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 September 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 November 5, 2009, there were 2,174,912 shares of Class A Common Stock, $0.10 par value, outstanding and 9,464,843 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 September 30, 2009
		and December 31, 2008 (unaudited)	2-3

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

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

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

		Notes to Condensed Consolidated Financial Statements (unaudited)	8-26

	Item 2.	Management's Discussion and Analysis of
		Financial Condition and Results of Operations	27-44

	Item 3.	Quantitative and Qualitative Disclosures About
		Market Risk	44

	Item 4.	Controls and Procedures	45

Part II		Other Information

	Item 1.	Legal Proceedings	47

	Item 6.	Exhibits	47

	Signatures		48

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 nine months ended September 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)

	September 30,		December 31,
	2009		2008

ASSETS
Current Assets:
Cash and cash equivalents	$	116,008	$	74,955
Marketable securities		9,976		13,735
Short-term investments		846		4,013
Accounts receivable - less allowance for doubtful accounts of $533 and $660 at September 30, 2009 and December 31, 2008, respectively		30,437		46,047
Inventories		29,795		46,524
Prepaid expenses and other current assets		1,273		859
Refundable income taxes		2,862		2,498
Assets held for sale		-		236
Deferred income taxes		2,003		4,752

Total Current Assets		193,200		193,619

Property, plant and equipment - net		36,622		39,936

Restricted cash		250		2,309
Long-term investments		212		1,062
Deferred income taxes		4,577		5,205
Intangible assets - net		678		926
Goodwill		2,047		14,334
Other assets		6,907		4,393

TOTAL ASSETS	$	244,493	$	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)

	September 30,		December 31,
	2009		2008

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	13,983	$	14,285
Accrued expenses		9,680		9,953
Accrued restructuring costs		155		555
Income taxes payable		1,947		4,054
Dividends payable		820		787
Total Current Liabilities		26,585		29,634

Long-term Liabilities:
Accrued restructuring costs		547		406
Deferred gain on sale of property		-		4,616
Liability for uncertain tax positions		2,574		3,445
Minimum pension obligation and unfunded pension liability		6,515		5,910
Total Long-term Liabilities		9,636		14,377

Total Liabilities		36,221		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 9,323,143 and 9,369,893 shares, respectively (net of 3,218,307 treasury shares)		932		937
Additional paid-in capital		21,375		19,963
Retained earnings		182,910		196,467
Accumulated other comprehensive income		2,838		188
Total Stockholders' Equity		208,272		217,773

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	244,493	$	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						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008

Net Sales	$	45,283		$	66,964		$	134,088		$	200,287

Costs and expenses:
Cost of sales		41,516			56,337			119,919			165,292
Selling, general and administrative		6,813			8,934			22,067			27,151
Impairment of goodwill		12,875			-			12,875			-
Restructuring charge		-			329			413			329
Loss (gain) on sale of property, plant and equipment		9			-			(4,643	)		-
		61,213			65,600			150,631			192,772

(Loss) income from operations		(15,930	)		1,364			(16,543	)		7,515

Realized gain (loss/impairment charge) on investment		656			(1,397	)		1,739			(4,030	)
Interest income and other, net		86			528			402			2,045

(Loss) earnings before benefit from income taxes		(15,188	)		495			(14,402	)		5,530
Income tax benefit		(4,436	)		(1,451	)		(3,194	)		(394	)

Net (loss) earnings	$	(10,752	)	$	1,946		$	(11,208	)	$	5,924

(Loss) earnings per Class A common share
Basic	$	(0.90	)	$	0.16		$	(0.95	)	$	0.47
Diluted	$	(0.90	)	$	0.16		$	(0.95	)	$	0.47

Weighted-average Class A common shares outstanding
Basic		2,174,912			2,325,745			2,175,322			2,460,550
Diluted		2,174,912			2,325,745			2,175,322			2,460,550

(Loss) earnings per Class B common share
Basic	$	(0.94	)	$	0.17		$	(0.98	)	$	0.51
Diluted	$	(0.94	)	$	0.17		$	(0.98	)	$	0.51

Weighted-average Class B common shares outstanding
Basic		9,324,472			9,373,347			9,343,088			9,344,234
Diluted		9,324,472			9,373,347			9,343,088			9,346,611

