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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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.
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(Exact name of registrant as specified in its charter)
New Jersey 22-1463699
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(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)
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(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, 1997, there were 5,073,195 shares of Common Stock, $.10 par
value, outstanding.
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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, 1997 (unaudited) and
December 31, 1996 2-3
Consolidated Statements of Operations
for the Three Months Ended
March 31, 1997 and 1996 (unaudited) 4
Consolidated Statements of
Cash Flows for the Three Months
Ended March 31, 1997 and 1996
(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, 1996.
The results of operations for the three month period ended March 31, 1997,
are not necessarily indicative of the results to be expected for the entire
fiscal year or for any other period.
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BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1997 1996
----------- -----------
(unaudited)
Current Assets:
Cash and cash equivalents ................... $21,947,633 $23,498,491
Marketable securities ....................... 4,347,610 2,981,020
Accounts receivable, less allowance
for doubtful accounts of $195,000 .......... 8,431,920 8,866,440
Inventories ................................. 9,814,403 8,411,540
Prepaid expenses and other current
assets ..................................... 533,298 479,012
Deferred income taxes ....................... 101,000 101,000
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Total Current Assets .................... 45,175,864 44,337,503
Property, plant and equipment - net ........... 26,820,507 26,321,014
Other assets .................................. 842,073 955,491
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TOTAL ASSETS ............................ $72,838,444 $71,614,008
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(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,
1997 1996
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(unaudited)
Current Liabilities:
Accounts payable $ 2,738,651 $ 3,297,825
Accrued expenses 4,099,313 3,846,626
Income taxes payable 448,858 320,460
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Total Current Liabilities 7,286,822 7,464,911
Deferred income taxes 812,000 750,000
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Total Liabilities 8,098,822 8,214,911
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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 5,073,195 and
5,070,820 shares 507,320 507,082
Additional paid-in capital 6,994,412 6,978,900
Retained earnings 57,230,695 55,920,836
Cumulative currency translation
adjustment 7,195 (7,721)
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Total Stockholders' Equity 64,739,622 63,399,097
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $72,838,444 $71,614,008
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See notes to consolidated financial statements.
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BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
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March 31,
---------------------------
1997 1996
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Sales ......................................... $15,962,204 $17,262,328
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Costs and Expenses:
Cost of sales ............................... 11,370,115 12,040,350
Selling, general and administrative
expenses ................................... 3,093,309 2,794,291
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14,463,424 14,834,641
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Income from operations ........................ 1,498,780 2,427,687
Other income -- net ........................... 340,079 166,222
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Earnings before income taxes .................. 1,838,859 2,593,909
Income tax provision .......................... 529,000 361,000
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Net earnings .................................. $ 1,309,859 $ 2,232,909
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Earnings per common share ..................... $.26 $.44
=== ===
Weighted average number of common
shares outstanding ........................ 5,072,094 5,051,857
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See notes to consolidated financial statements.
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BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
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March 31,
---------------------------
1997 1996
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Cash flows from operating activities:
Net income .................................. $ 1,309,859 $ 2,232,909
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ............... 775,307 763,745
Deferred income taxes ....................... 62,000 104,000
Net loss on sale of marketable
securities ................................. -- 888
Changes in operating assets and
liabilities ................................ (1,133,907) 633,300
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Net Cash Provided by Operating
Activities ............................. 1,013,259 3,734,842
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Cash flows from investing activities:
Purchase of property, plant and
equipment .................................... (1,269,628) (465,383)
Purchase of marketable securities ............. (2,000,000) -
Proceeds from sale of marketable
securities ................................... 633,410 400,000
Proceeds from repayment by contractor ......... 41,445 14,750
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Net Cash (used in) Investing
Activities ............................. (2,594,773) (50,633)
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Cash flows from financing activities:
Proceeds from exercise of stock options ...... 15,750 24,500
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Effect of exchange rate changes on
cash and cash equivalents ..................... 14,906 --
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Net (Decrease) Increase in Cash ................ (1,550,858) 3,708,709
Cash and Cash Equivalents --
beginning of period ........................... 23,498,491 8,343,925
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Cash and Cash Equivalents --
end of period ................................. $21,947,633 $12,052,634
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(Continued)
See notes to consolidated financial statements.
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BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(unaudited)
Three Months Ended
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March 31,
---------------------------
1997 1996
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Changes in operating assets and liabilities
consist of:
Decrease in accounts receivable ............... $ 434,520 $ 1,189,993
(Increase) decrease in inventories ............ (1,402,863) 393,124
(Increase) in prepaid expenses and
other current assets ......................... (95,731) (301,983)
Decrease in other assets ...................... 108,246 61,819
(Decrease) in accounts payable ................ (559,174) (657,300)
Increase (decrease) in accrued
expenses ..................................... 252,697 (110,824)
Increase in income taxes payable .............. 128,398 58,471
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$(1,133,907) $ 633,300
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Supplementary information:
Cash paid during the period for:
Interest .................................... $ -- $ --
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Income taxes ................................ $ 337,000 $ 184,000
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Supplemental disclosures of non-cash
activities:
Unrealized gains on marketable
securities ................................. $ -- $ 223,197
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See notes to consolidated financial statements.
