BELDEN INC. [BDC] Filings

10-Q 1 bdc-20231001.htm 10-Q bdc-20231001

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________

FORM 10-Q

_________________________________________________

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission File No. 001-12561

____________________________________

BELDEN INC.

(Exact name of registrant as specified in its charter)

_____________________________________________


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

1 North Brentwood Boulevard, 15th Floor, St. Louis, Missouri 63105

(Address of principal executive offices)

(314) 854-8000

Registrant’s telephone number, including area code

_________________________________________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐.

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

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

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

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

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

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

Title of each class

Trading Symbols

Name of each exchange on which registered

Common stock, $0.01 par value

BDC

New York Stock Exchange

As of October 27, 2023, the Registrant had 41,681,610 outstanding shares of common stock.

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

BELDEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	October 1, 2023		December 31, 2022

	(Unaudited)
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	530,971	$	687,676
Receivables, net	481,125		440,102
Inventories, net	336,420		341,563
Other current assets	63,831		66,866

Total current assets	1,412,347		1,536,207
Property, plant and equipment, less accumulated depreciation	404,950		381,864
Operating lease right-of-use assets	78,497		73,376
Goodwill	892,711		862,253
Intangible assets, less accumulated amortization	271,615		246,830
Deferred income taxes	14,830		14,642
Other long-lived assets	54,449		46,503
	$	3,129,399	$	3,161,675

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	304,851	$	350,058
Accrued liabilities	248,320		289,861

Total current liabilities	553,171		639,919
Long-term debt	1,145,796		1,161,176
Postretirement benefits	65,063		67,828
Deferred income taxes	67,709		58,582
Long-term operating lease liabilities	65,477		59,250
Other long-term liabilities	32,780		30,970
Stockholders’ equity:
Common stock	503		503
Additional paid-in capital	812,423		825,669
Retained earnings	949,422		751,522
Accumulated other comprehensive loss	(6,605)		(5,871)
Treasury stock	(556,343)		(428,812)
Total Belden stockholders’ equity	1,199,400		1,143,011
Noncontrolling interests	3		939
Total stockholders’ equity	1,199,403		1,143,950
	$	3,129,399	$	3,161,675

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

-1-

BELDEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022

	(In thousands, except per share data)
Revenues	$	626,807	$	670,491	$	1,960,841	$	1,947,413
Cost of sales	(385,639)		(431,845)		(1,212,240)		(1,277,602)
Gross profit	241,168		238,646		748,601		669,811
Selling, general and administrative expenses	(118,079)		(110,478)		(366,288)		(318,747)
Research and development expenses	(30,190)		(26,306)		(90,544)		(75,751)
Amortization of intangibles	(9,526)		(10,105)		(30,262)		(28,099)

Gain on sale of assets	12,056		37,891		12,056		37,891
Operating income	95,429		129,648		273,563		285,105
Interest expense, net	(8,580)		(9,883)		(25,593)		(35,570)
Non-operating pension benefit	328		26		1,462		2,296
Loss on debt extinguishment	—		—		—		(6,392)
Income from continuing operations before taxes	87,177		119,791		249,432		245,439
Income tax expense	(14,850)		(16,104)		(45,385)		(39,014)
Income from continuing operations	72,327		103,687		204,047		206,425
Loss from discontinued operations, net of tax	—		—		—		(3,685)
Loss on disposal of discontinued operations, net of tax	—		(5,366)		—		(9,933)
Net income	72,327		98,321		204,047		192,807
Less: Net income (loss) attributable to noncontrolling interest	(20)		27		(245)		111
Net income attributable to Belden stockholders	$	72,347	$	98,294	$	204,292	$	192,696

Weighted average number of common shares and equivalents:
Basic	42,053		43,466		42,460		44,181
Diluted	42,625		44,063		43,129		44,810

Basic income (loss) per share attributable to Belden stockholders:
Continuing operations	$	1.72	$	2.38	$	4.81	$	4.67
Discontinued operations	—		—		—		(0.08)
Disposal of discontinued operations	—		(0.12)		—		(0.22)
Net income	$	1.72	$	2.26	$	4.81	$	4.36

