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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-11676
BEL FUSE INC.
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(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1463699
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(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
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(Address of principal executive office)
201-432-0463
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(Registrant's telephone number, including area code)
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(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 May 1, 1998, there were 5,162,070 shares of Common Stock, $.10 par
value, outstanding.
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<PAGE>
BEL FUSE INC.
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS .............................. 1
Consolidated Balance Sheets as of
March 31, 1998 (unaudited) and
December 31, 1997 ............................... 2 - 3
Consolidated Statements of Operations
and Comprehensive Income for the
Three Months Ended March 31, 1998 and
1997 (unaudited) ................................ 4
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1998 and 1997 (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 - 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ................................. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .................. 12
SIGNATURES ......................................................... 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that the following
consolidated financial statements be read in conjunction with the year-end
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
The results of operations for the three month period ended March 31, 1998,
are not necessarily indicative of the results to be expected for the entire
fiscal year or for any other period.
-1-
<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1998 1997
----------- -----------
Current Assets:
Cash and cash equivalents .................. $31,606,662 $29,231,967
Marketable securities ...................... 2,102,012 --
Accounts receivable, less allowance
for doubtful accounts of $238,000
and $227,000 .............................. 10,219,688 11,181,379
Inventories ................................ 10,646,926 12,202,938
Prepaid expenses and other current
assets .................................... 675,988 383,084
Deferred income taxes ...................... 402,000 421,000
----------- -----------
Total Current Assets .................. 55,653,276 53,420,368
Property, plant and equipment -- net ......... 29,243,011 29,052,354
Other assets ................................. 636,336 679,511
----------- -----------
TOTAL ASSETS .......................... $85,532,623 $83,152,233
=========== ===========
See notes to consolidated financial statements.
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1998 1997
----------- -----------
Current Liabilities:
Accounts payable ............................. $ 2,707,894 $ 3,467,897
Accrued expenses ............................. 5,669,607 5,660,411
Income taxes payable ......................... 101,964 237,515
----------- -----------
Total Current Liabilities ............... 8,479,465 9,365,823
Deferred income taxes .......................... 950,000 957,000
----------- -----------
Total Liabilities ....................... 9,429,465 10,322,823
----------- -----------
Commitments and Contingencies
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 5,147,420 and
5,121,920 shares (net of 2,145,539
treasury shares) ........................... 514,742 512,192
Additional paid-in capital ................... 7,849,078 7,525,753
Retained earnings ............................ 67,737,786 64,771,298
Cumulative currency translation
adjustment ................................. 1,552 20,167
----------- -----------
Total Stockholders' Equity .............. 76,103,158 72,829,410
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ............................... $85,532,623 $83,152,233
=========== ===========
See notes to consolidated financial statements.
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three Months Ended
March 31,
----------------------------
1998 1997
----------- -----------
Net sales ..................................... $19,514,700 $15,962,204
----------- -----------
Costs and Expenses:
Cost of sales ............................... 13,177,728 11,370,115
Selling, general and
administrative ............................ 3,387,482 3,093,309
----------- -----------
16,565,210 14,463,424
----------- -----------
Income from operations ........................ 2,949,490 1,498,780
Other income -- net ........................... 415,998 340,079
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Earnings before income taxes .................. 3,365,488 1,838,859
Income tax provision .......................... 399,000 529,000
----------- -----------
Net earnings .................................. $ 2,966,488 $ 1,309,859
=========== ===========
Earnings per common share -- basic ............ $ .58 $ .26
=========== ===========
Earnings per common share -- diluted .......... $ .56 $ .26
=========== ===========
Weighted average number of common
shares outstanding -- basic ................. 5,130,885 5,072,094
=========== ===========
-- diluted ............... 5,232,465 5,138,826
=========== ===========
Net earnings .................................. $ 2,966,488 $ 1,309,859
Other comprehensive income (expense),
net of income taxes:
Foreign currency translation .............. (18,615) 14,916
----------- -----------
Comprehensive income .......................... $ 2,947,873 $ 1,324,775
=========== ===========
See notes to consolidated financial statements.