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BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The consolidated balance sheet as of March 31, 1997, and the consolidated
statements of operations and cash flows for the three months ended March 31,
1997 and 1996 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, 1996 financial statements have been reclassified to
conform to March 31, 1997 classifications. The information for December 31, 1996
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, 1997 and 1996 was not
material.
3. Inventories consist of the following:
March 31, 1997 December 31, 1996
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Raw materials .................... $ 6,933,550 $ 5,718,079
Work-in-process .................. 76,108 89,660
Finished goods ................... 2,804,745 2,603,801
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$ 9,814,403 $ 8,411,540
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4. Property, plant and equipment consists of the following:
March 31, 1997 December 31, 1996
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Land ............................. $ 835,218 $ 835,218
Buildings and improvements ....... 13,708,175 13,510,703
Machinery and equipment .......... 33,928,159 32,856,003
Idle property held for sale ...... 935,000 935,000
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49,406,552 48,136,924
Less accumulated
depreciation and
amortization .................... 22,586,045 21,815,910
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Net property, plant and
equipment ....................... $26,820,507 $26,321,014
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BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share", which
establishes new standards for computing and presenting net income per share and
replaces the standards previously found in Accounting Principles Board Opinion
No. 15, "Earnings Per Share". The Company will begin reporting net income per
share according to this new standard in its 1997 annual report on Form 10K. The
Company does not expect the implementation of SFAS No. 128 to have a material
effect on the Company's computation of earnings per share.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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
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Three Months Ended
March 31,
-----------------------
1997 1996
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Net sales ................................. 100.0% 100.0%
Cost of sales ............................. 71.2 69.8
Selling, general and
administrative expenses .................. 19.4 16.2
Other income, net of
interest expense ......................... 2.1 1.0
Earnings before income
tax provision ............................ 11.5 15.0
Income tax provision ...................... 3.3 2.1
Net earnings .............................. 8.2 12.9
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
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Three Months Ended
March 31,
1997 compared with 1996
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Net sales ............................. (7.5)%
Cost of sales ......................... (5.6)
Selling, general and
administrative expenses .............. 10.7
Other income - net .................... 104.6
Earnings before income tax
provision ............................ (29.1)
Income tax provision .................. 46.5
Net earnings .......................... (41.3)
-9-
Sales
Net sales decreased 7.5% from $17,262,328 during the first three months of
1996 to $15,962,204 during the first three months of 1997. The Company
attributes this decrease primarily to reduced sales of customer-specific
value-added circuits and assemblies offset, in part, by sales growth in network
and fuse products.
Cost of Sales
Cost of sales as a percentage of net sales increased 1.4% from 69.8% during
the first three months of 1996 to 71.2% during the first three months of 1997.
The increase in the cost of sales percentage is primarily attributable to
increases in direct labor due to the current sales mix which has higher direct
labor associated with it offset, in part, by 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 increased from 16.2% for the first three months of 1996 to 19.4%
for the first three months of 1997. The Company attributes the increase
primarily to increases in sales salaries and related expenses and the decrease
in sales. Selling, general and administrative expenses increased in dollar
amount by 10.7%. The Company attributes the increase in dollar amount of such
expenses primarily to increases in sales salaries and sales related expenses.
Other Income and Expenses
Other income, consisting of interest and dividends earned on marketable
securities and on cash equivalents, increased by approximately $174,000 from
the first three months of 1996 to the first three months of 1997. The increase
is primarily due to higher earnings on invested funds due to higher average
balances in 1997 compared to 1996.
Provision for Income Taxes
The provision for income taxes for the first three months of 1996 was
$361,000 as compared to $529,000 for the first three months of 1997. This
increase is due primarily to higher United States pretax earnings for the first
three months of 1997 versus 1996 despite lower overall Company earnings.
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.
-10-
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,
1997, 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.
The Company has entered into an agreement to purchase an additional 3,100
square feet of manufacturing space in Hong Kong for approximately $260,000.
During the first three months of 1997, the Company's cash and cash
equivalents decreased by $1.6 million, reflecting $2.0 million in purchases of
marketable securities and $1.3 million in purchases of plant and equipment,
offset in part by $1.0 million provided by operating activities and $.6 million
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 three
months of 1997 or 1996.
Cash, accounts receivable and marketable securities comprised approximately
47.7% and 49.3% of the Company's total assets at March 31, 1997 and December 31,
1996, respectively. The Company's current ratio (i.e., the ratio of current
assets to current liabilities) was 6.2 to 1 and 5.9 to 1 at March 31, 1997 and
December 31, 1996, respectively.
This report contains forward-looking statements that involve substantial
risks and uncertainties. The Company's actual results could differ materially
from those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the "Business",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and "Risks and Uncertainties" captions in the Company's Form 10-K
for the year ended December 31, 1996.
-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, 1996.
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, 1997.
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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
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Daniel Bernstein, President
(Principal Financial and
Accounting Officer)
Dated: May 13, 1997
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