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, 2010

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

For the transition period from

Commission File Number:

000-11676

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). o Yes o 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.o

Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o
		(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). o Yes x No

At August 3, 2010, there were 2,174,912 shares of Class A Common Stock, $0.10 par value, outstanding and 9,529,093 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, 2010
		and December 31, 2009 (unaudited)	2-3

		Condensed Consolidated Statements of Operations for the Three
		and Six Months Ended June 30, 2010 and 2009 (unaudited)	4

		Condensed Consolidated Statement of Stockholders' Equity for
		the Six Months Ended June 30, 2010 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Six
		Months Ended June 30, 2010 and 2009 (unaudited)	6-7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8-19

	Item 2.	Management's Discussion and Analysis of
		Financial Condition and Results of Operations	20-29

	Item 3.	Quantitative and Qualitative Disclosures About
		Market Risk	29

	Item 4.	Controls and Procedures	29

Part II		Other Information

	Item 1.	Legal Proceedings	30

	Item 6.	Exhibits	31

	Signatures		32

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, 2009.

The results of operations for the three and six months ended June 30, 2010 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, except share and per share data)

(Unaudited)


	June 30,		December 31,
	2010		2009

ASSETS
Current Assets:
Cash and cash equivalents	$	75,655	$	124,231
Accounts receivable - less allowance for doubtful
accounts of $486 and $596 at June 30, 2010
and December 31, 2009, respectively		50,140		34,783
Inventories		50,122		31,791
Prepaid expenses and other current assets		2,361		955
Refundable income taxes		3,361		3,255
Deferred income taxes		1,221		815

Total Current Assets		182,860		195,830

Property, plant and equipment - net		47,835		35,943

Restricted cash		401		250
Deferred income taxes		3,645		4,516
Intangible assets - net		11,480		551
Goodwill		4,548		1,957
Other assets		9,692		6,899

TOTAL ASSETS	$	260,461	$	245,946

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(dollars in thousands, except shares and per share data)

(Unaudited)


	June 30,			December 31,
	2010			2009


LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	22,789		$	17,194
Accrued expenses		13,173			7,991
Accrued restructuring costs		158			156
Income taxes payable		2,029			1,863
Dividends payable		836			793
Total Current Liabilities		38,985			27,997

Long-term Liabilities:
Accrued restructuring costs		428			508
Liability for uncertain tax positions		3,312			2,887
Minimum pension obligation and
unfunded pension liability		5,990			5,622
Total Long-term Liabilities		9,730			9,017

Total Liabilities		48,715			37,014

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
at each date (net of 1,072,769 treasury shares)		217			217
Class B common stock, par value $.10 per share -
authorized 30,000,000 shares; outstanding
9,529,093 and 9,464,343 shares, respectively
(net of 3,218,307 treasury shares)		953			946
Additional paid-in capital		22,750			21,663
Retained earnings		188,149			185,014
Accumulated other comprehensive (loss) income		(323	)		1,092
Total Stockholders' Equity		211,746			208,932

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	260,461		$	245,946

See notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except share and per share data)

(Unaudited)


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010		2009			2010		2009

Net Sales	$	77,732	$	44,934		$	133,881	$	88,805

Costs and expenses:
Cost of sales		61,676		40,192			108,729		78,403
Selling, general and administrative		10,299		7,601			19,461		15,254
Restructuring charges		-		-			-		413
Loss (gain) on sale of property, plant and equipment		19		13			19		(4,652	)
		71,994		47,806			128,209		89,418

Income (loss) from operations		5,738		(2,872	)		5,672		(613	)

Realized gain on sale of investments		-		1,081			-		1,083
Interest income and other, net		116		127			238		316

Earnings (loss) before provision (benefit) for income taxes		5,854		(1,664	)		5,910		786
Provision (benefit) for income taxes		1,159		(392	)		1,183		1,242

Net earnings (loss)	$	4,695	$	(1,272	)	$	4,727	$	(456	)


Earnings (loss) per share:
Class A common share - basic and diluted	$	0.38	$	(0.11	)	$	0.38	$	(0.05	)
Class B common share - basic and diluted	$	0.41	$	(0.11	)	$	0.41	$	(0.04	)

Weighted-average shares outstanding:
Class A common share - basic and diluted		2,174,912		2,174,912			2,174,912		2,175,531
Class B common share - basic and diluted		9,495,824		9,343,090			9,480,134		9,352,550

