Company Quick10K Filing
Quick10K
Belden
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$53.61 40 $2,160
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-07-01 Quarter: 2018-07-01
10-Q 2018-04-01 Quarter: 2018-04-01
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-10-01 Quarter: 2017-10-01
10-Q 2017-07-02 Quarter: 2017-07-02
10-Q 2017-04-02 Quarter: 2017-04-02
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-10-02 Quarter: 2016-10-02
10-Q 2016-07-03 Quarter: 2016-07-03
10-Q 2016-04-03 Quarter: 2016-04-03
10-K 2015-12-31 Annual: 2015-12-31
8-K 2018-12-03 Other Events
8-K 2018-10-31 Earnings, Exhibits, Earnings, Exhibits
8-K 2018-08-01 Earnings, Exhibits, Earnings, Exhibits
8-K 2018-05-24 Shareholder Vote, Other Events, Shareholder Vote, Other Events
8-K 2018-05-02 Earnings, Exhibits, Earnings, Exhibits
8-K 2018-03-23 Shareholder Rights, Exhibits
8-K 2018-03-13 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-03-06 Enter Agreement, Enter Agreement, Other Events, Exhibits
8-K 2018-02-01 Earnings, Exhibits, Earnings, Exhibits
VIV Telefonica Brasil
PHI PLDT
USM United States Cellular
SHEN Shenandoah Telecommunications
CCOI Cogent Communications Holdings
AVYA Avaya Holdings
CBB Cincinnati Bell
AKTS Akoustis Technologies
DZSI Dasan Zhone Solutions
XGTI XG Technology
BDC 2018-09-30
Part I Financial Information
Item 1. Financial Statements
Note 1: Summary of Significant Accounting Policies
Note 2: Revenues
Note 3: Acquisitions
Note 4: Disposals
Note 5: Reportable Segments
Note 6: Income per Share
Note 7: Inventories
Note 8: Long-Lived Assets
Note 9: Severance, Restructuring, and Acquisition Integration Activities
Note 10: Long-Term Debt and Other Borrowing Arrangements
Note 11: Net Investment Hedge
Note 12: Income Taxes
Note 13: Pension and Other Postretirement Obligations
Note 14: Comprehensive Income and Accumulated Other Comprehensive Income (Loss)
Note 15: Preferred Stock
Note 16: Share Repurchases
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3: Quantitative and Qualitative Disclosures About Market Risks
Item 4: Controls and Procedures
Part II Other Information
Item 1: Legal Proceedings
Item 1A: Risk Factors
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Item 6: Exhibits
EX-10.1 ex101.htm
EX-31.1 ex311.htm
EX-31.2 ex312.htm
EX-32.1 ex321.htm
EX-32.2 ex322.htm

Belden Earnings 2018-09-30

BDC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 bdc-09302018x10q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________________________
FORM 10-Q
_________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
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 þ  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  þ  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 þ   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  þ
As of November 1, 2018, the Registrant had 40,305,408 outstanding shares of common stock.




PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
BELDEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 
September 30, 2018
 
December 31, 2017
 
(Unaudited)
 
 
 
(In thousands)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
329,027

 
$
561,108

Receivables, net
474,870

 
473,570

Inventories, net
322,194

 
297,226

Other current assets
50,361

 
40,167

Total current assets
1,176,452

 
1,372,071

Property, plant and equipment, less accumulated depreciation
351,628

 
337,322

Goodwill
1,554,830

 
1,478,257

Intangible assets, less accumulated amortization
537,087

 
545,207

Deferred income taxes
63,853

 
42,549

Other long-lived assets
31,062

 
65,207

 
$
3,714,912

 
$
3,840,613

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Accounts payable
$
304,923

 
$
376,277

Accrued liabilities
314,667

 
302,651

Total current liabilities
619,590

 
678,928

Long-term debt
1,503,597

 
1,560,748

Postretirement benefits
124,013

 
102,085

Deferred income taxes
38,771

 
27,713

Other long-term liabilities
38,639

 
36,273

Stockholders’ equity:
 
 
 
Preferred stock
1

 
1

Common stock
503

 
503

Additional paid-in capital
1,135,699

 
1,123,832

Retained earnings
889,189

 
833,610

Accumulated other comprehensive loss
(85,667
)
 
(98,026
)
Treasury stock
(549,899
)
 
(425,685
)
Total Belden stockholders’ equity
1,389,826

 
1,434,235

Noncontrolling interest
476

 
631

Total stockholders’ equity
1,390,302

 
1,434,866

 
$
3,714,912

 
$
3,840,613

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
 
September 30, 2018

October 1, 2017
 
September 30, 2018
 
October 1, 2017
 
 
 
 
 
 
 
 
 
(In thousands, except per share data)
Revenues
$
655,774

 
$
621,745

 
$
1,929,978

 
$
1,783,759

Cost of sales
(394,917
)
 
(381,896
)
 
(1,180,931
)
 
(1,078,432
)
Gross profit
260,857

 
239,849

 
749,047

 
705,327

Selling, general and administrative expenses
(132,716
)
 
(116,129
)
 
(396,430
)
 
(346,786
)
Research and development
(33,471
)
 
(35,442
)
 
(107,781
)
 
(105,108
)
Amortization of intangibles
(25,533
)
 
(27,162
)
 
(74,990
)
 
(77,944
)
Gain from patent litigation
62,141

 

 
62,141

 

Operating income
131,278

 
61,116

 
231,987

 
175,489

Interest expense, net
(14,472
)
 
(19,385
)
 
(46,538
)
 
(66,424
)
Non-operating pension benefit (cost)
1,356

 
(325
)
 
824

 
(880
)
Loss on debt extinguishment

 
(51,594
)
 
(22,990
)
 
(52,441
)
Income (loss) before taxes
118,162

 
(10,188
)
 
163,283

 
55,744

Income tax benefit (expense)
(32,304
)
 
11,133

 
(46,063
)
 
6,673

Net income
85,858

 
945

 
117,220

 
62,417

Less: Net loss attributable to noncontrolling interest
(23
)
 
(82
)
 
(148
)
 
(274
)
Net income attributable to Belden
85,881

 
1,027

 
117,368

 
62,691

Less: Preferred stock dividends
8,732

 
8,732

 
26,198

 
26,198

Net income (loss) attributable to Belden common stockholders
$
77,149

 
$
(7,705
)
 
$
91,170

 
$
36,493

 
 
 
 
 
 
 
 
Weighted average number of common shares and equivalents:
 
 
 
 
 
 
 
Basic
40,510

 
42,256

 
40,960

 
42,251

Diluted
47,678

 
42,256

 
41,268

 
42,663

 
 
 
 
 
 
 
 
Basic income (loss) per share attributable to Belden common stockholders
$
1.90

 
$
(0.18
)
 
$
2.23

 
$
0.86

 
 
 
 
 
 
 
 
Diluted income (loss) per share attributable to Belden common stockholders
$
1.80

 
$
(0.18
)
 
$
2.21

 
$
0.86

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Belden
$
68,620

 
$
(18,127
)
 
$
129,727

 
$
17,416

 
 
 
 
 
 
 
 
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
 
September 30, 2018
 
October 1, 2017
 
 
 
 
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income
$
117,220

 
$
62,417

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
111,896

 
112,538

Share-based compensation
14,657

 
13,431

Loss on debt extinguishment
22,990

 
52,441

Changes in operating assets and liabilities, net of the effects of currency exchange rate changes and acquired businesses:
 
 
 
Receivables
(25,338
)
 
(32,950
)
Inventories
(16,642
)
 
(50,232
)
Accounts payable
(81,296
)
 
30,290

Accrued liabilities
(29,474
)
 
(54,828
)
Income taxes
4,463

 
(32,071
)
Other assets
(13,267
)
 
