UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 _________________________________________________

FORM 10-Q

_________________________________________________ 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 3, 2021

Commission File No. 001-12561 

_________________________________________________ 

BELDEN INC.

(Exact name of registrant as specified in its charter)

_________________________________________________

 

Delaware	36-3601505
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 North Brentwood Boulevard

15th Floor

St. Louis, Missouri 63105

(Address of principal executive offices)

(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 Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑  No ☐.

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☑  No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑   Accelerated filer ☐       Non-accelerated filer ☐       Smaller reporting company ☐    Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No  ☑

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Common stock, $0.01 par value	BDC	New York Stock Exchange

As of November 3, 2021, the Registrant had 44,898,477 outstanding shares of common stock.

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PART I    FINANCIAL INFORMATION

Item 1. Financial Statements

BELDEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	October 3, 2021		December 31, 2020
	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	457,753	$	501,994
Receivables, net	421,703		296,817
Inventories, net	312,088		247,298
Other current assets	48,890		52,289
Assets held for sale	27,559		—
Total current assets	1,267,993		1,098,398
Property, plant and equipment, less accumulated depreciation	334,407		368,620
Operating lease right-of-use assets	57,141		54,787
Goodwill	1,283,364		1,251,938
Intangible assets, less accumulated amortization	307,186		287,071
Deferred income taxes	29,057		29,536
Other long-lived assets	56,037		49,384
	$	3,335,185	$	3,139,734
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	321,253	$	244,120
Accrued liabilities	301,174		276,641
Total current liabilities	622,427		520,761
Long-term debt	1,492,642		1,573,726
Postretirement benefits	144,526		160,400
Deferred income taxes	42,867		38,400
Long-term operating lease liabilities	47,054		46,398
Other long-term liabilities	39,898		42,998
Stockholders’ equity:
Common stock	503		503
Additional paid-in capital	830,368		823,605
Retained earnings	557,764		450,876
Accumulated other comprehensive loss	(131,265)		(191,851)
Treasury stock	(317,852)		(332,552)
Total Belden stockholders’ equity	939,518		750,581
Noncontrolling interests	6,253		6,470
Total stockholders’ equity	945,771		757,051
	$	3,335,185	$	3,139,734

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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BELDEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited) 

	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 29, 2020
	(In thousands, except per share data)
Revenues	$	630,835	$	475,839	$	1,769,190	$	1,364,176
Cost of sales	(407,559)		(308,247)		(1,143,035)		(876,143)
Gross profit	223,276		167,592		626,155		488,033
Selling, general and administrative expenses	(109,963)		(85,037)		(313,966)		(275,129)
Research and development expenses	(32,451)		(30,324)		(94,873)		(81,633)
Amortization of intangibles	(9,696)		(16,104)		(28,745)		(48,306)
Operating income	71,166		36,127		188,571		82,965
Interest expense, net	(16,251)		(15,607)		(46,640)		(43,188)
Loss on debt extinguishment	(5,715)		—		(5,715)		—
Non-operating pension benefit	992		680		3,121		2,079
Income from continuing operations before taxes	50,192		21,200		139,337		41,856
Income tax expense	(8,875)		(631)		(25,307)		(3,223)
Income from continuing operations	41,317		20,569		114,030		38,633
Loss from discontinued operations, net of tax	—		(6,231)		—		(103,395)
Gain on disposal of discontinued operations, net of tax	—		2,743		—		2,743
Net income (loss)	41,317		17,081		114,030		(62,019)
Less: Net income attributable to noncontrolling interest	53		85		336		79
Net income (loss) attributable to Belden stockholders	$	41,264	$	16,996	$	113,694	$	(62,098)
Weighted average number of common shares and equivalents:
Basic	44,851		44,567		44,762		44,834
Diluted	45,425		44,709		45,242		44,968
Basic income (loss) per share attributable to Belden stockholders:
Continuing operations	$	0.92	$	0.46	$	2.54	$	0.86
Discontinued operations	—		(0.14)		—		(2.31)
Disposal of discontinued operations	—		0.06		—		0.06
Net income (loss)	$	0.92	$	0.38	$	2.54	$	(1.39)
Diluted income (loss) per share attributable to Belden stockholders:
Continuing operations	$	0.91	$	0.46	$	2.51	$	0.86
Discontinued operations	—		(0.14)		—		(2.31)
Disposal of discontinued operations	—		0.06		—		0.06
Net income (loss)	$	0.91	$	0.38	$	2.51	$	(1.39)
Comprehensive income (loss) attributable to Belden	$	69,390	$	(34,921)	$	174,280	$	(136,138)
Common stock dividends declared per share	$	0.05	$	0.05	$	0.15	$	0.15

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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BELDEN INC.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)

	Nine Months Ended
	October 3, 2021		September 27, 2020
	(In thousands)
Cash flows from operating activities:
Net income (loss)	114,030		$	(62,019)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization	65,028		80,620
Share-based compensation	18,242		13,650
Asset impairment	9,283		113,007
Loss on debt extinguishment	5,715		—
Gain on disposal of business	—		(2,743)
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes, acquired businesses and disposals:
Receivables	(128,997)		35,645
Inventories	(58,900)		(9,327)
Accounts payable	73,740		(69,579)
Accrued liabilities	17,796		(11,646)
Income taxes	5,159		(30,416)
Other assets	(1,794)		1,860
Other liabilities	(17,383)		(20,363)
Net cash provided by operating activities	101,919		38,689
Cash flows from investing activities:
Cash from (used for) business acquisitions, net of cash acquired	(73,749)		590
Capital expenditures	(55,569)		(56,809)
Purchase of intangible assets	(3,650)		—
Proceeds from disposal of tangible assets	3,249		3,090
Proceeds from disposal of businesses, net of cash sold	10,798		50,051
Net cash used for investing activities	(118,921)		(3,078)
Cash flows from financing activities:
Payments under borrowing arrangements	(360,304)		(190,000)
Debt issuance costs paid	(7,785)		—
Cash dividends paid	(6,740)		(6,800)
Payments under financing lease obligations	(3,116)		(154)
Withholding tax payments for share-based payment awards	(2,103)		(1,331)
Payments under share repurchase program	—		(35,000)
Payment of earnout consideration	—		(29,300)
Borrowings under credit arrangements	356,010		190,000
Net cash used for financing activities	(24,038)		(72,585)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(3,201)		2,586
Decrease in cash and cash equivalents	(44,241)		(34,388)
Cash and cash equivalents, beginning of period	501,994		425,885
Cash and cash equivalents, end of period	$	457,753	$	391,497

For the period ended September 27, 2020, the Condensed Consolidated Cash Flow Statement includes the results of discontinued operations up to the disposal date, July 2, 2020.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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BELDEN INC.

CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENTS

(Unaudited)

	Belden Inc. Stockholders
				Additional							Accumulated Other		Non-controlling
	Common Stock			Paid-In		Retained		Treasury Stock			Comprehensive
	Shares	Amount		Capital		Earnings		Shares	Amount		Income (Loss)		Interests		Total
	(In thousands)
Balance at December 31, 2020	50,335	$	503	$	823,605	$	450,876	(5,692)	$	(332,552)	$	(191,851)	$	6,470	$	757,051
Net income	—	—		—		28,666		—	—		—		75		28,741
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		53,725		(197)		53,528
Acquisition of business with noncontrolling interests	—	—		—		—		—	—		—		20		20
Retirement Savings Plan stock contributions	—	—		(493)		—		45	2,496		—		—		2,003
Exercise of stock options, net of tax withholding forfeitures	—	—		(723)		—		9	541		—		—		(182)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(2,403)		—		27	1,680		—		—		(723)
Share-based compensation	—	—		7,285		—		—	—		—		—		7,285
Common stock dividends ($0.05 per share)	—	—		—		(2,263)		—	—		—		—		(2,263)
Balance at April 4, 2021	50,335	$	503	$	827,271	$	477,279	(5,611)	$	(327,835)	$	(138,126)	$	6,368	$	845,460
Net income	—	—		—		43,764		—	—		—		208		43,972
Other comprehensive loss, net of tax	—	—		—		—		—	—		(21,265)		(229)		(21,494)
Retirement Savings Plan stock contributions	—	—		(418)		—		34	3,723		—		—		3,305
Exercise of stock options, net of tax withholding forfeitures	—	—		(147)		—		2	100		—		—		(47)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(5,795)		—		83	4,738		—		—		(1,057)
Share-based compensation	—	—		6,228		—		—	—		—		—		6,228
Common stock dividends ($0.05 per share)	—	—		—		(2,269)		—	—		—		—		(2,269)
Balance at July 4, 2021	50,335	$	503	$	827,139	$	518,774	(5,492)	$	(319,274)	$	(159,391)	$	6,347	$	874,098
Net income	—	—		—		41,264		—	—		—		53		41,317
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		28,126		(147)		27,979
Retirement Savings Plan stock contributions	—	—		87		—		29	(71)		—		—		16
Exercise of stock options, net of tax withholding forfeitures	—	—		(59)		—		1	20		—		—		(39)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(1,528)		—		16	1,473		—		—		(55)
Share-based compensation	—	—		4,729		—		—	—		—		—		4,729
Common stock dividends ($0.05 per share)	—	—		—		(2,274)		—	—		—		—		(2,274)
Balance at October 3, 2021	50,335	$	503	$	830,368	$	557,764	(5,446)	$	(317,852)	$	(131,265)	$	6,253	$	945,771

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	Belden Inc. Stockholders
				Additional							Accumulated Other		Non-controlling
	Common Stock			Paid-In		Retained		Treasury Stock			Comprehensive
	Shares	Amount		Capital		Earnings		Shares	Amount		Income (Loss)		Interests		Total
	(In thousands)
Balance at December 31, 2019	50,335	$	503	$	811,955	$	518,004	(4,877)	$	(307,197)	$	(63,418)	$	5,972	$	965,819
Cumulative effect of change in accounting principle	—	—		—		(2,916)		—	—		—		—		(2,916)
Net loss	—	—		—		(11,189)		—	—		—		(30)		(11,219)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		22,323		(150)		22,173
Exercise of stock options, net of tax withholding forfeitures	—	—		(542)		—		7	370		—		—		(172)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(2,631)		—		29	1,800		—		—		(831)
Share repurchase program	—	—		—		—		(592)	(21,239)		—		—		(21,239)
Share-based compensation	—	—		3,708		—		—	—		—		—		3,708
Common stock dividends ($0.05 per share)	—	—		—		(2,288)		—	—		—		—		(2,288)
Balance at March 29, 2020	50,335	$	503	$	812,490	$	501,611	(5,433)	$	(326,266)	$	(41,095)	$	5,792	$	953,035
Net income (loss)	—	—		—		(67,905)		—	—		—		24		(67,881)
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		(44,446)		147		(44,299)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(1,598)		—		27	1,543		—		—		(55)
Share repurchase program	—	—		—		—		(384)	(13,761)		—		—		(13,761)
Share-based compensation	—	—		5,090		—		—	—		—		—		5,090
Common stock dividends ($0.05 per share)	—	—		—		(2,247)		—	—		—		—		(2,247)
Balance at June 28, 2020	50,335	$	503	$	815,982	$	431,459	(5,790)	$	(338,484)	$	(85,541)	$	5,963	$	829,882
Net income	—	—		—		16,996		—	—		—		85		17,081
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		(51,917)		143		(51,774)
Retirement Savings Plan stock contributions	—	—		(747)		—		33	1,823		—		—		1,076
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(1,426)		—		17	1,153		—		—		(273)
Share-based compensation	—	—		4,852		—		—	—		—		—		4,852
Common stock dividends ($0.05 per share)	—	—		—		(2,257)		—	—		—		—		(2,257)
Balance at September 27, 2020	50,335	$	503	$	818,661	$	446,198	(5,740)	$	(335,508)	$	(137,458)	$	6,191	$	798,587

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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BELDEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1:  Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements include Belden Inc. and all of its subsidiaries (the Company, us, we, or our). We eliminate all significant affiliate accounts and transactions in consolidation.

