BEL FUSE INC.
|
(Exact
name of registrant as specified in its
charter)
|
NEW JERSEY
|
22-1463699
|
(State
of other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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206 Van Vorst Street
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Jersey City, New Jersey
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07302
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(Address
of principal executive offices)
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(Zip
Code)
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(201) 432-0463
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(Registrant's
telephone number, including area
code)
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
(Do
not check if a smaller
|
|||
reporting
company)
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Page
|
|||
Part I
|
Financial
Information
|
||
Item
1.
|
Financial
Statements
|
1
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008
(unaudited)
|
2-3
|
||
Condensed
Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2009 and 2008 (unaudited)
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4
|
||
Condensed
Consolidated Statements of Stockholders' Equity for the Year Ended
December 31, 2008 and the Six Months Ended June 30, 2009
(unaudited)
|
5
|
||
Condensed
Consolidated Statements of Cash Flows for the Six Months Ended June 30,
2009 and 2008 (unaudited)
|
6-7
|
||
Notes
to Condensed Consolidated Financial Statements (unaudited)
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8-24
|
||
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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25-38
|
|
Item
3.
|
Quantitative and
Qualitative Disclosures About Market
Risk
|
39
|
|
Item
4.
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Controls
and Procedures
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40
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|
Part II
|
Other
Information
|
||
Item
1.
|
Legal
Proceedings
|
42
|
|
Item
4.
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Submission
of Matters to a Vote of Security Holders
|
42
|
|
Item
6.
|
Exhibits
|
42
|
|
Signatures
|
43
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June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 97,976 | $ | 74,955 | ||||
Marketable
securities
|
14,451 | 13,735 | ||||||
Short-term
investments
|
2,345 | 4,013 | ||||||
Accounts
receivable - less allowance for doubtful
|
||||||||
accounts
of $596 and $660 at June 30, 2009
|
||||||||
and
December 31, 2008, respectively
|
32,254 | 46,047 | ||||||
Inventories
|
31,619 | 46,524 | ||||||
Prepaid
expenses and other current assets
|
1,514 | 859 | ||||||
Refundable
income taxes
|
3,996 | 2,498 | ||||||
Assets
held for sale
|
- | 236 | ||||||
Deferred
income taxes
|
2,830 | 4,752 | ||||||
Total
Current Assets
|
186,985 | 193,619 | ||||||
Property,
plant and equipment - net
|
37,960 | 39,936 | ||||||
Restricted
cash
|
- | 2,309 | ||||||
Long-term
investments
|
807 | 1,062 | ||||||
Deferred
income taxes
|
3,795 | 5,205 | ||||||
Intangible
assets - net
|
694 | 926 | ||||||
Goodwill
|
14,359 | 14,334 | ||||||
Other
assets
|
6,493 | 4,393 | ||||||
TOTAL
ASSETS
|
$ | 251,093 | $ | 261,784 |
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 10,848 | $ | 14,285 | ||||
Accrued
expenses
|
6,695 | 9,953 | ||||||
Accrued
restructuring costs
|
154 | 555 | ||||||
Income
taxes payable
|
3,985 | 4,054 | ||||||
Dividends
payable
|
811 | 787 | ||||||
Total
Current Liabilities
|
22,493 | 29,634 | ||||||
Long-term
Liabilities:
|
||||||||
Accrued
restructuring costs
|
586 | 406 | ||||||
Deferred
gain on sale of property
|
- | 4,616 | ||||||
Liability
for uncertain tax positions
|
3,509 | 3,445 | ||||||
Minimum
pension obligation and unfunded pension
liability
|
6,313 | 5,910 | ||||||
Total
Long-term Liabilities
|
10,408 | 14,377 | ||||||
Total
Liabilities
|
32,901 | 44,011 | ||||||
Commitments
and Contingencies
|
||||||||
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
|
||||||||
2,174,912
and 2,180,982 shares, respectively
|
||||||||
(net
of 1,072,769 treasury shares)
|
217 | 218 | ||||||
Class
B common stock, par value $.10 per share -
|
||||||||
authorized
30,000,000 shares; outstanding
|
||||||||