-4-
<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
---------------------------
1998 1997
----------- -----------
Cash flows from operating activities:
Net income ................................... $ 2,966,488 $ 1,309,859
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization ............ 803,236 775,307
Other .................................... 68,000 62,000
Changes in operating assets and
liabilities ............................ 1,324,110 (1,133,907)
----------- -----------
Net Cash Provided by Operating
Activities ......................... 5,161,834 1,013,259
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment .................................. (1,008,036) (1,269,628)
Purchase of marketable securities ............ (2,102,012) (2,000,000)
Proceeds from sale of marketable
securities ................................. -- 633,410
Proceeds from repayment by contractor ........ 41,334 41,445
----------- -----------
Net Cash (Used in) Investing
Activities ......................... (3,068,714) (2,594,773)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options ...... 281,575 15,750
----------- -----------
Effect of exchange rate changes on
cash and cash equivalents .................... -- 14,906
----------- -----------
Net Increase (Decrease) in Cash ................ 2,374,695 (1,550,858)
Cash and Cash Equivalents -- beginning
of period .................................... 29,231,967 23,498,491
----------- -----------
Cash and Cash Equivalents -- end
of period .................................... $31,606,662 $21,947,633
=========== ===========
(Continued)
See notes to consolidated financial statements.
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Three Months Ended
March 31,
---------------------------
1998 1997
----------- -----------
Changes in operating assets and
liabilities consist of:
Decrease in accounts receivable ............ $ 950,691 $ 434,520
(Increase) decrease in inventories ......... 1,556,012 (1,402,863)
(Increase) in prepaid expenses and
other current assets ..................... (339,040) (95,731)
Decrease in other assets ................... 42,805 108,246
(Decrease) in accounts payable ............. (760,003) (559,174)
Increase in accrued expenses ............... 9,196 252,697
Increase (decrease) in income
taxes payable ............................ (135,551) 128,398
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$ 1,324,110 $(1,133,907)
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Supplementary information:
Cash paid during the period for:
Interest ................................... $ -- $ --
=========== ===========
Income taxes ............................... $ 182,000 $ 337,000
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See notes to consolidated financial statements.
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The consolidated balance sheet as of March 31, 1998, and the consolidated
statements of operations and comprehensive income and cash flows for the three
months ended March 31, 1998 and 1997 have been prepared by the Company and are
unaudited. In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and comprehensive income and cash flows for all
periods presented have been made. Certain items in the March 31, 1997 financial
statements have been reclassified to conform to March 31, 1998 classifications.
The information for December 31, 1997 was derived from audited financial
statements.
2. Earnings Per Share -- Basic earnings per common share are computed using the
weighted average number of common shares outstanding during the period. Diluted
earnings per common share are computed using the weighted average number of
common shares and common stock equivalent shares outstanding during the period.
Earnings per share for the quarter ended March 31, 1997 have been restated to
conform to the provisions of SFAS 128.
Three Months Ended
March 31,
-------------------------
1998 1997
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Basic:
Net earnings ................................... $2,966,488 $1,309,859
Weighted average shares outstanding .............. 5,130,885 5,072,094
Earnings per share -- basic ...................... $.58 $.26
Diluted:
Net earnings ................................... $2,966,438 $1,309,859
Weighted average shares outstanding .............. 5,130,885 5,072,094
Incremental shares under
stock option plans ........................... 101,580 66,732
---------- ----------
Adjusted weighted average shares
outstanding ..................................... 5,232,465 5,138,826
---------- ----------
Earnings per share -- diluted .................... $.56 $.26
========== ==========
3. Inventories consist of the following:
March 31, December 31,
1998 1997
----------- -----------
Raw materials ............................. $ 6,147,638 $ 7,029,632
Work-in-process ........................... 112,678 115,586
Finished goods ............................ 4,386,610 5,057,720
----------- -----------
$10,646,926 $12,202,938
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
4. Property, plant and equipment consists of the following:
March 31, December 31,
1998 1997
----------- -----------
Land ..................................... $ 835,218 $ 835,218
Buildings and improvements ............... 14,294,251 14,230,326
Machinery and equipment .................. 39,158,260 38,233,434
Idle property held for sale .............. 935,000 935,000
----------- -----------
55,222,729 54,233,978
Less accumulated
depreciation and
amortization ........................... 25,979,718 25,181,624
----------- -----------
Net Property, Plant and
Equipment .............................. $29,243,011 $29,052,354
=========== ===========
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
All statements in this Quarterly Report on Form 10-Q that are not
historical statements constitute forward-looking statements under the Private
Securities Litigation Reform Act of 1995. Actual results could vary materially
from such statements as a result of a number of factors, including the impact of
competitive developments, fluctuations in customer demand and in the timing of
customer orders, general economic conditions, and other risk factors referred to
in the 10-K.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items included in the Company's
consolidated statements of operations.
Percentage of Net Sales
-----------------------
Three Months Ended
March 31,
----------------------
1998 1997
------ ------
Net sales ...................................... 100.0% 100.0%
Cost of sales .................................. 67.5 71.2
Selling, general and
administrative expenses ...................... 17.4 19.4
Other income, net of interest
expense ...................................... 2.1 2.1
Earnings before income tax
provision .................................... 17.2 11.5
Income tax provision ........................... 2.0 3.3
Net earnings ................................... 15.2 8.2
The following table sets forth, for the periods indicated, the percentage
increase (decrease) of items included in the Company's consolidated statements
of operations.
