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
For the Fiscal Year Ended December 31, 1999
[ ] 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.)
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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 _____
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. [X]
Aggregate market value of voting stock held by non-affiliates as of March 10, 2000 was approximately $186,428,188 (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 10, 2000:
2,635,322 Class A Common Stock; 7,934,054 Class B Common Stock
Documents incorporated by reference:
Bel Fuse Inc.'s Definitive Proxy Statement for the 1999 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................................. 5
Item 3. Legal Proceedings.......................... 5
Item 4. Submission of Matters to Vote of Security
Holders.................................... 5
Item 4A. Executive Officers of the Registrant....... 6
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters............ 8
Item 6. Selected Financial Data.................... 9
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations................................. 10
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk.......................... 15
Item 8. Financial Statements and Supplementary
Data....................................... 15*
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..... 16
Part III
Item 10. Directors of the Registrant; Compliance with
Section 16(a) of the Exchange Act........... 16
Item 11. Executive Compensation...................... 16
Item 12. Security Ownership of Certain
Beneficial Owners and Management............ 16
Item 13. Certain Relationships and Related
Transactions................................ 16
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K..................... 17
Signatures.................................................... 20
*Page F-1 follows page 15.
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The Company's quarterly and annual operating results are affected by
a wide variety of factors that could materially and adversely affect
revenues and profitability, (a) the risk that it may be unable to respond
adequately to rapidly changing technological developments in its industry,
(b) risks associated with its Far East operations described herein under
the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Other Matters," (c) the highly competitive
nature of the Company's industry and the impact that competitors' new
products and pricing may have upon the Company, (d) the likelihood that
revenues may vary significantly from one accounting period to another
accounting period due to a variety of factors, including customers' buying
decisions, the Company's product mix and general market and economic
conditions, (e) the Company's reliance on certain substantial customers,
and (f) risks associated with the Company's ability to manufacture and
deliver products in a manner that is responsive to its customers' needs.
As a result of these and other factors, the Company may experience
material fluctuations in future operating results on a quarterly or annual
basis, which could materially and adversely affect its business, financial
condition, operating results, and stock prices. Furthermore, this document
and other documents filed by the Company with the Securities and Exchange
Commission (the "SEC") contain certain forward-looking statements under
the Private Securities Litigation Reform Act of 1995 with respect to the
business of the Company. These forward-looking statements are subject to
certain risks and uncertainties, including those mentioned above, and
those detailed in Item 1 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, which could cause actual results to
differ significantly from these forward-looking statements. The Company
undertakes no obligation to publicly release the results of any revisions
to these forward-looking statements which may be necessary to reflect
events or circumstances after the date hereof or to reflect the occurrence
of unanticipated events. An investment in the Company involves various
risks, including those mentioned above and those which are detailed from
time to time in the Company's SEC filings.
PART I
Item 1. Business
General
Bel Fuse Inc. (the "Company") is organized under New Jersey law. The Company does not have reportable segments as defined in Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information". The Company is engaged in the design, manufacture and sale of products used in networking, telecommunication, automotive and consumer electronic applications. The Company operates facilities in the United States, Europe and the Far East. 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.
On October 2, 1998, the Company acquired 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 $27 million in cash. Under the terms of the agreement, the Company, among other things, continued to supply certain of Lucent's telecom magnetic requirements. The Company has moved substantially all of the manufacturing of this business to the People's Republic of China. The Company has established research and development support and legacy product manufacturing in Dallas, Texas. In addition, the Dallas facility will maintain a marketing office to sell and service the Lucent customers.
Additionally, Lucent and the Company entered into a Transition Services Agreement whereby Lucent has agreed to provide contract labor and transitional services to the Company for an agreed price. During September 1999 the transition was completed and all Signal Transformer manufacturing operations along with the purchased assets were relocated to the Company's manufacturing facilities.
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. Transformers may be either standard
devices to meet a market-based requirement or developed to meet an individual
customer need. They may be used either in conjunction with an Integrated Circuit
(IC) reference design or used independently to meet the needs of a unique
circuit.
Value-added Modules and Thick Film Hybrids
The Company supplies value-added modules to end users whose requirements can be satisfied by combining in one integrated package one or more of the Company's capabilities in surface mount assembly, automatic winding, hybrid fabrication and component encapsulation.
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, including packaged modules.
Miniature and Micro Fuses
Fuses prevent currents in an electrical or electronic circuit from exceeding certain predetermined levels. 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 worldwide market. They are used in such products as televisions, VCR's, power supplies, computers, telephones and networking equipment.
Marketing
The Company sells its products to more than 500 customers throughout North America, Western Europe and the Far East. Sales are made through independent sales representative organizations and authorized distributors who are overseen by the Company's sales personnel throughout the world. As of December 31, 1999, the Company had a sales staff of 32 persons that supported 51 sales representative organizations and 3 non-exclusive distributors.
The Company has written agreements with all of its sales representative 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 in the Americas or are shipped directly to other 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 to three customers in excess of ten percent of 1999 consolidated sales. The amounts and percentage of consolidated sales were approximately $24,066,000 (20.1%), $21,118,000 (17.7%) and $12,733,000 (10.7%), respectively. The loss of any of these customers could have a material adverse effect on the Company's results of operations, financial position and cash flows.
Research and Development
The Company's research and development efforts in 1999 were spread among all of the Company's current product groups. The Company's research and development facilities are located in New Jersey, California, Indiana, Texas, and Hong Kong. In addition, the Company maintains continuing programs to improve the reliability of its products and to design specialized assembly equipment to increase manufacturing efficiencies. Research and development costs amounted to $5,932,000 in 1999.
Suppliers
The Company has multiple suppliers for most of the raw materials that it purchases. Where possible, the Company has contractual agreements with suppliers to assure a continuing supply of critical components.
With respect to those items which are purchased from single sources, the Company believes that comparable items would be available in the event that there were a termination of the Company's existing business relationships with any such supplier. While such a termination could produce a disruption in production, the Company believes that the termination of business with any of its suppliers could have a material adverse effect on its long-term operations.
Backlog
The Company manufactures products against firm orders and projected usage by customers. The products are shipped to the customers from manufacturing locations, Company warehouses and customer designated consignment warehouses. Cancellation and return arrangements are either negotiated by the Company on a transactional basis or contractually determined. The Company's backlog of orders as of February 25, 2000 was approximately $31.5 million, as compared with a backlog of $33.4 million as of February 26, 1999. Management expects that all of the Company's backlog as of February 25, 2000 will be shipped by December 31, 2000. Such expectation constitutes a Forward-Looking Statement. Factors that could cause the Company to fail to ship all such orders by year-end include unanticipated supply difficulties, changes in customer demand and new customer designs. The Company's major customers have negotiated shorter lead times on purchase orders and annual contracts and have implemented consignment inventory programs with the goal of reducing their inventories. Accordingly, backlog is no longer as reliable an indicator of the timing of future sales as it has been in the past.
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 be obtained 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 or twenty years from filing of patent applications. The Company's existing patents expire on various dates from April 29, 2000 to January 27, 2020.
The Company utilizes seven U.S. registered trademarks - BELFUSE, BEL, BELMAG, BELSTACK, BELSTICK SLO-BEL and SURFUSE - to identify various products that it manufactures. The trademarks survive as long as they are in use and the registrations of these trademarks are renewed.
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, 1999, the Company had 1,025 full-time employees. The Company employed 122 people in its U.S. facilities and 903 throughout the rest of the world excluding workers supplied by independent contractors. The Company's employees are not represented by any labor union. The Company believes that its relations with employees are satisfactory.
