Quarterly Report (10-q)

0000729580 BEL FUSE INC /NJ false --12-31 Q3 2022 1,403 1,536 0 0 1,000,000 1,000,000 0 0 0.10 0.10 10,000,000 10,000,000 2,141,589 2,144,912 1,072,769 1,072,769 0.10 0.10 30,000,000 30,000,000 10,338,260 10,377,102 3,218,307 3,218,307 3,323 17,342 40 12 83 336 0 0 0 0 0 0 0 0 18 28 52 83 0.06 0.07 12 17 0.06 0.07 31 0 17 0.06 0.07 40 18 0.06 0.07 9 28 0.06 0.07 333 28 0.06 0.07 12 28 2,129 1,683 0 0 1 1 0 1.1 2.6 0.2 30.0 0.3 0.1 0.1 0 334 417 0 0 7 7 451 502 14,911 29 3,865 18,863 11 11 31,263 5,945 18 28,983 12.0 This reclassification relates to the amortization of prior service costs and gains/losses associated with the Company's SERP Plan. 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended September 30, 2022
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ____________

Commission File No. 000-11676

BEL FUSE INC.

(Exact name of registrant as specified in its charter)

206 Van Vorst Street
Jersey City, NJ 07302
(201) 432-0463

(Address of principal executive offices and zip code)

(Registrant’s telephone number, including area code)

New Jersey		22-1463699
(State of incorporation)		(I.R.S. Employer Identification No.)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Exchange on Which Registered
Class A Common Stock ($0.10 par value)	BELFA	Nasdaq Global Select Market
Class B Common Stock ($0.10 par value)	BELFB	Nasdaq Global Select Market

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 ☒	No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).	Yes ☒	No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated

filer ☐

Accelerated
filer ☒

Non-accelerated

filer ☐

Smaller reporting

company ☒

Emerging growth

company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐

No ☒

Title of Each Class

Number of Shares of Common Stock Outstanding

as of November 1, 2022

Class A Common Stock ($0.10 par value)

2,141,589

Class B Common Stock ($0.10 par value)

10,338,260

BEL FUSE INC. AND SUBSIDIARIES

FORM 10-Q INDEX

			Page
Part I		Financial Information

	Item 1.	Financial Statements (unaudited)	2

		Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)	2

		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	3

		Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	4

		Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	6

		Notes to Condensed Consolidated Financial Statements (unaudited)	7 - 17

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18 - 24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

	Item 4.	Controls and Procedures	24

Part II		Other Information

	Item 1.	Legal Proceedings	24

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

	Item 3.	Defaults Upon Senior Securities	25

	Item 4.	Mine Safety Disclosures	25

	Item 5.	Other Information	25

	Item 6.	Exhibits	26

	Signatures		27

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING INFORMATION

The terms the “Company,” “Bel,” “we,” “us,” and “our” as used in this report refer to Bel Fuse Inc. and its consolidated subsidiaries unless otherwise specified.

The Company’s consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in Item 1A of our 2021 Annual Report on Form 10-K and the risk factors described in this or other Quarterly Reports on Form 10-Q filed thereafter, and from time to time in our other filings with the Securities and Exchange Commission (“SEC”). 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, consolidated financial condition, operating results, and common stock prices. Furthermore, this document and other documents filed by the Company with the SEC contain certain forward-looking statements under the Private Securities Litigation Reform Act of 1995 (“Forward-Looking Statements”) with respect to the business of the Company. Forward-Looking Statements are necessarily subject to risks and uncertainties, many of which are outside our control, that could cause actual results to differ materially from these statements. Forward-Looking Statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives and regarding the anticipated impact of COVID-19 are Forward-Looking Statements. These Forward-Looking Statements are subject to certain risks and uncertainties, including those detailed in Item 1A of our 2021 Annual Report on Form 10-K and in the risk factors described in this or other Quarterly Reports on Form 10-Q filed thereafter, and from time to time in our other filings with the SEC, which could cause actual results to differ materially 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. Any Forward-Looking Statement made by the Company is based only on information currently available to us and speaks only as of the date on which it is made.

PART I. Financial Information

Item 1. Financial Statements (Unaudited)

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

	September 30,			December 31,
	2022			2021
ASSETS
Current Assets:
Cash and cash equivalents	$	70,895		$	61,756
Accounts receivable, net of allowance for doubtful accounts of $1,403 and $1,536, respectively		103,221			87,135
Inventories		164,381			139,383
Unbilled receivables		28,592			28,275
Assets held for sale		1,466			1,626
Other current assets		8,810			10,841
Total current assets		377,365			329,016

Property, plant and equipment, net		35,227			38,210
Right-of-use assets		20,828			21,252
Intangible assets, net		54,725			60,995
Goodwill		23,775			26,651
Deferred income taxes		8,965			4,461
Other assets		32,931			31,261
Total assets	$	553,816		$	511,846

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	66,191		$	65,960
Accrued expenses		42,662			34,453
Operating lease liabilities, current		5,904			6,880
Other current liabilities		22,325			4,719
Total current liabilities		137,082			112,012

Long-term Liabilities:
Long-term debt		110,000			112,500
Operating lease liabilities, long-term		14,992			14,668
Liability for uncertain tax positions		24,007			28,434
Minimum pension obligation and unfunded pension liability		24,284			23,909
Deferred income taxes		1,026			1,487
Other liabilities		6,392			10,093
Total liabilities		317,783			303,103

Commitments and contingencies (see Note 14)

Stockholders' Equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued		-			-
Class A common stock, par value $.10 per share, 10,000,000 shares authorized; 2,141,589 shares and 2,144,912 shares outstanding at September 30, 2022 and December 31, 2021, respectively (net of 1,072,769 restricted treasury shares)		214			214
Class B common stock, par value $.10 per share, 30,000,000 shares authorized; 10,338,260 and 10,377,102 shares outstanding at September 30, 2022 and December 31, 2021, respectively (net of 3,218,307 restricted treasury shares)		1,034			1,038
Treasury stock (unrestricted, consisting of 3,323 Class A shares and 17,342 Class B shares)		(349	)		-
Additional paid-in capital		40,095			38,419
Retained earnings		224,022			187,935
Accumulated other comprehensive loss		(28,983	)		(18,863	)
Total stockholders' equity		236,033			208,743
Total liabilities and stockholders' equity	$	553,816		$	511,846

