NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The condensed consolidated balance sheets and statements of operations, comprehensive income, ~~(loss),~~ stockholders’ equity 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 months ended June 30, ~~2019~~2020 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~~10-K for the year ended December 31, ~~2018.~~

2019.

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~~these condensed consolidated financial statements pursuant to the rules and regulations, including the interim reporting requirements, of the U.S. Securities and Exchange Commission (“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~~10-K for the year ended December 31, ~~2018.~~2019. There were no significant changes to these accounting policies during the six months ended June 30, ~~2019,~~2020, except as discussed in “Recently Adopted Accounting Standards” below.

Reclassifications - During the fourth quarter of 2019, the Company changed its financial statement presentation of research and development costs. These costs were previously included within cost of sales and were a factor in arriving at gross profit. Research and development costs in the amount of $6.9 million and $14.0 million have been reclassified from cost of sales to a separate line item below gross profit in the accompanying condensed consolidated statement of operations for the three and six months ended June 30, 2019, respectively. Also during the fourth quarter of 2019, the Company changed its financial statement presentation related to gain/loss on foreign currency exchange. These gains/losses were previously included within selling, general and administrative expense. Gains (losses) on foreign currency exchange in the amount of $0.5 million and ($0.1) million have been reclassified from selling, general and administrative expense and are now included within other (expense) income, net on the accompanying condensed consolidated statement of operations for the three and six months ended June 30, 2019, respectively. These changes in presentation are consistent with that of our peers. The Company also implemented a change to its reportable segments during the fourth quarter of 2019. In the past, the Company's reportable operating segments were geographic in nature: North America, Europe and Asia. In connection with the Company's migration to its new ERP system and with the acquisition of CUI, management is now assessing the business on a product group basis, and making decisions based on the profitability of three product segments, Cinch Connectivity Solutions, Power Solutions and Protection and Magnetic Solutions, in addition to a Corporate segment. The segment disclosures in Note 14 for the three and six months ended June 30, 2019 have been recast to reflect the new reportable operating segments.

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 ~~February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,~~ ~~Leases (Topic 842) (“ASU 2016-02”)~~, 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 was 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.

The Company adopted ASU 2016-02 as amended effective January 1, 2019 using the modified retrospective approach. In connection with the adoption, we elected to utilize the Comparatives Under 840 Option whereby the Company will continue to present prior period financial statements and disclosures under ASC 840. In addition, we elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs. Further, we elected a short-term lease exception policy, permitting us to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. We implemented a new lease system to facilitate the requirements of the new standard and completed the necessary changes to our accounting policies, processes, disclosures and internal control over financial reporting.

Adoption of the new standard resulted in the recording of right-of-use assets in the amount of $20.7 million and lease liabilities related to our operating leases in the amount of $21.0 million on our consolidated balance sheet as of January 1, 2019. The standard did not materially affect the Company’s consolidated net earnings or have any impact on cash flows. See Note 12, ~~Leases, for Topic 842 disclosures in connection with the adoption of ASU 2016-02.~~

~~In February~~August 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. This guidance was adopted by the Company effective January 1, 2019. In accordance with this guidance, the Company reclassified $0.5 million of stranded tax effects from accumulated other comprehensive income to retained earnings within the equity section of the condensed consolidated balance sheet as of January 1, 2019. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

~~Return to Index~~

~~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. This guidance was adopted by the Company effective January 1, 2019 and did not have a material impact on the Company’s condensed consolidated financial statements.

~~Accounting Standards Issued But Not Yet Adopted~~

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”)~~. The new guidance will broaden the information that an entity must consider in developing its expected credit loss estimates related to its financial instruments and adds to U.S. GAAP an impairment model that is based on expected losses rather than incurred losses. The amendment is currently effective for public entities for annual reporting periods beginning after December 15, 2019, with early adoption permitted. Management is currently assessing the impact of ASU 2016-13, but it is not expected to have a material impact on the Company’s condensed consolidated financial statements.

~~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 August 2018, the FASB issued ASU 2018-13,~~ -13,Fair Value Measurement (Topic ~~820)~~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~~adopted the updated ~~provisions.~~

provisions effective January 1, 2020. The adoption did not have a material impact on the Company's consolidated financial position or consolidated results of operations.

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 (“ASU 2018-14”)~~. 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 2018-15, ~~2020. The amendments in ASU 2018-14 would need to be applied on a retrospective basis. The Company is currently assessing the impact the new guidance will have on its disclosures.~~

~~In August 2018, the FASB issued ASU 2018-15,~~ Intangibles – Goodwill and Other-Internal-Use Software (Subtopic ~~350-40)~~350-40): ~~Customer’s~~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,~~ 2019. The Company adopted this guidance effective January 1, 2020 and it did not have a material impact on its consolidated financial position or consolidated results of operations.

Accounting Standards Issued But Not Yet Adopted

In June 2016, the FASB issued ASU No.2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), as amended. The new guidance will broaden the information that an entity must consider in developing its expected credit loss estimates related to its financial instruments and adds to U.S. GAAP an impairment model that is based on expected losses rather than incurred losses. The amendment is effective for the Company for annual reporting periods beginning after December 15, 2022, with early adoption permitted. Management is ~~permitted.~~currently assessing the impact of ASU 2016-13, but it is not expected to have a material impact on the Company’s consolidated financial statements.

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 ("ASU 2018-14"). This guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds 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. The Company is currently ~~evaluating~~assessing the ~~impacts that adoption of this ASU~~impact the new guidance will have on ~~its~~the Company's disclosures.

In December 2019, the FASB issued ASU 2019-12,Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which modifies ASC 740 to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 is effective for the Company for interim and annual reporting periods beginning after December 15, 2020. The Company is currently assessing the impact of ASU 2019-12, but it is not expected to have a material impact on the Company’s consolidated financial statements.

2.	ACQUISITION

On December 3, 2019, the Company completed the acquisition of the majority of the power supply products business of CUI Inc. ("CUI") through an asset purchase agreement with CUI Global Inc. for $29.2 million (after a working capital adjustment), plus the assumption of certain liabilities. The CUI power business designs and markets a broad portfolio of AC/DC and DC/DC power supplies and board level components. The CUI power business is headquartered in Tualatin, Oregon and had sales of $32.0 million for the year ended December 31, 2019. The acquisition of the CUI power business enhances Bel's existing offering of power products, allowing the Company to better address all of its customer power needs. It also introduces an alternative business model to Bel's, one which carries a higher gross margin profile and lower manufacturing risk. The acquisition of CUI has also created the opportunity for expense reduction and the elimination of redundancies. The combination of these factors has given rise to $10.9 million of goodwill.

During the three and six months ended June 30, 2020, the Company expensed $0.2 million of acquisition-related costs. These costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

While the purchase price allocation related to CUI is substantially complete, the allocations are currently under review and are subject to change. The Company expects to finalize the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

CUI’s results of operations have been included in the Company’s condensed consolidated financial statements for the period subsequent to the acquisition date. CUI contributed revenues of $10.6 million and estimated net earnings of $2.3 million to the Company for the three months ended June 30, 2020 and revenues of $18.9 million and estimated net earnings of $3.1 million to the Company for the six months ended June 30, 2020. The following unaudited pro forma information presents the combined operating results of the Company and CUI. The following unaudited pro forma consolidated results of operations assume that the acquisition of CUI was completed as of January 1,2019:

	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Revenue	$	135,847	$	270,504
Net earnings		3,383		5,069
Earnings per Class A common share - basic and diluted		0.26		0.39
Earnings per Class B common share - basic and diluted		0.28		0.42

~~Return to Index~~8

REVENUE

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

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
North North
America Asia Europe Consolidated America Asia Europe Consolidated

By Product Group:
Connectivity solutions $ 31,297 $ 3,027 $ 8,212 $ 42,536 $ 63,418 $ 6,502 $ 16,977 $ 86,897
Magnetic solutions 9,638 29,168 2,046 40,852 18,583 56,258 4,267 79,108
Power solutions and protection 26,131 7,129 10,768 44,028 49,652 13,841 23,307 86,800
$ 67,066 $ 39,324 $ 21,026 $ 127,416 $ 131,653 $ 76,601 $ 44,551 $ 252,805

By Sales Channel:
Direct to customer $ 45,442 $ 32,707 $ 13,293 $ 91,442 $ 89,323 $ 63,835 $ 29,506 $ 182,664
Through distribution 21,624 6,617 7,733 35,974 42,330 12,766 15,045 70,141
$ 67,066 $ 39,324 $ 21,026 $ 127,416 $ 131,653 $ 76,601 $ 44,551 $ 252,805

Three Months Ended June 30, 2018 Six Months Ended June 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 $ 65,878 $ 8,241 $ 17,727 $ 91,846
Magnetic solutions 10,158 32,844 2,546 45,548 18,209 60,669 4,898 83,776
Power solutions and protection 26,248 8,250 11,736 46,234 46,609 15,625 21,105 83,339
$ 71,240 $ 45,914 $ 23,556 $ 140,710 $ 130,696 $ 84,535 $ 43,730 $ 258,961

By Sales Channel:
Direct to customer $ 44,055 $ 39,402 $ 15,990 $ 99,447 $ 81,951 $ 72,330 $ 30,183 $ 184,464
Through distribution 27,185 6,512 7,566 41,263 48,745 12,205 13,547 74,497
$ 71,240 $ 45,914 $ 23,556 $ 140,710 $ 130,696 $ 84,535 $ 43,730 $ 258,961

	*Three Months Ended June 30, 2020*								*Six Months Ended June 30, 2020*
	Cinch Connectivity Solutions		Power Solutions and Protection		Magnetic Solutions		Consolidated		Cinch Connectivity Solutions		Power Solutions and Protection		Magnetic Solutions		Consolidated

*By Product Group:*
North America	$	27,608	$	29,029	$	7,097	$	63,734	$	57,310	$	51,752	$	14,204	$	123,266
Europe		8,356		8,965		1,717		19,038		16,118		18,279		2,918		37,315
Asia		2,944		7,118		28,338		38,400		4,579		11,258		48,731		64,568
	$	38,908	$	45,112	$	37,152	$	121,172	$	78,007	$	81,289	$	65,853	$	225,149

*By Sales Channel:*
Direct to customer	$	23,600	$	26,894	$	31,021	$	81,515	$	48,652	$	48,471	$	55,363	$	152,486
Through distribution		15,308		18,218		6,131		39,657		29,355		32,818		10,490		72,663
	$	38,908	$	45,112	$	37,152	$	121,172	$	78,007	$	81,289	$	65,853	$	225,149

	*Three Months Ended June 30, 2019*								*Six Months Ended June 30, 2019*
	Cinch Connectivity Solutions		Power Solutions and Protection		Magnetic Solutions		Consolidated		Cinch Connectivity Solutions		Power Solutions and Protection		Magnetic Solutions		Consolidated

*By Product Group:*
North America	$	31,297	$	26,131	$	9,638	$	67,066	$	63,418	$	49,652	$	18,583	$	131,653
Europe		8,212		10,768		2,046		21,026		16,977		23,307		4,267		44,551
Asia		3,027		7,129		29,168		39,324		6,502		13,841		56,258		76,601
	$	42,536	$	44,028	$	40,852	$	127,416	$	86,897	$	86,800	$	79,108	$	252,805

*By Sales Channel:*
Direct to customer	$	28,207	$	28,594	$	34,641	$	91,442	$	57,812	$	57,694	$	67,158	$	182,664
Through distribution		14,329		15,434		6,211		35,974		29,085		29,106		11,950		70,141
	$	42,536	$	44,028	$	40,852	$	127,416	$	86,897	$	86,800	$	79,108	$	252,805

The balances of the Company’s contract assets and contract liabilities at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are as follows:

June 30, December 31,
2019 2018

Contract assets - current (unbilled receivable) $ 11,470 $ 15,799
Contract liabilities - current (deferred revenue) $ 1,763 $ 1,036

	*June 30,*		*December 31,*
	*2020*		*2019*

Contract assets - current (unbilled receivable)	$	15,334	$	16,318
Contract liabilities - current (deferred revenue)	$	1,148	$	653

The change in balance of our unbilled receivables from December 31, ~~2018~~2019 to June 30, ~~2019~~2020 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).