Risks and Uncertainties
The Company's business is subject to several risks and uncertainties, including: (a) the risk that it may be unable to respond adequately to rapidly changing technological developments in its industry, (b) risks associated with its Far East operations described herein under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters," (c) the highly competitive nature of the Company's industry and the impact that competitors' new products and pricing may have upon the Company, (d) the likelihood that revenues may vary significantly from one accounting period to another accounting period due to a variety of factors, including customers' buying decisions, the Company's product mix and general market and economic conditions, (e) the Company's reliance on certain substantial customers, and (f) risks associated with the Company's ability to manufacture and deliver products in a manner that is responsive to its customers' needs. Such factors, as well as shortfalls in the Company's results of operations as compared with analysts' expectations, capital market conditions and general economic conditions, may also cause substantial volatility in the market price of the Company's common stock.
Item 2. Properties
The Company currently occupies approximately 392,000 square feet of manufacturing, warehouse, office, technical and staff quarter space worldwide. The Company has additional production processing arrangements with contractors in the People's Republic of China, occupying approximately 61,000 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 and its special administrative regions ("SAR") of Hong Kong and Macau in the Far East, in California, Texas and Indiana in the U.S.A. and in the United Kingdom in Europe. The Company also owns an idle facility of 46,300 square feet in Illinois. Approximately 47% of the 392,000 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 leased properties.
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 1999.
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, 76 1954 Chairman of the Board,
Chief Executive Officer
and Director
Daniel Bernstein, 46 1985 President, Managing
Director of the Company's
Macau Subsidiary and
Director
Robert H. Simandl, 71 1967 Secretary and Director
Arnold Sutta, 73 1985 Vice President of Sales
Peter Christoffer, 58 1986 Vice President of Research
and Development
Colin Dunn, 55 1992 Vice President and
Treasurer
Joseph Meccariello, 49 1995 Vice President of
Manufacturing
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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.
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 has 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.
Item 4A. Executive Officers of the Registrant (continued)
Robert H. Simandl, a Director and Secretary of the Company since 1967, is a member of the law firm of Robert H. Simandl, Counselor At 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, Sales since 1985. Mr. Sutta supervises the worldwide sales force of the Company.
Peter Christoffer has served the Company as Vice President since 1986. Since 1991, he has been responsible for the engineering and production of value-added modules at the Company's Indiana facility.
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.
Joseph Meccariello joined the Company in 1979 as a Manager of Mechanical Engineering and in 1994 became the Deputy Managing Director of the Company's Hong Kong subsidiary, Bel Fuse, Ltd. In 1995 he was named Vice President of Manufacturing with responsibility for Far East production operations.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
(a) Market Information
On July 9, 1998 the shareholders approved an amendment to the Company's Certificate of Incorporation authorizing 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 ("Class A" and "Class B," respectively), which are 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, after giving retroactive effect to a two for one stock dividend on December 1, 1999. On that date, the Company issued one share of Class B common stock for each share of Class A common stock and Class B common stock outstanding on the applicable record date.
High Low
---- ---
Year Ended December 31, 1998:
First Quarter ........................ $12.59 $ 9.25
Second Quarter........................ 17.00 10.50
Class A Class B Class A Class B
------- ------- ------- -------
High Low
---- ---
Third Quarter ........................ $10.88 $10.00 $ 7.38 $ 6.81
Fourth Quarter ....................... 20.00 17.19 6.00 5.50
Year Ended December 31, 1999:
First Quarter......................... 24.75 20.00 15.31 12.50
Second Quarter........................ 21.19 18.63 13.38 12.88
Third Quarter......................... 19.31 17.19 14.00 12.63
Fourth Quarter........................ 37.38 35.00 16.68 14.56
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The Common Stock is reported under the symbol BELFA and BELFB in the Nasdaq National Market.
(b) Holders
As of March 10, 2000 there were 113 registered shareholders of the Company's Class A Common Stock and 135 registered shareholders of Class B Common Stock. The Company estimates that there were 4,088 beneficial shareholders of Class A Common Stock and 4,884 beneficial shareholders of Class B Common Stock.
(c) Dividends
The Company did not pay any cash dividends during 1998. There are no contractual restrictions on the Company's ability to pay dividends. On February 1, 1999, May 1, 1999, August 1, 1999 and November 1, 1999, the Company paid a $.10 per share dividend to all shareholders of record of Class B common stock in the total amount of $254,239, $261,988, $262,356 and $262,469, respectively. On February 1, 2000 the Company paid a $.05 per share dividend to all shareholders of record at January 14, 2000 of Class B common stock in the total amount of $393,908.
Item 6. Selected Financial Data
Years Ended December 31,
---------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands of dollars, except per share data)
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Selected Statements of Operations Data:
Net sales $119,464 $90,754 $73,531 $65,458 $70,706
Cost of sales 76,113 58,654 50,724 46,539 50,590
Selling, general and
administrative
expenses 19,502 16,648 13,830 11,494 12,554
Other income - net
(a) 878 1,579 1,428 2,306 1,758
Earnings before
income taxes 24,727 17,031 10,405 9,731 9,320
Income tax provision 3,435 1,813 1,555 1,925 1,222
Net earnings 21,292 15,218 8,850 7,806 8,098
Earnings per common share -
basic (b) 2.03 1.47 .87 .77 .81
Earnings per common share -
diluted (b) 1.98 1.45 .86 .76 .80
Years Ended December 31,
---------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands of dollars, except per share data)
Selected Balance Sheet Data:
Working capital $ 63,074 $40,809 $44,055 $36,873 $28,644
Total assets 125,249 103,625 83,152 71,614 64,475
Stockholders' equity 110,254 88,806 72,829 63,399 55,889
Book value per
share (b) 10.46 8.56 7.11 6.25 5.53
Return on average
total assets, % 18.25 12.5 11.6 11.5 13.9
Return on average
stockholders'
equity, % 20.93 19.0 13.1 13.1 16.0
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(a) Includes gains of $1,267 and $1,359 from the sale of marketable securities during 1996 and 1995, respectively.
(b) After giving retroactive effect to a two for one stock split on December 1, 1999.
Item 7. Management's 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 infer 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
-----------------------
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
Net sales ............................ 100.0% 100.0% 100.0%
Cost of sales ........................ 63.7 64.6 69.0
Selling, general and administrative
expenses ............................ 16.3 18.3 18.8
Other income, net of interest
expense ............................. .7 1.7 1.9
Earnings before income taxes ......... 20.7 18.8 14.2
Income tax provision ................. 2.9 2.0 2.1
Net earnings ......................... 17.8 16.8 12.1
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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 from
Prior Period
----------------------------
1999 Compared 1998 Compared
with 1998 with 1997
------------- -------------
Net sales ...................................... 31.6% 23.4 %
Cost of sales .................................. 29.8 15.6
Selling, general and administrative
expenses ...................................... 17.1 20.4
Net earnings ................................... 39.9 71.9
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Sales
Net sales increased 31.6% from approximately $90.8 million in 1998 to approximately $119.5 million in 1999. The Company attributes this increase primarily to the inclusion of sales of telecom magnetic products of the signal transformer product line recently acquired from Lucent, increased fuse sales and initial sales of the new belMag(TM) high speed RJ-45 modular connector for computer network and hub applications, offset, in part, by reduced LAN magnetic component and delay line sales.
Net sales increased 23.4% from 1997 to 1998 from approximately $73.5 million to $90.8 million. The Company attributes this increase primarily to sales growth of network magnetic products and telecom magnetic products recently acquired from Lucent, offset, in part, by reduced sales of value added modules.
Cost of Sales
Cost of sales as a percentage of net sales decreased from 64.6% in 1998 to 63.7% in 1999. The decrease in the cost of sales percentage is primarily attributable to lower labor and factory overhead costs as a percentage of sales offset in part by higher material content, principally attributed to differences in sales mix.