See accompanying notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021

Net sales	$	177,739		$	146,966		$	485,030		$	396,351
Cost of sales		126,205			110,992			354,084			301,234
Gross profit		51,534			35,974			130,946			95,117

Research and development costs		4,877			5,918			14,381			16,301
Selling, general and administrative expenses		22,223			21,188			67,216			64,757
Restructuring charges		3,969			398			4,000			675
Gain on sale of property		(1,596	)		(403	)		(1,596	)		(6,578	)
Income from operations		22,061			8,873			46,945			19,962

Interest expense		(944	)		(1,491	)		(2,411	)		(3,014	)
Other (expense) income, net		(429	)		(201	)		(2,926	)		458
Earnings before provision for income taxes		20,688			7,181			41,608			17,406

Provision for income taxes		4,140			1,447			2,959			593
Net earnings available to common stockholders	$	16,548		$	5,734		$	38,649		$	16,813


Net earnings per common share:
Class A common share - basic and diluted	$	1.27		$	0.44		$	2.95		$	1.29
Class B common share - basic and diluted	$	1.34		$	0.47		$	3.12		$	1.37

Weighted-average number of shares outstanding:
Class A common share - basic and diluted		2,142			2,145			2,144			2,145
Class B common share - basic and diluted		10,340			10,269			10,358			10,237

See accompanying notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021

Net earnings available to common stockholders	$	16,548		$	5,734		$	38,649		$	16,813

Other comprehensive (loss) income:
Currency translation adjustment, net of taxes of ($40), ($12), ($83) and ($336), respectively		(8,372	)		(1,982	)		(16,352	)		(1,971	)
Unrealized gains on interest rate swap cash flow hedge, net of taxes of $0 in all periods presented		2,070			-			6,061			-
Unrealized holding (losses) gains on marketable securities, net of taxes of $0 in all periods presented		(1	)		46			(11	)		45
Change in unfunded SERP liability, net of taxes of ($18), ($28), ($52) and ($83), respectively		61			100			182			299
Other comprehensive loss		(6,242	)		(1,836	)		(10,120	)		(1,627	)

Comprehensive income	$	10,306		$	3,898		$	28,529		$	15,186

See accompanying notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except per share data)

(unaudited)

							Accumulated
							Other			Class A		Class B						Additional
				Retained			Comprehensive			Common		Common			Treasury			Paid-In
	Total			Earnings			(Loss) Income			Stock		Stock			Stock			Capital

Balance at December 31, 2021	$	208,743		$	187,935		$	(18,863	)	$	214	$	1,038		$	-		$	38,419
Net earnings		5,064			5,064			-			-		-			-			-
Dividends declared:
Class A Common Stock, $0.06/share		(129	)		(129	)		-			-		-			-			-
Class B Common Stock, $0.07/share		(727	)		(727	)		-			-		-			-			-
Forfeiture of restricted common stock		-			-			-			-		(1	)		-			1
Foreign currency translation adjustment, net of taxes of ($12)		(1,216	)		-			(1,216	)		-		-			-			-
Unrealized gains on interest rate swap cash flow hedge		2,984			-			2,984			-		-			-			-
Stock-based compensation expense		576			-			-			-		-			-			576
Change in unfunded SERP liability, net of taxes of ($17)		61			-			61			-		-			-			-
Balance at March 31, 2022		215,356			192,143			(17,034	)		214		1,037			-			38,996

Net earnings		17,038			17,038			-			-		-			-			-
Dividends declared:
Class A Common Stock, $0.06/share		(129	)		(129	)		-			-		-			-			-
Class B Common Stock, $0.07/share		(726	)		(726	)		-			-		-			-			-
Forfeiture of restricted common stock		-			-			-			-		(1	)		-			1
Repurchase of treasury stock		(349	)		-			-			-		-			(349	)		-
Foreign currency translation adjustment, net of taxes of ($31)		(6,764	)		-			(6,764	)		-		-			-			-
Unrealized gains on interest rate swap cash flow hedge		1,008			-			1,008			-		-			-			-
Unrealized holding losses on marketable securities arising during the year, net of taxes of $0		(12	)		-			(12	)		-		-			-			-
Stock-based compensation expense		512			-			-			-		-			-			512
Change in unfunded SERP liability, net of taxes of ($17)		61			-			61			-		-			-			-
Balance at June 30, 2022		225,995			208,326			(22,741	)		214		1,036			(349	)		39,509

Net earnings		16,548			16,548			-			-		-			-			-
Dividends declared:
Class A Common Stock, $0.06/share		(128	)		(128	)		-			-		-			-			-
Class B Common Stock, $0.07/share		(724	)		(724	)		-			-		-			-			-
Forfeiture of restricted common stock		-			-			-			-		(2	)		-			2
Repurchase of Class A common stock		-			-			-			-		-			-			-
Foreign currency translation adjustment, net of taxes of ($40)		(8,372	)		-			(8,372	)		-		-			-			-
Unrealized gains on interest rate swap cash flow hedge		2,070			-			2,070			-		-			-			-
Unrealized holding losses on marketable securities		(1	)		-			(1	)		-		-			-			-
Stock-based compensation expense		584			-			-			-		-			-			584
Change in unfunded SERP liability, net of taxes of ($18)		61			-			61			-		-			-			-
Balance at September 30, 2022	$	236,033		$	224,022		$	(28,983	)	$	214	$	1,034		$	(349	)	$	40,095

							Accumulated
							Other			Class A		Class B			Additional
				Retained			Comprehensive			Common		Common			Paid-In
	Total			Earnings			(Loss) Income			Stock		Stock			Capital

