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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 EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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.
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(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
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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 November 1, 1998, there were 2,601,428 shares of Class A Common Stock,
$.10 par value, outstanding and 2,601,427 shares of Class B 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
September 30, 1998 (unaudited) and
December 31, 1997 ................................. 2 - 3
Consolidated Statements of Operations
and Comprehensive Income
for the Nine Months and Three
Months Ended September 30, 1998
and 1997 (unaudited) .............................. 4 - 5
Consolidated Statements of
Cash Flows for the Nine Months
Ended September 30, 1998 and 1997
(unaudited) ....................................... 6 - 7
Notes to Consolidated Financial
Statements (unaudited) ............................ 8 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 11 - 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................. 17
Item 2. Changes in Securities and Use of Proceeds .......... 17
Item 4. Submission of Matters to a Vote of Security Holders . 17
Item 6. Exhibits and Reports on Form 8-K .................... 17
Signatures ....................................................... 18
<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 nine month period ended September 30,
1998 are not necessarily indicative of the results to be expected for the entire
fiscal year or for any other period.
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1998 1997
----------- -----------
(Unaudited)
Current Assets:
Cash and cash equivalents .................. $41,108,173 $29,231,967
Marketable securities ...................... 1,830,183 --
Accounts receivable, less allowance
for doubtful accounts of $238,000
and $227,000 ............................. 13,049,441 11,181,379
Inventories ................................ 9,610,761 12,202,938
Prepaid expenses and other current
assets .................................... 597,726 383,084
Deferred income taxes ...................... 296,000 421,000
----------- -----------
Total Current Assets .................. 66,492,284 53,420,368
Property, plant and equipment -- net ........... 29,527,023 29,052,354
Other assets ................................... 531,675 679,511
----------- -----------
TOTAL ASSETS .......................... $96,550,982 $83,152,233
=========== ===========
(Continued)
See notes to consolidated financial statements.
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1998 1997
----------- -----------
(Unaudited)
Current Liabilities:
Accounts payable ............................ $ 3,911,164 $ 3,467,897
Accrued expenses ............................ 7,650,358 5,660,411
Income taxes payable ........................ 514,963 237,515
------------ ------------
Total Current Liabilities .............. 12,076,485 9,365,823
Deferred income taxes ........................... 1,024,000 957,000
------------ ------------
Total Liabilities ...................... 13,100,485 10,322,823
------------ ------------
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 5,121,920
shares (net of 2,145,539
treasury shares) ............................ -- 512,192
Class A common stock, par value
$.10 per share -- authorized
10,000,000 shares; outstanding
2,601,248 shares (net of
1,072,770 treasury shares) .................. 260,125 --
Class B common stock, par value
$.10 per share -- authorized
10,000,000 shares; outstanding
2,601,247 shares (net of
1,072,770 treasury shares) .................. 260,124 --
Additional paid-in capital .................... 8,502,083 7,525,753
Retained earnings ............................. 74,428,252 64,771,298
Cumulative currency translation
adjustment .................................. (87) 20,167
------------ ------------
Total Stockholders' Equity ............. 83,450,497 72,829,410
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ................................ $ 96,550,982 $ 83,152,233
============ ============
See notes to consolidated financial statements.
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<PAGE>
<TABLE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales .................................... $60,195,036 $53,119,948 $21,148,681 $18,409,054
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales ............................ 39,616,162 37,165,097 13,591,527 12,687,080
Selling, general and
administrative expenses ................. 10,886,493 9,894,632 3,852,983 3,391,348
----------- ----------- ----------- -----------
50,502,655 47,059,729 17,444,510 16,078,428
----------- ----------- ----------- -----------
Income from operations ....................... 9,692,381 6,060,219 3,704,171 2,330,626
Other income -- net .......................... 1,441,573 1,045,245 547,590 363,217
----------- ----------- ----------- -----------
Earnings before income taxes ................. 11,133,954 7,105,464 4,251,761 2,693,843
Income tax provision ......................... 1,477,000 1,488,000 600,000 519,000
----------- ----------- ----------- -----------
Net earnings ................................. $ 9,656,954 $ 5,617,464 $ 3,651,761 $ 2,174,843
=========== =========== =========== ===========
Earnings per common share--basic ............. $ 1.87 $ 1.11 $ .70 $ .43
=========== =========== =========== ===========
Earnings per common share--diluted ........... $ 1.85 $ 1.09 $ .70 $ .42
=========== =========== =========== ===========
Weighted average number of
common shares outstanding--basic ........... 5,172,873 5,078,135 5,202,078 5,089,495
=========== =========== =========== ===========
Weighted average number of
common shares outstanding--diluted ......... 5,222,696 5,154,649 5,222,378 5,151,278
=========== =========== =========== ===========
(Continued)
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited) (Continued)
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------- -----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings ................................. $ 9,656,954 $ 5,617,464 $ 3,651,761 $ 2,174,843
Other comprehensive income
(expense), net of income
taxes:
Foreign currency
translation adjustment ................. (20,254) 22,166 (128) 6,790
----------- ----------- ----------- -----------
Comprehensive income ......................... $ 9,636,700 $ 5,639,630 $ 3,651,633 $ 2,181,633
=========== =========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
---------------------------
1998 1997
----------- -----------
Cash flows from operating activities:
Net income ................................. $ 9,656,954 $ 5,617,464
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ........... 2,547,636 2,494,566
Other ................................... 351,530 365,570
Changes in operating assets and
liabilities ........................... 3,216,730 (2,838,361)
----------- -----------
Net Cash Provided by Operating
Activities ........................ 15,772,850 5,639,239
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment ................................ (3,026,344) (5,223,321)
Purchase of marketable securities .......... (2,830,415) (3,470,829)
Proceeds from sale of marketable
securities ............................... 1,000,000 3,982,450
Proceeds from repayment by contractors ..... 124,728 125,684
----------- -----------
Net Cash (Used in) Investing
Activities ......................... (4,732,031) (4,586,016)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options .... 835,387 319,712
----------- -----------
Net increase in Cash ......................... 11,876,206 1,372,935
Cash and Cash Equivalents --
beginning of period ........................ 29,231,967 23,498,491
----------- -----------
Cash and Cash Equivalents --
end of period .............................. $41,108,173 $24,871,426
=========== ===========
(Continued)
See notes to consolidated financial statements.
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(unaudited)
Nine Months Ended
September 30,
---------------------------
1998 1997
----------- -----------
Changes in operating assets and
liabilities consist of:
(Increase) in accounts receivable ........ $(1,879,062) $ (937,423)
(Increase) decrease in inventories ....... 2,592,177 (3,299,219)
(Increase) in prepaid expenses and
other current assets ................... (344,172) (275,062)
Decrease in other assets ................. 137,124 249,059
Increase (decrease) in accounts payable .. 443,267 (413,355)
Increase in accrued expenses ............. 1,989,948 1,507,160
Increase in income taxes payable ......... 277,448 330,479
----------- -----------
$ 3,216,730 $(2,838,361)
=========== ===========
Supplementary information:
Cash paid during the period for:
Interest ................................. $ -- $ --
=========== ===========
Income taxes ............................. $ 555,000 $ 787,941
=========== ===========
See notes to consolidated financial statements.
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<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of September 30, 1998, and the consolidated
statements of operations and comprehensive income and cash flows for the periods
presented herein have been prepared by the Company and are unaudited. In the
opinion of management, all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and comprehensive income and cash flows for all periods presented
have been made. Certain items in the September 30, 1997 financial statements
have been reclassified to conform to September 30, 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 September 30, 1997 have been restated
to conform to the provisions of SFAS 128.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
---------------------------- ----------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic:
Net earnings ............... $9,656,954 $5,617,464 $3,651,761 $2,174,843
Weighted average
shares outstanding .......... 5,172,873 5,078,135 5,202,078 5,089,495
Earnings per share--
basic ...................... $ 1.87 $ 1.11 $ .70 $ .43
Diluted:
Net earnings ............... $9,656,954 $5,617,464 $3,651,761 $2,174,843
Weighted average
shares outstanding ......... 5,172,873 5,078,135 5,202,078 5,089,495
Incremental shares
under stock
option plan ................ 49,823 76,514 20,300 61,783
---------- ---------- ---------- ----------
Adjusted weighted
average shares
outstanding ................ 5,222,696 5,154,649 5,222,378 5,151,278
========== ========== ========== ==========
Earnings per share--
diluted .................... $ 1.85 $ 1.09 $ .70 $ .42
</TABLE>
-8-
<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Inventories consist of the following:
September 30, 1998 December 31, 1997
------------------ -----------------
Raw materials ..................... $5,516,381 $ 7,029,632
Work-in-process ................... 157,567 115,586
Finished goods .................... 3,936,813 5,057,720
---------- -----------
$9,610,761 $12,202,938
========== ===========
4. Property, plant and equipment consists of the following:
September 30, 1998 December 31, 1997
------------------ -----------------
Land .............................. $ 835,218 $ 835,218
Buildings and improvements ........ 14,294,251 14,230,326
Machinery and equipment ........... 41,176,300 38,233,434
Idle property held for sale ....... 935,000 935,000
----------- -----------
57,240,769 54,233,978
Less accumulated
depreciation and
amortization .................... 27,713,746 25,181,624
----------- -----------
Net property, plant and
equipment ....................... $29,527,023 $29,052,354
=========== ===========
5. Common Stock
On July 9, 1998, the shareholders approved an amendment to Article VI of
the Company's Certificate of Incorporation that (i) authorized a new voting
Class A Common Stock, par value $.10 per share, and a new non-voting Class B
Common Stock, par value $.10 per share, (ii) increased the authorized number of
shares of common stock from 10,000,000 to 20,000,000, consisting of 10,000,000
shares of Class A Common Stock and 10,000,000 shares of Class B Common Stock,
(iii) established the rights, powers and limitations of the Class A Common Stock
and the Class B Common Stock, and (iv) reclassified each share of the Company's
issued Common Stock, par value $.10 per share, as one-half share of Class A
Common Stock and one-half share of Class B Common Stock.
-9-
<PAGE>
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. New Accounting Pronouncements
SEGMENT INFORMATION -- During June 1997, the Financial Standards Board
issued Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This statement requires the
disclosure of financial and descriptive information about reportable operating
segments. Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly in
deciding how to allocate resources and in assessing performance. The Company has
not yet completed its evaluation of this Statement. This Statement is effective
for the Company's 1998 year end financial statements.
7. Subsequent Events
On October 2, 1998, the Company signed a definitive agreement to acquire
the manufacturing assets, primarily consisting of inventory and fixed assets, of
Lucent Technologies, Inc.'s ("Lucent") Power Systems Signal Transformer product
line in exchange for approximately $30 million in cash. Under the terms of the
agreement, the Company, among other things, will continue to supply Lucent's
signal transformer magnetics requirements for forty-two months, as defined. It
is the Company's intention to move the majority of the manufacturing operations
to facilities in the Republic of China and to maintain a small manufacturing
facility in Texas.
The Company filed a Form 8-K on October 19, 1998 describing this
transaction and will file an amended Form 8-K with the required financial
statements and pro forma information on or about December 15, 1998.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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
-----------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- -----------------
1998 1997 1998 1997
------ ------ ------ ------
Net sales .......................... 100.0% 100.0% 100.0% 100.0%
Cost of sales ...................... 65.8 70.0 64.3 68.9
Selling, general and
administrative expenses .......... 18.1 18.6 18.2 18.4
Other income, net of
interest expense ................. 2.4 2.0 2.6 2.0
Earnings before income
tax provision .................... 18.5 13.4 20.1 14.6
Income tax provision ............... 2.5 2.8 2.8 2.8
Net earnings ....................... 16.0 10.6 17.3 11.8
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
----------------------------------------
Nine Months Ended Three Months Ended
September 30, 1998 September 30, 1998
compared with 1997 compared with 1997
------------------ ------------------
Net sales ........................ 13.3% 14.9%
Cost of sales .................... 6.6 7.1
Selling, general and
administrative
expenses ....................... 10.0 13.6
Other income -- net .............. 37.9 50.8
Earnings before
income tax provision ........... 56.7 57.8
Income tax provision ............. (.7) 15.6
Net earnings ..................... 71.9 67.9
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<PAGE>
NINE MONTHS 1998 VS. NINE MONTHS 1997
NET SALES
Net sales increased 13.3% from $53,119,948 during the first nine months of
1997 to $60,195,036 during the first nine months of 1998. The Company attributes
this increase primarily to sales growth of network magnetic products offset, in
part, by reduced sales of value added products. 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 4.2% to 65.8% during
the first nine months of 1998 from 70.0% during the first nine months of 1997.
The decrease in the cost of sales percentage is primarily attributable to lower
overhead and labor costs principally due to higher sales volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The percentage relationship of selling, general and administrative
expenses to net sales decreased from 18.6% for the first nine months of 1997 to
18.1% for the first nine months of 1998. The Company attributes the percentage
decrease primarily to increased sales. Selling, general and administrative
expenses increased in dollar amount by 10.0%. The Company attributes the
increase in dollar amount of such expenses primarily to increases in sales and
marketing salaries and sales related expenses.
OTHER INCOME AND EXPENSES
Other income, consisting principally of interest earned on cash equivalents
and marketable securities, increased by approximately $397,000 during the first
nine months of 1998 compared to the first nine 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 nine months of 1997 was
$1,488,000 as compared to $1,477,000 for the first nine months of 1998. The
decrease in the provision is due primarily to lower foreign income tax rates
offset in part by higher United States earnings before income taxes in 1998
versus 1997.
