UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended ~~March 31,~~June 30, 2020
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ____________

Commission File No. 0-11676

BEL FUSE INC.

206 Van Vorst Street

Jersey City, NJ 07302

(201) 432-0463

(Address of principal executive offices and zip code)

(Registrant’s telephone number, including area code)

~~NEW JERSEY~~New Jersey		22-1463699
(State of incorporation)		~~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 ☒	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 ☒	No ☐

Indicate by ~~check mark~~checkmark whether the registrant ~~has submitted electronically every Interactive Data File required to be submitted pursuant to~~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 ~~405~~12b-2 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).~~Exchange Act.

Large accelerated

filer ☐

~~Yes~~Accelerated

filer ☒

~~No ☐~~

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

~~Large accelerated~~Non-accelerated

filer ☐

~~Accelerated~~Smaller reporting

~~filer~~company ☒

~~Non-accelerated~~

~~filer ☐~~

~~Smaller reporting~~

~~company ☒~~

Emerging growth

company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Securities registered pursuant to Section 12(b) of the 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)	~~BELFA~~BELFB	Nasdaq Global Select Market

~~Class B Common Stock ($0.10 par value)~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐

~~BELFB~~

~~Nasdaq Global Select Market~~No ☒

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).~~

~~Yes ☐~~

~~No ☒~~

Title of Each Class

Number of Shares of Common Stock Outstanding

as of ~~May~~August 1, 2020

Class A Common Stock ($0.10 par value)

2,144,912

Class B Common Stock ($0.10 par value)

~~10,120,602~~10,232,602

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 2019 Annual Report on Form 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 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.

	June 30,			December 31,
	2020			2019
ASSETS
Current Assets:
Cash and cash equivalents	$	75,288		$	72,289
Accounts receivable, net of allowance for doubtful accounts of $1,218 and $1,171, respectively		78,346			76,092
Inventories		104,726			107,276
Unbilled receivables		15,334			16,318
Assets held for sale		2,454			-
Other current assets		9,224			11,206
Total current assets		285,372			283,181

Property, plant and equipment, net		37,334			41,943
Right-of-use assets		16,627			18,504
Intangible assets, net		68,466			72,364
Goodwill		22,252			21,993
Deferred income taxes		4,071			3,731
Other assets		27,021			27,201
Total assets	$	461,143		$	468,917

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	44,826		$	44,169
Accrued expenses		28,402			26,918
Current portion of long-term debt		2,305			5,489
Operating lease liability, current		6,467			7,377
Other current liabilities		6,179			6,265
Total current liabilities		88,179			90,218

Long-term Liabilities:
Long-term debt		132,937			138,215
Operating lease liability, long-term		10,469			11,751
Liability for uncertain tax positions		27,075			26,901
Minimum pension obligation and unfunded pension liability		21,944			21,545
Deferred income taxes		1,145			1,726
Other liabilities		11,466			10,510
Total liabilities		293,215			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; 2,144,912 and 2,144,912 shares outstanding at June 30, 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; 10,233,602 and 10,127,602 shares outstanding at June 30, 2020 and December 31, 2019, respectively (net of 3,218,307 treasury shares)		1,023			1,013
Additional paid-in capital		35,036			33,826
Retained earnings		157,157			157,063
Accumulated other comprehensive loss		(25,502	)		(24,065	)
Total stockholders' equity		167,928			168,051
Total liabilities and stockholders' equity	$	461,143		$	468,917

March 31,

December 31,

2020

2019

ASSETS

Current Assets:

Cash and cash equivalents
$ 68,431 $ 72,289
Accounts receivable, net of allowance for doubtful accounts of $1,232 and $1,171, respectively
69,070 76,092
Inventories
104,313 107,276
Unbilled receivables
13,597 16,318
Other current assets
9,494 11,206
Total current assets
264,905 283,181

Property, plant and equipment, net 40,861 41,943
Right-of-use assets 17,466 18,504
Intangible assets, net
70,215 72,364
Goodwill
22,219 21,993
Deferred income taxes
4,489 3,731
Other assets
25,493 27,201
Total assets $ 445,648 $ 468,917

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable
$ 38,800 $ 44,169
Accrued expenses
24,104 26,918
Current portion of long-term debt
817 5,489
Operating lease liability, current
6,403 7,377
Other current liabilities
6,832 6,265
Total current liabilities
76,956 90,218

Long-term Liabilities:

Long-term debt
134,258 138,215
Operating lease liability, long-term
11,329 11,751
Liability for uncertain tax positions
26,864 26,901
Minimum pension obligation and unfunded pension liability
21,745 21,545
Deferred income taxes
1,239 1,726
Other liabilities
11,425 10,510
Total liabilities
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; 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
34,430 33,826
Retained earnings
152,420 157,063
Accumulated other comprehensive loss
(26,244 ) (24,065 )
Total stockholders' equity
161,832 168,051
Total liabilities and stockholders' equity
$ 445,648 $ 468,917

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

Revenue	$	121,172		$	127,416		$	225,149		$	252,805
Cost of sales		89,403			100,670			168,269			195,325
Gross profit		31,769			26,746			56,880			57,480

Research and development costs		6,116			6,862			12,175			14,036
Selling, general and administrative expenses		18,061			19,215			40,122			38,440
Restructuring charges		44			424			172			1,370
Gain on sale of property		-			(4,257	)		-			(4,257	)
Income from operations		7,548			4,502			4,411			7,891

Interest expense		(1,250	)		(1,381	)		(2,601	)		(2,820	)
Other (expense) income, net		(302	)		267			(390	)		(513	)
Earnings before provision for (benefit from) income taxes		5,996			3,388			1,420			4,558

Provision for (benefit from) income taxes		423			421			(349	)		460
Net earnings available to common stockholders	$	5,573		$	2,967		$	1,769		$	4,098


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

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

Three Months Ended

March 31,

2020

2019

Revenue
$ 103,978 $ 125,389
Cost of sales
78,866 94,645
Gross profit
25,112 30,744

Research and development costs
6,059 7,184
Selling, general and administrative expenses
22,062 19,225
Restructuring charges
128 946
(Loss) income from operations
(3,137 ) 3,389

Interest expense
(1,351 ) (1,440 )
Other income/expense, net
(88 ) (779 )
(Loss) earnings before (benefit from) provision for income taxes
(4,576 ) 1,170

(Benefit from) provision for income taxes
(772 ) 39
Net (loss) earnings available to common stockholders
$ (3,804 ) $ 1,131

Net (loss) earnings per common share:

Class A common share - basic and diluted
$ (0.30 ) $ 0.08
Class B common share - basic and diluted
$ (0.31 ) $ 0.09

Weighted-average number of shares outstanding:

Class A common share - basic and diluted
2,145 2,175
Class B common share - basic and diluted
10,123 10,089