Balance at December 31, 2020	$	185,799		$	166,491		$	(18,063	)	$	214	$	1,021		$	36,136
Net earnings		3,199			3,199			-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(128	)		(128	)		-			-		-			-
Class B Common Stock, $0.07/share		(716	)		(716	)		-			-		-			-
Forfeiture of restricted common stock		-			-			-			-		(1	)		1
Foreign currency translation adjustment, net of taxes of $9		(2,529	)		-			(2,529	)		-		-			-
Unrealized holding losses on marketable securities		(1	)		-			(1	)		-		-			-
Stock-based compensation expense		600			-			-			-		-			600
Change in unfunded SERP liability, net of taxes of ($28)		99			-			99			-		-			-
Balance at March 31, 2021		186,323			168,846			(20,494	)		214		1,020			36,737

Net earnings		7,880			7,880			-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(129	)		(129	)		-			-		-			-
Class B Common Stock, $0.07/share		(714	)		(714	)		-			-		-			-
Issuance of restricted common stock		-			-			-			-		8			(8	)
Forfeiture of restricted common stock		-			-			-			-		(1	)		1
Foreign currency translation adjustment, net of taxes of ($333)		2,540			-			2,540			-		-			-
Stock-based compensation expense		598			-			-			-		-			598
Change in unfunded SERP liability, net of taxes of ($28)		100			-			100			-		-			-
Balance at June 30, 2021		196,598			175,883			(17,854	)		214		1,027			37,328

Net earnings		5,734			5,734			-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(129	)		(129	)		-			-		-			-
Class B Common Stock, $0.07/share		(719	)		(719	)		-			-		-			-
Forfeiture of restricted common stock		-			-			-			-		(1	)		1
Foreign currency translation adjustment, net of taxes of ($12)		(1,982	)		-			(1,982	)		-		-			-
Unrealized holding gains on marketable securities		46			-			46			-		-			-
Stock-based compensation expense		554			-			-			-		-			554
Change in unfunded SERP liability, net of taxes of ($28)		100			-			100			-		-			-
Balance at September 30, 2021	$	200,202		$	180,769		$	(19,690	)	$	214	$	1,026		$	37,883

See accompanying notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended
	September 30,
	2022			2021

Cash flows from operating activities:
Net earnings	$	38,649		$	16,813
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		11,604			12,514
Stock-based compensation		1,672			1,752
Amortization of deferred financing costs		34			1,267
Deferred income taxes		(5,113	)		(124	)
Net unrealized gains on foreign currency revaluation		(494	)		(373	)
Gains on sale of property		(1,596	)		(6,578	)
Other, net		360			1,355
Changes in operating assets and liabilities:
Accounts receivable, net		(17,851	)		(11,893	)
Unbilled receivables		(317	)		(13,958	)
Inventories		(32,574	)		(22,831	)
Accounts payable		4,884			15,800
Accrued expenses		6,678			9,066
Accrued restructuring costs		3,628			124
Income taxes payable		6,380			(1,372	)
Other operating assets/liabilities, net		8,125			(3,276	)
Net cash provided by (used in) operating activities		24,069			(1,714	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(5,612	)		(4,154	)
Payments for acquisitions, net of cash acquired		-			(16,811	)
Proceeds from sale of property, plant and equipment		1,833			7,249
Net cash used in investing activities		(3,779	)		(13,716	)

Cash flows from financing activities:
Dividends paid to common stockholders		(2,470	)		(2,447	)
Purchase of treasury stock		(349	)		-
Deferred financing costs		-			(675	)
Borrowings under revolving credit line		-			115,000
Repayments of revolving credit line		-			(14,500	)
Repayments of long-term debt		(2,500	)		(104,846	)
Net cash used in financing activities		(5,319	)		(7,468	)

Effect of exchange rate changes on cash and cash equivalents		(5,832	)		(80	)

Net increase (decrease) in cash and cash equivalents		9,139			(22,978	)
Cash and cash equivalents - beginning of period		61,756			84,939
Cash and cash equivalents - end of period	$	70,895		$	61,961


Supplementary information:
Cash paid during the period for:
Income taxes, net of refunds received	$	7,496		$	2,024
Interest payments	$	2,129		$	1,683
ROU assets obtained in exchange for lease obligations	$	6,111		$	6,382

Details of acquisitions:
Fair value of identifiable net assets acquired	$	-		$	18,215
Goodwill		-			2,499
Fair value of net assets acquired	$	-		$	20,714

Fair value of consideration transferred	$	-		$	20,714
Less: Cash acquired in acquisitions		-			(3,903	)
Cash paid for acquisitions, net of cash acquired	$	-		$	16,811

See accompanying notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The condensed consolidated balance sheets and statements of operations, comprehensive income, stockholders’ equity and cash flows for the periods presented herein have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows for all periods presented have been made. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated 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 fiscal year ended December 31, 2021.

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted from these condensed consolidated financial statements pursuant to the rules and regulations, including the interim reporting requirements, of the U.S. Securities and Exchange Commission (“SEC”). The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There were no significant changes to these accounting policies during the nine months ended September 30, 2022, except as discussed in “Recently Adopted Accounting Standards” below.

All amounts included in the tables to these notes to condensed consolidated financial statements, except per share amounts, are in thousands.

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14"). This guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The Company adopted amendments in ASU 2018-14 on a retrospective basis effective January 1, 2021. The adoption of this guidance modified the Company's annual disclosures for its defined benefit plan, but did not have any impact on the Company's consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which modifies ASC 740 to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. This guidance was adopted by the Company effective January 1, 2021 and did not have a material impact on the Company’s consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), as amended. The new guidance will broaden the information that an entity must consider in developing its expected credit loss estimates related to its financial instruments and adds to U.S. GAAP an impairment model that is based on expected losses rather than incurred losses. The amendment is currently effective for the Company for annual reporting periods beginning after December 15, 2022, with early adoption permitted. Management is currently assessing the impact of ASU 2016-13, but it is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). ASU 2020-04 provides temporary optional guidance on contract modifications and hedging accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. In January 2021, the FASB issued ASU 2021-01, which refines the scope of Topic 848 and clarifies some of its guidance as part of the FASB’s monitoring of global reference rate activities. The new guidance was effective upon issuance, and the Company is allowed to elect to apply the amendments prospectively through December 31, 2022. Management is currently evaluating the impact of this accounting standard update on the Company's consolidated financial statements and related disclosures.

2.	ACQUISITIONS

rms Connectors

On January 8, 2021, the Company acquired rms Connectors, Inc. (“rms Connectors” or "rms"), from rms Company Inc., a division of Cretex Companies, Inc., for $9.0 million in cash, including a working capital adjustment. rms Connectors is a highly regarded connector manufacturer with over 30 years of experience producing harsh environment circular connectors used in a variety of military and aerospace applications. This acquisition complemented Bel's existing military and aerospace product portfolio and enabled us to expand key customer relationships within these end markets and leverage the combined manufacturing resources to improve our operational efficiency. Originally based in Coon Rapids, Minnesota, the rms Connectors business was relocated into Bel's existing facilities during the second quarter of 2021, and is part of Bel's Connectivity Solutions group. The transaction was funded with cash on hand.

EOS Power

On March 31, 2021, the Company completed the acquisition of EOS Power ("EOS") through a stock purchase agreement for $7.8 million, net of cash acquired, including a working capital adjustment. EOS, located in Mumbai, India, had sales of $12.0 million for the year ended December 31, 2020. EOS enhances Bel's position related to certain industrial and medical markets historically served by EOS, with a strong line of high-power density and low-profile products with high convection ratings. In addition to new products and customers acquired, this acquisition diversified Bel's manufacturing footprint in Asia. The EOS business is part of Bel’s Power Solutions and Protection group. The transaction was funded with cash on hand.

The acquisitions of rms Connectors and EOS may hereafter be referred to collectively as either the "2021 Acquisitions" or the "2021 Acquired Companies". As of the respective acquisition dates, all of the assets acquired and liabilities assumed were recorded at their fair values and the Company's condensed consolidated results of operations for the three and nine months ended September 30, 2021 include the operating results of the 2021 Acquired Companies from their respective acquisition dates through September 30, 2021. During the nine months ended September 30, 2021, the Company incurred $0.5 million of acquisition-related costs related to the 2021 Acquisitions. No acquisition-related costs were incurred during the three months ended September 30, 2022 or 2021 or during the nine months ended September 30, 2022. These costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

The results of operations of the 2021 Acquired Companies have been included in the Company’s condensed consolidated financial statements for the periods subsequent to their respective acquisition dates. During the three and nine months ended September 30, 2021, the 2021 Acquired Companies contributed revenues of $4.3 million and $12.4 million, respectively, and estimated net earnings of $0.2 million and $1.6 million, respectively, to the Company since their respective acquisition dates. The unaudited pro forma information below presents the combined operating results of the Company and the 2021 Acquired Companies assuming that the acquisition of the 2021 Acquired Companies had occurred as of January 1, 2021. 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. This unaudited pro forma information does not purport to be indicative of the results that would have actually been obtained if the 2021 Acquisitions had occurred as of January 1, 2021, nor is the pro forma data intended to be a projection of results that may be achieved in the future.

The following unaudited pro forma consolidated results of operations assume that the acquisition of the 2021 Acquired Companies was completed as of January 1, 2021:

	Three Months Ended		Nine Months Ended
	September 30, 2021		September 30, 2021
Revenue, net	$	146,966	$	399,372
Net earnings		5,734		17,043
Earnings per Class A common share - basic and diluted		0.44		1.31
Earnings per Class B common share - basic and diluted		0.47		1.39

3.	REVENUE

The following table provides information about disaggregated revenue by geographic region and sales channel, and includes a reconciliation of the disaggregated revenue to our reportable segments:

	*Three Months Ended September 30, 2022*								*Nine Months Ended September 30, 2022*
	*Connectivity Solutions*		*Power Solutions and Protection*		*Magnetic Solutions*		*Consolidated*		*Connectivity Solutions*		*Power Solutions and Protection*		*Magnetic Solutions*		*Consolidated*

*By Geographic Region:*
North America	$	37,877	$	60,267	$	13,490	$	111,634	$	105,189	$	155,022	$	38,616	$	298,827
Europe		9,327		8,779		2,535		20,641		26,895		29,264		8,128		64,287
Asia		3,049		7,387		35,028		45,464		7,978		21,961		91,977		121,916
	$	50,253	$	76,433	$	51,053	$	177,739	$	140,062	$	206,247	$	138,721	$	485,030

*By Sales Channel:*
Direct to customer	$	29,974	$	48,765	$	40,362	$	119,101	$	84,571	$	130,210	$	105,619	$	320,400
Through distribution		20,279		27,668		10,691		58,638		55,491		76,037		33,102		164,630
	$	50,253	$	76,433	$	51,053	$	177,739	$	140,062	$	206,247	$	138,721	$	485,030

	*Three Months Ended September 30, 2021*								*Nine Months Ended September 30, 2021*
	*Connectivity Solutions*		*Power Solutions and Protection*		*Magnetic Solutions*		*Consolidated*		*Connectivity Solutions*		*Power Solutions and Protection*		*Magnetic Solutions*		*Consolidated*

*By Geographic Region:*
North America	$	30,144	$	42,064	$	11,338	$	83,546	$	92,868	$	109,708	$	28,009	$	230,585
Europe		7,916		9,679		2,635		20,230		22,220		29,306		6,126		57,652
Asia		2,284		8,538		32,368		43,190		6,358		20,298		81,458		108,114
	$	40,344	$	60,281	$	46,341	$	146,966	$	121,446	$	159,312	$	115,593	$	396,351

*By Sales Channel:*
Direct to customer	$	23,476	$	36,154	$	38,022	$	97,652	$	72,898	$	96,759	$	95,104	$	264,761
Through distribution		16,868		24,127		8,319		49,314		48,548		62,553		20,489		131,590
	$	40,344	$	60,281	$	46,341	$	146,966	$	121,446	$	159,312	$	115,593	$	396,351

The balances of the Company’s contract assets and contract liabilities at September 30, 2022 and December 31, 2021 are as follows:

	*September 30,*		*December 31,*
	*2022*		*2021*

Contract assets - current (unbilled receivables)	$	28,592	$	28,275
Contract liabilities - current (deferred revenue)	$	11,303	$	2,224

The change in balance of our unbilled receivables from December 31, 2021 to September 30, 2022 primarily relates to a timing difference between the Company’s performance (i.e. when our product is shipped to a customer-controlled hub) and the point at which the Company can invoice the customer per the terms of the customer contract (i.e. when the customer pulls our product from the customer-controlled hub). The increase in our deferred revenue balance from December 31, 2021 to September 30, 2022 primarily relates to customer prepayments on raw material surcharges and expedite fees, which will be recorded as revenue in the period in which the related finished goods are shipped to the customer.

