Bel Fuse Inc. (NASDAQ:BELFA) and (NASDAQ:BELFB)
today announced preliminary financial results for the first quarter
of 2018.
First Quarter 2018
Highlights
- Net sales of $118.3 million, representing year-over-year growth
of 4.0%
- $178.3 million in backlog represents gain of $31.8 million, or
22%, from December 31, 2017
- GAAP net loss of $1.3 million compared to net earnings of $0.7
million in first quarter 2017
- Adjusted EBITDA of $5.3 million, or 4.5% of sales, versus $7.9
million, or 6.9% of sales, in first quarter 2017
- First quarter 2018 book-to-bill ratio of 1.27
Non-GAAP financial measures, such as Non-GAAP
EPS, EBITDA and Adjusted EBITDA, exclude the impact of costs
associated with ERP system implementation costs and restructuring
charges. Please refer to the financial information included with
this press release for reconciliations of GAAP financial measures
to Non-GAAP financial measures and our explanation of why we
present Non-GAAP financial measures.
CEO CommentsDaniel Bernstein,
President and CEO, said, “While first quarter sales showed modest
growth from the same period last year, we are more encouraged by
the continued growth in our backlog with heightened activity across
all of our major product groups and within each of our major end
markets. Since year-end, we saw a 33% increase in the backlog
at Connectivity Solutions, driven by recent awards on key military
programs, and a 25% increase at Magnetic Solutions, driven by
demand for our multi-gig variants of ICMs from our key networking
customers. Our Power Solutions and Protection backlog grew by 12%,
led by higher demand for our power supplies in the industrial and
rail industries, and orders from new customers within the
E-Mobility, Internet of Things and Blockchain segments.
"The majority of the sales growth in the first
quarter related to strong demand for our Magnetic Solutions
products, particularly our integrated connector modules within
industrial, Ethernet and server markets. Sales of our
Connectivity Solutions products were also higher in the first
quarter of 2018 with an increase in demand related to various
military programs and within the industrial market for oil and gas,
test and measurement, and broadcasting applications. Our
Power Solutions and Protection group, excluding the effects of our
divested NPS business, also contributed to our year-over-year sales
growth.
"While we are optimistic on the revenue front
for 2018, our results continue to be impacted by the weakening of
the U.S. Dollar, minimum wage increases in the PRC and increased
material costs related to certain of our purchased
components. Furthermore, our Power Solutions business has
also had an unfavorable impact on our bottom line, and we continue
to work on our plan to restore this business to a position of
profitability. Lastly, there have been recent tariff
proposals on U.S. imports that may impact our business. We are
carefully monitoring the status of these proposals and evaluating
various options in the event they are put into
effect.
"With our new credit facility in place and the
ability to cost-effectively repatriate foreign earnings under the
recent U.S. tax reform, we continue to evaluate acquisition targets
and believe this will be a key component of our strategic
development plan going forward,” concluded Mr.
Bernstein.
Financial Summary
All comparative percentages are on a
year-over-year basis, unless otherwise noted.
First Quarter 2018 Results
Net SalesNet sales were $118.3
million, up 4.0% from last year’s first quarter.
- By geographic segment, Europe was up by 15.8%, Asia was up by
7.8%, and North America was down by 1.6%.
- By product group, Magnetic Solutions sales were up by 9.3%,
Connectivity Solutions sales were 3.0% higher and Power Solutions
and Protection sales was up slightly by 0.2%.
- During the first quarter of 2018, 36% of our sales related to
our Connectivity Solutions products (versus 37% in 2017), 32%
related to our Magnetic products (versus 31% in 2017) and 32%
related to our Power Solutions and Protection products (versus 32%
in 2017).
On a consolidated basis, sales increased by $4.6
million in the first quarter of 2018 compared to the same period of
2017, despite a $1.6 million decline in sales related to the
winding down of our NPS product sales within the Power Solutions
Business.
Gross ProfitGross profit margin
decreased to 17.9%, from 20.6% in the first quarter of 2017,
primarily due to unfavorable foreign currency fluctuations, as the
Chinese Renminbi and Mexican Peso each appreciated by approximately
8% against the U.S. Dollar in the first quarter of 2018 compared to
the first quarter of 2017. Approximately 70% of the Company’s
associates and contract labor are located in the PRC and paid in
Renminbi and an additional 8% is located in Mexico and paid in
Pesos. Effective February 1, 2018, the PRC also issued an
increase to the minimum wage in a region where one of Bel’s
factories is located. We anticipate this increase in minimum
wage to result in higher labor costs of approximately $1.0 million
- $1.4 million per year at this facility going forward.
