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Acquisitions | 12 Months Ended
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Dec. 31, 2017
Business Combinations [Abstract] |
Acquisitions | Acquisitions Thinklogical Holdings, LLC We acquired 100% of the outstanding ownership interest in Thinklogical Holdings, LLC (Thinklogical) on May 31, 2017 for cash of $171.3 million. Thinklogical designs, manufactures, and markets high-bandwidth fiber matrix switches, video, and keyboard/video/mouse extender solutions, camera extenders, and console management solutions. Thinklogical is headquartered in Connecticut. The results of Thinklogical have been included in our Consolidated Financial Statements from May 31, 2017, and are reported within the Broadcast Solutions segment. The following table summarizes the estimated, preliminary fair values of the assets acquired and the liabilities assumed as of May 31, 2017 (in thousands):
Cash |  | $ | 5,376 |
Receivables |  | 4,355 |
Inventory |  | 16,424 |
Prepaid and other current assets |  | 320 |
Property, plant, and equipment |  | 4,289 |
Goodwill |  | 71,394 |
Intangible assets |  | 73,400 |
Total assets |  | 175,558 |
Accounts payable |  | 1,231 |
Accrued liabilities |  | 1,353 |
Deferred revenue |  | 1,702 |
Total liabilities |  | 4,286 |
Net assets |  | $ | 171,272 |
A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments we have used in estimating the preliminary fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations. The preliminary fair value of acquired receivables is $4.4 million, which is equivalent to its gross contractual amount. For purposes of the above allocation, we based our estimate of the preliminary fair values for the acquired inventory, intangible assets, and deferred revenue on a preliminary valuation study performed by a third party valuation firm. We have estimated a preliminary fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post acquisition selling efforts. We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets and deferred revenue (Level 3 valuation). The determination of the fair value of the assets acquired and liabilities assumed and the allocation of the purchase price is substantially complete pending the completion of taxes. Goodwill and other intangible assets reflected above were determined to meet the criterion for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to expected synergies and the assembled workforce. The expected synergies for the Thinklogical acquisition primarily consist of utilizing Belden's fiber and connectivity portfolio with Thinklogical's connections between matrix switch, control systems, transmitters and source to expand our product portfolio across our segments to both existing and new customers. Our tax basis in the acquired goodwill is approximately $44.0 million and is deductible for tax purposes over a period of 15 years up to the amount of the tax basis. The intangible assets related to the acquisition consisted of the following:
|  | Fair Value |  | Amortization Period
|  | (In thousands) |  | (In years)
Intangible assets subject to amortization: |  |  |  |
Developed technologies |  | $ | 62,600 |  |  | 10.0
Customer relationships |  | 6,500 |  |  | 8.0
Trademarks |  | 2,900 |  |  | 10.0
Sales backlog |  | 1,400 |  |  | 0.3
Total intangible assets subject to amortization |  | 73,400 |  |  |
Intangible assets not subject to amortization: |  |  |  |
Goodwill |  | 71,394 |  |  | n/a
Total intangible assets not subject to amortization |  | 71,394 |  |  |
Total intangible assets |  | $ | 144,794 |  |  |
Weighted average amortization period |  |  |  | 9.6
The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the developed technology intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period and pattern of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of estimated sales from recurring customers. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship. Our consolidated revenues and consolidated income from continuing operations before taxes for the year ended December 31, 2017 included $30.8 million and $(8.9) million, respectively, from Thinklogical. The loss before taxes from Thinklogical included $11.9 million of amortization of intangible assets and $6.1 million of cost of sales related to the adjustment of acquired inventory to fair value. The following table illustrates the unaudited pro forma effect on operating results as if the Thinklogical acquisition had been completed as of January 1, 2016.
|  | Years Ended
|  | December 31, 2017 |  | December 31, 2016
|  | (In thousands, except per share data) (Unaudited)
Revenues |  | $ | 2,399,715 |  |  | $ | 2,407,830 |
Net income attributable to Belden common stockholders |  | 60,690 |  |  | 113,014 |
Diluted income per share attributable to Belden common stockholders |  | $ | 1.42 |  |  | $ | 2.66 |
For purposes of the pro forma disclosures, the year ended December 31, 2016 includes nonrecurring expenses from the effects of purchase accounting, including cost of sales arising from the adjustment of inventory to fair value of $6.1 million and amortization of the sales backlog intangible asset of $1.4 million. The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition. M2FX We acquired 100% of the shares of M2FX Limited (M2FX) on January 7, 2016 for a purchase price of $19.0 million. M2FX is a manufacturer of fiber optic cable and fiber protective solutions for broadband access and telecommunications networks. M2FX is located in the United Kingdom. The results of M2FX have been included in our Consolidated Financial Statements from January 7, 2016, and are reported within the Broadcast Solutions segment. The M2FX acquisition was not material to our financial position or results of operations. Of the total purchase price, $3.2 million was deferred as estimated earn-out consideration. We determined the estimated fair value of the earn-out with the assistance of a third party valuation specialist using a probability weighted discounted cash flow model. The estimated earn-out was scheduled to be paid in early 2017, however, the financial targets tied to the earn-out were not achieved. We reduced the earn-out liability to zero as of December 31, 2016 and recognized a $3.2 million benefit in Selling, General and Administrative expenses in the Consolidated Statements of Operations. This benefit was excluded from Segment EBITDA of our Broadcast Solutions segment. Tripwire We acquired 100% of the outstanding ownership interest in Tripwire, Inc. (Tripwire) on January 2, 2015 for a purchase price of $703.2 million. The purchase price was funded with cash on hand and $200.0 million of borrowings under our revolving credit agreement (see Note 13). Tripwire is a leading global provider of advanced threat, security and compliance solutions. Tripwire’s solutions enable enterprises, service providers, manufacturers, and government agencies to detect, prevent, and respond to growing security threats. Tripwire is headquartered in Portland, Oregon. The results of Tripwire have been included in our Consolidated Financial Statements from January 2, 2015. Tripwire is reported within the Network Solutions segment. The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed as of January 2, 2015 (in thousands).
