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| BEL FUSE INC. AND SUBSIDIARIES | BEL FUSE INC. AND SUBSIDIARIES | | BEL FUSE INC. AND SUBSIDIARIES | |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) | | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) | |
| (dollars in thousands) | (dollars in thousands) | | (dollars in thousands) | |
| (Unaudited) | (Unaudited) | | (Unaudited) | |
| | | Nine Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2013 | | | 2012 | | | 2014 | | | 2013 | |
| | | | | | | | | | | | | |
| Changes in operating assets and liabilities consist of: | | | | | | | | | | | | |
| Increase in accounts receivable | | $ | (13,015 | ) | | $ | (3,562 | ) | | $ | (2,034 | ) | | $ | (13,015 | ) |
| Increase in inventories | | | (7,180 | ) | | | (1,718 | ) | |
| Increase in prepaid expenses and other current assets | | | (1,483 | ) | | | (668 | ) | |
| Decrease (increase) in inventories | | | | 9,737 | | | | (6,746 | ) |
| Decrease (increase) in prepaid expenses and other current assets | | | | 856 | | | | (1,483 | ) |
| Increase in other assets | | | (95 | ) | | | (189 | ) | | | (171 | ) | | | (95 | ) |
| Increase in accounts payable | | | 6,920 | | | | 288 | | |
| Increase in accrued expenses | | | 2,640 | | | | 1,174 | | |
| (Decrease) increase in accounts payable | | | | (2,030 | ) | | | 6,920 | |
| (Decrease) increase in accrued expenses | | | | (7,291 | ) | | | 2,640 | |
| Increase in other liabilities | | | 274 | | | | - | | | | 63 | | | | 274 | |
| (Decrease) increase in accrued restructuring costs | | | (122 | ) | | | 1,159 | | |
| Decrease in accrued restructuring costs | | | | - | | | | (122 | ) |
| Decrease in income taxes payable | | | (614 | ) | | | (486 | ) | | | (710 | ) | | | (614 | ) |
| | | $ | (12,675 | ) | | $ | (4,002 | ) | | $ | (1,580 | ) | | $ | (12,241 | ) |
| | | | | | | | | | | | | | | | | |
| Supplementary information: | | | | | | | | | | | | | | | | |
| Cash paid during the period for: | | | | | | | | | | | | | | | | |
| Income taxes, net of refunds received | | $ | 1,152 | | | $ | 1,234 | | | $ | 2,536 | | | $ | 1,152 | |
| Interest | | | 75 | | | | 2 | | | | 1,633 | | | | 75 | |
| | | | | | | | | | | | | | | | | |
| Details of acquisitions: | | | | | | | | | | | | | | | | |
| Fair value of identifiable net assets acquired | | $ | 25,689 | | | $ | 13,282 | | | $ | 122,041 | | | $ | 34,541 | |
| Goodwill | | | 13,630 | | | | 8,903 | | | | 111,952 | | | | 4,812 | |
| Fair value of net assets acquired | | $ | 39,319 | | | $ | 22,185 | | | $ | 233,993 | | | $ | 39,353 | |
| | | | | | | | | | | | | | | | | |
| Fair value of net assets acquired | | $ | 39,319 | | | $ | 22,185 | | | $ | 233,993 | | | $ | 39,353 | |
| Less: Cash acquired in acquisition | | | (8,388 | ) | | | (2,991 | ) | | | (27,457 | ) | | | (8,388 | ) |
| Deferred consideration | | | - | | | | (7 | ) | | | - | | | | (34 | ) |
| Cash paid for acquisitions, net of cash acquired | | $ | 30,931 | | | $ | 19,187 | | | $ | 206,536 | | | $ | 30,931 | |
| See notes to unaudited condensed consolidated financial statements. | See notes to unaudited condensed consolidated financial statements. | | See notes to unaudited condensed consolidated financial statements. | |
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | BASIS OF PRESENTATION AND ACCOUNTING POLICIES |
The condensed consolidated balance sheet as of September 30, 2013,2014, and the condensed consolidated statements of operations, comprehensive income and cash flows for the periods presented herein have been prepared by Bel Fuse Inc. (the “Company”"Company" or “Bel”"Bel") 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. The results for the three and nine months ended September 30, 20132014 should not be viewed as indicative of the Company’sCompany's annual results or the Company’sCompany's results for any other period. The information for the condensed consolidated balance sheet as of December 31, 20122013 was derived from audited financial statements. These 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 year ended December 31, 2012.2013.
On March 9, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of GigaCom Interconnect AB (“GigaCom”("GigaCom"). On July 31, 2012, the Company consummated its acquisition of 100% of the issued and outstanding capital stock of Fibreco Ltd. (“Fibreco”("Fibreco"). On September 12, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Powerbox Italia S.r.L. and its subsidiary, Powerbox Design (collectively, “Powerbox”, now merged to form Bel Power Europe S.r.l.S.r.L ("Powerbox"). The acquisitions of GigaCom, Fibreco and Powerbox may hereafter be referred to collectively as either the “2012 Acquisitions”"2012 Acquisitions" or the “2012"2012 Acquired Companies”Companies". Accordingly, as of the respective acquisition dates, all of the assets acquired and liabilities assumed were recorded at their preliminary fair values. The accompanying condensed consolidated statement of operations for the three and nine months ended September 30, 2013 have been restated to reflect immaterial measurement period adjustments related to the applicable 2012 Acquisitions.
On March 29, 2013, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Transpower Technologies (HK) Limited (“Transpower”("Transpower") and certain other tangible and intangible assets related to the Transpower magnetics business of TE Connectivity (“TRP”("TRP"). On August 20, 2013, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Array Connector Corporation (“Array”("Array"). The acquisitions of TRP and Array may hereafter be referred to collectively as either the “2013 Acquisitions”"2013 Acquisitions" or the “2013"2013 Acquired Companies”Companies". Accordingly, as of the respective acquisition dates, all of the assets acquired and liabilities assumed were recorded at their preliminary fair valuesvalues. The Company's condensed consolidated results of operations include the operating results of the 2013 Acquisitions since their respective acquisition dates. The accompanying condensed consolidated financial statements as of December 31, 2013 and for the Company’sthree and nine months ended September 30, 2013 have been restated to reflect measurement period adjustments, as further described in Note 3, related to the TRP acquisition.
On June 19, 2014, the Company completed its acquisition of 100% of the issued and outstanding capital stock of the Power-One Power Solutions business ("Power Solutions") of ABB Ltd. On July 25, 2014, the Company completed its acquisition of 100% of the issued and outstanding capital stock of the U.S. and U.K. Connectivity Solutions businesses from Emerson Electric Co. ("Emerson"). On August 29, 2014, the Company completed its acquisition of the Connectivity Solutions business in China from Emerson (collectively with the U.S. and U.K. portion of the transaction, "Connectivity Solutions"). The acquisitions of Power Solutions and Connectivity Solutions may hereafter be referred to collectively as either the "2014 Acquisitions" or the "2014 Acquired Companies". Accordingly, as of the respective acquisition dates, all of the assets acquired and liabilities assumed were recorded at their preliminary fair values. The Company's condensed consolidated results of operations for the three and nine months ended September 30, 2013 and September 30, 20122014 include the operating results of the acquired companies2014 Acquisitions from their respective acquisition dates through the respective period end dates. The accompanying condensed consolidated financial statements as of December 31, 2012 and for the three and nine months ended September 30, 2012 have been restated to reflect immaterial measurement period adjustments related to the 2012 Acquisitions, as applicable.
Recent Accounting Pronouncements2014.
The Company’sCompany's significant accounting policies are summarized in Note 1 of the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 2012.2013. There were no significant changes to these accounting policies during the nine months ended September 30, 2013. Recent accounting pronouncements adopted during the first nine months of 2013 are as follows:2014.
AccountingRecently Adopted Standards Update (“ASU”) No. 2012-02 – Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (“ASU No. 2012-02”)
ASU No. 2012-02 amends ASU No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, and permits an entityIn July 2013, the FASB issued revised guidance to first assess qualitative factorsaddress the diversity in practice related to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The Company adopted ASU No. 2012-02 during the first quarter of 2013. The adoption of this update did not have a material effect on the Company’s condensed consolidated financial statements.
Accounting Standards Update No. 2013-02 – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU No. 2013-02”)
ASU No. 2013-02 requires disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the consolidated statements of operations, or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net earnings, but only if the amount reclassified is required to be reclassified to net earnings in its entirety in the same reporting period. For amounts not reclassified in their entirety to net earnings, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. The Company adopted ASU No. 2013-02 during the first quarter of 2013. The adoption of this update did not have a material effect on the Company’s condensed consolidated financial statements.
Accounting Standards Update No. 2013-11 – Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU No. 2013-11”)
ASU No. 2013-11 provides guidance on financial statement presentation of an unrecognized tax benefitbenefits when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuingCompany adopted this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current U.S. GAAP. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date.January 1, 2014, on a prospective basis. The guidance in ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013. The Company doesadoption did not expect the adoption of this ASU to have a material impact on the Company’sCompany's financial statements.
Standards Issued Not Yet Adopted
In April 2014, the FASB issued guidance for the reporting of discontinued operations, which also contains new disclosure requirements for both discontinued operations and other disposals that do not meet the definition of a discontinued operation. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Management believes that the adoption of this guidance will not have a material impact on the Company's financial statements.
In May 2014, the FASB issued guidance on the accounting for revenue from contracts with customers that will supersede most existing revenue recognition guidance, including industry-specific guidance. The core principle requires an entity to recognize revenue to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the guidance requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Entities can choose to apply the guidance using either the full retrospective approach or a modified retrospective approach. Management is currently evaluating the impact that this guidance will have on the Company's financial statements, if any, including which transition method it will adopt.
In June 2014, the FASB issued guidance on stock compensation. The amendment requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendment is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Earlier adoption is permitted. Management does not believe that the adoption of this guidance will have any material impact on the Company's financial position or results of operations, financial condition or cash flows.operations.
In August 2014, the FASB issued guidance on the presentation of financial statements when there is substantial doubt about an entity's ability to continue as a going concern. The amendment requires that an entity's management evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. If conditions or events raise substantial doubt about an entity's ability to continue as a going concern, additional disclosure is required to enable users of the financial statements to understand the conditions or events, management's evaluation of the significance of those conditions and management's plans that are intended to alleviate or management's plans that have alleviated substantial doubt. The amendment is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Management does not believe that the adoption of this guidance will have any material impact on the Company's financial position or results of operations.
The Company utilizes the two-class method to report its earnings per share. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and participation rights in undistributed earnings. The Company’sCompany's Certificate of Incorporation, as amended, states that Class B common shares are entitled to dividends at least 5% greater than dividends paid to Class A common shares, resulting in the two-class method of computing earnings per share. In computing earnings per share, the Company has allocated dividends declared to Class A and Class B based on amounts actually declared for each class of stock and 5% more of the undistributed earnings have been allocated to Class B shares than to the Class A shares on a per share basis. Basic earnings per common share are computed by dividing net earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share, for each class of common stock, are computed by dividing net earnings by the weighted-average number of common shares and potential common shares outstanding during the period. There were no potential common shares outstanding during the three or nine months ended September 30, 20132014 or 2012September 30, 2013 which would have had a dilutive effect on earnings per share.
The earnings and weighted-average shares outstanding used in the computation of basic and diluted earnings per share are as follows (dollars in thousands, except share and per share data):
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| | | | | | | | | | | | | |
| Numerator: | | | | | | | | | | | | |
| Net earnings | | $ | 1,507 | | | $ | 7,380 | | | $ | 7,075 | | | $ | 8,511 | |
| Less Dividends declared: | | | | | | | | | | | | | | | | |
| Class A | | | 131 | | | | 131 | | | | 391 | | | | 391 | |
| Class B | | | 679 | | | | 650 | | | | 1,986 | | | | 1,925 | |
| Undistributed earnings | | $ | 697 | | | $ | 6,599 | | | $ | 4,698 | | | $ | 6,195 | |
| | | | | | | | | | | | | | | | | |
| Undistributed earnings allocation - basic and diluted: | | | | | | | | | | | | | | | | |
| Class A undistributed earnings | | $ | 124 | | | $ | 1,209 | | | $ | 847 | | | $ | 1,137 | |
| Class B undistributed earnings | | | 573 | | | | 5,390 | | | | 3,851 | | | | 5,058 | |
| Total undistributed earnings | | $ | 697 | | | $ | 6,599 | | | $ | 4,698 | | | $ | 6,195 | |
| | | | | | | | | | | | | | | | | |
| Net earnings allocation - basic and diluted: | | | | | | | | | | | | | | | | |
| Class A net earnings | | $ | 255 | | | $ | 1,340 | | | $ | 1,238 | | | $ | 1,528 | |
| Class B net earnings | | | 1,252 | | | | 6,040 | | | | 5,837 | | | $ | 6,983 | |
| Net earnings | | $ | 1,507 | | | $ | 7,380 | | | $ | 7,075 | | | $ | 8,511 | |
| | | | | | | | | | | | | | | | | |
| Denominator: | | | | | | | | | | | | | | | | |
| Weighted-average shares outstanding: | | | | | | | | | | | | | | | | |
| Class A common share - basic and diluted | | | 2,174,912 | | | | 2,174,912 | | | | 2,174,912 | | | | 2,174,912 | |
| Class B common share - basic and diluted | | | 9,590,586 | | | | 9,228,731 | | | | 9,420,111 | | | | 9,221,032 | |
| | | | | | | | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | | | | | | | |
| Class A common share - basic and diluted | | $ | 0.12 | | | $ | 0.62 | | | $ | 0.57 | | | $ | 0.70 | |
| Class B common share - basic and diluted | | $ | 0.13 | | | $ | 0.65 | | | $ | 0.62 | | | $ | 0.76 | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | | | | | | | | | | | | |
| Numerator: | | | | | | | | | | | | |
| Net earnings | | $ | 7,836 | | | $ | 2,491 | | | $ | 9,689 | | | $ | 4,804 | |
| Less Dividends: | | | | | | | | | | | | | | | | |
| Class A | | | 131 | | | | 130 | | | | 391 | | | | 392 | |
| Class B | | | 650 | | | | 681 | | | | 1,925 | | | | 2,036 | |
| Undistributed earnings | | $ | 7,055 | | | $ | 1,680 | | | $ | 7,373 | | | $ | 2,376 | |
| | | | | | | | | | | | | | | | | |
| Undistributed earnings allocation - basic and diluted: | | | | | | | | | | | | | | | | |
| Class A undistributed earnings | | $ | 1,293 | | | $ | 296 | | | $ | 1,353 | | | $ | 419 | |
| Class B undistributed earnings | | | 5,762 | | | | 1,384 | | | | 6,020 | | | | 1,957 | |
| Total undistributed earnings | | $ | 7,055 | | | $ | 1,680 | | | $ | 7,373 | | | $ | 2,376 | |
| | | | | | | | | | | | | | | | | |
| Net earnings allocation - basic and diluted: | | | | | | | | | | | | | | | | |
| Class A allocated earnings | | $ | 1,424 | | | $ | 426 | | | $ | 1,744 | | | $ | 811 | |
| Class B allocated earnings | | | 6,412 | | | | 2,065 | | | | 7,945 | | | | 3,993 | |
| Net earnings | | $ | 7,836 | | | $ | 2,491 | | | $ | 9,689 | | | $ | 4,804 | |
| | | | | | | | | | | | | | | | | |
| Denominator: | | | | | | | | | | | | | | | | |
| Weighted-average shares outstanding: | | | | | | | | | | | | | | | | |
| Class A common share - basic and diluted | | | 2,174,912 | | | | 2,174,912 | | | | 2,174,912 | | | | 2,174,912 | |
| Class B common share - basic and diluted | | | 9,228,731 | | | | 9,697,097 | | | | 9,221,032 | | | | 9,668,785 | |
| | | | | | | | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | | | | | | | |
| Class A common share - basic and diluted | | $ | 0.65 | | | $ | 0.20 | | | $ | 0.80 | | | $ | 0.37 | |
| Class B common share - basic and diluted | | $ | 0.69 | | | $ | 0.21 | | | $ | 0.86 | | | $ | 0.41 | |
On June 19, 2014, the Company completed its acquisition of Power Solutions for $110.0 million, net of cash acquired. Power Solutions is a leading provider of high-efficiency and high-density power conversion products for server, storage and networking equipment, industrial applications and power systems. Power Solutions offers a premier line of standard, modified-standard and custom designed AC/DC, DC/DC and other specific power conversion products for a variety of technologies in data centers, telecommunications and industrial applications. The acquisition of Power Solutions brings a complementary, industry-leading power product portfolio to Bel's existing line of power products, expands our current customer base in the areas of server, storage and networking equipment and adds industrial and additional transportation applications to the Company's product offering.