Dividends paid per share:
Class A common share	$	0.06	$	0.06		$	0.12	$	0.12
Class B common share	$	0.07	$	0.07		$	0.14	$	0.14

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			Income			Earnings			Income (Loss)			Stock		Stock		(APIC)

Balance, January 1, 2010	$	208,932					$	185,014		$	1,092		$	217	$	946	$	21,663

Cash dividends declared on Class A common stock		(261	)					(261	)
Cash dividends declared on Class B common stock		(1,331	)					(1,331	)
Issuance of restricted common stock		-														7		(7	)
Currency translation adjustment		(1,455	)	$	(1,455	)					(1,455	)
Unrealized holding gains on marketable securities
arising during the period, net of taxes of $25		40			40						40
Reduction in APIC pool associated with tax deficiencies
related to restricted stock awards		(60	)															(60	)
Stock-based compensation expense		1,154																1,154
Net earnings		4,727			4,727			4,727
Comprehensive income				$	3,312

Balance, June 30, 2010	$	211,746					$	188,149		$	(323	)	$	217	$	953	$	22,750

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,
	2010			2009
Cash flows from operating activities:
Net earnings (loss)	$	4,727		$	(456	)
Adjustments to reconcile net earnings (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization		4,195			3,359
Stock-based compensation		1,154			810
Loss (gain) on sale of property, plant and equipment		19			(4,652	)
Realized gain on sale of investments		-			(1,083	)
Other, net		541			821
Deferred income taxes		268			2,335
Changes in operating assets and liabilities (see below)		(14,642	)		19,604

Net Cash (Used in) Provided by Operating Activities		(3,738	)		20,738

Cash flows from investing activities:
Purchase of property, plant and equipment		(1,092	)		(1,122	)
Purchase of marketable securities		-			(5,629	)
Payment for acquisition of business, net of cash acquired		(40,424	)		-
Proceeds from sale of marketable securities		-			4,680
(Purchase of) proceeds from cash surrender value of
company-owned life insurance		(1,571	)		1,518
Proceeds from sale of property, plant and equipment		6			2,554
Redemption of investment		-			1,945

Net Cash (Used in) Provided by Investing Activities		(43,081	)		3,946

Cash flows from financing activities:
Dividends paid to common shareholders		(1,548	)		(1,544	)
Purchase and retirement of Class A common stock		-			(92	)

Net Cash Used In Financing Activities		(1,548	)		(1,636	)

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,
	2010			2009

Effect of exchange rate changes on cash		(209	)		(27	)

Net (Decrease) Increase in Cash and Cash Equivalents		(48,576	)		23,021

Cash and Cash Equivalents - beginning of period		124,231			74,955

Cash and Cash Equivalents - end of period	$	75,655		$	97,976


Changes in operating assets and liabilities consist of:
(Increase) decrease in accounts receivable	$	(9,187	)	$	13,760
(Increase) decrease in inventories		(11,138	)		14,914
Increase in prepaid expenses and other current assets		(812	)		(648	)
Decrease (increase) in other assets		36			(20	)
Increase (decrease) in accounts payable		3,403			(3,441	)
Increase (decrease) in accrued expenses		2,469			(3,249	)
Cash payments of accrued restructuring costs		(78	)		(221	)
Increase (decrease) in income taxes payable		665			(1,491	)

	$	(14,642	)	$	19,604

Supplementary information:
Cash paid during the period for:
Income taxes, net of refunds received	$	346		$	348
Interest		14			-

Details of acquisition (see Note 3):
Fair value of identifiable net assets acquired	$	37,717		$	-
Goodwill		2,764			-
Fair value of net assets acquired	$	40,481		$	-

Fair value of consideration transferred	$	40,481		$	-
Less: Cash acquired in acquisition		(57	)		-
Cash paid for acquisition, net of cash acquired	$	40,424		$	-

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, 2010, 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, 2010 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, 2009 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 Inc. Annual Report on Form 10-K for the year ended December 31, 2009.

On January 29, 2010, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Cinch Connectors, Inc. (“Cinch U.S.”), Cinch Connectors de Mexico, S.A. de C.V. (“Cinch Mexico”) and Cinch Connectors Ltd. (“Cinch Europe”) (collectively, “Cinch”) from Safran S.A. Accordingly, as of January 29, 2010, all of the assets acquired and liabilities assumed were recorded at their preliminary fair values and the Company’s condensed consolidated results of operations for the six months ended June 30, 2010 include Cinch’s operating results from January 29, 2010 through June 30, 2010.