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(dollars in thousands)

(Unaudited)

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

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 taxes		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		(390	)					(390	)
Cash dividends declared on Class B common stock		(1,959	)					(1,959	)
Termination of restricted common stock		-															(2	)		2
Repurchase/retirement of Class A common stock		(92	)											(1	)					(91	)
Currency translation adjustment		345		$	345						345
Unrealized holding gains on marketable securities arising during the year, net of taxes		3,985			3,985						3,985
Reclassification adjustment of unrealized holding gains included in net earnings, net of taxes		(1,680	)		(1,680	)					(1,680	)
Reduction in APIC pool associated with tax deficiencies related to restricted stock awards		(87	)																	(87	)
Unauthorized issuance of common stock		812																		812
Return of unauthorized shares of common stock		(456	)														(3	)		(453	)
Stock-based compensation expense		1,229																		1,229
Net loss		(11,208	)		(11,208	)		(11,208	)
Comprehensive loss				$	(8,558	)

Balance, September 30, 2009	$	208,272					$	182,910		$	2,838		$	217		$	932		$	21,375

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2009			2008
Cash flows from operating activities:
Net (loss) earnings	$	(11,208	)	$	5,924
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization		5,072			5,439
Stock-based compensation		1,229			1,083
Excess tax benefits from share-based payment arrangements		-			(79	)
(Gain) loss on sale of property, plant and equipment		(4,643	)		84
Realized (gain) loss/impairment charge on investment		(1,739	)		4,030
Impairment of goodwill		12,875			-
Other, net		648			748
Deferred income taxes		1,825			(1,081	)
Changes in operating assets and liabilities		27,738			(3,021	)

Net Cash Provided by Operating Activities		31,797			13,127

Cash flows from investing activities:
Purchase of property, plant and equipment		(1,373	)		(5,279	)
Purchase of intangible asset		-			(300	)
Purchase of marketable securities		(3,545	)		(12,524	)
Payment for acquisition		(438	)		-
Cash transferred to restricted cash		(250	)		-
Proceeds from sale of marketable securities		8,914			-
Proceeds from sale of property, plant and equipment		2,555			2,256
Proceeds from cash surrender value of company-owned life insurance		1,518			-
Redemption of investment		4,174			14,433

Net Cash Provided by (Used in) Investing Activities		11,555			(1,414	)

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(dollars in thousands)

(Unaudited)

	Nine Months Ended
	September 30,
	2009			2008
Cash flows from financing activities:
Proceeds from exercise of stock options		-			312
Dividends paid to common shareholders		(2,316	)		(2,362	)
Purchase and retirement of Class A common stock		(92	)		(10,785	)
Excess tax benefits from share-based payment arrangements		-			79

Net Cash Used In Financing Activities		(2,408	)		(12,756	)

Effect of exchange rate changes on cash		109			(61	)

Net Increase (Decrease) in Cash and Cash Equivalents		41,053			(1,104	)

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

Cash and Cash Equivalents - end of period	$	116,008		$	82,771

Changes in operating assets and liabilities consist of:
Decrease in accounts receivable	$	15,685		$	4,916
Decrease (increase) in inventories		16,818			(10,088	)
Increase in prepaid expenses and other current assets		(410	)		(158	)
Decrease (increase) in other assets		57			(64	)
(Decrease) increase in accounts payable		(320	)		2,222
Decrease in income taxes payable		(3,354	)		(1,496	)
Decrease in accrued restructuring costs		(259	)		-
(Decrease) increase in accrued expenses		(479	)		1,647

	$	27,738		$	(3,021	)
Supplementary information:
Cash paid during the period for income taxes, net of refunds	$	(1,676	)	$	2,017

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 September 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 nine months ended September 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 nine months ended September 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 nine months ended September 30, 2009 which would have had a dilutive effect on (loss) earnings per share.

As the Company experienced a loss during the three and nine months ended September 30, 2009, 42,500 outstanding options and 49,462 outstanding options, respectively, were not included in the calculation of diluted loss per Class B common share during these periods as their effect would be antidilutive. During the three and nine months ended September 30, 2008, 53,000 outstanding options were not included in the foregoing computations for Class B common shares because their effect would be antidilutive.