The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of June 30, ~~2019~~2020 related to contracts that exceed one year in duration amounted to ~~$14.3~~$15.2 million, with expected contract expiration dates that range from ~~2020~~2021 - 2025. It is expected that ~~21%~~27% of this aggregate amount will be recognized in ~~2020, 54%~~2021, 70% will be recognized in ~~2021~~2022 and the remainder will be recognized in years beyond ~~2021.~~

2022.

~~Return to Index~~9

The following table sets forth the calculation of basic and diluted net earnings per common share under the ~~two-class~~two-class method for the three and six months ended June 30, ~~2019~~ 2020 and ~~2018:~~2019:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019

Numerator:
Net earnings	$	5,573	$	2,967	$	1,769	$	4,098
Less dividends declared:
Class A		129		131		259		261
Class B		707		704		1,416		1,412
Undistributed earnings	$	4,737	$	2,132	$	94	$	2,425

Undistributed earnings allocation - basic and diluted:
Class A undistributed earnings	$	794	$	363	$	15	$	412
Class B undistributed earnings		3,943		1,769		79		2,013
Total undistributed earnings	$	4,737	$	2,132	$	94	$	2,425

Net earnings allocation - basic and diluted:
Class A net earnings	$	923	$	494	$	274	$	673
Class B net earnings		4,650		2,473		1,495		3,425
Net earnings	$	5,573	$	2,967	$	1,769	$	4,098

Denominator:
Weighted-average shares outstanding:
Class A - basic and diluted		2,145		2,175		2,145		2,175
Class B - basic and diluted		10,178		10,112		10,151		10,100

Net earnings per share:
Class A - basic and diluted	$	0.43	$	0.23	$	0.13	$	0.31
Class B - basic and diluted	$	0.46	$	0.24	$	0.15	$	0.34

   Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018

Numerator:
Net earnings $ 2,967 $ 6,634 $ 4,098 $ 5,332
Less dividends declared:
     Class A 131 131 261 261
     Class B 704 689 1,412 1,390
Undistributed earnings $ 2,132 $ 5,814 $ 2,425 $ 3,681

Undistributed earnings allocation - basic and diluted:
     Class A undistributed earnings $ 363 $ 1,010 $ 412 $ 640
     Class B undistributed earnings 1,769 4,804 2,013 3,041
     Total undistributed earnings $ 2,132 $ 5,814 $ 2,425 $ 3,681

Net earnings allocation - basic and diluted:
     Class A net earnings $ 494 $ 1,141 $ 673 $ 901
     Class B net earnings 2,473 5,493 3,425 4,431
     Net earnings $ 2,967 $ 6,634 $ 4,098 $ 5,332

Denominator:
Weighted-average shares outstanding:
     Class A - basic and diluted 2,175 2,175 2,175 2,175
     Class B - basic and diluted 10,112 9,844 10,100 9,850

Net earnings per share:
     Class A - basic and diluted $ 0.23 $ 0.52 $ 0.31 $ 0.41
     Class B - basic and diluted $ 0.24 $ 0.56 $ 0.34 $ 0.45

4.~~FAIR VALUE MEASUREMENTS~~

F~~air~~

5.	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, ~~2019~~2020 and December 31, ~~2018,~~2019, our available-for-sale securities primarily consisted of investments held in a rabbi trust which are intended to fund the Company’s Supplemental Executive Retirement Plan (“SERP”) obligations. These securities are measured at fair value using quoted prices in active markets for identical assets (Level ~~1) inputs~~1 inputs) and amounted to ~~$1.3~~$0.9 million at June 30, ~~2019~~2020 and ~~$1.4~~$1.1 million at December 31, ~~2018.~~ 2019. During the second quarter of 2020, the Company entered into foreign exchange forward contracts, the fair value of which was less than $0.1 million at June 30, 2020. 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 months ended June 30, 2020 or June 30, 2019 ~~or June 30, 2018.~~. There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the six months ended June 30, 2020 or June 30, 2019 ~~or June 30, 2018.~~

There were no financial assets accounted for at fair value on a nonrecurring basis as of June 30, ~~2019~~2020 or December 31, ~~2018.~~

~~Return to Index~~

2019.

The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable and accrued expenses, 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 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the estimated fair value of total debt was ~~$118.5~~$141.7 million and ~~$117.9~~$146.4 million, respectively, compared to a carrying amount of ~~$113.0~~$135.2 million and ~~$114.2~~$143.7 million, respectively. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of June 30, ~~2019.~~

2020.

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~~The Company considered the impacts of COVID-19 on Bel's business and on general economic conditions when making its assessment on whether a triggering ~~events that~~event had occurred during the six months ended June 30, ~~2019~~ 2020. Based on the Company's assessment, it was concluded that no triggering events occurred during the six months ended June 30, 2020 that would warrant interim impairment testing.

~~5. INVENTORIES~~

6.	INVENTORIES

The components of inventories are as follows:

	June 30,		December 31,
	2020		2019
Raw materials	$	47,707	$	47,936
Work in progress		29,139		27,065
Finished goods		27,880		32,275
Inventories	$	104,726	$	107,276

June 30, December 31,
2019 2018
Raw materials $ 53,251 $ 63,348
Work in progress 28,548 21,441
Finished goods 36,410 35,279
Inventories $ 118,209 $ 120,068

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

June 30, December 31,
2019 2018
Land $ 1,433 $ 2,251
Buildings and improvements 29,319 30,119
Machinery and equipment 129,386 126,747
Construction in progress 5,516 4,687
165,654 163,804
Accumulated depreciation (123,310 ) (119,872 )
Property, plant and equipment, net $ 42,344 $ 43,932

	June 30,			December 31,
	2020			2019
Land	$	1,428		$	1,431
Buildings and improvements		22,647			29,722
Machinery and equipment		124,192			132,134
Construction in progress		2,662			5,090
		150,929			168,377
Accumulated depreciation		(113,595	)		(126,434	)
Property, plant and equipment, net	$	37,334		$	41,943

Depreciation expense for the three months ended June 30, ~~2019~~ 2020 and ~~2018~~2019 was ~~$2.5~~$2.3 million and ~~$2.9~~$2.5 million, respectively. Depreciation expense for the six months ended June 30, ~~2019~~ 2020 and ~~2018~~2019 was ~~$5.0~~$4.7 million and ~~$6.1~~$5.0 million, respectively. Depreciation expense related to our manufacturing facilities and equipment is included in cost of sales and depreciation expense associated with administrative facilities and office equipment is included in selling, general and administrative expense within the accompanying condensed consolidated statements of operations.

During the first quarter of 2019, the Company finalized its plans to transition its manufacturing and warehousing operations from its Inwood, New York facility to Bel’s existing facilities in Glen Rock, Pennsylvania and the Dominican Republic. In connection with this transition, the Company had classified $1.5 million of property, plant and equipment as held for sale on its condensed consolidated balance sheet at March 31, 2019. The sale of the Inwood, New York property was completed during the second quarter of 2019, resulting in net proceeds of $5.8 million. The resulting gain on sale of $4.3 million (pre-tax) was recorded in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2019.

~~Return to Index~~11

ACCRUED EXPENSES

Accrued expenses consist of the following:

June 30, December 31,
2019 2018
Sales commissions $ 2,628 $ 2,609
Subcontracting labor 1,276 1,550
Salaries, bonuses and related benefits 14,918 18,275
Warranty accrual 1,329 1,078
Other 9,941 8,778
$ 30,092 $ 32,290

	June 30,		December 31,
	2020		2019
Sales commissions	$	2,685	$	2,542
Subcontracting labor		1,115		990
Salaries, bonuses and related benefits		15,301		14,715
Warranty accrual		1,368		1,576
Other		7,933		7,095
	$	28,402	$	26,918

The change in warranty accrual during the six months ended June 30, ~~2019~~2020 primarily related to repair costs incurred and adjustments to pre-existing warranties. There were no new material warranty charges incurred during the six months ended June 30, ~~2019.~~

2020.

Restructuring Activities

Included within other accrued expenses in the table above are costs accrued related to the Company’s restructuring activities. Activity and liability balances related to restructuring costs for the six months ended June 30, ~~2019~~2020 are as follows:

			Six Months Ended
			June 30, 2020
	Liability at					Cash Payments			Liability at
	December 31,		New			and Other			June 30,
	2019		Charges			Settlements			2020
Severance costs	$	-	$	216		$	(216	)	$	-
Other restructuring costs		44		(44	)		-			-
Total	$	44	$	172		$	(216	)	$	-

Six Months Ended
June 30, 2019
Liability at Cash Payments Liability at
December 31, New and Other June 30,
2018 Charges Settlements 2019
Severance costs $ - $ 311 $ (244 ) $ 67
Other restructuring costs - 809 (107 ) 702
Total $ - $ 1,120 $ (351 ) $ 769

During the six months ended June 30, 2019, the Company’s restructuring charges included $0.9 million of costs associated with the Company’s decision to transition manufacturing and warehousing operations from our Inwood, New York facility to other existing Bel facilities. The balance of the restructuring charges related to the realignment of our R&D resources dedicated to our Power Solutions and Protection group and other restructuring activities in Asia.

DEBT

The Company has a Credit and Security Agreement with KeyBank National Association (as amended, the ~~“CSA”~~"credit agreement" or the "CSA"). The CSA consists of (i) a term loan, with outstanding borrowings of ~~$114.5~~$104.8 million and ~~$116.0~~$113.0 million at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and (ii) a $75 million revolving credit facility (“Revolver”), with no$32.0 million in outstanding borrowings at each of June 30, ~~2019 or~~ 2020 and December 31, ~~2018.~~2019. The CSA has a maturity date of December 11, 2022. At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the carrying value of the debt on the condensed consolidated balance sheet is reflected net of ~~$1.5~~$1.6 million and ~~$1.8~~$1.3 million, respectively, of deferred financing costs. ~~During the six months ended June 30, 2019,~~

On February 18, 2020, the Company ~~borrowed $12.0 million from~~further amended its ~~revolver, all~~credit agreement whereby the Company voluntarily prepaid a portion of ~~which was repaid by June 30, 2019.~~

its term loan under the credit agreement in the amount of $8.2 million. The amendment also served to modify the interest rate and fees applicable to the loans under the credit agreement and change certain covenants related to matters including acquisitions, share repurchases and financial ratios.

The weighted-average interest rate in effect was ~~4.19%~~3.44% at June 30, ~~2019~~2020 and ~~4.31%~~3.31% at December 31, ~~2018~~2019 and consisted of LIBOR plus the Company’s credit spread, as determined per the terms of the CSA. The Company incurred ~~$1.4~~$1.3 million and ~~$1.3~~$1.4 million of interest expense during the three months ended June 30, 2020 and June 30, 2019 ~~and June 30, 2018, respectively, and $2.8~~, respectively. The Company incurred $2.6 million and ~~$2.5~~$2.8 million of interest expense during the six months ended June 30, 2020 and June 30, 2019, ~~and June 30, 2018,~~ respectively.

