Bel Fuse Inc. (NASDAQ: BELFA) (NASDAQ: BELFB) today announced preliminary financial results for the second quarter of 2016.

Second Quarter 2016 Highlights

• Net sales decreased 9.6% to $131.6 million in the second quarter of 2016 as compared with $145.7 million in the second quarter of 2015.
• Operating income was $10.0 million in the second quarter of 2016 as compared with operating income of $7.5 million in the second quarter of 2015.
• GAAP EPS was $1.83 per Class A share and $1.93 per Class B share in the second quarter of 2016 as compared with GAAP EPS of $0.49 per Class A share and $0.52 per Class B share in the second quarter of 2015. Non GAAP EPS was $0.43 per Class A share and $0.46 per Class B share in the second quarter of 2016. This compares with Non GAAP EPS of $0.57 per Class A share and $0.60 per Class B share in the second quarter of 2015.

Non GAAP financial measures, such as Non GAAP EPS, exclude the impact of acquisition-related costs, restructuring charges and certain other items. Please refer to the financial information included with this press release for reconciliations of GAAP financial measures to Non GAAP financial measures.

CEO Comments

Daniel Bernstein, President and CEO, said "We are pleased with the performance of the business in the second quarter of 2016 despite lower revenues. Bel's post acquisition cost saving and restructuring efforts completed last year have reduced fixed costs and allowed for continued improvement in profitability while we position for future revenue growth. As Bel moves forward, our focus turns to improving top line growth and we have realigned our sales structure to accomplish this goal.

"Bel's Cinch Connectivity Solutions (CCS) business finished the second quarter with essentially flat sales but improved operating profitability resulting from lower costs and favorable sales mix as compared with the same period last year. We were able to overcome continued general market weakness with improved distribution sales, highlighted by significant gains in sales through our value added distribution partners servicing the commercial avionics market and improved sales of our optical products sold primarily into high reliability military applications. CCS continues to allocate a significant amount of our design resources to the development of next generation avionics products and we are encouraged by recent progress made in the design of these products and in the qualification of these products with our OEM (original equipment manufacturer) customers. This effort and expected demand increases on existing commercial avionics platforms are anticipated to provide sales gro wth in future quarters.

"Bel Power Solutions (BPS) sales continued to decline as a result of previous management's actions. These actions had resulted in BPS being removed from key customers' preferred supplier lists. As a result of taking corrective actions since acquiring BPS, over the past 12 months we have been able to regain that status at key customers; however, not being able to participate in new designs for a period of time has contributed to a large part of the decline in sales. BPS has refreshed its product lines and introduced new products for the Rail industry and Open Compute market. Also, BPS will open a Taiwan engineering design and support center in August 2016 to better service the local needs of the ODM (original design manufacturer) customers who work closely with our major customers on the development of their new systems. We continue to expect BPS to be a major driver of future growth of our business.

"Bel's Magnetic Solutions products sales were lower in the second quarter of 2016 as compared with the same period last year as a result of a decrease in our ICM product sales. These products are mainly used by Networking and Telecommunication manufacturers."

Second Quarter 2016 Results

Net Sales

Net sales decreased 9.6% to $131.6 million in the second quarter of 2016 as compared with $145.7 million in the second quarter of 2015, primarily due to lower sales of Bel's power solutions and protection products, as well as certain magnetic products.

Gross ProfitGross profit decreased 10.0% to $25.7 million in the second quarter of 2016 as compared with $28.6 million in the second quarter of 2015 primarily due to the impact of lower sales. Despite the decline in net sales, lower material costs, lower warranty costs and a favorable mix of products sold enabled gross profit margin to remain essentially flat. In addition, the restructuring efforts taken last year also had a favorable impact on the second quarter of 2016 gross profit margin.

Selling, General and Administrative Expenses (SG&A) SG&A expenses decreased 13.5% to $18.0 million, or 13.6% of net sales in the second quarter of 2016 as compared with $20.8 million, or 14.3% of net sales in the second quarter of 2015. In the second quarter of 2016, we recorded a benefit of $2.4 million for certain value-added and business tax items recorded in connection with the acquisition of Power Solutions. Also, in the second quarter of 2016, foreign currency exchange gains increased $0.6 million as compared with the second quarter of 2015.