Cost of sales as a percentage of net sales decreased from 69.0% in 1997 to 64.6% in 1998. The decrease in the cost of sales percentage is primarily attributable to lower material content and 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 18.3% in 1998 to 16.3% in 1999. The Company attributes the percentage decrease primarily to increased sales. Selling, general and administrative expenses increased in dollar amount by 17.1%. The Company attributes the increase in dollar amount of such expenses primarily to increases in sales and marketing salaries and other sales related expenses and amortization of goodwill resulting from the acquisition of the signal transformer product line acquired from Lucent in the fourth quarter of 1998.
The percentage relationship of selling, general and administrative expenses to net sales remained relatively constant, decreasing from 18.8% in 1997 to 18.3% in 1998. Selling, general and administrative expenses increased in dollar amount by 20.4%. The Company attributes the increase in dollar amount of such expenses primarily to increases in sales and marketing salaries and sales related expenses, recruitment expenses to staff the signal transformer product line and, to a lesser extent, amortization of goodwill acquired from Lucent.
Other Income - Net
Other income, consisting principally of interest earned on cash equivalents, decreased by approximately $700,000 from the year 1998 to 1999. The decrease is primarily due to the use of cash and cash equivalents in the acquisition of the signal transformer business from Lucent.
Other income, consisting principally of interest and dividends earned on cash equivalents and marketable securities, increased by approximately $150,000 from the year 1997 to 1998. The increase is primarily due to higher earnings on invested funds due to greater average balances in 1998 compared to 1997, offset, in part, by the use of cash and cash equivalents in the acquisition of the signal transformer business from Lucent.
Provision for Income Taxes
The Company has historically followed a practice of reinvesting a portion of the earnings of foreign subsidiaries in the expansion of its foreign operations. If the unrepatriated earnings 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 earnings were repatriated during 1999, 1998, or 1997. The Company files income tax returns in every jurisdiction in which it has reason to believe it is subject to tax. Historically, the Company has been subject to examination by various taxing jurisdictions. To date, none of these examinations has resulted in any material additional tax. Nonetheless, any tax jurisdiction may contend that a filing position claimed by the Company regarding one or more of its transactions is contrary to that jurisdiction's laws or regulations.
The provision for income taxes for 1999 was $3,435,000 as compared to $1,813,000 in 1998. The increase in the provision is due primarily to higher foreign earnings and an increase in foreign effective tax rates in 1999 versus 1998.
The provision for incomes taxes in 1998 was $1,813,000 as compared to $1,555,000 in 1997. The increase in the provision is due primarily to higher earnings before income taxes in 1998 versus 1997, offset, in part, by certain recruitment expenses and the amortization of goodwill incurred in the U.S. in connection with the signal transformer product line acquired from Lucent and lower foreign income tax rates.
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.
Inflation
During the past two years, the effect of inflation on the Company's profitability was not material. Historically, fluctuations of the U.S. dollar against other major currencies have not significantly affected the Company's foreign operations as most transactions have been denominated in U.S. dollars or currencies linked to the U.S. dollar.
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 funds its operations for the near term. Such statement constitutes a Forward Looking Statement. Factors which could cause the Company to require additional capital include, among other things, potential acquisitions requiring substantial capital and future expansion of the Company's operations.
The Company has two domestic unsecured lines of credit amounting to $11,000,000 which were unused at December 31, 1999. The lines of credit are renewable annually. Borrowings under a $10 million line of credit are secured by a first priority security interest in and a lien on all personal property of Bel Fuse Inc. and its domestic subsidiaries.
The Company's Hong Kong subsidiary has an unsecured line of credit of approximately $2,000,000 which expires in October 2000. Borrowing on the line of credit is guaranteed by the U.S. parent.
On October 2, 1998, the Company acquired the manufacturing assets, primarily consisting of inventory and fixed assets, of Lucent Technologies, Inc.'s ("Lucent") signal transformer product line in exchange for approximately $27 million in cash. Under the terms of the agreement, the Company, among other things, continued to supply certain of Lucent's telecom magnetic requirements. The Company has moved substantially all of the manufacturing of this business to the People's Republic of China. The Company has established research and development, support and legacy product manufacturing in Dallas, Texas. In addition the Dallas facility will maintain a marketing office to sell and service the Lucent customers
Additionally, Lucent and the Company entered into a Transition Services Agreement whereby Lucent has agreed to provide contract labor and transitional services to the Company for an agreed price. During September 1999 the transition was completed and all signal transformer manufacturing operations along with the purchased assets were relocated to the Company's manufacturing facilities.
During 1999, the Company's cash and cash equivalents increased by approximately $16.5 million, reflecting approximately $23.3 million provided by operating activities and the exercise of stock options, offset, in part, by approximately $5.3 million in purchases of plant and equipment, $1.4 million in purchases of marketable securities and approximately $1.0 million in dividends.
Cash, marketable securities and cash equivalents and accounts receivable comprised approximately 42.2 % and 30.9 % of the Company's total assets at December 31, 1999 and 1998, respectively. The Company's current ratio (i.e., the ratio of current assets to current liabilities) was 5.5 to 1 and 4.0 to 1 at December 31, 1999 and 1998, respectively.
Other Matters
Year 2000
Impact of Year 2000
During 1999, the Company addressed the year 2000 readiness of its mission critical systems and mission critical service providers. Prior to December 31, 1999, the Company believed that its mission critical systems were year 2000 compliant and, based on written communications received from mission critical service providers, that all such service providers had addressed the year 2000 readiness of their mission critical systems and devices. Prior to December 31, 1999, the Company had also identified and upgraded non mission critical systems and devices to a state of year 2000 readiness. As of the filing date of this Form 10-K, the Company has not experienced any significant year 2000 related issues in its own operations, nor has there been any significant year 2000 related disruption in service from the Company's mission critical service providers.
Territories of Hong Kong, Macau and The People's Republic of China
The Territory of Hong Kong reverted to The People's Republic of China pursuant to a long-term land lease which expired in the middle of 1997. The territory of Macau reverted to The People's Republic of China at the end of 1999. 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 63% 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 as well as any change in the "Most Favored Nation" status granted to China by the U.S. could have a material adverse effect on the Company.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standard Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). This Statement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires the recognition of all derivatives as either assets or liabilities in the statement of financial position and measurement of those instruments as either assets or liabilities in the statement of financial position and measurement of those instruments at fair value. The accounting for changes in the fair value of a derivative is dependent upon the intended use of the derivative. SFAS No. 133 will be effective in the Company's first quarter in the year ending December 31, 2001 and retroactive application is not permitted. Management does not believe that this Statement will have a significant impact on the Company.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Fair Value of Financial Instruments -- The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments". The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The Company has not entered into, and does not expect to enter into, financial instruments for trading or hedging purposes. The Company does not currently anticipate entering into interest rate swaps and/or similar instruments.
The Company's carrying values of cash, marketable securities, accounts receivable, accounts payable and accrued expenses are a reasonable approximation of their fair value.
The Company's business in this regard is subject to certain risks, including, but not limited to, differing economic conditions, loss of significant customers, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility. The Company's future results could be materially and adversely impacted by changes in these or other factors.
Item 8. Financial Statements and Supplementary Data
See the consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements for the information required by this item.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
BelFuse Inc.
