-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DsG015tgLlcirsPENnlSa1xofvmpPf0vti6pe2GTno8nGvUVLsft8ov6n+KP4jzr TU+Z8fyuOkUJvg1XM/3RVg== 0000950137-06-005460.txt : 20060505 0000950137-06-005460.hdr.sgml : 20060505 20060505163101 ACCESSION NUMBER: 0000950137-06-005460 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20060326 FILED AS OF DATE: 20060505 DATE AS OF CHANGE: 20060505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELDEN CDT INC. CENTRAL INDEX KEY: 0000913142 STANDARD INDUSTRIAL CLASSIFICATION: DRAWING AND INSULATING NONFERROUS WIRE [3357] IRS NUMBER: 363601505 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12561 FILM NUMBER: 06813464 BUSINESS ADDRESS: STREET 1: BELDEN CDT INC. STREET 2: 7701 FORSYTH BOULEVARD, SUITE 800 CITY: ST. LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 314-854-8000 MAIL ADDRESS: STREET 1: BELDEN CDT INC. STREET 2: 7701 FORSYTH BOULEVARD, SUITE 800 CITY: ST. LOUIS STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: CABLE DESIGN TECHNOLOGIES CORP DATE OF NAME CHANGE: 19931006 10-Q 1 c05056e10vq.txt FORM 10-Q ================================================================================ 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 MARCH 26, 2006 COMMISSION FILE NO. 001-12561 ------------------- BELDEN CDT INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------- DELAWARE 36-3601505 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 7701 FORSYTH BOULEVARD, SUITE 800 ST. LOUIS, MISSOURI 63105 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (314) 854-8000 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE ------------------- 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, and (2) has been subject to such filing requirements for the past 90 days. The registrant is a large accelerated filer and is not a shell company. Following is the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT MAY 1, 2006 - ----------------------------- -------------------------- Common Stock, $0.01 Par Value 42,532,080 ================================================================================ Exhibit Index on Pages 33 Page 1 of 33 -1- PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BELDEN CDT INC. CONSOLIDATED BALANCE SHEETS
MARCH 26, DECEMBER 31, 2006 2005 -------------- ------------ (UNAUDITED) (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents $ 153,216 $ 134,638 Receivables 202,132 174,360 Inventories 261,859 245,481 Deferred income taxes 27,893 27,845 Other current assets 7,224 8,015 Current assets of discontinued operations - 56,997 -------------- ------------ Total current assets 652,324 647,336 Property, plant and equipment, less accumulated depreciation 283,114 287,778 Goodwill, less accumulated amortization 272,996 272,290 Other intangibles, less accumulated amortization 72,065 72,459 Other long-lived assets 17,621 6,214 -------------- ------------ $ 1,298,120 $ 1,286,077 ============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 195,962 $ 196,078 Current maturities of long-term debt 59,052 59,000 Current liabilities of discontinued operations 357 13,342 -------------- ------------ Total current liabilities 255,371 268,420 Long-term debt 172,000 172,051 Postretirement benefits other than pensions 33,917 33,167 Deferred income taxes 76,057 73,851 Other long-term liabilities 17,699 17,166 Minority interest 8,342 7,914 Stockholders' equity: Preferred stock - - Common stock 503 503 Additional paid-in capital 549,181 540,430 Retained earnings 298,047 290,870 Accumulated other comprehensive loss (1,535) (6,881) Unearned deferred compensation - (336) Treasury stock (111,462) (111,078) -------------- ------------ Total stockholders' equity 734,734 713,508 -------------- ------------ $ 1,298,120 $ 1,286,077 ============== ============
The accompanying notes are an integral part of these Consolidated Financial Statements -2- BELDEN CDT INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 26, 2006 MARCH 27, 2005 -------------- -------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues $ 321,905 $ 286,268 Cost of sales (248,490) (223,483) -------------- -------------- Gross profit 73,415 62,785 Selling, general and administrative expenses (46,459) (48,134) -------------- -------------- Operating income 26,956 14,651 Interest expense (3,792) (3,758) Interest income 995 756 Minority interest (217) (167) -------------- -------------- Income from continuing operations before taxes 23,942 11,482 Income tax expense (9,002) (4,100) -------------- -------------- Income from continuing operations 14,940 7,382 Loss from discontinued operations, net of tax (Note 3) (1,330) (739) Gain (loss) on disposal of discontinued operations, net of tax (Note 3) (4,298) 6,400 -------------- -------------- Net income $ 9,312 $ 13,043 ============== ============== Weighted average number of common shares and equivalents: Basic 42,550 47,007 Diluted 49,307 53,684 Basic income (loss) per share: Continuing operations $ 0.35 $ 0.16 Discontinued operations (0.03) (0.02) Disposal of discontinued operations (0.10) 0.14 Net income 0.22 0.28 Diluted income (loss) per share: Continuing operations $ 0.32 $ 0.15 Discontinued operations (0.03) (0.01) Disposal of discontinued operations (0.09) 0.12 Net income 0.20 0.26 Dividends declared per share $ 0.05 $ 0.05
The accompanying notes are an integral part of these Consolidated Financial Statements -3- BELDEN CDT INC. CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 26, 2006 MARCH 27, 2005 ---------------- --------------- (IN THOUSANDS) Cash flows from operating activities: Net income $ 9,312 $ 13,043 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization 12,368 9,730 Deferred income tax expense 5,543 5,545 Pension funding in excess of pension expense (14,639) (2,246) Share-based compensation 1,210 223 Loss (gain) on disposal of tangible assets 6,140 (10,000) Changes in operating assets and liabilities, net of the effects of currency exchange rate changes: Receivables (23,727) (25,961) Inventories (16,249) (8,880) Accounts payable and accrued liabilities (1,139) 880 Current income taxes, net (3,592) (5,296) Other assets and liabilities, net 13,747 19,400 ---------------- --------------- Net cash used for operating activities (11,026) (3,562) Cash flows from investing activities: Proceeds from disposal of tangible assets 27,856 12,833 Capital expenditures (3,074) (5,935) ---------------- --------------- Net cash provided by investing activities 24,782 6,898 Cash flows from financing activities: Proceeds from exercise of stock options 6,918 2,060 Excess tax benefits related to share-based compensation 966 - Cash dividends paid (2,135) (2,364) Debt issuance costs (1,063) - Payments under borrowing arrangements - (169) ---------------- --------------- Net cash provided by (used for) financing activities 4,686 (473) Effect of foreign currency exchange rate changes on cash and cash equivalents 136 (1,402) ---------------- --------------- Increase in cash and cash equivalents 18,578 1,461 Cash and cash equivalents, beginning of period 134,638 188,795 ---------------- --------------- Cash and cash equivalents, end of period $ 153,216 $ 190,256 ================ =============== Supplemental cash flow information: Income tax refunds received $ 450 $ 2,079 Income taxes paid (1,464) (1,749) Interest paid, net of amount capitalized (6,983) (7,336)
The accompanying notes are an integral part of these Consolidated Financial Statements -4- BELDEN CDT INC. CONSOLIDATED STOCKHOLDERS' EQUITY STATEMENTS THREE MONTHS ENDED MARCH 26, 2006 AND MARCH 27, 2005 (UNAUDITED)
ACCUMULATED COMMON STOCK TREASURY SHARES UNEARNED OTHER --------------- PAID-IN RETAINED ------------------ DEFERRED COMPREHENSIVE SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT COMPENSATION INCOME (LOSS) TOTAL ------ ------ --------- ---------- ------ ---------- ------------ -------------- --------- (IN THOUSANDS) Balance at December 31, 2004 50,211 $ 502 $ 531,984 $ 252,114 (3,009) $ - $ (2,462) $ 27,862 $ 810,000 Net income 13,043 13,043 Foreign currency translation (14,643) (14,643) Minimum pension liability 107 107 --------- Comprehensive loss (1,493) Exercise of stock options 99 1 2,059 2,060 Share-based compensation 17 (316) (316) Forfeiture of stock by incentive plan participants in lieu of cash payment of individual tax liabilities related to share-based compensation (11) - Amortization of unearned deferred compensation 539 539 Cash dividends ($.05 per share) (2,364) (2,364) Other 386 314 700 ------ ------ --------- ---------- ------ ---------- ------------ -------------- --------- Balance at March 27, 2005 50,310 $ 503 $ 534,429 $ 263,107 (3,003) $ (316) $ (1,923) $ 13,326 $ 809,126 ====== ====== ========= ========== ====== ========== ============ ============== ========= Balance at December 31, 2005 50,346 $ 503 $ 540,430 $ 290,870 (8,010) $ (111,078) $ (336) $ (6,881) $ 713,508 Net income 9,312 9,312 Foreign currency translation 5,392 5,392 Minimum pension liability (46) (46) --------- Comprehensive income 14,658 Exercise of stock options 6,918 359 6,918 Share-based compensation 2,169 3 2,169 Forfeiture of stock by incentive plan participants in lieu of cash payment of individual tax liabilities related to share-based compensation (15) (384) (384) Adoption of SFAS No. 123(R) (336) 336 - Cash dividends ($.05 per share) (2,135) (2,135) ------ ------ --------- ---------- ------ ---------- ------------ -------------- --------- Balance at March 26, 2006 50,346 $ 503 $ 549,181 $ 298,047 (7,663) $ (111,462) $ - $ (1,535) $ 734,734 ====== ====== ========= ========== ====== ========== ============ ============== =========
The accompanying notes are an integral part of these Consolidated Financial Statements -5- BELDEN CDT INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying Consolidated Financial Statements include Belden CDT Inc. and all of its subsidiaries (the COMPANY, US, WE, or OUR). We eliminate all significant affiliate accounts and transactions in consolidation. The accompanying Consolidated Financial Statements presented as of any date other than December 31, 2005: - Are prepared from the books and records without audit, and - Are prepared in accordance with the instructions to 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. Please read these Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and Supplementary Data contained in our Annual Report on Form 10-K for the year ended December 31, 2005. Reporting Periods Our fiscal year and fiscal fourth quarter both end on December 31. Our fiscal first, second and third quarter each end on the last Sunday falling on or before their respective calendar quarter-end. Foreign Currency Translation For international operations with functional currencies other than the United States dollar, we translate asset and liability accounts at current exchange rates and translate income and expenses using average exchange rates. We report the resulting translation adjustments, as well as gains and losses from certain affiliate transactions, in accumulated other comprehensive income (loss), a separate component of stockholders' equity. We include exchange gains and losses on transactions in operating earnings. Use of Estimates in the Preparation of the Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are made in regard to receivables collectibility, inventory valuation, realization of deferred tax assets, valuation of long-lived tangible assets, valuation of goodwill and intangible assets, calculation of share-based compensation expense, calculation of pension and other postretirement benefits expense, and valuation of acquired businesses. Reclassifications Certain reclassifications have been made to the 2005 Consolidated Financial Statements in order to conform to the 2006 presentation. -6- Inventories Inventories are stated at the lower of cost or market. We determine the cost of all raw materials, work-in-process and finished goods inventories by the first in, first out method. Cost components include direct labor, applicable production overhead and amounts paid to suppliers of materials and products as well as freight costs and, when applicable, duty costs to import the materials and products. Shipping and Handling Costs We include fees earned on the shipment of product to customers in revenues and include costs incurred on the shipment of product to customers as cost of sales. We include certain handling costs, primarily incurred at our distribution centers, totaling $1.5 million and $1.4 million in selling, general and administrative expenses for the three months ended March 26, 2006 and March 27, 2005, respectively. NOTE 2: OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION During the first quarter of 2006. we announced organizational changes that resulted in a change in our reported operating segments. We now conduct our operations through four reported operating segments--the Belden Americas segment, the Specialty Products segment, the Europe segment, and the Asia Pacific segment. The Belden Americas segment, the Specialty Products segment and the Europe segment all design, manufacture, and market metallic cable, fiber optic cable, connectivity products, and certain other non-cable products with industrial, communications/networking, video/sound/security, and transportation/defense applications. The Asia Pacific segment markets these same products, but currently has no design or manufacturing capabilities. We sell these products principally through distributors or directly to systems integrators, original equipment manufacturers, and large telecommunications companies. We have reclassified prior year segment disclosures to conform to the new segment presentation. We evaluate operating segment performance and allocate resources based on operating earnings before interest and income taxes. Operating earnings of the reportable operating segments include all the ongoing costs of operations. Allocations to or from these operating segments are not significant. Transactions between the operating segments are conducted on an arms-length basis. With the exception of unallocated goodwill, certain unallocated tax assets, and tangible assets located at the corporate headquarters, substantially all of our assets are utilized by the operating segments. Operating Segment Information Finance and administration costs reflected in the column entitled F&A in the tables below represent corporate headquarters operating, treasury and income tax expenses, corporate assets, and corporate investment in certain affiliates. Amounts reflected in the column entitled Eliminations in the tables below represent the eliminations of affiliate revenues, affiliate cost of sales, and certain investments in affiliates. -7-
BELDEN SPECIALTY ASIA THREE MONTHS ENDED MARCH 26, 2006 AMERICAS PRODUCTS EUROPE PACIFIC F&A ELIMINATIONS TOTAL - ------------------------------------------ -------- --------- --------- --------- --------- ------------ ---------- (IN THOUSANDS) Total assets (1) $422,202 $ 234,975 $ 434,094 $ 25,437 $ 521,526 $ (340,114) $1,298,120 External customer revenues $175,366 $ 60,718 $ 73,012 $ 12,809 $ - $ - $ 321,905 Affiliate revenues 14,912 5,370 2,136 - - (22,418) - Operating income (loss) 31,033 6,902 (1,140) 1,453 (6,265) (5,027) 26,956 Interest expense (3,792) Interest income 995 Minority interest (217) Income tax expense (9,002) ---------- Income from continuing operations 14,940 Loss from discontinued operations (Note 3) (1,330) Loss on disposal of discontinued operations (Note 3) (4,298) ---------- Net income $ 9,312 ==========
BELDEN SPECIALTY ASIA THREE MONTHS ENDED MARCH 27, 2005 AMERICAS PRODUCTS EUROPE PACIFIC F&A ELIMINATIONS TOTAL - ------------------------------------------ -------- --------- --------- --------- --------- ------------ ---------- (IN THOUSANDS) Total assets (1) $397,624 $ 233,084 $ 401,336 $ 26,329 $ 399,496 $ (166,810) $1,291,059 External customer revenues $142,421 $ 53,920 $ 78,947 $ 10,980 $ - $ - $ 286,268 Affiliate revenues 17,965 4,054 1,602 - - (23,621) - Operating income (loss) 16,644 7,428 719 95 (5,952) (4,283) 14,651 Interest expense (3,758) Interest income 756 Minority interest (167) Income tax expense (4,100) ---------- Income from continuing operations 7,382 Loss from discontinued operations (Note 3) (739) Gain on disposal of discontinued operations (Note 3) 6,400 ---------- Net income $ 13,043 ==========
(1) Excludes discontinued operations -8- Geographic Information The following table identifies revenues by geographic region based on the location of the customer.
