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~~September 30, 2018
or
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ____________

Commission File No. 0-11676

_____________________

BEL FUSE INC.
206 Van Vorst Street
Jersey City, NJ 07302
(201) 432-0463

(Address of principal executive offices and zip code)

(Registrant's telephone number, including area code)

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

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 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.	Yes [X]	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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).	Yes [X]	No [ ]

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

Large accelerated filer [ ]	Accelerated filer [X]	Non-accelerated filer [ ] ~~(Do not check if a smaller reporting company)~~	Smaller reporting company [ ]	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).				[ ] Yes [ ]	No [X]

Title of Each Class		Number of Shares of Common Stock Outstanding as of ~~August~~November 1, 2018
Class A Common Stock ($0.10 par value)		2,174,912
Class B Common Stock ($0.10 par value)		~~9,837,602~~10,072,352

BEL FUSE INC.

INDEX

			Page
Part I		Financial Information

	Item 1.	Financial Statements (unaudited)	2

		Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2018
		and December 31, 2017 (unaudited)	2

		Condensed Consolidated Statements of Operations for the Three
		and ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2017 (unaudited)	3

		Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for
		the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2018 and 2017 (unaudited)	4

		Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine
		Months Ended ~~June~~September 30, 2018 and 2017 (unaudited)	5

		Notes to Condensed Consolidated Financial Statements (unaudited)	6 - 1819

	Item 2.	Management's Discussion and Analysis of
		Financial Condition and Results of Operations	1920 - 2526

	Item 3.	Quantitative and Qualitative Disclosures About
		Market Risk	2526

	Item 4.	Controls and Procedures	2526

Part II		Other Information

	Item 1.	Legal Proceedings	2627

	Item 1A.	Risk Factors	2627

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2627

	Item 5.	Other Information	27

	Item 6.	Exhibits	2728

	Signatures		2829

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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING INFORMATION

The terms the "Company," "Bel," "we," "us," and "our" as used in this report refer to Bel Fuse Inc. and its consolidated subsidiaries unless otherwise specified.

The Company's consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in Item 1A of our 2017 Annual Report on Form 10-K. As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, consolidated financial condition, operating results, and common stock prices. Furthermore, this document and other documents filed by the Company with the Securities and Exchange Commission ("SEC") contain certain forward-looking statements under the Private Securities Litigation Reform Act of 1995 ("Forward-Looking Statements") with respect to the business of the Company. Forward-Looking Statements are necessarily subject to risks and uncertainties, many of which are outside our control, that could cause actual results to differ materially from these statements. Forward-Looking Statements can be identified by such words as "anticipates," "believes," "plan," "assumes," "could," "should," "estimates," "expects," "intends," "potential," "seek," "predict," "may," "will" and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are Forward-Looking Statements. These Forward-Looking Statements are subject to certain risks and uncertainties, including those detailed in Item 1A of our 2017 Annual Report on Form 10-K, which could cause actual results to differ materially from these Forward-Looking Statements. The Company undertakes no obligation to publicly release the results of any revisions to these Forward-Looking Statements which may be necessary to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Any Forward-Looking Statement made by the Company is based only on information currently available to us and speaks only as of the date on which it is made.

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PART I. Financial Information

Item 1. Financial Statements (Unaudited)

BEL FUSE INC. AND SUBSIDIARIES	BEL FUSE INC. AND SUBSIDIARIES							BEL FUSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS	CONDENSED CONSOLIDATED BALANCE SHEETS							CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)	(in thousands, except share and per share data)							(in thousands, except share and per share data)
(unaudited)	(unaudited)							(unaudited)

		June 30,			December 31,				September 30,			December 31,
		2018			2017				2018			2017
ASSETS
Current Assets:
Cash and cash equivalents		$	55,730		$	69,354			$	54,296		$	69,354
Accounts receivable, net of allowance for doubtful accounts of $2,388
Accounts receivable, net of allowance for doubtful accounts of $2,191
in 2018 and $1,745 in 2017			88,972			78,808				97,577			78,808
Unbilled receivables			15,587			-				16,553			-
Inventories			106,448			107,719				114,434			107,719
Other current assets			12,383			10,218				9,626			10,218
Total current assets			279,120			266,099				292,486			266,099

Property, plant and equipment, net			42,944			43,495				42,994			43,495
Intangible assets, net			65,784			69,366				64,161			69,366
Goodwill			18,972			20,177				19,135			20,177
Deferred income taxes			2,380			4,155				2,083			4,155
Other assets			27,548			27,973				27,044			27,973
Total assets		$	436,748		$	431,265			$	447,903		$	431,265

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable		$	59,370		$	47,947			$	62,415		$	47,947
Accrued expenses			29,252			30,508				32,533			30,508
Current portion of long-term debt			2,506			2,641				2,507			2,641
Other current liabilities			5,077			6,204				3,836			6,204
Total current liabilities			96,205			87,300				101,291			87,300

Long-term Liabilities:
Long-term debt			112,958			120,053				112,331			120,053
Liability for uncertain tax positions			28,409			27,948				27,180			27,948
Minimum pension obligation and unfunded pension liability			19,673			19,134				19,943			19,134
Deferred income taxes			1,614			1,567				1,472			1,567
Other liabilities			14,592			17,303				12,375			17,303
Total liabilities			273,451			273,305				274,592			273,305

Commitments and contingencies

Stockholders' Equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued			-			-				-			-
Class A common stock, par value $.10 per share, 10,000,000 shares
authorized; 2,174,912 shares outstanding at each date (net of
1,072,769 treasury shares)			217			217				217			217
Class B common stock, par value $.10 per share, 30,000,000 shares
authorized; shares outstanding: 9,838,852 in 2018 and 9,859,352
authorized; shares outstanding: 10,072,352 in 2018 and 9,859,352
in 2017 (net of 3,218,307 treasury shares)			984			986				1,007			986
Additional paid-in capital			30,027			28,575				30,602			28,575
Retained earnings			154,985			147,807				165,518			147,807
Accumulated other comprehensive loss			(22,916	)		(19,625	)			(24,033	)		(19,625	)
Total stockholders' equity			163,297			157,960				173,311			157,960
Total liabilities and stockholders' equity		$	436,748		$	431,265			$	447,903		$	431,265

See accompanying notes to unaudited condensed consolidated financial statements.	See accompanying notes to unaudited condensed consolidated financial statements.							See accompanying notes to unaudited condensed consolidated financial statements.

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BEL FUSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)
(unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017

Net sales $ 140,710 $ 131,617 $ 258,961 $ 245,285
Cost of sales 111,696 102,490 208,814 192,795
Gross profit 29,014 29,127 50,147 52,490

Selling, general and administrative expenses 18,306 21,723 38,998 42,698
Restructuring charges 41 138 45 171
Income from operations 10,667 7,266 11,104 9,621

Interest expense (1,349 ) (1,586 ) (2,527 ) (3,010 )
Interest income and other, net (285 ) (268 ) (521 ) (476 )
Earnings before provision for income taxes 9,033 5,412 8,056 6,135

Provision for income taxes 2,399 2,292 2,724 2,269
Net earnings available to common stockholders $ 6,634 $ 3,120 $ 5,332 $ 3,866

Net earnings per common share:
Class A common share - basic and diluted $ 0.52 $ 0.24 $ 0.41 $ 0.30
Class B common share - basic and diluted $ 0.56 $ 0.26 $ 0.45 $ 0.33

Weighted-average number of shares outstanding:
Class A common share - basic and diluted 2,175 2,175 2,175 2,175
Class B common share - basic and diluted 9,844 9,859 9,850 9,852

Dividends paid per common 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 accompanying notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017

Net sales	$	146,489		$	126,386		$	405,451		$	371,671
Cost of sales		117,282			98,686			326,096			291,481
Gross profit		29,207			27,700			79,355			80,190

Selling, general and administrative expenses		18,691			20,906			57,690			63,604
Restructuring charges		17			-			62			171
Income from operations		10,499			6,794			21,603			16,415

Interest expense		(1,391	)		(1,466	)		(3,917	)		(4,476	)
Interest income and other, net		43			(244	)		(479	)		(720	)
Earnings before provision for income taxes		9,151			5,084			17,207			11,219

(Benefit from) provision for income taxes		(2,201	)		60			523			2,329
Net earnings available to common stockholders	$	11,352		$	5,024		$	16,684		$	8,890


Net earnings per common share:
Class A common share - basic and diluted	$	0.89		$	0.40		$	1.31		$	0.69
Class B common share - basic and diluted	$	0.94		$	0.42		$	1.40		$	0.75

Weighted-average number of shares outstanding:
Class A common share - basic and diluted		2,175			2,175			2,175			2,175
Class B common share - basic and diluted		9,972			9,864			9,891			9,856

Dividends paid per common share:
Class A common share	$	0.06		$	0.06		$	0.18		$	0.18
Class B common share	$	0.07		$	0.07		$	0.21		$	0.21


See accompanying notes to unaudited condensed consolidated financial statements.

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BEL FUSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)
(unaudited)

   Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017

Net earnings available to common stockholders $ 6,634 $ 3,120 $ 5,332 $ 3,866

Other comprehensive income (loss):
Currency translation adjustment, net of taxes of $37 in the three months
   ended June 30, 2018, $153 in the three months ended June 30, 2017, $12 in
   the six months ended June 30, 2018 and $184 in the six months ended
    June 30, 2017 (7,448 ) 5,661 (3,431 ) 7,572
Unrealized gains (losses) on marketable securities arising during the period,
net of taxes of $0 in the three months ended June 30, 2018, $7 in the
three months ended June 30, 2017, ($20) in the six months ended June 30,
2018 and ($170) in the six months ended June 30, 2017 - 12 (31 ) (267 )
Change in unfunded SERP liability, net of taxes of $25 in the three months
ended June 30, 2018, $32 in the three months ended June 30, 2017, $51 in
the six months ended June 30, 2018 and $65 in the six months ended
June 30, 2017 85 61 171 122
Other comprehensive income (loss) (7,363 ) 5,734 (3,291 ) 7,427

Comprehensive income (loss) $ (729 ) $ 8,854 $ 2,041 $ 11,293

See accompanying notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017

Net earnings available to common stockholders	$	11,352		$	5,024		$	16,684		$	8,890

Other comprehensive income (loss):
Currency translation adjustment, net of taxes of ($1) in the three months
ended September 30, 2018, $101 in the three months ended September 30, 2017, $11 in
the nine months ended September 30, 2018 and $285 in the nine months ended
September 30, 2017		(1,032	)		3,476			(4,463	)		11,047
Unrealized losses on marketable securities arising during the period,
net of taxes of $3 in the three months ended September 30, 2018, ($21) in the
three months ended September 30, 2017, ($17) in the nine months ended September 30,
2018 and ($191) in the nine months ended September 30, 2017		(170	)		(33	)		(201	)		(300	)
Change in unfunded SERP liability, net of taxes of $25 in the three months
ended September 30, 2018, $32 in the three months ended September 30, 2017, $76 in
the nine months ended September 30, 2018 and $97 in the nine months ended
September 30, 2017		85			61			256			184
Other comprehensive income (loss)		(1,117	)		3,504			(4,408	)		10,931

Comprehensive income	$	10,235		$	8,528		$	12,276		$	19,821


See accompanying notes to unaudited condensed consolidated financial statements.

