Bel Fuse Inc. (NASDAQ:BELFA)(NASDAQ:BELFB) today announced preliminary unaudited financial results for the second quarter and first six months of 2012. The Company also announced a stock buyback program of up to$10.0 million of Class B common shares.
Second Quarter Highlights
Daniel Bernstein, Bel’s President and CEO, said, “Bel’s operating profit has now increased for two consecutive quarters, despite continued pressure on margins due to lower volumes and increases in certain material and labor costs that have outstripped price increases during the past year. The decrease in sales in the second quarter, compared to the second quarter of 2011, was concentrated in our modular products group.
“Bel has recorded pre-tax expenses related to our corporate restructuring program of about$0.4 millionin the first half of 2012. We currently estimate an additional$4.1 millionin pre-tax expenses associated with these steps in the second half of the year. We expect the program to reduce our operating costs by approximately$4.2 millionannually once it is fully implemented. We expect full implementation by the end of this year.
“As part of this program, we recently announced that we will close our Cinch North American manufacturing facility inVinita, Oklahomaby year end, and move the operation to a new facility inMcAllen, Texas, just across the Mexican border fromReynosawhere we already have a factory that does some of the processing for many of theVinitaparts. Having our facilities closer together will lower our transportation and logistics costs, as well as reduce lead-times for our customers. We also are taking a variety of overhead cost reduction steps at our facilities inAsia, which we expect to benefit our operating results beginning in the third quarter. The amount of these savings and the cost to implement them are not yet fully developed, but they will be in addition to the costs and savings mentioned above.”
Bernstein continued, “Product development in non-commodity areas is key to the success of our growth strategy. Last month we opened a technical office in Toulouse, Franceto support sales of Cinch’s next-generation fiber optic technology products to the European aerospace industry. Together with the recent acquisition of GigaCom Interconnect ABand its EBOSA® expanded beam fiber technology, our newToulouse technical office in the center of the European aerospace industry advances our strategy to focus on growth opportunities in military and aerospace markets. The EBOSA technology allows us to offer connector products that support our customers’ critical performance requirements for higher data transfer speeds and lower weight. In addition to our own product development efforts, we are talking to other connector suppliers regarding the incorporation of our EBOSA technology into their products. We are optimistic about these new growth opportunities.
“We also are exploring several potential acquisitions representing a total of about$80 millionin revenue that we believe will strengthen our product offerings and help us reduce costs. We expect a final decision on these potential transactions in the third quarter of 2012.”
Bernstein also announced that Bel’s Board of Directors has authorized the repurchase of up to$10.0 millionof the Company’s Class B common shares in open market, privately negotiated or block transactions at the discretion of Bel’s management. The Board believes that Bel’s common stock represents an attractive investment in light of the Company’s opportunities, improving profitability, the benefits expected to accrue from its current cost reductions and strong cash position.
Second Quarter Results
For the three months endedJune 30, 2012, net sales decreased to$73,222,000compared to$79,173,000for the second quarter of 2011.
Cost of sales increased slightly to 83.4% of sales for the second quarter of 2012, compared to 82.6% of sales for the second quarter of 2011, primarily because selling prices have not kept pace with the increase in wages inChina.
Operating income for the second quarter of 2012 increased to$2,363,000, compared to$160,000for the second quarter of 2011. Excluding costs detailed in the table reconciling GAAP to non-GAAP financial measures included in this release, non-GAAP operating income was$2,568,000for the second quarter of 2012, compared to$3,205,000for the second quarter of 2011.
Net earnings for the second quarter of 2012 were$1,463,000, compared to a net loss for the second quarter of 2011 of$574,000.
Excluding the charges detailed in the table reconciling GAAP to non-GAAP financial measures mentioned above, non-GAAP net earnings for the second quarter of 2012 were$1,918,000. This compares to non-GAAP net earnings for the second quarter of 2011, excluding charges, of$2,088,000.