Recent Accounting Pronouncements

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. There were no significant changes to these accounting policies during the six months ended June 30, 2010 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

2. EARNINGS (LOSS) PER SHARE

The Company utilizes the two-class method to report its earnings per share. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and participation rights in undistributed earnings (loss). 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 earnings per share. In computing earnings (loss) 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 earnings (loss) per common share are computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding during the period. There were no potential common shares outstanding during the three or six months ended June 30, 2010 or 2009 which would have had a dilutive effect on earnings per share.

The earnings (loss) and weighted-average shares outstanding used in the computation of basic and diluted 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,
	2010		2009			2010		2009

Numerator:
Net earnings (loss)	$	4,695	$	(1,272	)	$	4,727	$	(456	)
Less Dividends:
Class A		131		128			261		260
Class B		667		654			1,331		1,308
Undistributed earnings (loss)	$	3,897	$	(2,054	)	$	3,135	$	(2,024	)

Undistributed earnings (loss) allocation - basic and diluted:
Class A undistributed earnings (loss)		698		(373	)		562		(367	)
Class B undistributed earnings (loss)		3,199		(1,681	)		2,573		(1,657	)
Total undistributed earnings (loss)	$	3,897	$	(2,054	)	$	3,135	$	(2,024	)

Net earnings (loss) allocation - basic and diluted:
Class A allocated earnings (loss)		829		(245	)		823		(107	)
Class B allocated earnings (loss)		3,866		(1,027	)		3,904		(349	)
Net earnings	$	4,695	$	(1,272	)	$	4,727	$	(456	)

Denominator:
Weighted-average shares outstanding:
Class A common share - basic and diluted		2,174,912		2,174,912			2,174,912		2,175,531
Class B common share - basic and diluted		9,495,824		9,343,090			9,480,134		9,352,550

Earnings (loss) per share:
Class A common share - basic and diluted	$	0.38	$	(0.11	)	$	0.38	$	(0.05	)
Class B common share - basic and diluted	$	0.41	$	(0.11	)	$	0.41	$	(0.04	)

3. ACQUISITION

On January 29, 2010 (the “Acquisition Date”), the Company completed its acquisition of 100% of the issued and outstanding capital stock of Cinch from Safran S.A. As of June 30, 2010, Bel paid $39.7 million in cash and assumed an additional $0.8 million of expenses in exchange for the net assets acquired. The transaction was funded with cash on hand. Cinch is headquartered in Lombard, Illinois and has manufacturing facilities in Vinita, Oklahoma; Reynosa, Mexico; and Worksop, England.

Cinch manufactures a broad range of interconnect products for customers in the military and aerospace, high-performance computing, telecom/datacom, and transportation markets. The Company believes that the addition of Cinch’s well-established lines of connector and cable products and extensive customer base will provide Bel with immediate access to the large and growing aerospace and military markets. In addition to these strategic synergies, there is a significant opportunity for expense reduction and the elimination of redundancies. The combination of these factors, and Bel’s ability to leverage its existing product line, have given rise to the provisional amount of goodwill detailed below.

The following table summarizes the consideration paid and the preliminary allocation of the assets acquired and liabilities assumed as of the close of the acquisition (in thousands):

				Measurement
				Period			January 29, 2010
	January 29, 2010			Adjustments			(As adjusted)
Cash	$	57		$	-		$	57
Accounts receivable		6,910			-			6,910
Inventories		7,548			-			7,548
Other current assets		803			85			888
Property, plant and equipment		7,822			6,996			14,818
Intangible assets		2,528			8,887			11,415
Other assets		1,715			(375	)		1,340
Total identifiable assets		27,383			15,593			42,976

Accounts payable		(2,320	)		-			(2,320	)
Accrued expenses and other current liabilities		(2,932	)		(7	)		(2,939	)
Total liabilities assumed		(5,252	)		(7	)		(5,259	)
Net identifiable assets acquired		22,131			15,586			37,717
Goodwill		18,371			(15,607	)		2,764
Net assets acquired	$	40,502		$	(21	)	$	40,481


Cash paid	$	39,755			(79	)	$	39,676
Assumption of change-in-control payments		747			58			805
Fair value of consideration transferred	$	40,502		$	(21	)	$	40,481

The preliminary measurements of fair value set forth above are subject to change and such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the Acquisition Date. While the purchase price allocation is not complete, the Company did receive additional information during the second quarter of 2010 related to the Acquisition Date fair values of certain property, plant and equipment, and intangible assets acquired. These updates to the purchase price allocation are noted as measurement period adjustments in the above table.