9,326,543
and 9,369,893 shares, respectively
|
||||||||
(net
of 3,218,307 treasury shares)
|
933 | 937 | ||||||
Additional
paid-in capital
|
20,995 | 19,963 | ||||||
Retained
earnings
|
194,443 | 196,467 | ||||||
Accumulated
other comprehensive income
|
1,604 | 188 | ||||||
Total
Stockholders' Equity
|
218,192 | 217,773 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 251,093 | $ | 261,784 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
Sales
|
$ | 44,934 | $ | 72,454 | $ | 88,805 | $ | 133,323 | ||||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of sales
|
40,192 | 59,317 | 78,403 | 108,955 | ||||||||||||
Selling,
general and administrative
|
7,601 | 9,284 | 15,254 | 18,217 | ||||||||||||
Restructuring
charge
|
- | - | 413 | - | ||||||||||||
Loss
(gain) on sale of property, plant and equipment
|
13 | - | (4,652 | ) | - | |||||||||||
47,806 | 68,601 | 89,418 | 127,172 | |||||||||||||
(Loss)
Income from operations
|
(2,872 | ) | 3,853 | (613 | ) | 6,151 | ||||||||||
Other,
net
|
1 | (2 | ) | 9 | (1 | ) | ||||||||||
Realized
gain (loss/impairment charge) on investment
|
1,081 | (2,352 | ) | 1,083 | (2,633 | ) | ||||||||||
Interest
income
|
126 | 605 | 307 | 1,518 | ||||||||||||
(Loss)
earnings before (benefit) provision for income taxes
|
(1,664 | ) | 2,104 | 786 | 5,035 | |||||||||||
Income
tax (benefit) provision
|
(392 | ) | 293 | 1,242 | 1,057 | |||||||||||
Net
(loss) earnings
|
$ | (1,272 | ) | $ | 1,811 | $ | (456 | ) | $ | 3,978 | ||||||
(Loss)
earnings per Class A common share
|
|
|||||||||||||||
Basic
|
$ | (0.11 | ) | $ | 0.14 | $ | (0.05 | ) | $ | 0.31 | ||||||
Diluted
|
$ | (0.11 | ) | $ | 0.14 | $ | (0.05 | ) | $ | 0.31 | ||||||
Weighted-average
Class A common shares outstanding
|
||||||||||||||||
Basic
|
2,174,912 | 2,524,978 | 2,175,531 | 2,528,693 | ||||||||||||
Diluted
|
2,174,912 | 2,524,978 | 2,175,531 | 2,528,693 | ||||||||||||
(Loss)
earnings per Class B common share
|
||||||||||||||||
Basic
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$ | (0.11 | ) | $ | 0.16 | $ | (0.04 | ) | $ | 0.34 | ||||||
Diluted
|
$ | (0.11 | ) | $ | 0.16 | $ | (0.04 | ) | $ | 0.34 | ||||||
Weighted-average
Class B common shares outstanding
|
||||||||||||||||
Basic
|
9,343,090 | 9,352,092 | 9,352,550 | 9,329,516 | ||||||||||||
Diluted
|
9,343,090 | 9,352,609 | 9,352,550 | 9,333,082 |
Accumulated
|
||||||||||||||||||||||||||||
Other
|
Class A
|
Class B
|
Additional
|
|||||||||||||||||||||||||
Comprehensive
|
Retained
|
Comprehensive
|
Common
|
Common
|
Paid-In
|
|||||||||||||||||||||||
Total
|
(Loss) Income
|
Earnings
|
Income
|
Stock
|
Stock
|
Capital
|
||||||||||||||||||||||
Balance,
January 1, 2008
|
$ | 244,527 | $ | 214,580 | $ | (344 | ) | $ | 255 | $ | 929 | $ | 29,107 | |||||||||||||||
Exercise
of stock options
|
312 | 3 | 309 | |||||||||||||||||||||||||
Tax
benefits arising from the disposition of non-qualified incentive stock
options
|
39 | 39 | ||||||||||||||||||||||||||
Cash
dividends declared on Class A common stock
|
(565 | ) | (565 | ) | ||||||||||||||||||||||||
Cash
dividends declared on Class B common stock
|
(2,619 | ) | (2,619 | ) | ||||||||||||||||||||||||
Issuance
of restricted common stock
|
- | 6 | (6 | ) | ||||||||||||||||||||||||
Termination
of restricted common stock
|
- | (1 | ) | 1 | ||||||||||||||||||||||||
Repurchase/retirement
of Class A common stock
|
(11,002 | ) | (37 | ) | (10,965 | ) | ||||||||||||||||||||||
Currency
translation adjustment
|
(355 | ) | $ | (355 | ) | (355 | ) | |||||||||||||||||||||
Unrealized
holding losses on marketable securities arising during the year, net of
taxes
|
(4,230 | ) | (4,230 | ) | (4,230 | ) | ||||||||||||||||||||||
Reclassification
adjustment of unrealized holding losses for impairment charge included in
net earnings, net of tax
|
5,551 | 5,551 | 5,551 | |||||||||||||||||||||||||
Stock-based
compensation expense
|
1,478 | 1,478 | ||||||||||||||||||||||||||
Change
in unfunded SERP liability, net of taxes
|
(434 | ) | (434 | ) | (434 | ) | ||||||||||||||||||||||
Net
loss
|
(14,929 | ) | (14,929 | ) | (14,929 | ) | ||||||||||||||||||||||
Comprehensive
loss
|
$ | (14,397 | ) | |||||||||||||||||||||||||
Balance,
December 31, 2008
|
$ | 217,773 | $ | 196,467 | $ | 188 | $ | 218 | $ | 937 | $ | 19,963 | ||||||||||||||||
Cash
