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

Commission File No. 001-12561

BELDEN INC.

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

(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 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 August 1, 2008
Common Stock, $0.01 Par Value		43,112,024

 

 

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

BELDEN INC.
CONSOLIDATED BALANCE SHEETS

		June 29,				December 31,
		2008				2007
		(Unaudited)
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	189,666			$	159,964
Receivables, net			393,385				373,108
Inventories, net			260,472				257,540
Deferred income taxes			21,540				28,578
Other current assets			25,388				17,392
Total current assets			890,451				836,582
Property, plant and equipment, less accumulated depreciation			326,835				369,803
Goodwill			712,395				648,882
Intangible assets, less accumulated amortization			154,875				154,786
Other long-lived assets			66,357				58,796
		$	2,150,913			$	2,068,849
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	380,484			$	350,047
Current maturities of long-term debt			110,000				110,000
Total current liabilities			490,484				460,047
Long-term debt			350,000				350,000
Postretirement benefits			103,229				98,084
Deferred income taxes			64,486				78,140
Other long-term liabilities			14,797				9,915
Stockholders’ equity:
Preferred stock			—				—
Common stock			503				503
Additional paid-in capital			646,269				638,690
Retained earnings			529,757				478,776
Accumulated other comprehensive income			153,442				93,198
Treasury stock			(202,054	)			(138,504	)
Total stockholders’ equity			1,127,917				1,072,663
		$	2,150,913			$	2,068,849

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

BELDEN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended								Six Months Ended
		June 29, 2008				June 24, 2007				June 29, 2008				June 24, 2007
						(In thousands, except per share data)
Revenues		$	556,303			$	549,943			$	1,068,129			$	886,646
Cost of sales			(389,830	)			(398,743	)			(755,839	)			(644,757	)
Gross profit			166,473				151,200				312,290				241,889
Selling, general and administrative expenses			(89,522	)			(92,475	)			(187,237	)			(144,378	)
Research and development			(11,093	)			(5,126	)			(20,164	)			(5,272	)
Loss on sale of assets			—				—				(884	)			—
Asset impairment			—				(1,870	)			(11,549	)			(3,262	)
Operating income			65,858				51,729				92,456				88,977
Interest expense			(10,528	)			(8,682	)			(18,347	)			(11,208	)
Interest income			1,875				1,740				2,832				4,483
Other income (expense)			1,986				571				3,154				(1,445	)
Income before taxes			59,191				45,358				80,095				80,807
Income tax expense			(17,041	)			(15,254	)			(24,725	)			(28,689	)
Net income		$	42,150			$	30,104			$	55,370			$	52,118
Weighted average number of common shares and equivalents:
Basic			43,506				45,078				43,821				44,784
Diluted			47,478				50,920				47,926				51,289
Basic income per share		$	0.97			$	0.67			$	1.26			$	1.16
Diluted income per share		$	0.89			$	0.60			$	1.16			$	1.03
Dividends declared per share		$	0.05			$	0.05			$	0.10			$	0.10

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

BELDEN INC.
CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited)

		Six Months Ended
		June 29, 2008				June 24, 2007
		(In thousands)
Cash flows from operating activities:
Net income		$	55,370			$	52,118
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			27,503				25,312
Asset impairment			11,549				3,262
Pension funding in excess of pension expense			(3,339	)			(2,200	)
Share-based compensation			7,292				4,314
Provision for inventory obsolescence			4,132				4,872
Loss (gain) on disposal of tangible assets			884				(164	)
Excess tax benefits related to share-based compensation			(1,141	)			(6,914	)
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:
Receivables			(21,827	)			(28,652	)
Inventories			(3,746	)			6,734
Accounts payable and accrued liabilities			513				64,421
Accrued taxes			3,313				11,931
Other assets			(8,053	)			(3,571	)
Other liabilities			2,125				(15,119	)
Net cash provided by operating activities			74,575				116,344
Cash flows from investing activities:
Cash used to invest in and acquire businesses			(7,891	)			(571,356	)
Proceeds from disposal of tangible assets			40,249				7,608
Capital expenditures			(18,185	)			(28,132	)
Net cash provided by (used for) investing activities			14,173				(591,880	)
Cash flows from financing activities:
Proceeds from exercise of stock options			5,171				28,994
Excess tax benefits related to share-based compensation			1,141				6,914
Payments under share repurchase program			(68,336	)			—
Cash dividends paid			(4,458	)			(4,626	)
Debt issuance costs			—				(10,212	)
Borrowings under credit arrangements			—				530,000
Payments under borrowing arrangements			—				(242,000	)
Net cash provided by (used for) financing activities			(66,482	)			309,070
Effect of foreign currency exchange rate changes on cash and cash equivalents			7,436				2,411
Increase (decrease) in cash and cash equivalents			29,702				(164,055	)
Cash and cash equivalents, beginning of period			159,964				254,151
Cash and cash equivalents, end of period		$	189,666			$	90,096