During the ongoing valuation process, the Company is utilizing the income, cost, and market approaches in determining the fair values of the assets acquired and liabilities assumed. The fair value measurements are primarily based on significant inputs that are not observable in the market. The income approach is primarily being utilized to value the intangible assets, consisting primarily of trademarks, customer relationships and technology. The income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required market rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, is being utilized as appropriate for plant, property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the asset, less an allowance for loss in value due to depreciation.

The preliminary fair value of property, plant and equipment acquired from Cinch consists of the following:

	Weighted- Average Estimated Useful Life		Acquisition-Date Fair Value
Land	Indefinite		$	166
Buildings and improvements	11.7 years			2,464
Machinery and equipment	5.0 years			11,539
Construction in progress		N/A		649
Total property, plant and equipment acquired			$	14,818

The preliminary fair value of identifiable intangible assets noted above consists of the following:

	Weighted- Average Life	Acquisition-Date Fair Value
Trademarks	Indefinite	$	7,000
Customer relationships	16.5 years		2,600
Technology	9.8 years		1,700
Licensing agreements	10.0 years		75
Non-compete agreements	2.0 years		40
Total identifiable intangible assets acquired		$	11,415

Of the $2.8 million of goodwill noted above, $1.7 million has been allocated to the Company’s North America reportable operating segment and $1.1 million has been allocated to the Company’s Europe reportable operating segment. This allocation was determined based on those reportable operating segments expected to benefit from the acquisition of Cinch and was based primarily on the location of Cinch operations and associated revenue generation at the Acquisition Date. The Company expects $1.7 million of the goodwill and $8.8 million of intangible assets allocated to the North America reportable operating segment to be deductible for tax purposes over a period of 15 years.

During the six months ended June 30, 2010, the Company expensed approximately $0.3 million of acquisition-related costs. These costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations.

Cinch’s results of operations have been included in the Company’s condensed consolidated financial statements for the periods subsequent to the Acquisition Date. During the three and six months ended June 30, 2010, Cinch contributed revenues of $14.9 million and $24.8 million, respectively, and estimated net earnings of $0.8 million and $0.2 million, respectively, to the Company since the Acquisition Date. The unaudited pro forma information below presents the combined operating results of the Company and Cinch. The unaudited pro forma results are presented for illustrative purposes only and include the effects of headcount reductions that were effected on the Acquisition Date. They do not reflect the realization of any other potential cost savings, or any related integration costs. Certain cost savings may result from the acquisition; however, there can be no assurance that these cost savings will be achieved. These pro forma results do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred as of January 1, 2009, nor is the pro forma data intended to be a projection of results that may be obtained in the future.

The following unaudited pro forma consolidated results of operations assume that the acquisition of Cinch was completed as of January 1, 2009 (dollars in thousands except per share data):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010		2009			2010		2009

Revenue	$	77,732	$	57,184		$	137,550	$	115,627
Net earnings		5,151		(959	)		5,090		331
Earnings per Class A common share - basic and diluted		0.42		(0.09	)		0.41		0.02
Earnings per Class B common share - basic and diluted		0.45		(0.08	)		0.44		0.03

4. FAIR VALUE MEASUREMENTS

The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial 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. 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 are defined as follows:

Level 1 - Observable inputs such as quoted market prices in active markets

Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable

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

As of June 30, 2010 and December 31, 2009, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted primarily of the Company’s investments in a Rabbi Trust, which are intended to fund the Company’s SERP obligations. These are categorized as available-for-sale securities and are included as other assets in the accompanying condensed consolidated balance sheets at June 30, 2010 and December 31, 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 1, Level 2 or Level 3 during the three or six months ended June 30, 2010 and 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 three or six months ended June 30, 2010.

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 June 30, 2010 and December 31, 2009 (dollars in thousands).

