Edgar Filing: BEL FUSE INC /NJ

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________________________ to ________________________________________

Commission File Number: 0-F11676

BEL FUSE INC.

(Exact name of registrant as specified in its charter)

NEW JERSEY	22-1463699
(State of other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

206 Van Vorst Street	Jersey City, New Jersey	07302
(Address of principal executive offices)		(Zip Code)

(201) 432-0463

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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 and 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.x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes ¨ No Not applicable to the registrant.

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer x	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller
		reporting company)

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

¨ Yes x No

At August 10, 2009, there were 2,174,912 shares of Class A Common Stock, $0.10 par value, outstanding and 9,326,043 shares of Class B Common Stock, $0.10 par value, outstanding.

BEL FUSE INC.

INDEX

			Page
Part I		Financial Information

	Item 1.	Financial Statements	1

		Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008 (unaudited)	2-3

		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008 (unaudited)	4

		Condensed Consolidated Statements of Stockholders' Equity for the Year Ended December 31, 2008 and the Six Months Ended June 30, 2009 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008 (unaudited)	6-7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8-24

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25-38

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

	Item 4.	Controls and Procedures	40

Part II		Other Information

	Item 1.	Legal Proceedings	42

	Item 4.	Submission of Matters to a Vote of Security Holders	42

	Item 6.	Exhibits	42

	Signatures		43

PART I. Financial Information

Item 1. Financial Statements (Unaudited)

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. The following condensed consolidated financial statements should be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results for the entire fiscal year or for any other period.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

(Unaudited)

	June 30,		December 31,
	2009		2008

ASSETS
Current Assets:
Cash and cash equivalents	$	97,976	$	74,955
Marketable securities		14,451		13,735
Short-term investments		2,345		4,013
Accounts receivable - less allowance for doubtful
accounts of $596 and $660 at June 30, 2009
and December 31, 2008, respectively		32,254		46,047
Inventories		31,619		46,524
Prepaid expenses and other current assets		1,514		859
Refundable income taxes		3,996		2,498
Assets held for sale		-		236
Deferred income taxes		2,830		4,752

Total Current Assets		186,985		193,619

Property, plant and equipment - net		37,960		39,936

Restricted cash		-		2,309
Long-term investments		807		1,062
Deferred income taxes		3,795		5,205
Intangible assets - net		694		926
Goodwill		14,359		14,334
Other assets		6,493		4,393

TOTAL ASSETS	$	251,093	$	261,784

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED

(dollars in thousands, except per share data)

(Unaudited)

	June 30,		December 31,
	2009		2008

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	10,848	$	14,285
Accrued expenses		6,695		9,953
Accrued restructuring costs		154		555
Income taxes payable		3,985		4,054
Dividends payable		811		787
Total Current Liabilities		22,493		29,634

Long-term Liabilities:
Accrued restructuring costs		586		406
Deferred gain on sale of property		-		4,616
Liability for uncertain tax positions		3,509		3,445
Minimum pension obligation and unfunded pension liability		6,313		5,910
Total Long-term Liabilities		10,408		14,377

Total Liabilities		32,901		44,011

Commitments and Contingencies

Stockholders' Equity:
Preferred stock, no par value, authorized 1,000,000
shares; none issued		-		-
Class A common stock, par value $.10 per share -
authorized 10,000,000 shares; outstanding
2,174,912 and 2,180,982 shares, respectively
(net of 1,072,769 treasury shares)		217		218
Class B common stock, par value $.10 per share -
authorized 30,000,000 shares; outstanding
9,326,543 and 9,369,893 shares, respectively
(net of 3,218,307 treasury shares)		933		937
Additional paid-in capital		20,995		19,963
Retained earnings		194,443		196,467
Accumulated other comprehensive income		1,604		188
Total Stockholders' Equity		218,192		217,773

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	251,093	$	261,784

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008

Net Sales	$	44,934		$	72,454		$	88,805		$	133,323

Costs and expenses:
Cost of sales		40,192			59,317			78,403			108,955
Selling, general and administrative		7,601			9,284			15,254			18,217
Restructuring charge		-			-			413			-
Loss (gain) on sale of property, plant and equipment		13			-			(4,652	)		-
		47,806			68,601			89,418			127,172

(Loss) Income from operations		(2,872	)		3,853			(613	)		6,151

Other, net		1			(2	)		9			(1	)
Realized gain (loss/impairment charge) on investment		1,081			(2,352	)		1,083			(2,633	)
Interest income		126			605			307			1,518