(9,046
)
Other liabilities
(4,350
)
 
11,625

Net cash provided by operating activities
100,859

 
103,615

Cash flows from investing activities:
 
 
 
Cash used to acquire businesses, net of cash acquired
(84,580
)
 
(166,896
)
Capital expenditures
(63,451
)
 
(33,430
)
Proceeds from disposal of tangible assets
1,556

 
15

Proceeds from disposal of business
40,171

 

Net cash used for investing activities
(106,304
)
 
(200,311
)
Cash flows from financing activities:
 
 
 
Payments under borrowing arrangements
(484,757
)
 
(1,105,892
)
Payments under share repurchase program
(125,000
)
 
(11,508
)
Cash dividends paid
(32,421
)
 
(32,535
)
Debt issuance costs paid
(7,609
)
 
(16,586
)
Withholding tax payments for share-based payment awards
(2,004
)
 
(5,421
)
Redemption of stockholders' rights agreement
(411
)
 

Borrowings under credit arrangements
431,270

 
866,700

Net cash used for financing activities
(220,932
)
 
(305,242
)
Effect of foreign currency exchange rate changes on cash and cash equivalents
(5,704
)
 
15,185

Decrease in cash and cash equivalents
(232,081
)
 
(386,753
)
Cash and cash equivalents, beginning of period
561,108

 
848,116

Cash and cash equivalents, end of period
$
329,027

 
$
461,363

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

- 3-




BELDEN INC.
CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 2018
(Unaudited)
 
 
 
Belden Inc. Stockholders
 
 
 
 
 
 
 
Mandatory Convertible
 
 
 
 
 
Additional
 
 
 
 
 
Accumulated
Other
 
Non-controlling
 
 
 
Preferred Stock
 
Common Stock
 
Paid-In
 
Retained
 
Treasury Stock
 
Comprehensive
 
 
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
Earnings
 
Shares
 
Amount
 
Income (Loss)
 
Interest
 
Total
 
 
(In thousands)
 
 
Balance at December 31, 2017
52

 
$
1

 
50,335

 
$
503

 
$
1,123,832

 
$
833,610

 
(8,316
)
 
$
(425,685
)
 
$
(98,026
)
 
$
631

 
$
1,434,866

Cumulative effect of change in accounting principles

 

 

 

 

 
(29,041
)
 

 

 

 

 
(29,041
)
Net income (loss)

 

 

 

 

 
117,368

 

 

 

 
(148
)
 
117,220

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 
12,359

 
(7
)
 
12,352

Exercise of stock options, net of tax withholding forfeitures

 

 

 

 
(883
)
 

 
20

 
118

 

 

 
(765
)
Conversion of restricted stock units into common stock, net of tax withholding forfeitures

 

 

 

 
(1,907
)
 

 
48

 
668

 

 

 
(1,239
)
Share repurchase program

 

 

 

 

 

 
(1,782
)
 
(125,000
)
 

 

 
(125,000
)
Share-based compensation

 

 

 

 
14,657

 

 

 

 

 

 
14,657

Redemption of stockholders' rights agreement

 

 

 

 

 
(411
)
 

 

 

 

 
(411
)
Preferred stock dividends

 

 

 

 

 
(26,198
)
 

 

 

 

 
(26,198
)
Common stock dividends ($0.15 per share)

 

 

 

 

 
(6,139
)
 

 

 

 

 
(6,139
)
Balance at September 30, 2018
52

 
$
1

 
50,335

 
$
503

 
$
1,135,699

 
$
889,189

 
(10,030
)
 
$
(549,899
)
 
$
(85,667
)
 
$
476

 
$
1,390,302

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

- 4-



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, 2017:
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 2017 Annual Report on Form 10-K.
Business Description
We are a signal transmission solutions provider built around two global business platforms – Enterprise Solutions and Industrial Solutions. Our comprehensive portfolio of signal transmission solutions provides industry leading secure and reliable transmission of data, sound, and video for mission critical applications.
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 1, 2018, the 91st day of our fiscal year 2018. Our fiscal second and third quarters each have 91 days. The nine months ended September 30, 2018 and October 1, 2017 included 273 and 274 days, respectively.
Reportable Segments
Effective January 1, 2018, we changed our organizational structure and, as a result, now are reporting two segments. The segments formerly known as Broadcast Solutions and Enterprise Solutions now are presented as the Enterprise Solutions segment, and the segments formerly known as Industrial Solutions and Network Solutions now are presented as the Industrial Solutions segment. The reorganization allows us to further accelerate progress in key strategic areas, and the segment consolidation properly aligns our external reporting with the way the businesses are now managed. We have recast the prior period segment information to conform to the change in the composition of these reportable segments. 
Reclassifications
We have made certain reclassifications to the 2017 Condensed Consolidated Financial Statements, including those related to the adoption of Accounting Standards Update No. 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07) and our segment change, with no impact to reported net income in order to conform to the 2018 presentation. See Note 5.
Interim Periods of 2017
During the financial closing process for the fourth quarter of 2017, we determined that certain consolidated financial statement amounts were not recorded correctly in prior interim periods of 2017. We evaluated these errors and concluded that they were not material to any of our previously issued interim financial statements and did not require restatement of the quarters. The errors primarily related to recognizing revenue prior to satisfying all of the delivery criteria in one business within our Enterprise segment. All of the errors were corrected as of December 31, 2017. The impact of the errors in the three months ended October 1, 2017 was an overstatement of revenues and net income of $11.8 million and $2.6 million, respectively. The impact of the errors in the nine months ended October 1, 2017 was an overstatement of revenues and net income of $28.3 million and $6.9 million, respectively.

- 5-



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 September 30, 2018 and October 1, 2017, we utilized Level 1 inputs to determine the fair value of cash equivalents, and we utilized Level 2 and Level 3 inputs to determine the fair value of net assets acquired in business combinations (see Note 3). We did not have any transfers between Level 1 and Level 2 fair value measurements during the nine months ended September 30, 2018 and October 1, 2017.
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 September 30, 2018, 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.
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. 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.

As of September 30, 2018, we were party to standby letters of credit, bank guaranties, and surety bonds totaling $7.3 million, $3.2 million, and $2.3 million, respectively.
Gain from Patent Litigation
On July 5, 2011, our wholly-owned subsidiary, PPC Broadband, Inc. (PPC), filed an action for patent infringement against Corning Optical Communications RF LLC (Corning). The complaint alleged that Corning infringed two of PPC’s patents. In July 2015, a jury found that Corning willfully infringed both patents. In November 2016, following a series of post-trial motions, the trial judge issued rulings for a total judgment in our favor of approximately $61.3 million. In December 2016, Corning appealed the case to the U.S. Court of Appeals for the Federal Circuit. In March 2018, a panel of three judges of the United States Court of Appeals for the Federal Circuit issued a Rule 36 Affirmance of the District Court's final judgment that Corning, among other things, willfully infringed the PPC universal compression patents at issue in the case, and that PPC should be awarded approximately $61.8 million, plus accrued interest. In April 2018, Corning filed a petition for re-hearing, which was denied in May 2018. On July 16, 2018, the District Court ruled that Corning shall pay the judgments. We received a pre-tax amount of approximately $62.1 million from Corning on July 19, 2018. We recorded the $62.1 million of cash received as a pre-tax gain from patent litigation during the three and nine months ended September 30, 2018. Prior to the third quarter of 2018, we had not recognized any amounts in our consolidated financial statements related to this matter. On September 27, 2018, Corning filed a petition for certiorari review by the U.S. Supreme Court of the District Court’s decision to exercise its discretion to award PPC $23.85 million in enhanced damages based on the totality of the evidence, including a number of factual findings regarding Corning’s willful infringement and egregious

- 6-



conduct. For at least the same reasons why the Federal Circuit affirmed the District Court’s decision to enhance damages, we believe that Corning’s certiorari petition will not be granted, thus exhausting Corning’s opportunities for further appellate relief.
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 and did not identify any events that would require disclosure.
Current-Year Adoption of Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which replaced most existing revenue recognition guidance in U.S. GAAP. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. ASU 2014-09 requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. We adopted ASU 2014-09 on January 1, 2018, using the modified retrospective method of adoption. Adoption resulted in a $2.6 million, net of tax increase to retained earnings. This adjustment primarily relates to the deferral of costs to obtain a contract that were previously expensed at the beginning of the contract period.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). The new guidance addresses how the following eight specific cash flow items are to be presented: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. We adopted ASU 2016-15 on January 1, 2018. The adoption had no material impact on our statement of cash flows for the nine months ended September 30, 2018.