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

BELDEN INC.
CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENT
SIX MONTHS ENDED JUNE 29, 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															55,370																				55,370
Foreign currency translation																											60,244								60,244
Comprehensive income																																			115,614
Exercise of stock options, net of tax withholding forfeitures											1,264								190				3,893												5,157
Release of restricted stock, net of tax withholding forfeitures											(2,134	)							66				893												(1,241	)
Share-based compensation											8,433																								8,433
Share repurchase program																			(1,754	)			(68,336	)											(68,336	)
Dividends ($0.10 per share)											16				(4,389	)																			(4,373	)
Balance at June 29, 2008			50,335			$	503			$	646,269			$	529,757				(7,240	)		$	(202,054	)		$	168,964			$	(15,522	)		$	1,127,917

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

BELDEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 six months ended June 29, 2008 and June 24, 2007 include 181 and 175 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 June 29, 2008, we were party to unused bank guaranties, unused standby letters of credit, and surety bonds totaling $7.4 million, $6.1 million, and $2.6 million, respectively.

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 as of the April 2007 exchange date. 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 July 14, 2008, we called all of our convertible subordinated debentures for redemption as of July 31, 2008. See Notes 8 and 13.

Note 2: Acquisitions

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 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 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, which all affected goodwill:

	•		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 four reported operating segments—Belden Americas, Specialty Products, 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				EMEA				Pacific				F&A				Eliminations				Total
		(In thousands)
Three Months Ended June 29, 2008
Total assets		$	367,520			$	197,815			$	966,949			$	386,632			$	231,997			$	—			$	2,150,913
External customer revenues			200,063				59,652				199,265				97,323				—				—				556,303
Affiliate revenues			19,404				18,238				5,639				111				—				(43,392	)			—
Operating income (loss)			40,283				10,171				26,318				11,314				(12,327	)			(9,901	)			65,858
Three Months Ended June 24, 2007
Total assets		$	411,911			$	212,865			$	849,043			$	353,124			$	216,247			$	—			$	2,043,190
External customer revenues			221,738				64,580				176,339				87,286				—				—				549,943
Affiliate revenues			18,419				23,215				5,033				—				—				(46,667	)			—
Operating income (loss)			42,353				16,090				5,953				6,793				(11,252	)			(8,208	)			51,729
Six Months Ended June 29, 2008
Total assets		$	367,520			$	197,815			$	966,949			$	386,632			$	231,997			$	—			$	2,150,913
External customer revenues			386,341				113,084				383,828				184,876				—				—				1,068,129
Affiliate revenues			39,232				36,583				11,695				111				—				(87,621	)			—
Operating income (loss)			71,564				3,089				43,227				20,211				(26,223	)			(19,412	)			92,456
Six Months Ended June 24, 2007
Total assets		$	411,911			$	212,865			$	849,043			$	353,124			$	216,247			$	—			$	2,043,190
External customer revenues			408,036				121,233				258,287				99,090				—				—				886,646
Affiliate revenues			29,697				35,638				7,741				—				—				(73,076	)			—
Operating income (loss)			76,661				26,405				9,755				8,320				(19,192	)			(12,972	)			88,977

