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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, 1995
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, 1995, there were 4,977,820 shares of Common Stock, $.10 par
value, outstanding.
BEL FUSE INC.
INDEX
Page Number
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Part I. Financial Information
Item 1. Financial Statements 1
Consolidated Balance Sheets as of
March 31, 1995 (unaudited) and
December 31, 1994 2-3
Consolidated Statements of Operations
for the Three Months Ended
March 31, 1995 and 1994 (unaudited) 4
Consolidated Statements of
Cash Flows for the Three Months
Ended March 31, 1995 and 1994
(unaudited) 5-6
Notes to Consolidated Financial
Statements (unaudited) 7-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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, although the registrant believes that the
disclosures are adequate to insure that the information presented is not
misleading. 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, 1994.
The results of operations for the three month period ended March 31, 1995,
are not necessarily indicative of the results to be expected for the entire
fiscal year or for any other period.
-1-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1995 1994
----------- ------------
(unaudited)
Current Assets:
Cash and equivalents ....................... $ 2,177,517 $ 2,842,894
Marketable securities ...................... 7,569,389 7,508,304
Accounts receivable, less allowance
for doubtful accounts of $70,000 .......... 10,022,230 8,079,971
Inventories ................................ 9,567,749 8,766,203
Prepaid expenses and other current
assets .................................... 470,270 959,764
----------- -----------
Total Current Assets .................. 29,807,155 28,157,136
----------- -----------
Property, plant and equipment--net ............. 22,734,203 22,226,076
Unamortized excess of cost over fair
value of assets acquired ...................... 161,754 166,925
Other assets ................................... 1,067,574 1,102,898
----------- -----------
TOTAL ASSETS .......................... $53,770,686 $51,653,035
=========== ===========
(Continued)
See notes to consolidated financial statements.
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BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1995 1994
----------- ------------
(unaudited)
Current Liabilities:
Note payable ............................... $ -- $ 300,000
Accounts payable ........................... 2,713,891 3,171,408
Accrued expenses ........................... 2,516,529 1,987,536
Deferred income taxes ...................... 28,000 28,000
----------- -----------
Total Current Liabilities ............. 5,258,420 5,486,944
Deferred income taxes .......................... 338,000 240,000
----------- -----------
Total Liabilities ..................... 5,596,420 5,726,944
----------- -----------
Stockholders' Equity:
Preferred stock, no par value--
authorized 1,000,000 shares;
none issued ............................... -- --
Common stock, par value $.10 per
share--authorized 10,000,000
shares; outstanding 4,975,445 and
4,965,195 shares .......................... 497,545 496,520
Additional paid-in capital ................. 6,321,900 6,288,987
Retained earnings .......................... 41,490,803 40,017,231
Net unrealized loss on marketable
securities ................................ (135,982) (876,647)
----------- -----------
Total Stockholders' Equity ............ 48,174,266 45,926,091
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ............................... $53,770,686 $51,653,035
=========== ===========
See notes to consolidated financial statements.
.
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BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
----------------------------
1995 1994
----------- -----------
Sales ....................................... $15,849,971 $ 9,423,962
----------- -----------
Costs and Expenses:
Cost of sales ............................. 11,637,932 7,755,139
Selling, general and administrative
expenses ................................ 2,680,975 2,537,609
----------- -----------
14,318,907 10,292,748
----------- -----------
Income (loss) from operations ............... 1,531,064 (868,786)
Other income--net ........................... 51,395 172,697
Interest expense ............................ 2,887 403
----------- -----------
Earnings (loss) before income taxes ......... 1,579,572 (696,492)
Income tax provision (benefit) .............. 106,000 (31,000)
----------- -----------
Net earnings (loss) ......................... $ 1,473,572 $ (665,492)
=========== ===========
Earnings (loss) per common share ............ $ .30 $ (.13)
=== ====
Weighted average number of common
shares outstanding ........................ 4,969,594 4,935,821
=========== ===========
See notes to consolidated financial statements.
-4-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-----------------------------
1995 1994
----------- -----------
Cash flows from operating activities:
Net income (loss) ....................... $ 1,473,572 $ (665,492)
Adjustments to reconcile net income
(loss) to net cash provided from
operating activities:
Depreciation and amortization ........... 640,495 599,070
Deferred income taxes ................... 98,000 (33,000)
Net (gain) loss on sale of
marketable securities .................. 66,702 (8,165)
Changes in operating assets and
liabilities ............................ (2,162,820) 136,163
----------- -----------
Net Cash Provided by Operating
Activities ......................... 115,949 28,576
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment .................................. (1,143,452) (1,714,086)
Purchase of marketable securities ........... -- (2,218,762)
Proceeds from sale of marketable
securities ............................... 620,938 817,977
Proceeds from repayment by contractor ....... 7,250 7,250
----------- -----------
Net Cash (used in) Investing
Activities ......................... (515,264) (3,107,621)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options ..... 33,938 11,625
Repayment of borrowings ..................... (300,000) (1,148)
----------- -----------
Net Cash Provided by (used in)
Financing Activities ............... (266,062) 10,477
----------- -----------
Net Decrease in Cash and Cash
Equivalents ................................ (665,377) (3,068,568)
Cash and Cash Equivalents--Beginning
of Period ................................... 2,842,894 8,102,768
----------- -----------
Cash and Cash Equivalents--End of
Period ...................................... $ 2,177,517 $ 5,034,200
=========== ===========
(Continued)
See notes to consolidated financial statements.