dividends declared on Class A common stock
|
(260 | ) | (260 | ) | ||||||||||||||||||||||||
Cash
dividends declared on Class B common stock
|
(1,308 | ) | (1,308 | ) | ||||||||||||||||||||||||
Termination
of restricted common stock
|
- | (1 | ) | 1 | ||||||||||||||||||||||||
Repurchase/retirement
of Class A common stock
|
(92 | ) | (1 | ) | (91 | ) | ||||||||||||||||||||||
Currency
translation adjustment
|
13 | $ | 13 | 13 | ||||||||||||||||||||||||
Unrealized
holding gains on marketable securities arising during the period, net of
taxes of $1,262
|
2,061 | 2,061 | 2,061 | |||||||||||||||||||||||||
Reclassification
adjustment of unrealized holding gains included in net earnings, net of
taxes of $403
|
(658 | ) | (658 | ) | (658 | ) | ||||||||||||||||||||||
Reduction
in APIC pool associated with tax deficiencies related to restricted stock
awards
|
(87 | ) | (87 | ) | ||||||||||||||||||||||||
Unauthorized
issuance of common stock
|
852 | 852 | ||||||||||||||||||||||||||
Return
of unauthorized shares of common stock
|
(456 | ) | (3 | ) | (453 | ) | ||||||||||||||||||||||
Stock-based
compensation expense
|
810 | 810 | ||||||||||||||||||||||||||
Net
loss
|
(456 | ) | (456 | ) | (456 | ) | ||||||||||||||||||||||
Comprehensive
income
|
$ | 960 | ||||||||||||||||||||||||||
Balance,
June 30, 2009
|
$ | 218,192 | $ | 194,443 | $ | 1,604 | $ | 217 | $ | 933 | $ | 20,995 |
Six Months Ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
(loss) earnings
|
$ | (456 | ) | $ | 3,978 | |||
Adjustments
to reconcile net (loss) earnings to net
|
||||||||
cash
provided by operating activities:
|
||||||||
Depreciation
and amortization
|
3,359 | 3,601 | ||||||
Stock-based
compensation
|
810 | 668 | ||||||
Restructuring
charges, net of cash payments
|
(221 | ) | ||||||
Excess
tax benefits from share-based
|
||||||||
payment
arrangements
|
- | (40 | ) | |||||
(Gain)
loss on sale of property, plant and equipment
|
(4,652 | ) | 2 | |||||
Realized
(gain) loss/impairment charge on investment
|
(1,083 | ) | 2,633 | |||||
Other,
net
|
821 | 166 | ||||||
Deferred
income taxes
|
2,335 | (1,059 | ) | |||||
Changes
in operating assets and liabilities
|
19,825 | (1,245 | ) | |||||
Net
Cash Provided by Operating Activities
|
20,738 | 8,704 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchase
of property, plant and equipment
|
(1,122 | ) | (3,144 | ) | ||||
Purchase
of intangible asset
|
- | (300 | ) | |||||
Purchase
of marketable securities
|
(5,629 | ) | (12,524 | ) | ||||
Proceeds
from sale of marketable securities
|
4,680 | - | ||||||
Proceeds
from sale of property, plant and equipment
|
2,554 | 2,290 | ||||||
Proceeds
from cash surrender value of company-owned
|
||||||||
life
insurance
|
1,518 | - | ||||||
Redemption
of investment
|
1,945 | 10,949 | ||||||
Net
Cash Provided by (Used in) Investing Activities
|
3,946 | (2,729 | ) |
Six
Months Ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from exercise of stock options
|
$ | - | $ | 312 | ||||
Dividends
paid to common shareholders
|
(1,544 | ) | (1,572 | ) | ||||
Purchase
and retirement of Class A common stock
|
(92 | ) | (766 | ) | ||||
Excess
tax benefits from share-based
|
||||||||
payment
arrangements
|
- | 40 | ||||||
Net
Cash Used In Financing Activities
|
(1,636 | ) | (1,986 | ) | ||||
Effect
of exchange rate changes on cash
|
(27 | ) | 262 | |||||
Net
Increase in Cash and Cash Equivalents
|
23,021 | 4,251 | ||||||
Cash
and Cash Equivalents - beginning of period
|
74,955 | 83,875 | ||||||
Cash
and Cash Equivalents - end of period
|
$ | 97,976 | $ | 88,126 | ||||
Changes
in operating assets
|
||||||||
and
liabilities consist of:
|
||||||||
Decrease
in accounts receivable
|
$ | 13,760 | $ | 907 | ||||
Decrease
(increase) in inventories
|
14,914 | (6,990 | ) | |||||
Increase
in prepaid expenses and other current assets
|
(648 | ) | (360 | ) | ||||
Increase
in other assets
|
(20 | ) | (75 | ) | ||||
(Decrease)
increase in accounts payable
|
(3,441 | ) | 4,604 | |||||
Decrease
in accrued expenses
|
(3,249 | ) | (313 | ) | ||||
(Decrease)
increase in income taxes payable
|
(1,491 | ) | 982 | |||||
$ | 19,825 | $ | (1,245 | ) | ||||
Supplementary
information:
|
||||||||
Cash
paid during the period for income taxes
|
$ | 348 | $ | 854 |
1.
|
BASIS
OF PRESENTATION AND ACCOUNTING
POLICIES
|
2.