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

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

Net earnings available to common stockholders	$	5,573	$	2,967		$	1,769		$	4,098

Other comprehensive income (loss):
Currency translation adjustment, net of taxes of ($3) in the three months ended June 30, 2020, $16 in the three months ended June 30, 2019, ($30) in the six months ended June 30, 2020 and ($1) in the six months ended June 30, 2019		676		(834	)		(1,569	)		(294	)
Change in unfunded SERP liability, net of taxes of ($20) in the three months ended June 30, 2020, ($11) in the three months ended June 30, 2019, ($40) in the six months ended June 30, 2020 and ($22) in the six months ended June 30, 2019		66		37			132			74
Other comprehensive income (loss)		742		(797	)		(1,437	)		(220	)

Comprehensive income	$	6,315	$	2,170		$	332		$	3,878

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

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

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

							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

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

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 six months ended ~~March 31,~~June 30, 2020 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Bel Fuse Annual Report on Form ~~10-K~~10-K for the year ended December 31, 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~~10-K for the year ended December 31, 2019. There were no significant changes to these accounting policies during the ~~three~~six months ended ~~March 31,~~June 30, 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~~$6.9 million and $14.0 million have been reclassified from cost of sales to a separate line item below gross profit in the accompanying condensed consolidated statement of operations for the three and six months ended ~~March 31, 2019.~~June 30, 2019, respectively. Also during the fourth quarter of 2019, the Company changed its financial statement presentation related to gain/loss on foreign currency exchange. These gains/losses were previously included within selling, general and administrative expense. ~~Losses~~Gains (losses) on foreign currency exchange in the amount of ~~$0.6~~$0.5 million and ($0.1) million have been reclassified from selling, general and administrative expense and are now included within other ~~income/expense,~~(expense) income, net on the accompanying condensed consolidated statement of operations for the three and six months ended ~~March 31, 2019.~~June 30, 2019, respectively. These changes in presentation are consistent with that of our peers. The Company also implemented a change to its reportable segments during the fourth quarter of 2019. In the past, ~~its~~the Company's reportable operating segments were geographic in nature: North America, Europe and Asia. In connection with the Company's migration to its new ERP system and with the acquisition of CUI, management is now assessing the business on a product group basis, and making decisions based on the profitability of three product segments, Cinch Connectivity Solutions, Power Solutions and Protection and Magnetic Solutions, in addition to a Corporate segment. The segment disclosures in Note 14 for the three and six months ended ~~March 31,~~June 30, 2019 have been recast to reflect the new reportable operating segments.

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

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU ~~2018-13,~~2018-13, Fair Value Measurement (Topic ~~820)~~820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the updated provisions effective January 1, 2020. The adoption did not have a material impact on the Company's consolidated financial position or consolidated results of operations.

In August 2018, the FASB issued ASU ~~2018-15,~~2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic ~~350-40)~~350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Cost. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019. 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,~~2016-13, Financial Instruments – Credit Losses (Topic ~~326)~~326): Measurement of Credit Losses on Financial Instruments (“ASU ~~2016-13”~~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 currently assessing the impact of ASU ~~2016-13,~~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,~~2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic ~~715-20)~~715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU ~~2018-14"~~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~~2018-14 would need to be applied on a retrospective basis. The Company is currently assessing the impact the new guidance will have on ~~our~~the Company's disclosures.

In December 2019, the FASB issued ASU ~~2019-12,~~2019-12, Simplifying the Accounting for Income Taxes ("ASU ~~2019-12"~~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~~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,~~2019-12, but it is not expected to have a material impact on the Company’s consolidated financial statements.

2.	ACQUISITION

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

During the three and six months ended ~~March 31,~~June 30, 2020, the Company expensed $0.2 million of acquisition-related costs. These costs are included in selling, general and administrative expenses in the accompanying condensed consolidated ~~statement~~statements of operations.

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

CUI’s results of operations have been included in the Company’s condensed consolidated financial statements for the period subsequent to the acquisition date. CUI contributed revenues of ~~$8.2~~$10.6 million and estimated net earnings of ~~$0.9~~$2.3 million to the Company for the three months ended ~~March 31,~~June 30, 2020 and revenues of $18.9 million and estimated net earnings of $3.1 million to the Company for the six months ended June 30, 2020. The following unaudited pro forma information presents the combined operating results of the Company and CUI. The following unaudited pro forma consolidated results of operations assume that the acquisition of CUI was completed as of January 1,2019:

Three Months Ended

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

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

REVENUE

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

	Three Months Ended March 31, 2020								*Three Months Ended June 30, 2020*								*Six Months Ended June 30, 2020*
	Cinch Connectivity		Power Solutions		Magnetic				Cinch Connectivity Solutions		Power Solutions and Protection		Magnetic Solutions		Consolidated		Cinch Connectivity Solutions		Power Solutions and Protection		Magnetic Solutions		Consolidated
	Solutions		and Protection		Solutions		Consolidated

*By Geographic Region:*
*By Product Group:*
North America	$	29,703	$	22,723	$	7,107	$	59,533	$	27,608	$	29,029	$	7,097	$	63,734	$	57,310	$	51,752	$	14,204	$	123,266
Europe		7,762		9,314		1,201		18,277		8,356		8,965		1,717		19,038		16,118		18,279		2,918		37,315
Asia		1,635		4,140		20,393		26,168		2,944		7,118		28,338		38,400		4,579		11,258		48,731		64,568
	$	39,100	$	36,177	$	28,701	$	103,978	$	38,908	$	45,112	$	37,152	$	121,172	$	78,007	$	81,289	$	65,853	$	225,149

*By Sales Channel:*
Direct to customer	$	25,053	$	21,577	$	24,342	$	70,972	$	23,600	$	26,894	$	31,021	$	81,515	$	48,652	$	48,471	$	55,363	$	152,486
Through distribution		14,047		14,600		4,359		33,006		15,308		18,218		6,131		39,657		29,355		32,818		10,490		72,663
	$	39,100	$	36,177	$	28,701	$	103,978	$	38,908	$	45,112	$	37,152	$	121,172	$	78,007	$	81,289	$	65,853	$	225,149

	Three Months Ended March 31, 2019								*Three Months Ended June 30, 2019*								*Six Months Ended June 30, 2019*
	Cinch Connectivity		Power Solutions		Magnetic				Cinch Connectivity Solutions		Power Solutions and Protection		Magnetic Solutions		Consolidated		Cinch Connectivity Solutions		Power Solutions and Protection		Magnetic Solutions		Consolidated
	Solutions		and Protection		Solutions		Consolidated

*By Geographic Region:*
*By Product Group:*
North America	$	32,121	$	23,521	$	8,945	$	64,587	$	31,297	$	26,131	$	9,638	$	67,066	$	63,418	$	49,652	$	18,583	$	131,653
Europe		8,765		12,539		2,221		23,525		8,212		10,768		2,046		21,026		16,977		23,307		4,267		44,551
Asia		3,475		6,712		27,090		37,277		3,027		7,129		29,168		39,324		6,502		13,841		56,258		76,601
	$	44,361	$	42,772	$	38,256	$	125,389	$	42,536	$	44,028	$	40,852	$	127,416	$	86,897	$	86,800	$	79,108	$	252,805

*By Sales Channel:*
Direct to customer	$	29,615	$	29,101	$	32,506	$	91,222	$	28,207	$	28,594	$	34,641	$	91,442	$	57,812	$	57,694	$	67,158	$	182,664
Through distribution		14,746		13,671		5,750		34,167		14,329		15,434		6,211		35,974		29,085		29,106		11,950		70,141
	$	44,361	$	42,772	$	38,256	$	125,389	$	42,536	$	44,028	$	40,852	$	127,416	$	86,897	$	86,800	$	79,108	$	252,805

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

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

Contract assets - current (unbilled receivable)	$	13,597	$	16,318	$	15,334	$	16,318
Contract liabilities - current (deferred revenue)	$	917	$	653	$	1,148	$	653

The change in balance of our unbilled receivables from December 31, 2019 to ~~March 31,~~June 30, 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 ~~March 31,~~June 30, 2020 related to contracts that exceed one year in duration amounted to ~~$16.7~~$15.2 million, with expected contract expiration dates that range from 2021 - 2025. It is expected that ~~77%~~27% of this aggregate amount will be recognized in 2021, ~~20%~~ 70% will be recognized in 2022 and the remainder will be recognized in years beyond 2022.

