Market Overview

Belden Announces Results for Third Quarter 2019, Intent to Divest Grass Valley and Cost Reduction Program

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Belden Inc. (NYSE:BDC), a leading global supplier of specialty networking solutions, today reported fiscal third quarter 2019 results for the period ended September 29, 2019. The Company also announced two significant outcomes of its comprehensive strategic portfolio review. These include the intent to divest the Live Media business ("Grass Valley") and a new broad-based cost reduction program that is expected to result in $40 million of annualized savings.

Third Quarter 2019

Revenues for the quarter totaled $620.3 million, decreasing $35.5 million, or 5.4%, compared to $655.8 million in the third quarter 2018. Net loss was $(297.0) million, compared to $85.9 million in the prior-year period. Net loss included a $337.0 million after-tax non-cash impairment charge related to Grass Valley. EPS totaled $(6.70) compared to $1.80 in the third quarter 2018.

Excluding Grass Valley, adjusted revenues totaled $533.1 million, decreasing $20.9 million, or 3.8%, compared to $554.0 million in the third quarter 2018. Excluding Grass Valley, adjusted EPS was $1.18 compared to $1.29 in the third quarter 2018. Adjusted results are non-GAAP measures, and a non-GAAP reconciliation table is provided as an appendix to this release.

John Stroup, President, CEO, and Chairman of Belden Inc., said, "Revenues were near the midpoint of our expected range excluding Grass Valley. Consistent with our expectations, demand trends remained softer in some of our key Industrial markets in the third quarter, but we are encouraged by the improving trends in our Broadband business."

Intent to Divest Grass Valley

Subsequent to the end of the third quarter, the Company made the decision to pursue the divestiture of Grass Valley. Based on the approval of Belden's Board of Directors to divest this business and the probability that such divestiture will be consummated, Grass Valley's financial results will be presented as discontinued operations in our fourth quarter and full year 2019 financial statements and prior periods will be recast for consistency.

Mr. Stroup remarked, "We completed a rigorous strategic review of our portfolio of businesses, and today's announcement marks an important outcome. We concluded that it is in the best interests of our shareholders, customers, and employees to separate Grass Valley from Belden. This will enable Grass Valley to more effectively execute its strategic plan and pursue growth opportunities. Further, this separation will simplify Belden's portfolio and improve organic growth and revenue visibility."

"The remaining Belden portfolio will consist of strong businesses in attractive Industrial and Enterprise markets, each aligned with powerful secular trends. These include industrial automation, cybersecurity, broadband & 5G, and smart buildings. This portfolio, while smaller, offers improved predictability and multiple platforms for accelerating organic growth and margin expansion. In addition, we continue to see numerous opportunities for disciplined capital deployment as we invest in compelling inorganic opportunities in these robust markets," said Mr. Stroup.

Cost Reduction Program

The divestiture of Grass Valley provides an opportunity for a broad-based organizational recalibration. As a result, the Company announced a cost reduction program that is designed to improve performance and enhance margins, delivering a $40 million annualized reduction in selling, general, and administrative expenses. The Company intends to deliver improvements by streamlining the organizational structure and investing in technology to drive productivity. These actions will begin immediately, with some benefit in 2020, and the full benefit in 2021.

"Belden has a long track record of substantial growth, margin expansion, and shareholder value creation, but we are not satisfied with our recent performance. We are reaffirming our commitment to our stated financial goals, including a total revenue CAGR of 5-7% and EBITDA margins of 20-22%. The Company will be well-positioned to achieve these goals after executing these actions. Importantly, the expected cost savings will more than offset the free cash flow dilution associated with the divestiture of Grass Valley," said Mr. Stroup.

Outlook

"Near-term demand trends remain challenging, but our simplified portfolio of businesses is aligned with long-term secular trends and positioned for profitable growth. We are updating our expectations of revenue and EPS from continuing operations since Grass Valley will be presented as discontinued operations in our fourth quarter and full year 2019 financial statements," said Mr. Stroup.

The Company expects fourth quarter 2019 revenues to be $510 - $530 million. For the full year ending December 31, 2019, the Company now expects revenues to be $2.092 - $2.112 billion.

The Company expects fourth quarter 2019 GAAP EPS to be $0.00 - $0.15. For the full year ending December 31, 2019, the Company now expects GAAP EPS of $2.04 - $2.19. This full year 2019 guidance relates to income from continuing operations and excludes Grass Valley, the $337.0 million after-tax non-cash impairment charge related to Grass Valley and an estimated loss of $75 million upon a sale of Grass Valley, primarily related to its accumulated foreign currency translation losses, as these items will be included in income (losses) from discontinued operations.

The Company expects fourth quarter 2019 adjusted EPS to be $1.00 - $1.15. For the full year ending December 31, 2019, the Company now expects adjusted EPS of $4.32 - $4.47.

Earnings Conference Call

Management will host a conference call today at 8:30 am ET to discuss results of the quarter. The listen-only audio of the conference call will be broadcast live via the Internet at http://investor.belden.com. The dial-in number for participants in the U.S. is 888-599-8686; the dial-in number for participants outside the U.S. is 720-543-0302. A replay of this conference call will remain accessible in the investor relations section of the Company's website for a limited time.

Net Income and Earnings per Share (EPS)

All references to Net Income and EPS within this earnings release refer to net income attributable to Belden and income from continuing operations per diluted share attributable to Belden common stockholders, respectively.

Use of Non-GAAP Financial Information

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

 

BELDEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 29,

2019

 

September 30,

2018

 

September 29,

2019

 

September 30,

2018

 

 

(In thousands, except per share data)

Revenues

 

$

620,318

 

 

$

655,774

 

 

$

1,845,023

 

 

$

1,929,978

 

Cost of sales

 

(384,916

)

 

(394,917

)

 

(1,143,870

)

 

(1,180,931

)

Gross profit

 

235,402

 

 

260,857

 

 

701,153

 

 

749,047

 

Selling, general and administrative expenses

 

(120,169

)

 

(132,716

)

 

(365,439

)

 

(396,430

)

Research and development expenses

 

(31,351

)

 

(33,471

)

 

(100,539

)

 

(107,781

)

Amortization of intangibles

 

(22,243

)

 

(25,533

)

 

(67,952

)

 

(74,990

)

Goodwill and other asset impairment

 

(342,146

)

 

 

 

(342,146

)

 

 

Gain from patent litigation

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