NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
|
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
|
The condensed consolidated balance sheet as of March 31, 2013, and the condensed consolidated statements of operations, comprehensive income and cash flows for the periods presented herein have been prepared by Bel Fuse Inc. (the “Company” or “Bel”) and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The results for the three months ended March 31, 2013 should not be viewed as indicative of the Company’s annual results or the Company’s results for any other period. The information for the condensed consolidated balance sheet as of December 31, 2012 was derived from audited financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Bel Fuse Annual Report on Form 10-K for the year ended December 31, 2012.
On March 9, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of GigaCom Interconnect AB (“GigaCom”). On July 31, 2012, the Company consummated its acquisition of 100% of the issued and outstanding capital stock of Fibreco Ltd. (“Fibreco”). On September 12, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Powerbox Italia S.r.L. and its subsidiary, Powerbox Design (collectively, “Powerbox”). The acquisitions of GigaCom, Fibreco and Powerbox may hereafter be referred to collectively as either the “2012 Acquisitions” or the “2012 Acquired Companies”. On March 29, 2013, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Transpower Technologies (HK) Limited and certain other tangible and intangible assets of TE Connectivity. Accordingly, as of the respective acquisition dates, all of the assets acquired and liabilities assumed were recorded at their preliminary fair values and the Company’s condensed consolidated results of operations for the three months ended March 31, 2013 and March 31, 2012 include the operating results of the acquired companies from their respective acquisition date through the respective period end dates. The measurement period adjustments impacting the first quarter of 2012 related solely to an immaterial amount of depreciation associated with GigaCom. Due to the immaterial amount, the results of operations and cash flows for the three months ended March 31, 2012 have not been restated to reflect this measurement period adjustment.
Recent Accounting Pronouncements
The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. There were no significant changes to these accounting policies during the three months ended March 31, 2013. Recent accounting pronouncements adopted during the first quarter of 2013 are as follows:
Accounting Standards Update No. 2012-02 – Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (“ASU No. 2012-02”)
ASU No. 2012-02 amends ASU No. 2011-08,
Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment,
and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30,
Intangibles - Goodwill and Other - General Intangibles Other than Goodwill
. The Company adopted ASU No. 2012-02 during the first quarter of 2013. The adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.
Accounting Standards Update No. 2013-02 – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU No. 2013-02”)
ASU No. 2013-02 requires disclosure of amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present either on the face of the consolidated statements of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net earnings but only if the amount reclassified is required to be reclassified to net earnings in its entirety in the same reporting period. For amounts not reclassified in their entirety to net earnings, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. The Company adopted ASU No. 2013-02 during the first quarter of 2013. The adoption of this update did not have a material effect on the Company’s condensed consolidated financial statements.
2.
|
(LOSS) EARNINGS PER SHARE
|
The Company utilizes the two-class method to report its (loss) earnings per share. The two-class method is a (loss) earnings allocation formula that determines (loss) earnings per share for each class of common stock according to dividends declared and participation rights in undistributed (loss) earnings. The Company’s Certificate of Incorporation, as amended, states that Class B common shares are entitled to dividends at least 5% greater than dividends paid to Class A common shares, resulting in the two-class method of computing (loss) earnings per share. In computing (loss) earnings per share, the Company has allocated dividends declared to Class A and Class B based on amounts actually declared for each class of stock and 5% more of the undistributed (loss) earnings have been allocated to Class B shares than to the Class A shares on a per share basis. Basic (loss) earnings per common share are computed by dividing net (loss) earnings by the weighted-average number of common shares outstanding during the period. Diluted (loss) earnings per common share, for each class of common stock, are computed by dividing net (loss) earnings by the weighted-average number of common shares and potential common shares outstanding during the period. There were no potential common shares outstanding during the three months ended March 31, 2013 or 2012 which would have had a dilutive effect on earnings per share.