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

		Three Months Ended								Six Months Ended
		June 29, 2008				June 24, 2007				June 29, 2008				June 24, 2007
						(In thousands)
Operating income		$	65,858			$	51,729			$	92,456			$	88,977
Interest expense			(10,528	)			(8,682	)			(18,347	)			(11,208	)
Interest income			1,875				1,740				2,832				4,483
Other income (expense)			1,986				571				3,154				(1,445	)
Income before taxes		$	59,191			$	45,358			$	80,095			$	80,807

Note 4: Income per Share

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

		Three Months Ended								Six Months Ended
		June 29, 2008				June 24, 2007				June 29, 2008				June 24, 2007
						(In thousands)
Numerator for basic income per share:
Net income		$	42,150			$	30,104			$	55,370			$	52,118
Numerator for diluted income per share:
Net income		$	42,150			$	30,104			$	55,370			$	52,118
Tax-effected interest expense on convertible subordinated debentures			—				197				—				875
Adjusted net income		$	42,150			$	30,301			$	55,370			$	52,993
Denominator:
Weighted average shares—basic			43,506				45,078				43,821				44,784
Effect of dilutive common stock equivalents			3,972				5,842				4,105				6,505
Weighted average shares—diluted			47,478				50,920				47,926				51,289

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 Notes 8 and 13.

Note 5: Inventories

The major classes of inventories were as follows:

		June 29,				December 31,
		2008				2007
		(In thousands)
Raw materials		$	80,508			$	78,847
Work-in-process			57,345				57,562
Finished goods			140,108				136,305
Perishable tooling and supplies			4,285				4,355
Gross inventories			282,246				277,069
Obsolescence and other reserves			(21,774	)			(19,529	)
Net inventories		$	260,472			$	257,540

Note 6: Long-Lived Assets

Disposals

During the six months ended June 29, 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 six months ended June 29, 2008. We recognized no gain or loss on the transaction.

During the six months ended June 24, 2007, we sold certain Belden Americas segment real estate and equipment in South Carolina and Vermont for $6.7 million cash. We recognized an aggregate $0.1 million loss on the disposals of these assets in the Belden Americas segment operating results.

Impairments

During the six months ended June 29, 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 three and six months ended June 24, 2007, we identified certain tangible long-lived assets related to our 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.

During the six months ended June 24, 2007, we 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 $11.1 million and $22.3 million in the three- and six-month periods ended June 29, 2008, respectively. We recognized depreciation expense of $11.6 million and $19.4 million in the three- and six-month periods ended June 24, 2007, respectively.

We recognized amortization expense related to our intangible assets of $2.6 million and $5.2 million in the three- and six-month periods ended June 29, 2008, respectively. We recognized amortization expense related to our intangible assets of $5.1 million and $5.9 million in the three- and six-month periods ended June 24, 2007, respectively.

Note 7: Restructuring Activities

EMEA Restructuring

In 2008, we finalized certain plans to realign 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 expect to incur additional restructuring charges of $0.5 million related to these realignment plans.

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. We recognized $6.5 million of severance costs ($3.5 million in SG&A expenses and $3.0 million in cost of sales) in 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. 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 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 six months ended June 29, 2008:

										Voluntary
		EMEA				Reduction				Separation
(In thousands)		Restructuring				in Force				Program
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	)			—
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	)			—
Balance at June 29, 2008		$	32,761			$	618			$	5,001

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 rank 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 contain 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. The previous debentures were convertible only into shares of our common stock. Holders may surrender their debentures for conversion into cash and shares of common stock upon satisfaction of any of the following conditions: (1) the closing sale price of our common stock is at least 110% of the conversion price for a minimum of 20 days in the 30 trading-day period ending on the trading day prior to surrender; (2) the senior implied rating assigned to us by Moody’s Investors Service, Inc. is downgraded to B2 or below and the corporate credit rating assigned to us by Standard & Poor’s is downgraded to B or below; (3) we have called the debentures for redemption; or, (4) upon the occurrence of certain corporate transactions as specified in the indenture. As of June 29, 2008, condition (1) had been satisfied. Because the holders of these debentures may at their election tender them for conversion as of June 29, 2008, we have classified the obligations as a current liability.

