Belden Inc (BDC) 2005 Q4 法說會逐字稿

Welcome to this morning's Belden CDT Incorporated conference call.

Just a reminder, this call being recorded. At this time, you are in a listen-only mode. Later, we will conduct a question-and-answer session.

[OPERATOR INSTRUCTIONS]

I would like to turn the call over for Miss Dee Johnson, Director of Investor Relations of Belden CDT.

Please go ahead, maam.

Thank you, [Sarah].

Good morning, everyone, and thank you for joining us today for the fourth quarter earnings conference call at Belden CDT.

With me here in St. Louis today are John Stroup, President and CEO of Belden CDT, and Stephen Johnson, our interim Chief Financial Officer and Treasurer.

I hope that each of you has a copy of our press release. It can be found on our website, BeldenCDT.com, or if you'd like a copy faxed to you, please call [Linda] at 314-854-8000.

During the call today, management will make certain forward-looking statements. I would like to remind you that any forward-looking information we provide is given in reliance upon the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. The comments we will make today are management's best judgment based on information currently available.

Our actual results could differ materially from any forward-looking statements that we might make. However, the Company does not intend to update this information to reflect developments after today and disclaims any legal obligation to do so.

Please review today's press release and our annual report on form 10-K, filed on March 31, 2005, for a more complete discussion of factors that could have an impact on the Company's actual results.

This morning, John will open our conference call with some general comments about the business and the fourth quarter. Then, Steven will review the fourth quarter financial results, the share repurchase results, and some balance sheet and cashflow items. John will speak about our outlook for 2006, and finally, we will open the line up for questions.

So,at this time, let's turn to our President and CEO, John Stroup.

John?

Thanks, [Dee].

Good morning, everyone.

I've spent most of my first three months with the Company traveling. I've been to 18 company locations around the world, spent time with many of our associates, and met with key customers and channel partners. I've learned a lot about how we engineer, manufacture, market, and sell our products.

The impressions I shared with you in the last call were largely confirmed. We have some very strong brands, and the Belden brand may be the most valuable asset of the entire Company. Backing that up, we have an excellent process to deliver quality product on time, and our product breath is unparalleled. This is truly a unique position within our industry.

Earlier this week, we announced that we are changing the way we're organized in North America. This change will bring together the Belden electronics and networking operations into one group. Mohawk, Thermax, and West Penn Wire, all terrific brands in their respective served markets, make-up our specialty group. This change will help us better serve the customers who use Belden cable in multiple applications.

For example, a university, casino, or factory uses many of our Belden products, including our data networking cable, security products, and audio and video cables. All of these products are delivered and supported by the same channel partners, and by organizing around the Belden brand, we will be a more valuable channel partner. It's my belief that this change will allow us to better leverage our brand awareness and market reach in a way that creates a truly competitive advantage.

Beyond organization, there are some additional areas of focus. First, pricing -- I think we can improve on the discipline associated with our pricing policies and practices.

Second, lean manufacturing -- although we have some good operating practices in place, our flow is not based on the fundamentals of lean manufacturing. This constitutes an opportunity for us not only to reduce cost, but also to trim our inventory and become an even more responsive supplier.

Third, strategy -- our operations have not benefited from the insights of a rigorous strategic planning process. As you might expect, I've conveyed a strategic planning team. The team meeting is meeting frequently under my direction, and we'll have the results of that process by May or June, including 3-year financial goals and a road map for investments we will make.

I've a few comments on the fourth quarter results. Stephen will cover results in more detail.

In short, we generated the operating income we expected, but we needed more revenue to do so because of the rapid rise in copper in the fourth quarter. The average price of copper in the quarter was $2.03, an increase of 19% from the third quarter. It was also higher than our, and the metal market's, expectations at the time of establishing our operating margin guidance. This presented a challenge for the business, especially in our networking segment.

Our tax rate for income from continuing operations was higher than our earlier expectation, so our net EPS were lower than we expected. If our tax rate on adjusted results had been 34% as expected, EPS from continuing operations would have been $0.39. Cash from operations exceeded 50 million for the year, an increase compared with 41 million in 2004, and an indication of our earnings quality.