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					Nine Months Ended
	September 30,					September 30,
	2009			2008		2009			2008

Numerator:
Net (loss) earnings	$	(10,752	)	$	1,946	$	(11,208	)	$	5,924
Less Dividends:
Class A		130			142		390			448
Class B		650			644		1,959			1,949
Undistributed (loss) earnings	$	(11,532	)	$	1,160	$	(13,557	)	$	3,527

Undistributed (loss) earnings allocation - basic:
Class A undistributed (loss) earnings		(2,096	)		222		(2,460	)		707
Class B undistributed (loss) earnings		(9,436	)		938		(11,097	)		2,820
Total undistributed (loss) earnings	$	(11,532	)	$	1,160	$	(13,557	)	$	3,527

Undistributed (loss) earnings allocation - diluted:
Class A undistributed (loss) earnings		(2,096	)		222		(2,460	)		707
Class B undistributed (loss) earnings		(9,436	)		938		(11,097	)		2,820
Total undistributed (loss) earnings	$	(11,532	)	$	1,160	$	(13,557	)	$	3,527

Net (loss) earnings allocation - basic:
Class A allocated (loss) earnings		(1,966	)		364		(2,070	)		1,155
Class B allocated (loss) earnings		(8,786	)		1,582		(9,138	)		4,769
Net (loss) earnings	$	(10,752	)	$	1,946	$	(11,208	)	$	5,924

Net (loss) earnings allocation - diluted:
Class A allocated (loss) earnings		(1,966	)		364		(2,070	)		1,155
Class B allocated (loss) earnings		(8,786	)		1,582		(9,138	)		4,769
Net (loss) earnings	$	(10,752	)	$	1,946	$	(11,208	)	$	5,924

Denominator:
Weighted-average shares outstanding:
Class A - basic and diluted		2,174,912			2,325,745		2,175,322			2,460,550

Class B - basic		9,324,472			9,373,347		9,343,088			9,344,234
Dilutive impact of stock options		-			-		-			2,377
Class B - diluted		9,324,472			9,373,347		9,343,088			9,346,611

(Loss) Earnings per share:
Class A - basic	$	(0.90	)	$	0.16	$	(0.95	)	$	0.47
Class A - diluted	$	(0.90	)	$	0.16	$	(0.95	)	$	0.47

Class B - basic	$	(0.94	)	$	0.17	$	(0.98	)	$	0.51
Class B - diluted	$	(0.94	)	$	0.17	$	(0.98	)	$	0.51

During 2009, the Company implemented an update to the accounting guidance related to earnings per share. In accordance with this accounting guidance, unvested share-based payment awards with rights to dividends are participating securities and shall be included in the computation of basic earnings per share. The Company adopted this guidance effective January 1, 2009 and in accordance with the accounting guidance, all prior-period earnings per share data presented has been adjusted retrospectively to conform to the provisions of the new guidance. This adjustment did not have a material impact on prior periods presented.

3. MARKETABLE SECURITIES

At September 30, 2009 and December 31, 2008, the Company’s marketable securities classified as available-for-sale had an adjusted cost basis of approximately $6.3 million and $13.7 million and a fair market value of $10.0 million and $13.7 million, respectively. During the three and nine months ended September 30, 2009, the Company recorded realized gains on its investments in the amount of $0.7 million and $1.7 million, respectively. During the three and nine months ended September 30, 2008, the Company recorded realized losses/impairment charges on its investments in the amount of $1.4 million and $4.0 million, respectively. At September 30, 2009 and December 31, 2008, respectively, gross unrealized gains on other marketable securities of approximately $3.6 million and $0.1 million are included, net of tax, in accumulated other comprehensive income.

Columbia Strategic Cash Portfolio (“Columbia Portfolio”):

At September 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.