(Loss) earnings before (benefit) provision for income taxes		(1,664	)		2,104			786			5,035
Income tax (benefit) provision		(392	)		293			1,242			1,057

Net (loss) earnings	$	(1,272	)	$	1,811		$	(456	)	$	3,978


(Loss) earnings per Class A common share
Basic	$	(0.11	)	$	0.14		$	(0.05	)	$	0.31
Diluted	$	(0.11	)	$	0.14		$	(0.05	)	$	0.31

Weighted-average Class A common shares outstanding
Basic		2,174,912			2,524,978			2,175,531			2,528,693
Diluted		2,174,912			2,524,978			2,175,531			2,528,693

(Loss) earnings per Class B common share
Basic	$	(0.11	)	$	0.16		$	(0.04	)	$	0.34
Diluted	$	(0.11	)	$	0.16		$	(0.04	)	$	0.34

Weighted-average Class B common shares outstanding
Basic		9,343,090			9,352,092			9,352,550			9,329,516
Diluted		9,343,090			9,352,609			9,352,550			9,333,082

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(dollars in thousands)

(Unaudited)

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

Balance, January 1, 2008	$	244,527					$	214,580		$	(344	)	$	255		$	929		$	29,107

Exercise of stock options		312															3			309
Tax benefits arising from the disposition of non-qualified incentive stock options		39																		39
Cash dividends declared on Class A common stock		(565	)					(565	)
Cash dividends declared on Class B common stock		(2,619	)					(2,619	)
Issuance of restricted common stock		-															6			(6	)
Termination of restricted common stock		-															(1	)		1
Repurchase/retirement of Class A common stock		(11,002	)											(37	)					(10,965	)
Currency translation adjustment		(355	)	$	(355	)					(355	)
Unrealized holding losses on marketable securities arising during the year, net of taxes		(4,230	)		(4,230	)					(4,230	)
Reclassification adjustment of unrealized holding losses for impairment charge included in net earnings, net of tax		5,551			5,551						5,551
Stock-based compensation expense		1,478																		1,478
Change in unfunded SERP liability, net of taxes		(434	)		(434	)					(434	)
Net loss		(14,929	)		(14,929	)		(14,929	)
Comprehensive loss				$	(14,397	)

Balance, December 31, 2008	$	217,773					$	196,467		$	188		$	218		$	937		$	19,963

Cash dividends declared on Class A common stock		(260	)					(260	)
Cash dividends declared on Class B common stock		(1,308	)					(1,308	)
Termination of restricted common stock		-															(1	)		1
Repurchase/retirement of Class A common stock		(92	)											(1	)					(91	)
Currency translation adjustment		13		$	13						13
Unrealized holding gains on marketable securities arising during the period, net of taxes of $1,262		2,061			2,061						2,061
Reclassification adjustment of unrealized holding gains included in net earnings, net of taxes of $403		(658	)		(658	)					(658	)
Reduction in APIC pool associated with tax deficiencies related to restricted stock awards		(87	)																	(87	)
Unauthorized issuance of common stock		852																		852
Return of unauthorized shares of common stock		(456	)														(3	)		(453	)
Stock-based compensation expense		810																		810
Net loss		(456	)		(456	)		(456	)
Comprehensive income				$	960

Balance, June 30, 2009	$	218,192					$	194,443		$	1,604		$	217		$	933		$	20,995

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2009			2008
Cash flows from operating activities:
Net (loss) earnings	$	(456	)	$	3,978
Adjustments to reconcile net (loss) earnings to net
cash provided by operating activities:
Depreciation and amortization		3,359			3,601
Stock-based compensation		810			668
Restructuring charges, net of cash payments		(221	)
Excess tax benefits from share-based
payment arrangements		-			(40	)
(Gain) loss on sale of property, plant and equipment		(4,652	)		2
Realized (gain) loss/impairment charge on investment		(1,083	)		2,633
Other, net		821			166
Deferred income taxes		2,335			(1,059	)
Changes in operating assets and liabilities		19,825			(1,245	)