Going back to the top line, we achieved both volume and price increases in all of the electronics markets -- industrial, aerospace, broadcast, and security. We have seen more unit volume increases in the second half of the year than we had in the first half. The oil and gas industry has been one of the drivers of our industrial business.

It's exciting for us to be part of the winter Olympics. The broadcast authority for the Torino Olympics required scheduled deliveries of 3.8 million feet of specialized broadcast cable, meeting stringent safety and environmental standards, and able to stand harsh conditions. It's a wonderful example of the reputation capability and global reach of our Company.

Moving to the networking market, we had another good quarter in terms of sales volume and project wins. Just to name some of our major products -- projects -- we have a large system project for the IRS in Kansas City with thousands of drops, we're providing new fiber optic backbones for 190 HCA hospitals nationwide, and Boeing has selected our 10 gig high-end copper solution for its data center in Southern California that will amount to several thousand drops.

We increased our list prices twice during the quarter, October and December, but our net pricing did not keep up with our list pricing, and our margins suffered. Going forward, we need our pricing strategies to be reflective of the quality of our brands, the quality of our products, and our overall value proposition. In an environment of rising and volatile material costs, a disciplined approach to pricing is all the more important.

Turning to Europe, we made significant progress on our European restructuring program, which is the set of planned actions to reduce our manufacturing overhead and footprint and streamline the administrative work in Europe. In December, we informed associates we would be closing the wire drawing mill in our [Binlow], Netherlands operation in February, and we've made some organization changes to pull two European divisional staffs into one. All together, this is a reduction of 170 people, which is about 9% of our European employees outside of Manchester. We recognize severance charges of 7.7 million in connection with these actions.

As you know, making changes to operations in Europe can be very expensive and time consuming, but our European president, Larry Rose, and his team have a good start on this program and will continue to push this forward throughout the year.

Another good step taken into Europe is the Netherlands's pension plan. We transferred the assets and liabilities of our relatively small plan into a much larger pension plan operated by the Metal Workers Union. Our obligation going forward is now a defined contribution to sign, instead of a defined benefit. This change reduces the volatility of the cost and the funding associated with the provision of retirement benefits for the Company's associates in the Netherlands.

Those are the items I wanted to touch on.

I'll turn this over to Steven Johnson, our interim Chief Financial Officer and Treasurer.

Stephen?

Thank you, John.

I want to turn first to our results of continued operations for the fourth quarter.

Revenue for the fourth quarter of 2005 was 362.9 million, an increase of 9.9% from the fourth quarter of 2004. This 9.9% the net of 11.7% organic growth, offset by a 1.8% impact of unfavorable currency translation. As in the third quarter, increased volume contributed more to this increase than did higher prices.

Operating income, adjusted for the 12.4 billion in charges recorded during the quarter, was 30.9 million, a slight improvement sequentially from the third quarter and slightly greater than operating income a year ago. The charges recognized during the quarter included 3.5 million in accelerated depreciation related to our Manchester UK plant, where our decision to exit the business has shorted the depreciation lives of the assets, and similar accelerated depreciation elsewhere in Europe stemming from our restructuring program. We also incurred 7.7 million of severance charges in connection with our European restructuring, almost all of which are recorded in cost of goods sold.

Cost related to executive succession, about 1 million, are reflected in SG&A.

Interest expense for the quarter, net of interest income, was 2.4 million, and pre-tax income from continuing operations was 15.9 million.

Turning now to our full-year results -- revenue increased 8.9% to 1.35 billion, compared with pro forma 2004 revenue of 1.24 billion. Operating income from continuing operations, adjusted for 36.5 million in charges for asset impairment, severance, accelerated depreciation, merger-related costs, and expenses for executive succession, was 104.7 million, or some 7.7% of revenues, compared with an adjusted operating income percent of 6.7 for 2004. This improvement in operating performance reflects the combined affects of cost reduction activity, improved volume, and the net effect of rising material costs and pricing.

Interest expense, net of interest income, for the full year was 10.1 million, compared with 15.3 million for 2004 on a pro forma combined basis.

Adjusted pre-tax income from continuing operations in 2005 was 93.9 million, compared with 67.1 million for 2004.

