Bel Fuse Inc. (Nasdaq: BELFA and BELFB), a
designer, manufacturer and provider of products that power, protect
and connect electronic circuits, today announced preliminary
financial results for the first quarter of 2020.
First Quarter
2020 Highlights
- Net sales of $104.0 million, down 17.1% from
Q1-19
- Gross profit margin of 24.2%, down from 24.5% in
Q1-19
- Net loss of $3.8 million, as compared with net earnings of $1.1
million in Q1-19
- CUI acquisition in December 2019 contributed $8.2 million to
Q1-20 sales at a gross profit margin of 36.8%
- Backlog of $191.2 million at March 31, 2020, up 19% from
year-end
- Cash flow provided by operating activities of $8.1 million
Non-GAAP financial measures, such as Non-GAAP
net earnings, Non-GAAP EPS, EBITDA and Adjusted EBITDA, exclude the
impact of acquisition-related 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 Comments
Daniel Bernstein, President and CEO, said, “Our
focus during much of the first quarter has been on the continued
safety and well-being of our associates around the world in light
of COVID-19. The majority of the products manufactured
by Bel are utilized in military, medical and networking
applications, and are therefore deemed essential by the
various jurisdictions in which we operate. We have
implemented significant protective measures throughout our
facilities, including travel and visitor restrictions, work from
home policies, employee screenings, social distancing and use of
face coverings as we continue to service our customers. While
this remains a fluid situation that evolves daily, as of today, we
are pleased to report that all of our manufacturing sites are
operating, with the majority of them at or near normal production
rates. I want to extend a sincere thank you to the
manufacturing associates in each of Bel's factories around the
world who continue to come to work each day with courage and
dedication to our Company and our customers.
"Our first quarter financial
results reflect the extended closure of our facilities in
China earlier in the quarter due to the outbreak of COVID-19 and
the related impact to our supply chain. This led to a portion
of scheduled shipments being deferred to the second quarter, and
cost approximately $14-$17 million in first quarter sales. In
addition to the effects from such deferred shipments, the
Company also incurred additional indirect COVID-19 related costs,
including operational inefficiencies and employee retention
programs in the quarter. These costs were partially offset by
COVID-19 relief funding received from the Chinese government during
the quarter.
“We've seen positive signs in
Bel's underlying business as we enter the second
quarter. Orders received in the first quarter of 2020 were
the highest since the third quarter of 2018, indicating that the
excess inventory in the supply channel from 2019 has been worked
through, and our customers and distribution partners are starting
to place replenishment orders again. Further, our acquisition
of CUI in late 2019 was accretive to Bel's earnings during the
first quarter, generating $8.2 million in sales and
contributing $865,000 of operating income. CUI bookings
during the first quarter were over $11 million, one of their
highest booking quarters in history, which was a contributing
factor to Bel's consolidated book-to-bill ratio of 1.3 for the
first quarter. Based on the above factors, we currently anticipate
an improvement in sales and financial results in the second quarter
as compared to the first quarter. However, beyond the second
quarter, we have limited visibility due to the evolving
COVID-19 environment.” concluded Mr. Bernstein.
Financial Summary
All comparative percentages are on a
year-over-year basis, unless otherwise noted.
First Quarter 2020
Results
Net SalesNet sales were $104.0
million, down $21.4 million, or 17.1%, from last year’s first
quarter.
- By geographic area: Europe sales were down by 22.3%, North
America sales declined by 7.8% and Asia sales were lower by
29.8%.
- By product segment: Connectivity Solutions sales declined by
11.9%, Magnetic Solutions sales were lower by 24.8% and Power
Solutions and Protection sales were down by 15.6%.
Gross ProfitGross profit margin
decreased to 24.2%, from 24.5% in the first quarter of 2019,
primarily due to the lower sales base in the first quarter of 2020,
resulting in lower fixed cost absorption within cost of
sales. The financial impact of the extended Lunar New Year
holiday and other operational inefficiencies at our facilities in
Asia related to COVID-19 was largely offset by $2.2 million of
stimulus funding received from the Chinese government during the
first quarter of 2020 associated with COVID-19 relief programs.
Selling, General and Administrative
Expenses (SG&A)SG&A expenses were $22.1 million,
up $2.8 million from the first quarter of 2019. Included within
SG&A expenses is a loss on the cash surrender value of
company-owned life insurance (COLI) policies of $2.0 million
in the first quarter of 2020 compared to a gain on these policies
of $1.0 million in the first quarter of 2019. Excluding the
effects of market fluctuations of our COLI policies, SG&A
expense was largely the same in the first quarter of 2020 as
compared to the same period of 2019, as incremental SG&A
expense from the recently acquired CUI business were offset by
lower travel expense and other cost containment efforts.
Operating (Loss)
IncomeOperating (loss) income was $(3.1) million, down
from $3.4 million in the first quarter of 2019, with an operating
margin of -3.0% compared to 2.7% in the first quarter of
2019.
