SEC Filing - Bel Fuse Inc.

FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ............. to ............ Commission file number: 0-11676 BEL FUSE INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-1463699 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 198 Van Vorst Street Jersey City, New Jersey 07302 ---------------------------------------- (Address of principal executive offices) (Zip Code) 201-432-0463 ---------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 requirements for the past 90 days. Yes _X_ No ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. At May 1, 2000, there were 2,638,310 shares of Class A Common Stock, $.10 par value, outstanding and 7,941,141 shares of Class B Common Stock, $.10 par value, outstanding.

BEL FUSE INC. INDEX PAGE NUMBER ----------- Part I. Financial Information Item 1. Financial Statements ................................ 1 Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999 ................................... 2 - 3 Consolidated Statements of Opera- tions and Comprehensive Income for the Three Months Ended March 31, 2000 and 1999 (unaudited) ................. 4 - 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 (unaudited) ........................... 6 - 7 Notes to Consolidated Financial Statements (unaudited) .............................. 8 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ....................................... 10 - 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk ....................... 13 Part II. Other Information Item 1. Legal Proceedings ................................... 14 Item 6. Exhibits and Reports on Form 8-K .................... 14 Signatures ............................................................ 15

PART I. Financial Information Item 1. FINANCIAL STATEMENTS Certain information and footnote disclosures required under generally accepted accounting principles have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The results of operations for the three month period ended March 31, 2000 are not necessarily indicative of the results for the entire fiscal year or for any other period. -1-

BEL FUSE INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS March 31, December 31, 2000 1999 ------------ ----------- (Unaudited) Current Assets: Cash and cash equivalents ................. $ 38,764,852 $31,382,629 Marketable securities ..................... 359,357 2,253,039 Accounts receivable, less allowance for doubtful accounts of $670,000 and $661,000 ............................. 16,733,813 18,815,513 Inventories ............................... 24,876,550 24,210,654 Prepaid expenses and other current assets ................................... 741,158 334,820 Deferred income taxes ..................... 223,000 111,000 ------------ ----------- Total Current Assets ................. 81,698,730 77,107,655 Property, plant and equipment - net ........... 36,040,131 36,021,708 Goodwill-net of amortization of $2,418,606 and $2,042,008 ................ 11,370,846 11,747,444 Other assets .................................. 376,235 372,475 ------------ ------------ TOTAL ASSETS ......................... $129,485,942 $125,249,282 ============ ============ (Continued) See notes to consolidated financial statements. -2-

BEL FUSE INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31, 2000 1999 ------------ ------------ (unaudited) Current Liabilities: Accounts payable ............................ $ 4,076,752 $ 4,375,915 Accrued expenses ............................ 9,232,280 9,021,672 Income taxes payable ........................ 866,594 241,850 Dividends payable ........................... 395,356 393,908 ------------ ------------ Total Current Liabilities .............. 14,570,982 14,033,345 Deferred income taxes ........................... 797,000 962,000 ------------ ------------ Total Liabilities ...................... 15,367,982 14,995,345 ------------ ------------ Stockholders' Equity: Preferred stock, no par value - authorized 1,000,000 shares; none issued ................................ - - Class A common stock, par value $.10 per share - authorized 10,000,000 shares; outstanding 2,637,185 and 2,632,197 shares (net of 1,072,770 treasury shares) ......... 263,719 263,220 Class B common stock, par value $.10 per share - authorized 30,000,000 shares; outstanding 7,937,766 and 7,910,306 shares (net of 1,072,770 treasury shares) ......... 793,777 791,031 Additional paid-in capital .................. 9,106,890 8,811,653 Retained earnings ........................... 103,916,210 99,839,765 Cumulative other comprehensive income ..................................... 37,364 548,268 ------------ ------------ Total Stockholders' Equity ............. 114,117,960 110,253,937 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................ $129,485,942 $125,249,282 ============ ============ See notes to consolidated financial statements. -3-