The (loss) earnings and weighted-average shares outstanding used in the computation of basic and diluted (loss) earnings per share are as follows (dollars in thousands, except share and per share data):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
Net (loss) earnings
|
|
$
|
(553
|
)
|
|
$
|
876
|
|
Less Dividends:
|
|
|
|
|
|
|
|
|
Class A
|
|
|
130
|
|
|
|
130
|
|
Class B
|
|
|
632
|
|
|
|
675
|
|
Undistributed (loss) earnings
|
|
$
|
(1,315
|
)
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
Undistributed (loss) earnings allocation - basic and diluted:
|
|
|
|
|
|
|
|
|
Class A undistributed (loss) earnings
|
|
$
|
(241
|
)
|
|
$
|
13
|
|
Class B undistributed (loss) earnings
|
|
|
(1,074
|
)
|
|
|
58
|
|
Total undistributed (loss) earnings
|
|
$
|
(1,315
|
)
|
|
$
|
71
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings allocation - basic and diluted:
|
|
|
|
|
|
|
|
|
Class A allocated (loss) earnings
|
|
$
|
(111
|
)
|
|
$
|
143
|
|
Class B allocated (loss) earnings
|
|
|
(442
|
)
|
|
|
733
|
|
Net (loss) earnings
|
|
$
|
(553
|
)
|
|
$
|
876
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
Class A common share - basic and diluted
|
|
|
2,174,912
|
|
|
|
2,174,912
|
|
Class B common share - basic and diluted
|
|
|
9,221,104
|
|
|
|
9,631,805
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
Class A common share - basic and diluted
|
|
$
|
(0.05
|
)
|
|
$
|
0.07
|
|
Class B common share - basic and diluted
|
|
$
|
(0.05
|
)
|
|
$
|
0.08
|
|
3. ACQUISITIONS
2013 Acquisition
:
On March 29, 2013, the Company acquired 100% of the outstanding shares of Transpower Technology (HK) Limited (“Transpower”), certain intellectual property and other tangible assets related to the Transpower magnetics business of TE Connectivity (“TE”) for $22.4 million in cash and additional consideration including the assumption of $0.1 million in liabilities and the grant of a license to TE related to three of the Company’s patents. The Company has accrued $7.2 million of additional consideration payable to TE related to a working capital adjustment at March 31, 2013. Transpower Technology (HK) Limited is the sole shareholder of Dongguan Transpower Electronic Products Co., Ltd. in the People's Republic of China. The operations acquired are now doing business as TRP Connector (“TRP”). The Company’s purchase of the TRP magnetics business consisted of the integrated connector module (“ICM”) family of products, including RJ45, 10/100 Gigabit, 10G, PoE/PoE+, MRJ21 and RJ.5, a line of modules for smart-grid applications, and discrete magnetics.
During the three months ended March 31, 2013, the Company incurred $0.3 million of acquisition-related costs associated with TRP. These costs are included in selling, general and administrative expense in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2013.
While the initial accounting related to the TRP acquisition is not complete as of the filing date of this Form 10-Q, the following table depicts the Company’s initial estimate of the acquisition date fair values of the consideration paid or payable and identifiable net assets acquired (in thousands):
|
|
March 29, 2013
|
|
|
Cash
|
|
$
|
8,388
|
|
|
Accounts receivable
|
|
|
11,580
|
|
|
Inventories
|
|
|
6,258
|
|
(a)
|
Other current assets
|
|
|
1,953
|
|
|
Property, plant and equipment
|
|
|
4,693
|
|
(b)
|
Intangible assets
|
|
|
-
|
|
(c)
|
Other assets
|
|
|
1,151
|
|
|
Total identifiable assets
|
|
|
34,023
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(8,565
|
)
|
|
Accrued expenses
|
|
|
(4,003
|
)
|
|
Other current liabilities
|
|
|
(25
|
)
|
|
Total liabilities assumed
|
|
|
(12,593
|
)
|
|
Net identifiable assets acquired
|
|
|
21,430
|
|
|
Goodwill
|
|
|
8,278
|
|
(d)
|
Net assets acquired
|
|
$
|
29,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
|
|
$
|
22,400
|
|
|
Assumption of severance payment
|
|
|
109
|
|
|
Fair value of grant of license
|
|
|
-
|
|
(e)
|
Fair value of consideration transferred
|
|
|
22,509
|
|
|
Deferred consideration
|
|
|
7,199
|
|
(f)
|
Total consideration paid/payable
|
|
$
|
29,708
|
|
|
(a)
|
The determination of fair value related to the inventory acquired was still in progress as of the date of this filing. The amount above represents only the carrying value of the inventory on TRP’s balance sheet as of the acquisition date.
|
(b)
|
The appraisals related to machinery and equipment acquired were incomplete as of this filing date and, as such, the amount noted above represents only the carrying value of those assets as of the acquisition date.
|
(c)
|
The Company has identified certain intangible assets related to the TRP acquisition, including technology, license agreements and customer lists, which are being valued by a third-party appraiser. These appraisals were not complete as of the date of this filing.
|
(d)
|
The amount of goodwill is provisional as of the filing date, as the fair value determination of inventory acquired, and appraisals related to property, plant and equipment and various intangible assets are still underway. As the final amount of goodwill has not yet been determined or allocated by segment, the Company is unable to determine at this time the portion of goodwill, if any, that will be deductible for tax purposes.
|
(e)
|
As part of the consideration paid or payable, the Company granted Tyco a license related to three of the Company’s patents. The valuation related to this license grant was not complete as of the date of this filing.
|
(f)
|
Deferred consideration represents the Company’s estimate of a working capital adjustment which is payable to the seller. Such adjustment must be agreed upon between the Company and the seller, and has not yet been finalized as of the date of this filing.
|
There were no operations related to TRP between the March 29, 2013 acquisition date and March 31, 2013. As a result, TRP’s results of operations had no impact on the Company’s condensed consolidated statement of operations for the three months ended March 31, 2013. The preliminary fair values of net assets acquired, as noted above, are included in the Company’s condensed consolidated balance sheet at March 31, 2013. The unaudited pro forma information below presents the combined operating results of the Company and TRP. The unaudited pro forma results are presented for illustrative purposes only. They do not reflect the realization of any potential cost savings, or any related integration costs. Certain cost savings may result from the TRP acquisition; however, there can be no assurance that these cost savings will be achieved. These pro forma results do not purport to be indicative of the results that would have actually been obtained if the TRP acquisition had occurred as of January 1, 2012, nor is the pro forma data intended to be a projection of results that may be obtained in the future.
The following unaudited pro forma consolidated results of operations assume that the acquisition of TRP was completed as of January 1, 2012. The pro forma results noted below for the three months ended March 31, 2012 also assume the effects of the 2012 Acquisitions discussed below (dollars in thousands except per share data):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
83,529
|
|
|
$
|
86,410
|
|
Net earnings
|
|
|
2,129
|
|
|
|
2,720
|
|
Earnings per Class A common share - basic and diluted
|
|
|
0.18
|
|
|
|
0.22
|
|
Earnings per Class B common share - basic and diluted
|
|
|
0.19
|
|
|
|
0.23
|
|
2012 Acquisitions
:
On March 9, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of GigaCom with a cash payment of $2.7 million (£1.7 million). GigaCom, located in Gothenburg, Sweden, is a supplier of expanded beam fiber optic technology and a participant in the development of next-generation commercial aircraft components. GigaCom has become part of Bel’s Cinch Connector business. Management believes that GigaCom’s offering of expanded beam fiber optic products will enhance the Company’s position within the growing aerospace and military markets.
On July 31, 2012, the Company consummated its acquisition of 100% of the issued and outstanding capital stock of Fibreco with a cash payment, net of $2.7 million of cash acquired, of $13.7 million (£8.7 million). Fibreco, located in the United Kingdom, is a supplier of a broad range of expanded beam fiber optic components for use in military communications, outside broadcast and offshore exploration applications. Fibreco has become part of Bel’s interconnect product group under the Cinch Connector business. Management believes that the addition of Fibreco’s fiber optic-based product line to Cinch’s broad range of copper-based products will increase Cinch’s presence in emerging fiber applications within the military, aerospace and industrial markets. In addition, management believes the acquisition provides access to a range of customers for the recently acquired GigaCom EBOSA® product.
On September 12, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Powerbox with a cash payment, net of $0.2 million of cash acquired, of $3.0 million. The Company also granted 30,000 restricted shares of the Company’s Class B common stock in connection with this acquisition. Compensation expense equal to the grant date fair value of these restricted shares of $0.6 million is being recorded ratably through September 2014. Powerbox, located near Milan, Italy, develops high-power AC-DC power conversion solutions targeted at the broadcasting market. The acquisition of Powerbox will allow Bel to expand its portfolio of power product offerings to include AC-DC products and will also establish a European design center located close to several of Bel’s existing customers.
