Belden Reports Strong Results for First Quarter 2016

May 04, 2016

ST. LOUIS--(BUSINESS WIRE)-- Belden Inc. (NYSE: BDC), a global leader in high quality, end-to-end signal transmission solutions for mission-critical applications, today reported fiscal first quarter 2016 results for the period ended April 3, 2016.

First Quarter 2016 Highlights

  • Delivered GAAP first quarter revenues of $541.5 million, and adjusted first quarter revenues of $543.8 million;
  • Expanded adjusted gross profit margins to 42.3%, an increase of 170 basis points from 40.6% in the year-ago period;
  • Generated adjusted EBITDA margins of 16.4%, an increase of 90 basis points from 15.5% in the year-ago period;
  • Repaid $51 million of debt during the quarter; and
  • Increased full-year adjusted revenues and adjusted EPS guidance.

First Quarter 2016

On a GAAP basis, revenues for the quarter totaled $541.5 million, declining $5.5 million, or 1.0%, compared to $547.0 million in the first quarter 2015. Gross profit margin in the first quarter was 41.6%, increasing 360 basis points from 38.0% in the year-ago period. Operating income was $41.0 million, an increase from the prior-year period of $4.9 million. Operating profit margin in the first quarter was 7.6%, increasing from 0.9% in the year-ago period. EPS totaled $0.39, compared to a loss of $(0.46) in the first quarter 2015. GAAP operating profit margin expansion and net income improvement was largely driven by purchase accounting effects in the year-ago period related to the acquisition of Tripwire.

Adjusted revenues for the quarter totaled $543.8 million, declining $25.7 million, or 4.5%, compared to $569.5 million in the first quarter 2015. Adjusted gross profit margin in the first quarter was 42.3%, increasing 170 basis points from 40.6% in the year-ago period. Adjusted EBITDA margin in the first quarter was 16.4%, increasing 90 basis points from 15.5% in the year-ago period. Adjusted EPS increased to $1.01 from $1.00 in the first quarter 2015. Adjusted results are non-GAAP measures, and a non-GAAP reconciliation table is provided as an appendix to this release.

To capitalize on the adoption of IP technology and accelerate our penetration of the commercial audio-video market, we elected in the first quarter to transfer the responsibility of audio-video cable and connectors to our Enterprise segment leadership team. As a result, revenues for this product category are now reported within the Enterprise Connectivity platform. Such revenues were previously reported within the Broadcast Connectivity platform. Prior period segment information has been revised to conform to the change in the composition of reportable segments and is included as an appendix to this release.

John Stroup, President and CEO of Belden Inc., said, “We are extremely pleased with our first quarter results, including earnings growth, margin expansion, and cash flow. As expected, strength within Broadband, Enterprise, and Network Security markets offset weakness from our industrial platforms. Despite a difficult year-over-year comparison due primarily to lower oil prices and a stronger U.S. dollar, our attractive portfolio, superior business system, and talented team enabled us to outperform.”

Outlook

“Given our strong start, we have increased our revenue and earnings outlook for the year. We expect our Broadband, Enterprise, and Network Security businesses will continue to perform well and benefit from favorable end-market conditions. Although our industrial businesses are down year-over-year, sequential performance, backlog, and order rates suggest stability that should lead to a better second half,” said Mr. Stroup.

The Company expects second quarter 2016 adjusted revenues to be $570$590 million and adjusted EPS to be $1.20$1.30. For the full year ending December 31, 2016, the Company now expects adjusted revenues to be $2.320$2.370 billion compared to the previously guided range of $2.295$2.345 billion. The expected range of adjusted EPS is now $5.15$5.45 compared to the previously guided range of $5.10 - $5.40.

On a GAAP basis, the Company expects second quarter 2016 revenues to be $568$588 million and EPS to be $0.62$0.72. For the full year ending December 31, 2016, the Company now expects revenues to be $2.313$2.363 billion compared to the previously guided range of $2.288$2.338 billion. The expected range of EPS is now $2.84$3.14 compared to the previously guided range of $2.68 - $2.98.