In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16), which requires recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the standard eliminates the exception to the recognition of current and deferred income taxes for an intra-entity asset transfer other than for inventory until the asset has been sold to an outside party. We adopted ASU 2016-16 on January 1, 2018. The adoption resulted in a $3.0 million and $46.9 million decrease to other current assets and other long-lived assets, respectively, as well as an $18.2 million increase in deferred income tax assets and a $31.7 million decrease to retained earnings on January 1, 2018. The adoption had no material impact on our results of operations.

In March 2017, the FASB issued ASU 2017-07, which requires an entity to report the service cost component in the same line item or items as other compensation costs arising from the service rendered by their employees during the period. The other components of net benefit cost are required to be presented in the Statement of Operations separately from the service cost component after Operating Income. Additionally, only the service cost component is eligible for capitalization, when applicable. The standard requires the amendments to be applied retrospectively for the presentation of the service cost component and the other cost components of net periodic pension cost and net periodic OPEB cost in the Statement of Operations and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension and OPEB costs. We adopted ASU 2017-07 on January 1, 2018, and elected to use the practical expedient related to the retrospective presentation requirements. Adoption resulted in a $0.3 million and $0.9 million increase to operating income for the three and nine months ended October 1, 2017, respectively, but no changes to net income.
Pending Adoption of Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (ASU 2016-02), a leasing standard for both lessees and lessors that supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840,

- 7-



"Leases." Under its core principle, a lessee will recognize a right-of-use asset and lease liability on the balance sheet for nearly all leased assets. Lessor accounting remains largely consistent with existing U.S. generally accepted accounting principles. The new standard will be effective for us beginning January 1, 2019, and early adoption is permitted. We will adopt ASU 2016-02 on January 1, 2019. In July 2018, the FASB issued ASU No. 2018-11 (“ASU 2018-11”), Leases: Targeted Improvements, which provides an additional (and optional) transition method for adopting the new lease standard. Under this transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative effect adjustment to opening retained earnings in the period of adoption. Currently, we plan on adopting the new lease standard using the newly permitted transition method. Furthermore, we plan to elect the following practical expedients and accounting policy elections upon adoption: (i) the package of practical expedients as defined in ASU 2016-02, (ii) the short-term lease accounting policy election, (iii) the practical expedient to not separate non-lease components from lease components, and (iv) the easement practical expedient, which permits an entity to continue applying its current policy for accounting for land easements that existed as of the effective date of ASU 2016-02. Although we anticipate the adoption of ASU 2016-02 will have a material impact on our consolidated balance sheets, we do not expect the adoption to have a material impact on our consolidated statements of income.  We are completing our assessment of the potential impacts of ASU 2016-02 and also implementing changes to our systems and processes.

In August 2017, the FASB issued Accounting Standards Update No. ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new guidance better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The new guidance also makes certain targeted improvements to simplify the application of hedge accounting guidance and ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. The standard is effective for fiscal years beginning after December 15, 2018, and early adoption is permitted. We do not expect the standard to have a material impact on our consolidated financial statements and related disclosures.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of the Tax Cuts and Jobs Act (the “Act”). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI inclusions or to treat any taxes on GILTI inclusions as a period cost are both acceptable methods subject to an accounting policy election. Pending further review of the guidance related to the application of the GILTI provisions and their impact to Belden, we intend to further assess the materiality of the anticipated GILTI inclusion before making a policy election as allowed under current law as of the date of this report.

In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 provides an option to allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017.   The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures.

In August 2018, the Securities and Exchange Commission (“SEC”) adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. Additionally, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period presented. This final rule is effective on November 5, 2018. We are in the process of evaluating the impact of the final rule on its consolidated financial statements.
Note 2:  Revenues
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the accounting standards in effect for those periods.
We recorded a net increase to retained earnings of $2.6 million as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to sales commissions and software revenues within our Industrial Solutions segment. There was no significant impact to revenues for the three and nine months ended September 30, 2018 as a result of applying Topic 606.
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

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remitted to governmental authorities are not included in our revenues. The following tables present our revenues disaggregated by major product category.
 
 
Cable & Connectivity
 
Networking, Software & Security
 
Total Revenues 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
(In thousands)
Enterprise Solutions
 
$
271,928

 
$
116,923

 
$
388,851

Industrial Solutions
 
162,460

 
104,463

 
266,923

Total
 
$
434,388

 
$
221,386

 
$
655,774

 
 
 
 
 
 
 
Three Months Ended October 1, 2017
 
 
 
 
 
 
Enterprise Solutions
 
$
262,212

 
$
98,630

 
$
360,842

Industrial Solutions
 
160,520

 
100,383

 
260,903

Total
 
$
422,732

 
$
199,013

 
$
621,745

 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
Enterprise Solutions
 
$
785,970

 
$
348,906

 
$
1,134,876

Industrial Solutions
 
498,062

 
297,040

 
795,102

Total
 
$
1,284,032

 
$
645,946

 
$
1,929,978

 
 
 
 
 
 
 
Nine Months Ended October 1, 2017
 
 
 
 
 
 
Enterprise Solutions
 
$
751,459

 
$
272,465

 
$
1,023,924

Industrial Solutions
 
466,155

 
293,680

 
759,835

Total
 
$
1,217,614

 
$
566,145

 
$
1,783,759

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 September 30, 2018
 
(In thousands)
Enterprise Solutions
 
$
254,320

 
$
72,467

 
$
62,064

 
$
388,851

Industrial Solutions
 
156,334

 
71,280

 
39,309

 
266,923

Total
 
$
410,654

 
$
143,747

 
$
101,373

 
$
655,774

 
 
 
 
 
 
 
 
 
Three Months Ended October 1, 2017
 
 
 
 
 
 
 
 
Enterprise Solutions
 
$
243,223

 
$
61,270

 
$
56,349

 
$
360,842

Industrial Solutions
 
150,229

 
72,718

 
37,956

 
260,903

Total
 
$
393,452

 
$
133,988

 
$
94,305

 
$
621,745

 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
Enterprise Solutions
 
$
735,794

 
$
228,394

 
$
170,688

 
$
1,134,876

Industrial Solutions
 
461,667

 
217,851

 
115,584

 
795,102

Total
 
$
1,197,461

 
$
446,245

 
$
286,272

 
$
1,929,978

 
 
 
 
 
 
 
 
 
Nine Months Ended October 1, 2017
 
 
 
 
 
 
 
 
Enterprise Solutions
 
$
690,568

 
$
168,947

 
$
164,409

 
$
1,023,924

Industrial Solutions
 
448,675

 
205,050

 
106,110

 
759,835

Total
 
$
1,139,243

 
$
373,997

 
$
270,519

 
$
1,783,759

The following tables present our revenues disaggregated by products, including software products, and support and services.

