OREANDA-NEWS. Belden Inc. (NYSE: BDC), a global leader in high quality, end-to-end signal transmission solutions for mission-critical applications, today reported fiscal second quarter 2016 results for the period ended July 3, 2016.

Second Quarter 2016

On a GAAP basis, revenues for the quarter totaled $601.6 million, increasing $15.8 million, or 2.7%, compared to $585.8 million in the second quarter 2015. Gross profit margin in the second quarter was 41.3%, increasing 130 basis points from 40.0% in the year-ago period. Net income was $41.8 million, increasing from $21.7 million in the prior-year period. Net income as a percentage of revenues was 7.0% in the second quarter, increasing 330 basis points from 3.7% in the prior-year period. EPS totaled $0.98, compared to $0.50 in the second quarter 2015. The Company recognized an income tax benefit for the quarter, primarily as a result of tax planning initiatives.

Adjusted revenues for the quarter totaled $603.4 million, increasing $4.9 million, or 0.8%, compared to $598.5 million in the second quarter 2015. Adjusted gross profit margin in the second quarter was 41.8%, increasing 10 basis points from the year-ago period. Adjusted EBITDA margin in the second quarter was 17.9%, increasing 120 basis points from 16.7% in the year-ago period. Adjusted EPS increased to $1.54 from $1.21 in the second quarter 2015. Adjusted EPS includes the benefit of tax planning initiatives. Adjusted results are non-GAAP measures, and a non-GAAP reconciliation table is provided as an appendix to this release.

John Stroup, President and CEO of Belden Inc., said, “We are extremely pleased to generate revenues and earnings for the second quarter that exceeded our expectations, and we are proud to report organic revenue growth for the second quarter and first half of 2016. In addition to continued success in our Enterprise platform, the Broadcast platform generated broad-based, double-digit revenue growth in the quarter. Furthermore, margin expansion continues to be exceptional across the organization, as we benefit from our robust lean enterprise system.”

Outlook

“Given our strong first half, we are once again increasing our revenue and earnings outlook for the year. In addition to continued strength in the Broadcast, Enterprise and Network Security platforms, we expect our combined Industrial businesses to return to growth in the second half of the year,” said Mr. Stroup.

On a GAAP basis, the Company expects third quarter 2016 revenues to be $593 – $613 million and EPS to be $0.66 – $0.76. For the full year ending December 31, 2016, the Company now expects revenues to be $2.348 – $2.378 billion compared to the previously guided range of $2.313 – $2.363 billion. The expected range of EPS is now $3.23 – $3.43 compared to the previously guided range of $2.84 – $3.14.

The Company expects third quarter 2016 adjusted revenues to be $595 – $615 million and adjusted EPS to be $1.35 – $1.45. For the full year ending December 31, 2016, the Company now expects adjusted revenues to be $2.355 – $2.385 billion compared to the previously guided range of $2.320 – $2.370 billion. The expected range of adjusted EPS is now $5.50 – $5.70 compared to the previously guided range of $5.15 - $5.45.

                 

BELDEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                 
                 
    Three Months Ended   Six Months Ended
    July 3, 2016   June 28, 2015   July 3, 2016   June 28, 2015
    (In thousands, except per share data)
                 
Revenues   $ 601,631     $ 585,755     $ 1,143,128     $ 1,132,712  
Cost of sales     (353,418 )     (351,479 )     (669,880 )     (690,787 )
Gross profit     248,213       234,276       473,248       441,925  
Selling, general and administrative expenses     (123,057 )     (127,584 )     (245,463 )     (267,632 )
Research and development     (36,652 )     (36,632 )     (72,785 )     (72,831 )
Amortization of intangibles     (26,263 )     (25,917 )     (51,795 )     (52,421 )
Operating income     62,241       44,143       103,205       49,041  
Interest expense, net     (24,049 )     (24,769 )     (48,445 )     (48,615 )
Income from continuing operations before taxes     38,192       19,374       54,760       426  
Income tax benefit     3,558       2,303       3,415       1,615  
Income from continuing operations     41,750       21,677       58,175       2,041  
Loss from disposal of discontinued operations, net of tax     -       (86 )     -       (86 )
Net income     41,750       21,591       58,175       1,955  
Less: Net loss attributable to noncontrolling interest     (99 )     -       (198 )     -  
Net income attributable to Belden stockholders   $ 41,849     $ 21,591     $ 58,373     $ 1,955  
                 
                 

Weighted average number of common shares and equivalents:

