SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee Required)
For the Fiscal Year Ended December 31, 1994
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) For the transition period
from to
--------------- --------------
Commission File Number 0-11676
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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
(201) 432-0463
(Address and telephone number, including area code, of registrant's
principal executive office)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.10 par value
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
--- ---
[X] Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
Aggregate market value of voting stock held by non-affiliates as of March
15, 1995 was approximately $32,609,732 (based upon the closing sales price of
----------
those shares reported on the National Association of Securities Dealers
Automated Quotation System for that day).
Number of shares of Common Stock outstanding as of March 15, 1995:
4,974,445
---------
Documents incorporated by reference:
Bel Fuse Inc.'s Definitive Proxy Statement for the 1995 Annual Meeting of
Stockholders is incorporated by reference into Part III.
BEL FUSE INC.
INDEX
Part I Page
------ ----
Item 1. Business.......................................... 1
Item 2. Properties........................................ 3
Item 3. Legal Proceedings................................. 4
Item 4. Submission of Matters to Vote of Security
Holders........................................... 4
Item 4A. Executive Officers of the Registrant............. 4
Part II
-------
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters................... 5
Item 6. Selected Financial Data........................... 6
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................ 6
Item 8. Financial Statements and Supplementary
Data.............................................. 10*
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. .......... 11
Part III
--------
Item 10. Directors of the Registrant...................... 11
Item 11. Executive Compensation........................... 11
Item 12. Security Ownership of Certain
Beneficial Owners and Management................. 11
Item 13. Certain Relationships and Related
Transactions..................................... 11
Part IV
-------
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K.......................... 12
Signatures................................................ 14
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*Page F-1 follows page 10.
PART I
------
Item 1. Business
--------
General
-------
Bel Fuse Inc. (the "Company"), organized under New Jersey law, is engaged
in the design, manufacture and sale of products used in local area networking,
telecommunication, business equipment and consumer electronic applications. The
Company operates facilities in New Jersey, California, Indiana, Hong Kong, Macau
and France. The Company maintains its principal executive offices at 198 Van
Vorst Street, Jersey City, New Jersey 07302; telephone (201) 432-0463. The term
"Company" as used in this Annual Report on Form 10-K refers to Bel Fuse Inc. and
its consolidated subsidiaries unless otherwise specified.
Recent Developments
-------------------
From October 3, 1994 through November 8, 1994, the Company acquired 531,400
Class A Voting Common Shares of Pulse Engineering, Inc. ("Pulse"), representing
approximately 9.7% of Pulse's outstanding shares, at a cost of $2,464,839. For
additional information regarding the Company's purchase of these shares see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Product Groups
--------------
Magnetic Components
-------------------
The Company manufactures a broad range of magnetic components. These
wire-wound devices perform such functions as signal delay, signal timing, signal
conditioning, impedance matching, filtering, isolation, power conversion and
power transfer. The Company directs its design and marketing efforts to supply
the needs of the following markets: manufacturers of networking and
telecommunication equipment, computer manufacturers, and consumer, automotive
and industrial electronic manufacturers. Although applications tend to overlap,
the magnetic components manufactured by the Company fall into four major groups:
1. Pulse Transformers
------------------
These small wire-wound components offer the end user an inexpensive
answer to surge protection, isolation and signal transfer. The major
customers are the manufacturers of networking equipment, telecommunication
equipment and computers.
2. Delay Lines, Filters and DC/DC Converters
-----------------------------------------
These components are supplied to the same customer base as pulse
transformers. They are densely packaged combinations of wire-wound
components and other passive and active components such as capacitors,
resistors and silicon integrated circuits (IC's). They perform the critical
functions of timing, signal conditioning and power conversion.
3. Power Transformers, Line Chokes, Coils
--------------------------------------
The basic functions of power transformers include AC voltage
conversion and isolation, and they convert the power from the supply line
to the supply circuitry of a given electronic instrument such as a TV or
VCR. Line chokes block the conducted and radiated emissions of a power
supply, and coils are used for supply and control circuitry in TV's and
VCR's. These products are typically sold in large volume orders and are
subject to highly competitive pricing pressures.
4. Packaged Modules
----------------
The Company supplies packaged modules to end users in several other
industries whose requirements can be satisfied by combining in one
integrated package one or more of the Company's capabilities in circuit
board assembly, automatic winding, hybrid fabrication and component
encapsulation.
1
Miniature and Micro Fuses
-------------------------
Fuses prevent currents in an electrical or electronic circuit from
exceeding certain predetermined values. Fuses act as a safety valve to protect
expensive components from damage or to cut off high currents before they can
generate enough heat to cause smoke or fire. The Company manufactures miniature
and micro fuses for supplementary circuit protection. The Company sells its
fuses to a world-wide market. They are used in such products as televisions,
VCR's, power supplies, computers, telephones and networking assemblies.
Thick Film Hybrids
------------------
Thick film hybrids are dense, reliable, high quality electronic
microcircuits. The term "thick film hybrid" describes a method for screen
printing conductors, resistors and capacitors onto a ceramic substrate. This
substrate becomes a hybrid circuit when components such as integrated circuits,
transistors, capacitors, and inductors are added to the substrate in order to
form a functioning electrical circuit. The Company incorporates facets of this
technology in the design and manufacture of many of its other products.
Marketing
---------
The Company sells its products to approximately 556 customers throughout
North America, Western Europe and the Far East. Sales are made through
independent sales representative organizations, authorized distributors and the
Company's sales personnel. Presently the Company has 52 sales representative
organizations, 27 non-exclusive distributors and a sales staff of 18 persons.
The Company has written agreements with all of its sales representatives
organizations and major distributors. Written agreements terminable on short
notice by either party are standard in the industry.
Finished products manufactured by the Company in its Far East facilities
are, in general, either sold to the Company's Jersey City facility for resale to
customers or are shipped directly to customers throughout the world. For further
information regarding the Company's geographic operations, see Note 7 of Notes
to Consolidated Financial Statements.
The Company had sales in excess of ten percent of 1994 consolidated sales
to one customer who manufactures electronic equipment. The amounts and
percentage of consolidated sales were approximately $4,602,000 (10%).
Foreign Land Leases
-------------------
The territories of Hong Kong and Macau will revert to the Peoples Republic
of China pursuant to long-term land leases which expire in the middle of 1997
and the end of 1999, respectively. Management cannot presently predict what
impact, if any, the expiration of these leases will have on the Company or how
the political climate in China will affect its contractual arrangements in
China. Substantially all of the Company's manufacturing operations and
approximately 71% of its identifiable assets are located in Hong Kong, Macau,
and The People's Republic of China. Accordingly, events resulting from
the expiration of such leases would likely have a material adverse effect on the
Company.
Research and Development
------------------------
The Company's research and development efforts in 1994 were spread amongst
all of the Company's current product lines. The Company maintains continuing
programs to improve the reliability of its products and to design specialized
assembly equipment to increase manufacturing efficiencies. The Company's
research and development facilities are located in Indiana, California and Hong
Kong.
Suppliers
---------
The Company has multiple suppliers for most of the raw materials that it
purchases. Increasing demand for surface-mount components throughout the
electronics industry may result in longer lead times. Where possible, the
Company has contractual agreements with suppliers to assure continuing supply of
critical components.
2
With respect to those items which are purchased from single sources, the
Company believes that compatible items would be available in the event that
there were a termination of the Company's existing business relationships with
any such particular supplier. While such an eventuality resulting from such
termination could produce a disruption in production, the Company does not
believe that the termination of business with any of its suppliers would have a
material adverse effect on its long-term operations.
Backlog
-------
The Company normally manufactures products against firm orders.
Cancellation and return arrangements are normally negotiated by the Company on a
transactional basis. The Company's backlog of orders as of December 31, 1994 was
approximately $19.1 million, as compared with a backlog of $9.5 million as of
December 31, 1993. Management expects that substantially all of the Company's
backlog as of December 31, 1994 will be shipped by June 30, 1995.