Net Cash Provided by Operating Activities		20,738			8,704

Cash flows from investing activities:
Purchase of property, plant and equipment		(1,122	)		(3,144	)
Purchase of intangible asset		-			(300	)
Purchase of marketable securities		(5,629	)		(12,524	)
Proceeds from sale of marketable securities		4,680			-
Proceeds from sale of property, plant and equipment		2,554			2,290
Proceeds from cash surrender value of company-owned
life insurance		1,518			-
Redemption of investment		1,945			10,949

Net Cash Provided by (Used in) Investing Activities		3,946			(2,729	)

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(dollars in thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2009			2008
Cash flows from financing activities:
Proceeds from exercise of stock options	$	-		$	312
Dividends paid to common shareholders		(1,544	)		(1,572	)
Purchase and retirement of Class A common stock		(92	)		(766	)
Excess tax benefits from share-based
payment arrangements		-			40

Net Cash Used In Financing Activities		(1,636	)		(1,986	)

Effect of exchange rate changes on cash		(27	)		262

Net Increase in Cash and Cash Equivalents		23,021			4,251

Cash and Cash Equivalents - beginning of period		74,955			83,875

Cash and Cash Equivalents - end of period	$	97,976		$	88,126

Changes in operating assets
and liabilities consist of:
Decrease in accounts receivable	$	13,760		$	907
Decrease (increase) in inventories		14,914			(6,990	)
Increase in prepaid expenses and other current assets		(648	)		(360	)
Increase in other assets		(20	)		(75	)
(Decrease) increase in accounts payable		(3,441	)		4,604
Decrease in accrued expenses		(3,249	)		(313	)
(Decrease) increase in income taxes payable		(1,491	)		982

	$	19,825		$	(1,245	)

Supplementary information:
Cash paid during the period for income taxes	$	348		$	854

See 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 sheet as of June 30, 2009, and the condensed consolidated statements of operations, stockholders' equity and cash flows for the periods presented herein have been prepared by Bel Fuse Inc. (the "Company" or "Bel") and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations, changes in stockholders' equity and cash flows for all periods presented have been made. The results for the three and six months ended June 30, 2009 should not be viewed as indicative of the Company’s annual results or the Company’s results for any other period. The information for the condensed consolidated balance sheet as of December 31, 2008 was derived from audited financial statements. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Bel Fuse Annual Report on Form 10-K for the year ended December 31, 2008.

2.	(LOSS) EARNINGS PER SHARE

The Company utilizes the two-class method to report its (loss) earnings per share. The two-class method is a (loss) earnings allocation formula that determines (loss) earnings per share for each class of common stock according to dividends declared and participation rights in undistributed (loss) earnings. The Company’s Certificate of Incorporation, as amended, states that Class B common shares are entitled to dividends at least 5% greater than dividends paid to Class A common shares, resulting in the two-class method of computing (loss) earnings per share. In computing (loss) earnings per share, the Company has allocated dividends declared to Class A and Class B based on amounts actually declared for each class of stock and 5% more of the undistributed (loss) earnings have been allocated to Class B shares than to the Class A shares on a per share basis. Basic (loss) earnings per common share are computed by dividing net (loss) earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share, for each class of common stock, are computed by dividing net earnings by the weighted-average number of common shares and potential common shares outstanding during the period. In periods in which a loss from continuing operations is presented, potential common shares are not included in the diluted loss per common share calculation, as they would be antidilutive. During the three and six months ended June 30, 2008, potential common shares used in computing diluted (loss) earnings per share relate to stock options for Class B common shares which, if exercised, would have a dilutive effect on (loss) earnings per share. There were no stock options outstanding during the three and six months ended June 30, 2009 which would have had a dilutive effect on (loss) earnings per share.

The (loss) earnings and weighted-average shares outstanding used in the computation of basic and diluted (loss) earnings per share are as follows (dollars in thousands, except share and per share data):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2009			2008		2009			2008

Numerator:
Net (loss) earnings	$	(1,272	)	$	1,811	$	(456	)	$	3,978
Less Dividends:
Class A		128			152		260			306
Class B		654			655		1,308			1,305
Undistributed (loss) earnings	$	(2,054	)	$	1,004	$	(2,024	)	$	2,367

Undistributed (loss) earnings allocation - basic:
Class A undistributed (loss) earnings		(373	)		205		(367	)		486
Class B undistributed (loss) earnings		(1,681	)		799		(1,657	)		1,881
Total undistributed (loss) earnings	$	(2,054	)	$	1,004	$	(2,024	)	$	2,367