The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of September 30, 2022 related to contracts that exceed one year in duration amounted to $94.5 million, with expected contract expiration dates that range from 2023 - 2026. It is expected that 57% of this aggregate amount will be recognized in 2023, 36% will be recognized in 2024 and the remainder will largely be recognized in 2025.

4.	EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted net earnings per common share under the two-class method for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021

Numerator:
Net earnings	$	16,548	$	5,734	$	38,649	$	16,813
Less dividends declared:
Class A		128		129		386		386
Class B		724		719		2,176		2,149
Undistributed earnings	$	15,696	$	4,886	$	36,087	$	14,278

Undistributed earnings allocation - basic and diluted:
Class A undistributed earnings	$	2,587	$	811	$	5,941	$	2,375
Class B undistributed earnings		13,109		4,075		30,146		11,903
Total undistributed earnings	$	15,696	$	4,886	$	36,087	$	14,278

Net earnings allocation - basic and diluted:
Class A net earnings	$	2,715	$	940	$	6,327	$	2,761
Class B net earnings		13,833		4,794		32,322		14,052
Net earnings	$	16,548	$	5,734	$	38,649	$	16,813

Denominator:
Weighted-average shares outstanding:
Class A - basic and diluted		2,142		2,145		2,144		2,145
Class B - basic and diluted		10,340		10,269		10,358		10,237

Net earnings per share:
Class A - basic and diluted	$	1.27	$	0.44	$	2.95	$	1.29
Class B - basic and diluted	$	1.34	$	0.47	$	3.12	$	1.37

5.	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; and

Level 3 – Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of September 30, 2022 and December 31, 2021, our equity securities primarily consisted of investments held in a rabbi trust which are intended to fund the Company’s Supplemental Executive Retirement Plan (“SERP”) obligations. These securities are measured at fair value using quoted prices in active markets for identical assets (Level 1) inputs and amounted to $0.2 million at September 30, 2022 and $0.3 million at December 31, 2021.

Throughout 2022 and 2021, the Company entered into a series of foreign currency forward contracts, the fair value of which was ($1.0) million at September 30, 2022 and less than $0.1 million at December 31, 2021. The estimated fair value of foreign currency forward contracts is based on quotes received from the applicable counterparty, and represents the estimated amount we would receive or pay to settle the contracts, taking into consideration current exchange rates which can be validated through readily observable data from external sources (Level 2).

During the fourth quarter of 2021, the Company entered into two interest rate swap agreements as further described in Note 9, "Derivative Instruments and Hedging Activities". The fair value of the interest rate swap agreements was $5.9 million at September 30, 2022 and $0.1 million at December 31, 2021, which was based on market data, and represents the estimated amount we would receive or pay to settle the agreements, taking into consideration current and projected future interest rates as well as the creditworthiness of the parties, all of which can be validated through readily observable data from external sources.

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 nine months ended September 30, 2022 or September 30, 2021. There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the nine months ended September 30, 2022 or September 30, 2021.

There were no financial assets accounted for at fair value on a nonrecurring basis as of September 30, 2022 or December 31, 2021.

The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, accounts 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 fair value of the Company’s long-term debt is estimated using a discounted cash flow method based on interest rates that are currently available for debt issuances with similar terms and maturities. At September 30, 2022 and December 31, 2021, the estimated fair value of total debt was $110.0 million $112.5 million, respectively, compared to a carrying amount of $110.0 million $112.5 million, respectively. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of September 30, 2022.

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 upon the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. Based on the Company's assessment, it was concluded that no triggering events occurred during the nine months ended September 30, 2022 or September 30, 2021.

6.	INVENTORIES

The components of inventories are as follows:

	September 30,		December 31,
	2022		2021
Raw materials	$	71,024	$	67,127
Work in progress		44,814		31,103
Finished goods		48,543		41,153
Inventories	$	164,381	$	139,383

7.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	September 30,			December 31,
	2022			2021
Land	$	1,082		$	1,105
Buildings and improvements		21,058			20,915
Machinery and equipment		120,501			120,961
Construction in progress		3,135			5,081
		145,776			148,062
Accumulated depreciation		(110,549	)		(109,852	)
Property, plant and equipment, net	$	35,227		$	38,210

Depreciation expense was $2.1 million and $2.3 million, respectively, for the three months ended September 30, 2022 and 2021 and $6.8 million and $7.2 million, respectively, for the nine months ended September 30, 2022 and 2021. Depreciation expense related to our manufacturing facilities and equipment is included in cost of sales and depreciation expense associated with administrative facilities and office equipment is included in selling, general and administrative expense within the accompanying condensed consolidated statements of operations.

At December 31, 2021, a total of $1.6 million of property was classified as assets held for sale on the accompanying condensed consolidated balance sheet as of such date related to our corporate headquarters in Jersey City, New Jersey. On July 21, 2022, the Company closed on the sale of one of its two buildings in Jersey City, New Jersey. In connection with this sale, the Company received proceeds in the amount of $1.8 million and recognized a gain on sale during the third quarter of 2022 in the amount of $1.6 million. The other property in Jersey City, New Jersey continues to be classified as held for sale at a net book value of $1.5 million.

