<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File Number 1-12280
BELDEN INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 76-0412617
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7701 FORSYTH BOULEVARD, SUITE 800
ST. LOUIS, MISSOURI 63105
(Address of Principal Executive Offices and Zip Code)
(314) 854-8000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirement for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of the issuer's Common Stock, par value
$.01 per share, as of August 10, 2000: 24,414,168 shares
================================================================================
Exhibit Index on Page 17 Page 1 of 17
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, December 31,
2000 1999
--------------------------------------------------------------------------------------------------------------
(unaudited)
(in thousands)
-------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,496 $ 3,874
Receivables 154,183 135,576
Inventories 159,212 125,370
Deferred income taxes 12,929 10,911
Other 3,120 3,559
-------------------------------------------------------------------------------------------------------------
Total current assets 334,940 279,290
Property, plant and equipment, less
accumulated depreciation 350,663 336,817
Intangibles, less accumulated amortization 96,110 89,465
Other assets 3,043 6,892
-------------------------------------------------------------------------------------------------------------
$784,756 $712,464
=============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $122,355 $115,322
Income taxes payable 7,387 4,464
-------------------------------------------------------------------------------------------------------------
Total current liabilities 129,742 119,786
Long-term debt 322,095 283,817
Postretirement benefits other than pensions 12,750 13,432
Deferred income taxes 41,945 32,880
Other long-term liabilities 15,452 15,022
Stockholders' equity:
Preferred stock - -
Common stock 262 262
Additional paid-in capital 46,853 47,958
Retained earnings 269,056 249,653
Treasury stock, at cost (36,292) (37,296)
Accumulated other comprehensive income (loss) (17,107) (13,050)
-------------------------------------------------------------------------------------------------------------
Total stockholders' equity 262,772 247,527
-------------------------------------------------------------------------------------------------------------
$784,756 $712,464
=============================================================================================================
</TABLE>
See accompanying notes.
-2-
<PAGE> 3
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $291,199 $166,220 $519,208 $325,849
Cost of sales 233,518 126,418 414,657 251,243
-----------------------------------------------------------------------------------------------------------------------------
Gross profit 57,681 39,802 104,551 74,606
Selling, general and administrative expenses 32,063 22,560 59,064 44,942
Amortization of goodwill 509 496 1,004 990
-----------------------------------------------------------------------------------------------------------------------------
Operating earnings 25,109 16,746 44,483 28,674
Interest expense 5,309 1,913 9,827 3,832
-----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before tax 19,800 14,833 34,656 24,842
Income taxes 7,326 5,599 12,823 9,377
-----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 12,474 9,234 21,833 15,465
Income from discontinued business, net of tax
of $54 - - - 89
Loss on disposal of discontinued business, net of
tax benefit of $3,123 - - - (5,150)
-----------------------------------------------------------------------------------------------------------------------------
Net income $ 12,474 $ 9,234 $ 21,833 $ 10,404
=============================================================================================================================
Basic earnings per share from continuing operations $ .51 $ .38 $ .90 $ .64
Basic earnings per share $ .51 $ .38 $ .90 $ .43
=============================================================================================================================
Diluted earnings per share from continuing operations $ .50 $ .38 $ .88 $ .63
Diluted earnings per share $ .50 $ .38 $ .88 $ .43
=============================================================================================================================
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
2000 1999
-----------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 21,833 $ 15,465
Adjustments to reconcile income from continuing operations
to net cash provided by (used for) operating activities:
Depreciation 15,068 10,204
Amortization 3,077 2,586
Deferred income taxes 7,047 (2,266)
Changes in operating assets and liabilities(*):
Receivables (22,295) (3,031)
Inventories (25,554) 7,176
Accounts payable and accrued liabilities (8,601) 2,691
Income taxes payable 3,241 (433)
Other assets and liabilities, net (504) (870)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities (6,688) 31,522
Cash flows from investing activities:
Capital expenditures (16,607) (9,685)
Cash paid for acquired businesses (15,959) (180,956)
Proceeds from sale of Cord Products Division - 25,000
Proceeds from disposal of property - 922
-----------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (32,566) (164,719)
Cash flows from financing activities:
Net borrowings under long-term credit facility and
credit agreements 42,916 9,781
Proceeds from bridge loan to be refinanced - 125,000
Exercise of stock options 489 567
Cash dividends paid (2,430) (2,436)
-----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 40,975 132,912
Cash flows from discontinued operations:
Loss from discontinued operations - (5,061)
Adjustments to reconcile loss from discontinued
operations to net cash used for discontinued operations:
Depreciation and amortization - 695
Loss on disposal and other non-cash charges - 8,273
Changes in operating assets and liabilities of discontinued
operations - (4,823)
Capital expenditures - (416)
-----------------------------------------------------------------------------------------------------------------
Net cash used for discontinued operations - (1,332)
Effect of exchange rate changes on cash and cash equivalents (99) 4
-----------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,622 (1,613)
Cash and cash equivalents, beginning of period 3,874 3,291
-----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5,496 $ 1,678
=================================================================================================================
</TABLE>
See accompanying notes.