Earnings Conference Call

Management will host a conference call today at 8:30 am EDT to discuss results of the quarter. The listen-only audio of the conference call will be broadcast live via the Internet at http://investor.belden.com. The dial-in number for participants in the U.S. is 888-287-5563; the dial-in number for participants outside the U.S. is 719-325-2432. A replay of this conference call will remain accessible in the investor relations section of the Company’s Web site for a limited time.

 
BELDEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
         
Three Months Ended
April 3, 2016 March 29, 2015
(In thousands, except per share amounts)
 
Revenues $ 541,497 $ 546,957
Cost of sales   (316,462 )   (339,308 )
Gross profit 225,035 207,649
Selling, general and administrative expenses (122,406 ) (140,048 )
Research and development (36,133 ) (36,199 )
Amortization of intangibles   (25,532 )   (26,504 )
Operating income 40,964 4,898
Interest expense, net   (24,396 )   (23,846 )
Income (loss) before taxes 16,568 (18,948 )
Income tax expense   (143 )   (688 )
Net income (loss) 16,425 (19,636 )
Less: Net loss attributable to noncontrolling interest   (99 )   -  
Net income (loss) attributable to Belden stockholders $ 16,524   $ (19,636 )
 
Weighted average number of common shares and equivalents:
Basic 42,008 42,535
Diluted 42,440 42,535
   
Basic income (loss) per share attributable to Belden stockholders $ 0.39   $ (0.46 )
   
Diluted income (loss) per share attributable to Belden stockholders $ 0.39   $ (0.46 )
 
Dividends declared per share $ 0.05 $ 0.05
 
BELDEN INC.
OPERATING SEGMENT INFORMATION
(Unaudited)
                         

Broadcast

Solutions

Enterprise

Connectivity

Industrial

Connectivity

Industrial

IT

Network Security

Solutions

Total

Segments

(In thousands, except percentages)

For the three months ended April 3, 2016

 
Segment Revenues $ 171,272 $ 135,892 $ 141,091 $ 53,882 $ 41,663 $ 543,800
Segment EBITDA 23,267 23,736 22,987 8,609 11,467 90,066
Segment EBITDA margin 13.6 % 17.5 % 16.3 % 16.0 % 27.5 % 16.6 %
 
Depreciation expense 3,962 3,389 2,718 524 1,070 11,663
Amortization of intangibles 12,931 429 591 1,510 10,071 25,532
Severance, restructuring, and acquisition integration costs 4,378 500 865 2,665 - 8,408
Purchase accounting effects of acquisitions 195 - - - - 195
Deferred gross profit adjustments 614 - - - 1,689 2,303
 

For the three months ended March 29, 2015

 
Segment Revenues $ 176,500 $ 141,781 $ 152,972 $ 61,073 $ 37,125 $ 569,451
Segment EBITDA 23,127 20,009 24,173 11,087 9,901 88,297
Segment EBITDA margin 13.1 % 14.1 % 15.8 % 18.2 % 26.7 % 15.5 %
 
Depreciation expense 3,973 3,214 2,851 559 944 11,541
Amortization of intangibles 12,426 432 823 1,410 11,413 26,504
Severance, restructuring, and acquisition integration costs 11,527 568 1,773 (52 ) 667 14,483
Purchase accounting effects of acquisitions - - 267 - 9,155 9,422
Deferred gross profit adjustments 3,294 - - - 18,364 21,658
 

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 three months ended September 27, 2015

 
Segment Revenues $ 186,722 $ 155,148 $ 147,702 $ 59,184 $ 41,359 $ 590,115
Segment EBITDA 27,369 25,705 23,225 10,466 11,240 98,005
Segment EBITDA margin 14.7 % 16.6 % 15.7 % 17.7 % 27.2 % 16.6 %
 
Depreciation expense 4,027 3,156 2,810 570 1,255 11,818
Amortization of intangibles 12,354 429 799 1,480 10,607 25,669
Severance, restructuring, and acquisition integration costs 13,722 192 118 54 57 14,143
Deferred gross profit adjustments 419 - - - 10,909 11,328
 

For the three months ended December 31, 2015

 
Segment Revenues $ 201,825 $ 147,154 $ 141,801 $ 62,776 $ 48,948 $ 602,504
Segment EBITDA 40,264 24,708 23,863 11,522 14,707 115,064
Segment EBITDA margin 19.9 % 16.8 % 16.8 % 18.4 % 30.0 % 19.1 %
 