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BEL FUSE INC. AND SUBSIDIARIES	BEL FUSE INC. AND SUBSIDIARIES							BEL FUSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS							CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)	(dollars in thousands)							(dollars in thousands)
(unaudited)	(unaudited)							(unaudited)
		Six Months Ended							Nine Months Ended
		June 30,							September 30,
		2018			2017				2018			2017

Cash flows from operating activities:
Net earnings		$	5,332		$	3,866			$	16,684		$	8,890
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
cash provided by operating activities:
Depreciation and amortization			9,320			10,476				13,738			15,712
Stock-based compensation			1,447			1,545				2,046			2,310
Amortization of deferred financing costs			294			670				413			993
Deferred income taxes			1,780			(826	)			1,740			(3,072	)
Net unrealized (gains) losses on foreign currency revaluation			(871	)		2,107				(2,396	)		2,679
Other, net			616			892				963			1,548
Changes in operating assets and liabilities:
Accounts receivable, net			(10,541	)		(13,843	)			(18,985	)		(7,913	)
Unbilled receivables			(1,051	)		-				(2,017	)		-
Inventories			(10,629	)		(2,658	)			(18,844	)		(3,306	)
Account payable			12,082			492				15,545			(3,563	)
Accrued expenses			(1,251	)		(2,409	)			1,969			(2,031	)
Other operating assets/liabilities, net			(5,286	)		(694	)			(6,687	)		1,949
Net cash provided by (used in) operating activities			1,242			(382	)
Net cash provided by operating activities										4,169			14,196

Cash flows from investing activities:
Purchases of property, plant and equipment			(5,870	)		(2,243	)			(8,770	)		(3,756	)
Proceeds from disposal/sale of property, plant and equipment			53			10				53			10
Proceeds from sale of marketable securities within rabbi trust										1,348			-
Purchase of marketable securities within rabbi trust										(1,348	)		-
Net cash used in investing activities			(5,817	)		(2,233	)			(8,717	)		(3,746	)

Cash flows from financing activities:
Repayments of long-term debt			(7,525	)		(15,400	)			(8,268	)		(25,208	)
Dividends paid to common stockholders			(1,589	)		(1,562	)			(2,376	)		(2,347	)
Borrowings under revolving credit line			-			6,000				7,500			6,000
Repayments of revolving credit line			-			(2,000	)			(7,500	)		(2,000	)
Reduction in notes payable			-			(213	)			-			(55	)
Net cash used in financing activities			(9,114	)		(13,175	)			(10,644	)		(23,610	)

Effect of exchange rate changes on cash and cash equivalents			65			1,042				134			1,855

Net decrease in cash and cash equivalents			(13,624	)		(14,748	)			(15,058	)		(11,305	)
Cash and cash equivalents - beginning of period			69,354			73,411				69,354			73,411
Cash and cash equivalents - end of period		$	55,730		$	58,663			$	54,296		$	62,106


Supplementary information:
Cash paid during the period for:
Income tax payments, net of refunds received		$	5,073		$	881			$	6,291		$	1,688
Interest payments		$	2,260		$	2,336			$	3,485		$	3,471

See accompanying notes to unaudited condensed consolidated financial statements.	See accompanying notes to unaudited condensed consolidated financial statements.							See accompanying notes to unaudited condensed consolidated financial statements.

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BEL FUSE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The condensed consolidated balance sheets, statements of operations, comprehensive income ~~(loss)~~ and cash flows for the periods presented herein have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows for all periods presented have been made. The results for the three and ~~six~~nine months ended ~~June~~September 30, 2018 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated 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, 2017.

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted from the following condensed consolidated financial statements pursuant to the rules and regulations, including the interim reporting requirements, of the SEC. The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

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, 2017. There were no significant changes to these accounting policies during the ~~six~~nine months ended ~~June~~September 30, 2018, except as discussed in Note 2, Revenue, related to the adoption of the new revenue standards.

All amounts included in the tables to these notes to condensed consolidated financial statements, except per share amounts, are in thousands.

Recently Adopted Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. Subsequently, the FASB issued several other updates related to revenue recognition (collectively with ASU 2014-09, the "new revenue standards" or "ASC 606"). We adopted the guidance under the new revenue standards effective January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard as an increase to the opening balance of retained earnings.

Upon adoption, the new revenue standards replaced most existing revenue recognition guidance in U.S. GAAP. Based on our review of representative samples of contracts and other forms of agreements with customers globally and our evaluation of the provisions under the five-step model specified by the new revenue standards, the Company has implemented changes with respect to timing of revenue recognition primarily related to arrangements for which the customer takes the Company's products from a facility holding consignment inventory.

In connection with the modified retrospective application of the new revenue standards, we recorded an adjustment to increase retained earnings of $3.4 million upon the January 1, 2018 adoption date. Apart from this adjustment and the inclusion of additional required disclosures in Note 2, the adoption of the new revenue standards did not have a material impact on the Company's condensed consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, entities will be required to measure certain equity investments at fair value and recognize any changes in fair value in net earnings, unless the investments qualify for the new practicability exception. The new standard was effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017. We adopted this guidance on January 1, 2018. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This accounting guidance was effective for annual reporting periods beginning after December 31, 2017, including interim reporting periods within those annual reporting periods, and should be applied retrospectively to all periods presented. This guidance was adopted by the Company effective January 1, 2018 and it did not have any impact on the Company's condensed consolidated statement of cash flows in the periods presented.

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In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Current U.S. GAAP prohibits the recognition of current and deferred income taxes for intra-entity asset transfer until the asset has been sold to an outside party. The new guidance eliminates the exception and requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This accounting guidance was effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. This guidance was adopted by the Company effective January 1, 2018 and it did not have a material impact on the Company's condensed consolidated financial position or results of operations.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"), to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. ASU 2017-01 provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset or a business. The Company adopted ASU 2017-01 on January 1, 2018, and the guidance will be applied on a prospective basis.

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"). This guidance requires that an employer disaggregate the service cost component from the other components of net benefit cost. ASU 2017-07 requires employers to present the service cost component of the net periodic benefit cost in the same income statement line as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service costs and actuarial gains/losses, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. The guidance also specifies that the amount of costs that can be capitalized will be limited to service cost only. The Company adopted the guidance of ASU 2017-07 on January 1, 2018 and elected to apply the practical expedient and use the amounts disclosed in Note 9 to the financial statements included in Part I, Item 1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended ~~March 31,~~September 30, 2017 as the basis for applying the retrospective application required by the standard. The amounts reclassified within the statement of operations for the three-month and ~~six-month~~nine-month periods ended ~~June~~September 30, 2017 were not material.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). This update provides guidance about which changes to the terms or conditions of a share-based payment require an entity to apply modification accounting in Topic 718. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted ASU 2017-09 on January 1, 2018, and the guidance within this update will be applied to any future award modifications.

Accounting Standards Issued But Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to provide a new comprehensive model for lease accounting. Under this guidance, lessees and lessors should apply a "right-of-use" model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance sheet leases. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance. This guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. ~~Early adoption is permitted.~~ The updated guidance requires a modified retrospective adoption. We plan to adopt the standard on January 1, 2019. We are currently inassessing the ~~process of evaluating this~~impact that the new standard ~~update.~~will have on our consolidated financial statements, which will consist primarily of recording right-of-use assets and lease liabilities related to our operating leases on our consolidated balance sheet.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Early adoption is permitted for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is required to adopt ASU 2017-04 for its annual or any interim goodwill impairment tests for annual periods beginning after December 15, 2019, and the guidance is to be applied on a prospective basis.

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act, which was enacted on December 22, 2017. This guidance is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years and should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. Tax Cuts and Jobs Act is recognized. Early adoption is permitted. We are currently in the process of evaluating this new standard update.

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In May 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. This guidance will better align the treatment of share-based payments to nonemployees with the requirements for such share-based payments granted to employees. This guidance is effective for all public entities for fiscal years beginning after December 15, 2018, including interim periods within that year. We are currently in the process of evaluating this new standard update.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. This guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and added additional disclosures. The standard is effective for fiscal years ending after December 15, 2020. The amendments in ASU 2018-14 would need to be applied on a retrospective basis. We are currently assessing the impact the new guidance will have on our disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Cost. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impacts that adoption of this ASU will have on its consolidated financial statements.

REVENUE

Significant Accounting Policy

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the transfer of control of the Company's goods and services and provides financial statement readers with enhanced disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods and services.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales.

Nature of Goods and Services

Our revenues are substantially derived from sales of our products.

In our connectivity solutions product group, we provide ~~high-quality and reliable high-performance~~ connectors and cable assemblies to the aerospace, military/defense, commercial, rugged harsh environment and communication markets. This group also includes passive jacks, plugs and cable assemblies that provide connectivity in networking equipment, as well as modular plugs and cable assemblies used within the structured cabling system, known as premise wiring.

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In our power solutions and protection group, we provide ~~intelligent, efficient and reliable~~ AC-DC and DC-DC power conversion devices and circuit protection products. Applications range from board-mount power to system-level architectures for servers, storage, networking, industrial and transportation.

In our magnetic solutions group, we provide an extensive line of integrated connector modules (ICM), where an Ethernet magnetic solution is integrated into a connector package. Products within the Company's magnetic solutions group are primarily used in networking and industrial applications.

The Company also provides incremental services to our customers in the form of training, technical support, special tooling, and other support as deemed necessary from time to time. For purposes of ASC 606, all such incremental services were concluded to be immaterial in the context of the contracts.

Types of Contracts

Substantially all of the Company's revenue is derived from contracts with its customers under one of the following types of contracts:

Direct with customer: This includes contracts with original equipment manufacturers (OEMs), original design manufacturers (ODMs), and contract manufacturers (CMs). The nature of Bel's products are such that they represent components which are installed in various end applications (i.e. servers, aircraft, missiles and rail applications). The OEM, ODM or CM that purchases our product for further installation are our end customers. Contracts with these customers are broad-based and cover general terms and conditions. Details such as order volume and pricing are typically contained in individual purchase orders, and as a result, we view each product on each purchase order as an individual performance obligation. Incremental services included in the contracts, such as training, tooling and other customer support are determined to be immaterial in the context of the contract, both individually and in the aggregate. Revenue under these contracts is generally recognized at a point in time, generally upon shipping or delivery, which closely mirrors the shipping terms dictated by the applicable contract.

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Distributor: Distribution customers buy product directly from Bel and sell it in the marketplace to end customers. Bel contracts directly with the distributor. These contracts are typically global in nature and cover a variety of our product groups. Similar to contracts with OEMs, ODMs and CMs, each product on each purchase order is considered an individual performance obligation. Revenue is recognized at a point in time, generally upon shipping or delivery, which closely mirrors the shipping terms dictated by the applicable contract.

Consignment: These customers operate under a type of concession agreement whereby the Company ships goods to a warehouse or hub, where they will be pulled by the customer at a later date. The terms specified in the consignment contracts specify that the Company will not invoice the customer for product until it is pulled from the warehouse or hub. Once product arrives at the hub, it is generally not returned to Bel unless there is a warranty issue (see "Warranties" section below). Similar to the contracts described above, each product on each purchase order is considered an individual performance obligation. Under ASC 606, it was determined that the majority of these hubs are customer-controlled, and therefore control transfers to the customer upon either delivery from Bel's warehouse, or arrival at the customer-controlled hub, depending upon the applicable shipping terms. Effective January 1, 2018, revenue is recognized as control of the product is transferred to the customer (for customer-controlled hubs, this is at the time product is shipped to the hub). This gives rise to an unbilled receivable balance, as we do not have the right to invoice the customer until product is pulled from the hub.

Licensing Agreements: License agreements are only applicable to our Power Solutions and Protection product group, and include provisions for Bel to receive sales-based royalty income related to the licensing of Bel's patents or other intellectual property (IP) utilized by a third-party entity. Income related to these agreements is tracked by the licensee throughout the year based on their sales of product that utilize Bel's IP, and that data is reported to Bel either on a quarterly or annual basis, with payment generally received within 30 days of the reporting date. Our performance obligation is satisfied upon delivery of the IP at the beginning of the license period, as the licenses are functional in nature. However, the recognition of revenue associated with these licenses is subject to the sales- or usage-based constraint on variable consideration. As such, the Company records a constrained estimate of this variable consideration as royalty income in the period of the underlying customers' product sales, with adjustments made as actual licensee sales data becomes available.

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Warranties

Warranties vary by product line and are competitive for the markets in which the Company operates. Warranties generally extend for one to three years from the date of sale, providing customers with assurance that the related product will function as intended. The Company reviews its warranty liability quarterly based on an analysis of actual expenses and failure rates accompanied with estimated future costs and projected failure rate trends. Factors taken into consideration when evaluating our warranty reserve are (i) historical claims for each product, (ii) volume increases, (iii) life of warranty, (iv) historical warranty repair costs and (v) other factors. To the extent that actual experience differs from our estimate, the provision for product warranties will be adjusted in future periods. Actual warranty repair costs are charged against the reserve balance as incurred. See Note ~~11,~~7, "Accrued Expenses."