                
Basic     42,085       42,655       42,046       42,596  
Diluted     42,548       43,233       42,493       43,224  
                 
Basic income per share attributable to Belden stockholders:                
Continuing operations   $ 0.99     $ 0.51     $ 1.39     $ 0.05  
Disposal of discontinued operations     -       -       -       -  
Net income   $ 0.99     $ 0.51     $ 1.39     $ 0.05  
                 
                 
Diluted income per share attributable to Belden stockholders:                
Continuing operations   $ 0.98     $ 0.50     $ 1.37     $ 0.05  
Disposal of discontinued operations     -       -       -       -  
Net income   $ 0.98     $ 0.50     $ 1.37     $ 0.05  
                 
Dividends declared per share   $ 0.05     $ 0.05     $ 0.10     $ 0.10  
                 
                         
BELDEN INC.
OPERATING SEGMENT INFORMATION
(Unaudited)
                         
                         
        Enterprise   Industrial   Industrial        
        Connectivity   Connectivity   IT   Network Security  

 
    Broadcast Solutions   Solutions   Solutions   Solutions   Solutions  

Total Segments
    (In thousands, except percentages)

For the three months ended July 3, 2016

                        
                         
Segment Revenues   $ 193,521     $ 160,401     $ 147,808     $ 62,510     $ 39,141     $ 603,381  
Segment EBITDA     29,505       29,575       27,064       12,676       9,515       108,335  
Segment EBITDA margin     15.2 %     18.4 %     18.3 %     20.3 %     24.3 %     18.0 %
                         
Depreciation expense     4,061       3,429       2,709       660       1,128       11,987  
Amortization of intangibles     13,420       432       601       1,506       10,304       26,263  
Severance, restructuring, and acquisition integration costs     1,319       1,207       2,371       943       29       5,869  
Deferred gross profit adjustments     494       -       -       -       1,256       1,750  
                         

For the three months ended June 28, 2015

                        
                         
Segment Revenues   $ 174,923     $ 161,827     $ 160,875     $ 61,270     $ 39,618     $ 598,513  
Segment EBITDA     22,878       29,792       28,680       10,178       8,772       100,300  
Segment EBITDA margin     13.1 %     18.4 %     17.8 %     16.6 %     22.1 %     16.8 %
                         
Depreciation expense     4,140       3,180       2,869       584       919       11,692  
Amortization of intangibles     12,595       429       807       1,479       10,607       25,917  
Severance, restructuring, and acquisition integration costs     3,283       83       1,163       -       378       4,907  
Deferred gross profit adjustments     (924 )     -       -       -       14,364       13,440  
                         

For the six months ended July 3, 2016

                        
                         
Segment Revenues   $ 364,793     $ 296,293     $ 288,899     $ 116,392     $ 80,804     $ 1,147,181  
Segment EBITDA     52,772       53,311       50,051       21,285       20,982       198,401  
Segment EBITDA margin     14.5 %     18.0 %     17.3 %     18.3 %     26.0 %     17.3 %
                         
Depreciation expense     8,023       6,818       5,427       1,184       2,198       23,650  
Amortization of intangibles     26,351       861       1,192       3,016       20,375       51,795  
Severance, restructuring, and acquisition integration costs     5,697       1,707       3,236       3,608       29       14,277  
Purchase accounting effects of acquisitions     195       -       -       -       -       195  
Deferred gross profit adjustments     1,108       -       -       -       2,945       4,053  
                         

For the six months ended June 28, 2015

                        
                         
Segment Revenues   $ 351,423     $ 303,608     $ 313,847     $ 122,343     $ 76,743     $ 1,167,964  
Segment EBITDA     46,005       49,801       52,853       21,265       18,673       188,597  
Segment EBITDA margin     13.1 %     16.4 %     16.8 %     17.4 %     24.3 %     16.1 %
                         
Depreciation expense     8,113       6,394       5,720       1,143       1,863       23,233  
Amortization of intangibles     25,021       861       1,630       2,889       22,020       52,421  
Severance, restructuring, and acquisition integration costs     14,810       651       2,936       (52 )     1,045       19,390  
Purchase accounting effects of acquisitions     -       -       267       -       9,155       9,422  
Deferred gross profit adjustments     2,370       -       -       -       32,728       35,098  
                         
                         
BELDEN INC.
OPERATING SEGMENT RECONCILIATION TO CONSOLIDATED RESULTS
(Unaudited)
              Three Months Ended   Six Months Ended
              July 3, 2016   June 28, 2015   July 3, 2016   June 28, 2015
              (In thousands)
                           