Depreciation expense 4,052 3,144 2,705 580 1,019 11,500
Amortization of intangibles 12,439 428 725 1,490 10,619 25,701
Severance, restructuring, and acquisition integration costs 10,535 (109 ) 3,174 167 (130 ) 13,637
Purchase accounting effects of acquisitions 114 70 67 32 42 325
Deferred gross profit adjustments (343 ) - - - 6,793 6,450
 
BELDEN INC.
OPERATING SEGMENT RECONCILIATION TO CONSOLIDATED RESULTS
(Unaudited)
 
      Three Months Ended
April 3, 2016     March 29, 2015     June 28, 2015     September 27, 2015     December 31, 2015
(In thousands)
 
Total Segment Revenues $ 543,800 $ 569,451 $ 598,513 $ 590,115 $ 602,504
Deferred revenue adjustments   (2,303 )   (22,494 )   (12,758 )   (10,849 )   (5,260 )
Consolidated Revenues $ 541,497   $ 546,957   $ 585,755   $ 579,266   $ 597,244  
 
Total Segment EBITDA $ 90,066 $ 88,297 $ 100,300 $ 98,005 $ 115,064
Income (loss) from equity method investment (170 ) 768 343 348 311
Eliminations   (831 )   (559 )   (544 )   (893 )   (752 )
Consolidated Adjusted EBITDA (1) 89,065 88,506 100,099 97,460 114,623
Depreciation expense (11,663 ) (11,541 ) (11,692 ) (11,818 ) (11,500 )
Amortization of intangibles (25,532 ) (26,504 ) (25,917 ) (25,669 ) (25,701 )
Severance, restructuring, and acquisition integration costs (8,408 ) (14,483 ) (4,907 ) (14,143 ) (13,637 )
Deferred gross profit adjustments (2,303 ) (21,658 ) (13,440 ) (11,328 ) (6,450 )
Purchase accounting effects related to acquisitions   (195 )   (9,422 )   -     -     (325 )
Consolidated operating income 40,964 4,898 44,143 34,502 57,010
Interest expense, net   (24,396 )   (23,846 )   (24,769 )   (25,416 )   (26,582 )
 
Consolidated income (loss) before taxes $ 16,568   $ (18,948 ) $ 19,374   $ 9,086   $ 30,428  
 
 
(1) Consolidated Adjusted EBITDA is a non-GAAP measure. See Reconciliation of Non-GAAP Measures for additional information.
 
BELDEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
         
April 3, 2016 December 31, 2015
(Unaudited)
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 146,264 $ 216,751
Receivables, net 346,210 387,386
Inventories, net 215,947 195,942
Other current assets   44,489     37,079  
 
Total current assets 752,910 837,158
 
Property, plant and equipment, less accumulated depreciation 316,435 310,629
Goodwill 1,406,058 1,385,115
Intangible assets, less accumulated amortization 642,939 655,871
Deferred income taxes 36,481 34,295
Other long-lived assets   68,772     67,534  
 
$ 3,223,595   $ 3,290,602  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 208,921 $ 223,514
Accrued liabilities 281,392 323,249
Current maturities of long-term debt   2,500     2,500  
 
Total current liabilities 492,813 549,263
 
Long-term debt 1,689,664 1,725,282
Postretirement benefits 107,054 105,230
Deferred income taxes 49,341 46,034
Other long-term liabilities 45,416 39,270
Stockholders’ equity:
Common stock 503 503
Additional paid-in capital 606,591 605,660
Retained earnings 694,119 679,716
Accumulated other comprehensive loss (60,705 ) (58,987 )
Treasury stock   (402,524 )   (402,793 )

Total Belden stockholders’ equity

  837,984     824,099  
Noncontrolling interest   1,323     1,424  
Total stockholders' equity   839,307     825,523  
 
$ 3,223,595   $ 3,290,602  
 
BELDEN INC.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)
         
Three Months Ended
April 3, 2016 March 29, 2015
(In thousands)
Cash flows from operating activities:
Net income (loss) $ 16,425 $ (19,636 )
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization 37,195 38,045
Share-based compensation 4,100 5,006
Tax deficiency (benefit) related to share-based compensation 67 (3,690 )