Jersey City, New Jersey
We have audited the accompanying consolidated balance sheets of BelFuse Inc. and its subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. 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 audits 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 present fairly, in all material respects, the financial position of BelFuse Inc. and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basis consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/S/ DELOITTE & TOUCHE LLP February 16, 2000 New York, New York |
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
-----------------------------
1999 1998
-----------------------------
Current Assets:
Cash and cash equivalents $ 31,382,629 $ 14,923,685
Marketable securities 2,253,039 -
Accounts receivable - less allowances
of $661,000 and $317,000 18,815,513 17,072,537
Inventories 24,210,654 21,847,563
Prepaid expenses and other current
assets 334,820 353,869
Deferred income taxes 111,000 284,000
------------ ------------
Total Current Assets 77,107,655 54,481,654
Property, plant and equipment - net 36,021,708 35,471,498
Goodwill - net of amortization of
$2,042,008 and $523,423 11,747,444 13,222,223
Other assets 372,475 449,253
------------ ------------
TOTAL ASSETS $125,249,282 $103,624,628
============ ============
|
See notes to consolidated financial statements.
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
-----------------------------
1999 1998
-----------------------------
Current Liabilities:
Accounts payable $ 4,375,915 $ 4,985,840
Accrued expenses 9,021,672 8,416,051
Income taxes payable 241,850 10,247
Dividends payable 393,908 260,331
----------- -----------
Total Current Liabilities 14,033,345 13,672,469
Deferred income taxes 962,000 1,146,000
----------- -----------
Total Liabilities 14,995,345 14,818,469
----------- -----------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, no par value,
authorized 1,000,000 shares;
none issued -- --
Class A common stock, par value
$.10 per share - authorized
10,000,000 shares; outstanding
2,632,197 and 2,603,310 shares
(net of 1,072,770 treasury shares) 263,220 260,331
Class B common stock, par value
$.10 per share - authorized
30,000,000 shares; outstanding
7,910,306 and 7,809,930 shares
(net of 3,218,310 treasury shares) 791,031 780,993
Additional paid-in capital 8,811,653 8,040,759
Retained earnings 99,839,765 79,728,787
Cumulative other comprehensive
income (loss) 548,268 (4,711)
----------- ----------
Total Stockholders' Equity 110,253,937 88,806,159
----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $125,249,282 $103,624,628
=========== ===========
|
See notes to consolidated financial statements.
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
-------------------------------------------
1999 1998 1997
------------ ----------- -----------
Net sales $119,463,650 $90,754,195 $73,530,876
------------ ----------- -----------
Costs and Expenses:
Cost of sales 76,112,866 58,654,040 50,723,813
Selling, general and
administrative 19,501,988 16,648,125 13,829,765
------------ ----------- -----------
95,614,854 75,302,165 64,553,578
------------ ----------- -----------
Income from operations 23,848,796 15,452,030 8,977,298
Other income (net) 878,037 1,578,790 1,428,164
------------ ----------- -----------
Earnings before income
taxes 24,726,833 17,030,820 10,405,462
Income tax provision 3,435,000 1,813,000 1,555,000
------------ ----------- -----------
Net earnings $ 21,291,833 $15,217,820 $ 8,850,462
============ =========== ===========
Earnings per common
share - basic $2.03 $1.47 $ .87
==== ==== ====
Earnings per common
share - diluted $1.98 $1.45 $ .86
==== ==== ====
Weighted average number
of common shares out-
standing - basic 10,476,670 10,361,630 10,176,966
============ =========== ===========
- diluted 10,777,485 10,527,844 10,317,756
============ =========== ===========
|
See notes to consolidated financial statements.
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Cumulative
Other
Compre-
Compre- hensive Class A Class B Additional
hensive Retained Income Common Common Common Paid-In
Total Income Earnings (Loss) Stock Stock Stock Capital
------------ ---------- ------------ -------- ----------- -------- -------- ----------
Balance, January 1, 1997 $ 63,399,097 $ $ 55,920,836 $ (7,721) $ 1,014,164 $ -- $ -- $6,471,818
Exercise of stock options 426,963 10,220 416,743
Tax benefits arising
from the non-quali-
fied disposition of
incentive stock options 125,000 125,000
Currency translation adjustment 27,888 $ 27,888 27,888
Net earnings 8,850,462 8,850,462 8,850,462
-----------
Comprehensive Income $ 8,878,350
===========
------------ ------------ -------- ----------- -------- -------- ----------
Balance, December 31, 1997 72,829,410 64,771,298 20,167 1,024,384 -- -- 7,013,561
Exercise of stock options 863,138 16,016 231 693 846,198
Effect of splitting Common
Stock into A and B shares (1,040,400) 260,100 780,300
Tax benefits arising
from the non-quali-
fied disposition of
incentive stock options 181,000 181,000
Cash dividends on Class B
Common Stock-$.10 per share (260,331) (260,331)
Currency translation adjustment (24,878) $ (24,878) (24,878)
|
See notes to consolidated financial statements.
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Cumulative
Other
Compre-
Compre- hensive Class A Class B Additional
hensive Retained Income Common Common Common Paid-In
Total Income Earnings (Loss) Stock Stock Stock Capital
------------ ----------- ------------ -------- ----------- -------- -------- ----------
Net earnings 15,217,820 15,217,820 15,217,820
-----------
Comprehensive Income $15,192,942
===========
------------ ----------- ------- --------- --------- -------- ---------
Balance, December 31, 1998 88,806,159 79,728,787 (4,711) -- 260,331 780,993 8,040,759
Exercise of stock options 662,821 2,889 10,038 649,894
Tax benefits arising from
the non-qualified disposition
of incentive stock options 121,000 121,000
Cash dividends on Class B
common stock (1,180,855) (1,180,855)
Currency translation adjustment 15,275 $ 15,275 15,275
Unrealized gain on marketable
securities-net of taxes 537,704 537,704 537,704
Net earnings 21,291,833 21,291,833 21,291,833
-----------
Comprehensive Income $21,844,812
===========
------------ ----------- --------- -------- --------- -------- ----------
Balance, December 31, 1999 $110,253,937 $99,839,765 $ 548,268 $ -- $ 263,220 $791,031 $8,811,653
============ =========== ========= ======== ========= ======== ==========
|
See notes to consolidated financial statements.
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
-----------------------------------------
1999 1998 1997
------------ ------------ -----------
Cash flows from operating activities:
Net income $ 21,291,833 $ 15,217,820 $ 8,850,462
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation and
amortization 6,100,768 4,128,868 3,424,230
Other 126,929 303,108 178,347
Deferred income taxes (369,000) 326,000 (113,000)
Changes in operating assets
and liabilities (3,905,708) (4,160,999) (4,056,541)
------------ ------------ -----------
Net Cash Provided by
Operating Activities 23,244,822 15,814,797 8,283,498
------------ ------------ -----------
Cash flows from investing activities:
Purchase of property, plant
and equipment (5,272,130) (3,652,388) (6,137,171)
Purchase of marketable
securities (1,357,335) (2,830,415) (4,669,954)
Payment for acquisition (43,806) (27,514,000) --
Proceeds from sale of
marketable securities -- 2,829,840 7,651,275
Proceeds from sale of
equipment 136,953 14,291 8,526
Proceeds from repayment
by contractors 128,804 166,455 170,339
Dividends paid to common
shareholders (1,041,185) -- --
------------ ------------ -----------
Net Cash (Used in)
Investing Activities (7,448,699) (30,986,217) (2,976,985)
------------ ------------ -----------
|
(Continued)
See notes to consolidated financial statements.