THREE MONTHS ENDED THREE MONTHS ENDED MARCH 26, 2006 MARCH 27, 2005 ------------------------- -------------------------- PERCENT OF PERCENT OF REVENUES REVENUES REVENUES REVENUES ------------- ---------- ------------- ---------- (IN THOUSANDS, EXCEPT % DATA) United States $ 189,679 58.9% $ 154,691 54.0% Europe 68,255 21.2% 75,497 26.4% Canada 34,790 10.8% 31,063 10.9% Rest of World 29,181 9.1% 25,017 8.7% ------------- ---------- ------------- ---------- Total $ 321,905 100.0% $ 286,268 100.0% ============= ========== ============= ==========
NOTE 3: DISCONTINUED OPERATIONS In 2005, we announced our decision to exit the United Kingdom communications cable business. In the first quarter of 2006, we sold certain assets and liabilities of our telecommunications cable operation in Manchester, United Kingdom (MANCHESTER) for approximately $27.9 million cash and terminated, without penalty, our supply agreement with British Telecom plc. We recognized a $4.3 million after-tax loss on the disposal of this discontinued operation. During 2005, we sold substantially all of the remaining assets of our Belden Communications Company (BCC) operation in Phoenix, Arizona; our Raydex/CDT Ltd. (RAYDEX) operation in Skelmersdale, United Kingdom; our Montrose/CDT (MONTROSE) operation in Auburn, Massachusetts; and our Admiral/CDT (ADMIRAL) operation in Barberton, Ohio for approximately $40.0 million cash. We recognized a $15.2 million after-tax gain (which included a $6.4 million after-tax gain in the first quarter of 2005) on the disposal of the BCC discontinued operation. Raydex, Montrose and Admiral were acquired through the 2004 merger between Belden Inc. (BELDEN) and Cable Design Technologies Corporation (CDT). The net proceeds received from the sales of certain assets of Raydex, Montrose and Admiral exceeded the carrying values of these assets by $0.1 million. Upon the finalization of purchase accounting, we increased the portion of consideration we previously allocated to the tangible assets of these discontinued operations and reduced the portion of consideration we previously allocated to goodwill by this excess amount. We recognized severance and other related benefits costs related to the discontinued Manchester operation totaling $1.0 million in discontinued operations during 2005. We recognized severance and other related benefits costs related to the discontinued BCC operation totaling $5.7 million in discontinued operations during 2004 and 2005. We recognized severance and other related benefits costs related to the discontinued Raydex and Montrose operations totaling $5.3 million as a liability assumed in the merger between Belden and CDT during 2004 and 2005. The number of employees eligible for severance payments because of these actions was 1,244. -9- The following table sets forth discontinued operations restructuring activity that occurred during the current quarter:
TOTAL NUMBER OF ACCRUED SEVERANCE EMPLOYEES ELIGIBLE FOR AND OTHER RELATED SEVERANCE AND OTHER BENEFITS RELATED BENEFITS ----------------- ---------------------- (IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES) Balance at December 31, 2005 $ 160 6 Cash payments / employee terminations (162) (6) Foreign currency translation 2 - ----------------- --- Balance at March 26, 2006 $ - - ================= ===
The results of operations and financial position for Manchester, BCC, Raydex, Montrose and Admiral have been classified as discontinued operations in all periods presented. Results from discontinued operations include the following revenues, loss before taxes and income tax benefit:
THREE MONTHS ENDED MARCH 26, 2006 MARCH 27, 2005 - ------------------ -------------- -------------- (IN THOUSANDS) Revenues $ 27,644 $ 24,827 Loss before taxes (1,900) (1,206) Income tax benefit 570 467
Gain (loss) from disposal of discontinued operations includes the following gain (loss) before taxes and income tax benefit (expense):
THREE MONTHS ENDED MARCH 26, 2006 MARCH 27, 2005 - ------------------ -------------- -------------- (IN THOUSANDS) Gain (loss) before taxes $ (6,140) $ 10,000 Income tax benefit (expense) 1,842 (3,600)
At March 26, 2006, the only assets or liabilities belonging to the discontinued operations that remained as part of the disposal group were accrued liabilities related to our discontinued BCC operation totaling $0.4 million. NOTE 4: EUROPEAN RESTRUCTURING In 2005, we announced our decision to restructure European operations in an effort to reduce manufacturing floor space and overhead. We recognized accelerated depreciation of $1.3 million in cost of sales during the current quarter related to these restructuring actions. We recognized severance and other related benefits costs within the Europe operating segment totaling $1.1 million ($0.3 million in costs of sales and $0.8 million in SG&A expense) in the first quarter of 2006 related to personnel reductions in Sweden, Germany and the Netherlands because of the restructuring. We will provide contractual termination benefits statutorily defined by the Swedish and German governments to 52 and 3 employees, respectively, and will provide special termination benefits to 2 employees in the Netherlands. -10- We recognized severance and other related benefits costs within the Europe operating segment totaling $7.7 million ($7.5 million in cost of sales and $0.2 million in SG&A expense) during the year 2005 related to personnel reductions in the Netherlands, the Czech Republic, and the United Kingdom because of the restructuring. We provided contractual termination benefits statutorily defined by the Dutch, Czech and British governments to 61, 78, and 4 employees, respectively. We also offered one-time termination benefits to 1 employee in the United Kingdom. The following table sets forth European restructuring activity that occurred during the current quarter:
TOTAL NUMBER OF ACCRUED SEVERANCE EMPLOYEES ELIGIBLE FOR AND OTHER RELATED SEVERANCE AND OTHER BENEFITS RELATED BENEFITS ----------------- ---------------------- (IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES) Balance at December 31, 2005 $ 7,698 144 Cash payments / employee terminations (442) (13) New charges 1,110 57 Foreign currency translation 181 - ----------------- --- Balance at March 26, 2006 $ 8,547 188 ================= ===
We anticipate making substantially all severance payments against these accruals within one year of each accrual date. We continue to review our business strategies and evaluate further restructuring actions. This could result in additional severance and other related benefits charges in future periods. NOTE 5: BELDEN CDT MERGER RESTRUCTURING In 2004, we initiated plans to reduce personnel at several legacy CDT locations and recognized severance and other related benefits costs of $14.0 million ($6.7 million, $3.3 million, $2.0 million, $1.7 million and $0.3 million in the financial records of F&A, the Europe segment, the Specialty Products segment, the Belden Americas segment, and the Asia Pacific segment, respectively). These costs were recognized as a liability assumed in the Belden CDT merger and were included in the cost to acquire CDT. The number of employees eligible for severance payments because of these actions was 233. During 2005, we decided to terminate certain restructuring plans related to legacy CDT operations because of improved capacity utilization at those operations. We reduced accrued severance and other related benefits recorded within the Specialty Products segment, the Europe segment, and the Belden Americas segment by $0.8 million, $0.8 million and $0.5 million, respectively, and reduced the portion of the consideration we had previously allocated to goodwill by this same amount. This action reduced the number of employees eligible for severance payments by 76. The following table sets forth restructuring activity related to the Belden CDT merger that occurred during the current quarter: -11-
TOTAL NUMBER OF ACCRUED SEVERANCE EMPLOYEES ELIGIBLE FOR AND OTHER RELATED SEVERANCE AND OTHER BENEFITS RELATED BENEFITS ----------------- ---------------------- (IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES) Balance at December 31, 2005 $ 1,978 69 Cash payments / employee terminations (549) (2) Foreign currency translation 24 - ----------------- --- Balance at March 26, 2006 $ 1,453 67 ================= ===
We anticipate making substantially all severance payments against these accruals within the current year. NOTE 6: INCOME PER SHARE Basic income per share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted income per share is computed by dividing net income as adjusted for the tax-effected interest expense on our convertible subordinated debentures by the weighted average number of common shares outstanding plus additional potential dilutive shares assumed to be outstanding. Except for additional potential shares associated with our convertible subordinated debentures, additional potential shares are calculated for each measurement period based on the treasury stock method, under which repurchases are assumed to be made at the average fair market value price per share of our common stock during the period. Additional potential shares associated with our convertible subordinated debentures are calculated by dividing the principal amount of the debentures by their conversion price. Our additional potential dilutive shares currently consist of stock options, stock appreciation rights, nonvested restricted stock awards, and convertible subordinated debentures. Nonvested restricted stock awards carry dividend and voting rights but are not included in the weighted average number of common shares outstanding used to compute basic income per share. -12-
MARCH 26, MARCH 27, THREE MONTHS ENDED 2006 2005 - ---------------------------------------------------------------------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Numerator for basic income per share: Income from continuing operations $ 14,940 $ 7,382 Loss from discontinued operations (1,330) (739) Gain (loss) on disposal of discontinued operations (4,298) 6,400 --------- --------- Net income $ 9,312 $ 13,043 Numerator for diluted income per share: Income from continuing operations $ 14,940 $ 7,382 Tax-effected interest expense on convertible subordinated debentures 678 678 --------- --------- Adjusted income from continuing operations 15,618 8,060 Loss from discontinued operations (1,330) (739) Gain (loss) on disposal of discontinued operations (4,298) 6,400 --------- --------- Adjusted net income $ 9,990 $ 13,721 Denominator: Denominator for basic income per share -- weighted average shares 42,550 47,007 Effect of dilutive common stock equivalents 6,757 6,677 --------- --------- Denominator for diluted incomeper share -- adjusted weighted average shares 49,307 53,684 Basic income (loss) per share: Continuing operations $ 0.35 $ 0.16 Discontinued operations (0.03) (0.02) Disposal of discontinued operations (0.10) 0.14 Net income 0.22 0.28 Diluted income (loss) per share: Continuing operations $ 0.32 $ 0.15 Discontinued operations (0.03) (0.01) Disposal of discontinued operations (0.09) 0.12 Net income 0.20 0.26
-13- NOTE 7: INVENTORIES The major classes of inventories were as follows:
MARCH 26, DECEMBER 31, 2006 2005 ---------- ------------ (IN THOUSANDS) Raw materials $ 65,888 $ 67,899 Work-in-process 49,203 43,857 Finished goods 155,579 144,659 Perishable tooling and supplies 3,905 3,977 ---------- ------------ Gross inventories 274,575 260,392 Obsolescence and other reserves (12,716) (14,911) ---------- ------------ Net inventories $ 261,859 $ 245,481 ========== ============
NOTE 8: PROPERTY, PLANT AND EQUIPMENT The carrying values of property, plant and equipment were as follows:
MARCH 26, DECEMBER 31, 2006 2005 ---------- ------------ (IN THOUSANDS) Land and land improvements $ 23,938 $ 23,670 Buildings and leasehold improvements 129,272 128,498 Machinery and equipment 369,192 380,848 Computer software 24,363 23,861 Construction in process 10,298 10,056 ---------- ------------ Gross property, plant and equipment 557,063 566,933 Accumulated depreciation (273,949) (279,155) ---------- ------------ Net property, plant and equipment $ 283,114 $ 287,778 ========== ============
Disposal Disclosure regarding the sale of property, plant and equipment belonging to our discontinued Manchester operation is included in Note 3, Discontinued Operations, to the Consolidated Financial Statements. Depreciation Expense We recognized total depreciation expense of $12.4 million and $9.7 million during the three months ended March 26, 2006 and March 27, 2005, respectively, which included $2.7 million and $0.5 million for our discontinued Manchester operation, respectively. Disclosures regarding accelerated depreciation related to the Company's decisions to exit the United Kingdom communications cable market and restructure its European operations are included in Note 3, Discontinued Operations, and Note 4, European Restructuring, respectively, to the Consolidated Financial Statements. -14- NOTE 9: INTANGIBLE ASSETS The carrying values of intangible assets were as follows:
MARCH 26, DECEMBER 31, 2006 2005 ---------- ------------ (IN THOUSANDS) Intangible assets subject to amortization: Customer relations $ 54,777 $ 54,608 Developed technologies 6,241 6,179 Favorable contracts 1,094 1,094 Backlog 1,999 1,976 ---------- ------------ Gross intangible assets subject to amortization 64,111 63,857 Accumulated amortization (7,405) (6,634) ---------- ------------ Net intangible assets subject to amortization 56,706 57,223 ---------- ------------ Intangible assets not subject to amortization: Goodwill 272,996 272,290 Trademarks 15,359 15,236 ---------- ------------ Total intangible assets not subject to amortization 288,355 287,526 ---------- ------------ Net intangible assets $ 345,061 $ 344,749 ========== ============
The Company recognized total amortization expense of $0.6 million and $1.3 million during the three months ended March 26, 2006 and March 27, 2005, respectively. Goodwill, net of accumulated amortization, was allocated to our operating segments and other business units as follows:
MARCH 26, DECEMBER 31, 2006 2005 --------- ------------ (IN THOUSANDS) Belden Americas Segment $ 60,252 $ 60,252 Specialty Products Segment 36,950 36,950 Europe Segment 31,180 30,474 Finance & Administration 144,614 144,614 --------- ------------ Consolidated $ 272,996 $ 272,290 ========= ============
Goodwill allocated to the Europe segment increased from December 31, 2005 because of the impact of translation on goodwill denominated in currencies other than the United States dollar. Certain goodwill has not been assigned to any specific operating segment. Management believes it benefits the entire Company because it represents acquirer-specific synergies unique to the Belden CDT merger and is therefore recognized in the F&A financial records. -15- NOTE 10: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The carrying values of accounts payable and accrued liabilities were as follows:
MARCH 26, DECEMBER 31, 2006 2005 --------- ------------ (IN THOUSANDS) Accounts payable $ 105,993 $ 100,731 Wages, severance and related taxes 32,596 33,370 Employee benefits 32,323 34,526 Interest 2,010 5,485 Other (individual items less than 5% of total current liabilities) 23,040 21,966 --------- ------------ Total accounts payable and accrued liabilities $ 195,962 $ 196,078 ========= ============
Accrued Severance and Other Related Benefits During the current quarter, we recognized severance and other related benefits costs because of personnel reductions in the Specialty Products segment ($0.1 million in SG&A expenses) and the Europe segment ($0.1 million in cost of sales). We notified 5 employees, prior to the end of the quarter, of the pending terminations as well as the amount of one-time termination benefits they each should expect to receive. During 2004 and 2005, the Company recognized severance and other related benefits costs because of (1) personnel reductions and the closure of a manufacturing facility within the Belden Americas segment ($2.8 million in cost of sales and $0.4 million in SG&A expenses), (2) personnel reductions within the Europe segment ($9.0 million in cost of sales and $0.5 million in SG&A expenses), and (3) personnel reductions within the Asia Pacific segment ($0.2 million in SG&A expenses). The Company notified 236 employees, prior to the end of the respective quarter in which their severance costs were recognized, of the pending terminations as well as the amount of one-time termination benefits they each should expect to receive We anticipate making substantially all severance payments against these accruals within one year of each accrual date. The following table sets forth severance activity that occurred during the three months ended March 26, 2006:
TOTAL NUMBER OF ACCRUED SEVERANCE EMPLOYEES ELIGIBLE FOR AND OTHER RELATED SEVERANCE AND OTHER BENEFITS RELATED BENEFITS ----------------- ---------------------- (In thousands, except number of employees) Balance at December 31, 2005 $ 1,143 16 Cash payments / employee terminations (178) (7) New charges 185 5 Foreign currency translation 4 - Other adjustments (7) - ----------------- --- Balance at March 26, 2006 $ 1,147 14 ================= ===
We continue to review our business strategies and evaluate further restructuring actions. This could result in additional severance and other related benefits charges in future periods. -16- Environmental Remediation Liabilities The Company is involved in the environmental remediation of various current and former manufacturing sites. The Company estimates the range of potential costs to remediate environmental sites, which can vary significantly depending on the final determination on the extent of remediation required, the method of remediation required, the Company's share of remediation costs if other parties are involved, and other factors. The Company records a liability for its most likely estimate of remediation costs. The Company's reserve for environmental remediation and related costs was approximately $6.8 million at March 26, 2006 and $7.2 million at December 31, 2005. The Company expects to fund these environmental remediation liabilities over the next 5 years. It is reasonably possible that a change in the estimated remediation costs will occur before remediation is completed. NOTE 11: LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS Revolving Credit Facility We executed a new credit agreement with a group of 8 banks in January 2006. This new credit agreement provides us with a $165.0 million secured, variable-rate and revolving credit facility expiring in January 2011. The facility is secured by our overall cash flow and our assets in the United States. This new agreement contains certain financial covenants, including maintenance of maximum leverage and minimum fixed charge coverage ratios, with which we are required to comply. This new agreement also allows us to increase the facility, at any time and from time to time (subject to certain restrictions), to an aggregate amount not exceeding $200.0 million. The credit agreement executed in January 2006 replaced a $75.0 million agreement executed in October 2003 between us and a group of 6 banks that would have expired in June 2006. We cancelled this old credit agreement in January 2006. There were no outstanding borrowings at March 26, 2006 under our credit agreement executed in January 2006. We had $154.2 million in borrowing capacity available at March 26, 2006 .We were in compliance with the covenants required by this credit agreement at March 26, 2006. Convertible Subordinated Debentures At March 26, 2006, we had outstanding $110.0 million of unsecured subordinated debentures. The debentures are convertible into approximately 6.2 million shares of common stock, at a conversion price of $17.859 per share, upon the occurrence of certain events. Holders may surrender their debentures for conversion into shares of common stock upon satisfaction of any of the conditions listed in Note 14, Long-Term Debt and Other Borrowing Arrangements, to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2005. At March 26, 2006, one of these conditions--the closing sale price of our common stock must be at least 110% of the conversion price for a minimum of 20 days in the 30 trading-day period prior to surrender--had been satisfied. To date, no holders of the debentures have surrendered their debentures for conversion into shares of our common stock. The 6.2 million shares of common stock that would be issued if the debentures were converted are included in our calculation of diluted income per share for the three months ended March 26, 2006. -17- Medium-Term Notes At March 26, 2006, we had outstanding $121.0 million of unsecured medium-term notes. The agreements for these notes contain various customary affirmative and negative covenants and other provisions, including restrictions on the incurrence of debt, maintenance of a maximum leverage ratio and minimum net worth, with which we are required to comply. We were in compliance with these covenants at March 26, 2006. Short-Term Borrowings At March 26, 2006, we had unsecured, uncommitted arrangements with 7 banks under which we could borrow up to $2.7 million at prevailing interest rates. There were no outstanding borrowings under these arrangements on that date. NOTE 12: INCOME TAXES Net tax expense of $9.0 million for the three months ended March 26, 2006 resulted from income from continuing operations before taxes of $23.9 million. We consider earnings from foreign subsidiaries to be indefinitely reinvested and, accordingly, no provision for United States federal and state income taxes has been made for these earnings. Upon distribution of foreign subsidiary earnings, we may be subject to United States income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. The difference between the effective rate reflected in the provision for income taxes on income from continuing operations before taxes and the amounts determined by applying the applicable statutory United States tax rate for the three months ended March 26, 2006 are analyzed below:
THREE MONTHS ENDED MARCH 26, 2006 AMOUNT RATE - --------------------------------- --------------- ----------- (IN THOUSANDS, EXCEPT RATE DATA) Provision at statutory rate $ 8,380 35.00% State income taxes 638 2.70% Change in valuation allowance 455 1.90% Lower foreign tax rates and other, net (471) (2.00)% --------------- ----- Total tax expense $ 9,002 37.60% =============== =====
NOTE 13: PENSION AND OTHER POSTRETIREMENT OBLIGATIONS We sponsor defined benefit pension plans for certain employees in the United States, the United Kingdom, Canada and Germany. Annual contributions to these pension plans equal or exceed the minimum funding requirements of applicable local regulations. The assets of the pension plans are maintained in various trusts and invested primarily in equity and fixed income securities and money market funds. We also sponsor unfunded postretirement (medical and life insurance) benefit plans in the United States and Canada. The medical benefit portion of the United States plan is only for employees who retired prior to 1989 as well as certain other employees who were near retirement and elected to receive certain benefits. -18- The following table provides the components of net periodic benefit costs for the plans:
PENSION OBLIGATIONS OTHER POSTRETIREMENT OBLIGATIONS --------------------------------- ---------------------------------- MARCH 26, MARCH 27, MARCH 26, MARCH 27, THREE MONTHS ENDED 2006 2005 2006 2005 - ------------------------- --------------- -------------- -------------- -------------- (IN THOUSANDS) Service cost $ 1,729 $ 2,732 $ 174 $ 112 Interest cost 2,197 3,440 603 596 Expected return on plan assets (2,547) (3,903) - - Amortization of prior service cost (10) (10) (27) (27) Net (gain) loss recognition 600 899 187 155 -------------- -------------- --------- -------------- Net periodic benefit cost $ 1,969 $ 3,158 $ 937 $ 836 ============== ============== ========= ==============
We contributed $16.6 million and $0.8 million to our pension plans and other postretirement plans, respectively, during the three months ended March 26, 2006. We anticipate contributing $33.7 million and $2.7 million to our pension plans and other postretirement plans, respectively, during 2006. In connection with the sale of Manchester in the first quarter of 2006, there was a partial curtailment of our United Kingdom pension plan. No gain or loss resulted from the curtailment. NOTE 14: SHARE-BASED COMPENSATION PLANS Prior to January 1, 2006, we accounted for awards issued under our share-based compensation plans using the intrinsic-value method. We did not recognize compensation expense on stock options in the three months ended March 27, 2005 as all options granted had an exercise price equal to the market price of our stock on the date of grant. We did recognize compensation expense on restricted stock awards in the three months ended March 27, 2005 based on intrinsic value, which was equal to the market price of our stock on the date of grant. On January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (as revised in 2004 and referred to as SFAS 123(R)), Share-Based Payment, using the modified prospective method. This statement requires us to recognize in net income an estimate of expense for stock awards and options over their vesting periods typically determined as of the date of grant. Under the modified prospective application, SFAS No. 123(R) applies to new awards and to awards modified, repurchased, or cancelled after January 1, 2006. Additionally, we recognized compensation cost for the portion of awards for which the requisite service by the employee has not been rendered that were outstanding on January 1, 2006. The compensation cost for that portion of awards was based on the grant-date fair value of those awards as calculated for pro forma disclosure under SFAS No. 123 in prior years. Results for prior periods have not been restated. The following summarizes the effect on our results of operations and cash flows for the three months ended March 26, 2006 of changing from the intrinsic-value method to the fair-value method of accounting for share-based compensation: -19-
INTRINSIC FAIR VALUE VALUE INCREASE METHOD METHOD (DECREASE) -------------- ------------ ------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Income from continuing operations before taxes $ 24,397 $ 23,942 $ (455) Income from continuing operations 15,224 14,940 (284) Net income 9,596 9,312 (284) Net income per basic share 0.23 0.22 (0.01) Net income per diluted share 0.21 0.20 (0.01) Cash used by operating activities (10,742) (11,026) 284 Cash provided by financing activities 3,720 4,686 966
The following table illustrates the effect on net income and net income per share if we had accounted for stock options using the fair value method in the three months ended March 27, 2005. For purposes of this pro forma disclosure, the value of the options is estimated using a Black-Scholes-Merton option-pricing formula and amortized to expense over the options' vesting periods.