Undistributed (loss) earnings allocation - diluted:
Class A undistributed (loss) earnings		(373	)		205		(367	)		486
Class B undistributed (loss) earnings		(1,681	)		799		(1,657	)		1,881
Total undistributed (loss) earnings	$	(2,054	)	$	1,004	$	(2,024	)	$	2,367

Net (loss) earnings allocation - basic:
Class A allocated (loss) earnings		(245	)		357		(107	)		792
Class B allocated (loss) earnings		(1,027	)		1,454		(349	)		3,186
Net (loss) earnings	$	(1,272	)	$	1,811	$	(456	)	$	3,978

Net (loss) earnings allocation - diluted:
Class A allocated (loss) earnings		(245	)		357		(107	)		792
Class B allocated (loss) earnings		(1,027	)		1,454		(349	)		3,186
Net (loss) earnings	$	(1,272	)	$	1,811	$	(456	)	$	3,978

Denominator:
Weighted-average shares outstanding:
Class A - basic and diluted		2,174,912			2,524,978		2,175,531			2,528,693

Class B - basic		9,343,090			9,352,092		9,352,550			9,329,516
Dilutive impact of stock options		-			517		-			3,566
Class B - diluted		9,343,090			9,352,609		9,352,550			9,333,082

(Loss) Earnings per share:
Class A - basic	$	(0.11	)	$	0.14	$	(0.05	)	$	0.31
Class A - diluted	$	(0.11	)	$	0.14	$	(0.05	)	$	0.31

Class B - basic	$	(0.11	)	$	0.16	$	(0.04	)	$	0.34
Class B - diluted	$	(0.11	)	$	0.16	$	(0.04	)	$	0.34

During the three and six months ended June 30, 2009 and 2008, 53,000 outstanding options were not included in the foregoing computations for Class B common shares because their effect would be antidilutive.

3. MARKETABLE SECURITIES

At June 30, 2009 and December 31, 2008, marketable securities with an adjusted cost basis of approximately $12.2 million and $13.7 million had a fair market value of $14.5 million and $13.7 million, respectively. During the three and six months ended June 30, 2009, the Company recorded realized gains on its investments in the amount of $1.1 million in each period. During the three and six months ended June 30, 2008, the Company recorded realized losses/impairment charges on its investments in the amount of $2.4 million and $2.6 million, respectively. At June 30, 2009 and December 31, 2008, respectively, gross unrealized gains on other marketable securities of approximately $2.3 million and $0.1 million are included, net of tax, in accumulated other comprehensive income.

Columbia Strategic Cash Portfolio (“Columbia Portfolio”):

At June 30, 2009, the Company’s investment securities included privately placed units of beneficial interests in the Columbia Portfolio, which is an enhanced cash fund sold as an alternative to money-market funds. In December 2007, due to adverse market conditions, the fund was overwhelmed with withdrawal requests from investors and it was closed with a restriction placed upon the cash redemption ability of its holders. At the time the liquidation was announced, the Company held 25.7 million units of the Columbia Portfolio at a book value of $25.7 million.

As of June 30, 2009, the Company has received total cash redemptions to date of $20.8 million (including $1.9 million during the six months ended June 30, 2009) at a weighted-average net asset value (NAV) of $.9523 per unit. As of June 30, 2009, the Company holds 3.8 million units with a book value of $3.2 million and a fair market value of $3.3 million. Due to the restrictions placed on these investments, the balance in the Columbia Portfolio as of June 30, 2009 is categorized as an other investment on the accompanying condensed consolidated balance sheet, allocated into short-term and long-term based on the projected redemption schedule as issued by the portfolio manager. The information and the markets relating to these investments remain dynamic. There may be further declines in the value of these investments, in the value of the collateral held by these entities, and in the liquidity of the Company’s investments. To the extent that the Company determines that there is a further decline in fair value, the Company may recognize impairment charges in future periods up to the aggregate carrying amount of these investments.