Our effective tax rate for the year on reported income from continuing operations was 43.1%. This was a higher rate than the rate we had used earlier in the year. The change in rate is the result of the geographic configuration of our income. The primary factors affecting the rate are these -- we generated substantial income in the United States, one of our higher tax jurisdictions; we generated losses, losses affected by the charges we recorded in the fourth quarter in the Netherlands, a jurisdiction in which no tax benefit is currently available.

The geographic configuration of our income among the various tax jurisdictions in which we have operations, has a similar impact on the effective tax rate on adjusted income from continuing operations. The effective tax rate on adjusted income from continuing operations was 38% for the full year.

Taxes paid during the year, net of refunds received, amounted to only about $2.2 million. For 2006, we expect our effective tax rate on income from continuing operations, excluding any additional restructuring and severance charges, to be $0.37.

I would like to turn now to the results of our share repurchase program.

As you may remember, in May, 2005, our Board of Directors authorized $125 million share repurchase program. During the fourth quarter, the Company bought just over 2.7 million shares of its stock in the open market, bringing the total number of shares repurchased since May to 5.2 million. The average cost per share for the full year was $21.04, for a total outlay of 109.4 million. There's been no purchase activity by the Company in 2006.

The purchase of 5.2 million shares reduced our shares outstanding by approximately 11% of the shares outstanding at the beginning of the repurchase program and offsets most of the dilution inherent in our convertible debt securities. Shares outstanding at year-end were 42.2 million.

Weighted average shares outstanding for the calculation diluted EPS for the fourth quarter were 49.8 million. For the year, shares for diluted EPS were 52.1 million. For 2006, assuming no further share repurchase activity, our estimate of shares for diluted EPS is 48.8 million.

Earnings per share on adjusted income from continuing operations for the fourth quarter were $0.31. If our effective tax rate had been at our earlier estimate of 34%, adjusted EPS for the quarter would have been $0.39.

Our press release provides a reconciliation between reported results on a GAAP and our adjusted results.

Let's turn now to our segment results.

Our electronics segment had external customer revenue of 217 million in the fourth quarter, affiliate revenues of 23.5 million, for a total segment revenue of 240.5 million. Excluding the accelerated depreciation charge, the segment's operating income was 33.7 million, or 14% of total revenue. This is an improvement over the 13.3% for the 2004 fourth quarter, and the 13.3% for the 2005 third quarter. This performance reflects strength in North American and Asian end-markets and good price realization in this segment.

The networking segment had external customer revenue of 146 million in the fourth quarter, affiliate revenue of 4.6 million, for a total segment revenue amount for 150.6 million. Adjusted operating profit for the segment was 8.5 million, or 5.6% of total sales, a disappointment compared with adjusted operating profit of 10 million, or 7.3% of revenue in the fourth quarter of 2004. Rising material costs and a highly competitive pricing environment in North America contributed to this margin degradation.

Accounting principles generally accepted in the United States require that segment reporting align with the way management views the business. The recent re-organization announcement will cause us to change our segmentation for 2006, to a more geographic orientation. We are in the process of applying the relevant accounting literature to our changed organizational structure. We expect that when we report first quarter results in April, we will provide four quarters of history under the new segmentation.

Our geographic distribution of revenue for the fourth quarter was unchanged from the third quarter. The US and Canada made up 62% of sales, Europe was 30%, and the rest of the world, mainly Asia-Pacific, 8%.

Now, let's turn to some selected balance sheet and cashflow items.

Cash at year-end was 134.6 million, less than our cash of 188.8 million a year ago. This decline in cash is primarily the result of our share repurchase program. As I mentioned earlier, the share repurchase program used 109.4 million of cash. Cashflow from operations exceeded 50 million for the year. In addition to cash from operations, we generated approximately 47 million in cash during the year from the disposition of assets, primarily real estate.

Depreciation and amortization during the quarter were 12.7 million, including the 3.5 million of accelerated depreciation in Europe. Excluding this accelerated depreciation, depreciation and amortization for the year amounted to 37 million. Capital expenditures for the year were approximately 24 million.

We expect the depreciation in 2006 will be approximately 35 million, excluding accelerated depreciation and that capital spending will be between 25 and 30 million.

