease was an increase in selling, general, and
administrative expenses to 12.8% of revenues in 1998 versus 11.7% in 1997
primarily due to additional depreciation and amortization related to the
capitalization of computer system conversions early in 1998.
In 1998, the Company announced the following actions designated to improve its
operating efficiencies:
- - Closing the Franklin, North Carolina, facility and transferring production
and assembly operations to the other facilities within the Cord Products
segment in 1999.
- - Accelerating the closing of the Electronic and Electrical segment's Hudson,
Massachusetts and Charlotte, North Carolina, facilities and transferring
production into the new facility in Lancaster County, South Carolina. The new
facility was completed late in 1998 and the closings and production transfer
are expected to be complete in mid-1999.
- - Reducing salaried employment by approximately 7% in the Electronic and
Electrical segment through voluntary and involuntary programs. These
reductions were virtually complete by December 31, 1998.
- - Discontinuing certain less profitable lines within the Electronic and
Electrical segment.
In connection with these actions and other items, the Company took nonrecurring
charges of $10.6 million ($6.5 million after tax). The above actions, when
completed, as well as other cost reduction programs, are expected to generate
annual savings of approximately $15 million before tax.
Income before income taxes decreased to $56.3 million in 1998 from $99 million
in 1997, or 43% due to lower operating earnings and an increase in interest
expense because of greater borrowings at higher interest rates. The increase in
borrowings resulted from the 1998 acquisitions and the purchase of approximately
1.9 million shares of Company common stock partially offset by cash flow from
operations. Average debt outstanding during 1998 and 1997 was $146 million and
$135 million, respectively. The Company's average daily interest rate was 6.1%
in 1998 compared with 5.7% in 1997.
The Company's effective tax rate was 38.8% in 1998 and 1997. As a result of
various tax strategies the Company is in the process of implementing, the
effective income tax rate is expected to be approximately one percentage point
lower beginning in 1999.
RESULTS OF OPERATIONS:
1997 COMPARED WITH 1996
Revenues
Belden's revenues for the year ended December 31, 1997, were $747.2 million
compared with $667.4 million in 1996, an increase of 12%. Revenues were reduced
by $21.1 million due to the impact of foreign currency translation. Revenues
increased 2% when including revenues of Alpha (acquired January 8, 1997) and ICI
(acquired December 3, 1996) as if they had been
MARGINS
(Percent of revenues)
[Bar Charts reflecting margins]
<PAGE> 5
29
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
acquired at the beginning of each period and excluding the impact of foreign
currency translation. The following table shows the components of the 12%
increase in the Company's 1997 revenues in each of Belden's four served markets.
<TABLE>
<CAPTION>
% Increase/(Decrease)
% of Total in 1997 Revenues
1997 Revenues Compared with 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Computer 37% 29%
Audio/video 22 (8)
Industrial 20 26
Electrical 21 1
</TABLE>
The revenue growth in the computer market was primarily due to the inclusions of
Alpha and ICI revenues for a full year in 1997. Excluding the impact of
acquisitions and foreign currency translation, revenues increased approximately
7%. This improvement was attributable to strong growth in networking of
computers, workstations and servers, which increased demand for the Company's
high performance twisted pair products, and strong demand for the Company's
telephony products sold in the United States. This growth was significantly
offset by competitive price reductions on the Company's networking products and
decreased telephony project activity in Europe. In addition, sales of the
Company's computer interconnection products, which focus on serving mainframe
computer applications, were down slightly in 1997.
Audio/video market revenues declined 4% when excluding acquisitions and foreign
currency translation. The revenue decline was primarily due to soft demand for
cable television (CATV) drop cable sold in both the United States and export
markets. In the United States, CATV providers continued to delay spending as
they evaluated the telecommunications network architecture in light of
legislation enacted in 1996 and new technology. Sales of CATV drop cable in
export markets declined due to unfavorable economic conditions in
Asia/Pacific, which unfavorably impacted new construction activity. This decline
in demand in both the United States and export markets not only affected volume
growth, but also negatively impacted selling prices. Broadcast revenues were
down slightly in 1997 due to the delay of stadium and studio projects during the
year and the fact that 1996 revenues were aided by large orders in connection
with the Atlanta Olympic Games and the U.S. Presidential election. Partially
offsetting these declines was strong demand for CATV products sold in Europe.
Strong capital investment by manufacturers and the acquisitions of Alpha and ICI
caused the growth in industrial market revenues in 1997. Excluding the impact of
acquisitions and foreign currency translation, industrial market revenues
increased 11%. Factory floor automation and product "re-engineering" contributed
to the capital investment by manufacturers.
The electrical market revenues include the Cord Products segment. Cord Products
accounted for 45% of 1997 electrical market revenues. Revenues for the Cord
Products segment declined 14% in 1997 compared with 1996 primarily due to
decreased demand for the Company's electrical cord used on power tools,
appliances and other electrical equipment. The remaining revenue for the
electrical market, which principally consists of electrical cordage, lead and
hook-up wire, is included in the Electronic and Electrical segment. These
revenues increased 18% in 1997 compared with 1996 primarily due to the
acquisition of Alpha and ICI. Excluding the impact of acquisition and foreign
currency translation, electrical revenues included in the Electronic and
Electrical segment were flat. This is due to a decline attributable to the
conversion of certain electrical wire production capacity to more profitable
industrial cables offset by an increase in market demand for remaining products.
Average prices for the Company's products were down in 1997 compared with 1996.
This decline was attributable to competitive price reductions primarily on
computer networking and CATV products, and the pass-through of decreases in
copper costs during the year.
United States revenues, which represented approximately 68% of total 1997
revenues, increased 19% from 1996. Revenues from Asia/Pacific, Latin America,
and other export regions were $72 million, which represented a decrease of 3%.
The acquisitions of Alpha and ICI were the primary contributors to the domestic
revenue growth in 1997.
European customer revenues were flat from 1996 measured in U.S. dollars, but
increased 12% in local currency. Strong demand for networking and CATV products
in Europe caused this local currency growth. Canadian revenues increased 7% from
1997, with currency translation having minimal impact on revenues. This growth
resulted from increased demand for the Company's industrial products. European
and Canadian revenues represented 17% and 6% of 1997 total revenues,
respectively.
<PAGE> 6
30
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Costs, Expenses and Earnings
The following table sets forth information comparing the 1997 components of
earnings with 1996.
<TABLE>
<CAPTION>
% Increase
1997 Compared
Years Ended December 31, 1997* 1996 with 1996
- ------------------------------------------------------------------------------------------------------------------
(in thousands, except % data)
<S> <C> <C> <C>
Gross profit $ 197,309 $ 168,379 17.2%
As a percent of revenues 26.4% 25.2%
Operating earnings $ 107,583 $ 94,417 13.9%
As a percent of revenues 14.4% 14.1%
Income before income taxes $ 100,625 $ 90,920 10.7%
As a percent of revenues 13.5% 13.6%
Net income $ 61,633 $ 55,234 11.6%
As a percent of revenues 8.2% 8.3%
</TABLE>
* 1997 results exclude the impact of the $980 ($1,600 pretax) nonrecurring
charge taken in the third quarter relating to plant consolidation and
workforce reductions pursuant to a plan adopted in the third quarter. These
costs relate to employee severance and plant closure expenditures.
The revenue growth in 1997 primarily caused the increase in gross profit, and
was partially offset by the unfavorable foreign currency exchange rates on the
Company's gross profits in Europe. The improvement in gross profit as a percent
of revenues in 1997 was primarily attributable to manufacturing improvements,
material cost reductions and higher combined gross margins of the acquired
companies. Partially offsetting these improvements were competitive price
reductions on computer networking and CATV products and the impact of
unfavorable foreign currency exchange rates on the Company's products sold in
Europe that are sourced from the United States.
The increase in gross profit led to an increase in operating earnings during the
year. This increase was partially offset by an increase in selling, general and
administrative costs and goodwill amortization associated with the acquisitions.
Operating earnings as a percent of revenues in 1997 increased due primarily to
the improvement in gross profit.
Income before income taxes increased due to higher operating earnings, partially
offset by increased interest expense. Interest expense increased $3.5 million
due primarily to higher debt levels associated with the acquisitions and
elevated working capital levels. Average debt outstanding during 1997 and 1996
was $135 million and $82 million, respectively. The Company's average daily
interest rate was 5.7% in 1997 compared with 4.9% in 1996.
The Company's effective tax rate was 38.8% and 39.2%, in 1997 and 1996
respectively.
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 six banks. The Credit Agreement is
unsecured and expires in November 2001. At December 31, 1998, the Company had
$112 million available under the Credit Agreement. The facility includes certain
covenants including a maximum leverage ratio and maintaining a minimum net
worth. In addition, the Company has unsecured, uncommitted arrangements with
five banks under which it may borrow up to $91 million at prevailing interest
rates. At December 31, 1998, the Company had $73 million available under these
uncommitted arrangements.
On August 11, 1997, the Company completed a private placement of $75 million in
unsecured debt (Private Placement). The Private Placement debt will mature in
August 2009 with an average life of ten years. The Private Placement was priced
at a fixed rate of 6.92%. The proceeds from the Private Placement were used to
pay off borrowings under the Credit Agreement. The Note Purchase Agreement
effecting the Private Placement contains various customary affirmative and
negative covenants and other provisions, including restrictions on the
assumption of debt and a maximum leverage ratio.
[Bar Charts reflecting revenues per employees and number of employees]
<PAGE> 7
31
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company expects the cash provided by operations and borrowings under the
Credit Agreement will provide it with sufficient liquidity to meet its operating
needs and fund its normal dividends and anticipated capital expenditures.
During 1998, the Company increased debt by $39 million due primarily to the
acquisitions of Olex and EIW and the purchase of approximately 1.9 million
shares of Company common stock. As a result, the Company's debt to total
capitalization ratio increased from 35.1% at December 31, 1997, to 42.6% at the
end of 1998.
Working Capital
During 1998, operating working capital (defined as receivables and inventories
less payables and accrued liabilities, excluding the effect of exchange rate
changes and business combinations) decreased $29 million. This decrease resulted
primarily from lower receivables associated with lower revenues late in the year
and lower inventories as the Company has stressed strong cash flows in response
to more challenging markets partially offset by lower taxes payable.
During 1997, operating working capital increased $32 million. This increase
resulted primarily from increases in receivables associated with higher revenues
and increases in inventories to support current and future growth.
Capital Expenditures and Commitments
Capital expenditures currently planned for 1999, as well as actual expenditures
for 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
Years Ended December 31, Plan Actual Actual
- -------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Modernization and
Enhancement $14 $20 $ 7
Capacity expansion 7 11 7
Other 8 10 15
- -------------------------------------------------------------------------------
$29 $41 $29
- -------------------------------------------------------------------------------
</TABLE>
Capital spending planned for 1999 is primarily for capacity maintenance projects
and expansion of capacity for certain twisted pair wire products. Spending in
1998 and 1997 was primarily for machinery and equipment to increase production
capacity for twisted pair wire, the construction of the Lancaster County, South
Carolina, facility, the implementation of an integrated business information
system, and the modernization and enhancement of machinery and equipment.
EFFECTS OF INFLATION
During the years presented, inflation has had a relatively minor effect on the
Company's results of operations. In recent years, the U.S. rate of inflation has
been relatively low. In addition, because the Company's inventories are valued
primarily on the LIFO method, current inventory costs are matched against
current sales so that increases in cost are reflected in earnings on a current
basis.
ENVIRONMENTAL REMEDIATION
The Company has been identified as a potentially responsible party with respect
to five sites designated for cleanup under the Comprehensive Environmental
Response, Compensation and Liability Act or similar state laws. Belden does not
own or operate any of these waste sites. Although estimates of cleanup costs
have not yet been completed for most of these sites, the Company believes that,
based on its review and other factors, including its estimated share of the
waste volume at the sites, the existence of other financially viable,
potentially responsible parties and the anticipated nature and scope of the
cleanups, the costs to the Company relating to these sites will not have a
material adverse effect on its results of operations or financial condition.
Ground water contamination has been identified on the site of the Venlo, The
Netherlands, manufacturing facility, which was acquired in 1995. The Company has
recorded a liability for the remediation costs, which are currently estimated at
approximately $1 million.
[Bar Charts reflecting leverage, free cash flow and capital expenditures]
<PAGE> 8
32
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
YEAR 2000 READINESS
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. Software failures due to processing
errors potentially arising from calculations using the Year 2000 date are a
known risk.
Primary Business Operating Systems
The Company recently completed the implementation of an integrated business
information system at several operating units representing approximately 97% of
1998 revenues. The primary purpose was to replace numerous old mainframe legacy
systems with an integrated enterprise-wide business system in an effort to
streamline business processes, reduce programming and maintenance efforts, and
improve efficiencies throughout the organization. The Company incurred a total
capitalized cost of approximately $19 million relating to implementing the new
system which will be amortized into earnings over five years. Although
implementing this new system was unrelated to specific concerns over the Year
2000 issue, a benefit of this initiative is that the resulting system is Year
2000 compliant. Certain operating units, primarily those acquired by the Company
in 1998, have not completed enterprise-wide system solutions and are incurring
costs to deal specifically with the Year 2000 issue. These units represented
approximately 3% of 1998 revenues. The Company expects to incur approximately
$500,000 in 1999 related to completing the Year 2000 projects at those operating
units which will be expensed as incurred.
Manufacturing and Other Systems
The Company is now in the process of inventorying, assessing, renovating and
testing as it relates to manufacturing systems, and other supplemental
information systems and applications necessary to achieve a Year 2000 date
conversion with no effect on customers or disruption to business operations. The
Company has completed substantially all of the inventory and assessment phases
of its plan, and is in the process of completing the renovation and testing
phase. Critical manufacturing systems include plant accounting and reporting,
planning, and process controls. Plant accounting and reporting as well as
planning were addressed as part of the integrated enterprise-wide business
system and are therefore largely compliant. Process control units have been
replaced over the last three years with Year 2000 compliant units in the normal
course of equipment upgrades. Noncompliant units represent less than 10% of the
units in production and will be replaced throughout 1999 as part of the normal
equipment upgrades or have been determined not to pose a risk to the
manufacturing process.
Third Party Readiness
The Company has initiated formal discussions with its key suppliers, customers
and financial institutions to determine the extent to which the Company is
vulnerable to third parties' failure to correct their own Year 2000 issues.
Contingency plans will be developed on a case-by-case basis for suppliers,
customers, or service providers where a problem is identified that cannot be
remedied in time. For virtually all products and services the Company has
multiple suppliers. The Company also has a diverse customer base with only one
customer representing more than 10% of revenue.
Due in part to the reliance placed on customers, suppliers and financial
institutions, and their own susceptibility to Year 2000 issues, there can be no
assurances that the Company will not be exposed to significant unfavorable
operating results related to Year 2000 issues.
Conclusion
The total cost of compliance and its effect on the Company's future results of
operations are not expected to be significant due to the recent implementation
of the integrated business information system. The expected completion date of
projects currently in process is the end of the third quarter of 1999, which is
prior to any anticipated impact on the Company's operations. Contingency plans
will be revisited on an ongoing basis.
IMPACT OF PENDING ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued SOP 98-1, Accounting For the Costs of Computer Software Developed or
Obtained For Internal Use. The Company plans to adopt the SOP on January 1,
1999. The SOP will require the capitalization of certain internal costs incurred
after the date of adoption in connection with developing or obtaining software
for internal use. The Company currently expenses such costs as incurred. As a
result of adopting the new SOP, the Company expects to capitalize certain costs
related to software development projects in 1999. While the amount of such
capitalization cannot yet be estimated, the Company does not expect the adoption
of the SOP to have a material effect on net income for 1999.
<PAGE> 9
33
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) 133, Accounting for Derivative Instruments
and Hedging Activities, which is required to be adopted in years beginning after
June 15, 1999. The Statement permits early adoption as of the beginning of any
fiscal quarter after its issuance. The Company expects to adopt the new
Statement effective with the first quarter of 2000. The Statement will require
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company does not expect the adoption of
SFAS 133 to have a material effect on the earnings or financial position of the
Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Market risks relating to the Company's operations result primarily from interest
rates, foreign exchange rates and certain commodity prices, as well as
concentrations of credit risk. Each of these is discussed below.