Diluted income (loss) per share attributable to Belden stockholders:
Continuing operations	$	1.70	$	2.35	$	4.74	$	4.60
Discontinued operations	—		—		—		(0.08)
Disposal of discontinued operations	—		(0.12)		—		(0.22)
Net income	$	1.70	$	2.23	$	4.74	$	4.30

Comprehensive income attributable to Belden	$	93,915	$	149,907	$	203,697	$	300,388

Common stock dividends declared per share	$	0.05	$	0.05	$	0.15	$	0.15

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

-2-

BELDEN INC.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS

(Unaudited)


	Nine Months Ended
	October 1, 2023		October 2, 2022

	(In thousands)
Cash flows from operating activities:
Net income	$	204,047	$	192,807
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	73,974		65,730
Share-based compensation	14,843		18,438
Loss on disposal of discontinued operations	—		9,934
Loss on debt extinguishment	—		6,392

Gain on sale of assets	(12,056)		(37,891)
Changes in operating assets and liabilities, net of the effects of currency exchange rate changes, acquired businesses and disposals:
Receivables	(48,949)		(42,808)
Inventories	16,211		(11,393)
Accounts payable	(42,456)		(65,584)
Accrued liabilities	(43,318)		(41,247)
Income taxes	548		(2,347)
Other assets	(6,706)		4,269
Other liabilities	3,855		(17,500)
Net cash provided by operating activities	159,993		78,800
Cash flows from investing activities:
Cash used for business acquisitions, net of cash acquired	(106,712)		(104,481)
Capital expenditures	(61,870)		(50,250)
Proceeds from disposal of tangible assets	13,785		43,534
Proceeds from disposal of businesses, net of cash sold	9,300		334,574

Net cash provided by (used for) investing activities	(145,497)		223,377
Cash flows from financing activities:
Payments under share repurchase program	(150,000)		(136,336)
Withholding tax payments for share-based payment awards	(17,309)		(6,534)
Cash dividends paid	(6,408)		(6,762)
Payments under financing lease obligations	(254)		(123)

Payments under borrowing arrangements	—		(230,639)
Proceeds from issuance of common stock	6,568		3,717

Net cash used for financing activities	(167,403)		(376,677)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(3,798)		(21,791)
Decrease in cash and cash equivalents	(156,705)		(96,291)
Cash and cash equivalents, beginning of period	687,676		643,757
Cash and cash equivalents, end of period	$	530,971	$	547,466

The Condensed Consolidated Cash Flow Statement for the nine months ended October 2, 2022 includes the results of discontinued operations up to the February 22, 2022 disposal date.

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

-3-

BELDEN INC.

CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENTS

(Unaudited)


	Belden Inc. Stockholders
				Additional							Accumulated Other		Non-controlling
	Common Stock			Paid-In		Retained		Treasury Stock			Comprehensive
	Shares	Amount		Capital		Earnings		Shares	Amount		Income (Loss)		Interests		Total
	(In thousands)
Balance at December 31, 2022	50,335	$	503	$	825,669	$	751,522	(7,502)	$	(428,812)	$	(5,871)	$	939	$	1,143,950
Net income (loss)	—	—		—		63,192		—	—		—		(247)		62,945
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		(17,300)		2		(17,298)
Common stock issuance	—	—		(420)		—		37	2,099		—		—		1,679
Retirement Savings Plan stock contributions	—	—		638		—		28	1,758		—		—		2,396
Exercise of stock options, net of tax withholding forfeitures	—	—		(4,547)		—		47	1,951		—		—		(2,596)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(17,997)		—		196	7,301		—		—		(10,696)
Share repurchase program, net of excise tax	—	—		—		—		(594)	(50,266)		—		—		(50,266)
Share-based compensation	—	—		6,253		—		—	—		—		—		6,253
Common stock dividends ($0.05 per share)	—	—		—		(2,150)		—	—		—		—		(2,150)
Balance at April 2, 2023	50,335	$	503	$	809,596	$	812,564	(7,788)	$	(465,969)	$	(23,171)	$	694	$	1,134,217
Net income	—	—		—		68,753		—	—		—		22		68,775
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		(4,863)		2		(4,861)
Sale and deconsolidation of Hite JV	—	—		—		—		—	—		(139)		(695)		(834)
Retirement Savings Plan stock contributions	—	—		663		—		24	1,379		—		—		2,042
Exercise of stock options, net of tax withholding forfeitures	—	—		(2,698)		—		27	767		—		—		(1,931)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(4,130)		—		55	2,413		—		—		(1,717)
Share repurchase program, net of excise tax	—	—		—		—		(394)	(36,463)		—		—		(36,463)
Share-based compensation	—	—		5,901		—		—	—		—		—		5,901
Common stock dividends ($0.05 per share)	—	—		—		(2,138)		—	—		—		—		(2,138)
Balance at July 2, 2023	50,335	$	503	$	809,332	$	879,179	(8,076)	$	(497,873)	$	(28,173)	$	23	$	1,162,991
Net income (loss)	—	—		—		72,347		—	—		—		(20)		72,327
Other comprehensive income, net of tax	—	—		—		—		—	—		21,568		—		21,568
Common stock issuance	—	—		448		—		79	4,441		—		—		4,889
Retirement Savings Plan stock contributions	—	—		692		—		18	1,031		—		—		1,723
Exercise of stock options, net of tax withholding forfeitures	—	—		(620)		—		8	311		—		—		(309)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(118)		—		1	58		—		—		(60)
Share repurchase program, net of excise tax	—	—		—		—		(690)	(64,311)		—		—		(64,311)
Share-based compensation	—	—		2,689		—		—	—		—		—		2,689
Common stock dividends ($0.05 per share)	—	—		—		(2,104)		—	—		—		—		(2,104)
Balance at October 1, 2023	50,335	$	503	$	812,423	$	949,422	(8,660)	$	(556,343)	$	(6,605)	$	3	$	1,199,403