Debt to total capitalization at year-end was approximately 24.5%. Debt, net of cash, to total capitalization at year-end was approximately 11.9%. Our debt includes 121 million in private placement notes, and 110 million of 4% convertible debentures. 59 million of our private placement notes will mature in August and September of 2006. We plan to pay these notes off using the cash on the balance sheet at that time.

As we mentioned in our press release, we entered into a new credit agreement on January 24, of this year. This facility provides a $165 million line of credit with $35 million accordion feature, secured by the Company's overall cashflow and its assets in the US. The new facility replaces a $75 million asset back-line of credit that will have expired at mid-year in 2006.

Conditions in the debt market were favorable, and we were able to more than double our availability with only a minimal increase in fees. The agreement has both debt to EBIDTA leverage and fixed charge coverage covenants. Our leverage and coverage at the inception of this facility are well within the covenant parameters.

Before I turn to John Stroup for comments about our business outlook for 2006, I would like to speak very briefly about our option expensing on the FAS 123.

Our guidance for 2006 excludes any option expense. The amount of our option expense for 2006 will depend, in part, on the number of options granted and on the price of our stock on the date of these grants. Our option grants usually take place at the February meeting of our Board of Directors. We expect to amend our guidance later in the year when we have more information on this subject.

I'll turn now back to John Stroup, our CEO, for some comments about our outlook for 2006.

John?

Thank you, Stephen.

First let me talk about where we are with our Manchester plant in the UK.

Many of you recall that in September, 2005, we informed British Telecom that we wanted to exit the copper telecom cable business in the UK. The business performs reasonably well for us right now, but the trend in the telecom market worldwide toward lower volume and declining prices, and we wanted to focus our investment on markets with more growth opportunity and higher profit potential. We said we would exit that business when our current contract with BT expires in October, 2006, or earlier, if they could arrange some other source of supply, and that we would be happy to participate in an orderly transition.

We're in talks one or more potential buyers for our Manchester plant, but there is nothing conclusive at this time. If we're unable to sell the plant, we expect to liquidate it, and there is considerable value in the real estate. We had a good fourth quarter with BT, and the contract provides for price excalation based on material cost, so we have maintained the margin contribution.

Right now, the operation doesn't qualify to be accounted for as a discontinued operation, but we have developed our guidance for 2006 excluding Manchester, since we know that revenue is going away at some point during the year.

To make an apples-to-apples comparison then, we are starting by backing Manchester out of our 2005 results to create a baseline. Manchester's revenue in 2005 was 106.5 million, the operating profit contribution was 7.4 million. Subtracting those amounts from our 2005 adjusted results, our baseline is consolidated revenue of 1.25 billion, and operating profit of 97.3 million.

We expect revenue in 2006 will grow 5% to 10%. The stronger volume growth that we experienced in the second half of 2005 appears to be continuing. There are more projects in the sales pipeline now, and the general outlook for our industry is positive, especially in North America and Asia. We expect our operating margin to be between 9% and 9.5% of sales for the year, excluding any further severance charges or restructuring charges.

This expected improvement in profitability will require that we fix things that aren't working well. That means we keep going on our European restructuring, that's probably the single biggest thing we can do to enhance our earnings in 2006 and beyond, and we need to work on our commercial strategies in networking.

We believe that the restructuring we announced this week will enable us to leverage our strengths to improve the profitability of our networking products. We also think some of our better performing businesses, where we are well-positioned, can continue to grow in profitability given even modestly improving demand.

We expect interest expense to be about 9.9 million in 2006, lower than 2005, because we'll pay down a 59 million trunch of our notes in September. As Steven said, our effective tax rate in 2006 is expected to be 37%, and we're assuming 48.8 million shares for diluted EPS. Therefore, we expect 2006 EPS to be between $1.50 and $1.60.

For the first quarter, still excluding Manchester, we expect revenue between 310 and $320 million, and EPS between $0.27 and $0.30. Manchester could contribute up to an additional penny per share in the first quarter.

That completes our prepared remarks.

I would now like to turn the call over to our operator, [Sarah], who will remind you of the proceedings for asking your questions.

Thank you.

[OPERATOR INSTRUCTIONS]

Our first question comes from Celeste Laurenzano with Merrill Lynch.

Good morning.

Good morning.

Hi.

Question about the North American networking cable market -- are you seeing industry trends that pricing isn't sticking?

Celeste, I think what we saw, or at least our feeling anyway, is that this particular segment is struggling more with the increasing material price than some of our other segments. Although I think there's been good attempts to improve list pricing with us and others in the market, it does appear as though we're having a harder time making good on that net price increase, and especially in the fourth quarter. We saw competition increase a little bit more fierce in the fourth quarter, and we would view it as an industry -- an industry phenomenon.

Okay.

And then the improvements that you're talking about making in the pricing going forward, do you expect that to improve as soon as Q1, or will be a little bit of a lag?

we going to be focused on making sure our processes as it relates to how we price in both our open-architecture environment with the Mohawk brand, as well as our end-to-end products with the Belden brand, are performing better. That's an immediate priority for us. I would expect that we would see improvement in the first quarter, it will continue to be a focus for us in all of 2006.

Great.

Thank you.

Thank you.

And next, we'll move onto Kevin Sarsany with Foresight Research.

Hi, guys.

I was wondering -- a follow-up on that last question. Now, are you still seeing the increasing in the grades of cable, cat 5, cat 5E, cat 6?

Yes, Kevin.

The product mix is still working favorably for us. We're seeing better increases in the higher grades of cable than we are in the lower. I think part of that is, quite frankly, deliberate on our end as it relates to how we price and how we think about the products that we offer. So, that is still happening and still working for us in a favorable way, but the pricing scenarios that I discussed with you are relatively -- across all of the different categories.

So you're seeing more -- more difficult pricing in the higher grades also?

Not as much as in the lower grades -- it's more of an issue in the lower grades than the higher grades.

Okay.

And, looking to your outlook -- it looks like your first quarter guidance suggests a 7.7% to 7.9% operating margin. Now is that -- that excludes Manchester, which is at about that level. That suggests a further decline in margins sequentially. Obviously, revenue is going down a little bit. Is that mainly networking that you're basing that on?

Yes.

If my math is right.

Yes. Kevin.

As we look at the first quarter, the situation that we experienced in the fourth quarter with networking, although we're working on -- we're working already on ways to improve that, we don't think we're going to get all of that improvement in the first quarter. It will take us some time to get that pricing where we think it needs to be.

Okay.

And I guess the -- my last two questions -- on the change in the model segment, you talked about with the new organizational structure improving profitability. How does that happen? Is it synergies? Is it cost reductions, or is it just the elimination -- the accounting elimination -- that you currently have in the segments?

What we were speaking to is better performance, Kevin.

What we believe is that by bringing together the networking and electronic products under the Belden brand in one organization, that our go-to-market strategy will improve, and our ability to interact with distribution will improve. We think it will have an impact on our ability to generate and create demand, as well as to have better control of our pricing in that area.

So, for us, that's primarily about driving share, driving growth, and improving pricing. I think, as we get into it, we'll also see some cost benefits. I think there are some redundancies in those divisions, quite frankly, that our teams are looking at in terms of how we clear that up, but there aren't any major factory consolidations, for example, as a result of our planned announcement. That's, quite frankly, a subject we look at independently.

Okay.

My last question -- in your organizational changes, you highlighted the Asia, Can you talk about your strategy for Asia?

Yes.

Let me just share with you my perspective. I spent time in Asia in early 2006. I left very very optimistic about our opportunities in Asia.

The brand -- Belden brand -- in Asia is much better known than I had anticipated. We're actually doing a lot of good things already in Asia. I think that when we share with you in May or June, what our plans are, you should expect that Asia part of our growth strategy.

Okay.

Thank you.

Thank you.

Next, we'll move on the Jeff Beech with Stifel Nicholas.

Excuse me.

Good morning, John.

Good morning, Jeff.

I was hoping to get a little bit more information about what's happening in networking. The electronics side is -- seems to be able to pass on the rising cost as performing well. It looks like it's going to be the major driver in '06, and you're still struggling with your networking.

Is all of the -- all of the decline in the margin you saw in the fourth quarter? And, again, I'm taking out the take-or-pay contract and looking at a pretty good hit to the profitability. Is that all inability to pass on those higher raw material costs?