Since the announcement of the liquidation in December 2007, the Company has received cash redemptions totaling $23.1 million through September 30, 2009 (including $2.2 million and $4.2 million during the three and nine months ended September 30, 2009, respectively) at a weighted-average net asset value (NAV) of $.9449 per unit. As of September 30, 2009, the Company holds 1.3 million units with a book value of $1.1 million, which approximates the fair value of this investment at that date. The Company recorded gains on redemptions of $0.1 million and $0.2 million during the three and nine months ended September 30, 2009, respectively, for financial reporting purposes. As of September 30, 2008, the Company held 8.6 million units with a book value and fair value of $8.2 million. The Company recorded minimal losses on redemptions in the comparable periods of 2008. Due to the restrictions placed on these investments, the balance in the Columbia Portfolio as of September 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 September 30, 2009, the Company owned a total of 1,840,919 shares, or to the Company’s knowledge 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 $155.0 million as of September 30, 2009. These shares are reflected on the Company’s condensed consolidated balance sheets as marketable securities. These marketable securities are classified as available for sale. During the nine months ended September 30, 2008, the Company recorded impairment charges totaling $3.6 million related to this investment. At September 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 $2.9 million and $2.1 million, respectively. The gross unrealized gain of $0.9 million and $0.1 million at September 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 nine months ended September 30, 2009, the Company sold 3,725,425 shares of its Power-One common stock at an aggregate fair market value of $6.1 million, resulting in a gain of $1.6 million for financial reporting purposes. As of September 30, 2009, the Company owned 3,613,573 shares of Power-One common stock, representing, to the Company’s knowledge, 4.1% of Power-One’s outstanding common stock. At September 30, 2009, this investment had an adjusted basis of $4.3 million ($1.19 per share) and a fair market value of $7.0 million ($1.95 per share). The gross unrealized gain at September 30, 2009 of $2.7 million is included, net of income tax, in accumulated other comprehensive income in stockholders’ equity.

CDARS:

As December 31, 2008, the Company had a total of $4.9 million invested 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. Due to the varying maturities of these CDs, $2.0 million of the total investment was classified as cash equivalents at December 31, 2008. As of September 30, 2009, these CDs had not been renewed and the related money market funds were classified as a cash equivalent.

4. FAIR VALUE MEASUREMENT

The Company adopted the new accounting guidance for fair value measurements and disclosures 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 the new accounting guidance 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. As permitted by the accounting guidance, the Company delayed implementation of this standard 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.

The 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 based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The accounting guidance 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 September 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 and Power-One stock (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 September 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 nine months ended September 30, 2009. 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, 2009.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of September 30, 2009 (dollars in thousands).

			Assets at Fair Value as of September 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	$	9,976	$	9,976		-		-
Investments held in Rabbi Trust		3,696		3,696		-		-

Total	$	13,672	$	13,672		-		-

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a nonrecurring basis as of September 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 was determined based on the net asset value as issued by the portfolio manager as of September 30, 2009. The Company has categorized this as a significant other observable input (Level 2). These investments are included as short-term investments and long-term investments in the accompanying condensed consolidated balance sheet at September 30, 2009, in accordance with the current liquidation schedule of the remaining investments.

			Assets at Fair Value as of September 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 September 30, 2009		Nine Months Ended September 30, 2009

Other investments	$	1,131	$	-	$	1,131	$	-	$	137	$	158

Total	$	1,131	$	-	$	1,131	$	-	$	137	$	158

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. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of September 30, 2009.

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 upon the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. While there were signs of improvement at the beginning of the third quarter, the Company’s actual revenue stream for the nine months ended September 30, 2009 was significantly lower than the financial projections utilized in the annual goodwill impairment analysis (performed in the fourth quarter of 2008), and is not projected to rebound to those levels in 2009. The Company determined that current business conditions, and the resulting decrease in the Company’s projected cash flows, constituted a triggering event which required the Company to perform interim impairment tests related to its long-lived assets and goodwill during the third quarter of 2009. The Company’s interim test on its long-lived assets indicated that the carrying value of its long-lived assets was recoverable and that no impairment existed as of the testing date.

During the third quarter of 2009, the Company conducted an interim impairment test related to its goodwill by reporting unit, as a result of continued market declines. As of the testing date, only the Company’s Asia and Europe reporting units had goodwill associated with them. The Company’s fair value analysis related to the interim test was supported by a weighting of two generally accepted valuation approaches, the income approach and the market approach, as further described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. These approaches include numerous assumptions with respect to future circumstances, such as industry and/or local market conditions, that might directly impact each of the operating segment’s operations in the future, and are therefore uncertain. These approaches are utilized to develop a range of fair values and a weighted average of these approaches is utilized to determine the best fair value estimate within that range.