(*) Net of the effects of exchange rate changes, acquired businesses, and
discontinued operations.
-4-
<PAGE> 5
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Stock Treasury Stock Other
--------------- Paid-In Retained -------------------- Comprehensive
(in thousands) Shares Amount Capital Earnings Shares Amount Income (Loss) Total
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 26,204 $262 $48,482 $218,605 (1,875) ($38,823) ($8,859) $219,667
Net income 10,404 10,404
Foreign currency translation adjustments (2,300) (2,300)
---------
Comprehensive income 8,104
Equity transactions involving:
Stock options (345) 29 912 537
Cash dividends ($.05 per share) (2,436) (2,436)
--------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999 26,204 $262 $48,137 $226,573 (1,846) ($37,911) ($11,159) $225,902
================================================================================================================================
Balance at December 31, 1999 26,204 $262 $47,958 $249,653 (1,826) ($37,296) ($13,050) $247,527
Net income 21,833 21,833
Foreign currency translation adjustments (4,057) (4,057)
---------
Comprehensive income 17,776
Equity transactions involving:
Stock options (1,096) 28 878 (218)
Stock compensation (9) 4 126 117
Cash dividends ($.05 per share) (2,430) (2,430)
--------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2000 26,204 $262 $46,853 $269,056 (1,794) ($36,292) ($17,107) $262,772
================================================================================================================================
</TABLE>
See accompanying notes.
-5-
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Consolidated Financial Statements include Belden and all of its
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation. The financial information presented as of any date,
other than December 31, 1999, has been prepared from the books and records
without audit. The accompanying Consolidated Financial Statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and the footnotes required by generally accepted accounting
principles for complete statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such financial statements have been included. These
Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
NOTE 2: ACQUISITIONS
On April 3, 2000, the Company purchased certain assets and assumed certain
liabilities of Corning's metallic communications cable business for cash of
approximately $16 million. The Company financed the acquisition utilizing funds
available under its existing credit agreement. The acquired business primarily
serves the British communications market and is the sole supplier of metallic
communications cables to British Telecom. Located near Manchester, England, the
acquired business had fiscal 1999 revenues of approximately $100 million. The
Company accounted for the acquisition under the purchase method of accounting.
Accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair market value. The Company recorded a preliminary
goodwill amount of $7 million related to the acquisition. The acquired business'
operating results have been included in the Company's consolidated results from
April 3, 2000.
NOTE 3: SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for income taxes during the first six months of 2000 and 1999
amounted to $6,430,000 and $7,796,000, respectively. Included in these amounts
were $4,300,000 and $6,200,000 paid to Cooper Industries, Inc. in the first six
months of 2000 and 1999, respectively, in accordance with a Tax Sharing and
Separation Agreement between Cooper and the Company, entered into in 1993 in
connection with the Company's initial public offering.
Total interest paid, net of amounts capitalized, during the first six months of
2000 and 1999 amounted to $9,944,000 and $4,122,000, respectively.
-6-
<PAGE> 7
NOTE 4: INVENTORIES
<TABLE>
<CAPTION>
JUNE 30, December 31,
2000 1999
---------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Raw materials $ 29,024 $ 32,984
Work-in-process 24,720 20,495
Finished goods 115,650 77,966
Perishable tooling and supplies 6,645 6,577
---------------------------------------------------------------------------------------------------------------
Total 176,039 138,022
Excess of current standard costs over LIFO costs (7,964) (8,203)
Obsolescence and other reserves (8,863) (4,449)
---------------------------------------------------------------------------------------------------------------
Net inventories $ 159,212 $125,370
===============================================================================================================
</TABLE>
NOTE 5: PER SHARE INFORMATION
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------
Numerator: (in thousands, except per share data)
<S> <C> <C> <C> <C>
Income from continuing operations $ 12,474 $ 9,234 $ 21,833 $ 15,465
Net income $ 12,474 $ 9,234 $ 21,833 $ 10,404
------------------------------------------------------------------------------------------------------------------------
Denominator:
Denominator for basic earnings per share - weighted
average shares 24,399 24,356 24,392 24,349
Effect of dilutive employee stock options 389 121 280 85
------------------------------------------------------------------------------------------------------------------------
Denominator for dilutive earnings per share - adjusted 24,788 24,477
weighted average shares 24,672 24,434
------------------------------------------------------------------------------------------------------------------------
Basic earnings per share from continuing operations $ .51 $ .38 $ .90 $ .64
Basic earnings per share $ .51 $ .38 $ .90 $ .43
------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share from continuing operations $ .50 $ .38 $ .88 $ .63
Diluted earnings per share $ .50 $ .38 $ .88 $ .43
------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 7: INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION
The Company's operations are conducted within two business segments, the
Electronics segment and the Communications segment. The Electronics segment
designs, manufactures and markets wire, cable, and fiber optic products
primarily for the electronics and electrical markets, including products used
for the transmission of data, audio, video and electrical signals. These
products are sold primarily through distributors. The Communications segment
designs, manufactures, and markets wire and cable primarily for the
telecommunications market. The segment includes products used for the
transmission
-7-
<PAGE> 8
of voice, video, and data. These products are sold primarily to major
communications companies directly and, secondarily, through distributors.
The Communications segment was created in connection with the acquisition of CSI
in June 1999. Therefore, no comparative information is presented below.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000
CORPORATE &
ELECTRONICS COMMUNICATIONS ELIMINATIONS CONSOLIDATED
----------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUES $ 374,398 $ 144,810 $ - $ 519,208
INTERSEGMENT REVENUES 2,798 14,328 (17,126) -
OPERATING EARNINGS 42,510 5,604 (3,631) 44,483
INTEREST EXPENSE - - 9,827 9,827
INCOME FROM CONTINUING OPERATIONS BEFORE
TAX 42,510 5,604 (13,458) 34,656
<CAPTION>
Six Months Ended June 30, 1999
Corporate &
Electronics Communications Eliminations Consolidated
----------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $ 325,849 $ - $ - $ 325,849
Intersegment revenues 773 - (773) -
Operating earnings 31,200 - (2,526) 28,674
Interest expense - - 3,832 3,832
Income from continuing
operations before tax 31,200 - (6,358) 24,842
<CAPTION>
THREE MONTHS ENDED JUNE 30, 2000
CORPORATE &
ELECTRONICS COMMUNICATIONS ELIMINATIONS CONSOLIDATED
----------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUES $ 198,536 $92,663 $ - $ 291,199
INTERSEGMENT REVENUES 2,000 7,154 (9,154) -
OPERATING EARNINGS 24,480 3,909 (3,280) 25,109
INTEREST EXPENSE - - 5,309 5,309
INCOME FROM CONTINUING OPERATIONS BEFORE
TAX 24,480 3,909 (8,589) 19,800
<CAPTION>
Three Months Ended June 30, 1999
Corporate &
Electronics Communications Eliminations Consolidated
----------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $ 166,220 $ - $ - $ 166,220
Intersegment revenues 401 - (401) -
Operating earnings 18,054 - (1,308) 16,746
Interest expense - - 1,913 1,913
Income from continuing
operations before tax 18,054 - (3,221) 14,833
</TABLE>
-8-
<PAGE> 9
<TABLE>
<CAPTION>
Geographic information
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------------------------- ----------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
PERCENT OF Percent PERCENT OF Percent
Country & Region REVENUES REVENUES Revenues of Revenues REVENUES REVENUES Revenues of Revenues
-----------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. & Canada $207,824 71% $113,462 68% $377,341 73% $220,978 68%
Europe 62,753 22% 32,660 20% 101,173 19% 67,174 21%
Asia/Pacific 12,509 4% 13,230 8% 24,090 5% 24,921 7%
Latin America 6,357 2% 4,869 3% 13,175 2% 9,363 3%
Other 1,756 1% 1,999 1% 3,429 1% 3,413 1%
-----------------------------------------------------------------------------------------------------------------------------
Total $291,199 100% $166,220 100% $519,208 100% $325,849 100%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE> 10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF CONTINUING OPERATIONS
AND FINANCIAL CONDITION
SIX MONTHS ENDED JUNE 30, 2000, COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999
Revenues
Revenues for the six months ended June 30, 2000, were up 59% to $519.2 million
compared with $325.8 million in the same period last year. Included in the six
months ended June 30, 2000, is approximately $156.3 million of additional
revenues compared to the same period of 1999 relating to the acquisitions of
Corning's U.K. metallic communications cable business (UK Comms), Manchester,
England, completed April 3, 2000, Dorfler Kabelwerk GmbH. (Dorfler),
Klosterneuburg, Austria and Duna Kabel Kft. (Duna), Budapest, Hungary, completed
October 25, 1999, and CSI, Phoenix, Arizona, completed June 28, 1999. Revenues
were negatively affected by $9.7 million for the first half of 2000 due to
unfavorable foreign currency translation. The following table shows the
components of the 59% increase in the Company's revenues for the six months
ended June 30, 2000, compared with 1999 in each of the Company's four served
markets.
<TABLE>
<CAPTION>
% Increase
% of Total In 2000 Revenues
Revenues Compared with 1999
---------- ------------------
<S> <C> <C>
Communications 35% 282%
Networking 20% 44%
Industrial 28% 13%
Entertainment & OEM 17% 14%
</TABLE>
Communications market revenues were up 282% due primarily to the acquisitions of
CSI and UK Comms. Contributing further to the gains in this served market was
the success of new communications business contracts won since the CSI
acquisition. Revenues from internal growth in the communications market were 61%
in the six months ended June 30, 2000, compared to the same period in 1999. A
significant component of this internal growth was the strong demand for the
Company's broadband products across all geographic regions.
Networking market revenues for the six months ended June 30, 2000, were up 44%
compared to the same period of 1999. Included in this growth were revenues from
CSI as well as incremental business obtained from cross-selling and supply
strategies for high-demand products between the Company's operating divisions.
Growth before the impact of acquisitions was 2% from the six months ended June
30, 1999. This increase was due primarily to high growth rates for the Company's
networking products in the U.S., offset by unfavorable foreign exchange rate
changes in Europe. In addition, lower revenues on the Company's networking
products in Europe offset some of the volume increases from the six months ended
June 30, 1999.
Industrial market revenues were up 13% in the six months ended June 30, 2000,
over the same period in 1999. This increase resulted from the recent strength of
the Canadian instrumentation control cable market as well as an increase in
project activity in the Asia/Pacific region.
