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, 1995
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, 1995, there were 5,019,070 shares of 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, 1995 (unaudited) and
December 31, 1994 ..................................... 2 - 3
Consolidated Statements of Opera-
tions for the Six Months and Three
Months Ended June 30, 1995 and
1994 (unaudited) ...................................... 4
Consolidated Statements of
Cash Flows for the Six Months Ended
June 30, 1995 and 1994 (unaudited) .................... 5 - 6
Notes to Consolidated Financial
Statements (unaudited) ................................ 7 - 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations ......................................... 9 - 13
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders ........................................ 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, although the registrant believes that the
disclosures are adequate to insure that the information presented is not
misleading. 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, 1994.
The results of operations for the three and six month periods ended June
30, 1995, are not necessarily indicative of the results to be expected for the
entire fiscal year or for any other period.
-1-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1995 1994
---------- ------------
(unaudited)
Current Assets:
Cash and equivalents ........................... $ 2,694,924 $ 2,842,894
Marketable securities .......................... 6,885,314 7,508,304
Accounts receivable, less allowance
for doubtful accounts of $82,000 and $70,000.. 11,091,587 8,079,971
Inventories .................................... 9,778,309 8,766,203
Prepaid expenses and other current assets ...... 425,435 959,764
----------- -----------
Total Current Assets .................... 30,875,569 28,157,136
----------- -----------
Property, plant and equipment--net ............... 26,543,173 22,226,076
Unamortized excess of cost over fair
value of assets acquired ....................... 156,582 166,925
Other assets ..................................... 1,055,019 1,102,898
----------- -----------
TOTAL ASSETS ............................ $58,630,343 $51,653,035
=========== ===========
(Continued)
See notes to consolidated financial statements.
-2-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1995 1994
------------ ------------
(unaudited)
Current Liabilities:
Note payable ................................ $ -- $ 300,000
Accounts payable ............................ 4,257,157 3,171,408
Accrued expenses ............................ 3,205,173 1,987,536
Income taxes payable ........................ 191,844 --
Deferred income taxes ....................... 321,000 28,000
------------ ------------
Total Current Liabilities .............. 7,975,174 5,486,944
Deferred income taxes ........................... 326,000 240,000
------------ ------------
Total Liabilities ...................... 8,301,174 5,726,944
------------ ------------
Stockholders' Equity:
Preferred stock, no par value--
authorized 1,000,000 shares;
none issued ................................ -- --
Common stock, par value $.10 per
share-- authorized 10,000,000
shares; outstanding 5,017,820 and
4,965,195 shares ........................... 501,782 496,520
Additional paid-in capital ................... 6,500,575 6,288,987
Retained earnings ............................ 42,987,538 40,017,231
Net unrealized gain (loss) on
marketable securities ...................... 339,274 (876,647)
------------ ------------
Total Stockholders' Equity ............. 50,329,169 45,926,091
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ................................ $ 58,630,343 $ 51,653,035
============ ============
See notes to consolidated financial statements.
-3-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------- ---------------------------------
1995 1994 1995 1994
----------- ----------- ---------- -----------
Sales ......................................... $33,960,253 $19,534,290 $18,110,282 $10,110,328
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales ............................... 25,027,402 16,077,646 13,389,470 8,322,507
Selling, general and administrative
expenses .................................. 5,770,437 6,660,987 3,089,462 4,123,378
----------- ----------- ----------- -----------
30,797,839 22,738,633 16,478,932 12,445,885
----------- ----------- ----------- -----------
Income (loss) from operations ................. 3,162,414 (3,204,343) 1,631,350 (2,335,557)
Other income--net ............................. 115,004 342,436 63,609 169,739
Interest expense .............................. 3,111 471 224 68
----------- ----------- ----------- -----------
Earnings (loss) before income taxes ........... 3,274,307 (2,862,378) 1,694,735 (2,165,886)
Income tax provision .......................... 304,000 10,000 198,000 41,000
----------- ----------- ----------- -----------
Net earnings (loss) ........................... $ 2,970,307 $(2,872,378) $ 1,496,735 $(2,206,886)
=========== =========== =========== ===========
Earnings (loss) per common share .............. $.60 $(.58) $.30 $(.45)
==== ===== ==== =====
Weighted average number of common
shares outstanding .......................... 4,981,293 4,938,816 4,992,864 4,941,777
=========== =========== =========== ===========
See notes to consolidated financial statements.
