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FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 Commission File Number 1-12280 BELDEN INC.  Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
    
    76-0412617
(I.R.S. Employer
Identification No.)
 7701 Forsyth Boulevard, Suite 800
St. Louis, Missouri 63105
(Address of Principal Executive Offices and Zip Code) (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 Securities Exchange Act of 1934 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 requirement for the past 90
days. Yes x No o Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the
Exchange Act). Yes x No o Number of shares outstanding of the issuers Common Stock,
par value $.01 per share, as of May 7, 2004: 25,817,789 shares    Exhibit Index on Page 38
    
    Page 1 of 39




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TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONItem 1: Financial StatementsCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED CASH FLOW STATEMENTSSTATEMENTS OF CHANGES IN SHAREHOLDERS EQUITYNOTES TO CONSOLIDATED FINANCIAL STATEMENTSItem 2: Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3: Quantitative and Qualitative Disclosures About Market RisksItem 4: Disclosure Controls and ProceduresPART II OTHER INFORMATIONItem 1. Legal ProceedingsItem 6: Exhibits and Reports on Form 8-KAsset Purchase Agreement302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer    Table of Contents  
 PART I FINANCIAL INFORMATION 
 Item 1: Financial Statements 
 CONSOLIDATED BALANCE SHEETS March 31,
    
    December 31,2004
    
    2003(in thousands)
    
    (Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    83,345
    
    
    $
    94,955Receivables
    
    
    97,981
    
    
    
    83,242Inventories
    
    
    82,240
    
    
    
    80,958Income taxes receivable
    
    
    1,868
    
    
    
    1,770Deferred income taxes
    
    
    11,344
    
    
    
    11,070Other current assets
    
    
    5,642
    
    
    
    6,218Current assets of discontinued operations
    
    
    117,487
    
    
    
    106,178Total current assets
    
    
    399,907
    
    
    
    384,391Property, plant and equipment, less accumulated depreciation
    
    
    183,600
    
    
    
    189,128Goodwill and other intangibles, less accumulated amortization
    
    
    79,050
    
    
    
    79,463Other long-lived assets
    
    
    5,363
    
    
    
    6,008Long-lived assets of discontinued operations
    
    
    14,433
    
    
    
    14,565$
    682,353
    
    
    $
    673,555LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and accrued liabilities
    
    $
    92,319
    
    
    $
    89,179Current maturities of long-term debt
    
    
    64,996
    
    
    
    65,951Current liabilities of discontinued operations
    
    
    31,435
    
    
    
    28,003Total current liabilities
    
    
    188,750
    
    
    
    183,133Long-term debt
    
    
    136,000
    
    
    
    136,000Postretirement benefits other than pensions
    
    
    9,954
    
    
    
    10,201Deferred income taxes
    
    
    44,875
    
    
    
    43,112Other long-term liabilities
    
    
    22,246
    
    
    
    20,994Long-term liabilities of discontinued operations
    
    
    5,421
    
    
    
    5,705Stockholders equityPreferred stock
    
    
    
    
    
    
    Common stock
    
    
    262
    
    
    
    262Additional paid-in capital
    
    
    39,651
    
    
    
    39,022Retained earnings
    
    
    236,947
    
    
    
    237,087Accumulated other comprehensive loss
    
    
    7,008
    
    
    
    7,461Unearned deferred compensation
    
    
    (2,971
    )
    
    
    (1,700
    )Treasury stock
    
    
    (5,790
    )
    
    
    (7,722
    )Total stockholders equity
    
    
    275,107
    
    
    
    274,410$
    682,353
    
    
    $
    673,555
 See accompanying notes.




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CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Three Months EndedMarch 31,2004
    
    2003(in thousands, except per share data)Revenues
    
    $
    170,103
    
    
    $
    153,317Cost of sales
    
    
    137,820
    
    
    
    124,427Gross profit
    
    
    32,283
    
    
    
    28,890Selling, general and administrative expenses
    
    
    25,229
    
    
    
    23,497Operating earnings
    
    
    7,054
    
    
    
    5,393Interest expense
    
    
    3,166
    
    
    
    3,250Income before taxes
    
    
    3,888
    
    
    
    2,143Income tax expense
    
    
    1,244
    
    
    
    907Net income from continuing operations
    
    
    2,644
    
    
    
    1,236Net loss from discontinued operations, net
of tax benefit of $841 and $1,988,
respectively
    
    
    (1,496
    )
    
    
    (3,534
    )Net income/(loss)
    
    $
    1,148
    
    
    $
    (2,298
    )Weighted average number of common shares
and equivalents:Basic
    
    
    25,462
    
    
    
    24,992Diluted
    
    
    25,820
    
    
    
    25,091Basic earnings/(loss) per share:Continuing operations
    
    $
    .10
    
    
    $
    .05Discontinued operations
    
    
    (.06
    )
    
    
    (.14
    )Earnings/(loss) per share
    
    
    .04
    
    
    
    (.09
    )Diluted earnings/(loss) per share:Continuing operations
    
    $
    .10
    
    
    $
    .05Discontinued operations
    
    
    (.06
    )
    
    
    (.14
    )Earnings/(loss) per share
    
    
    .04
    
    
    
    (.09
    )Dividends declared per share
    
    $
    .05
    
    
    $
    .05
 See accompanying notes. - 3 -




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CONSOLIDATED CASH FLOW STATEMENTS
(Unaudited) Three Months Ended March 31,
    
    2004
    
    2003(in thousands)Cash flows from operating activitiesNet income/(loss)
    
    $
    1,148
    
    
    $
    (2,298
    )Adjustments to reconcile net income/(loss) to net cash provided by
operating activitiesDepreciation and amortization
    
    
    6,466
    
    
    
    9,142Asset impairment charges
    
    
    
    
    
    
    23Deferred income tax benefit
    
    
    (34
    )
    
    
    Retirement savings plan contributions
    
    
    1,089
    
    
    
    959Employee stock purchase plan settlement
    
    
    56
    
    
    
    60Stock compensation
    
    
    1,650
    
    
    
    Amortization of unearned deferred compensation
    
    
    379
    
    
    
    350Changes in operating assets and liabilities (1)Receivables
    
    
    (17,380
    )
    
    
    1,758Inventories
    
    
    (8,356
    )
    
    
    3,942Accounts payable and accrued liabilities
    
    
    11,664
    
    
    
    (146
    )Current and deferred income taxes, net
    
    
    916
    
    
    
    629Other assets and liabilities, net
    
    
    (5,859
    )
    
    
    2,299Net cash provided by/(used for) operating activities
    
    
    (8,356
    )
    
    
    16,718Cash flows from investing activitiesCapital expenditures
    
    
    (1,899
    )
    
    
    (4,202
    )Proceeds from disposal of long-lived assets
    
    
    252
    
    
    
    55Net cash used for investing activities
    
    
    (1,647
    )
    
    
    (4,147
    )Cash flows from financing activitiesProceeds from exercise of stock options
    
    
    43
    
    
    
    Purchase of treasury stock
    
    
    (277
    )
    
    
    Cash dividends paid
    
    
    (1,288
    )
    
    
    (1,262
    )Net cash used for financing activities
    
    
    (1,522
    )
    
    
    (1,262
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (85
    )
    
    
    183Increase/(decrease) in cash and cash equivalents
    
    
    (11,610
    )
    
    
    11,492Cash and cash equivalents, beginning of period
    
    
    94,955
    
    
    
    19,409Cash and cash equivalents, end of period
    
    $
    83,345
    
    
    $
    30,901Supplemental cash flow informationIncome tax refunds received
    
    $
    21
    
    
    $
    2,034Income taxes paid
    
    
    (378
    )
    
    
    (293
    )Interest paid, net of amount capitalized
    
    
    (7,466
    )
    
    
    (7,394
    )
 See accompanying notes. (1) Net of the effects of exchange rate changes and acquired businesses. - 4 -




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STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Unaudited) AccumulatedUnearned
    
    OtherCommon
    
    Paid-In
    
    Retained
    
    Treasury
    
    Deferred
    
    ComprehensiveStock
    
    Capital
    
    Earnings
    
    Stock
    
    Compensation
    
    Loss
    
    Total(in thousands)Balance at December 31, 2002
    
    $
    262
    
    
    $
    40,917
    
    
    $
    302,900
    
    
    $
    (17,011
    )
    
    $
    (2,014
    )
    
    $
    (17,859
    )
    
    $
    307,195Net loss
    
    
    
    
    
    
    
    
    
    
    (2,298
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,298
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402
    
    
    
    402Minimum pension liability, net of tax of
$9.5 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    (64
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,960
    )Issuance of treasury stockStock compensation
    
    
    
    
    
    
    (490
    )
    
    
    
    
    
    
    1,734
    
    
    
    (1,244
    )
    
    
    
    
    
    
    Employee stock purchase plans
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    60Retirement savings plan
    
    
    
    
    
    
    (376
    )
    
    
    
    
    
    
    1,335
    
    
    
    
    
    
    
    
    
    
    
    959Amortization of unearned deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    
    
    
    
    350Cash dividends ($.05 per share)
    
    
    
    
    
    
    
    
    
    
    (1,262
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,262
    )Balance at March 31, 2003
    
    $
    262
    
    
    $
    40,035
    
    
    $
    299,340
    
    
    $
    (13,866
    )
    
    $
    (2,908
    )
    
    $
    (17,521
    )
    
    $
    305,342Balance at December 31, 2003
    
    $
    262
    
    
    $
    39,022
    
    
    $
    237,087
    
    
    $
    (7,722
    )
    
    $
    (1,700
    )
    
    $
    7,461
    
    
    $
    274,410Net income
    
    
    
    
    
    
    
    
    
    
    1,148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,148Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (471
    )
    
    
    (471
    )Minimum pension liability, net of tax of
$8.7 million
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    18Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    695Issuance of treasury stockExercise of stock options
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    43Stock compensation
    
    
    
    
    
    
    348
    
    
    
    
    
    
    
    1,302
    
    
    
    (1,650
    )
    
    
    
    
    
    
    Employee stock purchase plans
    
    
    
    
    
    
    276
    
    
    
    
    
    
    
    813
    
    
    
    
    
    
    
    
    
    
    
    1,089Retirement savings plans
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    56Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (277
    )
    
    
    
    
    
    
    
    
    
    
    (277
    )Amortization of unearned deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    379Cash dividends ($.05 per share)
    
    
    
    
    
    
    
    
    
    
    (1,288
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,288
    )Balance at March 31, 2004
    
    $
    262
    
    
    $
    39,651
    
    
    $
    236,947
    
    
    $
    (5,790
    )
    
    $
    (2,971
    )
    
    $
    7,008
    
    
    $
    275,107
 See accompanying notes. - 5 -




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Note 1: Financial Statement Presentation Basis of Presentation The accompanying Consolidated Financial Statements include Belden and all of
its subsidiaries (the Company). All significant intercompany accounts and
transactions are eliminated in consolidation. The financial information
presented as of any date other than December 31, 2003 and December 31, 2002 has
been prepared from the books and records without audit. The accompanying
Consolidated Financial Statements have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information or the
Notes to Consolidated Financial Statements required by accounting principles
generally accepted in the United States for complete statements. In the opinion
of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such financial statements
have been included. These Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
contained in the Companys Annual Report on Form 10-K for the year ended
December 31, 2003. Foreign Currency Translation For international operations with functional currencies other than the United
States dollar, asset and liability accounts are translated at current exchange
rates; income and expenses are translated using average exchange rates.
Resulting translation adjustments, as well as gains and losses from certain
affiliate transactions, are reported in accumulated other comprehensive
income/(loss), a separate component of stockholders equity. Exchange gains and
losses on transactions are included in operating earnings/(loss) Use of Estimates in the Preparation of the Financial Statements The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the 2003 Consolidated Financial
Statements in order to conform to the 2004 presentation. Note 2: Summary of Significant Accounting Policies Stock-Based Compensation The Company has four stock compensation plans  the Belden Inc. 2003 Long-term
Incentive Plan and the Belden Inc. 1994 Incentive Plan (together, the
Incentive Plans) as well as the Belden Inc. 2003 Employee Stock Purchase Plan
and the Belden Inc. 1994 Employee Stock Purchase Plan (together, the Stock
Purchase Plans). The Belden Inc. 1994 Incentive Plan expired by its own terms in October 2003
and no future awards are available under this plan. The Belden Inc. 1993
Employee Stock Purchase Plan expired by its own terms in September 2003 and no
future purchase rights are available under this plan. Both plans are disclosed
in this note because options and stock purchase rights granted under these
plans affected pro forma operating results for the quarter ended March 31,
2003. Under the Incentive Plans, certain employees of the Company are eligible to
receive awards in the form of stock options, stock appreciation rights,
restricted stock grants and performance shares. The Company accounts for stock
options using the intrinsic value method provided in Accounting Principles
Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees.
Accordingly, no compensation cost has been recognized for options granted under
the Incentive Plans. The Company accounts for restricted stock grants under APB
No. 25 as fixed-plan awards since both the aggregate number of awards issued
and the aggregate amount to be paid by the participants for the common stock is
known. Compensation related to the grants is measured as the difference between
the market price of the Companys common stock at the grant date and the amount
to be paid by the participants for the common stock. Compensation costs
associated with each restricted stock grant are amortized to expense over the
grants vesting period. - 6 -




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Under the Stock Purchase Plans, all full-time employees and part-time employees
whose customary employment is for 20 or more hours per week and 5 or more
months per year in Canada, the Netherlands, the United States and, prior to
January 1, 2004, Germany receive the right to purchase a specified amount of
common stock at the lesser of 85% of the fair market value on the offering date
or 85% of the fair market value on the exercise date. The Company accounts for
these purchase rights using the intrinsic value method provided by APB No. 25.
Accordingly, no compensation cost has been recognized for purchase rights
granted under the Stock Purchase Plans. The Company adopted the disclosure rules under Statement of Financial
Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure, effective December 2002. The effect on operating
results of calculating the Companys stock-based employee compensation costs as
if the fair value method had been applied to all stock awards is as follows: Three Months EndedMarch 31,2004
    
    2003(in thousands, except per share amounts)As reportedStock-based employee compensation cost, net of tax
    
    $
    233
    
    
    $
    215Net income/(loss)
    
    
    1,148
    
    
    
    (2,298
    )Basic earnings/(loss) per share
    
    
    .04
    
    
    
    (.09
    )Diluted earnings/(loss) per share
    
    
    .04
    
    
    
    (.09
    )Pro formaStock-based employee compensation cost, net of tax
    
    $
    534
    
    
    $
    627Net income/(loss)
    
    
    847
    
    
    
    (2,710
    )Basic earning/(loss) per share
    
    
    .03
    
    
    
    (.11
    )Diluted earnings/(loss) per share
    
    
    .03
    
    
    
    (.11
    )
 The fair value of common stock options outstanding under the Incentive Plans
and the fair value of stock purchase rights outstanding under the Stock
Purchase Plans were estimated at the date of grant using the Black-Scholes
option-pricing model. For the three-month periods ended March 31, 2004 and 2003, weighted average
assumptions used to determine the fair values of the stock options and stock
purchase rights granted during each period included the following: Three Months EndedMarch 31,2004
    
    2003Dividend yield
    
    
    7.34
    %
    
    
    10.70
    %Expected volatility
    
    
    39.70
    %
    
    
    41.80
    %Expected life (in years)
    
    
    7.00
    
    
    
    7.00Risk free interest rate
    
    
    3.55
    %
    
    
    3.40
    %
 - 7 -




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For the three-month periods ended March 31, 2004 and 2003, the weighted average
per share fair value of options granted under the Incentive Plans and purchase
rights granted under the Stock Purchase Plans during each period were as
follows: Three Months EndedMarch 31,2004
    
    2003Incentive Plan
    
    $
    3.53
    
    
    $
    1.58Stock Purchase Plan
    
    
    
    
    
    
    
 The Black-Scholes option-pricing model was developed to estimate the fair value
of market-traded options. Incentive stock options and stock purchase rights
have certain characteristics, including vesting periods and
non-transferability, which market-traded options do not possess. Due to the
significant effect that changes in assumptions and differences in option and
purchase right characteristics might have on the fair values of stock options
and stock purchase rights, the models may not accurately reflect the fair
values of the stock options and stock purchase rights. On February 23, 2004, the Company granted 86,500 shares of restricted stock to
a number of its key employees. Grant participants receive a stated amount of
the Companys common stock, as well as dividends that have accumulated on that
stock during the vesting period, provided they remain employed with the Company
for three years from the grant date. Potential stock compensation expense
related to this grant is estimated to be approximately $1.6 million. The
Company recognized less than $0.1 million of stock compensation related to this
grant during the three months ended March 31, 2004. On February 23, 2004, the Company granted 190,500 stock options to a number of
its employees. Grant recipients may purchase shares of the Companys common
stock at a share price of $19.08. If the recipient remains an employee of the
Company, exercises of one-third of the available shares are permitted on the
first, second and third anniversaries of the grant date. Shipping and Handling Costs In accordance with Emerging Issues Task Force Abstract (EITF) No. 00-10,
Accounting for Shipping and Handling Fees and Costs, the Company includes fees
earned on the shipment of product to customers in revenues and includes costs
incurred on the shipment of product to customers as cost of sales. Certain
handling costs, primarily incurred at the Companys distribution centers,
totaling $1.8 million and $1.6 million were included in selling, general and
administrative expenses for the three-month periods ended March 31, 2004 and
2003, respectively. Interest Expense The Company presents interest expense net of capitalized interest costs and
interest income earned on cash equivalents. Three Months EndedMarch 31,2004
    
    2003(in thousands)Gross interest expense
    
    $
    3,379
    
    
    $
    3,415Capitalized interest costs
    
    
    (6
    )
    
    
    (57
    )Interest income earned on cash equivalents
    
    
    (207
    )
    
    
    (108
    )Net interest expense
    
    $
    3,166
    
    
    $
    3,250
 - 8 -




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Note 3: Share Information Common Stock
    
    Treasury Stock(number of shares in thousands)Balance at December 31, 2002
    
    
    26,204
    
    
    
    (1,091
    )Issuance of treasury stock:Stock compensation
    
    
    
    
    
    
    93Employee stock purchase plan settlement
    
    
    
    
    
    
    4Retirement savings plan contributions
    
    
    
    
    
    
    72Balance at March 31, 2003
    
    
    26,204
    
    
    
    (922
    )Balance at December 31, 2003
    
    
    26,204
    
    
    
    (547
    )Purchase of treasury stock
    
    
    
    
    
    
    (13
    )Issuance of treasury stock:Exercise of stock options
    
    
    
    
    
    
    3Stock compensation
    
    
    
    
    
    
    86Employee stock purchase plan settlement
    
    
    
    
    
    
    4Retirement savings plan contributions
    
    
    
    
    
    
    54Balance at March 31, 2004
    
    
    26,204
    
    
    
    (413
    )
 Note 4: Earnings/(Loss) Per Share Basic earnings/(loss) per share are computed by dividing net income/(loss)
available to common shareholders by the weighted average number of common
shares outstanding. Diluted earnings/(loss) per share are computed by dividing
net income/(loss) available to common shareholders by the weighted average
number of common shares outstanding plus additional potential dilutive shares
assumed to be outstanding. Additional potential shares are calculated for each
measurement period based on the treasury stock method, under which repurchases
are assumed to be made at the average fair market value price per share of the
Companys common stock during the period. The Companys additional potential
dilutive shares currently consist of stock options and unvested restricted
stock. Unvested restricted stock carries dividend and voting rights but is not
included in the weighted average number of common shares outstanding used to
compute basic earnings/(loss) per share. Three Months EndedMarch 31,2004
    
    2003(in thousands, except per share amounts)Numerator:Net income from continuing operations
    
    $
    2,644
    
    
    $
    1,236Net loss from discontinued operations
    
    
    (1,496
    )
    
    
    (3,534
    )Net income/(loss)
    
    $
    1,148
    
    
    $
    (2,298
    )Denominator:Denominator for basic earnings/(loss) per
share  adjusted weighted average shares
    
    
    25,462
    
    
    
    24,992Effect of dilutive common stock equivalents
    
    
    358
    
    
    
    99Denominator for diluted earnings/(loss)
per share  adjusted weighted average
shares
    
    
    25,820
    
    
    
    25,091Basic earnings/(loss) per share:Continuing operations
    
    $
    .10
    
    
    $
    .05Discontinued operations
    
    
    (.06
    )
    
    
    (.14
    )Earnings/(loss) per share
    
    
    .04
    
    
    
    (.09
    )Diluted earnings/(loss) per share:Continuing operations
    
    $
    .10
    
    
    $
    .05Discontinued operations
    
    
    (.06
    )
    
    
    (.14
    )Earnings/(loss) per share
    
    
    .04
    
    
    
    (.09
    )
 - 9 -




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##### Table of Contents



For the three-month periods ended March 31, 2004 and 2003, the Company did not
include 2.0. million and 2.6 million outstanding stock options, respectively, in
its development of the denominators used in the dilutive earnings/(loss) per
share computations. The exercise prices of these options were greater than the
respective average market price of the Companys common stock during those
measurement periods. Note 5: Discontinued Operations From 2001 through 2003, North America has suffered through a general
deterioration of its telecommunications market. Market deterioration has
occurred due primarily to a general economic slowdown within North America,
network overcapacity, network build-out delays and the limited availability of
capital. As a result, revenues and results of operations for the North American
operations of the Companys Communications segment have been adversely
affected. The significant declines in revenues led to underabsorption of fixed
costs, which adversely affected gross margin. Although the Company achieved
significant reductions in operating expenses during this same period, the
reductions were not sufficient to completely offset unabsorbed costs. On November 18, 2003, the Companys Board of Directors decided to seek
strategic alternatives for the North American operations of its Communications
segment. The Companys Board of Directors based its decision primarily on the
following factors:  
    
    The Company did not foresee North American telecommunications market
conditions improving sufficiently to return the North American
operations of its Communications segment to operating profitability in
2004;
    
    The significant slowdown in capital spending in the North American
telecommunications market created both uncertainty and instability
with regard to the level of product demand. Demand can change quickly
and can vary significantly over short periods of time. As a result of
this uncertainty and instability, the Company had difficulty
accurately forecasting near- and long-term operating results and cash
flow for the North American operations of its Communications segment;
and
    
    Since a limited number of customers account for a significant portion
of revenues in the North American telecommunications market, operating
results are subject to volatility from changes in spending by one or
more of these significant customers. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the Company performed an evaluation of the recoverability of
the carrying value of long-lived assets using undiscounted cash flow
projections. Based on the gross undiscounted cash flow projections, the Company
determined that all asset groups within the North American operations of its
Communications segment were impaired. The Company then estimated fair values
using a variety of techniques including discounted cash flows and comparable
market data. Calculating the estimated fair values involves significant
assumptions. Assumptions utilized in estimating fair values under continued
asset use included long-term forecasts of revenue growth, gross margins and
capital expenditures. Comparable market data was obtained from appraisals and
other third party valuation estimates. During the fourth quarter of 2003, the
Company determined that fair values of the asset groups within the North
American operations of its Communications segment were less than carrying
amounts by $92.4 million. The Company recognized this impairment loss during
the fourth quarter of 2003. On March 12, 2004, the Companys Board of Directors decided to sell the assets
of the affected operations and exit the North American telecommunications
market. On March 18, 2004, the Company announced a definitive agreement to sell
assets belonging to the North American operations of its Communications segment
to Superior Essex Inc. (Superior). Superior will buy inventory and certain
equipment, and will take over the Companys supply agreements with major
telecommunications customers, for an amount not to exceed $95.0 million. After
the sale takes place, the Company will close its communications cable plant in
Phoenix, Arizona. The Company and Superior received notice on April 21, 2004 of
early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, clearing the way for the transaction to proceed. The
companies expect that the transaction will close during the second quarter of
2004. - 10 -




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##### Table of Contents



Due to the decision made by the Board of Directors to sell the assets of the
North American operations of the Companys Communications segment, the Company
has accounted for these operations as discontinued operations in accordance
with SFAS No. 144. Listed below are the major classes of assets and liabilities of the North
American operations of the Companys Communications segment as of March 31,
2004 that are included as part of the disposal group: (in thousands)Assets:Receivables
    
    $
    19,865Inventories
    
    
    53,788Property, plant and equipment, net
    
    
    48,808Other assets
    
    
    9,459Total assets
    
    $
    131,920Liabilities:Accounts payable and accrued liabilities
    
    $
    31,435Other liabilities
    
    
    5,421Total liabilities
    
    $
    36,856
 Net loss from discontinued operations for the three months ended March 31, 2004
includes $45.2 million of revenues and $2.3 million of loss before income tax
benefits related to the North American operations of the Companys
Communications segment. Net loss from discontinued operations for the three
months ended March 31, 2003 includes $43.0 million of revenues and $5.5 million
of loss before income tax benefits related to the North American operations of
the Companys Communications segment. Note 6: Accumulated Other Comprehensive Income/(Loss) Foreign Currency
    
    Minimum
    
    Accumulated OtherTranslation
    
    Pension
    
    ComprehensiveAdjustments
    
    Liability
    
    Income/(Loss)(in thousands)Balance at December 31, 2002
    
    $
    (3,117
    )
    
    $
    (14,742
    )
    
    $
    (17,859
    )Current Period Change
    
    
    402
    
    
    
    (64
    )
    
    
    338Balance at March 31, 2003
    
    $
    (2,715
    )
    
    $
    (14,806
    )
    
    $
    (17,521
    )Balance at December 31, 2003
    
    $
    21,533
    
    
    $
    (14,072
    )
    
    $
    7,461Current Period Change
    
    
    (471
    )
    
    
    18
    
    
    
    (453
    )Balance at March 31, 2004
    
    $
    21,062
    
    
    $
    (14,054
    )
    
    $
    7,008
 - 11 -




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##### Table of Contents



Note 7: Inventories March 31,
    
    December 31,2004
    
    2003(in thousands)Raw materials
    
    $
    16,405
    
    
    $
    14,776Work-in-process
    
    
    12,532
    
    
    
    11,933Finished goods
    
    
    60,627
    
    
    
    61,451Perishable tooling and supplies
    
    
    3,987
    
    
    
    4,080Gross inventories
    
    
    93,551
    
    
    
    92,240Excess of current standard costs over LIFO costs
    
    
    (7,518
    )
    