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.~~charges ("Fixed Charge Coverage Ratio"). 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 30, ~~2019,~~2020, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio.

~~Return~~

10.

INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. Certain provisions of the CARES Act impact the 2019 income tax provision computations of the Company and were reflected in the three months ended March 31, 2020, or the period of enactment. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to ~~Index~~

9.~~INCOME TAXES~~

Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. This modification would increase the allowable interest expense deduction of the Company and result in a net operating loss (“NOL”) for the year ended December 31, 2019. The Company intends to carry back the NOL to the tax year ended December 31, 2015 and has reflected this impact in the tax provision for the three months ended March 31, 2020. Due to the foregoing, and as a result of the difference in corporate tax rates in the NOL carryback period, the Company recognized a benefit associated with the enactment of the CARES Act in the three months ended March 31, 2020.

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 ~~2015~~2016 and for state examinations before ~~2012.~~2013. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before ~~2008~~2009 in Asia and generally 2011 in Europe. The Company is currently under examination by the taxing authorities in Slovakia for the tax year ~~2014.~~

2014 and has accrued tax based on preliminary findings.

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 30, ~~2019.~~ 2020. The Company’s liabilities for uncertain tax positions totaled ~~$28.5~~$28.4 million and ~~$28.9~~$29.1 million at June 30, ~~2019~~ 2020 and December 31, ~~2018,~~ 2019, respectively, of which ~~$0.1~~$1.3 million and ~~$1.4~~$2.2 million is included in other current liabilities at June 30, ~~2019~~ 2020 and December 31, ~~2018, respectively.~~2019, respectively and are expected to be resolved during 2020 by way of expiration of the related statute of limitations. These amounts, if recognized, would reduce the Company’s effective tax rate. As of June 30, 2019, approximately $0.1 million of the Company’s liabilities for uncertain tax positions are expected to be resolved during 2019 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 months ended June 30, ~~2019~~ 2020 and ~~2018,~~2019, the Company recognized ~~$0.3~~$0.4 million ~~and $0.5 million, respectively,~~ in interest and penalties in the condensed consolidated statements of ~~operations.~~operations during each period. During the six months ended June 30, ~~2019 and 2018,~~ 2020, the Company recognized a benefit of ~~$0.7~~$0.3 million ~~and a benefit of $0.4 million, respectively,~~ for the reversal of such interest and penalties, relating to the settlement of the liability for uncertain tax positions. The Company has approximately ~~$4.5 million and $3.8~~$4.9 million accrued for the payment of interest and penalties at each of June 30, ~~2019~~ 2020 and December 31, ~~2018, respectively,~~ 2019, which is included in both income taxes payable and liability for uncertain tax positions in the condensed consolidated balance sheets.

The Company continues to monitor the impacts of the U.S. tax reform and supplementary guidance as it becomes available. At December 31, 2018, the remaining balance of the deemed repatriation tax was included in other current liabilities on the Company’s condensed consolidated balance sheet. At June 30, 2019, the majority of the deemed repatriation tax is included in other long-term liabilities on the Company's condensed consolidated balance sheet due to clarification of an Internal Revenue Service notice received in December 2018.

~~10.RETIREMENT FUND AND PROFIT SHARING PLAN~~

11.

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)~~401(a) and (k) of the Internal Revenue Code of 1986, as amended (the “Code”). The expense for the three months ended June 30, ~~2019~~ 2020 and ~~2018~~2019 amounted to $0.3 million in both periods. The expense for the six months ended June 30, ~~2019~~ 2020 and ~~2018~~2019 amounted to $0.6 million in both periods. The Company’s matching contribution is made in the form of Bel Fuse Inc. Class A common stock. As of June 30, ~~2019,~~2020, the plan owned ~~133,280~~223,406 and ~~107,962~~111,761 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

The Company's subsidiaries in Asia have a retirement fund covering substantially all of their Hong Kong based full-time employees. The expense for the three months ended June 30, ~~2019~~ 2020 and ~~2018~~2019 amounted to $0.1 million in both periods. The expense for the six months ended June 30, ~~2019~~ 2020 and ~~2018~~2019 amounted to $0.2 million in both periods. As of June 30, ~~2019,~~2020, 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 35 above, the Company has investments in a rabbi trust which are intended to fund the obligations of the SERP.

The components of SERP expense are as follows:

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Service cost $ 144 $ 183 $ 288 $ 366
Interest cost 185 166 370 332
Net amortization 48 111 96 222
Net periodic benefit cost $ 377 $ 460 $ 754 $ 920

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Service cost	$	150	$	144	$	300	$	288
Interest cost		159		185		318		370
Net amortization		86		48		172		96
Net periodic benefit cost	$	395	$	377	$	790	$	754

~~Return to Index~~13

The service cost component of net benefit cost is presented within cost of sales or selling, general and administrative expense on the accompanying condensed consolidated 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,~~(expense) income, net in the accompanying condensed consolidated statements of operations.

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

	June 30,		December 31,
	2020		2019
Prior service cost	$	662	$	738
Net loss		1,870		1,965
	$	2,532	$	2,703

June 30, December 31,
2019 2018
Prior service cost $ 828
$ 918
Net loss 1,971 1,977
$ 2,799 $ 2,895

~~11.ACCUMULATED OTHER COMPREHENSIVE LOSS~~

12.

ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are summarized below:

June 30, December 31,
2019 2018

Foreign currency translation adjustment, net of taxes of ($752) at
  June 30, 2019 and ($751) at December 31, 2018 $ (22,929 ) $ (22,635 )
Unrealized holding gains on available-for-sale securities, net of taxes of
  $0 at June 30, 2019 and $0 at December 31, 2018 12 12
Unfunded SERP liability, net of taxes of ($195) at June 30, 2019
  and ($680) at December 31, 2018 (2,604 ) (2,215 )

Accumulated other comprehensive loss $ (25,521 ) $ (24,838 )

	June 30,			December 31,
	2020			2019

Foreign currency translation adjustment, net of taxes of ($711) at June 30, 2020 and ($742) at December 31, 2019	$	(21,600	)	$	(20,032	)
Unrealized holding gains on available-for-sale securities, net of taxes of $0 at June 30, 2020 and $0 at December 31, 2019		11			12
Unfunded SERP liability, net of taxes of ($599) at June 30, 2020 and ($639) at December 31, 2019		(3,913	)		(4,045	)

Accumulated other comprehensive loss	$	(25,502	)	$	(24,065	)

Changes in accumulated other comprehensive loss by component during the six months ended June 30, ~~2019~~2020 are as follows. All amounts are net of tax.

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

Balance at January 1, 2019 $ (22,635 ) $ 12 $ (2,215 ) $ (24,838 )
     Other comprehensive income before reclassifications (294 ) - 11 (283 )
     Amount reclassified from accumulated other
          comprehensive loss - - 63 (a) 63
     Net current period other comprehensive income (294 ) - 74 (220 )

Effect of adoption of ASU 2018-02 (Topic 220) - - (463 ) (463 )
Balance at June 30, 2019 $ (22,929 ) $ 12 $ (2,604 ) $ (25,521 )

(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
      classification of the plan participants.

~~12. LEASES~~

The Company has operating leases for its facilities used for manufacturing, research and development, sales and administration. There are also operating and finance leases related to manufacturing equipment, office equipment and vehicles. These leases have remaining lease terms ranging from 1 year to 8 years. Certain of the leases contain options to extend the term of the lease and certain of the leases contain options to terminate the lease within a specified period of time. These options to extend or terminate a lease are included in the lease term only when it is reasonably likely that the Company will elect that option. The Company is not a party to any material sublease arrangements.

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

Balance at December 31, 2019	$	(20,032	)	$	12		$	(4,045	)		$	(24,065	)
Other comprehensive loss before reclassifications		(1,568	)		(1	)		(37	)			(1,606	)
Amount reclassified from accumulated other comprehensive loss		-			-			169		(a)		169
Net current period other comprehensive income (loss)		(1,568	)		(1	)		132				(1,437	)

Balance at June 30, 2020	$	(21,600	)	$	11		$	(3,913	)		$	(25,502	)

(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 classification of the plan participants.

~~Return to Index~~14

~~The components of lease expense, which are included in cost of sales and selling, general and administrative expense, based on the underlying use of the ROU asset, were as follows:~~

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Amortization of ROU Assets - Finance Leases $ 33 $ 67
Interest on Lease Liabilities - Finance Leases 12 25
Operating Lease Cost (Cost resulting from lease payments) 1,978 3,969
Short-term Lease Cost 31 100
Variable Lease Cost (Cost excluded from lease payments) 61 121
Sublease Income - -
Total Lease Cost $ 2,115 $ 4,282

~~Supplemental cash flow information related to leases are as follows:~~

Six Months Ended June 30, 2019
Cash paid for amounts included in the measruement of lease liabilities:
Operating cash flows from operating leases $ 3,963
Operating cash flows from finance leases 25
Finance cash flows from finance leases 57
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 21,396
Finance leases -

~~Supplemental balance sheet information related to leases was as follows:~~

June 30, 2019
Operating Leases:
Operating lease right-of-use assets $ 17,885
Operating lease liability, current 6,238
Operating lease liability, long-term 12,121
Total operating lease liabilities 18,359

Finance Leases:
Property, plant and equipment, gross $ 894
Accumulated depreciation (202 )
Property, plant and equipment, net 692
Other current liabilities 120
Other long-term liabilities 626
Total finance lease liabilities $ 746

*13.*	~~June 30, 2019~~		COMMITMENTS AND CONTINGENCIES
~~Weighted-Average Remaining Lease Term:~~
~~Operating leases~~	~~3.65 years~~
~~Finance leases~~	~~5.82 years~~

~~Weighted-Average Discount Rate:~~
~~Operating leases~~		~~6.0~~	%
~~Finance leases~~		~~6.5~~	%

~~Return to Index~~

~~Our discount rate is based on our incremental borrowing rate, as adjusted based on the geographic regions in which our leases assets are located.~~

~~Maturities of lease liabilities were as follows as of June 30, 2019:~~

Year Ending Operating Finance
June 30, Leases Leases
2020 $ 7,204 $ 164
2021 5,549 163
2022 4,206 163
2023 2,440 163
2024 422 163
Thereafter 305 67
Total undiscounted cash flows 20,126 883
Less imputed interest (1,767 ) (137 )
Present value of lease liabilities $ 18,359 $ 746

~~As of June 30, 2019, the Company did not have any additional operating or financing leases that have not yet commenced.~~

~~13.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 condensed consolidated balance sheets at June 30, ~~2019~~2020 and December 31, ~~2018.~~

2019.

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.

~~Return to Index~~

~~14.SEGMENTS~~

14.