|
(LOSS)
EARNINGS PER SHARE
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net
(loss) earnings
|
$ | (1,272 | ) | $ | 1,811 | $ | (456 | ) | $ | 3,978 | ||||||
Less
Dividends:
|
||||||||||||||||
Class
A
|
128 | 152 | 260 | 306 | ||||||||||||
Class
B
|
654 | 655 | 1,308 | 1,305 | ||||||||||||
Undistributed
(loss) earnings
|
$ | (2,054 | ) | $ | 1,004 | $ | (2,024 | ) | $ | 2,367 | ||||||
Undistributed
(loss) earnings allocation - basic:
|
||||||||||||||||
Class
A undistributed (loss) earnings
|
(373 | ) | 205 | (367 | ) | 486 | ||||||||||
Class
B undistributed (loss) earnings
|
(1,681 | ) | 799 | (1,657 | ) | 1,881 | ||||||||||
Total
undistributed (loss) earnings
|
$ | (2,054 | ) | $ | 1,004 | $ | (2,024 | ) | $ | 2,367 | ||||||
Undistributed
(loss) earnings allocation - diluted:
|
||||||||||||||||
Class
A undistributed (loss) earnings
|
(373 | ) | 205 | (367 | ) | 486 | ||||||||||
Class
B undistributed (loss) earnings
|
(1,681 | ) | 799 | (1,657 | ) | 1,881 | ||||||||||
Total
undistributed (loss) earnings
|
$ | (2,054 | ) | $ | 1,004 | $ | (2,024 | ) | $ | 2,367 | ||||||
Net
(loss) earnings allocation - basic:
|
||||||||||||||||
Class
A allocated (loss) earnings
|
(245 | ) | 357 | (107 | ) | 792 | ||||||||||
Class
B allocated (loss) earnings
|
(1,027 | ) | 1,454 | (349 | ) | 3,186 | ||||||||||
Net
(loss) earnings
|
$ | (1,272 | ) | $ | 1,811 | $ | (456 | ) | $ | 3,978 | ||||||
Net
(loss) earnings allocation - diluted:
|
||||||||||||||||
Class
A allocated (loss) earnings
|
(245 | ) | 357 | (107 | ) | 792 | ||||||||||
Class
B allocated (loss) earnings
|
(1,027 | ) | 1,454 | (349 | ) | 3,186 | ||||||||||
Net
(loss) earnings
|
$ | (1,272 | ) | $ | 1,811 | $ | (456 | ) | $ | 3,978 | ||||||
Denominator:
|
||||||||||||||||
Weighted-average
shares outstanding:
|
||||||||||||||||
Class
A - basic and diluted
|
2,174,912 | 2,524,978 | 2,175,531 | 2,528,693 | ||||||||||||
Class
B - basic
|
9,343,090 | 9,352,092 | 9,352,550 | 9,329,516 | ||||||||||||
Dilutive
impact of stock options
|
- | 517 | - | 3,566 | ||||||||||||
Class
B - diluted
|
9,343,090 | 9,352,609 | 9,352,550 | 9,333,082 | ||||||||||||
(Loss)
Earnings per share:
|
||||||||||||||||
Class
A - basic
|
$ | (0.11 | ) | $ | 0.14 | $ | (0.05 | ) | $ | 0.31 | ||||||
Class
A - diluted
|
$ | (0.11 | ) | $ | 0.14 | $ | (0.05 | ) | $ | 0.31 | ||||||
Class
B - basic
|
$ | (0.11 | ) | $ | 0.16 | $ | (0.04 | ) | $ | 0.34 | ||||||
Class
B - diluted
|
$ | (0.11 | ) | $ | 0.16 | $ | (0.04 | ) | $ | 0.34 |
Assets at Fair Value as of June 30, 2009 Using
|
||||||||||||||||
Total
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||||
Available-for-sale
securities:
|
||||||||||||||||
Marketable
securities
|
$ | 14,451 | $ | 14,451 | - | - | ||||||||||
Investments
held in Rabbi Trust
|
3,553 | 3,553 | - | - | ||||||||||||
Total
|
$ | 18,004 | $ | 18,004 | - | - |
Assets at Fair Value as of June 30, 2009 Using
|
Total Gains
|
|||||||||||||||||||||||
Total
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Three Months
Ended
June 30, 2009
|
Six Months
Ended
June 30, 2009
|
|||||||||||||||||||
Other
investments
|
$ | 3,323 | - | $ | 3,323 | - | $ | 19 | $ | 21 | ||||||||||||||
Total
|
$ | 3,323 | - | $ | 3,323 | - | $ | 19 | $ | 21 |
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Raw
materials
|
$ | 20,735 | $ | 25,527 | ||||
Work
in progress
|
1,323 | 1,650 | ||||||
Finished
goods
|
9,561 | 19,347 | ||||||
$ | 31,619 | $ | 46,524 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Total
segment revenues
|
||||||||||||||||
North
America
|
$ | 12,585 | $ | 24,022 | $ | 23,891 | $ | 47,014 | ||||||||
Asia
|
35,120 | 53,234 | 68,918 | 95,374 | ||||||||||||
Europe
|
4,684 | 7,624 | 9,724 | 14,410 | ||||||||||||
Total
segment revenues
|
52,389 | 84,880 | 102,533 | 156,798 | ||||||||||||
Reconciling
items:
|
||||||||||||||||
Intersegment
revenues
|
(7,455 | ) | (12,426 | ) | (13,728 | ) | (23,475 | ) | ||||||||
Net
sales
|
$ | 44,934 | $ | 72,454 | $ | 88,805 | $ | 133,323 | ||||||||
Income
(loss) from Operations:
|
||||||||||||||||
North
America
|
$ | (215 | ) | $ | 1,647 | $ | 2,356 | $ | 2,745 | |||||||
Asia
|
(2,674 | ) | 1,464 | (2,867 | ) | 2,304 | ||||||||||
Europe
|
17 | 742 | (102 | ) | 1,102 | |||||||||||
$ | (2,872 | ) | $ | 3,853 | $ | (613 | ) | $ | 6,151 |
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Sales
commissions
|
$ | 1,173 | $ | 1,598 | ||||
Contract
labor
|
1,530 | 2,939 | ||||||
Salaries,
bonuses and related benefits
|
1,866 | 2,834 | ||||||
Other
|
2,126 | 2,582 | ||||||
$ | 6,695 | $ | 9,953 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Service