Interest Rate Risk
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. For the Company's
short-term and long-term debt obligations, the table presents principal cash
flows and average interest rates by expected maturity dates. The table also
presents fair values as of December 31, 1998.
<TABLE>
<CAPTION>
Expected Maturity Dates
-------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Fair Value
- ----------------------------------------------------------------------------------------------------------------------
(in millions, except rates)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed-rate
debt obligations $75.0 $73.4
Average interest rate 6.92%
Variable-rate debt
to be refinanced $87.8 $87.8
Average interest rate 4.40%
</TABLE>
Foreign Exchange Rate Risk
The following table provides information about the Company's financial
instruments that are sensitive to changes in foreign currency rates. The Company
maintains debt denominated in multiple foreign currencies in order to align a
portion of the Company's borrowing in the same currency as that of the
anticipated cash flow of its foreign operations.
<TABLE>
<CAPTION>
Expected Maturity Dates
-------------------------------------------------------------
1999 2000 2001 2002 2003 Thereafter Fair Value
- ----------------------------------------------------------------------------------------------------------------------
Average exchange rates are stated in foreign currency/US dollars
<S> <C> <C> <C> <C> <C> <C> <C>
(in millions, except rates)
Variable-rate Dutch Guilder
debt to be refinanced $30.1 $30.1
Average exchange rate 1.892
Variable-rate Australian Dollar
debt to be refinanced $14.7 $14.7
Average exchange rate 1.6332
Variable-rate German Mark
debt to be refinanced $25.0 $25.0
Average exchange rate 1.6807
</TABLE>
<PAGE> 10
34
BELDEN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Commodity Price Risk
The Company is a purchaser of certain commodities, primarily copper. The Company
uses futures contracts for hedging purposes to reduce the effect of changing
commodity prices over the time frame required to reflect cost changes in sales
price for the Company's products. The Company does not speculate on commodity
prices. The following table presents the open futures contracts by the notional
amount in pounds, the weighted average contract price, and total dollar amounts
by expected maturity date. In addition, the table presents the physical
inventory of copper at December 31, 1998, by the amount of pounds held at
average cost. The fair value of copper futures contracts and physical inventory
as of December 31, 1998, is also presented.
<TABLE>
<CAPTION>
Expected Maturity Dates
-----------------------
1999 2000 Fair Value
- -----------------------------------------------------------------------------------------------------------------------
(in millions, except average price)
<S> <C> <C> <C>
Over-the-counter forward sell contracts
Contract volume (pounds) 10.4 0.3
Weighted average price (per pound) $0.7538 $0.7845
Contract amounts $ 7.9 $ 0.2 $7.3
On-hand copper rod at December 31, 1998
Pounds on hand 3.3
Weighted average price (per pound) $0.7400
Total value on hand $ 2.4 $2.2
</TABLE>
Credit Risk
Sales to a major customer were $122.1 million or 17% of total sales in 1998, and
$119.3 million or 16% of total sales in 1997. At December 31, 1998, outstanding
receivables to this customer totaled $13.7 million.
FORWARD-LOOKING STATEMENTS
Any statements set forth other than historical facts are forward-looking
statements made in reliance upon the safe harbor of the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially from such
forward-looking information for the reasons set forth below. The economic
downturn in the Asia/Pacific and Latin America regions and its negative impact
on revenues and earnings, heightened competition from domestic and foreign
competition, including new entrants; the success in identifying, acquiring and
integrating acquisitions; results from transfers of production to new
facilities; developments in technology; the threat of displacement from
competing technologies, including wireless and fiber optic technologies;
acceptance of Belden's products; changes in raw material costs and availability;
foreign currency rates; pricing of Belden's products; changes in the global
economy; the success of cost saving initiatives and programs and other specific
factors discussed in the Company's Form 10-K and other Securities and Exchange
Commission filings will have an impact on Belden's actual results. The
information contained herein represents management's best judgement as of the
date hereof based on information currently available; however, the Company does
not intend to update this information to reflect developments of information
obtained after the date hereof and disclaims any legal obligation to the
contrary.
<PAGE> 11
35
BELDEN INC.
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
BELDEN INC.
We have audited the accompanying consolidated balance sheets of Belden Inc. as
of December 31, 1998 and 1997, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Belden Inc. at
December 31, 1998 and 1997, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
St. Louis, Missouri
January, 20, 1999
/s/ERNST & YOUNG LLP
<PAGE> 12
36
BELDEN INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except par value and number of shares)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,291 $ 916
Receivables, less allowance for doubtful accounts
of $835 at 1998 and $879 at 1997 102,305 120,761
Inventories 99,881 107,340
Deferred income taxes 6,421 5,186
Other 3,340 3,065
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 215,238 237,268
Property, plant and equipment, less accumulated
depreciation 196,136 151,933
Goodwill, less accumulated amortization
of $7,545 at 1998 and $5,607 at 1997 82,112 70,565
Other intangibles, less accumulated amortization
of $11,245 at 1998 and $8,192 at 1997 11,916 14,975
Other assets 629 388
- ---------------------------------------------------------------------------------------------------------------------
$ 506,031 $ 475,129
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 76,182 $ 74,719
Income taxes payable 3,177 8,358
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 79,359 83,077
Long-term debt 162,850 124,047
Post-retirement benefits other than pensions 14,747 16,026
Deferred income taxes 14,159 13,141
Other long-term liabilities 15,249 9,884
Stockholders' equity:
Preferred stock, par value $.01 per share, 25,000,000
shares authorized, no shares outstanding -- --
Common stock, par value $.01 per share, 100,000,000
shares authorized 26,203,603 and 26,179,958 issued, and
24,328,742 and 26,142,328 shares outstanding at 1998 and
1997, respectively 262 262
Additional paid-in capital 48,482 49,370
Retained earnings 218,605 189,163
Accumulated other comprehensive income/(loss) (8,859) (8,600)
Treasury stock, at cost, 1,874,861 and 37,630 shares (38,823) (1,241)
at 1998 and 1997
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 219,667 228,954
- ---------------------------------------------------------------------------------------------------------------------
$ 506,031 $ 475,129
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 13
37
BELDEN INC.
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Years Ended December 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues $ 723,625 $ 747,207 $ 667,425
Cost of sales 554,124 549,898 499,046
- ---------------------------------------------------------------------------------------------------------------------
Gross profit 169,501 197,309 168,379
Selling, general and administrative expenses 92,905 87,764 73,502
Amortization of goodwill 1,925 1,962 460
Nonrecurring charges 10,600 1,600 -
- ---------------------------------------------------------------------------------------------------------------------
Operating earnings 64,071 105,983 94,417
Interest expense 7,738 6,958 3,497
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 56,333 99,025 90,920
Income taxes 21,829 38,372 35,686
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 34,504 $ 60,653 $ 55,234
- ---------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1.35 $ 2.32 $ 2.12
- ---------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 1.35 $ 2.30 $ 2.11
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 14
38
BELDEN INC.
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
Years Ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income $ 34,504 $ 60,653 $ 55,234
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 19,355 17,854 16,121
Amortization 4,992 1,962 1,465
Deferred income taxes 151 3,650 3,197
Changes in operating assets and liabilities(*):
Receivables 26,410 (12,694) (9,155)
Inventories 19,259 (22,249) (1,597)
Accounts payable and accrued liabilities (8,717) (2,935) (8,978)
Income taxes payable (7,864) 6,020 433
Other assets and liabilities, net (467) 5,333 1,492
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating 87,623 57,594 58,212
activities
Cash flows from investing activities:
Capital expenditures (40,844) (28,725) (26,100)
Cash used to acquire businesses (40,703) (76,082) (18,050)
Proceeds from sales of plant and equipment 317 198 209
- ------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (81,230) (104,609) (43,941)
Cash flows from financing activities:
Net borrowings (payments) under long-term
credit facility and credit agreements 39,375 (17,906) (7,101)
Proceeds from private placement of debt -- 75,000 --
Purchase of treasury stock (39,250) (6,846) (2,425)
Exercise of stock options 780 1,165 1,558
Cash dividends paid (5,062) (5,229) (5,212)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing (4,157) 46,184 (13,180)
activities
Effect of exchange rate changes on cash and
cash equivalents 139 (48) (46)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 2,375 (879) 1,045
Cash and cash equivalents, beginning of year 916 1,795 750
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 3,291 $ 916 $ 1,795
- ------------------------------------------------------------------------------------------------------------------------
(*) Net of the effects of exchange rate changes and acquired businesses.
</TABLE>
See accompanying notes.
<PAGE> 15
39
BELDEN INC.
CONSOLIDATED STOCKHOLDERS' EQUITY STATEMENTS
<TABLE>
<CAPTION>
Treasury Accumulated
Common Stock Additional Stock Other
------------------- Paid-In Retained --------------- Comprehensive
Shares Amount Capital Earnings Shares Amount Income (Loss) Total
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 26,115 $261 $51,034 $ 83,717 $ $(3,110) $131,902
Net Income 55,234 55,234
Foreign currency translation
adjustments (1,350) (1,350)
--------
53,884
Comprehensive income
Issuance of common stock for:
Stock Options 23 -- 409 47 1,149 1,558
Purchase of treasury stock (100) (2,425) (2,425)
Cash dividends ($.20 per share) (5,212) (5,212)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 26,138 261 51,443 133,739 (53) (1,276) (4,460) 179,707
Net Income 60,653 60,653
Foreign currency translation (4,140) (4,140)
adjustments --------
Comprehensive income 56,513
Issuance of common stock for:
Stock Options 42 1 115 53 1,276 1,392
Employee Stock Purchase Plan (2,188) 163 5,605 3,417
Purchase of treasury stock (201) (6,846) (6,846)
Cash dividends ($.20 per share) (5,229) (5,229)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 26,180 262 49,370 189,163 (38) (1,241) (8,600) 228,954
NET INCOME 34,504 34,504
FOREIGN CURRENCY TRANSLATION (259) (259)
ADJUSTMENTS --------
COMPREHENSIVE INCOME 34,245
ISSUANCE OF COMMON STOCK FOR:
STOCK OPTIONS 24 -- (888) 69 1,668 780
PURCHASE OF TREASURY STOCK (1,906) (39,250) (39,250)
CASH DIVIDENDS ($.20 PER SHARE) (5,062) (5,062)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 26,204 $262 $48,482 $218,605 (1,875) $(38,823) $(8,859) $219,667
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 16
40
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: DESCRIPTION OF BUSINESS
Founded in 1993, Belden Inc. (the "Company") is a leader in the design and
manufacture of wire, cable and cord products for the computer, audio/video,
industrial and electrical markets. The Company was previously an unincorporated
operating division of Cooper Industries, Inc. ("Cooper"), until October 1993,
when 23.5 million shares of Belden Inc. common stock were sold to the public in
an initial public offering. The 2.5 million shares of common stock originally
retained by Cooper were subsequently sold to the public in 1995 and 1996.
NOTE 2: 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.
Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments with a
maturity of three months or less.
Inventories
Inventories are carried at cost or, if lower, market value. On the basis of
current costs, 67% and 73% of inventories in 1998 and 1997, respectively, were
carried on the last-in, first-out (LIFO) method. The remaining inventories were
carried on the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciation is provided
over the estimated useful lives of the related assets using primarily the
straightline method, generally using asset lives of 10 to 40 years for buildings
and 5 to 12 years for machinery and equipment.
Intangibles
Goodwill is related to businesses acquired and is being amortized over 40 years
using the straightline method. On a periodic basis, the Company estimates the
future undiscounted cash flows of businesses to which goodwill relates in order
to ensure that the carrying value of goodwill has not been impaired. Other
intangibles, which consist primarily of business information systems, are
recorded at cost, and are being amortized over their estimated useful lives
using the straightline method.
Revenue Recognition
Revenue is recognized in the period product is shipped to customers. Provisions
are recorded for returns adjustments, and bad debts.
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 due to the recognition of revenues and expenses in different periods for
income tax and financial statement purposes. Income taxes are provided as if
operations in all countries, including the United States, were standalone
businesses filing separate tax returns.
Research and Development
Research and development expenditures are charged to expense as
incurred. Expenditures for research and development sponsored by the Company
were $8.5 million, $7.9 million and $8.7 million for 1998, 1997, and 1996,
respectively.
Environmental Remediation and Compliance
Environmental remediation costs are accrued, except to the extent costs can be
capitalized, based on estimates of known environmental remediation exposures.
Environmental compliance costs include maintenance and operating costs with
respect of ongoing monitoring programs. Such costs are expensed as incurred.
Capitalized environmental costs are depreciated generally utilizing a 15-year
life.
Futures Contracts
As part of its risk management strategy, the Company purchases exchange traded
forward contracts to manage its exposure to changes in copper costs. The copper
forward contracts obligate the Company to make or receive a payment equal to the
net change in the value of the contract at its maturity. Such contracts are
designated as hedges of the Company's anticipated sales for which selling prices
are firm, are short-term in nature, and are effective in hedging the Company's
exposure to changes in copper costs during that cycle.
Unrealized gains and losses are deferred and recognized in earnings when
realized as an adjustment to cost of sales when the future sales occur (the
deferral accounting method). Amounts securing open forward contracts are
included in inventory. Realized and unrealized gains or losses on options that
are no longer effective as hedges
<PAGE> 17
41
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
or that relate to sales that are no longer probable of occurring are recognized
in income from the date the contracts become ineffective until their expiration.
Foreign Currency Exposure Management
The Company enters into various transactions designed to manage foreign currency
exposure. The Company is subject to transaction exposures that arise from
foreign exchange rate movements between the date foreign currency transactions
are recorded (e.g., export purchases and sales) and the date they are
consummated (e.g., cash disbursements and receipts in foreign currencies). The
Company sometimes hedges specific transaction exposures by entering into forward
contracts, which typically do not exceed one year. Gains and losses on those
forward contracts from exchange rate movements offset losses and gains on the
transactions being hedged.
The Company sometimes enters into forward contracts to hedge a portion of
anticipated export sales, primarily intercompany, within the next 12 months. The
dates of the forward contracts are designated to match the dates of the
anticipated cash receipts of the hedged export sales. Gains and losses on the
forward contracts from exchange rate movements offset the losses and gains on
the portion of the export sales hedged.
As a result of having various foreign operations, the Company is exposed to the
effect of exchange rate movements on the U.S. dollar value of anticipated cash
flows of its foreign operations, which will be remitted to the U.S. The Company
sometimes utilizes a natural hedge to mitigate this exposure by denominating a
portion of the Company's borrowing in the same currency as the currency of the
anticipated cash flow of its foreign operations. The foreign currency
denominated cash flow from the foreign operation, when remitted, can be used to
reduce the foreign currency borrowing.
Impact of Pending Pronouncements
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued SOP 98-1, Accounting For the Costs of Computer Software Developed or
Obtained For Internal use. The Company plans to adopt the SOP on January 1,
1999. The SOP will require the capitalization of certain internal costs incurred
after the date of adoption in connection with developing or obtaining software
for internal use. The Company currently expenses such costs as incurred. As a
result of adopting the new SOP, the Company expects to capitalize certain costs
related to software development projects in 1999. While the amount of such
capitalization cannot yet be estimated, the Company does not expect the adoption
of the SOP to have a material effect on net income for the year.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) 133, Accounting for Derivative Instruments
and Hedging Activities, which is required to be adopted in years beginning after
June 15, 1999. The Statement permits early adoption as of the beginning of any
fiscal quarter after its issuance. The Company expects to adopt the new
Statement effective with the first quarter of 2000. The Statement will require
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings.
Hedging activities have been confined to copper futures during 1998. The Company
does not expect the adoption of SFAS 133 to have a material effect on the
earnings or financial portion of the Company.
Use of Estimates in the Preparation of the Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
<PAGE> 18
42
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Years Ended December 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Numerator:
Net Income $ 34,504 $ 60,653 $ 55,234
- --------------------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings per
share - weighted-average shares 25,507 26,126 26,055
Effect of dilutive employee stock options 113 214 181
- --------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted-average shares 25,620 26,340 26,236
- --------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1.35 $ 2.32 $ 2.12
- --------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 1.35 $ 2.30 $ 2.11
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4: ACQUISITIONS
During 1998, 1997, and 1996 the Company acquired the entities described below,
which were 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. Operating results of each acquisition are included
in the Company's consolidated results since its respective acquisition date.