Trademarks and Patents
----------------------
The Company has been granted a number of U.S. patents and has additional
U.S. patent applications pending relating to its products. While the Company
believes that the issued patents are defendable and that the pending patent
applications relate to patentable inventions, there can be no assurance that a
patent will issue from the applications or that its existing patents can be
successfully defended. It is management's opinion that the successful
continuation and operation of the Company's business does not depend upon the
ownership of patents or the granting of pending patent applications, but upon
the innovative skills, technical competence and marketing and managerial
abilities of its personnel. The patents have a life of seventeen years from the
date of issue.
The Company utilizes seven U.S. registered trademarks -- BELIMITER,
BELFUSE, BEL, SLOBEL, MICROBEL, KEMFUZE and SURFUSE -- to identify various
products that it manufactures. The trademarks survive as long as they are in
use.
Competition
-----------
There are numerous independent companies and divisions of major companies
which manufacture products that are competitive with one or more of the
Company's products. Some of the Company's competitors possess greater financial,
marketing and other resources than those available to the Company. The Company's
ability to compete is dependent upon several factors, including product
performance, quality, reliability, design and price. For information regarding
the effect of price competition on the Company's consolidated results of
operations, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
Employees
---------
As of December 31, 1994, the Company had 707 full-time employees. The
Company employed 86 people in its U.S. facilities, 618 in its Far East
facilities, and 3 in its French facility, excluding workers employed by
independent contractors. The Company's employees are not represented by any
labor union. The Company believes that its relations with employees are
satisfactory.
Item 2. Properties
----------
The Company currently occupies approximately 229,000 square feet of
manufacturing, warehouse, office, technical and staff quarter space worldwide.
In addition, the Company has production processing arrangements with
subcontractors in the People's Republic of China occupying approximately 60,000
square feet of manufacturing space. In addition to the Company's principal
corporate offices in New Jersey, the Company maintains facilities in The
People's Republic of China, Hong Kong, Macau (the Far East), California, Indiana
(U.S.A.) and France (Europe). The Company also owns an idle facility of 46,300
square feet in Illinois. Approximately 68% of the 229,000 square feet the
Company occupies is owned while the remainder is leased. See Note 11 of Notes to
Consolidated Financial Statements for additional information pertaining to lease
properties.
3
Item 3. 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
---------------------------------------------------
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1994.
Item 4A. Executive Officers of the Registrant
------------------------------------
The following table and biographical outlines set forth the positions and
offices within the Company presently held by each executive officer of the
Company and a brief account of the business experience of each such officer for
the past five years.
Positions and Offices
Officer With the Company/
Name and Age Since Business Experience
------------ ------- ---------------------
Elliot Bernstein, 71 1954 Chairman of the Board,
Chief Executive Officer
and Director
Daniel Bernstein, 41 1985 President, Managing
Director of the Company's
Macau Subsidiary and
Director
Robert H. Simandl, 66 1967 Secretary and Director
Arnold Sutta, 68 1985 Vice President
Peter Christoffer, 53 1986 Vice President
Colin Dunn, 50 1992 Vice President and
Treasurer
Elliot Bernstein has been a Director of the Company since its inception in
January 1949, served as President and Chief Executive Officer from 1954 to 1992,
and has served as Chairman of the Board and Chief Executive Officer since 1992.
One of his sons (Daniel Bernstein) is the President and a Director of the
Company and his brother (Howard Bernstein) is a Director of the Company. Another
one of his sons (Alexander Bernstein) formerly was an executive officer of the
Company.
Daniel Bernstein has served the Company as President since June, 1992. He
previously served as Vice President (1985-1992) and Treasurer (1986-1992) and
has served as a Director since 1986. He occupied other positions with the
Company since 1978. He was appointed Managing Director of the Company's Macau
subsidiary during 1991. Daniel Bernstein is Elliot Bernstein's son, and Howard
Bernstein's nephew.
Robert H. Simandl, a director of the Company since 1967 and Secretary of
the Company since 1967, is a member of the law firm of Simandl and Gerr,
Counsellors of Law. He has been a practicing attorney in New Jersey since 1953.
Arnold Sutta joined the Company in 1966 and has served the Company as Vice
President, Marketing, since 1985. Mr. Sutta supervises the worldwide marketing
functions of the Company.
Peter Christoffer has served the Company as Vice President since 1986 and
in 1990 became the President of the Company's former subsidiary, CAC
Microcircuits, Inc. ("CAC"). His responsibilities included the supervision of
engineering and production of thick film hybrids at CAC. Since 1991, he has
supervised the engineering and production of thick film hybrids at the Company's
Indiana facility.
4
Colin Dunn joined the Company in 1991 as Finance Manager and in 1992 was
named Vice President of Finance and Treasurer. Prior to joining the Company, Mr.
Dunn was Vice President of Finance and Operations at Kentek Information Systems,
Inc. from 1985 to 1991 and had previously held a series of senior management
positions with Braintech Inc. and Weyerhaeuser Company.
PART II
Item 5. Market for Registrant's Common Equity and
-----------------------------------------
Related Stockholder Matters
---------------------------
(a) Market Information
The Company's common stock, par value $.10 per share (the "Common Stock"),
is traded in the over-the-counter market. The following table sets forth the
high and low closing sales price range (as reported by National Quotation
Bureau, Inc.) for the Common Stock in the over-the-counter market for each
quarter during the past two years.
High Low
---- ---
Year Ended December 31, 1993:
First Quarter......................... $18 1/4 $12 3/4
Second Quarter........................ 17 9 1/4
Third Quarter......................... 10 7/8 8 1/4
Fourth Quarter........................ 10 8 1/4
Year Ended December 31, 1994:
First Quarter......................... 9 1/8 7 1/4
Second Quarter........................ 7 3/8 5 7/8
Third Quarter......................... 7 3/4 6
Fourth Quarter........................ 8 5/8 6 7/8
The Common Stock is reported under the symbol BELF in the NASDAQ National
Market.
(b) Holders.
As of March 21, 1995, there were 342 registered shareholders of the
Company's Common Stock plus an estimated 3,298 beneficial shareholders.
(c) Dividends.
The Company has not paid any cash dividends and has no current plans to pay
any such dividends. There are no contractual restrictions on the Company's
ability to pay dividends.
5
Item 6. Selected Financial Data
-----------------------
Year Ended December 31,
-----------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands of dollars, except per share data)
Selected Statements of Operations Data:
Net sales ............ $ 45,747 $ 47,460 $ 50,354 $ 36,641 $ 36,588
Cost of sales ........ 36,349 32,711 31,726 23,539 26,203
Selling, general and
administrative ex-
penses .............. 11,458 11,338 10,181 9,595 9,986
Provision for plant
closings ............ -- -- -- 6,395 475
Gain on sale of
building -- net ..... -- -- 11,410 -- --
Earnings (loss) before
income taxes ........ (1,761) 4,005 20,132 (2,775) (27)
Income tax provision
(benefit) ........... (203) 222 1,204 480 (739)
Net earnings (loss) . (1,558) 3,783 18,928 (3,255) 712
Earnings (loss) per
common share ........ (.32) .77 3.88 (.67) .15
As of December 31,
------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands of dollars, except per share data)
Selected Balance Sheet Data:
Working capital .... $22,670 $27,875 $26,966 $12,015 $ 9,611
Total assets ....... 51,653 53,122 50,005 28,430 34,452
Long-term debt, ex-
cluding current
installments ...... -- -- -- 7 265
Stockholders' equity 45,926 48,270 44,423 25,315 28,542
Book value per share 9.25 9.78 9.04 5.23 5.90
Item 7. Managements' Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the notes related thereto.
The discussion of results, causes and trends should not be construed to imply
any conclusion that such results, causes or trends will necessarily continue in
the future.
Results of Operations
The following table sets forth, for the past three years, the percentage
relationship to net sales of certain items included in the Company's
consolidated statements of operations.