cost
|
$ | 96 | $ | 73 | $ | 192 | $ | 146 | ||||||||
Interest
cost
|
88 | 76 | 176 | 152 | ||||||||||||
Amortization
of adjustments
|
37 | 33 | 74 | 66 | ||||||||||||
Total
SERP expense
|
$ | 221 | $ | 182 | $ | 442 | $ | 364 |
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Balance
sheet amounts:
|
||||||||
Minimum
pension obligation and unfunded pension liability
|
$ | 6,313 | $ | 5,910 | ||||
Accumulated
other comprehensive (loss) income
|
(1,588 | ) | (1,588 | ) |
Weighted
|
|||||||||||||
Average
|
|||||||||||||
Weighted
|
Remaining
|
Aggregate
|
|||||||||||
Average
|
Contractual
|
Intrinsic
|
|||||||||||
Options
|
Shares
|
Exercise Price
|
Term
|
Value (000's)
|
|||||||||
Outstanding
at January 1, 2009
|
53,000 | $ | 31.48 | ||||||||||
Granted
|
- | - | |||||||||||
Exercised
|
- | - | |||||||||||
Forfeited
or expired
|
- | - | |||||||||||
Outstanding
at June 30, 2009
|
53,000 | $ | 31.48 |
0.74 years
|
$ | - | |||||||
Exercisable
at June 30, 2009
|
53,000 | $ | 31.48 |
0.74 years
|
$ | - |
Weighted-Average
|
||||||||
Grant-Date
|
||||||||
Unvested Stock Options
|
Shares
|
Fair Value
|
||||||
Unvested
at December 31, 2008
|
15,000 | $ | 29.50 | |||||
Granted
|
- | - | ||||||
Vested
|
(15,000 | ) | 29.50 | |||||
Forfeited
|
- | - | ||||||
Unvested
at June 30, 2009
|
- | - |
Weighted
|
|||||||||
Weighted
|
Average
|
||||||||
Average
|
Remaining
|
||||||||
Restricted Stock
|
Award
|
Contractual
|
|||||||
Awards
|
Shares
|
Price
|
Term
|
||||||
Outstanding
at January 1, 2009
|
202,900 | $ | 32.58 |
3.06
years
|
|||||
Granted
|
- | - | |||||||
Vested
|
(20,550 | ) | 35.52 | ||||||
Forfeited
|
(16,150 | ) | 30.80 | ||||||
Outstanding
at June 30, 2009
|
166,200 | $ | 32.38 |
2.55
years
|
Dividend per Share
|
Payment (in thousands)
|
|||||||||||||||
Class A
|
Class B
|
Class A
|
Class B
|
|||||||||||||
Six
Months Ended June 30, 2009:
|
||||||||||||||||
February
1, 2009
|
$ | 0.06 | $ | 0.07 | $ | 130 | $ | 642 | ||||||||
May
1, 2009
|
0.06 | 0.07 | 130 | 642 | ||||||||||||
Six
Months Ended June 30, 2008:
|
||||||||||||||||
February
1, 2008
|
0.06 | 0.07 | 153 | 638 | ||||||||||||
May
1, 2008
|
0.06 | 0.07 | 152 | 638 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
June 30,
|
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
(loss) earnings
|
$ | (1,272 | ) | $ | 1,811 | $ | (456 | ) | $ | 3,978 | ||||||
Currency
translation adjustment
|
538 | 85 | 13 | 804 | ||||||||||||
Increase
(decrease) in unrealized gain on marketable securities - net of
taxes
|
1,184 | (4,229 | ) | 2,061 | (1,336 | ) | ||||||||||
Reclassification
adjustment for gains included in net loss, net of tax
|
(658 | ) | - | (658 | ) | - | ||||||||||
Reclassification
adjustment for impairment charge included in net earnings, net of
tax
|
- | 1,459 | - | 1,459 | ||||||||||||
Comprehensive
(loss) income
|
$ | (208 | ) | $ | (874 | ) | $ | 960 | $ | 4,905 |
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Foreign
currency translation adjustment
|
$ | 1,759 | $ | 1,746 | ||||
Unrealized
holding gains on available-for-sale securities under SFAS No. 115, net of
taxes of $882 and $23 as of June 30, 2009 and December 31,
2008
|
1,433 | 30 | ||||||
Unfunded
SERP liability, net of taxes of ($606) as of June 30, 2009 and December
31, 2008
|
(1,588 | ) | (1,588 | ) | ||||
Accumulated
other comprehensive income
|
$ | 1,604 | $ | 188 |
Liability at
|
New
|
Cash Payments &
|
Liability at
|
|||||||||||||
December 31, 2008
|
Charges
|
Other Settlements
|
June 30, 2009
|
|||||||||||||
Termination
benefit charges
|
$ | 437 | $ | 121 | $ | (558 | ) | $ | - | |||||||
Facility
lease obligation
|
524 | 292 | (76 | ) | 740 | |||||||||||
$ | 961 | $ | 413 | $ | (634 | ) | $ | 740 |
|
·
|
With
respect to the stock option plan, the Company has determined that over a
period of approximately eight years, the Employee exercised options
covering 30,000 shares of Class B Common Stock on the basis of
documentation that the Employee fabricated. The fair value of
these 30,000 shares at the times of issuance approximated $0.8
million. Option exercises covering an additional 1,000 shares
are questionable but have not, as yet, been determined to be based on
fabricated documentation. At this time, the Company does not believe that
it will be able to obtain sufficient evidentiary documents to conclusively
determine that these are fraudulent transactions. The Employee
has returned 30,000 shares to the Company for cancellation with a fair
market value on the dates of their return of approximately $0.4
million.