- - On November 30, 1998, the Company purchased for cash ABB
Elektro-Isolierwerke GmbH (EIW) from Asea Brown Boveri AG, Mannheim, the
holding company of the German ABB group to which EIW belonged. EIW designs,
manufacturers and markets cables serving primarily the industrial and
computer networking industries. The business is located in Villingen,
Germany. The Company has preliminarily recorded goodwill of approximately $12
million with respect to the acquisition.
- - On February 28, 1998, the Company purchased substantially all of the assets
of the Olex communication cable operations (Olex) of Pacific Dunlop Limited
for cash of approximately $16 million. Olex designs, manufactures, and
markets metallic and fiber optic cables serving primarily the computer
networking and telephony industries. The Company has not recorded any
goodwill with respect to the acquisition. The acquired business is located
near Melbourne, Australia.
- - On December 23, 1997, the Company purchased for cash the fixed assets and
inventory of Cowen Cable Corporation (Cowen). Cowen designs, manufactures and
markets a variety of multiconductor cables and is located in Leominster,
Massachusetts.
- - 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 $68 million. Alpha designs and markets specialty wire and cable
for a variety of markets, including the computer interconnect, industrial and
electrical markets, and is located in Elizabeth, New Jersey. The Company
recorded approximately $45 million of goodwill in connection with the
acquisition.
- - On December 3, 1996, the Company purchased for cash substantially all of the
assets of Intech Cable, Inc. (Intech). Intech designs, manufactures and
markets specialty wire and cable for a variety of markets, including the
telecommunications and industrial markets, and is located in Hudson,
Massachusetts.
<PAGE> 19
43
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5: NONRECURRING CHARGES
In 1998, the Company recorded a charge of $1.5 million ($928,000 after tax)
related to the consolidation of its Cord Products segment manufacturing facility
located in Franklin, North Carolina, into other Cord Products segment
facilities. The charge is primarily to cover severance costs of 172 of
employees who will be terminated in 1999. At December 31, 1998 no employees have
been terminated or any costs paid. Also in 1998, the Company recorded a charge
of $2.9 million ($1.8 million after tax) for salary continuation, extended
medical coverage and other miscellaneous employee benefits related to a
reduction of 35 salaried employees in the Electronic and Electrical segment.
Prior to December 31, 1998, 35 salaried employees had been terminated. At
December 31, 1998, $2.2 million remained to be paid related to this charge.
Additionally in 1998, the Company discontinued certain product lines. Inventory
writedowns related to discontinued product lines within the Electronics and
Electrical business segment were $3 million ($1.8 million after tax) and were
recorded net of expected recovery upon disposal. Other nonrecurring charges of
$3.2 million ($2 million after tax) were primarily for the write-off of
receivables due from a failed Asia/Pacific distributor.
In 1997, the Company recorded a restructuring charge of $1.6 million ($980,000
after tax) primarily related to employee severance and costs of plant closure.
At December 31, 1998, no such costs remain to be paid.
NOTE 6: INVENTORIES
<TABLE>
<CAPTION>
December 31, 1998 1997
- -------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Raw materials $ 23,662 $ 25,195
Work-in-process 14,362 16,203
Finished goods 67,955 75,794
Perishable tooling and supplies 4,321 4,365
- -------------------------------------------------------------------------------------------
110,300 121,557
Excess of current standard
costs over LIFO costs (6,450) (10,297)
Other (3,969) (3,920)
- -------------------------------------------------------------------------------------------
$99,881 $107,340
- -------------------------------------------------------------------------------------------
</TABLE>
NOTE 7: PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 31, 1998 1997
- -------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Land and land improvements $ 11,170 $ 10,115
Buildings 67,075 61,228
Machinery and equipment 265,386 217,115
Construction in process 15,515 9,592
- -------------------------------------------------------------------------------------------
359,146 298,050
Accumulated depreciation (163,010) (146,117)
- -------------------------------------------------------------------------------------------
$196,136 $151,933
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 20
44
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
December 31, 1998 1997
- --------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Trade accounts $ 46,418 $ 49,683
Payroll and related taxes 5,691 6,709
Employee stock purchase plan and
employee benefit accruals 5,800 3,609
Restructuring costs 3,758 686
Payable for acquired businesses -- 250
Other (individual items less than
5% of total current liabilities) 14,515 13,782
- --------------------------------------------------------------------------------------------
$ 76,182 $ 74,719
- --------------------------------------------------------------------------------------------
</TABLE>
NOTE 9: LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS
<TABLE>
<CAPTION>
December 31, 1998 1997
- --------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Variable-rate bank revolving
Credit agreement, due 2001,
Effective interest rate 3.90% at
December 31, 1998 $ 69,810 $ 9,000
Short-term borrowings to be
refinanced, effective interest rate
6.29% at December 31, 1998 18,040 40,047
Medium-term notes, face amount
of $75,000 due from 2005
through 2009, effective interest
rate 6.92% 75,000 75,000
- --------------------------------------------------------------------------------------------
$162,850 $124,047
- --------------------------------------------------------------------------------------------
</TABLE>
The variable-rate bank revolving credit agreement (Credit Agreement) provides
for an aggregate $200 million unsecured, multicurrency revolving credit facility
expiring in November 2001. Loans under the Credit Agreement can be advanced by
the banks either based on their commitments (committed loans) or their offers
which have been accepted by the Company under a special bidding procedure (bid
loans). Committed loans accrue interest at the option of the Company at LIBOR
plus 0.235% to 0.500%, or the higher of the prime rate or the federal funds rate
plus 0.500%. Bid loans accrue interest at prevailing interest rates. A facility
fee of 0.090% to 0.250% per annum is charged on the aggregate $200 million
credit. The facility includes certain covenants, including a maximum leverage
ratio and maintaining a minimum net worth. The short-term borrowings relate to
unsecured, uncommitted arrangements with five banks under which the Company may
borrow up to $91 million at prevailing interest rates. At December 31, 1998 and
1997, these borrowings were reclassified to long-term debt, reflecting the
Company's intention and ability to refinance the amounts during the next year
through either continued short-term borrowings or utilizing the Credit
Agreement.
In 1997, the Company completed a private placement of $75 million of unsecured
medium-term notes. The notes bear interest at 6.92% and mature 12 years from
closing with an average life of 10 years. The Note Purchase Agreement for the
notes contains various customary affirmative and negative covenants and other
provisions, including restrictions on the incurrence of debt, a maximum leverage
ratio, and maintaining a minimum net worth.
Total interest paid during 1998, 1997, and 1996 was $7.6 million, $4.8 million,
and $3.6 million, respectively.
NOTE 10: RETIREMENT PLANS
Substantially all employees are covered by defined benefit or defined
contribution pension plans maintained by the Company. The Company's defined
benefit plans include a noncontributory cash balance plan for its domestic
employees, a final pay pension plan and an early retirement plan for its Dutch
employees and a defined benefit plan for its German employees, obtained with the
acquisition of EIW. Annual contributions to retirement plans equal or exceed the
minimum funding requirements of the Employee Retirement Income Security Act or
applicable local regulations.
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 and under a 401(k) feature, a partial
matching of employees' salary deferrals with Company common stock. Defined
contribution expense for the years ended December 31, 1998, 1997 and 1996 was
$6.3 million, $6 million, and $5.7 million, respectively.
<PAGE> 21
45
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company sponsors an unfunded post-retirement benefit plan (medical and life
insurance benefits) for employees who retired prior to 1989 (as well as certain
other employees who were near retirement and elected to receive certain
benefits). The net actuarial gain/loss in excess of a 10% corridor, the prior
service cost and the transition asset or obligation are being amortized over the
average remaining service period of active participants on a straightline basis.
The assets of the pension plans are maintained in various trusts and invested
primarily in equity and fixed income securities and money market funds.
Included in the change in benefit obligation in 1998 is a special termination
benefit provided as an incentive for employees to accept the provisions of a
voluntary separation program offered to certain employee groups.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets over years ended December 31, 1998
and 1997, and a statement of the funded status as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
----------------------------------- ------------------------------
Years Ended December 31, 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation, beginning of year $ (88,243) $ (82,583) $ 14,629 $ 13,436
Service cost (3,928) (3,465) 50 30
Interest cost (5,671) (5,274) 939 827
Plan participants' contributions (87) 0 91 104
Actuarial gain/(loss) (1,435) 619 1,158 1,997
Special termination benefits (442) (196) 0 0
Acquisition (2,526) 0 0 43
Benefits paid 2,874 2,656 (1,881) (1,808)
- ----------------------------------------------------------------------------------------------------------------------
Benefit obligation, end of year $ (99,458) $ (88,243) $ 14,986 $ 14,629
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
----------------------------------- ------------------------------
Years Ended December 31, 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Change in plan assets:
Fair value of plan assets, beginning of
year $ 85,104 $ 71,390 $ 0 $ 0
Actual return on plan assets 16,227 15,144 0 0
Employer contributions 529 1,188 1,790 1,704
Plan participant contributions 87 170 91 104
Expenses paid (237) (132) 0 0
Benefits paid (2,874) (2,656) (1,881) (1,808)
- ----------------------------------------------------------------------------------------------------------------------
Fair value of plan assets, end of year $ 98,836 $ 85,104 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Subsequent to December 31, 1998, the Company allowed for the voluntary transfer
of assets in a Company sponsored non-contributory defined contribution plan
covering domestic hourly employees into the Company's defined benefit pension
plan. The amount of assets transferred was approximately $24,882.
<PAGE> 22
46
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
----------------------------------- ------------------------------
December 31, 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Funded status:
Funded status $ (622) $(3,139) $ (14,986) $ (14,629)
Unrecognized net actuarial (gain)/loss (14,050) (6,082) 2,639 1,603
Unrecognized prior service cost (20) (21) (2,400) (3,000)
Unrecognized net transition
obligation/(asset) (223) (450) 0 0
- ----------------------------------------------------------------------------------------------------------------------
Accrued benefit cost $ (14,915) $(9,692) $ (14,747) $ (16,026)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain of the pension plans had projected benefit obligations in excess of plan
assets. The net unfunded status of these plans was $15,784 and $12,597 at
December 31, 1998 and 1997 respectively. The table below shows the components of
the net unfunded status of these plans:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
----------------------------------- ------------------------------
December 31, 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Funded status of plans with projected
benefit obligations in excess of plan
assets:
Benefit obligation, end of year $(48,517) $(41,472) N/A N/A
Fair value of plan assets, end of year 32,733 28,875 N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
Net unfunded status $(15,784) $(12,597) N/A N/A
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Plans with assets in excess of projected benefit obligations had assets in
excess of projected benefit obligations of $15,162 and $9,458 at December 31,
1998 and 1997 respectively.
Plans with accumulated benefit obligations in excess of plan assets had no plan
assets at December 31, 1998 and 1997. The accumulated benefit obligation related
to these plans was $6,702 and $3,528 at December 31, 1998 and 1997 respectively.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
----------------------------------- ------------------------------
December 31, 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Weighted-average assumptions:
Discount rate 6.3% 6.5% 6.5% 6.8%
Expected return of plan assets 8.7% 8.7% N/A N/A
Rate of compensation increase 4.2% 4.3% N/A N/A
</TABLE>
For measurement purposes, a 6.86% gross health care trend rate was used for
benefits for 1999. Trend rates were to decrease gradually to 4% in 2003 and
remain at this level beyond.
<PAGE> 23
47
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one percentage point change in the assumed
health care cost trend rates would have the following effects on 1998 expense
and year-end liabilities:
<TABLE>
<CAPTION>
1% Increase 1% Decrease
------------------------------------
(in thousands)
<S> <C> <C>
Effect on total of service and interest cost components $ 55 $ (49)
Effect on postretirement benefit obligation $861 $(774)
</TABLE>
The following table provides the components of net periodic benefit costs for
the plans for the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
------------------------------------- ----------------------------------
Years Ended December 31, 1998 1997 1996 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 3,928 $ 3,465 $ 3,404 $ 50 $ 30 $ 34
Interest cost 5,671 5,274 5,134 939 827 870
Expected return on plan assets (6,556) (7,180) (6,338) 0 0 0
Amortization of prior service cost (1) (1) 4 (600) (600) (600)
Net (gain)/loss recognition 18 1,690 1,104 52 0 0
Transition (asset)/obligation recognition (294) (212) (226) 0 0 0
- ------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ 2,766 $ 3,036 $ 3,082 $ 441 $ 257 $ 304
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 11: INCOME TAXES
Effective October 6, 1993, the Company and Cooper entered into a Tax Sharing and
Separation Agreement ("Tax Agreement"). Pursuant to the Tax Agreement, the
Company and Cooper made an election in connection with the initial public
offering of the Company's stock under Section 338(h)(10) of the Internal Revenue
Code. The effect of this election was to increase the tax basis of the Company's
assets. This additional basis is expected to result in increased income tax
deductions and accordingly may reduce income taxes otherwise payable by the
Company. Pursuant to the Tax Agreement, the Company agreed to pay to Cooper the
amount of the tax benefit associated with this additional basis (retaining 10%
of the tax benefit associated with the amortization of the allocated cost of
certain intangibles, such as goodwill) as realized on a quarterly basis,
calculated by comparing the Company's actual taxes to the taxes that would have
been owed had the increase in basis not occurred. The amount required to be paid
to Cooper is subject to certain adjustments if certain business combinations or
other acquisitions involving the Company occur. Except for the retained 10%
benefit, the effect of the Tax Agreement is to put the Company in the same
financial position it would have been in had there been no increase in the tax
basis of the Company's assets.
The effect of the retained 10% benefit upon the income tax provisions reflected
in the accompanying income statements is to reduce these provisions for the
years ended December 31, 1998, 1997 and 1996 by $922,000, $789,000 and $733,000,
respectively.
<PAGE> 24
48
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Years Ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Income before income taxes:
U.S. operations $48,027 $90,662 $80,429
Foreign operations 8,306 8,363 10,491
- ------------------------------------------------------------------------------------------------------------------
$56,333 $99,025 $90,920
- ------------------------------------------------------------------------------------------------------------------
Income Tax expense/(benefit):
Currently payable:
U.S. federal $13,929 $26,548 $24,862
U.S. state and local 2,894 5,892 5,895
Foreign 5,223 2,282 1,729
- ------------------------------------------------------------------------------------------------------------------
22,046 34,722 32,486
Deferred:
U.S. federal $ 1,577 $ 2,486 $ 1,075
U.S. state and local 398 614 267
Foreign (2,192) 550 1,858
- ------------------------------------------------------------------------------------------------------------------
(217) 3,650 3,200
- ------------------------------------------------------------------------------------------------------------------
$21,829 $38,372 $35,686
- ------------------------------------------------------------------------------------------------------------------
Total income taxes paid (*) $27,764 $30,470 $31,247
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Included in 1998, 1997, and 1996 taxes paid are $12,000, $11,600 and
$11,400, respectively, paid to Cooper in accordance with the Tax Agreement.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Effective tax rate reconciliation:
U.S. federal statutory rate 35.0% 35.0% 35.0%
State and local income taxes 3.8 4.3 4.4
Other -- (0.5) (0.2)
- ------------------------------------------------------------------------------------------------------------------
Effective tax rate 38.8% 38.8% 39.2%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Components of deferred tax balances:
Deferred tax liabilities:
Plant, equipment and intangibles $ (25,289) $ (23,522)
Deferred tax assets:
Postretirement benefits 10,856 10,353
Reserves and accruals 6,695 4,943
Other -- 271
- ----------------------------------------------------------------------------------------------------------------------
17,551 15,567
- ----------------------------------------------------------------------------------------------------------------------
$ (7,738) $ ( 7,955)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Deferred income taxes have been established for differences in the basis of
assets and liabilities for financial statement and tax reporting purposes as
adjusted for the Tax Agreement with Cooper.