On July 25, 2014, the Company completed its acquisition of the U.S. and U.K. entities of the Emerson Network Power Connectivity Solutions business ("CS") from Emerson Electric Co. with a payment, net of cash acquired and including a working capital adjustment, of $90.7 million. On August 29, 2014, an additional payment of $9 million was made in connection with the closing of the China portion of the transaction. CS is a leading provider of high‑performance RF/Microwave and Harsh Environment Optical Connectors and Assemblies for military, aerospace, wireless communications, data communications, broadcast and industrial applications. CS is headquartered in Bannockburn, Illinois, and has manufacturing facilities in North America, the U.K. and China. CS will become part of Bel's Connectivity Solutions product group under the Cinch Connector business. Management believes the acquisition of CS will enable the Company to further expand into the aerospace and military markets where long-term product reliability resulting from highly engineered solutions is critical. The addition of the CS Stratos brand with our Fibreco/Gigacom Interconnect products will also give the Company a solid position in the expanded beam fiber optic market place. The CS group will also significantly expand the Company's existing copper‑based product offerings with the addition of RF/Microwave components and assemblies.
During the three and nine months ended September 30, 2014, the Company incurred $3.8 million and $5.3 million, respectively, of acquisition-related costs associated with the 2014 Acquisitions. These costs are included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2014.
While the initial accounting related to the acquisitions of Power Solutions and Connectivity Solutions is not complete as of the filing date of this Quarterly Report on Form 10-Q, the following table depicts the Company's current estimate of the respective acquisition date fair values of the consideration paid and identifiable net assets acquired (in thousands):
| | | Power Solutions | | | | Connectivity Solutions | | | | 2014 Acquisitions | |
| | | | | | Measurement | | | June 19, | | | | | | | | Acquisition-Date | |
| | | June 19, | | | Period | | | 2014 | | | | July 25/August 29, | | | | Fair Values | |
| | | 2014 | | | Adjustments | | | (As adjusted) | | | | 2014* | | | | (As adjusted) | |
| Cash | | $ | 20,913 | | | $ | - | | | $ | 20,913 | | | | $ | 6,544 | | | | $ | 27,457 | |
| Accounts receivable | | | 29,388 | | | | 1 | | | | 29,389 | | | | | 9,413 | | | | | 38,802 | |
| Inventories | | | 33,156 | | | | 3,273 | | | | 36,429 | | (a) | | | 17,601 | | (a) | | | 54,030 | |
| Other current assets | | | 5,387 | | | | 1,688 | | | | 7,075 | | | | | 2,634 | | | | | 9,709 | |
| Property, plant and equipment | | | 28,176 | | | | - | | | | 28,176 | | (b) | | | 10,440 | | (b) | | | 38,616 | |
| Intangible assets | | | 21,188 | | | | (9,153 | ) | | | 12,035 | | (c) | | | 46,505 | | (c) | | | 58,540 | |
| Other assets | | | 536 | | | | 18,212 | | | | 18,748 | | (d) | | | 2,684 | | | | | 21,432 | |
| Total identifiable assets | | | 138,744 | | | | 14,021 | | | | 152,765 | | | | | 95,821 | | | | | 248,586 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Accounts payable | | | (26,180 | ) | | | - | | | | (26,180 | ) | | | | (10,682 | ) | | | | (36,862 | ) |
| Accrued expenses | | | (20,290 | ) | | | (4,505 | ) | | | (24,795 | ) | (d) | | | (4,934 | ) | | | | (29,729 | ) |
| Other current liabilities | | | 223 | | | | - | | | | 223 | | | | | (57 | ) | | | | 166 | |
| Noncurrent liabilities | | | 761 | | | | (39,686 | ) | | | (38,925 | ) | (d) | | | (21,195 | ) | | | | (60,120 | ) |
| Total liabilities assumed | | | (45,486 | ) | | | (44,191 | ) | | | (89,677 | ) | | | | (36,868 | ) | | | | (126,545 | ) |
| Net identifiable assets acquired | | | 93,258 | | | | (30,170 | ) | | | 63,088 | | | | | 58,953 | | | | | 122,041 | |
| Goodwill | | | 37,534 | | | | 30,170 | | | | 67,704 | | (e) | | | 44,248 | | (e) | | | 111,952 | |
| Net assets acquired | | $ | 130,792 | | | $ | - | | | $ | 130,792 | | | | $ | 103,201 | | | | $ | 233,993 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Cash paid | | $ | 130,792 | | | $ | - | | | $ | 130,792 | | | | $ | 103,201 | | | | $ | 233,993 | |
| Assumption of liability | | | - | | | | - | | | | - | | | | | - | | | | | - | |
| Fair value of consideration | | | | | | | | | | | | | | | | | | | | | | |
| transferred | | | 130,792 | | | | - | | | | 130,792 | | | | | 103,201 | | | | | 233,993 | |
| Deferred consideration | | | - | | | | - | | | | - | | | | | - | | | | | - | |
| Total consideration paid | | $ | 130,792 | | | $ | - | | | $ | 130,792 | | | | $ | 103,201 | | | | $ | 233,993 | |
| | | | | | | | | | | | | | | | | | | | | | | |
* The Company acquired the U.S. and U.K. entities of Connectivity Solutions on July 25, 2014 and the China entity of Connectivity Solutions on August 29, 2014. These values represent the estimated fair values as of the respective acquisition date.
| (a) | The inventory amounts noted above for both Power Solutions and Connectivity Solutions include preliminary adjustments to acquisition-date fair value. |
| (b) | The appraisals related to machinery and equipment acquired were still in progress as of this filing date; however, the amount noted above for Connectivity Solutions includes preliminary adjustments to acquisition-date fair value. The amounts noted above for Power Solutions property, plant and equipment only include the carrying value of those assets on Power Solutions' balance sheet as of the acquisition date. |
| (c) | The Company has identified certain intangible assets related to the Power Solutions acquisition, including trademarks and trade names, developed technology and potential in-process research and development, license agreements, non-compete agreements, an investment in a 49%-owned joint venture and customer relationships, which are being valued by a third-party appraiser. These appraisals were not complete as of the date of this filing. The Company has also identified certain intangible assets related to the Connectivity Solutions acquisition, including trademarks, developed technology and customer relationships, which are being valued by a third-party appraiser. While these appraisals were still in progress as of the date of this filing, preliminary estimated adjustments to fair value have been reflected in the table above. |
| (d) | The Company recorded measurement period adjustments related to estimated uncertain tax provisions and other tax liabilities, including an indemnification asset related to certain liabilities. While these estimates were still in progress as of the date of this filing, preliminary estimated adjustments to these liabilities have been reflected in the table above. |
| (e) | The amount of goodwill is provisional as of the filing date, as the fair value determination of inventory acquired, and appraisals related to property, plant and equipment, various intangible assets and certain liabilities such as lease liabilities are still underway. As the final amount of goodwill has not yet been determined or allocated by segment, the Company is unable to determine at this time the portion of goodwill, if any, that will be deductible for tax purposes. |
3. ACQUISITIONSThe preliminary fair value of identifiable intangible assets related to the 2014 Acquired Companies is shown in the table below (dollars in thousands). For those intangible assets with finite lives, the acquisition-date fair values will be amortized over their respective estimated future lives utilizing the straight-line method.
| Weighted-Average Life | | Acquisition-Date Fair Value | |
| Trademarks | Indefinite | | $ | 7,115 | |
| Technology | 20 years | | | 20,818 | |
| Customer relationships | 15 years | | | 30,607 | |
| Total identifiable intangible assets acquired | | | $ | 58,540 | |
The results of operations of the 2014 Acquired Companies have been included in the Company's consolidated financial statements for the period subsequent to their respective acquisition dates. During the three and nine months ended September 30, 2014, the 2014 Acquired Companies contributed revenue of $63.1 million and $70.3 million, respectively, and net loss of approximately $0.8 million and $1.6 million, respectively, to the Company's consolidated financial results.
The following unaudited pro forma information presents a summary of the combined results of operations of the Company and the aggregate results of TRP, Array, Power Solutions and Connectivity Solutions for the periods presented as if the 2013 Acquisitions had occurred on January 1, 2012 and the 2014 Acquisitions had occurred on January 1, 2013, along with certain pro forma adjustments. These pro forma adjustments give effect to the amortization of certain definite-lived intangible assets, adjusted depreciation based upon estimated fair value of assets acquired, interest expense and amortization of deferred financing costs related to the financing of the business combinations, and related tax effects. The 2014 unaudited pro forma net earnings for the three and nine months ended September 30, 2014 were adjusted to exclude $3.9 million and $5.4 million ($2.4 million and $3.3 million after tax), respectively, of non-recurring expenses which were incurred in connection with the 2013 and 2014 Acquisitions. The 2013 unaudited pro forma net earnings were adjusted to include these charges in addition to an estimated non-recurring expense related to a fair value adjustment to acquisition-date inventory of $4.6 million ($4.4 million after tax) during each of the three and nine months ended September 30, 2013, respectively. The 2013 results reflected below include merger-related charges incurred by Power Solutions in connection with its acquisition by ABB in July 2013. The pro forma results do not reflect the realization of any potential cost savings, or any related integration costs. Certain cost savings may result from these acquisitions; however, there can be no assurance that these cost savings will be achieved. The unaudited pro forma results are presented for illustrative purposes only and are not necessarily indicative of the results that would have actually been obtained if the acquisitions had occurred on the assumed dates, nor is the pro forma data intended to be a projection of results that may be obtained in the future (in thousands):
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| | | | | | | | | | | | | |
| Revenue | | $ | 163,040 | | | $ | 185,091 | | | $ | 480,482 | | | $ | 533,605 | |
| Net earnings | | | 8,417 | | | | (28,213 | ) | | | 6,388 | | | | (39,714 | ) |
| Earnings per Class A common share - basic and diluted | | | 0.68 | | | | (2.38 | ) | | | 0.51 | | | | (3.36 | ) |
| Earnings per Class B common share - basic and diluted | | | 0.72 | | | | (2.50 | ) | | | 0.56 | | | | (3.51 | ) |
2013 Acquisitions:
On March 29, 2013, the Company acquired 100%completed its acquisition of the outstanding sharesTRP for $21.0 million, net of Transpower Technology (HK) Limited (“Transpower”), certain intellectual property and other tangible assets related to the Transpower magnetics business of TE Connectivity (“TE”) from Tyco Electronics Corporation (“Tyco”) for $22.4 million in cash and additional consideration including the assumption of $0.1 million in liabilities and the grant of a license to TE related to three of the Company’s patents. During the second quarter of 2013, the Company paid an additional $6.8 million in consideration to TE related to a working capital adjustment and an additional net payment of $0.1 million was made in the third quarter of 2013. Transpower is the sole shareholder of Dongguan Transpower Electronic Products Co., Ltd. in the People's Republic of China.acquired. The operations acquired are now doing business as TRP Connector (“TRP”). The Company’sCompany's purchase of the TRP magnetics business consisted of the integrated connector module (“ICM”("ICM") family of products, including RJ45, 10/100 Gigabit, 10G, PoE/PoE+, MRJ21 and RJ.5, a line of modules for smart-grid applications, and discrete magnetics.
On August 20, 2013, the Company completed its acquisition of Array, a manufacturer of aerospace and mil-spec connector products based in Miami, Florida, for $10.0 million in cash. The acquisition of Array expands the Company’sCompany's portfolio of connector products that can be offered to the combined customer base, and provides an opportunity to sell other products that Bel manufactures to Array's customers. Array has become part of Bel's Cinch Connector business.
During the three and nine months ended September 30, 2014, the Company incurred less than $0.1 million and $0.1 million, respectively, of acquisition-related costs associated with the 2012 and 2013 Acquisitions. During the three and nine months ended September 30, 2013, the Company incurred acquisition costs of $0.1 million and $0.6$0.8 million, respectively, of acquisition-related costs associated withrelated to the 2012 and 2013 Acquisitions. These costs are included in selling, general and administrative expense in the accompanying condensed consolidated statementstatements of operations for the three and nine months ended September 30, 2014 and 2013.
