FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............. to ............
Commission file number: 0-11676
BEL FUSE INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1463699
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
198 Van Vorst Street
Jersey City, New Jersey 07302
(Address of principal executive offices)
(Zip Code)
201-432-0463
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At August 1, 2000, there were 2,638,310 shares of Class A Common Stock,
$.10 par value, outstanding and 7,941,641 shares of Class B Common Stock, $.10
par value, outstanding.
BEL FUSE INC.
INDEX
Page Number
Part I. Financial Information
Item 1. Financial Statements 1
Consolidated Balance Sheets as of June 30, 2000
(unaudited) and December 31, 1999 2 - 3
Consolidated Statements of Operations and Comprehensive
Income for the Three and Six Months Ended June 30, 2000
and 1999 (unaudited) 4 - 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 (unaudited) 6 - 7
Notes to Consolidated Financial Statements (unaudited) 8 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 13
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
Part II. Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
PART I. Financial Information
Item 1. Financial Statements
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that the following
consolidated financial statements be read in conjunction with the year-end
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.
The results of operations for the six month period ended June 30, 2000 are
not necessarily indicative of the results for the entire fiscal year or for any
other period.
-1-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 44,864,522 $31,382,629
Marketable securities 1,129,284 2,253,039
Accounts receivable, less allowance
for doubtful accounts of $679,000
and $661,000 21,648,434 18,815,513
Inventories 22,697,513 24,210,654
Prepaid expenses and other current
assets 750,406 334,820
Deferred income taxes 510,000 111,000
------------ ------------
Total Current Assets 91,600,159 77,107,655
Property, plant and equipment - net 36,649,640 36,021,708
Goodwill-net of amortization of
$2,795,204 and $2,042,008 10,994,248 11,747,444
Other assets 377,666 372,475
------------ ------------
TOTAL ASSETS $139,621,713 $125,249,282
============ ============
See notes to consolidated financial statements.
-2-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2000 1999
------------ ------------
(unaudited)
Current Liabilities:
Accounts payable $ 5,893,756 $ 4,375,915
Accrued expenses 10,628,926 9,021,672
Income taxes payable 1,332,661 241,850
Dividends payable 397,057 393,908
------------ ------------
Total Current Liabilities 18,252,400 14,033,345
Deferred income taxes 1,067,000 962,000
------------ ------------
Total Liabilities 19,319,400 14,995,345
------------ ------------
Stockholders' Equity:
Preferred stock, no par value -
authorized 1,000,000 shares;
none issued -- --
Class A common stock, par value
$.10 per share - authorized
10,000,000 shares; outstanding
2,638,310 and 2,632,197 shares
(net of 1,072,770 treasury shares) 263,831 263,220
Class B common stock, par value
$.10 per share - authorized
30,000,000 shares; outstanding
7,941,641 and 7,910,306 shares
(net of 1,072,770 treasury shares) 794,164 791,031
Additional paid-in capital 9,129,586 8,811,653
Retained earnings 110,078,638 99,839,765
Cumulative other comprehensive
income 36,094 548,268
------------ ------------
Total Stockholders' Equity 120,302,313 110,253,937
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $139,621,713 $125,249,282
============ ============
See notes to consolidated financial statements.
-3-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Sales $59,855,125 $59,210,700 $33,721,946 $28,451,932
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales 37,647,443 38,253,853 20,942,948 17,939,247
Selling, general and
administrative expenses 10,745,553 9,648,344 5,575,859 4,843,473
----------- ----------- ----------- -----------
48,392,996 47,902,197 26,518,807 22,782,720
----------- ----------- ----------- -----------
Income from operations 11,462,129 11,308,503 7,203,139 5,669,212
Other income - net 2,084,156 331,109 607,345 179,367
----------- ----------- ----------- -----------
Earnings before income taxes 13,546,285 11,639,612 7,810,484 5,848,579
Income tax provision 2,515,000 1,801,000 1,251,000 1,131,000
----------- ----------- ----------- -----------
Net earnings $11,031,285 $9,838,612 $6,559,484 $4,717,579
=========== ========== ========== ==========
Earnings per common share-basic $1.04 $.94 $.62 $.45
===== ==== ==== ====
Earnings per common share-
diluted $1.01 $.91 $.60 $.44
===== ==== ==== ====
Weighted average number of
common shares outstanding-basic 10,567,240 10,448,298 10,578,765 10,469,694
=========== ========== ========== ==========
Weighted average number of
common shares outstanding-
diluted 10,878,914 10,759,000 10,901,506 10,752,822
=========== ========== ========== ==========
See notes to consolidated financial statements.