THREE MONTHS ENDED MARCH 27, 2005 ----------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) As reported: Share-based employee compensation cost, net of tax $ 332 Net income 13,043 Basic net income per share 0.28 Diluted net income per share 0.26 Pro forma: Share-based employee compensation cost, net of tax $ 334 Net income 13,041 Basic net income per share 0.28 Diluted net income per share 0.26
Our 2001 Long-Term Performance Incentive Plan (the PLAN), which is stockholder approved, permits the grant of stock-based awards such as stock options, stock appreciation rights (SARS), restricted stock, and performance shares to our employees and members of our Board of Directors for up to 4.3 million shares of our common stock. We believe that such awards better align the interests of our employees with those of our stockholders. Compensation cost charged against income for this plan and the total income tax benefit recognized for share-based compensation arrangements is included below:
THREE THREE MONTHS ENDED MONTHS ENDED MARCH 26, 2006 MARCH 27, 2005 -------------- --------------- (IN THOUSANDS) Total share-based compensation cost charged to SG&A expenses $ 1,210 $ 539 Income tax benefit 455 192
-20- Stock Appreciation Rights and Stock Options We currently have outstanding both SARs and stock options with service conditions. SARs may be converted into shares of our common stock in equal amounts on each of the first 3 anniversaries of the grant date and expire 10 years from the grant date. We grant stock options with an exercise price equal to the market price of our common stock on the grant date. Stock options become exercisable in equal amounts on each of the first 3 anniversaries of the grant date and expire 10 years from the grant date. Certain awards provide for accelerated vesting if there is a change in control of the Company (as defined in the Plan). We recognize compensation cost for SARs and stock options based on their fair values. These fair values are estimated on the grant date using the Black-Scholes-Merton option-pricing formula which incorporates the assumptions noted in the following table. The aggregate fair value of each award is amortized to expense over that award's vesting period using the straight-line method. We developed the expected term assumption using our historical exercise and post vesting cancellation experience. We developed the expected volatility assumption using our monthly historical price data and other economic data trended into future years.
THREE THREE MONTHS ENDED MONTHS ENDED MARCH 26, 2006 MARCH 27, 2005 ------------------------- --------------------------------- (IN THOUSANDS, EXCEPT WEIGHTED AVERAGE FAIR VALUE AND ASSUMPTIONS) Weighted-average fair value of SARs and options granted $ 10.86 $ 5.00 Total intrinsic value of SARs converted and options exercised 2,280 679 Cash received for options exercised 6,918 2,060 Excess tax benefits realized from SARs converted and options exercised 959 - Expected volatility 36.92% 38.39% Expected term (in years) 6.5 7.0 Risk-free rate 4.48% 4.40% Dividend yield 0.78% 6.18%
A summary of stock appreciation right and stock option activity under the Plan as of March 26, 2006, and changes during the three months then ended is presented below:
AVERAGE REMAINING AGGREGATE NUMBER OF EXERCISE CONTRACTUAL INTRINSIC SARs / OPTIONS PRICE TERM VALUE -------------- --------------- ------------ -------------- (IN THOUSANDS, EXCEPT EXERCISE PRICES AND CONTRACTUAL TERMS) Outstanding at January 1, 2006 4,548 $ 24.06 Granted 316 25.81 Exercised or converted (359) 19.25 Forfeited or expired (192) 29.97 ------------ --------------- Outstanding at March 26, 2006 4,313 $ 24.26 5.3 $ 10,696 ============ =============== === ========== Vested or expected to vest at March 26, 2006 4,279 $ 24.26 5.3 $ 10,612 ============ =============== === ========== Exercisable or convertible at March 26, 2006 3,178 $ 24.93 4.7 $ 5,752 ============ =============== === ==========
-21- Restricted Stock Shares and Units We currently have outstanding restricted stock shares and units, both with service vesting conditions, and restricted stock units with performance vesting conditions. Both restricted stock shares and units with service conditions "cliff vest" in either 3 or 5 years from the grant date. Restricted stock units with performance conditions begin to vest upon satisfaction of certain financial performance conditions on the first anniversary of their grant date and then vest ratably on the second and third anniversaries of their grant date. If the financial performance conditions are not satisfied, the restricted stock units will be forfeited. We believe it is probable that the performance vesting conditions will be satisfied. We recognize compensation expense for restricted stock shares and units over their vesting periods based on fair value, which is equal to the market price of our stock on the date of grant. Compensation costs for restricted stock shares and units with service conditions are amortized to expense using the straight-line method. Compensation costs for restricted stock units with performance conditions are amortized to expense using the graded attribution method.
THREE THREE MONTHS ENDED MONTHS ENDED MARCH 26, 2006 MARCH 27, 2005 --------------------- ---------------------- (IN THOUSANDS, EXCEPT WEIGHTED AVERAGE FAIR VALUE) Weighted-average fair value of restricted stock shares and units granted $ 25.81 $ - Total fair value of restricted stock shares and units vested $ 683 $ 993
A summary of the status of our restricted stock shares and units as of March 26, 2006, and changes during the three months then ended, is presented below:
WEIGHTED- AVERAGE NUMBER OF GRANT-DATE SHARES / UNITS FAIR VALUE -------------- -------------- (IN THOUSANDS, EXCEPT FAIR VALUES) Outstanding at January 1, 2006 222 $ 20.16 Granted 130 25.81 Vested (33) 20.69 Forfeited (2) 20.50 ---------------- -------------- Outstanding at March 26, 2006 317 $ 22.42 ================ ==============
At March 26, 2006, the total unrecognized compensation cost related to all nonvested awards was $14.0 million. That cost is expected to be recognized over a weighted-average period of 3.0 years. Historically, we have issued treasury shares, if available, to satisfy award conversions and exercises. We do not expect to repurchase any shares during 2006, based on estimates of award conversions and exercises during the year. NOTE 15: CONTINGENT LIABILITIES General Various claims are asserted against us in the ordinary course of business including those pertaining to income tax examinations and product liability, customer, employment, vendor and patent matters. Based on facts currently available, management believes that the disposition of the claims that are pending or asserted will not have a materially adverse effect on our financial position, results of operations or cash flow. -22- Letters of Credit, Guaranties and Bonds At March 26, 2006, we were party to unused standby letters of credit and unused bank guaranties totaling $10.7 million and $5.4 million, respectively. We also maintain surety bonds totaling $3.9 million in connection with workers compensation self-insurance programs in several states, taxation in Canada, and the importation of product into the United States and Canada. Severance and Other Related Benefits We completed the sale of part of our business in Germany to a management-led buyout group in October 2003. We will retain liability for severance and other related benefits estimated at $0.9 million on March 26, 2006 in the event the buyout group terminates transferred employees within three years of the buyout date. The severance and other related benefits amounts are reduced based upon the transferred employees' duration of employment with the buyout group. We will be relieved of any remaining contingent liability related to the transferred employees on the third anniversary of the buyout date. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis, as well as the accompanying Consolidated Financial Statements and related notes, will aid in the understanding of the operating results as well as the financial position, cash flows, indebtedness and other key financial information of the Company. Certain reclassifications have been made to prior year amounts to make them comparable to current year presentation. Preparation of this Quarterly Report on Form 10-Q requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily derived from other sources. There can be no assurance that actual amounts will not differ from those estimates. The following discussion will also contain forward-looking statements. In connection therewith, please see the cautionary statements contained herein under the caption "Forward-Looking Statements", which identify important factors that could cause actual results to differ materially from those in the forward-looking statements. OVERVIEW Belden CDT designs, manufactures and markets high-speed electronic cables, connectivity products and related items for the specialty electronics and data networking markets. We focus on segments of the worldwide cable and connectivity market that require highly differentiated, high-performance products. We add value through design, engineering, excellence in manufacturing, product quality, and customer service. We believe that revenue growth, operating margins and working capital management are our key operating performance indicators. EFFECTS OF INFLATION The principal raw material we use in many of our products is copper. We also purchase Teflon(R) fluoropolymers, PVC, polyethylene, color chips and insulating materials such as plastic and rubber in large quantities. During 2004, 2005 and 2006, the price of copper has risen significantly and rapidly. Materials such as PVC and other plastics derived from petrochemical feedstocks have also risen in price. Generally, we have recovered much of the higher cost of raw materials through higher pricing of our finished products. The majority of our products are sold through distribution, and we manage the pricing of these products through published price lists which we update from time to time, with new prices generally taking effect a few weeks after they are announced. Some original equipment manufacturer and telecommunications customer contracts have provisions which allow us to pass on raw material cost increases, generally with a lag of a few weeks to three months. -23- EUROPEAN OPERATIONS In 2005, we announced our decisions to (1) exit the United Kingdom communications cable market and (2) restructure our European operations in an effort to reduce manufacturing floor space and overhead and streamline administrative processes. In 2006, we sold certain assets and liabilities of our operation in Manchester, United Kingdom and announced the upcoming closure of our manufacturing facility in Orebro, Sweden. As a result of these decisions, we recognized asset impairment expense of $12.8 million, severance expense of $9.8 million, and accelerated depreciation of $7.1 million from our announcement date in 2005 through the first quarter of 2006. We may recognize additional restructuring costs and associated expenses during 2006. We may recognize additional asset impairment expenses or losses on the disposal of assets during the European restructuring. OPERATING SEGMENTS We conduct our operations through four reported operating segments--the Belden Americas segment, the Specialty Products segment, the Europe segment, and the Asia Pacific segment. The Belden Americas segment, the Specialty Products segment and the Europe segment all design, manufacture, and market metallic cable, fiber optic cable, connectivity products, and certain other non-cable products with industrial, communications/networking, video/sound/security, and transportation/defense applications. The Asia Pacific segment markets these same products, but currently has no design or manufacturing capabilities. We sell these products principally through distributors or directly to systems integrators, OEMs, and large telecommunications companies. RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 26, 2006 COMPARED WITH THREE MONTHS ENDED MARCH 27, 2005 CONTINUING OPERATIONS Revenues generated in the three months ended March 26, 2006 increased 12.4% to $321.9 million from revenues generated in the three months ended March 27, 2005 of $286.3 million because of increased selling prices and increased sales volume partially offset by unfavorable foreign currency translation on international revenues. Price improvement resulted primarily from the impact of sales price increases implemented by the Company during 2005 and 2006 across most product lines in response to increases in the costs of copper and commodities derived from petrochemical feedstocks and improved pricing practices at certain of our operations. Higher unit sales of products with industrial and video/sound/security applications were partially offset by a volume decrease in sales of products with communications/networking applications. Gross profit increased 16.9% to $73.4 million in the three months ended March 26, 2006 from $62.8 million in the three months ended March 27, 2005 primarily because of improved pricing practices in certain of our operations, higher sales volumes, and the current-quarter impact of our manufacturing cost reduction initiatives. These positive factors were partially offset by higher product costs resulting from increased purchase prices for copper and commodities derived from petrochemical feedstocks and $1.3 million of accelerated depreciation of certain European assets because of our restructuring efforts. Gross profit as a percent of revenues increased from 21.9% in the first quarter of 2005 to 22.8% in the current quarter because of the previously mentioned items and increased manufacturing utilization as a result of plant rationalization and consolidation. Operating income increased 84.0% to $27.0 million for the three months ended March 26, 2006 from $14.7 million for the three months ended March 27, 2005 because of higher gross profit and a decrease in selling, general and administrative (SG&A) expenses. These expenses decreased to $46.5 million in the first quarter of 2006 from $48.1 million for the first quarter of 2005 primarily because of the impact of cost reduction initiatives (including 2005 personnel reductions) partially offset by an increase in share-based compensation expense resulting from the 2006 adoption of Statement of Financial Accounting Standards (SFAS) No. 123(R) and an increase in severance expense resulting from the European restructuring and other 2006 personnel reductions. Operating income as a percent of revenues improved from 5.1% in the first quarter of 2005 to 8.4% in the current quarter because of the previously mentioned items. -24- Income from continuing operations before taxes increased 108.5% to $23.9 million in the three months ended March 26, 2006 from $11.5 million in the three months ended March 27, 2005 primarily because of higher operating income. The Company's effective annual tax rate increased to 37.6% in the three months ended March 26, 2006 from 35.7% in the three months ended March 27, 2005 primarily attributable to a smaller relative benefit of permanent deductions to a larger pretax income amount and to losses in foreign jurisdictions for which no tax benefit is currently available. Income from continuing operations increased 102.4% to $14.9 million in the three months ended March 26, 2006 from $7.4 million in the three months ended March 27, 2005 because of higher income from continuing operations before taxes partially offset by higher income tax expense. BELDEN AMERICAS SEGMENT
March 26, March 27, % Three months ended 2006 2005 Change - ------------------------ ---------- ---------- ---------- (in thousands, except percentages) Total revenues $ 190,278 $ 160,386 18.6% Operating income 31,033 16,644 86.5% as a percent of total revenues 16.3% 10.4%
Belden Americas total revenues (which includes affiliate revenues) increased 18.6% primarily because of sales price increases that we implemented in 2005 and 2006 in response to rising raw material costs, improved pricing behavior at operations manufacturing products with communications/networking applications, and increased demand for products with industrial applications by customers in the oil and gas, paper and pulp, automotive, power generation, and food processing industries. Operating income increased 86.5% primarily because of improved revenues, share gains and price realization in some of our stronger businesses, improved factory utilization and cost absorption that resulted from both the 2005 actions and the rising demand, and the impact of 2005 cost reduction initiatives (including manufacturing facility closures) partially offset by increased share-based compensation costs resulting from the adoption of SFAS No. 123(R). SPECIALTY PRODUCTS SEGMENT
March 26, March 27, % Three months ended 2006 2005 Change - ----------------------------- ---------- ---------- ---------- (in thousands, except percentages) Total revenues $ 66,088 $ 57,974 14.0% Operating income 6,902 7,428 -7.1% as a percent of total revenues 10.4% 12.8%
Specialty Products total revenues increased 14.0% primarily because of sales price increases that we implemented in 2005 and 2006 in response to rising raw material costs, improved pricing behavior at certain operations manufacturing networking products, and increased demand for both industrial products and aerospace products. Operating income decreased 7.1% primarily because of the rising costs of copper and commodities derived from petrochemical feedstocks and increased share-based compensation costs resulting from the adoption of SFAS No. 123(R). -25- EUROPE SEGMENT
March 26, March 27, % Three months ended 2006 2005 Change - ------------------------- ----------- ----------- -------- (in thousands, except percentages) Total revenues $ 75,148 $ 80,549 -6.7% Operating income (loss) (1,140) 719 -258.6% as a percent of total revenues -1.5% 0.9%
Europe total revenues decreased by 6.7% primarily because of the discontinuation in 2005 of some unprofitable product lines, some distributor buy-ahead in the fourth quarter of 2005 to take advantage of rebates, a weak quarter with Deutsche Telecom for weather-related reasons, and unfavorable foreign currency translation partially offset by the impact of sales price increases implemented in 2005 in response to rising raw material costs and improved demand for products with industrial applications. Europe operating results reflect a deterioration from operating income of $0.7 million in the first quarter of 2005 to an operating loss of $1.1 million in the current quarter. This deterioration resulted primarily from the rising costs of copper and commodities derived from petrochemical feedstocks, accelerated depreciation and severance costs related to restructuring actions, and increased share-based compensation costs because of the adoption of SFAS No. 123(R) partially offset by the impact of cost reduction initiatives throughout the segment. ASIA PACIFIC SEGMENT
March 26, March 27, % Three months ended 2006 2005 Change - ---------------------------------- ---------- ---------- ----------- (in thousands, except percentages) Total revenues $ 12,809 $ 10,980 16.7% Operating income 1,453 95 1,429.5% as a percent of total revenues 11.3% 0.9%