While the initial accounting related-11-
The purchase price allocations for TRP and Array is not complete aswere finalized during the first quarter of the filing date of this Form 10-Q, the2014. The following table depicts the Company’s initial estimate of thefinalized respective acquisition date fair values of the consideration paid or payable and identifiable net assets acquired (in thousands):
| | | TRP | | | Array | | | 2013 Acquisitions | | | TRP | | | Array | | | 2013 Acquisitions | |
| | | | | | | Measurement | | | March 29, | | | | | | Acquisition-Date | | | | | | Measurement | | | March 29, | | | | | | Measurement | | | August 20, | | | Acquisition-Date | |
| | | March 29, | | | | Period | | | 2013 | | | August 20, | | | Fair Values | | | March 29, | | | Period | | | 2013 | | | August 20, | | | Period | | | 2013 | | | Fair Values | |
| | | 2013 | | | | Adjustments | | | (As adjusted) | | | 2013 | | | (As adjusted) | | | 2013 | | | Adjustments | | | (As finalized) | | | 2013 | | | Adjustments | | | (As finalized) | | | (As finalized) | |
| Cash | | $ | 8,388 | | | | $ | - | | | $ | 8,388 | | | $ | - | | | $ | 8,388 | | | $ | 8,388 | | | $ | - | | | $ | 8,388 | | | $ | - | | | $ | - | | | $ | - | | | $ | 8,388 | |
| Accounts receivable | | | 11,580 | | | | | (39 | ) | | | 11,541 | | | | 994 | | | | 12,535 | | | | 11,580 | | | | (39 | ) | | | 11,541 | | | | 994 | | | | - | | | | 994 | | | | 12,535 | |
| Inventories | | | 6,258 | | (a) | | | 707 | | | | 6,965 | | | | 2,588 | | | | 9,553 | | | | 6,258 | | | | 1,097 | | | | 7,355 | | | | 2,588 | | | | (1,595 | ) | | | 993 | | | | 8,348 | |
| Other current assets | | | 1,953 | | | | | - | | | | 1,953 | | | | 83 | | | | 2,036 | | | | 1,953 | | | | (334 | ) | | | 1,619 | | | | 83 | | | | 345 | | | | 428 | | | | 2,047 | |
| Property, plant and equipment | | | 4,693 | | (b) | | | (165 | ) | | | 4,528 | | | | 2,285 | | | | 6,813 | | | | 4,693 | | | | 1,097 | | | | 5,790 | | | | 2,285 | | | | 1,225 | | | | 3,510 | | | | 9,300 | |
| Intangible assets | | | - | | (c) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 6,110 | | | | 6,110 | | | | - | | | | 1,470 | | | | 1,470 | | | | 7,580 | |
| Other assets | | | 1,151 | | | | | - | | | | 1,151 | | | | 84 | | | | 1,235 | | | | 1,151 | | | | 198 | | | | 1,349 | | | | 84 | | | | 1,663 | | | | 1,747 | | | | 3,096 | |
| Total identifiable assets | | | 34,023 | | | | | 503 | | | | 34,526 | | | | 6,034 | | | | 40,560 | | | | 34,023 | | | | 8,129 | | | | 42,152 | | | | 6,034 | | | | 3,108 | | | | 9,142 | | | | 51,294 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accounts payable | | | (8,565 | ) | | | | - | | | | (8,565 | ) | | | (677 | ) | | | (9,242 | ) | | | (8,565 | ) | | | 331 | | | | (8,234 | ) | | | (677 | ) | | | 1 | | | | (676 | ) | | | (8,910 | ) |
| Accrued expenses | | | (4,003 | ) | | | | 132 | | | | (3,871 | ) | | | (206 | ) | | | (4,077 | ) | | | (4,003 | ) | | | (462 | ) | | | (4,465 | ) | | | (206 | ) | | | (79 | ) | | | (285 | ) | | | (4,750 | ) |
| Other current liabilities | | | (25 | ) | | | | (671 | ) | | | (696 | ) | | | (214 | ) | | | (910 | ) | | | (25 | ) | | | (734 | ) | | | (759 | ) | | | (214 | ) | | | 214 | | | | - | | | | (759 | ) |
| Noncurrent liabilities | | | - | | | | | - | | | | - | | | | (643 | ) | | | (643 | ) | | | - | | | | (586 | ) | | | (586 | ) | | | (643 | ) | | | (1,105 | ) | | | (1,748 | ) | | | (2,334 | ) |
| Total liabilities assumed | | | (12,593 | ) | | | | (539 | ) | | | (13,132 | ) | | | (1,740 | ) | | | (14,229 | ) | | | (12,593 | ) | | | (1,451 | ) | | | (14,044 | ) | | | (1,740 | ) | | | (969 | ) | | | (2,709 | ) | | | (16,753 | ) |
| Net identifiable assets acquired | | | 21,430 | | | | | (36 | ) | | | 21,394 | | | | 4,294 | | | | 25,688 | | | | 21,430 | | | | 6,678 | | | | 28,108 | | | | 4,294 | | | | 2,139 | | | | 6,433 | | | | 34,541 | |
| Goodwill | | | 8,278 | | (d) | | | (313 | ) | | | 7,965 | | | | 5,666 | | | | 13,631 | | | | 8,278 | | | | (7,038 | ) | | | 1,240 | | | | 5,666 | | | | (2,094 | ) | | | 3,572 | | | | 4,812 | |
| Net assets acquired | | $ | 29,708 | | | | $ | (349 | ) | | $ | 29,359 | | | $ | 9,960 | | | $ | 39,319 | | | $ | 29,708 | | | $ | (360 | ) | | $ | 29,348 | | | $ | 9,960 | | | $ | 45 | | | $ | 10,005 | | | $ | 39,353 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash paid | | $ | 22,400 | | | | $ | 6,959 | | | $ | 29,359 | | | $ | 9,960 | | | $ | 39,319 | | | $ | 22,400 | | | $ | 6,948 | | | $ | 29,348 | | | $ | 9,960 | | | $ | 45 | | | $ | 10,005 | | | $ | 39,353 | |
| Assumption of severance payment | | | 109 | | | | | (109 | ) | | | - | | | | - | | | | - | | | | 109 | | | | (109 | ) | | | - | | | | - | | | | - | | | | - | | | | - | |
| Fair value of grant of license | | | - | | (e) | | | - | | | | - | | | | - | | | | - | | |
| Fair value of consideration transferred | | | 22,509 | | | | | 6,850 | | | | 29,359 | | | | 9,960 | | | | 39,319 | | |
| Fair value of consideration | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| transferred | | | | 22,509 | | | | 6,839 | | | | 29,348 | | | | 9,960 | | | | 45 | | | | 10,005 | | | | 39,353 | |
| Deferred consideration | | | 7,199 | | (f) | | | (7,199 | ) | | | - | | | | - | | | | - | | | | 7,199 | | | | (7,199 | ) | | | - | | | | - | | | | - | | | | - | | | | - | |
| Total consideration paid/payable | | $ | 29,708 | | | | $ | (349 | ) | | $ | 29,359 | | | $ | 9,960 | | | $ | 39,319 | | |
| Total consideration paid | | | $ | 29,708 | | | $ | (360 | ) | | $ | 29,348 | | | $ | 9,960 | | | $ | 45 | | | $ | 10,005 | | | $ | 39,353 | |
(a) | The determination of fair value related to the inventory acquired was still in progress as of the date of this filing. The amount above represents only the carrying value of the inventory on TRP’s balance sheet as of the acquisition date. The measurement period adjustment noted above for inventory relates to additional inventory received from TE, as well as inventory on customer consignments that was not previously accounted for. |
(b) | The appraisals related to machinery and equipment acquired were incomplete as of this filing date and, as such, the amount noted above represents only the carrying value of those assets on TRP’s balance sheet as of the acquisition date. The measurement period adjustment noted above for property, plant and equipment relates to equipment that could not be located upon a physical inventory of the assets acquired. |
(c) | The Company has identified certain intangible assets related to the TRP acquisition, including technology, license agreements and customer lists, which are being valued by a third-party appraiser. These appraisals were not complete as of the date of this filing. |
(d) | The amount of goodwill is provisional as of the filing date, as the fair value determination of inventory acquired, and appraisals related to property, plant and equipment and various intangible assets are still underway. As the final amount of goodwill has not yet been determined or allocated by segment, the Company is unable to determine at this time the portion of goodwill, if any, that will be deductible for tax purposes. |
(e) | As part of the consideration paid or payable, the Company granted Tyco a license related to three of the Company’s patents. The valuation related to this license grant was not complete as of the date of this filing. |
(f) | Deferred consideration represents the Company’s estimate of a working capital adjustment which is payable to the seller. Such adjustment must be agreed upon between the Company and the seller, and has not yet been finalized as of the date of this filing. |
The measurement period adjustments noted above primarily relate to adjustments to fair value based on the appraisals on inventory, property, plant and equipment, and intangible assets. In addition, various other asset and liability accounts had measurement period adjustments related to deferred taxes.
The results of operations of the 2013 Acquired Companies have been included in the Company’sCompany's consolidated financial statements for the period subsequent to their respective acquisition dates. During the three and nine months ended September 30, 2013,2014, the 2013 Acquired Companies contributed $26.4revenue of $20.7 million and $48.6$58.3 million, of revenue, respectively, and $4.6net earnings of $4.0 million and $8.7$8.9 million, of net earnings, respectively, to the Company’sCompany's consolidated financial results. The Company is still in the process of revising its corporate overhead allocations, and the results disclosed related to the 2013 Acquisitions do not yet include such allocations.
The unaudited pro forma information below presents the combined operating results of the Company and the 2013 Acquired Companies. The unaudited pro forma results are presented for illustrative purposes only. They do not reflect the realization of any potential cost savings, or any related integration costs. Certain cost savings may result from the 2013 Acquisitions; however, there can be no assurance that these cost savings will be achieved. These pro forma results do not purport to be indicative of the results that would have actually been obtained if the 2013 Acquisitions had occurred as of January 1, 2012, nor is the pro forma data intended to be a projection of results that may be obtained in the future. The following unaudited pro forma consolidated results of operations assume that the acquisitions of the 2013 Acquired Companies were completed as of January 1, 2012. The pro forma results noted below forDuring the three and nine months ended September 30, 2012 also include2013, the effects2013 Acquired Companies contributed revenue of the 2012 Acquisitions discussed below (dollars in thousands except per share data):
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | | | | | | | | | | | | |
| Revenue | | $ | 102,056 | | | $ | 97,982 | | | $ | 283,137 | | | $ | 283,986 | |
| Net earnings | | | 7,882 | | | | 5,295 | | | | 12,606 | | | | 12,578 | |
| Earnings per Class A common share - basic and diluted | | | 0.66 | | | | 0.42 | | | | 1.05 | | | | 1.00 | |
| Earnings per Class B common share - basic and diluted | | | 0.70 | | | | 0.45 | | | | 1.12 | | | | 1.08 | |
2012 Acquisitions:
On March 9, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of GigaCom with a cash payment of $2.7 million (£1.7 million). GigaCom, located in Gothenburg, Sweden, is a supplier of expanded beam fiber optic technology. GigaCom has become part of Bel’s Cinch Connector business. Management believes that GigaCom’s offering of expanded beam fiber optic (“EBOSA®”) products will enhance the Company’s position within the growing aerospace and military markets.
On July 31, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Fibreco with a cash payment, net of $2.7 million of cash acquired, of $13.7 million (£8.7 million). Fibreco, located in the United Kingdom, is a supplier of a broad range of expanded beam fiber optic components for use in military communications, outside broadcast and offshore exploration applications. Fibreco has become part of Bel’s interconnect product group under the Cinch Connector business. Management believes that the addition of Fibreco’s fiber optic-based product line to Cinch’s broad range of copper-based products will increase Cinch’s presence in emerging fiber applications within the military, aerospace and industrial markets. In addition, management believes the acquisition provides access to a range of customers for the recently acquired GigaCom EBOSA® product.
On September 12, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Powerbox, now known as Bel Power Europe, with a cash payment, net of $0.2 million of cash acquired, of $3.0 million. The Company also granted 30,000 restricted shares of the Company’s Class B common stock in connection with this acquisition. Compensation expense equal to the grant date fair value of these restricted shares of $0.6 million is being recorded ratably through September 2014. Bel Power Europe, located near Milan, Italy, develops high-power AC-DC power conversion solutions targeted at the broadcasting market. The acquisition of Bel Power Europe will allow Bel to expand its portfolio of power product offerings to include AC-DC products and will also establish a European design center located close to several of Bel’s existing customers.
Acquisition-related costs relating to the 2012 Acquisitions amounted to less than $0.1$26.4 million and $0.6 million during the three-month periods ended September 30, 2013 and 2012, respectively, and $0.1 million and $0.6 million during the nine-month periods ended September 30, 2013 and 2012, respectively. These costs are included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations.
