10-Q 1 belfb20240331_10q.htm FORM 10-Q belfb20240331_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

(MARK ONE)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2024

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 No. 000-11676

 


 

BEL FUSE INC.

(Exact name of registrant as specified in its charter)

 

New Jersey

 

22-1463699

(State of incorporation)

 

(I.R.S. Employer Identification No.)

 

300 Executive Drive, Suite 300
West Orange, NJ  07052

 

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (201) 432-0463

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

 Trading Symbol

 

Name of Exchange on Which Registered

Class A Common Stock ($0.10 par value)

 

 BELFA

 

Nasdaq Global Select Market

Class B Common Stock ($0.10 par value)

 

 BELFB

 

Nasdaq Global Select Market

 

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

No ☐

 

 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

No ☐

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated

filer ☐

Accelerated

filer

 ☒

Non-accelerated

filer ☐

Smaller reporting

company 

Emerging growth

company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

 No ☒

 


Title of Each Class

 

Number of Shares of Common Stock Outstanding

as of  April 26, 2024

Class A Common Stock ($0.10 par value)

 

2,123,686

Class B Common Stock ($0.10 par value)

 

10,496,271

 

 

  

 

BEL FUSE INC. AND SUBSIDIARIES

 

FORM 10-Q INDEX

 

 

 

 

Page

Part I

 

Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited)

2

 

 

 

 

 

 

Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2024 and December 31, 2023

2

 

 

 

 

 

 

Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2024 and 2023

3

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2024 and 2023

4

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders' Equity (unaudited) for the Three Months Ended March 31, 2024 and 2023

5

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2024 and 2023

6

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

7 17

 

 

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

18 24

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

 

 

 

 

 

Item 4.

Controls and Procedures

24

 

 

 

 

Part II

 

Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

24

 

 

 

 

 

Item 1A.

Risk Factors

24

 

 

 

 

  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 25
       
  Item 3. Defaults Upon Senior Securities 25
       
  Item 4. Mine Safety Disclosures 25
       
  Item 5. Other Information 25
       

 

Item 6.

Exhibits

26

 

 

 

 

 

Signatures

 

27

 

 

  

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING INFORMATION

 

The terms the “Company,” “Bel,” “we,” “us,” and “our” as used in this report refer to Bel Fuse Inc. and its consolidated subsidiaries unless otherwise specified.

 

The Company’s consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (our “2023 Annual Report on Form 10-K”), and the risks and other factors described in this and our other Quarterly Reports on Form 10-Q, and in our other reports and documents that we have filed or may file from time to time with the Securities and Exchange Commission ("SEC"). As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, consolidated financial condition, operating results, and common stock prices.  Furthermore, this document and other reports and documents filed by the Company with the SEC contain certain forward-looking statements under the Private Securities Litigation Reform Act of 1995 ("Forward-Looking Statements") with respect to the business of the Company.  Forward-Looking Statements are necessarily subject to risks and uncertainties, many of which are outside our control, that could cause actual results to differ materially from these statements. Forward-Looking Statements can be identified by such words as "anticipates," "believes," "plan," "assumes," "could," "should," "estimates," "forecasts," "projects," "expects," "intends," "potential," "seek," "predict," "may," "will" and similar references to future periods.  All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are Forward-Looking Statements.

 

These Forward-Looking Statements are subject to certain risks and uncertainties, including those detailed in Item 1A of our 2023 Annual Report on Form 10-K, and the risks and other factors described in this and our other Quarterly Reports on Form 10-Q, and in our other reports and documents that we have filed or may file from time to time with the SEC, which could cause actual results to differ materially from these Forward-Looking Statements.  Any Forward-Looking Statements are qualified in the entirety by reference to such risk factors discussed throughout our 2023 Annual Report on Form 10-K, in this and our other Quarterly Reports on Form 10-Q and as described in our other reports and documents filed from time to time with the SEC.  Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the Forward-Looking Statements include but are not limited to:

 

 

the market concerns facing our customers, and risks for the Company’s business in the event of the loss of certain substantial customers;

 

 

the continuing viability of sectors that rely on our products;

 

 

the effects of business and economic conditions, and challenges impacting the macroeconomic environment generally and/or our industry in particular;

 

 

the effects of rising input costs, and cost changes generally, including the potential impact and effects of inflationary pressures;

 

 

difficulties associated with integrating previously acquired companies;

 