Percentage of Net Sales
---------------------------
Year Ended December 31,
---------------------------
1994 1993 1992
---- ---- ----
Net sales ......................... 100.0% 100.0% 100.0%
Cost of sales ..................... 79.5 68.9 63.0
Selling, general and administrative
expenses ......................... 25.0 23.9 20.2
Gain on sale of building -- net ... -- -- 22.7
Earnings (loss) before income taxes (3.8) 8.4 40.0
Income tax provision (benefit) .... (.4) .5 2.4
Net earnings (loss) ............... (3.4) 7.9 37.6
6
The following table sets forth, for the periods indicated, the percentage
increase or decrease of certain items included in the Company's consolidated
statements of operations.
Increase (Decrease) from
Prior Period
------------------------
1994 Compared 1993 Compared
with 1993 with 1992
------------- -------------
Net sales .............................. (3.6)% (5.7)%
Cost of sales .......................... 11.1 3.1
Selling, general and administrative
expenses .............................. 1.1 11.4
Earnings (loss) before income taxes .... * (80.1)
Income tax provision ................... * (81.6)
Net earnings (loss) .................... * (80.0)
* Percentage not meaningful.
Sales
-----
Net sales decreased 3.6% from 1993 to 1994 from approximately $47.5 million
to $45.7 million. The Company attributes this decrease primarily to decreases in
transformer unit sales and selling prices as a result of continuing competition
in the industry, and decreases in delay line unit sales due to the maturity of
this product line, offset in part by an increase in sales of packaged modules.
Net sales decreased 5.7% from 1992 to 1993 from approximately $50.4 million
to $47.5 million. The Company attributes this decrease primarily to decreases in
thick film hybrid sales, selling price reductions on several mature products and
delays in the introduction of certain new products.
Cost of Sales
-------------
Cost of sales as a percentage of net sales increased from 68.9% in 1993 to
79.5% in 1994. The substantial increase in the relative percentage of cost of
sales to net sales was due primarily to selling price reductions on several
mature products and decreased sales. In addition, such percentage increased as a
result of increases in raw material costs due to product mix, and depreciation
expense in the Company's Far East facility and increased costs at the Company's
technical facilities in California and Indiana.
Cost of sales as a percentage of net sales increased from 63.0% in 1992 to
68.9% in 1993. The increases in the cost of sales percentage is primarily
attributable to an increase in manufacturing labor and related overhead in the
Company's Far East facilities and increases in engineering and related expenses
at the Company's Indiana facility. In addition, the relative percentage of
material, labor and overhead costs have increased due to selling price
reductions on several mature products.
Selling, General and Administrative Expenses
--------------------------------------------
The percentage relationship of selling, general and administrative expenses
to net sales increased 1.1% from 1994 to 1993. The Company attributes the
increase primarily to (1) severance and related moving and training expenses
incurred during the second quarter of 1994 in the amount of $1,190,000 in
connection with its Far East subsidiary's decision to move its manufacturing
from Hong Kong to lower cost areas in Macau and The People's Republic of China
and (2) decreased sales. Selling, general and administrative expenses increased
in dollar amount by 1.1% principally as a result of expenses in connection with
the manufacturing move described above offset in part by reductions in
commissions and related selling expenses.
The percentage relationship of selling, general and administrative expenses
to net sales increased by 3.7% from 1992 to 1993. The Company attributes the
increase primarily to decreased sales in 1993, the expansion of the sales and
marketing force and other sales related expenses, and certain housing expenses
and related amenities related to expatriates working at the Far East facilities.
These increases were offset by a duty refund received by the Company and its Far
East subsidiary and lower depreciation charges in the Far East. Selling, general
and administrative expenses increased in dollar amount by 11.4%.
Other Income and Expenses; Gain on Sale
---------------------------------------
Other income, consisting principally of earnings on cash and cash
equivalents and marketable securities offset in part by realized losses on the
sale of marketable securities and the loss on abandonment of fixed assets
incurred in connection with the Company's move from Hong Kong to Macau and The
People's Republic of China, decreased by approximately $288,000 in 1994 from
1993. The decrease is attributable to the
7
Company and its Far East subsidiary realizing approximately $135,000 of losses
from the sale of marketable securities during 1994, the loss on abandonment of
fixed assets of approximately $167,000 during 1994 and lower earnings on
invested funds due to lower average balances during 1994 versus 1993.
Other income, increased by approximately $311,000 from 1992 to 1993. The
Company attributes the increase primarily to increased cash balances and
marketable securities resulting from the sale of the Company's Hong Kong
principal manufacturing and office facility in November, 1992.
Provision for Income Taxes
--------------------------
The Company has historically followed a policy of reinvesting substantially
all of the earnings of foreign subsidiaries in the expansion of its foreign
operations. If the unrepatriated funds were distributed to the parent
corporation rather than reinvested in the Far East, such funds would be subject
to United States Federal income taxes. No funds were repatriated during 1994,
1993 or 1992. (See Note 6 of Notes to Consolidated Financial Statements).
The income tax provision decreased from a charge of $222,000 in 1993 to a
$203,000 benefit in 1994. The Company attributes this change primarily to the
loss before income tax provision during 1994 versus earnings before income tax
provision for 1993.
The provision for income taxes increased from 1992 to 1993. The Company
attributes this increase primarily to greater earnings at the Company's Far East
and U.S. operations, offset by the utilization of U.S. net operating loss
carryforward which reduced income taxes by approximately $750,000.
The Company's effective tax rate has been lower than the statutory United
States corporate rate primarily as a result of lower rates in Hong Kong and
Macau. In addition, during 1992, substantially all of the gain on the sale of
the Company's Hong Kong subsidiary's principal manufacturing and office facility
was not subject to taxation and in 1993 the tax rate was impacted for the
utilization of net operating loss carryforward in the United States. During 1994
there was no utilization of net operating loss carryforward in the United
States.
Inflation
---------
During the past two years, the effect of inflation on the Company's
profitability was not material. Fluctuation of the U.S. dollar against other
major currencies does not significantly affect the Company's foreign operations
as most transactions are denominated in U.S. dollars.
Liquidity and Capital Resources
-------------------------------
Historically, the Company has financed its capital expenditures through
operating profits. In addition, the capital base was enhanced in prior years as
a result of public offerings of common stock by the Company and, in 1992, by the
sale of a facility in Hong Kong. Management believes that its existing capital
base and the Company's available lines of credit will be sufficient to fund its
operations for the near term.
8
The Company has lines of credit, in the aggregate amount of $5,000,000, of
which $3,000,000 is from domestic banks and $2,000,000 is from foreign banks.
During 1994, the Company borrowed $300,000 under its domestic line-of-credit
with interest at the prime rate, 8.5% per annum. The Company repaid the loan in
full on March 2, 1995.
From October 3, 1994 through November 8, 1994, the Company acquired 531,400
Class A Voting Common Shares of Pulse Engineering, Inc. ("Pulse"), representing
approximately 9.7% of Pulse's outstanding shares, at a cost of $2,464,839.
The Company has proposed to acquire all of Pulse's common stock for $6 per
share, consisting of $3 in cash and $3 of the Company's Common Stock, subject
to, among other things, a mutually acceptable definitive merger agreement. Pulse
has advised the Company that is has retained an investment banker to study the
Company's offer. Pulse has given no other indication as to whether it intends to
accept or reject the Company's offer or otherwise pursue negotiations.
The Company intends to review its investment in Pulse on a continuing basis
and, depending on various factors, including Pulse's business affairs and
financial position, the price levels of its Common Stock, conditions in the
securities markets and general economic and industry conditions, it may in the
future take such actions with respect to its investment in Pulse as it deems
appropriate in light of the circumstances existing from time to time, including,
but not limited to, purchasing additional shares of Pulse's common stock,
selling some or all of its Pulse shares, proposing a slate of nominees for
election as directors at Pulse's annual meeting, or commencing a tender offer
for all, or a majority of, Pulse's outstanding stock.
The Company is in the process of seeking financing for the proposed
transaction. Because of its financial condition and banking relationships, the
Company has advised Pulse that it is confident that financing would not be an
impediment to consummation of the proposed transaction.