During the year ended December 31, 2012, the Company completed the purchase accounting related to the GigaCom and Fibreco acquisitions. During the third quarter of 2013, the Company completed the purchase accounting related to its acquisition of Bel Power Europe. The following table reflects the finalized acquisition date fair values of the consideration transferred and identifiable net assets acquired related to the 2012 acquisitions (in thousands):
| | | | | | Measurement | | | Acquisition-Date | |
| | | Acquisition-Date | | | Period | | | Fair Values | |
| | | Fair Values | | | Adjustments | | | (As finalized) | |
| Cash and cash equivalents | | $ | 2,991 | | | $ | - | | | $ | 2,991 | |
| Accounts receivable | | | 3,750 | | | | 3 | | | | 3,753 | |
| Inventories | | | 1,061 | | | | (16 | ) | | | 1,045 | |
| Other current assets | | | 90 | | | | - | | | | 90 | |
| Property, plant and equipment | | | 502 | | | | 263 | | | | 765 | |
| Intangible assets | | | 30 | | | | 11,626 | | | | 11,656 | |
| Total identifiable assets | | | 8,424 | | | | 11,876 | | | | 20,300 | |
| | | | | | | | | | | | | |
| Accounts payable | | | (1,702 | ) | | | - | | | | (1,702 | ) |
| Accrued expenses | | | (1,736 | ) | | | - | | | | (1,736 | ) |
| Notes payable | | | (216 | ) | | | - | | | | (216 | ) |
| Income taxes payable | | | (264 | ) | | | (60 | ) | | | (324 | ) |
| Deferred income tax liability, current | | | (70 | ) | | | - | | | | (70 | ) |
| Deferred income tax liability, noncurrent | | | - | | | | (2,700 | ) | | | (2,700 | ) |
| Other long-term liabilities | | | (216 | ) | | | - | | | | (216 | ) |
| Total liabilities assumed | | | (4,204 | ) | | | (2,760 | ) | | | (6,964 | ) |
| Net identifiable assets acquired | | | 4,220 | | | | 9,116 | | | | 13,336 | |
| Goodwill | | | 17,965 | | | | (8,900 | ) | | | 9,065 | |
| Net assets acquired | | $ | 22,185 | | | $ | 216 | | | $ | 22,401 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash paid | | $ | 22,138 | | | | 263 | | | $ | 22,401 | |
| Deferred consideration | | | 47 | | | | (47 | ) | | | - | |
| Fair value of consideration transferred | | $ | 22,185 | | | $ | 216 | | | $ | 22,401 | |
The fair value of identifiable intangible assets noted above (as adjusted) consists of the following:
| | Weighted-Average Life | | Acquisition-Date Fair Value | |
| Trademarks | Indefinite | | $ | 1,264 | |
| Technology | 20 years | | | 6,542 | |
| Customer relationships | 16 years | | | 3,292 | |
| Non-compete agreements | 2 years | | | 558 | |
| Total identifiable intangible assets acquired | | | $ | 11,656 | |
The results of operations of the 2012 Acquired Companies have been included in the Company’s consolidated financial statements for the periods subsequent to their respective acquisition dates. During the three-month periods ended September 30, 2013 and 2012, Fibreco and Bel Power Europe contributed combined revenues of $1.8 million and $0.9$48.6 million, respectively, and combined net earnings of $0.1$4.2 million and less than $0.1$7.4 million, respectively, to the Company’sCompany's consolidated financial results. During the nine-month periods ended September 30, 2013 and 2012, Fibreco and Bel Power Europe contributed combined revenues of $7.7 million and $0.9 million, respectively, and combined net earnings of $0.7 million and less than $0.1 million, respectively, to the Company’s consolidated financial results. The acquisition of GigaCom has contributed to Bel’s research and development efforts and its technology has been incorporated into products now being sold by Fibreco. GigaCom incurred expenses, primarily related to research and development, of $0.2 million and $0.1 million during the three-month periods ended September 30, 2013 and 2012, respectively, and $0.7 million and $0.3 million during the nine-month periods ended September 30, 2013 and 2012, respectively.
4. FAIR VALUE MEASUREMENTS
FairFair 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
Level 3 – Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions
As of September 30, 20132014 and December 31, 2012,2013, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of securities that are among the Company’sCompany's investments in a rabbi trustRabbi Trust which are intended to fund the Company’sCompany's Supplemental Executive Retirement Plan (“SERP”("SERP") obligations, and other marketable securities described below. The securities that are held in the rabbi trustRabbi Trust are categorized as available-for-sale securities and are included as other assets in the accompanying condensed consolidated balance sheets at September 30, 20132014 and December 31, 2012.2013. The gross unrealized gains associated with the investmentsinvestment securities held in the rabbi trustRabbi Trust were $0.6 million and $0.4 million at each of September 30, 20132014 and December 31, 2012.2013, respectively. Such unrealized gains are included, net of tax, in accumulated other comprehensive loss.income.
As of September 30, 20132014 and December 31, 2012,2013, the Company had other marketable securities with a combined fair value of less than $0.1 million at each date, and gross unrealized lossesgains of less than $0.1 million at each date. Such unrealized lossesgains are included, net of tax, in accumulated other comprehensive loss.income. The fair value of the equity securities is determined based on quoted market prices in public markets and is categorized as Level 1. 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 nine months ended September 30, 2013 and 2012.2014. There were no changes to the Company’sCompany's valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the nine months ended September 30, 2013.2014.
The following table sets forth by level, within the fair value hierarchy, the Company’sCompany's financial assets accounted for at fair value on a recurring basis as of September 30, 20132014 and December 31, 20122013 (dollars in thousands).
| | | | | | Assets at Fair Value Using | |
| | | Total | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | |
| As of September 30, 2013 | | | | | | | | | | | | |
| Available-for-sale securities: | | | | | | | | | | | | |
| Investments held in rabbi trust | | $ | 3,238 | | | $ | 3,238 | | | $ | - | | | $ | - | |
| Marketable securities | | | 3 | | | | 3 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Total | | $ | 3,241 | | | $ | 3,241 | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
| As of December 31, 2012 | | | | | | | | | | | | | | | | |
| Available-for-sale securities: | | | | | | | | | | | | | | | | |
| Investments held in rabbi trust | | $ | 6,014 | | | $ | 6,014 | | | $ | - | | | $ | - | |
| Marketable securities | | | 2 | | | | 2 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Total | | $ | 6,016 | | | $ | 6,016 | | | $ | - | | | $ | - | |
| | | | | | Assets at Fair Value Using | |
| | | Total | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Other Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | |
As of September 30, 2014 | | | | | | | | | | | | |
| Available-for-sale securities: | | | | | | | | | | | | |
| Investments held in Rabbi Trust | | $ | 4,867 | | | $ | 4,867 | | | $ | - | | | $ | - | |
| Marketable securities | | | 4 | | | | 4 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Total | | $ | 4,871 | | | $ | 4,871 | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | |
As of December 31, 2013 | | | | | | | | | | | | | | | | |
| Available-for-sale securities: | | | | | | | | | | | | | | | | |
| Investments held in Rabbi Trust | | $ | 3,313 | | | $ | 3,313 | | | $ | - | | | $ | - | |
| Marketable securities | | | 3 | | | | 3 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | |
| Total | | $ | 3,316 | | | $ | 3,316 | | | $ | - | | | $ | - | |
The Company has other financial instruments, such as cash equivalents, cash equivalents held within the Rabbi Trust, accounts receivable, notes receivable, accounts payable, notes 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 September 30, 2014, the estimated fair value of long-term debt was $234.3 million compared to a carrying amount of $235.3 million. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of September 30, 20132014 or December 31, 2012.2013.
Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment on the occurrence of a triggering event or, in the case of goodwill and indefinite-lived intangible assets, on at least an annual basis. There were no triggering events that occurred during the nine months ended September 30, 20132014 or 20122013 that would warrant interim impairment testing.
5.INVENTORIES
The components of inventories are as follows (dollars in thousands):
| | | September 30, | | | December 31, | |
| | | 2013 | | | 2012 | |
| Raw materials | | $ | 30,919 | | | $ | 26,157 | |
| Work in progress | | | 12,081 | | | | 8,200 | |
| Finished goods | | | 28,779 | | | | 20,567 | |
| | | $ | 71,779 | | | $ | 54,924 | |
| | | September 30, | | | December 31, | |
| | | 2014 | | | 2013 | |
| Raw materials | | $ | 55,302 | | | $ | 29,428 | |
| Work in progress | | | 16,964 | | | | 8,783 | |
| Finished goods | | | 41,240 | | | | 31,808 | |
| | | $ | 113,506 | | | $ | 70,019 | |
6. INTANGIBLE ASSETAt September 30, 2014, $46.2 million of inventory related to the 2014 Acquired Companies.
During the third quarter of 2013, the Company paid $1.3 million| 6. | PROPERTY, PLANT AND EQUIPMENT |
Property, plant and received $0.3 million associated with licensing agreements entered into with Radiall SA. The agreements cover the parties’ respective technologies for EBOSA® fibre optic termini and the EPX® connector range. The $1.3 million paid by the Company is reflected as an intangible asset and the $0.3 million received by the Company is included in other long-term liabilities on the accompanying condensed consolidated balance sheet at September 30, 2013. Each will be amortized over the lifeequipment consist of the respective agreement of 20 years.following (dollars in thousands):
| | | September 30, | | | December 31, | |
| | | 2014 | | | 2013 | |
| Land | | $ | 3,302 | | | $ | 3,229 | |
| Buildings and improvements | | | 31,259 | | | | 25,216 | |
| Machinery and equipment | | | 118,161 | | | | 82,420 | |
| Construction in progress | | | 5,263 | | | | 4,042 | |
| | | | 157,985 | | | | 114,907 | |
| Accumulated depreciation | | | (83,881 | ) | | | (74,011 | ) |
| | | $ | 74,104 | | | $ | 40,896 | |
At September 30, 2014, $36.5 million of property, plant and equipment related to the 2014 Acquired Companies. 7.BUSINESS SEGMENT INFORMATION
The Company operates in one industry with three reportable operating segments, which are geographic in nature. The segments consist of North America, Asia and Europe. The primary criteria by which financial performance is evaluated and resources are allocated are sales and income from operations. The following is a summary of key financial data (dollars in thousands):
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| Total segment sales: | | | | | | | | | | | | |
| North America | | $ | 34,273 | | | $ | 34,370 | | | $ | 95,796 | | | $ | 106,349 | |
| Asia | | | 69,602 | | | | 47,238 | | | | 166,362 | | | | 125,881 | |
| Europe | | | 9,313 | | | | 8,983 | | | | 30,029 | | | | 24,200 | |
| Total segment sales | | | 113,188 | | | | 90,591 | | | | 292,187 | | | | 256,430 | |
| Reconciling item: | | | | | | | | | | | | | | | | |
| Intersegment sales | | | (12,024 | ) | | | (14,532 | ) | | | (34,014 | ) | | | (41,588 | ) |
| Net sales | | $ | 101,164 | | | $ | 76,059 | | | $ | 258,173 | | | $ | 214,842 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from operations: | | | | | | | | | | | | | | | | |
| North America | | $ | (96 | ) | | $ | (189 | ) | | $ | (3,591 | ) | | $ | 4,074 | |
| Asia | | | 8,400 | | | | 1,048 | | | | 12,377 | | | | 8 | |
| Europe | | | 24 | | | | 21 | | | | 644 | | | | 560 | |
| | | $ | 8,328 | | | $ | 880 | | | $ | 9,430 | | | $ | 4,642 | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| Total segment sales: | | | | | | | | | | | | |
| North America | | $ | 91,556 | | | $ | 34,273 | | | $ | 162,415 | | | $ | 95,796 | |
| Asia | | | 87,714 | | | | 69,602 | | | | 199,574 | | | | 166,362 | |
| Europe | | | 44,778 | | | | 9,313 | | | | 72,220 | | | | 30,029 | |
| Total segment sales | | | 224,048 | | | | 113,188 | | | | 434,209 | | | | 292,187 | |
| Reconciling item: | | | | | | | | | | | | | | | | |
| Intersegment sales | | | (67,707 | ) | | | (12,024 | ) | | | (95,783 | ) | | | (34,014 | ) |
| Net sales | | $ | 156,341 | | | $ | 101,164 | | | $ | 338,426 | | | $ | 258,173 | |
| | | | | | | | | | | | | | | | | |
| Income from operations: | | | | | | | | | | | | | | | | |
| North America | | $ | (1,964 | ) | | $ | (239 | ) | | $ | (2,698 | ) | | $ | (3,734 | ) |
| Asia | | | 3,306 | | | | 7,915 | | | | 9,694 | | | | 11,026 | |
| Europe | | | 3,330 | | | | 56 | | | | 4,271 | | | | 672 | |
| | | $ | 4,672 | | | $ | 7,732 | | | $ | 11,267 | | | $ | 7,964 | |
| | | | | | | | | | | | | | | | | |
| | | September 30, | | | December 31, | | | | | | | | | |
| | | | 2014 | | | | 2013 | | | | | | | | | |
| Total Assets: | | | | | | | | | | | | | | | | |
| North America | | $ | 205,463 | | | $ | 117,261 | | | | | | | | | |
| Asia | | | 243,753 | | | | 148,780 | | | | | | | | | |
| Europe | | | 81,642 | | | | 42,100 | | | | | | | | | |
| | | | 530,858 | | | | 308,141 | | | | | | | | | |
| Unallocated Goodwill | | | 112,629 | | | | - | | | | | | | | | |
| | | $ | 643,487 | | | $ | 308,141 | | | | | | | | | |
Recent Acquisitions – At September 30, 2014, Power Solutions' total assets of $206.7 million and Connectivity Solutions' total assets of $136.9 million are included in the table above.