The majority of it, Jeff, is the fact that our material costs were rising faster than we were able to pass on net pricing increases, and that happened in both our Mohawk brand, as well as our Belden brand. I think that a part of it is -- a significant part of it is -- an environment where passing on pricing increases is difficult, given the competitive nature and rivalry of this segment.

But I also, Jeff, think that there are things we can be doing differently. As I alluded to -- I think our process and our discipline about how we price in an environment where materials are volatile and changing rapidly needs to improve.

We're not -- certainly not thinking that there isn't things we can be doing differently to make things better, and we're very focused on it, on making certain that we have a much more deliberate, disciplined approach as it relates to how we price, particularly around our brand proposition, and making certain we're going after the right customers. For us, it's a very big part of '06, and we believe that there is opportunity for improvement -- financial improvement -- in our networking segment in 2006, beyond the electronics segment.

Just as a follow-up -- A year ago plus, you dropped Panduit and introduced your IBDN line. You lost, in that early transition, some market share. You feel, at this point, you're gaining back that market share, and how fast is this transition to the system sales occurring? Is it occurring rapidly -- it doesn't look like it is -- and is it meeting your expectations?

I think we felt very good about the results in Q3 from a revenue point of view, and I would say, in general, we feel good about the revenue results in Q4.

I think that we made good traction as it relates to what was going on a year ago with reguard to the Panduit situation and share loss. I think that we're not making as much progress as I would like us to, as it relates to end-to-end and the margin improvement we can get as a result of that, and I think that that is an area for improvement in 2006, Jeff. But I think it's also going to be balanced, though, with pricing strategies that make sense for this segment as well.

So, for me it's really both. It's getting our percentage of networking volume, that is end-to-end, i.e., the percentage connectivity up, as well as making certain that our pricing discipline on cable across both brands really does make sense.

And last question -- do you expect margin improvement in networking when 2006 is over?

Yes. I do.

Alright.

Thanks.

Thank you.

Next, we'll move onto Errol Rudman with Rudman Capital Management.

Could you indicate what rate you paid on the increased borrowing, and the purposes for the increased borrowing?

I have some other questions after that.

Okay.

The pricing grid for the new facility is roughly 1.25% above LIBOR at the lower tier of the pricing grid, going up to some 2% above. We put it in place to have--.

When you say going to 2% -- I didn't understand that.

There's a pricing grid based on where we are with respect to our performance with respect to the covenant, and so it ranges from 1.25% above LIBOR to 2% above LIBOR.

Yes.

We put the facility in place to replace the expiring facility, and it's in place primarily to provide a back-up line for working capital purposes, should we need it.

As you know, we've been -- we have good cashflow, and we have good cash on the balance sheet. So, we've not had to draw down on our working capital lines over the last several years.

Do you anticipate that the stock purchase program will be re-initiated in '06?

We have the authority to do that. At the current prices, we are not intending to repurchase, but we would certainly be opportunistic buyers if the circumstances change.

Could you outline what type of pricing systems you think you might implement, and how soon that they might be put into place?

I think it's probably one for me to answer.

The systems that we're having put in place -- and we're in the process of doing it now -- is one that evaluates more critically the true net price that we experience with customers. Our pricing models today include a number of instruments, incentives, and so forth, for different customer parties, and we're trying to get greater clarity about, at the time of decision, that we understand truly what our net pricing is.

Secondly, is trying to have a much more rapid and flexible mechanism to understand our cost structure. As I said earlier, we're in a unique time of material volatility, and understanding that realtime, and to understand it more quickly, is obviously very important.

This was -- began to be implemented within our networking business this month, or, excuse me, in January. I'd say the early stages of it are already in place.

Is it your feeling that, by the second quarter, the implementation of this new pricing program will be put into effect?

Yes.

I would believe that the benefits of the program -- we would see benefits -- as I said earlier, see some benefits in the first quarter, but certainly, we'd see more in the second.

And is it your feeling that these -- that the rising costs will be more than offset by these -- by your new pricing mechanisms, or will there continue to be margin pressure?