During the three months ended March 31, 2013 and 2012, the Company incurred $0.1 million and less than $0.1 million, respectively, of acquisition-related costs relating to the 2012 Acquisitions. These costs are included in selling, general and administrative expense in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2012.
During the first quarter of 2013, the Company completed the purchase accounting related to its acquisitions of GigaCom and Fibreco. While the initial accounting related to the Powerbox acquisition is not complete as of the filing date of this Form 10-Q, the following table depicts the Company’s estimated acquisition date fair values of the consideration transferred and identifiable net assets acquired related to the 2012 Acquisitions (in thousands):
|
|
|
|
|
Measurement
|
|
|
Acquisition-Date
|
|
|
|
Acquisition-Date
|
|
|
Period
|
|
|
Fair Values
|
|
|
|
Fair Values
|
|
|
Adjustments (a)
|
|
|
(As adjusted)
|
|
Cash and cash equivalents
|
|
$
|
2,991
|
|
|
$
|
-
|
|
|
$
|
2,991
|
|
Accounts receivable
|
|
|
3,750
|
|
|
|
224
|
|
|
|
3,974
|
|
Inventories
|
|
|
1,061
|
|
|
|
(16
|
)
|
|
|
1,045
|
|
Other current assets
|
|
|
90
|
|
|
|
-
|
|
|
|
90
|
|
Property, plant and equipment
|
|
|
502
|
|
|
|
248
|
|
|
|
750
|
|
Intangible assets
|
|
|
30
|
|
|
|
10,358
|
|
|
|
10,388
|
|
Total identifiable assets
|
|
|
8,424
|
|
|
|
10,814
|
|
|
|
19,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(1,702
|
)
|
|
|
-
|
|
|
|
(1,702
|
)
|
Accrued expenses
|
|
|
(1,736
|
)
|
|
|
-
|
|
|
|
(1,736
|
)
|
Notes payable
|
|
|
(216
|
)
|
|
|
-
|
|
|
|
(216
|
)
|
Income taxes payable
|
|
|
(264
|
)
|
|
|
(60
|
)
|
|
|
(324
|
)
|
Deferred income tax liability, current
|
|
|
(70
|
)
|
|
|
-
|
|
|
|
(70
|
)
|
Deferred income tax liability, noncurrent
|
|
|
-
|
|
|
|
(2,297
|
)
|
|
|
(2,297
|
)
|
Other long-term liabilities
|
|
|
(216
|
)
|
|
|
-
|
|
|
|
(216
|
)
|
Total liabilities assumed
|
|
|
(4,204
|
)
|
|
|
(2,357
|
)
|
|
|
(6,561
|
)
|
Net identifiable assets acquired
|
|
|
4,220
|
|
|
|
8,457
|
|
|
|
12,677
|
|
Goodwill
|
|
|
17,965
|
|
|
|
(8,241
|
)
|
|
|
9,724
|
|
Net assets acquired
|
|
$
|
22,185
|
|
|
$
|
216
|
|
|
$
|
22,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
|
|
$
|
22,138
|
|
|
|
263
|
|
|
$
|
22,401
|
|
Deferred consideration
|
|
|
47
|
|
|
|
(47
|
)
|
|
|
-
|
|
Fair value of consideration transferred
|
|
$
|
22,185
|
|
|
$
|
216
|
|
|
$
|
22,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) There were no measurement period adjustments recorded during the three months ended March 31, 2013 related to the 2012
|
|
acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
The results of operations of the 2012 Acquired Companies have been included in the Company’s consolidated financial statements for the periods subsequent to their respective acquisition dates. During the three months ended March 31, 2013, the 2012 Acquisitions contributed $2.9 million of revenues and $0.8 million of net earnings to the Company. The 2012 Acquisitions had an immaterial contribution to the Company’s revenues and net earnings during the first quarter of 2012.
4. FAIR VALUE MEASUREMENTS
Fair value is defined as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level 1
– Observable inputs such as quoted market prices in active markets
Level 2
– Inputs other than quoted prices in active markets that are either directly or indirectly observable
Level 3
– Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions
As of March 31, 2013 and December 31, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of securities that are among the Company’s investments in a rabbi trust which are intended to fund the Company’s Supplemental Executive Retirement Plan (“SERP”) obligations, and other marketable securities described below. The securities that are held in the rabbi trust are categorized as available-for-sale securities and are included as other assets in the accompanying condensed consolidated balance sheets at March 31, 2013 and December 31, 2012.