Selling, General and Administrative
Expenses (SG&A) SG&A expenses were $20.7 million,
down from $21.0 million in the first quarter of 2017. The reduction
in SG&A expenses primarily related to a $0.9 million reduction
in legal and professional fees compared to the first quarter of
2017, largely offset by an increase in foreign exchange loss of
$0.5 million and higher salaries and fringe benefit costs of $0.3
million.
Operating Income Operating
income was $0.4 million, down from $2.4 million in the first
quarter of 2017, with an operating margin of 0.4% compared to 2.1%
in the first quarter of 2017.
Income TaxesThe provision for
income taxes was $0.3 million in the first quarter of 2018 as
compared with a tax benefit of less than $0.1 million during the
same period of 2017. This resulted in an effective tax rate
of -33.2% during the first quarter of 2018, compared to an
effective tax rate of -3.2% during the same quarter last
year. The change in the effective tax rate is primarily
attributable to a decrease in the benefit arising from the losses
in the North America segment due to the reduction in the U.S. tax
rate from 35% in 2017 to 21% in 2018. Additionally, there was
an increase in the liability for uncertain tax positions in the
2018 period. The Company continues to evaluate updates to the new
tax law and may adjust its initial estimate of the transition tax
throughout 2018 as further information becomes available.
Net EarningsThe above factors
resulted in a net loss of $1.3 million in the first quarter of 2018
as compared with net earnings of $0.7 million in the first quarter
of 2017.
Balance Sheet Data
As of March 31, 2018, working capital was $184.1
million, including $66.9 million of cash and cash equivalents with
a current ratio of 3.1-to-1. In comparison, as of December
31, 2017, working capital was $178.8 million, including $69.4
million of cash and cash equivalents with a current ratio of
3.0-to-1. Total debt at March 31, 2018 was $122.0 million as
compared to $122.7 million at December 31, 2017, reflecting $0.7
million of debt repayments made during the first quarter of
2018.
Conference CallBel has
scheduled a conference call at 11:00 a.m. ET today. To
participate in the conference call, investors should dial
866-548-4713, or 323-794-2093 if dialing internationally. The
presentation will additionally be broadcast live over the Internet
and will be available at
https://ir.belfuse.com/events-and-presentations. The webcast will
be available via replay for a period of 20 days at this same
Internet address. For those unable to access the live call, a
telephone replay will be available at 844-512-2921, or 412-317-6671
if dialing internationally, using access code 3268259 after 2:00
p.m. ET, also for 20 days.
About BelBel (www.belfuse.com)
designs, manufactures and markets a broad array of products that
power, protect and connect electronic circuits. These
products are primarily used in the networking, telecommunications,
computing, military, aerospace, transportation and broadcasting
industries. Bel's product groups include Magnetic Solutions
(integrated connector modules, power transformers, power inductors
and discrete components), Power Solutions and Protection
(front-end, board-mount and industrial power products, module
products and circuit protection), and Connectivity Solutions
(expanded beam fiber optic, copper-based, RF and RJ connectors and
cable assemblies). The Company operates facilities around the
world.
Forward-Looking Statements
Non-historical information contained in this press release (such as
the statements regarding future acquisitions and increased labor
costs in the PRC) are forward-looking statements (as described
under the Private Securities Litigation Reform Act of 1995) that
involve risks and uncertainties. Actual results could differ
materially from Bel's projections. Among the factors that could
cause actual results to differ materially from such statements are:
the market concerns facing our customers; the continuing viability
of sectors that rely on our products; the effects of business and
economic conditions; difficulties associated with integrating
recently acquired companies; capacity and supply constraints or
difficulties; product development, commercialization or
technological difficulties; the regulatory and trade environment;
risks associated with foreign currencies; uncertainties associated
with legal proceedings; the market's acceptance of the Company's
new products and competitive responses to those new products; our
ongoing evaluation of the consequences of the U.S. Tax Cuts and
Jobs Act; and the risk factors detailed from time to time in the
Company's SEC reports. In light of the risks and uncertainties
impacting our business, there can be no assurance that any
forward-looking statement will in fact prove to be correct. We
undertake no obligation to update or revise any forward looking
statements.
Non-GAAP Financial MeasuresThe
non-GAAP measures identified in this press release as well as in
the supplementary information to this press release (Non-GAAP EPS,
EBITDA and Adjusted EBITDA) are not measures of performance under
accounting principles generally accepted in the United States of
America ("GAAP"). These measures should not be considered a
substitute for, and the reader should also consider, income from
operations, net earnings, earnings per share and other measures of
performance as defined by GAAP as indicators of our performance or
profitability. Our non-GAAP measures may not be comparable to other
similarly-titled captions of other companies due to differences in
the method of calculation. We present results adjusted to
exclude the effects of certain unusual or special items and their
related tax impact that would otherwise be included under U.S.