Toko, Inc. (“Toko”):

As of June 30, 2009, the Company owned a total of 1,840,919 shares, or approximately 1.9%, of the outstanding shares, of the common stock of Toko. Toko develops, manufactures and sells power supply related components and radio frequency related components primarily in Japan. Toko had a market capitalization of approximately $162.2 million as of June 30, 2009. These shares are reflected on the Company’s condensed consolidated balance sheets as marketable securities. These marketable securities are considered to be available for sale under Statement of Financial Accounting Standards No. (“SFAS”) 115, “Accounting for Certain Investments in Debt and Equity Securities”. During the six months ended June 30, 2008, the Company recorded an impairment charge of $2.4 million related to this investment. At June 30, 2009 and December 31, 2008, this investment had an adjusted basis of $2.0 million at each date, and a fair market value of $3.1 million and $2.1 million, respectively. The gross unrealized gain of $1.0 million and $0.1 million at June 30, 2009 and December 31, 2008, respectively, is included, net of tax, in accumulated other comprehensive income.

Power-One, Inc. (“Power-One”):

As of December 31, 2008, the Company owned a total of 7,338,998 shares of Power-One common stock representing, to the Company’s knowledge, 8.4% of Power-One’s outstanding common stock, at a total purchase price of $14.1 million ($1.92 per share). Power-One’s common stock is quoted on the NASDAQ Global Market. Power-One is a designer and manufacturer of power conversion and power management products. During the second quarter of 2009, the Company sold 3,041,393 shares of its Power-One common stock at an aggregate fair market value of $4.7 million, resulting in a book gain of $1.1 million. As of June 30, 2009, the Company owned 4,297,605 shares of Power-One common stock, representing, to the Company’s knowledge, 4.9% of Power-One’s outstanding common stock. At June 30, 2009, this investment had an adjusted basis of $5.1 million ($1.19 per share) and a fair market value of $6.4 million ($1.49 per share). The gross unrealized gain at June 30, 2009 of $1.3 million is included, net of income tax, in accumulated other comprehensive income in stockholders’ equity.

CDARS:

During 2008, the Company invested a total of $4.9 million in certificates of deposit (CDs) through Stephens, Inc., with whom the Company has an investment banking relationship. These investments are part of the Certificate of Deposit Account Registry Service (CDARS) program whereby the funds are invested with various banks in order to achieve FDIC insurance on the full invested amount. The CDs had an initial maturity of 26-weeks and an early redemption feature with a 30-day interest penalty. During December 2008, $2.0 million of the CD’s matured and were temporarily renewed for a period of 29 days and, accordingly, were considered to be a cash equivalent as of December 31, 2008, due to the short-term nature of the investment. These CDs were renewed in January 2009 for a period of 13 weeks. The full $5.0 million investment (including interest) was renewed again in May 2009 for a period of 13 weeks. These CDs have been classified as marketable securities in the condensed consolidated balance sheet at June 30, 2009.

4. FAIR VALUE MEASUREMENT

The Company adopted SFAS No. 157, “Fair Value Measurements”, as amended by Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) 157-1, FSP 157-2, and FSP 157-3 (collectively referred to as SFAS No. 157), on January 1, 2008, for all financial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period. While the Company adopted the provisions of SFAS No. 157 for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis, no such assets or liabilities existed at the balance sheet date. The Company, in accordance with FSP 157-2, delayed implementation of SFAS No. 157 for all nonfinancial assets and liabilities recognized or disclosed at fair value in the financial statements on a nonrecurring basis and adopted these provisions effective January 1, 2009.

In accordance with the provisions of SFAS No. 157, which clarifies that fair value is 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 at the measurement date, the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of June 30, 2009, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of the Company’s investments in Toko stock, Power-One stock and CDARS (categorized as available-for-sale securities). In addition, the Company holds certain investments in a Rabbi Trust which are intended to fund the Company’s SERP obligations. These are also categorized as available-for-sale securities, and are included as other assets in the accompanying condensed consolidated balance sheet at June 30, 2009. The fair value of these investments is determined based on quoted market prices in public markets and is categorized as Level 1. The Company does not have any financial assets measured at fair value on a recurring basis categorized as Level 2 or Level 3, and there were no transfers in or out of Level 2 or Level 3 during the six months ended June 30, 2009.

The following table sets forth by level, within SFAS No. 157’s fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of June 30, 2009 (dollars in thousands).

			Assets at Fair Value as of June 30, 2009 Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Available-for-sale securities:
Marketable securities	$	14,451	$	14,451		-		-
Investments held in Rabbi Trust		3,553		3,553		-		-

Total	$	18,004	$	18,004		-		-

The following table sets forth by level, within SFAS No. 157’s fair value hierarchy, the Company’s financial assets accounted for at fair value on a nonrecurring basis as of June 30, 2009 (dollars in thousands). These consisted of the Company’s investment in the Columbia Portfolio (categorized as an other investment in the table below). The fair value of these investments is determined based on the net asset value as issued by the portfolio manager as of June 30, 2009. The Company has categorized this as a significant other observable input (Level 2).