4.	~~(LOSS)~~ EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted net ~~(loss)~~ earnings per common share under the ~~two-class~~two-class method for the three and six months ended ~~March 31,~~June 30, 2020 and 2019:

Three Months Ended

March 31,

2020

2019

Numerator:

Net (loss) earnings
$ (3,804 ) $ 1,131
Less dividends declared:

Class A
130 130
Class B
709 708
Undistributed (loss) earnings
$ (4,643 ) $ 293

Undistributed earnings (loss) allocation - basic and diluted:

Class A undistributed (loss) earnings
$ (780 ) $ 50
Class B undistributed (loss) earnings
(3,863 ) 243
Total undistributed (loss) earnings
$ (4,643 ) $ 293

Net earnings (loss) allocation - basic and diluted:

Class A net (loss) earnings
$ (649 ) $ 180
Class B net (loss) earnings
(3,155 ) 951
Net (loss) earnings
$ (3,804 ) $ 1,131

Denominator:

Weighted-average shares outstanding:

Class A - basic and diluted
2,145 2,175
Class B - basic and diluted
10,123 10,089

Net (loss) earnings per share:

Class A - basic and diluted
$ (0.30 ) $ 0.08
Class B - basic and diluted
$ (0.31 ) $ 0.09

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

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

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

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

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

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

5.	FAIR VALUE MEASUREMENTS

Fair value is defined as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

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

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

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

As of ~~March 31,~~June 30, 2020 and December 31, 2019, our available-for-sale securities primarily consisted of investments held in a rabbi trust which are intended to fund the Company’s Supplemental Executive Retirement Plan (“SERP”) obligations. These securities are measured at fair value using quoted prices in active markets for identical assets (Level ~~1) inputs~~1 inputs) and amounted to ~~$1.0~~$0.9 million at ~~March 31,~~June 30, 2020 and $1.1 million at December 31, 2019. During the second quarter of 2020, the Company entered into foreign exchange forward contracts, the fair value of which was less than $0.1 million at June 30, 2020. The Company does not have any financial assets measured at fair value on a recurring basis categorized as Level 3, and there were no transfers in or out of Level ~~1, Level 2 or Level~~ 3 during the ~~three~~six months ended ~~March 31,~~June 30, 2020 or ~~March 31,~~June 30, 2019. There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the ~~three~~six months ended ~~March 31,~~June 30, 2020 or ~~March 31,~~June 30, 2019.

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

The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable and accrued expenses, which are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. The fair value of the Company’s long-term debt is estimated using a discounted cash flow method based on interest rates that are currently available for debt issuances with similar terms and maturities. At ~~March 31,~~June 30, 2020 and December 31, 2019, the estimated fair value of total debt was ~~$141.4~~$141.7 million and $146.4 million, respectively, compared to a carrying amount of ~~$135.1~~$135.2 million and $143.7 million, respectively. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of ~~March 31,~~June 30, 2020.

Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment upon the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. ~~There were no~~The Company considered the impacts of COVID-19 on Bel's business and on general economic conditions when making its assessment on whether a triggering ~~events that~~event had occurred during the ~~three~~six months ended ~~March 31,~~June 30, 2020. Based on the Company's assessment, it was concluded that no triggering events occurred during the six months ended June 30, 2020 that would warrant interim impairment testing.

7.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	March 31,			December 31,			June 30,			December 31,
	2020			2019			2020			2019
Land	$	1,423		$	1,431		$	1,428		$	1,431
Buildings and improvements		30,550			29,722			22,647			29,722
Machinery and equipment		132,447			132,134			124,192			132,134
Construction in progress		2,645			5,090			2,662			5,090
		167,065			168,377			150,929			168,377
Accumulated depreciation		(126,204	)		(126,434	)		(113,595	)		(126,434	)
Property, plant and equipment, net	$	40,861		$	41,943		$	37,334		$	41,943

Depreciation expense for the three months ended ~~March 31,~~June 30, 2020 and 2019 was $2.3 million and $2.5 million, respectively. Depreciation expense for the six months ended June 30, 2020 and 2019 was $4.7 million and $5.0 million, respectively. Depreciation expense related to our manufacturing facilities and equipment is included in cost of sales and depreciation expense associated with administrative facilities and office equipment is included in selling, general and administrative expense within the accompanying condensed consolidated statements of operations.

8.	ACCRUED EXPENSES

Accrued expenses consist of the following:

	March 31,		December 31,		June 30,		December 31,
	2020		2019		2020		2019
Sales commissions	$	2,755	$	2,542	$	2,685	$	2,542
Subcontracting labor		742		990		1,115		990
Salaries, bonuses and related benefits		11,781		14,715		15,301		14,715
Warranty accrual		1,537		1,576		1,368		1,576
Other		7,289		7,095		7,933		7,095
	$	24,104	$	26,918	$	28,402	$	26,918

The change in warranty accrual during the ~~three~~six months ended ~~March 31,~~June 30, 2020 primarily related to repair costs incurred and adjustments to pre-existing warranties. There were no new material warranty charges incurred during the ~~three~~six months ended ~~March 31,~~June 30, 2020.

Restructuring Activities

Included within other accrued expenses in the table above are costs accrued related to the Company’s restructuring activities. Activity and liability balances related to restructuring costs for the ~~three~~six months ended ~~March 31,~~June 30, 2020 are as follows:

			Three Months Ended									Six Months Ended
			March 31, 2020									June 30, 2020
	Liability at				Cash Payments			Liability at		Liability at					Cash Payments			Liability at
	December 31,		New		and Other			March 31,		December 31,		New			and Other			June 30,
	2019		Charges		Settlements			2020		2019		Charges			Settlements			2020
Severance costs	$	-	$	128	$	(128	)	$	-	$	-	$	216		$	(216	)	$	-
Other restructuring costs		44		-		-			44		44		(44	)		-			-
Total	$	44	$	128	$	(128	)	$	44	$	44	$	172		$	(216	)	$	-

DEBT

The Company has a Credit and Security Agreement with KeyBank National Association (as amended, the ~~“CSA”~~"credit agreement" or the "CSA"). The CSA consists of (i) a term loan, with outstanding borrowings of $104.8 million and $113.0 million at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, and (ii) a $75 million revolving credit facility (“Revolver”), with $32.0 million in outstanding borrowings at each of ~~March 31,~~June 30, 2020 and December 31, 2019. The CSA has a maturity date of December 11, 2022. At ~~March 31,~~June 30, 2020 and December 31, 2019, the carrying value of the debt on the condensed consolidated balance sheet is reflected net of ~~$1.8~~$1.6 million and $1.3 million, respectively, of deferred financing costs.