Asia Pacific total revenues increased by 16.7% primarily because of increased demand for products with industrial and video/sound/security applications, sales price increases implemented in 2005 in response to rising raw material costs, and improvement in sales representation over the past year. Operating income increased from $0.1 million in the first quarter of 2005 to $1.5 million in the current quarter primarily because of the favorable revenue comparison and the impact of cost reduction initiatives. DISCONTINUED OPERATIONS During each of the periods presented we reported five operations--our telecommunications cable business in Manchester, United Kingdom (MANCHESTER); Belden Communications Company in Phoenix, Arizona (BCC); Raydex/CDT Ltd. in Skelmersdale, United Kingdom; Montrose/CDT in Auburn, Massachusetts; and Admiral/CDT in Wadsworth, Ohio and Barberton, Ohio--as discontinued operations. Loss from discontinued operations for the quarter ended March 26, 2006 includes $27.6 million of revenues and $1.9 million of loss before income tax benefits. We recognized a loss on the disposal of discontinued operations in the amount of $6.1 million before tax ($4.3 million after tax) during the first quarter of 2006 related to Manchester. Loss from discontinued operations for the quarter ended March 27, 2005 includes $24.8 million of revenues and $1.2 million of loss before income tax benefits. We recognized a gain on the disposal of discontinued operations in the amount of $10.0 million before tax ($6.4 million after tax) during the first quarter of 2005 related to BCC. At March 26, 2006, the only assets or liabilities belonging to the discontinued operations that remained as part of the disposal group were accrued liabilities related to our discontinued BCC operation totaling $0.4 million. -26- FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES Our sources of cash liquidity included cash and cash equivalents and amounts available under credit facilities. Generally, our primary source of cash has been from business operations. Cash sourced from credit facilities and other borrowing arrangements has historically been used to fund business acquisitions. We believe that the sources listed above are sufficient to fund the current requirements of working capital, to make scheduled pension contributions for our retirement plans, to fund scheduled debt maturity payments, to fund quarterly dividend payments and to support our short-term and long-term operating strategies. We anticipate funding $33.7 million in pension contributions and $2.7 million in contributions for other postretirement benefit plans in the upcoming year. We also plan to pay off tranches of both our 1997 and 1999 medium-term notes totaling $59.0 million during 2006. We anticipate we will have sufficient funds to satisfy these cash requirements. Because of net operating loss carryforwards and deductible temporary differences, we anticipate that cash payments of United States income taxes during 2006 will be significantly less than tax expense. Cash payments of income taxes for foreign jurisdictions will approximate tax expense. Planned capital expenditures for 2006 are approximately $30.0 million. We have the ability to revise and reschedule the anticipated capital expenditure program should our financial position require it. Customer demand, competitive market forces, uncertainties related to the effect of competitive products and pricing, customer acceptance of our product mix or economic conditions worldwide could affect our ability to continue to fund our needs from business operations. Net cash inflow during the current quarter totaled $18.6 million. The disposal of discontinued operations provided $27.9 million of cash during this period. CASH FLOWS FROM OPERATING ACTIVITIES Net cash used for operating activities in the first three months of 2006 totaled $11.0 million and included $12.4 million of other non-cash operating expenses and a $32.7 million net increase in operating assets and liabilities. Other non-cash operating expenses consisted of depreciation, amortization, deferred tax expense, share-based compensation, and a loss on the disposal of tangible assets partially offset by excess tax benefits recognized on share-based compensation. The net increase in operating assets and liabilities resulted primarily from increased receivables, increased inventories, increased current income taxes and decreased accounts payable and accrued liabilities partially offset by decreased other net operating assets and liabilities. CASH FLOW FROM INVESTING ACTIVITIES Net cash provided by investing activities totaled $24.8 million in the first three months of 2006. We received proceeds on the sale of certain tangible assets of our discontinued Manchester, United Kingdom operation totaling $27.9 million during the current quarter. This cash source was partially offset by capital expenditures totaling $3.1 million during the current quarter. CASH FLOW FROM FINANCING ACTIVITIES Net cash provided by financing activities during the first three months of 2006 totaled $4.7 million. During the current quarter, we received proceeds from the exercise of stock options totaling $6.9 million and recognized excess tax benefits related to share-based compensation in the amount of $1.0 million. These cash sources were partially offset by the payment of dividends of $.05 per share to stockholders during the quarter, which resulted in cash outflow of $2.1 million and the payment of debt issuance costs in the amount of $1.1 million. -27- During the quarter ended March 26, 2006, there were no material changes outside the ordinary course of business to the Company's contractual obligations presented in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of the Annual Report on Form 10-K for the period ended December 31, 2005. WORKING CAPITAL Current assets less cash and cash equivalents decreased 2.7% from December 31, 2005 to March 26, 2006 primarily because of the decrease in current assets of discontinued operations. Current assets of discontinued operations were eliminated during the first quarter of 2006 because of our sale of certain assets of the discontinued Manchester, United Kingdom business. Receivables and inventories increased 15.9% and 6.7%, respectively, from December 31, 2005 to March 26, 2006 mainly because of higher sales levels and increased costs for copper and commodities derived from petrochemical feedstocks. Current liabilities decreased 4.9%, from December 31, 2005 to March 26, 2006 primarily because of the decrease in current liabilities of discontinued operations. Current liabilities of discontinued operations decreased from December 31, 2005 to March 26, 2006 because of our sale of certain liabilities of the discontinued Manchester, United Kingdom business during the current quarter. LONG-LIVED ASSETS Our long-lived assets consist of property, plant and equipment, goodwill, intangible assets such as patents, trademarks, backlog, favorable contracts and customer relationships, and other assets such as prepaid pension contributions and prepaid debt service costs. Long-lived assets increased 1.1% from December 31, 2005 to March 26, 2006 primarily because of a $10.5 million contribution to our United Kingdom pension plan during the current quarter. LONG-TERM LIABILITIES Our long-term liabilities other than long-term debt consist of postretirement benefit obligations, deferred income taxes and other long-term liabilities such as accrued incentive compensation and accrued environmental remediation costs which we do not expect to settle within the upcoming year. Long-term liabilities other than long-term debt increased 3.0% from December 31, 2005 to March 26, 2006 primarily because of an increase in deferred income taxes. CAPITAL STRUCTURE Our capital structure consists primarily of current maturities of long-term debt, long-term debt and stockholders' equity. The capital structure increased 2.2% during the first quarter of 2006 because of an increase in stockholders' equity. Discussion regarding our various borrowing arrangements is included in Note 11, Long-Term Debt and Other Borrowing Arrangements, to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q. Stockholders' equity increased by 3.0% from December 31, 2005 to March 26, 2006 primarily because of increases in additional paid-in capital and retained earnings and improvement in accumulated other comprehensive loss. Additional paid-in capital increased primarily because of stock option exercises. Retained earnings increased primarily because of net income partially offset by dividends. Accumulated other comprehensive loss improved primarily because of the positive effect of currency exchange rates on financial statement translation. OFF-BALANCE SHEET ARRANGEMENTS We were not a party to any off-balance sheet arrangements at March 26, 2006. -28- CRITICAL ACCOUNTING POLICIES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that affect the amounts reported in our Consolidated Financial Statements and accompanying notes. We consider the accounting policies described in Critical Accounting Policies within Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2005 to be our most critical accounting policies. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the Consolidated Financial Statements. We base our estimates on historical experience or various assumptions that are believed to be reasonable under the circumstances, and the results form the basis for making judgments about the reported values of assets, liabilities, revenues and expenses. We believe these judgments have been materially accurate in the past and the basis for these judgments should not change significantly in the future. Our senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results may differ materially from these estimates under different assumptions or conditions. During the three months ended March 26, 2006: - We did not change any of our existing critical accounting policies; - 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; - There were no significant changes in the manner in which critical accounting policies were applied or in which related judgments and estimates were developed; and - We did adopt one new critical accounting policy, share-based compensation, as described below. SHARE-BASED COMPENSATION We compensate certain employees with various forms of share-based payment awards-- stock appreciation rights (SARs), stock options, restricted stock units, and performance stock units. We recognize compensation cost for SARs and stock options based on the fair values of these awards. These fair values are estimated on the grant date using the Black-Scholes-Merton option-pricing formula which incorporates certain assumptions regarding the expected term of an award, stock volatility, dividend yield, and risk-free investment rates. We developed the expected term assumption based on the vesting period and contractual term of an award, our historical exercise and post-vesting cancellation experience, our stock price history, our expected volatility, known blackout periods that may trigger automatic early exercise or delay exercise, plan provisions that require exercise or cancellation of awards after employees terminate, and the extent to which currently available information indicates that the future is reasonably expected to differ from past experience. We develop the expected volatility assumption based on monthly historical price data for our stock as well as the stock of legacy Belden and legacy CDT separately and other economic data trended into future years, information about our corporate and capital structure, and the extent to which currently available information indicates that future volatility is reasonably expected to differ from historical volatility. The dividend yield is the ratio of historical per-annum dividends paid per share of our common stock to the market price of our common stock on the grant date. The assumption made with regard to dividend yield is that current dividend payment practices will continue in the future. The risk-free rate is the implied yield currently available on United States Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the valuation model. After calculating the aggregate fair value of an award, we use an estimated forfeiture rate to discount the amount of share-based payments compensation cost to be recognized in our operating results over the service period of the award. We developed the forfeiture assumption based on our historical pre-vesting cancellation experience. Discussion regarding the adoption of SFAS No. 123(R) is included in Note 14, Share-Based Compensation Plans, to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q. -29- OUTLOOK We anticipate relatively strong end markets in both North America and Asia in 2006; however, we expect somewhat slower growth in Europe. We estimate that unit volumes will increase between 3.0% and 5.0% for 2006 compared with 2005. Revenue will also increase because of higher prices, largely in response to higher raw material costs. Management expects improvement in operating income from all parts of the Company--particularly, from Europe and certain North American operations that manufacture products with communications/networking applications. Restructuring in Europe is well under way, and management believes its recent reorganization in North America will help leverage the Company's strengths and improve the contribution made to operating income by the North American operations mentioned above. We anticipate operating margins will reflect continued product mix enrichment for networking products and will include further migration to higher bandwidth cables, more 10-gigabit projects, and an increasing proportion of connectivity sales. We will also benefit from the full-year realization of Belden CDT merger synergies in 2006. Management anticipates the Company will generate diluted income from continuing operations per share, excluding any further restructuring charges, between $1.55 and $1.70 in 2006. This outlook includes $.02 to $.03 of incremental stock option expense related to the adoption of SFAS No. 123(R). We anticipate funding $33.7 million in pension contributions and $2.7 million in contributions for other postretirement benefit plans in 2006. We also plan to pay off tranches of both our 1997 and 1999 medium-term notes totaling $59.0 million during 2006. We anticipate we will have sufficient funds to satisfy these cash requirements. Management expects that the Company's effective tax rate for continuing operations in 2006 will be 37.6%. Because of net operating loss carryforwards and deductible temporary differences, we anticipate that cash payments of United States income taxes during 2006 will be significantly less than tax expense. Cash payments of income taxes for foreign jurisdictions will approximate tax expense. Depreciation and amortization for continuing operations are expected to total approximately $37.0 million in 2006. Capital expenditures for Belden CDT during 2006 are expected to be approximately $30.0 million. We have incurred severance and executive succession charges related to the discontinuation of certain operations and with other actions intended to reduce costs. The amount of the charges recognized but not funded as of March 26, 2006 is $11.6 million. Management expects that that all of these charges will be funded in 2006. This will have a negative effect on cash flow. Management expects that there may be additional restructuring charges (severance and asset impairment) in future periods that would have a negative effect on both operating results and cash flow. We anticipate that annual dividends in the aggregate of $.20 per common share ($.05 per common share each quarter) will be paid to all common stockholders. -30- FORWARD-LOOKING STATEMENTS The statements set forth in this report other than historical facts, including those noted in the "Outlook" section, are forward-looking statements made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995. As such, they are based on current expectations, estimates, forecasts and projections about the industries in which we operate, general economic conditions, and management's beliefs and assumptions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. As a result, our actual results may differ materially from what is expected or forecasted in such forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, and disclaims any obligation to do so. Our actual results may differ materially from such forward-looking statements for the following reasons: - Changing economic conditions in the United States, Europe and parts of Asia (and the impact such conditions may have on our sales); - Changes in raw material costs (specifically, costs for copper, Teflon FEP(R) and commodities derived from petrochemical feedstocks) and availability; - The pricing of our products (including our ability to adjust product pricing in a timely manner in response to raw material cost volatility); - The ability to successfully implement its announced restructuring plans; - The level of business spending in the United States, Canada, Europe, and other markets on information technology and the building or reconfiguring of network infrastructure; - Demand and acceptance of our products by customers and end users; - The success of implementing cost-saving programs and initiatives; - Our continued ability to introduce, manufacture and deploy competitive new products and services on a timely, cost-effective basis; - Increasing price, product and service competition from competitors, including new entrants; - The creditworthiness of our customers; - Developments in technology; - Energy costs; - The threat of displacement from competing technologies (including wireless and fiber optic technologies); - The outcome of routine labor negotiations in Canada and Europe; - Changes in foreign currency exchange rates; - Reliance on large distributor customers; - The threat of war and terrorist activities; and - Other factors noted in this report and other Securities Exchange Act of 1934 filings of the Company. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Market risks relating to the Company's operations result primarily from general economic conditions, interest rates, foreign exchange rates, certain commodity prices and concentrations of credit. The Company manages its exposure to these and other market risks through regular operating and financing activities, and on a limited basis, through the use of derivative financial instruments. The Company intends to use such derivative financial instruments as risk management tools and not for speculative investment purposes. Item 7A, Quantitative and Qualitative Disclosures About Market Risks, of the Company's Annual Report on Form 10-K for the year ended December 31, 2005 provides more information as to the types of practices and instruments used to manage risk. There was no material change in the Company's exposure to market risks since December 31, 2005 other than commodities pricing discussed in the section entitled "Effects of Inflation" in Item 2 of this Quarterly Report on Form 10-Q. -31- 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. PART II OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS The Company is a party to various legal proceedings and administrative actions that are incidental to its operations. These proceedings include personal injury cases (about 147 of which the Company was aware at May 1, 2006) in which the Company is one of many defendants, 48 of which are scheduled for trial during 2006. Electricians have filed a majority of these cases, primarily in New Jersey and Pennsylvania. Plaintiffs in these cases generally seek compensatory, special and punitive damages. As of May 1, 2006, in 22 of these cases, plaintiffs generally allege only damages in excess of some dollar amount (i.e., in one case, not less than $15 thousand and in the other cases, in excess of $50.0 thousand in compensatory damages and $50.0 thousand in punitive damages). In 123 of these cases, plaintiffs generally do not allege a specific monetary damage demand. As to each of the other 2 cases, the plaintiffs generally allege $5.0 million in compensatory and $5.0 million in punitive damages. In none of these cases do plaintiffs allege claims for specific dollar amounts as to any defendant. Based on the Company's experience in such litigation, the amounts pleaded in the complaints are not typically meaningful as an indicator of the Company's ultimate liability. Typically in these cases, the claimant alleges injury from alleged exposure to heat-resistant asbestos fiber, which was usually encapsulated or embedded and lacquer-coated or covered by another material. Exposure to the fiber generally would have occurred, if at all, while stripping (cutting) the wire or cable that had such fiber. It is alleged by claimants that exposure to the fiber may result in respiratory illness. Generally, stripping was done to repair or to attach a connector to the wire or cable. Alleged predecessors of the Company had a small number of products that contained the fiber, but ceased production of such products more than fifteen years ago. Through May 1, 2006, the Company had been dismissed (or reached agreement to be dismissed) in approximately 158 similar cases without any