-4-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
---------------------------------
1995 1994
----------- ------------
Cash flows from operating activities:
Net income (loss) .......................................... $ 2,970,307 $(2,872,378)
Adjustments to reconcile net income
(loss) to net cash provided from
operating activities:
Depreciation and amortization ............................ 1,345,912 1,113,017
Deferred income taxes .................................... 86,000 (154,000)
Bad debt reserve ......................................... 12,000 --
Inventory obsolescence reserve ........................... 180,000 --
Net (gain) loss on sale of
marketable securities .................................. 95,086 6,236
Changes in operating assets and liabilities .............. (1,480,784) 92,501
----------- -----------
Net Cash Provided by Operating Activities .............. 3,208,521 (1,814,624)
----------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment ................... (5,652,667) (3,025,439)
Purchase of marketable securities ........................... -- (2,598,034)
Proceeds from sale of marketable securities ................. 2,364,826 1,956,836
Proceeds from repayment by contractor ....................... 14,500 14,500
----------- -----------
Net Cash (used in) Investing Activities ................ (3,273,341) (3,652,137)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options ..................... 216,850 26,025
Repayment of borrowings ..................................... (300,000) (2,331)
----------- -----------
Net Cash Provided by (used in)
Financing Activities ................................. (83,150) 23,694
----------- -----------
Net Decrease in Cash and Cash Equivalents ..................... (147,970) (5,443,067)
Cash and Cash Equivalents--Beginning of Period ................ 2,842,894 8,102,768
----------- -----------
Cash and Cash Equivalents--End of Period ...................... $ 2,694,924 $ 2,659,701
=========== ===========
(Continued)
See notes to consolidated financial statements.
-5-
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(unaudited)
Six Months Ended
June 30,
-------------------------------
1995 1994
----------- --------
Changes in operating assets and liabilities consist of:
(Increase) decrease in accounts receivable ...................... $(3,035,616) $ 141,424
(Increase) decrease in inventories .............................. (1,192,106) 389,554
(Increase) decrease in prepaid expenses and other
current assets ................................................ 519,829 (332,391)
Decrease in refundable income taxes ............................. -- 12,000
Increase (decrease) in other assets ............................. 47,879 (206,100)
Increase (decrease) in accounts payable ......................... 1,085,749 (39,869)
Increase in accrued expenses .................................... 901,637 615,514
Increase (decrease) in income taxes payable ..................... 191,844 (487,631)
----------- ---------
$(1,480,784) $ 92,501
=========== =========
Supplementary information:
Cash paid during the period for:
Interest ........................................................ $ 3,111 $ 471
=========== =========
Income taxes .................................................... $ 13,000 $ 639,000
=========== =========
Supplemental disclosures of non-cash activities:
Unrealized gains (losses) on marketable securities ............. $ 1,215,921 $(414,000)
=========== =========
Investment advisory fee ........................................ $ 316,000 $ --
=========== =========
See notes to consolidated financial statements.
-6-
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The consolidated balance sheet as of June 30, 1995, and the consolidated
statements of operations and cash flows for the six months ended June 30, 1995
and 1994 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
cash flows for all periods presented have been made. Certain items in the June
30, 1994 financial statements have been reclassified to conform to June 30, 1995
classifications.
2. Earnings (Loss) Per Share--Earnings (loss) per common share are computed
using the weighted average number of common shares outstanding during the
period. The dilutive effect of outstanding options at June 30, 1995 was not
material and were not considered at June 30, 1994 as their effect is
antidilutive.
3. Inventories consist of the following:
June 30, 1995 December 31, 1994
------------- -----------------
Raw materials .................. $7,027,485 $ 6,552,826
Work-in-process ................ 333,761 35,897
Finished goods ................. 2,417,063 2,177,480
---------- -----------
$9,778,309 $ 8,766,203
========== ===========
4. Property, plant and equipment consists of the following:
June 30, 1995 December 31, 1994
------------- -----------------
Land ........................... $ 686,987 $ 686,987
Buildings and improvements ..... 13,779,836 10,121,169
Machinery and equipment ........ 28,998,661 27,004,662
Idle property held for sale .... 935,000 935,000
----------- -----------
44,400,484 38,747,818
Less accumulated depreciation
and amortization ............. 17,857,311 16,521,742
----------- -----------
Net property, plant and
equipment .................... $26,543,173 $22,226,076
=========== ===========
-7-
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
5. INCOME TAXES
Financial Accounting Standards Board Statement No. 109, "Accounting for
Income Taxes" (SFAS 109), provides for the recognition of deferred assets
subject to a valuation allowance. At December 31, 1994, the Company established
a valuation allowance equal to the full amount of the tax effect of the net
operating loss carryforward. For the six months ended June 30, 1995 and 1994,
the Company recognized approximately $208,000 and $-0-, respectively as a
reduction of United States and Far East tax expense.
