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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, 1996
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, 1996, there were 5,054,445 shares of 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, 1996 (unaudited) and
December 31, 1995 .................................... 2 - 3
Consolidated Statements of Opera-
tions for the Three Months Ended
March 31, 1996 and 1995
(unaudited) .......................................... 4
Consolidated Statements of
Cash Flows for the Three Months
Ended March 31, 1996 and 1995
(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 - 11
Part II. Other Information
Item 1. Legal Proceedings .................................... 12
Item 6. Exhibits and Reports on Form 8-K ..................... 12
Signatures ......................................................... 13
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, 1995.
The results of operations for the three month period ended March 31, 1996,
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,
1996 1995
----------- ------------
(unaudited)
Current Assets:
Cash and cash equivalents .................. $12,052,634 $ 8,343,925
Marketable securities ...................... 5,701,320 5,556,740
Accounts receivable, less allowance
for doubtful accounts of $155,000 ......... 10,515,351 11,705,344
Inventories ................................ 10,406,607 10,799,731
Prepaid expenses and other current
assets .................................... 524,833 239,511
----------- -----------
Total Current Assets .................. 39,200,745 36,645,251
Property, plant and equipment - net ............ 26,369,821 26,662,351
Unamortized excess of cost over fair
value of assets acquired ...................... 139,747 145,579
Other assets ................................... 960,677 1,022,493
----------- -----------
TOTAL ASSETS .......................... $66,670,990 $64,475,674
=========== ===========
(Continued)
See notes to consolidated financial statements.
-2-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1996 1995
---------- ------------
(unaudited)
Current Liabilities:
Accounts payable ............................. $ 2,717,133 $ 3,374,433
Accrued expenses ............................. 4,086,405 4,049,366
Income taxes payable ......................... 598,895 539,924
Deferred income taxes ........................ 366,000 38,000
----------- -----------
Total Current Liabilities ............... 7,768,433 8,001,723
Deferred income taxes ............................ 532,000 584,000
----------- -----------
Total Liabilities ....................... 8,300,433 8,585,723
----------- -----------
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 5,055,445 and
5,051,445 shares ............................ 505,545 505,145
Additional paid-in capital ................... 6,836,000 6,811,900
Retained earnings ............................ 50,348,215 48,115,306
Net unrealized gain on marketable
securities .................................. 680,797 457,600
----------- -----------
Total Stockholders' Equity .............. 58,370,557 55,889,951
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ................................. $66,670,990 $64,475,674
=========== ===========
See notes to consolidated financial statements.
-3-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
---------------------------
1996 1995
---------- -----------
Sales .......................................... $17,262,328 $15,849,971
----------- -----------
Costs and Expenses:
Cost of sales .............................. 12,040,350 11,637,932
Selling, general and administrative
expenses .................................. 2,794,291 2,680,975
----------- -----------
14,834,641 14,318,907
----------- -----------
Income from operations ......................... 2,427,687 1,531,064
Other income - net ............................. 166,222 51,395
Interest (expense) ............................. -- (2,887)
----------- -----------
Earnings before income taxes ................... 2,593,909 1,579,572
Income tax provision ........................... 361,000 106,000
----------- -----------
Net earnings ................................... $ 2,232,909 $ 1,473,572
=========== ===========
Earnings per common share ...................... $ .44 $ .30
=========== ===========
Weighted average number of common
shares outstanding ......................... 5,051,857 4,969,594
=========== ===========
See notes to consolidated financial statements.