Total Segment Revenues         $ 603,381     $ 598,513     $ 1,147,181     $ 1,167,964  
Deferred revenue adjustments       (1,750 )     (12,758 )     (4,053 )     (35,252 )
Consolidated Revenues         $ 601,631     $ 585,755     $ 1,143,128     $ 1,132,712  
                           
Total Segment EBITDA         $ 108,335     $ 100,300     $ 198,401     $ 188,597  
Income from equity method investment     661       343       491       1,111  
Eliminations       (886 )     (544 )     (1,717 )     (1,103 )
Consolidated Adjusted EBITDA (1)       108,110       100,099       197,175       188,605  
Amortization of intangibles     (26,263 )     (25,917 )     (51,795 )     (52,421 )
Deferred gross profit adjustments     (1,750 )     (13,440 )     (4,053 )     (35,098 )
Severance, restructuring, and acquisition integration costs     (5,869 )     (4,907 )     (14,277 )     (19,390 )
Depreciation expense     (11,987 )     (11,692 )     (23,650 )     (23,233 )
Purchase accounting effects related to acquisitions     -       -       (195 )     (9,422 )
Consolidated operating income         62,241       44,143       103,205       49,041  
Interest expense, net     (24,049 )     (24,769 )     (48,445 )     (48,615 )
                           
Consolidated income from continuing operations before taxes   $ 38,192     $ 19,374     $ 54,760     $ 426  
                           
                           
(1) Consolidated Adjusted EBITDA is a non-GAAP measure. See Reconciliation of Non-GAAP Measures for additional information.
                 
           
BELDEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
             
        July 3, 2016   December 31, 2015
        (Unaudited)    
        (In thousands)
ASSETS
Current assets:          
Cash and cash equivalents     $ 175,772     $ 216,751  
Receivables, net       393,436       387,386  
Inventories, net       198,625       195,942  
Other current assets       51,403       37,079  
             
Total current assets       819,236       837,158  
             
Property, plant and equipment, less accumulated depreciation       314,697       310,629  
Goodwill       1,404,099       1,385,115  
Intangible assets, less accumulated amortization       614,422       655,871  
Deferred income taxes       34,747       34,295  
Other long-lived assets       67,689       67,534  
             
        $ 3,254,890     $ 3,290,602  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:          
Accounts payable     $ 204,272     $ 223,514  
Accrued liabilities       291,944       323,249  
Current maturities of long-term debt       2,500       2,500  
             
Total current liabilities       498,716       549,263  
             
Long-term debt       1,681,866       1,725,282  
Postretirement benefits       106,862       105,230  
Deferred income taxes       43,700       46,034  
Other long-term liabilities       39,291       39,270  
Stockholders’ equity:          
Common stock       503       503  
Additional paid-in capital       609,061       605,660  
Retained earnings       733,852       679,716  
Accumulated other comprehensive loss       (59,069 )     (58,987 )
Treasury stock       (401,089 )     (402,793 )
Total Belden stockholders’ equity       883,258       824,099  
Noncontrolling interest       1,197       1,424  
Total stockholders' equity       884,455       825,523  
             
        $ 3,254,890     $ 3,290,602  
                     
 
BELDEN INC.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
         
    Six Months Ended
    July 3, 2016   June 28, 2015
    (In thousands)
Cash flows from operating activities:        
Net income   $ 58,175     $ 1,955  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization     75,445       75,654  
Share-based compensation     8,587       9,891  
Tax benefit related to share-based compensation     (116 )     (5,288 )

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

        
Receivables     (3,750 )     (6,250 )
Inventories     368       (11,837 )
Accounts payable     (20,730 )     (43,689 )
Accrued liabilities     (39,356 )     (4,363 )
Accrued taxes     (17,759 )     (10,214 )
Other assets     2,457       (1,736 )
Other liabilities     (2,867 )     923  
Net cash provided by operating activities     60,454       5,046  
         
Cash flows from investing activities:        
Capital expenditures     (25,124 )     (27,224 )
Cash used to acquire businesses, net of cash acquired     (17,848 )     (695,345 )
Proceeds from disposal of tangible assets     41       80  
Net cash used for investing activities     (42,931 )     (722,489 )
         
Cash flows from financing activities:        
Payments under borrowing arrangements     (51,250 )     (625 )
Cash dividends paid     (4,204 )     (4,235 )
Withholding tax payments for share-based payment awards, net of proceeds from the exercise of stock options     (3,598 )     (11,439 )
Borrowings under credit arrangements     -       200,000  
Debt issuance costs paid     -       (643 )
Tax benefit related to share-based compensation     116       5,288  
Net cash provided by (used for) financing activities     (58,936 )     188,346  
         
