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Bel Reports Q3 Results

JERSEY CITY, N.J. — Bel Fuse Inc. (NASDAQ:BELFA)(NASDAQ:BELFB) today announced preliminary unaudited financial results for the third quarter and first nine months of 2011.

Summary

  • For the third quarter, sales decreased 10.7% to $75.9 million compared to $85.0 million for the third quarter of 2010. However, for the first nine months of 2011, sales increased 3.5% to a record $226.5 million compared to $218.8 million for the first nine months of 2010.
  • Excluding a litigation charge, non-GAAP net earnings for this year's third quarter were $1.2 million, or $0.10 per diluted Class A share and $0.11 per diluted Class B share.
  • Cash and investments were $102.2 million as of September 30, 2011, an increase of $16.7 million since December 31, 2010.
  • Cisco awarded Bel Fuse for “Excellence in Service and Responsiveness.”

CEO comments

Daniel Bernstein, Bel's President and CEO, stated, “In the third quarter, we earned an operating profit and generated cash in a difficult environment. Although sales in our modules group were up more than 50% over 2010 levels, this was not enough to overcome the decreases in sales of our other three product groups, compared to the third quarter of 2010. The most significant decrease was in the magnetics group, where increasing competition has affected sales of MagJack products. Compared to the second quarter of 2011, sales declined in all product groups. Because of these results and the current market outlook, we expect business conditions to remain challenging and are therefore realigning our organization to further reduce costs and improve operations. We expect to finalize and publicly announce our plan, including the anticipated costs and savings associated with it, as part of Bel's fourth quarter earnings report.

“In September, Bel received Cisco's prestigious 'Excellence in Service and Responsiveness' award and was nominated for Cisco's 'Excellence in Technology Alignment' and prestigious 'Supplier of the Year' award. We were the only Cisco supplier to be nominated in three separate categories, and are honored to be singled out for this recognition among Cisco's hundreds of vendors, including many Fortune 500 companies. Our award for 'Excellence in Service and Responsiveness' is a tribute to the hard work and dedication of all Bel associates throughout the world.”

“We continue to actively pursue acquisition candidates and believe strongly that acquiring the right company will further strengthen Bel for the future.”

Third Quarter Results

For the three months ended September 30, 2011, net sales decreased to $75,903,000 compared to $85,041,000 for the third quarter of 2010.

Cost of sales increased to 84.1% of sales for the third quarter of 2011, compared to 76.2% of sales for the third quarter of 2010, primarily due to a shift in the product mix to sales of a higher proportion of modules products, which have higher materials content and lower profit margins than Bel's other product lines.

The increase in Bel's effective tax rate for this year's third quarter compared to the third quarter of 2010 was primarily caused by an accounting loss with minimal tax benefit in Asia, where tax rates are lower, combined with an accounting profit in the US. In addition, the prior year tax rate reflected a benefit from the expiration of tax statutes of limitations of $1,196,000 which did not recur in 2011.

Net earnings for the third quarter of 2011 were $1,012,000, which included litigation charges of $247,000 ($223,000 after tax). This compares to net earnings for the third quarter of 2010 of $10,001,000, which included a benefit from the expiration of tax statutes of limitations of $1,196,000, a gain on sale of property, plant and equipment of $388,000 ($389,000 after tax), and severance and acquisition-related costs of $77,000 ($65,000 after tax) primarily related to the relocation of manufacturing operations in China and the Cinch acquisition.

Excluding litigation charges associated with the SynQor legal case, referenced below and in the comparison of GAAP and non-GAAP measures, non-GAAP net earnings for the third quarter of 2011 were $1,233,000. This compares to non-GAAP net earnings for the third quarter of 2010 of $8,481,000. A reconciliation of non-GAAP to GAAP financial measures is provided in the table attached to this press release.

Net earnings per diluted Class A common share for the third quarter of 2011 were $0.08, compared to net earnings per diluted Class A common share of $0.82 for the third quarter of 2010. Adjusted to exclude litigation charges, non-GAAP net earnings per diluted Class A common share were $0.10 for the third quarter of 2011, compared to non-GAAP net earnings per diluted Class A common share of $0.69 for the third quarter of 2010.

Net earnings per diluted Class B common share were $0.09 for the third quarter of 2011, compared to net earnings per diluted Class B common share of $0.86 for the third quarter of 2010. Adjusted to exclude litigation charges, non-GAAP net earnings per diluted Class B common share were $0.11 for the third quarter of 2011, compared to non-GAAP net earnings per diluted Class B common share of $0.73 for the third quarter of 2010.

Excluding litigation charges, non-GAAP income from operations for the third quarter of 2011 was $2,182,000. For the third quarter of 2010, adjusted to exclude a gain on sale of property, plant and equipment and severance and plant closure charges, non-GAAP income from operations was $9,140,000.

Balance Sheet Data

As of September 30, 2011, Bel reported working capital of $166,484,000, including cash, cash equivalents, and marketable securities of $102,248,000, a current ratio of 4.8 to 1, total long-term obligations of $12,320,000, and stockholders' equity of $222,587,000. In comparison, as of December 31, 2010, Bel reported working capital of $157,296,000, including cash, cash equivalents, and marketable securities of $85,535,000, a current ratio of 4.4 to 1, total long-term obligations of $10,571,000, and stockholders' equity of $220,333,000.

Nine Month Results

For the nine months ended September 30, 2011, net sales increased to a nine-month record $226,479,000 compared to $218,842,000 for the first nine months of 2010. Net earnings were $3,682,000 for this year's first nine months, compared to net earnings of $14,671,000 for the same period last year. Results for 2011 include a full nine months of operations for Cinch, which was acquired on January 29, 2010. Cinch's January 2011 revenue accounted for $5.5 million of the increase in Bel's total net sales for the first nine months of 2011.

Net earnings per diluted Class A common share for the first nine months of 2011 were $0.29, compared to net earnings per diluted Class A common share of $1.19 for the first nine months of 2010.

Adjusted to exclude litigation charges, non-GAAP net earnings per diluted Class A common share were $0.53 for the first nine months of 2011, compared to non-GAAP net earnings per diluted Class A common share of $1.24 for the same period last year.

Net earnings per diluted Class B common share were $0.32 for the first nine months of 2011, compared to net earnings per diluted Class B common share of $1.27 for the first nine months of 2010.

Adjusted to exclude litigation charges, non-GAAP net earnings per diluted Class B common share were $0.58 for the first nine months of 2011, compared to non-GAAP net earnings per diluted Class B common share of $1.32 for the first nine months of 2010.

SynQor Legal Case

On July 11, 2011, the Court awarded supplemental damages of $2.5 million against Bel in the previously disclosed SynQor litigation.

Of this amount, $1.9 million is covered through an indemnification agreement with one of Bel's customers and the remaining $0.6 million was recorded during the second quarter as an expense by the Company.

During the third quarter of 2011, Bel recorded costs and interest associated with this lawsuit of $0.2 million. Bel is in the process of appealing the verdict and judgment, and has been advised that the full amount of the damage award plus costs and interest must be posted as a supersedeas bond upon filing of the notice of appeal. In October, Bel will post a total of $13.0 million in the form of a supersedeas bond to the Court in the Eastern District of Texas while the case is on appeal to the United States Court of Appeals.

{complink 9266|Bel Fuse Inc.}

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