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

Receivables 45,098 10,341
Inventories (16,625 ) (18,211 )
Accounts payable (17,187 ) (34,562 )
Accrued liabilities (52,607 ) (23,965 )
Accrued taxes (6,395 ) (50 )
Other assets (1,226 ) (2,406 )
Other liabilities   3,834     923  
Net cash provided by (used for) operating activities 12,679 (48,205 )
 
Cash flows from investing activities:
Cash used to acquire businesses, net of cash acquired (15,348 ) (695,345 )
Capital expenditures (13,431 ) (15,456 )
Proceeds from disposal of tangible assets   10     6  
Net cash used for investing activities (28,769 ) (710,795 )
 
Cash flows from financing activities:

Payments under borrowing arrangements

(50,625 ) -
Withholding tax payments for share-based payment awards, net of proceeds from the exercise of stock options (2,833 ) (10,842 )
Cash dividends paid (2,101 ) (2,140 )
Tax benefit (deficiency) related to share-based compensation (67 ) 3,690
Borrowings under credit arrangements - 200,000
Debt issuance costs paid   -     (622 )
Net cash provided by (used for) financing activities (55,626 ) 190,086
 
Effect of foreign currency exchange rate changes on cash and cash equivalents   1,229     (5,548 )
 
Decrease in cash and cash equivalents (70,487 ) (574,462 )
Cash and cash equivalents, beginning of period   216,751     741,162  
Cash and cash equivalents, end of period $ 146,264   $ 166,700  
 
BELDEN INC.
CONSOLIDATED 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 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. Adjusted results should be considered only in conjunction with results reported according to accounting principles generally accepted in the United States.
 
      Three Months Ended
April 3, 2016     March 29, 2015     December 31, 2015
(In thousands, except percentages and per share amounts)
 
GAAP revenues $ 541,497 $ 546,957 $ 597,244
Deferred revenue adjustments   2,303     22,494     5,260  
Adjusted revenues $ 543,800   $ 569,451   $ 602,504  
 
GAAP gross profit $ 225,034 $ 207,649 $ 250,117
Deferred gross profit adjustments 2,303 21,658 6,450
Severance, restructuring, and acquisition integration costs 2,298 1,466 3,074
Purchase accounting effects related to acquisitions   195     267     -  
Adjusted gross profit $ 229,830   $ 231,040   $ 259,641  
 
GAAP gross profit margin 41.6 % 38.0 % 41.9 %
Adjusted gross profit margin 42.3 % 40.6 % 43.1 %
 
GAAP operating income $ 40,964 $ 4,898 $ 57,010
Amortization of intangible assets 25,532 26,504 25,701
Severance, restructuring, and acquisition integration costs 8,408 14,483 13,637
Deferred gross profit adjustments 2,303 21,658 6,450
Accelerated depreciation 206 140 81
Purchase accounting effects related to acquisitions   195     9,422     325  
Total operating income adjustments   36,644     72,207     46,194  
Depreciation expense   11,457     11,401     11,419  
Adjusted EBITDA $ 89,065   $ 88,506   $ 114,623  
 
GAAP operating income margin 7.6 % 0.9 % 9.5 %
Adjusted EBITDA margin 16.4 % 15.5 % 19.0 %
 
GAAP net income (loss) $ 16,425 $ (19,636 ) $ 49,656
Operating income adjustments from above 36,644 72,207 46,194
Tax effect of adjustments   (10,494 )   (9,309 )   (26,558 )
Adjusted net income $ 42,575   $ 43,262   $ 69,292  
 
GAAP net income (loss) $ 16,425 $ (19,636 ) $ 49,656
Less: Net loss attributable to noncontrolling interest   (99 )   -     (24 )
GAAP net income (loss) attributable to Belden stockholders $ 16,524   $ (19,636 ) $ 49,680  
 
Adjusted net income $ 42,575 $ 43,262 $ 69,292
Less: Net loss attributable to noncontrolling interest (99 ) - (24 )
Less: Amortization expense attributable to noncontrolling interest, net of tax   16     -     5  
Adjusted net income attributable to Belden stockholders $ 42,658   $ 43,262   $ 69,311  
 
GAAP income (loss) per diluted share attributable to Belden stockholders $ 0.39 $ (0.46 ) $ 1.17
Adjusted income per diluted share attributable to Belden stockholders $ 1.01 $ 1.00 $ 1.63
 