<PAGE> 25
49
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12: STOCK COMPENSATION PLANS
The Company has two forms of stock compensation plans, the Long-term Incentive
Plan ("Incentive Plan") and the Employee Stock Purchase Plan ("Stock Purchase
Plan"). Under the Incentive Plan, certain employees of the Company are eligible
to receive awards in the form of stock options, stock appreciation rights,
restricted stock grants and performance shares. An aggregate of 2.6 million
shares is reserved for issuance under the Incentive Plan. As of December 31,
1998, 2.3 million stock options have been granted with terms ranging from five
to ten years, vesting in equal amounts on each of the first three anniversaries
of the grant date. Under the Stock Purchase Plan, all full-time U.S., Canadian,
and effective with the 1997 offering, Dutch employees receive an option to
purchase common stock at the lesser of 85% of the fair market value on the
offering date or 100% of the fair market value on the exercise date.
With respect to the 1995 offering of the Stock Purchase Plan, on December 8,
1997, the Company sold 163,170 shares to 1,054 employees at $20.94 per share
using existing treasury shares. With respect to the 1997 offering, at December
31, 1998, 677 participating employees had options to acquire up to 73,318 shares
of common stock at the lesser of $32.06 per share or the market price on the
exercise date of December 6, 1999. An aggregate of 858,256 shares of common
stock is currently reserved for issuance under the Stock Purchase Plan.
The Company accounts for stock options under Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees" and has adopted the disclosure-only
provisions of SFAS 123, "Accounting for Stock-Based Compensation". Accordingly,
no compensation cost has been recognized for the stock compensation plans. The
effect of applying SFAS 123's fair value method to the Company's stock
compensation plan results in net income and earnings per share that are not
materially different from amounts reported.
The following table summarizes the Company's stock option activity and related
information for the years ended December 31, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
Years Ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 706,536 $25.73 738,247 $ 23.51 484,107 $ 16.84
Granted 1,288,500 28.64 88,000 34.94 347,000 30.74
Exercised (116,789) 18.49 (100,551) 17.85 (80,474) 15.40
Canceled (134,553) 29.24 (19,160) 23.87 (12,386) 18.13
- ------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 1,743,694 $28.08 706,536 $ 25.73 738,247 $ 23.51
- ------------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 369,365 $26.00 375,702 $ 20.66 297,747 $ 16.49
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -----------------------------------------------------------------------------------------------------------------------
Weighted Average Weighted Weighted
Range of Remaining Average Average
Exercise Contractual Life Exercise Exercise
Prices Options Price Options Price
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$16 to $19 756,262 8.1 years $ 17.19 138,762 $ 18.29
21 to 24 18,668 1.2 21.81 18,668 21.81
29 to 31 270,564 7.2 30.74 177,395 30.73
31 to 36 83,200 8.2 34.92 31,540 34.49
39 to 42 615,000 9.2 39.59 3,000 39.53
- -----------------------------------------------------------------------------------------------------------------------
$16 to $42 1,743,964 8.3 years $ 28.09 369,365 $ 26.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 26
50
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: STOCKHOLDER RIGHTS PLAN
Under the Company's Stockholder Rights Plan, each share of common stock
generally has "attached" to it one preferred share purchase right. Each right,
when exercisable, entitles the holder to purchase 1/100th of a share of the
Company's Series A Junior Participating Preferred Stock at a purchase price of
$100. Each 1/100th of a share of Series A Junior Participating Preferred Stock
will be substantially equivalent to one share of common stock and will be
entitled to one vote, voting together with the shares of common stock. The
rights will become exercisable only if, without the prior approval of the Board
of Directors, a person or group of persons acquires or announces the intention
to acquire 15% or more of the common stock. If the Company is acquired through a
merger or other business combination transaction, each right will entitle the
holder to purchase $200 worth of the surviving company's common stock for $100
(subject to adjustment). In addition, if a person or group of persons acquires
15% or more of the common stock, each right not owned by the 15% or greater
shareholder would permit the holder to purchase $200 worth of common stock for
$100 (subject to adjustment). The rights are redeemable, at the option of the
Company, at $.01 per right at any time until ten business days after a person or
group of persons acquires 15% or more of the common stock. The rights expire on
July 18, 2005.
NOTE 14: COMMITMENTS
At December 31, 1998, the Company was not a party to any foreign currency
exchange contracts. At December 31, 1998, the Company was committed to purchase
approximately 10.7 million pounds of copper, a two to three months supply of the
Company's anticipated U.S. requirements, at an aggregate cost of $8.1 million.
At December 31, 1998, there were unrealized losses of $751,000 on these
contracts, which will be realized as an adjustment to cost of sales when the
future sales that are being hedged occur. The contracts mature as follows:
<TABLE>
<CAPTION>
1999 (by quarter)
------------------------------------------------------
1 2 3 4 Thereafter
- -------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Commitments as of December 31, 1998 $ 2,588 $ 2,078 $ 2,595 $ 597 $ 196
</TABLE>
NOTE 15: LEASES
Rental expense for operating leases primarily for office space and machinery and
equipment was $4.5 million, $4.6 million, and $4 million in 1998, 1997, and
1996, respectively.
Minimum annual lease payments for noncancellable operating leases in effect at
December 31, 1998 are as follows:
<TABLE>
<S> <C>
(in thousands)
1999 $ 4,251
2000 2,531
2001 1,282
2002 814
2003 385
Thereafter 59
- --------------------------------------------------------------------------
$ 9,322
- --------------------------------------------------------------------------
</TABLE>
NOTE 16: CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Concentrations of Credit Risk
Concentrations of credit risk with respect to trade receivables are limited due
to the wide variety of customers and markets into which the Company's products
are sold, as well as their dispersion across many different geographic areas. As
a result, at December 31, 1998 and 1997, the Company did not consider itself to
have any significant concentrations of credit risk except for receivables from
several operating units of its largest customer of $ 13.7 million and $19
million, respectively.
<PAGE> 27
51
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, trade payables, and debt instruments. At
December 31, 1998 and 1997, the book values of cash and cash equivalents, trade
receivables, trade payables and debt instruments, excluding the medium-term
notes, are considered representative of their respective fair values. The book
value of the medium-term notes at December 31, 1998, was $75 million. The fair
value of the medium-term notes at December 31, 1998, was approximately $73
million estimated on a discounted cash flow basis using current obtainable rates
for similar financing.
NOTE 17: INDUSTRY SEGMENTS, MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
The Company's operations are conducted within two business segments; one which
designs, manufactures, and markets wire and cable for the electronics and
electrical markets, and one which designs, manufactures, and markets cord
products for the power cord market.
The Electronics and Electrical segment includes products used for the
transmission of data, audio, video, and electrical signals. These products are
sold primarily through distributors.
The Cord Products segment includes products designed for the purpose of power
transmission for appliances, power tools, floor care products, computers,
printers and peripherals, and other power supply requirements. These products
are sold primarily directly to original equipment manufacturers.
The Company evaluates performance and allocated resources based on operating
profits before interest and income taxes.
Operating profits of the two principal businesses include all the ongoing costs
of operations. Allocations to or from these businesses are immaterial. With the
exception of certain unallocated tax assets, substantially all the business
assets are the owned assets of each of the business segments. Segment
information below the quantitative threshold is attributable to Corporate
headquarters. Sales to a major customer were $122.1 million or 17% in 1998 and
$119.3 million or 16% in 1997 and $117.6 million or 17% in 1996. Product is sold
to this customer by both segments of the business.
Business segment information
<TABLE>
<CAPTION>
ELECTRONICS & CORD CORPORATE &
1998 ELECTRICAL PRODUCTS ELIMINATIONS CONSOLIDATED
- -------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUES $ 665,710 $ 59,477 $ (1,562) $ 723,625
DEPRECIATION &
AMORTIZATION 21,629 2,660 58 24,347
NONRECURRING ITEMS 8,205 1,516 879 10,600
OPERATING PROFIT/(LOSS) 71,112 (1,731) (5,310) 64,071
INTEREST EXPENSE - - 7,738 7,738
EARNINGS BEFORE TAX 71,112 (1,731) (13,048) 56,333
IDENTIFIABLE ASSETS 461,359 38,772 5,900 506,031
ACQUISITION OF PROPERTY,
PLANT & EQUIPMENT 64,403* 972 - 65,375
</TABLE>
* Includes $24,531 for acquired property, plant & equipment related to the Olex
and EIW acquisitions.
<PAGE> 28
52
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Electronics & Cord Corporate &
1997 Electrical Products Eliminations Consolidated
- -------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $ 680,603 $ 70,309 $ (3,705) $ 747,207
Depreciation &
amortization 17,400 2,366 50 19,816
Nonrecurring items 1,600 - - 1,600
Operating profit 101,582 1,674 (3,273) 105,983
Interest expense - - 6,958 6,958
Earnings before tax 107,582 1,674 ( 10,231) 99,025
Identifiable assets 425,636 43,663 5,830 475,129
Acquisition of property,
plant & equipment 37,263* 2,517 - 39,780
</TABLE>
*Includes $11,055 for acquired property, plant & equipment related to the
acquisitions of Alpha and Cowen Cable.
<TABLE>
<CAPTION>
Electronics & Cord Corporate &
1996 Electrical Products Eliminations Consolidated
- -------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $612,332 $81,144 $(26,051) $667,425
Depreciation &
amortization 15,590 1,951 45 17,586
Operating profit 93,409 3,113 (2,105) 94,417
Interest expense - - 3,497 3,497
Earnings before tax 93,409 3,113 (5,602) 90,920
Identifiable assets 322,005 43,259 6,381 371,645
Acquisition of property, -
plant & equipment 25,937* 3,077 29,014
</TABLE>
* Includes $2,914 for acquired property, plant & equipment related to the
acquisitions of ICI.
The following table identifies by country revenues based on the location of the
customer and property, plant and equipment based on physical location by
country.
GEOGRAPHIC INFORMATION
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
PERCENT PROPERTY, Percent Property, Percent Property,
OF PLANT & of Plant & of Plant &
COUNTRY & REGION REVENUES REVENUE EQUIPMENT Revenues Revenue Equipment Revenues Revenue Equipment
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES $491,713 68% $115,675 $ 504,037 68% $ 96,853 $424,564 64% $ 90,694
CANADA 40,230 6% 13,372 47,145 6% 13,325 44,053 6% 12,107
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL US & CANADA 531,943 74% 129,047 551,182 74% 110,178 468,617 70% 102,801
THE NETHERLANDS 17,822 2% 28,660 20,219 3% 39,512 33,596 5% 47,456
REST OF EUROPE 100,965 14% 23,294 103,875 14% 35 90,919 14% 6
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL EUROPE 118,787 16% 51,954 124,094 17% 39,547 124,515 19% 47,462
ASIA/PACIFIC 45,477 6% 13,130 46,825 6% 79 49,133 7% 63
LATIN AMERICA 20,944 3% 2,005 20,274 3% 2,129 21,400 3% 1,608
OTHER 6,474 1% - 4,832 - - 3,760 1% -
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $723,625 100% $196,136 $ 747,207 100% $151,933 $667,425 100% $151,934
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 29
53
BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18: QUARTERLY OPERATING RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
1998 (BY QUARTER)
-----------------------------------------------------------------------
1 2 3 4
- -----------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES $190,434 $196,291 $164,284 $172,616
GROSS PROFIT 49,650 51,371 33,559 34,921
OPERATING EARNINGS 27,014 26,754 6,143 4,160
NET INCOME 15,468 15,155 2,525 1,356
BASIC EARNINGS PER SHARE $ 0.59 $ 0.58 $ 0.10 $ 0.06
DILUTED EARNINGS PER SHARE $ 0.59 $ 0.58 $ 0.10 $ 0.06
</TABLE>
In 1998, the Company recorded certain nonrecurring charges in both the third
quarter and the fourth quarter. Operating earnings and net income before
nonrecurring items for the third quarter of 1998 would be $9,908 and $4,831
respectively. Operating earnings and net income before nonrecurring items for
the fourth quarter of 1998 would be $10,995 and $5,542 respectively.
<TABLE>
<CAPTION>
1997 (by quarter)
-----------------------------------------------------------------------
1 2 3 4
- -----------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues $175,974 $192,597 $183,693 $194,943
Gross profit 46,058 48,837 47,522 54,892
Operating earnings 24,499 25,643 25,068 30,773
Net income 13,885 14,440 14,503 17,825
Basic earnings per share $ 0.53 $ 0.55 $ 0.56 $ 0.68
Diluted earnings per share $ 0.53 $ 0.55 $ 0.55 $ 0.68
</TABLE>
In 1997, the Company recorded certain restructuring charges during the third
quarter. Operating earnings and net income before these charges would be $26,668
and $15,483 respectively.
NOTE 19: CONTINGENT LIABILITIES
Various claims are asserted against the Company in the ordinary course of
business including those pertaining to income tax examinations, product
liability 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 the financial position of the Company.
<PAGE> 30
54
BELDEN INC.
STOCKHOLDER INFORMATION
CORPORATE OFFICE
Belden Inc.
7701 Forsyth Boulevard
Suite 800
St. Louis, Missouri 63105
(314) 854-8000
INVESTOR RELATIONS CONTACT
Richard K. Reece
Vice President, Finance, Treasurer
and Chief Financial Officer
7701 Forsyth Boulevard
Suite 800
St. Louis, MO 63105
(314) 854-8054
ANNUAL MEETING
11:00 a.m.
May 6, 1999
St. Louis Club
7701 Forsyth Boulevard
St. Louis, Missouri 63105
TRANSFER AGENT
ChaseMellon Shareholder Services
85 Challenger Road
Overpeak Center
Ridgefield Park, NJ 07660
(201) 296-4266
INDEPENDENT AUDITORS
Ernst & Young LLP
701 Market Street, Suite 1400
St. Louis, Missouri 63101
(314) 259-1000
FORM 10-K
STOCKHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY WRITING TO
THE INVESTOR RELATIONS DEPARTMENT AT THE COMPANY'S CORPORATE OFFICE.
MARKET INFORMATION
The Company's common stock is traded under the symbol "BWC." Belden's common
stock began trading on the New York Exchange on September 30, 1993. At March
1, 1997, the Company had 1270 stockholders of record.
COMMON STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
1998 (by quarter)
----------------------------------------------
1 2 3 4
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividends per common share $.05 $.05 $.05 $.05
Common stock prices:
High 42 1/4 43 7/8 33 1/8 21 3/16
Low 33 9/16 29 7/8 13 1/8 11 1/4
<CAPTION>
1997 (by quarter)
----------------------------------------------
1 2 3 4
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividends per common share $.05 $.05 $.05 $.05
Common stock prices:
High 39 7/8 38 1/8 39 13/16 38 3/4
Low 34 3/4 30 5/8 33 3/4 32
</TABLE>
<PAGE> 1
Exhibit 21.1
<TABLE>
<CAPTION>
List of Subsidiaries of Belden Inc.
<S> <C>
Belden Wire & Cable Company (Incorporated in Delaware)
Belden International, Inc. (Incorporated in Delaware)
Belden Holdings, Inc. (Incorporated in Delaware)
Belden Foreign Sales Corporation (Incorporated in Barbados)
Belden Electronics Argentina S.A. (Incorporated in Argentina)
Belden (Canada) Inc. (Incorporated in Canada)
Belden Electronics S.a.r.l. (Incorporated in France)
Belden UK Limited (Incorporated in the United Kingdom)
Grupo Belden Mexicana S.A. de C.V. (Incorporated in Mexico)
Belden Electronics, S.A. de C.V. (Incorporated in Mexico)
Belden Brasil Comercial Limitada (Incorporated in Brazil)
Belden Pacific Finance Pty Ltd (Incorporated in Australia)
Belden Australia Pty Ltd (Incorporated in Australia)
Belden Superannuation Pty Ltd (Incorporated in Australia)
Belden Pacific Finance Unit Trust (Organized in Australia)
Belden International Holdings B.V. (Incorporated in The Netherlands)
Belden Europe B.V. (Incorporated in The Netherlands)
Belden Wire & Cable B.V. (Incorporated in The Netherlands)
Belden Deutschland GmbH (Incorporated in Germany)
Belden Electronics GmbH (Incorporated in Germany)
MCTEC B.V. (Incorporated in the Netherlands)
Belden-EIW, GmbH (Incorporated in Germany)
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Belden Inc. of our report dated January 20, 1999, included in the 1998 Annual
Report to Shareholders of Belden Inc.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8) pertaining to the Belden Inc. Employee Stock Purchase Plan (No.
33-66830), the Belden Inc. Long-Term Incentive Plan (No. 33-83154), the Belden
Inc. Non-Employee Director Stock Plan (No.333-11071), and the Belden Inc.