-4-


	Belden Inc. Stockholders
				Additional							Accumulated Other		Non-controlling
	Common Stock			Paid-In		Retained		Treasury Stock			Comprehensive
	Shares	Amount		Capital		Earnings		Shares	Amount		Income (Loss)		Interests		Total
	(In thousands)
Balance at December 31, 2021	50,335	$	503	$	833,627	$	505,717	(5,360)	$	(313,994)	$	(70,566)	$	795	$	956,082
Net income	—	—		—		35,841		—	—		—		3		35,844
Other comprehensive income, net of tax	—	—		—		—		—	—		3,928		27		3,955
Retirement Savings Plan stock contributions	—	—		(356)		—		43	2,809		—		—		2,453
Exercise of stock options, net of tax withholding forfeitures	—	—		(526)		—		6	375		—		—		(151)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(11,287)		—		103	7,739		—		—		(3,548)
Share repurchase program	—	—		—		—		(885)	(50,000)		—		—		(50,000)
Share-based compensation	—	—		5,224		—		—	—		—		—		5,224
Common stock dividends ($0.05 per share)	—	—		—		(2,264)		—	—		—		—		(2,264)
Balance at April 3, 2022	50,335	$	503	$	826,682	$	539,294	(6,093)	$	(353,071)	$	(66,638)	$	825	$	947,595

Net income	—	—		—		58,561		—	—		—		81		58,642
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		52,151		(25)		52,126
Common stock issuance	—	—		(2,775)		—		82	6,492		—		—		3,717
Retirement Savings Plan stock contributions	—	—		(730)		—		30	2,355		—		—		1,625
Exercise of stock options, net of tax withholding forfeitures	—	—		(173)		—		2	133		—		—		(40)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(8,048)		—		75	6,621		—		—		(1,427)
Share repurchase program	—	—		—		—		(320)	(16,559)		—		—		(16,559)
Share-based compensation	—	—		5,646		—		—	—		—		—		5,646
Common stock dividends ($0.05 per share)	—	—		—		(2,242)		—	—		—		—		(2,242)
Balance at July 3, 2022	50,335	$	503	$	820,602	$	595,613	(6,224)	$	(354,029)	$	(14,487)	$	881	$	1,049,083

Net income	—	—		—		98,294		—	—		—		27		98,321
Other comprehensive income (loss), net of tax	—	—		—		—		—	—		51,613		(44)		51,569
Retirement Savings Plan stock contributions	—	—		(339)		—		23	1,802		—		—		1,463
Exercise of stock options, net of tax withholding forfeitures	—	—		(2,492)		—		19	1,649		—		—		(843)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures	—	—		(2,851)		—		28	2,326		—		—		(525)
Share repurchase program	—	—		—		—		(1,166)	(69,777)		—		—		(69,777)
Share-based compensation	—	—		7,568		—		—	—		—		—		7,568
Common stock dividends ($0.05 per share)	—	—		—		(2,185)		—	—		—		—		(2,185)
Balance at October 2, 2022	50,335	$	503	$	822,488	$	691,722	(7,320)	$	(418,029)	$	37,126	$	864	$	1,134,674

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

-5-

BELDEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Summary of Significant Accounting Policies

Basis of Presentation

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

The accompanying Condensed Consolidated Financial Statements presented as of any date other than December 31, 2022:

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

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

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

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Supplementary Data contained in our 2022 Annual Report on Form 10-K.