-5-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(Unaudited)
Three Months Ended
March 31,
--------------------------
1995 1994
----------- -----------
Changes in operating assets and
liabilities consist of:
(Increase) decrease in accounts
receivable .................................. $(1,942,259) $ 500,337
(Increase) decrease in inventories ........... (801,546) 350,680
(Increase) decrease in prepaid
expenses and other current assets ........... 482,244 (226,365)
Increase (decrease) in other assets .......... 35,324 (165,866)
(Decrease) in accounts payable ............... (457,517) (44,303)
Increase (decrease) in accrued
expenses .................................... 520,934 (278,320)
----------- ----------
$(2,162,820) $ 136,163
=========== ===========
Supplementary information:
Cash paid during the period for:
Interest ..................................... $ 2,887 $ 403
=========== ===========
Income taxes ................................. $ 11,000 $ 589,000
=========== ===========
Supplemental disclosures of non-cash activities:
Unrealized gains (losses) on
marketable securities ...................... $ 740,665 $ (192,000)
=========== ===========
See notes to consolidated financial statements.
-6-
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of March 31, 1995, and the
consolidated statements of operations and cash flows for the three months ended
March 31, 1995 and 1994 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 cash flows for all periods presented have been made.
Certain items in the March 31, 1994 financial statements have been reclassified
to conform to March 31, 1995 classifications.
2. Earnings (Loss) Per Share--Earnings (loss) per common share are computed
using the weighted average number of common shares outstanding during the
period. The dilutive effect of outstanding options at March 31, 1995 was not
material and were not considered at March 31, 1994 as their effect is
antidilutive.
3. Inventories consist of the following:
March 31, 1995 December 31, 1994
-------------- -----------------
Raw materials ...................... $ 6,962,796 $ 6,552,826
Work-in-process .................... 325,838 35,897
Finished goods ..................... 2,279,115 2,177,480
---------- ----------
$ 9,567,749 $ 8,766,203
========== ==========
4. Property, plant and equipment consists of the following:
March 31, 1995 December 31, 1994
-------------- -----------------
Land ............................... $ 686,987 $ 686,987
Buildings and improvements ......... 10,346,434 10,121,169
Machinery and equipment ............ 27,922,848 27,004,662
Idle property held for sale ........ 935,000 935,000
----------- -----------
39,891,269 38,747,818
Less accumulated depreciation
and amortization .................. 17,157,066 16,521,742
----------- -----------
Net property, plant and equipment .. $22,734,203 $22,226,076
=========== ===========
-7-
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. INCOME TAXES
Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes" (SFAS 109), provides for the recognition of deferred assets
subject to a valuation allowance. At December 31, 1994, the Company established
a valuation allowance equal to the full amount of the tax effect of the net
operating loss carryforward. For the three months ended March 31, 1995 and 1994,
the Company recognized approximately $288,000 and $-0-, respectively as a
reduction of United States and Far East tax expense.
-8-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
a. Results of Operations
The following table sets forth, for the period indicated, the percentage
relationship to net sales of certain items included in the Company's
consolidated statements of operations and the percentage increase for such
items.
Increase (Decrease)
Percentage of Net Sales from Prior Period
------------------------ ------------------
Three Months Ended Three Months Ended
March 31, March 31, 1995
1995 1994 Compared with 1994
-------- -------- ------------------
Net sales ................. 100.0% 100.0% 68.2%
Cost of sales ............. 73.4 82.3 50.1
Selling, general and
administrative expenses .. 16.9 26.9 5.7
Other income, net of
interest expense ......... .3 1.8 (70.2)
Earnings (loss) before
income tax provision
(benefit) ................ 10.0 (7.4) *
Income tax provision
(benefit) ................ .7 (.3) *
Net earnings (loss) ....... 9.3 (7.1) *
* Percentage not meaningful
Sales
Net sales increased 68.2% from $9,423,962 during the first quarter of 1994
to $15,849,971 during the first quarter of 1995. The Company attributes this
increase primarily to increases in sales of packaged modules and transformers.