-8-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
a. 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 and the percentage increase for such
items.
Percentage of Net Sales
--------------------------------------
Six Months Ended Three Months Ended
June 30, June 30,
------------------- -----------------
1995 1994 1995 1994
-------- -------- -------- ------
Net sales .......................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ...................... 73.7 82.3 73.9 82.3
Selling, general and
administrative expenses ........... 17.0 34.1 17.1 40.8
Other income, net of
interest expense .................. .3 1.7 .4 1.7
Earnings (loss) before
income tax provision .............. 9.6 (14.7) 9.4 (21.4)
Income tax provision ............... .9 -- 1.1 .4
Net earnings (loss) ................ 8.7 (14.7) 8.3 (21.8)
The following table sets forth, for the periods indicated, the
percentage increase or 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, 1995 June 30, 1995
compared with 1994 compared with 1994
------------------ --------------------
Net sales .......................... 73.8% 79.1%
Cost of sales ...................... 55.7 60.9
Selling, general and
administrative expenses ........... (13.4) (25.1)
Other income--net .................. (66.4) (62.6)
Earnings (loss) before
income tax provision .............. 214.4 178.2
Income tax provision ............... * 382.9
Net earnings (loss) ................ 203.4 167.8
- --------------------
* Percentage not meaningful
-9-
Six Months 1995 vs. Six Months 1994
- -----------------------------------
Sales
-----
Net sales increased 73.8% from $19,534,290 during the first six months of
1994 to $33,960,253 during the first six months of 1995. The Company attributes
this increase primarily to increases in sales of packaged modules and
transformers.
Cost of Sales
-------------
Cost of sales as a percentage of net sales decreased 8.6% from 82.3% during
the first six months of 1994 to 73.7% during the first six months of 1995. The
decrease in the cost of sales percentage is primarily attributable to increased
sales, which resulted in better absorption of labor and overhead despite higher
material costs associated with the manufacture of packaged modules, and the move
to lower cost manufacturing facilities in the Far East.
Selling, General and Administrative Expenses
--------------------------------------------
The percentage relationship of selling, general and administrative expenses
to net sales decreased from 34.1% for the first six months of 1994 to 17.0% for
the first six months of 1995. The Company attributes the decrease primarily to
the decrease in the absolute dollar amount of such expenses and to the increase
in sales. Selling, general and administrative expenses decreased in dollar
amount by 13.4%. The Company attributes the decrease in the dollar amount of
such expenses primarily to a $1,190,000 charge related to severance costs and
moving expenses associated with a certain subsidiary's move to lower cost
production facilities during the first six months of 1994, offset in part by
increases in commissions and other sales related expenses due to higher sales
and the write off of certain expenses related to the unrealized acquisition of
Pulse Engineering, Inc. during the first six months of 1995.
Other Income and Expenses
-------------------------
Other income, consisting of earnings on cash equivalents and marketable
securities offset by net realized losses on the sale of marketable securities,
decreased by approximately $227,000 from the first six months of 1994 to the
first six months of 1995. This decrease is primarily due to the Company's and
its Far East subsidiary's realizing approximately $95,000 of losses from the
sale of marketable securities during the first six months of 1995, lower
earnings on invested funds due to lower average balances, and certain non-income
generating securities owned in 1995.
Provision for Income Taxes
--------------------------
The provision for income taxes increased from $10,000 for the first six
months of 1994 to $304,000 for the first six months of 1995. The Company
attributes this change primarily to the earnings before income tax for the first
six months of 1995 versus the loss before income tax during the first six months
of 1994. The utilization of the United States and Far East net operating loss
carryforward in 1995 reduced income taxes by approximately $208,000 and had no
impact in 1994.