SEGMENTS

The Company operates in one industry with three reportable operating segments, which ~~are geographic in nature.~~represent the Company's three product groups and a corporate segment. The segments consist of ~~North America, Asia~~Cinch Connectivity Solutions, Power Solutions and ~~Europe.~~Protection, Magnetic Solutions and a Corporate segment. The primary criteria by which financial performance is evaluated and resources are allocated are ~~net sales~~revenue and ~~income from operations.~~gross profit. The following is a summary of key financial data:

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Net Sales to External Customers:
    North America $ 67,066 $ 71,240 $ 131,653 $ 130,696
    Asia 39,324 45,914 76,601 84,535
    Europe 21,026 23,556 44,551 43,730
$ 127,416 $ 140,710 $ 252,805 $ 258,961

Net Sales:
North America $ 69,450 $ 74,602 $ 136,923 $ 137,173
Asia 63,062 70,005 125,372 126,144
Europe 25,734 27,630 52,598 51,942
Less intercompany net sales (30,830 ) (31,527 ) (62,088 ) (56,298 )
$ 127,416 $ 140,710 $ 252,805 $ 258,961

Income from Operations:
North America $ 2,373 $ 2,963 $ 1,880 $ 2,661
Asia 270 5,319 1,283 5,234
Europe 2,310 2,385 4,604 3,209
$ 4,953 $ 10,667 $ 7,767 $ 11,104

~~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 (loss) from operations represents net sales less operating costs and expenses and does not include any amounts related to intercompany transactions.~~

	Three Months Ended June 30, 2020
	Cinch Connectivity			Power Solutions			Magnetic			Corporate
	Solutions			and Protection			Solutions			Segment		Total
Revenue	$	38,908		$	45,112		$	37,152		$	-		121,172
Gross Profit		11,531			10,615			9,445			178		31,769
Gross Profit %		29.6	%		23.5	%		25.4	%		nm		26.2	%

	Three Months Ended June 30, 2019
	Cinch Connectivity			Power Solutions			Magnetic			Corporate
	Solutions			and Protection			Solutions			Segment			Total
Revenue	$	42,536		$	44,028		$	40,852		$	-			127,416
Gross Profit		10,135			8,876			8,180			(445	)		26,746
Gross Profit %		23.8	%		20.2	%		20.0	%		nm			21.0	%

	Six Months Ended June 30, 2020
	Cinch Connectivity			Power Solutions			Magnetic			Corporate
	Solutions			and Protection			Solutions			Segment			Total
Revenue	$	78,007		$	81,289		$	65,853		$	-			225,149
Gross Profit		22,698			19,523			15,438			(779	)		56,880
Gross Profit %		29.1	%		24.0	%		23.4	%		nm			25.3	%

	Six Months Ended June 30, 2019
	Cinch Connectivity			Power Solutions			Magnetic			Corporate
	Solutions			and Protection			Solutions			Segment			Total
Revenue	$	86,897		$	86,800		$	79,108		$	-			252,805
Gross Profit		22,450			18,855			16,708			(533	)		57,480
Gross Profit %		25.8	%		21.7	%		21.1	%		nm			22.7	%

~~Return to Index~~15

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

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.

The Effects of COVID-19 on Bel’s Business

During the first half of 2020, the Company has focused heavily on the continued safety and well-being of its associates around the world in light of COVID-19. The majority of the products manufactured by Bel are utilized in military, medical and networking applications, and are therefore deemed essential by the various jurisdictions in which we operate. Our management team has been able to respond quickly in implementing our business continuity plans around the world. Significant protective measures were put in place throughout our facilities, including employee screenings, physical partitions, social distancing, use of face coverings, travel and visitor restrictions and work from home policies as we continue to service our customers. The majority of our office staff continues to work remotely to avoid a large number of associates being present in an office setting at any one time. With the significant increase in the number of staff working remotely, Bel's IT department took a variety of precautionary measures to protect the computer equipment that associates are utilizing in the remote environment. The combination of protective measures at our factories coupled with remote work arrangements have enabled us to maintain operations, including financial reporting systems, internal controls over financial reporting and disclosure controls and procedures.

Our financial results for the first six months of 2020 reflected the temporary facility closures at certain of our manufacturing locations, particularly in China, Mexico and the Dominican Republic, due to the outbreak of COVID-19 and the related disruption to our supply chain. This led to an estimated $14-$17 million of shipments scheduled for the first quarter which were ultimately shipped in the second quarter. The Company also incurred additional indirect COVID-19 related costs, including operational inefficiencies and employee retention programs at its manufacturing facilities in China in the first quarter, which were partially offset by $2.2 million of COVID-19 relief funding received from the Chinese government also during the first quarter.

All of our manufacturing sites are operating as of the filing date of this Quarterly Report. Although the majority of our factories in North America, Europe and Asia are currently at 90+% of their normal workforce levels, we are experiencing lower productivity and efficiency rates at certain sites in North America and Europe (estimated at 60-85%, depending on the impacted site) due to a reduced workforce at those sites. In addition, in order to comply with social distancing requirements, certain of our factory floors have been reconfigured to provide additional spacing in production lines, which has resulted in some inefficiencies related to product flow. Bel has also experienced higher freight costs for products typically shipped by air due to lower cargo capacity with the reduction in commercial air travel. While there are some delays within the supply chain in the movement of products related to border closures, to date such delays have not materially impacted our ability to operate our business or achieve our business goals. To date, we have not seen a significant reduction in demand for our products due to COVID-19, as many of our products support military, medical and networking applications, which generally have not been negatively impacted by COVID-19. However, approximately 5% of our revenue relates to products utilized in end markets that have been impacted by COVID-19, such as commercial aerospace.

Given the general uncertainty regarding the impact of COVID-19 on our manufacturing capability and on our customers, we are unable to quantify the ultimate impact of COVID-19 on our future results at this time.

Based on our analysis of ASC 350 and ASC 360 during the six months ended June 30, 2020, we are currently not aware of any material impairments of our goodwill, indefinite-lived intangible assets or finite-lived assets. The Company will continue to assess the relevant criteria on a quarterly basis based on updated cash flow and market assumptions. Unfavorable changes in cash flow or market assumptions could result in impairment of these assets in future periods.

As our operations have continued, albeit at slightly reduced production and efficiency rates, we have not experienced a negative impact on our liquidity to date. Our balance of cash on hand continues to be strong at $75.3 million at June 30, 2020 as compared to $72.3 million at December 31, 2019, despite a voluntary debt payment of $8.2 million made during the first quarter. Our cash balance on hand as of July 31, 2020 was $78.5 million. The Company also has availability under its current revolving credit facility; as of June 30, 2020, the Company could borrow an additional $44.8 million while still being in compliance with its debt covenants. However, any further negative impact to our financial results related to COVID-19 would have a related negative impact on our financial covenants outlined in our credit agreement, which would impact the amount available to borrow under our revolving credit facility. In order to assist with maintaining our liquidity position, the Company implemented several measures during the first quarter, including the deferral of employer social security taxes under the federal CARES Act, restrictions on new hires, suspension of salary reviews, the elimination of all business travel and restrictions on spending related to capital expenditures. During the three and six months ended June 30, 2020, travel expenses incurred by the Company were $0.7 million and $0.9 million lower, respectively, than the comparable periods of 2019. Management has developed Phase 2 and Phase 3 of the Company’s cash conservation/cost savings plan which would be implemented in the event our liquidity position or financial results become materially impacted by COVID-19.

Our statements regarding the future impact of COVID-19 represent Forward-Looking Statements. See “Cautionary Notice Regarding Forward-Looking Information.”

Other Key Factors Affecting our Business

The Company believes that, in addition to COVID-19, the key factors affecting Bel’s results for the six months ended June 30, ~~2019~~2020 and/or future results include the following:

•

Revenues – The Company’s revenues decreased by ~~$6.2~~$27.7 million (or ~~2.4%~~10.9%) in the first ~~half~~six months of ~~2019~~2020 as compared to the same period of ~~2018.~~ 2019. The ~~sales~~ decline was seen across all of our major product groups and was largely due to ~~an over-inventoried supply channel~~lower product demand from our commercial aerospace and cloud customers, in addition to temporary closures and lower efficiency levels at certain of our ~~customers and distributors following~~factories during the ~~high volume~~first half of ~~purchases in 2018 in advance of the tariffs that went into effect in 2019.~~ 2020 due to COVID-19.

•

Backlog – Our backlog of orders amounted to ~~$150.9~~$179.6 million at June 30, ~~2019, a decline~~2020, an increase of ~~$20.3~~$19.3 million, or 12%, from December 31, ~~2018.~~2019. Since year-end, we saw ~~an 8%~~a 63% increase in the backlog for our ~~Connectivity~~Magnetic Solutions products, primarily driven by additional orders from ~~our military customers.~~a large networking customer. The backlog of orders for our Power Solutions and Protection products ~~declined~~increased by ~~17% and backlog~~15% due to increased demand across the majority of our power product lines. Backlog for our ~~Magnetic~~Connectivity Solutions products was down ~~29%~~14% from the 2019 year-end ~~2018 levels. Order volumes were~~levels, primarily due to lower ~~in the first half of 2019 as a result of slowdowns in certain markets coupled with customers working down heighted inventory levels which had been built up in response to new product launches~~demand from our direct and ~~the tariffs that went into effect in 2018 and 2019.~~after-market commercial aerospace customers.

•

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 of our three product groups. Our power products have a higher bill of materials and are impacted to a greater extent by changes in material costs. As our magnetic solutions products are more labor intensive, ~~and are therefore less profitable than the connectivity products and our power~~margins on these products are onimpacted to a greater extent by minimum wage increases in the ~~lower end of our profit margin range, due to their high material content.~~PRC and fluctuations in foreign exchange rates between the U.S. Dollar and the Chinese Renminbi. Fluctuations in ~~sales~~revenue volume among our product groups will have a corresponding impact on Bel’s profit margins. As compared to the first half of 2019, Connectivity Solutions revenues were down 10.2% in the first half of 2020, Power Solutions and Protection revenues were down 6.5% and Magnetic Solutions revenues were down 16.6%.

~~Return to Index~~

•

Pricing and Availability of Materials – ~~While material cost~~The inventory of resistors and ~~availability for certain components have started to ease, the higher raw material costs which were in place during 2018, particularly related to resistors,~~ capacitors acquired by Bel and ~~mosfets, are still running through our~~its supply chain ~~as we ship~~in 2018 at higher prices have been worked through and new prices for these materials are significantly less than the ~~balance of our inventory on hand from 2018.~~2018 costs. Lead times continue to be extended for certain mosfets and costs for those components remain elevated. As a result, the Company’s material costs as a percentage of ~~sales increased~~revenue decreased slightly to 43.5% during the first six months of 2020 from 43.8% during the ~~first half~~same period of ~~2019 from 41.4% during the first half of 2018.~~ 2019.

•

Labor Costs – Labor costs decreased from ~~11.4%~~11.0% of ~~sales~~revenue during the first ~~half~~six months of ~~2018~~2019 to ~~11.0%~~9.7% of ~~sales~~revenue during the ~~first half~~same period of ~~2019,~~2020, as a more favorable exchange rate environment in ~~2019~~2020 related to the Mexican Peso and Chinese Renminbi ~~offset~~outweighed the ~~overall~~ impact of minimum wage increases ~~in Mexico~~ which went into effect ~~on January 1, 2019 as well as minimum wage increases~~at two of our factories in the PRC ~~which went into effect in the first~~effective March 1, 2020 and ~~third quarters of 2018.~~May 1, 2020.