Detailed below is a table of key underlying assumptions utilized in the fair value estimate calculation for the interim test performed in the third quarter of 2009 as compared to those assumptions utilized during the 2008 annual valuation. Assumptions may vary by reporting unit. The table below shows the range of assumptions utilized across the various reporting units.

	Goodwill Impairment Analysis
	Key Assumptions
	2009 - Interim		2008 - Annual

Income Approach - Discounted Cash Flows:
Revenue growth rates		8.8% - 18.7%		(8.9%) - 10.3%
Cost of equity capital		13.8% - 14.8%		13.0% - 13.6%
Cost of debt capital		6.0% - 6.2%		4.9% - 7.7%
Weighted average cost of capital		12.6% - 13.4%		11.0% - 13.3%

Market Approach - Multiples of Guideline Companies (a):
EBIT multiples used		7.9 - 8.9		6.0 - 10.7
EBITDA multiples used		6.3 - 7.1		5.0 - 7.5
DFNI multiples used		12.2 - 13.7		9.3 - 13.5
DFCF multiples used		8.7 - 11.0		6.4 - 7.4
Control premium (b)		16.2% - 32.0%		27.5% - 31.7%

Weighting of Valuation Methods:
Income Approach - Discounted Cash Flows		75%		75%
Market Approach - Multiples of Guideline Companies		25%		25%

Definitions:
EBIT - Earnings before interest and taxes
EBITDA - Earnings before interest, taxes, depreciation and amortization
DFNI - Debt-free net income
DFCF - Debt-free cash flow

(a) Multiple range reflects multiples used throughout the North America, Asia and Europe reporting units

(b) Determined based on the industry mean control premium as published each year in MergerStat Review

The interim impairment test related to the Company's goodwill was performed by reporting unit. The valuation test, which heavily weights future cash flow projections, indicated that the goodwill associated with the Company’s Asia reporting unit was fully impaired and, as a result, the Company recorded an impairment charge of $12.9 million during the third quarter of 2009. The Company’s goodwill associated with its Asia reporting unit originated from several of Bel’s prior acquisitions, primarily e-Power, APC and Lucent (which represented $8.0 million, $2.0 million and $1.5 million, respectively, of the carrying value of goodwill at the testing date). The carrying value of the Company's goodwill was $14.3 million at December 31, 2008. The remaining goodwill as of September 30, 2009 has a carrying value of $2.0 million and relates solely to the Company’s Europe reporting unit.

5. OTHER ASSETS

At September 30, 2009, the Company has obligations of $6.5 million associated with its supplemental executive retirement plan (“SERP”). As a means of informally funding these obligations, the Company has invested in life insurance policies related to certain employees and marketable securities held in a Rabbi Trust. At September 30, 2009, these assets had a combined fair value of $6.4 million.

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 SERP obligations. 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 nine months ended September 30, 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 during the three and nine months ended September 30, 2009. 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 nine months ended September 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 September 30, 2009, the fair market value of the COLI was $2.7 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 September 30, 2009, the fair market value of these investments was $3.7 million. The unrealized gain of $0.2 million at September 30, 2009 has been included in accumulated other comprehensive income.

6. INVENTORIES

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

	September 30,		December 31,
	2009		2008
Raw materials	$	20,483	$	25,527
Work in progress		1,472		1,650
Finished goods		7,840		19,347
	$	29,795	$	46,524

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						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Total segment revenues
North America	$	13,499		$	17,980		$	37,391		$	64,993
Asia		36,098			50,505			105,016			145,879
Europe		4,213			7,516			13,936			21,926
Total segment revenues		53,810			76,001			156,343			232,798
Reconciling items:
Intersegment revenues		(8,527	)		(9,037	)		(22,255	)		(32,511	)
Net sales	$	45,283		$	66,964		$	134,088		$	200,287

Loss (income) from operations:
North America	$	(1,877	)	$	118		$	479		$	2,862
Asia		(13,864	)		1,095			(16,731	)		3,399
Europe		(189	)		151			(291	)		1,254
	$	(15,930	)	$	1,364		$	(16,543	)	$	7,515

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 June 30, 2011. There have not been any borrowings under the credit agreement and, as such, there was no balance outstanding as of September 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. The Company is in compliance with its debt covenants as of September 30, 2009.