 

capacity and supply constraints or difficulties, including supply chain constraints or other challenges;

 

 

the impact of public health crises (such as the governmental, social and economic effects of COVID or other future epidemics or pandemics);

 

 

difficulties associated with the availability of labor, and the risks of any labor unrest or labor shortages;

 

 

risks associated with our international operations, including our substantial manufacturing operations in the People’s Republic of China (the “PRC”);

 

 

risks associated with restructuring programs or other strategic initiatives, including any difficulties in implementation or realization of the expected benefits or cost savings;

 

 

product development, commercialization or technological difficulties;

 

 

the regulatory and trade environment;

 

 

risks associated with fluctuations in foreign currency exchange rates and interest rates;

 

 

uncertainties associated with legal proceedings;

 

 

the market's acceptance of the Company's new products and competitive responses to those new products; and

 

 

the impact of changes to U.S. and applicable foreign legal and regulatory requirements, including tax laws, trade and tariff policies.

 

The foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any Forward-Looking Statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of the document incorporated by reference into this report. Except as required by law, we assume no obligation and expressly disclaim any duty to publicly release the results of any revisions to these Forward-Looking Statements or otherwise update any Forward-Looking Statement to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any Forward-Looking Statements contained in this Quarterly Report on Form 10-Q. Any Forward-Looking Statement made by the Company is based only on information currently available to us and speaks only as of the date on which it is made. All Forward-Looking Statements are expressly qualified in their entirety by the cautionary statements contained in this section.

 

 

 

 

PART I.  Financial Information

 

Item 1.  Financial Statements (Unaudited)

 

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

 

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 

ASSETS

        

Current Assets:

        

Cash and cash equivalents

 $71,320  $89,371 

Held to maturity U.S. Treasury securities

  49,900   37,548 

Accounts receivable, net of allowance of $1,508 and $1,388, respectively

  83,458   84,129 

Inventories

  130,459   136,540 

Unbilled receivables

  9,150   12,793 

Other current assets

  20,052   21,097 

Total current assets

  364,339   381,478 
         

Property, plant and equipment, net

  36,036   36,533 

Right-of-use assets

  21,328   20,481 

Related party note receivable

  2,644   2,152 

Equity method investment

  10,324   10,282 

Intangible assets, net

  47,868   49,391 

Goodwill, net

  25,347   26,642 

Deferred income taxes

  13,052   11,553 

Other assets

  34,399   33,119 

Total assets

 $555,337  $571,631 
         

LIABILITIES AND STOCKHOLDERS' EQUITY

        

Current Liabilities:

        

Accounts payable

 $32,818  $40,441 

Accrued expenses

  36,772   54,657 

Operating lease liabilities, current

  5,730   6,350 

Other current liabilities

  11,181   9,161 

Total current liabilities

  86,501   110,609 
         

Long-term Liabilities:

        

Long-term debt

  60,000   60,000 

Operating lease liabilities, long-term

  15,727   14,212 

Liability for uncertain tax positions

  19,951   19,823 

Minimum pension obligation and unfunded pension liability

  20,174   19,876 

Deferred income taxes

  1,307   1,456 

Other long-term liabilities

  5,020   5,097 

Total liabilities

  208,680   231,073 
         

Commitments and contingencies (see Note 15)

          
         

Stockholders' Equity:

        

Preferred stock, no par value, 1,000,000 shares authorized; none issued

  -   - 

Class A common stock, par value $.10 per share, 10,000,000 shares authorized; 2,130,780 and 2,141,589 shares outstanding at March 31, 2024 and December 31, 2023, respectively (net of 1,072,769 restricted treasury shares)

  213   214 

Class B common stock, par value $.10 per share, 30,000,000 shares authorized; 10,574,081 and 10,620,260 shares outstanding at March 31, 2024 and December 31, 2023, respectively (net of 3,218,307 restricted treasury shares)

  1,061   1,065 

Treasury stock (unrestricted, consisting of 14,132 Class A shares and 115,481 Class B shares)

  (6,737)  (454)

Additional paid-in capital

  45,069   44,260 

Retained earnings

  322,508   307,510 

Accumulated other comprehensive loss

  (15,457)  (12,037)

Total stockholders' equity

  346,657   340,558 

Total liabilities and stockholders' equity

 $555,337  $571,631 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

                 
   

Three Months Ended

 
   

March 31,

 
   

2024

   

2023

 
                 

Net sales

  $ 128,090     $ 172,344  

Cost of sales

    80,012       118,680  

Gross profit

    48,078       53,664  
                 

Research and development costs

    5,215       5,223  

Selling, general and administrative expenses

    24,944       25,296  

Restructuring charges

    65       3,507  

Income from operations

    17,854       19,638  
                 

Interest expense

    (434 )     (983 )

Interest income

    1,115       107  

Other income/expense, net

    1,817       (26 )

Earnings before provision for income taxes

    20,352       18,736  
                 

Provision for income taxes

    4,478       4,164  

Net earnings available to common stockholders

  $ 15,874     $ 14,572  
                 
                 

Net earnings per common share:

               

Class A common share - basic and diluted

  $ 1.19     $ 1.09  

Class B common share - basic and diluted

  $ 1.26     $ 1.15  
                 

Weighted-average number of shares outstanding:

               

Class A common share - basic and diluted

    2,139       2,142  

Class B common share - basic and diluted

    10,610       10,639  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

         
  

Three Months Ended

 
  

March 31,

 
  

2024

  

2023

 
         

Net earnings available to common stockholders

 $15,874  $14,572 
         

Other comprehensive income (loss):

        

Currency translation adjustment, net of taxes of $26, and $9, respectively

  (3,776)  1,998 

Unrealized gains (losses) on interest rate swap cash flow hedge, net of taxes of $0 in both periods

  340   (894)

Unrealized holding gains on marketable securities, net of taxes of $0 in both periods

  1   1 

Change in unfunded SERP liability, net of taxes of ($4) in both periods

  15   13 

Other comprehensive (loss) income

  (3,420)  1,118 
         

Comprehensive income

 $12,454  $15,690 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except per share data)

 (unaudited)

 

          

Accumulated

                         

 

         Other  Class A  Class A   Class B  Class B      Additional 
      

Retained

  

Comprehensive

  

Common

  

# of

  

Common

  

# of

  

Treasury

  

Paid-In

 
  

Total

  

Earnings

  

(Loss) Income

  

Stock

  

Shares

  

Stock

  

Shares

  

Stock

  

Capital

 
                                     

Balance at December 31, 2023

 $340,558  $307,510  $(12,037) $214   2,142  $1,065   10,620  $(454) $44,260 

Net earnings

  15,874   15,874   -   -   -   -   -   -   - 

Dividends declared:

                                    

Class A Common Stock, $0.06/share

  (129)  (129)  -   -   -   -   -   -   - 

Class B Common Stock, $0.07/share

  (747)  (747)  -   -   -   -   -   -   - 

Issuance of restricted common stock

  -   -   -   -   -   6   58   -   (6)

Forfeiture of restricted common stock

  -   -   -   -   -   -   (6)  -   - 

Purchases of common stock

  (6,283)  -   -   (1)  (11)  (10)  (98)  (6,283)  11 

Foreign currency translation adjustment, net of taxes of $26

  (3,776)  -   (3,776)  -   -   -   -   -   - 

Unrealized holding gains on interest rate swap cash flow hedge, net of taxes of $0

  340   -   340   -   -   -   -   -   - 

Unrealized holding gains on marketable securities, net of taxes of $0

  1   -   1   -   -   -   -   -   - 

Stock-based compensation expense

  804   -   -   -   -   -   -   -   804 

Change in unfunded SERP liability, net of taxes of ($4)

  15   -   15   -   -   -   -   -   - 

Balance at March 31, 2024

 $346,657  $322,508  $(15,457) $213   2,131  $1,061   10,574  $(6,737) $45,069 

 

          

Accumulated

                         
          

Other

  

Class A

  Class A  

Class B

  Class B      

Additional

 
      

Retained

  

Comprehensive

  

Common

  

# of

  

Common

  # of  

Treasury

  

Paid-In

 
  

Total

  

Earnings

  

(Loss) Income

  

Stock

  

Shares

  

Stock

  

Shares

  

Stock

  

Capital

 
                                     

Balance at December 31, 2022

 $262,346  $237,188  $(16,546) $214   2,142  $1,067   10,643  $(349) $40,772 

Net earnings

  14,572   14,572   -   -   -   -   -   -   - 

Dividends declared:

                                    

Class A Common Stock, $0.06/share

  (128)  (128)  -   -   -   -   -   -   - 

Class B Common Stock, $0.07/share

  (747)  (747)  -   -   -   -   -   -   - 

Forfeiture of restricted common stock

  -   -   -   -   -   (1)  (10)  -   1 

Foreign currency translation adjustment, net of taxes of $9

  1,998   -   1,998   -   -   -   -   -   - 

Unrealized losses on interest rate swap cash flow hedge, net of taxes of $0

  (894)  -   (894)  -   -   -   -   -   - 

Unrealized holding gains on marketable securities, net of taxes of $0

  1   -   1   -   -   -   -   -   - 

Stock-based compensation expense

  902   -   -   -   -   -   -   -   902 

Change in unfunded SERP liability, net of taxes of ($4)

  13   -   13   -   -   -   -   -   - 

Balance at March 31, 2023

 $278,063  $250,885  $(15,428) $214   2,142  $1,066   10,633  $(349) $41,675 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

   

Three Months Ended

 
   

March 31,

 
   

2024

   

2023

 
                 

Cash flows from operating activities:

               

Net earnings

  $ 15,874     $ 14,572  

Adjustments to reconcile net earnings to net cash provided by operating activities:

               

Depreciation and amortization

    3,684       3,236  

Stock-based compensation

    804       902  

Amortization of deferred financing costs

    26       33  

Deferred tax benefit

    (1,676 )     (1,137 )

Net unrealized (gains)/losses on foreign currency revaluation

    (647 )     199  

Other, net

    (71 )     465  

Changes in operating assets and liabilities:

               

Accounts receivable

    725       (1,316 )

Unbilled receivables

    3,644       3,175  

Inventories

    5,688       7,652  

Accounts payable

    (7,575 )     (4,831 )

Accrued expenses

    (16,440 )     (6,417 )

Accrued restructuring costs

    (1,254 )     2,590  

Income taxes payable

    4,971       3,931  

Other operating assets/liabilities, net

    (1,603 )     (6,219 )

Net cash provided by operating activities

    6,150       16,835  
                 

Cash flows from investing activities:

               

Purchases of property, plant and equipment

    (2,929 )     (3,761 )

Purchases of held to maturity and marketable securities

    (42,726 )     -  

Proceeds from held to maturity securities

    30,374       -  

Payment for equity method investment

    -       (9,975 )

Investment in related party notes receivable

    (492 )     -  

Proceeds from disposal/sale of property, plant and equipment

    192       25  

Net cash used in investing activities

    (15,581 )     (13,711 )
                 

Cash flows from financing activities:

               

Dividends paid to common stockholders

    (837 )     (829 )

Borrowings under revolving credit line

    -       5,000  

Purchases of common stock

    (6,283 )     -  

Net cash (used in) provided by financing activities

    (7,120 )     4,171  
                 

Effect of exchange rate changes on cash and cash equivalents

    (1,500 )     279  
                 

Net (decrease) increase in cash and cash equivalents

    (18,051 )     7,574  

Cash and cash equivalents - beginning of period

    89,371       70,266  

Cash and cash equivalents - end of period

  $ 71,320     $ 77,840  
                 
                 

Supplementary information:

               

Cash paid during the period for:

               

Income taxes, net of refunds received

  $ 978     $ 976  

Interest payments

  $ 981     $ 1,415  

ROU assets obtained in exchange for lease obligations

  $ 2,951     $ 380  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

BEL FUSE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1.

BASIS OF PRESENTATION AND ACCOUNTING POLICIES

 

The condensed consolidated balance sheets and statements of operations, comprehensive income, stockholders’ equity and cash flows for the periods presented herein have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows for all periods presented have been made. The results for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Bel Fuse Annual Report on Form 10-K for the fiscal year ended  December 31, 2023.

 

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted from these condensed consolidated financial statements pursuant to the rules and regulations, including the interim reporting requirements, of the U.S. Securities and Exchange Commission (“SEC”). The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

 

The Company’s significant accounting policies are summarized in Note 1 to the consolidated financial statements of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There were no significant changes to these accounting policies during the three months ended March 31, 2024, except as discussed in “Recently Adopted Accounting Standards” below and as follows:

 

Cash, Cash Equivalents and Investments

 

Cash equivalents include short-term investments in money market funds and certificates of deposit with an original maturity of three months or less when purchased. Accounts at each U.S. institution are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. Substantially all of our U.S. cash and cash equivalents balances are in excess of the FDIC insured limit. The Company periodically invests its excess cash in money market funds and U.S. Treasury Bills. The Company's cash and cash equivalents are placed with high credit quality financial institutions.

