UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

BELDEN INC.

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

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 not a shell company.

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

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting 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 October 31, 2008
Common Stock, $0.01 Par Value		46,489,324

 

 

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

BELDEN INC.
CONSOLIDATED BALANCE SHEETS

		September 28,				December 31,
		2008				2007
		(Unaudited)
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	215,439			$	159,964
Receivables, net			383,527				373,108
Inventories, net			264,851				257,540
Deferred income taxes			21,578				28,578
Other current assets			25,459				17,392
Total current assets			910,854				836,582
Property, plant and equipment, less accumulated depreciation			334,114				369,803
Goodwill			780,558				648,882
Intangible assets, less accumulated amortization			179,194				154,786
Other long-lived assets			60,139				58,796
		$	2,264,859			$	2,068,849
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	220,830			$	190,018
Accrued liabilities			166,698				160,029
Current maturities of long-term debt			—				110,000
Total current liabilities			387,528				460,047
Long-term debt			590,000				350,000
Postretirement benefits			100,869				98,084
Deferred income taxes			51,444				78,140
Other long-term liabilities			14,877				9,915
Stockholders’ equity:
Preferred stock			—				—
Common stock			503				503
Additional paid-in capital			581,202				638,690
Retained earnings			559,059				478,776
Accumulated other comprehensive income			112,133				93,198
Treasury stock			(132,756	)			(138,504	)
Total stockholders’ equity			1,120,141				1,072,663
		$	2,264,859			$	2,068,849

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

BELDEN INC.

		Three Months Ended								Nine Months Ended
		September 28, 2008				September 23, 2007				September 28, 2008				September 23, 2007
		(In thousands, except per share data)
Revenues		$	520,494			$	561,611			$	1,588,623			$	1,448,257
Cost of sales			(366,842	)			(403,914	)			(1,122,681	)			(1,048,671	)
Gross profit			153,652				157,697				465,942				399,586
Selling, general and administrative expenses			(85,149	)			(85,567	)			(267,225	)			(224,095	)
Research and development			(15,887	)			(5,504	)			(36,051	)			(10,776	)
Amortization of intangibles			(4,125	)			(2,685	)			(9,286	)			(8,535	)
Gain (loss) on sale of assets			—				8,556				(884	)			8,556
Asset impairment			(753	)			—				(12,302	)			(3,262	)
Operating income			47,738				72,497				140,194				161,474
Interest expense			(8,671	)			(7,561	)			(27,018	)			(18,769	)
Interest income			1,226				803				4,058				5,286
Other income (expense)			813				581				3,967				(864	)
Income before taxes			41,106				66,320				121,201				147,127
Income tax expense			(9,453	)			(16,904	)			(34,178	)			(45,593	)
Net income		$	31,653			$	49,416			$	87,023			$	101,534
Weighted average number of common shares and equivalents:
Basic			44,571				45,084				44,072				44,887
Diluted			47,082				50,131				47,643				50,893
Basic income per share		$	0.71			$	1.10			$	1.97			$	2.26
Diluted income per share		$	0.67			$	0.99			$	1.83			$	2.01
Dividends declared per share		$	0.05			$	0.05			$	0.15			$	0.15

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

BELDEN INC.

		Nine Months Ended
		September 28, 2008				September 23, 2007
		(In thousands)
Cash flows from operating activities:
Net income		$	87,023			$	101,534
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			42,394				38,701
Asset impairment			12,302				3,262
Pension funding in excess of pension expense			(1,114	)			(1,724	)
Share-based compensation			10,614				7,516
Provision for inventory obsolescence			6,495				5,731
Loss (gain) on disposal of tangible assets			884				(8,556	)
Excess tax benefits related to share-based compensation			(1,297	)			(7,041	)
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:
Receivables			(9,297	)			(41,887	)
Inventories			(7,440	)			10,161
Deferred cost of sales			(3,300	)			—
Accounts payable			21,148				15,493
Accrued liabilities			(33,154	)			33,729
Deferred revenue			8,721				—
Accrued taxes			(5,441	)			24,090
Other assets			(1,987	)			(3,309	)
Other liabilities			1,316				(9,384	)
Net cash provided by operating activities			127,867				168,316
Cash flows from investing activities:
Cash used to invest in and acquire businesses			(144,625	)			(588,426	)
Proceeds from disposal of tangible assets			40,488				24,056
Capital expenditures			(32,421	)			(41,483	)
Net cash used for investing activities			(136,558	)			(605,853	)
Cash flows from financing activities:
Proceeds from exercise of stock options			5,957				29,132
Excess tax benefits related to share-based compensation			1,297				7,041
Payments under share repurchase program			(68,336	)			(10,626	)
Cash dividends paid			(6,616	)			(6,750	)
Debt issuance costs			—				(10,212	)
Borrowings under credit arrangements			240,000				546,000
Payments under borrowing arrangements			(110,000	)			(258,000	)
Net cash provided by financing activities			62,302				296,585
Effect of foreign currency exchange rate changes on cash and cash equivalents			1,864				7,125
Increase (decrease) in cash and cash equivalents			55,475				(133,827	)
Cash and cash equivalents, beginning of period			159,964				254,151
Cash and cash equivalents, end of period		$	215,439			$	120,324