The accompanying Condensed Consolidated Financial Statements presented as of any date other than December 31, 2020:

•Are prepared from the books and records without audit, and

•Are prepared in accordance with the instructions for Form 10-Q and do not include all of the information required by accounting principles generally accepted in the United States for complete statements, but

•Include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial statements.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Supplementary Data contained in our 2020 Annual Report on Form 10-K.

Business Description

We are a global supplier of specialty networking solutions built around two global businesses - Enterprise Solutions and Industrial Solutions.  Our comprehensive portfolio of solutions enables customers to transmit and secure data, sound, and video for mission critical applications across complex enterprise and industrial environments.

Reporting Periods

Our fiscal year and fiscal fourth quarter both end on December 31. Our fiscal first quarter ends on the Sunday falling closest to 91 days after December 31, which was April 4, 2021, the 94th day of our fiscal year 2021. Our fiscal second and third quarters each have 91 days. The nine months ended October 3, 2021 and September 27, 2020 included 276 days and 271 days, respectively.

Fair Value Measurement

Accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources or reflect our own assumptions of market participant valuation. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

•Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets, or financial instruments for which significant inputs are observable, either directly or indirectly; and

•Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. 

As of and during the three and nine months ended October 3, 2021 and September 27, 2020, we utilized Level 1 inputs to determine the fair value of cash equivalents, and we utilized Level 2 and Level 3 inputs to determine the fair value of net assets acquired in business combinations (see Note 3) and for impairment testing (see Notes 4 and 11). We did not have any transfers between Level 1 and Level 2 fair value measurements during the three and nine months ended October 3, 2021 and September 27, 2020.

Cash and Cash Equivalents

We classify cash on hand and deposits in banks, including commercial paper, money market accounts, and other investments with an original maturity of three months or less, that we hold from time to time, as cash and cash equivalents. We periodically have cash equivalents consisting of short-term money market funds and other investments. As of October 3, 2021, we did not have any such cash equivalents on hand. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations. We do not enter into investments for trading or speculative purposes.

-6-

During the nine months ended September 27, 2020, we paid the sellers of Snell Advanced Media (SAM) the full earnout consideration of $31.4 million in cash in accordance with the purchase agreement. SAM was acquired on February 8, 2018 and was included in the Grass Valley disposal group.

Contingent Liabilities

We have established liabilities for environmental and legal contingencies that are probable of occurrence and reasonably estimable, the amounts of which are currently not material. We accrue environmental remediation costs based on estimates of known environmental remediation exposures developed in consultation with our environmental consultants and legal counsel. We are, from time to time, subject to routine litigation incidental to our business. These lawsuits primarily involve claims for damages arising out of the use of our products, allegations of patent or trademark infringement, and litigation and administrative proceedings involving employment matters and commercial disputes. Based on facts currently available, we believe the disposition of the claims that are pending or asserted will not have a material adverse effect on our financial position, results of operations, or cash flow.

As of October 3, 2021, we were party to standby letters of credit, bank guaranties, and surety bonds totaling $8.4 million, $6.7 million, and $3.3 million, respectively.

Revenue Recognition

We recognize revenue consistent with the principles as outlined in the following five step model: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) each performance obligation is satisfied. See Note 2.

Subsequent Events

We evaluated subsequent events after the balance sheet date through the financial statement issuance date for appropriate accounting and disclosure.

Noncontrolling Interest

We have a 51% ownership percentage in a joint venture with Shanghai Hi-Tech Control System Co, Ltd (Hite). The purpose of the joint venture is to develop and provide certain Industrial Solutions products and integrated solutions to customers in China. Belden and Hite are committed to fund $1.53 million and $1.47 million, respectively, to the joint venture in the future. The joint venture is determined to not have sufficient equity at risk; therefore, it is considered a variable interest entity. We have determined that Belden is the primary beneficiary of the joint venture, due to both our ownership percentage and our control over the activities of the joint venture that most significantly impact its economic performance based on the terms of the joint venture agreement with Hite. Because Belden is the primary beneficiary of the joint venture, we have consolidated the joint venture in our financial statements. The results of the joint venture attributable to Hite’s ownership are presented as net income (loss) attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations. The joint venture is not material to our Condensed Consolidated financial statements as of or for the periods ended October 3, 2021 and September 27, 2020.

Furthermore, certain subsidiaries of our Opterna and OTN Systems N.V. (OTN Systems) businesses, which we acquired in April of 2019 and January 2021, respectively, include noncontrolling interests. Because we have a controlling financial interest in these subsidiaries, they are consolidated into our financial statements. The results of these subsidiaries were consolidated into our financial statements as of the respective acquisition dates. The results that are attributable to the noncontrolling interest holders are presented as net income (loss) attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations. An immaterial amount of Opterna's annual revenues are generated from transactions with the noncontrolling interests. The subsidiaries of Opterna and OTN Systems that include noncontrolling interests are not material to our Condensed Consolidated financial statements as of or for the periods ended October 3, 2021 and September 27, 2020.

Note 2:  Revenues

Revenues are recognized when control of the promised goods or services is transferred to our customers and in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Taxes collected from customers and remitted to governmental authorities are not included in our revenues.

The following tables present our revenues disaggregated by major product category.

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	Broadband & 5G		Cyber-security		Industrial Automation		Smart Buildings		Total  Revenues
Three Months Ended October 3, 2021	(In thousands)
Enterprise Solutions	$	124,330	$	—	$	—	$	161,901	$	286,231
Industrial Solutions	—		26,074		318,530		—		344,604
Total	$	124,330	$	26,074	$	318,530	$	161,901	$	630,835
Three Months Ended September 27, 2020
Enterprise Solutions	$	115,149	$	—	$	—	$	113,948	$	229,097
Industrial Solutions	—		27,384		219,358		—		246,742
Total	$	115,149	$	27,384	$	219,358	$	113,948	$	475,839
Nine Months Ended October 3, 2021
Enterprise Solutions	$	354,181	$	—	$	—	$	425,933	$	780,114
Industrial Solutions	—		79,899		909,177		—		989,076
Total	$	354,181	$	79,899	$	909,177	$	425,933	$	1,769,190
Nine Months Ended September 27, 2020
Enterprise Solutions	$	318,765	$	—	$	—	$	325,919	$	644,684
Industrial Solutions	—		78,829		640,663		—		719,492
Total	$	318,765	$	78,829	$	640,663	$	325,919	$	1,364,176

The following tables present our revenues disaggregated by geography, based on the location of the customer purchasing the product.

	Americas		EMEA		APAC		Total Revenues
Three Months Ended October 3, 2021	(In thousands)
Enterprise Solutions	$	216,565	$	34,963	$	34,703	$	286,231
Industrial Solutions	203,138		90,082		51,384		344,604
Total	$	419,703	$	125,045	$	86,087	$	630,835
Three Months Ended September 27, 2020
Enterprise Solutions	$	170,734	$	30,185	$	28,178	$	229,097
Industrial Solutions	148,421		59,180		39,141		246,742
Total	$	319,155	$	89,365	$	67,319	$	475,839
Nine Months Ended October 3, 2021
Enterprise Solutions	$	571,379	$	113,367	$	95,368	$	780,114
Industrial Solutions	584,853		258,124		146,099		989,076
Total	$	1,156,232	$	371,491	$	241,467	$	1,769,190
Nine Months Ended September 27, 2020
Enterprise Solutions	$	481,007	$	92,197	$	71,480	$	644,684
Industrial Solutions	429,461		182,406		107,625		719,492
Total	$	910,468	$	274,603	$	179,105	$	1,364,176

We generate revenues primarily by selling products that provide secure and reliable transmission of data, sound, and video for mission critical applications. We also generate revenues from providing support and professional services. We sell our products to distributors, end-users, installers, and directly to original equipment manufacturers. At times, we enter into arrangements that involve the delivery of multiple performance obligations. For these arrangements, revenue is allocated to each performance obligation based on its relative selling price and recognized when or as each performance obligation is satisfied. Most of our performance obligations related to the sale of products are satisfied at a point in time when control of the product is transferred based on the shipping terms of the arrangement. Generally, we determine relative selling price using the prices charged to customers on a standalone basis.

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The amount of consideration we receive and revenue we recognize varies due to rebates, returns, and price adjustments. We estimate the expected rebates, returns, and price adjustments based on an analysis of historical experience, anticipated sales demand, and trends in product pricing. We adjust our estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed. Adjustments to revenue for performance obligations satisfied in prior periods were not significant during the three and nine months ended October 3, 2021 and September 27, 2020.

The following table presents estimated and accrued variable consideration:

	October 3, 2021		December 31, 2020
	(in thousands)
Accrued rebates included in accrued liabilities	$	43,627	$	32,192
Accrued returns included in accrued liabilities	11,749		13,016
Price adjustments recognized against gross accounts receivable	28,372		25,244

Depending on the terms of an arrangement, we may defer the recognition of some or all of the consideration received because we have to satisfy a future obligation. Consideration allocated to support services under a support and maintenance contract is typically paid in advance and recognized ratably over the term of the service. Consideration allocated to professional services is typically recognized when or as the services are performed depending on the terms of the arrangement. As of October 3, 2021, total deferred revenue was $79.1 million, and of this amount, $53.9 million is expected to be recognized within the next twelve months, and the remaining $25.2 million is long-term and is expected to be recognized over a period greater than twelve months.

The following table presents deferred revenue activity during the three and nine months ended October 3, 2021 and September 27, 2020:

	2021		2020
	(In thousands)
Beginning balance at January 1	$	77,648	$	70,070
New deferrals	24,505		23,830
Acquisition of OTN Systems	5,997		—
Revenue recognized	(24,387)		(24,415)
Balance at the end of Q1	83,763		69,485
New deferrals	20,596		21,322
Adjustments related to acquisitions	(2,740)		—
Revenue recognized	(19,542)		(22,200)
Balance at the end of Q2	82,077		68,607
New deferrals	20,472		22,243
Revenue recognized	(23,481)		(20,649)
Balance at the end of Q3	$	79,068	$	70,201

Service-type warranties represent $11.6 million of the deferred revenue balance at October 3, 2021, and of this amount $4.7 million is expected to be recognized in the next twelve months, and the remaining $6.9 million is long-term and will be recognized over a period greater than twelve months.

We expense sales commissions as incurred when the duration of the related revenue arrangement is one year or less. We capitalize sales commissions in other current and long-lived assets on our balance sheet when the original duration of the related revenue arrangement is longer than one year, and we amortize it over the related revenue arrangement period. Total capitalized sales commissions was $6.0 million and $4.6 million as of October 3, 2021 and September 27, 2020, respectively. The following table presents sales commissions that are recorded within selling, general and administrative expenses:

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	Three Months ended				Nine Months ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Sales commissions	$	5,529	$	4,240	$	14,121	$	12,270

Note 3:  Acquisitions

OTN Systems N.V.