going to trial, and with only 7 of these involving any payment to the claimant. Some of these cases were dismissed without prejudice primarily because the claimants could not show any injury, or could not show that injury was caused from exposure to products of alleged predecessors of the Company. The Company has insurance that it believes should cover a significant portion of any defense or settlement costs borne by the Company in these types of cases. The Company vigorously defends these cases. As a separate matter, liability for any such injury generally should be allocated among all defendants in such cases in accordance with applicable law. In the opinion of the Company's management, the proceedings and actions in which the Company is involved should not, individually or in the aggregate, have a material adverse effect on the Company's results of operations, cash flows or financial condition. -32- ITEM 1A: RISK FACTORS There have been no material changes with respect to risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005. ITEM 6: EXHIBITS Exhibits Exhibit 10.1 Belden CDT Inc. Stock Appreciation Rights Award Agreement for Award Recipients Other than John S. Stroup Exhibit 10.2 Belden CDT Inc. Performance Stock Units Award Agreement for Award Recipients Other than John S. Stroup Exhibit 10.3 Belden CDT Inc. Restricted Stock Units Award Agreement for Award Recipients Exhibit 10.4 Belden CDT Inc. Stock Appreciation Rights Award Agreement for John S. Stroup Exhibit 10.5 Belden CDT Inc. Performance Stock Units Award Agreement for John S. Stroup Exhibit 10.6 Belden CDT Inc. Annual Cash Incentive Plan Agreement Exhibit 31.1 Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1 Certificate of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 32.2 Certificate of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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 CDT INC. Date: May 5, 2006 By: /s/ John S. Stroup ---------------------------------------------- John S. Stroup President, Chief Executive Officer and Director Date: May 5, 2006 By: /s/ Stephen H. Johnson ----------------------------------------------- Stephen H. Johnson Treasurer and Interim Chief Financial Officer Date: May 5, 2006 By: /s/ John S. Norman ------------------------------------------- - John S. Norman Controller and Chief Accounting Officer -33- EX-10.1 2 c05056exv10w1.txt STOCK APPRECIATION RIGHTS AWARD AGREEMENT Exhibit 10.1 BELDEN CDT INC. STOCK APPRECIATION RIGHT AWARD AGREEMENT THIS STOCK APPRECIATION RIGHT AWARD AGREEMENT (this "Agreement") is effective February 22, 2006 (the "GRANT DATE") by and between Belden CDT Inc., a Delaware corporation (the "COMPANY") and _________________________ ("GRANTEE"). WHEREAS, the Grantee is an executive or management employee of the Company and has been selected by the Compensation Committee (the "COMMITTEE") of the Board of Directors of the Company (the "BOARD") to receive a grant of stock appreciation rights corresponding to _________ shares (the "SHARES") of the Company's common stock, $0.01 par value per share (the "COMMON STOCK"), subject to certain restrictions, and to enter into a Stock Appreciation Right Award Agreement in the form hereof; NOW THEREFORE, the Company and the Grantee hereby agree as follows: 1. GRANT OF SARs. The Company hereby grants to the Grantee, on the Grant Date, stock appreciation rights corresponding to ________ Shares (such Stock Appreciation Rights with respect to such number of Shares being the "SARs"). The SARs have an exercise price of $25.805 per Share (the "EXERCISE PRICE"), which is the fair market value of a Share on the Grant Date (such fair market value representing the average of the high and low publicly-traded price of a Share on the Grant Date). The SARs shall vest and become exercisable ("VEST") in accordance with Section 2 below. The Grantee shall have no direct or secured claim in any specific assets of the Company or the Shares to be issued to Grantee under Section 4 hereof and will have the status of a general unsecured creditor of the Company. The SARs are granted under the Company's 2001 Long-Term Performance Incentive Plan (the "PLAN") and shall be subject to the terms and conditions of the Plan. Capitalized terms used in this Agreement without further definition shall have the same meanings given to such terms in the Plan. [N.B.: 13,600 OF MR. STROUP'S 113,600 AWARDS ARE SUBJECT TO SHAREHOLDERS APPROVING AN INCREASE OF THE PLAN'S ANNUAL INDIVIDUAL AWARD LIMIT TO 400,000 AWARDS.] 2. VESTING OF SARs. One-third (1/3) of the SARs shall Vest on the first anniversary of the Grant Date, one-third (1/3) shall Vest on the second anniversary of the Grant Date, and the remainder shall Vest on the third anniversary of the Grant Date. Such vesting rights with respect to the SARs are further subject to the following conditions: (a) Employment. During the Grantee's lifetime, the SARs are exercisable only by the Grantee, and, except as otherwise provided in clause (c) below, only if the Grantee has remained continuously employed by the Company from the Grant Date. (b) Term of SARs. The SARs shall expire ten years following the Grant Date (the period between the Grant Date and such expiration date being the "SAR TERM"), or earlier if clause (c) of this Section 2 applies. (c) Exceptions. Subject to the exceptions noted in subparts (i)-(iv) below, the SARs shall be forfeited, cancelled and terminated immediately if the Grantee is no longer employed by the Company. (i) Retirement. If after one year from the Grant Date the Grantee retires from employment with the Company in accordance with any Company retirement plan then in effect, the Grantee may at any time within the three-year period following such retirement (but within the SAR Term) exercise all SARs, including those SARs that had not previously vested which shall Vest upon retirement. The Grantee's right to exercise SARs upon retirement in such fashion is expressly conditioned on the Grantee's furnishing to the Company a non-compete covenant (the form of which must be reasonably acceptable to the Company) that would prevent the Grantee from competing against the Company during such three-year period following retirement (or, if shorter, through the end of the SAR Term). The non-compete covenant will contain a provision that will require the Grantee to pay the Company damages if the Grantee breaches such non-compete covenant. The damages shall include any gain the Grantee may receive from the exercise of an SAR in violation of such non-compete covenant. (ii) Disability. If the Grantee is no longer with the Company due to disability (in accordance with any Company disability policy then in effect), the Grantee may at any time within one year following the Grantee's leaving the Company (but within the SAR Term) exercise all SARs, including those SARs that had not previously vested which shall Vest upon the date of disability. (iii) Termination of Employment. If after one year from the Grant Date the Grantee or the Company terminates the Grantee's employment (other than when the Company terminates the Grantee's employment for Cause, as defined below), the Grantee may at any time within ninety days following the Grantee's leaving the Company (but within the SAR Term) exercise the Grantee's SARs to the extent the Grantee was entitled to exercise such SARs prior to leaving the Company, but not otherwise. "CAUSE" as used above shall mean the willful failure to discharge responsibilities. (iv) Death. If the Grantee dies while employed by the Company (or if the Grantee were to die during the post-employment period covered by Section 2(c)(ii) (Disability) above), the person entitled by will or the applicable laws of descent and distribution may, within one year from the Grantee's death (but within the SAR Term), exercise the 2 Grantee's SARs, including those SARs that had not previously vested which shall Vest upon the date of death. (d) Change in Control. Immediately preceding the occurrence of a Change in Control of the Company (as defined in Section 6(e) below), the unvested SARs shall immediately Vest in full and, to the extent not previously exercised by the Grantee, shall be deemed thereupon exercised in full. 3. NON-ASSIGNMENT OF RIGHTS. The Grantee may not assign or transfer any SARs except by will or by the laws of descent and distribution or by a qualified domestic relations order. 4. EXERCISE OF SARs. (a) Exercise. Vested SARs may be exercised by following the procedures the Company has in place at the time of exercise. For Vested SARs to be exercised by a person other than the Grantee (as provided above), the Company must have appropriate documentation evidencing the rights of the Grantee's beneficiary(s). The Grantee shall designate the number of Shares subject to the Vested SARs that are being exercised, and upon exercise shall be entitled to receive that number of Shares having an aggregate fair market value equal to the excess of the fair market value of one Share, at the time of such exercise, over the Exercise Price, multiplied by the number of Shares subject to the SARs which are so exercised. For purposes of this Section 4(a), fair market value shall be determined by calculating the average of the high and low publicly-traded price of a Share on the date of exercise. (b) Issuance of Shares. The Company shall issue Shares to the Grantee upon exercise of SARs pursuant to Section 4(a) above by issuing to the Grantee a stock certificate (or register Shares of Common Stock in book-entry form) representing a number of requisite number of Shares. No fractional shares may be delivered, but in lieu thereof a cash or other adjustment shall be made as determined by the Committee in its discretion. (c) Withholding Taxes. At the time Shares of Common Stock are issued to the Grantee, the Company shall satisfy the statutory Federal, state and local withholding tax obligation (including the FICA and Medicare tax obligation) required by law with respect to the distribution of Shares from one or more of the following methods, as the Grantee elects: (i) the Company shall withhold cash compensation then accrued and payable to Grantee of such required withholding amount, (ii) the Grantee may tender a check or other payment of cash to the Company of such required withholding amount, or (iii) by withholding from Shares issuable to the Grantee hereunder having an aggregate fair market value equal to the amount of such required withholding. 5. LEGALITY OF INITIAL ISSUANCE. No Shares shall be issued unless and until the Company has determined that: 3 (d) It and the Grantee, at Company's expense, have taken any actions required to register the Shares under the Securities Act of 1933, as amended, or to perfect an exemption from the registration requirements thereof; (e) Any applicable listing requirement of any stock exchange or other securities market on which the Common Stock is listed has been satisfied; and (f) Any other applicable provision of state or federal law has been satisfied. 6. MISCELLANEOUS PROVISIONS. (a) Rights as a Stockholder. Neither the Grantee nor the Grantee's representative shall have any rights as a stockholder with respect to any Shares subject to the SARs until the date that the Company is obligated to deliver Shares to the Grantee or the Grantee's representative pursuant to Section 4 above, and then only with respect to the Shares so delivered. (b) No Retention Rights. Nothing in this Agreement shall confer upon the Grantee any right to continue in the employment or service of the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of the Grantee, which rights are hereby expressly reserved by each, to terminate his employment or service at any time and for any reason, with or without cause. (c) Employment by Subsidiary, etc.. For purposes of this Agreement, employment by a parent or subsidiary of or a successor to the Company shall be considered employment by the Company. (d) Anti-Dilution. In the event that any change in the outstanding Shares of Common Stock of the Company (including an exchange of Common Stock for stock or other securities of another corporation) occurs by reason of a Common Stock dividend or split, recapitalization, merger, consolidation, combination, exchange of Shares or other similar corporate changes, other than for consideration received by the Company therefor, the number of Shares subject to the SARs hereunder shall be appropriately adjusted by the Committee whose determination shall be conclusive, final and binding; provided, however that fractional Shares shall be rounded to the nearest whole share. In the event of any other change in the Common Stock, the Committee shall in its sole discretion determine whether such change equitably requires a change in the number or type of Shares subject to the SARs and any adjustment made by the Committee shall be conclusive, final and binding. (e) Change in Control. A "CHANGE IN CONTROL" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following subparagraphs shall occur: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 4 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (y) the then-outstanding shares of common stock of the Company (the "OUTSTANDING COMPANY COMMON STOCK") or (z) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (1) and (2) of subsection (iii) of this definition; or (ii) individuals who, as of the date hereof, constitute the Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "BUSINESS COMBINATION"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (2) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 5 (f) Incorporation of Plan. The provisions of the Plan are incorporated by reference into these terms and conditions. (g) Inconsistency. To the extent any terms and conditions herein conflict with the terms and conditions of the Plan, the terms and conditions of the Plan shall control. (h) Notices. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery, upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or upon deposit with a reputable overnight courier. Notice shall be addressed to the Company at its principal executive office and to the Grantee at the address that he most recently provided to the Company. (i) Entire Agreement; Amendments. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof. The Committee shall have authority, subject to the express provisions of the Plan, to interpret this Agreement and the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to modify the terms and provisions of this Agreement, and to make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in this Agreement in the manner and to the extent it shall deem necessary or desirable to carry it into effect. All action by the Committee under the provisions of this paragraph shall be final, conclusive and binding for all purposes. (j) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State, without giving effect to the choice of law provisions thereof. (k) Successors. (i) This Agreement is personal to the Grantee and, except as otherwise provided in Section 2 above, shall not be assignable by the Grantee otherwise than by will or the laws of descent and distribution, without the written consent of the Company. This Agreement shall inure to the benefit of and be enforceable by the Grantee's legal representatives. (ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. It shall not be assignable except in connection with the sale or other disposition of all or substantially all the assets or business of the Company. (l) Severability. If any provision of this Agreement for any reason should be found by any court of competent jurisdiction to be invalid, illegal or 6 unenforceable, in whole or in part, such declaration shall not affect the validity, legality or enforceability of any remaining provision or portion hereof, which remaining provision or portion hereof shall remain in full force and effect as if this Agreement had been adopted with the invalid, illegal or unenforceable provision or portion hereof eliminated. (m) Headings. The headings, captions and arrangements utilized in this Agreement shall not be construed to limit or modify the terms or meaning of this Agreement. (n) Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument. This Agreement is executed by the Company as of the date and year first written above. BELDEN CDT INC. By:________________________________ Title: ____________________________ The undersigned Grantee hereby acknowledges receipt of an executed original of this Agreement and accepts the SARs granted hereunder, and further agrees to the terms and conditions hereinabove set forth. ________________________________ ____________________, Grantee Date:_______________, 2006 7 EX-10.2 3 c05056exv10w2.txt PERFORMANCE STOCK UNITS AWARD AGREEMENT Exhibit 10.2 BELDEN CDT INC. PERFORMANCE SHARE AWARD AGREEMENT THIS PERFORMANCE SHARE AWARD AGREEMENT (this "Agreement") is effective February 22, 2006 (the "GRANT DATE") by and between Belden CDT Inc., a Delaware corporation (the "COMPANY") and _________________________ ("GRANTEE"). WHEREAS, the Grantee is an executive or management employee of the Company and has been selected by the Compensation Committee (the "COMMITTEE") of the Board of Directors of the Company (the "BOARD") to receive a grant of ____________ performance share units ("PSUs") representing, subject to certain restrictions, a certain number of shares (the "SHARES") of the Company's common stock, $0.01 par value per share (the "COMMON STOCK"), such number shall be based on the attainment of performance objectives as provided below, and to enter into a Performance Share Award Agreement in the form hereof; NOW THEREFORE, the Company and the Grantee hereby agree as follows: 1. GRANT OF PSUs. The Company hereby grants to the Grantee on the Grant Date ______________ PSUs. Each PSU represents the right to receive between zero (0) and one and one-half (1.5) of a Restricted Stock Unit ("RSU"), depending on the attainment of Company performance objectives in accordance with Section 2 below. Each RSU in turn represents the right to receive one (1) Share, which RSUs shall vest and become nonforfeitable ("VEST") in accordance with Section 3 below. The Company shall hold any awarded RSUs in book-entry form. The Grantee shall have no direct or secured claim in any specific assets of the Company or the Shares of Common Stock to be issued to Grantee under Section 5(a) hereof and will have the status of a general unsecured creditor of the Company. The PSUs and RSUs are granted under the Company's 2001 Long-Term Performance Incentive Plan (the "PLAN") and shall be subject to the terms and conditions of the Plan. Capitalized terms used in this Agreement without further definition shall have the same meanings given to such terms in the Plan. [N.B.: MR. STROUP'S AWARD IS SUBJECT TO THE SHAREHOLDERS APPROVING AN INCREASE OF THE PLAN'S ANNUAL INDIVIDUAL LIMIT TO 400,000 AWARDS. IF SHAREHOLDERS FAIL TO APPROVE THE INCREASE, MR. STROUP WILL RECEIVE A CASH EQUIVALENT OUTSIDE THE PLAN PER HIS EMPLOYMENT AGREEMENT.] 