Product Returns

We estimate product returns, including product exchanges under warranty, based on historical experience. In general, the Company is not contractually obligated to accept returns except for defective product or in instances where the product does not meet the Company's product specifications. However, the Company may permit its customers to return product for other reasons. In certain instances, the Company would generally require a significant cancellation penalty payment by the customer. The Company estimates such returns, where applicable, based upon management's evaluation of historical experience, market acceptance of products produced and known negotiations with customers. Such estimates are deducted from sales and provided for at the time revenue is recognized. Distribution customers often receive what is referred to as "ship and debit" arrangements, whereby Bel will invoice them at an agreed upon unit price upon shipment of product and a price reduction may be granted if the market price of the product declines after shipment. Distributors may also be entitled to special pricing discount credits, and certain customers are entitled to return allowances based on previous sales volumes. Bel deducts estimates for anticipated credits, refunds and returns from sales each quarter based on historical experience.

Significant Payment Terms

Contracts with customers indicate the general terms and conditions in which business will be conducted for a set period of time. Individual purchase orders state the description, quantity and price of each product purchased. Payment for products sold under direct contracts with customers or contracts with distributors is typically due in full within 30-90 days from the transfer of title to customer. Payment for products sold under consignment contracts is typically due within 60 days of the customer pulling the product from the hub. Payment due related to our licensing agreements is generally within 30 days of receiving the licensee sales data, which is either on a quarterly or annual basis.

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Since the customer agrees to a stated price for each product on each purchase order, the majority of contracts are not subject to variable ~~consideration, except as discussed above related to product returns.~~consideration. However, the "ship and debit" arrangements with distributors, royalty income associated with our licensing agreements, and the product returns described above are each deemed to be variable consideration which requires the Company to make constrained estimates based on historical data.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by product group and sales channel, and includes a reconciliation of the disaggregated revenue to our reportable segments:

	Three Months Ended June 30, 2018								Three Months Ended September 30, 2018
	North								North
	America		Asia		Europe		Consolidated		America		Asia		Europe		Consolidated

By Product Group:
Connectivity solutions	$	34,834	$	4,820	$	9,274	$	48,928	$	34,919	$	5,293	$	8,314	$	48,526
Magnetic solutions		10,158		32,844		2,546		45,548		10,586		40,100		2,286		52,972
Power solutions and protection		26,248		8,250		11,736		46,234		25,149		8,135		11,707		44,991
	$	71,240	$	45,914	$	23,556	$	140,710	$	70,654	$	53,528	$	22,307	$	146,489

By Sales Channel:
Direct to customer	$	44,055	$	39,402	$	15,990	$	99,447	$	46,802	$	46,965	$	15,184	$	108,951
Through distribution		27,185		6,512		7,566		41,263		23,852		6,563		7,123		37,538
	$	71,240	$	45,914	$	23,556	$	140,710	$	70,654	$	53,528	$	22,307	$	146,489

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Six Months Ended June 30, 2018
North
America Asia Europe Consolidated

By Product Group:
Connectivity solutions $ 65,878 $ 8,241 $ 17,727 $ 91,846
Magnetic solutions 18,209 60,669 4,898 83,776
Power solutions and protection 46,609 15,625 21,105 83,339
$ 130,696 $ 84,535 $ 43,730 $ 258,961

By Sales Channel:
Direct to customer $ 81,951 $ 72,330 $ 30,183 $ 184,464
Through distribution 48,745 12,205 13,547 74,497
$ 130,696 $ 84,535 $ 43,730 $ 258,961

	Nine Months Ended September 30, 2018
	North
	America		Asia		Europe		Consolidated

By Product Group:
Connectivity solutions	$	100,797	$	13,533	$	26,043	$	140,373
Magnetic solutions		28,795		100,769		7,184		136,748
Power solutions and protection		71,759		23,760		32,811		128,330
	$	201,351	$	138,062	$	66,038	$	405,451

By Sales Channel:
Direct to customer	$	128,754	$	119,294	$	45,368	$	293,416
Through distribution		72,597		18,768		20,670		112,035
	$	201,351	$	138,062	$	66,038	$	405,451

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASC 606 were as follows:

	Balance at		Adjustments			Balance at
	December 31,		Due to			January 1,
	2017		ASC 606			2018
Balance Sheet
Unbilled receivables	$	-	$	14,536		$	14,536
Inventory		107,719		(11,044	)		96,675
Other current liabilities		6,204		43			6,247
Retained earnings		147,807		3,449			151,256

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In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our balance sheet as of ~~June~~September 30, 2018 and consolidated statement of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2018 was as follows:

	As of June 30, 2018							As of September 30, 2018
			Balances		Effect of					Balances		Effect of
	As		Without Adoption		Change			As		Without Adoption		Change
	Reported		of ASC 606		Higher/(Lower)			Reported		of ASC 606		Higher/(Lower)

Balance Sheet
Assets
Unbilled receivables	$	15,587	$	-	$	15,587		$	16,553	$	-	$	16,553
Inventories		106,448		117,780		(11,332	)		114,434		126,737		(12,303	)

Liabilities
Other current liabilities		5,077		4,918		159			3,836		3,715		121

Equity
Retained earnings		154,985		150,889		4,096			165,518		161,389		4,129

	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018						Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
			Balances		Effect of				Balances		Effect of					Balances			Effect of					Balances		Effect of
	As		Without Adoption		Change		As		Without Adoption		Change		As			Without Adoption			Change			As		Without Adoption		Change
	Reported		of ASC 606		Higher/(Lower)		Reported		of ASC 606		Higher/(Lower)		Reported			of ASC 606			Higher/(Lower)			Reported		of ASC 606		Higher/(Lower)

Statement of Operations
Net sales	$	140,710	$	138,777	$	1,933	$	258,961	$	257,911	$	1,050	$	146,489		$	145,523		$	966		$	405,451	$	403,434	$	2,017
Cost of sales		111,696		110,321		1,375		208,814		208,526		288		117,282			116,312			970			326,096		324,837		1,259
Operating income		10,667		10,109		558		11,104		10,342		762		10,499			10,503			(4	)		21,603		20,845		758
Provision for income taxes		2,399		2,343		56		2,724		2,608		116
(Benefit from) Provision for income taxes														(2,201	)		(2,163	)		(38	)		523		445		78
Net earnings	$	6,634	$	6,132	$	502	$	5,332	$	4,686	$	646		11,352			11,318			34			16,684		16,004		680

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Contract Assets and Contract Liabilities:

A contract asset results when goods or services have been transferred to the customer but payment is contingent upon a future event, other than passage of time. In the case of our consignment arrangements, we are unable to invoice the customer until product is pulled from the hub by the customer, which generates an unbilled receivable (a contract asset) when revenue is initially recognized.

A contract liability results when cash payments are received or due in advance of our performance obligation being met. We have certain customers who provide payment in advance of product being shipped, which results in deferred revenue (a contract liability).

The balances of the Company's contract assets and contract liabilities at ~~June~~September 30, 2018 are as follows:

	June 30,		January 1,		September 30,		January 1,
	2018		2018		2018		2018

Contract assets - current (unbilled receivable)	$	15,587	$	14,536	$	16,553	$	14,536
Contract liabilities - current (deferred revenue)	$	1,609	$	855	$	776	$	855

The change in balance of our unbilled receivables from January 1, 2018 to ~~June~~September 30, 2018 primarily relates to a timing difference between the Company's performance (i.e. when our product is shipped to a customer-controlled hub) and the point at which the Company can invoice the customer per the terms of the customer contract (i.e. when the customer pulls our product from the customer-controlled hub).

A tabular presentation of the activity within the deferred revenue account for the ~~six~~nine months ended ~~June~~September 30, 2018 is presented below:

	Six Months Ended			Nine Months Ended
	June 30, 2018			September 30, 2018
Balance, January 1	$	855		$	855
New advance payments received		3,928			6,180
Recognized as revenue during period		(3,174	)		(6,251	)
Balance, June 30	$	1,609
Currency translation					(8	)
Balance, September 30				$	776

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Transaction Price Allocated to Future Obligations:

The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of ~~June~~September 30, 2018 related to contracts that exceed one year in duration amounted to ~~$18.3~~$17.6 million, with expected contract expiration dates that range from 2019 - 2024. It is expected that ~~20%~~14% of this aggregate amount will be recognized in the fourth quarter of 2019, ~~63%~~52% will be recognized in 2020 and the remainder will be recognized in years beyond 2020. The majority of the Company's total backlog of orders at ~~June~~September 30, 2018 is related to contracts that have an original expected duration of one year or less, for which the Company is electing to utilize the practical expedient available within the guidance, and are excluded from the transaction price related to these future obligations. The Company will generally satisfy the remaining performance obligations as we transfer control of the products ordered to our customers. The transaction price related to these future obligations also excludes variable consideration consisting of sales or usage-based royalties earned on licensing agreements. The variability related to these sales or usage-based royalties will be resolved in the periods when the licensee generates sales related to the licensed intellectual property.

Other Practical Expedients:

In the application of the recognition and measurement principles of ASC 606, the Company elected to utilize the following additional practical expedients which are provided for within the guidance:

·	Financing Components: Bel has elected the practical expedient which enables management to disregard the effects of a financing component if the time difference between delivery of goods or services and payment for the goods or services is within one year.

Costs to Obtain a Contract: As part of negotiations, Bel may incur incremental costs to obtain a contract. Incremental costs are only those costs that would not have been incurred if the contract had not been obtained (e.g. sales commissions). Bel has elected the practical expedient that allows incremental costs to obtain a contract to be expensed as incurred when the expected amortization period is one year or less.

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3.	EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted net earnings per common share under the two-class method for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2017:

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
	2018		2017		2018		2017		2018		2017		2018		2017

Numerator:
Net earnings	$	6,634	$	3,120	$	5,332	$	3,866	$	11,352	$	5,024	$	16,684	$	8,890
Less dividends declared:
Class A		130		131		261		261		130		131		391		392
Class B		689		689		1,389		1,388		689		691		2,079		2,079
Undistributed earnings	$	5,815	$	2,300	$	3,682	$	2,217	$	10,533	$	4,202	$	14,214	$	6,419

Undistributed earnings allocation - basic and diluted:
Class A undistributed earnings	$	1,011	$	399	$	640	$	385	$	1,812	$	729	$	2,461	$	1,115
Class B undistributed earnings		4,804		1,901		3,042		1,832		8,721		3,473		11,753		5,304
Total undistributed earnings	$	5,815	$	2,300	$	3,682	$	2,217	$	10,533	$	4,202	$	14,214	$	6,419

Net earnings allocation - basic and diluted:
Class A net earnings	$	1,141	$	530	$	901	$	646	$	1,942	$	860	$	2,852	$	1,507
Class B net earnings		5,493		2,590		4,431		3,220		9,410		4,164		13,832		7,383
Net earnings	$	6,634	$	3,120	$	5,332	$	3,866	$	11,352	$	5,024	$	16,684	$	8,890

Denominator:
Weighted-average shares outstanding:
Class A - basic and diluted		2,175		2,175		2,175		2,175		2,175		2,175		2,175		2,175
Class B - basic and diluted		9,844		9,859		9,850		9,852		9,972		9,864		9,891		9,856

Net earnings per share:
Class A - basic and diluted	$	0.52	$	0.24	$	0.41	$	0.30	$	0.89	$	0.40	$	1.31	$	0.69
Class B - basic and diluted	$	0.56	$	0.26	$	0.45	$	0.33	$	0.94	$	0.42	$	1.40	$	0.75

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4. FAIR VALUE MEASUREMENTS

Fair value is defined as 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. Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

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; and

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, 2018 and~~ December 31, 2017, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of securities that are among the Company's investments in a rabbi trust which are intended to fund the Company's Supplemental Executive Retirement Plan ("SERP") obligations. The securities that are held in the rabbi trust are categorized as available-for-sale securities and are included as other assets in the accompanying condensed consolidated balance sheets at June 30, 2018 and December 31, 2017. The gross unrealized gains associated with the investment securities held in the rabbi trust were $0.2 million at ~~both June 30, 2018 and~~ December 31, 2017. Such unrealized gains are included, net of tax, in accumulated other comprehensive loss. During the nine months ended September 30, 2018, the Company sold its securities and realized a gain on sale of $0.2 million. The proceeds of $1.3 million were reinvested in other securities within the rabbi trust.