Long-Term Incentive Plan (No. 333-74923) of our report dated January 20, 1999,
with respect to the consolidated financial statements of Belden Inc.
incorporated herein by reference in this Annual Report (Form 10-K) for the year
ended December 31, 1998.
/s/ Ernst & Young LLP
St. Louis, Missouri
March 26, 1999
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
BELDEN INC. (the "Company"), does constitute and appoint C. BAKER CUNNINGHAM,
with full power and substitution, his true and lawful attorney and agent, to do
any and all acts and things and to execute any and all instruments which such
attorney and agent may deem necessary or advisable to enable the company to
comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the execution and filing of the Annual
Report (Form 10-K) of Belden Inc. for the fiscal year ended December 31, 1998
(the "Annual Report"), including specifically the power and authority to sign
for and on behalf of the undersigned the name of the undersigned as director of
the Company to the Annual Report or to any amendments thereto filed with the
Securities and Exchange Commission and to any instrument or document filed as
part of, as an exhibit to, or in connection with such Annual Report or
amendments; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorney and agent shall do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents, this
15th day of March, 1999.
/s/JOSEPH R. COPPOLA
--------------------
Joseph R. Coppola
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
BELDEN INC. (the "Company"), does constitute and appoint C. BAKER CUNNINGHAM,
with full power and substitution, his true and lawful attorney and agent, to do
any and all acts and things and to execute any and all instruments which such
attorney and agent may deem necessary or advisable to enable the company to
comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the execution and filing of the Annual
Report (Form 10-K) of Belden Inc. for the fiscal year ended December 31, 1998
(the "Annual Report"), including specifically the power and authority to sign
for and on behalf of the undersigned the name of the undersigned as director of
the Company to the Annual Report or to any amendments thereto filed with the
Securities and Exchange Commission and to any instrument or document filed as
part of, as an exhibit to, or in connection with such Annual Report or
amendments; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorney and agent shall do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents, this
15th day of March, 1999.
/s/ JOHN R. DALLEPEZZE
----------------------
John R. DallePezze
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
BELDEN INC. (the "Company"), does constitute and appoint C. BAKER CUNNINGHAM,
with full power and substitution, his true and lawful attorney and agent, to do
any and all acts and things and to execute any and all instruments which such
attorney and agent may deem necessary or advisable to enable the company to
comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the execution and filing of the Annual
Report (Form 10-K) of Belden Inc. for the fiscal year ended December 31, 1998
(the "Annual Report"), including specifically the power and authority to sign
for and on behalf of the undersigned the name of the undersigned as director of
the Company to the Annual Report or to any amendments thereto filed with the
Securities and Exchange Commission and to any instrument or document filed as
part of, as an exhibit to, or in connection with such Annual Report or
amendments; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorney and agent shall do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents, this
20th day of March, 1999.
/s/ BERNARD G. RETHORE
----------------------
Bernard G. Rethore
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
BELDEN INC. (the "Company"), does constitute and appoint C. BAKER CUNNINGHAM,
with full power and substitution, his true and lawful attorney and agent, to do
any and all acts and things and to execute any and all instruments which such
attorney and agent may deem necessary or advisable to enable the company to
comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the execution and filing of the Annual
Report (Form 10-K) of Belden Inc. for the fiscal year ended December 31, 1998
(the "Annual Report"), including specifically the power and authority to sign
for and on behalf of the undersigned the name of the undersigned as director of
the Company to the Annual Report or to any amendments thereto filed with the
Securities and Exchange Commission and to any instrument or document filed as
part of, as an exhibit to, or in connection with such Annual Report or
amendments; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorney and agent shall do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents, this
16th day of March, 1999.
/s/ LORNE D. BAIN
-----------------
Lorne D. Bain
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director of
BELDEN INC. (the "Company"), does constitute and appoint C. BAKER CUNNINGHAM,
with full power and substitution, his true and lawful attorney and agent, to do
any and all acts and things and to execute any and all instruments which such
attorney and agent may deem necessary or advisable to enable the company to
comply with the Securities Exchange Act of 1934, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, in connection with the execution and filing of the Annual
Report (Form 10-K) of Belden Inc. for the fiscal year ended December 31, 1998
(the "Annual Report"), including specifically the power and authority to sign
for and on behalf of the undersigned the name of the undersigned as director of
the Company to the Annual Report or to any amendments thereto filed with the
Securities and Exchange Commission and to any instrument or document filed as
part of, as an exhibit to, or in connection with such Annual Report or
amendments; and the undersigned does hereby ratify and confirm as his own act
and deed all that such attorney and agent shall do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents, this
15th day of March, 1999.
/s/ ALAN E. REIDEL
------------------
Alan E. Reidel
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<PAGE> 1
[Belden Logo]
March 26, 1999
Dear Shareholder:
The Board of Directors cordially invites you to attend the 1999 Annual
Meeting of Shareholders of Belden Inc. at the St. Louis Club (16th Floor),
Pierre Laclede Center, 7701 Forsyth Boulevard, St. Louis, Missouri, to be held
on Thursday, May 6, 1999, at 11:00 a.m.
Details of the business to be conducted at the meeting are given in the
attached Notice of Annual Meeting and Proxy Statement.
Whether or not you plan to attend, you can be sure your shares are
represented at the meeting by promptly completing and returning your proxy form
in the enclosed envelope.
Thank you for your continued support.
Sincerely,
/s/C. Baker Cunningham
C. Baker Cunningham
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 2
BELDEN INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 6, 1999
To the Shareholders of Belden Inc.:
Belden Inc. will hold its 1999 Annual Meeting of Shareholders in the Lewis
& Clark Room of the St. Louis Club, Pierre Laclede Center, 7701 Forsyth
Boulevard, 16th Floor, St. Louis, Missouri, on Thursday, May 6, 1999, at 11:00
a.m. C.D.T. to vote upon:
- The election of one director for a three-year term;
- Approval of a modification to the number of stock options individual
participants may receive under the Belden Inc. Long-Term Incentive Plan
to an annual limit of 200,000; and
- Other business that may properly come before the meeting.
Shareholders of record at the close of business on March 16, 1999 will be
entitled to vote at the meeting.
How to Vote:
Whether or not you expect to attend, it is important that your shares be
represented and voted at the meeting. To vote, you must mark, sign, date, and
timely return the enclosed proxy form in the postage-paid envelope provided.
Reduce Mailings:
If you are a Shareholder of record and have more than one account in your
name or the same address as other Shareholders of record, you may authorize the
Company to stop mailings of multiple Annual Reports.
By order of the Board of Directors,
/s/Kevin Bloomfield
Kevin Bloomfield
Vice President, Secretary
and General Counsel
St. Louis, Missouri
March 26, 1999
<PAGE> 3
BELDEN INC.
MARCH 26, 1999
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 6, 1999
PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Belden Inc. (the "Company") for the 1999
Annual Meeting of Shareholders. Beginning on March 26, 1999, the Company plans
to begin distributing this Proxy Statement and a proxy form.
A Shareholder who gives a proxy may revoke it at any time before it is
exercised by writing to the Corporate Secretary, by timely delivery of a
properly executed, later-date proxy or by voting by ballot at the Annual
Meeting. By providing your voting instructions promptly, you may save the
Company the expense of a second mailing.
Your voting by proxy will not limit your right to vote at the meeting if
you later decide to attend in person. If your Shares are held in the name of a
bank, broker or other holder of record, you must obtain a proxy, executed in
your favor, from the holder of record, to be able to vote at the meeting.
All shares entitled to vote and represented by properly completed proxies
received prior to the meeting and not revoked will be voted at the meeting in
accordance with your instructions. IF NO INSTRUCTIONS ARE NOTED ON A PROPERLY
COMPLETED PROXY, THE SHARES REPRESENTED BY THAT PROXY WILL BE VOTED AS
RECOMMENDED BY THE BOARD OF DIRECTORS.
If other matters are properly presented at the meeting for consideration,
including, among other things, consideration of a motion to adjourn the meeting
to another time or place, the persons named as proxies and acting thereunder
will have discretion to vote on those matters according to their best judgment
to the same extent as the person delivering the proxy would be entitled to vote.
At the date this Proxy Statement went to press, the Company did not anticipate
that any other matters would be raised at the meeting.
SHAREHOLDERS ENTITLED TO VOTE
Only record holders of the common stock ("Shares"), $.01 par value, of the
Company at the close of business on March 16, 1999 (the "Record Date") will be
entitled to vote at the meeting. At March 1, 1999, 24,355,061 shares of common
stock were outstanding and entitled to vote. Each common share is entitled to
one vote on each matter properly brought before the meeting.
If you are a participant in the Belden Wire & Cable Company Savings Plan or
the Belden Wire & Cable Company Retirement Savings Plan, you will receive a
proxy card for all Shares you own through either plan. The proxy card will serve
as a voting instruction card for the trustee, Bankers Trust Company. If you own
Shares through either plan and do not vote, the trustee will vote the plan
Shares in the same proportion as Shares for which instructions were received
under the plan.
In accordance with Delaware law, a list of Shareholders entitled to vote at
the meeting will be available one hour before the meeting at the Lewis & Clark
Room of the St. Louis Club, Pierre Laclede Center, 7701 Forsyth Blvd., 16th
Floor, St. Louis Missouri, 63105 and for ten days prior to the meeting at the
Company's offices.
REQUIRED VOTE
Vote Required: For approval of each proposal, Delaware law requires the
affirmative vote of holders of a majority of shares of common stock represented
at the meeting. For a proposal to be considered, the presence at the meeting, in
person or by proxy, of the holders of a majority of Shares is necessary to have
a quorum. Votes cast by proxy or in person at the meeting will be tabulated by
ChaseMellon Shareholder Services ("ChaseMellon"), the Company's Transfer Agent
and Inspector of Elections for the meeting.
2
<PAGE> 4
Effect of an Abstention and Broker Non-Votes: A Shareholder who withholds
from voting on Proposal I or who abstains from voting on Proposal II will be
included in the number of Shareholders present at the meeting to determine the
presence of a quorum. Abstentions (including votes withheld) will be treated as
votes cast against the proposal because they are deemed Shares present and
entitled to vote at the meeting. The Company is subject to the rules of the New
York Stock Exchange. Those rules permit brokers, who hold stock for the account
of their clients and who have not been given specific voting instructions as to
either proposal, to vote their clients' proxies in their own discretion for
either proposal. Should a matter arise for which brokers do not have such
discretion and have not been given specific voting instructions from their
clients ("broker non-votes"), such broker non-votes will not be considered as
shares entitled to vote on such matter and will not have any effect on the
outcome of the matter because such shares will not be considered in determining
whether a quorum is present for the issue.
COST OF PROXY SOLICITATION
The Company will bear the cost of soliciting proxies. Proxies may be
solicited for the Company by Directors, officers or employees of the Company in
person or by telephone, facsimile or other electronic means. The Company has
engaged ChaseMellon to solicit proxies at a fee of $4,500 plus expenses. In
accordance with the regulations of the Securities and Exchange Commission
("SEC") and the New York Stock Exchange, the Company also will reimburse firms
and other custodians, nominees and fiduciaries for their expenses incurred in
sending the Company's proxies and proxy materials to beneficial owners of
Shares.
ADVANCE NOTICE PROCEDURES
SHAREHOLDER PROPOSALS
The Company must receive at its principal executive offices (Attention:
Secretary), by November 25, 1999, any Shareholder proposal intended to be
presented at the 2000 Annual Meeting to be eligible for inclusion in the
Company's Proxy Statement and the form of proxy for the meeting in accordance
with the applicable rules of the SEC. Under the SEC rules, the Shareholder must
have continuously held at least $2,000 in market value, or 1%, of the Shares
entitled to vote on the proposal at the meeting for at least one year and must
continue to hold those Shares through the date of the meeting.
In addition to the SEC rules, the Company's Bylaws provide that for
business to be properly brought before an annual meeting by a Shareholder, the
Shareholder must have given notice thereof in writing to the Secretary of the
Company either by personal delivery or by United States registered or certified
mail, postage prepaid, not less than 60 nor more than 90 days prior to the date
of the meeting. The notice must include (i) a description of the business
desired to be brought before the meeting, including the complete text of any
resolutions to be presented at the meeting with respect to such business, and
the reasons for conducting such business at the meeting, (ii) the name and
address of record of the Shareholder proposing such business, (iii) the class
and number of shares of capital stock of the Company that are beneficially owned
by the Shareholder and (iv) any material interest of the Shareholder in such
business.
SHAREHOLDER NOMINEES
The Company's Bylaws provide that, subject to certain limitations discussed
below, any Shareholder entitled to vote in the election of directors generally
may nominate one or more persons for election as directors at the meeting. The
Shareholder must provide written notice of his intent to make such nomination or
nominations, either by personal delivery or by United States registered or
certified mail, postage prepaid, to the Secretary of the Company not less than
60 nor more than 90 days prior to a meeting of the Shareholders called for the
election of directors. However, if the Company gives less than 70 days' notice
of the date of the meeting, the Shareholder must provide the required written
notice not later than the close of business on the tenth day following the
earlier of (i) the date the Company provides public notice of the meeting or
(ii) the date the Company sends notice of the meeting to its Shareholders.
3
<PAGE> 5
Each notice must include (i) the name and address of the Shareholder who
intends to make the nomination and the person or persons to be nominated, (ii) a
representation that the Shareholder is a holder of record of shares of capital
stock of the Company entitled to vote at the meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the notice, (iii) a description of all arrangements between the Shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
Shareholder and (iv) such other information regarding each nominee proposed by
such Shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the SEC had the nominee been nominated, or
intended to be nominated, by the Board of Directors, and shall include a consent
signed by each such nominee to serve as a director of the Company if so elected.
SHAREHOLDER COMMUNICATIONS
Highlights of the meeting will be included in the Company's Form 10-Q
filing with the SEC for the quarter ending on June 30, 1999. This filing should
be available by August 14, 1999 on the Internet under the SEC's "EDGAR" filing
system under "Belden Inc." or by contacting the Corporate Secretary at the
Company's offices.
SHAREHOLDER ACCOUNT MAINTENANCE
Shareholders can contact ChaseMellon by calling 1-888-213-0965 (or by
visiting its Internet site at http://www.ChaseMellon.com.) for information
concerning accounts of Shareholders of record, including address changes, name
changes, inquiries as to requirements to transfer Shares and similar issues. For
other Company information, Shareholders can visit Belden's Internet site at
http://www.Belden.com.
MATTERS TO COME BEFORE THE MEETING
Two matters will be considered at the meeting: Election of one director and
approval of a modification to the number of stock options participants may
receive under the Belden Inc. Long-Term Incentive Plan ("Incentive Plan") to an
annual limit of 200,000.
PROPOSAL 1 -- ELECTION OF DIRECTOR
The directors of the Company are divided into three classes, Class I, Class
II and Class III, with each class serving for a term of three years. One class
stands for election at each annual meeting of Shareholders. There are three
Class I directors whose term will expire at the 2000 annual meeting, three Class
II directors whose term will expire at the 2001 annual meeting and one Class III
director whose term will expire at this annual meeting. At this meeting, one
Class III director will be elected for a term expiring at the 2002 annual
meeting. C. Baker Cunningham, the current Class III director, is the Board's
nominee for election at this meeting.
Mr. Cunningham is willing to serve if elected. Should he be unavailable or
unwilling to serve, and if any other person is nominated, the persons designated
on the accompanying form of proxy will have the discretionary authority to vote
or refrain from voting in accordance with their judgment on such other nominee
unless authority to vote on such matter is withheld.
NOMINEE FOR CLASS III DIRECTOR
C. BAKER CUNNINGHAM
Chairman of the Board, President and
Chief Executive Officer
Director since 1993 Age 57 C. BAKER CUNNINGHAM PHOTO
4
<PAGE> 6
Received a B.S. degree in civil engineering from Washington University, an M.S.
degree in civil engineering from Georgia Institute of Technology and an M.B.A.
from Harvard Business School. Has been Chairman, President and Chief Executive
Officer of the Company since its incorporation in July 1993. From February 1982
until July 1993, was an Executive Vice President, Operations of Cooper
Industries, Inc. ("Cooper"), a manufacturer of electrical equipment and tools
and hardware.