			Assets at Fair Value as of June 30, 2009 Using						Total Gains
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Three Months Ended June 30, 2009		Six Months Ended June 30, 2009

Other investments	$	3,323		-	$	3,323		-	$	19	$	21

Total	$	3,323		-	$	3,323		-	$	19	$	21

There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the six months ended June 30, 2009 and the Company did not have any financial liabilities as of June 30, 2009.

The Company has other financial instruments, such as accounts receivable, accounts payable and accrued expenses, which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value of accounts receivable, accounts payable and accrued expenses approximate their fair values.

Nonfinancial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment charges upon the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. While the Company's actual revenue stream for the six months ended June 30, 2009 was lower than the financial projections utilized in the annual goodwill impairment analysis (performed in the fourth quarter of 2008), there are signs of improvement as the Company enters its third quarter. The Company will continue to monitor its financial results as well as the overall economic conditions into the third quarter. In the event the Company's projected cash flows do not rebound to adequate levels, the Company may perform an interim impairment test, which could lead to goodwill impairment charges in future periods. We cannot predict at this time when, or if, there will be a triggering event in 2009 which would cause the Company to test for impairment on an interim basis. In any event, the Company's annual impairment analysis will be performed in the fourth quarter of 2009. The carrying value of the Company's goodwill was $14.4 million and $14.3 million at June 30, 2009 and December 31, 2008, respectively.

5. OTHER ASSETS

In conjunction with the Company’s supplemental executive retirement plan (“SERP plan”), the Company has invested in life insurance policies related to certain employees and marketable securities held in a Rabbi Trust to satisfy future obligations of the SERP plan.

Company-Owned Life Insurance

Investments in company-owned life insurance policies (“COLI”) were made with the intention of utilizing them as a long-term funding source for the Company’s supplemental retirement plan (“SERP”) obligations, which amounted to $6.3 million at June 30, 2009. However, the cash surrender value of the COLI does not represent a committed funding source for these obligations. Any proceeds from these policies are subject to claims from creditors. The fair market value of the COLI at December 31, 2008 was $3.8 million. During the second quarter of 2009, the Company surrendered certain of the policies within the COLI at a cash surrender value of $1.5 million and purchased an additional $0.3 million in new COLI policies. During the first half of 2009, significant volatility in global equity markets had a significant effect on the cash surrender value and as a result, the Company recorded income to account for the increase in cash surrender value in the amount of $0.3 million and $0.1 million during the three and six months ended June 30, 2009, respectively. This increase in cash surrender value was allocated between cost of sales and selling, general and administrative expenses on the condensed consolidated statements of operations for the six months ended June 30, 2009. The allocation is consistent with the costs associated with the long-term employee benefit obligations that the COLI is intended to fund. At June 30, 2009, the fair market value of the COLI was $2.4 million and is included in other assets in the accompanying condensed consolidated balance sheets.

Other Investments

During the second quarter of 2009, the Company invested $3.5 million in various marketable securities. Together with the COLI described above, these investments are intended to fund the Company’s SERP obligations and are classified as other assets in the accompanying condensed consolidated balance sheets. These investments are classified as available for sale and the Company monitors these investments for impairment on an ongoing basis. At June 30, 2009, the fair market value of these investments was $3.5 million. There was an immaterial unrealized gain at June 30, 2009 which has been included in accumulated other comprehensive income.

6. INVENTORIES

The components of inventories are as follows (dollars in thousands):

	June 30,		December 31,
	2009		2008
Raw materials	$	20,735	$	25,527
Work in progress		1,323		1,650
Finished goods		9,561		19,347
	$	31,619	$	46,524

Inventories are shown net of an allowance for excess and obsolete inventory of $3.1 million and $4.1 million as of June 30, 2009 and December 31, 2008, respectively.