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31,
------------------------------------------
1999 1998 1997
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from exercise of
stock options 662,821 863,138 426,963
------------ ------------ ------------
Net Increase (decrease) in
Cash and Cash Equivalents 16,458,944 (14,308,282) 5,733,476
Cash and Cash Equivalents
- beginning of year 14,923,685 29,231,967 23,498,491
------------ ------------ ------------
Cash and Cash Equivalents
- end of year $ 31,382,629 $ 14,923,685 $ 29,231,967
============ ============ ============
Changes in operating assets
and liabilities consist of:
Increase in accounts
receivable $ (1,742,976) $ (5,981,158) $ (2,346,939)
Increase in inventories (2,363,091) (2,215,625) (3,791,398)
Increase in prepaid
expenses and other
current assets (109,755) (142,042) (69,609)
Decrease in other assets 76,778 131,511 250,493
Increase (decrease) in
accounts payable (609,925) 1,517,943 170,072
Increase in accrued
expenses 611,658 2,755,640 1,813,785
Increase (decrease) in
income taxes payable 231,603 (227,268) (82,945)
------------ ------------ ------------
$ (3,905,708) $ (4,160,999) $ (4,056,541)
============ ============ ============
|
(Continued)
See notes to consolidated financial statements.
BEL FUSE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31,
1999 1998 1997
Supplementary information:
Cash paid during year for:
Income taxes $ 1,598,000 $ 1,261,000 $ 1,050,000
=========== =========== ===========
Details of acquisition:
Fair value of assets
acquired $27,514,000
Liabilities assumed --
-----------
Net cash paid for
acquisition $27,514,000
===========
Supplemental disclosure of
non-cash investing and
financing activities:
Unrealized gain on
marketable securities $ (537,704)
===========
Accrued and unpaid dividends
on Class B common shares $ 393,908 $ 260,331
=========== ===========
|
See notes to consolidated financial statements.
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Bel Fuse Inc. and its subsidiaries (the "Company") operate in one industry segment and are engaged in the design, manufacture and sale of products used in local area networking, telecommunication, business equipment and consumer electronic applications. Sales are predominantly in North America, Western Europe and the Far East.
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.
USE OF ESTIMATES - The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS - Cash equivalents include short-term investments in U.S. treasury bills and commercial paper with an original maturity of three months or less when purchased. At December 31, 1999 and 1998, cash equivalents approximate $19,586,000 and $4,206,000, respectively.
MARKETABLE SECURITIES - The Company classifies its investments in equity securities as "available for sale", and accordingly, reflects unrealized gains and losses, net of deferred income taxes, as a separate component of stockholders' equity.
The fair values of marketable securities are estimated based on quoted market prices. Realized gains or losses from the sales of marketable securities are based on the specific identification method.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable and temporary cash investments. The Company grants credit primarily to original equipment manufacturers and to subcontractors of original equipment manufacturers based on an evaluation of the customer's financial condition, without requiring collateral. Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company controls its exposure to credit risk through credit approvals, credit limits and monitoring procedures and establishes allowances for anticipated losses.
The Company places its temporary cash investments with quality financial institutions and, by policy, limits the amount of credit exposure with any one financial instrument.
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
INVENTORIES - Inventories are stated at the lower of weighted average cost or market.
REVENUE RECOGNITION - Revenue is recognized when products are shipped and title passes to customers.
AMORTIZATION OF INTANGIBLES - Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible assets acquired. Goodwill and other intangible assets are amortized on a straight-line basis over 3 1/2 to 15 years. Amortization expense was $1,518,000 in 1999, $394,000 in 1998 and $21,000 in 1997.
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 basis 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.
STOCK BASED COMPENSATION - The Company has adopted the disclosure-only provisions of Statement Of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The standard encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options and other equity instruments to employees based on fair value.
EVALUATION OF LONG-LIVED ASSETS - Long-lived assets are assessed for recoverability on an on-going basis. In evaluating the fair value and future benefits of long-lived assets, their carrying value would be reduced by the excess, if any, of the long-lived asset over management's estimate of the anticipated undiscounted future net cash flows of the related long-lived asset. As of December 31, 1999, management concluded that no impairment exists.
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
EARNINGS PER COMMON SHARE -
Basic earnings per common share are computed by dividing net earnings by the weighted average number of common shares outstanding during the year. Diluted earnings per common share are computed by dividing net earnings by the weighted average number of common shares and potential common shares outstanding during the year. Potential common shares used in computing diluted earnings per share relate to stock options which, if exercised, would have a dilutive effect on earnings per share. The number of potential common shares outstanding were 300,815, 166,214 and 140,790 for the years ended December 31, 1999, 1998 and 1997, respectively. During the three years ending December 31, 1999, there were no antidilutive options omitted from the calculation of diluted earnings per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS - For financial instruments including cash, accounts receivable, accounts payable and accrued expenses, it was assumed that the carrying amount approximated fair value because of the short maturities of such instruments.
NEW FINANCIAL ACCOUNTING STANDARDS - In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). This Statement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires the recognition of all derivatives as either assets or liabilities in the statement of financial position and measurement of those instruments as either assets or liabilities in the statement of financial position and measurement of those instruments at fair value. The accounting for changes in the fair value of a derivative is dependent upon the intended use of the derivative. SFAS No. 133 will be effective in the Company's first quarter in the year ending December 31, 2001. Management does not believe that this Statement will have a material impact on the Company.
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITION
On October 2, 1998, the Company acquired the manufacturing assets, primarily consisting of inventory and fixed assets, of Lucent Technologies, Inc.'s ("Lucent") signal transformer product line in exchange for approximately $27 million in cash. Under the terms of the agreement, the Company, among other things, continued to supply certain of Lucent's telecom magnetic requirements. The Company has moved substantially all of the manufacturing of this business to the People's Republic of China. The Company has established research and development, support and legacy product manufacturing in Dallas, Texas. In addition the Dallas facility will maintain a marketing office to sell and service the Lucent customers.
Additionally, Lucent and the Company entered into a Transition Services Agreement whereby Lucent has agreed to provide contract labor and transitional services to the Company for an agreed price. During September 1999, the transition was substantially completed and all signal transformer manufacturing operations along with the purchased assets were relocated to the Company's manufacturing facilities.
The acquisition has been accounted for under the purchase method of accounting and includes the results of operations of the acquired entity from October 2, 1998 to December 31, 1998. Intangible assets and goodwill which arose in connection with the acquisition in the amount of $13.5 million, are being amortized over 3 and one-half to 15 years using the straight line method. Proforma unaudited results of operations for the year ended December 31, 1998 reflect the consolidated operations of the Company assuming the acquisition occurred on January 1, 1998. Proforma adjustments have been made for amortization of intangibles, depreciation, reduction of interest income and income taxes. The proforma results are as follows:
Year Ended
December 31,
1998
---------------------
(Dollars in thousands
except per share data)
Sales $123,418
Net earnings (1) 25,003
Diluted earnings per
common share (2) $ 2.37
|
(1) In arriving at net earnings, income taxes were estimated based upon assumptions as to the geographic area in which the operating income would have been earned by the Company.
(2) After giving retroactive effect to a two for one stock dividend on December 1, 1999.
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. MARKETABLE SECURITIES
At December 31, 1999 marketable securities have a cost of $1,357,000, an estimated fair value of $2,253,000 and gross unrealized gain of $896,000.
4. INVENTORIES
December 31,
---------------------------
1999 1998
------------ -----------
Raw materials $ 11,311,699 $11,459,928
Work in process 100,273 139,166
Finished goods 12,298,682 10,248,469
------------ -----------
$ 23,710,654 $21,847,563
============ ===========
|
5. PROPERTY, PLANT AND EQUIPMENT
December 31,
---------------------------
1999 1998
------------ -----------
Land $ 1,164,436 $ 1,164,436
Buildings and improvements 14,282,892 13,901,108
Machinery and equipment 51,331,262 46,658,618
Idle property held for sale 935,000 935,000
------------ -----------
67,713,590 62,659,162
Less accumulated depreciation 31,691,882 27,187,664
------------ -----------
$ 36,021,708 $35,471,498
============ ===========
|
Depreciation expense for the years ended December 31, 1999, 1998 and 1997 was $4,585,000, $3,735,000, and $3,404,000, respectively.