Entertainment & OEM market revenues increased 14% in the six months ended June
30, 2000, compared with 1999. Sales of professional broadcast products increased
across all geographical regions. This favorable performance stemmed from
increased large project business such as the Sydney Olympics, continued
digital-upgrading projects by broadcasters and a higher rate of Direct Broadcast
-10-
<PAGE> 11
Satellite (DBS) installations in both the United States and Australia than was
experienced in the first six months of 1999. Revenues in Europe increased due to
the acquisitions of Duna and Dorfler.
U.S. revenues, which represented approximately 68% of total revenues in the six
months ended June 30, 2000, increased 77% due primarily to the acquisition of
CSI. Internal growth before this acquisition was 24% in the first half of 2000
versus the same period of 1999. Strong demand across all of the Company's served
markets contributed to this increase. European revenues increased 51% in the six
months ended June 30, 2000, compared with 1999 due to the acquisitions of Duna,
Dorfler and UK Comms. Without these acquisitions, sales in Europe decreased 1%.
This decrease is due primarily to the negative impact of unfavorable currency
translation on year-over-year revenues. Canadian revenues increased 17% in the
six months ended June 30, 2000, compared with 1999 due to robust demand for
instrumentation control cable that began late in the first quarter of 2000 and
carried through the second quarter of 2000. European and Canadian revenues
represented 19% and 5% of total revenues, respectively, for the six months ended
June 30, 2000. Sales to the Asia/Pacific region, which represented 5% of total
revenues for the first half of 2000, decreased 3% in the six months ended June
30, 2000, compared with the same period in the prior year. This decrease was due
primarily to the negative impact that unfavorable currency translation had on
year-over-year revenues and weakened demand for premise and telecom products.
Sales into export markets, including the Middle East and Latin America, were up
11% due to greater demand for both networking and industrial products and
increased broadband projects in Latin America.
Costs, Expenses and Earnings
The following table sets forth information regarding the components of earnings
from continuing operations for the six months ended June 30, 2000, compared with
the same period in 1999.
<TABLE>
<CAPTION>
Six Months Ended
June 30, % Increase
-------------------------------- 2000 Compared
2000 1999 With 1999
-----------------------------------------------------------------------------------------------------
(in thousands, except % data)
<S> <C> <C> <C>
Gross profit $ 104,551 $ 74,606 40.1%
As a % of revenue 20.1% 22.9%
Operating earnings $ 44,483 $ 28,674 55.1%
As a % of revenue 8.6% 8.8%
Income from continuing operations before
income taxes $ 34,656 $ 24,842 39.5%
As a % of revenue 6.7% 7.6%
Income from continuing operations $ 21,833 $ 15,465 41.2%
As a % of revenue 4.2% 4.7%
</TABLE>
Gross profit for the six months ended June 30, 2000, was up 40% from the same
period of 1999. Approximately 47% of this increase was the result of additional
revenues from the acquisitions of CSI and UK Comms. The remaining increase,
while including a small portion related to the acquisitions of Duna and Dorfler,
was predominately due to the impact of internal unit growth and higher average
prices for industrial products in the U.S., partially offset by lower average
prices on networking products in Europe and the Asia/Pacific region. In
addition, the Electronics segment continued to recognize the
-11-
<PAGE> 12
manufacturing cost structure benefits of the consolidation of higher-cost
facilities into a new facility in Fort Mill, South Carolina. The decrease in
gross profit as a percent of revenues in 2000 was primarily attributable to
lower average pricing in the networking markets as well as the currently lower
gross margins achieved by the recently-acquired Communications segment
businesses when compared to the Company's existing operations. These decreases
were partially offset by cost-saving programs put into effect in the fourth
quarter of 1998 and fully implemented by late 1999, including certain headcount
reductions, material cost reduction programs and the consolidation of
manufacturing into the new, lower-cost Fort Mill facility.