Business Description

We are a leading global supplier of network infrastructure and digitization solutions built around two global businesses - Enterprise Solutions and Industrial Automation Solutions. Our mission is to build the foundation for a digital world that makes the digital journey simpler, smarter and secure.

Reporting Periods

Our fiscal year and fiscal fourth quarter both end on December 31. Our fiscal first quarter ends on the Sunday falling closest to 91 days after December 31, which was April 2, 2023, the 92nd day of our fiscal year 2023. Our fiscal second and third quarters each have 91 days. The nine months ended October 1, 2023 and October 2, 2022 included 274 and 275 days, respectively.

Fair Value Measurement

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

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

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

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

As of and during the three and nine months ended October 1, 2023 and October 2, 2022, we utilized Level 1 inputs to determine the fair value of cash equivalents. We did not have any transfers between Level 1 and Level 2 fair value measurements during the nine months ended October 1, 2023 and October 2, 2022.

Cash and Cash Equivalents

We classify cash on hand and deposits in banks, including commercial paper, money market accounts, and other investments with an original maturity of three months or less, that we hold from time to time, as cash and cash equivalents. We periodically have cash equivalents consisting of short-term money market funds and other investments. As of October 1, 2023, we did not have any such cash equivalents on hand. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations. We do not enter into investments for trading or speculative purposes.

-6-

Contingent Liabilities

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

As of October 1, 2023, we were party to standby letters of credit, surety bonds, and bank guaranties totaling $8.3 million, $4.7 million, and $4.1 million, respectively.

Revenue Recognition

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

Subsequent Events

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

Noncontrolling Interest

On April 28, 2023, we sold our 51% ownership interest in Shanghai Hi-Tech Control System Co, Ltd to (Hite) for $0.9 million and recognized a $0.4 million pretax gain on sale. The sale also includes $0.6 million of potential earnout payments. The joint venture developed and provided certain Industrial Automation Solutions products and integrated solutions to customers in China. The joint venture was determined to not have sufficient equity at risk; therefore, it was considered a variable interest entity. As Belden was the primary beneficiary of the joint venture, due to both our ownership percentage and control over the activities of the joint venture, we consolidated the joint venture in our financial statements and presented the results of the joint venture attributable to Hite’s ownership as net income attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations up to April 28, 2023 when we sold and deconsolidated the entity. The joint venture was not material to our consolidated financial statements during the nine months ended October 1, 2023 and October 2, 2022.

A Belden subsidiary includes a noncontrolling interest as of and for the periods ended October 1, 2023 and October 2, 2022. The results attributable to the noncontrolling interest holders are not material to our consolidated financial statements, and are presented as net income attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations.

Current Year Adoption of Accounting Pronouncements

None of the accounting pronouncements that became effective during 2023 had a material impact to our condensed consolidated financial statements or disclosures.

-7-

Note 2: Revenues

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

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


	Broadband Solutions		Industrial Automation		Smart Buildings		Total Revenues

Three Months Ended October 1, 2023	(In thousands)
Enterprise Solutions	$	146,048	$	—	$	137,857	$	283,905
Industrial Automation Solutions	—		342,902		—		342,902
Total	$	146,048	$	342,902	$	137,857	$	626,807

Three Months Ended October 2, 2022
Enterprise Solutions	$	155,865	$	—	$	163,336	$	319,201
Industrial Automation Solutions	—		351,290		—		351,290
Total	$	155,865	$	351,290	$	163,336	$	670,491

Nine Months Ended October 1, 2023
Enterprise Solutions	$	436,935	$	—	$	434,842	$	871,777
Industrial Automation Solutions	—		1,089,064		—		1,089,064
Total	$	436,935	$	1,089,064	$	434,842	$	1,960,841