We acquired 100% of the shares of OTN Systems on January 29, 2021 for a preliminary purchase price, net of cash acquired, of $73.3 million, which was funded with cash on hand. OTN Systems, based in Olen, Belgium, is a leading provider of easy to use and highly-reliable network solutions tailored for specific applications in harsh, mission-critical environments. The acquisition of OTN Systems supports one of our key strategic priorities related to the growing demand for industrial automation by adding proprietary technology and mission-critical hardware and software products for more complete end-to-end solutions. The results of OTN Systems have been included in our Condensed Consolidated Financial Statements from January 29, 2021, and are reported within the Industrial Solutions segment. Belden assumed $1.8 million of OTN Systems' debt as part of the transaction, which was subsequently paid on the acquisition date. A subsidiary of OTN Systems includes a noncontrolling interest. Because OTN Systems has a controlling financial interest in the subsidiary, it is consolidated into our financial statements. The results that are attributable to the noncontrolling interest holder are presented as net income (loss) attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations.

The following table summarizes the estimated, preliminary fair values of the assets acquired and the liabilities assumed as of January 29, 2021 (in thousands):

Receivables	$	5,036
Inventories	10,700
Other current assets	1,361
Property, plant and equipment	602
Intangible assets	39,930
Goodwill	38,915
Operating lease right-of-use assets	4,144
Other long-lived assets	706
Total assets acquired	$	101,394
Accounts payable	$	5,931
Accrued liabilities	4,485
Deferred revenues	3,260
Long-term debt	1,841
Post retirement benefits	3,581
Deferred income taxes	4,889
Long-term operating lease liabilities	3,271
Other long-term liabilities	771
Total liabilities assumed	$	28,029
Net assets	$	73,365
Noncontrolling interests	20
Net assets attributable to Belden	$	73,345

The above purchase price allocation is preliminary, and is subject to revision as additional information about the fair value of individual assets and liabilities becomes available. The preliminary measurement of receivables, inventories, intangible assets, goodwill, deferred income taxes, other assets and liabilities, and noncontrolling interests are subject to change. A change in the estimated fair value of the net assets acquired or noncontrolling interests will change the amount of the purchase price allocable to goodwill.

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The preliminary fair value of acquired receivables is $5.0 million, which is equivalent to its gross contractual amount. During the third quarter of 2021, we recorded measurement-period adjustments that decreased goodwill by $0.6 million. The impact of these adjustments to the Condensed Consolidated Statements of Operations was immaterial.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments we have used in estimating the preliminary fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations.

For purposes of the above allocation, we based our preliminary estimate of the fair values for the acquired inventory, intangible assets, deferred revenue, and noncontrolling interests on valuation studies performed by a third party valuation firm. We have estimated a preliminary fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post acquisition selling efforts. We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets and deferred revenue (Level 3 valuation).

Goodwill and other intangible assets reflected above were determined to meet the criteria for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to the expansion of industrial automation product offerings in complete end-to-end solutions. Our tax basis in the acquired goodwill is zero.

The intangible assets related to the acquisition consisted of the following:

	Fair Value		Amortization Period
	(In thousands)		(In years)
Intangible assets subject to amortization:
Developed technologies	$	26,400	6.8
Customer relationships	6,200		15.0
Sales backlog	3,600		5.0
Trademarks	3,070		14.8
Non-compete agreements	660		2
Total intangible assets subject to amortization	$	39,930
Intangible assets not subject to amortization:
Goodwill	$	38,915	n/a
Total intangible assets not subject to amortization	$	38,915
Total intangible assets	$	78,845
Weighted average amortization period			8.5

The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the developed technology intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period and pattern of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of estimated sales from recurring customers. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship and control of the items transfers. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks. The useful life of the non-compete agreements was based on the term of the agreements.

Our consolidated revenues and income before taxes for the three months ended October 3, 2021 included $7.6 million and $(2.9) million, respectively, from OTN Systems. For the three months ended October 3, 2021, income before taxes included $0.6 million of severance and other restructuring costs, $1.4 million of amortization of intangible assets, and $0.4 million of cost of sales related to the adjustment of acquired inventory to fair value for OTN Systems.

Our consolidated revenues and income before taxes for the nine months ended October 3, 2021 included $20.5 million and $(7.1) million, respectively, from OTN Systems. For the nine months ended October 3, 2021, income before taxes included $2.3 million of severance and other restructuring costs, $3.7 million of amortization of intangible assets, and $2.4 million of cost of sales related to the adjustment of acquired inventory to fair value for OTN Systems.

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The following table illustrates the unaudited pro forma effect on operating results as if the OTN Systems acquisition had been completed as of January 1, 2020.

	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands, except per share data)
	(Unaudited)
Revenues	$	631,338	$	479,137	$	1,770,941	$	1,380,778
Net income from continuing operations attributable to Belden common stockholders	42,041		17,071		114,752		30,285
Diluted income from continuing operations per share attributable to Belden common stockholders	$	0.93	$	0.38	$	2.54	$	0.67

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

Opterna International Corp.

Our acquisition of Opterna International Corp. (Opterna) in 2019 included potential earn-out consideration. As of the acquisition date, we estimated the fair value of the earn-out to be $5.8 million. The earn-out period ended in 2021, and the financial targets tied to the earn-out were not achieved. We reduced the earn-out liability to zero and recognized a $5.8 million benefit in Selling, General and Administrative Expenses in the nine months ended October 3, 2021. This benefit was excluded from Segment EBITDA of our Enterprise Solutions segment.

Note 4: Assets Held for Sale

We classify assets and liabilities as held for sale (disposal group) when management, having the authority to approve the action, commits to a plan to sell the disposal group, the sale is probable within one year, and the disposal group is available for immediate sale in its present condition. We also consider whether an active program to locate a buyer has been initiated, whether the disposal group is marketed actively for sale at a price that is reasonable in relation to its current fair value, and whether actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. When we classify a disposal group as held for sale, we test for impairment. An impairment charge is recognized when the carrying value of the disposal group exceeds the estimated fair value, less costs to sell. We also cease depreciation and amortization for assets classified as held for sale.

During the first quarter of 2021, we committed to a plan to sell our oil and gas cable business in Brazil that met all of the criteria to classify the assets and liabilities of this business, formerly part of the Industrial Solutions segment, as held for sale. At such time, the carrying value of the disposal group exceeded the fair value less costs to sell, which we determined based upon the expected sale price, by $3.4 million. Therefore, we recognized an impairment charge in Selling, General and Administrative Expenses equal to this amount in the first quarter of 2021. The impairment charge was excluded from Segment EBITDA of our Industrial Solutions segment. We completed the sale of our oil and gas cable business in Brazil during the second quarter of 2021 for $10.9 million, net of cash delivered with the business.

During the third quarter of 2021, we entered into an agreement to sell and lease back certain Industrial Solutions segment real estate in Germany and met the criteria to classify the assets as held for sale. At such time, the carrying value of the assets exceeded the fair value less costs to sell, which we determined based upon the expected sale price, by $2.3 million. Therefore, we recognized an impairment charge in Selling, General and Administrative Expenses equal to this amount in the third quarter of 2021. The impairment charge was excluded from Segment EBITDA of our Industrial Solutions segment. We expect to close on the sale and lease back of the real estate in the fourth quarter of 2021.

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Note 5:  Discontinued Operations

During the fourth quarter of 2019, we committed to a plan to sell Grass Valley, and at such time, met all of the criteria to classify the assets and liabilities of this business as held for sale. Furthermore, the divestiture of Grass Valley represented a strategic shift that had a major impact on our operations and financial results. As a result, the Grass Valley disposal group, which was included in our Enterprise Solutions segment, was reported within discontinued operations. The Grass Valley disposal group excluded certain Grass Valley pension liabilities that we retained. We also ceased depreciating and amortizing the assets of the disposal group once they met the held for sale criteria during the fourth quarter of 2019.

We completed the sale of Grass Valley to Black Dragon Capital on July 2, 2020 for gross cash consideration of $120.0 million, or approximately $56.2 million net of cash delivered with the business. The sale also included deferred consideration consisting of a $175.0 million seller’s note that is expected to mature in 2025, up to $88 million in PIK (payment-in-kind) interest on the seller’s note, and $178.0 million in potential earnout payments. The seller’s note accrues PIK interest at an annual rate of 8.5%. During the three and nine months ended October 3, 2021, the seller's note accrued interest of $3.9 million and $11.6 million, respectively, which we reserved for based on our expected loss allowance methodology. Based upon a third party valuation specialist using certain assumptions in a Monte Carlo analysis, the estimated fair value of the seller’s note is $34.9 million, which we recorded in Other Long-Lived Assets. We accounted for the earnout under a loss recovery approach and did not record an asset as of the disposal date. Any subsequent recognition of an earnout will be based on the gain contingency guidance.

As part of the transaction, we also invested $3.0 million for a 9% equity interest in Grass Valley with the right to put the equity back to Black Dragon Capital. We exercised our right during the fourth quarter of 2020 and sold our 9% equity interest in Grass Valley to Black Dragon Capital for $2.7 million. We deconsolidated Grass Valley as of July 2, 2020 and accounted for our equity interest under the cost method for the period that we owned a 9% interest in Grass Valley. Grass Valley's operating results for periods after July 2, 2020 are not included in our Consolidated Financial Statements.

The following table summarizes the operating results of the disposal group for the three and nine months ended September 27, 2020 (in thousands):

	Three Months Ended		Nine Months Ended
	September 27, 2020		September 27, 2020
	(In Thousands)
Revenues	$	1,334	$	109,195
Cost of sales	(1,008)		(70,199)
Gross profit	326		38,996
Selling, general and administrative expenses	(574)		(37,435)
Research and development expenses	(610)		(15,083)
Asset impairment of discontinued operations	—		(113,007)
Interest expense, net	(12)		(432)
Non-operating pension cost	27		(169)
Loss before taxes	$	(843)	$	(127,130)

We wrote down the carrying value of Grass Valley and recognized asset impairments totaling $113.0 million in the nine months ended September 27, 2020. We determined the estimated fair values of the assets and of the reporting unit by calculating the present values of their estimated future cash flows.

The disposal group had capital expenditures of approximately $0.3 million and $16.7 million during the three and nine months ended September 27, 2020, respectively. The disposal group recognized credits to stock-based compensation of $0.0 million and $0.9 million during the three and nine months ended September 27, 2020, respectively. The disposal group did not have any significant non-cash charges for investing activities during the nine months ended September 27, 2020.

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Note 6:  Reportable Segments

We are organized around two global businesses: Enterprise Solutions and Industrial Solutions. Each of the global businesses represents a reportable segment.

The key measures of segment profit or loss are Segment Revenues and Segment EBITDA. Segment Revenues represent non-affiliate revenues and include revenues that would have otherwise been recorded by acquired businesses as independent entities but were not recognized in our Condensed Consolidated Statements of Operations and Comprehensive Income due to the effects of purchase accounting and the associated write-down of acquired deferred revenue to fair value. Segment EBITDA excludes certain items, including depreciation expense; amortization of intangibles; asset impairment; severance, restructuring, and acquisition integration costs; purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory and deferred revenue to fair value; and other costs. We allocate corporate expenses to the segments for purposes of measuring Segment EBITDA. Corporate expenses are allocated on the basis of each segment’s relative EBITDA prior to the allocation.