7. BUSINESS SEGMENT INFORMATION

The Company operates in one industry with three reportable segments. The segments are geographic and include North America, Asia and Europe. The primary criteria by which financial performance is evaluated and resources are allocated are revenues and operating income. The following is a summary of key financial data (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2009			2008			2009			2008
Total segment revenues
North America	$	12,585		$	24,022		$	23,891		$	47,014
Asia		35,120			53,234			68,918			95,374
Europe		4,684			7,624			9,724			14,410
Total segment revenues		52,389			84,880			102,533			156,798
Reconciling items:
Intersegment revenues		(7,455	)		(12,426	)		(13,728	)		(23,475	)
Net sales	$	44,934		$	72,454		$	88,805		$	133,323

Income (loss) from Operations:
North America	$	(215	)	$	1,647		$	2,356		$	2,745
Asia		(2,674	)		1,464			(2,867	)		2,304
Europe		17			742			(102	)		1,102
	$	(2,872	)	$	3,853		$	(613	)	$	6,151

Net sales to external customers are attributed to individual segments based on the geographic source of the billing for such customer sales. Transfers between geographic areas include finished products manufactured in foreign countries which are then transferred to the United States and Europe for sale; finished goods manufactured in the United States which are transferred to Europe and Asia for sale; and semi-finished components manufactured in the United States which are sold to Asia for further processing. Income from operations represents gross profit less operating expenses.

8. DEBT

The Company has an unsecured credit agreement in the amount of $20 million, which expires on September 10, 2011. There have not been any borrowings under the credit agreement and, as such, there was no balance outstanding as of June 30, 2009. At that date, the entire $20 million line of credit was available to the Company to borrow. The credit agreement bears interest at LIBOR plus 0.75% to 1.25% based on certain financial statement ratios maintained by the Company. In the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, it was noted that the Company was not in compliance with one of the covenants related to this credit agreement. Upon further clarification of the covenant calculation received from the lender subsequent to that filing, this matter has been resolved and the Company is in compliance with its debt covenants as of June 30, 2009.

The Company’s Hong Kong subsidiary had an unsecured line of credit of approximately $2 million which was unused as of June 30, 2009. The line of credit expired on January 31, 2009 and was renewed on February 10, 2009. Any borrowing on the line of credit will be guaranteed by the U.S. parent. The line of credit bears interest at a rate determined by the bank as the financing is extended.

9. INCOME TAXES

In accordance with the provisions of FASB Interpretation No. 48, “Accounting for Uncertainties in Income Taxes”, as of June 30, 2009 and December 31, 2008, the Company has approximately $7.4 million and $7.3 million, respectively, of liabilities for uncertain tax positions ($3.9 million and $3.9 million, respectively, included in income tax payable and $3.5 million and $3.4 million, respectively, included in liability for uncertain tax positions) all of which, if recognized, would reduce the Company’s effective tax rate.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2005 and for state examinations before 2004. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2002 in the Far East and generally 2004 in Europe.

As a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized benefits for tax positions taken regarding previously filed tax returns may change materially from those recorded as liabilities for uncertain tax positions in the Company’s condensed consolidated financial statements at June 30, 2009. A total of $3.9 million of previously recorded liabilities for uncertain tax positions relates to the 2005 tax year. The statute of limitations related to this liability is scheduled to expire on September 15, 2009.

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 six months ended June 30, 2009 and 2008, the Company recognized $0.1 million and $0.2 million, respectively, in interest and penalties in the condensed consolidated statements of operations. The Company has approximately $1.6 million accrued for the payment of interest and penalties at both June 30, 2009 and December 31, 2008, which is included in both income taxes payable and liability for uncertain tax positions in the condensed consolidated balance sheets.

10. ACCRUED EXPENSES

Accrued expenses consist of the following (dollars in thousands):

	June 30,		December 31,
	2009		2008
Sales commissions	$	1,173	$	1,598
Contract labor		1,530		2,939
Salaries, bonuses and related benefits		1,866		2,834
Other		2,126		2,582
	$	6,695	$	9,953

See Note 19 for discussion and details associated with restructuring accruals.

11. RETIREMENT FUND AND PROFIT SHARING PLAN

The Company maintains a domestic 401(K) plan, which consists of profit sharing, contributory stock ownership and individual voluntary savings to provide retirement benefits for plan participants. The expense for the six months ended June 30, 2009 and 2008 amounted to approximately $0.2 million in each period. The expense for the three months ended June 30, 2009 and 2008 amounted to approximately $0.1 million in each period. As of June 30, 2009, the plans owned 17,086 and 168,378 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

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 six months ended June 30, 2009 and 2008 amounted to approximately $0.2 million in each period. The expense for the three months ended June 30, 2009 and 2008 amounted to approximately $0.1 million in each period. As of June 30, 2009, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

The Supplemental Executive Retirement Plan (the "SERP" or the “Plan”) is designed to provide a limited group of key management and highly compensated employees of the Company with supplemental retirement and death benefits.