    
    (7,518
    )Obsolescence and other reserves
    
    
    (3,793
    )
    
    
    (3,764
    )Net inventories
    
    $
    82,240
    
    
    $
    80,958
 Inventories are stated at the lower of cost (last-in, first-out and first-in,
first-out methods) or market. Costs include direct material, direct labor and
applicable production overhead costs. Note 8: Accrued Severance and Other Related Benefits Acquisition-Related Severance and Other Related Benefits On December 31, 2002, the Company accrued severance and other related benefits
costs of $11.3 million associated with the announced manufacturing facility
closing in Canada in connection with the NORCOM acquisition. These costs were
recognized as a liability assumed in the purchase and included in the
allocation of the cost to acquire NORCOM in accordance with EITF No. 95-3,
Recognition of Liabilities in Connection with a Purchase Business Combination.
197 employees were eligible for severance payments. During the first quarter of
2004, the Company recorded additional severance and other related benefits
costs in an amount less than $0.1 million related to the manufacturing facility
closing in Canada. These costs are recognized as operating expenses. Facility Consolidation Severance and Other Related Benefits On December 31, 2002, the Company recorded severance and other related benefits
costs in the amount of $8.3 million related to announced manufacturing facility
closures in Germany and Australia as operating expense ($5.9 million in cost of
sales and $2.4 million in selling, general and administrative expenses) within
the Electronics segment in accordance with EITF No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). 266 employees were
eligible for severance payments. During the second quarter of 2003, the Company
recorded additional severance and other related benefits costs in the amount of
$2.5 million related to the manufacturing facility closures in Germany and
Australia as operating expense ($1.9 million in cost of sales and $0.6 million
in selling, general and administrative expenses). During the fourth quarter of
2003, the Company recorded additional severance and other related benefits
costs in the amount of $0.1 million related to the manufacturing facility
closure in Germany as selling, general and administrative expense. During the
first quarter of 2004, the Company recorded additional severance and other
related benefits costs in the amount of $0.1 million related to the German
manufacturing facility closure in selling, general and administrative expenses. Other Severance and Other Related Benefits In accordance with SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, the Company recorded severance and other related benefits
costs in the amount of $2.7 million in the third and fourth quarters of 2003
related to personnel reductions within the Electronics segment in the United
States, Canada and the Netherlands and within the Communications segment in the
United Kingdom as operating expense ($1.4 million in cost of sales and $1.3
million in selling, general and administrative expenses). 132 employees were
notified, prior to December 31, 2003, of their pending termination as well as
the amount of severance and other related benefits they should expect to
receive. During the first quarter of 2004, the Company recorded additional
severance and other related benefits costs in the amount of $0.5 million
related to personnel reductions within the Electronics segment in Canada and
the Netherlands as selling, general and administrative expenses. Three
employees were notified, prior to March 31, 2004, of their pending termination
as well as the amount of severance and other related benefits they should
expect to receive. - 12 -




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##### Table of Contents



In accordance with SFAS No. 88, Employers Accounting for Settlements &
Curtailments of Defined Benefit Pension Plans and for Termination Benefits, the
Company recorded severance and other related benefits costs in the amount of
$1.4 million in the third and fourth quarters of 2003 related to personnel
reductions within the Electronics segment in the United States as operating
expense ($0.3 million in cost of sales and $1.1 million in selling, general and
administrative expenses). Twenty employees were offered and accepted
termination packages prior to December 31, 2003. The Company anticipates making substantially all severance payments against
these accruals within one year of each accrual date. The following table sets forth termination activity that occurred during the
three months ended March 31, 2004: Total NumberAcquisition-
    
    Facility
    
    
    
    
    
    
    
    
    
    of EmployeesRelated
    
    Consolidation
    
    Other
    
    Total
    
    Eligible forSeverance and
    
    Severance and
    
    Severance and
    
    Severance and
    
    Severance andOther Related
    
    Other Related
    
    Other Related
    
    Other Related
    
    Other Related(in thousands, except  number of employees)
    
    Benefits
    
    Benefits
    
    Benefits
    
    Benefits
    
    BenefitsBalance at December 31, 2003
    
    $
    195
    
    
    $
    828
    
    
    $
    2,386
    
    
    $
    3,409
    
    
    
    119Cash payments/terminations
    
    
    (231
    )
    
    
    (758
    )
    
    
    (762
    )
    
    
    (1,751
    )
    
    
    (33
    )Foreign currency translation
    
    
    1
    
    
    
    (8
    )
    
    
    (16
    )
    
    
    (23
    )
    
    
    Charges/other adjustments
    
    
    35
    
    
    
    110
    
    
    
    453
    
    
    
    598
    
    
    
    3Balance at March 31, 2004
    
    $
    
    
    
    $
    172
    
    
    $
    2,061
    
    
    $
    2,233
    
    
    
    89
 Charges/other adjustments for acquisition-related severance and other related
benefits reflect additional charges recognized during the first quarter of 2004
related to the manufacturing facility closure in Canada. Charges/other
adjustments for facility consolidation severance and other related benefits
reflect additional charges recognized during the first quarter of 2004 related
to the manufacturing facility closure in Germany. Charges/other adjustments for
severance and other related benefits reflects charges recognized during the
first quarter of 2004 related to Electronics segment personnel reductions in
Canada and the Netherlands. The Company continues to review its business strategies and evaluate further
restructuring actions. This could result in additional severance and other
related benefits charges in future periods. Note 9: Long-Term Debt and Other Borrowing Arrangements Credit Agreement There were no outstanding borrowings at March 31, 2004 under the Companys
credit agreement dated October 9, 2003. Although the Company had $70.1 million
in borrowing capacity available at March 31, 2004, the Company and Cable Design
Technologies Corporation (CDT) have each agreed in the merger agreement
discussed in Note 14, Pending Business Combination, to the Consolidated
Financial Statements in this Quarterly Report on Form 10-Q that neither party
will borrow more than $25.0 million without the consent of the other party
prior to the effective date of the merger. Short-Term Borrowings At March 31, 2004, the Company had unsecured, uncommitted arrangements with
three banks under which it could borrow up to $6.2 million at prevailing
interest rates. There were no outstanding borrowings under these arrangements
at March 31, 2004. - 13 -




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##### Table of Contents



Interest Rate Management The Company manages its debt portfolio by using interest rate swap agreements
to achieve an overall desired position of fixed and floating rates. At March
31, 2004, the Company was party to interest rate swap agreements relating to
its 7.60% medium-term notes that mature on September 1, 2004. The swaps, which
mature in 2004, convert a notional amount of $64.0 million from a fixed rate to
a floating rate in conjunction with the Companys ongoing debt management
strategy. These arrangements have been designated and qualify as fair value
hedges of the associated medium-term notes in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. Based on current
interest rates for similar transactions, the fair value of the Companys
interest rate swap agreements at March 31, 2004 was $1.0 million. Credit and
market risk exposures on these agreements are limited to the net interest
differentials. Net interest differentials earned from the interest rate swaps
of $0.5 million pretax, or $0.01 per diluted share, were recorded as reductions
to interest expense for the three months ended March 31, 2004. Net interest
differentials earned from the interest rate swaps reduced the Companys average
interest rate on long-term debt by 0.99 percentage points for the three months
ended March 31, 2004. The Company is exposed to credit loss in the event of
nonperformance by counterparties on the agreements, but does not anticipate
nonperformance by any of the counterparties. Note 10: Income Taxes Net tax expense of $1.2 million for the three months ended March 31, 2004
resulted from net income from continuing operations before taxes of $3.9
million. Earnings from foreign subsidiaries are considered to be indefinitely
reinvested and, accordingly, no provision for United States federal and state
income taxes has been made for these earnings. Upon distribution of foreign
subsidiary earnings, the Company may be subject to United States income taxes
(subject to an adjustment for foreign tax credits) and withholding taxes
payable to the various foreign countries. The difference between the effective rate reflected in the provision for income
taxes on income from continuing operations before taxes and the amounts
determined by applying the applicable statutory United States tax rate for the
three months ended March 31, 2004 are analyzed below: Three Months Ended March 31, 2004
    
    Amount
    
    Rate(in thousands, except rate data)Provision at statutory rate
    
    $
    1,361
    
    
    
    35.0
    %State income taxes
    
    
    142
    
    
    
    3.7
    %Lower foreign tax rates and other, net
    
    
    (259
    )
    
    
    (6.7
    )%Total tax expense
    
    $
    1,244
    
    
    
    32.0
    %
 Note 11: Pension and Other Postretirement Obligations The Company sponsors defined benefit pension plans for certain employees in the
United States, the United Kingdom, the Netherlands and Germany. Annual
contributions to these pension plans equal or exceed the minimum funding
requirements of applicable local regulations. The assets of the pension plans
are maintained in various trusts and invested primarily in equity and fixed
income securities and money market funds. The Company also sponsors an unfunded postretirement (medical and life
insurance) benefit plan. The medical benefit portion of the plan is only for
employees who retired prior to 1989 as well as certain other employees who were
near retirement and elected to receive certain benefits. - 14 -




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##### Table of Contents



The following table provides the components of net periodic benefit costs for
the plans for the three-month periods ended March 31, 2004 and 2003: Pension Obligations
    
    Other Postretirement ObligationsThree Months Ended March 31,
    
    2004
    
    2003
    
    2004
    
    2003(in thousands)Service cost
    
    $
    1,947
    
    
    $
    1,889
    
    
    $
    7
    
    
    $
    6Interest cost
    
    
    2,795
    
    
    
    2,942
    
    
    
    242
    
    
    
    269Expected return on plan assets
    
    
    (3,232
    )
    
    
    (3,508
    )
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    (10
    )
    
    
    (10
    )
    
    
    (26
    )
    
    
    (26
    )Net (gain)/loss recognition
    
    
    486
    
    
    
    52
    
    
    
    118
    
    
    
    108Net periodic benefit cost
    
    $
    1,986
    
    
    $
    1,365
    
    
    $
    341
    
    
    $
    357
 The Company contributed $0.7 million and $0.6 million to its pension plans and
other postretirement plan, respectively, during the three months ended March
31, 2004. The Company anticipates contributing $10.3 million and $2.2 million
to its pension plans and other postretirement plan, respectively, during 2004. In January 2004, the Financial Accounting Standards Board (FASB) issued FASB
Staff Position (FAS) No. 106-1, Accounting and Disclosure Requirements Related
to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.
FAS No. 106-1 allows postretirement health care plan sponsors to defer
recognizing the effects of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (Act) in accounting for the plans under SFAS No. 106,
Employers Accounting for Postretirement Benefits Other Than Pensions, and in
providing disclosures related to the plans required by SFAS No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits, until
authoritative guidance on the accounting for the federal subsidy provided in
the Act is issued or until certain other events addressed in FAS No. 106-1
occur. Regardless of whether a plan sponsor elects the deferral, FAS No. 106-1
requires that certain other disclosures be included in the sponsors annual or
interim financial statements. FAS No. 106-1 was effective for interim or annual
financial statements of fiscal years ending after December 7, 2003. The Company
sponsors postretirement health care plans for certain of its locations and
expects that the Act will eventually reduce its costs for some of these plans.
At this point, the Companys investigation into its response to the Act is
preliminary as it awaits guidance from various governmental and regulatory
agencies concerning the requirements that must be met to obtain these cost
reductions as well as the manner in which such savings would be measured.
Because of the various uncertainties related to the Companys response to the
Act and the appropriate accounting methodology for this event, the Company has
elected to defer financial recognition of the Act until the FASB issues final
accounting guidance. When issued, the final guidance could require the Company
to change previously reported information. Note 12: Contingent Liabilities General Various claims are asserted against the Company in the ordinary course of
business including those pertaining to income tax examinations and product
liability, customer, vendor and patent matters. Based on facts currently
available, management believes that the disposition of the claims that are
pending or asserted will not have a materially adverse effect on the financial
position of the Company. Letters of Credit, Guarantees and Bonds At March 31, 2004, the Company was party to unused standby letters of credit
and unused bank guarantees totaling $4.0 million and $0.5 million,
respectively. The Company also maintains bonds totaling $2.7 million in
connection with workers compensation self-insurance programs in several states,
taxation in Canada and the importation of product into the United States. - 15 -