 

The Company has held to maturity securities comprised of U.S. Treasury Bills. These investments are classified as held to maturity as the Company has the intent and ability to hold these investments until they mature. The held to maturity securities mature within the next 12 months. The table below shows the amortized costs, associated gross unrealized gains and associated fair value of the held to maturity securities at March 31, 2024:

 

  

Amortized Cost

  

Gross Unrealized Gain

  

Fair Value

 

Held to maturity U.S. Treasury securities

 $49,900  $535  $50,435 

 

In determining the fair value of the Company's held to maturity U.S. Treasury securities, the Company utilized Level 1 inputs of the market price for comparable securities as of March 31 2024.

 

Investments

 

We account for non-marketable investments using the equity method of accounting if the investment gives us the ability to exercise significant influence over, but not control, of an investee. Significant influence generally exists if we have an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions.

 

Equity in earnings of unconsolidated affiliates, in the consolidated statements of operations, reflects our proportionate share of the investee's net income, including any associated affiliate taxes. Our proportionate share of the investee’s other comprehensive income (loss), net of income taxes, is recorded in the consolidated statements of stockholders’ equity and consolidated statements of comprehensive income. In general, the equity investment in our unconsolidated affiliates is equal to our original equity investment plus our share of those entities' undistributed earnings subsequent to our investment .

 

We evaluate our equity method investments for impairment at least annually or whenever events or changes in circumstances indicate, in management’s judgment, that the carrying value of an investment may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline in value to be other than temporary, the excess of the carrying value over the estimated fair value is recognized in the financial statements as an impairment. See Note 2, "Investment in Innolectric", below, for our discussion on specific equity method investments.

 

Where we are unable to exercise significant influence over the investee, or when our investment balance is reduced to zero from our proportionate share of losses, the investments are accounted for under the cost method. Under the cost method, investments are carried at cost and adjusted only for other-than-temporary declines in fair value, distributions of earnings, additional investments, or in the case of an observable price change in an orderly transaction for an identical security.

 

All amounts included in the tables to these notes to condensed consolidated financial statements, except per share amounts, are in thousands.

 

Recently Adopted Accounting Standards

 

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides temporary optional guidance on contract modifications and hedging accounting to ease the financial reporting burdens of the market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, which refined the scope of Topic 848 and clarified some of its guidance as part of the FASB’s monitoring of global reference rate activities. This updated guidance was effective upon issuance, and the Company was initially allowed to elect to apply the amendments prospectively through December 31, 2022.  In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848, which extended the date by which companies could elect to apply the amendments to December 31, 2024. During January 2023, the Company amended its credit agreement and related interest rate swap agreements to transition the reference rate from LIBOR to a Secured Overnight Financing Rate ("SOFR") effective January 31, 2023. In connection with these amendments, the Company adopted ASU 2020-04 in the first quarter of 2023 and elected to apply the relevant practical expedients within the guidance. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

 

7

  

In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), as amended. The new guidance broadens the information that an entity must consider in developing its expected credit loss estimates related to its financial instruments and adds to U.S. GAAP an impairment model that is based on expected losses rather than incurred losses. On January 1, 2023, the Company adopted ASU 2016-13. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

 

Accounting Standards Issued But Not Yet Adopted

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (CODM). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU 2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all periods presented. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition.

 

 

2.

INVESTMENT IN INNOLECTRIC

 

On February 1, 2023, the Company closed on a noncontrolling (one-third) investment in Germany-based innolectric AG (“innolectric”) for consideration of €8.0 million (approximately $8.8 million as of the February 2023 closing). Transaction costs associated with the Company's investment in innolectric amounted to $1.3 million and these costs have been recorded as part of the carrying value of the investment. Under the terms of the investment agreement, if innolectric achieves certain EBITDA thresholds within a specified timeframe, the Company would be committed to acquiring the remaining shares of innolectric at that time. The accompanying condensed consolidated balance sheet reflects the fair value as of the February 2023 closing of the initial one-third equity method investment, inclusive of transaction costs, of $11.0 million, and a separate liability of $1.0 million associated with the net fair value of the put and call options related to the remaining shares pursuant to the agreement in the event certain profitability thresholds are met.

 

This passive investment creates a strategic alliance that is focused on Electric Vehicles (“EV”) on-board power electronics, and in particular next generation fast-charging technology. With no product overlap, this relationship expands the Bel eMobility Power portfolio, further enhancing Bel's competitive position in this emerging field. Our investment in innolectric is accounted for using the equity method and we have determined that the innolectric investment is not a variable interest entity (VIE). Results from this investment have been included in Bel's Power Solution and Protection segment and amounted to income of $0.2 million during the three months ended March 31, 2024 The Company adopted a policy to record its share of innolectric's results on a one-month lag on a consistent basis to allow time for innolectric to provide its financial statements to Bel.

 

Related Party Transactions

 

From time to time, the Company provides cash loans to innolectric to fund working capital needs and further business development. During the three months ended March 31, 2024, the Company provided an incremental loan to innolectric in the amount of €0.5 million.  As of March 31, 2024 and December 31, 2023, the Company had loans outstanding to innolectric in the aggregate amount of €2.5 million (approximately $2.7 million at the March 31, 2024 exchange rate) and €2.0 million (approximately $2.1 million at the December 31, 2023 exchange rate), respectively. These loans bear interest at a rate of 5% per annum. This balance is shown as a related-party note receivable on the accompanying condensed consolidated balance sheet at March 31, 2024 and December 31, 2023.  

 

 

3.

DIVESTITURE OF SUBSIDIARY

 

On June 1, 2023, the Company completed its divestment of Bel Stewart s.r.o., a former subsidiary in the Czech Republic which has historically been reported within Bel’s Connectivity Solutions segment. The business was sold to PEI Genesis (“PEI”) for total consideration of $5.1 million, subject to working capital adjustments. The divestment of this non-core business was a strategic decision which allows the Connectivity Solutions segment to focus on its main product categories serving customer end markets such as commercial air, defense, industrial and networking which better align with its long-term growth objectives.

 

The carrying amounts of the major classes of assets and liabilities included as part of the sale were as follows:

 

     
  

Total

 

Cash and cash equivalents

 $2,072 

Accounts receivable

  1,030 

Inventories

  1,310 

Property, plant and equipment

  326 

Other assets

  48 

Accounts payable

  (441)

Accrued expenses

  (126)

Income taxes payable

  (100)

Other current liabilities

  (13)

Other long-term liabilities

  (23)

Total net assets transferred

  4,083 

Consideration received

  5,063 

Gain on sale recognized

 $980 

 

  

 

4.

REVENUE

 

The following table provides information about disaggregated revenue by geographic region and sales channel, and includes a reconciliation of the disaggregated revenue to our reportable segments:

 

  

Three Months Ended March 31, 2024

 
  

Power Solutions and Protection

  

Connectivity Solutions

  

Magnetic Solutions

  

Consolidated

 
                 

By Geographic Region:

                

North America

 $39,549  $43,884  $6,123  $89,556 

Europe

  16,333   9,436   1,216   26,985 

Asia

  4,365   965   6,219   11,549 
  $60,247  $54,285  $13,558  $128,090 
                 

By Sales Channel:

                

Direct to customer

 $38,825  $34,070  $9,786  $82,681 

Through distribution

  21,422   20,215   3,772   45,409 
  $60,247  $54,285  $13,558  $128,090 

 

  

Three Months Ended March 31, 2023

 
  

Power Solutions and Protection

  

Connectivity Solutions

  

Magnetic Solutions

  

Consolidated

 
                 

By Geographic Region:

                

North America

 $62,800  $43,013  $10,354  $116,167 

Europe

  13,599   8,401   2,766   24,766 

Asia

  6,782   1,982   22,647   31,411 
  $83,181  $53,396  $35,767  $172,344 
                 

By Sales Channel:

                

Direct to customer

 $59,614  $33,725  $27,411  $120,750 

Through distribution

  23,567   19,671   8,356   51,594 
  $83,181  $53,396  $35,767  $172,344 


The balances of the Company’s contract assets and contract liabilities at  March 31, 2024 and December 31, 2023 are as follows:

 

  

March 31,

  

December 31,

 
  

2024

  

2023

 
         

Contract assets - current (unbilled receivables)

 $9,150  $12,793 

Contract liabilities - current (deferred revenue)

 $2,606  $3,046 

 

The change in balance of our unbilled receivables from December 31, 2023 to March 31, 2024 primarily relates to a timing difference between the Company’s performance (i.e. when our product is shipped to a customer-controlled hub) and the point at which the Company can invoice the customer per the terms of the customer contract (i.e. when the customer pulls our product from the customer-controlled hub). Our deferred revenue balance at  December 31, 2023 and  March 31, 2024 primarily relates to customer prepayments on invoices related to surcharges and expedite fees, which will be recorded as revenue in the period in which the related finished goods are shipped to the customer.