Net earnings per diluted Class A common share for the second quarter of 2012 were$0.11, compared to a net loss per Class A common share of$0.05for the second quarter of 2011. Adjusted to exclude the amounts referenced above, non-GAAP net earnings per diluted Class A common share were$0.15for the second quarter of 2012, compared to$0.17for the second quarter of 2011.
Net earnings per diluted Class B common share were$0.13for the second quarter of 2012, compared to a net loss per Class B common share of$0.05for the second quarter of 2011. Adjusted to exclude the amounts referenced above, non-GAAP net earnings per diluted Class B common share were$0.16for the second quarter of 2012, compared to$0.18for the second quarter of 2011.
Balance Sheet Data
As ofJune 30, 2012, Bel reported working capital of$165,641,000, including cash, cash equivalents and marketable securities of$87,363,000, a current ratio of 4.8-to-1, total long-term obligations of$13,679,000, and stockholders’ equity of$222,557,000. In comparison, atDecember 31, 2011, Bel reported working capital of$165,264,000, including cash, cash equivalents, and marketable securities of$93,972,000, a current ratio of 4.9-to-1, total long-term obligations of$13,406,000, and stockholders’ equity of$221,080,000.
First Half Results
For the six months endedJune 30, 2012, net sales decreased to$138,783,000compared to$150,576,000for the first half of 2011. Net earnings for this year’s first half were$2,339,000, compared to net earnings of$2,670,000for the first half of 2011.
Net earnings per diluted Class A common share for the first six months of 2012 were$0.18, compared to$0.21for the same period of 2011. Adjusted to exclude various amounts, detailed in the reconciliation table included in this release, non-GAAP net earnings per diluted Class A common share were$0.24for the first six months of 2012, compared to$0.44a year earlier.
Net earnings per diluted Class B common share for the first six months of 2012 were$0.20, compared to$0.23for the same period of 2011. Adjusted to exclude the amounts referenced above, non-GAAP net earnings per diluted Class B common share were$0.26for the first six months of 2012, compared to$0.47a year earlier.
Bel has scheduled a conference call at 11:00 a.m. EDTtoday. To participate in the call, dial (720) 545-0088, conference ID #12329359. A simultaneous webcast is available from the Investors link under the “About Bel” tab at www.BelFuse.com. The webcast will be available for replay for a period of 20 days at this same Internet address. For a telephone replay, dial (404) 537-3406, conference ID #12329359, after2:00 p.m. EDT.
Bel (www.belfuse.com) and its divisions are primarily engaged in the design, manufacture, and sale of products used in networking, telecommunications, high-speed data transmission, commercial aerospace, military, transportation, and consumer electronics. Products include magnetics (discrete components, power transformers and MagJack® connectors with integrated magnetics), modules (DC-DC converters, integrated analog front-end modules and custom designs), circuit protection (miniature, micro and surface mount fuses) and interconnect devices (micro, circular and filtered D-Sub connectors, passive jacks, plugs and high-speed cable assemblies). The Company operates facilities around the world.
Except for historical information contained in this press release, the matters discussed in this press release (including the statements regarding the effects and costs of, and the anticipated savings resulting from, Bel’s streamlining activities, the time required to implement such streamlining activities, Cinch’s place in the aerospace market, anticipated changes in product offerings and the Company’s ability to support more effectively its growing international customer base) are forward looking statements that involve risks and uncertainties. Actual savings from the streamlining activities and the relocation from Vinita could materially differ from the amounts that the Company has projected, due principally to uncertainties associated with modifying existing approaches to operations. Among the factors that could cause actual results to differ materially from such statements are: the market concerns facing our customers; the continuing viability of sectors that rely on our products; the effects of business and economic conditions; capacity and supply constraints or difficulties; product development, commercializing 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; and the risk factors detailed from time to time in the Company’s SEC reports. In light of the risks and uncertainties, 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.
Neil Berkman Associates
Bel Fuse Inc.
President & CEO