I think that, given where copper is at today, I think the pricing actions we've taken will, in fact, improve margins. If there's further rise in copper, then, of course, we have to reset pricing again, but I think that we're in an appropriate pricing level now, given where copper is, and I think we'll see improvement.

Is it your sense that -- do you feel that the prices have exceeded the cost -- the cost that you're paying in increased copper have exceeded the demand that's in the system now?

I don't think, quite frankly, it's an issue of either substitution of other technologies or any elasticity with demand. I think, quite frankly, it's a matter of relatively high competitive rivalry, and I think a group of companies that have not dealt with such a rapid, volatile material market quite like this one.

So, I'm not concerned about substitution from other technologies. I'm not concerned about elasticity of demand. I think it's us leading by example, in terms of how we have a more rigid, disciplined, thoughtful pricing process.

I guess it's your sense that this would not be to a temporary loss of market share?

That's not what we believe. No.

I think it includes a more intelligent approach to the segments that we go after and making certain that we're clear about the value that we offer.

And does your market intelligence suggest that your competitors will also be implementing new pricing systems that would be similar to yours?

I'm not in a position to know that.

What do your marketing people say?

I think our marketing folks feel as though we're -- we're in a good position to improve our pricing approach and our pricing discipline, but as it relates to whether or not others might follow, it's impossible for us to know.

You've been in place now for some months. Do you have a feeling as to what your rate of return goals could be for the Company going forward?

I would say that our focus, and my focus, has been on making certain that our business is positioned to achieve the results that we expressed in 2006, and I think we're well positioned to do that, as we've provided guidance. Separately from that, we've really begun a longer-term strategy in parallel, and in May or June in a good position to share with you what our longer-range returns -- expectations would be on the business.

Thank you.

You're welcome.

Thank you.

[OPERATOR INSTRUCTIONS]

We'll take our next question from Joni Jensen with McMahan Securities.

Hi.

Just a couple of questions -- first off, in Q4, what was your cashflow from operations, and how much of that was from working capital changes?

We're looking through our notebook right now for our cashflow from operations.

For the quarter, was the question?

Yes.

For the quarter -- it was roughly 13 million for the quarter.

Okay.

And how much of that was due to the working capital changes?

I'm looking for that just as we speak. Just give us a moment. Yes, just give us a moment.

Where is that, John?

Joni, we'll get back with you.

Okay. That's fine.

We don't seem to have that right -- ready at our fingertips.

Okay.

My other question -- you talked about this earlier -- putting into place your new revolving credit facility -- since it's back up and your free cashflow positive, what was your reason for ramping the size up so dramatically? Is it potentially in place for M&A or other reasons?

The market for revolving credit facilities, right now, is as good as it's been for a number of years. So, since we were able to get a five-year deal, we got a little bit more than we, perhaps, needed, but given that we anticipate growing larger from organic growth, or, perhaps, acquisition growth, but certainly from organic growth, and we had the opportunity to get it in at roughly the same price, we did. The facility is of the size to where, at best, it would accommodate a very modern acquisition, but it's not -- it's primary design is not to fund acquisition. It's primary design is to serve as a back-up facility.

Okay.

And I know that you talked about this earlier, but what are your debt maturities in '06 again?

We have 15 million due in August of '06, 44 million in September.

Okay.

And lastly, what's your capital structure strategy because is this going to be de-levering you if paying those down with cash? Do you like being in a more delevered state? Do you potentially see adding leverage over time? What are your thoughts in that area?

When we have finished with the strategic planning process, we'll have a much better idea of how we're going to be going forward, and, thus, at that point, we'll have a much better idea of what kind of capital structure might appropriate to support those objectives.

Okay.

At this time, we're planning to pay them off, not refinance them.

Could that change? It very well could depending on the outcome of our strategic planning process.

Okay.

Lastly, you talked about, in the event you're not able to exit or sell your Manchester operations, that -- or divest business -- that you would look at selling the real estate there. Do you have a sense as to what the ranges are on the potential value for that real estate?

We believe that the alternative of liquidating the operation there in Manchester will be roughly equivalent to what would be if we were successful in selling the operation.

Which would be, more or less, what?

What would that be? Somewhere in the neighborhood of 17 to 19, to 20 million pounds.