GAAP, to aid in comparisons with other periods. We may use
Non-GAAP financial measures to determine performance-based
compensation and management believes that this information may be
useful to investors.
Website InformationWe routinely
post important information for investors on our
website, www.belfuse.com, in the "Investor Relations" section.
We use our website as a means of disclosing material, otherwise
non-public information and for complying with our disclosure
obligations under Regulation FD. Accordingly, investors should
monitor the Investor Relations section of our website, in addition
to following our press releases, SEC filings, public conference
calls, presentations and webcasts. The information contained on, or
that may be accessed through, our website is not incorporated by
reference into, and is not a part of, this document.
[Financial tables follow]
|
Bel Fuse Inc. |
Supplementary
Information(1) |
Condensed Consolidated Statements of
Operations |
(in thousands, except per share
amounts) |
(unaudited) |
|
|
|
|
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
2018 |
|
2017 |
|
|
|
|
(Revised) |
Net sales |
|
$ |
118,251 |
|
|
$ |
113,668 |
|
Cost of
sales |
|
|
97,118 |
|
|
|
90,305 |
|
Gross profit |
|
|
21,133 |
|
|
|
23,363 |
|
As a %
of net sales |
|
|
17.9% |
|
|
|
20.6% |
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
|
20,692 |
|
|
|
20,975 |
|
As a %
of net sales |
|
|
17.5% |
|
|
|
18.5% |
|
Restructuring charges |
|
|
4 |
|
|
|
33 |
|
|
|
|
|
|
Income from operations |
|
|
437 |
|
|
|
2,355 |
|
As a %
of net sales |
|
|
0.4% |
|
|
|
2.1% |
|
|
|
|
|
|
Interest
expense |
|
|
(1,177 |
) |
|
|
(1,424 |
) |
Other
income/expense, net |
|
|
(238 |
) |
|
|
(208 |
) |
(Loss) earnings before benefit for income
taxes |
|
|
(978 |
) |
|
|
723 |
|
|
|
|
|
|
Provision for (benefit from) income taxes(3) |
|
|
325 |
|
|
|
(23 |
) |
Effective tax rate |
|
|
-33.2% |
|
|
|
-3.2% |
|
Net (loss) earnings |
|
$ |
(1,303 |
) |
|
$ |
746 |
|
As a %
of net sales |
|
|
-1.1% |
|
|
|
0.7% |
|
|
|
|
|
|
Weighted
average number of shares outstanding: |
|
|
|
|
Class A common shares -
basic and diluted |
|
|
2,175 |
|
|
|
2,175 |
|
Class B common shares -
basic and diluted |
|
|
9,856 |
|
|
|
9,845 |
|
|
|
|
|
|
Net (loss)
earnings per common share: |
|
|
|
|
Class A common shares -
basic and diluted |
|
$ |
(0.11 |
) |
|
$ |
0.05 |
|
Class B common shares -
basic and diluted |
|
$ |
(0.11 |
) |
|
$ |
0.06 |
|
|
(1) The supplementary information included in this press
release for 2018 is preliminary and subject to change prior to the
filing of our upcoming Quarterly Report on Form 10-Q with the
Securities and Exchange Commission. |
|
(2) The statement of operations for the three months ended
March 31, 2017 reflects immaterial reclassifications related to the
retrospective adoption of new accounting guidance related to
presentation of pension costs within the statement of
operations. There was no impact on net earnings in connection
with the adoption of this guidance. |
|
|
Bel Fuse Inc. |
Supplementary
Information(1) |
Condensed Consolidated Balance
Sheets |
(in thousands, unaudited) |
|
|
|
March 31, |
|
December 31, |
|
|
2018 |
|
2017 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
66,852 |
|
|
$ |
69,354 |
|
Accounts
receivable, net |
|
|
76,787 |
|
|
|
78,808 |
|
Inventories |
|
|
102,693 |
|
|
|
107,719 |
|
Other
current assets |
|
|
23,647 |
|
|
|
10,218 |
|
Total current assets |
|
|
269,979 |
|
|
|
266,099 |
|
Property, plant and equipment, net |
|
|
43,322 |
|
|
|
43,495 |
|
Goodwill
and other intangible assets, net |
|
|
88,705 |
|
|
|
89,543 |
|
Other
assets |
|
|
33,388 |
|
|
|
32,128 |
|
Total assets |
|
$ |
435,394 |
|
|
$ |
431,265 |
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
48,169 |
|
|
$ |
47,947 |
|
Current
portion of long-term debt |
|
|
2,642 |
|