As of ~~June~~September 30, 2018 and December 31, 2017, our ~~available-for-sale~~ securities ~~which~~ primarily ~~consist~~consisted of investments held in a rabbi trust of $1.3 million and $1.5 million, ~~at each date, are~~respectively, which were measured at fair value using quoted prices in active markets for identical assets (Level 1) inputs. The Company does not have any financial assets measured at fair value on a recurring basis categorized as Level 3, and there were no transfers in or out of Level 1, Level 2 or Level 3 during the ~~six~~nine months ended ~~June~~September 30, 2018 or ~~June~~September 30, 2017. ~~There~~Excluding the changes made in accordance with the Company's adoption of ASU 2016-01, there were no additional changes to the Company's valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the ~~six~~nine months ended ~~June~~September 30, 2018.

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There were no financial assets accounted for at fair value on a nonrecurring basis as of ~~June~~September 30, 2018 or December 31, 2017.

The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable, accrued expenses and notes payable, which are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. The fair value of the Company's long-term debt is estimated using a discounted cash flow method based on interest rates that are currently available for debt issuances with similar terms and maturities. At ~~June~~September 30, 2018 and December 31, 2017, the estimated fair value of total debt was ~~$117.9~~$116.9 million and $124.8 million, respectively, compared to a carrying amount of ~~$115.5~~$114.8 million and $122.7 million, respectively. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of ~~June~~September 30, 2018.

Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets 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. There were no triggering events that occurred during the ~~six~~nine months ended ~~June~~September 30, 2018 that would warrant interim impairment testing.

5. INVENTORIES

The components of inventories are as follows:

June 30, December 31,
2018 2017
Raw materials $ 56,680 $ 46,712
Work in progress 20,007 17,688
Finished goods 29,761 43,319
Inventories $ 106,448 $ 107,719

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	September 30,		December 31,
	2018		2017
Raw materials	$	62,373	$	46,712
Work in progress		21,602		17,688
Finished goods		30,459		43,319
Inventories	$	114,434	$	107,719

6.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	June 30,			December 31,			September 30,			December 31,
	2018			2017			2018			2017
Land	$	2,253		$	2,259		$	2,256		$	2,259
Buildings and improvements		30,543			30,761			30,572			30,761
Machinery and equipment		123,280			122,773			124,160			122,773
Construction in progress		2,951			1,511			4,133			1,511
		159,027			157,304			161,121			157,304
Accumulated depreciation		(116,083	)		(113,809	)		(118,127	)		(113,809	)
Property, plant and equipment, net	$	42,944		$	43,495		$	42,994		$	43,495

Depreciation expense for the three months ended ~~June~~September 30, 2018 and 2017 was ~~$2.9~~$2.8 million and ~~$3.4~~$3.6 million, respectively. Depreciation expense for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 was ~~$6.1~~$8.9 million and ~~$7.0~~$10.6 million, respectively.

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7.	ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30,		December 31,		September 30,		December 31,
	2018		2017		2018		2017
Sales commissions	$	2,549	$	2,461	$	2,685	$	2,461
Subcontracting labor		1,648		1,408		1,542		1,408
Salaries, bonuses and related benefits		15,452		16,531		19,177		16,531
Warranty accrual		1,251		1,769		1,104		1,769
Other		8,352		8,339		8,025		8,339
	$	29,252	$	30,508	$	32,533	$	30,508

A tabular presentation of the activity within the warranty accrual account for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 is presented below:

	Six Months Ended June 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Balance, January 1	$	1,769		$	2,718		$	1,769		$	2,718
Charges and costs accrued		-			27			-			211
Adjustments related to pre-existing warranties
(including changes in estimates)		(379	)		(282	)		(494	)		(779	)
Less repair costs incurred		(148	)		(119	)		(181	)		(173	)
Currency translation		9			73			10			66
Balance, June 30	$	1,251		$	2,417
Balance, September 30							$	1,104		$	2,043

DEBT

The Company has a Credit and Security Agreement with KeyBank National Association (as amended, the "CSA"). The CSA consists of (i) a term loan, with outstanding borrowings of ~~$117.5~~$116.7 million and $125.0 million at ~~June~~September 30, 2018 and December 31, 2017, respectively and (ii) a $75 million revolving credit facility ("Revolver"), with no outstanding borrowings at ~~June~~September 30, 2018 or December 31, 2017. The CSA has a maturity date of December 11, 2022. At ~~June~~September 30, 2018 and December 31, 2017, the carrying value of the debt on the condensed consolidated balance sheet is reflected net of ~~$2.0~~$1.9 million and $2.3 million, respectively, of deferred financing costs. During the ~~six~~nine months ended ~~June~~September 30, 2018, the Company made voluntary prepayments of $6.0 million. Per the terms of the CSA, such voluntary prepayments reduce the amount of future scheduled payments on a pro rata basis.

The weighted-average interest rate in effect was ~~4.13%~~4.25% at ~~June~~September 30, 2018 and 3.38% at December 31, 2017 and consisted of LIBOR plus the Company's credit spread, as determined per the terms of the CSA. The Company incurred ~~$1.3~~$1.4 million and ~~$1.6~~$1.5 million of interest expense during the three months ended ~~June~~September 30, 2018 and ~~June~~September 30, 2017, respectively, and ~~$2.5~~$3.9 million and ~~$3.0~~$4.5 million of interest expense during the ~~six~~nine months ended ~~June~~September 30, 2018 and ~~June~~September 30, 2017, respectively.

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The CSA contains customary representations and warranties, covenants and events of default and financial covenants that measure (i) the ratio of the Company's total funded indebtedness, on a consolidated basis, to the amount of the Company's consolidated EBITDA, as defined, ("Leverage Ratio") and (ii) the ratio of the amount of the Company's consolidated EBITDA to the Company's consolidated fixed charges. If an event of default occurs, the lenders under the CSA would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. At ~~June~~September 30, 2018, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio.

9. INCOME TAXES

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 ~~2014~~2015 and for state examinations before ~~2011.~~2012. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before ~~2007~~2008 in Asia and generally 2010 in Europe.

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As a result of the expiration of the statutes 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 consolidated financial statements at ~~June~~September 30, 2018. The Company's liabilities for uncertain tax positions totaled ~~$29.8~~$28.2 million and $30.4 million at ~~June~~September 30, 2018 and December 31, 2017, respectively, of which ~~$1.4~~$1.1 million and $2.5 million is included in other current liabilities at ~~June~~September 30, 2018 and December 31, 2017, respectively. These amounts, if recognized, would reduce the Company's effective tax rate. As of ~~June~~September 30, 2018, approximately ~~$1.4~~$2.5 million of the Company's liabilities for uncertain tax positions ~~are expected to be~~were resolved during 2018 by way of expiration of the related statute of limitations.

The Company's policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes. During the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, the Company recognized ~~$0.5~~$0.7 million and ~~$0.4~~$0.6 million, respectively, in interest and penalties in the consolidated statements of operations. During the ~~six~~three and nine months ended ~~June~~September 30, 2018, ~~and 2017,~~ the Company recognized a benefit of ~~$0.4~~$0.3 million and ~~less than $0.1~~$0.7 million, respectively, for the reversal of such interest and penalties, relating to the expiration of statutes of limitations and settlement of the acquired liability for uncertain tax ~~positions, respectively.~~ positions. There were no reversals of interest or penalties in the three or nine months ended September 30, 2017. The Company has approximately $3.1 million and $3.2 million accrued for the payment of interest and penalties at ~~June~~September 30, 2018 and December 31, 2017, respectively, which is included in both income taxes payable and liability for uncertain tax positions in the consolidated balance sheets.

Tax Reform

The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act; however, we had made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax in which we recognized a provisional amount of $18.1 million, which was included as a component of income tax expense from continuing operations. During the ~~six~~nine months ended ~~June~~September 30, 2018, ~~we continue~~the Company has made measurement-period adjustments related to ~~refine our~~foreign earnings and profits computations and foreign income tax calculations ~~as additional analysis is completed. In addition, our estimates may also be affected as we gain a more thorough understanding~~for the Company's non-U.S. subsidiaries. The Company's measurement-period adjustment reduced its estimate of the deemed repatriation tax ~~law.~~by $2.6 million, resulting in the reduction of the Company's provisional estimate from $18.1 million to $15.5 million. The Company plans to pay the tax in installments in accordance with the Act. The Company's estimates of the effects of the Act were calculated using currently available information; however, the Company is continuing to evaluate the underlying documentation and revisions to the current calculation may occur.

Effective January 1, 2018, the Act subjects a U.S. shareholder to current tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries. The Company has elected an accounting policy to provide for the tax expense related to the GILTI in the period the tax is incurred.

10. RETIREMENT FUND AND PROFIT SHARING PLAN

The Company maintains the Bel Fuse Inc. Employees' Savings Plan, a defined contribution plan that is intended to meet the applicable requirements for tax-qualification under sections 401(a) and (k) of the Internal Revenue Code of 1986, as amended (the "Code"). The expense for the three months ended ~~June~~September 30, 2018 and 2017 amounted to $0.3 million in both periods. The expense for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 amounted to ~~$0.6~~$0.8 million ~~in both periods.~~and $0.9 million, respectively. The Company's matching contribution is made in the form of Bel Fuse Inc. Class A common stock. As of ~~June~~September 30, 2018, the plan owned ~~90,521~~111,393 and ~~140,591~~137,700 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

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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 three months ended ~~June~~September 30, 2018 and 2017 amounted to $0.1 million in both periods. The expense for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 amounted to ~~$0.2~~$0.3 million in both periods. As of ~~June~~September 30, 2018, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

The Company maintains a SERP, which is designed to provide a limited group of key management and other key employees of the Company with supplemental retirement and death benefits. As discussed in Note 34 above, the Company has investments in a rabbi trust which are intended to fund the obligations of the SERP.

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The components of SERP expense are as follows:

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
	2018		2017		2018		2017		2018		2017		2018		2017
Service cost	$	183	$	175	$	366	$	350	$	183	$	175	$	549	$	525
Interest cost		166		168		332		337		166		168		498		505
Net amortization		111		94		222		187		111		94		332		281
Net periodic benefit cost	$	460	$	437	$	920	$	874	$	460	$	437	$	1,379	$	1,311

The service cost component of net benefit cost is presented within cost of sales or selling, general and administrative expense on the accompanying statements of operations, in accordance with where compensation cost for the related associate is reported. All other components of net benefit cost, including interest cost and net amortization noted above, are presented within other income/expense, net in the accompanying statements of operations.

The following amounts are recognized net of tax in accumulated other comprehensive loss:

	June 30,		December 31,		September 30,		December 31,
	2018		2017		2018		2017
Prior service cost	$	1,007	$	1,135	$	943	$	1,135
Net loss		3,638		3,732		3,591		3,732
	$	4,645	$	4,867	$	4,534	$	4,867

11. ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss at ~~June~~September 30, 2018 and December 31, 2017 are summarized below:

June 30, December 31,
2018 2017

Foreign currency translation adjustment, net of taxes of ($789) at
  June 30, 2018 and ($801) at December 31, 2017 $ (19,968 ) $ (16,537 )
Unrealized holding gains on available-for-sale securities, net of taxes of
  $65 at June 30, 2018 and $85 at December 31, 2017 114 145
Unfunded SERP liability, net of taxes of ($1,584) at June 30, 2018
  and ($1,635) at December 31, 2017 (3,062 ) (3,233 )

Accumulated other comprehensive loss $ (22,916 ) $ (19,625 )

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	September 30,			December 31,
	2018			2017

Foreign currency translation adjustment, net of taxes of ($790) at
September 30, 2018 and ($801) at December 31, 2017	$	(21,000	)	$	(16,537	)
Unrealized holding (losses) gains on available-for-sale securities, net of taxes of
$67 at September 30, 2018 and $85 at December 31, 2017		(56	)		145
Unfunded SERP liability, net of taxes of ($1,558) at September 30, 2018
and ($1,635) at December 31, 2017		(2,977	)		(3,233	)

Accumulated other comprehensive loss	$	(24,033	)	$	(19,625	)

Changes in accumulated other comprehensive loss by component during the ~~six~~nine months ended ~~June~~September 30, 2018 are as follows. All amounts are net of tax.