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

BELDEN INC.
CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENT
NINE MONTHS ENDED SEPTEMBER 28, 2008
(Unaudited)

																										Accumulated Other
																										Comprehensive Income (Loss)
																										Translation				Pension and
		Common Stock								Paid-In				Retained				Treasury Stock								Component				Postretirement
		Shares				Amount				Capital				Earnings				Shares				Amount				of Equity				Liability				Total
		(in thousands)
Balance at December 31, 2007			50,335			$	503			$	638,690			$	478,776				(5,742	)		$	(138,504	)		$	108,720			$	(15,522	)		$	1,072,663
Net income															87,023																				87,023
Foreign currency translation																											18,935								18,935
Comprehensive income																																			105,958
Exercise of stock options, net of tax withholding forfeitures											1,250								228				4,683												5,933
Release of restricted stock, net of tax withholding forfeitures											(2,158	)							67				894												(1,264	)
Share-based compensation											11,904																								11,904
Conversion of convertible subordinated debentures											(68,507	)							3,344				68,507												—
Share repurchase program																			(1,754	)			(68,336	)											(68,336	)
Dividends ($0.15 per share)											23				(6,740	)																			(6,717	)
Balance at September 28, 2008			50,335			$	503			$	581,202			$	559,059				(3,857	)		$	(132,756	)		$	127,655			$	(15,522	)		$	1,120,141

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

BELDEN INC.

Note 1: Summary of Significant Accounting Policies

Basis of Presentation

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

The accompanying Consolidated Financial Statements presented as of any date other than December 31, 2007:

	•		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.

These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Supplementary Data contained in our 2007 Annual Report on Form 10-K.

Business Description

We design, manufacture, and market signal transmission solutions, including cable, connectivity and active components for mission-critical applications in markets ranging from industrial automation to data centers, broadcast studios, and aerospace.

Reporting Periods

Our fiscal year and fiscal fourth quarter both end on December 31. Typically, our fiscal first, second and third quarter each end on the last Sunday falling on or before their respective calendar quarter-end. The nine months ended September 28, 2008 and September 23, 2007 include 272 and 266 calendar days, respectively.

Reclassifications

We have made certain reclassifications to the 2007 Consolidated Financial Statements with no impact to reported net income in order to conform to the 2008 presentation.

Contingent Liabilities

We have established liabilities for environmental and legal contingencies that are probable of occurrence and reasonably estimable. We accrue environmental remediation costs, on an undiscounted basis, based on estimates of known environmental remediation exposures developed in consultation with our environmental consultants and legal counsel. We are, from time to time, subject to routine litigation incidental to our business. These lawsuits primarily involve claims for damages arising out of the use of our products, allegations of patent or trademark infringement, and litigation and administrative proceedings involving employment matters and commercial disputes. Based on facts currently available,

we believe the disposition of the claims that are pending or asserted will not have a materially adverse effect on our financial position, results of operations or cash flow.

At September 28, 2008, we were party to bank guaranties, standby letters of credit, and surety bonds totaling $8.0 million, $5.9 million, and $2.6 million, respectively.

Revenue Recognition

We recognize revenue when all of the following circumstances are satisfied: (1) persuasive evidence of an arrangement exists, (2) price is fixed or determinable, (3) collectibility is reasonably assured, and (4) delivery has occurred. Delivery occurs in the period in which the customer takes title and assumes the risks and rewards of ownership of the products specified in the customer’s purchase order or sales agreement. We record revenue net of estimated rebates, price allowances, invoicing adjustments, and product returns. We charge revisions to these estimates back to revenue in the period in which the facts that give rise to each revision become known.

Our Wireless segment accounts for revenue in accordance with Statement of Position No. 97-2, Software Revenue Recognition, and all related amendments and interpretations (SOP 97-2). Sales from our Wireless segment often involve multiple elements, principally hardware, software, hardware and software maintenance and other support services. When a sale involves multiple elements, we allocate the entire fee from the arrangement to each respective element based on its Vendor Specific Objective Evidence (VSOE) of fair value and recognize revenue when each element’s revenue recognition criteria are met. VSOE of fair value for each element is established based on the price charged when the same element is sold separately. If VSOE of fair value cannot be established for the undelivered element of an agreement and the only undelivered element is support, the entire amount of revenue from the arrangement is deferred and recognized ratably over the period that the support is delivered. Through September 28, 2008, our Wireless segment did not establish VSOE of fair value of post-contract customer support. As a result, the entire fee and related cost of sales from revenue transactions involving multiple-element arrangements were deferred and recognized ratably over the contractual post-contract customer support period, ranging from one to three years. As of September 28, 2008, total deferred revenue and deferred cost of sales were $10.7 million and $3.5 million, respectively. Of the total deferred revenue, $9.8 million is included in accrued liabilities, and $0.9 million is included in other long-term liabilities. Of the total deferred cost of sales, $3.1 million is included in other current assets and $0.4 million is included in other long-lived assets.