-4-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
----------------------------
1996 1995
----------- -----------
Cash flows from operating activities:
Net income .............................. $ 2,232,909 $ 1,473,572
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ........... 763,745 640,495
Deferred income taxes ................... 104,000 98,000
Net loss on sale of marketable
securities ............................. 888 66,702
Changes in operating assets and
liabilities ............................ 633,300 (2,162,820)
----------- -----------
Net Cash Provided by Operating
Activities ......................... 3,734,842 115,949
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment .................................. (465,383) (1,143,452)
Proceeds from sale of marketable
securities ............................... 400,000 620,938
Proceeds from repayment by contractor ....... 14,750 7,250
----------- -----------
Net Cash (used in) Investing
Activities ......................... (50,633) (515,264)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options ..... 24,500 33,938
Repayment of borrowings ..................... -- (300,000)
----------- -----------
Net Cash Provided by (used in)
Financing Activities ............... 24,500 (266,062)
----------- -----------
Net Increase (Decrease) in Cash .............. 3,708,709 (665,377)
Cash and Cash Equivalents -
beginning of period ......................... 8,343,925 2,842,894
----------- -----------
Cash and Cash Equivalents -
end of period ............................... $12,052,634 $ 2,177,517
=========== ===========
(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,
---------------------------
1996 1995
----------- -----------
Changes in operating assets and
liabilities consist of:
Decrease (increase) in accounts
receivable .................................. $1,189,993 $(1,942,259)
Decrease (increase) in inventories ........... 393,124 (801,546)
Decrease (increase) in prepaid
expenses and other current assets ........... (301,983) 482,244
Decrease in other assets ..................... 61,819 35,324
Decrease in accounts payable ................. (657,300) (457,517)
Increase (decrease) in accrued
expenses .................................... (110,824) 520,934
Increase in income taxes payable ............. 58,471 --
---------- -----------
$ 633,300 $(2,162,820)
========== ===========
Supplementary information:
Cash paid during the period for:
Interest ..................................... $ -- $ 2,887
========== ===========
Income taxes ................................. $ 184,000 $ 11,000
========== ===========
Supplemental disclosures of non-cash activities:
Unrealized gains on marketable
securities ................................. $ 223,197 $ 740,665
========== ===========
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, 1996, and the consolidated
statements of operations and cash flows for the three months ended March 31,
1996 and 1995 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, 1995 financial statements have been reclassified to
conform to March 31, 1996 classifications. The information for December 31, 1995
was derived from audited financial statements.
2. Earnings Per Share--Earnings 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, 1996 and 1995 was not
material.
3. In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation", which is effective for the Company beginning January 1, 1996.
SFAS No. 123 requires expanded diclosures of stock-based compensation
arrangements with employees in notes to annual financial statements and
encourages (but does not require) compensation cost to be measured based on the
fair value of the equity instrument awarded. Companies are permitted, however,
to continue to apply APB Opinion No. 25, which recognizes compensation cost
based on the intrinsic value of the equity instrument awarded. The Company will
continue to apply APB Opinion No. 25 to its stock based compensation awards to
employees and will disclose the required pro forma effect on net income and
earnings per share in its annual financial statements.
4. Inventories consist of the following:
March 31, 1996 December 31, 1995
-------------- -----------------
Raw materials ................. $ 7,328,712 $ 7,059,330
Work-in-process ............... 67,243 191,518
Finished goods ................ 3,010,652 3,548,883
----------- -----------
$10,406,607 $10,799,731
=========== ===========
-7-
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. Property, plant and equipment consists of the following:
March 31, 1996 December 31, 1995
-------------- -----------------
Land ................................ $ 835,218 $ 835,218
Buildings and improvements .......... 13,571,011 13,481,550
Machinery and equipment ............. 30,755,561 30,379,639
Idle property held for sale ......... 935,000 935,000
----------- -----------
46,096,790 45,631,407
Less accumulated
depreciation and
amortization ....................... 19,726,969 18,969,056
----------- -----------
Net property, plant and
equipment .......................... $26,369,821 $26,662,351
=========== ===========
6. 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, the
Company recognized $286,000, as a reduction of United States and Far East tax
expense.
7. SUBSEQUENT EVENT
During April, 1996 the Company sold 112,485 shares of Technitrol, Inc.
("Technitrol") common stock for net proceeds of approximately $3.6 million.
-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 periods 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.