|
|
2,641 |
|
Other
current liabilities |
|
|
35,073 |
|
|
|
36,712 |
|
Total current liabilities |
|
|
85,884 |
|
|
|
87,300 |
|
Long-term debt |
|
|
119,390 |
|
|
|
120,053 |
|
Other
liabilities |
|
|
65,945 |
|
|
|
65,952 |
|
Total liabilities |
|
|
271,219 |
|
|
|
273,305 |
|
Stockholders' equity |
|
|
164,175 |
|
|
|
157,960 |
|
Total liabilities and stockholders' equity |
|
$ |
435,394 |
|
|
$ |
431,265 |
|
|
|
|
|
|
(1) The supplementary information included in this
press release for 2018 is preliminary and subject to change prior
to the filing of our upcoming Quarterly Report on Form 10-Q
with the Securities and Exchange Commission. |
|
|
Bel Fuse Inc. |
Supplementary
Information(1) |
Reconciliation of GAAP Net Earnings to EBITDA
and Adjusted EBITDA(2) |
(in thousands, unaudited) |
|
|
|
Three Months
Ended |
|
|
March 31, |
|
|
2018 |
|
2017 |
|
|
|
|
|
GAAP Net (loss) earnings |
|
$ |
(1,303 |
) |
|
$ |
746 |
|
Interest expense |
|
|
1,177 |
|
|
|
1,424 |
|
Provision for (benefit from) income taxes |
|
|
325 |
|
|
|
(23 |
) |
Depreciation and
amortization |
|
|
4,776 |
|
|
|
5,227 |
|
EBITDA |
|
$ |
4,975 |
|
|
$ |
7,374 |
|
% of net sales |
|
|
4.2% |
|
|
|
6.5% |
|
|
|
|
|
|
Unusual or
special items: |
|
|
|
|
ERP
system implementation consulting costs |
|
|
323 |
|
|
|
449 |
|
Restructuring charges |
|
|
4 |
|
|
|
33 |
|
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
5,302 |
|
|
$ |
7,856 |
|
% of net sales |
|
|
4.5% |
|
|
|
6.9% |
|
|
|
|
|
|
|
|
|
|
|
(1) The supplementary information included in this press
release for 2018 is preliminary and subject to change prior to the
filing of our upcoming Quarterly Report on Form 10-Q with the
Securities and Exchange Commission. |
|
(2) In this press release and supplemental information, we have
included Non-GAAP financial measures, including Non-GAAP EPS,
EBITDA and Adjusted EBITDA. We present results adjusted to exclude
the effects of certain specified items and their related tax impact
that would otherwise be included under GAAP, to aid in comparisons
with other periods. We may use Non-GAAP financial measures to
determine performance-based compensation and management believes
that this information may be useful to investors. |
|
|
The following tables detail the impact of certain unusual or
non-recurring items had on the Company's net earnings per common
Class A and Class B basic and diluted shares ("EPS") and the line
items these items were included on the condensed consolidated
statements of operations. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
2018 |
|
Three Months Ended March 31,
2017 |
Reconciling Items |
|
(Loss) earningsbefore taxes |
|
Provision forincometaxes |
|
Net (loss)earnings |
|
Class AEPS |
|
Class BEPS |
|
Earningsbefore taxes |
|
Benefit fromincome taxes |
|
Net earnings |
|
Class AEPS |
|
Class BEPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP measures |
|
$ |
(978 |
) |
|
$ |
325 |
|
$ |
(1,303 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.11 |
) |
|
$ |
723 |
|
$ |
(23 |
) |
|
$ |
746 |
|
$ |
0.05 |
|
$ |
0.06 |
Items
included in SG&A expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ERP
system implementation consulting costs |
|
|
323 |
|
|
|
61 |
|
|
262 |
|
|
|
0.02 |
|
|
|
0.02 |
|
|
|
449 |
|
|
140 |
|
|
|
309 |
|
|
0.02 |
|
|
0.03 |
Restructuring
charges |
|
|
4 |
|
|
|
1 |
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
33 |
|
|
(2 |
) |
|
|
35 |
|
|
- |
|
|
- |
Non-GAAP
measures |
|
$ |
(651 |
) |
|
$ |
387 |
|
$ |
(1,038 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.09 |
) |
|
$ |
1,205 |
|
$ |
115 |
|
|
$ |
1,090 |
|
$ |
0.07 |
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
Contact:Darrow Associatestel
516.419.9915pseltzberg@darrowir.com |
|
Company Contact:Daniel
BernsteinPresidentir@belf.com |
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