•

Restructuring – The Company continues to implement restructuring programs to increase operational efficiencies and incurred ~~$1.4~~$0.2 million in restructuring costs during the first six months of 2020. Actions implemented in 2019 related to our Power Solutions and Protections and Magnetic Solutions segments are expected to yield incremental annualized cost savings of $5.7 million. Of this amount, $1.7 million was realized in 2019, and $1.4 million and $2.9 million were realized during the three and six months ended June 30, 2020, respectively, with $1.1 million to be realized in the second half of ~~2019.~~ ~~During~~2020. Additionally, during the second quarter of 2020, Bel initiated the ~~Company completed the realignment~~closure of its Power R&D ~~resources dedicated to its Power Solutions and Protection group and substantially completed the transition of manufacturing and warehousing operations from its Inwood, New York~~ facility ~~to other existing Bel facilities. The R&D and Inwood initiatives combined are expected~~in Uster, Switzerland. This closure is anticipated to result in annualized cost savings of ~~$2.1~~$3.0 million, ~~beginning in the third quarter of 2019. We further identified and have started~~with expected savings to ~~implement measures at certain facilities in Asia that are expected to result in annualized cost savings of $1.4 million~~be realized beginning in the fourth quarter of ~~2019. Incremental~~2020. The Company also implemented temporary cost reduction measures ~~are expected~~within its Cinch Connectivity Solutions segment during the first half of 2020 in order to ~~follow throughout~~align its cost structure with its current level of revenue. These scalable manufacturing costs, which resulted in estimated cost savings of $1.7 million and $3.0 million during the ~~third~~three and ~~fourth quarters of 2019~~six months ended June 30, 2020, respectively, will increase as demand from our ~~remaining sites are reviewed.~~ commercial aerospace customers recovers. The Company continues to implement its corporate-wide cost savings program to look at all areas for improvements. The preceding sentences represent Forward-Looking Statements. See “Cautionary Notice Regarding Forward-Looking Information.”

•

Impact of Foreign Currency – During the first six months of ~~2019, the Company experienced lower~~2020, labor and overhead costs were $1.6 million lower than the same period of ~~$3.2 million related~~2019 due to a favorable ~~fluctuations in~~foreign exchange ~~rates versus 2018, partially offset by~~environment. The Company also realized foreign exchange transactional losses ~~realized~~ of less than $0.1 ~~million.~~million during the six months ended June 30, 2020. 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 favorably impacted by transactional foreign exchange gains in the first ~~half~~six months of ~~2019~~2020 due to the depreciation of the Peso, Euro, Pound, and Renminbi against the U.S. dollar as compared to exchange rates in effect during ~~2018.~~2019. The Company has significant manufacturing operations located in Mexico and 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~~$1.6 million lower in the first ~~half~~six months of ~~2019~~2020 as compared to the same period of ~~2018.~~2019. During the second quarter of 2020, the Company entered into forward contracts to secure a favorable exchange rate related to the Peso through December 31, 2020 for a portion of Bel's expected Peso obligations for the remainder of the year. The Company monitors changes in foreign currencies and may implement further 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~~jurisdiction in which our pretax profits are earned. Of the geographic ~~segments~~jurisdictions in which we operate, the U.S.'s and Europe’s tax rates are generally equivalent; and Asia has the lowest tax rates of the Company’s three geographical ~~segments.~~jurisdictions. See Note 9,10, “Income Taxes”.

~~After record bookings throughout 2018,~~

Visibility is limited as we enter the ~~Company has experienced slower bookings during the first~~second half of ~~2019 as customers work through their inventory on hand. The Company experienced margin pressure during~~ the ~~second quarter of 2019~~year due to ~~lower sales volumes~~the continued uncertainty around COVID-19, and ~~high material costs from 2018 which~~its potential impact on the operations of Bel, its customers and its suppliers globally. Bel's management team will continue to ~~run through~~take meaningful steps toward improving our profitability. Further restructuring efforts and related incremental cost savings are expected to continue over the ~~Company’s statement~~next 18 months as we further rationalize our operational footprint and complete the implementation of ~~operations. As a result~~our new ERP system. We remain focused on bottom line growth, and will continue the process of ~~these ongoing factors, the Company expects the balance~~re-evaluating our customer base and product portfolio to ensure our resources are supporting those customers and products that align with our goal of ~~2019 to remain challenging from both a sales and margin perspective.~~improved profitability. The preceding ~~sentence represents a~~sentences represent Forward-Looking ~~Statement.~~Statements. See “Cautionary Notice Regarding Forward-Looking Information.”

Summary by Operating Segment

~~Net sales to external customers~~

Revenue

The Company’s revenue by operating segment for the three and six months ended June 30, ~~2019~~2020 and ~~2018~~2019 were as follows:

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
    North America $ 67,066 53 % $ 71,240 50 % $ 131,653 52 % $ 130,696 50 %
    Asia 39,324 31 % 45,914 33 % 76,601 30 % 84,535 33 %
    Europe 21,026 16 % 23,556 17 % 44,551 18 % 43,730 17 %
$ 127,416 100 % $ 140,710 100 % $ 252,805 100 % $ 258,961 100 %

~~Return to Index~~

Sales declines in our North America segment during the second quarter of 2019 reflected lower sales into our distribution channel as our distribution partners continue to work down their level of inventory on hand.

	Three Months Ended										Six Months Ended
	June 30,										June 30,
	Revenue				Gross Margin						Revenue				Gross Margin
	2020		2019		2020			2019			2020		2019		2020			2019
Connectivity solutions	$	38,908	$	42,536		29.6	%		23.8	%	$	78,007	$	86,897		29.1	%		25.8	%
Magnetic solutions		37,152		40,852		25.4	%		20.0	%		65,853		79,108		23.4	%		21.1	%
Power solutions and protection		45,112		44,028		23.5	%		20.2	%		81,289		86,800		24.0	%		21.7	%
	$	121,172	$	127,416		26.2	%		21.0	%	$	225,149	$	252,805		25.3	%		22.7	%

Connectivity Solutions:

Sales of our ~~connector~~Connectivity Solutions products ~~into military applications were also lower~~declined $3.6 million and $8.9 million during the ~~second~~three and six months ended June 30, 2020, respectively, as compared to the same periods of 2019. These declines were primarily due to lower demand from direct and after-market commercial aerospace customers, partially offset by higher demand for our military products in the first half of 2020 as compared to the first half of 2019. This shift in product mix along with the operational cost reductions detailed in the "Restructuring" section above have resulted in improved gross margins for the three and six month periods of 2020 as compared to the same periods of 2019.

Magnetic Solutions:

Sales of our Magnetic Solutions products were down $3.7 million and $13.3 million during the three and six months ended June 30, 2020, respectively, as compared to the same periods of 2019. As the majority of our manufacturing of Magnetic Solutions products is in the PRC, our ability to manufacture product was temporarily impacted during the first quarter of ~~2019~~2020 due to the factory closures associated with COVID-19, which contributed to the decline in sales for the first half of 2020 as compared to the same period of ~~2018, impacting~~2019. There were improvements in both the levels of productivity and customer demand for our ~~North America and European segment sales. Sales in our Asia segment~~ICM products in the second quarter of 2020 as compared to the first quarter of 2020, while demand remained below that of the second quarter 2019 levels. The gross margin improvement in the 2020 periods presented above versus the comparable 2019 periods was largely the result of restructuring measures implemented in late 2019 and a shift in product mix within the Magnetic Solutions segment.

Power Solutions and Protection:

Sales of our Power Solutions and Protection products were ~~down versus 2018~~ $1.1 million higher in the second quarter of 2020 compared to the same quarter of 2019, while sales were $5.5 million lower for the first half of 2020 as compared to the same period of 2019. The CUI business, which was acquired in December 2019, contributed sales of $10.6 million and $18.9 million during the three and six months ended June 30, 2020, respectively, at a gross margin of 39.3% and 38.2%, respectively. Sales of our Bel Power Solutions products decreased by $9.0 million and $20.9 million during the three and six months ended June 30, 2020, respectively, as compared to the same periods of 2019. These declines were due in part to factory closures in China following the Lunar New Year holiday in connection with COVID-19, in addition to lower demand from a Cloud customer due to tariffs imposed on our product. Our DC/DC power products were also $1.4 million and $2.6 million lower during the three and six months ended June 30, 2020, respectively, as compared to the same periods last year. The gross margin expansion noted for the 2020 periods above as compared to the 2019 periods is largely due to the inclusion of higher-margin CUI sales in addition to cost savings that resulted from restructuring efforts implemented in the latter half of 2019.

Cost of Sales

Cost of sales as a ~~result~~percentage of ~~customers working down heighted inventory levels which had been built up during 2018 in response to new product launches and the tariffs that went into effect in 2018 and 2019.~~

~~Net sales and income from operations by operating segment~~revenue for the three and six months ended June 30, 2020 and 2019 ~~and 2018 were as follows. Segment net sales are attributed to individual segments based on the geographic source~~consisted of the ~~billing for customer sales.~~

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Total segment sales:
     North America $ 69,450 $ 74,602 $ 136,923 $ 137,173
     Asia 63,062 70,005 125,372 126,144
     Europe 25,734 27,630 52,598 51,942
Total segment sales 158,246 172,237 314,893 315,259
Reconciling item:
     Intersegment sales (30,830 ) (31,527 ) (62,088 ) (56,298 )
Net sales $ 127,416 $ 140,710 $ 252,805 $ 258,961

Income from operations:
    North America $ 2,373 $ 2,963 $ 1,880 $ 2,661
    Asia 270 5,319 1,283 5,234
    Europe 2,310 2,385 4,604 3,209
$ 4,953 $ 10,667 $ 7,767 $ 11,104

Income from operations declined across all segments during the second quarter of 2019 as compared with the same quarter of 2018 primary due to lower sales volume. Our Asia segment was also impacted by $0.4 million of restructuring charges during the second quarter of 2019. During the first half of 2019, income from operations for our North America segment was unfavorably impacted by $0.9 million of restructuringfollowing:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Material costs		43.4	%		45.7	%		43.5	%		43.8	%
Labor costs		10.5	%		10.6	%		9.7	%		11.0	%
Other expenses		19.9	%		22.7	%		21.5	%		22.4	%
Total cost of sales		73.8	%		79.0	%		74.7	%		77.2	%

The fluctuations in material costs ~~associated with the transition of manufacturing~~ and ~~warehouse operations from our Inwood, New York facility to other existing Bel facilities, and higher~~ labor costs ~~in Mexico due to an increase in minimum wage rates which went into effect on January 1, 2019.~~

~~Net Sales~~

~~The Company’s net~~as a percentage of sales ~~by major product line for~~during the three and six months ended June 30, 2020 compared to the same periods in 2019 ~~and 2018~~ were ~~as follows:~~

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Connectivity solutions $ 42,536 33 % $ 48,928 35 % $ 86,897 35 % $ 91,846 35 %
Magnetic solutions 40,852 32 % 45,548 32 % 79,108 31 % 83,776 33 %
Power solutions and protection 44,028 35 % 46,234 33 % 86,800 34 % 83,339 32 %
$ 127,416 100 % $ 140,710 100 % $ 252,805 100 % $ 258,961 100 %

~~Connectivity Solutions:~~

~~Sales of our connectivity solutions products during the second quarter of 2019 declined $6.4 million~~ primarily due to ~~lower demand~~a shift in classification of certain outsourced manufacturing from ~~military customers during~~labor costs to material costs in connection with the quarter, and reduced volume of product flowing through our distribution channels as our distribution partners continue to work down inventory levels that had been built up in 2018 ahead of the tariffs. These factors also impacted the six-month period ended June 30, 2019, which declined $4.9 million from the same period of 2018, partially offset by higher sales to aerospace customers during the first quarter of 2019.

