Belden Reports Second-Quarter Results: Earnings Per Share Of $0.39 on Revenues of $247 Million
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ST. LOUIS, July 26 /PRNewswire/ -- Belden Inc. (NYSE: BWC) today announced financial results for the three and six months ended June 30, 2001. Revenues for the second quarter of 2001 decreased 15% to $246.9 million, compared with $291.2 million in the second quarter of 2000. Net income was $9.6 million, or $0.39 per diluted share, compared with $12.5 million, or $0.50 per diluted share, in the prior year.
Revenues for the first half of 2001 were $498.7 million, a 4% decrease compared with revenues of $519.2 million for the same period last year. Net income was $20.8 million, or $0.84 per diluted share, compared with $21.8 million, or $0.88 per diluted share, in the first half of 2000. Included in net income for the first half of 2001 was a one-time net gain of $0.02 per diluted share related to the sale of the Company's interest in a joint venture investment and the cumulative effect of adopting Financial Accounting Standards Board Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
Second-Quarter Results
Highlights of Belden's second quarter include:
-- The Electronics segment, which generated more than 60% of total
revenues, maintained solid operating margins.
-- Aggressive cost management of operations to reflect the current
economic environment, and significant reduction of selling, general
and administrative expenses from prior-year levels.
-- Stable customer demand for maintenance and repair needs bolstered
performance.
C. Baker Cunningham, Chairman, President, and Chief Executive Officer said, ``The markets for both our Electronics and Communications products continue to soften, reflecting the weak economy. In North America, we're experiencing additional customer spending reductions in the communications and networking industries. In Europe, our Electronics operations began to slow in the second quarter after a solid first-quarter performance.
``Fortunately, we estimate that more than half of our business comes from maintenance and repair needs, which helps provide a level of stability in this volatile business climate. Additionally, our operating earnings as a percent of revenues are only down fractionally on a sequential basis because of our aggressive cost-containment measures, such as matching production to demand and reducing overhead.''
Electronics Segment
The Electronics segment posted operating earnings of $19.0 million compared with $24.5 million in the second quarter of 2000, a decrease of 22%. Revenues for the quarter were $165.3 million, an 18% decline from $200.5 million in the same period last year. As a percent of revenues, operating earnings improved sequentially to 11.5% compared with 11.2% in the first quarter of 2001. This margin stability reflects reduced material costs, continuous improvement measures and careful attention to other cost management and cash flow initiatives.
The lower sales in the Electronics segment reflect the overall weakness in the U.S. manufacturing sector. Reduction in capital spending has resulted in delays in factory automation projects. Industrial product demand was lower in the general electronic, medical equipment and semiconductor industries. The entertainment and OEM markets showed particular softness in the second quarter as significant reductions in advertising expenditures prompted numerous delays in studio upgrades and new facilities construction. However, Belden's order rates remained in line with end-use demand; thus, the Company continues to believe that distributor inventories are at appropriate levels.
Communications Segment
The Communications segment reported operating earnings of $2.6 million in the second quarter of 2001, versus $3.9 million in the year-ago period. The operating earnings decline of $1.3 million was primarily due to lower results in Europe. Revenues for the quarter were $87.3 million, a 13% decline from $99.8 million in the second quarter of 2000. As a percent of revenues, operating earnings declined to 3.0% versus 3.9% in the year-ago period.
This segment was adversely impacted by the capital spending reductions of major communications companies, particularly in the United Kingdom. Belden's recent increases in U.S. revenues achieved through new contract awards in prior periods were more than offset by a lack of significant purchases during the quarter by a major private label customer that is obligated under a ``take-or-pay'' contract to purchase an average of $15 million per quarter. Although the customer has indicated that additional purchases are unlikely due to weak market conditions, it has confirmed its intent to fulfill its take-or- pay obligations. The Company expects to receive minimum pre-tax compensation in the fourth quarter of 2001 of approximately $8.5 million and should be entitled to recover an additional $8 million to $10 million in further compensation according to the settlement terms of the contract. While the Company previously expected to resolve the compensation issues this year and continues working on an earlier settlement, it now appears the determination of the additional amount of compensation may be delayed until 2002.
In addition, Belden's revenues were lower than anticipated due to financial difficulties encountered by a value-added reseller (VAR) designated contractually by a major communications customer. Although the Company has firm orders from the customer, the Company has discontinued selling to the VAR until the VAR obtains additional financing, and has begun to ship and bill the customer directly to restore supply. Belden currently has an account receivable due from the VAR of $8.4 million and is seeking full recovery. A loss, if any, cannot yet be reasonably estimated and, accordingly, no special provision has been made.
Balance Sheet and Cash Flow
Belden's second-quarter balance sheet and cash flow improved compared to the first quarter. On June 30, 2001, the Company's debt as a percent of total capitalization was 47.6%, and the EBITDA interest coverage ratio was over six times for the quarter. Belden expects to generate increased levels of cash in the second half of 2001. This, combined with selected reductions in capital spending, will allow the Company to reduce debt further. However, Belden continues to look for attractive acquisition opportunities. To support this growth strategy, the Company recently entered into a new three year, $150 million credit facility to replace its existing facility that would have expired in November 2001.
Outlook
``Although we are confident of our excellent long-term growth prospects, the impact of the current economic slowdown has been more extensive than we had anticipated,'' commented Mr. Cunningham. ``We are not seeing indications that the downturn has run its course, and we expect weak demand to continue for the remainder of the year. During this period, we are focusing on aggressive cost cutting and process improvements to mitigate the effects of reduced revenues. However, these actions will only partially offset the impact of the expected decline in demand on earnings.
``We are now estimating our third quarter revenues to be lower than last year by as much as 15% to 20%, resulting in an estimated $0.30 to $0.35 per share. Unless we see an increase in our order rates soon, we project that Belden's earnings per share for the full-year 2001 will be in a range of $1.60 to $1.70. This assumes that we will receive only about $8.5 million this year under the take-or-pay contract mentioned earlier, and it assumes no special provision for the collection of the receivable from the VAR with financial difficulties noted above.
``Once the general economy and the electronics and communications markets improve, we expect to rebuild our sales and profitability quickly,'' observed Mr. Cunningham. ``Belden's broad product applications, its expertise in providing innovative solutions, its geographic diversification, and its aggressive cost management position it to have an even more important role as a leading supplier to attractive specialty wire and cable markets.'' |