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Products
 
Support & Services
 
Total Revenues 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
(In thousands)
Enterprise Solutions
 
$
368,389

 
$
20,462

 
$
388,851

Industrial Solutions
 
243,578

 
23,345

 
266,923

Total
 
$
611,967

 
$
43,807

 
$
655,774

 
 
 
 
 
 
 
Three Months Ended October 1, 2017
 
 
 
 
 
 
Enterprise Solutions
 
$
342,216

 
$
18,626

 
$
360,842

Industrial Solutions
 
235,378

 
25,525

 
260,903

Total
 
$
577,594

 
$
44,151

 
$
621,745

 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
Enterprise Solutions
 
$
1,080,549

 
$
54,327

 
$
1,134,876

Industrial Solutions
 
723,653

 
71,449

 
795,102

Total
 
$
1,804,202

 
$
125,776

 
$
1,929,978

 
 
 
 
 
 
 
Nine Months Ended October 1, 2017
 
 
 
 
 
 
Enterprise Solutions
 
$
968,855

 
$
55,069

 
$
1,023,924

Industrial Solutions
 
683,121

 
76,714

 
759,835

Total
 
$
1,651,976

 
$
131,783

 
$
1,783,759

We generate revenues primarily by selling products that provide secure and reliable transmission of data, sound, and video for mission critical applications. 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 selling price and recognized when or as each performance obligation is satisfied. 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. Generally, we determine relative selling price using the prices charged to customers on a standalone basis.
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 was not significant during the three and nine months ended September 30, 2018. Accrued rebates and accrued returns as of September 30, 2018 totaled $30.1 million and $9.3 million, respectively. Estimated price adjustments recognized against our gross accounts receivable balance as of September 30, 2018 totaled $29.0 million.
Depending on the terms of an arrangement, we may defer the recognition of a portion of the consideration received because we have to satisfy a future obligation. Consideration allocated to support services under a support and maintenance contract is typically paid in advance and recognized ratably over the term of the service. Consideration allocated to professional services is recognized when or as the services are performed depending on the terms of the arrangement. As of January 1, 2018, total deferred revenue was $104.4 million, and $50.8 million and $149.4 million was recognized as revenue during the three and nine months ended September 30, 2018, respectively. As of September 30, 2018, total deferred revenue was $90.8 million, and of this amount, $78.5 million will be recognized within the next twelve months, and the remaining $12.3 million is long-term and will be recognized over a period greater than twelve months.
We expense sales commissions as incurred when the duration of the related revenue arrangement is one year or less. We capitalize sales commissions in other current and long-lived assets on our balance sheet when the duration of the related revenue arrangement is longer than one year, and we amortize it over the related revenue arrangement period. Total capitalized sales commissions was $2.3 million as of September 30, 2018. Total sales commissions costs were $5.9 million and $18.4 million during the three and nine months ended September 30, 2018, respectively. Sales commissions are recorded within selling, general and administrative expenses.
Note 3:  Acquisitions
Net-Tech Technology, Inc.

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We acquired 100% of the shares of Net-Tech Technology, Inc. (NT2) on April 25, 2018 for a preliminary purchase price of $8.5 million that was funded with cash on hand. NT2 is an integrator of optical passive components and network optimization products used within broadband network applications where optical backhaul is used. NT2 is located in the United States. The results of NT2 have been included in our Consolidated Financial Statements from April 25, 2018, and are reported within the Enterprise Solutions segment. The NT2 acquisition was not material to our financial position or results of operations.
Snell Advanced Media
We acquired 100% of the outstanding ownership interest in Snell Advanced Media (SAM) on February 8, 2018 for a purchase price, net of cash acquired, of $104.5 million that was funded with cash on hand. The acquisition includes a potential earnout, which is based upon future combined earnings of SAM and Grass Valley through December 31, 2019. The maximum earnout consideration is $31.4 million, but based upon a third party valuation specialist using certain assumptions in a discounted cash flow model, the preliminary estimated fair value of the earnout included in the purchase price is $29.3 million. We assumed debt of $19.3 million and paid it off during the first quarter of 2018. SAM designs, manufactures, and sells innovative content production and distribution systems for the broadcast and media markets. SAM is located in the United Kingdom. The results of SAM have been included in our Consolidated Financial Statements from February 8, 2018, and are reported within the Enterprise Solutions segment. The following table summarizes the estimated, preliminary fair value of the assets acquired and the liabilities assumed as of February 8, 2018 (in thousands):

Receivables
 
$
17,182

Inventory
 
15,312

Prepaid and other current assets
 
3,375

Property, plant, and equipment
 
7,789

Intangible assets
 
54,100

Goodwill
 
87,853

Deferred taxes
 
5,476

Other long-lived assets
 
2,156

   Total assets acquired
 
$
193,243

 
 
 
Accounts payable
 
$
11,927

Accrued liabilities
 
21,614

Deferred revenue
 
3,924

Long-term debt
 
19,315

Postretirement benefits
 
31,343

Other long-term liabilities
 
591

   Total liabilities assumed
 
$
88,714

 
 
 
Net assets
 
$
104,529


The above purchase price allocation is preliminary, and is subject to revision as additional information about the fair value of individual assets and liabilities becomes available. The preliminary measurement of receivables; inventories; property, plant and equipment; intangible assets; goodwill; deferred income taxes; deferred revenue; 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.

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.

The preliminary fair value of acquired receivables is $17.2 million, which is equivalent to its gross contractual amount.

For purposes of the above allocation, we based our estimates of the preliminary fair values for the acquired inventory; property, plant, and equipment; intangible assets; and deferred revenue on preliminary valuation studies performed by a third party valuation firm. We have estimated a preliminary fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of

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disposal, and a reasonable profit allowance for our post acquisition selling efforts. To determine the value of the acquired property, plant, and equipment, we used various valuation methods, including both the market approach, which considers sales prices of similar assets in similar conditions (Level 2 valuation), and the cost approach, which considers the cost to replace the asset adjusted for depreciation (Level 3 valuation). We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets and deferred revenue (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 expected synergies and the assembled workforce. The expected synergies for the SAM acquisition may be gained from helping broadcast and media content creators, aggregators and distributors significantly improve their effectiveness and efficiency during a period of rapid change in technology, viewer and advertiser behavior and business models. Our tax basis in the acquired goodwill is zero. The intangible assets related to the acquisition consisted of the following:

 
 
Preliminary Fair Value
 
Amortization Period
 
 
(In thousands)
 
(In years)
Intangible assets subject to amortization:
 
 
 
 
Developed technologies
 
$
38,100

 
5.0
Customer relationships
 
12,300

 
12.0
Sales backlog
 
2,000

 
0.3
Trademarks
 
1,700

 
0.9
Total intangible assets subject to amortization
 
$
54,100

 
 
 
 
 
 
 
Intangible assets not subject to amortization:
 
 
 
 
Goodwill
 
$
87,853

 
n/a
Total intangible assets not subject to amortization
 
$
87,853

 
 
 
 
 
 
 
Total intangible assets
 
$
141,953

 
 
Weighted average amortization period
 
 
 
6.3 years

The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the developed technology intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period and pattern of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of estimated sales from recurring customers. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks.

Our consolidated revenues for the three and nine months ended September 30, 2018 included an estimated $25.3 million and $77.2 million, respectively, from SAM. Due to the integration of SAM into our existing business, we are unable to reasonably estimate the amount of income before taxes from SAM included in our consolidated financial statements. Our consolidated income before taxes for the three months ended September 30, 2018 included $7.1 million of severance and other restructuring costs, $3.7 million of amortization of intangible assets, and $0.6 million of cost of sales related to the adjustment of acquired inventory to fair value from SAM. Our consolidated income before taxes for the nine months ended September 30, 2018 included $36.6 million of severance and other restructuring costs, $8.7 million of amortization of intangible assets, and $1.8 million of cost of sales related to the adjustment of acquired inventory to fair value from SAM.