Our measure of segment assets does not include cash, goodwill, intangible assets, deferred tax assets, or corporate assets. All goodwill is allocated to reporting units of our segments for purposes of impairment testing. Inter-company revenues between our segments is not material.

 

	Enterprise Solutions		Industrial Solutions		Total Segments
	(In thousands)
As of and for the three months ended October 3, 2021
Segment revenues	$	286,231	$	345,107	$	631,338
Segment EBITDA	40,156		59,582		99,738
Depreciation expense	5,270		6,000		11,270
Amortization of intangibles	4,427		5,269		9,696
Amortization of software development intangible assets	20		770		790
Severance, restructuring, and acquisition integration costs	3,381		947		4,328
Adjustments related to acquisitions and divestitures	(510)		2,974		2,464
Segment assets	552,416		608,262		1,160,678
As of and for the three months ended September 27, 2020
Segment revenues	$	229,097	$	246,742	$	475,839
Segment EBITDA	26,250		38,391		64,641
Depreciation expense	5,005		5,450		10,455
Amortization of intangibles	5,408		10,696		16,104
Amortization of software development intangible assets	73		456		529
Severance, restructuring, and acquisition integration costs	1,337		20		1,357
Segment assets	519,142		486,110		1,005,252
As of and for the nine months ended October 3, 2021
Segment revenues	$	780,114	$	990,428	$	1,770,542
Segment EBITDA	103,531		167,676		271,207
Depreciation expense	15,985		18,212		34,197
Amortization of intangibles	13,202		15,543		28,745
Amortization of software development intangible assets	72		2,014		2,086
Severance, restructuring, and acquisition integration costs	7,756		4,783		12,539
Adjustments related to acquisitions and divestitures	(6,828)		11,825		4,997
Segment assets	552,416		608,262		1,160,678

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	Enterprise Solutions		Industrial Solutions		Total Segments
	(In thousands)
As of and for the nine months ended September 27, 2020
Segment revenues	$	644,684	$	719,492	$	1,364,176
Segment EBITDA	73,193		100,367		173,560
Depreciation expense	15,208		15,861		31,069
Amortization of intangibles	16,266		32,040		48,306
Amortization of software development intangible assets	184		1,061		1,245
Severance, restructuring, and acquisition integration costs	6,310		3,138		9,448
Adjustments related to acquisitions and divestitures	125		—		125
Segment assets	519,142		486,110		1,005,252

The following table is a reconciliation of the total of the reportable segments’ Revenues and EBITDA to consolidated revenues and consolidated income from continuing operations before taxes, respectively. 

	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Total Segment Revenues	$	631,338	$	475,839	$	1,770,542	$	1,364,176
Adjustments related to acquisitions	(503)		—		(1,352)		—
Consolidated Revenues	$	630,835	$	475,839	$	1,769,190	$	1,364,176
Total Segment EBITDA	$	99,738	$	64,641	$	271,207	$	173,560
Amortization of intangibles	(9,696)		(16,104)		(28,745)		(48,306)
Depreciation expense	(11,270)		(10,455)		(34,197)		(31,069)
Severance, restructuring, and acquisition integration costs (1)	(4,328)		(1,357)		(12,539)		(9,448)
Amortization of software development intangible assets	(790)		(529)		(2,086)		(1,245)
Adjustments related to acquisitions and divestitures (2)	(2,464)		—		(4,997)		(125)
Eliminations	(24)		(69)		(72)		(402)
Consolidated operating income	71,166		36,127		188,571		82,965
Interest expense, net	(16,251)		(15,607)		(46,640)		(43,188)
Loss on debt extinguishment	(5,715)		—		(5,715)		—
Total non-operating pension benefit	992		680		3,121		2,079
Consolidated income from continuing operations before taxes	$	50,192	$	21,200	$	139,337	$	41,856

(1) See Note 12, Severance, Restructuring, and Acquisition Integration Activities, for details.

(2) During the three months ended October 3, 2021, we recognized a $2.3 million impairment on assets held for sale, collected $0.7 million of receivables associated with the sale of Grass Valley and acquisition of SPC that were previously written off, included $0.5 million in Segment EBITDA for the purchase accounting effect of recording deferred revenue at fair value for the OTN Systems acquisition, and recognized cost of sales of $0.4 million related to purchase accounting adjustments of acquired inventory to fair value for the OTN Systems acquisition. During the nine months ended October 3, 2021, we reduced the Opterna earn-out liability by $5.8 million, recognized a $5.7 million impairment on assets held for sale, recognized a $3.6 million impairment on assets held and used, recognized cost of sales of $2.4 million related to purchase accounting adjustments of acquired inventory to fair value for the OTN Systems acquisition, collected $2.2 million of receivables associated with the sale of Grass Valley and acquisition of SPC that were previously written off, and included $1.3 million in Segment EBITDA for the purchase accounting effect of recording deferred revenue at fair value for the OTN Systems acquisition. During the nine months ended September 27, 2020, we recognized cost of sales related to purchase accounting adjustments of acquired inventory to fair value for the SPC acquisition.

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Note 7: Income (loss) per Share

The following table presents the basis for the income (loss) per share computations:

	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Numerator:
Income from continuing operations	$	41,317	$	20,569	$	114,030	$	38,633
Less: Net income attributable to noncontrolling interest	53		85		336		79
Income from continuing operations attributable to Belden stockholders	41,264		20,484		113,694		38,554
Add: Loss from discontinued operations, net of tax	—		(6,231)		—		(103,395)
Add: Gain on disposal of discontinued operations, net of tax	—		2,743		—		2,743
Net income (loss) attributable to Belden stockholders	$	41,264	$	16,996	$	113,694	$	(62,098)
Denominator:
Weighted average shares outstanding, basic	44,851		44,567		44,762		44,834
Effect of dilutive common stock equivalents	574		142		480		134
Weighted average shares outstanding, diluted	45,425		44,709		45,242		44,968

For the three and nine months ended October 3, 2021, diluted weighted average shares outstanding exclude outstanding equity awards of 1.0 million and 1.2 million, respectively, as they are anti-dilutive. In addition, for the three and nine months ended October 3, 2021, diluted weighted average shares outstanding do not include outstanding equity awards of 0.2 million and 0.3 million, respectively, because the related performance conditions have not been satisfied.

For the three and nine months ended September 27, 2020, diluted weighted average shares outstanding exclude outstanding equity awards of 1.6 million and 1.5 million, respectively, as they are anti-dilutive. In addition, for both the three and nine months ended September 27, 2020, diluted weighted average shares outstanding do not include outstanding equity awards of 0.4 million because the related performance conditions have not been satisfied.

For purposes of calculating basic earnings per share, unvested restricted stock units are not included in the calculation of basic weighted average shares outstanding until all necessary conditions have been satisfied and issuance of the shares underlying the restricted stock units is no longer contingent. Necessary conditions are not satisfied until the vesting date, at which time holders of our restricted stock units receive shares of our common stock.

For purposes of calculating diluted earnings per share, unvested restricted stock units are included to the extent that they are dilutive. In determining whether unvested restricted stock units are dilutive, each issuance of restricted stock units is considered separately.

Once a restricted stock unit has vested, it is included in the calculation of both basic and diluted weighted average shares outstanding.

Note 8: Credit Losses

Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments prospectively. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance. Upon adoption, we recorded a noncash cumulative effect adjustment to retained earnings of $2.9 million. Of this amount, $1.0 million related to our continuing operations and $1.9 million related to our discontinued operations.

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We are exposed to credit losses primarily through sales of products and services. Our expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimated amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible.

Estimates are used to determine the allowance, which is based upon an assessment of anticipated payments as well as other information that is reasonably available. The following table presents the activity in the trade receivables allowance for doubtful accounts for our continuing operations for the three and nine months ended October 3, 2021 and September 27, 2020, respectively:

	2021		2020
	(In thousands)
Beginning balance at January 1	$	5,150	$	2,569
Adoption adjustment	—		1,011
Current period provision	82		(172)
Write-offs	(57)		—
Recoveries collected	(23)		(9)
Fx impact	(17)		(213)
Q1 ending balance	5,135		3,186
Current period provision	305		2,621
Disposals	(192)		—
Write-offs	(20)		(52)
Recoveries collected	(36)		(100)
Fx impact	(25)		37
Q2 ending balance	5,167		5,692
Current period provision	86		(108)
Write-offs	(252)		(76)
Recoveries collected	(107)		—
Fx impact	(17)		29
Q3 ending balance	$	4,877	$	5,537

Note 9:  Inventories

The following table presents the major classes of inventories as of October 3, 2021 and December 31, 2020, respectively:

	October 3, 2021		December 31, 2020
	(In thousands)
Raw materials	$	142,000	$	106,514
Work-in-process	38,046		32,011
Finished goods	170,427		141,042
Gross inventories	350,473		279,567
Excess and obsolete reserves	(38,385)		(32,269)
Net inventories	$	312,088	$	247,298

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Note 10:  Leases

We have operating and finance leases for properties, including manufacturing facilities, warehouses, and office space; as well as vehicles and certain equipment. We make certain judgments in determining whether a contract contains a lease in accordance with ASU 2016-02. Our leases have remaining lease terms of less than 1 year to 15 years; some of which include extension and termination options for an additional 15 years or within 1 year, respectively. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably certain as of the commencement date of the lease. Our lease agreements do not contain any material residual value guarantees or material variable lease payments.

We have entered into various short-term operating leases with an initial term of twelve months or less. These leases are not recorded on our balance sheet, and for the three and nine months ended October 3, 2021 and September 27, 2020, the rent expense for short-term leases was not material.

We have certain property and equipment lease contracts that may contain lease and non-lease components, and we have elected to utilize the practical expedient to account for these components together as a single combined lease component.

As the rate implicit in most of our leases is not readily determinable, we use the incremental borrowing rate to determine the present value of the lease payments, which is unique to each leased asset, and is based upon the term of the lease, commencement date of the lease, local currency of the leased asset, and the credit rating of the legal entity leasing the asset.

We are party to a lease guarantee, whereby Belden has covenanted the lease payments for one of Snell Advanced Media's (SAM) property leases through its 2035 expiration date. The lease guarantee was executed in 2018 following the acquisition of SAM, which we subsequently sold on July 2, 2020 as part of the Grass Valley disposal group (see Note 5). This lease guarantee was retained by Belden and not transferred to Black Dragon Capital as part of the sale of Grass Valley. Belden would be required to make lease payments only if the primary obligor, Black Dragon Capital, fails to make the payments. As of October 3, 2021, the SAM lease has approximately $20.2 million of lease payments remaining, but we do not believe that it is probable that we have incurred a liability from the guarantee.