2. PERFORMANCE OBJECTIVES. (a) Award Period; Performance Objectives. The award period ("AWARD PERIOD") during which performance shall be measured is calendar year 2006. The Committee has established performance objectives for such Award Period based on the attainment of 2006 financial performance goals. The financial performance goals are those the Committee has established for the Company's 2006 annual cash incentive plan. If Company performance during the Award Period is at 100% of targeted objectives, then the Grantee shall be entitled to receive one (1) RSU for each PSU. If Company performance during the Award Period is at 80% of targeted objectives, then the Grantee shall be entitled to receive one-half (.5) of an RSU for each PSU. If Company performance during the Award Period is at 120% of targeted objectives, then the Grantee shall be entitled to receive one and one-half (1.5) of an RSU for each PSU. The number of RSUs shall be prorated for performance between the foregoing standards. If Company performance during the Award Period is at less than 80% of targeted objectives, then the Grantee shall not be entitled to receive any RSUs for the PSUs, and this Performance Share Award and the PSUs shall have no value and shall be deemed forfeited, cancelled and terminated. After the Award Period, the Committee shall determine the number (if any) of RSUs to be awarded for each PSU based on Company performance during the Award Period, which determination shall be final, conclusive and binding (the date on which the Committee makes such determination is the "PERFORMANCE DETERMINATION DATE", and the RSUs that are so awarded are the "AWARDED RSUs"). (b) Death or Disability During Award Period. If prior to the Performance Determination Date and while employed by the Company the Grantee dies or becomes disabled (and leaves the Company) in accordance with any Company disability policy then in effect, then the Grantee (or, as the case may be, the person entitled by will or the applicable laws of descent and distribution) shall, after the Award Period, be entitled to receive a prorated portion of the RSUs that would otherwise (but for such death or disability) be awarded to the Grantee after the Award Period pursuant to Section 2(a) above, such prorated portion being a fraction whose numerator shall be the number of days of the Grantee's employment by the Company during the Award Period prior to such death or disability and the denominator of which shall be three hundred and sixty-five (365). Such Awarded RSUs shall immediately Vest in full. (c) Other Employment Termination During Award Period. If the Grantee or the Company otherwise terminates the Grantee's employment during the Award Period, any and all PSUs shall be forfeited, cancelled and terminated upon such termination. 3. VESTING OF AWARDED RSUs. (a) Generally. Subject to the acceleration of the Vesting pursuant to Section 2(b) above or Section 3(b) or (d) below, or the forfeiture and termination of the Awarded RSUs pursuant to Section 3(c) below, one-half (1/2) of the Awarded RSUs shall Vest on the first anniversary of the Performance Determination Date, and the remaining one-half (1/2) shall Vest on the second anniversary of the Performance Determination Date. All Vested Awarded RSUs shall be paid to the Grantee as provided in Section 5 hereof. (b) Death, Disability or Retirement. If, after the award of the Awarded RSUs and while employed by the Company, the Grantee dies or becomes disabled (and leaves the Company) in accordance with any Company disability policy then in effect or retires from employment with the Company under any Company retirement plan then in effect, then any and all unvested Awarded RSUs shall immediately Vest in full. 2 (c) Other Employment Termination. If the Grantee or the Company otherwise terminates the Grantee's employment after the award of the Awarded RSUs, any and all Awarded RSUs that are not Vested at such time shall be forfeited, cancelled and terminated upon such termination. (d) Change of Control. Immediately preceding the occurrence of a Change in Control of the Company (as defined in Section 7(f) below), any and all unvested Awarded RSUs shall immediately Vest in full, subject to any deferral pursuant to an election under Section 5(b) hereof. 4. NO TRANSFER OR ASSIGNMENT OF PSUs OR AWARDED RSUs; RESTRICTIONS ON SALE. Except as otherwise provided in this Agreement, the PSUs, the Awarded RSUs and the rights and privileges conferred thereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process until the Shares underlying the Awarded RSUs are delivered to the Grantee or his designated representative. The Grantee agrees not to sell any Shares at any time when applicable laws or Company policies prohibit a sale. This restriction shall apply as long as the Grantee is an employee of the Company. 5. DELIVERY OF SHARES. (a) Issuance of Shares. As of the date(s) on which the Awarded RSUs Vest, the Company shall issue to the Grantee a stock certificate (or register Shares of Common Stock in book-entry form) representing a number of Shares of Common Stock equal to the number of Awarded RSUs then vested. (b) Withholding Taxes. At the time Shares of Common Stock are issued to the Grantee, the Company shall satisfy the statutory Federal, state and local withholding tax obligation (including the FICA and Medicare tax obligation) required by law with respect to the distribution of Shares from one or more of the following methods, as the Grantee elects: (i) the Company shall withhold cash compensation then accrued and payable to Grantee of such required withholding amount, (ii) the Grantee may tender a check or other payment of cash to the Company of such required withholding amount, or (iii) by withholding from Shares issuable to the Grantee hereunder having an aggregate fair market value equal to the amount of such required withholding. 6. LEGALITY OF INITIAL ISSUANCE. No Shares shall be issued unless and until the Company has determined that: (a) It and the Grantee, at Company's expense, have taken any actions required to register the Shares under the Securities Act of 1933, as amended, or to perfect an exemption from the registration requirements thereof; (b) Any applicable listing requirement of any stock exchange or other securities market on which the Common Stock is listed has been satisfied; and 3 (c) Any other applicable provision of state or federal law has been satisfied. 7. MISCELLANEOUS PROVISIONS. (a) Rights as a Stockholder. Neither the Grantee nor the Grantee's representative shall have any rights as a stockholder with respect to any Shares underlying the Awarded RSUs until the date that the Company is obligated to deliver such Shares to the Grantee or the Grantee's representative. (b) Dividends. Between the Performance Determination Date and the date of Vesting of the Awarded RSUs (the "ACCRUAL PERIOD"), any dividends or distributions payable with respect to the number of Shares equal to the number of Awarded RSUs held by the Grantee shall be accumulated and deferred until the Vesting of the Awarded RSUs. After such Vesting of the Awarded RSUs, the Company shall promptly distribute to the Grantee all such dividends and distributions accrued during the Accrual Period. (c) No Retention Rights. Nothing in this Agreement shall confer upon the Grantee any right to continue in the employment or service of the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of the Grantee, which rights are hereby expressly reserved by each, to terminate his employment or service at any time and for any reason, with or without cause. (d) Employment by Subsidiary, etc.. For purposes of this Agreement, employment by a parent or subsidiary of or a successor to the Company shall be considered employment by the Company. (e) Anti-Dilution. In the event that any change in the outstanding Shares of Common Stock of the Company (including an exchange of Common Stock for stock or other securities of another corporation) occurs by reason of a Common Stock dividend or split, recapitalization, merger, consolidation, combination, exchange of Shares or other similar corporate changes, other than for consideration received by the Company therefor, the number of Awarded RSUs hereunder, and the number of Shares distributable pursuant to Vested Awarded RSUs, shall be appropriately adjusted by the Committee whose determination shall be conclusive, final and binding; provided, however that fractional Shares shall be rounded to the nearest whole share. In the event of any other change in the Common Stock, the Committee shall in its sole discretion determine whether such change equitably requires a change in the number or type of Shares subject to Awarded RSUs and any adjustment made by the Committee shall be conclusive, final and binding. 4 (f) Change in Control. A "CHANGE IN CONTROL" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following subparagraphs shall occur: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (y) the then-outstanding shares of common stock of the Company (the "OUTSTANDING COMPANY COMMON STOCK") or (z) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (1) and (2) of subsection (iii) of this definition; or (ii) individuals who, as of the date hereof, constitute the Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "BUSINESS COMBINATION"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (2) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the 5 time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (g) Incorporation of Plan. The provisions of the Plan are incorporated by reference into these terms and conditions. (h) Inconsistency. To the extent any terms and conditions herein conflict with the terms and conditions of the Plan, the terms and conditions of the Plan shall control. (i) Notices. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery, upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or upon deposit with a reputable overnight courier. Notice shall be addressed to the Company at its principal executive office and to the Grantee at the address that he most recently provided to the Company. (j) Entire Agreement; Amendments. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof. The Committee shall have authority, subject to the express provisions of the Plan, to interpret this Agreement and the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to modify the terms and provisions of this Agreement, and to make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in this Agreement in the manner and to the extent it shall deem necessary or desirable to carry it into effect. All action by the Committee under the provisions of this paragraph shall be final, conclusive and binding for all purposes. (k) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State, without giving effect to the choice of law provisions thereof. (l) Successors. (i) This Agreement is personal to the Grantee and, except as otherwise provided in Section 4 above, shall not be assignable by the Grantee otherwise than by will or the laws of descent and distribution, without the written consent of the Company. This Agreement shall inure to the benefit of and be enforceable by the Grantee's legal representatives. 6 (ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. It shall not be assignable except in connection with the sale or other disposition of all or substantially all the assets or business of the Company. (m) Severability. If any provision of this Agreement for any reason should be found by any court of competent jurisdiction to be invalid, illegal or unenforceable, in whole or in part, such declaration shall not affect the validity, legality or enforceability of any remaining provision or portion hereof, which remaining provision or portion hereof shall remain in full force and effect as if this Agreement had been adopted with the invalid, illegal or unenforceable provision or portion hereof eliminated. (n) Headings. The headings, captions and arrangements utilized in this Agreement shall not be construed to limit or modify the terms or meaning of this Agreement. (o) Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument. This Agreement is executed by the Company as of the date and year first written above. BELDEN CDT INC. By:_____________________________ Title:__________________________ The undersigned Grantee hereby acknowledges receipt of an executed original of this Agreement and accepts the PSUs granted hereunder, and further agrees to the terms and conditions hereinabove set forth. ______________________________ ____________________, Grantee Date:___________________, 2006 7 EX-10.3 4 c05056exv10w3.txt RESTRICTED STOCK UNITS AWARD AGREEMENT Exhibit 10.3 BELDEN CDT INC. RESTRICTED STOCK UNIT AWARD AGREEMENT THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this "Agreement") is effective February 22, 2006 (the "GRANT DATE") by and between Belden CDT Inc., a Delaware corporation (the "COMPANY") and _________________________ ("GRANTEE"). WHEREAS, the Grantee is an executive or management employee of the Company and has been selected by the Compensation Committee (the "COMMITTEE") of the Board of Directors of the Company (the "BOARD") to receive a grant of ____________ restricted stock units ("RSUs") representing ____________ shares (the "SHARES") of the Company's common stock, $0.01 par value per share (the "COMMON STOCK"), subject to certain restrictions, and to enter into a Restricted Stock Unit Agreement in the form hereof; NOW THEREFORE, the Company and the Grantee hereby agree as follows: 1. GRANT OF RSUs. The Company hereby grants to the Grantee on the Grant Date ______________ RSUs. Each RSU represents the right to receive one (1) Share. Each RSU shall vest and become nonforfeitable ("VEST") in accordance with Section 2 below. The Company shall hold the RSUs in book-entry form. The Grantee shall have no direct or secured claim in any specific assets of the Company or the Shares of Common Stock to be issued to Grantee under Section 4(a) hereof and will have the status of a general unsecured creditor of the Company. The RSUs are granted under the Company's 2001 Long-Term Performance Incentive Plan (the "PLAN") and shall be subject to the terms and conditions of the Plan. Capitalized terms used in this Agreement without further definition shall have the same meanings given to such terms in the Plan. 2. VESTING. (a) Generally. Subject to the acceleration of the Vesting pursuant to Section 2(b) or (d) below, or the forfeiture and termination of the RSUs pursuant to Section 2(c) below, all of the RSUs shall Vest on February 22, 2009. All Vested RSUs shall be paid to the Grantee as provided in Section 4 hereof. (b) Death, Disability or Retirement. If while employed by the Company the Grantee dies or becomes disabled (and leaves the Company) in accordance with any Company disability policy then in effect or (if after one year from the Grant Date) retires from employment with the Company under any Company retirement plan then in effect, then any and all unvested RSUs shall immediately Vest in full. (c) Other Employment Termination. If the Grantee or the Company otherwise terminates the Grantee's employment, any and all RSUs that are not Vested at such time shall be forfeited, cancelled and terminated upon such termination. (d) Change of Control. Immediately preceding the occurrence of a Change in Control of the Company (as defined in Section 6(f) below), any and all unvested RSUs shall immediately Vest in full. 3. NO TRANSFER OR ASSIGNMENT OF RSUs; RESTRICTIONS ON SALE. Except as otherwise provided in this Agreement, the RSUs and the rights and privileges conferred thereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process until the Shares underlying the RSUs are delivered to the Grantee or his designated representative. The Grantee agrees not to sell any Shares at any time when applicable laws or Company policies prohibit a sale. This restriction shall apply as long as the Grantee is an employee of the Company. 4. DELIVERY OF SHARES. (a) Issuance of Shares. As of the date in which the RSUs Vest, the Company shall issue to the Grantee a stock certificate (or register Shares of Common Stock in book-entry form) representing a number of Shares of Common Stock equal to the number of RSUs then vested. (b) Withholding Taxes. At the time Shares of Common Stock are issued to the Grantee, the Company shall satisfy the statutory Federal, state and local withholding tax obligation (including the FICA and Medicare tax obligation) required by law with respect to the distribution of Shares from one or more of the following methods, as the Grantee elects: (i) the Company shall withhold cash compensation then accrued and payable to the Grantee of such required withholding amount, (ii) the Grantee may tender a check or other payment of cash to the Company of such required withholding amount, or (iii) by withholding from Shares issuable to the Grantee hereunder having an aggregate fair market value equal to the amount of such required withholding. 5. LEGALITY OF INITIAL ISSUANCE. No Shares shall be issued unless and until the Company has determined that: (a) It and the Grantee, at Company's expense, have taken any actions required to register the Shares under the Securities Act of 1933, as amended or to perfect an exemption from the registration requirements thereof; (b) Any applicable listing requirement of any stock exchange or other securities market on which the Common Stock is listed has been satisfied; and (c) Any other applicable provision of state or federal law has been satisfied. 2 6. MISCELLANEOUS PROVISIONS. (a) Rights as a Stockholder. Neither the Grantee nor the Grantee's representative shall have any rights as a stockholder with respect to any Shares underlying the RSUs until the date that the Company is obligated to deliver such Shares to the Grantee or the Grantee's representative. (b) Dividends. Between the Grant Date and the date of Vesting of the RSUs (the "ACCRUAL PERIOD"), any dividends or distributions payable with respect to the number of Shares equal to the number of RSUs held by the Grantee shall be accumulated and deferred until the Vesting of the RSUs. After such Vesting of the RSUs, the Company shall promptly distribute to the Grantee all such dividends and distributions accrued during the Accrual Period. (c) No Retention Rights. Nothing in this Agreement shall confer upon the Grantee any right to continue in the employment or service of the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of the Grantee, which rights are hereby expressly reserved by each, to terminate his employment or service at any time and for any reason, with or without cause. (d) Employment by Subsidiary, etc.. For purposes of this Agreement, employment by a parent or subsidiary of or a successor to the Company shall be considered employment by the Company. (e) Anti-Dilution. In the event that any change in the outstanding Shares of Common Stock of the Company (including an exchange of Common Stock for stock or other securities of another corporation) occurs by reason of a Common Stock dividend or split, recapitalization, merger, consolidation, combination, exchange of Shares or other similar corporate changes, other than for consideration received by the Company therefor, the number of RSUs awarded hereunder, and the number of Shares distributable pursuant to Vested RSUs, shall be appropriately adjusted by the Committee whose determination shall be conclusive, final and binding; provided, however that fractional Shares shall be rounded to the nearest whole share. In the event of any other change in the Common Stock, the Committee shall in its sole discretion determine whether such change equitably requires a change in the number or type of Shares subject to RSUs and any adjustment made by the Committee shall be conclusive, final and binding. (f) Change in Control. A "CHANGE IN CONTROL" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following subparagraphs shall occur: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (y) the then-outstanding shares of common stock of the 3 Company (the "OUTSTANDING COMPANY COMMON STOCK") or (z) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (1) and (2) of subsection (iii) of this definition; or (ii) individuals who, as of the date hereof, constitute the Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "BUSINESS COMBINATION"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (2) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (g) Incorporation of Plan. The provisions of the Plan are incorporated by reference into these terms and conditions. 4 (h) Inconsistency. To the extent any terms and conditions herein conflict with the terms and conditions of the Plan, the terms and conditions of the Plan shall control. (i) Notices. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery, upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or upon deposit with a reputable overnight courier. Notice shall be addressed to the Company at its principal executive office and to the Grantee at the address that he most recently provided to the Company. (j) Entire Agreement; Amendments. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof. The Committee shall have authority, subject to the express provisions of the Plan, to interpret this Agreement and the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to modify the terms and provisions of this Agreement, and to make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in this Agreement in the manner and to the extent it shall deem necessary or desirable to carry it into effect. All action by the Committee under the provisions of this paragraph shall be final, conclusive and binding for all purposes. (k) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State, without giving effect to the choice of law provisions thereof. (l) Successors. (i) This Agreement is personal to the Grantee and, except as otherwise provided in Section 3 above, shall not be assignable by the Grantee otherwise than by will or the laws of descent and distribution, without the written consent of the Company. This Agreement shall inure to the benefit of and be enforceable by the Grantee's legal representatives. (ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. It shall not be assignable except in connection with the sale or other disposition of all or substantially all the assets or business of the Company. (m) Severability. If any provision of this Agreement for any reason should be found by any court of competent jurisdiction to be invalid, illegal or unenforceable, in whole or in part, such declaration shall not affect the validity, legality or enforceability of any remaining provision or portion hereof, which remaining provision or portion hereof shall remain in full force and effect as if this Agreement had 5 been adopted with the invalid, illegal or unenforceable provision or portion hereof eliminated. (n) Headings. The headings, captions and arrangements utilized in this Agreement shall not be construed to limit or modify the terms or meaning of this Agreement. (o) Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument. This Agreement is executed by the Company as of the date and year first written above. BELDEN CDT INC. By:_____________________________________ Title:__________________________________ The undersigned Grantee hereby acknowledges receipt of an executed original of this Agreement and accepts the RSUs granted hereunder, and further agrees to the terms and conditions hereinabove set forth. ________________________________________ ____________________, Grantee Date:____________________, 2006 6 EX-10.4 5 c05056exv10w4.txt STOCK APPRECIATION RIGHTS AWARD AGREEMENT FOR JOHN S. STROUP Exhibit 10.4 BELDEN CDT INC. STOCK APPRECIATION RIGHT AWARD AGREEMENT THIS STOCK APPRECIATION RIGHT AWARD AGREEMENT (this "Agreement") is effective February 22, 2006 (the "GRANT DATE") by and between Belden CDT Inc., a Delaware corporation (the "COMPANY") and John Stroup ("GRANTEE"). WHEREAS, the Grantee is an executive or management employee of the Company and has been selected by the Compensation Committee (the "COMMITTEE") of the Board of Directors of the Company (the "BOARD") to receive a grant of stock appreciation rights corresponding to 113,600 shares (the "SHARES") of the Company's common stock, $0.01 par value per share (the "COMMON STOCK"), subject to certain restrictions, and to enter into a Stock Appreciation Right Award Agreement in the form hereof; NOW THEREFORE, the Company and the Grantee hereby agree as follows: 1. GRANT OF SARs. The Company hereby grants to the Grantee, on the Grant Date, stock appreciation rights corresponding to 113,600 Shares (such Stock Appreciation Rights with respect to such number of Shares being the "SARs"). The SARs have an exercise price of $25.805 per Share (the "EXERCISE PRICE"), which is the fair market value of a Share on the Grant Date (such fair market value representing the average of the high and low publicly-traded price of a Share on the Grant Date). The SARs shall vest and become exercisable ("VEST") in accordance with Section 2 below. The Grantee shall have no direct or secured claim in any specific assets of the Company or the Shares to be issued to Grantee under Section 4 hereof and will have the status of a general unsecured creditor of the Company. The SARs are granted under the Company's 2001 Long-Term Performance Incentive Plan (the "PLAN") and shall be subject to the terms and conditions of the Plan. Capitalized terms used in this Agreement without further definition shall have the same meanings given to such terms in the Plan. The award of 13,600 of the SARs ( the amount in excess of the original annual award limit under the Plan) is conditioned on shareholders approving an increase in the number of awards individual participants may receive under the Plan to an annual limit of 400,000. If shareholder approval is not obtained, the portion of the SARs in excess of the original individual limit of 100,000 awards (i.e., 13,600 SARs) will be cancelled and terminated, notwithstanding any contrary provision of Grantee's executive employment agreement with the Company, effective October 31, 2005. 2. VESTING OF SARs. One-third (1/3) of the SARs shall Vest on the first anniversary of the Grant Date, one-third (1/3) shall Vest on the second anniversary of the Grant Date, and the remainder shall Vest on the third anniversary of the Grant Date. Such vesting rights with respect to the SARs are further subject to the following conditions: (a) Employment. During the Grantee's lifetime, the SARs are exercisable only by the Grantee, and, except as otherwise provided in clause (c) below, only if the Grantee has remained continuously employed by the Company from the Grant Date. (b) Term of SARs. The SARs shall expire ten years following the Grant Date (the period between the Grant Date and such expiration date being the "SAR TERM"), or earlier if clause (c) of this Section 2 applies. (c) Exceptions. Subject to the exceptions noted in subparts (i)-(iv) below, the SARs shall be forfeited, cancelled and terminated immediately if the Grantee is no longer employed by the Company. (i) Retirement. If after one year from the Grant Date the Grantee retires from employment with the Company in accordance with any Company retirement plan then in effect, the Grantee may at any time within the three-year period following such retirement (but within the SAR Term) exercise all SARs, including those SARs that had not previously vested which shall Vest upon retirement. The Grantee's right to exercise SARs upon retirement in such fashion is expressly conditioned on the Grantee's furnishing to the Company a non-compete covenant (the form of which must be reasonably acceptable to the Company) that would prevent the Grantee from competing against the Company during such three-year period following retirement (or, if shorter, through the end of the SAR Term). The non-compete covenant will contain a provision that will require the Grantee to pay the Company damages if the Grantee breaches such non-compete covenant. The damages shall include any gain the Grantee may receive from the exercise of an SAR in violation of such non-compete covenant. (ii) Disability. If the Grantee is no longer with the Company due to disability (in accordance with any Company disability policy then in effect), the Grantee may at any time within one year following the Grantee's leaving the Company (but within the SAR Term) exercise all SARs, including those SARs that had not previously vested which shall Vest upon the date of disability. (iii) Termination of Employment. If after one year from the Grant Date the Grantee or the Company terminates the Grantee's employment (other than when the Company terminates the Grantee's employment for Cause, as defined below), the Grantee may at any time within ninety days following the Grantee's leaving the Company (but within the SAR Term) exercise the Grantee's SARs to the extent the Grantee was entitled to exercise such SARs prior to leaving the Company, but not otherwise. "CAUSE" as used above shall mean the willful failure to discharge responsibilities. 2 (iv) Death. If the Grantee dies while employed by the Company (or if the Grantee were to die during the post-employment period covered by Section 2(c)(ii) (Disability) above), the person entitled by will or the applicable laws of descent and distribution may, within one year from the Grantee's death (but within the SAR Term), exercise the Grantee's SARs, including those SARs that had not previously vested which shall Vest upon the date of death. (d) Change in Control. Immediately preceding the occurrence of a Change in Control of the Company (as defined in Section 6(e) below), the unvested SARs shall immediately Vest in full and, to the extent not previously exercised by the Grantee, shall be deemed thereupon exercised in full. 3. NON-ASSIGNMENT OF RIGHTS. The Grantee may not assign or transfer any SARs except by will or by the laws of descent and distribution or by a qualified domestic relations order. 4. EXERCISE OF SARs. (a) Exercise. Vested SARs may be exercised by following the procedures the Company has in place at the time of exercise. For Vested SARs to be exercised by a person other than the Grantee (as provided above), the Company must have appropriate documentation evidencing the rights of the Grantee's beneficiary(s). The Grantee shall designate the number of Shares subject to the Vested SARs that are being exercised, and upon exercise shall be entitled to receive that number of Shares having an aggregate fair market value equal to the excess of the fair market value of one Share, at the time of such exercise, over the Exercise Price, multiplied by the number of Shares subject to the SARs which are so exercised. For purposes of this Section 4(a), fair market value shall be determined by calculating the average of the high and low publicly-traded price of a Share on the date of exercise. (b) Issuance of Shares. The Company shall issue Shares to the Grantee upon exercise of SARs pursuant to Section 4(a) above by issuing to the Grantee a stock certificate (or register Shares of Common Stock in book-entry form) representing a number of requisite number of Shares. No fractional shares may be delivered, but in lieu thereof a cash or other adjustment shall be made as determined by the Committee in its discretion. (c) Withholding Taxes. At the time Shares of Common Stock are issued to the Grantee, the Company shall satisfy the statutory Federal, state and local withholding tax obligation (including the FICA and Medicare tax obligation) required by law with respect to the distribution of Shares from one or more of the following methods, as the Grantee elects: (i) the Company shall withhold cash compensation then accrued and payable to Grantee of such required withholding amount, (ii) the Grantee may tender a check or other payment of cash to the Company of such required withholding amount, 3 or (iii) by withholding from Shares issuable to the Grantee hereunder having an aggregate fair market value equal to the amount of such required withholding. 5. LEGALITY OF INITIAL ISSUANCE. No Shares shall be issued unless and until the Company has determined that: (d) It and the Grantee, at Company's expense, have taken any actions required to register the Shares under the Securities Act of 1933, as amended, or to perfect an exemption from the registration requirements thereof; (e) Any applicable listing requirement of any stock exchange or other securities market on which the Common Stock is listed has been satisfied; and (f) Any other applicable provision of state or federal law has been satisfied. 6. MISCELLANEOUS PROVISIONS. (a) Rights as a Stockholder. Neither the Grantee nor the Grantee's representative shall have any rights as a stockholder with respect to any Shares subject to the SARs until the date that the Company is obligated to deliver Shares to the Grantee or the Grantee's representative pursuant to Section 4 above, and then only with respect to the Shares so delivered. (b) No Retention Rights. Nothing in this Agreement shall confer upon the Grantee any right to continue in the employment or service of the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of the Grantee, which rights are hereby expressly reserved by each, to terminate his employment or service at any time and for any reason, with or without cause. (c) Employment by Subsidiary, etc.. For purposes of this Agreement, employment by a parent or subsidiary of or a successor to the Company shall be considered employment by the Company. (d) Anti-Dilution. In the event that any change in the outstanding Shares of Common Stock of the Company (including an exchange of Common Stock for stock or other securities of another corporation) occurs by reason of a Common Stock dividend or split, recapitalization, merger, consolidation, combination, exchange of Shares or other similar corporate changes, other than for consideration received by the Company therefore, the number of Shares subject to the SARs hereunder shall be appropriately adjusted by the Committee whose determination shall be conclusive, final and binding; provided, however that fractional Shares shall be rounded to the nearest whole share. In the event of any other change in the Common Stock, the Committee shall in its sole discretion determine whether such change equitably requires a change in the number or type of Shares subject to the SARs and any adjustment made by the Committee shall be conclusive, final and binding. 4 (e) Change in Control. A "CHANGE IN CONTROL" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following subparagraphs shall occur: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (y) the then-outstanding shares of common stock of the Company (the "OUTSTANDING COMPANY COMMON STOCK") or (z) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (1) and (2) of subsection (iii) of this definition; or (ii) individuals who, as of the date hereof, constitute the Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "BUSINESS COMBINATION"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (2) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the 5 time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (f) Incorporation of Plan. The provisions of the Plan are incorporated by reference into these terms and conditions. (g) Inconsistency. To the extent any terms and conditions herein conflict with the terms and conditions of the Plan, the terms and conditions of the Plan shall control. (h) Notices. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery, upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or upon deposit with a reputable overnight courier. Notice shall be addressed to the Company at its principal executive office and to the Grantee at the address that he most recently provided to the Company. (i) Entire Agreement; Amendments. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof. The Committee shall have authority, subject to the express provisions of the Plan, to interpret this Agreement and the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to modify the terms and provisions of this Agreement, and to make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in this Agreement in the manner and to the extent it shall deem necessary or desirable to carry it into effect. All action by the Committee under the provisions of this paragraph shall be final, conclusive and binding for all purposes. (j) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State, without giving effect to the choice of law provisions thereof. (k) Successors. (i) This Agreement is personal to the Grantee and, except as otherwise provided in Section 2 above, shall not be assignable by the Grantee otherwise than by will or the laws of descent and distribution, without the written consent of the Company. This Agreement shall inure to the benefit of and be enforceable by the Grantee's legal representatives. 6 (ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. It shall not be assignable except in connection with the sale or other disposition of all or substantially all the assets or business of the Company. (l) Severability. If any provision of this Agreement for any reason should be found by any court of competent jurisdiction to be invalid, illegal or unenforceable, in whole or in part, such declaration shall not affect the validity, legality or enforceability of any remaining provision or portion hereof, which remaining provision or portion hereof shall remain in full force and effect as if this Agreement had been adopted with the invalid, illegal or unenforceable provision or portion hereof eliminated. (m) Headings. The headings, captions and arrangements utilized in this Agreement shall not be construed to limit or modify the terms or meaning of this Agreement. (n) Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument. This Agreement is executed by the Company as of the date and year first written above. BELDEN CDT INC. By:_____________________________________ Title:__________________________________ The undersigned Grantee hereby acknowledges receipt of an executed original of this Agreement and accepts the SARs granted hereunder, and further agrees to the terms and conditions hereinabove set forth. ________________________________________ ____________________, Grantee Date:_______________, 2006 7 EX-10.5 6 c05056exv10w5.txt PERFORMANCE STOCK UNITS AWARD AGREEMENT FOR JOHN S. STROUP Exhibit 10.5 BELDEN CDT INC. PERFORMANCE SHARE AWARD AGREEMENT THIS PERFORMANCE SHARE AWARD AGREEMENT (this "Agreement") is effective February 22, 2006 (the "GRANT DATE") by and between Belden CDT Inc., a Delaware corporation (the "COMPANY") and John Stroup ("GRANTEE"). WHEREAS, the Grantee is an executive or management employee of the Company and has been selected by the Compensation Committee (the "COMMITTEE") of the Board of Directors of the Company (the "BOARD") to receive a grant of 50,000 performance share units ("PSUs") representing, subject to certain restrictions, a certain number of shares (the "SHARES") of the Company's common stock, $0.01 par value per share (the "COMMON STOCK"), such number shall be based on the attainment of performance objectives as provided below, and to enter into a Performance Share Award Agreement in the form hereof; NOW THEREFORE, the Company and the Grantee hereby agree as follows: 1. GRANT OF PSUs. The Company hereby grants to the Grantee on the Grant Date 50,000 PSUs. Each PSU represents the right to receive between zero (0) and one and one-half (1.5) of a Restricted Stock Unit ("RSU"), depending on the attainment of Company performance objectives in accordance with Section 2 below. Each RSU in turn represents the right to receive one (1) Share, which RSUs shall vest and become nonforfeitable ("VEST") in accordance with Section 3 below. The Company shall hold any awarded RSUs in book-entry form. The Grantee shall have no direct or secured claim in any specific assets of the Company or the Shares of Common Stock to be issued to Grantee under Section 5(a) hereof and will have the status of a general unsecured creditor of the Company. The PSUs and RSUs are granted under the Company's 2001 Long-Term Performance Incentive Plan (the "PLAN") and shall be subject to the terms and conditions of the Plan. Capitalized terms used in this Agreement without further definition shall have the same meanings given to such terms in the Plan. 2. PERFORMANCE OBJECTIVES. (a) Award Period; Performance Objectives. The award period ("AWARD PERIOD") during which performance shall be measured is calendar year 2006. The Committee has established performance objectives for such Award Period based on the attainment of 2006 financial performance goals. The financial performance goals are those the Committee has established for the Company's 2006 annual cash incentive plan. If Company performance during the Award Period is at 100% of targeted objectives, then the Grantee shall be entitled to receive one (1) RSU for each PSU. If Company performance during the Award Period is at 80% of targeted objectives, then the Grantee shall be entitled to receive one-half (.5) of an RSU for each PSU. If Company performance during the Award Period is at 120% of targeted objectives, then the Grantee shall be entitled to receive one and one-half (1.5) of an RSU for each PSU. The number of RSUs shall be prorated for performance between the foregoing standards. If Company performance during the Award Period is at less than 80% of targeted objectives, then the Grantee shall not be entitled to receive any RSUs for the PSUs, and this Performance Share Award and the PSUs shall have no value and shall be deemed forfeited, cancelled and terminated. After the Award Period, the Committee shall determine the number (if any) of RSUs to be awarded for each PSU based on Company performance during the Award Period, which determination shall be final, conclusive and binding (the date on which the Committee makes such determination is the "PERFORMANCE DETERMINATION DATE", and the RSUs that are so awarded are the "AWARDED RSUs"). This grant of PSUs is subject to shareholders approving at the Company's 2006 annual meeting a Plan amendment authorizing an increase in the number of awards individual participants may receive under the Plan to an annual limit of 400,000. If shareholder approval is not obtained, then PSUs granted hereunder shall not be deemed granted under the Plan, but shall be subject to the terms and conditions of the Plan and of this Agreement as if they had been granted under the Plan except that no RSUs or other Company shares shall be awarded in connection with the PSUs granted hereunder. Instead, each PSU shall represent the right to receive a cash equivalent to the RSUs that would have otherwise been awarded hereunder. (b) Death or Disability During Award Period. If prior to the Performance Determination Date and while employed by the Company the Grantee dies or becomes disabled (and leaves the Company) in accordance with any Company disability policy then in effect, then the Grantee (or, as the case may be, the person entitled by will or the applicable laws of descent and distribution) shall, after the Award Period, be entitled to receive a prorated portion of the RSUs that would otherwise (but for such death or disability) be awarded to the Grantee after the Award Period pursuant to Section 2(a) above, such prorated portion being a fraction whose numerator shall be the number of days of the Grantee's employment by the Company during the Award Period prior to such death or disability and the denominator of which shall be three hundred and sixty-five (365). Such Awarded RSUs shall immediately Vest in full. (c) Other Employment Termination During Award Period. If the Grantee or the Company otherwise terminates the Grantee's employment during the Award Period, any and all PSUs shall be forfeited, cancelled and terminated upon such termination. 