6. INCOME TAXES
The provision for income taxes consists of the following:
Years Ended December 31,
------------------------------------------
1999 1998 1997
---------- ---------- -----------
Current:
Federal $ 907,000 $ 935,000 $ 961,000
Foreign 2,732,000 352,000 614,000
State 165,000 200,000 93,000
---------- ---------- -----------
3,804,000 1,487,000 1,668,000
---------- ---------- -----------
Deferred:
Federal (312,000) 180,000 (396,000)
Foreign (57,000) 146,000 283,000
---------- ---------- -----------
(369,000) 326,000 (113,000)
---------- ---------- -----------
$3,435,000 $1,813,000 $1,555,000
========== ========== ==========
|
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INCOME TAXES (continued)
A reconciliation of taxes on income at the federal statutory rate to amounts provided is as follows:
Years Ended December 31,
--------------------------------------------
1999 1998 1997
----------- ----------- -----------
Tax provision computed
at the Federal sta-
tutory rate $ 8,407,000 $ 5,791,000 $ 3,538,000
Increase (decrease) in
taxes resulting from:
Lower tax rates applicable
to foreign operations (4,924,000) (4,255,000) (2,280,000)
State taxes, net of federal
benefit 109,000 132,000 61,000
Other, net (157,000) 145,000 236,000
----------- ----------- -----------
$ 3,435,000 $ 1,813,000 $ 1,555,000
=========== =========== ===========
|
The types of temporary differences between the tax basis 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,
--------------------------------------------------------
1999 1998
--------------------------- --------------------------
Temporary Temporary
Difference Tax Effect Difference Tax Effect
------------ ------------ ------------ -----------
Deferred Liabilities:
Depreciation and
amortization $ 13,961,000 $ 604,000 $ 14,632,000 $ 1,146,000
Unrealized
appreciation
in marketable
securities 896,000 358,000 -- --
------------ ------------ ------------ -----------
$ 14,875,000 $ 962,000 $ 14,632,000 $ 1,146,000
============ ============ ============ ===========
Deferred Asset:
Other temporary
differences $ (278,000) $ (111,000) $ (711,000) $ (284,000)
============ ============ ============ ===========
|
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INCOME TAXES (continued)
The Company files income tax returns in all jurisdictions in which it has reason to believe it is subject to tax. Historically, the Company has been subject to examination by various taxing jurisdictions. To date, none of these examinations has resulted in any material additional tax. Nonetheless, any tax jurisdiction may contend that a filing position claimed by the Company regarding one or more of its transactions is contrary to that jurisdiction's laws or regulations.
It is management's intention to permanently reinvest a portion of the earnings of foreign subsidiaries in the expansion of its foreign operations. No earnings were repatriated during 1999, 1998 or 1997. Unrepatriated earnings, upon which income taxes have not been accrued, approximate $92.8 million at December 31, 1999. Estimated income taxes related to unrepatriated foreign earnings would approximate $22.6 million.
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. SEGMENTS - GEOGRAPHIC AREAS
The Company does not have reportable operating segments as defined in Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information". The method for attributing revenues to individual countries is based on the destination to which finished goods are shipped. The Company operates facilities in the United States, Europe and the Far East.
The Company had sales to individual customers in excess of ten percent of consolidated net sales as follows: The amounts and percentages of the Company's sales were approximately $24,066,000 (20.1%), $21,118,000 (17.7%) and $12,733,000 (10.7%) in 1999; $23,055,000 (25.4%) and $13,385,000 (14.7%) in 1998; and $19,217,000 (26.1%) and $8,272,000 (11.3%) in 1997. The loss of any of these customers could have a material adverse effect on the Company's results of operations, financial position and cash flows.
1999 1998 1997
------------- ------------- ------------
Revenue from unrelated entities
and country of Company's
domicile:
United States $ 69,603,111 $ 47,884,195 $ 37,702,876
Asia/Pacific 23,675,905 17,914,000 11,491,000
Hong Kong 7,622,297 4,337,000 3,507,000
United Kingdom 347,745 1,657,000 2,455,000
Europe 17,835,412 17,656,000 16,085,000
Other 379,180 1,306,000 2,290,000
------------- ------------- ------------
$ 119,463,650 $ 90,754,195 $ 73,530,876
============= ============= ============
Total revenues:
United States $ 72,048,046 $ 49,641,429 $ 39,083,088
Asia 104,083,997 75,662,502 64,727,693
Less intergeographic
revenues (56,668,393) (34,549,736) (30,279,905)
------------- ------------- ------------
$ 119,463,650 $ 90,754,195 $ 73,530,876
============= ============= ============
Income from Operations:
United States $ 2,299,951 $ 1,877,219 $ 454,908
Asia 21,548,845 13,574,811 8,522,390
------------- ------------- ------------
$ 23,848,796 $ 15,452,030 $ 8,977,298
============= ============= ============
Assets:
United States $ 51,770,893 $ 42,374,486 $ 37,415,565
Asia 87,937,707 66,096,256 49,194,689
Less intergeographic
eliminations (14,459,318) (4,846,114) (3,458,031)
------------- ------------- ------------
Total identifiable assets $ 125,249,282 $ 103,624,628 $ 83,152,223
============= ============= ============
Capital Expenditures:
United States $ 1,334,885 $ 469,286 $ 798,258
Asia 3,937,245 3,183,102 5,338,913
------------- ------------- ------------
$ 5,272,130 $ 3,652,388 $ 6,137,171
============= ============= ============
|
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. OPERATIONS IN GEOGRAPHIC AREAS, FOREIGN OPERATIONS AND EXPORT SALES
(Continued)
1999 1998 1997
----------- ------------ ------------
Depreciation and Amortization
expense:
United States $ 1,208,414 $ 639,637 $ 500,564
Asia 4,892,354 3,489,231 2,923,666
----------- ------------ ------------
$ 6,100,768 $ 4,128,868 $ 3,424,230
=========== ============ ============
|
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. Income from operations represents total revenue less operating expenses.
Identifiable assets are those assets of the Company that are identified with the operations of each geographic area.
The territory of Hong Kong reverted to the People's Republic of China pursuant to a long-term land lease which expired in the middle of 1997. The territory of Macau reverted to the People's Republic of China at the end of 1999. Management cannot presently predict what impact, if any, the expiration of these leases will have on the Company, if any, or how the political climate in China will affect the Company's contractual arrangements in China. Substantially all of the Company's manufacturing operations and approximately 63% of its identifiable assets are located in The People's Republic of China and its special administrative regions ("SAR") of Hong Kong and Macau. Accordingly, events which may result from the expiration of such leases, as well as any change in the "Most Favored Nation" status granted to China by the U.S. could have a material adverse effect on the Company.
The Company's research and development facilities are located in California, Indiana, Texas and Hong Kong. Research and development costs amounted to $5,932,000 in 1999, $4,989,000 in 1998, and $3,895,000 in 1997.
8. RETIREMENT FUND AND PROFIT SHARING PLAN
The Company maintains a domestic profit sharing plan, 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 purchased in the open market. The expense for the years ended December 31, 1999, 1998 and 1997 amounted to approximately $281,000, $174,000 and $152,000 , respectively. As of December 31, 1999, the plans owned 39,050 and 137,120 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RETIREMENT FUND AND PROFIT SHARING PLAN (Continued)
The Company's Far East subsidiaries have a retirement fund covering substantially all of their Hong Kong based 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, 1999, 1998 and 1997 amounted to approximately $511,000, $516,000 and $385,000, 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. As of December 31, 1999, the plan owned 4,820 and 20,401 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.