On March 23, 1995, Pulse announced that it had received an offer from
Technitrol, Inc. ("Technitrol") to acquire all of Pulse's outstanding stock at a
price of $6.25 per share, one-half (1/2) of such consideration to be in cash and
one-half (1/2) to be in Technitrol stock. Pulse has asked potential acquirers
for final offers on or about April 19, 1995. The Company is analyzing its
alternatives in light of this announcement.
The Company's cash and cash equivalent position declined by $5.3 million,
principally reflecting $6.3 million in purchases of property, plant and
equipment.
The Company has historically followed a policy of reinvesting the earnings
of foreign subsidiaries in the Far East. If the unrepatriated funds were
distributed to the parent corporation, such funds would be subject to United
States federal income taxes. No funds were repatriated during 1994 or 1993.
The Company's shareholders' equity declined by $2.3 million from December
31, 1993 to December 31, 1994, reflecting the Company's 1994 net loss of $1.6
million and a net unrealized loss on marketable securities of $.9 million. Such
unrealized loss on marketable securities primarily reflects the decline in value
of certain U.S. Government agencies--collateralized mortgage obligations,
including principal only strips. (See Note 3 of Notes to Consolidated Financial
Statements.)
Cash, accounts receivable and marketable securities comprised approximately
35.7% and 43.9% of the Company's total assets at December 31, 1994 and December
31, 1993, respectively. The Company's current ratio (i.e., the ratio of current
assets to current liabilities) was 5.1 to 1 at December 31, 1994 and 7.3 to 1 at
December 31, 1993.
9
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Index to Consolidated Financial Statements
and Supplementary Financial Data Page
------------------------------------------ ----
Independent Auditors' Report .................................... F-1
Financial Statements:
Consolidated Balance Sheets, December 31, 1994
and 1993 ................................................. F-2 -- F-3
Consolidated Statements of Operations, Years
Ended December 31, 1994, 1993 and 1992 ................... F-4
Consolidated Statements of Stockholders' Equity,
Years Ended December 31, 1994, 1993 and 1992 ............. F-5
Consolidated Statements of Cash Flows, Years
Ended December 31, 1994, 1993 and 1992 ................... F-6 -- F-7
Notes to Consolidated Financial Statements ................. F-8 -- F-15
Supplementary Financial Data:
Selected Quarterly Financial Data (Unaudited)
Years Ended December 31, 1994 and 1993 ................... F-16
Schedule VIII: Valuation and Qualifying Accounts ........... S-1
10
[DELOITTE LOGO & LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Bel Fuse Inc.
Jersey City, New Jersey
We have audited the accompanying consolidated balance sheets of Bel Fuse Inc.
and its subsidiaries (the "Company") as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements presents fairly, in all
material respects, the financial position of Bel Fuse Inc. and its subsidiaries
at December 31, 1994 and 1993, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
March 8, 1995
[DELOITTE TOHMATSU LOGO]
F-1
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
December 31,
-------------------------
1994 1993
---- ----
Current Assets:
Cash and cash equivalents ............. $ 2,842,894 $ 8,102,768
Marketable securities (Note 3) ........ 7,508,304 9,140,906
Accounts receivable -- less allowance
for doubtful accounts of $70,000 .... 8,079,971 6,062,867
Inventories (Note 4) .................. 8,766,203 8,827,945
Prepaid expenses and other current
assets (Note 10) .................... 959,764 152,413
----------- -----------
Total Current Assets .................. 28,157,136 32,286,899
Property, plant and equipment -- net
(Notes 5 and 11) .................... 22,226,076 19,479,971
Unamortized excess of cost over fair
value of assets acquired ............ 166,925 188,273
Other assets (Note 11) ................ 1,102,898 1,166,601
----------- -----------
TOTAL ASSETS .......................... $51,653,035 $53,121,744
=========== ===========
See notes to consolidated financial statements.
F-2
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
----------------------------
1994 1993
---- ----
Current Liabilities:
Note payable (Note 11) .................... $ 300,000 $ 3,139
Accounts payable .......................... 3,171,408 1,261,093
Accrued expenses .......................... 1,987,536 2,020,860
Income taxes payable (Note 6) ............. -- 924,251
Deferred income taxes ..................... 28,000 203,000
------------ ------------
Total Current Liabilities ............... 5,486,944 4,412,343
Deferred income taxes (Note 6) .............. 240,000 439,000
------------ ------------
Total Liabilities ....................... 5,726,944 4,851,343
------------ ------------
Commitments and Contingencies
(Notes 6, 7, 8, 9 and 11)
Stockholders' Equity (Note 9):
Preferred stock, no par value,
authorized 1,000,000 shares;
none issued ............................. -- --
Common stock, par value $.10 per share --
authorized 10,000,000 shares; out-
standing 4,965,195 and 4,934,288
shares .................................. 496,520 493,429
Additional paid-in capital ................ 6,288,987 6,201,682
Retained earnings ......................... 40,017,231 41,575,290
Net unrealized loss on marketable
securities (Note 3) ..................... (876,647) --
------------ ------------
Total Stockholders' Equity .............. 45,926,091 48,270,401
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ................................ $ 51,653,035 $ 53,121,744
============ ============
See notes to consolidated financial statements.
F-3
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
-----------------------------------------
1994 1993 1992
---- ---- ----
Net sales .................. $ 45,746,724 $ 47,460,108 $ 50,354,150
------------ ------------ ------------
Costs and Expenses:
Cost of sales ............ 36,349,461 32,711,024 31,726,012
Selling, general and
administrative ......... 11,458,246 11,337,782 10,181,482
------------ ------------ ------------
47,807,707 44,048,806 41,907,494
------------ ------------ ------------
Income (loss) from
operations ............... (2,060,983) 3,411,302 8,446,656
------------ ------------ ------------
Gain on sale of
building -- net (Note 2).. -- -- 11,410,084
Other income (net) ......... 306,477 594,415 283,878
Interest expense ........... 6,553 1,204 8,268
------------ ------------ ------------
Earnings (loss) before
income taxes ............. (1,761,059) 4,004,513 20,132,350
Income tax provision
(benefit) (Note 6) ....... (203,000) 222,000 1,204,000
------------ ------------ ------------
Net earnings (loss) ........ $ (1,558,059) $ 3,782,513 $ 18,928,350
============ ============ ============
Earnings (loss) per
common share ............. $(.32) $.77 $3.88
===== ==== =====
Weighted average number
of common shares out-
standing ................. 4,947,060 4,921,076 4,883,913
============ ============ ============
See notes to consolidated financial statements.
F-4
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Net Unreal-
----------------------- Additional ized Loss on
Shares Par Paid-in Retained Marketable
Outstanding Value Capital Earnings Securities Total
----------- ----- ---------- -------- ------------ -----
Balance, January 1, 1992 ...... 4,853,707 $ 485,371 $ 5,964,977 $ 18,864,427 -- $ 25,314,775
Exercise of stock options ..... 59,199 5,920 173,946 -- -- 179,866
Net earnings .................. -- -- -- 18,928,350 -- 18,928,350
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1992..... 4,912,906 491,291 6,138,923 37,792,777 -- 44,422,991
Exercise of stock options ..... 21,382 2,138 62,759 -- -- 64,897
Net earnings .................. -- -- -- 3,782,513 -- 3,782,513
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1993..... 4,934,288 493,429 6,201,682 41,575,290 -- 48,270,401
Exercise of stock options ..... 30,907 3,091 87,305 -- -- 90,396
Net (loss) .................... -- -- -- (1,558,059) -- (1,558,059)
Net unrealized loss on
marketable securities ....... -- -- -- -- (876,647) (876,647)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1994..... 4,965,195 $ 496,520 $ 6,288,987 $ 40,017,231 $ (876,647) $ 45,926,091
============ ============ ============ ============ ============ ============
See notes to consolidated financial statements.