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##### Table of Contents



Severance and Other Related Benefits The Company recently completed the sale of part of its business in Germany to a
management-led buyout group. The Company will retain liability for severance
and other related benefits estimated at $1.5 million on March 31, 2004 in the
event the buyout group terminates transferred employees within three years of
the buyout date. The severance and other related benefits amounts are reduced
based upon the transferred employees duration of employment with the buyout
group. The Company will be relieved of any remaining contingent liability
related to the transferred employees on the third anniversary of the buyout
date. Intercompany Guarantees An intercompany guarantee is a contingent commitment issued by either Belden
Inc. or one of its subsidiaries to guarantee the performance of either Belden
Inc. or one of its subsidiaries to a third party in a borrowing arrangement or
similar transaction. The terms of these intercompany guarantees are equal to
the terms of the related borrowing arrangements or similar transactions and
range from 1 year to 12 years. The only intercompany guarantees outstanding at
March 31, 2004 are the guarantees executed by Belden Wire & Cable Company and
Belden Communications Company related to the $200.0 million indebtedness of
Belden Inc. under various medium-term note purchase agreements and the guaranty
executed by Belden Inc. related to $3.6 million of potential indebtedness under
an overdraft line of credit between Belden Wire & Cable B.V. and its local cash
management bank. The maximum potential amount of future payments Belden Inc. or
its subsidiaries could be required to make under these intercompany guarantees
at March 31, 2004 is $203.6 million. In accordance with the scope exceptions
provided by FASB Interpretation No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, the Company has not measured and recorded the carrying values of these
guarantees in its Consolidated Financial Statements. The Company also does not
hold collateral to support these guarantees. Note 13: Business Segment and Geographic Information The Company conducts its operations through two business segments  the
Electronics segment and the Communications segment. The Electronics segment
designs, manufactures and markets metallic and fiber optic wire and cable
products with industrial, networking, entertainment/OEM and communications
applications. These products are sold primarily through distributors. The
Communications segment designs, manufactures and markets metallic cable
products primarily with communications and networking applications. These
products are sold through distribution or to local exchange carriers (LECs)
either directly or through value-added resellers designated by the LECs. Due to
the pending sale of assets belonging to the North American operations of the
Companys Communications segment to Superior, the North American operations of
the Communications segment are accounted for as discontinued operations.
Therefore, the European operations, with a manufacturing facility in
Manchester, United Kingdom, are accounted for as the only continuing operations
of the Communications segment in this Quarterly Report on Form 10-Q. The Company evaluates segment performance and allocates resources based on
operating earnings/(loss) before interest and income taxes. Operating
earnings/(loss) of the two principal segments include all the ongoing costs of
operations. Allocations to or from these business segments are not significant.
With the exception of certain unallocated tax assets, substantially all the
business assets are utilized by the business segments. Amounts reflected in the column entitled Other in the tables below represent
corporate headquarters operating, treasury and income tax expenses and the
elimination of intersegment revenues and cost of sales. Revenues are attributed to geographic areas based on the location of the
customer. - 16 -




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##### Table of Contents



Business Segment Information Three Months Ended March 31, 2004
    
    Electronics
    
    Communications
    
    Other
    
    Total(in thousands)External customer revenues
    
    $
    148,568
    
    
    $
    21,535
    
    
    $
    
    
    
    $
    170,103Affiliate revenues
    
    
    1,135
    
    
    
    47
    
    
    
    (1,182
    )
    
    
    Segment operating earnings/(loss)
    
    
    10,395
    
    
    
    1,025
    
    
    
    (4,366
    )
    
    
    7,054Segment assets(1)
    
    
    385,653
    
    
    
    63,946
    
    
    
    84,170
    
    
    
    533,769
 (1) Excludes assets of discontinued operations Three Months Ended March 31, 2003
    
    Electronics
    
    Communications
    
    Other
    
    Total(in thousands)External customer revenues
    
    $
    137,039
    
    
    $
    16,278
    
    
    $
    
    
    
    $
    153,317Affiliate revenues
    
    
    2,124
    
    
    
    119
    
    
    
    (2,243
    )
    
    
    Segment operating earnings/(loss)
    
    
    6,976
    
    
    
    1,230
    
    
    
    (2,813
    )
    
    
    5,393Segment assets(1)
    
    
    421,155
    
    
    
    49,765
    
    
    
    32,389
    
    
    
    503,309
 (1) Excludes assets of discontinued operations Total segment operating earnings differ from net income/(loss) reported in the
Consolidated Statements of Operations as follows: Three Months Ended March 31,
    
    2004
    
    2003(in thousands)Total segment operating earnings
    
    $
    7,054
    
    
    $
    5,393Interest expense
    
    
    3,166
    
    
    
    3,250Income tax expense
    
    
    1,244
    
    
    
    907Net income from continuing operations
    
    
    2,644
    
    
    
    1,236Net loss from discontinued operations(1)
    
    
    (1,496
    )
    
    
    (3,534
    )Net income/(loss)
    
    $
    1,148
    
    
    $
    (2,298
    )
 (1) Net of tax benefit of $841 and $1,988, respectively. Geographic Information 2004
    
    2003Percent of
    
    
    
    
    
    Percent ofThree Months Ended March 31,
    
    Revenues
    
    Revenues
    
    Revenues
    
    Revenues(in thousands, except % data)United States
    
    $
    91,493
    
    
    
    53.8
    %
    
    $
    73,774
    
    
    
    48.1
    %Canada
    
    
    12,565
    
    
    
    7.4
    %
    
    
    14,971
    
    
    
    9.8
    %United Kingdom
    
    
    24,784
    
    
    
    14.6
    %
    
    
    19,562
    
    
    
    12.8
    %Continental Europe
    
    
    24,533
    
    
    
    14.4
    %
    
    
    27,070
    
    
    
    17.7
    %Rest of World
    
    
    16,728
    
    
    
    9.8
    %
    
    
    17,940
    
    
    
    11.6
    %Total
    
    $
    170,103
    
    
    
    100.0
    %
    
    $
    153,317
    
    
    
    100.0
    %
 - 17 -




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##### Table of Contents



Note 14: Pending Business Combination On February 4, 2004, the Company entered into an Agreement and Plan of Merger
(the Merger) with CDT. If the Merger is consummated, the combined company will
focus on products for the specialty electronics and data networking markets,
including connectivity. Completion of the Merger is subject to various
conditions including approval by stockholders of both companies and by certain
domestic and international regulatory agencies. Under terms of the Merger,
Belden common stockholders would receive 2 shares of CDT common stock (or 1
share of CDT common stock if a proposed reverse stock split of CDT common stock
is effected prior to the Merger) for every 1 share of Belden common stock. If
the proposed stock split of CDT common stock is effected prior to the Merger,
the combined company would have approximately 47.0 million shares of common
stock outstanding. The former CDT stockholders will own approximately 45% of
the combined company and the former Belden stockholders will own approximately
55% of the combined company. Upon completion of the Merger, Belden will become
a wholly-owned subsidiary of CDT. The Company anticipates that annual dividends
in the aggregate of $0.20 per common share will be paid to all common
stockholders of the merged companies starting in the third calendar quarter of
2004. The Company anticipates the Merger will be completed late in the second
quarter or early in the third quarter of 2004 and accounted for as a reverse acquisition under the purchase
method of accounting with Belden deemed the acquiring entity and CDT deemed the
acquired entity in accordance with SFAS No. 141, Business Combinations, because
Beldens owners as a group will retain or receive the larger portion of the
voting rights in the combined entity and Beldens senior management will
represent a majority of the senior management of the combined entity. The
Company and CDT received notice on March 24, 2004 of early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The following is a summary of selected unaudited balance sheet information of
CDT as of its most recent reported quarter ended January 31, 2004: (in thousands)Current assets
    
    $
    277,202Total assets
    
    
    513,253Current liabilities, excluding debt
    
    
    69,854Current maturities of long-term debt
    
    
    1,984Long-term debt, excluding current maturities
    
    
    111,921Total liabilities
    
    
    217,545Stockholders equity
    
    
    295,708
 The following is a summary of selected unaudited income statement information
of CDT for the most recent reported twelve months ended January 31, 2004: (in thousands)Revenues
    
    $
    503,445Operating earnings before restructuring charges
    
    
    13,961Restructuring charges
    
    
    (3,894
    )Operating earnings
    
    
    10,067Net loss
    
    
    (473
    )
 Based on the net assets of
CDT as of January 31, 2004, subject to changes in
net assets through the closing date and determination of the final cost of CDT and
allocations of such cost, the aggregate fair values of net assets are expected
to be in excess of the book values of net assets by approximately $150 million. -18-




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##### Table of Contents



Note 15: Subsequent Event The Company sold certain fully-impaired equipment and technology used for the
production of deflection coils to Elektrisola Dr. Gerd Schildbach GmbH & Co. KG
during the second quarter of 2003 and received a cash payment of $1.3 million.
The Company could not receive the remaining $0.4 million of the contracted
purchase amount or recognize a gain on the sale of the equipment until certain
technical conditions of the sale were fulfilled. The Company received notice on
April 23, 2004 that the technical conditions of the sale have now been
fulfilled. The Company should receive the remainder of the contracted purchase
amount during the second quarter of 2004. The Company will also recognize a
$1.7 million gain on the sale of the equipment in the second quarter of 2004. 
 Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis, as well as the accompanying Consolidated
Financial Statements and related footnotes, will aid in the understanding of
the Companys operating results as well as its financial position, cash flows,
indebtedness and other key financial information. Certain reclassifications
have been made to prior year amounts to make them comparable to current year
presentation. Preparation of this Quarterly Report on Form 10-Q requires the
Company to make estimates and assumptions that affect the reported amount of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of its financial statements and the reported amounts of revenue and
expenses during the reporting period. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily derived from other sources. There can be no assurance that actual
amounts will not differ from those estimates. The following discussion will
also contain forward-looking statements. In connection therewith, please see
the cautionary statements contained herein, which identify important factors
that could cause actual results to differ materially from those in the
forward-looking statements. Overview The Company designs, manufactures and markets metallic and fiber optic wire and
cable products for the electronics and communications markets. The Company
focuses on segments of the worldwide wire and cable market that require highly
differentiated, high-performance products and adds value through design,
engineering, excellence in manufacturing, product quality, and customer
service. The Company has manufacturing facilities in North America and Europe
and had a manufacturing facility in Australia until June 2003. The Company believes that revenue growth, operating margins and working capital
management are its key performance indicators. Discontinued Operations From 2001 through 2003, North America has suffered through a general
deterioration of its telecommunications market. Market deterioration has
occurred due primarily to a general economic slowdown within North America,
network overcapacity, network build-out delays and the limited availability of
capital. As a result, revenues and results of operations for the North American
operations of the Companys Communications segment have been adversely
affected. The significant declines in revenues led to underabsorption of fixed
costs, which adversely affected gross margin. Although the Company achieved
significant reductions in operating expenses during this same period, the
reductions were not sufficient to completely offset unabsorbed costs. -19-




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##### Table of Contents



On November 18, 2003, the Companys Board of Directors decided to seek
strategic alternatives for the North American operations of its Communications
segment. The Companys Board of Directors based its decision primarily on the
following factors:  
    
    The Company did not foresee North American telecommunications market
conditions improving sufficiently to return the North American
operations of its Communications segment to operating profitability in
2004;
    
    The significant slowdown in capital spending in the North American
telecommunications market had created both uncertainty and instability
with regard to the level of product demand. Demand can change quickly
and can vary significantly over short periods of time. As a result of
this uncertainty and instability, the Company had difficulty
accurately forecasting near- and long-term operating results and cash
flow for the North American operations of its Communications segment;
and
    
    Since a limited number of customers account for a significant portion
of revenues in the North American telecommunications market, operating
results were subject to volatility from changes in spending by one or
more of these significant customers. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the Company performed an evaluation of the recoverability of
the carrying value of long-lived assets using undiscounted cash flow
projections. Based on the gross undiscounted cash flow projections, the Company
determined that all asset groups within the North American operations of its
Communications segment were impaired. The Company then estimated fair values
using a variety of techniques including discounted cash flows and comparable
market data. Calculating the estimated fair values involves significant
assumptions. Assumptions utilized in estimating fair values under continued
asset use included long-term forecasts of revenue growth, gross margins and
capital expenditures. Comparable market data was obtained from appraisals and
other third party valuation estimates. During the fourth quarter of 2003, the
Company determined that fair values of the asset groups within the North
American operations of its Communications segment were less than carrying
amounts by $92.4 million. The Company recognized this impairment loss during
the fourth quarter of 2003. On March 12, 2004, the Companys Board of Directors decided to sell the assets
of the affected operations and exit the North American telecommunications
market. On March 18, 2004, the Company announced a definitive agreement to sell
assets belonging to the North American operations of its Communications segment
to Superior Essex Inc. (Superior). Superior will buy inventory and certain
equipment, and will take over the Companys supply agreements with major
telecommunications customers, for an amount not to exceed $95.0 million. After
the sale takes place, the Company will close its communications cable plant in
Phoenix, Arizona. The Company and Superior received notice on April 21, 2004 of
early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, clearing the way for the transaction to proceed. The
companies expect that the transaction will close during the second quarter of
2004. Due to the decision made by the Board of Directors to sell the assets of the
North American operations of the Companys Communications segment, the Company
has accounted for these operations as discontinued operations in accordance
with SFAS No. 144. -20-




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##### Table of Contents



Pending Business Combination On February 4, 2004, the Company entered into an Agreement and Plan of Merger
(the Merger) with Cable Design Technologies Corporation (CDT). If the Merger is
consummated, the combined company will focus on products for the specialty
electronics and data networking markets, including connectivity. Completion of
the Merger is subject to various conditions including approval by stockholders
of both companies and by certain domestic and international regulatory
agencies. Under terms of the Merger, Belden common stockholders would receive 2
shares of CDT common stock (or 1 share of CDT common stock if a proposed
reverse stock split of CDT common stock is effected prior to the Merger) for
every 1 share of Belden common stock. If the proposed stock split of CDT common
stock is effected prior to the Merger, the combined company would have
approximately 47.0 million shares of common stock outstanding. The former CDT
stockholders will own approximately 45% of the combined company and the former
Belden stockholders will own approximately 55% of the combined company. Upon
completion of the Merger, Belden will become a wholly-owned subsidiary of CDT.
The Company anticipates that annual dividends in the aggregate of $0.20 per
common share will be paid to all common stockholders of the merged companies
starting in the third calendar quarter of 2004. The Company anticipates the
Merger will be completed late in the second quarter or early in the
third quarter of 2004 and accounted for as
a reverse acquisition under the purchase method of accounting with Belden
deemed the acquiring entity and CDT deemed the acquired entity in accordance
with SFAS No. 141, Business Combinations, because Beldens owners as a group
will retain or receive the larger portion of the voting rights in the combined
entity and Beldens senior management will represent a majority of the senior
management of the combined entity. The Company and CDT received notice on March
24, 2004 of early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. Selected unaudited balance sheet and income statement information for CDT as of
its most recent reported quarter ended January 31, 2004 is disclosed in Note
14, Pending Business Combination, to the Consolidated Financial Statements
included in this Quarterly Report on Form 10-Q. Subsequent Event The Company sold certain fully-impaired equipment and technology used for the
production of deflection coils to Elektrisola Dr. Gerd Schilbach GmbH & Co. KG
during the second quarter of 2003 and received a cash payment of $1.3 million.
The Company could not receive the remaining $0.4 million of the contracted
purchase amount or recognize a gain on the sale of the equipment until certain
technical conditions of the sale were fulfilled. The Company received notice on
April 23, 2004 that the technical conditions of the sale have now been
fulfilled. The Company should receive the remainder of the contracted purchase
amount during the second quarter of 2004. The Company will also recognize a
$1.7 million gain on the sale of the equipment in the second quarter of 2004. Consolidated Operating Results The following table sets forth information comparing consolidated operating
results for the three-month periods ended March 31, 2004 and 2003. Three Months EndedMarch 31,(In thousands)
    
    2004
    
    2003Revenues
    
    $
    170,103
    
    
    $
    153,317Gross profit
    
    
    32,283
    
    
    
    28,890Operating earnings
    
    
    7,054
    
    
    
    5,393Interest expense
    
    
    3,166
    
    
    
    3,250Income before taxes
    
    
    3,888
    
    
    
    2,143Net income from continuing operations
    
    
    2,644
    
    
    
    1,236Net loss from discontinued
operations(1)
    
    
    (1,496
    )
    
    
    (3,534
    )Net income/(loss)
    
    
    1,148
    
    
    
    (2,298
    )
 (1)     Net of tax benefit of $841 and $1,988, respectively. -21-




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##### Table of Contents



Business Segments The Company conducts its operations through two business segmentsthe
Electronics segment and the Communications segment. The Electronics segment
designs, manufactures and markets metallic and fiber optic wire and cable
products with industrial, networking, entertainment/OEM and communications
applications. These products are sold chiefly through distribution. The
Communications segment designs, manufactures, and markets metallic cable
products primarily with communications and networking applications. These
products are sold through distribution or to local exchange carriers (LECs)
either directly or through value-added resellers (VARs) designated by the LECs.
Due to the pending sale of assets belonging to the North American operations of
the Companys Communications segment, these operations are accounted for as
discontinued operations. Therefore, the European operations, with a
manufacturing facility in Manchester, United Kingdom, are accounted for as the
only continuing operations of the Communications segment in this Quarterly
Report on Form 10-Q. The following table sets forth information comparing the Electronics segment
operating results for the three-month periods ended March 31, 2004 and 2003. Three Months EndedMarch 31,(In thousands, except % data)
    
    2004
    
    2003External customer revenues
    
    $
    148,568
    
    
    $
    137,039Affiliate revenues
    
    
    1,135
    
    
    
    2,124Operating earnings
    
    
    10,395
    
    
    
    6,976As a percent of external customer revenues
    
    
    7.0
    %
    
    
    5.1
    %
 The following table sets forth information comparing the Communications segment
operating results for the three-month periods ended March 31, 2004 and 2003. Three Months EndedMarch 31,(In thousands, except % data)
    
    2004
    
    2003External customer revenues
    
    $
    21,535
    
    
    $
    16,278Affiliate revenues
    
    
    47
    
    
    
    119Operating earnings
    
    
    1,025
    
    
    
    1,230As a percent of external customer revenues
    
    
    4.8
    %
    
    
    7.6
    %
 Results of Operations
Three Months Ended March 31, 2004 Compared With Three Months Ended March 31, 2003Continuing Operations Consolidated Revenues
Revenues generated in the three months ended March 31, 2004 increased 10.9% to
$170.1 million from revenues generated in the three months ended March 31, 2003
of $153.3 million due to favorable currency translation on international
revenues, increased sales volume and increased selling prices. Favorable foreign currency translation on international revenues contributed
5.6 percentage points of revenue increase. The euro, British pound, Canadian
dollar, Australian dollar and Hungarian forint appreciated in relation to the
United States dollar from average exchange values of $1.07, $1.60, $0.66, $0.59
and $0.0044, respectively, in the first quarter of 2003 to $1.25, $1.84, $0.76,
$0.77 and $0.0048, respectively, in the first quarter of 2004. -22-




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##### Table of Contents



Increased unit sales generated during the three months ended March 31, 2004
contributed 5.0 percentage points of revenue increase. The Company experienced
volume increases in its sales of products with communications, networking and
industrial applications. Higher unit sales of products with communications,
networking and industrial applications contributed 4.0, 2.1 and 1.2 percentage
points of revenue increase, respectively. These volume increases were partially
offset by 2.3 percentage points due to a volume decrease in sales of products
with entertainment/OEM applications. Factors contributing to the net increased
sales volume are listed below:  
    
    Improvement in general economic conditions within North America and Asia;
    
    Increased unit purchasing of products with communications applications by a large telecommunications
customer in the United Kingdom during the final quarter of its annual capital spending cycle;
    
    Customer pre-buying of products with industrial applications and, to a lesser extent, networking
applications ahead of the Companys announced March 2004 sales price increases;
    
    Increased project activity in Asia requiring products with industrial and communications applications;
    
    Increased distributor restocking activity in Asia for products with communications applications;
    
    Increased project activity in North America requiring products with entertainment/OEM applications; and
    
    Increased distributor restocking activity in North America for products with industrial applications. Factors partially mitigating the net increased sales volume are listed below:  
    
    The Companys decision to cease during the second quarter of 2003 the production of certain products
with industrial and entertainment/OEM applications in Europe and production of certain products with
communications applications in Australia; and
    
    Reduced stocking orders from distribution customers in Asia for products with networking applications
resulting from a decline in market share due to increased competition from local manufacturers. The impact of increased product pricing contributed 0.3 percentage points of
revenue increase during the first quarter of 2004. This price improvement
resulted primarily from the impact of sales price increases implemented by the
Companys North America operations on certain products with industrial
applications early in the first quarter of 2004 in response to increasing
copper costs. The Companys North America operations also implemented sales
price increases on products with communications, networking and
entertainment/OEM applications at the same time, but the positive impact that
these increases had on the revenue comparison was not sufficient to overcome
the year-over-year sales price erosion experienced on products with these
applications by the Companys Europe operations. The Companys North America
and Asia/Pacific operations implemented additional sales prices increases
across all product lines in March 2004 in response to further copper cost
escalation and announced April 2004 increases in
Teflon® FEP costs. The impact
of these additional sales price increases on revenues generated during the
three months ended March 31, 2004 was minimal. The Company implemented sales
price increases across all product lines in Europe on May 1, 2004 in response
to copper cost escalation and the increasing costs of other raw materials. Revenues generated on sales of product to customers in the United States,
representing 53.8% of the Companys total revenues generated during the three
months ended March 31, 2004, increased by 24.0% compared with revenues
generated during the same period in 2003. This increase resulted primarily from
improvement in general economic conditions in the United States, increased
project activity requiring products with entertainment/OEM applications,
increased distributor restocking activity for products with industrial
applications and the impact of sales price increases implemented in January
2004 and March 2004. Revenues generated on sales of product to customers in Canada represented 7.4%
of the Companys total revenues for the quarter ended March 31, 2004. Canadian
revenues for the first quarter of 2004 decreased by 16.1% compared with
revenues for the first quarter of 2003. Absent the impact of favorable currency
translation, revenues generated for the first quarter of 2004 decreased by
26.6% compared with revenues generated for the same period in 2003. This
decrease resulted primarily from lower sales volume due to the Companys
decision not to reduce sales prices on certain of its lower-margin product
offerings to meet the prices offered by its competitors and a decrease in
demand for certain CATV coaxial products. -23-




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##### Table of Contents



Revenues generated on sales of product to customers in the United Kingdom,
representing 14.6% of the Companys total revenues generated during the first
quarter of 2004, increased by 26.7% compared with revenues generated during the
same period in 2003. Absent the impact of favorable currency translation,
revenues generated for the first quarter of 2004 increased by 12.7% compared
with revenues generated for the same period in 2003. This increase resulted
primarily from increased unit purchasing of products with communications
applications by a large telecommunications customer in the United Kingdom
during the final quarter of its annual capital spending cycle. Revenues generated on sales of product to customers in Continental Europe
represented 14.4% of the Companys total revenues for the quarter ended March
30, 2004. Continental European revenues generated during the first quarter of
2004 decreased by 19.2% compared with revenues generated during the same period
in 2003. Absent the impact that favorable currency translation had on the
revenue comparison, Continental European revenues generated during the first
quarter of 2004 decreased by 24.3% compared with revenues generated during the
same period of 2003. Absent the impact of the Companys decision to cease
production of certain products with industrial and entertainment/OEM
applications in the second quarter of 2003, Continental European revenues
generated during the first quarter of 2004 decreased by 12.7% compared with
revenues generated during the same period in 2003. This decrease resulted
primarily from unfavorable general economic conditions in Europe and increased
competition from Asian manufacturers. Revenues generated on sales of product to customers in the rest of the world,
representing 9.8% of the Companys total revenues generated during the three
months ended March 31, 2004, decreased by 6.8% from the same period in 2003.
The decrease represented lower demand in the Latin America, Asia/Pacific and
Africa/Middle East markets partially offset by favorable currency translation. Continuing Operations Consolidated Costs, Expenses and Earnings The following table sets forth information comparing the components of earnings
for the three-month periods ended March 31, 2004 and 2003. PercentIncreaseThree Months Ended March 31,
    
    
    
    
    
    
    
    
    
    2004 Compared(in thousands, except % data)
    
    2004
    
    2003
    
    With 2003Gross profit
    
    $
    32,283
    
    
    $
    28,890
    
    
    
    11.7
    %As a percent of revenues
    
    
    19.0
    %
    
    
    18.8
    %Operating earnings
    
    $
    7,054
    
    
    $
    5,393
    
    
    
    30.8
    %As a percent of revenues
    
    
    4.1
    %
    
    
    3.5
    %Income before taxes
    
    $
    3,888
    
    
    $
    2,143
    
    
    
    81.4
    %As a percent of revenues
    
    
    2.3
    %
    
    
    1.4
    %Net income from continuing operations
    
    $
    2,644
    
    
    $
    1,236
    
    
    
    113.9
    %As a percent of revenues
    
    
    1.6
    %
    
    
    0.8
    %
 -24-




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##### Table of Contents



Gross profit increased 11.7% to $32.3 million in the three months ended March
31, 2004 from $28.9 million in the three months ended March 31, 2003 due
primarily to higher sales volume, a net increase in product sales prices, and
the favorable impact of currency translation on gross profit. Also contributing
to the favorable gross profit comparison were the current-quarter impact of
material, labor and overhead cost reduction initiatives. These positive factors
were partially offset by higher product costs resulting from increasing
purchase prices for copper and commodities derived from both petroleum and
natural gas, the impact of production outsourcing in Europe, and the impact of
production capacity rationalization in Europe during the fourth quarter of 2003
that resulted in lower output, higher scrap and increased maintenance costs in
the first quarter of 2004. Gross profit as a percent of revenues increased by
0.2 percentage points from the prior year due to the previously mentioned items
and the Companys favorable leveraging of fixed costs over a higher revenue
base. Operating earnings increased 30.8% to $7.1 million for the three months ended
March 31, 2004 from $5.4 million for the three months ended March 31, 2003 due
primarily to higher gross profit. Partially offsetting the positive operating
earnings comparison was an increase in selling, general and administrative
expenses to $25.2 million in the first quarter of 2004 from $23.5 million for
the first quarter of 2003 due primarily to the unfavorable impact of currency
translation on international expenses, severance and other benefits costs of
$0.6 million recognized in the current quarter related to personnel reductions
within the Electronics segment, increased incentive compensation costs and
increased professional services costs. Selling, general and administrative
expenses as a percentage of revenues decreased to 14.8% in the first quarter of
2004 from 15.3% in the first quarter of 2003. Operating earnings as a percent
of revenues increased by 0.6 percentage points from the prior year due to the
previously mentioned items and the Companys favorable leveraging of fixed
costs over a higher revenue base. Income before taxes increased 81.4% to $3.9 million in the three months ended
March 31, 2004 from $2.1 million in the three months ended March 31, 2003 due
to higher operating earnings and lower net interest expense. Net interest
expense decreased 2.6% to $3.2 million in the first quarter of 2004 from $3.3
million in the first quarter of 2003 due to higher interest income earned on
cash equivalents. Interest income earned on cash equivalents was $0.2 million
in the first quarter of 2004 compared to $0.1 million in the first quarter of
2003. Average debt outstanding was $200.0 million during both the first quarters of
2004 and 2003. The Companys average interest rate was 6.90% in the first
quarter of 2004 and 6.87% in the first quarter of 2003. The Companys effective annual tax rate was 32.0% in both the quarter ended
March 31, 2004 and the quarter ended March 31, 2003. Net income from continuing operations increased 113.9% to $2.6 million in the
three months ended March 31, 2004 from $1.2 million in the three months ended
March 31, 2003 due mainly to higher income before taxes partially offset by
higher income tax expense. -25-




