[BELDEN LETTERHEAD]
August 30, 2006
Via EDGAR
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549-7010
Attention: Ms. Nudrat Salik
RE: BELDEN CDT INC.
FILE NO. 001-12561
FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2005,
FILED MARCH 16, 2006
Dear Ms. Salik:
We have included in this letter the responses of Belden CDT Inc. ("Belden",
"us", "we", or "our") to the comment letter of the Staff of the Division of
Corporation Finance (the "Staff") of the Securities and Exchange Commission (the
"Commission") dated August 14, 2006.
Set forth below are the Staff's comments, indicated in bold, together with the
responses of Belden. All references to page numbers in the document correspond
to pagination in the filing referenced above.
Form 10-K for the Fiscal Year Ended December 31, 2005
Notes to Financial Statements
Note 3: Belden CDT Merger, page 63
1. WE NOTE YOUR RESPONSE TO PRIOR COMMENT 7. IT IS UNCLEAR HOW YOU DETERMINED
THE APPROPRIATE AMORTIZATION PERIODS FOR YOUR INTANGIBLE ASSETS RELATED TO
CUSTOMER RELATIONS. WE REMIND YOU THAT PARAGRAPH 11 OF SFAS 142 STATES THAT THE
USEFUL LIFE OF AN INTANGIBLE ASSET TO AN ENTITY IS THE PERIOD OVER WHICH THE
ASSET IS EXPECTED TO CONTRIBUTE DIRECTLY OR INDIRECTLY TO YOUR FUTURE CASH
FLOWS. PLEASE HELP US UNDERSTAND HOW YOU ARRIVED AT THESE PERIODS BY PROVIDING
US WITH ADDITIONAL INFORMATION REGARDING THE WEST PENN AND THERMAX CUSTOMER
RELATIONS INTANGIBLE ASSETS. YOU STATE THAT YOU CONSIDERED WEST PENN'S HIGH
MARKET SHARE PERCENTAGES, THE COMPOSITION OF ITS CUSTOMER BASE, AND THE FACT
THAT WEST PENN HAS BEEN DOING BUSINESS WITH MANY OF ITS CUSTOMERS FOR DECADES
AND ESTIMATED THAT THIS CUSTOMER BUSINESS WOULD CONTRIBUTE DIRECTLY OR
INDIRECTLY TO THE CASH FLOW OF WEST PENN FOR ANOTHER 30 YEARS. PLEASE HELP US
UNDERSTAND HOW YOU DETERMINED THAT YOUR RELATIONSHIP WITH WEST PENN WOULD
CONTRIBUTE TO YOUR CASH FLOWS FOR 30 YEARS. IN A SIMILAR MANNER, PLEASE ADDRESS
HOW YOU DETERMINED THAT YOU EXPECT THERMAX TO CONTRIBUTE TO YOUR CASH FLOWS FOR
20 YEARS. PLEASE ALSO TELL US HOW MANY YEARS THESE TWO COMPANIES WERE CUSTOMERS
OF CDT PRIOR TO THE MERGER.
Securities and Exchange Commission
August 30, 2006
Page 2
It appears that our response to your prior comment 7 led you to believe that
West Penn and Thermax were customers of CDT prior to the merger and customers of
Belden after the merger. West Penn and Thermax were actually wholly owned
subsidiaries of CDT that were acquired in the 2004 merger.
For both West Penn and Thermax, we utilized a third party valuation firm to
assist us regarding valuations and amortization periods for the customer
relations intangible assets.
West Penn was first to market with many of its products, and as a result was
able to develop spec positions in the sound and security market. As a result,
West Penn became a leading wire and cable supplier to those market segments. At
the time it was acquired in the 2004 merger, West Penn derived approximately 80
percent of its annual sales from direct sales to system integrators as opposed
to wire and cable distributors. In the wire and cable industry, a company is
considered to hold a spec position for a particular product for a particular
application when system integrators specify wire and cable with electrical,
mechanical, and physical characteristics identical to those of the particular
company's wire and cable products. Because system integrators are reluctant to
change specifications, companies that have spec positions may benefit from a
high volume of repeat business. In addition, system integrators are constantly
in the market making buying decisions, whereas ultimate end users enter and
leave the market sporadically. We considered West Penn's high market share
percentages, the fact the West Penn held many spec positions in the niche
markets it served, and the fact that West Penn had been doing business with many
of its customers for decades and estimated that this customer business would
contribute directly or indirectly to our cash flows for another 30 years.