Cash | $ | 2,364 |
Receivables | 37,792 |
Inventories | 603 |
Other current assets | 2,453 |
Property, plant and equipment | 10,021 |
Goodwill | 462,215 |
Intangible assets | 306,000 |
Other non-current assets | 659 |
Total assets | 822,107 |
Accounts payable | 3,142 |
Accrued liabilities | 12,142 |
Deferred revenue | 8,000 |
Deferred income taxes | 95,074 |
Other non-current liabilities | 540 |
Total liabilities | 118,898 |
Net assets | $ | 703,209 |
A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments we have used in estimating the fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations. The fair value of acquired receivables is $37.8 million, with a gross contractual amount of $38.0 million. For purposes of the above allocation, we based our estimate of the fair values for the acquired intangible assets, property, plant and equipment, and deferred revenue on a valuation study performed by a third party valuation firm. We used various valuation methods including discounted cash flows to estimate the fair value of the identifiable intangible assets and deferred revenue (Level 3 valuation). To determine the value of the acquired property, plant, and equipment, we used various valuation methods, including both the market approach, which considers sales prices of similar assets in similar conditions (Level 2 valuation), and the cost approach, which considers the cost to replace the asset adjusted for depreciation (Level 3 valuation). Goodwill and other intangible assets reflected above were determined to meet the criterion for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to expected synergies and the assembled workforce. The expected synergies for the Tripwire acquisition primarily consist of an expanded product portfolio with network security solutions that can be marketed to our existing broadcast, enterprise, and industrial customers. We do not have tax basis in the goodwill, and therefore, the goodwill is not deductible for tax purposes. The intangible assets related to the acquisition consisted of the following:
| Estimated Fair Value |  | Amortization Period
| (In thousands) |  | (In years)
Intangible assets subject to amortization: |  |  |
Developed technology | $ | 210,000 |  |  | 5.8
Customer relationships | 56,000 |  |  | 15
Trademarks | 31,000 |  |  | 10
Backlog | 3,000 |  |  | 1
Total intangible assets subject to amortization | 300,000 |  |  |
Intangible assets not subject to amortization: |  |  |
Goodwill | 462,215 |  |  |
In-process research and development | 6,000 |  |  |
Total intangible assets not subject to amortization | 468,215 |  |  |
Total intangible assets | $ | 768,215 |  |  |
Weighted average amortization period |  |  | 7.9
The amortizable intangible assets reflected in the table above were determined by us to have finite lives. In connection with the segment change discussed in Note 6, we re-evaluated the useful life of the Tripwire trademark and concluded that an indefinite life was no longer appropriate; therefore, we began amortizing the Tripwire trademark in the first quarter of 2017. The useful life for the developed technology intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of customer turnover. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship. In-process research and development assets are considered indefinite-lived intangible assets until the completion or abandonment of the associated research and development efforts. Upon completion of the development process, we will make a determination of the useful life of the asset and begin amortizing the assets over that period. If the project is abandoned, we will write-off the asset at such time. Our consolidated revenues and consolidated income from continuing operations before taxes for the year ended December 31, 2015 included $116.6 million and $(47.8) million, respectively, from Tripwire. In 2015, segment revenues for our Network Solutions segment included $50.4 million of revenues that would have been recorded by Tripwire had they remained an independent entity. Our consolidated revenues in 2015 do not include these revenues due to the purchase accounting effect of recording deferred revenue at fair value. The loss before taxes from Tripwire for the year ended December 31, 2015 included $43.2 million of amortization of intangible assets and $9.2 million of compensation expense related to the accelerated vesting of acquiree stock based compensation awards. The following table illustrates the unaudited pro forma effect on operating results as if the Tripwire acquisition had been completed as of January 1, 2014.
| Year Ended
| December 31, 2015
| (In thousands, except per share data) (Unaudited)
Revenues | $ | 2,354,191 |
Net income attributable to Belden common stockholders | 92,104 |
Diluted income per share attributable to Belden common stockholders | $ | 2.14 |
For purposes of the pro forma disclosures, the year ended December 31, 2014 includes nonrecurring expenses from the effects of purchase accounting, including compensation expense from the accelerated vesting of acquiree stock compensation awards of $9.2 million and amortization of the sales backlog intangible asset of $3.0 million. The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

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