					Unrealized Holding														Unrealized Holding
		Foreign Currency			Gains on											Foreign Currency			Gains (Losses) on
		Translation			Available-for-			Unfunded								Translation			Available-for-			Unfunded
		Adjustment			Sale Securities			SERP Liability				Total				Adjustment			Sale Securities			SERP Liability				Total

Balance at January 1, 2018		$	(16,537	)	$	145		$	(3,233	)		$	(19,625	)		$	(16,537	)	$	145		$	(3,233	)		$	(19,625	)
Other comprehensive income before reclassifications			(3,431	)		(31	)		26				(3,436	)
Other comprehensive (loss) income before reclassifications																	(4,463	)		(31	)		39				(4,455	)
Amount reclassified from accumulated other
comprehensive loss			-			-			145		(a)		145				-			(170	)		217		(a)		47
Net current period other comprehensive income			(3,431	)		(31	)		171				(3,291	)
Net current period other comprehensive (loss) income																	(4,463	)		(201	)		256				(4,408	)

Balance at June 30, 2018		$	(19,968	)	$	114		$	(3,062	)		$	(22,916	)
Balance at September 30, 2018																$	(21,000	)	$	(56	)	$	(2,977	)		$	(24,033	)

(a) This reclassification relates to the amortization of prior service costs and gains/losses associated with the Company's SERP plan.	(a) This reclassification relates to the amortization of prior service costs and gains/losses associated with the Company's SERP plan.														(a) This reclassification relates to the amortization of prior service costs and gains/losses associated with the Company's SERP plan.
This expense is allocated between cost of sales and selling, general and administrative expense based upon the employment	This expense is allocated between cost of sales and selling, general and administrative expense based upon the employment														This expense is allocated between cost of sales and selling, general and administrative expense based upon the employment
classification of the plan participants.

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12. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is party to a number of legal actions and claims, none of which individually or in the aggregate, in the opinion of management, are expected to have a material adverse effect on the Company's consolidated results of operations or financial position.

In connection with the acquisition of Power Solutions, there is an ongoing claim by the Arezzo Revenue Agency in Italy concerning certain tax matters related to what was then Power-One Asia Pacific Electronics Shenzhen Co. Ltd. (now Bel Power Solutions Asia Pacific Electronics Shenzhen Co. Ltd, or "BPS China") for the years 2004 to 2006. In September 2012, the Tax Court of Arezzo ruled in favor of BPS China and cancelled the claim. In February 2013, the Arezzo Revenue Agency filed an appeal of the Tax Court's ruling. The hearing of the appeal was held on October 2, 2014. On October 13, 2014, BPS China was informed of the Regional Tax Commission of Florence ruling which was in favor of the Arezzo Revenue Agency and against BPS China. An appeal was filed on July 18, 2015 before the Regional Tax Commission of Florence and rejected. On December 5, 2016, the Arezzo Revenue Agency filed an appeal with the Supreme Court and BPS China filed a counter-appeal on January 4, 2017. The Supreme Court has yet to render its judgment. The estimated liability related to this matter is approximately $12.0 million and has been included as a liability for uncertain tax positions on the accompanying condensed consolidated balance sheets. As Bel is fully indemnified in this matter per the terms of the stock purchase agreement with ABB, a corresponding other asset for indemnification is also included in other assets on the accompanying consolidated balance sheets at ~~June~~September 30, 2018 and December 31, 2017.

In 2015, the Company was provided notice of a potential patent infringement claim by Setec Netzwerke AG ("Setec"), a German company for the alleged infringement of their patent EP 306 934 B1. Setec subsequently filed a lawsuit against the Company and three of its subsidiaries in the Regional Court of Dusseldorf, Germany on January 29, 2016 for patent infringement. The Company filed its defense to Setec's Complaint and a nullity lawsuit against Setec's patent on August 31 2016. The Court hearing on infringement took place on March 23, 2017. Upon hearing argument from both parties, the Court issued a decision on April 6, 2017 staying final judgment in the infringement case pending resolution of the nullity lawsuit in the Federal Patents Courts in Munich, Germany. The Federal Patents Courts issued its preliminary opinion regarding the patent-in-suit on March 29, 2018, stating that it considers the patent-in-suit to not be novel over the prior art documents presented in the case. The parties agreed to withdraw from the pending infringement and nullity proceedings and entered into a settlement agreement on June 29, 2018. The Company paid Setec 75,000 Euro in exchange for a perpetual, worldwide royalty-free license to the patent-in-suit and all its counterparts.

In 2015, one of the Company's subsidiaries in the PRC, Dongguan Transpower Electric Products Co., Ltd. ("Dongguan Transpower"), was provided notice of a claim by DG Yu Shing Industrial Development Company Limited against Dongguan Transpower and three other defendants for past due construction costs of approximately $3.2 million. In April 2018, the 3^rd People Court of Dongguan ruled and provided an unfavorable judgment against Dongguan Transpower and two of the other defendants requiring payment of the aforementioned amount. The defendants were held to be jointly and severally liable for approximately $3.2 million in costs. Due to the fact that none of the other defendants had sufficient funds to pay the damages amount, the Court ordered the entire amount (CNY ~~20,133,174)~~20,133,174.10) to be paid by Dongguan Transpower. On May 25, 2018, the Court enforced its order and withdrew the damages amount from Dongguan Transpower's bank accounts. On May 31, 2018, Dongguan Transpower filed an action against the other defendants in CP Court to recoup the damages amount paid pursuant to an indemnification letter dated October 16, 2015. The Court heard arguments on July 2, 2018 and rendered a verdict on July 9, 2018 ordering the Jinmei entities (defendants) to pay CNY 20,133,174 back to Dongguan Transpower together with the incurred interest. ~~The Company's balance sheet at June 30,~~On August 27, 2018, ~~includes an indemnification asset in~~Dongguan Transpower received payment of CNY 20,430,203 (approximately $3.2 million) from the ~~amount of $3.2 million, included in other current assets, related to this. The Company expects that funds will be remitted by mid-August.~~defendants and this case was closed.

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On June 1, 2018, the Company filed an action against Unipower, LLC in the United States District Court for the Southern District of New York for breach of contract. Specifically, the Company alleges in its Complaint that Unipower has willfully violated the Master Services Agreement ("MSA") entered into by the parties on January 23, 2015 by failing to make payment for the products it contracted for under the MSA. The Company is claiming irreparable harm and substantial damages in excess of $1.0 million. The ~~Court has set an initial~~ case ~~management conference for August 17, 2018.~~is currently in the discovery phase of the litigation.

The Company is not a party to any other legal proceeding, the adverse outcome of which is likely to have a material adverse effect on the Company's consolidated financial condition or results of operations.

13. SEGMENTS

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 net sales and income from operations. The following is a summary of key financial data:

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Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Net Sales to External Customers:
    North America $ 71,240 $ 64,905 $ 130,696 $ 125,335
    Asia 45,914 46,071 84,535 81,883
    Europe 23,556 20,641 43,730 38,067
$ 140,710 $ 131,617 $ 258,961 $ 245,285

Net Sales:
North America $ 74,602 $ 67,970 $ 137,173 $ 131,125
Asia 70,005 70,419 126,144 126,830
Europe 27,630 23,416 51,942 43,801
Less intercompany net sales (31,527 ) (30,188 ) (56,298 ) (56,471 )
$ 140,710 $ 131,617 $ 258,961 $ 245,285

Income from Operations:
North America $ 2,963 $ 1,210 $ 2,661 $ 2,202
Asia 5,319 5,314 5,234 6,350
Europe 2,385 742 3,209 1,069
$ 10,667 $ 7,266 $ 11,104 $ 9,621

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Net Sales to External Customers:
North America	$	70,654		$	59,537		$	201,351		$	184,873
Asia		53,528			45,919			138,062			127,801
Europe		22,307			20,930			66,038			58,997
	$	146,489		$	126,386		$	405,451		$	371,671

Net Sales:
North America	$	73,932		$	62,348		$	211,105		$	193,473
Asia		78,008			66,534			204,152			193,364
Europe		25,398			23,633			77,341			67,434
Less intercompany net sales		(30,849	)		(26,129	)		(87,147	)		(82,600	)
	$	146,489		$	126,386		$	405,451		$	371,671

Income from Operations:
North America	$	3,360		$	366		$	6,021		$	2,566
Asia		5,753			5,408			10,987			11,759
Europe		1,386			1,020			4,595			2,090
	$	10,499		$	6,794		$	21,603		$	16,415

Net Sales – Segment net sales are attributed to individual segments based on the geographic source of the billing for such customer sales. Intercompany sales 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 and does not include any amounts related to intercompany transactions.

14.SUBSEQUENT EVENT

On October 1, 2018, the Company completed the acquisition of BCMZ Precision Engineering Limited, a UK manufacturer of precision machined components, for approximately $2.6 million in cash. The final purchase price remains subject to certain adjustments related to working capital. The transaction was funded with cash on hand. The purchase price allocation was still in progress and was not available at the time of filing of this Quarterly Report.

BCMZ has a diversified portfolio of customers in the automotive, aerospace, defense, telecommunication, fibre-optic and medical industrial sectors and has been a long-term key supplier of precision machined components for our Cinch Connectivity Solutions UK business. BCMZ is additionally expected to give Cinch the capability to continue to support key defense and industrial customers across Europe with localized in-house machining ability.

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

The information in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Company's condensed consolidated financial statements and the related notes set forth in Item 1 of Part I of this quarterly report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 2017 Annual Report on Form 10-K and our consolidated financial statements and related notes set forth in Item 8 of Part II of our 2017 Annual Report on Form 10-K. See Part II, Item 1A, "Risk Factors," below and "Cautionary Notice Regarding Forward-Looking Information," above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. All amounts and percentages are approximate due to rounding and all dollars are in millions, except per share amounts or where otherwise noted. When we cross-reference to a "Note," we are referring to our "Notes to Condensed Consolidated Financial Statements," unless the context indicates otherwise. All amounts noted within the tables are in thousands and amounts and percentages are approximate due to rounding.

Overview

Our Company

We design, manufacture and market 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 portfolio of products also finds application in the automotive, medical and consumer electronics markets.

We operate through three geographic segments: North America, Asia and Europe. In the ~~six~~nine months ended ~~June~~September 30, 2018, 50% of the Company's revenues were derived from North America, ~~33%~~34% from Asia and ~~17%~~16% from its Europe operating segment. By product group, ~~35%~~34% of sales for the ~~six~~nine months ended ~~June~~September 30, 2018 related to the Company's connectivity solutions products, ~~33%~~34% in magnetic solutions products and 32% in power solutions and protection products.

Our operating expenses are driven principally by the cost of labor where the factories that Bel uses are located, the cost of the materials that we use and our ability to effectively and efficiently manage overhead costs. As labor and material costs vary by product line and region, any significant shift in product mix can have an associated impact on our costs of sales. Costs are recorded as incurred for all products manufactured. Such amounts are determined based upon the estimated stage of production and include labor cost and fringes and related allocations of factory overhead. Our products are manufactured at various facilities in the U.S., Mexico, Dominican Republic, England, Czech Republic, Slovakia and the PRC.

We have little visibility into the ordering habits of our customers and we can be subjected to large and unpredictable variations in demand for our products. Accordingly, we must continually recruit and train new workers to replace those lost to attrition and be able to address peaks in demand that may occur from time to time. These recruiting and training efforts and related inefficiencies, and overtime required in order to meet any increase in demand, can add volatility to the labor costs incurred by us.

Key Factors Affecting our Business

The Company believes the key factors affecting Bel's results for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and/or future results include the following:

Revenues – The Company's revenues increased by ~~$13.7~~$33.8 million, ~~(or 5.6%)~~or 9.1%, in the first ~~half~~nine months of 2018 as compared to the same period of 2017, despite a ~~$3.7~~$5.1 million decline in sales related to the NPS divestiture. Sales growth was seen across all of our major product groups as certain project wins from 2017 are in full production and ~~primarily related~~we continue to ~~higher~~see strength in sales through our distribution ~~partners during the 2018 period and the new project wins from 2017 moving into production.~~partners.