|
|
·
|
With
respect to the Company's 401(k) plan, the Company has determined that over
the same approximate eight-year period, the Employee fraudulently
increased the balance in his 401(k) account by a total of $44,300. The
Employee has not withdrawn any funds in his 401(k) account. Accordingly,
the Company intends to recoup the amount directly from the Employee's
401(k) account. In addition, the Employee initiated special
401(k) stock distributions directly into the Employee’s IRA account
representing 3,420 shares of Class B Common Stock and 65 shares of Class A
Common Stock. The fair value of these shares at the time of
transfer approximated $0.1 million. The Employee has returned
1,200 shares of Class B Common Stock to the Company for cancellation with
a fair market value on the dates of their return of approximately
$16,000.
|
|
·
|
With
respect to the Company's profit-sharing plan, the Company has determined
that the Employee diverted to his account a total of $3,600 credited to
the account of an employee whose employment had terminated and who
therefore was about to forfeit his profit-sharing interest. The Employee
has not withdrawn any funds in his profit-sharing account. The Company
intends to recoup such $3,600 directly from the
Employee.
|
|
·
|
Increasing
pressures in the U.S. and global economy related to the global economic
downturn, the credit crisis, volatility in interest rates, investment
returns, energy prices and other elements that impact commercial and
end-user consumer spending are creating a highly challenging environment
for Bel and its customers.
|
|
·
|
These
weakening economic conditions have resulted in reductions in capital
expenditures by end-user consumers of our products, resulting in a
decreased backlog of orders in
2009.
|
|
·
|
With
the overall reduction in demand in our industry, competition will continue
to increase. As a result, Bel is being faced with pricing pressures, which
will impact Bel’s future profit
margins.
|
|
·
|
Commodity
prices, especially those pertaining to gold and copper, have been highly
volatile. Fluctuations in these prices and other commodity
prices associated with Bel’s raw materials will have a corresponding
impact on our profit margins.
|
|
·
|
The
costs of labor, particularly in the People’s Republic of China where
several of Bel’s factories are located, have risen significantly as a
result of government mandates for new minimum wage and overtime
requirements (effective April 2008). These higher labor rates
will continue to have a negative impact on Bel’s profit
margins.
|
|
·
|
The
global nature of Bel’s business exposes Bel to earnings volatility
resulting from exchange rate
fluctuations.
|
|
·
|
Net
Sales. The Company’s sales decreased by $27.5 million
and $44.5 million or 38.0% and 33.4% during the three and six months ended
June 30, 2009 as compared to the same periods of 2008, primarily due to a
reduction in demand across all product lines related to weakening global
economic conditions.
|
|
·
|
Loss from
Operations. During the six months ended June 30, 2009,
income from operations decreased $6.8 million from income of operations of
$6.2 million for the six months ended June 30, 2008 to a loss from
operations of $0.6 million for the six months ended June 30, 2009,
primarily due to the decrease in sales noted above. Other
factors impacting the Company’s loss from operations for the six months
ended June 30, 2009 were as
follows:
|
|
§
|
Rising
Bill of Material Costs. Bel manufactures a particular product
line within the modules group that is comprised of a larger percentage of
purchased components than most of the Company’s other
products. The proportion of total sales represented by this
product line has increased in the six months ended June 30, 2009 as
compared to the same period of 2008, resulting in reduced gross
margins.
|
|
§
|
Restructuring
Charges. The Company ceased manufacturing at its Bel Power
manufacturing facility in Westborough, Massachusetts as of December 31,
2008. Related to this closure, the Company incurred severance
costs of $0.1 million and costs associated with its facility lease
obligation of $0.3 million during the six months ended June 30,
2009.
|
|
§
|
Reduced
Labor Costs. The Company experienced a significant increase in
customer demand after the Lunar New Year in early February 2008, leading
to large number of new workers being hired, which resulted in associated
training costs, production inefficiencies and excessive
overtime. Due to reduced demand in the first half of 2009,
additional workforce was not
needed.
|
|
§
|
Reduction
in Selling, General and Administrative (“SG&A”)
Expenses. SG&A expenses were $3.0 million lower during the
six months ended June 30, 2009 as compared to the same period of
2008. This reduction was primarily due to lower commissions
from the reduced sales volume, administrative headcount reductions and
travel restrictions put in place during the first quarter of
2009.
|
|
§
|
Gain
on Sale of Property. The Company recorded a $4.6 million gain
on the sale of property in Jersey City, New Jersey in early
2009. This gain was an offsetting factor to the loss from
operations.