The number of shares to be delivered upon conversion is limited to the face value of the notes divided by the conversion price (or 6.2 million shares) less the number of shares that amount to a total fair market value of $110.0 million, which will be settled in cash. As of June 29, 2008, the debentures are convertible into cash of $110.0 million and approximately 3.0 million shares of common stock based on a conversion price of $17.679 and the closing price of our common stock of $34.09. The conversion price is subject to adjustment for dividends and other equity distributions. As of June 29, 2008, no holders of the debentures had surrendered their debentures for conversion into cash and shares of our common stock. Interest of 4.0% is payable semiannually in arrears, on January 15 and July 15. The debentures mature on July 15, 2023, if not previously redeemed or converted.

We have called all of the debentures for redemption as of July 31, 2008. As a result of the call for redemption, holders of the debentures have 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 approximately $17.598). All holders of the debentures elected to convert their debentures. We expect to complete the conversion during the third quarter of 2008.

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 and is secured by our overall cash flow and certain of our assets in the United States. The facility contains certain financial covenants, including maintenance of maximum leverage and minimum fixed charge coverage ratios, with which we are required to comply. At June 29, 2008, there were no outstanding borrowings under the facility, we had $346.8 million in available borrowing capacity, and we were in compliance with the covenants required by the facility. In July 2008, we borrowed under the facility to fund our acquisition of Trapeze Networks, Inc. (Trapeze), see Note 13.

Note 9: Income Taxes

Tax expense of $24.7 million for the six months ended June 29, 2008, resulted from income before taxes of $80.1 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 six months ended June 29, 2008, is analyzed below:

Six Months Ended June 29, 2008		Amount				Rate
		(in thousands, except rate data)
United States federal statutory rate		$	28,033				35.0	%
State and local income taxes			1,123				1.4
Decrease in deferred tax asset valuation allowance			(772	)			(0.9	)
Increase in uncertain tax positions			65				0.1
Effect of foreign tax rate changes on deferred taxes			1,621				2.0
Foreign income tax rate differences and other, net			(5,345	)			(6.7	)
Total tax expense		$	24,725				30.9	%

During the six months ended June 29, 2008, we recorded a net increase to income tax expense 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 in the second quarter of 2008 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
		June 29, 2008				June 24, 2007				June 29, 2008				June 24, 2007
		(In thousands)
Three Months Ended
Service cost		$	1,455			$	1,735			$	34			$	171
Interest cost			3,203				3,007				637				597
Expected return on plan assets			(3,076	)			(2,969	)			—				—
Amortization of prior service cost			4				3				(54	)			(27	)
Curtailment gain			—				(523	)			—				—
Settlement loss			1,760				—				—				—
Net loss recognition			359				645				171				153
Net periodic benefit cost		$	3,705			$	1,898			$	788			$	894
Six Months Ended
Service cost		$	2,855			$	3,229			$	69			$	338
Interest cost			6,432				5,436				1,290				1,183
Expected return on plan assets			(6,246	)			(6,088	)			—				—
Amortization of prior service cost			8				7				(108	)			(54	)
Curtailment gain			—				(523	)			—				—
Settlement loss			1,760				—				—				—
Net loss recognition			682				1,128				342				306
Net periodic benefit cost		$	5,491			$	3,189			$	1,593			$	1,773

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 six months ended June 29, 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								Six Months Ended
		June 29, 2008				June 24, 2007				June 29, 2008				June 24, 2007
		(In thousands)
Net income		$	42,150			$	30,104			$	55,370			$	52,118
Foreign currency translation gain (loss)			(533	)			7,839				60,244				12,909
Total comprehensive income		$	41,617			$	37,943			$	115,614			$	65,027

Note 13: Subsequent Events

On July 16, 2008, we acquired Trapeze for approximately $133 million cash. We financed the total purchase price with borrowings under our revolving credit facility. California-based Trapeze is a leading provider of wireless local area networking equipment and management software and had annual revenues of approximately $56 million in 2007.

On July 14, 2008, we called all of our convertible subordinated debentures for redemption as of July 31, 2008. We expect to pay the $110.0 million aggregate principal and any accrued interest with a combination of cash on-hand and borrowings under our revolving credit facility. See Note 8.