-4-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
---------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- ---------- ----------
Net earnings $11,031,285 $9,838,612 $6,559,484 $4,717,579
Other comprehensive income
(expense), net of income
taxes:
Unrealized gain (loss) on
marketable securities (482,218) -- 20,694
Foreign currency
translation adjustment (6,939) 9,225 1,053 2,278
----------- ---------- ---------- ----------
Comprehensive income $10,542,128 $9,847,837 $6,581,231 $4,719,857
=========== ========== ========== ==========
See notes to consolidated financial statements.
-5-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
-----------------------------------
2000 1999
----------- -----------
Cash flows from operating activities:
Net income $11,031,285 $ 9,838,612
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,791,819 2,982,029
Gain on sale of marketable
securities (1,012,095) --
Other 121,000 (78,000)
Changes in operating assets and
liabilities 2,398,886 (8,791,097)
----------- -----------
Net Cash Provided by Operating
Activities 15,330,895 3,951,544
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment (2,672,820) (2,872,939)
Payment for acquisition -- (43,806)
Proceeds from sale of marketable
securities 2,071,157 --
Purchase of marketable securities (773,253) --
Proceeds from repayment by contractors 64,500 64,500
----------- -----------
Net Cash Used in
Investing Activities (1,310,416) (2,852,245)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options 250,677 308,057
Dividends paid to common shareholders (789,263) (524,479)
----------- -----------
Net Cash Used in
Financing Activities (538,586) (216,422)
----------- -----------
Net increase in Cash 13,481,893 882,877
Cash and Cash Equivalents -
beginning of period 31,382,629 14,923,685
----------- -----------
Cash and Cash Equivalents -
end of period $44,864,522 $15,806,562
=========== ===========
See notes to consolidated financial statements.
-6-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(unaudited)
Six Months Ended
June 30,
-----------------------------------
2000 1999
----------- -----------
Changes in operating assets and liabilities
consist of:
Increase in accounts receivable $(2,850,921) $(3,262,722)
(Increase) decrease in inventories 1,513,141 (5,949,678)
Increase in prepaid expenses and
other current assets (480,086) (406,833)
(Increase) decrease in other assets (5,191) 33,614
Increase in accounts payable 1,517,841 615,722
Increase (decrease) in accrued expenses 1,613,291 (997,129)
Increase in income taxes payable 1,090,811 1,175,929
----------- -----------
$ 2,398,886 $(8,791,097)
=========== ===========
Supplementary information:
Cash paid during the period for:
Income taxes $ 830,000 $ 726,000
=========== ===========
Non-cash investing activities:
Unrealized loss on marketable
securities $ (482,218) $ --
=========== ===========
See notes to consolidated financial statements.
-7-
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of June 30, 2000, and the consolidated
statements of operations and comprehensive income and cash flows for the periods
presented herein have been prepared by the Company and are unaudited. In the
opinion of management, all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and comprehensive income and cash flows for all periods presented
have been made. The information for December 31, 1999 was derived from audited
financial statements.
2. Earnings Per Share
Basic earnings per common share are computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share are computed using the weighted average number of common shares and
potential common shares outstanding during the period.
3. Common Stock
On November 5, 1999 the Board of Directors declared a two for one stock
split to be paid in the form of a special dividend of one share of Class B
common stock for each share of Class A and Class B outstanding. The special
dividend was payable on December 1, 1999 to all Class A and Class B shareholders
of record on November 22, 1999. The Board also approved an amendment to the
Company's Certificate of Incorporation increasing the number of authorized
shares of Class B common stock from 10,000,000 shares to 30,000,000 shares. All
shares and per share data have been retroactively adjusted to reflect the two
for one stock split.
4. Business Segment Information
The Company does not have reportable operating segments as defined in
Statement of Financial Accounting Standards No.131, "Disclosures about Segments
of an Enterprise and Related Information". The method for attributing revenues
for interim purposes is based on total shipments from the country of origination
less intergeographic revenues. The Company operates facilities in the United
States, Europe and the Far East. The primary criteria by which financial
performance is evaluated and resources are allocated include revenues and
operating income. The following is a summary of key financial data:
-8-
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Total Revenues:
United States $ 34,576,951 $ 38,346,172 $ 20,510,630 $ 18,538,709
Asia 57,137,881 53,958,049 31,140,306 25,437,471
Less intergeographic
revenues (31,859,707) (33,093,521) (17,928,990) (15,524,248)
------------ ------------ ------------ ------------
$ 59,855,125 $ 59,210,700 $ 33,721,946 $ 28,451,932
============ ============ ============ ============
Income from Operations:
United States $ 1,601,221 $ 681,358 $ 611,489 $ 327,732
Asia 9,860,908 10,627,145 6,591,650 5,341,480
------------ ------------ ------------ ------------
$ 11,462,129 $ 11,308,503 $ 7,203,139 $ 5,669,212
============ ============ ============ ============
5. On May 10, 2000 the Board of Directors authorized the repurchase of up to 10%
of the Company's outstanding Class A and Class B shares from time to time in
market or privately negotiated transactions.