Current-Year Adoption of Accounting Pronouncements

On January 1, 2008, we adopted Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This Statement establishes a framework for measuring fair value within generally accepted accounting principles, clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. This Statement does not require any new fair value measurements following generally accepted accounting principles. However, the definition of fair value in SFAS No. 157 may affect assumptions used by companies in determining fair value. Adoption of SFAS No. 157 did not have a material impact on our operating results, cash flows or financial condition.

On January 1, 2008, we adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value in an effort to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently. Adoption of SFAS No. 159 did not have a material impact on our operating results,

cash flows or financial condition as we elected not to use the fair value measurement option on our financial instruments and other applicable items.

Pending Adoption of Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141(R), Business Combinations, which replaces SFAS No. 141 and retains the fundamental requirements in SFAS No. 141, including that the purchase method be used for all business combinations and for an acquirer to be identified for each business combination. This standard defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control instead of the date that the consideration is transferred. SFAS No. 141(R) requires an acquirer in a business combination to recognize the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. It also requires the recognition of assets acquired and liabilities assumed arising from certain contractual contingencies as of the acquisition date, measured at their acquisition-date fair values. SFAS No. 141(R) becomes effective for us for any business combination with an acquisition date on or after January 1, 2009. We are currently evaluating the potential impact of SFAS No. 141(R) on our operating results, cash flows and financial condition.

In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), which is effective for us on January 1, 2009. The FSP requires retrospective application to all periods presented and does not grandfather existing debt instruments. The FSP changes the accounting for our $110.0 million aggregate principal convertible subordinated debentures in that it requires that we bifurcate the proceeds from the debt issuance between debt and equity components. The equity component would reflect the value of the conversion feature of the debentures. We are currently evaluating the potential impact of FSP APB 14-1 on our operating results, cash flows and financial condition. On August 29, 2008, we completed the redemption of our convertible subordinated debentures. See Note 8.

Note 2: Acquisitions

On July 16, 2008, we acquired Trapeze Networks, Inc. (Trapeze) for cash of $136.0 million, including transaction costs. We financed the total purchase price with borrowings under our revolving credit facility. California-based Trapeze is a provider of wireless local area networking equipment. The acquisition of Trapeze improves our ability to provide a full complement of signal transmission solutions including wireless systems. The results of operations of Trapeze have been included in our results of operations from July 16, 2008. Trapeze is reported as a separate operating segment disclosed as the Wireless segment. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed (in thousands).

Current assets		$	16,304
Property, plant and equipment			2,171
Goodwill			81,796
Intangible assets			39,375
Other assets			216
Assets acquired			139,862
Liabilities assumed			3,834
Net assets acquired		$	136,028

The above purchase price allocation is subject to revision as more detailed analyses are completed and additional information about the fair value of individual assets and liabilities becomes available. Any change in the fair value of the acquired net assets and resolution of income tax uncertainties will change the amount of the purchase price allocable to goodwill.

The following table reflects the pro forma operating results of the Company as if the Trapeze acquisition had been completed as of the beginning of each respective period. The pro forma effect on the three-month period ended September 28, 2008 was not material.

		Nine Months Ended				Nine Months Ended				Three Months Ended
		September 28, 2008				September 23, 2007				September 23, 2007
		(In thousands, except per share data)
Revenues		$	1,612,400			$	1,486,538			$	574,662
Net income			68,271				76,970				40,260
Net income per diluted share			1.43				1.53				0.80

For purposes of the pro forma disclosures, each respective period includes $2.1 million ($1.4 million after tax) of nonrecurring expenses from the effects of purchase accounting, including in-process research and development charges of $1.5 million, amortization of the sales backlog intangible of $0.4 million, and inventory cost step-up of $0.2 million. The pro forma information above also reflects interest expense assuming borrowings at the beginning of each respective period of $136.0 million at 3.8% interest under our senior secured credit agreement to finance the acquisition.

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

During 2007, we completed three acquisitions. We acquired Hirschmann Automation and Control GmbH (Hirschmann) on March 26, 2007 for $258.0 million. Hirschmann has its headquarters in Germany and is a leading supplier of industrial ethernet solutions and industrial connectivity. The acquisition of Hirschmann enables us to deliver connectivity and networking solutions for demanding industrial environments and large-scale infrastructure projects worldwide. On March 27, 2007, we acquired LTK Wiring Co. Ltd. (LTK), a Hong Kong company, for $214.4 million. LTK is one of the largest manufacturers of electronic cable for the China market. LTK gives us a strong presence in China among OEM customers, including consumer electronics manufacturers. On April 30, 2007, we purchased the assets of Lumberg Automation Components (Lumberg Automation) for $117.6 million. Lumberg Automation has its headquarters in Germany and is a leading supplier of industrial connectors, high performance cord-sets and fieldbus communication components for factory automation machinery. Lumberg Automation complements the industrial connectivity portfolio of Hirschmann as well as our expertise in signal transmission. The results of operations of each acquisition have been included in our results of operations from their respective acquisition dates. Hirschmann and Lumberg Automation are included in the Europe, Middle East and Africa (EMEA) segment, and LTK is included in the Asia Pacific segment.