8.	ACCRUED EXPENSES

Accrued expenses consist of the following:

	September 30,		December 31,
	2022		2021
Salaries, bonuses and related benefits	$	24,718	$	21,342
Accrued restructuring costs		3,637		9
Sales commissions		2,449		2,049
Subcontracting labor		1,927		1,622
Warranty accrual		1,338		1,056
Other		8,593		8,375
	$	42,662	$	34,453

The change in warranty accrual during the nine months ended September 30, 2022 primarily related to repair costs incurred and adjustments to pre-existing warranties. There were no new material warranty charges incurred during the nine months ended September 30, 2022.

Restructuring Activities:

Activity and liability balances related to restructuring costs for the nine months ended September 30, 2022 are as follows:

			Nine Months Ended
			September 30, 2022
	Liability at				Cash Payments			Liability at
	December 31,		New		and Other			September 30,
	2021		Charges		Settlements			2022
Severance costs	$	9	$	1,429	$	(372	)	$	1,066
Other restructuring costs		-		2,571		-			2,571
Total	$	9	$	4,000	$	(372	)	$	3,637

During the third quarter of 2022, Bel launched a series of initiatives to simplify its operational footprint. Two of the Company's Magnetic Solutions manufacturing facilities in China will be consolidated into a single new facility in Southwestern China, with expected completion by mid-2023. In connection with the announcement internally, the Company recorded $1.1 million of severance costs and $2.6 million of other restructuring costs associated with this initiative. Also during the third quarter of 2022, the Company incurred $0.2 million of severance costs in connection with the reorganization of the Connectivity Solutions' sales and product management teams. These amounts are classified as restructuring charges on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022.

9.	DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Our primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk, when deemed appropriate. We enter into these contracts in the normal course of business to mitigate risks and not for speculative purposes.

Foreign Currency Forward Contracts

Under our risk management strategy, we periodically use foreign currency forward contracts to manage our short-term exposures to fluctuations in operational cash flows resulting from changes in foreign currency exchange rates. These cash flow exposures result from portions of our forecasted operating expenses, primarily compensation and related expenses, which are transacted in currencies other than the U.S. dollar, most notably the Chinese Renminbi and the Mexican Peso. These foreign currency forward contracts generally have maturities of no longer than twelve months, although occasionally we will execute a contract that extends beyond twelve months, depending upon the nature of the underlying risk. The foreign currency forward contracts related to the Chinese Renminbi have been designated for hedge accounting.

We held outstanding foreign currency forward contracts with notional amounts of $14.9 million and $17.1 million as of September 30, 2022 and December 31, 2021, respectively.

Interest Rate Swap Agreements

To partially mitigate risks associated with the variable interest rates on the revolver borrowings under the credit agreement (further described in Note 10, "Debt"), in December 2021, we executed a pay-fixed, receive-variable interest rate swap agreement with each of two multinational financial institutions under which we (i) pay interest at a fixed rate of 1.3055% and receive variable interest of one-month LIBOR on a notional amount of $30.0 million and (ii) pay interest at a fixed rate of 1.3180% and receive variable interest of one-month LIBOR on a notional amount of $30.0 million (the “2021 Swaps”). The effective date of the 2021 Swaps was December 31, 2021, and settlements with the counterparties began on January 31, 2022 and occur on a monthly basis. The 2021 Swaps will terminate on August 31, 2026.

The 2021 Swaps are designated as cash flow hedges for accounting purposes and as such, changes in their fair value are recognized in accumulated other comprehensive loss in the condensed consolidated balance sheets and are reclassified into the condensed consolidated statements of operations within interest expense in the period in which the hedged transaction affects earnings.

Fair Values of Derivative Financial Instruments

The fair values of our derivative financial instruments and their classifications in our condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021 were as follows:

	Balance Sheet Classification	September 30, 2022		December 31, 2021
Derivative assets:
Foreign currency forward contracts:
Designated as cash flow hedges	Other current assets	$	-	$	57
Interest rate swap agreements:
Designated as a cash flow hedge	Other assets		5,946		-
Total derivative assets		$	5,946	$	57

Derivative liabilities:
Foreign currency forward contracts:
Designated as cash flow hedges	Other current liabilities	$	995	$	-
Not designated as hedging instruments	Other current liabilities		-		19
Interest rate swap agreements:
Designated as a cash flow hedge	Other long-term liabilities		-		116
Total derivative liabilities		$	995	$	135

Derivative Financial Instruments in Cash Flow Hedging Relationships

The effects of derivative financial instruments designated as cash flow hedges on accumulated other comprehensive loss (“AOCL”) and on the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2022			2021		2022			2021
Net (losses) gains recognized in AOCL:
Foreign currency forward contracts	$	(671	)	$	-	$	(1,196	)	$	-
Interest rate swap agreements		2,206			-		5,939			-
	$	1,535		$	-	$	4,743		$	-

Net (losses) gains reclassified from AOCL to the consolidated statement of operations:
Foreign currency forward contracts	$	(308	)	$	-	$	(381	)	$	-
Interest rate swap agreements		136			-		(122	)		-
	$	(172	)	$	-	$	(503	)	$	-

The losses related to the foreign currency forward contracts are included as a component of currency translation adjustment on the accompanying condensed consolidated statements of comprehensive income at September 30, 2022 and December 31, 2021.

Derivative Financial Instruments Not Designated as Hedging Instruments

Gains recognized on derivative financial instruments not designated as hedging instruments in our condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 were as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
	Classification in Consolidated Statements of Operations	2022		2021		2022		2021
Foreign currency forward contracts	Other (expense) income, net		17		31		58		82
		$	17	$	31	$	58	$	82

10.

DEBT

The Company has a Credit and Security Agreement with KeyBank National Association (as amended, the "credit agreement" or the "CSA"). The CSA provides a $175 million 5-year senior secured revolving credit facility ("Revolver"), with a sublimit of up to $10 million available for letters of credit and a sublimit of up to $5 million available for swing line loans. The Company had $110.0 million and $112.5 million in outstanding borrowings under the Revolver at September 30, 2022 and December 31, 2021, respectively. Revolving loans borrowed under the CSA mature on September 1, 2026.