The acquisitions of TRP in March 2013, Array in August 2013, Power Solutions in June 2014 and Connectivity Solutions in July and August 2014 contributed to Bel's segment sales, income (loss) from operations presented above:and total assets as follows:
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| Sales to External Customers: | | | | | | | | | | | | |
| North America: | | | | | | | | | | | | |
| Array | | $ | 1,758 | | | $ | 811 | | | $ | 5,302 | | | $ | 811 | |
| Power Solutions | | | 36,517 | | | | - | | | | 41,554 | | | | - | |
| Connectivity Solutions | | | 11,941 | | | | - | | | | 11,941 | | | | - | |
| | | | 50,216 | | | | 811 | | | | 58,797 | | | | 811 | |
| Asia: | | | | | | | | | | | | | | | | |
| TRP | | | 18,228 | | | | 25,096 | | | | 51,060 | | | | 46,885 | |
| Power Solutions | | | 1,600 | | | | - | | | | 1,958 | | | | - | |
| Connectivity Solutions | | | 749 | | | | - | | | | 749 | | | | - | |
| | | | 20,577 | | | | 25,096 | | | | 53,767 | | | | 46,885 | |
| Europe: | | | | | | | | | | | | | | | | |
| TRP | | | 727 | | | | 494 | | | | 1,912 | | | | 886 | |
| Power Solutions | | | 10,963 | | | | - | | | | 12,802 | | | | - | |
| Connectivity Solutions | | | 1,295 | | | | - | | | | 1,295 | | | | - | |
| | | | 12,985 | | | | 494 | | | | 16,009 | | | | 886 | |
| Net sales from 2013-2014 acquisitions | | | 83,778 | | | | 26,401 | | | | 128,573 | | | | 48,582 | |
| | | | | | | | | | | | | | | | | |
| Income from operations: | | | | | | | | | | | | | | | | |
| North America: | | | | | | | | | | | | | | | | |
| Array | | | (61 | ) | | | (135 | ) | | | (744 | ) | | | (135 | ) |
| Power Solutions | | | 1,072 | | | | - | | | | (53 | ) | | | - | |
| Connectivity Solutions | | | (1,299 | ) | | | - | | | | (1,299 | ) | | | - | |
| | | | (288 | ) | | | (135 | ) | | | (2,096 | ) | | | (135 | ) |
| Asia: | | | | | | | | | | | | | | | | |
| TRP | | | 4,200 | | | | 4,527 | | | | 9,311 | | | | 8,115 | |
| Power Solutions | | | (3,201 | ) | | | - | | | | (3,363 | ) | | | - | |
| Connectivity Solutions | | | 112 | | | | - | | | | 112 | | | | - | |
| | | | 1,111 | | | | 4,527 | | | | 6,060 | | | | 8,115 | |
| Europe: | | | | | | | | | | | | | | | | |
| TRP | | | 115 | | | | 92 | | | | 343 | | | | 196 | |
| Power Solutions | | | 2,726 | | | | - | | | | 3,024 | | | | - | |
| Connectivity Solutions | | | 73 | | | | - | | | | 73 | | | | - | |
| | | | 2,914 | | | | 92 | | | | 3,440 | | | | 196 | |
| Total income from operations from | | | | | | | | | | | | | | | | |
| 2013-2014 acquisitions | | $ | 3,737 | | | $ | 4,484 | | | $ | 7,404 | | | $ | 8,176 | |
Recent Acquisitions – During the three and nine months ended September 30, 2013, the acquisition of TRP contributed revenues of $25.6 million and $47.8 million, respectively, and income from operations of $5.0 million and $9.5 million, respectively, to the Company’s Asia operating segment. During each of the three and nine months ended September 30, 2013, the acquisition of Array contributed revenues of $0.8 million to the Company’s North America operating segment. The Company is still in the process of revising its corporate overhead allocations, and the results disclosed related to the 2013 Acquisitions do not yet include such allocations. During the three-month periods ended September 30, 2013 and 2012, Fibreco and Bel Power Europe contributed combined revenues of $1.8 million and $0.9 million, respectively, and combined operating income of $0.1 million and $0.1 million, respectively, to the Company’s Europe operating segment. During the nine-month periods ended September 30, 2013 and 2012, Fibreco and Bel Power Europe contributed combined revenues of $7.7 million and $0.9 million, respectively, and combined operating income of $1.3 million and $0.1 million, respectively, to the Company’s Europe operating segment.
Segment Sales – Segment sales are attributed to individual segments based on the geographic source of the billing for such customer sales. Transfers between geographic areas include finished products manufactured in foreign countries which are then transferred to the United States and Europe for sale; finished goods manufactured in the United States which are transferred to Europe and Asia for sale; and semi-finished components manufactured in any one of the United States which are soldgeographic segments and transferred to Asia any of the other geographic segments for sale or further processing. Income (loss) from operations represents net sales less operating costs and expenses.
8.INCOME TAXES
At September 30, 20132014 and December 31, 2012,2013, the Company has approximately $2.2$38.6 million and 2.7$2.2 million, respectively, of liabilities for uncertain tax positions ($1.00.2 million and $0.5$1.0 million, respectively, included in income taxes payable and $1.2$38.4 million and $2.2$1.2 million, respectively, included in liability for uncertain tax positions) all of which, if recognized, would reduce the Company’sCompany's effective tax rate. In connection with the acquisition of Power Solutions, the Company recorded an estimated liability for uncertain tax positions of $35.9 million, including interest and penalties of $11.9 million.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations by tax authorities for years before 20102011 and for state examinations before 2007.2008. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 20042003 in Asia and generally 20062007 in Europe.
As a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized benefits for tax positions taken regarding previously filed tax returns may change materially from those recorded as liabilities for uncertain tax positions in the Company’sCompany's condensed consolidated financial statements at September 30, 2013.2014. A total of $1.0$4.8 million of previously recorded liabilities for uncertain tax positions relates primarilyprincipally to the 20082011 tax year which expire during the three months ended September 30, 2014.2015. Additionally, a total of $0.5 million and $2.5$0.8 million of previously recorded liabilities for uncertain tax positions interest and penalties relating to the 2006 and 20092010 tax years and the 2007 through 2009 tax years, respectively,year were reversed during the quartersquarter ended September 30, 2013 and 2012, respectively.2014. This was offset in part by an increase into the liability for uncertain tax positions in the amount of $1.2$1.4 million which is included in the condensed consolidated statement of operations during the nine months ended September 30, 2014. A total of $0.5 million of previously recorded liabilities for uncertain tax positions relating to 2006 and 2009 tax years were reversed during the quarter ended September 30, 2012.2013.
The Company’sCompany's policy is to recognize interest and penalties related to unrecognized tax benefits arising from uncertain tax positions as a component of the current provision for income taxes. During the nine months ended September 30, 20132014 and 2012,2013, the Company recognized $0.7 million and an immaterial amount, respectively, of interest and penalties and no interest and penalties, respectively, in the condensed consolidated statements of operations. The Company has approximately$12.6 million and $0.2 million, respectively, accrued for the payment of such interest and penalties at September 30, 20132014 and December 31, 2012,2013, a portion of which is included in theeach of income taxes payable and liability for uncertain tax positions in the accompanying condensed consolidated balance sheets at each date. In connection with the estimated liability for uncertain tax positions, the Company will accrue approximately $2.5 million of interest and penalties annually.
Upon completion of the acquisitions of Power Solutions and Connectivity Solutions, there were net deferred tax assets of $7.1 million and deferred tax liabilities of $19.1 million, respectively, arising from various temporary differences and net operating loss carry forward acquired, which are included in the condensed consolidated balance sheet at September 30, 2014. At September 30, 2014, the fair market value reports have not been completed and therefore the Company had no additional deferred tax amounts relating to the Power Solutions or Connectivity Solutions acquisitions. At September 30, 2014, a net deferred tax liability of $11.0 million remains on the condensed consolidated balance sheet for the 2014 Acquisitions.
The Company intends to make elections to step up the tax basis of the Power Solutions acquisition to fair value under IRC Section 338(g). The Company does not intend to make an election to step-up the tax basis of the Emerson acquisition to fair value under IRC Section 338(g).
Upon the acquisition of Fibreco, FibrecoTRP, TRP had a deferred tax asset in the amount of $2.2 million arising from various timing differences related to depreciation and accrued expenses. Upon the acquisition of Array, Array had a deferred tax liability in the amount of $0.1$0.7 million arising from various temporary differences.timing differences related to depreciation and a deferred tax asset of $2.1 million arising from the NOL acquired. In connection with the 20122013 Acquisitions, the Company completedwas required to complete a fair market value report of property, plant and equipment and intangibles. As a result of that report, the Company established deferred tax liabilities at the date of acquisition in the amountsamount of $1.7 million, $0.6 million and $0.4$1.0 million respectively for the Fibreco, GigacomTRP and Bel Power EuropeArray acquisitions. At September 30, 2013 and December 31, 2012,2014, a combinednet deferred tax liabilityasset of $2.4$1.7 million and $2.2 million, respectively, remains on the condensed consolidated balance sheets. Upon completionsheet.
The Company does not intend to make any election to step up the tax basis of the acquisition of TRP, TRP had deferred tax assets of $2.2 million arising from various temporary differences, which are included in2013 acquisitions to fair value under IRC Section 338(g).
On December 31, 2013, under the condensed consolidated balance sheet at September 30, 2013. It is"American Taxpayer Relief Act" ("ATRA"), the Company’s intention to repatriate substantially all net income from its wholly owned PRC subsidiary, DG Transpower, a Chinese LimitedResearch and Experimentation credit ("R&E") expired. The Company to its direct Hong Kong parent company Transpower Technologies (Hong Kong) Ltd. Applicable income and dividend withholding taxes have been reflected indid not recognize any R&E credits during the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2013. However, U.S. deferred taxes need not be provided under current U.S. tax law. At September 30, 2013,2014. If the fair market value reports have not been completed and thereforeR&E credit is extended back to January 1, 2014, the Company had no additional deferred tax amounts relating towill recognize the TRP acquisition.
In connection with the 2013 acquisition of Array, the Company has not completed a preliminary fair market value report of property, plant and equipment and intangibles.R&E credit at that time. The Company acquired a deferred tax liability in the amount of $0.9 million arising from temporary differences related to property, plant and equipment. At September 30, 2013, there were no additional deferred tax amounts reported on the condensed consolidated balance sheet as the fair market value report has not been completed.
The Company has made elections under Internal Revenue Code (“IRC”) Section 338(g) to step-up the tax basis of the 2012 Acquisitions to fair value. The elections made under Section 338(g) affect only the U.S. income taxes (not those of the foreign countries where the acquired entities were incorporated). The Companyannual R&E credit is considering making a Section 338(g) election with respect to the 2013 acquisition of Array.
On January 2, 2013, President Obama signed the “American Taxpayer Relief Act” (“ATRA”). Among other things, ATRA extends the Research and Experimentation credit (“R&E”), which expired at the end of 2011, through 2013 and 2014, respectively. Under Accounting Standards Codification (“ASC”) 740, Income Taxes, the effects of the new legislation are recognized upon enactment, which is when the President signs a tax bill into law. Although the extenders were effective retroactively for 2012, the Company could only consider currently enacted tax law as of the balance sheet date in determining current and deferred taxes at December 31, 2012.approximately $0.3 million. During the first quarter of 2013, the Company recognized thea $0.4 million R&E credit from 2012 as an increase in the March 31, 2013 quarterly benefit for income taxes.
The Company continues to monitor proposed legislation affecting the taxation of transfers of U.S. intangible property and other potential tax law changes.
9.ACCRUED EXPENSES
Accrued expenses consist of the following (dollars in thousands):
| | | September 30, | | | December 31, | |
| | | 2013 | | | 2012 | |
| Sales commissions | | $ | 1,589 | | | $ | 1,295 | |
| Subcontracting labor | | | 2,626 | | | | 2,408 | |
| Salaries, bonuses and related benefits | | | 12,905 | | | | 6,023 | |
| Litigation reserve | | | 11,549 | | | | 11,549 | |
| Other | | | 3,481 | | | | 4,085 | |
| | | $ | 32,150 | | | $ | 25,360 | |
| | | September 30, | | | December 31, | |
| | | 2014 | | | 2013 | |
| Sales commissions | | $ | 2,922 | | | $ | 1,431 | |
| Subcontracting labor | | | 2,014 | | | | 2,406 | |
| Salaries, bonuses and related benefits | | | 23,592 | | | | 13,674 | |
| Litigation reserve | | | - | | | | 723 | |
| Warranty accrual | | | 3,623 | | | | - | |
| Other | | | 12,400 | | | | 4,208 | |
| | | $ | 44,551 | | | $ | 22,442 | |
Warranty Accrual - Power Solutions generally offers its customers a standard two-year warranty on power products sold, although warranty periods may vary by product type and application. The Company reviews its warranty liability quarterly based on an analysis of actual expenses and failure rates by specific product lines and estimated future costs and projected failure rate trends by specific product lines. Factors taken into consideration when evaluating the Company's warranty reserve are (i) historical claims for each product, (ii) the maturity of the product within its life cycle, (iii) volume increases, (iv) life of warranty, (v) historical warranty repair costs and (vi) other factors. To the extent that actual experience differs from our estimate, the provision for product warranties will be adjusted in future periods. Actual warranty repair costs are charged against the reserve balance as incurred.
Accrued Restructuring CostsA tabular presentation of the activity within the warranty accrual account for the period from the acquisition date of Power Solutions through September 30, 2014 is presented below (in thousands):
Activity and liability balances related to restructuring charges for the nine months ended September 30, 2013 are shown in the table below (dollars in thousands). The liability at December 31, 2012 related to the final severance payments due related to the closure of the Vinita, Oklahoma manufacturing facility. New charges noted below relate to severance costs associated with an additional reduction in workforce implemented in the second quarter of 2013.
| | | September 30, | |
| | | 2014 | |
| Beginning balance as of June 19, 2014 | | $ | 4,111 | |
| Charges and costs accrued | | | 859 | |
| Adjustments related to pre-existing warranties (including changes in estimates) | | | (35 | ) |
| Less repair costs incurred | | | (1,377 | ) |
| Currency translation | | | (43 | ) |
| Ending balance as of September 30, 2014 | | $ | 3,515 | |
| | | Liability at December 31, 2012 | | | New Charges | | | Cash Payments and Other Settlements | | | Liability at September 30, 2013 | |
| Severance costs | | $ | 122 | | | $ | 1,239 | | | $ | (1,361 | ) | | $ | - | |
| Transportation of equipment | | | - | | | | 100 | | | | (100 | ) | | | - | |
| Other restructuring charges | | | - | | | | 48 | | | | (48 | ) | | | - | |
| Total | | $ | 122 | | | $ | 1,387 | | | $ | (1,509 | ) | | $ | - | |
At September 30, 2013 and December 31, 2012,2013, the Company maintained a $30 million line of credit with Bank of America (the "Credit Agreement"), which was due to expire on June 30, 2014. In AugustOctober 14, 2016. At December 31, 2013, the Company borrowed $12.0 millionborrowings under the line of credit in connection with its acquisition of Array. At September 30, 2013,amounted to $12.0 million and the balance available under the credit agreementCredit Agreement was $18.0 million. There were no previous borrowings under the credit agreement and, as a result, there was no balance outstanding as of December 31, 2012. Amounts outstanding under this line of credit are collateralized with a first priority security interest in 100% of the issued and outstanding shares of the capital stock of the Company's material domestic subsidiaries and 65% of all the issued and outstanding shares of the capital stock of certain of the foreign subsidiaries of the Company. The credit agreement bearsCredit Agreement bore interest at LIBOR plus 0.75%1.00% to 1.25%1.50% based on certain financial statement ratios maintained by the Company. The interest rate in effect on the borrowings outstanding at December 31, 2013 was 1.4%. The Company incurred interest expense of less than $0.1 million related to the borrowings under the Credit Agreement during the nine months ended September 30, 2014. There was no interest expense related to the line of credit during the nine months ended September 30, 2013 as there were no borrowings outstanding during that period. Under the terms of the credit agreement,Credit Agreement, the Company iswas required to maintain certain financial ratios and comply with other financial conditions. AsDuring the nine months ended September 30, 2014, the Company repaid the full $12.0 million balance outstanding and terminated the Credit Agreement.