	Assets at Fair Value Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of June 30, 2010
Available-for-sale securities:
Investments held in Rabbi Trust	$	3,721	$	3,721	$	-	$	-
Marketable securities		3		3		-		-

Total	$	3,724	$	3,724	$	-	$	-

As of December 31, 2009
Available-for-sale securities:
Investments held in Rabbi Trust	$	3,656	$	3,656	$	-	$	-
Marketable securities		2		2		-		-

Total	$	3,658	$	3,658	$	-	$	-

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 June 30, 2010.

There were no financial assets or liabilities accounted for at fair value on a nonrecurring basis as of June 30, 2010 and December 31, 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 on the occurrence of a triggering event or in the case of goodwill and intangible assets with indefinite useful lives, on at least an annual basis. There were no triggering events that occurred during the six months ended June 30, 2010 that would warrant interim impairment testing.

5. INVENTORIES

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

	June 30,		December 31,
	2010		2009
Raw materials	$	33,480	$	22,431
Work in progress		5,864		1,478
Finished goods		10,778		7,882
	$	50,122	$	31,791

6. BUSINESS SEGMENT INFORMATION

The Company operates in one industry with three reportable operating segments, which are geographic in nature. The segments consist of 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,
	2010			2009			2010			2009

Net sales to external customers:
North America	$	27,393		$	9,420		$	48,491		$	19,119
Asia		40,348			31,125			68,861			60,578
Europe		9,991			4,389			16,529			9,108
	$	77,732		$	44,934		$	133,881		$	88,805

Total segment revenues:
North America	$	31,531		$	12,585		$	55,777		$	23,891
Asia		49,950			35,120			84,721			68,918
Europe		10,273			4,684			17,049			9,724
Total segment revenues		91,754			52,389			157,547			102,533
Intersegment revenues		(14,022	)		(7,455	)		(23,666	)		(13,728	)
Net sales	$	77,732		$	44,934		$	133,881		$	88,805

Income (Loss) from operations:
North America	$	1,236		$	(215	)	$	1,098		$	2,356
Asia		4,110			(2,674	)		4,243			(2,867	)
Europe		392			17			331			(102	)
	$	5,738		$	(2,872	)	$	5,672		$	(613	)

The following items are included in the income (loss) from operations presented above:

Acquisition of Cinch – The above figures for the three and six months ended June 30, 2010 include sales volume and expenses of Cinch since the acquisition date of January 29, 2010. During the three months ended June 30, 2010, the Cinch acquisition contributed sales to external customers of $11.8 million and income from operations of $0.8 million to the Company’s North America operating segment and sales to external customers of $3.1 million and income from operations of $0.1 million to the Company’s Europe operating segment. During the six months ended June 30, 2010, the Cinch acquisition contributed sales to external customers of $19.8 million and income from operations of $0.3 million to the Company’s North America operating segment and sales to external customers of $5.0 million and an immaterial amount of income from operations to the Company’s Europe operating segment.

Restructuring Charges – In connection with the closure of its Westborough, Massachusetts facility in 2008, the Company incurred $0.4 million of restructuring charges during the six months ended June 30, 2009, including $0.1 million of severance costs and $0.3 million related to its facility lease obligation. These charges impacted the operating profit of the Company’s North America operating segment.

Gain on Sale of Property, Plant & Equipment – During the six months ended June 30, 2009, the Company recognized a previously-deferred $4.6 million pre-tax gain in the North America operating segment from the 2007 sale of a property in Jersey City, New Jersey.

Net Sales – 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 net sales less operating costs and expenses.

7. INCOME TAXES

As of June 30, 2010 and December 31, 2009, the Company has approximately $5.2 million and $4.7 million, respectively, of liabilities for uncertain tax positions ($1.9 million and $1.8 million, respectively, included in income taxes payable and $3.3 million and $2.9 million, respectively, included in liability for uncertain tax positions) all of which, if reversed, 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 2002 in Asia and generally 2004 in Europe. The Company is not currently being audited by any tax authorities.

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, 2010. A total of $1.9 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 each of the six months ended June 30, 2010 and 2009, the Company recognized $0.2 million and $0.1 million, respectively, in interest and penalties in the condensed consolidated statements of operations. The Company has approximately $0.8 million and $0.6 million accrued for the payment of interest and penalties at June 30, 2010 and December 31, 2009, respectively, which is included in both income taxes payable and liability for uncertain tax positions in the condensed consolidated balance sheets.