Director, Cooper Cameron Corporation.
CLASS I DIRECTORS: TERM EXPIRING IN 2000
JOSEPH R. COPPOLA
Chairman -- Compensation Committee
Director since 1993 Age 68 JOSEPH R. COPPOLA PHOTO
Received a B.S. degree in mechanical engineering from the University of
Massachusetts. Had been Chairman and Chief Executive Officer of Giddings &
Lewis, Inc., a manufacturer of machine tools and assembly systems, from July 1,
1993, and a director of the company, from July 1989 until April 1997, when he
retired. From 1985 to 1993, was Senior Vice President, Manufacturing Services of
Cooper.
Director, Coltec Industries Inc.
CHRISTOPHER I. BYRNES
Dean, School of Engineering and Applied Science
Washington University
Member -- Compensation Committee
Director since 1995 Age 49 CHRISTOPHER I. BYRNES PHOTO
Received a B.S. degree in mathematics from Manhattan College and M.S. and Ph.D.
degrees in mathematics from the University of Massachusetts. Has served on the
engineering faculty at Arizona State, Harvard, and the Royal Institute of
Technology in Stockholm. Has held visiting appointments in Austria, France,
Germany, Italy, Japan, the Netherlands, Sweden and the former Soviet Union.
Elected Fellow of the Institute of Electrical and Electronics Engineers and of
the Japan Society for the Promotion of Science. Since 1991, has been Dean of the
School of Engineering and Applied Science of Washington University.
JOHN R. DALLEPEZZE
Chairman of the Board, President and Chief Executive Officer
Holophane Corporation
Member -- Compensation Committee
Director since 1997 Age 55 JOHN R. DALLEPEZZE PHOTO
Received a B.S.E.E. degree from Princeton University and an M.S. degree from the
Massachusetts Institute of Technology. Since October 1989, has been Director,
President and Chief Executive Officer and, since February 1992, Chairman of the
Board of the Holophane Corporation, a manufacturer of lighting fixtures and
systems.
5
<PAGE> 7
CLASS II DIRECTORS: TERM EXPIRING IN 2001
ALAN E. RIEDEL
Member -- Audit Committee
Director since 1993 Age 68 ALAN E. RIEDEL PHOTO
Graduated magna cum laude from Ohio University with a B.A. degree in government.
Received a Juris Doctor degree from Case Western Reserve University School of
Law, where he was elected to the Order of the Coif. Has completed Harvard
Business School's Advanced Management Program. Received an Honorary Doctor of
Laws from Ohio University. Since April 1994, has served in the position "Of
Counsel" to Squire, Sanders & Dempsey. Had been Director and Chairman of Gardner
Denver Machinery, Inc., a manufacturer of air compressor products and pumps,
from April 1994 until November 1998, when he retired as Chairman but continues
as director. Had been Vice Chairman of Cooper, from April 1992 until April 1994,
when he retired. From 1973 to 1992, was Senior Vice President, Administration of
Cooper.
Director, Standard Products Company and Factory Mutual Insurance Company.
LORNE D. BAIN
Managing Director
Bellmeade Capital Partners, L.L.C.
Member -- Audit Committee
Director since 1993 Age 57 LORNE D. BAIN PHOTO
Received a B.B.A. degree from St. Edwards University and a Juris Doctor degree
from the University of Texas School of Law and has completed Harvard Business
School's Advanced Management Program. Presently, Managing Director of Bellmeade
Capital Partners, L.L.C., a venture capital firm. From 1991 to 1996, had been
Chairman and Chief Executive Officer of Sanifill, Inc., an environmental
services company.
BERNARD G. RETHORE
Chairman, President and Chief Executive Officer
Flowserve Corporation
Chairman -- Audit Committee
Director since 1997 Age 57 BERNARD G. RETHORE PHOTO
Received a B.A. degree in economics (Honors) from Yale University and an M.B.A.
degree from the Wharton School of the University of Pennsylvania. Since 1995,
had been Director, President and Chief Executive Officer of BW/IP, Inc., a
supplier of advanced-technology fluid transfer and control equipment, systems
and services and was elected its Chairman in February 1997. In July 1997, became
Chairman and Chief Executive Officer of Flowserve Corporation ("Flowserve") and
added the additional title of President, in October 1998. Flowserve, formed by
the merger of BW/IP Inc. and Durco International, Inc., produces highly
engineered pumps, precision seals, valves and valve actuators, and flow
management services. From
6
<PAGE> 8
1985 to 1995, was Senior Vice President of Phelps Dodge Corporation and
President of Phelps Dodge Industries. Phelps Dodge produces copper.
Director, Maytag Corporation.
VOTE REQUIRED AND BOARD RECOMMENDATION
To be elected, the nominee must receive the affirmative vote of a majority
of the Shares represented at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEE
TO THE BOARD OF DIRECTORS.
PROPOSAL II -- APPROVAL OF A MODIFICATION TO THE NUMBER OF STOCK OPTIONS
PARTICIPANTS MAY RECEIVE UNDER THE BELDEN INC. LONG-TERM INCENTIVE PLAN TO AN
ANNUAL LIMIT OF 200,000.
OVERVIEW
Under Section 162(m) of the Internal Revenue Code, as amended, the
Company's tax deduction for certain compensation paid to designated executives
is limited to $1 million per year ("Limit"). These executives include the Chief
Executive Officer and the next four highest compensated officers of the Company.
The Limit applies to compensation relating to stock option exercises and, under
certain conditions, to the sale of shares received in connection with the
exercise of stock options.
Section 162(m) provides an exception from the Limit for certain
"performance-based" compensation. Performance-based compensation in general must
satisfy certain conditions, those being: (i) the compensation must be paid
solely because the executive has attained one or more performance goals; (ii) a
compensation committee (consisting solely of two or more "outside directors")
must set the performance goals before commencement of the executive's service;
(iii) before the compensation is paid, shareholders must approve the terms under
which the compensation is paid, including the performance goals; and (iv) before
the compensation is paid, the compensation committee must certify that the
performance goals were met.
However, stock options will satisfy the requirements for
"performance-based" awards if (i) they are granted by a compensation committee
consisting of outside directors, (ii) they are granted under a plan which states
the maximum number of shares that may be granted during a specified period to
any employee, and which plan received shareholder approval following a
submission to shareholders, and (iii) the options were issued at a price no
lower than the fair market value of the shares on the grant date of the option.
The Belden Inc. Long-Term Incentive Plan ("Incentive Plan") is generally
designed to satisfy the requirements of Section 162(m) for stock options issued
by the Compensation Committee. The Incentive Plan does this, in part, by
requiring the Compensation Committee (composed of outside directors) to grant
options at no less than the fair market value on the grant date and by imposing
a 100,000 limit on individual grants every two years. To give greater
flexibility to the Compensation Committee in making stock option awards under
the Incentive Plan, the Board of Directors changed this amount to an annual
limit of 200,000.
In February 1998 and January 1999, the Compensation Committee awarded the
Chief Executive Officer 120,000 stock options, on each such date, at the fair
market value on the grant dates. The options vest over a three-year period: a
third after the first anniversary, another third after the second anniversary,
and the remaining third after the third anniversary. They will expire ten years
after the grant date. None of the options has been exercised.
Shareholder approval of this proposal should permit the exercise of such
options to qualify as "performance-based" compensation under Section 162(m) and,
consequently, should permit the Company to deduct any income arising from the
exercise of the options (or, under certain circumstances, the subsequent sale of
Shares issued in connection with the options) as an ordinary business expense
and not be subject to the Limit. The proposed change to limit individual awards
to an annual amount of 200,000 would apply to the February 1998 and January 1999
option grants, and to future grants made under the Incentive Plan.
7
<PAGE> 9
SUMMARY OF INCENTIVE PLAN
The Incentive Plan is intended to promote the long-term financial interests
of the Company, including its growth and performance, by encouraging employees
of the Company and its subsidiaries to acquire an ownership position in the
Company, enhancing the ability of the Company to attract and retain employees of
outstanding ability, and providing employees with an interest in the Company
parallel to that of the Company's shareholders. The Compensation Committee
administers the Incentive Plan.
Eligibility and Participation. All employees of the Company and its
subsidiaries who have demonstrated significant management potential or who have
the capacity for contributing in a substantial measure to the successful
performance of the Company, as determined by the Compensation Committee, are
eligible to be participants in the Incentive Plan. Presently, 126 employees
participate.
Shares Subject to Awards. As amended in 1997, the Incentive Plan reserved
2,600,000 Shares (subject to adjustment for changes in capitalization) for the
granting of stock options, stock appreciation rights, restricted stock awards,
and performance shares. Such awards may be treasury Shares or authorized but
unissued Shares. Presently, more than 340,000 Shares are reserved under the
Plan.
If any outstanding options expire or terminate, the shares of common stock
allocable to the unexercised portion of such option may again be subject to
award under the Incentive Plan, subject to certain exceptions. The Compensation
Committee has the discretion to grant either "incentive stock options" (within
the meaning of Section 422 of the Code ("ISO's")) or "non-statutory stock
options" ("NSO's"). The aggregate fair market value (determined as of the date
the option is granted) of the stock with respect to which incentive stock
options are exercisable for the first time by the participant in any calendar
year may not exceed $100,000. A description of these two types of stock options
appear below under the heading "Federal Income Tax Consequences."
Grant and Exercise of Options. Each option granted under the Incentive
Plan is embodied in a written option agreement, which is subject to the terms
and conditions of the Incentive Plan and which contain other provisions as the
Compensation Committee in its discretion deems advisable.
The price at which Shares may be purchased pursuant to an option, whether
an ISO or an NSO, is determined by the Compensation Committee, but in no event
may such price be less than the fair market value of the Shares on the date the
option is granted. As of March 4, 1999, the high and low sale prices of the
Shares were $17.75 and $17.375 per share, respectively.
No option is exercisable ten years after the date of grant. The
Compensation Committee in its discretion may provide that an option will be
exercisable throughout a ten-year period or during any shorter period of time
commencing on or after the date of grant of the option and ending on or before
the expiration of a ten-year period. The Compensation Committee may, in its
discretion, provide for vesting or other conditions on exercise of options
granted under the Incentive Plan.
Upon exercise, a participant in the Incentive Plan may pay the option
exercise price of a stock option in cash, Shares, stock appreciation rights or a
combination of the foregoing, or such other consideration as the Committee may
deem appropriate.
Rights of Participants. No participant has rights as a shareholder with
respect to the shares covered by his option until the date of issuance of a
stock certificate for the shares. The granting of any option by the Company does
not impose any obligation on the Company to employ or continue to employ any
participant.
Stock Appreciation Rights. Under the Incentive Plan, the Compensation
Committee also may grant stock appreciation rights either in tandem with an
option or alone. Stock appreciation rights granted in tandem with a stock option
may be granted at the same time as the stock option or at a later time. A stock
appreciation right issued in tandem with stock options shall entitle the
participant to receive from the Company an amount payable in cash, in Shares or
a combination of cash and Shares equal to the positive difference between the
fair market value on the date of exercise of a Share and the grant price. The
grant of a freestanding stock appreciation right may be at such price as
determined by the Committee; provided that such price may not be less than the
fair market value of the Shares on the date of grant. No stock appreciation
right shall be
8
<PAGE> 10
exercisable earlier than six months after grant. The Compensation Committee has
not granted any stock appreciation rights.
Restricted Stock Awards. Under the Incentive Plan, the Compensation
Committee may grant shares of restricted stock, which are subject to forfeiture
to the Company under such conditions and for such period of time (not less than
one year) as the Compensation Committee may determine. The Compensation
Committee shall determine the conditions or restrictions of any restricted stock
awards, which may include restrictions on transferability, requirements of
continued employment, individual performance or the Company's financial
performance. The Compensation Committee has not granted any restricted stock
awards.
Performance Shares. Under the Incentive Plan, the Compensation Committee
may grant performance shares that are earned only after the attainment of
predetermined performance targets during a performance period as established by
the Compensation Committee. Performance shares are convertible into Common
Stock, cash or a combination of both as determined by the Compensation
Committee. At the end of the performance cycle, the Compensation Committee shall
determine the number of performance shares that have been earned on the basis of
the Company's performance in relation to the performance goals. Performance
shares may not be sold, transferred, assigned, pledged or otherwise encumbered
so long as such performance shares remain restricted. The Compensation Committee
has not granted any performance shares.
Stock Options for Nonemployee Directors. Under the Incentive Plan, each
nonemployee director is automatically granted, on the day following each annual
meeting of shareholders, an option to purchase 1,000 Shares. The option exercise
price is 100% of the fair market value (as defined in the Incentive Plan) of the
Shares on the date of the option grant. The options become exercisable on the
first anniversary of the date of the grant and expire five years after the date
of grant. The option price may be paid in cash, Shares or a combination of cash
and shares. All options granted to nonemployee directors are nontransferable,
other than by will or the laws of descent and distribution, and each option is
exercisable, during the lifetime of the optionee, only by the optionee. If a
person ceases to be a nonemployee director due to death, disability or
retirement, his or her options generally will be exercisable for a period of one
year (but not later than the expiration date of the option). If a nonemployee
director's service terminates for any other reason, options that are not then
exercisable shall be canceled and options that are exercisable may be exercised
at any time within 90 days after the date of such termination (but not later
than the expiration date of the options). The portion of the Incentive Plan
applicable to nonemployee directors operates automatically and does not require
administration.
Effect of Change of Control. The Incentive Plan provides for the
acceleration of certain benefits in the event of a "Change of Control" of the
Company. A Change of Control will be deemed to have occurred if either (i) any
person or group acquires beneficial ownership of 25% of the voting securities of
the Company, (ii) there is a change in the composition of a majority of the
Board of Directors within any two-year period; or (iii) a change in control (as
such term is used in Schedule 14A promulgated under the Securities Exchange Act
of 1934) otherwise occurs.
Upon the occurrence of a Change of Control, each nonemployee director
option with respect to which six months has elapsed since the date of grant,
whether the option is then exercisable or not, will be cancelled in
consideration for a payment equal to the excess of the fair market value of the
Shares (as calculated in accordance with the Incentive Plan) over the option
exercise price. A holder of any other options granted under the Incentive Plan
which are not then exercisable in full at the time of a Change of Control will
be entitled, with respect to the portion not then exercisable, to receive a cash
payment equal to the excess of the then fair market value of the Shares (as
calculated in accordance with the Incentive Plan) over the option exercise
price. In addition, upon a Change of Control (as defined in the Incentive Plan),
all stock appreciation rights which have not been granted in tandem with options
and which have been outstanding for at least six months will become exercisable
in full, restrictions on restricted stock shall lapse and all performance shares
shall be deemed to be earned in full.
Changes in the Company's Capital Structure. In the event of any change in
the outstanding Shares by reason of a reorganization, recapitalization, stock
split, stock dividend, combination or exchange of Shares, merger, consolidation
or any change in the corporate structure or Shares of the Company, the maximum
9
<PAGE> 11
aggregate number and class of Shares as to which stock options, stock
appreciation rights, restricted stock awards, and performance shares may be
granted under the Incentive Plan and the Shares issuable pursuant to outstanding
stock options, stock appreciation rights, restricted stock awards, and
performance shares shall be appropriately adjusted by the Compensation
Committee, whose determination shall be final.
Amendment of the Incentive Plan. The Board of Directors may amend, suspend
or terminate the Incentive Plan at any time and from time to time, subject to
certain conditions.
Duration of the Incentive Plan; Registration of Shares. The Incentive Plan
became effective on October 6, 1993 and no awards may be granted under the Plan
after October 6, 2003.
Federal Income Tax Consequences -- Incentive Stock Options. The grant of
incentive stock options to an employee does not result in any income tax
consequences. The exercise of an incentive stock option does not result in any
income tax consequences to the employee if the incentive stock option is
exercised by the employee during his employment with the Company or a
subsidiary, or within a specified period after termination of employment due to
death or retirement for age or disability under then established rules of the
Company. However, the excess of the fair market value of the shares of stock as
of the date of exercise over the option price is a tax preference item for
purposes of determining an employee's alternative minimum tax. An employee who
sells shares acquired pursuant to the exercise of an incentive stock option
after the expiration of (i) two years from the date of grant of the incentive
stock option, and (ii) one year after the transfer of the shares to him (the
"Waiting Period") will generally recognize long term capital gain or loss on the
sale.