F-5
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------------------
1994 1993 1992
---- ---- ----
Cash flows from operating activities:
Net income (loss) .............................. $ (1,558,059) $ 3,782,513 $ 18,928,350
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization .............. 2,619,083 2,409,123 2,365,426
Deferred income taxes ...................... (374,000) (87,000) (77,600)
(Gain) on sale of building ................. -- -- (12,379,084)
Net (gain) loss on sale of marketable
securities ............................... 134,743 30,844 (76,361)
Provision for doubtful accounts ............ 16,175 20,000 --
Inventory reserve adjustment ............... 658,432 194,272 --
Loss on disposal/abandonment
of property and equipment ................ 167,094 25,017 --
Changes in operating assets
and liabilities .......................... (2,449,875) (1,259,191) (294,435)
------------- ------------- -------------
Net Cash Provided by (used in)
Operating Activities ............... (786,407) 5,115,578 8,466,296
------------- ------------- -------------
Cash flows from investing activities:
Purchase of property, plant and equipment .... (6,318,700) (5,099,913) (7,913,672)
Proceeds from sale of building ............... -- -- 14,569,923
Purchase of marketable securities ............ (4,924,030) (12,478,210) --
Proceeds from sale of marketable securities... 5,545,242 3,286,460 105,979
Proceeds from sale of equipment .............. 807,764 50,372 --
Payments to contractor ....................... -- -- (640,000)
Proceeds from repayment by contractor ........ 29,000 29,000 29,000
------------- ------------- -------------
Net Cash Provided by (used in)
Investing Activities ............... (4,860,724) (14,212,291) 6,151,230
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from exercise of stock options ...... 90,396 64,897 179,866
Proceeds from borrowings ..................... 300,000 -- --
Repayment of borrowings ...................... (3,139) (4,264) (3,785)
------------- ------------- -------------
Net Cash Provided by Financing
Activities ......................... 387,257 60,633 176,081
------------- ------------- -------------
Net Increase (Decrease) in Cash and Cash
Equivalents .................................. (5,259,874) (9,036,080) 14,793,607
Cash and Cash Equivalents -- beginning of year.. 8,102,768 17,138,848 2,345,241
------------- ------------- -------------
Cash and Cash Equivalents -- end of year ....... $ 2,842,894 $ 8,102,768 $ 17,138,848
============= ============= =============
See notes to consolidated financial statements.
F-6
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Year Ended December 31,
-----------------------------------------------
1994 1993 1992
---- ---- ----
Changes in operating assets
and liabilities consist of:
(Increase) decrease in
accounts receivable ....... (2,033,279) 1,450,207 (1,803,143)
(Increase) in inventories .. (596,690) (2,019,177) (1,256,602)
(Increase) decrease in
prepaid expenses and
other current assets ...... (836,351) 51,909 178,735
(Increase) decrease in other
assets .................... 63,703 (102,709) 11,152
Increase (decrease) in
accounts payable .......... 1,910,315 (14,489) 434,640
Increase (decrease) in
accrued expenses .......... (957,573) (549,128) 1,140,733
Increase (decrease) in
income taxes payable ...... -- (75,804) 1,000,050
------------ ------------ ------------
$ (2,449,875) $ (1,259,191) $ (294,435)
============ ============ ============
Supplementary information:
Cash paid during year for:
Interest .................. $ 4,778 $ 1,204 $ 8,268
============ ============ ============
Income taxes .............. $ 680,783 $ 387,809 $ 250,883
============ ============ ============
See notes to consolidated financial statements.
F-7
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bel Fuse Inc. and its subsidiaries (the "Company") are engaged in the
design, manufacture and sale of products used in local area networking,
telecommunication, business equipment and consumer electronic applications.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS -- Cash equivalents include short-term
investments with an original maturity of three months or less when purchased
(principally commercial paper, U.S. treasury bills, and municipal funds) which
amounted to $1,291,000 at December 31, 1993.
MARKETABLE SECURITIES -- Effective January 1, 1994, the Company implemented
Financial Accounting Standards Board Statement No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). In accordance with SFAS
115 the Company classifies its investments in debt and equity securities as
"available for sale", and accordingly, reflects unrealized gains and losses, as
a separate component of stockholders' equity. At December 31, 1994, the income
tax benefit attributable to the unrealized loss on marketable securities, was
entirely offset by a valuation allowance.
Marketable securities are held by both the parent company and its Hong Kong
subsidiary. The fair values are estimated based on quoted market prices.
Realized gains or losses from the sales of marketable securities are based on
the specific identification method.
INVENTORIES -- Inventories are stated at the lower of weighted average cost
(first-in, first-out) or market.
DEPRECIATION -- Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is calculated primarily using the
declining-balance method for machinery and equipment and the straight-line
method for buildings over their estimated useful lives.
INCOME TAXES -- Deferred taxes are provided to reflect the tax effect of
temporary differences between financial reporting and tax bases of assets and
liabilities. The principal items giving rise to deferred taxes are the use of
accelerated depreciation methods for plant and equipment and certain expenses
which have been deducted for financial reporting purposes which are not
currently deductible for income tax purposes.
EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED -- The excess of cost
over fair market value of assets acquired is being amortized on a straight-line
basis over forty years. Amortization was approximately $21,000, for each of the
years ended December 31, 1994, 1993 and 1992.
EARNINGS (LOSS) PER COMMON SHARE -- Earnings (loss) per common share are
computed using the weighted average number of common shares outstanding during
the year. The dilutive effect of outstanding options were not material in 1993
and 1992 and were not considered in 1994 as their effect is antidilutive.
RECLASSIFICATIONS -- Certain reclassifications have been made to prior year
balances in order to conform with the current year's presentation.
F-8
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SALE OF BUILDING
On November 18, 1992 the Company's Hong Kong subsidiary sold its principal
Hong Kong manufacturing and office facility for approximately $14,900,000
resulting in a gain of $12,400,000, net of approximately $1,000,000 in related
severance and moving expenses, in connection with the Company's move to new
manufacturing and office facilities in Hong Kong and Macau.
3. MARKETABLE SECURITIES
Estimated Gross Gross
Amortized Fair Unrealized Unrealized
Cost Value Gains Losses
--------- --------- ---------- ----------
December 31, 1994:
Municipalities ..... $ 1,214,699 $ 1,197,913 $ -- $ (16,786)
U.S. Government
agencies--
collateralized
mortgage
obligations(2).... 1,575,511 924,942 -- (650,569)
Equities:
Common stock (1) . 3,857,214 3,746,375 138,939 (249,778)
Preferred stock .. 830,690 762,800 -- (67,890)
Mutual funds ....... 545,963 528,350 -- (17,613)
Foreign corporation
bonds ............ 360,575 347,625 -- (12,950)
----------- ----------- ----------- -----------
$ 8,384,652 $ 7,508,005 $ 138,939 $(1,015,586)
=========== =========== =========== ===========
<FN>
----------
(1) During the fourth quarter of 1994 the Company acquired 531,400 Class A
Voting Common Shares of Pulse Engineering, Inc., 9.7% of Pulse's outstanding
shares, at a cost of $2,464,839.
(2) Includes principal only strips valued at amortized cost of $987,716 and an
estimated fair value of $415,649.
</FN>
December 31, 1993:
Municipalities ........................ $2,976,755
U.S. Government
bonds ............................... 1,100,086
U.S. Government agencies--
collateralized mortgage obligations . 1,603,996
Equities:
Common stock ........................ 1,487,452
Preferred stock ..................... 691,172
Foreign corporation
bonds ................................ 1,281,445
----------
$9,140,906
==========
At December 31, 1993, fair value approximated amortized cost.
Gross realized gains were $34,964 in 1994 ($38,128 in 1993 and $76,361 in
1992). Gross realized losses were $169,707 in 1994 ($68,972 in 1993 and $-0- in
1992).