BEL FUSE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) Three Months Ended March 31, ------------------------------ 2000 1999 ------------ ------------ Sales ....................................... $ 26,133,179 $ 30,758,768 ------------ ------------ Costs and Expenses: Cost of sales ........................... 16,704,445 20,314,606 Selling, general and administrative expenses ................ 5,169,744 4,804,871 ------------- ------------ 21,874,189 25,119,477 ------------ ------------ Income from operations ...................... 4,258,990 5,639,291 Other income - net .......................... 1,476,811 151,742 ------------ ------------ Earnings before income taxes ................ 5,735,801 5,791,033 Income tax provision ........................ 1,264,000 670,000 ------------ ------------ Net earnings ................................ $ 4,471,801 $ 5,121,033 ============ ============ Basic earnings per common share ............. $ .42 $ .49 ==== ==== Diluted earnings per common share ........... $ .41 $ .48 ==== ==== Weighted average number of common shares outstanding-basic ............ 10,556,886 10,426,666 ============ ============ Weighted average number of common shares outstanding and potential common shares - diluted .......... 10,856,269 10,764,940 ============ ============ (Continued) See notes to consolidated financial statements. -4-

BEL FUSE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) Three Months Ended March 31, ------------------------------ 2000 1999 ---------- ---------- Net earnings .............................. $4,471,801 $5,121,033 Other comprehensive income (expense), net of income taxes: Unrealized loss on marketable securities ............................ (502,912) - Foreign currency translation adjustment ................ (7,992) 6,947 ---------- ---------- Comprehensive income ...................... $3,960,897 $5,127,980 ========== ========== See notes to consolidated financial statements. -5-

BEL FUSE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended March 31, -------------------------- 2000 1999 ----------- ----------- Cash flows from operating activities: Net income ................................... $ 4,471,801 $ 5,121,033 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................ 1,588,649 1,469,208 Gain on sale of marketable securities .................................. (1,012,095) - Other ........................................ 148,000 (71,000) Changes in operating assets and liabilities ................................. 1,506,682 (5,397,316) ----------- ----------- Net Cash Provided by Operating Activities .............................. 6,703,037 1,121,925 ----------- ----------- Cash flows from investing activities: Purchase of property, plant and equipment ....................................... (1,246,795) (1,270,983) Proceeds from sale of marketable securities ...................................... 2,071,157 - Proceeds from repayment by contractors ........... 32,250 32,250 ---------- ----------- Net Cash (Used in) Provided by Investing Activities ................. 856,612 (1,238,733) ----------- ----------- Cash flows from financing activities: Proceeds from exercise of stock options .......... 216,482 229,026 Dividends paid to common shareholders ............ (393,908) (260,466) ----------- ---------- Net Cash (Used in) Financing Activities ........................ (177,426) (31,440) ----------- ----------- Net increase (decrease) in Cash ................... 7,382,223 (148,248) Cash and Cash Equivalents - beginning of period .............................. 31,382,629 14,923,685 ----------- ----------- Cash and Cash Equivalents - end of period .................................... $38,764,852 $14,775,437 =========== =========== (Continued) See notes to consolidated financial statements. -6-

BEL FUSE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (unaudited) Three Months Ended March 31, -------------------------- 2000 1999 ---------- ----------- Changes in operating assets and liabilities consist of: (Increase) decrease in accounts receivable ................................. $ 2,072,700 $(3,148,854) (Increase) in inventories ................... (665,896) (1,887,878) (Increase) in prepaid expenses and other current assets ....................... (438,588) (352,690) (Increase) decrease in other assets ......... (3,760) 31,832 Increase (decrease) in accounts payable ..... (299,163) 620,640 Increase (decrease) in accrued expenses ..... 216,645 (1,040,993) Increase in income taxes payable ............ 624,744 380,627 ----------- ----------- ................................................ $ 1,506,682 $(5,397,316) =========== =========== Supplementary information: Cash paid during the period for: Income taxes ................................ $ 370,000 $ 344,000 =========== =========== Non-cash investing activities: Unrealized (loss) on marketable securities ................................. $ (502,912) $ - =========== =========== See notes to consolidated financial statements. -7-