The following table illustrates the unaudited pro forma effect on operating results as if the SAM acquisition had been completed as of January 1, 2017.

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Three Months Ended
 
Nine Months Ended
 
 
September 30, 2018
 
October 1, 2017
 
September 30, 2018
 
October 1, 2017
 
 
 
 
 
 
 
 
 
 
 
(In thousands, except per share data)
 
 
(Unaudited)
Revenues
 
$
659,003

 
$
644,017

 
$
1,944,628

 
$
1,857,885

Net income (loss) attributable to Belden common stockholders
 
92,769

 
(24,050
)
 
126,937

 
(19,056
)
Diluted income (loss) per share attributable to Belden common stockholders
 
$
2.13

 
$
(0.57
)
 
$
3.08

 
$
(0.45
)
For purposes of the pro forma disclosures, the three months ended October 1, 2017 includes nonrecurring expenses related to the acquisition, including severance, restructuring, and acquisition integration costs; amortization of the sales backlog intangible asset; and cost of sales arising from the adjustment of inventory to fair value of $7.1 million, $0.2 million, and $0.2 million, respectively. For purposes of the pro forma disclosures, the nine months ended October 1, 2017 includes nonrecurring expenses related to the acquisition, including severance, restructuring, and acquisition integration costs; amortization of the sales backlog intangible asset; and cost of sales arising from the adjustment of inventory to fair value of $36.6 million, $2.0 million, and $1.7 million, respectively.

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 date 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.
Thinklogical Holdings, LLC
We acquired 100% of the outstanding ownership interest in Thinklogical Holdings, LLC (Thinklogical) on May 31, 2017 for a purchase price, net of cash acquired, of $165.8 million. Thinklogical designs, manufactures, and markets high-bandwidth fiber matrix switches, video, and keyboard/video/mouse extender solutions, camera extenders, and console management solutions. Thinklogical is headquartered in Connecticut. The results of Thinklogical have been included in our Consolidated Financial Statements from May 31, 2017, and are reported within the Enterprise Solutions segment. The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed as of May 31, 2017 (in thousands):
Receivables
 
$
4,355

Inventory
 
16,424

Prepaid and other current assets
 
320

Property, plant, and equipment
 
4,289

Intangible assets
 
73,400

Goodwill
 
70,654

Deferred income taxes
 
598

   Total assets acquired
 
$
170,040

 
 
 
Accounts payable
 
$
1,231

Accrued liabilities
 
1,353

Deferred revenue
 
1,702

   Total liabilities assumed
 
$
4,286

 
 
 
Net assets
 
$
165,754


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 fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations.

The fair value of acquired receivables is $4.4 million, which is equivalent to its gross contractual amount.


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For purposes of the above allocation, we based our estimate of the fair value for the acquired inventory, intangible assets, and deferred revenue on a valuation study performed by a third party valuation firm. We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets and deferred revenue (Level 3 valuation). The determination of the fair value of the assets acquired and liabilities assumed and the allocation of the purchase price is complete.

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 expected synergies and the assembled workforce. The expected synergies for the Thinklogical acquisition primarily consist of utilizing Belden's fiber and connectivity portfolio with Thinklogical's connections between matrix switch, control systems, transmitters and source to expand our product portfolio across our segments to both existing and new customers. Our tax basis in the acquired goodwill is approximately $43.3 million and is deductible for tax purposes over a period of 15 years up to the amount of the tax basis. The intangible assets related to the acquisition consisted of the following:

 
 
Preliminary Fair Value
 
Amortization Period
 
 
(In thousands)
 
(In years)
Intangible assets subject to amortization:
 
 
 
 
Developed technologies
 
$
62,600

 
10.0
Customer relationships
 
6,500

 
8.0
Trademarks
 
2,900

 
10.0
Sales backlog
 
1,400

 
0.3
Total intangible assets subject to amortization
 
$
73,400

 
 
 
 
 
 
 
Intangible assets not subject to amortization:
 
 
 
 
Goodwill
 
$
70,654

 
n/a
Total intangible assets not subject to amortization
 
$
70,654

 
 
 
 
 
 
 
Total intangible assets
 
$
144,054

 
 
Weighted average amortization period
 
 
 
9.6

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. The useful life for the developed technology intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period and pattern of consumption of the intangible asset. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship.

Our consolidated revenues and consolidated income before taxes for the three months ended September 30, 2018 included $15.2 million and $2.6 million, respectively, from Thinklogical. The income before taxes from Thinklogical included $3.2 million of amortization of intangible assets. Our consolidated revenues and consolidated income before taxes for the nine months ended September 30, 2018 included $32.6 million and $(0.5) million, respectively, from Thinklogical. Thinklogical's loss before taxes included $9.5 million of amortization of intangible assets and $0.5 million of severance and other restructuring costs.

The following table illustrates the unaudited pro forma effect on operating results as if the Thinklogical acquisition had been completed as of January 1, 2016.

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Three Months Ended
 
Nine Months Ended
 
 
October 1, 2017
 
October 1, 2017
 
 
 
 
 
 
 
(In thousands, except per share data)
 
 
(Unaudited)
Revenues
 
$
621,745

 
$
1,792,614

Net income (loss) attributable to Belden common stockholders
 
(5,128
)
 
37,097

Diluted income (loss) per share attributable to Belden common stockholders
 
$
(0.12
)
 
$
0.87


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 date 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.
Note 4:  Disposals
During the fourth quarter of 2016, we committed to a plan to sell our MCS business and Hirschmann JV. The MCS business operated in Germany and the United States and was part of the Industrial Solutions segment, and the Hirschmann JV was an equity method investment located in China. Effective December 31, 2017, we sold the MCS business and Hirschmann JV for a total purchase price of $40.2 million, which was collected in the nine months ended September 30, 2018.

During the nine months ended September 30, 2018, we also sold a previously closed operating facility for net proceeds of $1.5 million and recognized a $0.6 million gain on the sale.
Note 5:  Reportable Segments

Effective January 1, 2018, we changed our organizational structure and, as a result, now are reporting two segments. The segments formerly known as Broadcast Solutions and Enterprise Solutions now are presented as the Enterprise Solutions segment, and the segments formerly known as Industrial Solutions and Network Solutions now are presented as the Industrial Solutions segment. The reorganization allows us to further accelerate progress in key strategic areas, and the segment consolidation properly aligns our external reporting with the way the businesses are now managed. We have recast the prior period segment information to conform to the change in the composition of these reportable segments. This change had no impact to our reporting units for purposes of goodwill impairment testing.

The key measures of segment profit or loss reviewed by our chief operating decision maker are Segment Revenues and Segment EBITDA. Segment Revenues represent non-affiliate revenues and include revenues that would have otherwise been recorded by acquired businesses as independent entities but were not recognized in our Consolidated Statements of Operations and Comprehensive Income due to the effects of purchase accounting and the associated write-down of acquired deferred revenue to fair value. Segment EBITDA excludes certain items, including depreciation expense; amortization of intangibles; asset impairment; severance, restructuring, and acquisition integration costs; purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory and deferred revenue 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.
 