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##### Table of Contents



Electronics Segment Revenues generated from sales to external customers increased 8.4% to $148.6
million for the quarter ended March 31, 2004 from $137.0 million for the
quarter ended March 31, 2003 due to favorable currency translation on
international revenues, increased sales volume and increased selling prices.
Favorable foreign currency translation on international revenues contributed
4.7 percentage points of revenue increase. Increased unit sales generated
during the three months ended March 31, 2004 contributed 3.5 percentage points
of revenue increase. The segment experienced volume increases in its sales of
products with communications, networking and industrial applications. Higher
unit sales of products with communications, networking and industrial
applications contributed 2.5, 2.3 and 1.3 percentage points of revenue
increase, respectively. Positive factors contributing to the volume increase
and negative factors partially mitigating the volume increase are listed under
Consolidated Revenueson Page 22 of this Quarterly Report on Form 10-Q. Each of
the factors listed, with the exception of increased unit purchasing by a large
telecommunications customer in the United Kingdom, applies to the Electronics
segment. These volume increases were partially offset by a volume decrease in
sales of products with entertainment/OEM applications. Lower unit sales of
products with entertainment/OEM applications offset the gross revenue increase
by 2.6 percentage points. The impact of increased product pricing contributed
0.2 percentage points of revenue increase during the first quarter of 2004.
This price improvement resulted primarily from the impact of sales price
increases implemented by the segments North America operations on certain
products with industrial applications early in the first quarter of 2004 in
response to increasing copper costs. The segments North America operations
also implemented sales price increases on products with communications,
networking and entertainment/OEM applications at the same time, but the
positive impact that these increases had on the revenue comparison was not
sufficient to overcome the year-over-year sales price erosion experienced on
products with these applications by the segments Europe operations. The
segments North America and Asia/Pacific operations implemented additional
sales prices increases across all product lines in March 2004 in response to
further copper cost escalation and announced April 2004
increases in Teflon®
FEP costs. The impact of these additional sales price increases on revenues
generated during the three months ended March 31, 2004 was minimal. Operating earnings increased 49.0% to $10.4 million for the quarter ended March
31, 2004 from $7.0 million for the quarter ended March 31, 2003 due mainly to
higher sales volumes, a net increase in product sales prices and the
current-quarter impact of manufacturing, selling, general and administrative
cost reduction initiatives. Also contributing to the favorable operating
earnings comparison was $1.1 million in unabsorbed production costs recognized
during the first quarter of 2003 at the Companys manufacturing facility in Ft.
Mill, South Carolina, which was transferred from this segment to the
Communications segment effective July 1, 2003. These positive factors were
partially offset by higher product costs resulting from increasing purchase
prices for copper and commodities derived from both petroleum and natural gas,
the impact of production outsourcing in Europe, the impact of production
capacity rationalization in Europe discussed above, the unfavorable impact of
currency translation on international operating losses in Europe, Asia and
Canada, and severance and other benefits costs of $0.6 million recognized in
the current quarter related to personnel reductions within the segment. As a
percent of revenues from external customers, operating earnings increased to
7.0% in the first quarter of 2004 from 5.1% in the first quarter of 2003 due to
the previously mentioned items and the segments favorable leveraging of fixed
costs over a higher revenue base. Communications Segment Due to the pending sale of assets belonging to the North American operations of
the Companys Communications segment during the second quarter of 2004, these
operations are accounted for as discontinued operations in accordance with SFAS
No. 144. Therefore, the European operations, with a manufacturing facility in
Manchester, United Kingdom, are accounted for as the only continuing operations
of the Companys Communications segment in this Quarterly Report on Form 10-Q.
All revenues, costs, income and expenses generated or incurred by the European
operations are translated to United States dollars from British pounds. -26-




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Revenues generated on sales to external customers increased 32.3% to $21.5
million for the quarter ended March 31, 2004 from $16.3 million for the quarter
ended March 31, 2003. The revenue increase was due primarily to increased sales
volume, favorable currency translation on revenues and increased selling
prices. Increased unit sales generated during the three months ended March 31,
2004 contributed 17.0 percentage points of revenue increase. This increase
resulted primarily from increased unit purchasing of products with
communications applications by the segments largest customer during the final
quarter of that customers annual capital spending cycle. Favorable foreign
currency translation on revenues contributed 14.1 percentage points of revenue
increase. The impact of increased product pricing, initiated in response to
recent copper cost escalation, contributed 1.2 percentage points of revenue
increase during the first quarter of 2004. Operating earnings decreased 16.7% to $1.0 million for the quarter ended March
31, 2004 from $1.2 million for the quarter ended March 31, 2003 due primarily
to the impact of production outsourcing and higher product costs resulting from
escalating purchase prices for copper and commodities derived from both
petroleum and natural gas. The negative impact that these factors had on the
operating earnings comparison was partially offset by higher sales volumes, a
net increase in product sales prices, the favorable impact of currency
translation on operating earnings and the current-quarter impact of
manufacturing, selling, general and administrative cost reduction initiatives.
Operating earnings as a percent of revenues from external customers decreased
to 4.8% in the quarter ended March 31, 2004 from 7.6% for the quarter ended
March 31, 2003 due to the previously mentioned items. Absent $0.5 million in
nonrecurring inventory-related gains, operating earnings as a percent of
revenues from external customers was 4.3% for the quarter ended March 31, 2003. Discontinued Operations Due to the pending sale of assets belonging to the North American operations of
the Companys Communications segment during the second quarter of 2004, these
operations are accounted for as discontinued operations in accordance with SFAS
No. 144. Net loss from discontinued operations for the three months ended March 31, 2004
includes $45.2 million of revenues and $2.3 million of loss before income tax
benefits related to the North American operations of the Companys
Communications segment. Net loss from discontinued operations for the three
months ended March 31, 2003 includes $43.0 million of revenues and $5.5 million
of loss before income tax benefits related to the North American operations of
the Companys Communications segment. Financial Condition Liquidity and Capital Resources The Companys sources of cash liquidity included cash and cash equivalents,
cash from operations and amounts available under credit facilities. Generally,
the Companys primary source of cash has been from business operations. Cash
sourced from credit facilities and other borrowing arrangements has
historically been used to fund business acquisitions. The Company believes that
these sources are sufficient to fund the current requirements of working
capital, to make scheduled pension contributions for the Companys retirement
plans, to fund scheduled debt maturity payments, to fund quarterly dividend
payments and to support its short-term and long-term operating strategies.
Planned capital expenditures for 2004 are approximately $13.7 million, of which
approximately $9.8 million relates to capacity maintenance and enhancement. The
Company has the ability to revise and reschedule the anticipated capital
expenditure program should the Companys financial position require it. Any materially adverse reaction to customer demand, competitive market forces,
uncertainties related to the effect of competitive products and pricing,
customer acceptance of the Companys product mix or economic conditions
worldwide could affect the ability of the Company to continue to fund its needs
from business operations. -27-




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##### Table of Contents



The following table summarizes the Companys cash flows from operating,
investing and financing activities for the three-month periods ended March 31,
2004 and 2003. Summarized Cash Flow Statements Three Months Ended March
31,
    
    2004
    
    2003(in thousands)Net cash provided by/(used for)Operating activities
    
    $
    (8,356
    )
    
    $
    16,718Investing activities
    
    
    (1,647
    )
    
    
    (4,147
    )Financing activities
    
    
    (1,522
    )
    
    
    (1,262
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (85
    )
    
    
    183Increase/(decrease) in cash and cash equivalents
    
    $
    (11,610
    )
    
    $
    11,492
 Net Cash Provided by Operating Activities Three Months Ended March
31,
    
    2004
    
    2003(in thousands)Net income/(loss)
    
    $
    1,148
    
    
    $
    (2,298
    )Depreciation and amortization
    
    
    6,466
    
    
    
    9,142Deferred income tax benefit
    
    
    (34
    )
    
    
    Other non-cash operating expenses
    
    
    3,174
    
    
    
    1,392Decrease/(increase) in operating assets and liabilities, net
    
    
    (19,110
    )
    
    
    8,482Net cash provided by/(used for) operating activities
    
    $
    (8,356
    )
    
    $
    16,718
 Net cash used for operating activities in the first three months of 2004
totaled $8.4 million and included $3.2 million of other non-cash operating
expenses and a $19.1 million net increase in operating assets and liabilities.
Other non-cash operating expenses consisted of certain retirement savings plan
contributions funded with common stock held in treasury rather than with cash,
employee stock purchase plan settlement charges, stock compensation, and
amortization of unearned deferred compensation on restricted shares granted to
certain of the Companys key employees. The net increase in operating assets
and liabilities resulted primarily from increased receivables, increased
inventories and increased other net operating assets and liabilities partially
offset by increased accounts payable and accrued liabilities and decreased
current and deferred income tax assets. Net cash provided by operating activities in the first three months of 2003
totaled $16.7 million and included $1.4 million of non-cash operating expenses
and an $8.5 million net decrease in operating assets and liabilities. Other
non-cash operating assets consisted of certain retirement savings plan
contributions funded with common stock held in treasury rather than with cash,
employee stock purchase plan settlement charges, amortization of unearned
deferred compensation on restricted shares granted to certain of the Companys
key employees, and immaterial asset impairment charges. This net decrease in
operating assets and liabilities resulted from decreased receivables, decreased
inventories, decreased current and deferred tax assets and decreased other net
operating assets and liabilities partially offset by decreased accounts payable
and accrued liabilities. Net Cash Used in Investing Activities Three Months Ended March 31,(in thousands)
    
    2004
    
    2003Capital expenditures
    
    $
    (1,899
    )
    
    $
    (4,202
    )Proceeds from disposal of long-lived assets
    
    
    252
    
    
    
    55Net cash used in investing activities
    
    $
    (1,647
    )
    
    $
    (4,147
    )
 -28-




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##### Table of Contents



Capital Expenditures Three Months Ended March
31,
    
    2004
    
    2003(in thousands)Capacity modernization and enhancement
    
    $
    1,423
    
    
    $
    3,489Capacity expansion
    
    
    106
    
    
    
    76Other
    
    
    370
    
    
    
    637$
    1,899
    
    
    $
    4,202
 Capital expenditures during the three months ended March 31, 2004 and 2003
represented 1.1% and 2.7%, respectively, of revenues for the same periods.
Investment during both the first three months of 2004 and 2003 was utilized
principally for maintaining and enhancing existing production capabilities. Net Cash Used in Financing Activities Three Months Ended March
31,
    
    2004
    
    2003(in thousands)Proceeds from the exercise of stock options
    
    
    43
    
    
    
    Purchase of treasury stock
    
    
    (277
    )
    
    
    Cash dividends paid
    
    
    (1,288
    )
    
    
    (1,262
    )Net cash used in financing activities
    
    $
    (1,522
    )
    
    $
    (1,262
    )
 During the three months ended March 31, 2004, the Company purchased 13,464
shares of its own common stock at a price of $20.55 per share to satisfy tax
and social security withholding obligations of certain holders of restricted
stock that vested in February 2004. During the three-month periods ended March 31, 2004 and 2003, dividends of
$0.05 per share were paid to stockholders. During the quarter ended March 31, 2004, there were no material changes outside
the ordinary course of business to the Companys contractual obligations
presented in Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations, of the Annual Report on Form 10-K for the
period ended December 31, 2003. With regard to the North American operations of the Communications segment
recognized as discontinued operations, net cash used for operating activities
during the year ended December 31, 2003 and the three months ended March 31,
2004 was $5.1 million and less than $0.1 million, respectively. -29-




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##### Table of Contents



Working Capital The following table summarizes the Companys working capital position at March
31, 2004 and December 31, 2003. March 31,
    
    December 31,(in thousands, except current ratio)
    
    2004
    
    2003Current assetsCash and cash equivalents
    
    $
    83,345
    
    
    $
    94,955Receivables
    
    
    97,981
    
    
    
    83,242Inventories
    
    
    82,240
    
    
    
    80,958Income taxes receivable
    
    
    1,868
    
    
    
    1,770Deferred income taxes
    
    
    11,344
    
    
    
    11,070Other current assets
    
    
    5,642
    
    
    
    6,218Current assets of discontinued operations
    
    
    117,487
    
    
    
    106,178Total current assets
    
    $
    399,907
    
    
    $
    384,391Total current assets less cash and cash equivalents
    
    $
    316,562
    
    
    $
    289,436Current liabilitiesAccounts payable and accrued liabilities
    
    $
    92,319
    
    
    $
    89,179Current maturities of long-term debt
    
    
    64,996
    
    
    
    65,951Current liabilities of discontinued operations
    
    
    31,435
    
    
    
    28,003Total current liabilities
    
    $
    188,750
    
    
    $
    183,133Working capital (1)
    
    $
    127,812
    
    
    $
    106,303Current ratio(2)
    
    
    1.68
    
    
    