Nine Months Ended October 2, 2022
Enterprise Solutions	$	424,441	$	—	$	470,634	$	895,075
Industrial Automation Solutions	—		1,052,338		—		1,052,338
Total	$	424,441	$	1,052,338	$	470,634	$	1,947,413

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


	Americas		EMEA		APAC		Total Revenues

Three Months Ended October 1, 2023	(In thousands)
Enterprise Solutions	$	199,002	$	51,476	$	33,427	$	283,905
Industrial Automation Solutions	195,154		92,189		55,559		342,902
Total	$	394,156	$	143,665	$	88,986	$	626,807

Three Months Ended October 2, 2022
Enterprise Solutions	$	247,322	$	35,045	$	36,834	$	319,201
Industrial Automation Solutions	202,632		87,828		60,830		351,290
Total	$	449,954	$	122,873	$	97,664	$	670,491

Nine Months Ended October 1, 2023
Enterprise Solutions	$	659,360	$	125,595	$	86,822	$	871,777
Industrial Automation Solutions	624,219		303,165		161,680		1,089,064
Total	$	1,283,579	$	428,760	$	248,502	$	1,960,841

Nine Months Ended October 2, 2022
Enterprise Solutions	$	685,209	$	110,931	$	98,935	$	895,075
Industrial Automation Solutions	620,987		270,044		161,307		1,052,338
Total	$	1,306,196	$	380,975	$	260,242	$	1,947,413

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We generate revenues primarily by selling products that support communication, infrastructure, and delivery solutions that make the digital journey simpler, smarter, and secure. We also generate revenues from providing support and professional services. We sell our products to distributors, end-users, installers, and directly to original equipment manufacturers. At times, we enter into arrangements that involve the delivery of multiple performance obligations. For these arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price and recognized when or as each performance obligation is satisfied. Generally, we determine relative standalone selling price using the prices charged separately to customers on a standalone basis. Most of our performance obligations related to the sale of products are satisfied at a point in time when control of the product is transferred based on the shipping terms of the arrangement. Typically, payments are due after control transfers, which is less than one year from satisfaction of the performance obligation.

The amount of consideration we receive and revenue we recognize varies due to rebates, returns, and price adjustments. We estimate the expected rebates, returns, and price adjustments based on an analysis of historical experience, anticipated sales demand, and trends in product pricing. We adjust our estimate of revenue at the earlier of when the most likely amount of consideration we expect to receive changes or when the consideration becomes fixed. Adjustments to revenue for performance obligations satisfied in prior periods were not significant during the three and nine months ended October 1, 2023 and October 2, 2022.

The following table presents estimated and accrued variable consideration:


	October 1, 2023		December 31, 2022

	(in thousands)
Accrued rebates included in accrued liabilities	$	37,872	$	55,559
Accrued returns included in accrued liabilities	13,722		11,700
Price adjustments recognized against gross accounts receivable	26,871		24,304

Depending on the terms of an arrangement, we may defer the recognition of some or all of the consideration received because we have to satisfy a future obligation. Consideration allocated to support services under a support and maintenance contract is recognized ratably over the term of the service. Consideration allocated to professional services is typically recognized when or as the services are performed depending on the terms of the arrangement. Our contract terms for support, maintenance, and professional services typically require payment within one year or less of when the services will be provided. As of October 1, 2023, total deferred revenue was $27.7 million, and of this amount, $21.5 million is expected to be recognized within the next twelve months, and the remaining $6.2 million is long-term and is expected to be recognized over a period greater than twelve months. The following table presents deferred revenue activity during the three and nine months ended October 1, 2023 and October 2, 2022, respectively:


	2023		2022

	(In thousands)
Beginning balance at January 1	$	33,243	$	19,390
New deferrals	4,359		8,857
Acquisitions	—		6,567
Revenue recognized	(8,307)		(3,365)
Balance at the end of Q1	$	29,295	$	31,449

New deferrals	6,900		4,265

Revenue recognized	(6,528)		(8,880)
Balance at the end of Q2	$	29,667	$	26,834

New deferrals	9,146		7,137
Acquisitions	104		—
Revenue recognized	(11,224)		(4,960)
Balance at the end of Q3	$	27,693	$	29,011

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Service-type warranties represent $9.9 million of the deferred revenue balance at October 1, 2023, and of this amount $6.1 million is expected to be recognized in the next twelve months, and the remaining $3.8 million is long-term and will be recognized over a period greater than twelve months. As of October 1, 2023 and December 31, 2022, we did not have any material contract assets recorded in the Condensed Consolidated Balance Sheets.