9. STOCK OPTION PLAN
The Company has a Qualified Stock Option Plan (the "Plan") which provides for the granting of "Incentive Stock Options" to key employees within the meaning of Section 422 of the Internal Revenue Code of 1954, as amended. The Plan provides for the issuance of 2,400,000 shares. Substantially all options outstanding become exercisable twenty-five (25%) percent one year from the date of grant and twenty-five (25%) percent for each year of the three years thereafter. The price of the options granted pursuant to the Plan is not to be less than 100 percent of the fair market value of the shares on the date of grant. An option may not be exercised within one year from the date of grant, and in general, no option will be exercisable after six years from the date granted. All outstanding options as of July 9, 1998 were split equally into Class A Common Stock and Class B Common Stock. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation (SFAS No. 123)." Accordingly, no compensation cost has been recognized for the stock options awarded. Had compensation cost for the Company's stock option plan been determined based on the fair value at the grant date for awards in 1999 and 1998 consistent with the provisions of SFAS No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:
December 31,
----------------------------
1999 1998
----------- -----------
Net earnings - as reported $21,291,833 $15,217,820
Net earnings - pro forma 20,373,438 14,717,692
Earnings per share - basic - as reported $2.03 $1.47
Earnings per share - basic - pro forma $1.95 $1.43
Earnings per share - diluted - as reported $1.98 $1.45
Earnings per share - diluted - pro forma $1.89 $1.41
|
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1999 and 1998, respectively: dividends yield of .8% and -0-%; expected volatility of 65% for Class A in 1998 and 82% and 59% for Class B; risk-free interest rate of 5% and 5.05% , and expected lives of 5 years.
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. STOCK OPTION PLAN (Continued)
Information regarding the Company's Plan for 1999, 1998 and 1997 is as
follows after giving retroactive effect to a two for one stock split on December
1, 1999:
1999 1998 1997
-------------------------------- ------------------------------- -------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------------- -------------- -------------- -------------- -------------- --------------
Options out-
standing, begin-
ning of year 523,400 $ 6.07 472,800 $ 5.73 372,000 $ 4.80
Options exercised (129,263) $ 5.13 (169,400) $ 5.10 (102,200) $ 4.18
Options granted 174,000 $15.40 230,000 $ 6.07 211,000 $ 6.63
Options cancelled -- $ -- (10,000) $ 6.44 (8,000) $ 6.07
--------------- -------------- --------------
Options out-
standing, end
of year 568,137 $ 9.03 523,400 $ 6.07 472,800 $ 5.73
=============== ============== ==============
Options price
range at end of
year $5.75 to $15.44 $3.25 to $6.63 $3.25 to $7.00
Options price range
for exercised
shares $3.25 to $7.00 $3.25 to $7.00 $3.25 to $7.00
Options available
for grant at end
of year 713,000 887,000 107,000
Weighted-average fair
value of options,
granted during the
year $9.61 $3.35 $3.73
|
The following table summarizes information about fixed-price stock options outstanding at December 31, 1999:
Weighted-
Number Out- Average Weighted Number Exer- Weighted-
Range of standing at Remaining Average cisable at Average
Exercise December 31, Contractual Exercise December 31, Exercise
Prices 1999 Life Price 1999 Price
---------------- ------------ ----------- --------- ----------- ---------
$ 5.75 to $ 7.00 394,137 3 years $ 6.37 87,219 $ 6.31
$15.38 to $15.44 174,000 4 years $15.40 -- $ --
------- ------
568,137 87,219
======= ======
|
10. 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
BEL FUSE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMON STOCK (continued)
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.
On November 5, 1999 the Board of Directors declared a two for one stock split to be paid in the form of a special dividend of one share of Class B common stock for each share of Class A and Class B outstanding. The special stock dividend was payable on December 1, 1999 to all Class A and Class B shareholders of record on November 22, 1999. The Board also approved an amendment to the Company's certificate of incorporation increasing the number of authorized shares of Class B common stock from 10,000,000 shares to 30,000,000 shares.
11. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases various facilities. Some of these leases require the Company to pay certain executory costs (such as insurance and maintenance).
Future minimum lease payments for operating leases are approximately as
follows:
Years Ending December 31,
--------------------------
2000 538,000
2001 233,000
2002 172,000
2003 142,000
2004 103,000
2005 11,000
----------
$1,199,000
==========
|
Rental expense was approximately $600,000, $521,000, and $484,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Credit Facilities
The Company has two domestic unsecured lines of credit amounting to $11,000,000 which were unused at December 31, 1999. The lines of credit are renewable annually. Borrowings under the $10 million line of credit are secured by a first priority security interest in and a lien on all personal property of Bel Fuse Inc. and its domestic subsidiaries.
The Company's Hong Kong subsidiary has an unsecured line of credit of approximately $2,000,000 which expires in October 2000. Borrowing on the line of credit is guaranteed by the U.S. parent.
Facilities
The Company has contracted for the renovation and addition of new corporate offices in Jersey City in the amount of $2.5 million. As of December 31, 1999, no payments have been made towards this contract.
BEL FUSE INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
Quarter Ended Total Year
------------------------------------------------------------ Ended
March 31, June 30, September 30, December 31, December 31,
1999 1999 1999 1999 1999
----------- ----------- ----------- ----------- ------------
Net sales $30,758,768 $28,451,932 $30,536,478 $29,716,472 $119,463,650
Gross
Profit 10,444,162 10,512,466 10,931,466 11,462,471 43,350,784
Net
earnings 5,121,033 4,717,579 5,315,398 6,137,823 21,291,833
Earnings
per share
- basic (1)(2) $.49 $.45 $ .51 $ .58 $2.03
Earnings
per
share -
diluted (1)(2) $.48 $.44 $ .50 $ .57 $1.98
Quarter Ended Total Year
------------------------------------------------------------ Ended
March 31, June 30, September 30, December 31, December 31,
1998 1998 1998 1998 1998
----------- ----------- ----------- ----------- ------------
Net sales $19,514,700 $19,531,655 $21,148,681 $30,559,159 $90,754,195
Gross
Profit 6,336,972 6,684,748 7,557,154 11,521,281 32,100,155
Net
earnings 2,966,488 3,038,705 3,651,761 5,560,866 15,217,820
Earnings
per share
- basic (1)(2) $.29 $.30 $.35 $.54 $1.47
Earnings
per
share -
diluted (1)(2) $.28 $.29 $.35 $.53 $1.45
(1) Quarterly amounts of earnings per share may not agree to the total for
the year due to rounding.
(2) After giving retroactive effect to a two for one stock split on
December 1, 1999.
|
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
The information required by Items 10 through 13 is included in the Company's definitive proxy statement under the captions "The Board of Directors and its Committees," "Election of Directors," "Executive Officers," "Security Ownership of Certain Beneficial Owners and Management" and "Certain Relationships and Related Transactions." Such information is incorporated herein by reference, pursuant to General Instruction G(3).
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page
(a) Financial Statements
1. Financial statements filed as a part of this Annual
Report on Form 10-K:
Independent Auditors' Report F-1
Consolidated Balance Sheets as of December 31,
1999 and 1998 F-2 - F-3
Consolidated Statements of Operations for Each
of the Three Years in the Period Ended
December 31, 1999 F-4
Consolidated Statements of Stockholders' Equity
for Each of the Three Years in the Period
Ended December 31, 1999 F-5 - F-6
Consolidated Statements of Cash Flows for Each
of the Three Years in the Period Ended
December 31, 1999 F-7 - F-9
Notes to Consolidated Financial Statements F-10 - F-21
Selected Quarterly Financial Data - Years Ended
December 31, 1999 and 1998 (Unaudited) F-22
2. Financial statement schedules filed as part of
this report:
Schedule II: 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) Reports on Form 8-K
The Company did not file any current reports on Form 8-K during
the three month period ended December 31, 1999.