Percentage of Net Sales
--------------------------
Three Months Ended
March 31,
---------------------------
1996 1995
---------- ---------
Net sales ..................................... 100.0% 100.0%
Cost of sales ................................. 69.8 73.4
Selling, general and
administrative expenses ...................... 16.2 16.9
Other income, net of
interest expense ............................. 1.0 .3
Earnings before income
tax provision ................................ 15.0 10.0
Income tax provision .......................... * *
Net earnings .................................. 12.9 9.3
The following table sets forth, for the periods indicated, the percentage
increase of items included in the Company's consolidated statements of
operations.
Increase from
Prior Period
-------------------
Three Months Ended
March 31, 1996
compared with 1995
-------------------
Net sales ........................................ 8.9%
Cost of sales .................................... 3.5
Selling, general and
administrative expenses ......................... 4.2
Other income--net ............................... *
Earnings before income tax
provision ....................................... 64.2
Income tax provision ............................. *
Net earnings ..................................... 51.5
* Percentage not meaningful
-9-
Sales
-----
Net sales increased 8.9% from $15,849,971 during the first three months of
1995 to $17,262,328 during the first three months of 1996. The Company
attributes this increase primarily to strong demand from OEM customers for
network products and increased sales to the automotive industry. Increased
network sales are due primarily to a greater focus on certain key OEM accounts
and sales growth from improvements in the Company's engineering service and
support to major OEM customers.
Cost of Sales
--------------
Cost of sales as a percentage of net sales decreased 3.6% from 73.4% during
the first three months of 1995 to 69.8% during the first three months of 1996.
The decrease in the cost of sales percentage is primarily attributable to (i)
increased sales, which resulted in better absorption of indirect labor and
overhead and (ii) lower 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 decreased from 16.9% for the first three months of 1995 to 16.2%
for the first three months of 1996. The Company attributes the decrease
primarily to the increase in sales, as the Company was able to leverage the
increase in the dollar amount of such expenses over an increased revenue base.
Selling, general and administrative expenses increased in dollar amount by 4.2%.
The Company attributes the increase in the dollar amount of such expenses
primarily to increases in 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 and net realized losses on the sale of marketable securities,
increased by approximately $118,000 from the first three months of 1995 to the
first three months of 1996. This increase is primarily due to higher earnings on
invested funds due to higher average balances and lower net realized losses in
the first three months of 1996 compared to the first three months of 1995.
Provision for Income Taxes
--------------------------
The provision for income taxes for the first three months of 1996 was
$361,000 as compared to $106,000 for the first three months of 1995. The Company
attributes this change primarily to the higher earnings before income tax for
the first three months of 1996 versus 1995.
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 cash flows. 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,
1996, in the aggregate amount of $7,000,000, of which $5,000,000 is from
domestic banks and $2,000,000 is from foreign banks.
During April, 1996 the Company sold 112,485 shares of Technitrol, Inc.
("Technitrol") common stock for net proceeds of approximately $3.6 million.
During the first three months of 1996, the Company's cash increased by
$3.7 million, principally reflecting $3.7 million provided by operating
activities and $400,000 from the sale of marketable securities offset in part by
$465,000 in purchases of property, plant and equipment.
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
three months of 1996 or 1995.
The Company's shareholders' equity increased by $2.5 million from
December 31, 1995 to March 31, 1996, reflecting the Company's first three months
profit of $2.2 million, an increase of $223,000 net unrealized gain on
marketable securities and the exercise of incentive stock options of $25,000.
Cash, accounts receivable and marketable securities comprised
approximately 42.4% and 39.7% of the Company's total assets at March 31, 1996
and December 31, 1995, respectively. The Company's current ratio (i.e., the
ratio of current assets to current liabilities) was 5.1 to 1 and 4.6 to 1 at
March 31, 1996 and December 31, 1995, respectively.
-11-
PART II. Other Information
Item 1. Legal Proceedings
-----------------
See Item 3 of the Company's Form 10-K for the
year ended December 31, 1995.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: Exhibit 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,
1996.
-12-
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 14, 1996
-13-