An employee who disposes of his incentive stock option shares prior to the
expiration of the Waiting Period (an "Early Disposition") generally will
recognize ordinary income in the year of sale in an amount equal to the excess,
if any, of (i) the lesser of (a) the fair market value of the shares as of the
date of exercise or (b) the amount realized on the sale, over (ii) the option
price. Any additional amount realized on an Early Disposition should be treated
as capital gain to the employee, short or long term, depending on the employee's
holding period for the shares. If the shares are sold for less than the option
price, the employee will not recognize any ordinary income but will recognize a
capital loss, short or long term, depending on the holding period.
The Company will not be entitled to a deduction as a result of the grant of
an incentive stock option, the exercise of an incentive stock option, or the
sale of incentive stock option shares after the Waiting Period. If an employee
disposes of his incentive stock option shares in an Early Disposition, the
Company will be entitled to deduct the amount of ordinary income recognized by
the employee.
Federal Income Tax Consequences -- Non-Statutory Stock Options. The grant
of NSO's under the Incentive Plan will not result in the recognition of any
taxable income by the participants. A participant will recognize income on the
date of exercise of the non-qualified stock option equal to the difference
between (i) the fair market value on that date of the shares acquired, and (ii)
the exercise price. The tax basis of these shares for purposes of a subsequent
sale includes the option price paid and the ordinary income reported on exercise
of the option. The income reportable on exercise of the option by an employee is
subject to federal and state income and employment tax withholding.
Generally, the Company will be entitled to a deduction in the amount
reportable as income by the participant on the exercise of a non-qualified stock
option.
Federal Income Tax Consequences -- Stock Appreciation Rights and
Performance Shares. Stock Appreciation Rights and Performance Share awards
involve the issuance of Shares or the payment of cash, without other payment by
the recipient, as additional compensation for services to the Company. The
recipient will recognize taxable income equal to cash received or the fair
market value of the Shares on the date of the award, which becomes the tax basis
in a subsequent sale. Generally, the Company will be entitled to a corresponding
deduction in an amount equal to the income recognized by the recipient.
Federal Income Tax Consequences -- Restricted Stock Grants. Restricted
stock granted under the Incentive Plan ("Restricted Stock Grants") generally
will not be taxed to the recipient, nor deductible by the
10
<PAGE> 12
Company, at the time of grant. Restricted Stock Grants involve the issuance of
Shares to a participant subject to specified restrictions as to sale or
transferability of the Shares and are subject to a substantial risk of
forfeiture. On the date the restrictions lapse, and the Shares becomes
transferable or not subject to a substantial risk of forfeiture, whichever is
applicable, the recipient recognizes ordinary income equal to the excess of the
fair market value of the Shares on that date over the purchase price paid for
the stock, if any. The participant's tax basis for the Shares includes the
amount paid for the Shares, if any, and the ordinary income recognized.
Generally, the Company will be entitled to a corresponding deduction in an
amount equal to the income recognized by the recipient.
VOTE REQUIRED AND BOARD RECOMMENDATION.
The affirmative vote of holders of a majority of Shares represented at the
meeting is required to approve this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following information lists beneficial ownership of common stock at
March 1, 1999 of (i) each director or nominee; (ii) each executive officer named
in the Summary Compensation Table; and (iii) directors and executive officers as
a group. Except as otherwise noted, each person has sole voting and investment
power as to his Shares. The percentage of outstanding common stock, including
options exercisable within 60 days of March 1, 1999, beneficially owned by
directors and executive officers as a group is 1.7%. The percentage beneficially
owned by any director or nominee individually does not exceed 1%.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(A) (B)
-------------------
<S> <C>
C. Baker Cunningham 209,488
Chairman of the Board, President, Chief Executive Officer
and Director
Richard K. Reece 55,442(c)
Vice President, Finance, Treasurer and Chief Financial
Officer
Peter J. Wickman 53,571
Vice President, Operations
Kevin L. Bloomfield 32,666
Vice President, Secretary and General Counsel
Cathy O. Staples 19,543
Vice President, Human Resources
Lorne D. Bain 5,600
Director
Joseph R. Coppola 5,100
Director
Alan E. Riedel 20,506(d)
Director
Christopher I. Byrnes 3,100
Director
Bernard G. Rethore 6,400(e)
Director
John R. DallePezze 5,400
Director
All Directors and Executive Officers as a Group 416,816
</TABLE>
(a) Includes the following shares covered by stock options which are currently
exercisable or exercisable within 60 days of March 1, 1999: Mr. Cunningham,
105,000 shares; Mr. Reece, 31,666 shares; Mr. Wickman, 31,666 shares; Mr.
Bloomfield, 16,666 shares; Ms. Staples, 10,333 shares;
11
<PAGE> 13
Messrs. Coppola and Bain, 4,000 shares each; Dr. Byrnes 2000 shares; and
Messrs. Riedel, Rethore and DallePezze, 1,000 shares each.
(b) Includes shares held in the Company's savings plan.
(c) Includes 23,776 shares owned jointly by Mr. Reece and his wife.
(d) Includes 1,500 shares held in an Individual Retirement Account.
(e) Includes 5,200 shares held in trust.
The following table shows certain information regarding those Shareholders
known to the Company to beneficially own more than 5% of the outstanding Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- ----------------- --------
<S> <C> <C>
Lazard Freres & Co. LLC 1,622,724(a) 6.6%
30 Rockefeller Plaza
New York, NY 10020
First Pacific Advisors, Inc. 1,521,500(b) 6.2%
11400 West Olympic Boulevard
Suite 1200
Los Angeles, CA 90064
Strong Capital Management, Inc. 1,239,150(c) 5.1%
One Hundred Heritage Reserve
P.O. Box 2936
Milwaukee, WI 53201
</TABLE>
(a) Information based on a Schedule 13G filed with the SEC by Lazard Freres &
Co. LLC ("Lazard"). Lazard has sole voting power over 1,335,790 Shares,
sole dispositive power over 1,622,724, and no shared voting or shared
dispositive power.
(b) Information based on a Schedule 13G filed with the SEC by First Pacific
Advisors, Inc. ("First Pacific"). First Pacific has shared voting power
over 43,000 Shares, shared dispositive power over 1,521,500 and no sole
voting or sole dispositive power.
(c) Information based on a Schedule 13G filed with the SEC by Strong Capital
Management, Inc. ("Strong"). Strong has sole voting power over 981,225
Shares, sole dispositive power over 1,239,150 and no shared voting or
shared dispositive power.
In addition, at December 31, 1998, Bankers Trust Company, as Trustee of the
Belden Wire & Cable Company Savings Plan and the Belden Wire & Cable Retirement
Savings Plan ("Savings Plans"), held of record 539,603 Shares, 2.2% of common
stock. The Savings Plans permit plan participants to direct the plans' Trustee
to vote the Shares allocated to their accounts. Under the terms of the plans,
the Trustee will vote unallocated and uninstructed Shares in proportion to the
Shares to which instructions have been received.
BOARD MEETINGS AND COMMITTEES
During 1998, the Board of Directors had four regular meetings and one
special meeting. All directors attended 75% or more of the meetings of the Board
and of the Board committees on which they served. The Company has two committees
of the Board of Directors: an Audit Committee and a Compensation Committee. It
does not have a nominating committee.
AUDIT COMMITTEE
Members: Mr. Rethore, Chairman, Mr. Riedel and Mr. Bain.
The Committee met four times in 1998. The Audit Committee's objective is to
assist the Board in fulfilling its responsibilities to Shareholders, potential
Shareholders and the investment community regarding
12
<PAGE> 14
corporate accounting, reporting practices of the Company, and the quality and
integrity of the financial reports of the Company. In fulfilling these
responsibilities, the Committee will, among other things, meet with the
Company's financial management and independent auditors to review and recommend
to the Board the independent auditors to be selected to audit the financial
statements of the Company; review the scope, procedures and results of Company
audits; review the adequacy and effectiveness of the accounting and financial
controls of the Company; review the Company's financial statements, quarterly
earnings releases and selected financial data; and evaluate the Company's key
financial and accounting personnel.
COMPENSATION COMMITTEE
Members: Mr. Coppola, Chairman, Dr. Byrnes, and Mr. DallePezze.
The Committee met two times in 1998. The Compensation Committee's objective
is to assist the Board of Directors in developing compensation and benefit
strategies to attract, develop and retain qualified employees to operate the
Company. In carrying out this responsibility, the Committee will review
periodically the Company's compensation and benefit strategies, the elements of
total compensation for the Chief Executive Officer and his direct reports, the
salary and wage guidelines for employees, participation and awards in the
Company's annual and long-term incentive plans, and the competitiveness and
effectiveness of the Company's compensation programs.
COMPENSATION OF DIRECTORS
The Company's non-employee directors each receive an annual retainer of
$20,000 and $1,000 per meeting for special board meetings or committee meetings
not held in conjunction with a regular board meeting. All non-employee directors
are reimbursed for expenses incurred in connection with attending board and
committee meetings. Mr. Cunningham does not receive any compensation for serving
as a member of the Board.
Also, under the Non-Employee Director Stock Plan, Messrs. Bain, Riedel,
Rethore, Coppola, Byrnes, and DallePezze each automatically receive on the day
following each annual meeting of Shareholders 200 treasury Shares.
In addition, under the Incentive Plan, each non-employee director is
automatically granted, on the day following each annual meeting of Shareholders,
an option to purchase 1,000 Shares. The option exercise price is equal to 100%
of the fair market value (as defined in the Incentive Plan) of Shares on the
date of the option grant. The options become exercisable on the first
anniversary of the date of grant and expire five years after the date of grant.
The option price may be paid in cash, Shares, or a combination of cash and
Shares.
Following the Company's 1998 annual meeting, pursuant to the Incentive
Plan, Messrs. Bain, Riedel, Coppola, Rethore, DallePezze and Byrnes each
received an option to purchase 1,000 Shares at a price of $41.40 per share. The
options will become exercisable on May 8, 1999 and will expire on May 8, 2003.
All options granted to non-employee directors are nontransferable, other
than by will or the laws of descent and distribution, and each option is
exercisable, during the lifetime of the optionee, only by the optionee. If a
person ceases to be a non-employee director due to death, disability or
retirement, his or her options generally will be exercisable for a period of one
year (but not later than the expiration date of the option). If a non-employee
director's service terminates for any other reason, options that are not then
exercisable shall be cancelled and options that are exercisable may be exercised
at any time within 90 days after the date of such termination (but not later
than the expiration date of the options). The portion of the Incentive Plan
applicable to non-employee directors is designed to operate automatically and
not require administration.
13
<PAGE> 15
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee, comprised of non-employee directors of the
Company, is responsible for establishing the Company's compensation philosophy
and making all decisions regarding compensation for the Chief Executive Officer
and other named executive officers, including determining base salary and bonus
amounts, approving target financial performance levels, and granting stock
options and other long-term incentives. The Committee also reviews guidelines
for compensation, bonus, and stock option grants for other employees.
EXECUTIVE COMPENSATION OBJECTIVES
The Company's executive compensation plans are designed to attract and
retain key management employees and to motivate these employees to take actions
that enhance Shareholder value and attain Company goals. The officers of the
Company are paid salaries in line with their responsibilities. The Company's
philosophy is to target total direct compensation at the 50th percentile of
other comparably sized companies. An outside consultant is hired to evaluate the
level of competitiveness of the executive compensation programs relative to
other companies within the electronics and communication equipment industry.
Companies selected for comparison purposes were those with whom the Company
competes for executive talent. Because this group may differ from the Company's
product competitors, this comparison group has not been selected to reflect the
companies shown on the proxy performance graph.
ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM
In 1998, the total compensation package for the Company's top executives
consisted of the following elements:
- - Base salary
- - Annual bonus
- - Stock options
The Company's incentive programs are key elements of the total compensation
package, designed to reward executives for short- and long-term enhancements to
the value received by Shareholders.
BASE SALARIES
Base salaries are reviewed each year and adjusted based on Company
performance, individual performance, and the executive's level of
responsibility. During 1998, salaries paid to the named executive officers
increased 6.3% over those paid in 1997.
ANNUAL INCENTIVES
The annual incentive program provides executives with the opportunity to
earn bonuses when warranted by Company and individual performance. Awards are
based on individual achievements, operational performance, and Company progress
towards long-term goals. Goals are established by the Committee at the beginning
of the fiscal year. The Company's overall financial performance determines the
size of the bonus pool to be distributed to the executives participating in the
program.
The Company had a challenging year in 1998. Revenues and earnings were down
from those of the previous year, caused, in part, by weaker demand in many of
the Company's geographic markets and by competitive conditions in several of the
Company's product lines. The Company has taken various steps to respond to these
conditions, including restructuring and cost-saving initiatives. The Company
also has completed two acquisitions in 1998 to improve its competitive position:
Olex Communication Cable in Australia and ABB Elektro-Isolierwerke (EIW) in
Germany. The acquisition of Olex is designed to strengthen the Company's
position in Asia/Pacific by providing a manufacturing base to better serve that
part
14
<PAGE> 16
of the world. The acquisition of EIW is designed to enhance the Company's
presence in Europe and expand its industrial product offerings. To reflect
1998's performance, bonuses awarded to the named executives for 1998 were 55%
less than those paid in 1997.
LONG-TERM INCENTIVES
The Company also uses stock options to strengthen the relationship between
top management and Shareholders. These stock options provide the opportunity for
the executives to share in any gains created for Shareholders and act as a tool
for retaining key executives. The policy of the Compensation Committee is to
grant stock options to members of the management group to encourage ownership of
the Company's stock and to more closely align the executive's interest with the
interest of other Shareholders. Pursuant to this policy, options were granted to
officers in 1998.
CEO COMPENSATION
In keeping with the Company's philosophy of emphasizing the incentive
elements of the total compensation package, Mr. Cunningham's base salary was
increased in 1998 by 6.4% to $500,000. Mr. Cunningham participates in the same
incentive plans as the other named executive officers. For 1998, he earned a
bonus of $105,000 or 21% of salary, which reflects the challenging year the
Company had, the steps the Company initiated to deal with the challenges, and
the successful acquisitions of Olex Cable and EIW. Consistent with the
Committee's general policy to grant stock options, Mr. Cunningham was awarded
stock options in 1998.
The Company also maintains certain benefit programs in which the named
executive officers participate. The compensation attributed to these executive
officers for 1998 from these programs is detailed in this proxy statement. Mr.
Cunningham's participation in these programs reflects what the Committee
believes is the participation that other executives at his level in similarly
sized organizations would expect.
Section 162(m) of the Internal Revenue Code imposes a limitation on the
deductibility of nonperformance-based compensation in excess of $1 million paid
to the executive officers. Although the Committee considers this provision when
reviewing executive compensation, the Committee uses sound business judgment to
determine whether specific compensation programs are appropriate, even if
certain elements may not meet the performance criteria under the tax code
provision.
Joseph R. Coppola, Chairman
Christopher I.Byrnes
John R. DallePezze
15
<PAGE> 17
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL
----------------------------- UNDERLYING OTHER
SALARY(1) BONUS(2) OPTIONS(3) COMPENSATION(4)
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
--------------------------- ---- --------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
C. Baker Cunningham 1998 495,000 105,000 120,000 26,134
Chairman of the Board, President, 1997 467,833 240,000 26,150
and Chief Executive Officer 1996 440,833 270,000 65,000 22,839
Richard K. Reece 1998 242,500 40,000 30,000 7,762
Vice President, Finance, Treasurer 1997 231,750 90,000 10,000 7,803
and Chief Financial Officer 1996 222,000 100,000 15,000 6,840
Peter J. Wickman 1998 242,500 40,000 30,000 7,762
Vice President, Operations 1997 220,000 90,000 10,000 7,275
1996 197,500 100,000 15,000 5,737
Kevin L. Bloomfield 1998 187,500 32,000 20,000 4,477
Vice President, Secretary 1997 179,000 72,000 4,529
and General Counsel 1996 169,666 80,000 10,000 3,810
Cathy O. Staples 1998 153,333 25,000 16,000 1,949
Vice President, 1997 141,167 50,000 802
Human Resources 1996 115,767 35,000 5,000 0
</TABLE>
(1) Salaries are annualized. The aggregate amount of perquisites and other
personal benefits for any named executive does not exceed $50,000 or 10% of
the total annual salary and bonus for any such named executive and,
therefore, such items have been excluded.