The amortized cost and estimated fair value of debt securities at December
31, 1994, by contractual maturity, are as follows:
Estimated
Cost Fair Value
---- ----------
Due in one year or less ..... $ 600,552 $ 597,705
Due in one year through three
years ..................... 860,153 842,235
Due after three years ....... 1,690,080 1,030,540
---------- ----------
$3,150,785 $2,470,480
========== ==========
4. INVENTORIES
December 31,
--------------------------
1994 1993
---- ----
Raw materials .............. $ 6,552,826 $ 5,367,270
Work in process............. 35,897 282,247
Finished goods.............. 2,177,480 3,178,428
----------- -----------
$ 8,766,203 $ 8,827,945
=========== ===========
5. PROPERTY, PLANT AND EQUIPMENT
December 31,
-------------------------
1994 1993
---- ----
Land ........................... $ 686,987 $ 458,039
Buildings and improvements ..... 10,121,169 6,760,978
Construction in progress ....... -- 2,935,478
Machinery and equipment ........ 27,004,661 22,798,347
Idle property held for sale .... 935,000 935,000
----------- -----------
38,747,817 33,887,842
Less accumulated depreciation... 16,521,742 14,407,871
----------- -----------
$22,226,075 $19,479,971
=========== ===========
Depreciation expense for the years ended December 31, 1994, 1993 and 1992
was $2,597,735, $2,367,777, and $2,344,081, respectively.
F-9
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
Year Ended December 31,
-----------------------------------------
1994 1993 1992
---- ---- ----
Current:
Federal(a)... $ -- $ 22,000 $ 40,000
Foreign ..... 162,000 286,000 1,242,000
State ....... 9,000 1,000 --
----------- ----------- -----------
171,000 309,000 1,282,000
----------- ----------- -----------
Deferred:
Foreign ..... (374,000) (87,000) (78,000)
----------- ----------- -----------
$ (203,000) $ 222,000 $ 1,204,000
=========== =========== ===========
<FN>
----------
(a) Reduced by $645,000 and $750,000 in 1993 and 1992 for utilization of a net
operating loss carryforward.
</FN>
A reconciliation of taxes on income at the federal statutory rate to
amounts provided is as follows:
Years Ended December 31,
-----------------------------------------
1994 1993 1992
---- ---- ----
Tax provision (benefit) computed
at the Federal statutory rate .. $ (599,000) $ 1,361,000 $ 6,845,000
Increase (decrease) in taxes
resulting from:
Effect of unused U.S. tax
losses ......................... 163,000 -- --
Utilization of Federal net
operating loss carryforward --
U.S ............................ -- (645,000) (750,000)
Alternative minimum tax -- U.S ... -- 22,000 40,000
Lower tax rates applicable
to foreign operations .......... -- (516,000) (774,000)
Exclusion of taxes applicable
to gain on sale of foreign
property ....................... -- -- (4,215,000)
Effect of unused foreign tax
losses ......................... 107,000 -- 58,000
Other, net ....................... 126,000 -- --
----------- ----------- -----------
$ (203,000) $ 222,000 $ 1,204,000
=========== =========== ===========
F-10
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. INCOME TAXES (Continued)
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to the deferred
tax liability and deferred tax asset and their approximate tax effects are as
follows:
December 31,
----------------------------------------------------------
1994 1993
---- ----
Temporary Temporary
Difference Tax Effect Difference Tax Effect
---------- ---------- ---------- ----------
Depreciation .... $ 3,947,000 $ 576,000 $ 4,152,000 $ 786,000
Net operating
loss carry-
forward ........ (3,074,000) (682,000) (455,000) (155,000)
Net unrealized
loss on mar-
ketable
securities ..... (356,000) (121,000) -- --
Vacation and
medical accruals -- -- (198,000) (67,000)
Allowance
accruals ....... (70,000) (20,000) (50,000) (17,000)
Accrued moving
expenses ....... -- -- (366,000) (29,000)
Amortization .... -- -- 97,000 7,000
Tax credit carry-
forward ........ (175,000) (175,000) (175,000) (175,000)
Valuation
allowances ..... 1,786,000 690,000 520,000 292,000
----------- ----------- ----------- -----------
$ 2,058,000 $ 268,000 $3,525,000 $ 642,000
=========== =========== =========== ===========
The United States net operating loss carryforward of approximately $746,000
expires in 2007. Approximately $300,000 of such amounts arose from deductions
related to incentive stock options. Upon utilization, additional paid-in-capital
will be increased by the tax benefit realized.
It is management's intention to permanently reinvest a substantial portion
of the earnings of foreign subsidiaries in the expansion of its foreign
operations. No funds were repatriated during 1994. Unrepatriated earnings, upon
which income taxes have not been accrued, amounted to approximately $37,282,000
at December 31, 1994. The related amount of income taxes would approximate
$6,338,000.
F-11
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. OPERATIONS IN GEOGRAPHIC AREAS, FOREIGN OPERATIONS AND EXPORT SALES
Adjustments
United Foreign and
States Countries Eliminations Consolidated
------------ ------------ ------------ ------------
1994
----
Sales to unaffil-
iated customers .. $ 25,917,319 $ 19,829,405 $ -- $ 45,746,724
Transfers between
geographic areas . 1,674,378 17,256,984 (18,931,362) --
------------ ------------ ------------ ------------
Total Revenue ... $ 27,591,697 $ 37,086,389 $(18,931,362) $ 45,746,724
============ ============ ============ ============
Operating (loss) .. $ (1,125,758) $ (935,225) $ -- $ (2,060,983)
============ ============ ============ ============
Identifiable assets
as at December 31,
1994 ............. $ 15,124,357 $ 36,536,422 $ (7,744) $ 51,653,035
============ ============ ============ ============
1993
----
Sales to unaffil-
iated customers .. $ 25,381,690 $ 22,078,418 $ -- $ 47,460,108
Transfers between
geographic areas . 3,364,331 16,891,277 (20,255,608) --
------------ ------------ ------------ ------------
Total Revenue ..... $ 28,746,021 $ 38,969,695 $(20,255,608) $ 47,460,108
============ ============ ============ ============
Operating income .. $ 1,181,644 $ 2,229,658 $ -- $ 3,411,302
============ ============ ============ ============
Identifiable assets
as at December 31,
1993 ............. $ 12,811,141 $ 40,318,347 $ (7,744) $ 53,121,744
============ ============ ============ ============
1992
----
Sales to unaffil-
iated customers .. $ 25,532,563 $ 24,821,587 $ -- $ 50,354,150
Transfers between
geographic areas . 4,446,317 16,867,689 (21,314,006) --
------------ ------------ ------------ ------------
Total Revenue ..... $ 29,978,880 $ 41,689,276 $(21,314,006) $ 50,354,150
============ ============ ============ ============
Operating income .. $ 1,644,331 $ 6,802,325 $ -- $ 8,446,656
============ ============ ============ ============
Identifiable assets
as at December 31,
1992 ............. $ 13,352,922 $ 36,659,839 $ (7,744) $ 50,005,017
============ ============ ============ ============
F-12
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. OPERATIONS IN GEOGRAPHIC AREAS, FOREIGN OPERATIONS AND EXPORT
SALES (Continued)
Transfers between geographic areas include raw materials manufactured in
the United States which are shipped to foreign countries to be manufactured into
finished products and finished products manufactured in foreign countries and
transferred to the United States for sale. Operating income (loss) represents
total revenue less operating expenses. In computing operating income (loss),
none of the following items have been included: gain on sale of building,
interest income or expense, other income and income taxes.
Identifiable assets are those assets of the Company that are identified
with the operations of each geographic area.
The Company realized exchange (gains) losses of approximately $(2,000),
$32,000, and $71,000 for the years ended December 31, 1994, 1993 and 1992,
respectively. Unrealized exchange gains (losses) on foreign currency amounted to
approximately $72,000, $(101,000), and $31,000 for the years ended December 31,
1994, 1993 and 1992, respectively.
The Company had sales in excess of ten percent to customers who manufacture
electronic equipment. The amounts and percentages were approximately $4,602,000
(10%) in 1994; $6,720,000 (14%) and $5,338,000 (11%) in 1993; and $7,251,000
(14%) in 1992.
The Company's foreign operations are principally in the Far East and the
Company has minor operations in Europe.