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

The weighted-average interest rate in effect was ~~3.25%~~3.44% at ~~March 31,~~June 30, 2020 and 3.31% at December 31, 2019 and consisted of LIBOR plus the Company’s credit spread, as determined per the terms of the CSA. The Company incurred ~~$1.4~~$1.3 million and $1.4 million of interest expense during the three months ended ~~March 31,~~June 30, 2020 and ~~March 31,~~June 30, 2019, respectively. The Company incurred $2.6 million and $2.8 million of interest expense during the six months ended June 30, 2020 and June 30, 2019, respectively.

The CSA contains customary representations and warranties, covenants and events of default and financial covenants that measure (i) the ratio of the Company's total funded indebtedness, on a consolidated basis, to the amount of the Company’s consolidated EBITDA, as defined, (“Leverage Ratio”) and (ii) the ratio of the amount of the Company’s consolidated EBITDA to the Company’s consolidated fixed ~~charges.~~charges ("Fixed Charge Coverage Ratio"). If an event of default occurs, the lenders under the CSA would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. At ~~March 31,~~June 30, 2020, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio.

10.

INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law. Certain provisions of the CARES Act impact the 2019 income tax provision computations of the Company and were reflected in the three months ended March 31, 2020, or the period of enactment. The CARES Act contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section ~~163(j)~~163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. This modification would increase the allowable interest expense deduction of the Company and result in a net operating loss (“NOL”) for the year ended December 31, 2019. The Company intends to carry back the NOL to the tax year ended December 31, 2015 and has reflected this impact in the tax provision for the three months ended March 31, 2020. Due to the foregoing, and as a result of the difference in corporate tax rates in the NOL carryback period, the Company recognized a benefit associated with the enactment of the CARES ~~act~~Act in the three months ended March 31, 2020.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2016 and for state examinations before 2013. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2009 in Asia and generally 2011 in Europe. The Company is currently under examination by the taxing authorities in Slovakia for the tax year 2014 and has accrued tax based on preliminary findings.

As a result of the expiration of the statutes of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized benefits for tax positions taken regarding previously filed tax returns may change materially from those recorded as liabilities for uncertain tax positions in the Company’s consolidated financial statements at ~~March 31,~~June 30, 2020. The Company’s liabilities for uncertain tax positions totaled $28.4 million and $29.1 million at ~~March 31,~~June 30, 2020 and December 31, 2019, respectively, of which $1.3 million and $2.2 million is included in other current liabilities at ~~March 31,~~June 30, 2020 and December 31, 2019,respectively and are expected to be resolved during 2020 by way of expiration of the related statute of limitations. These amounts, if recognized, would reduce the Company’s effective tax rate.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes. During the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, the Company recognized ~~$0.2~~$0.4 million in interest and penalties in the condensed consolidated statements of operations during each period. During the ~~three~~six months ended ~~March 31, 2019,~~ June 30, 2020, the Company recognized a benefit of $0.3 million for the reversal of such interest and penalties, relating to the settlement of the liability for uncertain tax positions. The Company has approximately ~~$5.1 million and~~ $4.9 million accrued for the payment of interest and penalties at ~~March 31,~~each of June 30, 2020 and December 31, 2019, ~~respectively,~~ which is included in both income taxes payable and liability for uncertain tax positions in the condensed consolidated balance sheets.

11.

RETIREMENT FUND AND PROFIT SHARING PLAN

The Company maintains the Bel Fuse Inc. Employees’ Savings Plan, a defined contribution plan that is intended to meet the applicable requirements for tax-qualification under sections ~~401(a)~~401(a) and (k) of the Internal Revenue Code of 1986, as amended (the “Code”). The expense for the three months ended ~~March 31,~~June 30, 2020 and 2019 amounted to $0.3 million in both periods. The expense for the six months ended June 30, 2020 and 2019 amounted to $0.6 million in both periods. The Company’s matching contribution is made in the form of Bel Fuse Inc. Class A common stock. As of ~~March 31,~~June 30, 2020, the plan owned ~~194,235~~223,406 and ~~111,879~~111,761 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

The Company's subsidiaries in Asia have a retirement fund covering substantially all of their Hong Kong based full-time employees. The expense for the three months ended ~~March 31,~~June 30, 2020 and 2019 amounted to $0.1 million in both periods. The expense for the six months ended June 30, 2020 and 2019 amounted to $0.2 million in both periods. As of ~~March 31,~~June 30, 2020, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.

The Company maintains a SERP, which is designed to provide a limited group of key management and other key employees of the Company with supplemental retirement and death benefits. As discussed in Note 45 above, the Company has investments in a rabbi trust which are intended to fund the obligations of the SERP.

The components of SERP expense are as follows:

	Three Months Ended				Three Months Ended				Six Months Ended
	March 31,				June 30,				June 30,
	2020		2019		2020		2019		2020		2019
Service cost	$	150	$	144	$	150	$	144	$	300	$	288
Interest cost		159		185		159		185		318		370
Net amortization		86		48		86		48		172		96
Net periodic benefit cost	$	395	$	377	$	395	$	377	$	790	$	754

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

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

	March 31,		December 31,		June 30,		December 31,
	2020		2019		2020		2019
Prior service cost	$	700	$	738	$	662	$	738
Net loss		1,918		1,965		1,870		1,965
	$	2,618	$	2,703	$	2,532	$	2,703

12.

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

March 31,

December 31,

2020

2019

Foreign currency translation adjustment, net of taxes of ($715) at March 31, 2020 and ($742) at December 31, 2019
$ (22,277 ) $ (20,032 )
Unrealized holding gains on available-for-sale securities, net of taxes of $0 at March 31, 2020 and $0 at December 31, 2019
12 12
Unfunded SERP liability, net of taxes of ($619) at March 31, 2020 and ($639) at December 31, 2019
(3,979 ) (4,045 )

Accumulated other comprehensive loss
$ (26,244 ) $ (24,065 )

	June 30,			December 31,
	2020			2019

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

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

Changes in accumulated other comprehensive loss by component during the ~~three~~six months ended ~~March 31,~~June 30, 2020 are as follows. All amounts are net of tax.

Unrealized Holding

Foreign Currency

Gains on

Translation

Available-for-

Unfunded

Adjustment

Sale Securities

SERP Liability

Total

Balance at December 31, 2019
$ (20,032 ) $ 12 $ (4,045 ) $ (24,065 )
Other comprehensive (loss) income before reclassifications
(2,245 ) - (169 ) (2,414 )
Amount reclassified from accumulated other comprehensive income (Loss)
- - 235 (a) 235
Net current period other comprehensive income (loss)
(2,245 ) - 66 (2,179 )

Balance at March 31, 2020
$ (22,277 ) $ 12 $ (3,979 ) $ (26,244 )

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

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

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

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

13.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

In connection with the acquisition of Power Solutions, there is an ongoing claim by the Arezzo Revenue Agency in Italy concerning certain tax matters related to what was then Power-One Asia Pacific Electronics Shenzhen Co. Ltd. (now Bel Power Solutions Asia Pacific Electronics Shenzhen Co. Ltd, or “BPS China”) for the years 2004 to 2006. In September 2012, the Tax Court of Arezzo ruled in favor of BPS China and cancelled the claim. In February 2013, the Arezzo Revenue Agency filed an appeal of the Tax Court’s ruling. The hearing of the appeal was held on October 2, 2014. On October 13, 2014, BPS China was informed of the Regional Tax Commission of Florence ruling which was in favor of the Arezzo Revenue Agency and against BPS China. An appeal was filed on July 18, 2015 before the Regional Tax Commission of Florence and rejected. On December 5, 2016, the Arezzo Revenue Agency filed an appeal with the Supreme Court and BPS China filed a counter-appeal on January 4, 2017. The Supreme Court has yet to render its judgment. The estimated liability related to this matter is approximately $12.0 million and has been included as a liability for uncertain tax positions on the accompanying condensed consolidated balance sheets. As Bel is fully indemnified in this matter per the terms of the stock purchase agreement with ABB, a corresponding other asset for indemnification is also included in other assets on the accompanying condensed consolidated balance sheets at ~~March 31,~~June 30, 2020 and December 31, 2019.

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

14.

SEGMENTS

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

	Three Months Ended March 31, 2020															Three Months Ended June 30, 2020
	Cinch Connectivity			Power Solutions			Magnetic			Corporate						Cinch Connectivity			Power Solutions			Magnetic			Corporate
	Solutions			and Protection			Solutions			Segment			Total			Solutions			and Protection			Solutions			Segment		Total
Revenue	$	39,100		$	36,177		$	28,701		$	-			103,978		$	38,908		$	45,112		$	37,152		$	-		121,172
Gross Profit		11,194			8,798			6,076			(956	)		25,112			11,531			10,615			9,445			178		31,769
Gross Profit %		28.6	%		24.3	%		21.2	%		nm			24.2	%		29.6	%		23.5	%		25.4	%		nm		26.2	%

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

Three Months Ended March 31, 2019

Cinch Connectivity

Power Solutions

Magnetic

Corporate

Solutions

and Protection

Solutions

Segment

Total

Revenue
$ 44,361 $ 42,772 $ 38,256 $ - $ 125,389
Gross Profit 12,315 9,991 8,525 (87 ) 30,744
Gross Profit %
27.8 % 23.4 % 22.3 % nm 24.5 %

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~~Quarterly Report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 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 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.

Bel designs, manufactures and 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, transportation and broadcasting industries. Bel’s portfolio of products also finds application in the automotive, medical and consumer electronics markets.

The Company operates through three product group segments, in addition to a Corporate segment. In the ~~three~~six months ended ~~March 31,~~June 30, 2020,~~, 37%~~ 36% of the Company’s revenues were derived from ~~Cinch Connectivity Solutions, 35% from~~ Power Solutions and Protection, 35% from Cinch Connectivity Solutions and ~~28%~~29% from its Magnetic Solutions operating segment.

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

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

All of our manufacturing sites are operating as of the filing date of this Quarterly Report, 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.~~Report. Although the majority of our factories in North America, Europe and Asia are currently at 90+% of their normal workforce levels, we are experiencing lower productivity and efficiency rates at certain sites in North America and Europe (estimated at ~~80-85%)~~60-85%, depending on the impacted site) due to a reduced workforce at ~~certain~~those sites. In addition, in order to comply with social distancing requirements, certain of our factory floors have been reconfigured to provide additional spacing in production lines, which has resulted in some inefficiencies related to product flow. Bel has also experienced higher freight costs for products typically shipped by air due to lower cargo capacity with the reduction in commercial air travel. While there are some delays within the supply chain in the movement of products related to border closures, to date such delays have not materially impacted our ability to operate our business or achieve our business goals. To date, we have not seen a significant reduction in demand for our products due to COVID-19, as many of our products support military, medical and networking applications, which generally have not been negatively impacted by COVID-19. However, approximately 5% of our revenue relates to products utilized in end markets that have been impacted by COVID-19, such as commercial aerospace.

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

Based on our analysis of ASC 350 and ASC 360 during the ~~three~~six months ended ~~March 31,~~June 30, 2020, we are currently not aware of any material impairments of our goodwill, indefinite-lived intangible assets or finite-lived assets. The Company will continue to assess the relevant criteria on a quarterly basis based on updated cash flow and market assumptions. Unfavorable changes in cash flow or market assumptions could result in impairment of these assets in future periods.

As our operations have continued, albeit at slightly reduced production and efficiency rates, we have not experienced a negative impact on our liquidity to date. Our balance of cash on hand continues to be strong at ~~$68.4~~$75.3 million at ~~March 31,~~June 30, 2020 as compared to $72.3 million at December 31, 2019, despite a voluntary debt payment of $8.2 million made during the first quarter. Our cash balance on hand as of ~~April 30,~~July 31, 2020 was ~~$68.2~~$78.5 million. The Company also has availability under its current revolving credit facility; as of ~~March 31,~~June 30, 2020, the Company could borrow an additional ~~$12.5~~$44.8 million while still being in compliance with its debt covenants. However, any further negative impact to our financial results related to COVID-19 would have a related negative impact on our financial covenants outlined in our credit agreement, which would impact the amount available to borrow under our revolving credit facility. In order to assist with maintaining our liquidity position, the Company implemented several measures during the first quarter, including the deferral of employer social security taxes under the federal CARES Act, restrictions on new hires, suspension of salary reviews, the elimination of all business travel and restrictions on spending related to capital expenditures. During the three and six months ended June 30, 2020, travel expenses incurred by the Company were $0.7 million and $0.9 million lower, respectively, than the comparable periods of 2019. Management has developed Phase 2 and Phase 3 of the Company’s cash conservation/cost savings plan which would be implemented in the event our liquidity position or financial results become materially impacted by COVID-19.

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

~~We've seen positive signs in Bel's underlying business~~Visibility is limited as we enter the second ~~quarter. Orders received in~~half of 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 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 quarter were over $11 million, one of 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 compared to the first quarter. However, beyond the second quarter, we have limited visibilityyear due to the ~~evolving~~continued uncertainty around COVID-19, ~~environment.~~and its potential impact on the operations of Bel, its customers and its suppliers globally. Bel's management team will continue to take meaningful steps toward improving our profitability. Further restructuring efforts and related incremental cost savings are expected to continue over the next 18 months as we further rationalize our operational footprint and complete the implementation of our new ERP system. We remain focused on bottom line growth, and will continue the process of re-evaluating our customer base and product portfolio to ensure our resources are supporting those customers and products that align with our goal of improved profitability. The preceding sentences represent Forward-Looking Statements. See “Cautionary Notice Regarding Forward-Looking Information.”

Sales of our Connectivity Solutions products declined $3.6 million and $8.9 million during the ~~first~~ ~~quarter~~three and six months ended June 30, 2020, respectively, as compared to the same periods of ~~2020~~ ~~declined $5.3 million~~2019. These declines were primarily due to lower demand from direct and after-market commercial aerospace customers, ~~and products used in structured cabling applications. This was~~ partially offset by higher demand for our military products in the first ~~quarter~~half of 2020 as compared to the first ~~quarter~~half of 2019. This shift in product mix along with the operational cost reductions detailed in the "Restructuring" section above have resulted in improved gross margins for the three and six month periods of 2020 as compared to the same periods of 2019.

Sales of our Magnetic Solutions products were down $3.7 million and $13.3 million during the three and six months ended ~~March 31,~~June 30, 2020, ~~were down $9.5 million from~~respectively, as compared to the same ~~period~~periods of ~~2019 as~~2019. As the majority of our manufacturing of Magnetic Solutions products is in the PRC, our ability to manufacture product ~~in China~~ was temporarily impacted during ~~February~~the first quarter of 2020 due to the factory closures associated with ~~COVID-19.~~COVID-19, which contributed to the decline in sales for the first half of 2020 as compared to the same period of 2019. There were improvements in both the levels of productivity and customer demand for our ICM products in the second quarter of 2020 as compared to the first quarter of 2020, while demand remained below that of the second quarter 2019 levels. The gross margin improvement in the 2020 periods presented above versus the comparable 2019 periods was largely the result of restructuring measures implemented in late 2019 and a shift in product mix within the Magnetic Solutions segment.

Sales of our Power Solutions and Protection products were ~~$6.7~~$1.1 million ~~lower~~higher in the ~~first~~second quarter of 2020 compared to the same quarter of 2019, while sales were $5.5 million lower for the first half of 2020 as compared to the same period of 2019. The CUI business, which was acquired in December 2019, contributed sales of $10.6 million and $18.9 million during the three and six months ended June 30, 2020, respectively, at a gross margin of 39.3% and 38.2%, respectively. Sales of our Bel Power Solutions products ~~into datacenter applications~~ decreased by ~~$11.9~~$9.0 million and $20.9 million during the three and six months ended June 30, 2020, respectively, as compared to the same periods of 2019. These declines were due in part to factory closures in China following the Lunar New Year holiday in connection with ~~COVID-19. First quarter 2020 sales were also impacted by~~COVID-19, in addition to lower demand from a Cloud customer due to tariffs imposed on our product. ~~Sales of our Custom Module and~~Our DC/DC power products were ~~$1.3~~also $1.4 million and ~~$1.1~~$2.6 million lower during the three and six months ended June 30, 2020, respectively, as compared to the same periods last ~~year’s first quarter. These decreases were partially offset by~~year. The gross margin expansion noted for the 2020 periods above as compared to the 2019 periods is largely due to the inclusion of higher-margin CUI sales in addition to cost savings that resulted from restructuring efforts implemented in the ~~recently-acquired CUI business, which contributed $8.2 million in power sales during the first quarter~~latter half of ~~2020.~~2019.

The fluctuations in material costs and labor costs as a percentage of sales during the three and six months ended ~~March 31,~~June 30, 2020 compared to the same ~~period~~periods in 2019 were primarily due to a shift in classification of certain outsourced manufacturing from labor costs to material costs in connection with the transition of our TRP business onto the 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%~~56.3% of revenue in the ~~first~~second quarter of 2019 to ~~52.5%~~53.9% of revenue in the ~~first~~second quarter of 2020 and from 54.8% in the first half of 2019 to 53.2% in the first half of 2020. ~~This reduction was~~These reductions were primarily due to a reduction in material costs and a more favorable exchange rate environment related to the Chinese Renminbi and Mexican ~~Peso.~~Peso, which resulted in lower labor costs. This was partially offset by PRC government-mandated minimum wage increases in ~~one~~two of the regions where Bel’s factories are located effective March 1, 2020 and May 1, 2020.

The other expenses noted in the table above include fixed cost items such as support labor and fringe, depreciation and amortization, and facility costs (rent, utilities, insurance). In total, these other expenses decreased during the three and six months ended ~~March 31,~~June 30, 2020 by ~~$3.6~~$4.8 million and $8.4 million, respectively, as compared to the same ~~period~~periods of ~~2019,~~2019. These declines primarily ~~due to~~related cost savings from restructuring measures and other operational cost reductions noted in the "Restructuring" section above. The costs during the first half of 2020 were also reduced by $2.2 million ofrelated to subsidies received during the first quarter from the Chinese government to offset costs and inefficiencies incurred ~~in the first quarter of 2020~~ due to the temporary closures of our factories in China in connection with COVID-19.

R&D expense amounted to $6.1 million and ~~$7.2~~$6.9 million for the three months ended ~~March 31,~~June 30, 2020 and 2019, respectively, and $12.2 million and $14.0 million for the six months ended June 30, 2020 and 2019, respectively. The lower R&D expenses in 2020 as compared to the ~~first quarter of~~same periods 2019 is largely reflective of cost savings related to the realignment of our Power Solutions R&D implemented in 2019 and a more favorable foreign exchange rate environment in the 2020 periods as compared to the rates in effect during 2019.

SG&A expenses ~~during~~were $18.1 million, down $1.2 million from the ~~first~~second quarter of ~~2020~~ ~~were $22.1~~2019. Lower travel expenses of $0.7 million, upa reduction in ERP costs of $0.4 million and savings from $~~19.2~~other cost containment efforts outweighed the $1.9 million ~~in the~~ ~~first~~ ~~quarter~~ of ~~2019. Included within~~incremental SG&A expenses isassociated with the recently-acquired CUI business. SG&A expense also included a ~~reduction in~~gain on the cash surrender value of ~~our company-owned life insurance~~COLI policies of ~~$1.4~~$1.0 million in the ~~first~~second quarter of 2020 compared to a gain on these policies of ~~$0.7~~$0.2 million in the second quarter of 2019.

SG&A expenses were $40.1 million, up $1.7 million from the first half of 2019. A reduction in ERP costs of $1.4 million, lower travel expenses of $0.9 million and savings from other cost containment efforts partially offset the $4.1 million of incremental SG&A expenses associated with the recently-acquired CUI business. SG&A expense also included a loss on the cash surrender value of COLI policies of $0.4 million in the first ~~quarter~~half of ~~2019. SG&A expense was also higher~~2020 compared to a gain on these policies of $0.8 million in the first ~~quarter~~half of ~~2020 due to the inclusion of CUI expenses of $2.0 million for the quarter. These factors were offset by lower ERP implementation costs of $1.0 million.~~2019.