The components of lease expense were as follows:

	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Operating lease cost	$	5,112	$	3,571	$	13,958	$	10,512
Finance lease cost
Amortization of right-of-use asset	$	196	$	35	$	251	$	101
Interest on lease liabilities	4		4		9		13
Total finance lease cost	$	200	$	39	$	260	$	114

Supplemental cash flow information related to leases was as follows:

	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,480	$	3,891	$	12,853	$	11,352
Operating cash flows from finance leases	5		4		10		13
Financing cash flows from finance leases	3,041		43		3,116		130

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Supplemental balance sheet information related to leases was as follows:

	October 3, 2021		December 31, 2020
	(In thousands, except lease term and discount rate)
Operating leases:
Total operating lease right-of-use assets	$	57,141	$	54,787
Accrued liabilities	$	16,292	$	14,742
Long-term operating lease liabilities	47,054		46,398
Total operating lease liabilities	$	63,346	$	61,140
Finance leases:
Other long-lived assets, at cost	$	3,662	$	764
Accumulated depreciation	(332)		(483)
Other long-lived assets, net	$	3,330	$	281

Weighted Average Remaining Lease Term
Operating leases	5 years		5 years
Finance leases	4 years		3 years
Weighted Average Discount Rate
Operating leases	6.0	%	6.6	%
Finance leases	4.5	%	4.9	%

The following table summarizes maturities of lease liabilities as of October 3, 2021 and December 31, 2020, respectively:

	October 3, 2021		December 31, 2020
	(In thousands)
2021	$	5,270	$	19,250
2022	19,736		16,305
2023	15,624		12,552
2024	12,251		9,516
2025	11,022		8,718
Thereafter	11,910		8,901
Total	$	75,813	$	75,242

Note 11:  Long-Lived Assets

Depreciation and Amortization Expense

We recognized depreciation expense of $11.3 million and $34.2 million in the three and nine months ended October 3, 2021, respectively. We recognized depreciation expense of $10.5 million and $31.1 million in the three and nine months ended September 27, 2020, respectively.

We recognized amortization expense related to our intangible assets of $10.5 million and $30.8 million in the three and nine months ended October 3, 2021, respectively. We recognized amortization expense related to our intangible assets of $16.6 million and $49.6 million in the three and nine months ended September 27, 2020, respectively.

Asset Impairment

During the first quarter of 2021, we committed to a plan to sell our oil and gas cable business in Brazil, and recognized an impairment charge of $3.4 million. During the second quarter of 2021, we completed the sale of this business. See Note 4.

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Also in the first quarter of 2021, we performed a recoverability test over certain held and used long-lived assets in our Industrial Solutions segment. We determined that the carrying values of the assets were not recoverable and recognized a $3.6 million impairment charge in Selling, General and Administrative Expenses during the nine months ended October 3, 2021 to write them down to fair value. This impairment charge was excluded from Segment EBITDA of our Industrial Solutions segment.

During the third quarter of 2021, we entered into an agreement to sell and lease back certain real estate in Germany, and recognized an impairment charge of $2.3 million. See Note 4.

Note 12:  Severance, Restructuring, and Acquisition Integration Activities

Cost Reduction Program

We have executed a cost reduction program to streamline the organizational structure and invest in technology to drive productivity. We recognized $0.0 million and $3.5 million of severance and other restructuring costs for this program during the three and nine months ended October 3, 2021, respectively, and $0.2 million and $3.2 million during the three and nine months ended September 27, 2020, respectively. These costs were incurred by both the Enterprise Solutions and Industrial Solutions segments. The cost reduction program is substantially complete and has delivered a reduction in selling, general, and administrative expenses of approximately $60 million on an annual basis. We expect to recognize costs of approximately $5 million for this program during the fourth quarter of 2021.

Acquisition Integration Program

We are integrating our recent acquisitions such as OTN Systems, SPC, and Opterna with our existing businesses. The restructuring and integration activities are focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions. We recognized $0.8 million and $3.2 million of severance and other restructuring costs for this program during the three and nine months ended October 3, 2021, respectively. We recognized $0.9 million and $4.0 million of severance and other restructuring costs for this program during the three and nine months ended September 27, 2020, respectively. These costs were incurred by both the Enterprise Solutions and Industrial Solutions segments. We do not expect to incur significant incremental costs for this program in 2021.

The following table summarizes the costs by segment of the programs described above as well as other immaterial programs and acquisition integration activities during the three and nine months ended October 3, 2021 and September 27, 2020:

	Severance		Other Restructuring and Integration Costs		Total Costs
Three Months Ended October 3, 2021	(In thousands)
Enterprise Solutions	$	(77)	$	3,458	$	3,381
Industrial Solutions	(51)		998		947
Total	$	(128)	$	4,456	$	4,328
Three Months Ended September 27, 2020
Enterprise Solutions	$	327	$	1,010	$	1,337
Industrial Solutions	314		(294)		20
Total	$	641	$	716	$	1,357
Nine Months Ended October 3, 2021
Enterprise Solutions	$	1,031	$	6,725	$	7,756
Industrial Solutions	1,651		3,132		4,783
Total	$	2,682	$	9,857	$	12,539
Nine Months Ended September 27, 2020
Enterprise Solutions	$	1,162	$	5,148	$	6,310
Industrial Solutions	1,132		2,006		3,138
Total	$	2,294	$	7,154	$	9,448

The other restructuring and integration costs primarily consisted of equipment transfer, costs to consolidate operating and support facilities, retention bonuses, relocation, travel, legal, and other costs. The majority of the other restructuring and integration costs related to these actions were paid as incurred or are payable within the next 60 days.  

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The following table summarizes the costs of the various programs described above as well as other immaterial programs and acquisition integration activities by financial statement line item in the Condensed Consolidated Statement of Operations:

	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Cost of sales	$	2,943	$	85	$	4,306	$	222
Selling, general and administrative expenses	1,385		1,272		8,233		9,226
Total	$	4,328	$	1,357	$	12,539	$	9,448

Accrued Severance

The table below summarizes severance activity, included in accrued liabilities, for the Cost Reduction Program and the Acquisition Integration Program discussed above for the three and nine months ended October 3, 2021 and September 27, 2020, respectively.

	2021		2020
	(In thousands)
Beginning year balance	$	7,085	$	19,575
New charges	2,060		2,529
Cash payments	(1,798)		(4,483)
Foreign currency translation	49		(89)
Other adjustments	—		(4,147)
Balance at the end of Q1	7,396		13,385
New charges	458		4,660
Cash payments	(1,023)		(4,795)
Foreign currency translation	(4)		(132)
Other adjustments	(59)		(1,420)
Balance at the end of Q2	$	6,768	$	11,698
New charges	63		2,060
Cash payments	(941)		(3,968)
Foreign currency translation	(2)		(156)
Other adjustments	(197)		(1,541)
Balance at the end of Q3	$	5,691	$	8,093

The other adjustments were the result of changes in estimates. We experienced higher than expected voluntary turnover, and as a result, certain approved severance actions were not taken.

Note 13:  Long-Term Debt and Other Borrowing Arrangements

The carrying values of our long-term debt were as follows:

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	October 3, 2021		December 31, 2020
	(In thousands)
Revolving credit agreement due 2026	$	—	$	—
Senior subordinated notes:
2.875% Senior subordinated notes due 2025	—		367,110
4.125% Senior subordinated notes due 2026	232,320		244,740
3.375% Senior subordinated notes due 2027	522,720		550,665
3.875% Senior subordinated notes due 2028	406,560		428,295
3.375% Senior subordinated notes due 2031	348,480		—
Total senior subordinated notes	1,510,080		1,590,810
Less unamortized debt issuance costs	(17,438)		(17,084)
Long-term debt	$	1,492,642	$	1,573,726

Revolving Credit Agreement due 2026

On June 2, 2021, we entered into an amended and restated Revolving Credit Agreement that provides a $300.0 million multi-currency asset-based revolving credit facility (the Revolver). The maturity date of the Revolver is June 2, 2026. The borrowing base under the Revolver includes eligible accounts receivable; inventory; and property, plant and equipment of certain of our subsidiaries in the United States, Canada, Germany, the United Kingdom and the Netherlands. Interest on outstanding borrowings is variable, based upon LIBOR or other similar indices in foreign jurisdictions, plus a spread that ranges from 1.25%-1.75%, depending upon our leverage position. Outstanding borrowings in the U.S. and Canada may also, at our election, be priced on a base rate plus a spread that ranges from 0.25% — 0.75%, depending on our leverage position. We pay a commitment fee on the total commitments of 0.25%. In the event that we borrow more than 90% of our combined borrowing base or our borrowing base availability is less than $20.0 million, we are subject to a fixed charge coverage ratio covenant. We paid approximately $2.2 million of fees associated with the amended Revolver, which will be amortized over its term using the effective interest method. As of October 3, 2021, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $293.9 million.

Senior Subordinated Notes

We had outstanding €300.0 million aggregate principal amount of 2.875% senior subordinated notes due 2025 (the 2025 Notes). In September 2021, we repurchased the full €300.0 million 2025 Notes outstanding for cash consideration of €300.0 million ($358.5 million), including a prepayment penalty, and recognized a $5.7 million loss on debt extinguishment including the write-off of unamortized debt issuance costs.

We have outstanding €200.0 million aggregate principal amount of 4.125% senior subordinated notes due 2026 (the 2026 Notes). The carrying value of the 2026 Notes as of October 3, 2021 is $232.3 million. The 2026 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2026 Notes rank equal in right of payment with our senior subordinated notes due 2031, 2028, and 2027 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on April 15 and October 15 of each year.

We have outstanding €450.0 million aggregate principal amount of 3.375% senior subordinated notes due 2027 (the 2027 Notes). The carrying value of the 2027 Notes as of October 3, 2021 is $522.7 million. The 2027 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2027 Notes rank equal in right of payment with our senior subordinated notes due 2031, 2028, and 2026 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on January 15 and July 15 of each year.

We have outstanding €350.0 million aggregate principal amount of 3.875% senior subordinated notes due 2028 (the 2028 Notes). The carrying value of the 2028 Notes as of October 3, 2021 is $406.6 million. The 2028 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2028 Notes rank equal in right of payment with our senior subordinated notes due 2031, 2027, and 2026 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on March 15 and September 15 of each year.

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In July 2021, we completed an offering for €300.0 million ($356.0 million at issuance) aggregate principal amount of 3.375% senior subordinated notes due 2031 (the 2031 Notes). The carrying value of the 2031 Notes as of October 3, 2021 is $348.5 million. The 2031 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2031 Notes rank equal in right of payment with our senior subordinated notes due 2028, 2027, and 2026 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on January 15 and July 15 of each year, commencing January 15, 2022. We paid approximately $5.6 million of fees associated with the issuance of the 2031 Notes, which will be amortized over the life of the 2031 Notes using the effective interest method. We used the net proceeds from this offering, along with cash on hand, to fund the full redemption of the 2025 Notes - see further discussion above.

Fair Value of Long-Term Debt

The fair value of our senior subordinated notes as of October 3, 2021 was approximately $1,556.8 million based on quoted prices of the debt instruments in inactive markets (Level 2 valuation). This amount represents the fair value of our senior subordinated notes with a carrying value of $1,510.1 million as of October 3, 2021.

Note 14:  Net Investment Hedge

All of our euro denominated notes were issued by Belden Inc., a USD functional currency entity. As of October 3, 2021, €767.8 million of our outstanding foreign denominated debt is designated as a net investment hedge on the foreign currency risk of our net investment in our euro foreign operations. The objective of the hedge is to protect the net investment in the foreign operation against adverse changes in the euro exchange rate. The transaction gain or loss is reported in the translation adjustment section of other comprehensive income. For the nine months ended October 3, 2021 and September 27, 2020, the transaction gain/(loss) associated with the net investment hedge reported in other comprehensive income was $47.9 million and $(13.1) million, respectively. During the nine months ended September 27, 2020, we de-designated €532.2 million of our outstanding debt that was previously designated as a net investment hedge. After the de-designation, transaction gains or losses associated with this €532.2 million of debt are reported in income from continuing operations.