We expense sales commissions as incurred when the duration of the related revenue arrangement is one year or less. We capitalize sales commissions when the original duration of the related revenue arrangement is longer than one year, and we amortize it over the related revenue arrangement period. We did not have any capitalized sales commissions on our balance sheet as of October 1, 2023 and December 31, 2022. The following table presents sales commissions that are recorded within selling, general and administrative expenses:


	Three Months Ended				Nine Months ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022

	(In thousands)
Sales commissions	$	4,729	$	6,372	$	16,819	$	17,721

Note 3: Acquisitions

On August 31, 2023, we acquired CloudRail GmbH (CloudRail) with cash on hand for $9.2 million, net of cash acquired. CloudRail, based in Mannheim, Germany, specializes in sensor to cloud data solutions allowing end users to quickly connect sensors on their machinery to cloud providers to drive business insights and improve outcomes. The results of CloudRail have been included in our Condensed Consolidated Financial Statements from August 31, 2023 and are reported within the Industrial Automation Solutions segment. The CloudRail acquisition was not material to our financial position or results of operations.

On April 17, 2023, we acquired Berthold Sichert GmbH (Sichert) with cash on hand for $97.5 million, net of cash acquired. Sichert, based in Berlin, Germany, designs and manufactures a portfolio of polycarbonate street cabinets utilized in outside plant passive optical networks (“PON”) and 5G networks. Sichert is reported within the Enterprise Solutions segment. The Sichert acquisition was not material to our results of operations. The following table summarizes the estimated, preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):


Receivables	$	6,040
Inventory	13,113
Other current assets	816
Property, plant and equipment	13,247
Intangible assets	44,764
Goodwill	27,457
Other long-lived assets	4,922
Total assets acquired	$	110,359

Accounts payable	$	2,423
Accrued liabilities	2,015
Deferred income taxes	8,417

Total liabilities assumed	$	12,855

Net assets	$	97,504

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

The preliminary fair value of acquired receivables is $6.0 million, which is equivalent to its gross contractual amount. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments we have used in estimating the preliminary fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations.

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For purposes of the above allocation, we based our preliminary estimate of the fair values for intangible assets on valuation studies performed by a third party valuation firm. We used various valuation methods including discounted cash flows, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets (Level 3 valuation). Goodwill and other intangible assets reflected above were determined to meet the criteria for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to the expansion of broadband product offerings in end-to-end solutions. Our tax basis in the acquired goodwill is zero.

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


	Fair Value		Amortization Period
	(In thousands)		(In years)
Intangible assets subject to amortization:
Customer relationships	$	41,597	20.0
Trademarks	2,184		7.0
Sales backlog	983		0.2
Total intangible assets subject to amortization	$	44,764

Intangible assets not subject to amortization:
Goodwill	$	27,457	n/a
Total intangible assets not subject to amortization	$	27,457

Total intangible assets	$	72,221
Weighted average amortization period			18.9

The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the customer relationship intangible asset was based on our forecasts of estimated sales from recurring customers. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks.

Note 4: Discontinued Operations

On February 22, 2022, we sold Tripwire for gross cash consideration of $350 million. The divestiture of Tripwire represented a strategic shift impacting our operations and financial results. As a result, the Tripwire disposal group, which was included in our Industrial Automation Solutions segment, is reported within discontinued operations. We recognized a loss on disposal of discontinued operations, net of tax of $5.4 million and $9.9 million during the three and nine months ended October 2, 2022, respectively. The following table summarizes the operating results of the Tripwire disposal group from January 1, 2022 to the February 22, 2022 disposal date (in thousands):


Revenues	$	12,067
Cost of sales	(3,256)
Gross profit	8,811
Selling, general and administrative expenses	(8,185)
Research and development expenses	(5,528)
Amortization of intangible assets	(638)
Loss before taxes	$	(5,540)

From January 1, 2022 to February 22, 2022, the Tripwire disposal group did not have any capital expenditures and recognized share-based compensation expense of $0.2 million. The disposal group did not have any significant non-cash charges for investing activities from January 1, 2022 to February 22, 2022.