As of March 31, 2013 and December 31, 2012, the Company had marketable securities with a combined fair value of less than $0.1 million at each date, and gross unrealized losses of less than $0.1 million at each date. Such unrealized losses are included, net of tax, in accumulated other comprehensive loss. The fair value of the equity securities is determined based on quoted market prices in public markets and is categorized as Level 1. The Company does not have any financial assets measured at fair value on a recurring basis categorized as Level 3, and there were no transfers in or out of Level 1, Level 2 or Level 3 during the three months ended March 31, 2013 and 2012. There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the three months ended March 31, 2013.
The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of March 31, 2013 and December 31, 2012 (dollars in thousands).
|
|
|
|
|
Assets at Fair Value Using
|
|
|
|
Total
|
|
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
|
|
Significant Other Observable Inputs (Level 2)
|
|
|
Significant Unobservable Inputs (Level 3)
|
|
As of March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments held in rabbi trust
|
|
$
|
6,150
|
|
|
$
|
6,150
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Marketable securities
|
|
|
3
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,153
|
|
|
$
|
6,153
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments held in rabbi trust
|
|
$
|
6,014
|
|
|
$
|
6,014
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Marketable securities
|
|
|
2
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,016
|
|
|
$
|
6,016
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company has other financial instruments, such as cash equivalents, accounts receivable, accounts payable, notes payable and accrued expenses, which are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of March 31, 2013 or December 31, 2012.
Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment on the occurrence of a triggering event or, in the case of goodwill and indefinite-lived intangible assets, on at least an annual basis. There were no triggering events that occurred during the three months ended March 31, 2013 or 2012 that would warrant interim impairment testing.
5. INVENTORIES
The components of inventories are as follows (dollars in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Raw materials
|
|
$
|
29,482
|
|
|
$
|
26,157
|
|
Work in progress
|
|
|
11,600
|
|
|
|
8,200
|
|
Finished goods
|
|
|
19,614
|
|
|
|
20,567
|
|
|
|
$
|
60,696
|
|
|
$
|
54,924
|
|
6. BUSINESS SEGMENT INFORMATION
The Company operates in one industry with three reportable operating segments, which are geographic in nature. The segments consist of North America, Asia and Europe. The primary criteria by which financial performance is evaluated and resources are allocated are sales and income from operations. The following is a summary of key financial data (dollars in thousands):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Total segment sales:
|
|
|
|
|
|
|
North America
|
|
$
|
29,222
|
|
|
$
|
36,525
|
|
Asia
|
|
|
32,725
|
|
|
|
34,847
|
|
Europe
|
|
|
10,125
|
|
|
|
7,990
|
|
Total segment sales
|
|
|
72,072
|
|
|
|
79,362
|
|
Reconciling item:
|
|
|
|
|
|
|
|
|
Intersegment sales
|
|
|
(9,044
|
)
|
|
|
(13,801
|
)
|
Net sales
|
|
$
|
63,028
|
|
|
$
|
65,561
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations:
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
(1,482
|
)
|
|
$
|
2,310
|
|
Asia
|
|
|
(666
|
)
|
|
|
(1,562
|
)
|
Europe
|
|
|
728
|
|
|
|
686
|
|
|
|
$
|
(1,420
|
)
|
|
$
|
1,434
|
|
The following items are included in the (loss) income from operations presented above:
Recent Acquisitions
– During the three months ended March 31, 2013, the 2012 Acquired Companies contributed combined revenues of $2.9 million and estimated income from operations of $0.8 million, respectively, to the Company’s Europe operating segment. The first of the 2012 Acquisitions occurred on March 9, 2012 with the acquisition of GigaCom and, as a result, the 2012 Acquisitions did not have a material impact on the Company’s condensed consolidated statement of operations for the three months ended March 31, 2012.