Cost of Sales
Cost of sales as a percentage of net sales decreased 8.9% from 82.3% during
the first quarter of 1994 to 73.4% during the first quarter of 1995. The
decrease in the cost of sales percentage is primarily attributable to increased
sales, which resulted in better absorption of labor and overhead despite higher
material costs associated with the manufacture of packaged modules, and the move
to lower cost manufacturing facilities in the Far East.
-9-
Selling, General and Administrative Expenses
The percentage relationship of selling, general and administrative expenses
to net sales decreased 10% from the first quarter of 1994 to the first quarter
of 1995. The Company attributes the decrease primarily to the increase in sales.
Selling, general and administrative expenses increased in dollar amount by
5.7%. The Company attributes the increase primarily to commissions and other
sales related expenses due to higher sales.
Other Income and Expenses
Other income, consisting of earnings on cash equivalents and marketable
securities offset by realized losses on the sale of marketable securities,
decreased by approximately $124,000 from the first quarter of 1994 to the first
quarter of 1995. This decrease is primarily due to the Company and its Far East
subsidiary realizing approximately $67,000 of losses from the sale of marketable
securities during the first quarter of 1995, lower earnings on invested funds
due to lower average balances, and certain non-income generating securities
owned in 1995.
Provision for Income Taxes
The provision (benefit) for income taxes increased from a (benefit) of
$31,000 for the first quarter of 1994 to a provision of $106,000 for the first
quarter of 1995. The Company attributes this change primarily to the earnings
before income tax for the first quarter of 1995 versus the loss before income
tax during the first quarter of 1994. The utilization of United States and Far
East net operating loss carryforward in 1995 reduced income taxes by
approximately $288,000 and had no impact in 1994.
The Company's effective tax rate has been lower than the statutory United
States corporate rate primarily as a result of the lower tax rates in Hong Kong
and Macau and the utilization of tax benefits arising from the operating loss
carryforward in the United States and the Far East.
-10-
Liquidity and Capital Resources
Historically, the Company has financed its capital expenditures through
operating profits. In addition, the capital base was enhanced in prior years as
a result of public offerings of common stock by the Company and, in 1992, by the
sale of a facility in Hong Kong. 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.
The Company has lines of credit, all of which were unused at March 31,
1995, in the aggregate amount of $5,000,000, of which $3,000,000 is from
domestic banks and $2,000,000 is from foreign banks.
From October 3, 1994 through November 8, 1994, the Company acquired in the
market 531,400 Class A Voting Common Shares of Pulse Engineering, Inc.
("Pulse"), representing approximately 9.7% of Pulse's outstanding shares at a
cost of $2,464,839.
On April 19, 1995 the Company proposed, subject to a definitive merger
agreement, to acquire all of Pulse's common stock. The Company's offer involved
the issuance of stock (0.73 shares of the Company's Common Stock for each Pulse
share) and contingent value rights (assuring that such 0.73 share interest would
produce at least $8.00 of value within three years) and the partial spin-off of
certain assets associated with Pulse's Spectrum business.
Pulse subsequently announced that its Board of Directors had accepted a
revised offer from Technitrol, Inc. ("Technitrol"), to acquire all of Pulse's
outstanding common stock at a per share price of $4.25 per share in cash plus
.2906 shares of Technitrol common stock, subject to certain adjustments. The
Company understands that Pulse and Technitrol are presently seeking to negotiate
a definitive agreement, although the Company has had no involvement in such
negotiations.
As of the date hereof, the Company had made no decision regarding the steps
that it may take with respect to its Pulse shares.
During the first quarter of 1995, the Company's cash and cash equivalent
position declined by $665,000, principally reflecting $1.1 million in purchases
of fixed assets and repayment of $300,000 of long-term debt, offset by the
proceeds of approximately $620,000 from the sale of marketable securities.
The Company has historically followed a policy of reinvesting the earnings
of foreign subsidiaries in the Far East. If the unrepatriated funds were
distributed to the parent corporation, such funds would be subject to United
States federal income taxes. No funds were repatriated during the first quarter
of 1995 or 1994.
-11-
Liquidity and Capital Resources (Continued)
The Company's shareholders' equity increased by $2.2 million from December
31, 1994 to March 31, 1995, reflecting the Company's first quarter profit of
$1.5 million and a reduction of the net unrealized loss on marketable securities
of $740,000.
Cash, accounts receivable and marketable securities comprised approximately
36.8% and 35.7% of the Company's total assets at March 31, 1995 and December 31,
1994, respectively. The Company's current ratio (i.e., the ratio of current
assets to current liabilities) was 5.7 to 1 and 5.1 to 1 at March 31, 1995 and
December 31, 1994, respectively.
-12-
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) There were no Current Reports on Form 8-K filed by the
registrant during the quarter ended March 31, 1995.
-13-
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, 1995
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