Goodwill and Other Intangible Assets Impairment In the second quarter of 2016, we finalized the goodwill and other intangible assets impairment analysis, and, as a result, we recorded a $2.6 million reduction to the impairment charge.

Operating Income
Operating income was $10.0 million in the second quarter of 2016 as compared with operating income of $7.5 million in the second quarter of 2015.

Income TaxesIncome tax benefit was $14.1 million in the second quarter of 2016 as compared with an income tax benefit of $0.6 million in the second quarter of 2015. The income tax benefit in the second quarter of 2016 included a net benefit related to the resolution of certain liabilities for uncertain tax positions of $10.4 million and a net benefit related to the goodwill and other intangible assets impairment of $2.3 million finalized in the second quarter of 2016. In addition, the mix of pre-tax earnings and losses in different jurisdictions contributed to the benefit in the second quarter of 2016.

Net EarningsNet earnings was $22.8 million in the second quarter of 2016 as compared with net earnings of $6.1 million in the second quarter of 2015.

First Half 2016 Results

Net SalesNet sales decreased 12.1% to $252.8 million in the first half of 2016 as compared with $287.7 million in the first half of 2015, primarily due to lower sales of Bel's power solutions and protection products, as well as certain magnetic products.

Gross ProfitGross profit decreased 11.9% to $48.8 million in the first half of 2016 as compared with $55.4 million in the first half of 2015 primarily due to the impact of lower sales. Gross profit margin was relatively flat in the first half of 2016 as compared with the first half of 2015. Gross profit margin performance reflected the impact of lower sales, offset by lower material costs, lower warranty costs and the favorable mix of products sold. In addition, the restructuring efforts taken last year also had a favorable impact on the first half of 2016 gross profit margin.

Selling, General and Administrative Expenses (SG&A) SG&A expenses decreased to $35.6 million, or 14.1% of net sales in the first half of 2016 as compared with $38.4 million, or 13.3% of net sales in the first half of 2015. In the first half of 2016, we recorded a benefit of $5.2 million for certain value-added and business tax items recorded in connection with the acquisition of Power Solutions. These factors were partially offset by a decrease in foreign currency exchange gains of $4.3 million in the first half of 2016 as compared with the first half of 2015.

Goodwill and Other Intangible Assets Impairment

In the second quarter of 2016, we finalized the goodwill and other intangible assets impairment analysis, and, as a result, we recorded a $2.6 million reduction to the impairment charge. The final impairment charge was $106.0 million in the first half of 2016. As previously disclosed, this impairment charge will not result in any future cash expenditures, impact liquidity, affect the ongoing business or financial performance of our reporting units, or impact compliance with our debt covenants.

Operating (Loss) IncomeOperating loss was $(93.4) million in the first half of 2016 as compared with operating income of $16.5 million in the first half of 2015.

Income TaxesIncome tax benefit was $19.0 million in the first half of 2016 as compared with an income tax provision of $1.4 million in the first half of 2015. The income tax benefit in the first half of 2016 included a net benefit related to the resolution of certain liabilities for uncertain tax positions of $13.0 million and a net benefit related to the goodwill and other intangible assets impairment of $4.4 million finalized in the second quarter of 2016. In addition, the mix of pre-tax earnings and losses in different jurisdictions contributed to the benefit in the second quarter of 2016.

Net (Loss) EarningsNet loss was $(77.9) million in the first half of 2016 as compared with net earnings of $11.4 million in the first half of 2015.

Balance Sheet DataAs of June 30, 2016, working capital was $160.4 million, including $67.5 million of cash and cash equivalents with a current ratio of 2.6-to-1. Total debt was $156.5 million. In comparison, as of December 31, 2015, working capital was $158.6 million, including $85.0 million of cash and cash equivalents with a current ratio of 2.3-to-1 and total debt of $183.5 million.

About Bel

Bel (www.belfuse.com) designs, manufactures and markets a broad array of products that power, protect and connect electronic circuits. These products are primarily used in the networking, telecommunications, computing, military, aerospace, transportation and broadcasting industries. Bel's product groups include Magnetic Solutions (integrated connector modules, power transformers, power inductors and discrete components), Power Solutions and Protection (front-end, board-mount and industrial power products, module products and circuit protection), and Connectivity Solutions (expanded beam fiber optic, copper-based, RF and RJ connectors and cable assemblies). The Company operates facilities around the world.