-9-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company's quarterly and annual operating results are affected by a wide
variety of factors that could materially and adversely affect revenues and
profitability including the following: (a) the risk that the Company may be
unable to respond adequately to rapidly changing technological developments in
its industry, (b) risks associated with its Far East operations described herein
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations," (c) the highly competitive nature of the Company's
industry and the impact that competitors' new products and pricing may have upon
the Company, (d) the likelihood that revenues may vary significantly from one
accounting period to another accounting period due to a variety of factors,
including customers' buying decisions, the Company's product mix and general
market and economic conditions, (e) the Company's reliance on certain
substantial customers, and (f) risks associated with the Company's ability to
manufacture and deliver products in a manner that is responsive to its
customers' needs. As a result of these and other factors, the Company may
experience material fluctuations in future operating results on a quarterly or
annual basis, which could materially and adversely affect its business,
financial condition, operating results, and stock prices. Furthermore, this
document and other documents filed by the Company with the Securities and
Exchange Commission (the "SEC") contain certain forward-looking statements under
the Private Securities Litigation Reform Act of 1995 with respect to the
business of the Company. These forward-looking statements are subject to certain
risks and uncertainties, including those mentioned above, and those detailed in
Item 1 of the Company's Annual Report on Form 10-K for the year ended December
31, 1999, which could cause actual results to differ materially from these
forward-looking statements. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements which
may be necessary to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. An investment in the Company
involves various risks, including those mentioned above and those which are
detailed from time to time in the Company's SEC filings.
-10-
Results of Operations
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items included in the Company's
consolidated statements of operations.
Percentage of Net Sales
------------------------------------------
Six Months Ended Three Months Ended
June 30, June 30,
----------------- -----------------
2000 1999 2000 1999
------ ------ ------ ------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 62.9 64.6 62.1 63.0
Selling, general and
administrative expenses 18.0 16.3 16.5 17.0
Other income, net of
interest expense 3.5 .6 1.8 .6
Earnings before income
tax provision 22.6 19.7 23.2 20.6
Income tax provision 4.2 3.0 3.7 4.0
Net earnings 18.4 16.7 19.5 16.6
The following table sets forth, for the periods indicated, the percentage
increase (decrease) of items included in the Company's consolidated statements
of operations.
Increase (Decrease) from Prior Period
-----------------------------------------
Six Months Ended Three Months Ended
June 30, 2000 June 30, 2000
compared with 1999 compared with 1999
------------------ ------------------
Net sales 1.1 % 18.5 %
Cost of sales (1.6) 16.7
Selling, general and
administrative
expenses 11.4 15.1
Other income - net 529.5 238.6
Earnings before
income tax provision 16.4 33.5
Income tax provision 39.6 10.6
Net earnings 12.1 39.0
-11-
Six Months ended June 30, 2000 vs.
Six Months ended June 30, 1999
Net Sales
Net sales increased 1.1 % from $59,210,700 during the first six months of
1999 to $59,855,125 during the first six months of 2000. The Company attributes
this increase to higher belMag(TM) and fuse sales volume offset in part by lower
sales of magnetic products primarily due to the impact during the first quarter
of 2000 of a change in the structure of the supply channel by two of the
Company's largest customers.
Cost of Sales
Cost of sales as a percentage of net sales decreased 1.7 % to 62.9 % during
the first six months of 2000 from 64.6 % during the first six months of 1999.
The decrease in the cost of sales percentage is primarily attributable to lower
labor and factory overhead expenses due to the move of Telcom production to the
Far East from Texas during the fourth quarter of 1999 offset in part by higher
raw material content associated with the current sales mix.
Selling, General and Administrative Expenses
The percentage relationship of selling, general and administrative expenses
to net sales increased 1.7 % to 18.0 % during the first six months of 2000 from
16.3 % during the first six months of 1999. The Company attributes the
percentage increase primarily to an increase in the dollar amount of selling,
general and administrative expenses compared to a lower increase in sales.
Selling, general and administrative expenses increased in dollar amount by
approximately $1,097,000. The Company attributes the increase in the dollar
amount of such expenses primarily to increases in sales and marketing salaries
and related expenses.
Other Income and Expense
During the first six months of 2000, other income, consisting principally
of gain on the sale of marketable securities, and interest earned on cash
equivalents, increased by approximately $1,753,000 compared to the first six
months of 1999. The increase is due to the gain on the sale of marketable
securities and higher interest income due to higher cash and cash equivalent
balances.
Provision for Income Taxes
The provision for income taxes for the first six months of 2000 was
$2,515,000 as compared to $1,801,000 for the first six months of 1999. The
increase in the provision is due primarily to higher United States taxes,
resulting from the gain on the sale of marketable securities and higher foreign
earnings subject to taxes in 2000 versus 1999.