~~Return to Index~~

~~Magnetic Solutions:~~

~~Sales~~transition of our ~~magnetic products during~~TRP business onto the ~~second quarter~~new ERP system effective January 1, 2020. As such, material costs and ~~first half~~labor costs should be viewed on a combined basis when comparing to the prior year period. In the aggregate, these variable costs decreased from 56.3% of ~~2019 were down $4.7 million from the same periods of 2018 while inventory levels built up in advance of a new program launch during 2018 are worked through.~~

~~Power Solutions and Protection:~~

~~Sales of our power solutions and protection products were $2.2 million lower~~revenue in the second quarter of 2019 ~~compared~~ to ~~the same quarter~~53.9% of 2018. Sales of our Bel Power Solutions products into datacenter applications decreased by $1.9 million and sales of our Custom Module products were $0.8 million lower as compared to last year’s second quarter. These decreases were partially offset by a $0.8 million increaserevenue in ~~sales of our DC/DC power products.~~ Sales during the six-month period ended June 30, 2019 increased by $3.5 million from the same period of 2018, as stronger sales into datacenter applications during the first quarter of 2019 lessened the impact of the second quarter ~~declines on~~of 2020 and from 54.8% in the ~~six-month period.~~

~~Cost of Sales~~

~~Cost of sales as a percentage of net sales for the three and six months ended June 30, 2019 and 2018 consisted of the following:~~

Three Months Ended Six Months Ended
June 30, June 30,
2019 2018 2019 2018
Material costs 45.7 % 41.9 % 43.8 % 41.4 %
Labor costs 10.6 % 11.5 % 11.0 % 11.4 %
Research and development expenses 5.4 % 5.2 % 5.6 % 5.7 %
Other expenses 22.7 % 20.8 % 22.4 % 22.1 %
Total cost of sales 84.4 % 79.4 % 82.8 % 80.6 %

~~Material costs as a percentage of sales continued to increase during the second quarter and~~ first half of 2019 ~~compared~~ to 53.2% in the ~~same periods~~first half of ~~2018~~2020. These reductions were primarily due to the industry-wide supply constraints related to certain of our purchased components during 2018. The finished goods shipped during the second quarter of 2019 still contained some of the higher-cost rawa reduction in material ~~components.~~

~~Labor~~ costs ~~as a percentage of sales also declined during the second quarter~~ and ~~first six months of 2019 compared to the same periods of 2018 as~~ a more favorable exchange rate environment related to the Chinese Renminbi and Mexican Peso, which resulted in lower labor costs. This was partially offset ~~the overall impact of~~by PRC government-mandated minimum wage increases in ~~the PRC and Mexico. The PRC government increased the minimum wage in~~two of the regions where Bel’s factories are located ~~in February~~effective March 1, 2020 and ~~July of 2018. Furthermore, the minimum wage rates in Mexico increased effective January~~May 1, ~~2019 which also drove labor costs higher in the second quarter and first half of 2019.~~

Included in cost of sales is research and development (“R&D”) expense of $6.9 million and $7.4 million for the three months ended June 30, 2019 and 2018, respectively, and $14.0 million and $14.7 million for the six months ended June 30, 2019 and 2018, respectively. The lower R&D expenses in 2019 as compared to the respective 2018 periods is largely reflective of cost savings related to the realignment of our Power Solutions R&D resources earlier in 2019.

2020.

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 decreased during the three and six months ended June 30, ~~2019~~2020 by ~~$0.2~~$4.8 million and ~~$0.5~~$8.4 million, respectively, as compared to the same periods of ~~2018,~~2019. These declines primarily related cost savings from restructuring measures and other operational cost reductions noted in the "Restructuring" section above. The costs during the first half of 2020 were also reduced by $2.2 million related to subsidies received during the first quarter from the Chinese government to offset costs and inefficiencies incurred due to the temporary closures of our factories in China in connection with COVID-19.

Research and Development ("R&D") Expense:

R&D expense amounted to $6.1 million and $6.9 million for the three months ended June 30, 2020 and 2019, respectively, and $12.2 million and $14.0 million for the six months ended June 30, 2020 and 2019, respectively. The lower ~~depreciation~~R&D expenses in 2020 as compared to the same periods 2019 is largely reflective of cost savings related to the realignment of our Power Solutions R&D implemented in 2019 and ~~amortization expense~~a more favorable foreign exchange rate environment in the ~~2019 periods.~~

2020 periods as compared to the rates in effect during 2019.

Selling, General and Administrative Expense (“SG&A”)

SG&A expenses were ~~$18.8~~$18.1 million, ~~up $0.5~~down $1.2 million from the second quarter of ~~2018. Included within~~2019. Lower travel expenses of $0.7 million, a reduction in ERP costs of $0.4 million and savings from other cost containment efforts outweighed the $1.9 million of incremental SG&A expenses ~~is a foreign exchange gain of $0.5 million in~~associated with the ~~second quarter of 2019 compared to a foreign exchange gain of $1.9 million in the second quarter of 2018. Excluding the effects of foreign exchange gains,~~recently-acquired CUI business. SG&A expense ~~was down~~also included a gain on the cash surrender value of COLI policies of $1.0 million in the second quarter of ~~2019 as~~2020 compared to a gain on these policies of $0.2 million in the ~~same period~~second quarter of ~~2018, led by reductions~~2019.

SG&A expenses were $40.1 million, up $1.7 million from the first half of 2019. A reduction in ERP costs of ~~$0.5~~$1.4 million, lower travel expenses of $0.9 million and ~~sales and marketing expenses~~savings from other cost containment efforts partially offset the $4.1 million of ~~$0.3 million from last year’s second quarter.~~

incremental SG&A expenses ~~were $38.6 million, down from $39.0~~associated with the recently-acquired CUI business. SG&A expense also included a loss on the cash surrender value of COLI policies of $0.4 million in the first half of ~~2018. Factors contributing~~2020 compared to ~~the lower SG&A expense in the 2019 period were lower legal and professional fees and~~ a ~~reduction in sales and marketing expenses from the 2018 period. These reductions were partially offset by a $1.0 million unfavorable swing in foreign exchange rates (a loss~~gain on these policies of ~~$0.1~~$0.8 million in the first half of ~~2019 compared to a foreign exchange gain of $0.9 million in the first half of 2018).~~

~~Return to Index~~

2019.

Provision for Income Taxes

The Company’s effective tax rate will fluctuate based on the geographic ~~segment~~jurisdiction in which the pretax profits are earned. Of the geographic ~~segments~~jurisdictions in which the Company operates, the U.S.'s and Europe’s tax rates are generally equivalent; and Asia has the lowest tax rates of the Company’s three geographical ~~segments.~~jurisdictions. See Note 9,10, “Income Taxes”.

The provision for income taxes for the three months ended June 30, ~~2019~~2020 and ~~2018~~2019 was $0.4 ~~million and $2.4 million, respectively.~~million. The Company’s earnings before income taxes for the three months ended June 30, ~~2019,~~2020, were approximately ~~$5.6~~$2.6 million ~~lower~~higher than the same period in ~~2018,~~2019, primarily attributable to ~~lower earnings~~an increase in the income from the Asia ~~and Europe segments.~~segment. The Company’s effective tax rate was ~~12.4%~~7.1% and ~~26.6%~~12.4% for the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The change in the effective tax rate during the three months ended June 30, ~~2019~~2020 as compared to the same period in ~~2018,~~2019, is primarily attributable to ~~a decrease in~~the impact of permanent differences on U.S. ~~taxes relating to income from foreign subsidiaries taxed in the U.S. as part of the~~ ~~Tax Cuts and Jobs Act~~.tax exempt activities. See Note 9,10, “Income Taxes.”

The (benefit) provision for income taxes for the six months ended June 30, 2020 and 2019 ~~and 2018~~ was ~~$0.5~~($0.3) million and ~~$2.7~~$0.5 million, respectively. The Company’s earnings before income taxes for the six months ended June 30, ~~2019~~2020, were approximately ~~$3.5~~$3.1 million lower than the same period in ~~2018,~~2019, primarily attributable to ~~lower earnings~~a decrease in the ~~Asia~~income from the North America and Europe ~~segment.~~segments. The Company’s effective tax rate was ~~10.1%~~(24.6%) and ~~33.8%~~10.1% for the ~~six-month periods~~six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The change in the effective tax rate during the six months ended June 30, ~~2019~~2020 as compared to the same period ~~of 2018,~~in 2019, is primarily attributable to ~~a decrease in U.S. taxes~~tax benefits relating to ~~income from foreign subsidiaries taxed in~~ the ~~U.S. as part~~reversal of valuation allowances and the ~~Tax Cuts and Jobs~~federal tax law changes for the CARES Act, ~~and~~ offset by the impact of permanent differences on U.S. tax exempt activities.

See Note 10, “Income Taxes.”

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.

At June 30, ~~2019~~2020 and December 31, ~~2018, $37.6~~2019, $37.5 million and ~~$46.3~~$29.1 million, respectively (or ~~64%~~50% and ~~86%~~40%, respectively), of cash and cash equivalents was held by foreign subsidiaries of the Company. During the first ~~half~~six months of ~~2019,~~2020, the Company repatriated ~~$10.0~~$5.0 million of funds from outside of the U.S., with minimal incremental tax liability, and completed an intercompany loan from one of the Company’s foreign subsidiaries to its U.S. parent entity during the second quarter. Management has current intentions to repatriate an additional $5.0 million of funds from outside of the U.S., with a minimal incremental tax liability, by the end of 2019 with the intent of reducing our outstanding debt balance. The preceding sentence represents a Forward-Looking Statement. See “Cautionary Notice Regarding Forward-Looking Information."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 ~~31.7%~~33.3% of the Company’s total assets at June 30, ~~2019~~2020 and ~~32.9~~%31.6% of total assets at December 31, ~~2018.~~2019. The Company’s current ratio (i.e., the ratio of current assets to current liabilities) was 3.2 to 1 at June 30, ~~2019~~2020 and ~~2.7~~3.1 to 1 at December 31, ~~2018.~~

2019.

In June 2014, the Company entered into a senior Credit and Security Agreement, which was subsequently amended in December 2014, 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~~Company's consolidated EBITDA, as defined (“("Leverage ~~Ratio”~~Ratio"), and (ii) the ratio of the amount of the ~~Company’s~~Company's consolidated EBITDA to the ~~Company’s~~Company's consolidated fixed charges (“("Fixed Charge Coverage ~~Ratio”~~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 30, 2019,~~On February 18, 2020, the Company further amended its credit agreement whereby the Company voluntarily prepaid a portion of its term loan under the credit agreement in the amount of $8.2 million. The amendment also served to modify the interest rate and fees applicable to the loans under the credit agreement and changes certain covenants related to matters including acquisitions, share repurchases and financial ratios.

The Company was in compliance with its debt covenants as of June 30, 2020, including its most restrictive covenant, the Fixed Charge Coverage Ratio. The unused credit available under the credit facility at June 30, ~~2019~~2020 was ~~$75.0~~$43.0 million, of which we had the ability to borrow ~~$37.1~~$44.8 million without violating our Leverage Ratio covenant based on the ~~Company’s~~Company's existing consolidated EBITDA.

We are currently engaged in a multi-year process of conforming the majority of our operations onto one global 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 ~~units~~unit on a three-phase approach through 2020. We currently estimate total costs over the course of this system implementation to be approximately $6.9 million. The preceding sentence represents a Forward-Looking Statement. See “Cautionary Notice Regarding Forward-Looking Information.”early 2021. Since inception of the project, we have incurred costs in a cumulative amount of ~~$6.5~~$7.0 million in connection with this implementation, of which $0.4 million and $1.4 million ~~in implementation costs~~ was incurred ~~during~~in the ~~three~~second quarter and ~~six months ended June 30,~~first half of 2019, ~~respectively.~~respectively, with no additional costs incurred in the second quarter or first half of 2020. These costs are included in SG&A on the ~~condensed~~ consolidated financial statements. The first phase of the ERP implementation project was completed in the first quarter of 2019 with the Power Solutions business going live on the new system effective January 1, 2019. ~~In relation to this~~The second phase of the project was completed in the first ~~phase completed, we started realizing annualized~~quarter of 2020 with the TRP business going live on the new system effective January 1, 2020. To date, we've achieved annual cost savings on ERP licensing fees of approximately ~~$1.3~~$2 million within SG&A expense which were largely realized starting in ~~the second quarter of~~ 2019. We anticipate completing this project with in-house resources by early 2021, with no further outside consulting costs. The preceding sentence represents a Forward-Looking Statement. See ~~“Cautionary~~"Cautionary Notice Regarding Forward-Looking Information.”