 

Transaction Price Allocated to Future Obligations:

 

The aggregate amount of transaction price allocated to remaining performance obligations that have not been fully satisfied as of  March 31, 2024 related to contracts that exceed one year in duration amounted to $6.7 million, with expected contract expiration dates that range largely from 2025 – 2026. It is expected that $0.7 million of this aggregate amount will be recognized in 2025, $6.0 million will be recognized in 2026 and the remainder will be recognized in years beyond 2026.  The majority of the Company's orders received (but not yet shipped) at  March 31, 2024 is related to contracts that have an original expected duration of one year or less, for which the Company is electing to utilize the practical expedient available within the guidance, and are excluded from the transaction price related to these future obligations. The Company will generally satisfy the remaining performance obligations as we transfer control of the products ordered to our customers.

 

  

 

5.

EARNINGS PER SHARE

 

The following table sets forth the calculation of basic and diluted net earnings per common share under the two-class method for the three months ended March 31, 2024 and 2023:

 

   

Three Months Ended

 
   

March 31,

 
   

2024

   

2023

 
                 

Numerator:

               

Net earnings

  $ 15,874     $ 14,572  

Less dividends declared:

               

Class A

    129       128  

Class B

    747       747  

Undistributed earnings

  $ 14,998     $ 13,697  
                 

Undistributed earnings allocation:

               

Class A undistributed earnings

  $ 2,416     $ 2,203  

Class B undistributed earnings

    12,582       11,494  

Total undistributed earnings

  $ 14,998     $ 13,697  
                 

Net earnings allocation:

               

Class A net earnings

  $ 2,545     $ 2,331  

Class B net earnings

    13,329       12,241  

Net earnings

  $ 15,874     $ 14,572  
                 

Denominator:

               

Weighted-average shares outstanding:

               

Class A

    2,139       2,142  

Class B

    10,610       10,639  
                 

Net earnings per share:

               

Class A

  $ 1.19     $ 1.09  

Class B

  $ 1.26     $ 1.15  

  

 

6.

FAIR VALUE MEASUREMENTS

 

Fair value is defined as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date.  Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.  There are three levels of inputs that may be used to measure fair value:

 

Level 1 – Observable inputs such as quoted market prices in active markets;

 

Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

Level 3 – Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

10

 

 

  

March 31, 2024

 
  

Carrying value

  

Fair value

  

Cash and cash equivalents

  

Other Current Assets

 

Cash

 $59,231  $59,231  $59,231  $- 

Level 1:

                

Money market funds

  10,995   10,995   10,995   - 

Money market funds (Rabbi Trust)

  179   179   -   179 

Subtotal

  11,174   11,174   10,995   179 

Level 2:

                

Certificates of deposit and time deposits

  3,499   3,781   1,094   2,405 

Subtotal

  3,499   3,781   1,094   2,405 

Total

 $73,904  $74,186  $71,320  $2,584 

 

  

December 31, 2023

 
  

Carrying value

  

Fair value

  

Cash and cash equivalents

  

Other Current Assets

 

Cash

 $57,544  $57,544  $57,544  $- 

Level 1:

                

Money market funds

  31,188   31,188   31,188   - 

Money market funds (Rabbi Trust)

  303   303   -   303 

Subtotal

  31,491   31,491   31,188   303 

Level 2:

                

Certificates of deposit and time deposits

  3,629   3,926   639   2,990 

Subtotal

  3,629   3,926   639   2,990 

Total

 $92,664  $92,961  $89,371  $3,293 

 

As of March 31, 2024 and December 31, 2023, our available-for-sale securities primarily consisted of investments held in a rabbi trust which are intended to fund the Company’s Supplemental Executive Retirement Plan (“SERP”) obligations. These securities are measured at fair value using quoted prices in active markets for identical assets (Level 1) inputs and amounted to $0.2 million at  March 31, 2024 and $0.3 million at December 31, 2023

 

Throughout 2024 and 2023, the Company entered into a series of foreign currency forward contracts, the fair value of which was $0.2 million at  March 31, 2024 and $0.5 million at  December 31, 2023. The estimated fair value of foreign currency forward contracts is based on quotes received from the applicable counterparty, and represents the estimated amount we would receive or pay to settle the contracts, taking into consideration current exchange rates which can be validated through readily observable data from external sources (Level 2).