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<PAGE>
THREE MONTHS 1998 VS. THREE MONTHS 1997
SALES
Sales increased 14.9% to $21,148,681 during the third quarter of 1998 from
$18,409,054 during the third quarter of 1997. The Company attributes the
increase primarily to the reasons set forth in the nine month analysis.
COST OF SALES
Cost of sales as a percentage of net sales decreased 4.6% to 64.3% during
the third quarter of 1998 from 68.9% during the third quarter of 1997. The
Company attributes the decrease primarily to the reasons set forth in the nine
month analysis.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The percentage relationship of selling, general and administrative expenses
to net sales remained relatively constant during the third quarter of 1998 as
compared to 1997. Selling, general and administrative expenses increased in
dollar amount by approximately $462,000. The Company attributes the increase in
dollar amount to the reasons set forth in the nine month analysis.
OTHER INCOME AND EXPENSE
Other income increased for the third quarter of 1998 compared to the third
quarter of 1997 due to those reasons set forth in the nine month analysis.
PROVISION FOR INCOME TAXES
The provision for income taxes increased to $600,000 for the third quarter
of 1998 from $519,000 for the third quarter of 1997. The increase in the
provision is due primarily to higher United States earnings before income taxes
offset in part by lower foreign income tax rates in the third quarter of 1998
versus 1997.
-13-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its capital expenditures through
cash flows from operating activities. Management believes that the cash flow
from operations, combined with its existing capital base and the Company's
available lines of credit, will be sufficient to fund its operations for the
near term. This statement represents a forward-looking statement. Actual results
could differ materially from such statement if the Company experiences
substantial unanticipated cash requirements.
The Company has lines of credit, all of which were unused at September 30,
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.
On October 2, 1998, the Company signed a definitive agreement to acquire
the manufacturing assets, primarily consisting of inventory and fixed assets, of
Lucent Technologies, Inc.'s ("Lucent") Power Systems Signal Transformer product
line in exchange for $30 million in cash. Under the terms of the agreement, the
Company, among other things, will continue to supply Lucent's signal transformer
magnetics requirements for forty-two months, as defined. It is the Company's
intention to move the majority of the manufacturing operations to facilities in
the Republic of China and to maintain a small manufacturing facility in Texas.
During the first nine months of 1998, the Company's cash and cash
equivalents and marketable securities increased by $13.7 million, reflecting
$15.8 million provided by operating activities and $.8 million from the exercise
of stock options, offset, in part, by $3.0 million in purchases of plant and
equipment.
The Company has historically followed a policy of reinvesting the earnings
of foreign subsidiaries in the Far East. No earnings were repatriated during the
first nine months of 1998 or 1997.
Cash, accounts receivable and marketable securities comprised approximately
58.0% and 48.6% of the Company's total assets at September 30, 1998 and December
31, 1997, respectively. The Company's current ratio (i.e., the ratio of current
assets to current liabilities) was 5.5 to 1 and 5.7 to 1 at September 30, 1998
and December 31, 1997, respectively.
OTHER MATTERS
Year 2000
Background
The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable years. Any of the
Company's programs that have time-sensitive software may recognize the date
using "00" as the year 1900 rather than the year 2000, which could result in
miscalculations or system failures.
The Company relies heavily on computer technologies to operate its
business. In 1997, the Company conducted an initial assessment of its
information technology to determine which Year 2000 related problems might cause
processing errors or computer system failures. The Company also did a complete
analysis of it's computer system. Based on the results of that analysis, the
Company's executive management
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<PAGE>
identified the Year 2000 problem as a top corporate priority and established a
group to provide a solution. Based on the group's evaluation, it was determined
to upgrade the entire computer system at the same time as solving the Year 2000
problem. Though the cost of the Year 2000 problem is not material, the estimate
for the upgrading of the computer system, including the solution for the Year
2000 problem, is approximately $350,000.
The following discussion of the implications of the Year 2000 problem for
the Company contains numerous forward-looking statements based on inherently
uncertain information. The cost of the project and the date on which the Company
plans to complete its internal Year 2000 modifications are based on the
Company's best estimates, which were derived utilizing a number of assumptions
of future events including the continued availability of internal and external
resources, third party modifications and other factors. However, there can be no
guarantee that these estimates will be achieved, and actual results could
differ. Moreover, although the Company believes it will be able to make the
necessary modifications in advance, there can be no guarantee that failure to
modify the systems would not have a material adverse effect on the Company.
In addition, the Company places a high degree of reliance on computer
systems of third parties, such as customers, trade suppliers and computer
hardware and commercial software suppliers. Although the Company is assessing
the readiness of these third parties and preparing contingency plans, there can
be no guarantee that the failure of these third parties to modify their systems
in advance of December 31, 1999, would not have a material adverse effect on the
Company.