Note 15:  Income Taxes

For the three and nine months ended October 3, 2021, we recognized income tax expense of $8.9 million and $25.3 million, respectively, representing an effective tax rate of 17.7% and 18.2%, respectively. The effective tax rates were primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits.

For the three and nine months ended September 27, 2020, we recognized income tax expense of $0.6 million and $3.2 million, respectively, representing an effective tax rate of 3.0% and 7.7%, respectively. The effective tax rates were impacted by income tax benefits for certain foreign tax credits of $0.9 million and $2.1 million in the three and nine months ended September 27, 2020, respectively.

Note 16:  Pension and Other Postretirement Obligations

The following table provides the components of net periodic benefit costs for our pension and other postretirement benefit plans: 

	Pension Obligations				Other Postretirement Obligations
Three Months Ended	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Service cost	$	941	$	885	$	8	$	8
Interest cost	1,914		2,493		182		202
Expected return on plan assets	(4,081)		(4,091)		—		—
Amortization of prior service cost	27		47		—		—
Actuarial losses (gains)	971		688		(5)		(19)
Net periodic benefit cost (income)	$	(228)	$	22	$	185	$	191

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	Pension Obligations				Other Postretirement Obligations
Nine Months Ended	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Service cost	$	2,982	$	2,709	$	26	$	24
Interest cost	5,617		7,240		545		599
Expected return on plan assets	(12,276)		(12,035)		—		—
Amortization of prior service cost	83		136		—		—
Actuarial losses (gains)	2,926		2,038		(16)		(57)
Net periodic benefit cost (income)	$	(668)	$	88	$	555	$	566

Note 17:  Comprehensive Income and Accumulated Other Comprehensive Income (Loss)

The following table summarizes total comprehensive income (losses): 

	Three Months Ended				Nine Months Ended
	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
	(In thousands)
Net income (loss)	$	41,317	$	17,081	$	114,030	$	(62,019)
Foreign currency translation adjustments, net of tax	27,221		(52,910)		57,728		(75,791)
Adjustments to pension and postretirement liability, net of tax	758		1,136		2,285		1,891
Total comprehensive income (loss)	69,296		(34,693)		174,043		(135,919)
Less: Comprehensive income (loss) attributable to noncontrolling interests	(94)		228		(237)		219
Comprehensive income (loss) attributable to Belden	$	69,390	$	(34,921)	$	174,280	$	(136,138)

The tax impacts of the foreign currency translation adjustments and pension liability adjustments in the table above are not material.

The accumulated balances related to each component of other comprehensive income (loss), net of tax, are as follows: 

	Foreign Currency Translation Component		Pension and Other  Postretirement Benefit Plans		Accumulated Other  Comprehensive Income (Loss)
	(In thousands)
Balance at December 31, 2020	$	(131,181)	$	(60,670)	$	(191,851)
Other comprehensive income attributable to Belden before reclassifications	59,278		—		59,278
Amounts reclassified from accumulated other comprehensive income (loss)	(977)		2,285		1,308
Net current period other comprehensive income attributable to Belden	58,301		2,285		60,586
Balance at October 3, 2021	$	(72,880)	$	(58,385)	$	(131,265)

The following table summarizes the effects of reclassifications from accumulated other comprehensive income (loss) for the nine months ended October 3, 2021:

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	Amount Reclassified from Accumulated Other Comprehensive Income (2)		Affected Line Item in the Consolidated Statements of Operations and Comprehensive Income
	(In thousands)
Amortization of pension and other postretirement benefit plan items:
Actuarial losses	$	2,910	(1)
Prior service cost	83		(1)
Total before tax	2,993
Tax benefit	(708)
Total net of tax	$	2,285

(1) The amortization of these accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit costs (see Note 16).

(2) We reclassified $1.0 million of accumulated foreign currency translation gains associated with the sale of our oil and gas cable business in Brazil.

Note 18: Share Repurchase

On November 29, 2018, our Board of Directors authorized a share repurchase program, which allows us to purchase up to $300.0 million of our common stock through open market repurchases, negotiated transactions, or other means, in accordance with applicable securities laws and other restrictions. This program is funded with cash on hand and cash flows from operating activities. During the nine months ended October 3, 2021, we did not repurchase any stock. During the nine months ended September 27, 2020, we repurchased 1.0 million shares of our common stock under the share repurchase program for an aggregate cost of $35.0 million at an average price per share of $35.83.

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Item 2:        Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Belden Inc. (the Company, us, we, or our) is a global supplier of specialty networking solutions built around two global businesses - Enterprise Solutions and Industrial Solutions.  Our comprehensive portfolio of solutions enables customers to transmit and secure data, sound, and video for mission critical applications across complex enterprise and industrial environments.

We strive for operational excellence through the execution of our Belden Business System, which includes three areas of focus: Lean enterprise initiatives, our Market Delivery System, and our Talent Management System. Through operational excellence we generate free cash flow on an annual basis. We utilize the cash flow generated by our business to fuel our continued transformation and generate shareholder value. We believe our business system, balance across markets and geographies, systematic go-to-market approach, extensive portfolio of innovative solutions, commitment to Lean principles, and improving margins present a unique value proposition for shareholders.

We use a set of tools and processes that are designed to continuously improve business performance in the critical areas of quality, delivery, cost, and innovation. We consider revenue growth, Adjusted EBITDA margin, free cash flows, and return on invested capital to be our key operating performance indicators. We also seek to acquire businesses that we believe can help us achieve these objectives.

Trends and Events

The following trends and events during 2021 have had varying effects on our financial condition, results of operations, and cash flows.

Pandemic

On March 11, 2020, the World Health Organization (WHO) declared the outbreak of the novel coronavirus (COVID-19) a pandemic. Since the beginning of the pandemic, our foremost focus has been on the health and safety of our employees and customers. In response to the outbreak, to protect the health and safety of our employees, we modified practices at our manufacturing locations and offices to adhere to guidance from the WHO, the U.S. Centers for Disease Control and Prevention and other local health and governmental authorities with respect to social distancing, physical separation, personal protective equipment and sanitization. In light of variant mutations of the virus, even as vaccinations become more prevalent and more employees return to our offices, many of these safeguards will continue.

Our suppliers, distributors, and other partners have similarly had their operations disrupted, and in regions of the world where infection rates have remained high, human suffering and market disruptions have persisted. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by local or foreign governmental authorities, or that we determine are in the best interests of our employees and customers.

Foreign Currency

Our exposure to currency rate fluctuations primarily relates to exchange rate movements between the U.S. dollar and the Euro, Canadian dollar, Hong Kong dollar, Chinese yuan, Mexican peso, Australian dollar, British pound, and Indian rupee. Generally, as the U.S. dollar strengthens against these foreign currencies, our revenues and earnings are negatively impacted as our foreign denominated revenues and earnings are translated into U.S. dollars at a lower rate. Conversely, as the U.S. dollar weakens against foreign currencies, our revenues and earnings are positively impacted. Approximately 45% of our consolidated revenues during the quarter ended October 3, 2021 were to customers outside of the U.S.

In addition to the translation impact described above, currency rate fluctuations have an economic impact on our financial results. As the U.S. dollar strengthens or weakens against foreign currencies, it results in a relative price increase or decrease for certain of our products that are priced in U.S. dollars in a foreign location.

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Commodity Prices

Our operating results can be affected by changes in prices of commodities, primarily copper and compounds, which are components in some of the products we sell. Generally, as the costs of inventory purchases increase due to higher commodity prices, we raise selling prices to customers to cover the increase in costs, resulting in higher sales revenue but a lower gross profit percentage. Conversely, a decrease in commodity prices would result in lower sales revenue but a higher gross profit percentage. Selling prices of our products are affected by many factors, including end market demand, capacity utilization, overall economic conditions, and commodity prices. During periods of inflation, if we are unable to raise prices timely and sufficiently to recover our material costs, our earnings could decline. We are mindful of ongoing inflationary pressures and as a result, proactively implement selling price increases and cost control measures. Importantly, however, there is no exact measure of the effect of changing commodity prices, as there are thousands of transactions in any given quarter, each of which has various factors involved in the individual pricing decisions. Therefore, all references to the effect of copper prices or other commodity prices are estimates.

Channel Inventory

Our operating results also can be affected by the levels of Belden products purchased and held as inventory by our channel partners and customers. Our channel partners and customers purchase and hold the products they bought from us in their inventory in order to meet the service and on-time delivery requirements of their customers. Generally, as our channel partners and customers change the level of products they buy from us and hold in their inventory, it impacts our revenues. Comparisons of our results between periods can be impacted by changes in the levels of channel inventory. We use information provided to us by our channel partners and make certain assumptions based on our sales to them to determine the amount of products they bought from us and hold in their inventory. As such, all references to the effect of channel inventory changes are estimates.

Market Growth and Market Share

The markets in which we operate can generally be characterized as highly competitive and highly fragmented, with many players. We monitor available data regarding market growth, including independent market research reports, publicly available indices, and the financial results of our direct and indirect peer companies, in order to estimate the extent to which our served markets grew or contracted during a particular period. We expect that our unit sales volume will increase or decrease consistently with the market growth rate. Our strategic goal is to utilize our Market Delivery System to target faster growing geographies, applications, and trends within our end markets, in order to achieve growth that is higher than the general market growth rate. To the extent that we exceed the market growth rates, we consider it to be the result of capturing market share.

Amended Revolving Credit Agreement

During the second quarter of 2021, we entered into an amended and restated Revolving Credit Agreement that provides a $300.0 million multi-currency asset-based revolving credit facility (the Revolver). The maturity date of the Revolver is June 2, 2026. The borrowing base under the Revolver includes eligible accounts receivable; inventory; and property, plant and equipment of certain of our subsidiaries in the United States, Canada, Germany, the United Kingdom and the Netherlands. Interest on outstanding borrowings is variable, based upon LIBOR or other similar indices in foreign jurisdictions, plus a spread that ranges from 1.25%-1.75%, depending upon our leverage position. We paid approximately $2.2 million of fees associated with the amended Revolver, which are being amortized over its term using the effective interest method. As of October 3, 2021, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $293.9 million. See Note 13.

Debt Refinancing

During the three and nine months ended October 3, 2021, we completed an offering for €300.0 million aggregate principal amount of 3.375% senior subordinated notes due 2031. With the proceeds from this offering and cash on hand, we repurchased all of the €300.0 million aggregate principal amount of 2.875% senior subordinated notes previously due 2025. We recognized a $5.7 million loss on debt extinguishment for the premiums paid to the bond holders to retire the 2025 Notes and for the unamortized debt issuance costs on the 2025 Notes that we were required to write-off. See Note 13.