8. RETIREMENT FUND AND PROFIT SHARING PLAN
The Company maintains a domestic profit sharing plan to a contributory
stock ownership and savings 401(K) plan which combines stock ownership and
individual voluntary savings provisions to provide retirement benefits for plan
participants. The plan provides for participants to voluntarily contribute a
portion of their compensation, subject to certain legal maximums. The Company
will match, based on a sliding scale, up to $350 for the first $600 contributed
by each participant. Matching contributions plus additional discretionary
contributions will be made with Company stock. The expense for the years ended
December 31, 1994, 1993 and 1992 amounted to approximately $125,000, $107,000
and $122,000, respectively.
The Company's Far East subsidiaries have a retirement fund covering
substantially all of their full-time employees. Eligible employees contribute up
to 5% of salary to the fund. In addition, the Company may contribute an amount
equal to a percentage of eligible salary, as determined by the Company, in cash
or Company stock. The expense for the years ended December 31, 1994, 1993 and
1992 amounted to approximately $345,000, $459,000 and $356,000, respectively.
The Company has agreed to repurchase its stock, if no market exists, should it
be requested to do so by the trustees of the Company's Far East plan.
9. STOCK OPTION PLAN
The Company has a Qualified Stock Option Plan (the "Plan") which provides
for the granting to key employees of "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1954, as amended. The
Plan provides for the issuance of 700,000 shares, all of which have been
registered as of December 31, 1994.
On May 26, 1994 the Company cancelled 103,500 options to employees
exercisable at $9.125 to $9.75 per share and regranted them at an option price
of $6.50 per share. On May 26, 1994 the Company granted options to employees
covering 43,000 shares at option prices of $6.50 to $7.00 per share and on
September 27, 1994 40,000 options to officers of the Company at an option price
of $7.70 per share.
Substantially all options outstanding become exercisable twenty-five
percent one year from the date of the grant and twenty-five percent for each of
the three years thereafter.
F-13
9. STOCK OPTION PLAN (Continued)
The following summarizes the stock option transactions for the years ended
December 31, 1994, 1993 and 1992:
Number of Per Share
Shares Option Price
--------- ------------
Outstanding at January 1, 1992 ... 187,863 $2.34-$3.75
Cancelled ...................... (8,000) $3.00-$9.125
Granted ........................ 84,500 $ 9.125
Exercised ...................... (59,199) $2.34-$3.75
Outstanding at December 31, 1992.. 205,164 $2.34-$9.125
Cancelled ...................... (18,000) $3.00-$9.125
Granted ........................ 38,000 $ 9.75
Exercised ...................... (21,382) $2.34-$9.75
Outstanding at December 31, 1993.. 203,782 $2.34-$9.75
Cancelled ...................... (116,625) $3.00-$9.75
Granted ........................ 186,500 $6.50-$7.70
Exercised ...................... (30,907) $2.34-$3.75
Outstanding at December 31, 1994.. 242,750 $2.34-$7.70
Available for future grant ....... 203,875
December 31, 1994
Exercisable at December 31, 1994.. 67,250
10. RELATED PARTY TRANSACTIONS
At December 31, 1994 and 1993 prepaid expenses and other current assets
include advances against compensation of $49,577 and $47,500, respectively, to
the Company's Chief Executive Officer.
11. COMMITMENTS AND CONTINGENCIES
Pulse Engineering, Inc.
-----------------------
From October 3, 1994 through November 8, 1994, the Company acquired 531,400
Class A Voting Common Shares of Pulse Engineering, Inc. ("Pulse"), representing
approximately 9.7% of Pulse's outstanding shares, at a cost of $2,464,839.
The Company has proposed to acquire all of Pulse's common stock for $6 per
share, consisting of $3 in cash and $3 of the Company's Common Stock, subject
to, among other things, a mutually acceptable definitive merger agreement. Pulse
has advised the Company that is has retained an investment banker to study the
Company's offer. Pulse has given no other indication as to whether it intends to
accept or reject the Company's offer or otherwise pursue negotiations.
The Company intends to review its investment in Pulse on a continuing basis
and, depending on various factors, including Pulse's business affairs and
financial position, the price levels of its Common Stock, conditions in the
securities markets and general economic and industry conditions, it may in the
future take such actions with respect to its investment in Pulse as it deems
appropriate in light of the circumstances existing from time to time, including,
but not limited to, purchasing additional shares of Pulse's common stock,
selling some or all of its Pulse shares, proposing a slate of nominees for
election as directors at Pulse's annual meeting, or commencing a tender offer
for all, or a majority of, Pulse's outstanding stock.
The Company is in the process of seeking financing for the proposed
transaction. Because of its financial condition and banking relationships, the
Company has advised Pulse that it is confident that financing would not be an
impediment to consummation of the proposed transaction.
On March 23, 1995, Pulse announced that it had received an offer from
Technitrol, Inc. ("Technitrol") to acquire all of Pulse's outstanding stock at a
price of $6.25 per share, one-half (1/2) of such consideration to be in cash and
one-half (1/2) to be in Technitrol stock. Pulse has asked potential acquirers
for final offers on or about April 19, 1995. The Company is analyzing its
alternatives in light of this announcement.
F-14
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. COMMITMENTS AND CONTINGENCIES (Continued)
Leases
------
The Company leases various facilities. Certain of these leases require the
Company to pay certain executory costs (such as insurance and maintenance).
Future minimum lease payments for operating leases are as follows:
Year Ending December 31,
--------------------------------
1995 ............... $ 377,000
1996 ............... 297,000
1997 ............... 141,000
1998 ............... 102,000
1999 ............... 102,000
Thereafter ......... 34,000
----------
$1,053,000
==========
Rental expense was approximately $318,000, $267,000 and $86,000 for the
years ended December 31, 1994, 1993 and 1992, respectively.
Credit Facilities
-----------------
The Company has two domestic unsecured lines of credit totalling
$3,000,000, of which $300,000 was outstanding at December 31, 1994 with interest
at the prime rate, 8.5% per annum. On March 2, 1995 the Company repaid the loan.
The lines of credit are renewable annually.
The Company's Hong Kong subsidiary has an unsecured line of credit of
approximately $2,000,000 which expires in August, 1995 and was unused at
December 31, 1994. The line of credit is guaranteed by the U.S. parent.
Production Arrangements
-----------------------
The Company's Hong Kong subsidiary has an agreement with a contractor in
the People's Republic of China for the assembly of electronic components. The
Company advanced the contractor monies for the construction of a 50,000 square
foot facility of which $288,681 is outstanding at December 31, 1994. The Company
is obligated to the contractor in the amount of approximately $259,000 a year
through 2003 for minimum labor charges offset in part by the $288,681 owed to
the Company by the contractor.
F-15
BEL FUSE INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
Total Year
Ended
March 31, June 30, September 30, December 31, December 31,
1994 1994 1994 1994 1994
---- ---- ---- ---- ----
Net sales .... $ 9,423,962 $ 10,110,328 $ 12,191,187 $ 14,021,247 $ 45,746,724
------------ ------------ ------------ ------------ ------------
Gross
Profit ..... $ 1,668,823 $ 1,787,821 $ 2,578,092 $ 3,362,527 $ 9,397,263
------------ ------------ ------------ ------------ ------------
Net
earnings
(loss) ..... $ (665,492) $ (2,206,886) $ 354,731 $ 959,588 $ (1,558,059)
============ ============ ============ ============ ============
Earnings
per share .. $(.13) $(.45) $.07 $.19 $(.32)
===== ===== ==== ==== =====
Total Year
Ended
March 31, June 30, September 30, December 31, December 31,
1993 1993 1993 1993 1993
---- ---- ---- ---- ----
Net sales .... $11,740,440 $12,042,854 $13,359,525 $10,317,299 $47,460,108
----------- ----------- ----------- ----------- -----------
Gross
profit ..... $ 3,929,582 $ 3,902,320 $ 4,266,647 $ 2,650,535 $14,749,084
----------- ----------- ----------- ----------- -----------
Net
earnings ... $ 1,365,466 $ 1,029,156 $ 1,324,757 $ 63,134 $ 3,782,513
=========== =========== =========== =========== ===========
Earnings
per
share ...... $.28 $.21 $.27 $.01 $.77
==== ==== ==== ==== ====
F-16
Item 9. Changes in and Disagreements with Accountants
---------------------------------------------
on Accounting and Financial Disclosure
--------------------------------------
None.