All three 2007 acquisitions were cash transactions and were valued in total at $590.0 million, including transaction costs. The following table summarizes the fair values of the assets acquired and liabilities assumed in 2007 (in thousands).

Current assets		$	235,092
Property, plant and equipment			94,239
Goodwill			378,355
Intangible assets			88,629
Other assets			29,014
Assets acquired			825,329
Liabilities assumed			235,352
Net assets acquired		$	589,977

The allocation above differs from our preliminary allocation as of December 31, 2007 primarily due to the following adjustments that we recorded in the first and second quarters of 2008:

	•		a $15.9 million decrease in the estimated fair value of property, plant and equipment;
	•		a $23.9 million accrual for restructuring costs related to finalizing certain plans to realign portions of the acquired businesses;
	•		a $4.3 million accrual for unfavorable lease agreements and service provider contracts; and
	•		a $4.5 million increase to current deferred tax assets, and a $10.2 million decrease to long-term deferred tax liabilities related to the adjustments described above.

Note 3: Operating Segments

We conduct our operations through five reported operating segments—Belden Americas, Specialty Products, Wireless, EMEA, and Asia Pacific.

Finance and administration costs reflected in the column entitled F&A in the following tables primarily represent corporate headquarters operating expenses. Amounts reflected in the column entitled Eliminations represent the eliminations of affiliate revenues and affiliate cost of sales.

		Belden				Specialty												Asia
		Americas				Products				Wireless				EMEA				Pacific				F&A				Eliminations				Total
		(In thousands)
Three Months Ended September 28, 2008
Total assets		$	382,470			$	190,994			$	143,992			$	920,518			$	392,190			$	234,695			$	—			$	2,264,859
External customer revenues			202,565				56,536				7,792				164,352				89,249				—				—				520,494
Affiliate revenues			17,558				15,855				38				4,587				—				—				(38,038	)			—
Operating income (loss)			46,318				7,107				(8,784	)			12,976				8,843				(10,824	)			(7,898	)			47,738
Three Months Ended September 23, 2007
Total assets		$	417,027			$	212,279			$	—			$	872,277			$	365,560			$	236,609			$	—			$	2,103,752
External customer revenues			231,625				60,575				—				171,828				97,583				—				—				561,611
Affiliate revenues			18,069				26,459				—				7,271				—				—				(51,799	)			—
Operating income (loss)			44,929				14,557				—				23,627				10,276				(10,680	)			(10,212	)			72,497
Nine Months Ended September 28, 2008
Total assets		$	382,470			$	190,994			$	143,992			$	920,518			$	392,190			$	234,695			$	—			$	2,264,859
External customer revenues			588,906				169,620				7,792				548,180				274,125				—				—				1,588,623
Affiliate revenues			56,790				52,438				38				16,282				111				—				(125,659	)			—
Operating income (loss)			117,882				10,196				(8,784	)			56,203				29,054				(37,047	)			(27,310	)			140,194
Nine Months Ended September 23, 2007
Total assets		$	417,027			$	212,279			$	—			$	872,277			$	365,560			$	236,609			$	—			$	2,103,752
External customer revenues			639,661				181,808				—				430,115				196,673				—				—				1,448,257
Affiliate revenues			47,766				62,097				—				15,012				—				—				(124,875	)			—
Operating income (loss)			121,590				40,962				—				33,382				18,596				(29,872	)			(23,184	)			161,474

The following table is a reconciliation of the total of the reportable segments’ operating income to consolidated income before taxes.

		Three Months Ended								Nine Months Ended
		September 28, 2008				September 23, 2007				September 28, 2008				September 23, 2007
		(In thousands)
Operating income		$	47,738			$	72,497			$	140,194			$	161,474
Interest expense			(8,671	)			(7,561	)			(27,018	)			(18,769	)
Interest income			1,226				803				4,058				5,286
Other income (expense)			813				581				3,967				(864	)
Income before taxes		$	41,106			$	66,320			$	121,201			$	147,127

Note 4: Income per Share

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

		Three Months Ended								Nine Months Ended
		September 28,				September 23,				September 28,				September 23,
		2008				2007				2008				2007
		(In thousands)
Numerator for basic income per share:
Net income		$	31,653			$	49,416			$	87,023			$	101,534
Numerator for diluted income per share:
Net income			31,653				49,416				87,023				101,534
Tax-effected interest expense on convertible subordinated debentures			—				—				—				875
Adjusted net income		$	31,653			$	49,416			$	87,023			$	102,409
Denominator:
Weighted average shares—basic			44,571				45,084				44,072				44,887
Effect of dilutive common stock equivalents			2,511				5,047				3,571				6,006
Weighted average shares—diluted			47,082				50,131				47,643				50,893

The diluted weighted average shares for each period includes the impact of shares issuable with respect to the conversion of our $110.0 million aggregate principal convertible subordinated debentures. See Note 8.