On June 19, 2014, the Company entered into a resultsenior Credit and Security Agreement with KeyBank National Association ("KeyBank"), as administrative agent and lender, which was amended on June 30, 2014 principally to add a syndicate of additional lenders (as so amended, the "New Secured Credit Agreement"). The maturity date of the Company’s recent acquisitions, which resulted inNew Secured Credit Agreement is June 18, 2019.
The New Secured Credit Agreement consists of (i) a lower cash balance$50 million revolving credit facility ("Revolver"), (ii) a $145 million term loan facility ("Term Loan") and increased intangible assets,(iii) a $70 million delayed draw term loan ("DDTL"). Under the terms of the New Secured Credit Agreement, the Company is entitled, subject to the satisfaction of certain conditions, to request additional commitments under the revolving credit facility or term loans in the aggregate principal amount of up to $100 million to the extent that existing or new lenders agree to provide such additional commitments and/or term loans.
The obligations of the Company under the New Secured Credit Agreement are guaranteed by certain of the Company's material U.S. subsidiaries (together with the Company, the "Loan Parties") and are secured by a first priority security interest in substantially all of the existing and future personal property of the Loan Parties, certain material real property of the Loan Parties and certain of the Loan Parties' material U.S. subsidiaries, including 65% of the voting capital stock of certain of the Loan Parties' direct foreign subsidiaries.
The borrowings under the New Secured Credit Agreement will bear interest at a rate equal to, at the Company's option, either (1) LIBOR, plus a margin ranging from 1.75% per annum to 3.00% per annum depending on the Company's leverage ratio, or (2)(a) an "Alternate Base Rate," which is the highest of (i) the federal funds rate plus 0.50%, (ii) KeyBank's prime rate and (iii) the LIBOR rate with a maturity of one month plus 1.00%, plus (b) a margin ranging from 0.75% per annum to 2.00% per annum, depending on the Company's leverage ratio. The interest rate in effect at September 30, 2014 was not2.25%, which consists of LIBOR of 0.25% plus the Company's margin of 2.00%.
The New Secured Credit Agreement contains customary representations and warranties, covenants and events of default and financial covenants that measure (i) the ratio of the Company's total funded indebtedness, on a consolidated basis, to the amount of the Company's consolidated EBITDA, as defined, ("Leverage Ratio") and (ii) the ratio of the amount of the Company's consolidated EBITDA to the Company's consolidated fixed charges ("Fixed Charge Coverage Ratio"). If an event of default occurs, the lenders under the New Secured Credit Agreement would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. At September 30, 2014, the Company was in compliance with its tangible net worth debtmost restrictive covenant, as ofthe Leverage Ratio. The unused credit available under the credit facility at September 30, 2013.2014 was $27.0 million, of which we had the ability to borrow the full available balance without violating our Leverage Ratio covenant based on the Company's existing consolidated EBITDA.
Concurrent with its entry into the New Secured Credit Agreement on June 19, 2014, the Company borrowed $145.0 million under the Term Loan to complete its acquisition of Power Solutions. In November 2013,July 2014, in connection with the credit agreement was amended to reflect modificationsacquisition of Connectivity Solutions, the Company borrowed an additional $90.0 million under the New Secured Credit Agreement ($70.0 million through the DDTL and $20.0 million under the Revolver). During the three and nine months ended September 30, 2014, the Company recorded $0.4 million and $5.8 million in deferred financing costs, respectively, which will be amortized over the five-year term, and incurred $1.9 million and $2.1 million of interest expense, respectively. At September 30, 2014, borrowings outstanding related solely to the minimum tangible net worth$145.0 million Term Loan, the $70.0 million DDTL and maximum leverage covenant calculations, and to extend$23.0 million under the termrevolver.
Scheduled principal payments of the agreement through October 14, 2016.long-term debt outstanding at September 30, 2014 are as follows (in thousands):
| 2014 | | $ | 2,687 | |
| 2015 | | | 13,438 | |
| 2016 | | | 16,125 | |
| 2017 | | | 18,812 | |
| 2018 | | | 24,188 | |
| Thereafter | | | 160,063 | |
| Total long-term debt | | | 235,313 | |
| Less: Current maturities of long-term debt | | | (12,094 | ) |
| Noncurrent portion of long-term debt | | $ | 223,219 | |
11.RETIREMENT FUND AND PROFIT SHARING PLAN
The Company maintains the Bel Fuse Inc. Employees’Employees' Savings Plan (the "U.S. Plan"), a defined contribution plan that is intended to meet the applicable requirements for tax-qualification under sections 401(a) and (k) of the IRC. The Employees’ SavingsU.S. Plan allows eligible employees to voluntarily contribute a percentage of their eligible compensation, subject to Code limitations, which contributions are matched by the Company. The Company’sCompany's matching contributions are equal to 100% of the first 1% of compensation contributed by participants, and 50% of the next 5% of compensation contributed by participants. The expense for the three months ended September 30, 20132014 and 20122013 amounted to approximately $0.3 million and $0.1 million, in each period.respectively. The expense for the nine months ended September 30, 20132014 and 20122013 amounted to approximately $0.6 million and $0.4 million, in each period.respectively. Prior to January 1, 2012, the plan’sU.S. Plan's structure provided for a Company match and discretionary profit sharing contributions that were made in the form of the Company’sCompany's common stock. As of September 30, 2013,2014, the planU.S. Plan owned 14,91114,886 and 203,069181,831 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.
The Company also has a retirement fund in Asia (the "Asia Plan") which covers substantially all of its Hong Kong-based full-time employees. Eligible employees contribute up to 5% of salary to the fund. In addition, the Company must contribute a minimum of 5% of eligible salary, as determined by Hong Kong government regulations. The Company currently contributes 7% of eligible salary in cash or Company stock. The expense for the three months ended September 30, 20132014 and 20122013 amounted to approximately $0.1 million in each period. The expense for the nine months ended September 30, 20132014 and 20122013 amounted to approximately $0.2 million in each period. As of September 30, 2013,2014, the planAsia Plan owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.
The Company maintains a SERP, which is designed to provide a limited group of key management and highly compensated employees of the Company with supplemental retirement and death benefits.
The components of SERP expense are as follows (dollars in thousands):
| | | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | | | September 30, | | | September 30, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| Service cost | | $ | 139 | | | $ | 109 | | | $ | 417 | | | $ | 327 | | | $ | 138 | | | $ | 139 | | | $ | 414 | | | $ | 417 | |
| Interest cost | | | 112 | | | | 104 | | | | 337 | | | | 312 | | | | 135 | | | | 112 | | | | 405 | | | | 337 | |
| Amortization of adjustments | | | 77 | | | | 58 | | | | 231 | | | | 174 | | | | 46 | | | | 77 | | | | 138 | | | | 231 | |
| Total SERP expense | | $ | 328 | | | $ | 271 | | | $ | 985 | | | $ | 813 | | | $ | 319 | | | $ | 328 | | | $ | 957 | | | $ | 985 | |
| | | September 30, | | | December 31, | | | September 30, | | | December 31, | |
| | | 2013 | | | 2012 | | | 2014 | | | 2013 | |
| Balance sheet amounts: | | | | | | | | | | | | |
| Minimum pension obligation | | | | | | | | | | | | |
| and unfunded pension liability | | $ | 11,964 | | | $ | 11,045 | | | $ | 11,649 | | | $ | 10,830 | |
| | | | | | | | | | | | | | | | | |
| Amounts recognized in accumulated | | | | | | | | | | | | | | | | |
| other comprehensive loss, pretax: | | | | | | | | | | | | | | | | |
| Prior service cost | | $ | 931 | | | $ | 877 | | | $ | 1,094 | | | $ | 1,230 | |
| Net gains | | | 2,764 | | | | 2,884 | | |
| Net loss | | | | 1,004 | | | | 1,004 | |
| | | $ | 3,695 | | | $ | 3,761 | | | $ | 2,098 | | | $ | 2,234 | |
12.ACCUMULATED OTHER COMPREHENSIVE LOSS(LOSS) INCOME
The components of accumulated other comprehensive loss(loss) income at September 30, 20132014 and December 31, 20122013 are summarized below (dollars in thousands):
| | | September 30, | | | December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| Foreign currency translation adjustment, net of taxes of ($4) | | | | | | |
| at September 30, 2013 | | $ | 1,565 | | | $ | 927 | |
| Unrealized holding gains on available-for-sale | | | | | | | | |
| securities, net of taxes of $140 and $161 as of | | | | | | | | |
| September 30, 2013 and December 31, 2012 | | | 223 | | | | 256 | |
| Unfunded SERP liability, net of taxes of ($1,131) and ($1,151) as | | | | | | | | |
| of September 30, 2013 and December 31, 2012 | | | (2,564 | ) | | | (2,610 | ) |
| | | | | | | | | |
| Accumulated other comprehensive loss | | $ | (776 | ) | | $ | (1,427 | ) |
| | | September 30, | | | December 31, | |
| | | 2014 | | | 2013 | |
| | | | | | | |
| Foreign currency translation adjustment, net of taxes of ($20) and $77 | | | | | | |
| at September 30, 2014 and December 31, 2013 | | $ | (4,350 | ) | | $ | 1,904 | |
| Unrealized holding gains on available-for-sale | | | | | | | | |
| securities, net of taxes of $227 and $169 as of | | | | | | | | |
| September 30, 2014 and December 31, 2013 | | | 377 | | | | 282 | |
| Unfunded SERP liability, net of taxes of ($652) and ($693) as | | | | | | | | |
| of September 30, 2014 and December 31, 2013 | | | (1,446 | ) | | | (1,541 | ) |
| | | | | | | | | |
| Accumulated other comprehensive (loss) income | | $ | (5,419 | ) | | $ | 645 | |
Changes in accumulated other comprehensive loss by component during the nine months ended September 30, 20132014 are as follows. All amounts are net of tax (dollars in thousands).
| | | | | | Unrealized Holding | | | | | | | | | | | | | | Unrealized Holding | | | | | | | | |
| | | Foreign Currency | | | Gains on | | | | | | | | | | | Foreign Currency | | | Gains on | | | | | | | | |
| | | Translation | | | Available-for- | | | | Unfunded | | | | | | | Translation | | | Available-for- | | | Unfunded | | | | | |
| | | Adjustment | | | Sale Securities | | | | SERP Liability | | | | Total | | | Adjustment | | | Sale Securities | | | SERP Liability | | | | Total | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2013 | | $ | 927 | | | $ | 256 | | | | $ | (2,610 | ) | | | $ | (1,427 | ) | |
| Balance at January 1, 2014 | | | $ | 1,904 | | | $ | 282 | | | $ | (1,541 | ) | | | $ | 645 | |
| Other comprehensive income (loss) before reclassifications | | | 638 | | | | 28 | | | | | (185 | ) | | | | 481 | | | | (6,254 | ) | | | 95 | | | | - | | | | | (6,159 | ) |
| Amounts reclassified from accumulated other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| comprehensive income (loss) | | | - | | | | (61 | ) | (a) | | | 231 | | (b) | | | 170 | | | | - | | | | - | | | | 95 | | (a) | | | 95 | |
| Net current period other comprehensive income (loss) | | | 638 | | | | (33 | ) | | | | 46 | | | | | 651 | | | | (6,254 | ) | | | 95 | | | | 95 | | | | | (6,064 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at September 30, 2013 | | $ | 1,565 | | | $ | 223 | | | | $ | (2,564 | ) | | | $ | (776 | ) | |
| Balance at September 30, 2014 | | | $ | (4,350 | ) | | $ | 377 | | | $ | (1,446 | ) | | | $ | (5,419 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) This reclassification relates to the gain on sale of SERP investments during the third quarter of 2013. This is recorded as | | | | | | | |
| a gain on sale of investment in the accompanying condensed consolidated statements of operations. | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| (b) This reclassification relates to the amortization of prior service costs and gains/losses associated with the Company's SERP plan. | | | | | |
| (a) This reclassification relates to the amortization of prior service costs associated with the Company's SERP. | | (a) This reclassification relates to the amortization of prior service costs associated with the Company's SERP. | | | | | | |
| This expense is allocated between cost of sales and selling, general and administrative expense based upon the employment | This expense is allocated between cost of sales and selling, general and administrative expense based upon the employment | | | | | | | This expense is allocated between cost of sales and selling, general and administrative expense based upon the employment | | | | |
| classification of the plan participants. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
13.COMMITMENTS AND CONTINGENCIES Leases
Leases
The Company leases various facilities. Some of thesefacilities under operating leases require the Company to pay certain executory costs (such as insurance and maintenance). expiring through March 2023. At December 31, 2012,2013, the Company’sCompany's total future minimum lease payments for operating leases amounted to $11.5$15.3 million. The only significant change since December 31, 2012 relates to the inclusion of lease commitments associated with the 2013 Acquired Companies. At September 30, 2013, theCompany incurred additional lease commitments related toof approximately $7.3 million upon the 2013 Acquired Companies amounted to $3.6 million.acquisitions of Power Solutions and Connectivity Solutions.
Other Commitments
The Company submits purchase orders for raw materials to various vendors throughout the year for current production requirements, as well as forecasted requirements. Certain of these purchase orders relate to special purpose material and, as such, the Company may incur penalties if the order is cancelled. At December 31, 2012,2013, the Company had outstanding purchase orders related to purchasepurchases of raw materials in the aggregate amount of $18.8$23.4 million and purchase orders related to capital expenditures of $1.7$3.0 million. The only significant change since December 31, 2012 relates toCompany incurred additional commitments upon the inclusionacquisitions of Power Solutions and Connectivity Solutions totaling approximately $19.3 million in raw material purchase orders associated with the 2013 Acquired Companies. At September 30, 2013, the Company had additional purchase orders related to the purchase of raw materials of approximately $4.5 million and additional purchase orders related to capital expenditures of $0.5 million associated with the 2013 Acquired Companies. in capital expenditure commitments.