Backlog – Our backlog reached ~~$176.9~~$185.1 million at ~~June~~September 30, 2018, representing an increase of ~~$30.3~~$38.6 million, or ~~21%~~26%, from December 31, 2017. Since year-end, we saw a ~~49%~~65% increase at Magnetic Solutions, driven by a strong position with our integrated connector modules in next-generation switching ~~products and higher demand for our Signal transformer products for use in medical equipment.~~products. The backlog for our Connectivity Solutions products increased by ~~25%~~21%, driven by recent awards on key military programs, and heightened structured cabling demand for our passive connectors. Our Power Solutions and Protection backlog grew by ~~19%~~9%, led by higher demand for our power supplies ~~in both traditional data centers and those used~~ for ~~blockchain technology.~~a variety of datacenter applications.

Product Mix – Material and labor costs vary by product line and any significant shift in product mix between higher- and lower-margin product lines will have a corresponding impact on the Company's gross margin percentage. In general, our connectivity products have the highest contribution margins, our magnetic products are more labor intensive and are therefore less profitable than the connectivity products and our power products are on the lower end of our profit margin range, due to their high material content. Fluctuations in sales volume among our product groups will have a corresponding impact on Bel's profit margins.

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Pricing and Availability of Materials – There have been recent supply constraints related to components that constitute raw materials in our manufacturing processes, particularly with resistors, capacitors, mosfets and printed circuit boards. Lead times have been extended and the reduction in supply has also caused an increase in prices for certain of these components. As a result, the Company's material costs as a percentage of sales increased to ~~41.4%~~42.0% during the first ~~half~~nine months of 2018 from ~~40.4%~~39.7% during the first ~~half~~nine months of 2017.

Labor Costs – Labor costs during the first ~~half~~nine months of 2018 increased from ~~10.2%~~10.4% of sales during the first ~~half~~nine months of 2017 to ~~11.4%~~11.5% of sales during the first ~~half~~nine months of 2018, primarily due to the appreciation of the Renminbi against the U.S. Dollar, particularly during the first half of 2018, minimum wage increases in the PRC, and growth in sales of our labor-intensive integrated connector module (ICM) products. Effective February 1, 2018, the PRC government issued an increase to the minimum wage in a region where one of Bel's factories is located. Effective July 1, 2018, government-mandated minimum wage increases ~~will go~~went into effect at Bel's other three manufacturing facilities in the PRC.

Restructuring – The Company continues to implement restructuring programs to increase operational efficiencies. While the Company incurred minimal restructuring charges during the first ~~half~~nine months of 2018, additional restructuring efforts are expected to continue ~~throughout~~during the fourth quarter of 2018 as we realign our R&D resources dedicated to our power solutions and protection group. ~~We are also in~~By the ~~process~~end of ~~transitioning~~the third quarter, we had completed the transition of one of our product lines from a third party factory in Malaysia to an existing Bel facility in the PRC. ~~We anticipate completing these two initiatives by the end of 2018, with minimal restructuring costs incurred.~~ Annual savings of approximately $1.4 million are expected from ~~these~~the initiatives ~~once fully implemented~~completed during the first nine months of 2018 (primarily within cost of sales).

Impact of Foreign Currency – During the first ~~half~~nine months of 2018, the Company incurred foreign exchange transactional gains of ~~$0.9~~$2.4 million and higher labor and overhead costs of ~~$3.2~~$2.5 million related to unfavorable ~~fluctuations~~fluctuation in exchange rates versus the first ~~half~~nine months of 2017. Since we are a U.S. domiciled company, we translate our foreign currency-denominated financial results into U.S. dollars. Due to the changes in the value of foreign currencies relative to the U.S. dollar, translating our financial results and the revaluation of certain intercompany as well as third-party transactions to and from foreign currencies to U.S. dollars may result in a favorable or unfavorable impact to our consolidated statements of operations and cash flows. The Company was unfavorably impacted by transactional foreign exchange losses during the first ~~half~~nine months of 2018 due to the appreciation of the Euro, Pound, and Renminbi against the U.S. dollar as compared to exchange rates in effect during the first ~~half~~nine months of 2017. The Company has significant manufacturing operations located in the PRC where labor and overhead costs are paid in local currency. As a result, the U.S. Dollar equivalent costs of these operations were ~~$3.2~~$2.5 million higher in the first ~~half~~nine months of 2018. The Company monitors changes in foreign currencies and may implement pricing actions to help mitigate the impact that changes in foreign currencies may have on its consolidated operating results.

Effective Tax Rate – The Company's effective tax rate will fluctuate based on the geographic segment in which our pretax profits are earned. Of the geographic segments in which we operate, the U.S. and Europe's tax rates are generally equivalent; and Asia has the lowest tax rates of the Company's three geographical segments. See Note 9, "Income Taxes".

~~While~~Our third quarter 2018 bookings reached its highest quarterly amount in the last four years, representing a 28% increase from the third quarter of last year. This growth in orders received was seen across all of our major product groups, and is an encouraging data point for our top line as we ~~are optimistic as~~look to 2019. On the ~~business opportunities we see ahead, we continue to see challenges in~~cost side, higher labor and material costs have had a more visible impact on our margins this quarter as the cost of finished goods that were sold during the quarter were impacted by both higher raw material costs and ~~limited component availability within certain areas of~~increased minimum wage rates associated with production labor in the supply chain. Additionally, on July 6, 2018, the U.S. Trade Representative implemented increased duty percentages across several hundred Harmonized Tariff Codes that cover several thousand products imported from the PRC into the U.S. by Bel. In orderPRC. Sales growth and price stabilization will help to ~~contain and offset~~mitigate these margin ~~challenges, we are invoicing surcharges~~pressures. We continue to evaluate opportunities to grow our business through acquisitions that would provide access to new markets and ~~pricing adjustments~~customers while being accretive to ~~our customers to cover costs incurred to expedite material lead times and additional duties imposed on products imported from~~ the ~~PRC. In the event that any additional tariff proposals are put into effect later in 2018, we would expect to implement similar measures to preserve our gross margins.~~overall business.

Summary by Operating Segment

Net sales to external customers by operating segment for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 were as follows:

	Three Months Ended								Six Months Ended								Three Months Ended								Nine Months Ended
	June 30,								June 30,								September 30,								September 30,
	2018				2017				2018				2017				2018				2017				2018				2017
North America	$	71,240	50	%	$	64,905	49	%	$	130,696	50	%	$	125,335	51	%	$	70,654	48	%	$	59,537	47	%	$	201,351	50	%	$	184,873	50	%
Asia		45,914	33	%		46,071	35	%		84,535	33	%		81,883	33	%		53,528	37	%		45,919	36	%		138,062	34	%		127,801	34	%
Europe		23,556	17	%		20,641	16	%		43,730	17	%		38,067	16	%		22,307	15	%		20,930	17	%		66,038	16	%		58,997	16	%
	$	140,710	100	%	$	131,617	100	%	$	258,961	100	%	$	245,285	100	%	$	146,489	100	%	$	126,386	100	%	$	405,451	100	%	$	371,671	100	%

~~Return to Index~~

The growth in North America sales in 2018 was largely due to increased demand for our passive connector products ~~in structured cabling applications,~~from our premise wiring customers, strength in our connectivity products within key military programs, and higher sales of our transformer products into medical applications. ~~In addition, sales with~~Sales of our Power Solutions ~~business rebounded~~products have also increased in 2018 ~~largely due to increased~~with heightened demand for our power supplies for use in various datacenter applications. The ~~decrease~~increases in Asia sales noted above for the ~~second quarter~~2018 periods primarily ~~relates~~relate to ~~reduced demand for custom module products, which was offset in part by~~ higher sales of our integrated connector modules ~~during the second quarter of 2018.~~for next-generation switching platforms. Sales in Europe increased in both 2018 periods presented as a result of higher demand for our Stewart and Cinch connector products in that region, coupled with strong sales of our power products into rail applications. There was also a favorable impact on our European sales in general during the nine-month period ended September 30, 2018 as a portion of those sales are invoiced in Euros or Pounds, which had appreciated against the U.S. Dollar inparticularly during the ~~three and six months ended June 30,~~first half of 2018 as compared to the same ~~periods~~period of 2017.

Return to Index

Net sales and income from operations by operating segment for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 were as follows. Segment net sales are attributed to individual segments based on the geographic source of the billing for customer sales.

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
	2018			2017			2018			2017			2018			2017			2018			2017
Total segment sales:
North America	$	74,602		$	67,970		$	137,173		$	131,125		$	73,932		$	62,348		$	211,105		$	193,473
Asia		70,005			70,419			126,144			126,830			78,008			66,534			204,152			193,364
Europe		27,630			23,416			51,942			43,801			25,398			23,633			77,341			67,434
Total segment sales		172,237			161,805			315,259			301,756			177,338			152,515			492,598			454,271
Reconciling item:
Intersegment sales		(31,527	)		(30,188	)		(56,298	)		(56,471	)		(30,849	)		(26,129	)		(87,147	)		(82,600	)
Net sales	$	140,710		$	131,617		$	258,961		$	245,285		$	146,489		$	126,386		$	405,451		$	371,671

Income from operations:
North America	$	2,963		$	1,210		$	2,661		$	2,202		$	3,360		$	366		$	6,021		$	2,566
Asia		5,319			5,314			5,234			6,350			5,753			5,408			10,987			11,759
Europe		2,385			742			3,209			1,069			1,386			1,020			4,595			2,090
	$	10,667		$	7,266		$	11,104		$	9,621		$	10,499		$	6,794		$	21,603		$	16,415

The improvement in income from operations within our North America segment was largely due to higher sales volumes in the 2018 periods, partially offset by increased material costs on purchased components. The six-month period of 2018 was also affected by higher labor costs in Mexico, due to the appreciation of the Peso during the first quarter of 2018 compared to the same period last year. The reduction in income from operations at our Asia segment for ~~the six-month period~~both 2018 periods presented was ~~primarily due to~~impacted by higher labor costs driven by ~~an increase in~~increased minimum wage rates at ~~one of~~ our factories in the PRC, higher raw material costs during 2018 and the unfavorable appreciation of the Renminbi particularly during the first half of 2018 compared to the same period of 2017. Asia income from operations was flat year-over-year for the second quarter as higher labor and material costs were offset by a favorable shift in product mix and foreign exchange gains on the remeasurement of foreign exchange transactions. The increase in income from operations from our Europe segment are consistent with the increase in sales for that segment.

Net Sales

The Company's net sales by major product line for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 were as follows:

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2018				2017				2018				2017
Magnetic solutions	$	52,972	36	%	$	44,002	35	%	$	136,748	34	%	$	122,468	33	%
Connectivity solutions		48,526	33	%		42,837	34	%		140,373	34	%		128,350	35	%
Power solutions and protection		44,991	31	%		39,547	31	%		128,330	32	%		120,853	32	%
	$	146,489	100	%	$	126,386	100	%	$	405,451	100	%	$	371,671	100	%

Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Connectivity solutions $ 48,928 35 % $ 43,831 33 % $ 91,846 35 % $ 85,513 35 %
Magnetic solutions 45,548 32 % 43,501 33 % 83,776 33 % 78,466 32 %
Power solutions and protection 46,234 33 % 44,285 34 % 83,339 32 % 81,306 33 %
$ 140,710 100 % $ 131,617 100 % $ 258,961 100 % $ 245,285 100 %

Return to Index

Magnetic Solutions:

Our Magnetic Solutions group continued to benefit from a strong position on next-generation switching products which utilize our integrated connector modules. This accounted for $7.5 million and $11.4 million of the sales growth during the third quarter and nine-month period of 2018 versus 2017. Our Signal Transformer business also contributed with an increase in sales of $1.6 million and $3.2 million during the third quarter and nine-month period of 2018, as orders from new programs within industrial applications remained strong throughout the third quarter.