Note 14: 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 rank 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

		June 29, 2008
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	10			$	29,322			$	160,334			$	—			$	189,666
Receivables, net			230				99,841				293,314				—				393,385
Inventories, net			—				126,265				134,207				—				260,472
Deferred income taxes			—				(6,509	)			28,049				—				21,540
Other current assets			1,771				6,190				17,427				—				25,388
Total current assets			2,011				255,109				633,331				—				890,451
Property, plant and equipment, less accumulated depreciation			—				117,199				209,636				—				326,835
Goodwill			—				253,559				458,836				—				712,395
Intangible assets, less accumulated amortization			—				53,045				101,830				—				154,875
Investment in subsidiaries			1,115,101				685,313				—				(1,800,414	)			—
Other long-lived assets			6,921				6,077				53,359				—				66,357
		$	1,124,033			$	1,370,302			$	1,456,992			$	(1,800,414	)		$	2,150,913
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	15,539			$	128,921			$	236,024			$	—			$	380,484
Current maturities of long-term debt			110,000				—				—				—				110,000
Total current liabilities			125,539				128,921				236,024				—				490,484
Long-term debt			350,000				—				—				—				350,000
Postretirement benefits			—				17,722				85,507				—				103,229
Deferred income taxes			—				41,932				22,554				—				64,486
Other long-term liabilities			7,104				197				7,496				—				14,797
Intercompany accounts			117,632				(400,267	)			282,635				—				—
Total stockholders’ equity			523,758				1,581,797				822,776				(1,800,414	)			1,127,917
		$	1,124,033			$	1,370,302			$	1,456,992			$	(1,800,414	)		$	2,150,913

		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 and accrued liabilities		$	14,418			$	123,226			$	212,403			$	—			$	350,047
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 June 29, 2008
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
		(In thousands)
Revenues		$	—			$	258,826			$	353,623			$	(56,146	)		$	556,303
Cost of sales			—				(185,290	)			(260,686	)			56,146				(389,830	)
Gross profit			—				73,536				92,937				—				166,473
Selling, general and administrative expenses			(22	)			(39,075	)			(50,425	)			—				(89,522	)
Research and development			—				(1,596	)			(9,497	)			—				(11,093	)
Operating income (loss)			(22	)			32,865				33,015				—				65,858
Interest expense			(8,324	)			33				(2,237	)			—				(10,528	)
Interest income			—				24				1,851				—				1,875
Other income			—				—				1,986				—				1,986
Intercompany income (expense)			3,050				(4,676	)			1,626				—				—
Income (loss) from equity investment in subsidiaries			44,937				25,455				—				(70,392	)			—
Income (loss) before taxes			39,641				53,701				36,241				(70,392	)			59,191
Income tax benefit (expense)			2,509				(8,764	)			(10,786	)			—				(17,041	)
Net income (loss)		$	42,150			$	44,937			$	25,455			$	(70,392	)		$	42,150

		Three Months Ended June 24, 2007
										Non-
						Guarantor				Guarantor
		Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
		(In thousands)
Revenues		$	—			$	270,815			$	346,479			$	(67,351	)		$	549,943
Cost of sales			—				(196,017	)			(270,077	)			67,351				(398,743	)
Gross profit			—				74,798				76,402				—				151,200
Selling, general and administrative expenses			(386	)			(40,401	)			(51,688	)			—				(92,475	)
Research and development			—				(146	)			(4,980	)			—				(5,126	)
Asset impairment			—				—				(1,870	)			—				(1,870	)
Operating income (loss)			(386	)			34,251				17,864				—				51,729
Interest expense			(8,593	)			223				(312	)			—				(8,682	)
Interest income			—				439				1,301				—				1,740
Other income			—				—				571				—				571
Intercompany income (expense)			4,599				(1,405	)			(3,194	)			—				—
Income (loss) from equity investment in subsidiaries			33,887				12,540				—				(46,427	)			—
Income (loss) before taxes			29,507				46,048				16,230				(46,427	)			45,358
Income tax benefit (expense)			597				(12,161	)			(3,690	)			—				(15,254	)
Net income (loss)		$	30,104			$	33,887			$	12,540			$	(46,427	)		$	30,104