Segment Sales
– Segment sales are attributed to individual segments based on the geographic source of the billing for such customer sales. Transfers between geographic areas include finished products manufactured in foreign countries which are then transferred to the United States and Europe for sale; finished goods manufactured in the United States which are transferred to Europe and Asia for sale; and semi-finished components manufactured in the United States which are sold to Asia for further processing. (Loss) income from operations represents net sales less operating costs and expenses.
7. INCOME TAXES
At March 31, 2013 and December 31, 2012, the Company has approximately $2.7 million of liabilities for uncertain tax positions ($0.5 million included in income taxes payable and $2.2 million, included in liability for uncertain tax positions) all of which, if recognized, would reduce the Company’s effective tax rate.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2010 and for state examinations before 2007. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2004 in Asia and generally 2006 in Europe.
As a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized benefits for tax positions taken regarding previously filed tax returns may change materially from those recorded as liabilities for uncertain tax positions in the Company’s condensed consolidated financial statements at March 31, 2013. A total of $0.6 million of previously recorded liabilities for uncertain tax positions relates principally to the 2007 tax year. The statute of limitations related to these liabilities is scheduled to expire on September 15, 2013.
The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits arising from uncertain tax positions as a component of the current provision for income taxes. During the three months ended March 31, 2013 and 2012, the Company recognized an immaterial amount of interest and penalties and no interest and penalties, respectively, in the condensed consolidated statements of operations. The Company has approximately $0.2 million accrued for the payment of interest and penalties at March 31, 2013 and December 31, 2012, which is included in the liability for uncertain tax positions in the accompanying condensed consolidated balance sheets at each date.
Upon the acquisition of Fibreco, Fibreco had a deferred tax liability in the amount of $0.1 million arising from various temporary differences. In connection with the 2012 Acquisitions, the Company was required to complete a preliminary fair market value report of property, plant and equipment and intangibles. As a result of that report, the Company established deferred tax liabilities at the date of acquisition in the amounts of $1.7 million and $0.6 million, respectively, for the Fibreco and GigaCom acquisitions. At March 31, 2013 and December 31, 2012, a combined deferred tax liability of $2.1 million and $2.2 million, respectively, remains on the condensed consolidated balance sheets. Upon completion of the acquisition of TRP, TRP had deferred tax assets of $2.2 million arising from various temporary differences, which are included in the condensed consolidated balance sheet at March 31, 2013. At March 31, 2013, the fair market value reports have not been completed and therefore the Company had no additional deferred tax amounts relating to the Powerbox and TRP acquisitions.
The Company has made elections under Internal Revenue Code (“IRC”) Section 338(g) to step-up the tax basis of the 2012 acquisitions to fair value. The elections made under Section 338(g) only affect the U.S. income taxes (not those of the foreign countries where the acquired entities were incorporated).
On January 2, 2013, President Obama signed the “American Taxpayer Relief Act” (“ATRA”). Among other things, ATRA extends the Research and Experimentation credit (“R&E”), which expired at the end of 2011, through 2013 and 2014, respectively. Under Accounting Standards Codification (“ASC”) 740,
Income Taxes
, the effects of the new legislation are recognized upon enactment, which is when the President signs a tax bill into law. Although the extenders were effective retroactively for 2012, the Company could only consider currently enacted tax law as of the balance sheet date in determining current and deferred taxes at December 31, 2012. During the quarter ended March 31, 2013, the Company recognized the $0.4 million R&E credit from 2012 as an increase in the March 31, 2013 quarterly benefit for income taxes.
The Company continues to monitor proposed legislation affecting the taxation of transfers of U.S. intangible property and other potential tax law changes.
8. ACCRUED EXPENSES
Accrued expenses consist of the following (dollars in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Sales commissions
|
|
$
|
1,224
|
|
|
$
|
1,295
|
|
Subcontracting labor
|
|
|
1,960
|
|
|
|
2,408
|
|
Salaries, bonuses and related benefits
|
|
|
8,163
|
|
|
|
6,023
|
|
Litigation reserve
|
|
|
11,549
|
|
|
|
11,549
|
|
Consideration payable on Transpower acquisition
|
|
|
7,199
|
|
|
|
-
|
|
Other
|
|
|
4,342
|
|
|
|
4,085
|
|
|
|
$
|
34,437
|
|
|
$
|
25,360
|
|
9. RETIREMENT FUND AND PROFIT SHARING PLAN
The Company maintains the Bel Fuse Inc. Employees’ Savings Plan, a defined contribution plan that is intended to meet the applicable requirements for tax-qualification under sections 401(a) and (k) of the IRC. The Employees’ Savings Plan allows eligible employees to voluntarily contribute a percentage of their eligible compensation, subject to Code limitations, which contributions are matched by the Company. The Company’s matching contributions are equal to 100% of the first 1% of compensation contributed by participants, and 50% of the next 5% of compensation contributed by participants. The expense for the three months ended March 31, 2013 and 2012 amounted to approximately $0.1 million in each period. Prior to January 1, 2012, the plan’s structure provided for a Company match and discretionary profit sharing contributions that were made in the form of the Company’s common stock. As of March 31, 2013, the plan owned 15,325 and 216,867 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.