~~Return~~"

Cash Flows

Six Months Ended June 30, 2020

During the six months ended June 30, 2020, the Company’s cash and cash equivalents increased by $3.0 million. This increase was primarily due to ~~Index~~

~~Cash Flows~~

the following:

	•	net cash provided by operating activities of $16.8 million; partially offset by
	•	purchases of property, plant and equipment of $3.0 million;

•

dividend payments of $1.6 million; and

•

repayments of long-term debt of $8.2 million.

During the six months ended June 30, 2020, accounts receivable increased by $2.5 million primarily due to higher sales during the second quarter of 2020 as compared to the fourth quarter of 2019. Days sales outstanding (DSO) improved slightly to 59 days at June 30, 2020 as compared to 60 days at December 31, 2019. Inventory decreased by $1.9 million at June 30, 2020 compared to December 31, 2019. Inventory turns were 3.6 at each June 30, 2020 and December 31, 2019.

Six Months Ended June 30, 2019

During the six months ended June 30, 2019, the Company’s cash and cash equivalents increased by $4.5 million. This increase was primarily due to the following:

•

net cash provided by operating activities of $7.8 million; and

•

proceeds from the sale of property, plant and equipment of $5.8 million; partially offset by

•

purchases of property, plant and equipment of $5.3 million;

•

dividend payments of $1.6 million; and

•

repayments of long-term debt of $1.5 ~~million~~million.

During the six months ended June 30, 2019, accounts receivable decreased by $7.7 million primarily due to lower sales during the second quarter of 2019 as compared to the fourth quarter of 2018. Days sales outstanding (DSO) increased slightly to 60 days at June 30, 2019 from 59 days at December 31, 2018. Inventory decreased by $1.8 million at June 30, 2019 compared to December 31, 2018. Inventory turns were 3.6 at June 30, 2019 as compared to 3.7 at December 31, 2018.

~~Six Months Ended June 30, 2018~~

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

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

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

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

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

During the six months ended June 30, 2018, accounts receivable increased by $10.5 million primarily due to higher sales volume in the second quarter of 2018 as compared to the fourth quarter of 2017. Days sales outstanding (DSO) declined to 58 days at June 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. Excluding the adoption adjustment related to this accounting change, inventory increased by $10.6 million at June 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 at June 30, 2018, primarily due to the change in revenue recognition accounting noted above.

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.

~~Return to Index~~21

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~~six months of ~~2019,~~2020, the U.S. Dollar was stronger against most other currencies in which the Company pays its expenses. In comparing average exchange rates during the first ~~half~~six months of ~~2019~~2020 versus those during the ~~first half~~same period of ~~2018,~~2019, the Euro depreciated by 7%2%, the Pound depreciated by 6%2%, the Peso depreciated by 1%11% and the Renminbi depreciated by 6%3% against the U.S. ~~Dollar~~.Dollar. The Company estimates that the depreciation in these foreign currencies led to lower operating costs of ~~$3.2~~$1.6 million during the first half of 2020 as compared to the same period of 2019, as the majority of ~~our~~the Company's expenses in the PRC, Europe and Mexico are paid in local currency. ~~This offset the foreign~~Foreign exchange ~~loss~~losses were also recognized in the first ~~half~~six months of ~~2019~~2020 of less than $0.1 million on translation of local currency balance sheet accounts to the U.S. Dollar in consolidation, resulting from foreign currency fluctuations since December 31, ~~2018.~~2019. During the second quarter of 2020, the Company entered into forward contracts to secure a favorable exchange rate related to the Peso through December 31, 2020 for a portion of Bel's expected Peso obligations for the remainder of the year. The Company monitors changes in foreign currencies and may implement further pricing actions to help mitigate the impact that changes in foreign currencies may have on its consolidated operating results. 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, ~~2018~~2019 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.

Changes in internal controls over financial reporting: There were no significant changes in the Company’s internal controls over financial reporting that occurred during the Company’s last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. Other Information

Item 1.Legal Proceedings

The information called for by this Item is incorporated herein by reference to Note 13, "Commitments and Contingencies" of the Company’s Condensed Consolidated 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~~

The risks described below, in addition to those described in Part I, Item 1A, ~~“Risk~~"Risk Factors,”" of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019, should be carefully considered before making an investment decision. These are the risk factors that we consider to be the most significant risk factors, but they are not the only risk factors that should be considered in making an investment decision. This Form 10-Q also contains Forward-Looking Statements that involve risks and uncertainties. See the "Cautionary Notice Regarding Forward-Looking Information," above. Our business, consolidated financial condition and consolidated results of operations could be materially adversely affected by any of the risk factors described, under "Cautionary Notice Regarding Forward-Looking Information" or with respect to specific Forward-Looking Statements presented herein. The trading price of our securities could decline due to any of these risks, and investors in our securities may lose all or part of their investment. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also materially adversely affect our business in the future. 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.

~~Return~~

Our global operations and demand for our products face risks related to ~~Index~~health epidemics such as the coronavirus.

Any outbreaks of contagious diseases and other adverse public health developments in countries where we operate could have a material and adverse effect on our business, consolidated financial condition and consolidated results of operations. In January 2020, the outbreak of COVID-19 was first identified and had an unfavorable impact on our four largest manufacturing facilities, which are located in China, throughout the first quarter of 2020. Travel restrictions imposed by the local governmental authorities to control the spread of the virus resulted in an extended closure of our facilities in China over the Lunar New Year holiday, with the return of workers delayed after the holiday break. By March 9, 2020, our overall worker return rate at our China facilities was approximately 85%. Our suppliers, customers and our customers’ contract manufacturers have been similarly impacted, and many are also currently operating at less than full capacity. Throughout the second quarter of 2020, many of the jurisdictions in which we operate within North America and Europe had mandated shelter-in-place orders, with the exception of essential businesses. As of the filing date of this Quarterly Report, all of the Company's manufacturing sites were open, with certain locations at reduced workforce levels due to local government mandates. As the status of the COVID-19 outbreak continues to be uncertain particularly in the U.S. and Europe, additional Bel facilities could become negatively impacted. In addition, COVID-19 has adversely affect the economies and financial markets of many countries, resulting in an economic downturn that has affected demand for certain of our end customers’ products. The extent to which COVID-19 will impact our business and our consolidated financial results will depend on future developments which are highly uncertain and cannot be predicted at the time of the filing of this Quarterly Report on Form 10-Q.

Our high level of indebtedness could negatively impact our access to the capital markets and our ability to satisfy financial covenants under our existing credit agreement.

We incurred substantial amounts of indebtedness to fund the acquisitions of Power Solutions and Connectivity Solutions in 2014, and CUI in December 2019, and we may need to incur additional indebtedness to finance operations or for other general corporate purposes in the future. Our consolidated principal amount of outstanding indebtedness was $136.8 million at June 30, 2020, resulting in a leverage ratio of 3.45x adjusted EBITDA, as calculated in accordance with our credit agreement (as compared to the maximum leverage ratio of 5.00x as noted in our amended credit agreement). As of June 30, 2020, our fixed charge coverage ratio was 1.50x, as calculated in accordance with our credit agreement (as compared to the minimum fixed charge coverage ratio of 1.05x). Pursuant to the terms of our amended credit agreement, the leverage ratio will step down to 4.75x effective September 30, 2020, to 4.00x effective December 31, 2020, to 3.25x effective March 31, 2021 and to 3.00x effective June 30, 2021 and thereafter. The fixed charge coverage ratio will step up to 1.10x effective September 30, 2020, to 1.15x effective December 31, 2020 and to 1.25x effective March 31, 2021 and thereafter. Our U.S. debt service requirements are significant in relation to our U.S. revenue and cash flow. This leverage exposes us to risk in the event of downturns in our business, in our industry or in the economy generally, and may impair our operating flexibility and our ability to compete effectively. Our current credit agreement requires us to maintain certain covenant ratios, and as noted, the ratios become more restrictive at specific dates during the term. If we do not continue to satisfy these required ratios or receive waivers from our lenders, we will be in default under the credit agreement, which could result in an accelerated maturity of our debt obligations. We cannot assure investors that we will be able to access private or public debt or equity on satisfactory terms, or at all. Any equity financing that could be arranged may dilute existing shareholders and any debt financing that could be arranged may result in the imposition of more stringent financial and operating covenants.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

(a) Exhibits:

10.1†	Bel Fuse Inc. 2020 Equity Compensation Plan, as amended, is incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on June 12, 2020.

~~(a)Exhibits:~~ 31.1*


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*	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH*	Inline XBRL Taxonomy Extension Schema Document

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.INS104	Cover Page Interactive Data File (formatted as Inline XBRL ~~Instance Document~~and contained in Exhibit 101)

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.

† Management contract or compensatory plan or arrangement.

~~Return to Index~~24

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 ~~6, 2019~~7, 2020
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)

~~[X]~~ ☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended June 30, ~~2019~~2020
or
~~[ ]~~ ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ____________

~~NEW JERSEY~~ 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 every Interactive Data File required to be submitted 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 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.

Title of Each Class	Trading Symbol	Name of Exchange on Which Registered
Class A Common Stock ($0.10 par value)	BELFA	Nasdaq Global Select Market
Class B Common Stock ($0.10 par value)	BELFB	Nasdaq Global Select Market

Title of Each Class		Number of Shares of Common Stock Outstanding as of August 1, ~~2019~~ 2020
Class A Common Stock ($0.10 par value)		~~2,174,912~~ 2,144,912
Class B Common Stock ($0.10 par value)		~~10,141,602~~ 10,232,602


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.				~~[ ]~~☐

			Page
Part I		Financial Information
			~~Page~~
~~Part I~~		~~Financial Information~~

	Item 1.	Financial Statements (unaudited)	2

		Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (unaudited)	2
		~~and December 31, 2018 (unaudited)~~	2

		Condensed Consolidated Statements of Operations for the Three and Six
		Months Ended June 30, 2020 and 2019 ~~and 2018~~ (unaudited)	3

		Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the
		~~the~~ Three and Six Months Ended June 30, 2020 and 2019 ~~and 2018~~ (unaudited)	4

		Condensed Consolidated Statements of Stockholders' Equity for the Three
		and Six Months Ended June 30, 2020 and 2019 ~~and 2018~~ (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Six
		Months Ended June 30, 2020 and 2019 ~~and 2018~~ (unaudited)	7 6

		Notes to Condensed Consolidated Financial Statements (unaudited)	8 7 - 1815

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	16 - 22

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

	Item 4.	Controls and Procedures	22

Part II		Other Information

	Item 1.	Legal Proceedings	22

	Item 1A.	Risk Factors	22

	Item 2.	~~Management's Discussion~~Unregistered Sales of Equity Securities and ~~Analysis~~Use of Proceeds
		~~Financial Condition and Results of Operations~~	~~19 - 25~~23

	Item 3.	~~Quantitative and Qualitative Disclosures About~~Defaults Upon Senior Securities
		~~Market Risk~~	2523