Connectivity Solutions:

Our connectivity solutions products showed an overall improvement in sales of ~~$5.1~~$5.7 million and ~~$6.3~~$12.0 million during the ~~second~~third quarter and first ~~half~~nine months of 2018, respectively, compared to the same periods of 2017. Sales of our Stewart passive connectors were very strong in the 2018 periods with increases of ~~$3.0~~$3.6 million and ~~$3.5~~$7.1 million during the three and ~~six~~nine months ended ~~June~~September 30, 2018 as compared to 2017. This was largely led by higher demand from our premise wiring customers in North America and Europe in response to improved economic conditions in the ~~successful expansion~~construction industry. We have also had a greater level of ~~its existing~~focus on our distribution channel in 2018 and our Stewart products ~~and new product introductions (NPI)~~have benefited from the increased exposure through our distribution channels. There was also a recovery in demand for passive connectors for use in structured cabling/premise wiring which had been down last year due to lower spending within the construction industry.base. Sales of our Cinch products were also up in 2018 (by $2.1 million for the ~~second~~third quarter and by ~~$2.8~~$5.0 million for the ~~six-month~~nine-month period) primarily from the military sector for our optical and copper products used in encryption, communications and flight-grade applications and for our micro-miniature copper connectivity products in relation to key defense programs.

~~Return to Index~~

~~Magnetic Solutions:~~

Our Magnetic Solutions group benefited from a strong position on next-generation switching products which utilize our integrated connector modules. This accounted for $1.0 million and $3.9 million of the sales growth during the second quarter and six-month period versus 2017. Our Signal Transformer business also contributed with an increase in sales of $1.3 million and $1.6 million during the second quarter and six-month period, as orders from new programs within industrial applications continued to ramp up in the second quarter.

Power Solutions and Protection:

~~The second~~Year-over-year sales growth from our Power Solutions and Protection group continued in the third quarter of ~~2018 was the first quarter since 2014 where this product group has seen year-over-year sales growth. Our~~2018. Sales of our Power Solutions ~~business (acquired in 2014) showed improvement in sales of $3.3~~products increased by $5.7 million and ~~$2.1~~$7.8 million during the ~~three~~third quarter and ~~six month~~nine-month period ~~ending June 30,~~of 2018, asrespectively, compared to the ~~2017 periods.~~same periods of 2017. Excluding the effects of NPS divestiture, sales for the Power Solutions business increased by ~~$5.5~~$7.1 million for the ~~second~~third quarter and by ~~$5.8~~$12.9 million for the first ~~half~~nine months of 2018 compared to the prior year periods. Our circuit protection products continue to experience top line growth as more of these products are introduced into our distribution channels and our DC/DC product sales were also strong during the 2018 periods. These growth drivers were offset in part by lower sales of our custom module products (which were down by ~~$1.7~~$1.3 million and ~~$1.0~~$2.3 million during the three and ~~six~~nine month periods ended ~~June~~September 30, 2018, respectively). In addition, shipments of our AC/DC converter products ~~had specific projects that shipped~~were strong in ~~the second quarter of~~ 2017 in response to a program which did not recur in 2018. This led to a reduction in sales for this product line of ~~$1.1~~$1.4 million for the ~~second~~third quarter and ~~$0.8~~$2.2 million for the ~~six month~~nine-month period.

Cost of Sales

Cost of sales as a percentage of net sales for the three and ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 consisted of the following:

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
	2018			2017			2018			2017			2018			2017			2018			2017
Material costs		41.9	%		40.7	%		41.4	%		40.4	%		43.0	%		38.2	%		42.0	%		39.7	%
Labor costs		11.5	%		10.2	%		11.4	%		10.2	%		11.5	%		11.0	%		11.5	%		10.4	%
Research and development expenses		5.2	%		5.2	%		5.7	%		5.5	%		4.7	%		5.4	%		5.3	%		5.5	%
Other expenses		20.8	%		21.8	%		22.1	%		22.6	%		20.9	%		23.5	%		21.6	%		22.8	%
Total cost of sales		79.4	%		77.9	%		80.6	%		78.7	%		80.1	%		78.1	%		80.4	%		78.4	%

Material costs as a percentage of sales increased during the 2018 periods noted above compared to the same periods of 2017 primarily due to ~~two factors. Starting in late-2017, there have been~~ industry-wide supply constraints related to certain of our purchased components ~~and this~~throughout 2018. This has had an unfavorable impact in the form of higher material costs across most of our product lines. In addition, certain of our manufacturing sites outside of the U.S., particularly those in the PRC, invoice in U.S. Dollars, but purchase materials in a mix of U.S. Dollars and local currency. The Renminbi appreciated 7% relative to the U.S. Dollar in the three and six months ended June 2018 versus the same periods last year. As a result, our material costs as a percentage of sales has increased for the 2018 periods noted.

Labor costs as a percentage of sales also increased during the ~~second~~third quarter and first ~~half~~nine months of 2018 compared to the same periods of 2017 due primarily to ~~several~~two factors. Effective February 1, 2018, the PRC issued an increase to the minimum wage in a region where one of Bel's factories is located, and effective July 1, 2018, minimum wage increases went into effect at our remaining facilities in the PRC. This contributed to the higher labor costs in both 2018 periods presented above. The other factor impacting the nine-month period above relates to the appreciation of the Renminbi against the U.S. Dollar, particularly during the first half of 2018. This drove labor costs as a percentage of sales higher induring the earlier part of 2018, as the majority of our Asia sales are invoiced in U.S. Dollars, while our manufacturing staff at PRC locations are paid in local currency. ~~Effective February 1, 2018, the PRC issued an increase to the minimum wage in a region where one of Bel's factories is located, and this contributed to the higher labor costs in the 2018 periods.~~

~~Return to Index~~

Included in cost of sales is research and development ("R&D") expense of ~~$7.4 million and~~ $6.9 million for each of the three months ended ~~June~~September 30, 2018 and 2017, ~~respectively,~~ and ~~$14.7~~$21.6 million and ~~$13.5~~$20.3 million for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017, respectively. The majority of the increase ~~from~~during the ~~2017 periods~~nine-month period relates to ~~the continued weakening of the~~a weaker U.S. Dollar earlier in 2018 relative to the local currencies in the countries in which our engineers are located. Approximately 85% of our global engineering staff is located outside of the U.S. and is paid in either Euros, Pounds, Swiss Francs or Renminbi, each of which ~~has~~ appreciated against the U.S. Dollar ~~since~~in the first ~~half~~two quarters of 2018 as compared to the same quarters of 2017.

Return to Index

The other expenses noted in the table above include fixed cost items such as support labor and fringe, depreciation and amortization, and facility costs (rent, utilities, insurance). In total, these other expenses increased during the three and ~~six~~nine months ended ~~June~~September 30, 2018 by ~~$0.5~~$1.1 million and ~~$2.1~~$3.1 million, respectively, as compared to the same periods of 2017. This included higher support labor costs of ~~$0.2~~$1.5 million and ~~$1.4~~$3.0 million, respectively, ~~due to~~partially offset by lower depreciation and amortization expense of $0.4 million and $0.9 million during the ~~appreciation of the Euro, Pound, Swiss Franc~~three and ~~Renminbi~~nine-month periods ending September 30, 2018 as compared to the ~~U.S. Dollar as compared to the 2017 periods.~~same periods of 2017.

Selling, General and Administrative Expense ("SG&A")

SG&A expense decreased ~~$3.4~~$2.2 million and ~~$3.7~~$5.9 million during the three and ~~six~~nine months ended ~~June~~September 30, 2018, respectively, as compared with the same periods of 2017. This primarily related to a favorable fluctuation in foreign currency exchange rates on the remeasurement of foreign currency transactions, which accounted for ~~$3.5~~$2.1 million and ~~$3.0~~$5.1 million, respectively, of the decrease noted from the 2017 periods. Other offsetting factors that affected the variance in the ~~second~~third quarter periods ~~are lower general~~included a decline in legal and ~~administrative costs~~professional fees of ~~$0.4~~$0.5 million and ~~reduced~~lower depreciation and amortization expense of ~~$0.5~~$0.4 million, partially offset by a $0.6 million ~~increase in bad debt expense and~~of higher ~~sales commissions of $0.3 million.~~fringe benefit expense. Other factors contributing to the reduction in SG&A during the ~~six-month~~nine-month period were lower legal and professional fees of ~~$0.8~~$1.3 million and a reduction in depreciation and amortization of ~~$0.7~~$1.1 million. These factors were partially offset by an increase in bad debt expense of $0.6 million, higher fringe benefit expense of $0.6 million, and a $0.4 million increase in sales commissions during the first ~~half~~nine months of 2018.

Provision for Income Taxes

The Company's effective tax rate will fluctuate based on the geographic segment in which the pretax profits are earned. Of the geographic segments in which the Company operates, the U.S. and Europe's tax rates are generally equivalent; and Asia has the lowest tax rates of the Company's three geographical segments. See Note 9, "Income Taxes".

The (benefit) provision for income taxes for the three months ended ~~June~~September 30, 2018 and 2017 was ~~$2.4~~($2.2) million and ~~$2.3~~less than $0.1 million, respectively. The Company's earnings before income taxes for the three months ended ~~June~~September 30, 2018, were approximately ~~$3.6~~$4.1 million higher than the same period in 2017, primarily attributable to ~~increases in income~~significantly higher earnings in the ~~Europe~~North America and ~~North America~~Asia segments. The Company's effective tax rate was ~~26.6%~~(24.1%) and ~~42.4%~~1.2% for the three months ended ~~June~~September 30, 2018 and 2017, respectively. The change in the effective tax rate during the three months ended ~~June~~September 30, 2018 as compared to the same period in 2017, is primarily attributable to a decrease in tax expense in the North America segment due to the reduction in the estimated transition tax on post 1986 untaxed accumulated foreign earnings, a reduction in the U.S. tax rate from 35% in 2017 to 21% in 2018, as well as a decrease in the taxes related to uncertain tax positions. This decrease was partially offset by an increase in U.S. taxes relating to income from foreign subsidiaries taxed in the U.S. as part of the Tax Cuts and Jobs Act. Additionally, the decrease in the effective tax rate for the three months ended June 30, 2018, as compared to the same period in 2017, is attributable to U.S. and foreign taxes accrued for gains recognized on a Bel Fuse legal entity restructuring transaction during the three months ended June 30, 2017. See Note 9, "Income Taxes."

The provision for income taxes for the ~~six~~nine months ended ~~June~~September 30, 2018 and 2017 was ~~$2.7~~$0.5 million and $2.3 million, respectively. The Company's earnings before income taxes for the ~~six~~nine months ended ~~June~~September 30, 2018 were approximately ~~$1.9~~$6.0 million higher than the same period in 2017, primarily attributable to increases in income in the Europe and North America segments. The Company's effective tax rate was ~~33.8%~~3.0% and ~~37.0%~~20.8% for the ~~six~~nine month periods ended ~~June~~September 30, 2018 and 2017, respectively. The change in the effective tax rate during the ~~six~~nine months ended ~~June~~September 30, 2018 as compared to the same period of 2017, is primarily attributable to a decrease in tax expense in the North America segment due to the reduction in the estimated transition tax on post 1986 untaxed accumulated foreign earnings, a reduction in the U.S. tax rate from 35% in 2017 to 21% in 2018, as well as a decrease in taxes related to uncertain tax positions. This decrease was partially offset by an increase in U.S. taxes relating to income from foreign subsidiaries taxed in the U.S. as part of the Tax Cuts and Jobs Act. Additionally, the decrease in the effective tax rate for the ~~six~~nine months ended ~~June~~September 30, 2018 as compared to the same period in 2017, is attributable to U.S. and foreign taxes accrued for gains recognized on a Bel Fuse legal entity restructuring transaction during the 2017 period.

Liquidity and Capital Resources

Our primary sources of cash are the collection of trade receivables generated from the sales of our products and services to our customers and amounts available under our existing lines of credit, including our credit facility. Our primary uses of cash are payments for operating expenses, investments in working capital, capital expenditures, interest, taxes, dividends, debt obligations and other long-term liabilities. We believe that our current liquidity position and future cash flows from operations will enable us to fund our operations, including all of the items mentioned above in the next twelve months.