In connection with the Cinch acquisition, the Company acquired the following tax assets and liabilities. Cinch Europe had net operating loss and capital loss carryforwards in the amounts of $0.6 million and $0.2 million, respectively, as of the acquisition date. The related tax benefits were $0.2 million and $0.1 million, respectively. The capital loss carryforward was acquired with a valuation allowance, which the Company maintained at June 30, 2010. During the quarter ended June 30, 2010, $0.2 million of the $0.6 million net operating loss was utilized. Additionally, Cinch Europe had a deferred tax liability in the amount of $0.1 million for various timing differences. Cinch U.S. had a deferred tax asset in the amount of $0.3 million relating to vacation accruals at the time of the acquisition. Of this amount, $0.2 million remains on the balance sheet at June 30, 2010. Cinch Mexico was acquired with a refundable income tax in the amount of $0.1 million, which should be collected or applied to current year income tax by December 31, 2010. The Company has received a preliminary fair market value report of property, plant and equipment, and intangibles related to Cinch Europe and Cinch Mexico which resulted in the establishment of deferred tax liabilities at the date of acquisition in the amounts of $0.4 million and an immaterial amount, respectively. None of the reversals of the deferred tax asset or deferred tax liabilities or use of net operating loss carryforwards acquired from the Cinch acquisition will impact the condensed consolidated statement of operations.

The President of the United States has presented a budget to the United States Congress which contains various modifications to international tax provisions. Some of the proposed changes might affect taxation regarding the transfer of intangible property and subject the Company to, among other things, additional income taxes and restrictions on how foreign tax credits would be calculated. The Company cannot ascertain at this time what the final outcome of this proposed legislation will be or the effect, if any, on the Company's results of operations or financial condition. Additionally, the Internal Revenue Service ("IRS") released a draft tax schedule and instructions that provide additional details on its proposal to require companies with assets of $10.0 million or more to report their uncertain tax positions annually, beginning with the 2010 tax year, on their business tax returns.

8. ACCRUED EXPENSES AND RESTRUCTURING COSTS

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

	June 30,		December 31,
	2010		2009
Sales commissions	$	1,779	$	1,506
Contract labor		3,264		2,615
Salaries, bonuses and related benefits		5,017		1,475
Other		3,113		2,395
	$	13,173	$	7,991

Accrued Restructuring Costs

Activity and liability balances related to restructuring charges for the six months ended June 30, 2010 are as follows (these charges are associated with the 2008 closure of the Company’s facility in Westborough, Massachusetts) (dollars in thousands):

	Liability at		New		Cash Payments &			Liability at
	December 31, 2009		Charges		Other Settlements			June 30, 2010
Facility lease obligation	$	664	$	-	$	(78	)	$	586

The Company has included the current portion of $0.2 million in accrued restructuring costs in the condensed consolidated balance sheet at June 30, 2010, and has classified the remaining $0.4 million of the liability related to the facility lease obligation as noncurrent. During the six months ended June 30, 2009, the Company recorded $0.4 million in restructuring charges, including $0.1 million of severance charges and $0.3 million related to its facility lease obligations.

9. 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 non-defined retirement benefits for plan participants. The expense for the three months ended June 30, 2010 and 2009 amounted to approximately $0.1 million in each period. The expense for the six months ended June 30, 2010 and 2009 amounted to approximately $0.3 million and $0.2 million, respectively. As of June 30, 2010, the plans owned 16,558 and 189,890 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

The Company's subsidiaries in Asia have a non-defined retirement fund covering substantially all of their Hong Kong-based full-time employees. The expense for the three months ended June 30, 2010 and 2009 amounted to approximately $0.1 million in each period. The expense for the six months ended June 30, 2010 and 2009 amounted to approximately $0.1 million and $0.2 million, respectively. As of June 30, 2010, 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,
	2010		2009		2010		2009
Service cost	$	85	$	96	$	170	$	192
Interest cost		84		88		168		176
Amortization of adjustments		33		37		66		74
Total SERP expense	$	202	$	221	$	404	$	442

	June 30,		December 31,
	2010		2009
Balance sheet amounts:
Minimum pension obligation
and unfunded pension liability	$	5,990	$	5,622

Amounts recognized in accumulated
other comprehensive income, pretax:
Prior service cost	$	1,276