|
|
·
|
Net
Loss. The Company’s net earnings decreased significantly
from income of $4.0 million for the six months ended June 30, 2008 to a
loss of $0.5 million for the six months ended June 30, 2009. In
addition to the factors impacting loss from operations discussed above,
the following non-operating factors impacted net earnings during the six
months ended June 30, 2009:
|
|
§
|
Gain
on Sale of Investment. During the six months ended June 30,
2009, the Company sold 3.0 million shares of its investment in Power-One
stock resulting in a book gain of $1.1
million.
|
|
§
|
Reduced
Interest Rates. Interest income decreased from $1.5 million
during the six months ended June 30, 2008 to $0.3 million during the six
months ended June 30, 2009 as a result of significantly lower interest
rates earned on invested balances during
2009.
|
|
§
|
Income
tax expense of $1.7 million was recognized related to the gain on sale of
property described above, partially offset by the tax benefit associated
with operating losses in the U.S.
|
Percentage
of Net Sales
|
Percentage
of Net Sales
|
|||||||||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of sales
|
89.4 | 81.9 | 88.3 | 81.7 | ||||||||||||
Selling,
general and administrative expenses
|
16.9 | 12.8 | 17.2 | 13.7 | ||||||||||||
Restructuring
charge
|
- | - | 0.5 | - | ||||||||||||
Gain
on sale of property, plant and equipment
|
- | - | 5.2 | - | ||||||||||||
Realized
gain (loss/impairment charge) on investment
|
2.4 | (3.2 | ) | 1.2 | (2.0 | ) | ||||||||||
Interest
income
|
0.3 | 0.8 | 0.3 | 1.1 | ||||||||||||
Earnings
before (benefit) provision for income taxes
|
(3.7 | ) | 2.9 | 0.9 | 3.8 | |||||||||||
Income
tax (benefit) provision
|
(0.9 | ) | 0.4 | 1.4 | 0.8 | |||||||||||
Net
(loss) earnings
|
(2.8 | ) | 2.5 | (0.5 | ) | 3.0 |
Increase
(decrease) from
|
Increase
(decrease) from
|
|||||||
Prior
Period
|
Prior
Period
|
|||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||
June
30, 2009
|
June
30, 2009
|
|||||||
Compared
with
|
Compared
with
|
|||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||
June 30,
2008
|
June 30,
2008
|
|||||||
Net
sales
|
(38.0 | )% | (33.4 | )% | ||||
Cost
of sales
|
(32.2 | ) | (28.0 | ) | ||||
Selling,
general and administrative expenses
|
(18.1 | ) | (16.3 | ) | ||||
Net
loss
|
(170.2 | ) | (111.5 | ) |
¨
|
Material
costs as a percentage of sales have increased from 50.4% during the three
months ended June 30, 2008 to 58.7% during the three months ended June 30,
2009. Bel manufactures a particular product line within the
modules group that consists of a larger percentage of purchased components
than most of the Company’s other products. The proportion of
total sales attributable to this product has increased to 15% of total
sales for the three months ended June 30, 2009 as compared to 11% of total
sales in the same period in 2008, mainly due to relatively larger revenue
declines in other product lines. While these products are
strategic to Bel’s growth and important to total earnings, they return
lower gross profit margins due to their higher material content, and the
Company’s average gross profit percentage will likely decline as these
sales continue to account for an increasing proportion of total
sales.
|
¨
|
While
other fixed costs within cost of sales, such as support labor and
depreciation and amortization, have decreased in dollar amount during the
second quarter of 2009 as compared to 2008, as a percentage of sales these
costs have increased due to the lower sales volume in
2009.
|
¨
|
Sales
commissions decreased by $0.8 million due to the 2009 lower sales
volume.
|
¨
|
Travel
expenses were reduced by $0.3 million, as management implemented travel
restrictions during the first quarter of
2009.
|
¨
|
General
and administrative salaries and fringe benefits decreased as compared to
the second quarter of 2008 as a result savings of approximately $0.7
million from company-wide reductions in headcount and a of reduction of
$0.3 million in bonus expense, partially offset by severance expense of
$0.3 million.
|
¨
|
The
Company recorded charges totaling $0.6 million for compensation and fees
related to the unauthorized issuance of
stock.
|
¨
|
Other
reductions in SG&A of $0.5 million included reductions in various
expense categories that were not individually
significant.
|
¨
|
Material
costs as a percentage of sales have increased from 51.7% during the six
months ended June 30, 2008 to 57.9% during the six months ended June 30,
2009. Bel manufactures a particular product line within the
modules group that consists of a larger percentage of purchased components
than most of the Company’s other products. The proportion of
total sales attributable to this product has increased to 15% of total
sales for the six months ended June 30, 2009 as compared to 11% of total
sales in the same period in 2008, mainly due to relatively larger revenue
declines in other product lines. While these products are
strategic to Bel’s growth and important to total earnings, they return
lower gross profit margins due to their higher material content, and the
Company’s average gross profit percentage will likely decrease as these
sales continue to account for an increasing proportion of total
sales.
|
¨
|
Included
in cost of sales are research and development expenses of $4.2 million and
$3.9 million for the six months ended June 30, 2009 and 2008,
respectively. The increase in research and development
expenses during the six months ended June 30, 2009 was primarily related
to Bel’s power products and new integrated connector
modules.