Operating earnings increased during the first half of 2000 compared to the first
half of 1999 due to higher gross profit. Operating earnings as a percent of
revenues decreased slightly during the six months ended June 30, 2000, compared
to the same period in 1999 due primarily to the lower gross margins achieved by
recent acquisitions. The increased manufacturing costs incurred within the
Communications segment during production "ramp-up" for recently-awarded sales
contracts also exceeded throughput/absorption. Although selling, general and
administrative expenses were substantially higher during the first half of 2000
compared to the same period in 1999 due to the recent acquisitions, selling,
general and administrative expenses as a percentage of revenues improved from
13.8% for the first half of 1999 to 11.4% for the first half of 2000.
Income before income taxes increased due to higher operating earnings, partially
offset by increased interest costs associated with a higher average debt level
and effective interest rates. The Company's average debt level for the first six
months of 2000 was higher than the same period in 1999 primarily due to the
acquisitions of CSI, Duna, Dorfler and UK Comms. Average debt during the first
half of 2000 and 1999 was $308 million and $160 million, respectively. The
Company's average daily interest rate for the six months ended June 30, 2000,
was 6.5% compared to 5.4% for the same period in 1999.
The Company's effective tax rate was 37.0% and 37.8%, for the six months ended
June 30, 2000 and 1999, respectively. This decrease was due primarily to a
reduction in the Company's effective state income tax rate.
-12-
<PAGE> 13
THREE MONTHS ENDED JUNE 30, 2000, COMPARED WITH THREE MONTHS ENDED JUNE 30, 1999
Revenues
Revenues for the three months ended June 30, 2000, were up 75% to $291.2 million
compared with $166.2 million in the same period last year. Included in the
second quarter of 2000 were approximately $98.2 million of additional revenues
compared to the second quarter of 1999 relating to the acquisitions of UK Comms,
Dorfler, Duna and CSI. Revenues were negatively affected by $5.4 million for the
three months ended June 30, 2000, due to unfavorable foreign currency
translation. The following table shows the components of the 75% increase in the
Company's revenues for the three months ended June 30, 2000, compared with 1999
in each of the Company's four served markets.
<TABLE>
<CAPTION>
% Increase
% of Total In 2000 Revenues
Revenues Compared with 1999
---------- ------------------
<S> <C> <C>
Communications 39% 389%
Networking 19% 44%
Industrial 27% 17%
Entertainment & OEM 15% 16%
</TABLE>
Communications market revenues were up 389% due primarily to the acquisitions of
CSI and UK Comms as well as new communications business contracts won since the
CSI acquisition. Revenues from internal growth in the communications market were
104% in the second quarter of 2000 compared to the same period in 1999. The
Company experienced strong demand for its broadband products across all
geographic regions. This growth was driven by increased sales of the Company's
fiber optic, wireless and CATV products.
Networking market revenues for the three months ended June 30, 2000, were up 44%
compared to the same period of 1999. Included in this growth were revenues from
CSI as well as incremental business obtained due to cross-selling and supply
strategies for high-demand products between the Company's operating divisions.
Growth before the impact of acquisitions was 2% from the second quarter of 1999.
This increase is due primarily to high growth rates for the Company's networking
products in the U.S., offset by unfavorable foreign currency translation in
Europe and the Asia/Pacific region. In addition, offsetting some of the volume
increases from the second quarter of 1999 are lower revenues on the Company's
networking products in Europe.
Industrial market revenues were up 17% in the second quarter of 2000 over 1999.
This increase is due to strong demand in the electrical equipment sector for
products supporting semi-conductor, robotic and computer interconnect
applications.
Entertainment & OEM market revenues increased 16% in the second quarter of 2000
compared with 1999. Sales of professional broadcast products increased across
all geographical regions due to increased large project business, continued
digital-upgrading projects by broadcasters and a higher rate of DBS
installations than was experienced in the second quarter of 1999. Revenues in
Europe increased due to the acquisition of Duna and Dorfler.
U.S. revenues, which represented approximately 66% of total revenues in the
second quarter of 2000, increased 87% due primarily to the acquisition of CSI.