The Company’s Hong Kong subsidiary had an unsecured line of credit of $2 million which was unused as of September 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.

In July 2009, the Company established a standby letter of credit with the State of New Jersey as a performance guarantee related to environmental cleanup associated with the Jersey City, New Jersey property sale. In connection with this agreement, the Company has a compensating balance of $0.3 million which has been classified as restricted cash as of September 30, 2009.

9. INCOME TAXES

As of September 30, 2009 and December 31, 2008, the Company has approximately $4.4 million and $7.3 million, respectively, of liabilities for uncertain tax positions ($1.8 million and $3.9 million, respectively, included in income tax payable and $2.6 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 2006 and for state examinations before 2005. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2003 in the Far East and generally 2005 in Europe.

During the nine months ended September 30, 2009, certain statutes of limitations expired which resulted in a reversal of a previously recognized liability for uncertain tax positions in the amount of $3.9 million. This was offset by an increase in the liability for uncertain tax positions in the amount of $0.9 million during the nine months ended September 30, 2009. Additionally, the Company settled a lawsuit during the third quarter of 2009 which resulted in a tax benefit of $0.8 million. During the nine months ended September 30, 2008, certain statute of limitations expired which resulted in a reversal of a previously recognized liability for uncertain tax positions in the amount of $2.3 million. This was offset by certain changes in estimates for prior year taxes arising from the finalization of the 2007 tax returns together with the resolution of the Bel Fuse, Inc. State of New Jersey tax examination in the total amount of $0.5 million.

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 September 30, 2009. A total of $1.8 million of previously recorded liabilities for uncertain tax positions relates to the 2006 tax year. The statute of limitations related to this liability is scheduled to expire on September 15, 2010.

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, 2009 and 2008, the Company recognized $0.1 million and $0.3 million, respectively, in interest and penalties in the condensed consolidated statements of operations. The Company has approximately $1.0 million and $1.6 million accrued for the payment of interest and penalties at September 30, 2009 and December 31, 2008, respectively, which is included in both income taxes payable and liability for uncertain tax positions in the condensed consolidated balance sheets. During the quarters ended September 30, 2009 and 2008, $0.7 million and $0.3 million, respectively, of interest and penalties was reversed from the liability for uncertain tax positions. These amounts are included in the reversals of previously recognized liabilities for uncertain tax positions discussed above.

10. ACCRUED EXPENSES

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

	September 30,		December 31,
	2009		2008
Sales commissions	$	1,359	$	1,598
Contract labor		1,560		2,939
Salaries, bonuses and related benefits		2,684		2,834
License fee		2,100		-
Other		1,977		2,582
	$	9,680	$	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 nine months ended September 30, 2009 and 2008 amounted to approximately $0.3 million in each period. The expense for the three months ended September 30, 2009 and 2008 amounted to approximately $0.1 million in each period. As of September 30, 2009, the plans owned 17,086 and 174,334 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 nine months ended September 30, 2009 and 2008 amounted to approximately $0.2 million and $0.3 million, respectively. The expense for the three months ended September 30, 2009 and 2008 amounted to approximately $0.1 million in each period. As of September 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				Nine Months Ended
	September 30,				September 30,
	2009		2008		2009		2008
Service cost	$	96	$	73	$	288	$	220
Interest cost		88		76		264		227
Amortization of adjustments		37		33		110		100
Total SERP expense	$	221	$	182	$	662	$	547

	September 30,			December 31,
	2009			2008
Balance sheet amounts:
Minimum pension obligation and unfunded pension liability	$	6,515		$	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. 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 $1.2 million and $1.1 million, respectively, for the nine months ended September 30, 2009 and 2008. For the three months ended September 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 nine months ended September 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 nine months ended September 30, 2009 and 2008.

Information regarding the Company’s stock options for the nine months ended September 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		(14,000	)		37.00
Outstanding at September 30, 2009		39,000		$	29.50	0.73 years	$	-
Exercisable at September 30, 2009		39,000		$	29.50	0.73 years	$	-

No stock options were exercised during the nine months ended September 30, 2009. During the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2009 is presented below: