BEL FUSE INC. AND SUBSIDIARIES

INDEX

			Page
Part I		Financial Information

	Item 1.	Financial Statements (unaudited)	2

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

		Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	3

		Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	4

		Condensed Consolidated Statements of Stockholders' Equity for the Three ~~and~~ ~~Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (unaudited)	76

		Notes to Condensed Consolidated Financial Statements (unaudited)	87 - 1816

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	1917 - 2523

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2523

	Item 4.	Controls and Procedures	2523

Part II		Other Information

	Item 1.	Legal Proceedings	2523

	Item 1A.	Risk Factors	2523

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2524

	Item 3.	Defaults Upon Senior Securities	2524

	Item 4.	Mine Safety Disclosures	2524

	Item 5.	Other Information	2524

	Item 6.	Exhibits	2625

	Signatures		2726

~~Table of Contents~~

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING INFORMATION

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

The Company’s consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in Item 1A of our ~~2018~~2019 Annual Report on Form ~~10-K.~~10-K and the risk factors described in this quarterly report. As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, consolidated financial condition, operating results, and common stock prices. Furthermore, this document and other documents filed by the Company with the Securities and Exchange Commission (“SEC”) contain certain forward-looking statements under the Private Securities Litigation Reform Act of 1995 (“Forward-Looking Statements”) with respect to the business of the Company. Forward-Looking Statements are necessarily subject to risks and uncertainties, many of which are outside our control, that could cause actual results to differ materially from these statements. Forward-Looking Statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “should,” “estimates,” “expects,” “intends,” “potential,” “seek,” “predict,” “may,” “will” and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives and regarding the anticipated impact of COVID-19 are Forward-Looking Statements. These Forward-Looking Statements are subject to certain risks and uncertainties, including those detailed in Item 1A of our ~~2018~~2019 Annual Report on Form 10-K and in the risk factors described in this quarterly report, which could cause actual results to differ materially from these Forward-Looking Statements. The Company undertakes no obligation to publicly release the results of any revisions to these Forward-Looking Statements which may be necessary to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Any Forward-Looking Statement made by the Company is based only on information currently available to us and speaks only as of the date on which it is made.

~~Table of Contents~~

PART I. Financial Information

Item 1. Financial Statements (Unaudited)

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

	September 30,			December 31,			March 31,			December 31,
	2019			2018			2020			2019
ASSETS
Current Assets:
Cash and cash equivalents	$	64,816		$	53,911		$	68,431		$	72,289
Accounts receivable, net of allowance for doubtful accounts of $1,975 and $1,638, respectively		79,110			91,939
Accounts receivable, net of allowance for doubtful accounts of $1,232 and $1,171, respectively								69,070			76,092
Inventories		110,209			120,068			104,313			107,276
Unbilled receivables		14,868			15,799			13,597			16,318
Other current assets		9,058			8,792			9,494			11,206
Total current assets		278,061			290,509			264,905			283,181

Property, plant and equipment, net		42,470			43,932			40,861			41,943
Right-of-use assets		16,296			-			17,466			18,504
Intangible assets, net		57,509			62,689			70,215			72,364
Goodwill		10,778			19,817			22,219			21,993
Deferred income taxes		2,283			496			4,489			3,731
Other assets		26,948			26,081			25,493			27,201
Total assets	$	434,345		$	443,524		$	445,648		$	468,917

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	38,890		$	56,171		$	38,800		$	44,169
Accrued expenses		31,069			32,290			24,104			26,918
Current portion of long-term debt		4,743			2,508			817			5,489
Operating lease liability, current		6,039			-			6,403			7,377
Other current liabilities		5,785			15,061			6,832			6,265
Total current liabilities		86,526			106,030			76,956			90,218

Long-term Liabilities:
Long-term debt		107,588			111,705			134,258			138,215
Operating lease liability, long-term		10,713			-			11,329			11,751
Liability for uncertain tax positions		26,464			27,553			26,864			26,901
Minimum pension obligation and unfunded pension liability		19,346			18,683			21,745			21,545
Deferred income taxes		1,319			1,161			1,239			1,726
Other liabilities		11,749			1,922			11,425			10,510
Total liabilities		263,705			267,054			283,816			300,866

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; shares outstanding: 2,144,912 in 2019 and 2,174,912 in 2018 (net of 1,072,769 treasury shares)		214			217
Class B common stock, par value $.10 per share, 30,000,000 shares authorized; shares outstanding: 10,132,102 in 2019 and 10,092,352 in 2018 (net of 3,218,307 treasury shares)		1,013			1,009
Class A common stock, par value $.10 per share, 10,000,000 shares authorized; 2,144,912 and 2,144,912 shares outstanding at March 31, 2020 and December 31, 2019, respectively (net of 1,072,769 treasury shares)								214			214
Class B common stock, par value $.10 per share, 30,000,000 shares authorized; 10,120,602 and 10,127,602 shares outstanding at March 31, 2020 and December 31, 2019, respectively (net of 3,218,307 treasury shares)								1,012			1,013
Additional paid-in capital		33,206			31,387			34,430			33,826
Retained earnings		164,252			168,695			152,420			157,063
Accumulated other comprehensive loss		(28,045	)		(24,838	)		(26,244	)		(24,065	)
Total stockholders' equity		170,640			176,470			161,832			168,051
Total liabilities and stockholders' equity	$	434,345		$	443,524		$	445,648		$	468,917

See accompanying notes to unaudited condensed consolidated financial statements.

~~Table of Contents~~

BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2019			2018			2019			2018			2020			2019

Net sales	$	124,479		$	146,489		$	377,284		$	405,451
Revenue													$	103,978		$	125,389
Cost of sales		102,021			117,282			311,382			326,096			78,866			94,645
Gross profit		22,458			29,207			65,902			79,355			25,112			30,744

Research and development costs														6,059			7,184
Selling, general and administrative expenses		17,909			18,691			56,472			57,690			22,062			19,225
Impairment of Goodwill		8,891			-			8,891			-
Restructuring charges		281			17			1,651			62			128			946
Gain on sale of property		-			-			(4,257	)		-
(Loss) Income from operations		(4,623	)		10,499			3,145			21,603
(Loss) income from operations														(3,137	)		3,389

Interest expense		(1,305	)		(1,391	)		(4,126	)		(3,917	)		(1,351	)		(1,440	)
Other income (expense), net		28			43			(361	)		(479	)
(Loss) Earnings before provision for (benefit from) income taxes		(5,900	)		9,151			(1,342	)		17,207
Other income/expense, net														(88	)		(779	)
(Loss) earnings before (benefit from) provision for income taxes														(4,576	)		1,170

Provision for (benefit from) income taxes		590			(2,201	)		1,049			523
(Benefit from) provision for income taxes														(772	)		39
Net (loss) earnings available to common stockholders	$	(6,490	)	$	11,352		$	(2,391	)	$	16,684		$	(3,804	)	$	1,131


Net (loss) earnings per common share:
Class A common share - basic and diluted	$	(0.51	)	$	0.89		$	(0.20	)	$	1.31		$	(0.30	)	$	0.08
Class B common share - basic and diluted	$	(0.53	)	$	0.94		$	(0.19	)	$	1.40		$	(0.31	)	$	0.09

Weighted-average number of shares outstanding:
Class A common share - basic and diluted		2,173			2,175			2,174			2,175			2,145			2,175
Class B common share - basic and diluted		10,139			9,972			10,113			9,891			10,123			10,089

See accompanying notes to unaudited condensed consolidated financial statements.

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BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Net (loss) earnings available to common stockholders
$ (6,490 ) $ 11,352 $ (2,391 ) $ 16,684

Other comprehensive (loss) income:

Currency translation adjustment, net of taxes of ($13) in the three months ended September 30, 2019, $1 in the three months ended September 30, 2018, ($12) in the nine months ended September 30, 2019 and ($11) in the nine months ended September 30, 2018
(2,561 ) (1,032 ) (2,854 ) (4,463 )
Unrealized losses on marketable securities arising during the period, net of taxes of $0 in the three months ended September 30, 2019, ($3) in the three months ended September 30, 2018, $0 in the nine months ended September 30, 2019 and $17 in the nine months ended September 30, 2018
- (170 ) - (201 )
Change in unfunded SERP liability, net of taxes of ($11) in the three months ended September 30, 2019, ($25) in the three months ended September 30, 2018, ($33) in the nine months ended September 30, 2019 and ($76) in the nine months ended September 30, 2018
37 85 111 256
Other comprehensive loss
(2,524 ) (1,117 ) (2,743 ) (4,408 )

Comprehensive (loss) income
$ (9,014 ) $ 10,235 $ (5,134 ) $ 12,276

	Three Months Ended
	March 31,
	2020			2019

Net (loss) earnings available to common stockholders	$	(3,804	)	$	1,131

Other comprehensive (loss) income:
Currency translation adjustment, net of taxes of ($27) in the three months ended March 31, 2020 and $17 in the three months ended March 31, 2019		(2,245	)		540
Change in unfunded SERP liability, net of taxes of ($20) in the three months ended March 31, 2020 and ($11) in the three months ended March 31, 2019		66			37
Other comprehensive (loss) income		(2,179	)		577

Comprehensive (loss) income	$	(5,983	)	$	1,708

See accompanying notes to unaudited condensed consolidated financial statements.

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BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except per share data)

(unaudited)

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

Balance at December 31, 2018	$	176,470		$	168,695		$	(24,838	)	$	217		$	1,009		$	31,387
Net earnings		1,131			1,131			-			-			-			-
Dividends declared:
Class A Common Stock, $0.06/share		(130	)		(130	)		-			-			-			-
Class B Common Stock, $0.07/share		(708	)		(708	)		-			-			-			-
Forfeiture of restricted common stock		-			-			-			-			(1	)		1
Foreign currency translation adjustment, net of taxes of $17		540			-			540			-			-			-
Stock-based compensation expense		813			-			-			-			-			813
Change in unfunded SERP liability, net of taxes of ($11)		37			-			37			-			-			-
Effect of adoption of ASU 2018-02 (Topic 220)		-			463			(463	)		-			-			-
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

Balance at December 31, 2019																			$	168,051		$	157,063		$	(24,065	)	$	214	$	1,013		$	33,826
Net loss		(6,490	)		(6,490	)		-			-			-			-			(3,804	)		(3,804	)		-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(131	)		(131	)		-			-			-			-			(130	)		(130	)		-			-		-			-
Class B Common Stock, $0.07/share		(710	)		(710	)		-			-			-			-			(709	)		(709	)		-			-		-			-
Forfeiture of restricted common stock		-			-			-			-			(1	)		1			-			-			-			-		(1	)		1
Repurchase of Class A common stock		(448	)		-			-			(3	)		-			(445	)
Foreign currency translation adjustment, net of taxes of ($13)		(2,561	)		-			(2,561	)		-			-			-
Foreign currency translation adjustment, net of taxes of ($27)																				(2,245	)		-			(2,245	)		-		-			-
Stock-based compensation expense		667			-			-			-			-			667			603			-			-			-		-			603
Change in unfunded SERP liability, net of taxes of ($11)		37			-			37			-			-			-
Balance at September 30, 2019	$	170,640		$	164,252		$	(28,045	)	$	214		$	1,013		$	33,206
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

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

Balance at December 31, 2018	$	176,470		$	168,695		$	(24,838	)	$	217	$	1,009		$	31,387
Net earnings		1,131			1,131			-			-		-			-
Dividends declared:
Class A Common Stock, $0.06/share		(130	)		(130	)		-			-		-			-
Class B Common Stock, $0.07/share		(708	)		(708	)		-			-		-			-
Forfeiture of restricted common stock		-			-			-			-		(1	)		1
Foreign currency translation adjustment, net of taxes of $17		540			-			540			-		-			-
Stock-based compensation expense		813			-			-			-		-			813
Change in unfunded SERP liability, net of taxes of ($11)		37			-			37			-		-			-
Effect of adoption of ASU 2018-02 (Topic 220)		-			463			(463	)		-		-			-
Balance at March 31, 2019	$	178,153		$	169,451		$	(24,724	)	$	217	$	1,008		$	32,201

See accompanying notes to unaudited condensed consolidated financial statements.

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~~BEL FUSE INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY~~

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

~~(unaudited)~~

Accumulated

Other

Class A

Class B

Additional

Retained

Comprehensive

Common

Common

Paid-In

Total Earnings (Loss) Income Stock Stock Capital

Balance at December 31, 2017
$ 157,960 $ 147,807 $ (19,625 ) $ 217 $ 986 $ 28,575
Net loss
(1,303 ) (1,303 ) - - - -
Dividends declared:

Class A Common Stock, $0.06/share
(130 ) (130 ) - - - -
Class B Common Stock, $0.07/share
(700 ) (700 ) - - - -
Forfeiture of restricted common stock
- - - - (1 ) 1
Foreign currency translation adjustment, net of taxes of $25 4,017 - 4,017 - - -
Unrealized holding losses on marketable securities
arising during the year, net of taxes of $20 (31 ) - (31 ) - - -
Stock-based compensation expense
779 - - - - 779
Change in unfunded SERP liability, net of taxes of ($25)
86 - 86 - - -
Effect of adoption of ASU 2014-09 (Topic 606)
3,497 3,497 - - - -
Balance at March 31, 2018 164,175 149,171 (15,553 ) 217 985 29,355

Net earnings 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

Net earnings 11,352 11,352 - - - -
Dividends declared:
Class A Common Stock, $0.06/share (130 ) (130 ) - - - -
Class B Common Stock, $0.07/share (689 ) (689 ) - - - -
Issuance of restricted common stock
- - - - 24 (24 )
Forfeiture of restricted common stock - - - - (1 ) 1
Foreign currency translation adjustment, net of taxes of $1
(1,032 ) - (1,032 ) - - -
Unrealized holding losses on marketable securities
arising during the year, net of taxes of ($3) (170 ) - (170 ) - - -
Stock-based compensation expense 598 - - - - 598
Change in unfunded SERP liability, net of taxes of ($25) 85 - 85 - - -
Balance at September 30, 2018
$ 173,311 $ 165,518 $ (24,033 ) $ 217 $ 1,007 $ 30,602

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

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BEL FUSE INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2019			2018			2020			2019

Cash flows from operating activities:
Net (loss) earnings	$	(2,391	)	$	16,684		$	(3,804	)	$	1,131
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Impairment of goodwill		8,891			-
Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		12,265			13,738			4,126			4,110
Stock-based compensation		2,268			2,046			603			813
Amortization of deferred financing costs		349			413			149			115
Deferred income taxes		(1,765	)		1,740			(1,322	)		(756	)
Net unrealized gains on foreign currency revaluation		(478	)		(2,396	)
Gain on sale of property		(4,257	)		-
Net unrealized gains/losses on foreign currency revaluation								(45	)		573
Other, net		1,172			963			(215	)		950
Changes in operating assets and liabilities:
Accounts receivable, net		12,395			(18,985	)		6,682			(2,285	)
Unbilled receivables		931			(2,017	)		2,721			5,569
Inventories		8,383			(18,844	)		2,059			(4,239	)
Account payable		(16,249	)		15,545
Accounts payable								(4,891	)		(8,493	)
Accrued expenses		(874	)		1,969			(2,884	)		(5,044	)
Other operating assets/liabilities, net		(1,712	)		(6,687	)		4,879			1,299
Net cash provided by operating activities		18,928			4,169
Net cash provided by (used in) operating activities								8,058			(6,257	)

Cash flows from investing activities:
Purchases of property, plant and equipment		(8,188	)		(8,770	)		(1,832	)		(2,437	)
Proceeds from sale of marketable securities within rabbi trust		-			1,348
Purchase of marketable securities within rabbi trust		-			(1,348	)
Proceeds from disposal/sale of property, plant and equipment		5,787			53			2			2
Net cash used in investing activities		(2,401	)		(8,717	)		(1,830	)		(2,435	)

Cash flows from financing activities:
Dividends paid to common stockholders		(2,403	)		(2,376	)		(806	)		(800	)
Deferred financing costs								(600	)		-
Borrowings under revolving credit line		12,000			7,500			-			10,000
Repayments of revolving credit line		(12,000	)		(7,500	)		-			(10,000	)
Repayments of long-term debt		(2,231	)		(8,268	)		(8,179	)		(744	)
Purchase and retirement of Class A common stock		(448	)		-
Net cash used in financing activities		(5,082	)		(10,644	)		(9,585	)		(1,544	)

Effect of exchange rate changes on cash and cash equivalents		(540	)		134			(501	)		(484	)

Net increase (decrease) in cash and cash equivalents		10,905			(15,058	)
Net decrease in cash and cash equivalents								(3,858	)		(10,720	)
Cash and cash equivalents - beginning of period		53,911			69,354			72,289			53,911
Cash and cash equivalents - end of period	$	64,816		$	54,296		$	68,431		$	43,191


Supplementary information:
Cash paid during the period for:
Income taxes, net of refunds received	$	3,497		$	6,291		$	857		$	926
Interest payment	$	3,815		$	3,485
Interest payments							$	1,266		$	1,216

See accompanying notes to unaudited condensed consolidated financial statements.

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BEL FUSE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The condensed consolidated balance sheets and statements of operations, comprehensive (loss) income, 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 nine~~ months ended ~~September 30, 2019~~March 31, 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 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 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 for the year ended December 31, ~~2018~~2019. There were no significant changes to these accounting policies during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 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 $7.2 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 months ended March 31, 2019. 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. Losses on foreign currency exchange in the amount of $0.6 million have been reclassified from selling, general and administrative expense and are now included within other income/expense, net on the accompanying condensed consolidated statement of operations for the three months ended March 31, 2019. 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, its 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 months ended March 31, 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 13, ~~Leases~~~~, for Topic 842 disclosures in connection with the adoption of ASU 2016-02.~~

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

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

~~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 elected to early adopt ASU 2017-04 effective July 1, 2019, and accounted for the goodwill impairment charge discussed in Note 4 under this guidance.

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

~~In August 2018, the FASB issued ASU 2018-14,~~ ~~Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans (“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~~provisions effective ~~for fiscal years ending after December 15,~~January 1, 2020. The ~~amendments in ASU 2018-14 would need to be applied~~adoption did not have a material impact on ~~a retrospective basis. The Company is currently assessing~~ the ~~impact the new guidance will have on its disclosures.~~Company's consolidated financial position or consolidated results of operations.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 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~~our 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.

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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 months ended March 31, 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 statement 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 $8.2 million and estimated net earnings of $0.9 million to the Company for the three months ended March 31, 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
	March 31, 2019
Revenue	$	134,657
Net earnings		1,686
Earnings per Class A common share - basic and diluted		0.13
Earnings per Class B common share - basic and diluted		0.14

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 September 30, 2019

Nine Months Ended September 30, 2019

North

North

America

Asia

Europe

Consolidated

America

Asia

Europe

Consolidated

By Product Group:

Connectivity solutions
$ 33,929 $ 2,510 $ 8,092 $ 44,531 $ 97,273 $ 9,012 $ 25,069 $ 131,354
Magnetic solutions
8,241 29,576 1,842 39,659 26,662 85,834 6,109 118,605
Power solutions and protection
23,608 7,868 8,813 40,289 73,495 21,709 32,121 127,325
$ 65,778 $ 39,954 $ 18,747 $ 124,479 $ 197,430 $ 116,555 $ 63,299 $ 377,284

By Sales Channel:

Direct to customer
$ 44,110 $ 34,837 $ 12,397 $ 91,344 $ 133,432 $ 98,672 $ 41,903 $ 274,007
Through distribution
21,668 5,117 6,350 33,135 63,998 17,883 21,396 103,277
$ 65,778 $ 39,954 $ 18,747 $ 124,479 $ 197,430 $ 116,555 $ 63,299 $ 377,284

	Three Months Ended March 31, 2020
	Cinch Connectivity		Power Solutions		Magnetic
	Solutions		and Protection		Solutions		Consolidated

*By Geographic Region:*
North America	$	29,703	$	22,723	$	7,107	$	59,533
Europe		7,762		9,314		1,201		18,277
Asia		1,635		4,140		20,393		26,168
	$	39,100	$	36,177	$	28,701	$	103,978

*By Sales Channel:*
Direct to customer	$	25,053	$	21,577	$	24,342	$	70,972
Through distribution		14,047		14,600		4,359		33,006
	$	39,100	$	36,177	$	28,701	$	103,978

Three Months Ended September 30, 2018

Nine Months Ended September 30, 2018

North

North

America

Asia

Europe

Consolidated

America

Asia

Europe

Consolidated

By Product Group:

Connectivity solutions
$ 34,919 $ 5,293 $ 8,314 $ 48,526 $ 100,797 $ 13,533 $ 26,043 $ 140,373
Magnetic solutions
10,586 40,100 2,286 52,972 28,795 100,769 7,184 136,748
Power solutions and protection
25,149 8,135 11,707 44,991 71,759 23,760 32,811 128,330
$ 70,654 $ 53,528 $ 22,307 $ 146,489 $ 201,351 $ 138,062 $ 66,038 $ 405,451

By Sales Channel:

Direct to customer
$ 46,802 $ 46,965 $ 15,184 $ 108,951 $ 128,754 $ 119,294 $ 45,368 $ 293,416
Through distribution
23,852 6,563 7,123 37,538 72,597 18,768 20,670 112,035
$ 70,654 $ 53,528 $ 22,307 $ 146,489 $ 201,351 $ 138,062 $ 66,038 $ 405,451

	Three Months Ended March 31, 2019
	Cinch Connectivity		Power Solutions		Magnetic
	Solutions		and Protection		Solutions		Consolidated

*By Geographic Region:*
North America	$	32,121	$	23,521	$	8,945	$	64,587
Europe		8,765		12,539		2,221		23,525
Asia		3,475		6,712		27,090		37,277
	$	44,361	$	42,772	$	38,256	$	125,389

*By Sales Channel:*
Direct to customer	$	29,615	$	29,101	$	32,506	$	91,222
Through distribution		14,746		13,671		5,750		34,167
	$	44,361	$	42,772	$	38,256	$	125,389

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

	September 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019

Contract assets - current (unbilled receivable)	$	14,868	$	15,799	$	13,597	$	16,318
Contract liabilities - current (deferred revenue)	$	1,004	$	1,036	$	917	$	653

The change in balance of our unbilled receivables from December 31, ~~2018~~2019 to ~~September 30, 2019~~March 31, 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 ~~September 30, 2019~~March 31, 2020 related to contracts that exceed one year in duration amounted to ~~$15.7~~$16.7 million, with expected contract expiration dates that range from ~~2020~~2021 - 2025. It is expected that ~~20%~~77% of this aggregate amount will be recognized in ~~2020, 57%~~2021, 20% will be recognized in ~~2021~~2022 and the remainder will be recognized in years beyond ~~2021.~~2022.

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Depreciation expense for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$2.5~~$2.3 million and ~~$2.8 million, respectively. Depreciation expense for the~~ ~~nine months ended September 30, 2019 and 2018~~ ~~was $7.5 million and $8.9~~$2.5 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 second quarter of~~ ~~2019~~, the Company transitioned 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 sold its Inwood, New York property during the second quarter of ~~2019~~, which resulted in net proceeds of $5.8 million. The accompanying condensed consolidated statements of operations for the nine months ended September 30, 2019 includes a related gain on sale of $4.3 million (pre-tax).

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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 ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 are as follows:

~~During the~~ ~~nine months ended September 30, 2019~~, the Company’s restructuring charges included $1.1 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.

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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, net in the accompanying condensed consolidated statements of operations.

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

~~Goodwill Impairment~~ - As discussed in Note 4, Fair Value Measurements, the Company recorded an $8.9 million non-cash impairment charge related to its North America goodwill in the third quarter of 2019. This charge impacted income from operations for the North America segment in the three- and nine-month periods ended September 30, 2019.

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

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

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes set forth in Item 1 of Part I of this quarterly report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our ~~2018~~2019 Annual Report on Form 10-K and our consolidated financial statements and related notes set forth in Item 8 of Part II of our ~~2018~~2019 Annual Report on Form 10-K. See Part II, Item 1A, “Risk Factors,” below and “Cautionary Notice Regarding Forward-Looking Information,” above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. All statements herein regarding the likely impact of COVID-19 constitute forward-looking statements. All amounts and percentages are approximate due to rounding and all dollars in the text are in millions, except per share amounts or where otherwise noted. When we cross-reference to a “Note,” we are referring to our “Notes to Condensed Consolidated Financial Statements,” unless the context indicates otherwise. All amounts noted within the tables are in thousands and amounts and percentages are approximate due to rounding.

~~We design, manufacture~~Bel designs, manufactures and ~~market~~markets a broad array of products that power, protect and connect electronic circuits. These products are primarily used in the military, aerospace, networking, telecommunications, computing, ~~military, aerospace,~~ transportation and broadcasting industries. Bel’s portfolio of products also finds application in the automotive, medical and consumer electronics markets.

~~We operate~~The Company operates through three ~~geographic segments: North America, Asia and Europe.~~product group segments, in addition to a Corporate segment. In the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020, ~~52%~~37% of the Company’s revenues were derived from ~~North America,~~ ~~31%~~Cinch Connectivity Solutions, 35% from ~~Asia~~Power Solutions and ~~17%~~Protection and 28% from its ~~Europe~~Magnetic Solutions operating segment. ~~By product group,~~ ~~35%~~ ~~of sales for the~~ ~~nine months ended September 30, 2019~~ ~~related to the Company’s connectivity solutions products,~~ ~~34%~~ ~~in power solutions and protection products and~~ ~~31%~~ ~~in magnetic solutions products.~~

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

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

During the first quarter 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 was 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 is working 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 first quarter 2020 financial results reflect the extended closure of our facilities in China early in the quarter 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 being deferred to the second quarter. In addition to the loss of revenue effects from such deferred shipments, the Company also incurred additional indirect COVID-19 related costs, including operational inefficiencies and employee retention programs in the first quarter. These costs were partially offset by $2.2 million of COVID-19 relief funding received from the Chinese government during the first quarter.

All of our manufacturing sites are operating as of the filing date of this Quarterly Report, with only two factories running at substantially less than full production. In March 2020, our manufacturing facility in the Dominican Republic, which supports our Signal Transformer products, was reduced to 35-50% of normal production levels in response to government mandates. Further, in April 2020, our manufacturing facility in Reynosa, Mexico, which supports our Cinch Connectivity Solutions business, was reduced to 20% of normal production rates, also in response to government mandates. By the filing date of this Quarterly Report, the Reynosa facility had increased production levels to 60%. The reduced production capacity at these two North American factories had an estimated $2.4 million unfavorable impact on revenue during the month of April 2020. We are unable to predict when the production levels at these two facilities will return to more typical levels. As the scope of the COVID-19 outbreak continues to be uncertain in North America and Europe, additional Bel facilities could also become subject to reductions in production levels in the future.

The Company anticipates further impacts to its financial results while the COVID-19 pandemic persists. 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 (estimated at 80-85%) at certain sites. 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 three months ended March 31, 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 $68.4 million at March 31, 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 April 30, 2020 was $68.2 million. The Company also has availability under its current revolving credit facility; as of March 31, 2020, the Company could borrow an additional $12.5 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. 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.”

~~After record bookings throughout~~ ~~2018~~,We've seen positive signs in Bel's underlying business as we enter the ~~Company~~second quarter. Orders received in the first quarter of 2020 were the highest since the third quarter of 2018, indicating that the excess inventory in the supply channel from 2019 has ~~experienced slower~~been worked through, and our customers and distribution partners are starting to place replenishment orders again. Further, our acquisition of CUI in late 2019 was accretive to Bel's earnings during the first quarter, generating $8.2 million in revenue and contributing $865,000 of operating income. CUI bookings during the first ~~nine months~~quarter were over $11 million, one of ~~2019~~their highest booking quarters in history, which was a contributing factor to Bel's consolidated book-to-bill ratio of 1.3 for the first quarter. Based on these factors, we currently anticipate an improvement in revenue and financial results in the second quarter as ~~customers work through their inventory on hand. The Company has also experienced margin pressure throughout 2019~~compared to the first quarter. However, beyond the second quarter, we have limited visibility due to ~~lower sales volumes and high material costs from~~ ~~2018~~ ~~which continue to run through~~ the ~~Company’s statement of operations. As a result of these ongoing factors, the Company expects the balance of~~ ~~2019~~ ~~to remain challenging from both a sales and margin perspective.~~evolving COVID-19 environment. The preceding ~~sentence represents a~~sentences represent Forward-Looking ~~Statement.~~Statements. See “Cautionary Notice Regarding Forward-Looking Information.”

~~Sales declines in each of our segments during the third quarter of~~ ~~2019~~ reflected lower sales into our distribution channel as our distribution partners continue to work down their level of inventory on hand. Sales of our connector products into military applications were also lower during the third quarter of ~~2019~~ ~~compared to the same period of~~ ~~2018, impacting our North America segment sales. Sales in our Asia segment in the third quarter of~~ ~~2019~~ ~~were down versus~~ ~~2018~~ ~~as a result of customers working down heightened 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 (loss) income from operations by operating segment for the~~ ~~three and nine months ended September 30, 2019~~ ~~and~~ ~~2018~~ ~~were as follows. Segment net sales are attributed to individual segments based on the geographic source of the billing for customer sales.~~

~~Income from operations declined across all segments during the third quarter of~~ ~~2019~~ ~~as compared with the same quarter of~~ ~~2018~~ primary due to lower sales volume. The Company recorded an $8.9 million goodwill impairment charge during the third quarter of 2019 related to its North America operating segment, which impacted (loss) income from operations for the three- and nine-month periods ended September 30, 2019. Our Asia and North America segments were also impacted by $0.1 million and $0.2 million, respectively, of restructuring charges during the third quarter of ~~2019. During the nine months ended September 30,~~ ~~2019~~, (loss) income from operations for our North America segment was unfavorably impacted by $1.1 million of restructuring 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 and our Asia segment was impacted by $0.5 million of restructuring charges related to realignment of our R&D resources for our Power Solutions business.

Sales of our Connectivity Solutions products during the ~~third~~first quarter of ~~2019~~2020 declined $~~4.0~~$5.3 million primarily due to lower demand from ~~military~~commercial aerospace customers ~~as compared to last year's third 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~~products used in ~~2018~~ ~~ahead of the tariffs. These factors also impacted the nine-month period ended~~ ~~September 30, 2019, which declined $8.9~~ ~~million from the same period of~~ ~~2018~~,structured cabling applications. This was partially offset by higher ~~sales~~demand for our military products in the first quarter of 2020 as compared to ~~commercial aerospace customers during~~ the ~~three and nine months ended September 30,~~ ~~2019~~.

Sales of our Magnetic Solutions products during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 were down $~~13.3~~$9.5 million ~~and $18.0~~ ~~million, respectively,~~ from the same ~~periods~~period of ~~2018~~ ~~while inventory levels built up~~2019 as our ability to manufacture product in ~~advance of a customer's new program launch~~China was temporarily impacted during ~~2018~~ ~~are worked through.~~February 2020 due to the factory closures associated with COVID-19.

Sales of our Power Solutions and Protection products were $~~4.7~~$6.7 million lower in the ~~third~~first quarter of ~~2019~~2020 compared to the same quarter of ~~2018~~.2019. Sales of our Bel Power Solutions products into datacenter applications decreased by ~~$3.8~~$11.9 million, due in part to factory closures in China following the Lunar New Year holiday in connection with COVID-19. First quarter 2020 sales were also impacted by lower demand from a Cloud customer due to tariffs imposed on our product. Sales of our Custom Module and DC/DC power products were $1.3 million and ~~sales of our Circuit Protection products were $0.9~~$1.1 million lower, respectively, as compared to last year’s ~~third~~first quarter. These decreases were partially offset by ~~a $0.5~~the inclusion of the recently-acquired CUI business, which contributed $8.2 million ~~increase~~ in power sales ~~of our Custom Module products. Sales during the nine-month period ended~~ ~~September 30, 2019~~ ~~decreased by $1.2~~ ~~million from the same period of~~ ~~2018, as stronger sales into datacenter applications~~ during the first quarter of ~~2019~~ ~~lessened the impact of sales declines during the second and third quarters of 2019.~~2020.

~~Material~~The fluctuations in material costs and labor costs as a percentage of sales ~~were higher~~ during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 compared to the same ~~periods of~~ ~~2018~~period in 2019 were primarily due to a shift in classification of certain outsourced manufacturing from labor costs to material costs in connection with the ~~industry-wide supply constraints related to certain~~transition of our ~~purchased components during~~ ~~2018. The finished goods shipped during~~TRP business onto the ~~third~~new ERP system effective January 1, 2020. As such, material costs and labor costs should be viewed on a combined basis when comparing to the prior year period. In the aggregate, these variable costs decreased from 53.3% of revenue in the first quarter of 2019 ~~still contained some~~ to 52.5% of revenue in the ~~higher-cost raw material components.~~

~~Labor costs as a percentage~~first quarter of ~~sales declined during the three and nine months ended September 30, 2019 compared~~2020. This reduction was primarily due to ~~the same periods of~~ ~~2018~~ as a more favorable exchange rate environment related to the Chinese Renminbi and Mexican Peso. 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~~one of the regions where Bel’s factories are located ~~in February and July of~~ ~~2018. The minimum wage rates in Mexico increased~~ effective ~~January~~March 1, ~~2019.~~

~~Included in cost of sales is research and development (“R&D”) expense of $6.2 million and $6.9 million for the~~ ~~three months ended September 30, 2019 and 2018, respectively, and $20.2 million and $21.6 million for the~~ ~~nine months ended September 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 nine~~ months ended ~~September 30, 2019~~March 31, 2020 by ~~$2.1~~$3.6 million ~~and $2.6 million, respectively,~~ as compared to the same ~~periods~~period of ~~2018~~,2019, primarily due to ~~lower support labor~~$2.2 million of subsidies received from the Chinese government to offset costs and ~~fringe expense and a reduction in depreciation and amortization expense~~inefficiencies incurred in the first quarter of 2020 due to the temporary closures of our factories in China in connection with COVID-19.

SG&A expenses during the ~~third~~first quarter of ~~2019~~2020 were $~~17.9~~22.1 million, ~~down~~up from $~~18.7~~19.2 million in the ~~third~~first quarter of ~~2018~~2019. Included within SG&A expenses is a ~~foreign exchange gain of $0.6 million~~reduction in the ~~third quarter~~cash surrender value of ~~2019~~ ~~compared to a foreign exchange gain~~our company-owned life insurance policies of ~~$1.5 million in the third quarter of~~ ~~2018. Excluding the effects of foreign exchange gains, SG&A expense was down $1.7 million in the third quarter of~~ ~~2019~~ ~~as compared to the same period of~~ ~~2018, led by lower salaries and fringe expense of $1.1 million and reductions in legal and professional fees of $0.7 million from last year’s third quarter.~~

~~SG&A expenses during the first nine months of 2019 were $56.5~~ ~~million,~~ ~~down~~ ~~from $57.7~~ ~~million in the same period of~~ ~~2018. Included within SG&A expenses is a foreign exchange gain of $0.5 million in the nine months ended September 30, 2019 compared to a foreign exchange gain of $2.4 million in the same period of~~ ~~2018. Excluding the effects of foreign exchange gains, SG&A expense was down $3.1~~$1.4 million in the first ~~nine months~~quarter of ~~2019~~ as2020 compared to a gain on these policies of $0.7 million in the ~~same period~~first quarter of ~~2018. Factors contributing~~2019. SG&A expense was also higher in the first quarter of 2020 due to the inclusion of CUI expenses of $2.0 million for the quarter. These factors were offset by lower ~~SG&A expense in the~~ ~~2019~~ ~~period were lower salaries and fringe expense~~ERP implementation costs of ~~$2.3 million and a reduction in legal and professional fees of $1.4~~$1.0 million.

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

The (benefit) provision ~~(benefit)~~ for income taxes for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~was $~~0.6~~($0.8) million and ~~($2.2)~~less than $0.1 million, respectively. The Company’s earnings (loss) before income taxes for the three months ended ~~September 30, 2019~~,March 31, 2020, were approximately ~~$15.1~~$5.7 million lower than the same period in ~~2018~~,2019, primarily attributable to a decrease in the ~~$8.9 million impairment of goodwill in~~income from the North America, ~~as well as lower earnings in the North America~~Europe and Asia segments. The Company’s effective tax rate was ~~(10.0%)~~16.9% and ~~(24.1%)~~3.3% for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018~~, respectively. The change in the effective tax rate during the three months ended ~~September 30, 2019~~March 31, 2020 as compared to the same period in ~~2018~~,2019, is primarily attributable to a decrease in U.S. taxes relating to income from foreign subsidiaries taxed in the U.S. as part of the Tax Cuts and Jobs Act. Additionally, the change in the tax rate during the three months ended September 30, 2019 compared to the same period in 2018 is attributable to a decrease in tax expense in the North America segment due to the reduction in the estimated transition tax on post-1986 untaxed accumulated foreign earnings as well as a decrease in the taxes related to ~~uncertain~~GILTI income and the federal tax ~~positions during~~law change for the ~~2018 period.~~CARES Act, and due in part to tax benefits relating to the reversal of valuation allowances, offset by the impact of permanent differences on U.S. tax exempt activities. See Note 10, “Income Taxes.”

~~The provision for income taxes for the~~ ~~nine months ended September 30, 2019 and 2018~~ ~~was $1.0~~ ~~million and $0.5~~ ~~million, respectively. The Company’s earnings before income taxes for the~~ ~~nine months ended September 30, 2019~~ ~~were approximately $18.5 million lower than the same period in~~ ~~2018~~, primarily attributable to the $8.9 million impairment of goodwill in North America, as well as lower earnings in the North America and Asia segments. The Company’s effective tax rate was (78.2%) and 3.0% for the nine-month periods ended ~~September 30, 2019~~ ~~and~~ ~~2018~~, respectively. The change in the effective tax rate during the nine months ended September 30, 2019 as compared to the same period of 2018, is primarily attributable to the same factors noted above related to the third quarter, as well as the impact from permanent tax differences on U.S. tax-exempt activities during the first quarter of 2019.

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 ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, ~~$25.2~~$34.5 million and ~~$46.3~~$29.1 million, respectively (or ~~39%~~50% and ~~86%~~40%, respectively), of cash and cash equivalents was held by foreign subsidiaries of the Company. During the first ~~nine~~three months of ~~2019~~2020, the Company repatriated ~~$29.3~~$5.0 million of funds from outside of the U.S., with minimal incremental tax liability. We continue to analyze our global working capital and cash requirements and the potential tax liabilities attributable to further repatriation, and we have yet to make any further determination regarding repatriation of funds from outside the U.S. to fund the Company’s U.S. operations in the future. In the event these funds were needed for Bel’s U.S. operations, the Company would be required to accrue and pay U.S. state taxes and any applicable foreign withholding taxes to repatriate these funds.

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 ~~September 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 March 31, 2020, including its most restrictive covenant, the Fixed Charge Coverage Ratio. The unused credit available under the credit facility at ~~September 30, 2019~~March 31, 2020 was ~~$75.0~~$43.0 million, of which we had the ability to borrow ~~$40.6~~$12.5 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 $7.0 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 ~~$6.8~~$7.0 million in connection with this implementation, of which ~~$0.2~~$1.0 million ~~and $1.6 million in implementation costs~~ was incurred ~~during~~in the ~~three and nine months ended September 30,~~first quarter of 2019,~~, respectively.~~ with no additional costs incurred in the first quarter 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~~The second phase of the project was completed in the first quarter of 2020 with the TRP business going live on the new system effective January 1, 2020. To date, 40% of our overall business has transitioned to ~~this first phase completed, we started realizing annualized~~the new ERP system and 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~~.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.”~~Statements."

~~During the~~ ~~nine months ended September 30, 2018~~2020, the Company’s cash and cash equivalents decreased by ~~$15.1~~$3.9 million. This decrease was primarily due to the following:

During the three months ended March 31, 2019, the Company’s cash and cash equivalents decreased by $10.7 million. This decrease was primarily due to the following:

During the three months ended March 31, 2019, accounts receivable increased by $2.3 million primarily due to a $2.4 million increase in revenue during the month of March 2019 as compared to the month of December 2018. DSO increased to 68 days at March 31, 2019 from 6059 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, inventory2018. Inventory increased by ~~$20.1~~$4.2 million at ~~September 30, 2018~~March 31, 2019 compared to December 31, ~~2017,~~2018, primarily due to a slowdown 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.~~as customers worked through their inventory levels on hand. Inventory turns ~~increased from 3.6~~were 3.3 at March 31, 2019 as compared to 3.7 at December 31, ~~2017 to 4.0 at~~ ~~September 30, 2018, primarily due to the change in revenue recognition accounting noted above.~~2018.

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.

~~Table of Contents~~

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.

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 ~~nine~~three 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 ~~nine~~three months of ~~2019~~2020 versus those during the same period of ~~2018~~2019, the Euro depreciated by 6%2%, the Pound depreciated by 6%1%, the Peso depreciated by 1%2% and the Renminbi depreciated by 5%2% against the U.S. Dollar. The Company estimates that the depreciation in these foreign currencies led to lower operating costs of ~~$3.9~~$0.4 million, as the majority of our expenses in the PRC, Europe and Mexico are paid in local currency. Foreign exchange gains were also recognized in the first ~~nine~~three months of ~~2019~~2020 of ~~$0.5~~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. 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.

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.

The information called for by this Item is incorporated herein by reference to Note 1413, "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.

~~See~~The risks described below, in addition to those described in Part I, Item 1A, ~~“Risk~~"Risk Factors,”" of our ~~Annual~~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.

Our global operations and demand for our products face risks related to 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 until following 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. By the end of the first 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. In March 2020, our manufacturing facility in the Dominican Republic, which supports our Signal Transformer products, was reduced to 35-50% of normal production levels in response to government mandates. Further, in April 2020, our manufacturing facility in Reynosa, Mexico, which supports our Cinch Connectivity Solutions business, was reduced to 20% of normal production rates, also in response to government mandates. By the filing date of this Quarterly Report, the Reynosa facility had increased production levels of 60%. As the status of the COVID-19 outbreak continues to be uncertain 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 March 31, 2020, resulting in a leverage ratio of 4.46x 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 March 31, 2020, our fixed charge coverage ratio was 1.03x, as calculated in accordance with our credit agreement (as compared to the minimum fixed charge coverage ratio of 1.00x). 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 1.05x effective June 30, 2020, 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.

~~The following table sets forth certain information regarding the Company's purchase of shares of its Class A Common Stock during each calendar month in the quarter ended September 30, 2019:~~Not applicable.

~~Table of Contents~~

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.

~~[X]~~☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended ~~September 30, 2019~~March 31, 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		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

	Goodwill Impairment Analysis
	Key Assumptions
	2019 - Interim			2018 - Annual

Income Approach - Discounted Cash Flows:
Revenue 5-year compound annual growth rate (CAGR)		1.5	%		2.6	%
2019 EBITDA margins		3.9	%		7.6	%
Cost of equity capital		15.4	%		14.2	%
Cost of debt capital		4.0	%		3.7	%
Weighted average cost of capital		14.0	%		13.0	%

Market Approach - Multiples of Guideline Companies:
Net operating revenue multiples used		0.3			0.4
Operating EBITDA multiples used		7.0 - 8.0			5.1 - 5.7
Invested capital control premium		25	%		25	%

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

	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019
	North								North
	America		Asia		Europe		Consolidated		America		Asia		Europe		Consolidated

*By Product Group:*
Connectivity solutions	$	33,929	$	2,510	$	8,092	$	44,531	$	97,273	$	9,012	$	25,069	$	131,354
Magnetic solutions		8,241		29,576		1,842		39,659		26,662		85,834		6,109		118,605
Power solutions and protection		23,608		7,868		8,813		40,289		73,495		21,709		32,121		127,325
	$	65,778	$	39,954	$	18,747	$	124,479	$	197,430	$	116,555	$	63,299	$	377,284

*By Sales Channel:*
Direct to customer	$	44,110	$	34,837	$	12,397	$	91,344	$	133,432	$	98,672	$	41,903	$	274,007
Through distribution		21,668		5,117		6,350		33,135		63,998		17,883		21,396		103,277
	$	65,778	$	39,954	$	18,747	$	124,479	$	197,430	$	116,555	$	63,299	$	377,284

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

*By Product Group:*
Connectivity solutions	$	34,919	$	5,293	$	8,314	$	48,526	$	100,797	$	13,533	$	26,043	$	140,373
Magnetic solutions		10,586		40,100		2,286		52,972		28,795		100,769		7,184		136,748
Power solutions and protection		25,149		8,135		11,707		44,991		71,759		23,760		32,811		128,330
	$	70,654	$	53,528	$	22,307	$	146,489	$	201,351	$	138,062	$	66,038	$	405,451

*By Sales Channel:*
Direct to customer	$	46,802	$	46,965	$	15,184	$	108,951	$	128,754	$	119,294	$	45,368	$	293,416
Through distribution		23,852		6,563		7,123		37,538		72,597		18,768		20,670		112,035
	$	70,654	$	53,528	$	22,307	$	146,489	$	201,351	$	138,062	$	66,038	$	405,451

			Nine Months Ended									Three Months Ended
			September 30, 2019									March 31, 2020
	Liability at				Cash Payments			Liability at		Liability at				Cash Payments			Liability at
	December 31,		New		and Other			September 30,		December 31,		New		and Other			March 31,
	2018		Charges		Settlements			2019		2019		Charges		Settlements			2020
Severance costs	$	-	$	663	$	(663	)	$	-	$	-	$	128	$	(128	)	$	-
Other restructuring costs		-		988		(943	)		45		44		-		-			44
Total	$	-	$	1,651	$	(1,606	)	$	45	$	44	$	128	$	(128	)	$	44

				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 (loss) income before reclassifications		(2,854	)		-		16				(2,838	)
Amount reclassified from accumulated other comprehensive loss		-			-		94		(a)		94
Net current period other comprehensive (loss) income		(2,854	)		-		110				(2,744	)

Effect of adoption of ASU 2018-02 (Topic 220)		-			-		(463	)			(463	)
Balance at September 30, 2019	$	(25,489	)	$	12	$	(2,568	)		$	(28,045	)

	Nine Months Ended
	September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,958
Operating cash flows from finance leases		36
Finance cash flows from finance leases		86
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		21,783
Finance leases		-

	September 30, 2019
Operating Leases:
Operating lease right-of-use assets	$	16,296
Operating lease liability, current		6,039
Operating lease liability, long-term		10,713
Total operating lease liabilities		16,752

Finance Leases:
Property, plant and equipment, gross	$	860
Accumulated depreciation		(225	)
Property, plant and equipment, net		635
Other current liabilities		97
Other long-term liabilities		529
Total finance lease liabilities	$	626

	~~September 30, 2019~~
~~Weighted-Average Remaining Lease Term:~~
~~Operating leases (in years)~~	~~3.22~~
~~Finance leases (in years)~~	~~5.1~~

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

Year Ending	Operating			Finance
September 30,	Leases			Leases
2020	$	6,712		$	160
2021		5,310			159
2022		3,681			159
2023		2,031			159
2024		326			159
Thereafter		438			26
Total undiscounted cash flows		18,498			822
Less imputed interest		(1,746	)		(196	)
Present value of lease liabilities	$	16,752		$	626


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

July 1 - July 31, 2019		-	$	-		-	$	-
August 1 - August 31, 2019		-		-		-		-
September 1 - September 30, 2019		30,000		14.93		-		-

Total		30,000	$	14.93		-	$	-

Item 6. Exhibits

(a) Exhibits:


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

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

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

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

101.INS*	XBRL Instance Document

101.SCH*	XBRL Taxonomy Extension Schema Document

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

	BEL FUSE INC.
~~November 12, 2019~~May 8, 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)