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Enterprise
Solutions    
 
Industrial
Solutions     
 
Total
Segments     
 
 
 
 
 
 
 
 
 
(In thousands)
As of and for the three months ended September 30, 2018
 
 
 
 
 
 
Segment revenues
 
$
392,080

 
$
266,923

 
$
659,003

Affiliate revenues
 
1,776

 
15

 
1,791

Segment EBITDA
 
72,210

 
53,750

 
125,960

Depreciation expense
 
7,092

 
4,579

 
11,671

Amortization of intangibles
 
12,322

 
13,211

 
25,533

Amortization of software development intangible assets
 
620

 

 
620

Severance, restructuring, and acquisition integration costs
 
9,528

 
2,160

 
11,688

Purchase accounting effects of acquisitions
 
821

 

 
821

Deferred revenue adjustments
 
3,229

 

 
3,229

Segment assets
 
766,505

 
448,626

 
1,215,131

As of and for the three months ended October 1, 2017
 
 
 
 
 
 
Segment revenues
 
$
360,842

 
$
260,903

 
$
621,745

Affiliate revenues
 
971

 
2

 
973

Segment EBITDA
 
62,109

 
55,747

 
117,856

Depreciation expense
 
6,828

 
4,855

 
11,683

Amortization of intangibles
 
13,920

 
13,242

 
27,162

Severance, restructuring, and acquisition integration costs
 
9,309

 
7,370

 
16,679

Purchase accounting effects of acquisitions
 
2,922

 

 
2,922

Segment assets
 
658,175

 
400,538

 
1,058,713

As of and for the nine months ended September 30, 2018
 
 
 
 
 
 
Segment revenues
 
$
1,142,765

 
$
795,102

 
$
1,937,867

Affiliate revenues
 
4,318

 
61

 
4,379

Segment EBITDA
 
199,943

 
153,401

 
353,344

Depreciation expense
 
21,465

 
14,097

 
35,562

Amortization of intangibles
 
35,301

 
39,689

 
74,990

Amortization of software development intangible assets
 
1,344

 

 
1,344

Severance, restructuring, and acquisition integration costs
 
46,949

 
10,061

 
57,010

Purchase accounting effects of acquisitions
 
2,359

 

 
2,359

Deferred revenue adjustments
 
7,889

 

 
7,889

Segment assets
 
766,505

 
448,626

 
1,215,131

As of and for the nine months ended October 1, 2017
 
 
 
 
 
 
Segment revenues
 
$
1,023,924

 
$
759,835

 
$
1,783,759

Affiliate revenues
 
4,084

 
51

 
4,135

Segment EBITDA
 
168,073

 
153,675

 
321,748

Depreciation expense
 
20,129

 
14,465

 
34,594

Amortization of intangibles
 
38,241

 
39,703

 
77,944

Severance, restructuring, and acquisition integration costs
 
23,701

 
9,138

 
32,839

Purchase accounting effects of acquisitions
 
4,089

 

 
4,089

Segment assets
 
658,175

 
400,538

 
1,058,713


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

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Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
October 1, 2017
 
September 30, 2018
 
October 1, 2017
 
 
 
 
 
 
 
 
 
(In thousands)
Total Segment Revenues
$
659,003

 
$
621,745

 
$
1,937,867

 
$
1,783,759

Deferred revenue adjustments (1)
(3,229
)
 

 
(7,889
)
 

Consolidated Revenues
$
655,774

 
$
621,745

 
$
1,929,978

 
$
1,783,759

 
 
 
 
 
 
 
 
Total Segment EBITDA
$
125,960

 
$
117,856

 
$
353,344

 
$
321,748

Gain from patent litigation
62,141

 

 
62,141

 

Costs related to patent litigation
(2,634
)
 

 
(2,634
)
 

Amortization of intangibles
(25,533
)
 
(27,162
)
 
(74,990
)
 
(77,944
)
Severance, restructuring, and acquisition integration costs (2)
(11,688
)
 
(16,679
)
 
(57,010
)
 
(32,839
)
Depreciation expense
(11,671
)
 
(11,683
)
 
(35,562
)
 
(34,594
)
Deferred revenue adjustments (1)
(3,229
)
 

 
(7,889
)
 

Purchase accounting effects related to acquisitions (3)
(821
)
 
(2,922
)
 
(2,359
)
 
(4,089
)
Amortization of software development intangible assets
(620
)
 

 
(1,344
)
 

Loss on sale of assets

 

 
(94
)
 

Income from equity method investment

 
2,551

 

 
5,835

Eliminations
(627
)
 
(845
)
 
(1,616
)
 
(2,628
)
Consolidated operating income
131,278

 
61,116

 
231,987

 
175,489

Interest expense, net
(14,472
)
 
(19,385
)
 
(46,538
)
 
(66,424
)
Non-operating pension benefit (cost)
1,356

 
(325
)
 
824

 
(880
)
Loss on debt extinguishment

 
(51,594
)
 
(22,990
)
 
(52,441
)
Consolidated income (loss) before taxes
$
118,162

 
$
(10,188
)
 
$
163,283

 
$
55,744

(1) For the three and nine months ended September 30, 2018, our segment results include revenues that would have been recorded by acquired businesses had they remained as independent entities. Our consolidated results do not include these revenues due to the purchase accounting effect of recording deferred revenue at fair value.
(2) See Note 9, Severance, Restructuring, and Acquisition Integration Activities, for details.
(3) For the three and nine months ended September 30, 2018, we recognized cost of sales for the adjustment of acquired inventory to fair value related to the SAM and NT2 acquisitions.
Note 6: Income per Share
The following table presents the basis for the income per share computations:

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Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
October 1, 2017
 
September 30, 2018
 
October 1, 2017
 
 
 
 
 
 
 
 
 
(In thousands)
Numerator:
 
 
 
 
 
 
 
Net income
$
85,858

 
$
945

 
$
117,220

 
$
62,417

Less: Net loss attributable to noncontrolling interest
(23
)
 
(82
)
 
(148
)
 
(274
)
Less: Preferred stock dividends
8,732

 
8,732

 
26,198

 
26,198

Net income (loss) attributable to Belden common stockholders for basic income (loss) per share
$
77,149

 
$
(7,705
)
 
$
91,170

 
$
36,493

Plus: Preferred stock dividends
8,732

 

 

 

Net income (loss) attributable to Belden common stockholders for diluted income (loss) per share
$
85,881

 
$
(7,705
)
 
$
91,170

 
$
36,493

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Weighted average shares outstanding, basic
40,510

 
42,256

 
40,960

 
42,251

Assumed conversion of preferred stock into common stock
6,857

 

 

 

Effect of dilutive common stock equivalents
311

 

 
308

 
412

     Weighted average shares outstanding, diluted
47,678

 
42,256

 
41,268

 
42,663


For the three and nine months ended September 30, 2018, diluted weighted average shares outstanding do not include outstanding equity awards of 0.9 million and 0.8 million, respectively, because to do so would have been anti-dilutive. In addition, for the three and nine months ended September 30, 2018, diluted weighted average shares outstanding do not include outstanding equity awards of 0.3 million and 0.2 million, respectively, because the related performance conditions have not been satisfied. Furthermore, for the nine months ended September 30, 2018, diluted weighted average shares outstanding do not include the impact of preferred shares that are convertible into 6.9 million common shares, because deducting the preferred stock dividends from net income was more dilutive.
For the three and nine months ended October 1, 2017, diluted weighted average shares outstanding do not include outstanding equity awards of 0.9 million and 0.5 million, respectively, because to do so would have been anti-dilutive. In addition, for both the three and nine months ended October 1, 2017, diluted weighted average shares outstanding do not include outstanding equity awards of 0.2 million because the related performance conditions have not been satisfied. Furthermore, for the three and nine months ended October 1, 2017, diluted weighted average shares outstanding do not include the impact of preferred shares that are convertible into 6.8 million and 6.9 million common shares, respectively, because deducting the preferred stock dividends from net income was more dilutive.
For purposes of calculating basic earnings per share, unvested restricted stock units are not included in the calculation of basic weighted average shares outstanding until all necessary conditions have been satisfied and issuance of the shares underlying the restricted stock units is no longer contingent. Necessary conditions are not satisfied until the vesting date, at which time holders of our restricted stock units receive shares of our common stock.
For purposes of calculating diluted earnings per share, unvested restricted stock units are included to the extent that they are dilutive. In determining whether unvested restricted stock units are dilutive, each issuance of restricted stock units is considered separately.
Once a restricted stock unit has vested, it is included in the calculation of both basic and diluted weighted average shares outstanding.
Note 7:  Inventories
The major classes of inventories were as follows:

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September 30, 2018
 
December 31, 2017
 
 
 
 
 
(In thousands)
Raw materials
$
164,925

 
$
133,311

Work-in-process
45,054

 
35,807

Finished goods
142,297

 
153,377

Gross inventories
352,276

 
322,495

Excess and obsolete reserves
(30,082
)
 
(25,269
)
Net inventories
$
322,194

 
$
297,226

Note 8:  Long-Lived Assets
Depreciation and Amortization Expense
We recognized depreciation expense of $11.7 million and $35.6 million in the three and nine months ended September 30, 2018, respectively. We recognized depreciation expense of $11.7 million and $34.6 million in the three and nine months ended October 1, 2017, respectively.