-12-
Three Months ended June 30, 2000 vs.
Three Months ended June 30, 1999
Net Sales
Net sales increased 18.5 % from $28,451,932 during the second quarter of
1999 to $33,721,946 during the second quarter of 2000. The Company attributes
this increase primarily to the reasons set forth in the six month analysis.
Cost of Sales
Cost of sales as a percentage of net sales decreased .9% to 62.1% during
the second quarter of 2000 from 63.0 % during the second quarter of 1999. The
Company attributes this decrease primarily to the reasons set forth in the six
month analysis.
Selling, General and Administrative Expenses
The percentage relationship of selling, general and administrative expenses
to net sales decreased .5 % to 16.5 % during the second quarter of 2000 from
17.0 % during the second quarter of 1999. The Company attributes the percentage
decrease primarily to increased sales. Selling, general and administrative
expenses increased in dollar amount by approximately $733,000. The Company
attributes the increase in dollar amount of such expenses primarily to increases
in sales and marketing salaries and related expenses.
Other Income and Expense
Other income, consisting principally of interest earned on cash
equivalents, increased by approximately $428,000 during the second quarter of
2000 compared to the second quarter of 1999. The increase is due to higher
interest income due to higher cash and cash equivalent balances.
Provision for Income Taxes
The provision for income taxes for the second quarter of 2000 was
$1,251,000 as compared to $1,131,000 for the second quarter of 1999. The
increase in the provision is due primarily to higher foreign earnings subject to
taxes in the second quarter of 2000 versus 1999.
Liquidity and Capital Resources
Historically, the Company has financed its capital expenditures through
cash flows from operating activities. Management believes that the cash flow
from operations, combined with its existing capital base and the Company's
available lines of credit, will be sufficient to fund its operations for the
near term. This statement represents a Forward-Looking Statement. Actual results
could differ materially from such statement if the Company experiences
substantial unanticipated cash requirements.
The Company has lines of credit, in the aggregate amount of $14 million,
all of which were unused at June 30, 2000; $12 million is from domestic banks
and $2 million is from foreign banks.
The Company has contracted for the renovation and addition of new corporate
offices in Jersey City in the amount of $2.5 million. As of June 30, 2000
approximately $505,000 has been paid towards this contract.
-13-
On May 10, 2000 the Board of Directors authorized the repurchase of up to
10% of the Company's outstanding Class A and Class B shares from time to time in
market or privately negotiated transactions.
During the second quarter of 2000, the Company's cash and cash equivalents
increased by approximately $13.5 million, reflecting approximately $15.3 million
provided by operating activities and approximately $2.1 million from the sale of
marketable securities, offset, in part, by approximately $2.7 million in
purchases of plant and equipment, .8 million in purchases of marketable
securities and approximately $.8 million in dividends paid to common
shareholders.
Cash and cash equivalents and accounts receivable comprised approximately
48.5 % and 41.9 % of the Company's total assets at June 30, 2000 and December
31, 1999, respectively. The Company's current ratio (i.e., the ratio of current
assets to current liabilities) was 5.0 to 1 and 5.5 to 1 at June 30, 2000 and
December 31, 1999, respectively.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Fair Value of Financial Instruments - The following disclosure of the
estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments." The estimated fair
values of financial instruments have been determined by the Company using
available market information and appropriate valuation methodologies. However,
considerable judgement is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
The Company has not entered into, and does not expect to enter into,
financial instruments for trading or hedging purposes. The Company does not
currently anticipate entering into interest rate swaps and/or similar
instruments.
The Company's carrying values of cash, marketable securities, accounts
receivable, accounts payable and accrued expenses are a reasonable approximation
of their fair value.
The Company's business in this regard is subject to certain risks,
including, but not limited to, differing economic conditions, loss of
significant customers, changes in political climate, differing tax structures,
other regulations and restrictions and foreign exchange rate volatility. The
Company's future results could be materially and adversely impacted by changes
in these or other factors.
-14-
PART II. Other Information
Item 1. Legal Proceedings
The Company is not presently subject to any legal proceedings
which are material to the consolidated results of operations or
financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of security holders was held on May
25, 2000. At the meeting the following vote was taken:
(1) The Board's nominees were elected to the Board of Directors
for the term of three years. The votes were cast as follows:
For Withheld
--------- --------
Howard Bernstein 2,406,360 23,308
John Tweedy 2,406,412 23,775
There were -0- abstentions and -0- broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) There were no Current Reports on Form 8-K filed by
the registrant during the quarter ended June 30, 2000.
-15-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BEL FUSE INC.
By: /S/ DANIEL BERNSTEIN
----------------------------
Daniel Bernstein, President
(Principal Financial and
Accounting Officer)
Dated: August 10, 2000
-16-