OTN Systems Acquisition

We acquired 100% of the shares of OTN Systems on January 29, 2021 for a purchase price, net of cash acquired, of $73.3 million. OTN Systems, based in Olen, Belgium, is a leading provider of easy to use and highly-reliable network solutions tailored for specific applications in harsh, mission-critical environments. The acquisition of OTN Systems supports one of our key strategic priorities related to the growing demand for industrial automation by adding proprietary technology and mission-critical hardware and software products for more complete end-to-end solutions. The results of OTN Systems have been included in our Condensed Consolidated Financial Statements from January 29, 2021, and are reported within the Industrial Solutions segment. See Note 3.

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Sale-Leaseback

During the three and nine months ended October 3, 2021, we entered into an agreement to sell and lease back certain property in Germany. The closing of the sale and the commencement of the lease is expected to occur during the fourth quarter of 2021. During the third quarter of 2021, we performed a recoverability test on the assets and determined that the carrying values of the assets were not recoverable and recognized a $2.3 million impairment charge in Selling, General and Administrative Expenses to write them down to fair value. The impairment charge was excluded from Segment EBITDA of our Industrial Solutions segment. See Note 4.

Disposal

We completed the sale of our oil and gas cable business in Brazil during the second quarter of 2021 for $10.9 million, net of cash delivered with the business. During the first quarter of 2021, we committed to a plan to sell the business and determined that we met all of the criteria to classify the assets and liabilities of this business as held for sale. At such time, the carrying value of the disposal group exceeded the fair value less costs to sell, which we determined based upon the expected sale price, by $3.4 million. Therefore, we recognized an impairment charge in Selling, General and Administrative Expenses equal to this amount in the first quarter of 2021. The impairment charge was excluded from Segment EBITDA of our Industrial Solutions segment. See Note 4.

Long-Lived Asset Impairment

During the nine months ended October 3, 2021, we performed a recoverability test on certain held and used long-lived assets in our Industrial Solutions segment. We determined that the carrying values of the assets were not recoverable and recognized a $3.6 million impairment charge in Selling, General and Administrative Expenses to write them down to fair value. This impairment charge was excluded from Segment EBITDA of our Industrial Solutions segment. See Note 11.

Opterna Earn-Out

Our acquisition of Opterna in 2019 included potential earn-out consideration, which as of the acquisition date, had an estimated fair value of $5.8 million. As the financial targets tied to the earn-out were not achieved within the contractual timeframe, we reduced the earn-out liability to zero and recognized a $5.8 million benefit in Selling, General and Administrative Expenses during the nine months ended October 3, 2021. This benefit was excluded from Segment EBITDA of our Enterprise Solutions segment. See Note 4.

Cost Reduction Program

We have executed a cost reduction program to streamline the organizational structure and invest in technology to drive productivity. We recognized $0.0 million and $3.5 million of severance and other restructuring costs for this program during the three and nine months ended October 3, 2021, respectively. The cost reduction program is substantially complete and has delivered a reduction in selling, general, and administrative expenses of approximately $60 million on an annual basis. We expect to recognize costs of approximately $5 million for this program during the fourth quarter of 2021. See Note 12.

Acquisition Integration Program

We are integrating our recent acquisitions such as OTN Systems, SPC, and Opterna with our existing businesses. The restructuring and integration activities are focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions. We recognized $0.8 million and $3.2 million of severance and other restructuring costs for this program during the three and nine months ended October 3, 2021, respectively. We do not expect to incur significant incremental costs for this program in 2021. See Note 12.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows that are or would be considered material to investors.

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Critical Accounting Policies

During the nine months ended October 3, 2021:

•We did not change any of our existing critical accounting policies from those listed in our 2020 Annual Report on Form 10-K;

•No existing accounting policies became critical accounting policies because of an increase in the materiality of associated transactions or changes in the circumstances to which associated judgments and estimates relate; and

•There were no significant changes in the manner in which critical accounting policies were applied or in which related judgments and estimates were developed.

Results of Operations

Consolidated Income before Taxes

 

	Three Months Ended				% Change		Nine Months Ended				% Change
	October 3, 2021		September 27, 2020				October 3, 2021		September 27, 2020
	(In thousands, except percentages)
Revenues	$	630,835	$	475,839	32.6	%	$	1,769,190	$	1,364,176	29.7	%
Gross profit	223,276		167,592		33.2	%	626,155		488,033		28.3	%
Selling, general and administrative expenses	(109,963)		(85,037)		29.3	%	(313,966)		(275,129)		14.1	%
Research and development expenses	(32,451)		(30,324)		7.0	%	(94,873)		(81,633)		16.2	%
Amortization of intangibles	(9,696)		(16,104)		(39.8)	%	(28,745)		(48,306)		(40.5)	%
Operating income	71,166		36,127		97.0	%	188,571		82,965		127.3	%
Interest expense, net	(16,251)		(15,607)		4.1	%	(46,640)		(43,188)		8.0	%
Loss on debt extinguishment	(5,715)		—		n/a		(5,715)		—		n/a
Non-operating pension benefit	992		680		45.9	%	3,121		2,079		50.1	%
Income from continuing operations before taxes	50,192		21,200		136.8	%	139,337		41,856		232.9	%

Revenues increased $155.0 million and $405.0 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 due to the following factors:

•Higher sales volume from industrial automation, smart buildings, and broadband & 5G products resulted in a $115.7 million and $270.1 million increase in revenues, respectively.

•Copper prices had a $30.4 million and $91.2 million favorable impact on revenues, respectively.

•Currency translation had a $4.6 million and $27.5 million favorable impact on revenues, respectively.

•Acquisitions contributed an estimated $8.2 million and $21.2 million in revenues, respectively.

•Divestitures had a $3.9 million and $5.0 million unfavorable impact on revenues, respectively.

Gross profit increased $55.7 million and $138.1 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 due to the increases in revenues discussed above.

Selling, general and administrative expenses increased $24.9 million and $38.8 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020. The increase in selling, general and administrative expenses is primarily attributable to strategic investments to enhance our solution selling capabilities as well as increases from incentive compensation, acquisitions, and the impact of currency translation.

Research and development expenses increased $2.1 million and $13.2 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to increased investments in R&D projects as we continue our commitment to growth initiatives.

Amortization of intangibles decreased $6.4 million and $19.6 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to certain intangible assets becoming fully amortized.

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Operating income increased $35.0 million and $105.6 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily as a result of the increase in gross profit discussed above.

Net interest expense increased $0.6 million and $3.5 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to currency translation.

Loss on debt extinguishment increased $5.7 million in both the three and nine months ended October 3, 2021 from the comparable periods of 2020 due to the debt refinancing that took place during the third quarter of 2021. The $5.7 million loss on debt extinguishment represents the premium paid to the bond holders to retire the 2025 Notes and for the unamortized debt issuance costs on the 2025 Notes that we were required to write-off. See Note 13.

Income from continuing operations before taxes increased $29.0 million and $97.5 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to the increase in operating income discussed above.

Income Taxes

	Three Months Ended								Nine Months Ended
	October 3, 2021			September 27, 2020			% Change		October 3, 2021			September 27, 2020			% Change
	(In thousands, except percentages)
Income before taxes	$	50,192		$	21,200		136.8	%	$	139,337		$	41,856		232.9	%
Income tax expense	8,875			631			1,306.5	%	25,307			3,223			685.2	%
Effective tax rate	17.7		%	3.0		%			18.2		%	7.7		%

For the three and nine months ended October 3, 2021, we recognized income tax expense of $8.9 million and $25.3 million, representing an effective tax rate of 17.7% and 18.2%, respectively. The effective tax rates were primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits. For the three and nine months ended September 27, 2020, we recognized income tax expense of $0.6 million and $3.2 million, respectively, representing an effective tax rate of 3.0% and 7.7%, respectively. The effective tax rates were impacted by income tax benefits for certain foreign tax credits of $0.9 million and $2.1 million in the three and nine months ended September 27, 2020, respectively.

Consolidated Adjusted Revenues and Adjusted EBITDA 

	Three Months Ended								Nine Months Ended
	October 3, 2021			September 27, 2020			% Change		October 3, 2021			September 27, 2020			% Change
	(In thousands, except percentages)
Adjusted Revenues	$	631,338		$	475,839		32.7	%	$	1,770,542		$	1,364,176		29.8	%
Adjusted EBITDA	100,706			65,252			54.3	%	274,256			175,237			56.5	%
as a percent of adjusted revenues	16.0		%	13.7		%			15.5		%	12.8		%

Adjusted Revenues increased $155.5 million and $406.4 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 due to the following factors:

•Higher sales volume from industrial automation, smart buildings, and broadband & 5G products resulted in a $115.7 million and $270.1 million increase in revenues, respectively.

•Copper prices had a $30.4 million and $91.2 million favorable impact on revenues, respectively.

•Currency translation had a $4.6 million and $27.5 million favorable impact on revenues, respectively.

•Acquisitions contributed an estimated $8.7 million and $22.6 million in revenues, respectively.

•Divestitures had a $3.9 million and $5.0 million unfavorable impact on revenues, respectively.

Adjusted EBITDA increased $35.5 million and $99.0 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020 primarily due to leverage on higher sales volume, as discussed above. Accordingly, Adjusted EBITDA margins in the three and nine months ended October 3, 2021 expanded to 16.0% and 15.5% from 13.7% and 12.8% in the comparable periods of 2020, respectively.

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Use of Non-GAAP Financial Information

Adjusted Revenues, Adjusted EBITDA, Adjusted EBITDA margin, and free cash flow are non-GAAP financial measures. 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; certain revenues and gains (losses) from patent settlements; 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. The following tables reconcile our GAAP results to our non-GAAP financial measures:

	Three Months Ended						Nine Months Ended
	October 3, 2021			September 27, 2020			October 3, 2021			September 27, 2020
	(In thousands, except percentages)
GAAP revenues	$	630,835		$	475,839		$	1,769,190		$	1,364,176
Adjustments related to acquisitions	503			—			1,352			—
Adjusted revenues	$	631,338		$	475,839		$	1,770,542		$	1,364,176
GAAP income from continuing operations	$	41,317		$	20,569		$	114,030		$	38,633
Interest expense, net	16,251			15,607			46,640			43,188
Depreciation expense	11,270			10,455			34,197			31,069
Amortization of intangible assets	9,696			16,104			28,745			48,306
Income tax expense	8,875			631			25,307			3,223
Severance, restructuring, and acquisition integration costs (1)	4,328			1,357			12,539			9,448
Loss on debt extinguishment	5,715			—			5,715			—
Adjustments related to acquisitions and divestitures (2)	2,464			—			4,997			125
Amortization of software development intangible assets	790			529			2,086			1,245
Adjusted EBITDA	$	100,706		$	65,252		$	274,256		$	175,237
GAAP income from continuing operations margin	6.5		%	4.3		%	6.4		%	2.8		%
Adjusted EBITDA margin	16.0		%	13.7		%	15.5		%	12.8		%

(1) See Note 12, Severance, Restructuring, and Acquisition Integration Activities, for details.