We recognized amortization expense related to our intangible assets of $26.2 million and $76.3 million in the three and nine months ended September 30, 2018, respectively. We recognized amortization expense related to our intangible assets of $27.2 million and $77.9 million in the three and nine months ended October 1, 2017, respectively.
Note 9:  Severance, Restructuring, and Acquisition Integration Activities
Grass Valley and SAM Integration Program: 2018
During the first quarter of 2018, we began a restructuring program to integrate SAM with Grass Valley. The restructuring and integration activities are focused on achieving desired cost savings by consolidating existing and acquired facilities and other support functions. We recognized $7.1 million and $36.6 million of severance and other restructuring costs for this program during the three and nine months ended September 30, 2018, respectively. The costs were incurred by the Enterprise Solutions segment. We expect to incur approximately $12 million of additional severance and restructuring costs for this program, which will be incurred during the fourth quarter of 2018 and first quarter of 2019.
Industrial Manufacturing Footprint Program: 2016 - 2018
In 2016, we began a program to consolidate our manufacturing footprint. This program is expected to be completed by the end of 2018. We recognized $4.3 million and $15.8 million of severance and other restructuring costs for this program during the three and nine months ended September 30, 2018, respectively. We recognized $11.4 million and $25.3 million of severance and other restructuring costs for this program during the three and nine months ended October 1, 2017, respectively. The costs were incurred by the Enterprise Solutions and Industrial Solutions segments, as the manufacturing locations involved in the program serve both platforms. To date, we have incurred a total of $64.1 million in severance and other restructuring costs, including manufacturing inefficiencies for this program. 
The following table summarizes the costs by segment of the various programs described above as well as other immaterial programs and acquisition integration activities:

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Severance     
 
Other
Restructuring and
Integration Costs
 
Total Costs     
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
(In thousands)
Enterprise Solutions
 
$
(1,283
)
 
$
10,811

 
$
9,528

Industrial Solutions
 
136

 
2,024

 
2,160

Total
 
$
(1,147
)
 
$
12,835

 
$
11,688

 
 
 
 
 
 
 
Three Months Ended October 1, 2017
 
 
 
 
 
 
Enterprise Solutions
 
$
1,222

 
$
8,087

 
$
9,309

Industrial Solutions
 
712

 
6,658

 
7,370

Total
 
$
1,934

 
$
14,745

 
$
16,679

 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
 
 
 
 
Enterprise Solutions
 
$
10,097

 
$
36,852

 
$
46,949

Industrial Solutions
 
378

 
9,683

 
10,061

Total
 
$
10,475

 
$
46,535

 
$
57,010

 
 
 
 
 
 
 
Nine Months Ended October 1, 2017
 
 
 
 
 
 
Enterprise Solutions
 
$
3,398

 
$
20,303

 
$
23,701

Industrial Solutions
 
865

 
8,273

 
9,138

Total
 
$
4,263

 
$
28,576

 
$
32,839

Of the total severance, restructuring, and acquisition integration costs recognized in the three months ended September 30, 2018, $4.8 million, $6.4 million, and $0.5 million were included in cost of sales; selling, general and administrative expenses; and research and development, respectively. Of the total severance, restructuring, and acquisition integration costs recognized in the three months ended October 1, 2017, $12.4 million, $4.2 million, and $0.1 million were included in cost of sales; selling, general and administrative expenses; and research and development, respectively.
Of the total severance, restructuring, and acquisition integration costs recognized in the nine months ended September 30, 2018, $21.4 million, $30.3 million, and $5.3 million were included in cost of sales; selling, general and administrative expenses; and research and development, respectively. Of the total severance, restructuring, and acquisition integration costs recognized in the nine months ended October 1, 2017, $26.5 million, $6.2 million, and $0.1 million were included in cost of sales; selling, general and administrative expenses; and research and development, respectively.
The net credit to severance expense for the Enterprise Solutions segment in the three months ended September 30, 2018 is attributable to voluntary employee turnover in advance of receiving severance benefits, thus resulting in the reversal of previously accrued severance expense. The other restructuring and integration costs primarily consisted of equipment transfer, costs to consolidate operating and support facilities, retention bonuses, relocation, travel, legal, and other costs. The majority of the other restructuring and integration costs related to these actions were paid as incurred or are payable within the next 60 days.   
Accrued Severance
The table below summarizes the significant severance activity that occurred during the year for the Grass Valley and SAM Integration Program described above. The balances are included in accrued liabilities.

- 20-



 
 
Grass Valley and SAM Integration Program
 
 
 
 
 
(In thousands)
Balance at December 31, 2017
 
$

New charges
 
456

Cash payments
 
(50
)
Balance at April 1, 2018
 
$
406

New charges
 
10,714

Cash payments
 
(7,556
)
Foreign currency translation
 
(4
)
Balance at July 1, 2018
 
$
3,560

New charges
 
121

Cash payments
 
(989
)
Foreign currency translation
 
(9
)
Other adjustments
 
(1,531
)
Balance at September 30, 2018
 
$
1,152

Note 10:  Long-Term Debt and Other Borrowing Arrangements
The carrying values of our long-term debt were as follows:
 
 
September 30, 2018
 
December 31, 2017
 
 
 
 
 
(In thousands)
Revolving credit agreement due 2022
$

 
$

Senior subordinated notes:
 
 
 
3.875% Senior subordinated notes due 2028
411,110

 

3.375% Senior subordinated notes due 2027
528,570

 
540,810

4.125% Senior subordinated notes due 2026
234,920

 
240,360

2.875% Senior subordinated notes due 2025
352,380

 
360,540

5.25% Senior subordinated notes due 2024

 
200,000

5.50% Senior subordinated notes due 2023

 
242,522

Total senior subordinated notes
1,526,980

 
1,584,232

Less unamortized debt issuance costs
(23,383
)
 
(23,484
)
Long-term debt
$
1,503,597

 
$
1,560,748

Revolving Credit Agreement due 2022
Our Revolving Credit Agreement provides a $400.0 million multi-currency asset-based revolving credit facility (The Revolver). The borrowing base under the Revolver includes eligible accounts receivable; inventory; and property, plant and equipment of certain of our subsidiaries in the U.S., Canada, Germany, and the Netherlands. The maturity date of the Revolver is May 16, 2022. Interest on outstanding borrowings is variable, based upon LIBOR or other similar indices in foreign jurisdictions, plus a spread that ranges from 1.25%-1.75%, depending upon our leverage position. We pay a commitment fee on our available borrowing capacity of 0.25%. In the event we borrow more than 90% of our borrowing base, we are subject to a fixed charge coverage ratio covenant. As of September 30, 2018, we had no borrowings outstanding on the Revolver, and our available borrowing capacity was $359.8 million.
Senior Subordinated Notes
In March 2018, we completed an offering for €350.0 million ($431.3 million at issuance) aggregate principal amount of 3.875% senior subordinated notes due 2028 (the 2028 Notes). The carrying value of the 2028 Notes as of September 30, 2018 is $411.1