Note 5: Reportable Segments

We are organized around two global businesses: Enterprise Solutions and Industrial Automation Solutions. Each of the global businesses represents a reportable segment. The key measures of segment profit or loss are Segment Revenues and Segment EBITDA. Segment Revenues represent non-affiliate revenues. Segment EBITDA excludes certain items, including depreciation expense; amortization of intangibles; asset impairment; severance, restructuring, and acquisition integration costs; purchase

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accounting effects related to acquisitions, such as the adjustment of acquired inventory to fair value; and other costs. We allocate corporate expenses to the segments for purposes of measuring Segment EBITDA. Corporate expenses are allocated on the basis of each segment’s relative EBITDA prior to the allocation.

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


	Enterprise Solutions		Industrial Automation Solutions		Total Segments

	(In thousands)
As of and for the three months ended October 1, 2023
Segment Revenues	$	283,905	$	342,902	$	626,807
Segment EBITDA	37,693		77,244		114,937
Depreciation expense	6,632		6,810		13,442
Amortization of intangibles	4,468		5,058		9,526
Amortization of software development intangible assets	—		1,963		1,963
Severance, restructuring, and acquisition integration costs	3,453		2,622		6,075
Adjustments related to acquisitions and divestitures	197		298		495
Segment assets	625,356		698,287		1,323,643

As of and for the three months ended October 2, 2022
Segment Revenues	$	319,201	$	351,290	$	670,491
Segment EBITDA	46,110		71,055		117,165
Depreciation expense	6,020		5,827		11,847
Amortization of intangibles	4,512		5,593		10,105
Amortization of software development intangible assets	8		860		868
Severance, restructuring, and acquisition integration costs	2,702		1,858		4,560
Adjustments related to acquisitions and divestitures	(2,537)		514		(2,023)
Segment assets	575,829		632,997		1,208,826

As of and for the nine months ended October 1, 2023
Segment revenues	$	871,777	$	1,089,064	$	1,960,841
Segment EBITDA	118,854		229,662		348,516
Depreciation expense	18,779		19,699		38,478
Amortization of intangibles	15,171		15,091		30,262
Amortization of software development intangible assets	—		5,235		5,235
Severance, restructuring, and acquisition integration costs	5,147		6,699		11,846
Adjustments related to acquisitions and divestitures	522		520		1,042
Segment assets	625,356		698,287		1,323,643

As of and for the nine months ended October 2, 2022
Segment Revenues	$	895,075	$	1,052,338	$	1,947,413
Segment EBITDA	118,818		206,643		325,461
Depreciation expense	17,214		17,229		34,443
Amortization of intangibles	13,051		15,048		28,099
Amortization of software development intangible assets	52		2,804		2,856
Severance, restructuring, and acquisition integration costs	7,605		6,535		14,140
Adjustments related to acquisitions and divestitures	(3,095)		1,648		(1,447)
Segment assets	575,829		632,997		1,208,826

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


	Three Months Ended				Nine Months Ended
	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022

	(In thousands)
Total Segment and Consolidated Revenues	$	626,807	$	670,491	$	1,960,841	$	1,947,413



Total Segment EBITDA	$	114,937	$	117,165	$	348,516	$	325,461
Gain on sale of asset	12,056		37,891		12,056		37,891

Depreciation expense	(13,442)		(11,847)		(38,478)		(34,443)
Amortization of intangibles	(9,526)		(10,105)		(30,262)		(28,099)
Severance, restructuring, and acquisition integration costs (1)	(6,075)		(4,560)		(11,846)		(14,140)
Amortization of software development intangible assets	(1,963)		(868)		(5,235)		(2,856)
Adjustments related to acquisitions and divestitures (2)	(495)		2,023		(1,042)		1,447
Eliminations	(63)		(51)		(146)		(156)
Consolidated operating income	95,429		129,648		273,563		285,105
Interest expense, net	(8,580)		(9,883)		(25,593)		(35,570)
Loss on debt extinguishment	—		—		—		(6,392)
Total non-operating pension benefit	328		26		1,462		2,296
Consolidated income from continuing operations before taxes	$	87,177	$	119,791	$	249,432	$