 

The Company is a party to two interest rate swap agreements as further described in Note 10, "Derivative Instruments and Hedging Activities". The fair value of the interest rate swap agreements was $4.3 million at March 31, 2024 and $4.0 million at  December 31, 2023, which was based on market data, and represents the estimated amount we would receive or pay to settle the agreements, taking into consideration current and projected future interest rates as well as the creditworthiness of the parties, all of which can be validated through readily observable data from external sources.

 

The fair values of our derivative financial instruments and their classifications in our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 were as follows:

 

 

 

Balance Sheet Classification

 

March 31, 2024

  

December 31, 2023

 

Derivative assets:

         

Foreign currency forward contracts:

         

Designated as cash flow hedges

Other current assets

 $-  $- 

Non designated as hedging instruments

Other current assets

  430   486 

Interest rate swap agreements:

         

Designated as a cash flow hedge

Other assets

  4,300   3,960 

Total derivative assets

 $4,730  $4,446 
          

Derivative liabilities:

         

Foreign currency forward contracts:

         

Designated as cash flow hedges

Other current liabilities

 $196  $5 

Total derivative liabilities

 $196  $5 

 

The Company does not have any financial assets measured at fair value on a recurring basis categorized as Level 3, and there were no transfers in or out of Level 1, Level 2 or Level 3 during the three months ended March 31, 2024 or  March 31, 2023. There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the three months ended March 31, 2024 or  March 31, 2023.

 

There were no financial assets accounted for at fair value on a nonrecurring basis as of  March 31, 2024 or December 31, 2023.

 

The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, which are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. The fair value of the Company’s long-term debt is estimated using a discounted cash flow method based on interest rates that are currently available for debt issuances with similar terms and maturities. At  March 31, 2024 and December 31, 2023, the estimated fair value of total debt was $60.0 million at each date, compared to a carrying amount of $60.0 million at each date. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of March 31, 2024.

 

Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets, long-lived assets and the net liability related to the put/call options pursuant to the innolectric investment agreement, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment upon the occurrence of a triggering event or in the case of goodwill, on at least an annual basis.  Based on the Company's assessment, it was concluded that no triggering events occurred during the three months ended March 31, 2024 or March 31, 2023.  

 

 

7.

INVENTORIES

 

The components of inventories are as follows:

 

   

March 31,

   

December 31,

 
   

2024

   

2023

 

Raw materials

  $ 60,507     $ 63,647  

Work in progress

    44,006       42,038  

Finished goods

    25,946       30,855  

Inventories

  $ 130,459     $ 136,540  

  

 

8.

 PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consist of the following:

 

   

March 31,

   

December 31,

 
   

2024

   

2023

 

Land

  $ 121     $ 348  

Buildings and improvements

    12,788       15,286  

Machinery and equipment

    99,346       98,527  

Construction in progress

    1,340       1,567  
      113,595       115,728  

Accumulated depreciation

    (77,559 )     (79,195 )

Property, plant and equipment, net

  $ 36,036     $ 36,533  

 

Depreciation expense was $2.3 million and $2.1 million, respectively, for the three months ended  March 31, 2024 and 2023. Depreciation expense related to our manufacturing facilities and equipment is included in cost of sales and depreciation expense associated with administrative facilities and office equipment is included in selling, general and administrative expense within the accompanying condensed consolidated statements of operations.

 

At March 31, 2024, a total of $2.0 million of property was classified as assets held for sale within other current assets on the accompanying condensed consolidated balance sheets related to property in Glen Rock, Pennsylvania and several buildings in Zhongshan, PRC. At  December 31, 2023, a total of $1.3 million of property was classified as assets held for sale within other current assets on the accompanying condensed consolidated balance sheets related solely to the buildings in Zhongshan, PRC. 

 

  

 

9.

ACCRUED EXPENSES

 

Accrued expenses consist of the following:

 

   

March 31,

   

December 31,

 
   

2024

   

2023

 

Salaries, bonuses and related benefits

  $ 18,403     $ 33,566  

Deferred revenue

    2,606       3,046  

Accrued restructuring costs

    4,287       5,498  

Sales commissions

    1,929       2,347  

Warranty accrual

    1,594       1,542  

Other