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

The provision for income taxes for the three months ended June 30, 2020 and 2019 was $0.4 million. The Company’s earnings before income taxes for the three months ended June 30, 2020, were approximately $2.6 million higher than the same period in 2019, primarily attributable to an increase in the income from the Asia segment. The Company’s effective tax rate was 7.1% and 12.4% for the three months ended June 30, 2020 and 2019, respectively. The change in the effective tax rate during the three months ended June 30, 2020 as compared to the same period in 2019, is primarily attributable to the impact of permanent differences on U.S. tax exempt activities. See Note 10, “Income Taxes.”

The (benefit) provision for income taxes for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 was ($~~0.8)~~0.3) million and ~~less than $0.1~~$0.5 million, respectively. The Company’s earnings ~~(loss)~~ before income taxes for the ~~three~~six months ended ~~March 31,~~June 30, 2020, were approximately ~~$5.7~~$3.1 million lower than the same period in 2019, primarily attributable to a decrease in the income from the North America ~~Europe~~ and ~~Asia~~Europe segments. The Company’s effective tax rate was ~~16.9%~~(24.6%) and ~~3.3%~~10.1% for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively. The change in the effective tax rate during the ~~three~~six months ended ~~March 31,~~June 30, 2020 as compared to the same period in 2019, is primarily attributable to ~~a decrease in taxes related to GILTI income and the federal tax law change for the CARES Act, and due in part to~~ tax benefits relating to the reversal of valuation allowances and the federal tax law changes for the CARES Act, offset by the impact of permanent differences on U.S. tax exempt activities. See Note 10, “Income Taxes.”

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 ~~March 31,~~June 30, 2020 and December 31, 2019,~~, $34.5~~ $37.5 million and $29.1 million, respectively (or 50% and 40%, respectively), of cash and cash equivalents was held by foreign subsidiaries of the Company. During the first ~~three~~six months of 2020,, the Company repatriated $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.

Cash and cash equivalents, marketable securities and accounts receivable comprised approximately ~~30.9%~~33.3% of the Company’s total assets at ~~March 31,~~June 30, 2020 and 31.6% of total assets at December 31, ~~2019~~.2019. The Company’s current ratio (i.e., the ratio of current assets to current liabilities) was ~~3.4~~3.2 to 1 at ~~March 31,~~June 30, 2020 and 3.1 to 1 at December 31, ~~2019~~.2019.

In June 2014, the Company entered into a senior Credit and Security Agreement, which was subsequently amended in December 2014, March 2016, and further amended and refinanced in December 2017. The Credit and Security Agreement contains customary representations and warranties, covenants and events of default and financial covenants that measure (i) the ratio of the Company's total funded indebtedness, on a consolidated basis, to the amount of the Company's consolidated EBITDA, as defined ("Leverage Ratio"), and (ii) the ratio of the amount of the Company's consolidated EBITDA to the Company's consolidated fixed charges ("Fixed Charge Coverage Ratio"). If an event of default occurs, the lenders under the Credit and Security Agreement would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. 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~~credit agreement in the amount of $8.2 million. The ~~Amendment~~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,~~June 30, 2020, including its most restrictive covenant, the Fixed Charge Coverage Ratio. The unused credit available under the credit facility at ~~March 31,~~June 30, 2020 was $43.0 million, of which we had the ability to borrow ~~$12.5~~$44.8 million without violating our Leverage Ratio covenant based on the Company's existing consolidated EBITDA.

We are currently engaged in a multi-year process of conforming the majority of our operations onto one global Enterprise Resource Planning system (“ERP”). The ERP is designed to improve the efficiency of our supply chain and financial transaction processes, accurately maintain our books and records, and provide information important to the operation of the business to our management team. The implementation of the ERP is being conducted by business unit on a three-phase approach through early 2021. Since inception of the project, we have incurred costs in a cumulative amount of $7.0 million in connection with this implementation, of which ~~$1.0~~$0.4 million and $1.4 million was incurred in the second quarter and first ~~quarter~~half of 2019, respectively, with no additional costs incurred in the second quarter or first ~~quarter~~half of 2020. These costs are included in SG&A on the 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. 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 the new ERP system and~~ we've achieved annual cost savings on ERP licensing fees of approximately $2 million within SG&A expense which were largely realized starting in 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 Notice Regarding Forward-Looking ~~Statements.~~Information."

During the ~~three~~six months ended ~~March 31,~~June 30, 2020,, the Company’s cash and cash equivalents ~~decreased~~increased by ~~$3.9~~$3.0 million. This ~~decrease~~increase was primarily due to the following:

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

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

~~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,June 30, 2019 from 59 days at December 31, 2018. Inventory ~~increased~~decreased by ~~$4.2~~$1.8 million at ~~March 31,~~June 30, 2019 compared to December 31, ~~2018, primarily due to a slowdown in demand as customers worked through their inventory levels on hand.~~2018. Inventory turns were ~~3.3~~3.6 at ~~March 31,~~June 30, 2019 as compared to 3.7 at December 31, 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.

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 ~~three~~six months of 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 ~~three~~six months of 2020 versus those during the same period of 2019,, the Euro depreciated by 2%, the Pound depreciated by 1%2%, the Peso depreciated by 2%11% and the Renminbi depreciated by 2%3% against the U.S. Dollar. The Company estimates that the depreciation in these foreign currencies led to lower operating costs of ~~$0.4~~$1.6 million during the first half of 2020 as compared to the same period of 2019, as the majority of ~~our~~the Company's expenses in the PRC, Europe and Mexico are paid in local currency. Foreign exchange ~~gains~~losses were also recognized in the first ~~three~~six months of 2020 of less than $0.1 million on translation of local currency balance sheet accounts to the U.S. Dollar in consolidation, resulting from foreign currency fluctuations since December 31, ~~2019~~.2019. During the second quarter of 2020, the Company entered into forward contracts to secure a favorable exchange rate related to the Peso through December 31, 2020 for a portion of Bel's expected Peso obligations for the remainder of the year. The Company monitors changes in foreign currencies and may implement further pricing actions to help mitigate the impact that changes in foreign currencies may have on its consolidated operating results. Refer to Item 7A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 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 13, "Commitments and Contingencies" of the Company’s Condensed Consolidated Financial Statements, under “Legal Proceedings”, as set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q. We are also involved in various other legal actions incidental to our business. We believe, after consulting with counsel, that the disposition of these other legal proceedings and matters will not have a material effect on our condensed consolidated financial condition or results of operations.

The risks described below, in addition to those described in Part I, Item 1A, "Risk Factors," of our ~~annual~~Annual Report on Form 10-K for the fiscal year ended December 31, 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~~after the holiday break. By March 9, 2020, our overall worker return rate at our China facilities was approximately 85%. Our suppliers, customers and our customers’ contract manufacturers have been similarly impacted, and many are also currently operating at less than full capacity. ByThroughout the ~~end of the first~~second quarter of 2020, many of the jurisdictions in which we operate within North America and Europe had mandated shelter-in-place orders, with the exception of essential businesses. ~~In March 2020, our manufacturing facility in the Dominican Republic, which supports our Signal Transformer products, was reduced to 35-50%~~As 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, all of the ~~Reynosa facility had increased production~~Company's manufacturing sites were open, with certain locations at reduced workforce levels ~~of 60%.~~due to local government mandates. As the status of the COVID-19 outbreak continues to be uncertain particularly in the U.S. and Europe, additional Bel facilities could become negatively impacted. In addition, COVID-19 has adversely affect the economies and financial markets of many countries, resulting in an economic downturn that has affected demand for certain of our end customers’ products. The extent to which COVID-19 will impact our business and our consolidated financial results will depend on future developments which are highly uncertain and cannot be predicted at the time of the filing of this Quarterly Report on Form 10-Q.

