Belden Inc

Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Incorporated conference call. Just a reminder, this call is being recorded. At this time, you're in listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question, please press star 1 on your touchstone phone. If you're in the question queue and would like to withdraw your question, simply press star 2. I would now like to turn the conference over to Kevin Mazga. Please go ahead, sir.

Thank you, Mary. Good morning, everyone, and thank you for joining us today for Belden's Fourth Quarter 2019 Earnings Conference Call. My name is Kevin Masca. I'm Belden's Vice President of Investor Relations and Treasurer. With me this morning are Belden's President, CEO and Chairman John Stroup, Chief Operating Officer Ruel Vestjens, and CFO Hank Dirksen. John will provide a strategic overview of our business, Rule will review our segment results, and then Hank will provide a detailed review of our financial and operating results, followed by Q&A. We issued our earnings release earlier this morning, and we have prepared a slide presentation that we will reference on this call. The press release, presentation, and transcript of these prepared remarks are currently available online at investor.belden.com. Turning to slide two in the presentation, during this call, management will make certain forward-looking statements in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For more information, please review today's press release and our annual report on Form 10-K. Additionally, during today's call, management will reference adjusted or non-GAAP financial information. In accordance with Regulation G, the appendix to our presentation and the investor relations section of our website contain a reconciliation of the most closely associated GAAP financial information to the non-GAAP financial information we communicate. I will now turn the call over to our President, CEO, and Chairman, John Stroup. John?

Thank you, Kevin, and good morning, everyone. As a reminder, I'll be referring to adjusted results today. Please turn to slide three in our presentation. Before I review our fourth quarter performance, I'd like to discuss the announcement we made this morning regarding the divestiture of Grass Valley. As we reported last quarter, we completed a rigorous strategic review of our portfolio of businesses and concluded that it was in the best interests of our shareholders, customers, and employees to separate Grass Valley from Belden. Today, we announced that we reached a definitive agreement to sell 100% of Grass Valley to private equity firm Black Dragon Capital. The transaction is expected to close in the first half of 2020. Black Dragon's deep broadcast industry experience will enable Grass Valley to more effectively execute its strategic plan and pursue growth opportunities. We look forward to supporting the Black Dragon and Grass Valley teams during the transition. The transaction consideration includes an upfront cash payment of $140 million plus various forms of deferred consideration, including a $213 million five-year seller's note subject to certain adjustments, up to $130 million in PIC interest on the seller's note over its five-year term and $150 million in potential earn-out payments. These earn-out payments are based on certain performance thresholds, but the seller's note and the interest on the seller's note are not. We are pleased to announce this definitive agreement and extremely excited about the opportunities for Belden going forward as we continue our transformation. Now let's review our fourth quarter performance. Revenues in the fourth quarter of $549.7 million exceeded the high end of our guidance range. Importantly, we delivered healthy organic growth of 2.7% after adjusting for changes in channel inventory levels in the fourth quarter of 2018. This demonstrates the enhanced growth potential of our improved portfolio of businesses. We did not see the reduction in channel inventory levels that we anticipated in the fourth quarter 2019, so we are reflecting that expectation in our guidance for the first quarter of 2020. EPS of $1.20 also exceeded the high end of our guidance range of $1 to $1.15. Consistent with our M&A strategy, in the fourth quarter, we completed another bolt-on acquisition of a broadband fiber-related business called Special Product Company, or SPC, for $23 million. SPC is a supplier of enclosure systems for fiber and 5G applications with annual revenues of approximately $32 million. SPC's products complement our broadband fiber portfolio with many of our current outside-the-home products already being utilized in conjunction with SPC products. We see significant opportunities to leverage our global customer base and accelerate SPC's growth. In addition, we continue to pursue a number of compelling inorganic opportunities in this robust market that would further enhance our product offering and growth potential. Please turn to slide four for a brief discussion of our full year 2019 results. 2019 was highlighted by the significant actions we initiated following our comprehensive strategic portfolio review. These include the divestiture of Grass Valley, the ongoing $40 million cost reduction program and our planned exit of approximately $250 million in undifferentiated copper cable product lines. These actions will result in an improved portfolio of businesses that is aligned with favorable secular trends in industrial automation, cybersecurity, broadband and 5G, and smart buildings. Full year revenues were $2.131 billion, and despite the headwinds from global trade policies, in demand for our products increased during the year. 2019 was another year of disciplined and balanced capital deployment toward organic growth investments, acquisitions, and share repurchases. Net capital expenditures of $80 million funded a number of attractive organic initiatives that are expected to drive meaningful growth in future periods. This included investments in new software solutions for both cybersecurity and industrial automation and targeted capacity additions to support our customers by shortening our lead times and expanding our fiber capabilities. We completed three strategic broadband fiber acquisitions in 2019 for a combined purchase price of $74 million. These included Opterna and the FutureLink product line in the second quarter and SPC in the fourth quarter. Importantly, our product mix continues to improve as the majority of our broadband revenues came from higher growth outside the home products for the first time in 2019. During the year, we also deployed $50 million towards share repurchases. All of this was accomplished with year-end financial leverage of 2.5 times net debt to EBITDA. This is well within our stated range of two to three times. Moreover, our net interest coverage ratio exceeds seven times. I will now ask Roel to provide a review of our business segment results. Roel?