-10-
Provision for Income Taxes (Continued)
--------------------------------------
The Company's effective tax rate has been lower than the statutory United
States corporate rate primarily as a result of the lower tax rates in Hong Kong
and Macau and the utilization of tax benefits arising from the operating loss
carryforward in the United States and the Far East.
Three Months 1995 vs. Three Months 1994
- ---------------------------------------
Sales
-----
Net sales increased 79.1% from $10,110,328 during the second quarter of
1994 to $18,110,282 during the second quarter of 1995. The Company attributes
this increase primarily to those reasons set forth in the six month analysis.
Cost of Sales
-------------
Cost of sales as a percentage of net sales decreased 8.4% from 82.3% during
the second quarter of 1994 to 73.9% during the second quarter of 1995. The
Company attributes this decrease primarily to those 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 23.7% from the second quarter of 1994 to the second
quarter of 1995 and selling, general and administrative expenses decreased in
dollar amount by 25.1%. The Company attributes these decreases to those reasons
set forth in the six month analysis.
Other Income and Expenses
-------------------------
Other income for the second quarter of 1995 compared to the second quarter
of 1994 decreased in dollar amount by 62.6% due to those reasons set forth in
the six month analysis.
Provision for Income Taxes
--------------------------
The provision for income taxes increased from $41,000 for the second
quarter of 1994 to $198,000 for the second quarter of 1995 due primarily to
those reasons set forth in the six month analysis.
-11-
Liquidity and Capital Resources
-------------------------------
Historically, the Company has financed its capital expenditures through
operating cash flows. 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 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.
The Company has lines of credit, all of which were unused at June 30, 1995,
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.
From October 3, 1994 through November 8, 1994, the Company acquired in the
market 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.
On April 19, 1995 the Company proposed, subject to a definitive merger
agreement, to acquire all of Pulse's common stock. The Company's offer involved
the issuance of stock (0.73 shares of the Company's Common Stock for each Pulse
share) and contingent value rights (assuring that such 0.73 share interest would
produce at least $8.00 of value within three years) and the partial spin-off of
certain assets associated with Pulse's Spectrum business.
On July 20, 1995, Pulse announced that its Board of Directors had accepted
a revised offer from Technitrol, Inc. ("Technitrol"), to acquire all of Pulse's
outstanding common stock at a per share price of $4.25 per share in cash plus
.2906 shares of Technitrol common stock, subject to certain adjustments. Pulse
and Technitrol have signed a definitive agreement, although that transaction has
not closed.
As of the date hereof, the Company had made no decision regarding the steps
that it may take with respect to its Pulse shares.
During June, 1995, the Company's Far East subsidiary acquired 22,000 square
feet of additional production facilities for approximately $3,200,000 in cash.
The Company estimates that approximately $195,000 will be required to refurbish
the facility.
During the first six months of 1995, the Company's cash and cash equivalent
position declined by $148,000, principally reflecting $5.7 million in purchases
of fixed assets (including the above mentioned production facilities) and
repayment of $300,000 of long-term debt, offset by $3.2 million provided by
operating activities, the proceeds of approximately $2.4 million from the sale
of marketable securities and $217,000 from the exercise of stock options.
-12-
Liquidity and Capital Resources (Continued)
-------------------------------------------
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 the first six
months of 1995 or 1994.
The Company's shareholders' equity increased by $4.4 million from December
31, 1994 to June 30, 1995, reflecting the Company's first six months profit of
$3.0 million, a reduction of the net unrealized loss on marketable securities of
$1.2 million and the exercise of incentive stock options.
Cash, accounts receivable and marketable securities comprised approximately
35.3% and 35.7% of the Company's total assets at June 30, 1995 and December 31,
1994, respectively. The Company's current ratio (i.e., the ratio of current
assets to current liabilities) was 3.9 to 1 and 5.1 to 1 at June 30, 1995 and
December 31, 1994, respectively.
-13-
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's annual meeting of security holders was held on
May 25, 1995. At the meeting, the Board's nominees were elected
to the Board of Directors for a term of three years. The votes
were cast as follows:
Daniel Bernstein: 4,112,100 votes for, 38,059 withheld
David Olsan: 4,106,490 votes for, 43,669 withheld
There were -0- abstentions and -0- broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: None
(b) There were no Current Reports on Form 8-K filed by the
registrant during the quarter ended June 30, 1995.
-14-
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 11, 1995
-15-