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

We incurred substantial amounts of indebtedness to fund the acquisitions of Power Solutions and Connectivity Solutions in 2014, and CUI in December 2019, and we may need to incur additional indebtedness to finance operations or for other general corporate purposes in the future. Our consolidated principal amount of outstanding indebtedness was $136.8 million at ~~March 31,~~June 30, 2020, resulting in a leverage ratio of ~~4.46x~~3.45x adjusted EBITDA, as calculated in accordance with our credit agreement (as compared to the maximum leverage ratio of 5.00x as noted in our amended credit agreement). As of ~~March 31,~~June 30, 2020, our fixed charge coverage ratio was ~~1.03x,~~1.50x, as calculated in accordance with our credit agreement (as compared to the minimum fixed charge coverage ratio of ~~1.00x)~~1.05x). Pursuant to the terms of our amended credit agreement, the leverage ratio will step down to 4.75x effective September 30, 2020, to 4.00x effective December 31, 2020, to 3.25x effective March 31, 2021 and to 3.00x effective June 30, 2021 and thereafter. The fixed charge coverage ratio will step up ~~to 1.05x 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.

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.

			Page
Part I		Financial Information

	Item 1.	Financial Statements (unaudited)	2

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

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

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

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

		Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2020 and 2019 (unaudited)	6

		Notes to Condensed Consolidated Financial Statements (unaudited)	7 - 1615

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	1716 - 2322

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2322

	Item 4.	Controls and Procedures	2322

Part II		Other Information

	Item 1.	Legal Proceedings	2322

	Item 1A.	Risk Factors	2322

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2423

	Item 3.	Defaults Upon Senior Securities	2423

	Item 4.	Mine Safety Disclosures	2423

	Item 5.	Other Information	2423

	Item 6.	Exhibits	2524

	Signatures		2625

	Three Months Ended						Six Months Ended
	March 31,						June 30,
	2020			2019			2020			2019

Cash flows from operating activities:
Net (loss) earnings	$	(3,804	)	$	1,131
Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:
Net earnings							$	1,769		$	4,098
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		4,126			4,110			8,234			8,216
Stock-based compensation		603			813			1,220			1,601
Amortization of deferred financing costs		149			115			316			232
Deferred income taxes		(1,322	)		(756	)		(1,030	)		(1,002	)
Net unrealized gains/losses on foreign currency revaluation		(45	)		573			58			123
Gain on sale of property								-			(4,257	)
Other, net		(215	)		950			105			1,316
Changes in operating assets and liabilities:
Accounts receivable, net		6,682			(2,285	)		(2,463	)		7,734
Unbilled receivables		2,721			5,569			984			4,329
Inventories		2,059			(4,239	)		1,906			1,799
Accounts payable		(4,891	)		(8,493	)		994			(13,350	)
Accrued expenses		(2,884	)		(5,044	)		1,307			(2,052	)
Other operating assets/liabilities, net		4,879			1,299			3,443			(1,032	)
Net cash provided by (used in) operating activities		8,058			(6,257	)
Net cash provided by operating activities								16,843			7,755

Cash flows from investing activities:
Purchases of property, plant and equipment		(1,832	)		(2,437	)		(2,980	)		(5,329	)
Proceeds from disposal/sale of property, plant and equipment		2			2			20			5,784
Net cash used in investing activities		(1,830	)		(2,435	)
Net cash (used in) provided by investing activities								(2,960	)		455

Cash flows from financing activities:
Dividends paid to common stockholders		(806	)		(800	)		(1,613	)		(1,600	)
Deferred financing costs		(600	)		-			(600	)		-
Borrowings under revolving credit line		-			10,000			-			12,000
Repayments of revolving credit line		-			(10,000	)		-			(12,000	)
Repayments of long-term debt		(8,179	)		(744	)		(8,179	)		(1,487	)
Net cash used in financing activities		(9,585	)		(1,544	)		(10,392	)		(3,087	)

Effect of exchange rate changes on cash and cash equivalents		(501	)		(484	)		(492	)		(639	)

Net decrease in cash and cash equivalents		(3,858	)		(10,720	)
Net increase in cash and cash equivalents								2,999			4,484
Cash and cash equivalents - beginning of period		72,289			53,911			72,289			53,911
Cash and cash equivalents - end of period	$	68,431		$	43,191		$	75,288		$	58,395


Supplementary information:
Cash paid during the period for:
Income taxes, net of refunds received	$	857		$	926		$	1,473		$	2,805
Interest payments	$	1,266		$	1,216		$	2,339		$	2,533

	March 31,		December 31,		June 30,		December 31,
	2020		2019		2020		2019
Raw materials	$	50,011	$	47,936	$	47,707	$	47,936
Work in progress		28,784		27,065		29,139		27,065
Finished goods		25,518		32,275		27,880		32,275
Inventories	$	104,313	$	107,276	$	104,726	$	107,276

	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2020			2019			2020			2019			2020			2019
Material costs		43.6	%		41.8	%		43.4	%		45.7	%		43.5	%		43.8	%
Labor costs		8.9	%		11.5	%		10.5	%		10.6	%		9.7	%		11.0	%
Other expenses		23.3	%		22.2	%		19.9	%		22.7	%		21.5	%		22.4	%
Total cost of sales		75.8	%		75.5	%		73.8	%		79.0	%		74.7	%		77.2	%

	•	net cash provided by operating activities of $16.8 million; partially offset by
	•	purchases of property, plant and equipment of $~~1.8~~$3.0 million;

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

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

	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

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

Balance at December 31, 2019	$	(20,032	)	$	12	$	(4,045	)		$	(24,065	)
Other comprehensive (loss) income before reclassifications		(2,245	)		-		(169	)			(2,414	)
Amount reclassified from accumulated other comprehensive income (Loss)		-			-		235		(a)		235
Net current period other comprehensive income (loss)		(2,245	)		-		66				(2,179	)

Balance at March 31, 2020	$	(22,277	)	$	12	$	(3,979	)		$	(26,244	)

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

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

	•	net cash provided by operating activities of $~~8.1~~$7.8 million; and
	•	proceeds from the sale of property, plant and equipment of $5.8 million; partially offset by

Item 6. Exhibits

(a) Exhibits:

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

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

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

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

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

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

101.SCH*	Inline XBRL Taxonomy Extension Schema Document

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	BEL FUSE INC.
~~May 8,~~August 7, 2020
By:	/s/ Daniel Bernstein
	Daniel Bernstein
	President and Chief Executive Officer

By:	/s/ ~~Daniel Bernstein~~Craig Brosious
	~~Daniel Bernstein~~
	~~President and Chief Executive Officer~~

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