Readiness
The Year 2000 project is intended to ensure that all critical systems,
devices and applications, as well as data exchanged with customers, trade
suppliers and other third parties have been evaluated and will be suitable for
continued use into and beyond the Year 2000.
Responsibility for implementation of the project has been assigned to an
internal group of the Company. General priorities have been defined,
dependencies identified, preliminary delivery dates assigned, detailed project
plans developed, and internal and external technical resources assigned or
hired. In addition, internal management reporting requirements have been
established. Plans and progress against these plans are reviewed by the
Company's Chief Financial Officer.
The Company has completed the majority of the project and expects to be in
full compliance by early 1999. In calender year 1999, the Company will be
conducting a rigorous final level of review called integrated testing under
Post-Year 2000 conditions.
Since early 1997, the Company has required Year 2000 compliance statements
from all suppliers of the Company's computer hardware and commercial software.
Regardless of the compliance statements, all third party hardware and software
will also be subjected to testing to reconfirm the Year 2000 readiness.
15
<PAGE>
Cost
The Company estimates that the total cost of achieving Year 2000 readiness
for its internal systems, devices and application is approximately $350,000.
Year 2000 project costs are difficult to estimate accurately and the projected
cost could change due to unanticipated technological difficulties and Year 2000
readiness of third parties.
Contingency Plans
In the event that the efforts of the Company's Year 2000 project do not
address all potential systems problems, the Company is currently developing
business interruption contingency plans, including maintaining the Company's old
computer system which was not subject to the Year 2000 problem. The Company
believes, however, that due to the widespread nature of potential Year 2000,
issues, the contingency planning process is an ongoing one which will require
further modifications as the Company obtains additional information regarding
(1) the Company's internal systems during the remediation and testing phases of
its Year 2000 project and (2) the status of third party Year 2000 readiness.
Contingency planning for possible Year 2000 disruptions will continue to be
defined, improved and implemented.
Risks
The Company believes that completed and planned modifications and
conversions of its critical systems, devices and applications will allow it to
be Year 2000 compliant in a timely manner. There can be no assurances, however,
that the Company's internal systems, devices and applications or those of a
third parties on which the Company relies will be Year 2000 compliant by year
2000 or that the Company's or third parties' contingency plans will mitigate the
effects of any noncompliance. An interruption of the Company's ability to
conduct its business due to a Year 2000 readiness problem could have a material
adverse effect on the Company.
This report contains forward-looking statements that involve substantial
risks and uncertainties. The Company's actual results could differ materially
from those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the "Business",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and "Risks and Uncertainties" captions in the Company's Form 10-K
for the year ended December 21, 1997.
16
<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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 9, 1998, the shareholders of the Company approved an
amendment to Article VI of the Company's Certificate of
Incorporation that (i) authorized a new voting Class A Common
Stock, par value $.10 per share, and a new non-voting Class B
Common Stock, par value $.10 per share, (ii) increased the
authorized number of shares of Common Stock from 10,000,000 to
20,000,000 consisting of 10,000,000 shares of Class A Common
Stock and 10,000,000 shares of Class B Common Stock, (iii)
established the rights, powers and limitations of the Class A
Common Stock and the Class B Common Stock and (iv) reclassified
each share of the Company's issued Common Stock, par value $.10
per share, as one-half of Class B Common Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) There were no Current Reports on Form 8-K filed by the
registrant during the quarter ended September 30, 1998.
-17-
<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: November 9, 1998
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BEL
FUSE INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AT SEPTEMBER 30, 1998 AND
THE NINE 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> SEP-30-1998
<CASH> 41,108,173
<SECURITIES> 1,830,183
<RECEIVABLES> 13,287,441
<ALLOWANCES> 238,000
<INVENTORY> 9,610,761
<CURRENT-ASSETS> 66,492,284
<PP&E> 57,240,769
<DEPRECIATION> 27,713,746
<TOTAL-ASSETS> 96,550,982
<CURRENT-LIABILITIES> 12,076,485
<BONDS> 0
<COMMON> 520,249
0
0
<OTHER-SE> 82,930,248
<TOTAL-LIABILITY-AND-EQUITY> 96,550,982
<SALES> 60,195,036
<TOTAL-REVENUES> 60,195,036
<CGS> 39,616,162
<TOTAL-COSTS> 50,502,655
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,133,954
<INCOME-TAX> 1,477,000
<INCOME-CONTINUING> 9,656,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,656,954
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.85
</TABLE>