The weighted-average interest rate in effect for the variable-rate portion of our outstanding borrowings ($50.0 million at September 30, 2022 and $52.5 million at December 31, 2021) was 4.37% at September 30, 2022 and 1.60% at December 31, 2021 and consisted of LIBOR plus the Company’s credit spread, as determined per the terms of the CSA. In order to manage our interest rate exposure on the remaining borrowings, and as further described in Note 9, "Derivative Instruments and Hedging Activities", the Company is party to the 2021 Swaps, each with an aggregate notional amount of $30 million, or $60 million in the aggregate, the effect of which is to fix the LIBOR portion of the interest rate on a portion of our outstanding debt on our Revolver. The 2021 Swaps require the Company to pay interest on the notional amount at the rate of 1.3055% and 1.3180%, respectively, in exchange for the one-month LIBOR rate. The effective rate of interest for our outstanding borrowings, including the impact of the 2021 Swaps, was 3.38% and 2.92%, respectively, during the three and nine months ended September 30, 2022. The Company incurred $0.9 million and $1.5 million of interest expense during the three months ended September 30, 2022 and September 30, 2021, respectively, and $2.4 million and $3.0 million during the nine months ended September 30, 2022 and 2021, respectively in connection with interest due on its outstanding borrowings under the CSA during each period, the effects of the 2021 Swaps and amortization of deferred financing costs.

The CSA contains customary representations and warranties, covenants and events of default. In addition, the CSA contains financial covenants that measure (i) the ratio of the Company’s total funded indebtedness, on a consolidated basis, less the aggregate amount of all unencumbered cash and cash equivalents, to the amount of the Company’s consolidated EBITDA (“Leverage Ratio”) and (ii) the ratio of the amount of the Company’s consolidated EBITDA to the Company’s consolidated fixed charges (“Fixed Charge Coverage Ratio”). If an event of default occurs, the lenders under the CSA would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. At September 30, 2022, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio.

Subsequent to September 30, 2022, the Company made a voluntary payment of $10.0 million towards its Revolver balance, bringing the outstanding borrowings under the Revolver to $100.0 million as of October 31, 2022.

11.

INCOME TAXES

The Company's estimated taxable income in future periods is not on a legal entity basis and therefore income tax expense for the interim period is not measured using the annual effective tax rate ("AETR") method. 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 2018 and for state examinations before 2015. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2012 in Asia and generally 2013 in Europe.

As a result of the expiration of the statutes 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 September 30, 2022. The Company’s liabilities for uncertain tax positions totaled $24.0 million and $28.4 million at September 30, 2022 and December 31, 2021, respectively, of which $4.1 million is included in other current liabilities at December 31, 2021 and was resolved during 2022 by way of expiration of the related statute of limitations. These amounts, if recognized, would reduce the Company’s effective tax rate.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes. During the nine months ended September 30, 2022 and 2021, the Company recognized $0.4 million and $0.5 million, respectively, in interest and penalties in the condensed consolidated statements of operations during each period. The Company has approximately $3.8 million and $5.0 million, respectively, accrued for the payment of interest and penalties at September 30, 2022 and December 31, 2021, which is included in both income taxes payable and liability for uncertain tax positions in the condensed consolidated balance sheets.

12.

RETIREMENT, SAVINGS AND DEFERRED COMPENSATION PLANS

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 Internal Revenue Code of 1986, as amended. The expense for the three months ended September 30, 2022 and 2021 amounted to $0.3 million for each period. The expense for the nine months ended September 30, 2022 and 2021 amounted to $1.0 million and $0.9 million, respectively. The Company’s matching contribution is made in the form of Bel Fuse Inc. Class A common stock. As of September 30, 2022, the plan owned 313,559 and 93,789 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

The Company also maintains a Nonqualified Deferred Compensation Plan (the "DCP"). With certain exceptions, the Company's contributions to the DCP are discretionary and become fully vested by the participants upon reaching age 65. The expense for the three months September 30, 2022 and 2021 amounted to less than $0.1 million during each period. The expense for the nine months ended September 30, 2022 and 2021 amounted to $0.1 million during each period. As the plan is fully funded, the assets and liabilities related to the DCP were in equal amounts of $0.6 million at September 30, 2022 and $0.8 million at December 31, 2021. These amounts are included in other assets and other liabilities, respectively, on the accompanying condensed consolidated balance sheets as of each date.

The Company's subsidiaries in Asia have a retirement fund covering substantially all of their Hong Kong based full-time employees. The expense for the three months ended September 30, 2022 and 2021 amounted to $0.4 million and $0.6 million, respectively, and the expense for the nine months ended September 30, 2022 and 2021 amounted to $1.3 million and $1.9 million, respectively. As of December 31, 2021, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class B common stock, respectively. During the second quarter of 2022, the Company repurchased all shares back from the Asia retirement plan and no shares were owned by the plan as of September 30, 2022.

The Company maintains a SERP, which is designed to provide a limited group of key management and other key employees of the Company with supplemental retirement and death benefits. As discussed in Note 5 above, the Company has investments in a rabbi trust which are intended to fund the obligations of the SERP.

The components of SERP expense are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Service cost	$	126	$	169	$	377	$	508
Interest cost		159		135		477		405
Net amortization		78		127		234		382
Net periodic benefit cost	$	363	$	431	$	1,088	$	1,295

The service cost component of net benefit cost is presented within cost of sales or selling, general and administrative expense on the accompanying condensed consolidated statements of operations, in accordance with where compensation cost for the related associate is reported. All other components of net benefit cost, including interest cost and net amortization noted above, are presented within other (expense) income, net in the accompanying condensed consolidated statements of operations.

The following amounts are recognized net of tax in accumulated other comprehensive loss:

	September 30,		December 31,
	2022		2021
Prior service cost	$	365	$	460
Net loss		1,252		1,391
	$	1,617	$	1,851

13.

ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss at September 30, 2022 and December 31, 2021 are summarized below:

	September 30,			December 31,
	2022			2021

Foreign currency translation adjustment, net of taxes of ($334) at September 30, 2022 and ($417) at December 31, 2021	$	(31,263	)	$	(14,911	)
Unrealized gains (losses) on interest rate swap cash flow hedge, net of taxes of $0 at September 30, 2022 and $0 at December 31, 2021		5,945			(116	)
Unrealized holding gains on marketable securities, net of taxes of ($7) at September 30, 2022 and ($7) at December 31, 2021		18			29
Unfunded SERP liability, net of taxes of ($451) at September 30, 2022 and ($502) at December 31, 2021		(3,683	)		(3,865	)

Accumulated other comprehensive loss	$	(28,983	)	$	(18,863	)

Changes in accumulated other comprehensive loss by component during the nine months ended September 30, 2022 are as follows. All amounts are net of tax.

				Unrealized			Unrealized
	Foreign Currency			Gains (Losses) on			Holding Gains
	Translation			Interest Rate Swap			(Losses) on			Unfunded
	Adjustment			Cash Flow Hedge			Marketable Securities			SERP Liability				Total

Balance at December 31, 2021	$	(14,911	)	$	(116	)	$	29		$	(3,865	)		$	(18,863	)
Other comprehensive (loss) income before reclassifications		(16,733	)		5,939			(11	)		(7	)			(10,812	)
Amount reclassified from accumulated other comprehensive loss		381			122			-			189		(a)		692
Net current period other comprehensive (loss) income		(16,352	)		6,061			(11	)		182				(10,120	)

Balance at September 30, 2022	$	(31,263	)	$	5,945		$	18		$	(3,683	)		$	(28,983	)

(a) This reclassification relates to the amortization of prior service costs and gains/losses associated with the Company's SERP Plan. This expense is reflected in other (expense) income, net on the accompanying condensed consolidated statements of operations.

14.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

On June 23, 2021, a patent infringement lawsuit styled Bel Power Solutions, Inc. v. Monolithic Power Systems, Inc., Case Number 6:21cv00655, was filed in the United States District Court for the Western District of Texas (Waco Division) by Bel Power Solutions, Inc. against Monolithic Power Systems, Inc. ("MPS") for infringement of various patents directed towards systems, methods and articles of manufacture that provide a substantial improvement in power control for circuits, including novel and unique point-of-load regulators. MPS filed a Motion to Dismiss and a Motion to Transfer Venue to the Northern District of California in September 2021. On May 5, 2022, the Western District of Texas court denied MPS’s motion to dismiss and its efforts to challenge venue. As such, the suit shall remain and continue in the Western District of Texas. The Company has made a demand for a jury trial.

In connection with the Company's 2014 acquisition of the Power-One Power Solutions business ("Power Solutions") of ABB Ltd., there is an ongoing claim by the Arezzo Revenue Agency in Italy concerning certain tax matters related to what was then Power-One Asia Pacific Electronics Shenzhen Co. Ltd. (now Bel Power Solutions Asia Pacific Electronics Shenzhen Co. Ltd, or “BPS China”) for the years 2004 to 2006. In September 2012, the Tax Court of Arezzo ruled in favor of BPS China and cancelled the claim. In February 2013, the Arezzo Revenue Agency filed an appeal of the Tax Court’s ruling. The hearing of the appeal was held on October 2, 2014. On October 13, 2014, BPS China was informed of the Regional Tax Commission of Florence ruling which was in favor of the Arezzo Revenue Agency and against BPS China. An appeal was filed on July 18, 2015 before the Regional Tax Commission of Florence and rejected. On December 5, 2016, the Arezzo Revenue Agency filed an appeal with the Supreme Court and BPS China filed a counter-appeal on January 4, 2017. The Supreme Court has yet to render its judgment. The estimated liability related to this matter is approximately $12.0 million and has been included as a liability for uncertain tax positions on the accompanying condensed consolidated balance sheets at September 30, 2022 and December 31, 2021. As Bel is fully indemnified in this matter per the terms of the stock purchase agreement with ABB, a corresponding other asset for indemnification is also included in other assets on the accompanying condensed consolidated balance sheets at September 30, 2022 and December 31, 2021.

The Company is not a party to any other legal proceeding, the adverse outcome of which is likely to have a material adverse effect on the Company's consolidated financial condition or results of operations.

15.

SEGMENTS

The Company operates in one industry with three reportable operating segments, which represent the Company's three product groups and a corporate segment. The segments consist of Connectivity Solutions, Power Solutions and Protection, Magnetic Solutions and a Corporate segment. The primary criteria by which financial performance is evaluated and resources are allocated are revenue and gross profit. The following is a summary of key financial data:

	Three Months Ended September 30, 2022
	Connectivity			Power Solutions			Magnetic			Corporate
	Solutions			and Protection			Solutions			Segment			Total
Revenue	$	50,253		$	76,433		$	51,053		$	-		$	177,739
Gross Profit		13,099			24,801			15,501			(1,867	)		51,534
Gross Profit %		26.1	%		32.4	%		30.4	%		nm			29.0	%

	Three Months Ended September 30, 2021
	Connectivity			Power Solutions			Magnetic			Corporate
	Solutions			and Protection			Solutions			Segment			Total
Revenue	$	40,344		$	60,281		$	46,341		$	-		$	146,966
Gross Profit		10,003			15,762			10,722			(513	)		35,974
Gross Profit %		24.8	%		26.1	%		23.1	%		nm			24.5	%

	Nine Months Ended September 30, 2022
	Connectivity			Power Solutions			Magnetic			Corporate
	Solutions			and Protection			Solutions			Segment			Total
Revenue	$	140,062		$	206,247		$	138,721		$	-		$	485,030
Gross Profit		37,414			60,775			37,476			(4,719	)		130,946
Gross Profit %		26.7	%		29.5	%		27.0	%		nm			27.0	%

	Nine Months Ended September 30, 2021
	Connectivity		Power Solutions		Magnetic		Corporate
	Solutions		and Protection		Solutions		Segment			Total
Revenue	$	121,446	$	159,312	$	115,593	$	-		$	396,351
Gross Profit		32,826		40,917		24,026		(2,652	)		95,117
Gross Profit %

Boards:

Quotes:

BELFB