(c) Exhibits
3.1 Certificate of Incorporation, as amended.
|
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K (continued)
Exhibit No.:
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. Incorporated by reference to Exhibit 10.1 of the Company's annual report on Form 10-K for the year ended December 31, 1994.
10.2 Contract dated March 16, 1990 between Accessorios Electronicos (Bel Fuse Macau Ltd.) and the Government of Macau. Incorporated by reference to Exhibit 10.2 of the Company's annual report on Form 10-K for the year ended December 31, 1994.
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 10.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995.
10.4 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.
10.5 Employment agreement between Elliot Bernstein and Bel Fuse Inc. dated October 29, 1997. Incorporated by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K (continued)
Exhibit No.:
10.6 Agreement for the Purchase and Sale of Assets by and among Lucent Technologies Inc. and Lucent Technologies Maquiladoras Inc. (each as Seller) and BelFuse Inc. (Buyer) dated October 9, 1998. Incorporated by reference to Exhibit 2.1 of the Company's Report on Form 8-K dated October 17, 1998.
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.
27.1 Financial Data Schedule.
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, 2000
|
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
--------- ----- ----
Chairman of the Board
/s/ Elliot Bernstein and Director (Principal March 29, 2000
-------------------------- Executive Officer)
Elliot Bernstein
President, (Principal
/s/ Daniel Bernstein Financial and Account- March 29, 2000
-------------------------- ing Officer) and
Daniel Bernstein Director
/s/ Howard B. Bernstein Director March 29, 2000
--------------------------
Howard B. Bernstein
/s/ Robert H. Simandl Director March 29, 2000
--------------------------
Robert H. Simandl
/s/ Peter Gilbert Director March 29, 2000
--------------------------
Peter Gilbert
/s/ John Tweedy Director March 29, 2000
--------------------------
John Tweedy
/s/ John Johnson Director March 29, 2000
--------------------------
John Johnson
|
BEL FUSE INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
---------------------------
(1) (2)
Charged Charged
Balance at to profit to other Balance
Beginning and loss accounts Deductions at close
Description of period or income (describe) (describe) of period
----------- --------- --------- ---------- ---------- ---------
Year ended December 31, 1999
Allowance for doubtful
accounts $317,000 $ 344,000 $ - $ - $ 661,000
======== ========== ======== ========= ==========
Allowance for excess and obsolete
inventory $764,000 $1,468,000 $ - (a) $(690,000) $1,542,000
======== ========== ======== ========= ==========
Year ended December 31, 1998
Allowance for doubtful
accounts $227,000 $ 90,000 $ - $ - $ 317,000
======== ========== ======== ========= ==========
Allowance for excess and obsolete
inventory $522,000 $ 242,000 $ - $ - $ 764,000
======== ========== ======== ========= ==========
Year ended December 31, 1997
Allowance for doubtful
accounts $195,000 $ 32,000 $ - $ - $ 227,000
======== ========== ======== ========= ==========
Allowance for excess and obsolete
inventory $100,000 $ 422,000 $ - $ - $ 522,000
======== ========== ======== ========= ==========
(a) Write offs.
|
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
BEL FUSE INC.
Pursuant to the provisions of Section 14A:9-2(2) and Section 14A:9-4(2), Corporations, General, of the New Jersey Statutes, the undersigned corporation executed the following Certificate of Amendment to its Restated Certificate of Incorporation:
1. The name of the corporation is Bel Fuse Inc. (the "Corporation").
2. On November 5, 1999, the Corporation's Board of Directors adopted a resolution declaring a dividend of one share of the Corporation's Class B Common Stock payable with respect to each share of the Corporation's Class A Common Stock and each share of the Corporation's Class B Common Stock outstanding as of the record date. The Board also approved on such date this amendment to the Corporation's Restated Certificate of Incorporation in accordance with N.J.S. 14A:7-15.1.
3. The amendment to the Corporation's Restated Certificate of Incorporation will not adversely affect the rights or preferences of the holders of outstanding shares of any class or series and will not result in the percentage of authorized shares that remains unissued after the share dividend exceeding the percentage of authorized shares that was unissued before the share dividend.
4. A total of 5,260,688 shares of the Corporation's Class B Common Stock, exclusive of treasury shares, were issued in connection with the dividend including 2,627,694 shares of Class B Common Stock issued with respect to the 2,627,694 shares of Class A Common Stock outstanding on the record date and 2,632,994 shares of Class B Common Stock issued with respect to the 2,632,994 shares of Class B Common Stock outstanding on the record date.
5. The following amendment to the Certificate of Incorporation was approved by the Board of Directors:
"RESOLVED, that upon payment of the Dividend, Section 6.0 of Article VI of this Corporation's Restated Certificate of Incorporation shall be amended to provide as follows:
Authorized Capital. The total number of shares of all classes of capital stock that the Corporation shall have authority to issue shall be 41,000,000, consisting of 1,000,000 shares of preferred stock, without par value ("Preferred Stock"), and
40,000,000 shares of common stock, consisting of 10,000,000 shares of Class A Common Stock, par value $0.10 per share ("Class A Common Stock"), and 30,000,000 shares of Class B Common Stock, par value $0.10 per share ("Class B Common Stock" and, together with the Class A Common Stock, "Common Stock")."
IN WITNESS WHEREOF, the undersigned Corporation has caused this certificate to be executed on its behalf by its duly authorized officer as of March 23, 2000.
BEL FUSE INC.
By: /s/ Colin Dunn
----------------------------------
Colin Dunn, Vice President and CFO
|
Subsidiaries of Bel Fuse Inc.
Jurisdiction of
Name Incorporation
---- -------------
Bel Fuse Limited Hong Kong
Bel Fuse Macau LDA Macau
Bel Hybrids and Magnetics Inc. Indiana
Bel Delaware LLC Delaware
Bel Fuse Europe Ltd. United Kingdom
Bel Magnetics Ltd. Texas
Bel Fuse America Inc. Delaware
Bel Fuse Delaware Inc. Delaware
Bel Fuse California Inc. Delaware
Bel Ventures Inc. Delaware
|
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements (2-93572, 33-45809 and 33-53462) on Forms S-8 of BelFuse Inc. of our report dated February 16, 2000 appearing in this Annual Report on Form 10-K of BelFuse Inc. for the year ended December 31, 1999.
/S/ DELOITTE & TOUCHE LLP March 28, 2000 New York, New York |
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BEL FUSE INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AT DECEMBER 31, 1999 AND THE TWELVE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1 |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD END | DEC 31 1999 |
| CASH | 31,382,629 |
| SECURITIES | 2,253,039 |
| RECEIVABLES | 19,476,513 |
| ALLOWANCES | 661,000 |
| INVENTORY | 24,210,654 |
| CURRENT ASSETS | 77,107,655 |
| PP&E | 67,713,590 |
| DEPRECIATION | 31,691,882 |
| TOTAL ASSETS | 125,249,282 |
| CURRENT LIABILITIES | 14,033,345 |
| BONDS | 0 |
| COMMON | 1,054,251 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| OTHER SE | 109,199,686 |
| TOTAL LIABILITY AND EQUITY | 125,249,282 |
| SALES | 119,463,650 |
| TOTAL REVENUES | 119,463,650 |
| CGS | 76,112,866 |
| TOTAL COSTS | 95,614,854 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 0 |
| INCOME PRETAX | 24,726,033 |
| INCOME TAX | 3,435,000 |
| INCOME CONTINUING | 24,726,833 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 24,726,833 |
| EPS BASIC | 2.03 |
| EPS DILUTED | 1.98 |