The Company’s subsidiaries in Asia, other than TRP, 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 must contribute a minimum of 5% of eligible salary, as determined by Hong Kong government regulations. The Company currently contributes 7% of eligible salary in cash or Company stock. The expense for the three months ended March 31, 2013 and 2012 amounted to approximately $0.1 million in each period. As of March 31, 2013, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.
The SERP is designed to provide a limited group of key management and highly compensated employees of the Company with supplemental retirement and death benefits.
The components of SERP expense are as follows (dollars in thousands):
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Service cost
|
|
$
|
139
|
|
|
$
|
109
|
|
Interest cost
|
|
|
112
|
|
|
|
104
|
|
Amortization of adjustments
|
|
|
77
|
|
|
|
58
|
|
Total SERP expense
|
|
$
|
328
|
|
|
$
|
271
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
Balance sheet amounts:
|
|
|
|
|
|
|
Minimum pension obligation
|
|
|
|
|
|
|
and unfunded pension liability
|
|
$
|
11,462
|
|
|
$
|
11,045
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated
|
|
|
|
|
|
|
|
|
other comprehensive loss, pretax:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
1,005
|
|
|
$
|
877
|
|
Net gains
|
|
|
2,844
|
|
|
|
2,884
|
|
|
|
$
|
3,849
|
|
|
$
|
3,761
|
|
10. ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of accumulated other comprehensive loss at March 31, 2013 and December 31, 2012 are summarized below (dollars in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
$
|
(486
|
)
|
|
$
|
927
|
|
Unrealized holding losses on available-for-sale
|
|
|
|
|
|
|
|
|
securities, net of taxes of $213 and $161 as of
|
|
|
|
|
|
|
|
|
March 31, 2013 and December 31, 2012
|
|
|
341
|
|
|
|
256
|
|
Unfunded SERP liability, net of taxes of ($1,178) and ($1,151) as
|
|
|
|
|
|
|
|
|
of March 31, 2013 and December 31, 2012
|
|
|
(2,671
|
)
|
|
|
(2,610
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(2,816
|
)
|
|
$
|
(1,427
|
)
|
Changes in accumulated other comprehensive loss by component during the three months ended March 31, 2013 are as follows. All amounts are net of tax (dollars in thousands).
|
|
|
|
|
Unrealized Holding
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
|
|
|
Losses on
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
|
Available-for-
|
|
|
Unfunded
|
|
|
|
|
|
|
|
Adjustment
|
|
|
Sale Securities
|
|
|
SERP Liability
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2013
|
|
$
|
927
|
|
|
$
|
256
|
|
|
$
|
(2,610
|
)
|
|
$
|
(1,427
|
)
|
|
Other comprehensive loss before reclassifications
|
|
|
(1,413
|
)
|
|
|
85
|
|
|
|
(101
|
)
|
|
|
(1,429
|
)
|
|
Amounts reclassified from accumulated other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
40
|
|
|
|
40
|
|
(a)
|
Net current period other comprehensive loss
|
|
|
(1,413
|
)
|
|
|
85
|
|
|
|
(61
|
)
|
|
|
(1,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2013
|
|
$
|
(486
|
)
|
|
$
|
341
|
|
|
$
|
(2,671
|
)
|
|
$
|
(2,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) This reclassification from accumulated other comprehensive loss relates to the amortization of prior service costs associated with the
|
|
|
Company's SERP plan. This expense is allocated between cost of sales and selling, general and administrative expense based upon the
|
|
|
employment classification of the plan participants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|