At the time it was acquired in the 2004 merger, Thermax had been in business for
more than 50 years and held various spec positions in the transportation and
military markets. Unlike West Penn's spec positions with system integrators,
Thermax held its spec positions on temperature-resistant wire and cable products
with original equipment manufacturers in the markets mentioned above. Original
equipment manufacturers have historically been more conscious of product cost
and delivery performance than system integrators and, therefore, more apt to
change specifications if not fully satisfied with the supplier relationship. We
estimated that the Thermax customer base would contribute directly or indirectly
to our cash flows for another 20 years.
Securities and Exchange Commission
August 30, 2006
Page 3
Contingently Convertible Notes, page 79
2. WE NOTE YOUR RESPONSE TO PRIOR COMMENT 11. PLEASE FURTHER CLARIFY HOW YOU
DETERMINED THAT THERE IS AN EXPLICIT LIMIT ON THE NUMBER OF SHARES TO BE
DELIVERED IN A SHARE SETTLEMENT. YOUR DISCLOSURE STATES THAT THE CONVERSION
PRICE IS SUBJECT TO ADJUSTMENT FOR DIVIDENDS AND OTHER EQUITY TRANSACTIONS.
PLEASE TELL US THE SPECIFIC EQUITY TRANSACTIONS THAT WOULD IMPACT THE CONVERSION
PRICE. PLEASE ALSO TELL US THE SPECIFIC TERMS INCLUDED IN THE NOTE AGREEMENT
RELATED TO THE CHANGE IN CONVERSION PRICE AS A RESULT OF DIVIDENDS AND OTHER
EQUITY TRANSACTIONS.
Under Section 11 of the note agreement, the number of shares to be delivered
upon conversion of our notes is limited to the face value of the notes ($110.0
million) divided by the conversion price.
The conversion price, number of shares to be delivered upon conversion, and the
number of authorized and unissued shares available for delivery upon conversion
was as follows on several key reporting dates:
July 15,
2004 December 31, December 31, June 25,
Merger Date 2004 2005 2006
----------- ------------ ------------ ---------
(In thousands, except conversion price)
Conversion price ................................. $18.069 $18.069 $17.859 $17.859
Number of shares to be delivered upon conversion . 6,088 6,088 6,159 6,159
Number of authorized and unissued shares available
for delivery upon conversion ................ 98,638 98,549 103,016 102,766
The conversion price which determines the number of shares to be delivered upon
conversion can change as a result of the equity transactions listed below;
however, all of these transactions are within our control. We would not initiate
any equity transaction that would result in our inability to deliver sufficient
shares of our common stock upon conversion.
Securities and Exchange Commission
August 30, 2006
Page 4
The note agreement for our $110 million, 4.0% convertible subordinated
debentures due 2023 includes the following equity transactions that would impact
the conversion price:
SECTION 11.06 ADJUSTMENT FOR CHANGE IN CAPITAL STOCK
If, after the Issue Date of the Securities, the Company:
(1) Pays a dividend or makes another distribution on the Common Stock payable
exclusively in shares of Common Stock;
(2) Subdivides the outstanding shares of Common Stock into a greater number of
shares;
(3) Combines the outstanding shares of Common Stock into a smaller number of
shares;
(4) Pays a dividend or makes a distribution on the Common Stock in shares of
its Capital Stock (other than Common Stock or rights, warrants or options
for its Capital Stock); or
(5) Issues by reclassification of the Common Stock any shares of its Capital
Stock (other than Common Stock or rights, warrants or options for its
Capital Stock);
Then the conversion privilege and the Conversion Price in effect immediately
prior to such action shall be adjusted so that the Holder of a Security
thereafter converted may receive the number of shares of Capital Stock of the
Company which such Holder would have owned immediately following such action if
such Holder had converted the Security immediately prior to such action.