2324

Return to Index

At ~~June~~September 30, 2018 and December 31, 2017, ~~$46.0~~$45.9 million and $50.5 million, respectively (or ~~82%~~85% and 73%, respectively), of cash and cash equivalents was held by foreign subsidiaries of the Company. ~~Management has current intentions to repatriate approximately $12~~During the third quarter of 2018, the Company repatriated $12.2 million of funds from outside of the U.S., with a minimal incremental tax ~~liability, with the intent of utilizing $3~~liability. Of this amount, approximately $9 million ~~to reduce our outstanding debt balance and $9 million~~was utilized to pay down intercompany balances that have been generating foreign exchange gains/losses in our consolidated statement of operations. Management currently intends to repatriate an additional $1.8 million in the fourth quarter of 2018 and an incremental $5 to $8 million in the first quarter of 2019, with minimal incremental tax liability. We continue to analyze our global working capital and cash requirements and the potential tax liabilities attributable to further repatriation, and we have yet to make any further determination regarding repatriation of funds from outside the U.S. to fund the Company's U.S. operations in the future. In the event these funds were needed for Bel's U.S. operations, the Company would be required to accrue and pay U.S. state taxes and any applicable foreign withholding taxes to repatriate these funds.

Cash and cash equivalents, marketable securities and accounts receivable comprised approximately ~~33.1%~~33.9% of the Company's total assets at ~~June~~September 30, 2018 and 34.4% of total assets at December 31, 2017. The Company's current ratio (i.e., the ratio of current assets to current liabilities) was 2.9 to 1 at ~~June~~September 30, 2018 and 3.0 to 1 at December 31, 2017.

In June 2014, the Company entered into a senior Credit and Security Agreement, which was subsequently amended in March 2016, and further amended and refinanced in December 2017. The Credit and Security Agreement contains customary representations and warranties, covenants and events of default and financial covenants that measure (i) the ratio of the Company's total funded indebtedness, on a consolidated basis, to the amount of the Company's consolidated EBITDA, as defined ("Leverage Ratio"), and (ii) the ratio of the amount of the Company's consolidated EBITDA to the Company's consolidated fixed charges ("Fixed Charge Coverage Ratio"). If an event of default occurs, the lenders under the Credit and Security Agreement would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. At ~~June~~September 30, 2018, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio. The unused credit available under the credit facility at ~~June~~September 30, 2018 was $75.0 million, of which we had the ability to borrow ~~$30.4~~$34.1 million without violating our Leverage Ratio covenant based on the Company's existing consolidated EBITDA.

We are currently engaged in a multi-year process of conforming the majority of our operations onto one global ~~ERP.~~Enterprise Resource Planning system ("ERP"). The ERP is designed to improve the efficiency of our supply chain and financial transaction processes, accurately maintain our books and records, and provide information important to the operation of the business to our management team. The implementation of the ERP is being conducted by business unit on a three phase approach through ~~2019.~~2020. We currently estimate total costs over the course of this project to be ~~between $4.5 million to $5.5~~approximately $6.0 million. Since inception of the project, we have incurred a cumulative amount of ~~$4.1~~$4.4 million in connection with this implementation, of which ~~$0.9~~$0.3 million and ~~$1.2~~$1.5 million was incurred during the three and ~~six~~nine months ended ~~June~~September 30, 2018, respectively. These costs are included in SG&A on the consolidated financial statements. Upon completion of the implementation of the new ERP, we anticipate lower maintenance and lower external information and technology support fees resulting in annual savings of approximately $2 million. The preceding sentence represents a Forward-Looking Statement. See "Cautionary Notice Regarding Forward-Looking Statements."

Cash Flows

~~Six Months~~Nine months Ended ~~June~~September 30, 2018

During the ~~six~~nine months ended ~~June~~September 30, 2018, the Company's cash and cash equivalents decreased by ~~$13.6~~$15.1 million. This decrease was primarily due to the following:

·	purchases of property, plant and equipment of ~~$5.9~~$8.8 million;

·	repayments of long-term debt of ~~$7.5~~$8.3 million; and

·	dividend payments of ~~$1.6~~$2.4 million; partially offset by

·	net cash provided by operations of ~~$1.2~~$4.2 million.

During the ~~six~~nine months ended ~~June~~September 30, 2018, accounts receivable increased by ~~$10.5~~$19.0 million primarily due to higher sales volume in the ~~second~~third quarter of 2018 as compared to the fourth quarter of 2017. Days sales outstanding (DSO) ~~declined~~increased to 5861 days at ~~June~~September 30, 2018 from 60 days at December 31, 2017. Effective January 1, 2018, the Company implemented a change in the timing of revenue recognition (and related release of inventory from our books) in connection with the adoption of ASC 606, as described in Note 2. Excluding the adoption adjustment related to this accounting change, inventory increased by ~~$10.6~~$20.1 million at ~~June~~September 30, 2018 compared to December 31, 2017, primarily in raw materials. The increased raw materials balance was driven by a higher volume of raw materials purchased to accommodate increased demand for our products, coupled with higher material costs in 2018 resulting from constraints in component availability. Inventory turns increased from 3.6 at December 31, 2017 to ~~4.2~~4.0 at ~~June~~September 30, 2018, primarily due to the change in revenue recognition accounting noted above.

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~~Six Months~~Nine months Ended ~~June~~September 30, 2017

During the ~~six~~nine months ended ~~June~~September 30, 2017, the Company's cash and cash equivalents decreased by ~~$14.7 million. This decrease was~~$11.3 million primarily due to the ~~following:~~following factors:

~~Return to Index~~

·	~~net cash used in operating activities of $0.4 million;~~

·	purchases of property, plant and equipment of ~~$2.2~~$3.8 million;

·	dividend payments of ~~$1.6~~$2.3 million; and

·	repayments of long-term debt of ~~$15.4 million.~~$25.2 million; partially offset by

·	net cash provided by operating activities of $14.2 million; and

·	net borrowings under our revolving credit line of $4.0 million

During the ~~six~~nine months ended ~~June~~September 30, 2017, accounts receivable increased by ~~$13.8~~$7.9 million primarily due to higher sales volume in the ~~second~~third quarter of 2017 as compared to the fourth quarter of 2016. Days sales outstanding (DSO) increased to 6260 days at ~~June~~September 30, 2017 from 54 days at December 31, 2016, primary due the extension of credit terms with one of our large customers, as well as the increase in revenue (and resulting accounts receivable balance) in our Asia segment where DSO tends to be higher as compared to our other geographic segments. Inventory levels were up by ~~$2.7~~$3.3 million at ~~June~~September 30, 2017 compared to December 31, 2016 as ~~raw materials and~~ work in progress and finished goods balances increased from year-end levels to accommodate ~~increased~~the increase in demand for our ~~products.~~products in 2017.

Critical Accounting Policies

Management's discussion and analysis of Bel's financial condition and results of operations are based upon the Company's condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, goodwill, intangible assets, investments, warranties, SERP expense, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Recent Accounting Pronouncements

The discussion of new financial accounting standards applicable to the Company is incorporated herein by reference to Note 1 to the Company's Financial Statements, "Basis of Presentation and Accounting Policies," included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk primarily from changes in foreign currency exchange rates and changes in interest rates associated with its long-term debt. During the first ~~half~~nine months of 2018, the U.S. Dollar was in a weakened position (compared to the first ~~half~~nine months of 2017) against most other currencies in which the Company pays its expenses. In comparing average exchange rates during the ~~second quarter~~first nine months of 2018 versus those during the ~~second quarter~~first nine months of 2017, the Euro appreciated by 8%7%, the Pound appreciated by 6%, and the Renminbi appreciated by 7% against the U.S. Dollar. In comparing average exchange rates during the first half of 2018 versus those during the first half of 2017, the Euro appreciated by 11%, the Pound appreciated by 9%, and the Renminbi appreciated by 7%4% against the U.S. Dollar. The Company estimates that the appreciation in these foreign currencies led to ~~$1.4 million and $3.2~~$2.5 million in higher operating costs for the ~~second quarter and six-month periods, respectively,~~nine-month period as the majority of our expenses in the PRC, Europe and Mexico are paid in local currency. In addition to the foreign exchange losses recognized, the Company recorded foreign exchange gains of ~~$1.9~~$1.5 million and ~~$0.9~~$2.4 million during the three and ~~six~~nine months ended ~~June~~September 30, 2018, respectively, on remeasurement of foreign currency transactions. This compares to foreign exchange losses recorded during the three and ~~six~~nine months ended ~~June~~September 30, 2017 of ~~$1.6~~$0.6 million and ~~$2.1~~$2.7 million, respectively, resulting from remeasurement of foreign currency transactions. Refer to Item 7A, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion of market risks.

Item 4. Controls and Procedures

Disclosure controls and procedures: As of the end of the period covered by this report, the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer and Vice President of Finance, of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based on that evaluation, the Company's Chief Executive Officer and Vice President of Finance concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

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Changes in internal controls over financial reporting: There has not been any change in the Company's internal controls over financial reporting during the three months ended ~~June~~September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. Other Information

Item 1. Legal Proceedings

The information called for by this Item is incorporated herein by reference to Note 12 of the Company's Financial Statements, under "Legal Proceedings", as set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q. We are also involved in various other legal actions incidental to our business. We believe, after consulting with counsel, that the disposition of these other legal proceedings and matters will not have a material effect on our condensed consolidated financial condition or results of operations.

Item 1A. Risk Factors

See Part I, Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Except as required by the federal securities law, we undertake no obligation to update or revise any risk factor, whether as a result of new information, future events or otherwise.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth certain information regarding the Company's purchase of shares of its Class A Common Stock during each calendar month in the quarter ended ~~June~~September 30, 2018:

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan

April 1 - April 30, 2018 5,451 $ 17.58 5,451 $ 477,463
May 1 - May 31, 2018 5,083 18.84 5,083 381,689
June 1 - June 30, 2018 9,356 20.40 9,356 190,807

Total 19,890 $ 19.23 19,890 $ 190,807

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan

July 1 - July 31, 2018		8,873	$	21.32		8,873	$	-
August 1 - August 31, 2018		1,761		24.15		1,761		607,464
September 1 - September 30, 2018		12,052		23.29		12,052		326,727

Total		22,686	$	22.59		22,686	$	326,727

Pursuant to the Bel Fuse Inc. Employees' Savings Plan (the "Employees' Savings Plan"), the Company makes matching contributions of pre-tax elective deferral contributions made by associates. The Employees' Savings Plan provides for matching contributions to be invested in shares of the Company's Class A Common Stock. The trustees of the Employees' Savings Plan adopted a "10b5-1 Plan," in accordance with guidelines specified by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, to make open market purchases of shares of Class A Common Stock with such matching contributions. The purchases in the table above were made under the 10b5-1 Plan. The maximum dollar amount for cumulative purchases under the 10b5-1 Plan during the plan period ~~(March 15,~~(August 20, 2018 to ~~July 31,~~November 30, 2018) will not exceed $650,000.

Item 5. Other Information

As previously disclosed, on August 16, 2018, the trustees of the Employees' Savings Plan adopted a plan (the "10b5-1 Plan") in accordance with guidelines specified by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, pursuant to which KeyBanc Capital Markets Inc. was engaged to purchase shares of the Class A common stock of Bel Fuse Inc. ("Bel") to implement the Employees' Savings Plan's requirements that matching contributions be invested in shares of Bel's Class A common stock. While it was originally expected that purchases under the 10b5-1 Plan would be completed by November 30, 2018, as a sufficient number of shares of Class A common stock have been purchased already to meet the requirements of the "match" for 2018, the 10b5-1 Plan was terminated effective November 7, 2018.

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Item 6. Exhibits

(a) Exhibits:


31.1*	Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*	Certification of the Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**	Certification of the President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**	Certification of the Principal Financial Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	XBRL Instance Document

101.SCH*	XBRL Taxonomy Extension Schema Document

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** Submitted herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BEL FUSE INC.
~~August~~November 7, 2018
By:	/s/ Daniel Bernstein
	Daniel Bernstein
	President and Chief Executive Officer

By:	/s/ Craig Brosious
	Craig Brosious
	Vice President of Finance and Secretary
	(Principal Financial Officer and Principal Accounting Officer)

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