GAAP diluted weighted average shares 42,440 42,535 42,482
Adjustment for anti-dilutive shares that are dilutive under adjusted measures   -     677     -  
Adjusted diluted weighted average shares 42,440 43,212 42,482
 
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
FREE CASH FLOW
(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     Three Months Ended
April 3, 2016 March 29, 2015
(In thousands)
GAAP net cash provided by (used for) operating activities $ 12,679 $ (48,205 )

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

  (13,421 )   (15,450 )
Non-GAAP free cash flow $ (742 ) $ (63,655 )
 
BELDEN INC.
RECONCILIATION OF NON-GAAP MEASURES
2016 REVENUES AND EARNINGS GUIDANCE
         
Year Ended Three Months Ended
December 31, 2016 July 3, 2016
Adjusted revenues $2.320 - $2.370 billion $570 - $590 million
Deferred revenue adjustments ($7 million) ($2 million)
GAAP revenues $2.313 - $2.363 billion $568 - $588 million
 
Adjusted income per diluted share attributable to Belden stockholders $5.15 - $5.45 $1.20 - $1.30
Amortization of intangible assets ($1.64) ($0.43)
Severance, restructuring, and acquisition integration costs ($0.56) ($0.12)
Deferred gross profit adjustments ($0.11) ($0.03)
GAAP income per diluted share attributable to Belden stockholders $2.84 - $3.14 $0.62 - $0.72
 
 
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 in the 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.
 

Earnings per Share (EPS)

All references to EPS within this earnings release refer to income per diluted share attributable to Belden stockholders.

Use of Non-GAAP Financial Information

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

Forward-Looking Statements

This release contains, and statements made by us concerning the release may contain, forward-looking statements, including our expectations for the second quarter and full-year 2016. Forward-looking statements include statements regarding future financial performance (including revenues, expenses, earnings, margins, cash flows, dividends, capital expenditures and financial condition), plans and objectives, and related assumptions. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “forecast,” “guide,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions. Forward-looking statements reflect management’s current beliefs and expectations and are not guarantees of future performance. Actual results may differ materially from those suggested by any forward-looking statements for a number of reasons, including, without limitation: the impact of a challenging global economy or a downturn in served markets; the cost and availability of raw materials including copper, plastic compounds, electronic components, and other materials; the competitiveness of the global broadcast, enterprise, and industrial markets; disruption of, or changes in, the Company’s key distribution channels; volatility in credit and foreign exchange markets; the inability to execute and realize the expected benefits from strategic initiatives (including revenue growth, cost control, and productivity improvement programs); the inability to successfully complete and integrate acquisitions in furtherance of the Company’s strategic plan; the inability of the Company to develop and introduce new products and competitive responses to our products; assertions that the Company violates the intellectual property of others and the ownership of intellectual property by competitors and others that prevents the use of that intellectual property by the Company; risks related to the use of open source software; the inability to retain senior management and key employees; disruptions in the Company’s information systems including due to cyber-attacks; variability in the Company’s quarterly and annual effective tax rates; perceived or actual product failures; political and economic uncertainties in the countries where the Company conducts business, including emerging markets; the impairment of goodwill and other intangible assets and the resulting impact on financial performance; the impact of regulatory requirements and other legal compliance issues; disruptions and increased costs attendant to collective bargaining groups and other labor matters; and other factors.

For a more complete discussion of risk factors, please see our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on February 25, 2016. Although the content of this release represents our best judgment as of the date of this report based on information currently available and reasonable assumptions, we give no assurances that the expectations will prove to be accurate. Deviations from the expectations may be material. For these reasons, Belden cautions readers to not place undue reliance on these forward-looking statements, which speak only as of the date made. Belden disclaims any duty to update any forward looking statements as a result of new information, future developments, or otherwise, except as required by law.

About Belden

Belden Inc. delivers a comprehensive product portfolio designed to meet the mission-critical network infrastructure needs of industrial, 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. For more information, visit us at www.belden.com or follow us on Twitter @BeldenInc.

BDC-E

Source: Belden Inc.

Belden Investor Relations

314-854-8054

Investor.Relations@Belden.com

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