    1.58
 (1)     Total current assets less cash and cash equivalents and total current
liabilities (2)     Total current assets less cash and cash equivalents divided by total
current liabilities Current assets less cash and cash equivalents increased $27.1 million, or 9.4%,
from $289.4 million at December 31, 2003 to $316.6 million at March 31, 2004.
Receivables increased $14.7 million during the three months ended March 31,
2004 due primarily to increased sales late in the first quarter of 2004 and the
impact of currency translation on receivables denominated in currencies other
than the United States dollar. Inventories increased by $1.3 million during the
first quarter of 2004 due primarily to increased production necessary to
support higher sales levels and the impact of currency translation on
inventories denominated in currencies other than the United States dollar.
Current assets of discontinued operations increased $11.3 million during the
three months ended March 31, 2004 due primarily to (1) an inventory buildup of
$6.1 million during the first quarter of 2004 resulting from steady annual
production rates in excess of seasonally low first quarter sales and (2) a
receivables buildup of $4.2 million resulting from improved sales volume late
in the first quarter of 2004 and payment of 2003 sales incentive rebates to
certain customers during the current quarter. Current liabilities increased $5.6 million, or 3.1%, from $183.1 million at
December 31, 2003 to $188.7 million at March 31, 2004. Accounts payable and
accrued liabilities increased during the three months ended March 31, 2004 due
primarily to increased production late in the current quarter, higher costs on
copper and commodities derived from petroleum and natural gas and the impact of
currency translation on accounts payable and accrued liabilities denominated in
currencies other than the United States dollar partially offset by severance
payments totaling $1.8 million during the first quarter of 2004. In regard to
the severance payments, please refer to Note 8, Accrued Severance and Other
Related Benefits, to the Consolidated Financial Statements in this Quarterly
Report on Form 10-Q. Current maturities of long-term debt decreased $1.0
million during the quarter ended March 31, 2004, due to a downward adjustment
of fair value on the notional principal related to the Companys outstanding
interest rate swaps. Current liabilities of discontinued operations increased
$3.4 million due primarily to a buildup of accounts payable during the first
quarter of 2004 resulting from increased production late in the first quarter
of 2004 and higher costs on copper and commodities derived from petroleum and
natural gas. -30-




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##### Table of Contents



Long-lived Assets The following table summarizes the Company long-lived assets at March 31, 2004
and December 31, 2003. March 31,
    
    December 31,(in thousands)
    
    2004
    
    2003Property, plant and equipment
    
    $
    183,600
    
    
    $
    189,128Goodwill and other intangibles
    
    
    79,050
    
    
    
    79,463Other long-lived assets
    
    
    5,363
    
    
    
    6,008Long-lived assets of discontinued operations
    
    
    14,433
    
    
    
    14,565$
    282,466
    
    
    $
    289,164
 Long-lived assets decreased $6.7 million, or 2.3%, from $289.2 million at
December 31, 2003 to $282.5 million at March 31, 2004. Property, plant and equipment includes the acquisition cost less accumulated
depreciation of the Companys land and land improvements, buildings and
leasehold improvements and machinery and equipment. Property, plant and
equipment decreased $5.5 million during the first three months of 2004 due
mainly to depreciation. Goodwill and other intangibles includes goodwill, defined as the unamortized
difference between the aggregate purchase price of acquired businesses taken as
a whole and the fair market value of the identifiable net assets of those
acquired businesses. Included in other long-lived assets are unamortized prepaid service fees
associated with the Companys borrowing arrangements and long-lived pension
fund prepayments. Other long-lived assets decreased $0.6 million during the
first quarter of 2003 due to the transfer of prepaid service fees associated
with borrowing arrangements that mature within one year to current assets. Capital Structure March 31, 2003
    
    December 31, 2003(in thousands, except % data)
    
    Amount
    
    Percent
    
    Amount
    
    PercentCurrent maturities of long-term debt
    
    $
    64,996
    
    
    
    13.6
    %
    
    $
    65,951
    
    
    
    13.9
    %Long-term debt
    
    
    136,000
    
    
    
    28.6
    %
    
    
    136,000
    
    
    
    28.5
    %Total debt
    
    
    200,996
    
    
    
    42.2
    %
    
    
    201,951
    
    
    
    42.4
    %Stockholders equity
    
    
    275,107
    
    
    
    57.8
    %
    
    
    274,410
    
    
    
    57.6
    %$
    476,103
    
    
    
    100.0
    %
    
    $
    476,361
    
    
    
    100.0
    %
 The Companys capital structure consists primarily of current maturities of
long-term debt, long-term debt and stockholders equity. The capital structure
decreased $0.3 million during the first quarter of 2004 due to a $1.0 million
downward adjustment of fair value on the notional principal related to the
Companys outstanding interest rate swaps partially offset by a $0.7 million
increase in stockholders equity. -31-




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##### Table of Contents



The Company had privately-placed debt of $200.0 million outstanding at March
31, 2004. Details regarding maturities and interest rates are shown below. Principal
    
    Maturity
    
    Effective(in thousands, except % data)
    
    Balance
    
    Date
    
    Interest RateSenior Notes, Series
1997-A (1)
    
    $
    75,000
    
    
    
    08/11/2009
    
    
    
    6.92
    %Senior Notes, Series
1999-A (2)
    
    
    64,000
    (2)
    
    
    09/01/2004
    
    
    
    7.60
    %Senior Notes, Series 1999-B
    
    
    44,000
    
    
    
    09/01/2006
    
    
    
    7.75
    %Senior Notes, Series 1999-C
    
    
    17,000
    
    
    
    09/01/2009
    
    
    
    8.06
    %
  (1)
    
    The Senior Notes, Series 1997-A include an amortizing maturity feature.
The Company is required to repay $15.0 million in principal per annum
beginning August 11, 2005.  (2)
    
    The Senior Notes, Series 1999-A, mature within one year of the balance
sheet date. Accordingly, they have been reclassified as current maturities
of long-term debt in the financial records as of September 1,
2004. These
notes also serve as the notional principal on certain outstanding interest
rate swap agreements. Therefore, they were recorded in the financial
records in accordance with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activity, at a fair market value as of March 31,
2004 of $65.0 million. The agreements for these private placements contain affirmative and negative
covenants including maintenance of minimum net worth and maintenance of a
maximum ratio of debt to total capitalization. The Company was in compliance
with these covenants at March 31, 2004. The Company entered into a credit agreement with a group of six banks on
October 9, 2003 (Credit Agreement). The Credit Agreement provides for a
secured, variable-rate and revolving credit facility not to exceed $75.0
million expiring in June 2006. In general, the Companys assets in the United
States, other than real property, secure any borrowing under the Credit
Agreement. The amount of any such borrowing is subject to a borrowing base
comprised of the Companys receivables and inventories located in the United
States. A fixed charge coverage ratio covenant becomes applicable if the
Companys excess borrowing availability falls below $25.0 million. There were
no outstanding borrowings at March 31, 2004 under the Credit Agreement.
Although the Company had $70.1 million in borrowing capacity available at March
31, 2004, the Company and CDT have each agreed in the merger agreement
discussed in Note 14, Pending Business Combination, to the Consolidated
Financial Statements in this Quarterly Report on Form 10-Q that neither party
will borrow more than $25.0 million without the consent of the other party
prior to the effective date of the merger. At March 31, 2004, the Company had unsecured, uncommitted arrangements with
three banks under which it could borrow up to $6.2 million at prevailing
interest rates. There were no outstanding borrowings under these arrangements
at March 31, 2004. The Company manages its debt portfolio by using interest rate swap agreements
to achieve an overall desired position of fixed and floating rates. At March
31, 2004, the Company was party to interest rate swap agreements relating to
7.60% medium-term notes that mature in 2004. The swaps convert a notional
amount of $64.0 million from fixed rates to floating rates and mature in 2004.
These arrangements have been designated and qualify as fair value hedges of the
associated medium-term notes in accordance with SFAS No. 133. Based on current
interest rates for similar transactions, the fair value of the Companys
interest rate swap agreements at March 31, 2004 was $1.0 million. Credit and
market risk exposures on these agreements are limited to the net interest
differentials. Net interest differentials earned from the interest rate swaps
of $0.5 million pretax, or $0.01 per diluted share were recorded as reductions
to interest expense for the three months ended March 31, 2004. Net interest
differentials earned from the interest rate swaps reduced the Companys average
interest rate on long-term debt by 0.99 percentage points for the three months
ended March 31, 2004. The Company is exposed to credit loss in the event of
nonperformance by counterparties on the agreements, but does not anticipate
nonperformance by any of the counterparties. -32-




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##### Table of Contents



Borrowings have the following scheduled maturities. Payments Due by PeriodLess than
    
    1-2
    
    3-4
    
    AfterMarch 31, 2004
    
    Total
    
    1 year
    
    years
    
    years
    
    4 years(in thousands)Long-term debt (1)
    
    $
    200,000
    
    
    $
    64,000
    
    
    $
    15,000
    
    
    $
    74,000
    
    
    $
    47,000
  (1)
    
    The Senior Notes, Series 1999-A, mature within one year of the balance
sheet date. Accordingly, they have been reclassified as current maturities
of long-term debt in the financial records as of September 1, 2003. These
notes also serve as the notional principal on certain outstanding interest
rate swap agreements. Therefore, they were recorded in the financial
records in accordance with SFAS No. 133 at a fair market value as of
March 31, 2004 of $65.0 million. Other Commercial Commitments Amount of Commitment Expiration Per PeriodLess than
    
    1-3
    
    4-5
    
    AfterMarch 31, 2004
    
    Total
    
    1 year
    
    years
    
    years
    
    5 years(in thousands)Lines of credit (1)
    
    $
    70,148
    
    
    $
    70,148
    
    
    $
    
    
    
    $
    
    
    
    $
    Standby letters of credit
    
    
    3,966
    
    
    
    3,966
    
    
    
    
    
    
    
    
    
    
    
    Guarantees
    
    
    512
    
    
    
    512
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    74,626
    
    
    $
    74,626
    
    
    $
    
    
    
    $
    
    
    
    $
    
  (1)
    
    The Company entered into a credit agreement with a group of six banks on
October 9, 2003 (Credit Agreement). The Credit Agreement provides for a
secured, variable-rate and revolving credit facility not to exceed $75.0
million expiring in June 2006. The amount of any borrowing under the
Credit Agreement is subject to a borrowing base comprised of the Companys
receivables and inventories located in the United States. Although the
Companys borrowing capacity under the Credit Agreement as of March 31,
2004 was $70.1 million, the Company and CDT have each agreed in the merger
agreement discussed in Note 14, Pending Business Combination, to the
Consolidated Financial Statements in this Quarterly Report on Form 10-Q
that neither party will borrow more than $25.0 million without the consent
of the other party prior to the effective date of the merger. Stockholders equity increased by $0.7 million, or less than 0.1%, during the
first quarter of 2004 due primarily to net income for the quarter ended March
31, 2004 of $1.1 million, a $1.9 million reduction of common stock held in
treasury and a $0.6 million increase in additional paid-in capital both as a
result of stock compensation plans settlement activity and employer
contributions to the Companys retirement savings plan. These positive
factors were partially offset by dividends of $1.2 million, an increase of $1.3
million in unearned deferred compensation due to restricted shares awarded in
the first quarter of 2004 and a $0.4 million reduction of accumulated other
comprehensive income resulting from the unfavorable impact of currency exchange
rates on financial statement translation during the first quarter of 2004. -33-




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##### Table of Contents



Off-Balance Sheet Arrangements The Company was not a party to any of the following types of off-balance sheet
arrangements at March 31, 2004:  
    
    Guarantee contracts or indemnification agreements that contingently
require the Company to make payments to the guaranteed or indemnified
party based on changes in an underlying asset, liability or equity
security of the guaranteed or indemnified party;
    
    Guarantee contracts that contingently require the Company to make
payments to the guaranteed party based on another entitys failure to
perform under an obligating agreement;
    
    Indirect guarantees under agreements that contingently require the
Company to transfer funds to the guaranteed party upon the occurrence
of specified events under conditions whereby the funds become legally
available to creditors of the guaranteed party and those creditors may
enforce the guaranteed partys claims against the Company under the
agreement;
    
    Retained or contingent interests in assets transferred to an
unconsolidated entity or similar arrangements that serve as credit,
liquidity or market risk support to that entity for such assets;
    
    Derivative instruments that are indexed to the Companys common or
preferred stock and classified as stockholders equity under
accounting principles generally accepted in the United States; or
    
    Material variable interests held by the Company in unconsolidated
entities that provide financing, liquidity, market risk or credit risk
support to the Company, or engage in leasing, hedging or research and
development services with the Company. Critical Accounting Policies The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires the
Company to make judgments, assumptions and estimates that affect the amounts
reported in its Consolidated Financial Statements and accompanying notes. The
Company considers the accounting policies described in Critical Accounting
Policieswithin Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations, of its Annual Report on Form 10-K for the
year ended December 31, 2003 to be its most critical accounting policies. An
accounting policy is deemed to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly
uncertain at the time the estimate is made, and if different estimates that
reasonably could have been used, or changes in the accounting estimates that
are reasonably likely to occur periodically, could materially impact the
Consolidated Financial Statements. The Company bases its estimates on
historical experience or various assumptions that are believed to be reasonable
under the circumstances, and the results form the basis for making judgments
about the reported values of assets, liabilities, revenues and expenses. The
Company believes these judgments have been materially accurate in the past and
the basis for these judgments should not change significantly in the future.
The Companys senior management has discussed the development, selection and
disclosure of these estimates with the Audit Committee of the Companys Board
of Directors. Actual results may differ materially from these estimates under
different assumptions or conditions. During the three months ended March 31, 2004:  
    