Internal growth before this acquisition was 34% in the second quarter of 2000
versus the same period of 1999. Strong demand across all of the
-13-
<PAGE> 14
Company's served markets contributed to this increase. European revenues
increased 92% in the second quarter of 2000 compared with 1999 due to the
acquisitions of Duna, Dorfler and UK Comms. Without these acquisitions, sales in
Europe increased 3%. This increase is due primarily to healthy demand for
broadband products that was offset by the negative impact of unfavorable
currency exchange rates on year-over-year revenues. Canadian revenues increased
40% in the second quarter of 2000 compared with 1999 due to robust demand for
instrumentation control cable. European and Canadian revenues represented 22%
and 5% of total revenues, respectively, for the second quarter of 2000. Sales to
the Asia/Pacific region, which represented 4% of total revenues for the second
quarter of 2000, decreased 6% in the second quarter of 2000 compared with the
same period in the prior year. This decrease was due primarily to the negative
impact that unfavorable currency translation had on year-over-year revenues and
weakened demand for premise and telecom products. Sales into export markets,
including the Middle East and Latin America, were up 15% due to greater demand
for both networking and industrial products.
Costs, Expenses and Earnings
The following table sets forth information regarding the components of earnings
from continuing operations for the three months ended June 30, 2000, compared
with the same period in 1999.
<TABLE>
<CAPTION>
Three Months Ended
June 30, % Increase
-------------------------------- 2000 Compared
2000 1999 With 1999
-----------------------------------------------------------------------------------------------------
(in thousands, except % data)
<S> <C> <C> <C>
Gross profit $ 57,681 $ 39,802 44.9%
As a % of revenue 19.8% 23.9%
Operating earnings $ 25,109 $ 16,746 49.9%
As a % of revenue 8.6% 10.1%
Income before income taxes $ 19,800 $ 14,833 33.5%
As a % of revenue 6.8% 8.9%
Net income $ 12,474 $ 9,234 35.1%
As a % of revenue 4.3% 5.6%
</TABLE>
Gross profit for the second quarter of 2000 was up 45% from the second quarter
of 1999. Approximately 49% of this increase was the result of additional
revenues from the acquisitions of CSI and UK Comms. The remaining increase,
while including a small portion related to the acquisitions of Duna and Dorfler,
was primarily due to the impact of internal unit growth and higher average
prices on industrial products in the U.S., partially offset by lower average
prices on networking products in Europe and the Asia/Pacific region. The
decrease in gross profit as a percent of revenues in the second quarter of 2000
was primarily attributable to lower average pricing in the networking markets
and the lower average margins achieved by the recently-acquired Communications
segment businesses when compared to existing operations. These decreases were
partially offset by cost-saving programs put into effect in the fourth quarter
of 1998 and fully implemented by late 1999, including certain headcount
reductions, material cost reduction programs and the consolidation of
manufacturing into the new, lower-cost Fort Mill facility.
-14-
<PAGE> 15
Operating earnings increased during the second quarter of 2000 compared to the
second quarter of 1999 due to higher gross profit. Operating earnings as a
percent of revenues decreased during the three months ended June 30, 2000,
compared to the same period in 1999 due primarily to the lower gross margins
achieved by recent acquisitions. The increased manufacturing costs incurred
within the Communications segment during production "ramp-up" for
recently-awarded sales contracts also exceeded throughput/absorption. Although
selling, general and administrative expense were substantially higher during the
second quarter of 2000 compared to the same period in 1999 due to the recent
acquisitions, selling, general and administrative expenses as a percentage of
revenues improved from 13.6% for the second quarter of 1999 to 11.0% for the
second quarter of 2000.
Income before income taxes increased due to higher operating earnings, partially
offset by increased interest costs associated with a higher average debt level
and effective interest rates. The Company's average debt level for the second
quarter of 2000 exceeded the average debt level for the same period in 1999
primarily due to the acquisitions of CSI, Duna, Dorfler and UK Comms. Average
debt during the second quarters of 2000 and 1999 was $323 million and $149
million, respectively. The Company's average daily interest rate for the second
quarter of 2000 was 6.4% compared to 5.3% for the same period in 1999.