The components of SERP expense are as follows (dollars in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2009		2008		2009		2008
Service cost	$	96	$	73	$	192	$	146
Interest cost		88		76		176		152
Amortization of adjustments		37		33		74		66
Total SERP expense	$	221	$	182	$	442	$	364

	June 30,			December 31,
	2009			2008
Balance sheet amounts:
Minimum pension obligation and unfunded pension liability	$	6,313		$	5,910
Accumulated other comprehensive (loss) income		(1,588	)		(1,588	)

12. SHARE-BASED COMPENSATION

The Company records compensation expense in its condensed consolidated statements of operations related to employee stock-based options and awards in accordance with SFAS No. 123(R), “Share-Based Payment”. The aggregate pretax compensation cost recognized in net (loss) earnings for stock-based compensation (including incentive stock options and restricted stock, as further discussed below) amounted to approximately $0.8 million and $0.7 million, respectively, for the six months ended June 30, 2009 and 2008. For the three months ended June 30, 2009 and 2008 the aggregate compensation cost recognized in net earnings amounted to $0.4 million in each period. The Company did not use any cash to settle any equity instruments granted under share-based arrangements during the six months ended June 30, 2009 and 2008.

Stock Options

The Company has an equity compensation program (the "Program") which provides for the granting of "Incentive Stock Options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options and restricted stock awards. No stock options were granted during the six months ended June 30, 2009 and 2008.

Information regarding the Company’s stock options for the six months ended June 30, 2009 is as follows. All of the stock options noted below relate to options to purchase shares of the Company’s Class B common stock.

					Weighted
					Average
			Weighted		Remaining	Aggregate
			Average		Contractual	Intrinsic
Options	Shares		Exercise Price		Term	Value (000's)

Outstanding at January 1, 2009		53,000	$	31.48
Granted		-		-
Exercised		-		-
Forfeited or expired		-		-
Outstanding at June 30, 2009		53,000	$	31.48	0.74 years	$	-
Exercisable at June 30, 2009		53,000	$	31.48	0.74 years	$	-

No stock options were exercised during the six months ended June 30, 2009. During the six months ended June 30, 2008, a nominal amount of stock options were exercised and, as a result, the amount received from the exercise of stock options and the associated intrinsic value and tax benefits related to these exercises were minimal. Stock compensation expense applicable to stock options was minimal for the six months ended June 30, 2009 and 2008.

A summary of the status of the Company's unvested stock options as of December 31, 2008 and changes during the six months ended June 30, 2009 is presented below:

				Weighted-Average
				Grant-Date
Unvested Stock Options	Shares			Fair Value

Unvested at December 31, 2008		15,000		$	29.50
Granted		-			-
Vested		(15,000	)		29.50
Forfeited		-			-
Unvested at June 30, 2009		-			-

Restricted Stock Awards

The Company provides common stock awards to certain officers and key associates. The Company grants these awards, at its discretion, from the shares available under the Program. Unless otherwise provided at the date of grant or unless subsequently accelerated, the shares awarded vest in 25% increments on the second, third, fourth and fifth anniversaries of the award, respectively, and are distributed provided the employee has remained employed by the Company through such anniversary dates; otherwise the unearned shares are forfeited. The market value of these shares at the date of award is recorded as compensation expense on the straight-line method over the five year periods from the respective award dates, as adjusted for forfeitures of unvested awards. No common stock awards were granted by the Company during the six months ended June 30, 2009. During the six months ended June 30, 2008, the Company issued 56,300 Class B common shares under a restricted stock plan to various employees. In connection with awards granted in prior years, the Company recorded pre-tax compensation expense of $0.8 million and $0.7 million for the six months ended June 30, 2009 and 2008, respectively and $0.4 million for each of the three months ended June 30, 2009 and 2008.

A summary of the activity under the Restricted Stock Awards Plan as of January 1, 2009 and for the six months ended June 30, 2009 is presented below:

					Weighted
			Weighted		Average
			Average		Remaining
Restricted Stock			Award		Contractual
Awards	Shares		Price		Term

Outstanding at January 1, 2009		202,900	$	32.58	3.06 years