3. VESTING OF AWARDED RSUs. (a) Generally. Subject to the acceleration of the Vesting pursuant to Section 2(b) above or Section 3(b) or (d) below, or the forfeiture and termination of the Awarded RSUs pursuant to Section 3(c) below, one-half (1/2) of the Awarded RSUs shall Vest on the first anniversary of the Performance Determination Date, and the remaining one-half (1/2) shall Vest on the second anniversary of the Performance Determination Date. All Vested Awarded RSUs shall be paid to the Grantee as provided in Section 5 hereof. 2 (b) Death, Disability or Retirement. If, after the award of the Awarded RSUs and while employed by the Company, the Grantee dies or becomes disabled (and leaves the Company) in accordance with any Company disability policy then in effect or retires from employment with the Company under any Company retirement plan then in effect, then any and all unvested Awarded RSUs shall immediately Vest in full. (c) Other Employment Termination. If the Grantee or the Company otherwise terminates the Grantee's employment after the award of the Awarded RSUs, any and all Awarded RSUs that are not Vested at such time shall be forfeited, cancelled and terminated upon such termination. (d) Change of Control. Immediately preceding the occurrence of a Change in Control of the Company (as defined in Section 7(f) below), any and all unvested Awarded RSUs shall immediately Vest in full, subject to any deferral pursuant to an election under Section 5(b) hereof. 4. NO TRANSFER OR ASSIGNMENT OF PSUs OR AWARDED RSUs; RESTRICTIONS ON SALE. Except as otherwise provided in this Agreement, the PSUs, the Awarded RSUs and the rights and privileges conferred thereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process until the Shares underlying the Awarded RSUs are delivered to the Grantee or his designated representative. The Grantee agrees not to sell any Shares at any time when applicable laws or Company policies prohibit a sale. This restriction shall apply as long as the Grantee is an employee of the Company. 5. DELIVERY OF SHARES. (a) Issuance of Shares. As of the date(s) on which the Awarded RSUs Vest, the Company shall issue to the Grantee a stock certificate (or register Shares of Common Stock in book-entry form) representing a number of Shares of Common Stock equal to the number of Awarded RSUs then vested. (b) Withholding Taxes. At the time Shares of Common Stock are issued to the Grantee, the Company shall satisfy the statutory Federal, state and local withholding tax obligation (including the FICA and Medicare tax obligation) required by law with respect to the distribution of Shares from one or more of the following methods, as the Grantee elects: (i) the Company shall withhold cash compensation then accrued and payable to Grantee of such required withholding amount, (ii) the Grantee may tender a check or other payment of cash to the Company of such required withholding amount, or (iii) by withholding from Shares issuable to the Grantee hereunder having an aggregate fair market value equal to the amount of such required withholding. 6. LEGALITY OF INITIAL ISSUANCE. No Shares shall be issued unless and until the Company has determined that: 3 (a) It and the Grantee, at Company's expense, have taken any actions required to register the Shares under the Securities Act of 1933, as amended, or to perfect an exemption from the registration requirements thereof; (b) Any applicable listing requirement of any stock exchange or other securities market on which the Common Stock is listed has been satisfied; and (c) Any other applicable provision of state or federal law has been satisfied. 7. MISCELLANEOUS PROVISIONS. (a) Rights as a Stockholder. Neither the Grantee nor the Grantee's representative shall have any rights as a stockholder with respect to any Shares underlying the Awarded RSUs until the date that the Company is obligated to deliver such Shares to the Grantee or the Grantee's representative. (b) Dividends. Between the Performance Determination Date and the date of Vesting of the Awarded RSUs (the "ACCRUAL PERIOD"), any dividends or distributions payable with respect to the number of Shares equal to the number of Awarded RSUs held by the Grantee shall be accumulated and deferred until the Vesting of the Awarded RSUs. After such Vesting of the Awarded RSUs, the Company shall promptly distribute to the Grantee all such dividends and distributions accrued during the Accrual Period. (c) No Retention Rights. Nothing in this Agreement shall confer upon the Grantee any right to continue in the employment or service of the Company for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company or of the Grantee, which rights are hereby expressly reserved by each, to terminate his employment or service at any time and for any reason, with or without cause. (d) Employment by Subsidiary, etc.. For purposes of this Agreement, employment by a parent or subsidiary of or a successor to the Company shall be considered employment by the Company. (e) Anti-Dilution. In the event that any change in the outstanding Shares of Common Stock of the Company (including an exchange of Common Stock for stock or other securities of another corporation) occurs by reason of a Common Stock dividend or split, recapitalization, merger, consolidation, combination, exchange of Shares or other similar corporate changes, other than for consideration received by the Company therefore, the number of Awarded RSUs hereunder, and the number of Shares distributable pursuant to Vested Awarded RSUs, shall be appropriately adjusted by the Committee whose determination shall be conclusive, final and binding; provided, however that fractional Shares shall be rounded to the nearest whole share. In the event of any other change in the Common Stock, the Committee shall in its sole discretion determine whether such change equitably requires a change in the number or type of 4 Shares subject to Awarded RSUs and any adjustment made by the Committee shall be conclusive, final and binding. (f) Change in Control. A "CHANGE IN CONTROL" of the Company shall be deemed to have occurred if any of the events set forth in any one of the following subparagraphs shall occur: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (y) the then-outstanding shares of common stock of the Company (the "OUTSTANDING COMPANY COMMON STOCK") or (z) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "OUTSTANDING COMPANY VOTING SECURITIES"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (1) and (2) of subsection (iii) of this definition; or (ii) individuals who, as of the date hereof, constitute the Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; or (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "BUSINESS COMBINATION"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (2) at least a 5 majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (g) Incorporation of Plan. The provisions of the Plan are incorporated by reference into these terms and conditions. (h) Inconsistency. To the extent any terms and conditions herein conflict with the terms and conditions of the Plan, the terms and conditions of the Plan shall control. (i) Notices. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery, upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or upon deposit with a reputable overnight courier. Notice shall be addressed to the Company at its principal executive office and to the Grantee at the address that he most recently provided to the Company. (j) Entire Agreement; Amendments. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) which relate to the subject matter hereof. The Committee shall have authority, subject to the express provisions of the Plan, to interpret this Agreement and the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, to modify the terms and provisions of this Agreement, and to make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in this Agreement in the manner and to the extent it shall deem necessary or desirable to carry it into effect. All action by the Committee under the provisions of this paragraph shall be final, conclusive and binding for all purposes. (k) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State, without giving effect to the choice of law provisions thereof. (l) Successors. (i) This Agreement is personal to the Grantee and, except as otherwise provided in Section 4 above, shall not be assignable by the Grantee otherwise than by will or the laws of descent and distribution, without the written consent of the Company. This Agreement shall inure to the benefit of and be enforceable by the Grantee's legal representatives. 6 (ii) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. It shall not be assignable except in connection with the sale or other disposition of all or substantially all the assets or business of the Company. (m) Severability. If any provision of this Agreement for any reason should be found by any court of competent jurisdiction to be invalid, illegal or unenforceable, in whole or in part, such declaration shall not affect the validity, legality or enforceability of any remaining provision or portion hereof, which remaining provision or portion hereof shall remain in full force and effect as if this Agreement had been adopted with the invalid, illegal or unenforceable provision or portion hereof eliminated. (n) Headings. The headings, captions and arrangements utilized in this Agreement shall not be construed to limit or modify the terms or meaning of this Agreement. (o) Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument. This Agreement is executed by the Company as of the date and year first written above. BELDEN CDT INC. By:_____________________________________ Title:__________________________________ The undersigned Grantee hereby acknowledges receipt of an executed original of this Agreement and accepts the PSUs granted hereunder, and further agrees to the terms and conditions hereinabove set forth. ____________________________________ ____________________, Grantee Date:___________________, 2006 7 EX-10.6 7 c05056exv10w6.txt ANNUAL CASH INCENTIVE PLAN AGREEMENT Exhibit 10.6 BELDEN CDT INC. [2006] ANNUAL CASH INCENTIVE PLAN BELDEN CDT INC. - [NAME OF PARTICIPANT] OBJECTIVE The Annual Cash Incentive Plan is designed to (1) attract, motivate and retain key talent, (2) reward participants for individual and company performance and (3) align management and shareholder interests. ELIGIBILITY Designated active, full-time associates who are direct reports to the President and CEO and their direct reports (if (1) they occupy positions with a minimum E7 salary grade, (2) are not a covered participant in another annual incentive plan and (3) have been approved for inclusion by the CEO) who are employed by the Company as of the payout date of the plan year are eligible to participate. New hires and associates who have been promoted, transferred or reclassified into a covered position during the plan year will be eligible to participate on a prorated basis based on the number of months of plan participation. An individual must be hired, promoted, transferred or reclassified on or before the 15th of the calendar month to receive credit for that month. Participants who are transferred to disability status will be paid according to Belden CDT's short- and/or long-term disability plan and are normally ineligible for incentive earnings during the period of disability. Participants who are on an approved leave of absence are not normally entitled to earn performance credit after the date of transfer to that status. INCENTIVE AMOUNTS Award levels will be calculated as a percent of salary. For purposes of the incentive calculation, each employee's base salary as of January 1 of the plan year will be used. In the case of promotions and associated salary increases, the incentive payment will be prorated. Discretion may be used to adjust incentive awards based on individual performance only with the approval of the Compensation Committee of the Board of Directors. PLAN OBJECTIVES Performance measures and weights are established annually. PLAN YEAR January 1 through December 31, [2006]. PAYMENT DATE Incentive awards will be paid in the first quarter of the year following the plan year except in the absence of information required to report or calculate payment. Participants must be on the payroll on the payment date to receive the incentive award. The only exception to this rule is for a participant who retires or who is terminated by the Company without cause after December 31 but before the payment date. BENEFITS AND TAX TREATMENT Incentive award payments are subject to normal payroll taxes. Eligibility for inclusion in pension contributions varies by country and pension plan design provisions. Consult your local human resources department for questions on this matter. ADMINISTRATION The Annual Cash Incentive Plan will be overseen by the President & CEO, the Vice President of Human Resources, and the Chief Financial Officer. They, in turn, will report to the Compensation Committee of the Board of Directors. These individuals are responsible for: - Plan interpretation; - Examination of extraordinary circumstances; - Approval of performance standards (i.e. goals, payouts, etc.); and - Review and approval of performance achievement levels and awards Issues concerning plan administration will be first taken up with the Vice President of Human Resources; next level of review will be the CEO. Incentive plan calculations are the responsibility of the Chief Financial Officer or his designee. CLAIMS/RIGHTS This Annual Cash Incentive Plan shall not be construed as an employment contract with Belden CDT Inc. or any affiliate nor is it a guarantee of compensation or benefits. The plan may be suspended, modified, revoked or terminated in its entirety, or any portion thereof, at any time for any reason and without notice, by the Company. Participants will receive a personal copy of the Plan, which shall be "RESTRICTED" and may not be distributed to others by the participant. APPROVED: ___________________________ DATE:___________________________ CATHY ODOM STAPLES VICE PRESIDENT, HUMAN RESOURCES ___________________________ DATE:___________________________ JOHN S. STROUP PRESIDENT & CEO 2 I HAVE RECEIVED A COPY OF THE [2006] ANNUAL CASH INCENTIVE PLAN. [NAME OF PARTICIPANT] [TITLE OF PARTICIPANT] [PARTICIPANT'S OPERATING UNIT] [LOCATION] ___________________________________ _________________________ SIGNATURE DATE BELDEN CDT INC. - [NAME OF PARTICIPANT]
MEASUREMENT RELATIVE WEIGHTING THRESHOLD BUDGET/TARGET - ---------------------------------- -------------------------------- ---------------- ---------------- Consolidated EPS from continuing 80% [40% for division operations presidents] $1.28 [for 2006] $1.60 [for 2006] Consolidated working capital as % of revenues 20%[10% for division presidents] 20.9% [for 2006] 18.8% [for 2006] [For division presidents, division operating income] [35%] [$_____________] [$_____________] [For division presidents, division working capital as % of revenues] [15%] [________%] [_______%]
January 1, [2006] Base Salary: $_________ 50% Target Bonus: $_________ [insert any increased Base Salary amount after January 1, [2006] and associated Target Bonus] Subject to (1) financial performance factor adjustment, (2) individual performance factor adjustment, and (3) Compensation Committee approval. 3 I HAVE RECEIVED A COPY OF THE [2006] ANNUAL CASH INCENTIVE PLAN. [NAME OF PARTICIPANT] [TITLE OF PARTICIPANT] [PARTICIPANT'S OPERATING UNIT] [LOCATION] ___________________________________ _________________________ SIGNATURE DATE BELDEN CDT INC. - [NAME OF PARTICIPANT]
MEASUREMENT RELATIVE WEIGHTING THRESHOLD BUDGET/TARGET - ---------------------------------- -------------------------------- ---------------- ---------------- Consolidated EPS from continuing 80% [40% for division operations presidents] $1.28 [for 2006] $1.60 [for 2006] Consolidated working capital as % of revenues 20%[10% for division presidents] 20.9% [for 2006] 18.8% [for 2006] [For division presidents, division operating income] [35%] [$_____________] [$_____________] [For division presidents, division working capital as % of revenues] [15%] [________%] [_______%]
January 1, [2006] Base Salary: $_________ 50% Target Bonus: $_________ [insert any increased Base Salary amount after January 1, [2006] and associated Target Bonus] Subject to (1) financial performance factor adjustment, (2) individual performance factor adjustment, and (3) Compensation Committee approval. SIGN AND RETURN THIS COPY TO CATHY STAPLES, SAINT LOUIS. 4 EX-31.1 8 c05056exv31w1.txt CERTIFICATE OF THE CEO PURSUANT TO SECTION 302 EXHIBIT 31.1 CERTIFICATE PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, John S. Stroup, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Belden CDT Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which the statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. May 5, 2006 /s/ John S. Stroup ----------------------------------------------- John S. Stroup President, Chief Executive Officer and Director EX-31.2 9 c05056exv31w2.txt CERTIFICATE OF THE CFO PURSUANT TO SECTION 302 EXHIBIT 31.2 CERTIFICATE PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Stephen H. Johnson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Belden CDT Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of circumstances under which the statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. May 5, 2006 /s/ Stephen H. Johnson ----------------------------------------------- Stephen H. Johnson Treasurer and Interim Chief Financial Officer EX-32.1 10 c05056exv32w1.txt CERTIFICATE OF THE CEO PURSUANT TO SECTION 906 EXHIBIT 32.1 CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Belden CDT Inc. (the "Company") on Form 10-Q for the period ended March 26, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John S. Stroup, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ John S. Stroup John S. Stroup President, Chief Executive Officer and Director May 5, 2006 EX-32.2 11 c05056exv32w2.txt CERTIFICATE OF THE CFO PURSUANT TO SECTION 906 EXHIBIT 32.2 CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Belden CDT Inc. (the "Company") on Form 10-Q for the period ended March 26, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen H. Johnson, Treasurer and Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Stephen H. Johnson Stephen H. Johnson Treasurer and Interim Chief Financial Officer May 5, 2006 -----END PRIVACY-ENHANCED MESSAGE-----