Okay.

Thank you so much.

Thank you.

At this time, we have one question remaining in the queue. We'll take from Dennis Scannell with Rutabaga Capital.

Yes. Good morning.

Just a couple quick things -- to drill down a little bit more on the networking side -- is the net pricing issue, is that more of the project level or at tech business, or is it your just general business with distributors or both?

I think it's both. I think it's probably a little more visible to us at the project level because there's a lot of -- there's a lot of attention around it, and that gets a lot of fanfare. But I think, in general, we're seeing similar issues across the board with networking.

Can you comment at all about some of the larger projects that you discussed earlier in the call, HCA, Boeing, the IRS? In those sorts of projects, do you have -- were you're dealing with, as you're saying, a lot of connections, a lot of cable -- do you have raw material price protection, or are you able to pre-buy? How are you managing that? What would you say about the pricing of some of the larger projects that you've won more recently?

Dennis, in general, we don't have commodity escalators in our pricing on big projects. There are exceptions, like we talked about with Manchester and Telecom where we do, but a lot of the bigger networking projects that we described, they don't have the mechanisms in place. Obviously, if they did, the situation would be different.

I think our feeling is that that's appropriate in certain instances, but I think, for me anyway, more important is making certain that when we are engaged in these projects, we have more realtime data around our cost structure because, as I said, the world is very dynamic from a cost point of view, and that we're doing a better job selling the value of our brands, selling the value of our capability, which is valued by many customers, and we see it in the margin. I just don't think that we've been consistent enough in how we apply it.

And are you -- will you approach that business any differently? Obviously, we've lived through a pretty extraordinary time in terms of the volatility of raw material prices, particularly on the copper side, but are you going to look to hedge out some of that risk or pre-buy some of your buy for that -- for those projects?

We don't have any current plans to do that.

As you might imagine, with our inventory situation, we're operationally hedged to a certain extent, and whether or not we would engage in financial instruments to do so, that's not a current plan, and not something we plan to implement immediately.

Yes.

At this point, we're dealing with it operationally.

Okay.

Couple of things on Europe -- I remember you all talking about a 9 million per year cost savings target, is that right, and should we be seeing that in '06? Maybe I have the annual cost savings number wrong.

When we announced the restructuring last fall in the third quarter, we suggested that there would be cost savings associated with that, and as we go through the 2006 year, depending upon the timing of the implementation of all those steps, we will be getting some of those savings, and then, going out of the year, we should have the full 9 million on an annualized basis.

Exiting '06?

Yes.

Now, is -- are these all the actions that are being taken, or will we be seeing others through the course of the year? I know these will take awhile to execute, but are there others in the program?

These are the actions that are currently baked into our plan in 2006. We're contemplating, as always, other things that might make our company stronger, and we're looking at a number of things, not just in Europe, but globally, about how we improve revenue, improve margins, and improve our cost structure.

I think, as we continue to look at that, there might be things beyond our current plan, beyond our current guidance, that we think makes sense, and obviously, we'd communicate with you when we're at that point.

And then, one final thing on Europe -- I'm sure you guys mentioned this -- is it pretty safe to say that pricing continues to be challenging in Europe? You mentioned, in the past, that there's too much capacity there. The demand hasn't been quite where you'd like it to be, but has that continued to be an issue?

Yes.

There's no question that the pricing environment in Europe is more difficult than it is in North America. What I expressed to you in networking, is relatively global phenomenon, so it existing in all regions of the world, but on an apples-to-apples, Europe is typically a more difficult pricing environment than what we are see in North America.

So it does sound like we'll be seeing European results in total in the new segments? Is that the -- we'll do like North America, Europe, and other, or--? I think, as Steven expressed, we're currently working through that, but a geographical alignment of our segmentation reporting is a very possible outcome. Yes.

Okay. Great. That's it for me.

Thanks a lot.

And there are no other questions at this time.

Alright. Thank you.

I thank everyone for joining us on today's earnings conference call. We sincerely appreciate your interest in Belden CDT, and please give us a call anytime if you have follow-up questions.

This concludes our call.

Thank you.

That does concludes today's teleconference. We do thank you for your participation, and have a great day.