|
¨
|
While
other fixed costs within cost of sales, such as support labor and
depreciation and amortization, have decreased in dollar amount during the
six months ended June 30, 2009 as compared to 2008, as a percentage of
sales these costs have increased due to the lower sales volume in
2009.
|
¨
|
As
a partially offsetting factor, the Company experienced a reduction in
labor costs during the six months ended June 30, 2009 (9.1% of sales as
compared to 13.8% of sales for the six months ended June 30,
2008). A significant increase in customer demand after the
Lunar New Year in February 2008 resulted in the hiring of approximately
5,000 new workers, which resulted in training expenses, production
inefficiencies and excessive overtime. With lower customer
demand in 2009, additional manpower was not needed after Lunar New Year
and Bel has effectively eliminated overtime costs. In addition,
the Company continues to transition the labor intensive assembly
operations to lower cost regions of the
PRC.
|
¨
|
Sales
commissions decreased by $1.5 million due to the 2009 lower sales
volume.
|
¨
|
Travel
expenses were reduced by $0.5 million, as management implemented travel
restrictions during the first quarter of
2009.
|
¨
|
General
and administrative salaries and fringe benefits decreased as compared to
the first half of 2008 as a result of savings of approximately $0.9
million from company-wide reductions in headcount and a reduction of $0.3
million in bonus expense, partially offset by severance expense of $0.3
million.
|
¨
|
The
Company recorded charges totaling $0.6 million for compensation expense
and fees related to the unauthorized issuance of
stock.
|
¨
|
Other
reductions in SG&A of $0.7 million included reductions in various
other expense categories that were not individually
significant.
|
|
·
|
With
respect to the stock option plan, the Company has determined that over a
period of approximately eight years, the Employee exercised options
covering 30,000 shares of Class B Common Stock on the basis of
documentation that the Employee fabricated. The fair value of
these 30,000 shares at the times of issuance approximated $0.8
million. Option exercises covering an additional 1,000 shares
are questionable but have not, as yet, been determined to be based on
fabricated documentation. At this time, the Company does not believe that
it will be able to obtain sufficient evidentiary documents to conclusively
determine that these are fraudulent transactions. The Employee
has returned 30,000 shares to the Company for cancellation with a fair
market value on the dates of their return of approximately $0.4
million.
|
|
·
|
With
respect to the Company's 401(k) plan, the Company has determined that over
the same approximate eight-year period, the Employee fraudulently
increased the balance in his 401(k) account by a total of $44,300. The
Employee has not withdrawn any funds in his 401(k) account. Accordingly,
the Company intends to recoup the amount directly from the Employee's
401(k) account. In addition, the Employee initiated special
401(k) stock distributions directly into the Employee’s IRA account
representing 3,420 shares of Class B Common Stock and 65 shares of Class A
Common Stock. The fair value of these shares at the time of
transfer approximated $0.1 million. The Employee has returned
1,200 shares of Class B Common Stock to the Company for cancellation with
a fair market value on the dates of their return of approximately
$16,000.
|
|
·
|
With
respect to the Company's profit-sharing plan, the Company has determined
that the Employee diverted to his account a total of $3,600 credited to
the account of an employee whose employment had terminated and who
therefore was about to forfeit his profit-sharing interest. The Employee
has not withdrawn any funds in his profit-sharing account. The Company
intends to recoup such $3,600 directly from the
Employee.
|
|
·
|
The
Company does not believe that the Employee's actions have had or will have
a material effect on the Company's consolidated financial
statements.
|
|
·
|
The
Audit Committee directed the Company's internal audit staff to assess
whether existing controls should be enhanced to assure that employees
engaged in benefit plan administration do not have the ability to allocate
employment benefits to themselves absent a third party
approval. The Company’s internal audit staff has completed this
assessment and has implemented certain enhancements to the Company’s
internal control structure related to the Company’s benefit plan
administration.
|
|
·
|
Management
recommended to the Company's Compensation Committee that no stock options
or restricted stock be granted by the Company until such time as the Audit
Committee determines that enhanced controls have been implemented or are
not necessary. The Company’s Audit Committee has reviewed the enhancements
to the control procedures implemented during the second quarter of 2009
and has cleared the Company for future issuances of stock options and
restricted stock.
|
|
·
|
The
Company's Chief Executive Officer and Vice President - Finance have
concluded that the Company’s disclosure controls and procedures are
effective in ensuring that information required to be disclosed by the
Company in the reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and
forms.
|
For
|
Withheld
|
|||||||
Howard
B. Bernstein
|
1,808,118 | 280,609 | ||||||
John
F. Tweedy
|
2,045,275 | 43,452 |
For
|
Against
|
Abstain
|
||||||
2,060,201
|
27,188
|
1,338
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
31.2
|
Certification
of the Vice President of Finance pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification
of the Chief Executive Officer pursuant to Section 906 of the Sarbanes -
Oxley Act of 2002.
|
32.2
|
Certification
of the Vice-President of Finance pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|
BEL
FUSE INC.
|
|
By:
|
/s/ Daniel Bernstein
|
Daniel
Bernstein, President and
|
|
Chief
Executive Officer
|
|
By:
|
/s/ Colin Dunn
|
Colin
Dunn, Vice President of
Finance
|