	Item 4.	~~Controls and Procedures~~Mine Safety Disclosures	25

~~Part II~~		~~Other Information~~	23

	Item 1.5.	~~Legal Proceedings~~Other Information	2523

	Item ~~1A.~~6.	~~Risk Factors~~Exhibits	25 24

	~~Item 6.~~	~~Exhibits~~	26

	Signatures		27 25

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

	June 30,			December 31,
	2019			2018
ASSETS
Current Assets:
Cash and cash equivalents	$	58,395		$	53,911
Accounts receivable, net of allowance for doubtful accounts of $1,694
and $1,638, respectively		84,248			91,939
Inventories		118,209			120,068
Unbilled receivables		11,470			15,799
Other current assets		9,090			8,792
Total current assets		281,412			290,509

Property, plant and equipment, net		42,344			43,932
Right-of-use assets		17,885			-
Intangible assets, net		59,476			62,689
Goodwill		20,017			19,817
Deferred income taxes		1,194			496
Other assets		27,347			26,081
Total assets	$	449,675		$	443,524

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	42,764		$	56,171
Accrued expenses		30,092			32,290
Current portion of long-term debt		3,997			2,508
Operating lease liability, current		6,238			-
Other current liabilities		4,060			15,061
Total current liabilities		87,151			106,030

Long-term Liabilities:
Long-term debt		108,960			111,705
Operating lease liability, long-term		12,121			-
Liability for uncertain tax positions		28,379			27,553
Minimum pension obligation and unfunded pension liability		19,126			18,683
Deferred income taxes		1,061			1,161
Other liabilities		12,601			1,922
Total liabilities		269,399			267,054

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
Class B common stock, par value $.10 per share, 30,000,000 shares
authorized; shares outstanding: 10,141,602 in 2019 and 10,092,352
in 2018 (net of 3,218,307 treasury shares)		1,014			1,009
Additional paid-in capital		32,983			31,387
Retained earnings		171,583			168,695
Accumulated other comprehensive loss		(25,521	)		(24,838	)
Total stockholders' equity		180,276			176,470
Total liabilities and stockholders' equity	$	449,675		$	443,524
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						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018

Net sales	$	127,416		$	140,710		$	252,805		$	258,961
Cost of sales		107,532			111,696			209,361			208,814
Gross profit		19,884			29,014			43,444			50,147

Selling, general and administrative expenses		18,764			18,306			38,564			38,998
Gain on sale of property		(4,257	)		-			(4,257	)		-
Restructuring charges		424			41			1,370			45
Income from operations		4,953			10,667			7,767			11,104

Interest expense		(1,381	)		(1,349	)		(2,820	)		(2,527	)
Interest income and other, net		(184	)		(285	)		(389	)		(521	)
Earnings before provision for income taxes		3,388			9,033			4,558			8,056

Provision for income taxes		421			2,399			460			2,724
Net earnings available to common stockholders	$	2,967		$	6,634		$	4,098		$	5,332


Net earnings per common share:
Class A common share - basic and diluted	$	0.23		$	0.52		$	0.31		$	0.41
Class B common share - basic and diluted	$	0.24		$	0.56		$	0.34		$	0.45

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		10,112			9,844			10,100			9,850

See accompanying notes to unaudited condensed consolidated financial statements.

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,
	2019			2018			2019			2018

Net earnings available to common stockholders	$	2,967		$	6,634		$	4,098		$	5,332

Other comprehensive income (loss):
Currency translation adjustment, net of taxes of $16 in the three months
ended June 30, 2019, $37 in the three months ended June 30, 2018, ($1) in
the six months ended June 30, 2019 and $12 in the six months ended
June 30, 2018		(834	)		(7,448	)		(294	)		(3,431	)
Unrealized losses on marketable securities arising during the period,
net of taxes of $0 in the three months ended June 30, 2019, $0 in the
three months ended June 30, 2018, $0 in the six months ended June 30,
2019 and ($20) in the six months ended June 30, 2018		-			-			-			(31	)
Change in unfunded SERP liability, net of taxes of $11 in the three months
ended June 30, 2019, $25 in the three months ended June 30, 2018, $22 in
the six months ended June 30, 2019 and $51 in the six months ended
June 30, 2018		37			85			74			171
Other comprehensive loss		(797	)		(7,363	)		(220	)		(3,291	)

Comprehensive income (loss)	$	2,170		$	(729	)	$	3,878		$	2,041


See accompanying notes to unaudited condensed consolidated financial statements.

BEL FUSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)


							Accumulated
							Other			Class A		Class B			Additional
				Retained			Comprehensive			Common		Common			Paid-In
Three Months Ended June 30, 2019	Total			Earnings			(Loss) Income			Stock		Stock			Capital

Balance at March 31, 2019	$	178,153		$	169,451		$	(24,724	)	$	217	$	1,008		$	32,201
Net earnings		2,967			2,967			-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(131	)		(131	)		-			-		-			-
Class B Common Stock, $0.07/share		(704	)		(704	)		-			-		-			-
Issuance of restricted common stock		-			-			-			-		7			(7	)
Forfeiture of restricted common stock		-			-			-			-		(1	)		1
Foreign currency translation adjustment, net of taxes of $16		(834	)		-			(834	)		-		-			-
Stock-based compensation expense		788			-			-			-		-			788
Change in unfunded SERP liability, net of taxes of ($11)		37			-			37			-		-			-

Balance at June 30, 2019		180,276			171,583			(25,521	)		217		1,014			32,983


							Accumulated
							Other			Class A		Class B			Additional
				Retained			Comprehensive			Common		Common			Paid-In
Three Months Ended June 30, 2018	Total			Earnings			(Loss) Income			Stock		Stock			Capital


Balance at March 31, 2018	$	164,175		$	149,171		$	(15,553	)	$	217	$	985		$	29,355
Net loss		6,634			6,634			-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(131	)		(131	)		-			-		-			-
Class B Common Stock, $0.07/share		(689	)		(689	)		-			-		-			-
Forfeiture of restricted common stock		-			-			-			-		(1	)		1
Foreign currency translation adjustment, net of taxes of $37		(7,448	)		-			(7,448	)		-		-			-
Stock-based compensation expense		671			-			-			-		-			671
Change in unfunded SERP liability, net of taxes of ($25)		85			-			85			-		-			-

Balance at June 30, 2018	$	163,297		$	154,985		$	(22,916	)	$	217	$	984		$	30,027

See accompanying notes to unaudited condensed consolidated financial statements.

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

Balance at December 31, 2019	$	168,051		$	157,063		$	(24,065	)	$	214	$	1,013		$	33,826
Net loss		(3,804	)		(3,804	)		-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(130	)		(130	)		-			-		-			-
Class B Common Stock, $0.07/share		(709	)		(709	)		-			-		-			-
Forfeiture of restricted common stock		-			-			-			-		(1	)		1
Foreign currency translation adjustment, net of taxes of ($27)		(2,245	)		-			(2,245	)		-		-			-
Stock-based compensation expense		603			-			-			-		-			603
Change in unfunded SERP liability, net of taxes of ($20)		66			-			66			-		-			-
Balance at March 31, 2020		161,832			152,420			(26,244	)		214		1,012			34,430

Net earnings		5,573			5,573			-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(129	)		(129	)		-			-		-			-
Class B Common Stock, $0.07/share		(707	)		(707	)		-			-		-			-
Forfeiture of restricted common stock		-			-			-			-		11			(11	)
Foreign currency translation adjustment, net of taxes of ($3)		676			-			676			-		-			-
Stock-based compensation expense		617			-			-			-		-			617
Change in unfunded SERP liability, net of taxes of ($20)		66			-			66			-		-			-
Balance at June 30, 2020	$	167,928		$	157,157		$	(25,502	)	$	214	$	1,023		$	35,036

	Three Months Ended June 30, 2019								Six Months Ended June 30, 2019
	North								North
	America		Asia		Europe		Consolidated		America		Asia		Europe		Consolidated

By Product Group:
Connectivity solutions	$	31,297	$	3,027	$	8,212	$	42,536	$	63,418	$	6,502	$	16,977	$	86,897
Magnetic solutions		9,638		29,168		2,046		40,852		18,583		56,258		4,267		79,108
Power solutions and protection		26,131		7,129		10,768		44,028		49,652		13,841		23,307		86,800
	$	67,066	$	39,324	$	21,026	$	127,416	$	131,653	$	76,601	$	44,551	$	252,805

By Sales Channel:
Direct to customer	$	45,442	$	32,707	$	13,293	$	91,442	$	89,323	$	63,835	$	29,506	$	182,664
Through distribution		21,624		6,617		7,733		35,974		42,330		12,766		15,045		70,141
	$	67,066	$	39,324	$	21,026	$	127,416	$	131,653	$	76,601	$	44,551	$	252,805


	Three Months Ended June 30, 2018								Six Months Ended June 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	$	65,878	$	8,241	$	17,727	$	91,846
Magnetic solutions		10,158		32,844		2,546		45,548		18,209		60,669		4,898		83,776
Power solutions and protection		26,248		8,250		11,736		46,234		46,609		15,625		21,105		83,339
	$	71,240	$	45,914	$	23,556	$	140,710	$	130,696	$	84,535	$	43,730	$	258,961

By Sales Channel:
Direct to customer	$	44,055	$	39,402	$	15,990	$	99,447	$	81,951	$	72,330	$	30,183	$	184,464
Through distribution		27,185		6,512		7,566		41,263		48,745		12,205		13,547		74,497
	$	71,240	$	45,914	$	23,556	$	140,710	$	130,696	$	84,535	$	43,730	$	258,961

			Six Months Ended
			June 30, 2019
	Liability at				Cash Payments			Liability at
	December 31,		New		and Other			June 30,
	2018		Charges		Settlements			2019
Severance costs	$	-	$	311	$	(244	)	$	67
Other restructuring costs		-		809		(107	)		702
Total	$	-	$	1,120	$	(351	)	$	769

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

Balance at January 1, 2019	$	(22,635	)	$	12	$	(2,215	)		$	(24,838	)
Other comprehensive income before reclassifications		(294	)		-		11				(283	)
Amount reclassified from accumulated other
comprehensive loss		-			-		63		(a)		63
Net current period other comprehensive income		(294	)		-		74				(220	)

Effect of adoption of ASU 2018-02 (Topic 220)		-			-		(463	)			(463	)
Balance at June 30, 2019	$	(22,929	)	$	12	$	(2,604	)		$	(25,521	)

(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
classification of the plan participants.

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Amortization of ROU Assets - Finance Leases	$	33	$	67
Interest on Lease Liabilities - Finance Leases		12		25
Operating Lease Cost (Cost resulting from lease payments)		1,978		3,969
Short-term Lease Cost		31		100
Variable Lease Cost (Cost excluded from lease payments)		61		121
Sublease Income		-		-
Total Lease Cost	$	2,115	$	4,282

	Six Months Ended June 30, 2019
Cash paid for amounts included in the measruement of lease liabilities:
Operating cash flows from operating leases	$	3,963
Operating cash flows from finance leases		25
Finance cash flows from finance leases		57
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		21,396
Finance leases		-

	June 30, 2019
Operating Leases:
Operating lease right-of-use assets	$	17,885
Operating lease liability, current		6,238
Operating lease liability, long-term		12,121
Total operating lease liabilities		18,359

Finance Leases:
Property, plant and equipment, gross	$	894
Accumulated depreciation		(202	)
Property, plant and equipment, net		692
Other current liabilities		120
Other long-term liabilities		626
Total finance lease liabilities	$	746

Year Ending	Operating			Finance
June 30,	Leases			Leases
2020	$	7,204		$	164
2021		5,549			163
2022		4,206			163
2023		2,440			163
2024		422			163
Thereafter		305			67
Total undiscounted cash flows		20,126			883
Less imputed interest		(1,767	)		(137	)
Present value of lease liabilities	$	18,359		$	746