Note 5: Inventories

The major classes of inventories were as follows:

		September 28,				December 31,
		2008				2007
		(In thousands)
Raw materials		$	78,940			$	78,847
Work-in-process			61,862				57,562
Finished goods			143,304				136,305
Perishable tooling and supplies			4,120				4,355
Gross inventories			288,226				277,069
Obsolescence and other reserves			(23,375	)			(19,529	)
Net inventories		$	264,851			$	257,540

Note 6: Long-Lived Assets

Disposals

During the nine months ended September 28, 2008, we sold and leased back under a normal sale-leaseback certain Belden Americas segment real estate in Mexico. The sales price was $25.0 million, and we recognized a loss of $0.9 million on the transaction. The lease term is 15 years with an option to renew up to an additional 10 years.

We sold our assembly operation in the Czech Republic for $8.2 million during the nine months ended September 28, 2008. We recognized no gain or loss on the transaction.

During the three months ended September 23, 2007, we completed the sale of our telecommunications cable operation in the Czech Republic for $25.7 million and recorded a gain of $7.8 million in our EMEA segment. We also sold certain Belden Americas segment real estate and equipment in Illinois for $4.2 million cash and recognized a gain of $0.7 million.

During the nine months ended September 23, 2007, we sold certain Belden Americas segment real estate and equipment in South Carolina and Vermont for $6.7 million cash and recognized an aggregate loss of $0.1 million.

Impairments

During the three months ended September 28, 2008, we identified certain tangible long-lived assets related to a warehouse in Tennessee for which the carrying value was not fully recoverable. We estimated the fair market value of these tangible long-lived assets based upon anticipated net proceeds from their eventual sale and recognized an impairment loss of $0.8 million in the Specialty Products segment operating results.

During the nine months ended September 28, 2008, we recognized an impairment loss of $7.3 million in the operating results of our Specialty Products segment due to the decision to close our manufacturing facility in Manchester, Connecticut. We also recognized impairment losses of $3.8 million and $0.4 million in the operating results of our Specialty Products and Belden Americas segments, respectively, related to our decision to consolidate capacity and dispose of excess machinery and equipment.

During the nine months ended September 23, 2007, we identified certain tangible long-lived assets related to a plant in Canada for which the carrying value was not fully recoverable. We estimated the fair market value of these tangible long-lived assets based upon anticipated net proceeds from their eventual sale and recognized a total impairment loss of $1.9 million in the Belden Americas segment operating results. We also determined that certain asset groups related to our plants in the Czech Republic and the Netherlands were impaired due to product portfolio management and product sourcing actions. We estimated the fair market value of these long-lived assets based upon anticipated net proceeds from their eventual sale and recognized an impairment loss of $1.4 million in the operating results of our EMEA segment.

Depreciation and Amortization Expense

We recognized depreciation expense of $9.3 million and $31.6 million in the three- and nine-month periods ended September 28, 2008, respectively. We recognized depreciation expense of $10.7 million and $30.2 million in the three- and nine-month periods ended September 23, 2007, respectively.

We recognized amortization expense related to our intangible assets of $5.6 million and $10.8 million in the three- and nine-month periods ended September 28, 2008, respectively, including $1.5 million of amortization expense in each period classified as research and development expenses. We recognized amortization expense related to our intangible assets of $2.7 million and $8.5 million in the three- and nine-month periods ended September 23, 2007, respectively.

Note 7: Restructuring Activities

EMEA Restructuring

In April of 2008, we finalized certain plans to realign part of our EMEA operations in order to consolidate manufacturing capacity. We recognized $28.9 million of severance and other restructuring costs related to these realignment plans, including $23.9 million that was accounted for through purchase accounting and $5.0 million that was charged to the statement of operations ($4.8 million in SG&A expenses and $0.2 million in cost of sales). We do not expect to recognize additional costs related to this prior year restructuring activity.

In prior years, we announced various decisions to restructure certain EMEA operations in an effort to reduce manufacturing floor space and overhead, starting with the closures of a manufacturing facility in Sweden and sales offices in the United Kingdom and Germany, as well as product portfolio actions in the Czech Republic and the Netherlands. We do not expect to recognize additional costs related to these prior year restructuring activities.

Voluntary Separation Program

In 2007, we announced a voluntary separation program primarily for associates in the United States who were at least 50 years of age and had 10 years of service with the Company and recognized $0.7 million of severance costs. We recognized $6.5 million of additional severance costs ($3.5 million in SG&A expenses and $3.0 million in cost of sales) in the first quarter of 2008. Severance costs of $3.5 million, $2.4 million, and $0.6 million were recognized by the Belden Americas segment, the Specialty Products segment and F&A, respectively, in 2008. To date, we have recognized severance costs totaling $7.2 million related to these activities. We do not expect to recognize additional costs related to this program.