- 21-



million. The 2028 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2028 Notes rank equal in right of payment with our senior subordinated notes due 2027, 2026, and 2025 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on March 15 and September 15 of each year, beginning on September 15, 2018. We paid approximately $7.5 million of fees associated with the issuance of the 2028 Notes, which will be amortized over the life of the 2028 Notes using the effective interest method. We used the net proceeds from this offering and cash on hand to repurchase the 2023 and 2024 Notes - see further discussion below.
We have outstanding €450.0 million aggregate principal amount of 3.375% senior subordinated notes due 2027 (the 2027 Notes). The carrying value of the 2027 Notes as of September 30, 2018 is $528.6 million. The 2027 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2027 Notes rank equal in right of payment with our senior subordinated notes due 2028, 2026, and 2025 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on January 15 and July 15 of each year.
We have outstanding €200.0 million aggregate principal amount of 4.125% senior subordinated notes due 2026 (the 2026 Notes). The carrying value of the 2026 Notes as of September 30, 2018 is $234.9 million. The 2026 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2026 Notes rank equal in right of payment with our senior subordinated notes due 2028, 2027, and 2025 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on April 15 and October 15 of each year.
We have outstanding €300.0 million aggregate principal amount of 2.875% senior subordinated notes due 2025 (the 2025 Notes). The carrying value of the 2025 Notes as of September 30, 2018 is $352.4 million. The 2025 Notes are guaranteed on a senior subordinated basis by our current and future domestic subsidiaries. The 2025 Notes rank equal in right of payment with our senior subordinated notes due 2028, 2027, and 2026 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Revolver. Interest is payable semiannually on March 15 and September 15 of each year.
We had outstanding $200.0 million aggregate principal amount of 5.25% senior subordinated notes due 2024 (the 2024 Notes). In March 2018, we repurchased $188.7 million of the $200.0 million 2024 Notes outstanding for cash consideration of $199.8 million, including a prepayment penalty and recognized a $13.8 million loss on debt extinguishment including the write-off of unamortized debt issuance costs. In April 2018, we repurchased the remaining 2024 Notes outstanding for cash consideration of $11.9 million, including a prepayment penalty, and recognized a $0.8 million loss on debt extinguishment including the write-off of unamortized debt issuance costs.
We had outstanding €200.0 million aggregate principal amount of 5.5% senior subordinated notes due 2023 (the 2023 Notes). In March 2018, we repurchased €143.1 million of the €200.0 million 2023 Notes outstanding for cash consideration of €147.8 million ($182.1 million), including a prepayment penalty and recognized a $6.2 million loss on debt extinguishment including the write-off of unamortized debt issuance costs. In April 2018, we repurchased the remaining 2023 Notes outstanding for cash consideration of €58.5 million ($71.6 million), including a prepayment penalty, and recognized a $2.2 million loss on debt extinguishment including the write-off of unamortized debt issuance costs.
Fair Value of Long-Term Debt
The fair value of our senior subordinated notes as of September 30, 2018 was approximately $1,526.9 million based on quoted prices of the debt instruments in inactive markets (Level 2 valuation). This amount represents the fair value of our senior subordinated notes with a carrying value of $1,527.0 million as of September 30, 2018.
Note 11:  Net Investment Hedge
All of our euro denominated notes were issued by Belden Inc., a USD functional currency entity. As of September 30, 2018, all of our outstanding foreign denominated debt is designated as a net investment hedge on the foreign currency risk of our net investment in our euro foreign operations. The objective of the hedge is to protect the net investment in the foreign operation against adverse changes in exchange rates. The transaction gain or loss is reported in the cumulative translation adjustment section of other comprehensive income. The amount of the cumulative translation adjustment associated with these notes for the nine month periods ended September 30, 2018 and October 1, 2017 was a gain of $46.3 million and a loss of $25.3 million, respectively.


- 22-



Note 12:  Income Taxes
For the three and nine months ended September 30, 2018, we recognized income tax expense of $32.3 million and $46.1 million, respectively, representing an effective tax rate of 27.3% and 28.2%, respectively. The effective tax rate was impacted by the following significant factors:

We recognized income tax expense of $3.8 million and $4.3 million, respectively, in the three and nine months ended September 30, 2018 as a result of changes in our valuation allowance for the “Tax Cuts and Jobs Act” (the Act). The amount of this adjustment remains provisional under Staff Accounting Bulletin No. 118 (SAB 118) as of the date of this report.
We recognized income tax expense of $1.8 million in the nine months ended September 30, 2018 as a result of a change in our valuation allowance on foreign tax credits associated with our euro debt refinancing.
We recognized an income tax benefit of $3.3 million and $4.4 million, respectively, in the three and nine months ended September 30, 2018 primarily related to certain foreign tax credits.
We recognized an income tax benefit of $1.2 million in the nine months ended September 30, 2018 due to a decrease in reserves for uncertain tax positions of prior years.
 
On December 22, 2017, the Act was signed into law, making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial tax system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

On December 22, 2017, SAB 118 was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. The issuance of proposed regulations regarding GILTI and the one-time transition tax on the mandatory deemed repatriation of foreign earnings as well as the IRS notice addressing IRC section 162(m)  has resulted in refinements to the provisional amounts initially recorded for the valuation allowance on certain foreign tax credits in 2017, certain covered employee compensation associated with the amendments to IRC section 162(m), the one-time transition tax on the mandatory deemed repatriation of foreign earnings and the estimated tax expense associated with the GILTI taxable inclusion. As a result, we recorded an adjustment to the valuation allowance on certain foreign tax credits and an adjustment to the deferred tax asset associated with certain covered employee compensation. Additional work is still necessary for a more detailed analysis of all provisional amounts associated with the Act including the remeasurement of certain deferred tax assets and liabilities, the one-time transition tax on the mandatory deemed repatriation of foreign earnings, the valuation allowance on certain foreign tax credits, and the non-deductibility of certain covered employee compensation associated with the amendments to IRC section 162(m).  The transition tax on the mandatory deemed repatriation of foreign earnings will be finalized in the fourth quarter 2018 when the tax return is filed, and any subsequent adjustment to all other provisional amounts will be recorded to tax expense in the fourth quarter 2018 when the analysis is complete. All adjustments related to the Act remain provisional as of the date of this report.

Our income tax expense and effective tax rate in future periods may be impacted by many factors, including our geographic mix of income and changes in tax laws.

We recognized an income tax benefit of $11.1 million and $6.7 million for the three and nine months ended October 1, 2017, respectively, representing effective tax rates of 109.3% and (12.0)%, respectively. The effective tax rates were impacted by the following significant factors:

We recognized an income tax benefit of $2.5 million and $8.4 million in the three and nine months ended October 1, 2017, respectively, as a result of the implementation of a foreign tax credit planning strategy.
Foreign tax rate differences reduced our income tax expense by approximately $1.4 million and $8.4 million in the three and nine months ended October 1, 2017, respectively. The statutory tax rates associated with our foreign earnings generally are lower than the 2017 statutory U.S. tax rate of 35%. This had the greatest impact on our income before taxes that is generated in Germany, Canada, and the Netherlands, which have statutory tax rates of approximately 28%, 26%, and 25%, respectively.
We also recognized an income tax benefit of $6.4 million and $11.7 million in the three and nine months ended October 1, 2017, respectively, related to non-taxable currency translation gains.

All other items impacting the effective tax rate represented a net expense of $2.6 million and $2.3 million in the three and nine months ended October 1, 2017, respectively.
Note 13:  Pension and Other Postretirement Obligations
The following table provides the components of net periodic benefit costs for our pension and other postretirement benefit plans:

- 23-