Legal Proceedings
The Company is party to a number of legal actions and claims, none of which individually or in the aggregate, in the opinion of management, are expected to have a material adverse effect on the Company’sCompany's results of operations or financial position. See the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 20122013 for the details of all of Bel’sBel's material pending lawsuits. Certain developments that have arisen in legal proceedings subsequent to the filing of the Company’sCompany's Annual Report on Form 10-K are described below.
The Company iswas a defendant in a lawsuit captioned SynQor, Inc. v. Artesyn Technologies, Inc., et al. brought in the United States District Court, Eastern District of Texas in November 2007. 2007 ("SynQor I case"). The plaintiff alleged that eleven defendants, including Bel, infringed its patents covering certain power products. With respectrespect to the Company, the plaintiff claimed that the Company infringed its patents related to unregulated bus converters and/or point-of-load (POL) converters used in intermediate bus architecture power supply systems. The case initially went to trial in December 2010 and a partial judgment2010. A decision was entered on December 29, 2010 based on the jury verdict. The jury found that certain productsultimately rendered in November 2013 in favor of the defendants directly and/or indirectly infringe the SynQor patents. The jury awarded damages of $8.1 million againstplaintiff, and the Company which was recorded by thereleased a payment to SynQor of $10.9 million. The Company assubsequently received a litigation charge in the consolidated statement$2.1 million payment from one of operations in the fourth quarter of 2010. On July 11, 2011, the Court awarded supplemental damages of $2.5 million against the Company. Of this amount, $1.9 million is covered throughits customers related to an indemnification agreement with oneand reimbursement of Bel’s customers and the remaining $0.6 million was recorded as an expense by the Company during the second quarter of 2011. During the third quarter of 2011, the Company recorded costs and interest associated with this lawsuit of $0.2 million. A final judgment in the case was entered on August 17, 2011. The Company was in the process of appealing the verdict and judgment and filed a notice of appeal with the Federal Circuit Court of Appeals on October 28, 2011. The Company was advised that the full amount of the damage award plus costs and interest would need to be posted as a supersedeas bond upon filing of the notice of appeal. In November 2011, the Company posted a $13.0 million supersedeas bond to the Court in the Eastern District of Texas while the case was on appeal to the Federal Circuit. The amount of the bond was reflected as restricted cash in the accompanying condensed consolidated balance sheets at September 30, 2013 and December 31, 2012. The United States Court of Appeals for the Federal Circuit (“CAFC”) heard oral argument in the SynQor case on October 2, 2012 and issued its opinion on March 13, 2013. In its opinion, the CAFC affirmed the district court’s findings and judgment on all issues up on appeal. The Company and the other Defendants jointly filed a Petition for Rehearing En Banc with the CAFC on April 12, 2013, which was denied by the CAFC on May 14, 2013. The Defendants filed a joint petition for certiorari with the Supreme Court on September 23, 2013.certain legal fees.
In a related matter, on September 29, 2011, the United States District Court for the Eastern District of Texas ordered SynQor, Inc.’s's continuing causes of action for post-injunctionpost-verdict damages to be severed from the original action and assigned to a new case number. The new action captioned SynQor, Inc. v. Artesyn Technologies, Inc., et al. (Case Number 2:11cv444) is a patent infringement action for damages in the form of lost profits and reasonable royalties for the period beginning January 24, 2011.2011 ("SynQor II case"). SynQor, Inc. also seeks enhanced damages. The Company has an indemnification agreement in place with one of its customers specifically covering post-injunctionpost-verdict damages related to this case. As a result, the Company does not anticipate that its consolidated statement of operations will be materially impacted by any potential post-injunction damages. This case went to trial on July 30, 2013. In April 2014, a final judgment was rendered in this case, whereby the Company was assessed an additional $0.7 million in post-verdict damages. This amount was paid by the Company in July 2014 and was subsequently reimbursed by one of its customers under the terms of the indemnification agreement referenced above. SynQor filed an appeal of the final judgment in May 2014, which is currently pending with the CAFC.
The Company is a plaintiff in a lawsuit captioned Bel Fuse Inc. et al. v. Molex Inc. brought in the United District Court of New Jersey in April 2013. The Company claims that Molex infringed three of the Company’sCompany's patents related to integrated magnetic connector products. Molex filed a motion to dismiss the complaint on August 6, 2013. The Company filed an amended complaint and response on August 20, 2013. Molex withdrew its original Motion to Dismiss and filed a second, revised Motion to Dismiss on September 6, 2013. The Company filed its response on October 7, 2013.
The Court denied Molex's revised Motion to Dismiss on June 16, 2014. In June 2014, Molex initiated an Inter Partes Review (IPR) at the U.S. Patent and Trademark Office for one of the three patents associated with this case. The Company and Molex executed an agreement in September 2014 to terminate the IPR and to withdraw one of the patents from the district court litigation. The case continues to proceed in the district court and now involves two of the Company's patents related to integrated magnetic connector products.
In connection with the acquisition of Power Solutions, there is an ongoing claim by the Arezzo Revenue Agency in Italy concerning certain tax matters related to what was then Power-One Asia Pacific Electronics Shenzhen Co. Ltd. (now Bel Power Solutions Asia Pacific Electronics Shenzhen Co. Ltd, or "BPS China") for the years 2004 to 2006. In September 2012, the Tax Court of Arezzo ruled in favor of BPS China and cancelled the claim. In February 2013, the Arezzo Revenue Agency filed an appeal of the Tax Court's ruling. The hearing of the appeal was held on October 2, 2014. On October 13, 2014, BPS China was informed of the Regional Tax Commission of Florence ruling which was in favor of the Arezzo Revenue Agency and against BPS China. The estimated liability related to this matter is approximately $12.0 million and has been included in the accompanying condensed consolidated balance sheet. As Bel is fully indemnified in this matter per the terms of the stock purchase agreement with ABB, an offsetting indemnification asset is also reflected in the accompanying condensed consolidated balance sheet at September 30, 2014.
Net sales to external customers by reportable operating segment for the three and nine months ended September 30, 20132014 and 20122013 were as follows (dollars in thousands):
Net sales and income from operations by reportable operating segment for the three and nine months ended September 30, 20132014 and 20122013 were as follows (dollars in thousands):
The discussion of new financial accounting standards applicable to the Company is incorporated herein by reference to Note 1 to the Company’sCompany's Financial Statements, “Basis"Basis of Presentation and Accounting Policies,”" included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
The following table sets forth, for the periods presented, the percentage relationship to net sales of certain items included in the Company’sCompany's condensed consolidated statements of operations.
The following table sets forth the year over year percentage increase of certain items included in the Company’sCompany's condensed consolidated statements of operations.
The increase in other expenses as a percentage of sales for the nine months ended September 30, 2013 as compared-26-
Included in cost of sales are research and development (R&D) expenses of $3.5$6.7 million and $2.9$3.5 million for the three-month periods ended September 30, 20132014 and 2012,2013, respectively, and $10.3$14.1 million and $9.2$10.3 million for the nine-month periods ended September 30, 20132014 and 2012,2013, respectively. The majority of the increase relatesthese increases relate to the inclusion of R&D expenses associated with the recent acquisitions,2013 and 2014 Acquisitions, which have been included in Bel’sBel's results since their respective acquisition dates.
Selling, General and Administrative Expenses (“("SG&A”&A")
The dollar amount of SG&A expenses was $2.2 million higher duringFor the three months ended September 30, 20132014, SG&A expense was $10.8 million higher as compared to the same period of 2012.2013. Of this increase, $0.8$8.2 million related to the inclusion of SG&A expenses of the 20122014 Acquisitions and 2013 acquisitions.$0.2 million in incremental SG&A expenses associated with a full three months of Array activity in 2014. Other contributing factors contributing to theincluded a $3.7 million increase included higherin acquisition-related costs, offset by lower incentive compensation expense of $2.3 million, and unfavorable foreign exchange fluctuations of $0.6 million, partially offset by insurance proceeds related to Hurricane Sandy of $0.7$2.0 million and a $0.5 million reduction in acquisition-related costs.legal and professional fees of $0.5 million. Other items within SG&A increased by $1.2 million in total.
For the nine months ended September 30, 2013, the dollar amount of2014, SG&A expense was $6.3$12.4 million higher as compared to the same period of 2012.2013. Of this increase, $2.9$8.2 million related to the inclusion of SG&A expenses of the 20122014 Acquisitions and 2013 acquisitions.$1.0 million in incremental SG&A expenses associated with a full nine months of TRP and Array activity in 2014. Other contributing factors included a $2.8$4.6 million increase in acquisition-related costs, offset by lower incentive compensation unfavorable fluctuations in foreign currency exchange ratesexpense of $0.7$2.2 million and an increasea reduction in freight charges primarily due to the Cinch transitionlegal and professional fees of $0.7, partially offset$0.8 million. Other items within SG&A increased by $0.7$1.6 million of insurance proceeds related to Hurricane Sandy.in total.
Restructuring Charges
The Company recorded restructuring charges of $1.8 million and $2.2 million during the three and nine months ended September 30, 2012, respectively, related to the 2012 restructuring program. During 2013, the Company implemented additional reductions in workforce, resulting in restructuring charges of $1.4 million during the nine months ended September 30, 2013, respectively.
Provision (Benefit) for Income Taxes
The Company’sCompany's effective tax rate will fluctuate based on the geographic segment in which the pretax profits are earned. Of the geographic segments in which the Company operates, the U.S. has the highest tax rates; Europe’sEurope's tax rates are generally lower than U.S. tax rates; and Asia has the lowest tax rates of the Company’sCompany's three geographical segments.
The provision (benefit) for income taxes for the three months ended September 30, 20132014 was $0.6$1.3 million compared to a benefit of ($1.8)$0.5 million for the three months ended September 30, 2012.2013. The Company’sCompany's earnings before income taxes for the three months ended September 30, 20132014 are approximately $7.8$5.0 million higherlower than the same period in 2012.2013. The Company’sCompany's effective tax rate, the income tax provision (benefit) as a percentage of earnings before provision for income taxes, was 7.2%46.7% and (285.6%)5.9% for the three-month periods ended September 30, 20132014 and 2012,2013, respectively. The change in the effective tax rate during the three months ended September 30, 20132014 compared to the third quarter of 20122013 is primarily attributed to a significantthe increase in theUS taxes despite a pretax income earnedloss in the AsiaNorth America segment with minimal tax effect. Additionally,principally related to increases in the Company had a significantly lower net reversal of liabilitiesliability for uncertain tax positions, duringvaluation allowances and sub part F related income. This was offset in part by a true up of tax accruals. Additionally, the quarterincrease in the effective tax rate is attributable to the increase in the European segments' profitability for the three months ended September 30, 20132014 compared to the same period in 2012. The favorable effective tax rate in 2012 was primarily attributable to the net reversal of liabilities for uncertain tax positions during the quarter ended September 30, 2012, combined with strong earnings in Asia, where the tax rates are lowest of all of Bel’s tax regions, and a loss in the North America segment due to restructuring expenses.2013.
The benefitprovision for income taxes for the nine months ended September 30, 20132014 was $0.1$2.2 million compared to a benefit of $0.7$0.3 million for the nine months ended September 30, 2012.2013. The Company’sCompany's earnings before income taxes for the nine months ended September 30, 20132014 are approximately $5.6$1.1 million higher than the same period in 2012.2013. The Company’sCompany's effective tax rate was (0.5%)23.6% and (17.7%(4.1%) for the nine-month periods ended September 30, 20132014 and 2012,2013, respectively. The change in the effective tax rate during the nine months ended September 30, 20132014 compared to the same period of 2012in 2013 is primarily attributed to the same reasons as described above. In addition, for the nine months ended September 30, 2013, the Company recognized an additional $0.4 million in R&E credits related to the year ended December 31, 2012, which offset the increase in the effective tax rate for the nine months ended September 30, 2014. See Note 8 of the condensed consolidated financial statements.
Liquidity and Capital Resources
Historically, the Company has financed its capital expenditures primarily through cash flows from operating activities and has financed acquisitions through cash flows from operating activities, cash reserves, borrowings, and the issuance of Bel Fuse Inc. common stock. Management believes that the cash flow from operations after payments of dividends and mandatory principal payments of long-term debt combined with its existing capital base, and the Company’sCompany's cash reserves and available line of credit will be sufficient to fund its operations for at least the next twelve months. Such statement constitutes a Forward-Looking Statement. Factors which could cause the Company to require additional capitalfunding include, among other things, a softening in the demand for the Company’sCompany's existing products,and recently-acquired products; an inability to respond to customer demand for new products, potentialproducts; an inability to successfully integrate the recent acquisitions (as discussed below) requiringbelow, which could require substantial capital,capital; future expansion of the Company’sCompany's operations and net losses that would result in net cash being used in operating investing and/or financing activities, which resultresulting in net decreases in cash and cash equivalents. Net losses may impact availability under our credit facility and preclude the Company from raising debt or equity financing in the capital markets on affordable terms or otherwise.
On April 25, 2014, the Company has an unsecured credit agreement inentered into a Stock and Asset Purchase Agreement with ABB Ltd. ("ABB") pursuant to which the Company agreed to acquire the Power-One Power Solutions business from ABB for approximately $117.0 million, subject to adjustments based on working capital and the amount of cash at closing. On June 19, 2014, the Company completed its acquisition of Power Solutions with a cash payment, net of cash acquired and including a working capital adjustment, of $110.0 million. The Power Solutions acquisition was funded through bank borrowings, as discussed below.
On May 16, 2014, the Company entered into a Stock Purchase Agreement with Emerson Electric Co. ("Emerson") pursuant to which the Company agreed to acquire the Emerson Network Power Connectivity Solutions ("CS") business from Emerson for $98.0 million, subject to adjustments based on working capital and the amount of cash at closing. On July 25, 2014, the Company completed its acquisition of the U.S. and U.K. entities of the CS business from Emerson with a payment, net of cash acquired and including a working capital adjustment, of $90.7 million. This portion of the CS acquisition was funded primarily through additional bank borrowings and with $3.9 million funded from Bel's cash on hand. On August 29, 2014, an additional payment of $9 million, funded from Bel's cash on hand, was made in connection with the closing of the China portion of the acquisition.