Reduction in Force

Beginning in 2006, we identified certain positions throughout the organization for elimination in an effort to reduce production, selling, and administration costs. In the first quarter of 2008, we recognized severance costs totaling $0.6 million ($0.4 million in cost of sales and $0.2 million in SG&A expenses) related to North America position eliminations in the Specialty Products segment. To date, we have recognized severance costs totaling $4.8 million related to these activities. We do not expect to recognize additional costs related to these restructuring activities.

The following table sets forth restructuring activity that occurred during the three and nine months ended September 28, 2008:

										Voluntary
		EMEA				Reduction				Separation
(In thousands)		Restructuring				in Force				Program
Accrued Liabilities Balance at December 31, 2007		$	759			$	967			$	707
New charges			4,826				612				6,479
Purchase accounting			23,850				—				—
Cash payments			(45	)			(188	)			(209	)
Foreign currency translation			4,040				4				—
Other adjustments			—				(18	)			—
Accrued Liabilities Balance at March 30, 2008			33,430				1,377				6,977
New charges			160				—				—
Cash payments			(745	)			(651	)			(1,976	)
Foreign currency translation			99				—				—
Other adjustments			(183	)			(108	)			—
Accrued Liabilities Balance at June 29, 2008			32,761				618				5,001
Cash payments			(1,551	)			(538	)			(1,820	)
Foreign currency translation			(1,575	)			(2	)			—
Other adjustments			(80	)			(32	)			—
Accrued Liabilities Balance at September 28, 2008		$	29,555			$	46			$	3,181

The Company continues to review its business strategies and evaluate further restructuring actions. This could result in additional restructuring costs in future periods.

Note 8: Long-Term Debt and Other Borrowing Arrangements

Senior Subordinated Notes

In 2007, we completed an offering of $350.0 million aggregate principal amount of 7.0% senior subordinated notes due 2017. The notes are guaranteed on a senior subordinated basis by certain of our domestic subsidiaries. The notes ranked senior to our convertible subordinated debentures, rank equal in right of payment with any of our future senior subordinated debt, and are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our senior secured credit facility. Interest is payable semiannually on March 15 and September 15.

Convertible Subordinated Debentures

On April 20, 2007, we completed the exchange of $110.0 million aggregate principal of new 4.0% convertible subordinated debentures due 2023 for $110.0 million aggregate principal of the previous 4.0% convertible subordinated debentures due 2023. The new convertible debentures contained a net share settlement feature requiring us upon conversion to pay the principal amount in cash and to pay any conversion consideration in excess of the principal amount in shares of our common stock.

On July 14, 2008, we called all of our convertible subordinated debentures for redemption as of July 31, 2008. As a result of the call for redemption, holders of the debentures had the option to convert each $1,000 principal amount of their debentures and receive value in a combination of cash and shares equal to 56.8246 shares of Belden’s common stock (a conversion price of $17.598). All holders of the debentures elected to convert their debentures. We completed the conversion on August 29, 2008 and paid $110.0 million in cash and issued 3,343,509 shares of common stock. We financed the cash portion of the conversion through borrowings under our senior secured credit facility.

Medium-Term Notes

On February 16, 2007, we redeemed our medium-term notes in the aggregate principal amount of $62.0 million. In connection therewith, we paid a make-whole premium of approximately $2.0 million which was recognized as other expense in the Consolidated Statements of Operations.

Senior Secured Credit Facility

We have a senior secured credit facility with a $350.0 million commitment. The facility matures in 2011, has a variable interest rate based on LIBOR or the prime rate and is secured by our overall cash flow and certain of our assets in the United States. At September 28, 2008, there was $240.0 million of outstanding borrowings under the facility at a 3.8% interest rate, and we had $103.3 million in available borrowing capacity, net of letters of credit. The facility contains certain financial covenants, including maintenance of maximum leverage and minimum fixed charge coverage ratios, with which we are required to comply. As of September 28, 2008, we were in compliance with these covenants.

Note 9: Income Taxes

Tax expense of $34.2 million for the nine months ended September 28, 2008, resulted from income before taxes of $121.2 million. The difference between the effective rate reflected in the provision for income taxes on income before taxes and the amount determined by applying the applicable statutory United States tax rate for the nine months ended September 28, 2008, is analyzed below:

Nine Months Ended September 28, 2008		Amount				Rate
		(in thousands, except rate data)
United States federal statutory rate		$	42,420				35.0	%
State and local income taxes			3,256				2.7
Decrease in deferred tax asset valuation allowance			(3,835	)			(3.2	)
Decrease in uncertain tax positions			(443	)			(0.3	)
Effect of foreign tax rate changes on deferred taxes			1,620				1.3
Foreign income tax rate differences and other, net			(8,840	)			(7.3	)
Total tax expense		$	34,178				28.2	%

During the nine months ended September 28, 2008, we recognized a tax benefit of $3.8 million associated with a decrease in the deferred tax asset valuation allowance with respect to net operating losses in the Netherlands. We also reached a settlement with the Dutch income tax authorities in connection with an audit of our Dutch affiliates for tax years 2001 through 2004. As a result of this settlement, we recorded a decrease to our reserve related to uncertain tax positions of $0.5 million.