Effect of foreign currency exchange rate changes on cash and cash equivalents     434       (3,646 )
         
Decrease in cash and cash equivalents     (40,979 )     (532,743 )
Cash and cash equivalents, beginning of period     216,751       741,162  
Cash and cash equivalents, end of period   $ 175,772     $ 208,419  
                 
 
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
                 

In addition to reporting financial results in accordance with accounting principles generally accepted in the United States, we provide non-GAAP operating results adjusted for certain items, including: asset impairments; accelerated depreciation expense due to plant consolidation activities; purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory and deferred revenue to fair value and transaction costs; severance, restructuring, and acquisition integration costs; gains (losses) recognized on the disposal of businesses and tangible assets; amortization of intangible assets; gains (losses) on debt extinguishment; discontinued operations; and other costs. We adjust for the items listed above in all periods presented, unless the impact is clearly immaterial to our financial statements. When we calculate the tax effect of the adjustments, we include all current and deferred income tax expense commensurate with the adjusted measure of pre-tax profitability.
                 

We utilize the adjusted results to review our ongoing operations without the effect of these adjustments and for comparison to budgeted operating results. We believe the adjusted results are useful to investors because they help them compare our results to previous periods and provide important insights into underlying trends in the business and how management oversees our business operations on a day-to-day basis. As an example, we adjust for the purchase accounting effect of recording deferred revenue at fair value in order to reflect the revenues that would have otherwise been recorded by acquired businesses had they remained as independent entities. We believe this presentation is useful in evaluating the underlying performance of acquired companies. Similarly, we adjust for other acquisition-related expenses, such as amortization of intangibles and other impacts of fair value adjustments because they generally are not related to the acquired business' core business performance. As an additional example, we exclude the costs of restructuring programs, which can occur from time to time for our current businesses and/or recently acquired businesses. We exclude the costs in calculating adjusted results to allow us and investors to evaluate the performance of the business based upon its expected ongoing operating structure. We believe the adjusted measures, accompanied by the disclosure of the costs of these programs, provides valuable insight.
                 

Adjusted results should be considered only in conjunction with results reported according to accounting principles generally accepted in the United States.
                 
                 
                 
    Three Months Ended   Six Months Ended
    July 3, 2016   June 28, 2015   July 3, 2016   June 28, 2015
    (In thousands, except percentages and per share amounts)
                 
GAAP revenues   $ 601,631     $ 585,755     $ 1,143,128     $ 1,132,712  
Deferred revenue adjustments     1,750       12,758       4,053       35,252  
Adjusted revenues   $ 603,381     $ 598,513     $ 1,147,181     $ 1,167,964  
                 
GAAP gross profit   $ 248,213     $ 234,276     $ 473,248     $ 441,925  
Severance, restructuring, and integration costs     1,826       1,783       3,918       3,174  
Deferred gross profit adjustments     1,750       13,440       4,053       35,098  
Accelerated depreciation     206       25       412       100  
Purchase accounting effects related to acquisitions     -       -       195       267  
Adjusted gross profit   $ 251,995     $ 249,524     $ 481,826     $ 480,564  
                 

GAAP gross profit margin

     41.3 %     40.0 %     41.4 %     39.0 %

Adjusted gross profit margin

     41.8 %     41.7 %     42.0 %     41.1 %
                 
GAAP net income attributable to Belden stockholders   $ 41,849     $ 21,591     $ 58,373     $ 1,955  
                 
Interest expense, net     24,049       24,769       48,445       48,615  
Loss from disposal of discontinued operations     -       86       -       86  
Noncontrolling interest     (99 )     -       (198 )     -  
Income tax benefit     (3,558 )     (2,303 )     (3,415 )     (1,615 )
Total non-operating adjustments     20,392       22,552       44,832       47,086  
                 
Amortization of intangible assets     26,263       25,917       51,795       52,421  
Severance, restructuring, and integration costs     5,869       4,907       14,277       19,390  
Deferred gross profit adjustments     1,750       13,440       4,053       35,098  
Accelerated depreciation     206       42       412       182  
Purchase accounting effects related to acquisitions     -       -       195       9,422  
Total operating income adjustments     34,088       44,306       70,732       116,513  
                 