Income TaxesThe provision
(benefit) for income taxes was $(0.8) million in the first quarter
of 2020, compared to less than $0.1 million in the same period of
2019. This resulted in an effective tax rate of
16.9% during the first quarter of 2020, compared to an
effective tax rate of 3.3% during the same quarter last
year. The effective tax rate for the first quarter of 2020
reflects a reduction in GILTI tax as compared to the same quarter
of 2019, as well as tax benefits recognized from federal
legislation (the CARES Act) and adjustments to valuation allowances
in the first quarter of 2020.
Net (Loss) EarningsThe above
factors resulted in net loss of $(3.8) million in the first quarter
of 2020 as compared with net earnings of $1.1 million in the first
quarter of 2019.
Balance Sheet DataAs of March
31, 2020, working capital was $188.2 million, including $68.4
million of cash and cash equivalents with a current ratio of
3.5-to-1. In comparison, as of December 31, 2019, working
capital was $193.0 million, including $72.3 million of cash and
cash equivalents with a current ratio of 3.1-to-1. Total debt
at March 31, 2020, net of deferred financing costs, declined to
$135.1 million as compared to $143.7 million at December 31, 2019,
primarily due to a voluntary prepayment of $8.2 million made in
connection with the amendment to the Company's credit agreement in
February 2020.
Conference CallBel has
scheduled a conference call at 11:00 a.m. ET today. To
participate in the conference call, investors should dial
888-394-8218, or 323-794-2590 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 1896455 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, medical, 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
StatementsNon-historical information contained in this
press release (including the statements regarding positive signs in
Bel's underlying business, the placement of replenishment orders
and the anticipated improvement in sales and financial results in
the second quarter of 2020 as compared to the first quarter of
2020) 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 impact of public health crises (such
as the governmental, social and economic effects of COVID-19); the
effects of business and economic conditions; difficulties
associated with integrating previously 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; the impact of changes to U.S. trade and
tariff policies; 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 net
earnings, 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.
Investor Contact: |
Company Contact: |
Darrow Associates |
Daniel Bernstein |
tel 516.419.9915 |
President |
pseltzberg@darrowir.com |
ir@belf.com |
[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, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
103,978 |
|
|
$ |
125,389 |
|
Cost of sales |
|
|
78,866 |
|
|
|
94,645 |
|
Gross
profit |
|
|
25,112 |
|
|
|
30,744 |
|
As a % of net sales |
|
|
24.2 |
% |
|
|
24.5 |
% |
|
|
|
|
|
|
|
|
|
Research and development
costs |
|
|
6,059 |
|
|
|
7,184 |
|
Selling, general and
administrative expenses |
|
|
22,062 |
|
|
|
19,225 |
|
As a % of net sales |
|
|
21.2 |
% |
|
|
15.3 |
% |
Restructuring charges |
|
|
128 |
|
|
|
946 |
|
|
|
|
|
|
|
|
|
|
(Loss) income from
operations |
|
|
(3,137 |
) |
|
|
3,389 |
|
As a % of net sales |
|
|
-3.0 |
% |
|
|
2.7 |
% |
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(1,351 |
) |
|
|
(1,440 |
) |
Other income/expense, net |
|
|
(88 |
) |
|
|
(779 |
) |
(Loss) earnings before
benefit for income taxes |
|
|
(4,576 |
) |
|
|
1,170 |
|
|
|
|
|
|
|
|
|
|
(Benefit from) provision for
income taxes |
|
|
(772 |
) |
|
|
39 |
|
Effective tax rate |
|
|
16.9 |
% |
|
|
3.3 |
% |
Net (loss)
earnings |
|
$ |
(3,804 |
) |
|
$ |
1,131 |
|
As a % of net sales |
|
|
-3.7 |
% |
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding: |
|
|
|
|
|
|
|
|
Class A common shares - basic
and diluted |
|
|
2,145 |
|
|
|
2,175 |
|
Class B common shares - basic
and diluted |
|
|
10,123 |
|
|
|
10,089 |
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings
per common share: |
|
|
|
|
|
|
|
|
Class A common shares - basic
and diluted |
|
$ |
(0.30 |
) |
|
$ |
0.08 |
|
Class B common shares - basic
and diluted |
|
$ |
(0.31 |
) |
|
$ |
0.09 |
|
|
(1) The
supplementary information included in this press release for 2020
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) |
Condensed Consolidated Balance Sheets |
(in thousands, unaudited) |
|