We recorded a net increase to income tax expense in 2008 to reflect the impact of changes to statutory tax rates in several foreign jurisdictions. Income tax expense increased by $1.6 million due to the application of the new statutory rates to deferred tax balances in Germany, Italy, Denmark, China and Hong Kong.

In the second quarter of 2008, we paid tax reassessments of $3.2 million stemming from an audit by the Canada Revenue Agency of Nordx/CDT, Inc., the former Canadian subsidiary of Cable Design Technologies. In connection with this audit, we also recorded a $1.9 million addition to our reserve related to uncertain tax positions. Because the periods under audit pre-date Belden’s merger with Cable Design Technologies in 2004, settlement of these matters is accounted for as an adjustment to the goodwill related to the 2004 merger. We also incurred interest of $2.1 million in connection with the Canadian audit. Of the total $2.1 million incurred, $1.9 million was recognized as interest expense and $0.2 million was recorded as an adjustment to goodwill.

Note 10: Pension and Other Postretirement Obligations

The following table provides the components of net periodic benefit costs for the plans:

		Pension Obligations								Other Postretirement Obligations
		September 28, 2008				September 23, 2007				September 28, 2008				September 23, 2007
		(In thousands)
Three Months Ended
Service cost		$	1,401			$	1,667			$	34			$	72
Interest cost			3,153				2,949				630				477
Expected return on plan assets			(3,057	)			(3,031	)			—				—
Amortization of prior service cost			4				4				(53	)			(27	)
Net loss recognition			343				563				171				153
Net periodic benefit cost		$	1,844			$	2,152			$	782			$	675
Nine Months Ended
Service cost		$	4,256			$	4,896			$	103			$	410
Interest cost			9,585				8,385				1,920				1,660
Expected return on plan assets			(9,303	)			(9,119	)			—				—
Amortization of prior service cost			12				11				(161	)			(81	)
Curtailment gain			—				(523	)			—				—
Settlement loss			1,760				—				—				—
Net loss recognition			1,025				1,691				513				459
Net periodic benefit cost		$	7,335			$	5,341			$	2,375			$	2,448

Note 11: Share Repurchases

In 2007, the Board of Directors authorized the Company to repurchase up to $100.0 million of common stock in the open market or in privately negotiated transactions. During the nine months ended September 28, 2008, we completed the share repurchase program and repurchased 1,753,794 shares of our common stock at an aggregate cost of $68.3 million, an average price per share of $38.96. From the inception of the share repurchase program in August 2007 through its completion, we repurchased a total of 2,430,594 shares of our common stock at an aggregate cost of $100.0 million, an average price per share of $41.14.

Note 12: Comprehensive Income

The following table summarizes total comprehensive income:

		Three Months Ended								Nine Months Ended
		September 28,				September 23,				September 28,				September 23,
		2008				2007				2008				2007
		(In thousands)
Net income		$	31,653			$	49,416			$	87,023			$	101,534
Foreign currency translation gain (loss)			(41,309	)			19,462				18,935				32,371
Total comprehensive income (loss)		$	(9,656	)		$	68,878			$	105,958			$	133,905

Note 13: Supplemental Guarantor Information

In 2007, Belden Inc. (the Issuer) issued $350.0 million aggregate principal amount of 7.0% senior subordinated notes due 2017. The notes ranked senior to our convertible subordinated debentures, rank equal in right of payment with any of our future senior subordinated debt, and are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our senior secured credit facility. Interest is payable semiannually on March 15 and September 15. Belden Inc. and its current and future material domestic subsidiaries have fully and unconditionally guaranteed the notes on a joint and several basis. The following consolidating financial information presents information about the Issuer, guarantor subsidiaries and non-guarantor subsidiaries. Investments in subsidiaries are accounted for on the equity basis. Intercompany transactions are eliminated.

Supplemental Condensed Consolidating Balance Sheets

		September 28, 2008
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	164			$	32,835			$	182,440			$	—			$	215,439
Receivables, net			—				115,436				268,091				—				383,527
Inventories, net			—				139,711				125,140				—				264,851
Deferred income taxes			—				(7,184	)			28,762				—				21,578
Other current assets			1,763				6,907				16,789				—				25,459
Total current assets			1,927				287,705				621,222				—				910,854
Property, plant and equipment, less accumulated depreciation			—				122,634				211,480				—				334,114
Goodwill			—				335,355				445,203				—				780,558
Intangible assets, less accumulated amortization			—				88,851				90,343				—				179,194
Investment in subsidiaries			1,281,851				708,176				—				(1,990,027	)			—
Other long-lived assets			6,476				6,278				47,385				—				60,139
		$	1,290,254			$	1,548,999			$	1,415,633			$	(1,990,027	)		$	2,264,859
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	15			$	81,256			$	139,559			$	—			$	220,830
Accrued liabilities			7,617				69,883				89,198				—				166,698
Total current liabilities			7,632				151,139				228,757				—				387,528
Long-term debt			590,000				—				—				—				590,000
Postretirement benefits			—				19,111				81,758				—				100,869
Deferred income taxes			—				31,034				20,410				—				51,444
Other long-term liabilities			7,119				1,129				6,629				—				14,877
Intercompany accounts			130,250				(402,476	)			272,226				—				—
Total stockholders’ equity			555,253				1,749,062				805,853				(1,990,027	)			1,120,141
		$	1,290,254			$	1,548,999			$	1,415,633			$	(1,990,027	)		$	2,264,859