Depreciation expense     11,781       11,650       23,238       23,051  
                 
Adjusted EBITDA   $ 108,110     $ 100,099     $ 197,175     $ 188,605  
                 
GAAP net income margin     7.0 %     3.7 %     5.1 %     0.2 %
Adjusted EBITDA margin     17.9 %     16.7 %     17.2 %     16.1 %
                 
GAAP income from continuing operations   $ 41,750     $ 21,677     $ 58,175     $ 2,041  
Operating income adjustments from above     34,088       44,306       70,732       116,513  
Tax effect of adjustments     (10,420 )     (13,768 )     (20,914 )     (23,077 )
Adjusted income from continuing operations   $ 65,418     $ 52,215     $ 107,993     $ 95,477  
                 
GAAP income from continuing operations   $ 41,750     $ 21,677     $ 58,175     $ 2,041  
Less: Net loss attributable to noncontrolling interest     (99 )     -       (198 )     -  
GAAP income from continuing operations attributable to Belden stockholders   $ 41,849     $ 21,677     $ 58,373     $ 2,041  
                 
Adjusted income from continuing operations   $ 65,418     $ 52,215     $ 107,993     $ 95,477  
Less: Net loss attributable to noncontrolling interest     (99 )     -       (198 )     -  
Less: Amortization expense attributable to noncontrolling interest, net of tax     16       -       32       -  
Adjusted income from continuing operations attributable to Belden stockholders   $ 65,501     $ 52,215     $ 108,159     $ 95,477  
                 
GAAP income from continuing operations per diluted share attributable to Belden stockholders   $ 0.98     $ 0.50     $ 1.37     $ 0.05  
Adjusted income from continuing operations per diluted share attributable to Belden stockholders   $ 1.54     $ 1.21     $ 2.55     $ 2.21  
                 
GAAP and Adjusted diluted weighted average shares     42,548       43,233       42,493       43,224  
                                 
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
                 
We define free cash flow, which is a non-GAAP financial measure, as net cash from operating activities adjusted for capital expenditures net of the proceeds from the disposal of tangible assets. We believe free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends and share repurchases. We use free cash flow, as defined, as one financial measure to monitor and evaluate performance and liquidity. Non-GAAP financial measures should be considered only in conjunction with financial measures reported according to accounting principles generally accepted in the United States. Our definition of free cash flow may differ from definitions used by other companies.
                 
    Three Months Ended   Six Months Ended
    July 3, 2016   June 28, 2015   July 3, 2016   June 28, 2015
    (In thousands)
GAAP net cash provided by operating activities   $ 47,775     $ 53,251     $ 60,454     $ 5,046  

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

     (11,662 )     (11,694 )     (25,083 )     (27,144 )
Non-GAAP free cash flow   $ 36,113     $ 41,557     $ 35,371     $ (22,098 )
                                 
           
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
2016 REVENUES AND EARNINGS GUIDANCE
             
        Year Ended   Three Months Ended
        December 31, 2016   October 2, 2016
Adjusted revenues   $2.355 - $2.385 billion   $595 - $615 million
Deferred revenue adjustments   ($7 million)   ($2 million)
GAAP revenues     $2.348 - $2.378 billion   $593 - $613 million
             
Adjusted income per diluted share attributable to Belden stockholders   $5.50 - $5.70   $1.35 - $1.45
Amortization of intangible assets   ($1.61)   ($0.41)
Severance, restructuring, and acquisition integration costs   ($0.55)   ($0.26)
Deferred gross profit adjustments   ($0.11)   ($0.02)
GAAP income per diluted share attributable to Belden stockholders   $3.23 - $3.43   $0.66 - $0.76
             
             
             
Our guidance for revenues and income per diluted share attributable to Belden stockholders is based upon information currently available regarding events and conditions that will impact our future operating results. In particular, our results are subject to the factors listed under "Forward-Looking Statements" in this release. In addition, our actual results are likely to be impacted by other additional events for which information is not available, such as asset impairments, purchase accounting effects related to acquisitions, severance, restructuring, and acquisition integration costs, gains (losses) recognized on the disposal of tangible assets, gains (losses) on debt extinguishment, discontinued operations, and other gains (losses) related to events or conditions that are not yet known.
         

 

About Belden

Belden Inc. delivers a comprehensive product portfolio designed to meet the mission-critical network infrastructure needs of industrial, enterprise and broadcast markets. With innovative solutions targeted at reliable and secure transmission of rapidly growing amounts of data, audio and video needed for today's applications, Belden is at the center of the global transformation to a connected world. Founded in 1902, the Company is headquartered in St. Louis and has manufacturing capabilities in North and South America, Europe and Asia.