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(2) During the three months ended October 3, 2021, we recognized a $2.3 million impairment on assets held for sale, collected $0.7 million of receivables associated with the sale of Grass Valley and acquisition of SPC that were previously written off, included $0.5 million in Segment EBITDA for the purchase accounting effect of recording deferred revenue at fair value for the OTN Systems acquisition, and recognized cost of sales of $0.4 million related to purchase accounting adjustments of acquired inventory to fair value for the OTN Systems acquisition. During the nine months ended October 3, 2021, we reduced the Opterna earn-out liability by $5.8 million, recognized a $5.7 million impairment on assets held for sale, recognized a $3.6 million impairment on assets held and used, recognized cost of sales of $2.4 million related to purchase accounting adjustments of acquired inventory to fair value for the OTN Systems acquisition, collected $2.2 million of receivables associated with the sale of Grass Valley and acquisition of SPC that were previously written off, and included $1.3 million in Segment EBITDA for the purchase accounting effect of recording deferred revenue at fair value for the OTN Systems acquisition. During the nine months ended September 27, 2020, we recognized cost of sales related to purchase accounting adjustments of acquired inventory to fair value for the SPC acquisition.

Segment Results of Operations

For additional information regarding our segment measures, see Note 6 to the Condensed Consolidated Financial Statements.

Enterprise Solutions

	Three Months Ended								Nine Months Ended
	October 3, 2021			September 27, 2020			% Change		October 3, 2021			September 27, 2020			% Change
	(In thousands, except percentages)
Segment Revenues	$	286,231		$	229,097		24.9	%	$	780,114		$	644,684		21.0	%
Segment EBITDA	40,156			26,250			53.0	%	103,531			73,193			41.4	%
as a percent of segment revenues	14.0		%	11.5		%			13.3		%	11.4		%

Enterprise Solutions revenues increased $57.1 million and $135.4 million in the three and nine months ended October 3, 2021, respectively, from the comparable periods of 2020. As compared to the year ago period, for the three months ended October 3, 2021, increases in volume, higher copper prices, and favorable currency translation contributed $41.6 million, $13.9 million, and $1.6 million, respectively. As compared to the year ago period, for the nine months ended October 3, 2021, increases in volume, higher copper prices, and favorable currency translation contributed $90.5 million, $37.4 million, and $7.5 million, respectively.

Enterprise Solutions EBITDA increased $13.9 million and $30.3 million in the three and nine months ended October 3, 2021, respectively, compared to the year ago periods primarily as a result of the increase in revenues discussed above.

Industrial Solutions 

	Three Months Ended								Nine Months Ended
	October 3, 2021			September 27, 2020			% Change		October 3, 2021			September 27, 2020			% Change
	(In thousands, except percentages)
Segment Revenues	$	345,107		$	246,742		39.9	%	$	990,428		$	719,492		37.7	%
Segment EBITDA	59,582			38,391			55.2	%	167,676			100,367			67.1	%
as a percent of segment revenues	17.3		%	15.6		%			16.9		%	13.9		%

Industrial Solutions revenues increased $98.4 million and $270.9 million in the three and nine months ended October 3, 2021 from the comparable periods of 2020. The increase in revenues in the three months ended October 3, 2021 was primarily due to increases in volume; higher copper prices; favorable currency translation; and acquisitions, net of disposals of $74.6 million, $16.5 million, $3.0 million, and $4.3 million, respectively. The increase in revenues in the nine months ended October 3, 2021 was primarily due to increases in volume; higher copper prices; favorable currency translation; and acquisitions, net of disposals of $180.0 million, $53.8 million, $20.0 million, and $17.1 million, respectively.

Industrial Solutions EBITDA increased $21.2 million and $67.3 million in the three and nine months ended October 3, 2021 from the comparable periods of 2020 primarily as a result of the increase in revenues discussed above, partially offset by an increase in incentive compensation and increased investments in R&D projects as we continue our commitment to growth initiatives.

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Liquidity and Capital Resources

Significant factors affecting our cash liquidity include (1) cash from operating activities, (2) disposals of businesses and tangible assets, (3) cash used for acquisitions, restructuring actions, capital expenditures, share repurchases, dividends, and senior subordinated note repurchases, and (4) our available credit facilities and other borrowing arrangements. We expect our operating activities to generate cash in 2021 and believe our sources of liquidity are sufficient to fund current working capital requirements, capital expenditures, contributions to our retirement plans, share repurchases, senior subordinated note repurchases, quarterly dividend payments, and our short-term operating strategies. However, we may require external financing in the event we complete a significant acquisition. Our ability to continue to fund our future needs from business operations could be affected by many factors, including, but not limited to: economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product mix, and commodities pricing.

The following table is derived from our Condensed Consolidated Cash Flow Statements, and for the period ended September 27, 2020, includes the results of discontinued operations up to the July 2, 2020 disposal date of Grass Valley:

	Nine Months Ended
	October 3, 2021		September 27, 2020
	(In thousands)
Net cash provided by (used for):
Operating activities	$	101,919	$	38,689
Investing activities	(118,921)		(3,078)
Financing activities	(24,038)		(72,585)
Effects of currency exchange rate changes on cash and cash equivalents	(3,201)		2,586
Decrease in cash and cash equivalents	(44,241)		(34,388)
Cash and cash equivalents, beginning of period	501,994		425,885
Cash and cash equivalents, end of period	$	457,753	$	391,497

Operating cash flows were a source of cash of $101.9 million in the nine months ended October 3, 2021 compared to $38.7 million in the nine months ended September 27, 2020. Operating cash flow improved $63.2 million compared to the prior year primarily due to an increase in earnings. In 2021, changes in operating assets and liabilities included an unfavorable change in receivables partially offset by a favorable change in accounts payable. For the nine months ended October 3, 2021, receivables were a use of cash of $129.0 million compared to a source of cash of $35.6 million in the year ago period. The increase in receivables was primarily due to the increase in revenues discussed above. Accounts payable was a source of cash of $73.7 million in the nine months ended October 3, 2021 compared to a use of cash of $69.6 million in the year ago period.

Net cash used for investing activities totaled $118.9 million in the nine months ended October 3, 2021, compared to $3.1 million in the prior year. Investing activities for the nine months ended October 3, 2021 included capital expenditures of $55.6 million compared to $56.8 million in the comparable period of 2020. The nine months ended October 3, 2021 also included payments of $73.7 million primarily for the acquisition of OTN Systems, partially offset by cash receipts of $10.8 million primarily for the sale of our oil and gas cable business in Brazil. The nine months ended September 27, 2020 also included proceeds of $50.1 million, $3.1 million, and $0.6 million from the sale of the Grass Valley disposal group, the sale of tangible property, and a working capital adjustment related to the SPC acquisition.

Net cash from financing activities was a use of cash of $24.0 million for the nine months ended October 3, 2021, compared to $72.6 million in the prior year. Financing activities for the nine months ended October 3, 2021 included repayments of debt obligations of $360.3 million, debt issuance costs of $7.8 million, cash dividend payments of $6.7 million, financing lease payments of $3.1 million, net payments related to share based compensation activities of $2.1 million, and borrowings under credit arrangements of $356.0 million. During the nine months ended October 3, 2021, we completed an offering for €300.0 million aggregate principal amount of 3.375% senior subordinated notes due 2031, repurchased the €300.0 million 2025 Notes, and refinanced the Revolver - see Note 13. Financing activities for the nine months ended September 27, 2020 included borrowings on our revolver of $190.0 million, repayments of our revolver borrowings of $190.0 million, payments under our share repurchase program of $35.0 million, earnout consideration payments of $29.3 million, cash dividend payments of $6.8 million, and net payments related to share based compensation activities of $1.3 million.

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Our cash and cash equivalents balance was $457.8 million as of October 3, 2021. Of this amount, $188.1 million was held outside of the U.S. in our foreign operations. Substantially all of the foreign cash and cash equivalents are readily convertible into U.S. dollars or other foreign currencies. We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and accordingly, no provision for any withholding taxes has been recorded. Upon distribution of those earnings in the form of dividends or otherwise, we may be subject to withholding taxes payable to the respective foreign countries.

Our outstanding debt obligations as of October 3, 2021 consisted of $1,510.1 million of senior subordinated notes. Additional discussion regarding our various borrowing arrangements is included in Note 13 to the Condensed Consolidated Financial Statements. 

Forward-Looking Statements

Statements in this report other than historical facts are “forward-looking statements.” 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. These 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 based on a number of factors. These factors include, among others, those set forth in Part II, Item 1A and in other documents that we file with the SEC.

We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Item 3:        Quantitative and Qualitative Disclosures about Market Risks

The following table provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal amounts by expected maturity dates and fair values as of October 3, 2021. 

	Principal Amount by Expected Maturity							Fair
	2021		Thereafter			Total		Value
	(In thousands, except interest rates)
€200.0 million fixed-rate senior subordinated notes due 2026	$	—	$	232,320		$	232,320	$	237,301
Average interest rate			4.125		%
€450.0 million fixed-rate senior subordinated notes due 2027	$	—	$	522,720		$	522,720	$	535,856
Average interest rate			3.375		%
€350.0 million fixed-rate senior subordinated notes due 2028	$	—	$	406,560		$	406,560	$	422,416
Average interest rate			3.875		%
€300.0 million fixed-rate senior subordinated notes due 2031	$	—	348,480			$	348,480	$	361,276
Average interest rate			3.375		%
Total						$	1,510,080	$	1,556,849

Item 7A of our 2020 Annual Report on Form 10-K provides information as to the practices and instruments that we use to manage market risks. There were no material changes in our exposure to market risks since December 31, 2020.

Item 4:        Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1:        Legal Proceedings

On November 24, 2020, the Company announced a data incident involving unauthorized access and copying of some current and former employee data, as well as limited company information regarding some business partners. In January 2021, Anand Edke filed a putative class action lawsuit against the Company in the Circuit Court of Cook County, Illinois, Case No. 2021 CH 47. Jurisdiction for the matter has moved to federal court and the case has been transferred to the U.S. District Court for the Eastern District of Missouri. In February 2021, Kia Mackey filed a separate putative class action lawsuit against the Company in the U.S. District Court for the Eastern District of Missouri, Case No. 4:21-CV-00149. The plaintiffs have each asked for injunctive relief, unspecified damages, and unspecified legal fees. It is premature to estimate the potential exposure to the Company associated with the litigation. The Company intends to vigorously defend the lawsuits.

We are a party to various other legal proceedings and administrative actions that are incidental to our operations. In our opinion, the proceedings and actions in which we are involved should not, individually or in the aggregate, have a material adverse effect on our financial condition, operating results, or cash flows. However, since the trends and outcome of this litigation are inherently uncertain, we cannot give absolute assurance regarding the future resolution of such litigation, or that such litigation may not become material in the future.

Item 1A:      Risk Factors

There have been no material changes with respect to risk factors as previously disclosed in our Form 10-Q filed on August 9,

2021. There may be additional risks that impact our business that we currently do not recognize as, or that are not currently,

material to our business.

Item 6:        Exhibits

Exhibits

 

Exhibit 31.1	Certificate of the Chief Executive Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certificate of the Chief Financial Officer pursuant to § 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	Certificate of the Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Certificate of the Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.SCH	Schema Document
Exhibit 101.CAL	Calculation Linkbase Document
Exhibit 101.DEF	Definition Linkbase Document
Exhibit 101.LAB	Labels Linkbase Document
Exhibit 101.PRE	Presentation Linkbase Document

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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:	November 8, 2021	By:	/s/ Roel Vestjens
			Roel Vestjens
			President and Chief Executive Officer
Date:	November 8, 2021	By:	/s/ Jeremy Parks
			Jeremy Parks
			Senior Vice President, Finance, and Chief Financial Officer
Date:	November 8, 2021	By:	/s/ Douglas R. Zink
			Douglas R. Zink
			Vice President and Chief Accounting Officer

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