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
Assets |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
68,431 |
|
|
$ |
72,289 |
|
Accounts receivable, net |
|
|
69,070 |
|
|
|
76,092 |
|
Inventories |
|
|
104,313 |
|
|
|
107,276 |
|
Other current assets |
|
|
23,091 |
|
|
|
27,524 |
|
Total current assets |
|
|
264,905 |
|
|
|
283,181 |
|
Property, plant and equipment,
net |
|
|
40,861 |
|
|
|
41,943 |
|
Right-of-use assets |
|
|
15,959 |
|
|
|
18,504 |
|
Goodwill and other intangible
assets, net |
|
|
92,434 |
|
|
|
94,357 |
|
Other assets |
|
|
29,960 |
|
|
|
30,932 |
|
Total
assets |
|
$ |
444,119 |
|
|
$ |
468,917 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
38,800 |
|
|
$ |
44,169 |
|
Current portion of long-term
debt |
|
|
817 |
|
|
|
5,489 |
|
Operating lease liability,
current |
|
|
6,123 |
|
|
|
7,377 |
|
Other current liabilities |
|
|
30,936 |
|
|
|
33,183 |
|
Total current liabilities |
|
|
76,676 |
|
|
|
90,218 |
|
Long-term debt |
|
|
134,258 |
|
|
|
138,215 |
|
Operating lease liability,
long-term |
|
|
10,080 |
|
|
|
11,751 |
|
Other liabilities |
|
|
61,273 |
|
|
|
60,682 |
|
Total liabilities |
|
|
282,287 |
|
|
|
300,866 |
|
Stockholders' equity |
|
|
161,832 |
|
|
|
168,051 |
|
Total liabilities and
stockholders' equity |
|
$ |
444,119 |
|
|
$ |
468,917 |
|
|
(1) The
supplementary information included in this press release for 2020
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 (Loss) Earnings to EBITDA and
Adjusted EBITDA(2) |
(in thousands, unaudited) |
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
GAAP Net (loss)
earnings |
|
$ |
(3,804 |
) |
|
$ |
1,131 |
|
Interest expense |
|
|
1,351 |
|
|
|
1,440 |
|
(Benefit from) provision for
income taxes |
|
|
(772 |
) |
|
|
39 |
|
Depreciation and
amortization |
|
|
4,126 |
|
|
|
4,110 |
|
EBITDA |
|
$ |
901 |
|
|
$ |
6,720 |
|
% of net sales |
|
|
0.9 |
% |
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
Unusual or special
items: |
|
|
|
|
|
|
|
|
Acquisition-related costs |
|
|
186 |
|
|
|
- |
|
ERP system implementation consulting costs |
|
|
- |
|
|
|
984 |
|
Restructuring charges |
|
|
128 |
|
|
|
946 |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
1,215 |
|
|
$ |
8,650 |
|
% of net sales |
|
|
1.2 |
% |
|
|
6.9 |
% |
|
(1) The
supplementary information included in this press release for 2020
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 net (loss) earnings,
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. |
Bel Fuse Inc. |
Supplementary
Information(1) |
Reconciliation of GAAP Measures to Non-GAAP
Measures(2) |
(in thousands, unaudited) |
|
The following
tables detail the impact that certain unusual or special items had
on the Company's net (loss) earnings per common Class A and Class B
basic and diluted shares ("EPS") and the line items in which these
items were included in the condensed consolidated statements of
operations. |
|
|
|
Three Months Ended March 31, 2020 |
|
|
Three Months Ended March 31, 2019 |
|
Reconciling Items |
|
(Loss) earnings before taxes |
|
|
(Benefit from) provision for income taxes |
|
|
Net (loss) earnings |
|
|
Class A EPS(3) |
|
|
Class B EPS(3) |
|
|
Earnings before taxes |
|
|
Provision for income taxes |
|
|
Net earnings |
|
|
Class A EPS(3) |
|
|
Class B EPS(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
measures |
|
$ |
(4,576 |
) |
|
$ |
(772 |
) |
|
$ |
(3,804 |
) |
|
$ |
(0.30 |
) |
|
$ |
(0.31 |
) |
|
$ |
1,170 |
|
|
$ |
39 |
|
|
$ |
1,131 |
|
|
$ |
0.08 |
|
|
$ |
0.09 |
|
Items included in SG&A
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related costs |
|
|
186 |
|
|
|
43 |
|
|
|
143 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
ERP system implementation consulting costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
984 |
|
|
|
185 |
|
|
|
799 |
|
|
|
0.06 |
|
|
|
0.07 |
|
Restructuring charges |
|
|
128 |
|
|
|
29 |
|
|
|
99 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
946 |
|
|
|
218 |
|
|
|
728 |
|
|
|
0.06 |
|
|
|
0.06 |
|
Non-GAAP
measures |
|
$ |
(4,262 |
) |
|
$ |
(700 |
) |
|
$ |
(3,562 |
) |
|
|
(0.28 |
) |
|
|
(0.29 |
) |
|
$ |
3,100 |
|
|
$ |
442 |
|
|
$ |
2,658 |
|
|
|
0.20 |
|
|
|
0.22 |
|
|
(1) The
supplementary information included in this press release for 2020
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 net earnings, 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. |
(3) Individual
amounts of earnings per share may not agree to the total due to
rounding. |
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