    The Company did not change any of its existing critical accounting
policies and did not adopt any new critical accounting policies;
    
    No existing accounting policies became critical accounting policies
due to an increase in the materiality of associated transactions or
changes in the circumstances to which associated judgments and
estimates relate; and
    
    There were no significant changes in the manner in which critical
accounting policies were applied or in which related judgments and
estimates were developed. -34-




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##### Table of Contents



Outlook The comments in the following paragraphs exclude the impact of the possible
merger between the Company and CDT announced on February 5, 2004 (See Note 14,
Pending Business Combination, to the Consolidated Financial Statements included
in this Quarterly Report on Form 10-Q). Based on current orders, a steady, moderate improvement in volume is continuing
across many of the Companys product markets worldwide. In addition, the
full-quarter impact of the price increases already enacted in 2004 should
continue to push consolidated revenues higher and the impact of company-wide
cost-saving initiatives taken during 2002 and 2003, including plant closures
and personnel reductions, should result in improved profitability in 2004.
Having met its goals with regard to inventory reduction in 2003, the Company
also expects to be producing at or near the level of demand in 2004, thus
further helping operating margins. However, if customer pre-buying ahead of the
Companys announced sales price increases in March 2004 created some stockpiles
in customers hands, the improvement in market demand might not be fully
reflected in the Companys second quarter 2004 revenues. That said, management
believes the Companys continuing operations will generate revenues at least
five percent higher in the second quarter of 2004 than in the first quarter of
the same year and that earnings per share will improve in the second quarter of
2004, perhaps to as much as twice the level achieved in the first quarter of
the same year. Costs for such raw materials
as copper, Teflon® FEP and commodities derived
from petroleum and natural gas have recently increased substantially due to
worldwide demand, temporary supply restrictions and the effect of a weaker
United States dollar in relation to other currencies. If these raw material
prices continue to rise, in the absence of additional sales price increases
implemented by the Company, the Companys profitability will be negatively
impacted in the remaining quarters of 2004. The Company implemented sales price increases across all product lines in
Europe on May 1, 2004 in response to copper cost escalation and increasing
costs of other raw materials. The Company is currently uncertain as to whether
these increased prices will be accepted in the European market. Should
competitors not implement similar sales price increases in Europe, the
Companys European sales volume and gross margins could be adversely affected. On March 18, 2004, the Company announced a definitive agreement to sell assets
belonging to the North American operations of its Communications segment to
Superior. Superior will buy inventory and certain equipment, and will take over
the Companys supply agreements with major telecommunications customers, for an
amount not to exceed $95.0 million. The companies expect that the transaction
will close during the second quarter of 2004. At the time the transaction is
closed, the Company will receive approximately $85.0 million in
cash. The remaining
payment of up to $10.0 million is contingent upon Superiors retention of the
economic value derived from the assumed supply agreements. The Company does not
anticipate that it will recognize a significant gain or loss on the disposal of
this inventory and equipment. After the sale takes place, the Company will
close its communications cable plant in Phoenix, Arizona. The Company
anticipates incurring severance and other related benefits charges in the range
of $6.0-$7.0 million that will have a negative effect on both cash flow and
results of discontinued operations during the remainder of 2004. The Company recognized $0.6 million of severance and other benefits costs in
the first quarter of 2004 related to personnel reductions within its
Electronics segment. These costs had a negative effect on operating results in
the first quarter of 2004 and will have a negative effect on cash flow in later
quarters of 2004. The Company anticipates it will recognize additional costs in
the later quarters of 2004 associated with on-going restructuring activities. -35-




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The Company anticipates recognizing increased expenses for its pension plans
during 2004. The Company anticipates expenses for these plans of $7.9 million
during 2004. The increase in expense results primarily from the recognition of
investment losses deferred from prior years into the market-related value of
plan assets. The market-related value of plan assets is the base to which the
expected rate of return is applied to generate the expected return on plan
assets component of the net periodic pension cost. Although there were deferred
investment losses totaling $44.3 million at December 31, 2003, the amortization
of those losses is not anticipated to be a material component of the net
periodic pension costs for these plans. The Company anticipates paying off its Series 1999-A Medium-Term Notes in the
amount of $64.0 million during 2004. The Company also anticipates funding $12.5
million during 2004 ($1.3 million of which the Company had contributed as of
March 31, 2004) to its defined benefit pension plans and its other
postretirement plan and funding $2.2 million in severance accruals recorded at
March 31, 2004 related to both the manufacturing facility closure in Germany
and personnel reductions in the Electronics segment. These transactions will
have a significant impact on the Companys cash flow in 2004; however, the
Company anticipates it will have sufficient funds to satisfy these cash
requirements. The Company estimates that it has currently incurred and deferred, or is
committed to incur, professional services costs related to its potential merger
with CDT totaling $2.5$3.0 million. Committed costs in the range of $1.2$1.7
million remain unpaid at March 31, 2004. These unpaid costs will have a
negative effect on cash flow in the remaining quarters of 2004. Should the
merger not be consummated, both deferred costs and committed but unpaid costs
would be expensed and would negatively impact the Companys profitability for
2004. Forward-Looking Statements The statements set forth in this Quarterly Report on Form 10-Q other than
historical facts, including those noted in the Outlook section, are
forward-looking statements made in reliance upon the safe harbor of the Private
Securities Litigation Reform Act of 1995. As such, they are based on current
expectations, estimates, forecasts and projections about the industries in
which the Company operates, general economic conditions, and managements
beliefs and assumptions. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions, which are
difficult to predict. As a result, the Companys actual results may differ
materially from what is expected or forecasted in such forward-looking
statements. The Company undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events or otherwise,
and disclaims any obligation to do so. See Note 14, Pending Business Combination, to the Consolidated Financial
Statements included in this Quarterly Report on Form 10-Q for a brief synopsis
of the planned merger of the Company with CDT. There can be no assurance as to
the timing of the closing of the merger, or whether the merger will close at
all. Obtaining required regulatory approvals might delay consummation of the
merger. The consideration to be received by the Companys stockholders, as set
forth in the Agreement and Plan of Merger, is fixed despite potential changes
in stock prices. The officers and directors of the Company and CDT may have
interests in the merger that are different from the interests of stockholders
because of employment agreements, severance agreements and stock-based
compensation arrangements. The combined company will rely heavily on key
personnel, and there can be no assurance that the combined company will retain
such key personnel. Integration of the Company and CDT operations may be
difficult, and the expected synergies and cost savings might not be realized.
If the merger is not completed, the Companys business and stock price might be
negatively affected if customers, investors and others were to doubt the
Companys ability to compete effectively on its own. -36-




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The Companys actual results may differ materially from such forward-looking
statements for the following reasons: changing economic conditions in the North
America, Europe and Asia (and the impact such conditions may have on the
Companys sales); increasing price, product and service competition from local
and international competitors (including new entrants); the creditworthiness of
the Companys customers; the outcome of the Companys planned sale of certain
assets belonging to the North American operations of its Communications
segment; the Companys continued ability to introduce, manufacture and deploy
competitive new products and services on a timely, cost-effective basis; the
ability to successfully restructure the Companys operations; the ability to
transfer production to new or existing facilities; developments in technology;
the threat of displacement from competing technologies (including wireless and
fiber optic technologies); demand and acceptance of the Companys products by
customers and end users; changes in raw material costs (specifically, costs for
copper, Teflon® FEP and commodities derived from petroleum and natural gas) and
availability; changes in foreign currency exchange rates; the pricing of the
Companys products (including the Companys ability to adjust product pricing
in a timely manner in response to raw material cost volatility); the success of
implementing cost-saving programs and initiatives; reliance on large customers
(particularly, the reliance of the Electronics segment on sales to certain
large distributors and the reliance of the Communications segment on sales to a
large telecommunications customer in the United Kingdom); the threat of war and terrorist activities; general
industry and market conditions and growth rates; and other factors noted in the
Companys Annual Report on Form 10-K for 2003 and other Securities Exchange Act
of 1934 filings. 
 Item 3: Quantitative and Qualitative Disclosures About Market Risks Market risks relating to the Companys operations result primarily from
interest rates, foreign exchange rates, certain commodity prices and
concentrations of credit. The Company manages its exposure to these and other
market risks through regular operating and financing activities, and on a
limited basis, through the use of derivative financial instruments. The Company
intends to use such derivative financial instruments as risk management tools
and not for speculative investment purposes. Item 7A, Quantitative and
Qualitative Disclosures About Market Risks, of the Companys Annual Report on
Form 10-K for the year ended December 31, 2003 provides more information as to
the types of practices and instruments used to manage risk. There was no
material change in the Companys exposure to market risks since December 31,
2003. 
 Item 4: Disclosure Controls and Procedures As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Companys disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the Exchange Act)). Based on this
evaluation, the principal executive officer and principal financial officer
concluded that the Companys disclosure controls and procedures were effective
as of the end of the period covered by this report. There was no change in the Companys internal control over financial reporting
during the Companys most recently completed fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting. -37-




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PART II OTHER INFORMATION 
 Item 1. Legal Proceedings The Company is a party to various legal proceedings and administrative actions
that are incidental to its operations. These proceedings include personal
injury cases (about 203 of which the Company was aware at May 1, 2004) in which
the Company is one of many defendants, eight of which are scheduled to go to
trial in 2004. The relief sought in the cases generally seeks compensatory,
special and punitive damages. Electricians have filed a majority of these
cases, primarily in New Jersey and Pennsylvania. Typically, the claimant
alleges injury from alleged exposure to heat-resistant asbestos fiber, which
was usually encapsulated or embedded and lacquer-coated or covered by another
material. Exposure to the fiber would have occurred, if at all, while stripping
(cutting) the wire or cable that had such fiber. It is alleged by claimants
that exposure to the fiber may result in respiratory illness. Generally,
stripping was done to repair or to attach a connector to the wire or cable.
Alleged predecessors of the Company had a small number of products that
contained the fiber, but ceased production of such products more than fifteen
years ago. Through May 1, 2004, the Company had been dismissed in approximately
50 similar cases without any going to trial or any payment to the claimant;
only one involved a settlement, with the Company having paid $1,275 and two of
its insurers having paid the remainder. These cases were dismissed primarily
because the claimants could not show any injury, or could not show that injury
was caused from exposure to products of alleged predecessors of the Company.
The Company has insurance that it believes should cover a significant portion
of any defense, settlement or judgment costs borne by the Company in these
types of cases and, under an agreement with the Company, two insurance carriers
are paying 83% of the defense costs in these types of cases and defense costs
do not erode their policy limits. The Company vigorously defends these cases
and is unaware of any valid study or literature that proves that stripping (or
otherwise handling) wire and cable, which contains the fiber and which was
manufactured by any alleged predecessor of the Company, would cause any
illness. As a separate matter, liability for any such injury generally should
be allocated among all defendants in such cases in accordance with applicable
law. From 1996 through May 1, 2004, the total amount of litigation costs paid
by the Company for all cases of this nature was approximately $180,447. In the
opinion of the Companys management, the proceedings and actions in which the
Company is involved should not, individually or in the aggregate, have a
material adverse effect on the Companys results of operations or financial
condition. 
 Item 6: Exhibits and Reports on Form 8-K Exhibits Exhibit 10.1
    
    Asset Purchase Agreement by and among Superior Essex
Communications LLC as Purchaser and Belden
Communications Company and Belden (Canada) Inc. as
Seller dated as of March 18, 2004Exhibit 31.1
    
    Certificate of the Chief Executive Officer pursuant
to § 302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certificate of the Chief Financial Officer pursuant
to § 302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    Certificate of the Chief Executive Officer pursuant
to 18 U.S.C. § 1350, as adopted pursuant to § 906 of
the Sarbanes-Oxley Act of 2002.Exhibit 32.2
    
    Certificate of the Chief Financial Officer pursuant
to 18 U.S.C. § 1350, as adopted pursuant to § 906 of
the Sarbanes-Oxley Act of 2002.
 Reports on Form 8-K  On February 5, 2004, the Company furnished a Current Report on Form 8-K
relating to (1) the Companys execution of an Agreement and Plan of Merger
between the Company, Cable Design Technologies Corporation (CDT) and BC
Merger Corporation, (2) the joint announcement of the proposed merger by the
Company and CDT and (3) the announcement of the Companys financial results
for the three months ended December 31, 2003.On February 23, 2004, the Company furnished a Current Report on Form 8-K
relating to the execution of Amendment No. 1 to the Rights Agreement between
the Company and Mellon Investor Services LLC resulting from the proposed
merger between the Company and CDT. -38-




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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. BELDEN INC.Date: May 10, 2004
    
    By:
    
    /s/ C. Baker CunninghamC. Baker CunninghamChairman of the Board, Presidentand Chief Executive OfficerDate: May 10, 2004
    
    
    
    By: /s/ Richard K. ReeceRichard K. ReeceVice President, Financeand Chief Financial Officer
 -39-