BEL FUSE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of March 31, 2000, and the consolidated statements of operations and comprehensive income and cash flows for the periods presented herein have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations and comprehensive income and cash flows for all periods presented have been made. The information for December 31, 1999 was derived from audited financial statements. 2. Earnings Per Share Basic earnings per common share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share are computed using the weighted average number of common shares and potential common shares outstanding during the period. 3. Common Stock On November 5, 1999 the Board of Directors declared a two for one stock split to be paid in the form of a special dividend of one share of Class B common stock for each share of Class A and Class B outstanding. The special dividend was payable on December 1, 1999 to all Class A and Class B shareholders of record on November 22, 1999. The Board also approved an amendment to the Company's Certificate of Incorporation increasing the number of authorized shares of Class B common stock from 10,000,000 shares to 30,000,000 shares. All shares and per share data have been retroactively adjusted to reflect the two for one stock split. 4. Business Segment Information The Company does not have reportable operating segments as defined in Statement of Financial Accounting Standards No.131, "Disclosures about Segments of an Enterprise and Related Information". The method for attributing revenues for interim purposes is based on total shipments from the country of origination less intergeographic revenues. The Company operates facilities in the United States, Europe and the Far East. The primary criteria by which financial performance is evaluated and resources are allocated include revenues and operating income. The following is a summary of key financial data: -8-

BEL FUSE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended March 31, ----------------------------- 2000 1999 ----------- ----------- Total Revenues: United States ........................... $14,066,321 $19,807,466 Asia .................................... 25,997,575 28,520,578 Less intergeographic revenues ............................... (13,930,717) (17,569,276) ----------- ----------- $26,133,179 $30,758,768 =========== ----------- Income from Operations: United States ............................ $ 989,732 $ 2,227,732 Asia ..................................... 3,269,258 3,411,559 ----------- ----------- $ 4,258,990 $ 5,639,291 =========== =========== 5. On May 10, 2000 the Board of Directors authorized the repurchase of up to 10% of the Company's outstanding shares. -9-

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's quarterly and annual operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability including the following: (a) the risk that the Company may be unable to respond adequately to rapidly changing technological developments in its industry, (b) risks associated with its Far East operations described herein under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," (c) the highly competitive nature of the Company's industry and the impact that competitors' new products and pricing may have upon the Company, (d) the likelihood that revenues may vary significantly from one accounting period to another accounting period due to a variety of factors, including customers' buying decisions, the Company's product mix and general market and economic conditions, (e) the Company's reliance on certain substantial customers, and (f) risks associated with the Company's ability to manufacture and deliver products in a manner that is responsive to its customers' needs. As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, financial condition, operating results, and stock prices. Furthermore, this document and other documents filed by the Company with the Securities and Exchange Commission (the "SEC") contain certain forward-looking statements under the Private Securities Litigation Reform Act of 1995 with respect to the business of the Company. These forward-looking statements are subject to certain risks and uncertainties, including those mentioned above, and those detailed in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1999, which could cause actual results to differ materially from these forward-looking statements. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be necessary to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. An investment in the Company involves various risks, including those mentioned above and those which are detailed from time to time in the Company's SEC filings. -10-

RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage relationship to net sales of certain items included in the Company's consolidated statements of operations. Percentage of Net Sales ------------------ Three Months Ended March 31, ----------------- 2000 1999 ------ ------ Net sales ................................... 100.0% 100.0% Cost of sales ............................... 63.9 66.1 Selling, general and administrative expenses .................... 19.8 15.6 Other income - net .......................... 5.7 .5 Earnings before income tax provision .............................. 22.0 18.8 Income tax provision ........................ 4.8 2.2 Net earnings ................................ 17.2 16.6 The following table sets forth, for the periods indicated, the percentage increase (decrease) of items included in the Company's consolidated statements of operations. Increase (Decrease) From Prior Period ------------------- Three Months Ended March 31, 2000 Compared With 1999 ------------------- Net sales .................................. (15.0)% Cost of sales .............................. (17.8) Selling, general and administrative expenses .................................. 7.6 Other income - net ......................... 873.2 Earnings before income tax provision ...................... (1.0) Income tax provision ....................... 88.7 Net earnings ............................... (12.7) -11-

THREE MONTHS ENDED MARCH 31, 2000 VS. THREE MONTHS ENDED MARCH 31, 1999 NET SALES Net sales decreased 15.0 % from $30,758,768 during the first three months of 1999 to $26,133,179 during the first three months of 2000. The Company attributes this decrease to lower sales of magnetic products primarily due to the impact of a change in the structure of the supply channel by two of the Company's largest customers offset in part by belMag(TM) and fuse sales. COST OF SALES Cost of sales as a percentage of net sales decreased 2.2 % to 63.9 % during the first three months of 2000 from 66.1 % during the first three months of 1999. The decrease in the cost of sales percentage is primarily attributable to lower factory overhead expenses due to the move of Telcom production to the Far East from Texas during the fourth quarter of 1999 and lower raw material content associated with the current sales mix. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The percentage relationship of selling, general and administrative expenses to net sales increased 4.2 % to 19.8 % during the first three months of 2000 from 15.6 % during the first three months of 1999. The Company attributes the percentage increase primarily to decreased sales. Selling, general and administrative expenses increased in dollar amount by approximately $365,000. The Company attributes the increase in dollar amount of such expenses primarily to increases in sales and marketing salaries and related expenses. OTHER INCOME AND EXPENSE Other income, consisting principally of gain on the sale of marketable securities, during the first three months of 2000, and interest earned on cash equivalents, increased by approximately $1,325,000 during the first three months of 2000 compared to the first three months of 1999. The increase is due to the gain on the sale of marketable securities and higher interest income due to higher cash and cash equivalent balances. PROVISION FOR INCOME TAXES The provision for income taxes for the first three months of 2000 was $1,264,000 as compared to $670,000 for the first three months of 1999. The increase in the provision is due primarily to higher United States taxes from the gain on the sale of marketable securities and higher foreign earnings subject to taxes in 2000 versus 1999. -12-

LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has financed its capital expenditures through cash flows from operating activities. Management believes that the cash flow from operations, combined with its existing capital base and the Company's available lines of credit, will be sufficient to fund its operations for the near term. This statement represents a Forward-Looking Statement. Actual results could differ materially from such statement if the Company experiences substantial unanticipated cash requirements. The Company has lines of credit, all of which were unused at March 31, 2000, in the aggregate amount of $14 million, of which $12 million is from domestic banks and $2 million is from foreign banks. The Company has contracted for the renovation and addition of new corporate offices in Jersey City in the amount of $2.5 million. As of March 31, 2000 approximately $200,000 has been paid towards this contract. On May 10, 2000 the Board of Directors authorized the repurchase of up to 10% of the Company's outstanding shares. During the first three months of 2000, the Company's cash and cash equivalents increased by approximately $7.4 million, reflecting approximately $6.7 million provided by operating activities and approximately $2.1 million from the sale of marketable securities, offset, in part, by approximately $1.2 million in purchases of plant and equipment and approximately $.4 million in dividends paid to common shareholders. Cash and cash equivalents and accounts receivable comprised approximately 42.9 % and 40.1 % of the Company's total assets at March 31, 2000 and December 31, 1999, respectively. The Company's current ratio (i.e., the ratio of current assets to current liabilities) was 5.6 to 1 and 5.5 to 1 at March 31, 2000 and December 31, 1999, respectively. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable - no significant changes to the information included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. -13-

PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS See Item 3 of the Company's Form 10-K for the year ended December 31, 1999. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27.1 Financial Data Schedule (b) There were no Current Reports on Form 8-K filed by the registrant during the quarter ended March 31, 2000. -14-

SIGNATURES 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. BEL FUSE INC. By: /S/ DANIEL BERNSTEIN ------------------------------- Daniel Bernstein, President (Principal Financial and Accounting Officer) Dated: May 12, 2000 -15-

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BEL FUSE INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AT MARCH 31, 2000 AND THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 12-MOS DEC-31-2000 MAR-31-2000 38,764,852 359,357 17,403,813 670,000 24,876,550 81,698,730 68,944,039 32,903,908 129,485,942 14,570,982 0 1,057,496 0 0 113,060,464 129,485,942 26,133,179 26,133,179 16,704,445 21,874,149 0 0 0 5,735,801 1,264,000 4,471,801 0 0 0 4,471,801 .42 .41