		December 31, 2007
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	13,947			$	146,017			$	—			$	159,964
Receivables, net			—				100,091				273,017				—				373,108
Inventories, net			—				119,585				137,955				—				257,540
Deferred income taxes			—				(6,509	)			35,087				—				28,578
Other current assets			1,986				4,910				10,496				—				17,392
Total current assets			1,986				232,024				602,572				—				836,582
Property, plant and equipment, less accumulated depreciation			—				133,882				235,921				—				369,803
Goodwill			—				248,604				400,278				—				648,882
Intangible assets, less accumulated amortization			—				54,019				100,767				—				154,786
Investment in subsidiaries			923,888				647,642				—				(1,571,530	)			—
Other long-lived assets			7,709				5,547				45,540				—				58,796
		$	933,583			$	1,321,718			$	1,385,078			$	(1,571,530	)		$	2,068,849
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	2,037			$	59,073			$	128,908			$	—			$	190,018
Accrued liabilities			12,381				64,153				83,495				—				160,029
Current maturities of long-term debt			110,000				—				—				—				110,000
Total current liabilities			124,418				123,226				212,403				—				460,047
Long-term debt			350,000				—				—				—				350,000
Postretirement benefits			—				15,486				82,598				—				98,084
Deferred income taxes			—				41,932				36,208				—				78,140
Other long-term liabilities			5,250				2,597				2,068				—				9,915
Intercompany accounts			(79,093	)			(246,038	)			325,131				—				—
Total stockholders’ equity			533,008				1,384,515				726,670				(1,571,530	)			1,072,663
		$	933,583			$	1,321,718			$	1,385,078			$	(1,571,530	)		$	2,068,849

Supplemental Condensed Consolidating Statements of Operations

		Three Months Ended September 28, 2008
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
		(In thousands)
Revenues		$	—			$	261,358			$	315,661			$	(56,525	)		$	520,494
Cost of sales			—				(187,941	)			(235,426	)			56,525				(366,842	)
Gross profit			—				73,417				80,235				—				153,652
Selling, general and administrative expenses			(142	)			(38,510	)			(46,497	)			—				(85,149	)
Research and development			—				(6,532	)			(9,355	)			—				(15,887	)
Amortization of intangibles			—				(2,072	)			(2,053	)							(4,125	)
Asset impairment			—				(753	)			—								(753	)
Operating income (loss)			(142	)			25,550				22,330				—				47,738
Interest expense			(8,719	)			52				(4	)			—				(8,671	)
Interest income			—				141				1,085				—				1,226
Other income			—				—				813				—				813
Intercompany income (expense)			3,043				(8,093	)			5,050				—				—
Income (loss) from equity investment in subsidiaries			35,434				22,863				—				(58,297	)			—
Income (loss) before taxes			29,616				40,513				29,274				(58,297	)			41,106
Income tax benefit (expense)			2,037				(5,079	)			(6,411	)			—				(9,453	)
Net income (loss)		$	31,653			$	35,434			$	22,863			$	(58,297	)		$	31,653
		Three Months Ended September 23, 2007
										Non-
						Guarantor				Non-Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
		(In thousands)
Revenues		$	—			$	278,254			$	348,511			$	(65,154	)		$	561,611
Cost of sales			—				(207,565	)			(261,503	)			65,154				(403,914	)
Gross profit			—				70,689				87,008				—				157,697
Selling, general and administrative expenses			(277	)			(38,405	)			(46,885	)			—				(85,567	)
Research and development			—				(145	)			(5,359	)							(5,504	)
Amortization of intangibles							(563	)			(2,122	)							(2,685	)
Gain on sale of assets			—				716				7,840				—				8,556
Operating income (loss)			(277	)			32,292				40,482				—				72,497
Interest expense			(8,052	)			344				147				—				(7,561	)
Interest income			—				214				589				—				803
Intercompany income (expense)			4,354				(1,952	)			(2,402	)			—				—
Income (loss) from equity investment in subsidiaries			52,000				34,191				—				(86,191	)			—
Other income			—				—				581				—				581
Income (loss) from continuing operations before taxes			48,025				65,089				39,397				(86,191	)			66,320
Income tax benefit (expense)			1,391				(13,089	)			(5,206	)			—				(16,904	)
Net income (loss)		$	49,416			$	52,000			$	34,191			$	(86,191	)		$	49,416