The adjustment shall become effective immediately after the record date in the
case of a dividend or distribution and immediately after the effective date in
the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Security upon conversion of such Security
may receive shares of two or more classes of Capital Stock of the Company, the
Company shall determine the allocation of the adjusted Conversion Price between
or among such classes or series of Capital Stock. After such allocation, the
conversion privilege and the Conversion Price of each class of Capital Stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to the Common Stock.
Securities and Exchange Commission
August 30, 2006
Page 5
SECTION 11.07 ADJUSTMENT FOR RIGHTS ISSUE
If the Company distributes any rights or warrants to all holders of its Common
Stock entitling them to subscribe for or purchase shares of Common Stock for a
period expiring within 60 days after the record date for such distribution at a
price per share less than the Current Market Price per share, then, on the
Record Date, the Conversion Price shall be adjusted in accordance with the
following formula:
(N x P)
O + -------
AC = CC x M
------------------
O + N
Where:
AC = The Adjusted Conversion Price.
CC = The Conversion Price in effect immediately prior to the close of business
on the Record Date.
O = The number of shares of Common Stock outstanding at the close of business
on the Record Date.
N = The number of additional shares of Common Stock offered.
P = The offering price per share of the additional shares.
M = The Current Market Price per share of Common Stock on the Record Date.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights and warrants.
SECTION 11.08 ADJUSTMENT FOR CERTAIN DISTRIBUTIONS
If the Company distributes to all holders of its Common Stock any cash, debt
securities (or other evidences of indebtedness) or other assets (excluding
dividends or distributions for which adjustment is required to be made), the
Conversion Price shall be reduced in accordance with the following formula:
M - P
AC = CC x -------
M
Where:
AC = The Adjusted Conversion Price.
CC = The Conversion Price in effect immediately prior to the close of business
on the Record Date.
M = The Current Market Price per share of Common Stock on the Record Date.
P = The aggregate fair market value on the Record Date (as determined in good
faith by the Board of Directors and set forth in a certified resolution
filed with the Trustee) of the cash, debt securities (or other evidences of
indebtedness) or other assets distributed applicable to one share of Common
Stock.
Securities and Exchange Commission
August 30, 2006
Page 6
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution.
No adjustment will be made, if in lieu of such adjustment, the Securityholders
upon conversion, will be entitled to receive, in addition to the shares of
Common Stock into which such Securities are convertible, the kind and amount of
cash, debt securities (or other evidences of indebtedness) or other assets
comprising the distribution that such Holders would have received had they
converted their Securities immediately prior to the record date. In addition, no
adjustment will be made in the event that the then fair market value (as so
determined) of the cash, debt securities (or other evidences of indebtedness) or
other assets so distributed applicable to one share of Common Stock is equal to
or greater than the Current Market Price per share of the Common Stock, in which
case, in lieu of such adjustment, adequate provision shall be made so that each
Securityholder shall have the right to receive upon conversion the amount of
cash, debt securities (or other evidences of indebtedness) or other assets such
Holder would have received had such Holder converted each Security on the Record
Date.
SECTION 11.09 ADJUSTMENT FOR ALL CASH DISTRIBUTION
If the Company shall pay or make a dividend or other distribution consisting
exclusively of cash to all holders of its Common Stock, the Conversion Price
shall be reduced in accordance with the following formula:
M - C
AC = CC x -------
M
Where:
AC = The Adjusted Conversion Price.
CC = The Conversion Price in effect immediately prior to the close of business
on the Record Date.
M = The Current Market Price per share of Common Stock on the Record Date.
C = The amount of cash so distributed and not excluded applicable to one
share of Common Stock.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution.
No adjustment will be made in the event that the amount of cash so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price per share of the Common Stock, in which case, in lieu of such
adjustment, adequate provision shall be made so that each Securityholder shall
have the right to receive upon conversion the amount of cash such Holder would
have received had such Holder converted each Security immediately prior to the
record date for the distribution of the cash.
Securities and Exchange Commission
August 30, 2006
Page 7
SECTION 11.10 ADJUSTMENT FOR TENDER OR EXCHANGE OFFER
In the event that a tender or exchange offer (other than an odd-lot offer) made
by the Company or any Subsidiary for all or a portion of the Common Stock shall
expire and such tender or exchange offer (including any amendment in effect
immediately prior to the expiration thereof) shall require the payment to
stockholders of consideration per share of Common Stock having a fair market
value (as determined in good faith by the Board of Directors and set forth in a
certified resolution filed with the Trustee) that, as of the last time tenders
or exchanges may be made pursuant to such tender or exchange offer (the
"Expiration Time"), exceeds 110% of the Current Market Price per share of Common
Stock at the Expiration Time, the Conversion Price shall be reduced in
accordance with the following formula:
O x M
AC = CC x -----------
P + (T x M)
Where:
AC = The Adjusted Conversion Price.
CC = The Conversion Price in effect immediately prior to the close of business
on the date of the Expiration Time.
O = The number of shares of Common Stock outstanding (including any tendered
or exchanged shares) at the Expiration Time.
C = The fair market value of the aggregate consideration payable to holders
of Common Stock based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares of Common Stock
validly tendered or exchanged and not withdrawn as of the Expiration Time
(the shares of Common Stock so accepted, up to any such maximum, being
referred to as the Purchased Shares).
T = The number of shares of Common Stock outstanding (less any Purchased
Shares) on the Expiration Time.
M = The Current Market Price per share of Common Stock at the Expiration
Time.
The adjustment shall become effective immediately prior to the opening of
business on the day following the Expiration Time.
In the event that the Company or any Subsidiary, if applicable, is permanently
prevented by applicable law from effecting such purchases or all such purchases
are rescinded, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such tender or exchange offer had not
been made.
Securities and Exchange Commission
August 30, 2006
Page 8
3. YOU STATE THAT YOUR NOTE AGREEMENT DOES CONTAIN A CHANGE OF CONTROL
PROVISION, BUT THE PROVISION DOES NOT CALL FOR NET CASH SETTLEMENT. PLEASE
CONFIRM THAT THERE ARE NO CIRCUMSTANCES IN WHICH HOLDERS OF SHARES UNDERLYING
THE CONTRACT WOULD RECEIVE CASH IN EXCHANGE FOR THEIR SHARES.
If a change of control occurs, the noteholders have three courses of action:
a. The noteholders can tender the notes that they hold for conversion into
shares of our common stock. If so, we must exchange whole shares of our
common stock for the notes based on the face value of the notes ($110
million) divided by the current conversion price and pay the noteholders
cash for any fractional shares computed. We could only be forced into a net
cash settlement if we did not have sufficient authorized and unissued
shares of our common stock to exchange for the notes. As noted in our
response to your comment 2 above, we have had sufficient authorized and
unissued shares of common stock to exchange for the notes at each of our
key reporting dates following the 2004 merger through our most recent
fiscal quarter ended June 25, 2006 and we would not initiate any equity
transaction that would result in our inability to exchange sufficient
shares of our common stock for the notes.
b. The noteholders can request that we purchase the outstanding notes within
70 to 90 days of the change of control event. If so, we must pay the
principal amount of the notes and any accrued and unpaid interest with
cash. However, we would not be required to settle the embedded option
contract in the notes.
c. The noteholders can do nothing.
Therefore, there is no circumstance in which the noteholders could receive a net
cash settlement for the embedded option contract in the notes.
If you have any questions relating to any of the foregoing, please feel free to
contact me at 314-854-8010 or my colleague, John Norman, at 314-854-8015.
Sincerely,
/s/ Gray G. Benoist
Gray G. Benoist
Chief Financial Officer