Increase (Decrease)
From Prior Period
-------------------
Three Months Ended
March 31, 1998
compared with 1997
-------------------
Net sales .......................................... 22.3 %
Cost of sales ...................................... 15.9
Selling, general and
administrative expenses .......................... 9.5
Other income -- net ................................ 22.3
Earnings before income tax
provision ........................................ 83.0
Income tax provision ............................... (24.6)
Net earnings ....................................... 126.5
-9-
<PAGE>
SALES
Net sales increased 22.3% during the first three months of 1998 compared to
the first three months of 1997 from approximately $16.0 million to $19.5
million. The Company attributes this increase primarily to sales growth in
magnetic components and, to a lesser extent, fuse products, offset, in part, by
reduced sales of customer-specific value-added circuits and assemblies. Such
reduced sales reflect the completion of certain contracts. Sales growth
consisted primarily of growth in unit sales, including sales of certain new
products.
COST OF SALES
Cost of sales as a percentage of net sales decreased 3.7% during the first
three months of 1998 compared to the first three months of 1997, from 71.2% to
67.5%. The decrease in the cost of sales percentage is primarily attributable to
lower labor and overhead costs as a percentage of sales due to the increase in
sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The percentage relationship of selling, general and administrative expenses
to net sales decreased during the first three months of 1998 compared to the
first three months of 1997 from 19.4% to 17.4%. The Company attributes the
decrease primarily to increased sales. Selling, general and administrative
expenses increased in dollar amount by 9.5%. The Company attributes the increase
in dollar amount of such expenses primarily to increased sales volume and
increases in sales and marketing salaries and sales related expenses.
OTHER INCOME
Other income, consisting principally of interest earned on cash equivalents
and marketable securities, increased by approximately $76,000 during the first
three months of 1998 compared to the first three months of 1997. The increase is
primarily due to higher earnings on invested funds due to greater average
balances in 1998 compared to 1997.
PROVISION FOR INCOME TAXES
The provision for income taxes for the first three months of 1998 versus
1997 was $399,000 as compared to $529,000. The decrease in the provision is due
primarily to lower foreign income tax rates and lower United States earnings
before income taxes in 1998 versus 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its capital expenditures primarily
through cash flows from operating activities. Management believes that the cash
flow from operations, combined with its existing capital base and the Company's
available lines of credit, will be sufficient to fund its operations for the
near term.
The Company has lines of credit, all of which were unused at March 31,
1998, in the aggregate amount of $7.0 million, of which $5.0 million is from
domestic banks and $2.0 million is from foreign banks.
During 1998, the Company's cash increased by $2.4 million, reflecting $5.2
million provided by operating activities and $.3 million from proceeds from the
exercise of stock options, offset, in part, by $2.1 million in purchases of
marketable securities and $1.0 million in purchases of plant and equipment.
-10-
<PAGE>
Cash, marketable securities and accounts receivable comprised 51.4% and
48.6% of the Company's total assets at March 31, 1998 and December 31, 1997,
respectively. The Company's working capital ratio (i.e., the ratio of current
assets to current liabilities) was 6.6 to 1 at March 31, 1998 and 5.7 to 1 at
December 31, 1997, respectively.
-11-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Item 3 of the Company's Form 10-K for the year ended December 31,
1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Exhibit 27.1 Financial Data Schedule.
(b) There were no current reports on Form 8-K filed by the registrant
during the quarter ended March 31, 1998.
-12-
<PAGE>
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: May 12, 1998
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BEL FUSE
INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AT MARCH 31, 1998 AND THE THREE
MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 31,606,662
<SECURITIES> 2,102,012
<RECEIVABLES> 10,457,688
<ALLOWANCES> 238,000
<INVENTORY> 10,646,926
<CURRENT-ASSETS> 55,653,276
<PP&E> 55,222,729
<DEPRECIATION> 25,979,710
<TOTAL-ASSETS> 85,532,623
<CURRENT-LIABILITIES> 8,479,465
<BONDS> 0
<COMMON> 514,742
0
0
<OTHER-SE> 75,588,416
<TOTAL-LIABILITY-AND-EQUITY> 85,532,623
<SALES> 19,514,700
<TOTAL-REVENUES> 19,514,700
<CGS> 13,177,728
<TOTAL-COSTS> 16,565,210
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,365,488
<INCOME-TAX> 399,000
<INCOME-CONTINUING> 2,966,488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,966,488
<EPS-PRIMARY> .58
<EPS-DILUTED> .56
</TABLE>