At December 31, 2013, the Company maintained a $30 million line of credit with Bank of America (the "Credit Agreement"), which was due to expire on June 30, 2014. In AugustOctober 14, 2016. At December 31, 2013, the Company borrowed $12.0 millionborrowings under the line of credit in connection with its acquisition of Array. At September 30, 2013,amounted to $12.0 million and the balance available under the credit agreementCredit Agreement was $18.0 million. There were no previous borrowings under the credit agreement and, as a result, there was no balance outstanding as of December 31, 2012. The credit agreement bearsCredit Agreement bore interest at LIBOR plus 0.75%1.00% to 1.25%1.50% based on certain financial statement ratios maintained by the Company. As a resultThe interest rate in effect on the borrowings outstanding at December 31, 2013 was 1.4%. The Company incurred interest expense of less than $0.1 million related to the borrowings under the Credit Agreement during the nine months ended September 30, 2014. There was no interest expense related to the line of credit during the nine months ended September 30, 2013 as there were no borrowings outstanding during that period. Under the terms of the Company’s recent acquisitions, which resulted in a lower cash balance and increased intangible assets,Credit Agreement, the Company was notrequired to maintain certain financial ratios and comply with other financial conditions. During the nine months ended September 30, 2014, the Company repaid the full $12.0 million balance outstanding and terminated the Credit Agreement.
On June 19, 2014, the Company entered into a senior Credit and Security Agreement with KeyBank National Association ("KeyBank"), as administrative agent, and lender, which was amended on June 30, 2014 principally to add a syndicate of additional lenders (as so amended, the "New Secured Credit Agreement"). The maturity date of the New Secured Credit Agreement is June 18, 2019.
The New Secured Credit Agreement consists of (i) a $50 million revolving credit facility ("Revolver"), (ii) a $145 million term loan facility ("Term Loan") and (iii) a $70 million delayed draw term loan ("DDTL"). Under the terms of the New Secured Credit Agreement, the Company is entitled, subject to the satisfaction of certain conditions, to request additional commitments under the revolving credit facility or term loans in the aggregate principal amount of up to $100 million to the extent that existing or new lenders agree to provide such additional commitments and/or term loans.
The obligations of the Company under the New Secured Credit Agreement are guaranteed by certain of the Company's material U.S. subsidiaries (together with the Company, the "Loan Parties") and are secured by a first priority security interest in substantially all of the existing and future personal property of the Loan Parties, certain material real property of the Loan Parties and certain of the Loan Parties' material U.S. subsidiaries, including 65% of the voting capital stock of certain of the Loan Parties' direct foreign subsidiaries.
The borrowings under the New Secured Credit Agreement will bear interest at a rate equal to, at the Company's option, either (1) LIBOR, plus a margin ranging from 1.75% per annum to 3.00% per annum depending on the Company's leverage ratio, or (2)(a) an "Alternate Base Rate," which is the highest of (i) the federal funds rate plus 0.50%, (ii) KeyBank's prime rate and (iii) LIBOR with a maturity of one month plus 1.00%, plus (b) a margin ranging from 0.75% per annum to 2.00% per annum, depending on the Company's leverage ratio. The interest rate in effect at September 30, 2014 was 2.25%, which consists of LIBOR of 0.25% plus the Company's margin of 2.00%.
The New Secured Credit Agreement contains customary representations and warranties, covenants and events of default and financial covenants that measure (i) the ratio of the Company's total funded indebtedness, on a consolidated basis to the amount of the Company's consolidated EBITDA, as defined, ("Leverage Ratio") and (ii) the ratio of the amount of the Company's consolidated EBITDA to the Company's consolidated fixed charges ("Fixed Charge Coverage Ratio"). If an event of default occurs, the lenders under the New Secured Credit Agreement would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. At September 30, 2014, the Company was in compliance with its tangible net worth debtmost restrictive covenant, as ofthe Leverage Ratio. The unused credit available under the credit facility at September 30, 2013. In November 2013,2014 was $27.0 million, of which we had the credit agreement was amendedability to reflect modificationsborrow the full available balance without violating our Leverage Ratio covenant based on the Company's existing consolidated EBITDA.
KeyBank and certain of the agents and lenders party to the minimum tangible net worthNew Secured Credit Agreement (and each of their respective subsidiaries or affiliates) have provided and maximum leverage covenant calculations,may in the future provide investment banking, cash management, underwriting, lending, commercial banking, trust, leasing services, foreign exchange and other advisory services to, extend the term of the agreement through October 14, 2016.
On March 29, 2013,or engage in transactions with, the Company completedand its subsidiaries or affiliates. Certain of these parties have received, and these parties may in the future receive, customary compensation from the Company and its subsidiaries or affiliates, for such services.
Concurrent with its entry into the New Secured Credit Agreement on June 19, 2014, the Company borrowed $145.0 million under the Term Loan to complete its acquisition of TRP for $22.4Power Solutions. On July 25, 2014, the Company borrowed the full $70.0 million in cashavailable under the DDTL and additional consideration including the assumption of $0.1$20.0 million in liabilities and the grant of a license to TE related to three of the Company’s patents.Revolver in order to fund the acquisition of Connectivity Solutions. During the second quarter of 2013,three and nine months ended September 30, 2014, the Company paid an additional $6.8recorded deferred financing costs of $0.4 million in consideration to TE related to a working capital adjustment and a final net cash payment$5.8 million, respectively, which will be amortized over the five-year term, and incurred interest expense of $0.1$1.9 million was made during the third quarter of 2013. Transpower is the sole shareholder of Dongguan Transpower Electronic Products Co., Ltd., located in the PRC. The Company’s purchaseand $2.1 million, respectively.
Scheduled principal payments of the Transpower magnetics business consisted of the ICM family of products, including RJ45, 10/100 Gigabit, 10G, PoE/PoE+, MRJ21 and RJ.5, a line of modules for smart-grid applications and discrete magnetics.long-term debt outstanding at September 30, 2014 are as follows (in thousands):
On August 20, 2013, the Company completed its acquisition of Array, a manufacturer of aerospace and mil-spec connector products based in Miami, Florida, for $10.0 million in cash. As discussed above, this acquisition was funded through borrowings under the Company’s existing credit agreement.| 2014 | | $ | 2,687 | |
| 2015 | | | 13,438 | |
| 2016 | | | 16,125 | |
| 2017 | | | 18,812 | |
| 2018 | | | 24,188 | |
| Thereafter | | | 160,063 | |
| Total long-term debt | | | 235,313 | |
| Less: Current maturities of long-term debt | | | (12,094 | ) |
| Noncurrent portion of long-term debt | | $ | 223,219 | |
Cash Flows
During the nine months ended September 30, 2013,2014, the Company’sCompany's cash and cash equivalents decreasedincreased by $24.3$21.0 million. This resulted primarily from $30.9$19.1 million provided by operating activities, $215.0 million of proceeds from long-term debt and $23.0 million of proceeds from borrowing under the revolver, partially offset by payments totaling $206.5 million, net of cash paymentsacquired, for the acquisitions of TRPPower Solutions and Array, $5.1Connectivity Solutions, $12.0 million of repayments under the revolving credit line, $2.7 million of repayments of long-term debt, $5.4 million paid in deferred financing costs, $5.8 million paid for the purchase of property, plant and equipment and $2.3 million for payments of dividends, $3.4 million for the repurchase of 178,643 shares of the Company’s Class B common stock, and $1.3 million for the purchase of an intangible asset associated with the Radiall agreement, partially offset by an increase in short-term borrowings of $12.3 million and $6.1 million provided by operating activities.dividends. As compared to the nine months ended September 30, 2012,2013, cash provided by operating activities decreased by $1.7 million. During the nine months ended September 30, 2013, accounts receivable increased by $13.0 million, primarilypartially due to the addition of third-party receivables at TRP, which replaced intercompany receivables collected from TRP’s pre-acquisition affiliates. TRP’s third-party receivables are higher than its formerly-intercompany receivables duea $5.0 million increase in depreciation and amortization and a $2.0 million increase in accounts receivable during 2014, as compared to higher gross margina $13.0 million increase in accounts receivable during 2013. The decrease in inventory during 2014 was mostly offset by a reduction in accounts payable and longer payment terms on third party sales. The longer payment terms in TRP customer contracts acquired from the seller led to an increase of 11 days in overall days sales outstanding (DSO), Management intends to bring TRP payment terms in line with those of Bel’s existing customer base during contract renewals. Inventories increased by $7.2 millionaccrued expense balances during the nine months ended September 30, 2013 primarily due to the implementation of a new stocking program, whereby certain of Bel’s customers now have quicker access to commonly-ordered parts. The level of raw materials has also increased since December 31, 2012, as the Company has been building up stocks of long-lead-time materials in order to lower lead times to customers.2014.
Cash and cash equivalents, marketable securities and accounts receivable comprised approximately 36.3%37.4% and 41.4%40.9% of the Company’sCompany's total assets at September 30, 20132014 and December 31, 2012,2013, respectively. The Company’sCompany's current ratio (i.e., the ratio of current assets to current liabilities) was 2.6 to 1 and 4.13.0 to 1 at September 30, 20132014 and December 31, 2012,2013, respectively.
Contractual Obligations
The following table sets forth at December 31, 2013 the amounts of payments due under specific types of contractual obligations, aggregated by category of contractual obligation, for the time periods described below. This table excludes $2.2 million of unrecognized tax benefits as of December 31, 2013, as the Company is unable to make reasonably reliable estimates of the period of cash settlements, if any, with the respective taxing authorities.
| | | Payments due by period (dollars in thousands) | |
| Contractual Obligations | | Total | | | Less than 1 year | | | 1-3
years | | | 3-5
years | | | More than
5 years | |
| | | | | | | �� | | | | | | | | | |
| Capital expenditure obligations | | $ | 3,014 | | | $ | 3,014 | | | $ | - | | | $ | - | | | $ | - | |
| Operating leases | | | 15,305 | | | | 4,522 | | | | 5,630 | | | | 2,654 | | | | 2,499 | |
| Raw material purchase obligations | | | 23,376 | | | | 23,288 | | | | 88 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 41,695 | | | $ | 30,824 | | | $ | 5,718 | | | $ | 2,654 | | | $ | 2,499 | |
During the nine months ended September 30, 2014, in connection with the 2014 Acquisitions and the associated borrowings under the New Secured Credit Agreement, the following additional contractual obligations existed as of September 30, 2014:
| | | Payments due by period (dollars in thousands) | |
| Contractual Obligations | | Total | | | Less than 1 year | | | 1-3
years | | | 3-5
years | | | More than
5 years | |
| | | | | | | | | | | | | | | | |
| Long-term debt obligations | | $ | 235,313 | | | $ | 12,094 | | | $ | 33,594 | | | $ | 189,625 | | | $ | - | |
| Capital expenditure obligations | | | 530 | | | | 530 | | | | - | | | | - | | | | - | |
| Operating leases | | | 7,342 | | | | 3,929 | | | | 2,702 | | | | 711 | | | | - | |
| Raw material purchase obligations | | | 19,325 | | | | 19,296 | | | | 29 | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 262,510 | | | $ | 35,849 | | | $ | 36,325 | | | $ | 190,336 | | | $ | - | |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk primarily from changes in foreign currency exchange rates and therechanges in interest rates associated with its long-term debt. There have not been any material changes with regard to market risk during the nine months ended September 30, 2013.2014. Refer to Item 7A, “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations,”" in the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 20122013 for further discussion of market risks.
Item 4. Controls and Procedures
Disclosure controls and procedures: As of the end of the Company’sCompany's most recently completed fiscal quarter covered by this report, the Company carried out an evaluation, with the participation of the Company’sCompany's management, including the Company’sCompany's Chief Executive Officer and Vice President of Finance, of the effectiveness of the Company’sCompany's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based on that evaluation, the Company’sCompany's Chief Executive Officer and Vice President of Finance concluded that the Company’sCompany's disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in internal controls over financial reporting: There were no significant changes in the Company’sCompany's internal controls over financial reporting that occurred during the Company’sCompany's last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting.
Item 1. Legal Proceedings
The information called for by this Item is incorporated herein by reference to Note 13 of the Company’sCompany's Financial Statements, under “Legal Proceedings”"Legal Proceedings", as set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
In July 2012, Bel’s Board of Directors approved a share buyback program whereby the Company was authorized to repurchase up to $10 million of the Company’s Class B common stock. In connection with the program, the Company repurchased and retired a total of 547,366 shares of the Company’s Class B common stock at an aggregate purchase price of $10.0 million by the end of the first quarter of 2013. This completed the share buyback program approved by the Board in 2012. There were no repurchases of Company stock during the second or third quarters of 2013.
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(a)Exhibits: | |
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10.1* | Sixth Amendment to Credit and Guaranty Agreement dated as of November 8, 2013, by and among Bel Fuse Inc., as Borrower, the Subsidiary Guarantors party thereto and the Bank of America, N.A., as Lender. |
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| Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | |
| Certification of the Vice President of Financeprincipal accounting and financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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| Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | |
| Certification of the Vice President of Financeprincipal accounting and financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| 101.INS*** | XBRL Instance Document |
| | |
| 101.SCH*** | XBRL Taxonomy Extension Schema Document |
| | |
| 101.CAL*** | XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
| 101.DEF*** | XBRL Taxonomy Extension Definition Linkbase Document |
| | |
| 101.LAB*** | XBRL Taxonomy Extension Label Linkbase Document |
| | |
| 101.PRE*** | XBRL Taxonomy Extension Presentation Linkbase Document |
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* Filed herewith.
**** Submitted herewith.
***** XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
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. |
November 8, 201310, 2014 | |
| By: | /s/ Daniel Bernstein |
| | Daniel Bernstein |
| | President and Chief Executive Officer |
| | |
| By: | /s/ Colin Dunn |
| | Colin Dunn |
| | Vice President of Finance and Secretary |
| (Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT INDEX
Exhibit 10.1* - Sixth Amendment to Credit and Guaranty Agreement dated as of November 8, 2013, by and among Bel Fuse Inc., as Borrower, the Subsidiary Guarantors party thereto and the Bank of America, N.A., as Lender.
EXHIBIT INDEX
Exhibit 31.1* - Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2* - Certification of the Vice President of Financeprincipal accounting and financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1** - Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2** - Certification of the Vice President of Financeprincipal accounting and financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS*** – XBRL Instance Document
Exhibit 101.SCH*** – XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL*** – XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF*** – XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB*** – XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE*** – XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith.
**** Submitted herewith.
***** XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not a part of a registration statement or Prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.