The Company's effective tax rate was 37.0% and 37.8%, for the three months ended
June 30, 2000 and 1999, respectively. This decrease was due primarily to a
reduction in the Company's effective state income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $200 million Credit Agreement with a group of seven banks. The
Credit Agreement is unsecured and expires in November 2001. At June 30, 2000,
the Company had $35 million outstanding under the Credit Agreement. In addition,
as of June 30, 2000, the Company had unsecured, uncommitted arrangements with
six banks under which it may borrow up to $98 million at prevailing interest
rates. At June 30, 2000, the Company had $90 million outstanding under these
arrangements. At June 30, 2000, the Company had available borrowing capacity of
$83 million. This capacity consisted of $8 million available under the
unsecured, uncommitted arrangements and $75 million available under the Credit
Agreement.
The Company had privately-placed, unsecured debt of $200 million outstanding as
of June 30, 2000. The private placements were issued in tranches of $75 million,
$64 million, $44 million, and $17 million that will mature in 2009, 2004, 2006
and 2009 and were priced at 6.92%, 7.60%, 7.74%, and 7.95%, respectively. The
Note Purchase Agreements effecting these private placements contain various
customary affirmative and negative covenants and other provisions, the most
restrictive of which are maintenance of a minimum net worth and a debt to total
capitalization ratio limit of 65%.
The Company expects that cash provided by operations and borrowings available
under the Credit Agreement will provide it with sufficient liquidity to meet its
operating needs and fund its normal dividends and anticipated capital
expenditures.
Working Capital
During the first six months of 2000, operating working capital (defined as
receivables and inventories less payables and accrued liabilities, excluding the
effect of exchange rate changes and business combinations and dispositions) used
cash of $56 million. The change in operating working capital was primarily due
to post-acquisition working capital infusions into UK Comms, investments made
for
-15-
<PAGE> 16
additional inventory to service new business, and the impact of higher accounts
receivable balances resulting from increased revenues.
Capital Expenditures
For the first six months in 2000, the Company had capital expenditures of $16.6
million, primarily for modernization and enhancement of machinery and equipment.
The Company plans on spending approximately $40 million during 2000 on these and
similar projects.
FORWARD-LOOKING STATEMENTS
The statements set forth in this Form 10-Q, 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
improving but still unsettled economic climate being experienced in the
Asia/Pacific regions and its impact on sales; heightened competition from
domestic and foreign competitors, including new entrants; the success in
identifying, acquiring and integrating acquisitions, including but not limited
to cost-saving and profit improvement initiatives within the Communications
segment; 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 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 do so.
-16-
<PAGE> 17
PART II OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 4, 2000, the Company held its regular Annual Meeting of Stockholders
("Meeting"). The stockholders considered two proposals. Each was approved by the
necessary majority.
PROPOSAL 1:
Election for a three-year term, three class I directors: Christopher I.
Byrnes, Whitson Sadler, and John M. Monter. Mr. Byrnes has served as a
director since 1995, but Messrs. Sadler and Monter have not previously
served on the Company's Board of Directors. Mr. Byrnes received
19,274,018 shares for his reelection and 308,738 shares were withheld.
Mr. Sadler received 19,273,546 shares for his election and 309,210
shares were withheld. Mr. Monter received 20,266,782 shares for his
election and 315,974 shares were withheld.
PROPOSAL 2:
Approval to increase share reserve under the Company's Long Term
Incentive Plan. The voting on this proposal was as follows: for
17,581,429; against 1,960,208; and abstentions of 41,119.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 10.1 Indemnification Agreement, dated July 3, 2000, between
the Company and Stephen H. Johnson, Treasurer.
Exhibit 27.1: Financial Data Schedule
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELDEN INC.
Date: August 10, 2000 By: /s/ C. Baker Cunningham
---------------------------------------
C. Baker Cunningham
Chairman of the Board, President
and Chief Executive Officer
Date: August 10, 2000 By: /s/ Paul Schlessman
---------------------------------------
Vice President, Finance
and Chief Financial Officer
-17-