PART III
--------
Item 10. Directors of the Registrant
---------------------------
The Company hereby incorporates by reference the applicable information
from its definitive proxy statement for its 1995 Annual Meeting of Shareholders.
Item 11. Executive Compensation
----------------------
The Company hereby incorporates by reference the applicable information
from its definitive proxy statement for its 1995 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The Company hereby incorporates by reference the applicable information
from its definitive proxy statement for its 1995 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The Company hereby incorporates by reference the applicable information
from its definitive proxy statement for its 1995 Annual Meeting of Shareholders.
11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
Page
----
(a)
1. Financial statements filed as a part of this report:
Independent Auditors' Report ............................... F-1
Consolidated Balance Sheets as of December 31,
1994 and 1993 ............................................ F-2 -- F-3
Consolidated Statements of Operations for Each
of the Three Years in the Period Ended
December 31, 1994 ........................................ F-4
Consolidated Statements of Stockholders' Equity
for Each of the Three Years in the Period
Ended December 31, 1994 .................................. F-5
Consolidated Statements of Cash Flows for Each
of the Three Years in the Period Ended
December 31, 1994 ........................................ F-6 -- F-7
Notes to Consolidated Financial Statements ................. F-8 -- F-15
Selected Quarterly Financial Data--Years Ended
December 31, 1994 and 1993 (Unaudited) ................... F-16
2. Financial statement schedules filed as part of
this report:
Schedule VIII: Valuation and Qualifying Accounts ........... S-1
All other schedules are omitted because they are
inapplicable, not required or the information is
included in the financial statements or notes
thereto.
(b)
3. Exhibits filed as part of this report.
Exhibit No.:
------------
3.1 Certificate of Incorporation, as amended -- Incorporated by
reference to Exhibit 3.1 of the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
3.2 By-laws, as amended, are hereby incorporated by reference to
Exhibit 4.2 of the Company's Registration Statement on Form S-2
(Registration No. 33-16703) filed with the Securities and Exchange
Commission on August 25, 1987.
10.1 Agency agreement dated October 1, 1988 between Bel Fuse Ltd. and
Rush Profit Ltd.
10.2 Contract dated March 16, 1990 between Accessorios Electronicos (Bel
Fuse Macau Ltd.) and the Government of Macau.
10.3 Loan agreement dated February 14, 1990 between Bel
Fuse, Ltd. (as lender) and Luen Fat Lee Electronic Factory (as
borrower). -- Incorporated by reference to Exhibit 10.9 of the
Company's Annual Report on Form 10-K for the year ended December
31, 1989.
12
Item 14. Exhibits. Financial Statement Schedules and Reports on
------------------------------------------------------
Form 8-K (Continued)
--------------------
Exhibit No. ___:
---------------
10.4 Lease dated April 15, 1990 between the Company's French subsidiary
(as lessee) and lessor. -- Incorporated by reference to Exhibit
10.9 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1990.
10.5 Lease dated March 20, 1992 between the Company's Central Coil
Company, Inc. subsidiary (as lessee) and lessor. -- Incorporated
by reference to Exhibit 10.12 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1991.
10.6 Stock Option Plan -- Incorporated by reference to Exhibit 28.1 of
the Company's Registration Statement on Form S-8 (Registration No.
33-53462) filed with the Securities and Exchange Commission on
October 20, 1992.
10.7 Contract for purchase of the new manufacturing and office space of
the Company's Macau subsidiary located in Macau, dated May 4, 1993
between Fundicio e Construciones Mecanicas (Macau) S.A.R.L.
(seller) and Accessorios Electronicos "Bel Fuse" Macau LDA (buyer)
-- Incorporated by reference to Exhibit 10-11 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
11.1 A statement regarding the computation of earnings per share is
omitted because such computation can be clearly determined from the
material contained in this Annual Report on Form 10-K.
22.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
(c) The Company did not file any reports or Form 8-K during the quarter ended
December 31, 1994.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
BEL FUSE, INC.
BY:/s/ DANIEL BERNSTEIN
---------------------------
Daniel Bernstein, President
Dated: March 29, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ ELLIOT BERNSTEIN
------------------------- Chairman of the Board March 29, 1995
Elliot Bernstein and Director (Principal
Executive Officer)
/s/ DANIEL BERNSTEIN
------------------------- President, (Principal March 29, 1995
Daniel Bernstein Financial and Account-
ing Officer) and
Director
------------------------- Director
Howard B. Bernstein
/s/ ROBERT H. SIMANDL
------------------------- Director March 29, 1995
Robert H. Simandl
/s/ DAVID OLSAN
------------------------- Director March 29, 1995
David Olsan
------------------------- Director
Peter Gilbert
14
BEL FUSE INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Schedule VIII
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
------------------------
(1) (2)
Charged Charged
Balance to to profit to other Balance
Beginning and loss accounts Deductions at close
of period or income (describe) (describe) of period
Description ---------- --------- ---------- ---------- ---------
-----------
Year ended December 31, 1994
Allowance for doubtful
accounts ................. $ 70,000 $ 16,175 $ -- $ 16,175(a) $ 70,000
========== ========== ======== ========== ========
Year ended December 31, 1993
Allowance for doubtful
accounts ................. $ 50,000 $ 20,000 $ -- -- $ 70,000
========== ========== ======== ========== ========
Year ended December 31, 1992
Allowance for doubtful
accounts ................. $ 50,000 $ 11,882 $ -- $ 11,882(a) $ 50,000
========== ========== ======== ========== ========
<FN>
----------
(a) Write-offs.
</FN>
S-1
Exhibit No.: Description
------------ -----------
3.1 Certificate of Incorporation, as amended -- Incorporated by
reference to Exhibit 3.1 of the Company's Annual Report on Form
10-K for the year ended December 31, 1992.
3.2 By-laws, as amended, are hereby incorporated by reference to
Exhibit 4.2 of the Company's Registration Statement on Form S-2
(Registration No. 33-16703) filed with the Securities and Exchange
Commission on August 25, 1987.
10.1 Agency agreement dated October 1, 1988 between Bel Fuse Ltd. and
Rush Profit Ltd.
10.2 Contract dated March 16, 1990 between Accessorios Electronicos (Bel
Fuse Macau Ltd.) and the Government of Macau.
10.3 Loan agreement dated February 14, 1990 between Bel
Fuse, Ltd. (as lender) and Luen Fat Lee Electronic Factory (as
borrower). -- Incorporated by reference to Exhibit 10.9 of the
Company's Annual Report on Form 10-K for the year ended December
31, 1989.
10.4 Lease dated April 15, 1990 between the Company's French subsidiary
(as lessee) and lessor. -- Incorporated by reference to Exhibit
10.9 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1990.
10.5 Lease dated March 20, 1992 between the Company's Central Coil
Company, Inc. subsidiary (as lessee) and lessor. -- Incorporated
by reference to Exhibit 10.12 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1991.
10.6 Stock Option Plan -- Incorporated by reference to Exhibit 28.1 of
the Company's Registration Statement on Form S-8 (Registration No.
33-53462) filed with the Securities and Exchange Commission on
October 20, 1992.
10.7 Contract for purchase of the new manufacturing and office space of
the Company's Macau subsidiary located in Macau, dated May 4, 1993
between Fundicio e Construciones Mecanicas (Macau) S.A.R.L.
(seller) and Accessorios Electronicos "Bel Fuse" Macau LDA (buyer)
-- Incorporated by reference to Exhibit 10-11 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
11.1 A statement regarding the computation of earnings per share is
omitted because such computation can be clearly determined from the
material contained in this Annual Report on Form 10-K.
22.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.