(2) Determined by the Compensation Committee at its first meeting held after the
end of the fiscal year in which the compensation was earned.
(3) Options granted under the Incentive Plan. The exercise of one-third of the
Shares is permitted on the first, second, and third anniversaries of the
grant dates. The exercise price for the 1996 options was $30.75 per share;
the exercise price for the 1997 options was $35.18; and the exercise price
for the 1998 options was $39.53. In each instance, the exercise price
equaled the fair market value (as defined in the Incentive Plan) on the
grant date.
(4) Amounts reflected consist of Company allocations under the Company's
non-qualified (excess) savings plan.
16
<PAGE> 18
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUES AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(1)
OPTIONS IN FISCAL EXERCISE EXPIRATION ----------------------
GRANTED(#)(2) YEAR PRICE($/SH)(3) DATE 5%($) 10%($)
------------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
C. Baker Cunningham 120,000 9.3% 39.53 2/20/08 2,983,323 7,560,325
Richard K. Reece 30,000 2.3% 39.53 2/20/08 745,831 1,890,081
Peter J. Wickman 30,000 2.3% 39.53 2/20/08 745,831 1,890,081
Kevin L. Bloomfield 20,000 1.6% 39.53 2/20/08 497,220 1,260,054
Cathy O. Staples 16,000 1.2% 39.53 2/20/08 397,776 1,008,043
</TABLE>
(1) The Company elected to use "Potential Realizable Values at Assumed Annual
Rates of Stock Price Appreciation for Option Term". The dollar amounts under
these columns are the result of calculations at the 5% and 10% rates set by
the SEC and therefore are not intended to forecast possible future
appreciation, if any, of the stock price of the Company.
(2) Grants of stock options in 1998 awarded under the Incentive Plan. Exercises
of one-third of the Shares are permitted on the first, second, and third
anniversaries of the grant date.
(3) The purchase price of Shares subject to an option is the fair market value
of the Shares on the date of grant as defined in the Incentive Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE DECEMBER 31, 1998(#) DECEMBER 31, 1998($)
ACQUIRED ON REALIZED(1) EXERCISABLE/ EXERCISABLE/
EXERCISE(#) ($) UNEXERCISABLE(2) UNEXERCISABLE(3)
----------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
C. Baker Cunningham 18,000 321,750 113,333/141,667 201,425/0
Richard K. Reece 7,500 134,063 28,333/41,667 43,163/0
Peter J. Wickman 9,000 242,157 28,333/41,667 43,163/0
Kevin L. Bloomfield 3,500 547 14,666/23,334 23,020/0
Cathy O. Staples 0 0 4,833/17,667 4,316/0
</TABLE>
(1) Represents the difference between the option price ($14.875) and the fair
market value of the stock on the exercise date.
(2) Each of the executive officers has received four option grants under the
Incentive Plan through 1998: on October 6, 1993, at an exercise price of
$14.875 per share; on February 28, 1994, at an exercise price of $18.31 per
share; on February 28, 1996, at an exercise price of $30.75 per share; and
on February 20, 1998, at an exercise price of $39.53 per share. Messrs.
Reece and Wickman each received an additional option grant to purchase
10,000 Shares on February 26, 1997, at an option price of $35.1875. For each
grant, the exercise price was the fair market value of the common stock (as
defined in the Incentive Plan) on the date of grant. Options become
exercisable as to one-third of such options on each of the first three
anniversaries of the date of grant and will expire five years after the date
of grant for the 1993 and 1994 grants and ten years after the date of grant
for the 1996 and 1998 grants. The named officers also received an additional
stock option award on January 5, 1999 at an exercise price of $20.0625 (the
fair market value on the grant date): Mr. Cunningham, 120,000 shares; Mr.
Reece, 30,000 shares; Mr. Wickman, 30,000 shares; Mr. Bloomfield, 25,000
shares; and Ms. Staples, 20,000 shares.
(3) "Value" represents the difference between the closing price of the common
stock on the New York Stock Exchange on December 31, 1998 ($21.18), and the
exercise price of such options.
17
<PAGE> 19
CERTAIN CHANGE IN CONTROL ARRANGEMENTS
The Company maintains a "grantor trust" under Section 671 of the Code to
provide certain participants in designated compensation and supplemental
retirement plans with greater assurance that the benefits and payments to which
those participants are entitled under those plans will be paid. Prior to a
"change of control" of the Company (as defined in the Trust agreement), the
Company has the discretion to make contributions to the Trust. After a change in
control of the Company, the Company must transfer to the Trust the amount of the
benefits participants have earned through the date of the change in control and
thereafter continue to fund the Trust as benefits accrue. At December 31, 1998,
the balance in the Trust totalled $543. The assets of the Trust are subject to
claims of the creditors of the Company in the event the Company becomes
"insolvent" as defined in the Trust agreement.
The Company has severance compensation agreements with the executives named
in the Summary Compensation Table that become operative if they are terminated
following a change in control (as defined in the agreement). In the event of a
change in control of the Company, the officer agrees to remain in the employ of
the Company for at least three years. Each agreement contemplates that upon a
change in control, the officer will continue to receive substantially the same
compensation and benefits from the Company (or its successor) that he received
before the change. If during the three-year period following a change in
control, the officer's employment is terminated by the Company (or its
successor) other than for "cause" or "disability" or if the officer terminates
the agreement for "good reason" (as defined in the agreement), the officer
generally will be entitled to a payment of 2 times (2.99 times for Mr.
Cunningham) his annual compensation from the Company, and also be entitled to
accrued benefits through the date of termination, and continued life, medical
and dental benefits for two years.
The Incentive Plan provides for the acceleration of certain benefits in the
event of a change of control (as defined in the plan) of the Company. Upon the
occurrence of a change of control, each non-employee director option with
respect to which six months have elapsed since the date of grant, whether the
option is then exercisable or not, will be cancelled in consideration for a
payment equal to the excess of the then fair market value of the common stock
(as calculated in accordance with the Incentive Plan) over the option exercise
price. Except as may be provided in the agreement relating to the options, a
holder of any other options granted under the Incentive Plan which are not then
exercisable in full at the time of a change of control will be entitled, with
respect to the portion not then exercisable, to receive a cash payment equal to
the excess of the then fair market value of the common stock (as calculated in
accordance with the Incentive Plan) over the option exercise price. In addition,
upon a change of control, all stock appreciation rights which have not been
granted in tandem with options and which have been outstanding for at least six
months will become exerciseable in full, restrictions on restricted stock shall
lapse and all performance Shares shall be deemed to be earned in full.
PENSION PLANS
The executives named in the Summary Compensation Table may upon retirement
be entitled to benefits from the Belden Wire & Cable Company Pension Plan (the
"Pension Plan") and the Supplemental Excess Defined Benefit Plan of Belden Wire
& Cable Company (the "Supplemental Plan"). Benefits under the plans upon
retirement are determined based upon compensation during the employment period
and years of service.
Pursuant to the Pension Plan, the Company credits to each individual's
account thereunder 4% of each year's total compensation up to the Social
Security wage base for the year, plus 8% of each year's total compensation that
exceeds the Social Security wage base. For this purpose, total compensation is
cash remuneration paid by the Company to or for the benefit of a participant in
the Pension Plan for services rendered while an employee.
For the executives named in the Summary Compensation Table, the total
compensation will be computed as shown in the columns "Salary" and "Bonus" of
the Summary Compensation Table. Employees who were formerly employees of Cooper
Industries were credited for service while employed by Cooper. Benefits for
service through August 1, 1993 were determined under the Cooper Salaried
Employees'
18
<PAGE> 20
Retirement Plan then in effect and converted to initial balances under the
Pension Plan. Funds equal to the actuarial value of the accrued liabilities for
all participants plus a pro rata portion of the Cooper plan excess assets have
been transferred from the Cooper pension trust to a trust established by Belden
for the Pension Plan.
Employees do not make any contributions to the Pension Plan. Benefits at
retirement are payable, as the participant elects, in the form of an escalating
annuity, a level annuity with or without survivorship, or a lump-sum payment.
The Company contributes to a trust fund sufficient to meet the minimum
requirements under the Code to maintain the status of the Pension Plan as a
qualified defined benefit plan.
The Supplemental Plan is an unfunded, nonqualified plan which provides to
certain employees, including those named in the Summary Compensation Table,
Pension Plan benefits that cannot be paid from a qualified, defined benefit plan
due to provisions of the Code.
PENSION BENEFITS
<TABLE>
<CAPTION>
YEARS OF ESTIMATED
CREDITED YEAR ANNUAL
SERVICE AS OF INDIVIDUAL BENEFIT AT
JANUARY 1, 1999 REACHES AGE 65 AGE 65
--------------- -------------- ----------
<S> <C> <C> <C>
C. Baker Cunningham 28.5 2006 $235,100
Richard K. Reece 5.4 2021 $127,200
Peter J. Wickman 18.0 2014 $ 91,800
Kevin L. Bloomfield 17.5 2016 $ 87,900
Cathy O. Staples 18.8 2015 $ 53,400
</TABLE>
For each of the individuals shown in the Summary Compensation Table, the
table above shows current credited years of service, the year each attains age
65, and the projected annual pension benefit at age 65. The projected annual
pension benefit is based on the following assumptions: benefits will be paid on
a straight-line annuity basis, continued compensation at 1998 levels and an
interest credit rate of 4.0%. Amounts payable under the Supplemental Plan are
included in the estimated annual benefit.
19
<PAGE> 21
STOCK PRICE PERFORMANCE GRAPH
The graph below compares, starting on December 31, 1993, cumulative total
Shareholder return (assuming reinvestment of dividends) with the cumulative
total shareholder return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Electrical Equipment Index at closing prices.
[GRAPH]
<TABLE>
<CAPTION>
December 31,1993 December 31,1994 December, 1995 December 31,1996 December 31,1997 December 31, 1998
----------------- ---------------- ---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Belden 100.00 119.87 140.40 201.88 193.56 119.13
S&P 500 Index 100.00 101.32 139.40 171.40 228.39 239.91
S&P Electrical Index 100.00 101.17 141.97 194.93 274.77 368.77
</TABLE>
(*) The Company did not pay any dividends in 1993.
RELATIONSHIP WITH INDEPENDENT AUDITORS
During 1998, the Company employed Ernst & Young LLP ("EY") primarily to
perform the annual audit and to render other services. Mr. Reece was a partner
with EY prior to his joining the Company in August 1993.
Representatives of EY will be present at the meeting and will be available
to answer questions and discuss matters pertaining to the Report of Independent
Auditors contained in the 1998 Annual Report to Shareholders, which is being
mailed with this Proxy Statement to all Shareholders. Representatives of EY will
have the opportunity to make a statement, if they desire to do so.
OTHER MATTERS
Mr. Riedel, a director, is of counsel to the law firm, Squire, Sanders &
Dempsey; the firm represented the Company in certain legal matters in 1998.
A COPY OF THE 1998 ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1998, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE UPON
REQUEST. PLEASE WRITE TO:
BELDEN INC.
ATTENTION: INVESTOR RELATIONS
7701 FORSYTH BOULEVARD, SUITE 800
ST. LOUIS, MISSOURI 63105
20
<PAGE> 22
PROXY
BELDEN INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Belden Inc. appoints Kevin Bloomfield
and Christopher Allen, or either of them, proxies of the undersigned with power
of substitution to vote, as designated on the reverse side of this card, all
shares which the undersigned would be entitled to vote at the Annual Meeting of
Shareholders to be held on May 6, 1999, at 11:00 a.m., C.D.T., in the Lewis &
Clark Room, the St. Louis Club, 7701 Forsyth Blvd., St. Louis, Missouri, or at
any adjournment thereof, with all powers the shareholder would possess, if
present, on the matters described in the Proxy Statement dated March 26, 1999.
The shareholder revokes any proxies previously given with respect to such
meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE, BUT IF NO
SPECIFICATION IS MADE, IT WILL BE VOTED "FOR" PROPOSAL I (C. BAKER CUNNINGHAM AS
NOMINEE FOR DIRECTOR), "FOR" PROPOSAL II (APPROVAL OF A MODIFICATION TO THE
NUMBER OF STOCK OPTIONS INDIVIDUAL PARTICIPANTS MAY RECEIVE UNDER THE BELDEN
INC. LONG-TERM INCENTIVE PLAN TO AN ANNUAL LIMIT OF 200,000), AND IN THE
DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
To Participants in the Belden Wire & Cable Company Savings Plan and the
Belden Wire & Cable Company Retirement Savings Plan ("Plans"): The number of
shares shown on the reverse side shows shares credited to the accounts of
participants in each applicable Plan. This card therefore will constitute
voting instructions for shares held by participants in the Plans. If you own
shares through the Plans and do not vote, the trustee of the Plans will vote
the Plans' shares in the same proportion as shares for which instructions were
received under the Plans.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS AND PROXY STATEMENT, EACH DATED MARCH 26, 1999, AND THE ANNUAL
REPORT OF BELDEN INC. FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.
SEE REVERSE SIDE
- FOLD AND DETACH HERE -
<PAGE> 23
<TABLE>
<S><C>
PLEASE MARK |X|
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
BOARD OF DIRECTOR RECOMMENDS A VOTE FOR EACH PROPOSAL.
- ---------------------------------------------------------------------------------------
FOR WITHHELD
PROPOSAL I: Election Of Director Nominee.
C. BAKER CUNNINGHAM I PLAN TO ATTEND
THE MEETING
- ---------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
Proposal II: Approval of a modification to the number
of stock options individual participants may receive
under the Belden Inc. Long-Term Incentive Plan to an
annual limit of 200,000.
In their discretion, proxies are authorized to transact and
vote upon such other matters as may properly come before the
meeting or any adjournment thereof.
SIGNATURE____________________________SIGNATURE____________________________DATE___________________,1999
Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
- FOLD AND DETACH HERE -
</TABLE>
<PAGE> 24
PROXY
BELDEN INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Belden Inc. appoints Kevin Bloomfield
and Christopher Allen, or either of them, proxies of the undersigned with power
of substitution to vote, as designated on the reverse side of this card, all
shares which the undersigned would be entitled to vote at the Annual Meeting of
Shareholders to be held on May 6, 1999, at 11:00 a.m., C.D.T., in the Lewis &
Clark Room, the St. Louis Club, 7701 Forsyth Blvd., St. Louis, Missouri, or at
any adjournment thereof, with all powers the shareholder would possess, if
present, on the matters described in the Proxy Statement dated March 26, 1999.
The shareholder revokes any proxies previously given with respect to such
meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE, BUT IF NO
SPECIFICATION IS MADE, IT WILL BE VOTED "FOR" PROPOSAL I (C. BAKER CUNNINGHAM AS
NOMINEE FOR DIRECTOR), "FOR" PROPOSAL II (APPROVAL OF A MODIFICATION TO THE
NUMBER OF STOCK OPTIONS INDIVIDUAL PARTICIPANTS MAY RECEIVE UNDER THE BELDEN
INC. LONG-TERM INCENTIVE PLAN TO AN ANNUAL LIMIT OF 200,000), AND IN THE
DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS AND PROXY STATEMENT, EACH DATED MARCH 26, 1999, AND THE ANNUAL
REPORT OF BELDEN INC. FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.
SEE REVERSE SIDE
- FOLD AND DETACH HERE -
<PAGE> 25
<TABLE>
<S><C>
PLEASE MARK |X|
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
BOARD OF DIRECTOR RECOMMENDS A VOTE FOR EACH PROPOSAL.
- ---------------------------------------------------------------------------------------
FOR WITHHELD
PROPOSAL I: Election Of Director Nominee.
C. BAKER CUNNINGHAM I PLAN TO ATTEND
THE MEETING
- ---------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
Proposal II: Approval of a modification to the number
of stock options individual participants may receive
under the Belden Inc. Long-Term Incentive Plan to an
annual limit of 200,000.
In their discretion, proxies are authorized to transact and
vote upon such other matters as may properly come before the
meeting or any adjournment thereof.
SIGNATURE____________________________SIGNATURE____________________________DATE___________________,1999
Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
- FOLD AND DETACH HERE -
</TABLE>
