BEL FUSE INC /NJ 10-Q

belfb20230930_10q.htm     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 September 30, 2023 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. 000-11676     BEL FUSE INC. (Exact name of registrant as specified in its charter)   New Jersey   22-1463699 (State of incorporation)   (I.R.S. Employer Identification No.)   300 Executive Drive, Suite 300 West Orange , NJ   07052 ( 201 ) 432-0463   (Address of principal executive offices and zip code) (Registrant’s telephone number, including area code)   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)     BELFB   Nasdaq Global Select Market   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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.   Large accelerated filer ☐ Accelerated filer  ☒ 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. ☐     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒   Title of Each Class   Number of Shares of Common Stock Outstanding as  of  November  1, 2023   Class A Common Stock ($0.10 par value)   2,141,589 Class B Common Stock ($0.10 par value)   10,630,760     Table of Contents        BEL FUSE INC. AND SUBSIDIARIES   FORM 10-Q INDEX         Page Part I   Financial Information             Item 1. Financial Statements (unaudited) 2             Condensed Consolidated Balance Sheets (unaudited) as of  September 30, 2023   and  December 31, 2022   2             Condensed Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended  September 30, 2023 and 2022   3             Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended  September 30, 2023 and 2022   4             Condensed Consolidated Statements of Stockholders' Equity (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022   5             Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2023 and 2022   6             Notes to Condensed Consolidated Financial Statements (unaudited) 7   -  17           Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 18   -  24           Item 3. Quantitative and Qualitative Disclosures About Market Risk 24           Item 4. Controls and Procedures 24         Part II   Other Information             Item 1. Legal Proceedings 24           Item 1A. Risk Factors 24           Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 25           Item 3. Defaults Upon Senior Securities 25           Item 4. Mine Safety Disclosures 25           Item 5. Other Information 25           Item 6. Exhibits 26           Signatures   27     Table of Contents      CAUTIONARY NOTICE REGARDING FORWARD-LOOKING INFORMATION   The terms the “Company,” “Bel,” “we,” “us,” and “our” as used in this report refer to Bel Fuse Inc. and its consolidated subsidiaries unless otherwise specified.   The Company’s consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (our “2022 Annual Report on Form 10-K”), and the risks and other factors described in this and our other Quarterly Reports on Form 10-Q, and in our other reports and documents that we have filed or may file from time to time with the Securities and Exchange Commission ("SEC"). 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 reports and documents filed by the Company with the 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 r isks 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," "forecasts," "projects," "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 or likely impact of COVID-19 including regarding the continuing, lasting, consequential or related impacts and uncertainties resulting from the associated pandemic are F orward-Looking Statements.   These Forward-Looking Statements are subject to certain risks and uncertainties, including those detailed in Item 1A of our 2022 Annual Report on Form 10-K, and the risks and other factors described in this and our other Quarterly Reports on Form 10-Q, and in our other reports and documents that we have filed or may file from time to time with the SEC, which could cause actual results to differ materially from these Forward-Looking Statements.  Any Forward-Looking Statements are qualified in the entirety by reference to such risk factors discussed throughout our 2022 Annual Report on Form 10-K, in this and our other Quarterly Reports on Form 10-Q and as described in our other reports and documents filed from time to time with the SEC.  Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the Forward-Looking Statements include but are not limited to:     ● the market concerns facing our customers, and risks for the Company’s business in the event of the loss of certain substantial customers;     ● the continuing viability of sectors that rely on our products;     ● the effects of business and economic conditions;     ● the impact of public health crises (such as the ongoing governmental, social and economic effects and ultimate impact of COVID-19);     ● the effects of rising input costs, and cost changes generally, including the potential impact and effects of inflationary pressures;     ● difficulties associated with integrating previously acquired companies;     ● capacity and supply constraints or difficulties, including supply chain constraints or other challenges;     ● difficulties associated with the availability of labor, and the risks of any labor unrest or labor shortages;     ● risks associated with our international operations, including our substantial manufacturing operations in China;     ● risks associated with restructuring programs or other strategic initiatives, including any difficulties in implementation or realization of the expected benefits or cost savings;     ● product development, commercialization or technological difficulties;     ● the regulatory and trade environment;     ● risks associated with fluctuations in foreign currency exchange rates and interest rates;     ● uncertainties associated with legal proceedings;     ● the market's acceptance of the Company's new products and competitive responses to those new products; and     ● the impact of changes to U.S. and applicable foreign legal and regulatory requirements, including tax laws, trade and tariff policies.   The foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any Forward-Looking Statements, which speak only as of the date of this Quarterly Report on Form 10-Q or the date of the document incorporated by reference into this report. Except as required by law, we assume no obligation and expressly disclaim any duty to publicly release the results of any revisions to these Forward-Looking Statements or otherwise update any Forward-Looking Statement to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any Forward-Looking Statements contained in this Quarterly Report on Form 10-Q. 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. All Forward-Looking Statements are expressly qualified in their entirety by the cautionary statements contained in this section.     1 Table of Contents     PART I.  Financial Information   Item 1.  Financial Statements (Unaudited)   BEL FUSE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (unaudited)         September 30,     December 31,       2023     2022   ASSETS                 Current Assets:                 Cash and cash equivalents   $ 100,225     $ 70,266   Accounts receivable, net of allowance of $ 1,233 and $ 1,552 , respectively     94,265       107,274   Inventories     139,997       172,465   Unbilled receivables     16,654       18,244   Assets held for sale     -       1,466   Other current assets     11,875       11,693   Total current assets     363,016       381,408                     Property, plant and equipment, net     38,193       36,833   Right-of-use assets     21,660       21,551   Related party note receivable     1,905       -   Equity method investment     9,978       -   Intangible assets, net     50,662       54,111   Goodwill     25,463       25,099   Deferred income taxes     11,936       7,281   Other assets     36,255       34,183   Total assets   $ 559,068     $ 560,466                     LIABILITIES AND STOCKHOLDERS' EQUITY                 Current Liabilities:                 Accounts payable   $ 43,984     $ 64,589   Accrued expenses     55,256       50,873   Operating lease liabilities, current     6,190       5,870   Other current liabilities     12,252       14,972   Total current liabilities     117,682       136,304                     Long-term Liabilities:                 Long-term debt     60,000       95,000   Operating lease liabilities, long-term     15,551       15,742   Liability for uncertain tax positions     19,608       24,798   Minimum pension obligation and unfunded pension liability     18,903       18,522   Deferred income taxes     973       1,257   Other liabilities     4,940       6,497   Total liabilities     237,657       298,120                     Commitments and contingencies (see Note 15)                                       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; 2,141,589 shares outstanding at each date (net of 1,072,769 restricted treasury shares)     214       214   Class B common stock, par value $ .10 per share, 30,000,000 shares authorized; 10,630,760 and 10,642,760 shares outstanding at September 30, 2023 and December 31, 2022, respectively (net of 3,218,307 restricted treasury shares)     1,063       1,067   Treasury stock (unrestricted, consisting of 3,323 Class A shares and 17,342 Class B shares)     ( 349 )     ( 349 ) Additional paid-in capital     43,488       40,772   Retained earnings     296,365       237,188   Accumulated other comprehensive loss     ( 19,370 )     ( 16,546 ) Total stockholders' equity     321,411       262,346   Total liabilities and stockholders' equity   $ 559,068     $ 560,466     See accompanying notes to unaudited condensed consolidated financial statements.   2 Table of Contents     BEL FUSE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)       Three Months Ended     Nine Months Ended       September 30,     September 30,       2023     2022     2023     2022                                     Net sales   $ 158,682     $ 177,739     $ 499,803     $ 485,030   Cost of sales     103,217       126,205       335,137       354,084   Gross profit     55,465       51,534       164,666       130,946                                     Research and development costs     5,292       4,877       16,521       14,381   Selling, general and administrative expenses     23,717       22,223       74,149       67,216   Restructuring charges     2,091       3,969       6,306       4,000   Gains on sale of properties     ( 147 )     ( 1,596 )     ( 3,819 )     ( 1,596 ) Income from operations     24,512       22,061       71,509       46,945                                     Gain on sale of Czech Republic business     ( 135 )     -       980       -   Interest expense     ( 512 )     ( 944 )     ( 2,402 )     ( 2,411 ) Other expense, net     ( 96 )     ( 429 )     ( 286 )     ( 2,926 ) Earnings before provision for income taxes     23,769       20,688       69,801       41,608                                     Provision for income taxes     4,321       4,140       8,006       2,959   Net earnings available to common stockholders   $ 19,448     $ 16,548     $ 61,795     $ 38,649                                                                       Net earnings per common share:                                 Class A common share - basic and diluted   $ 1.46     $ 1.27     $ 4.63     $ 2.95   Class B common share - basic and diluted   $ 1.54     $ 1.34     $ 4.88     $ 3.12                                     Weighted-average number of shares outstanding:                                 Class A common share - basic and diluted     2,142       2,142       2,142       2,144   Class B common share - basic and diluted     10,636       10,340       10,636       10,358     See accompanying notes to unaudited condensed consolidated financial statements.     3 Table of Contents     BEL FUSE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited)       Three Months Ended     Nine Months Ended       September 30,     September 30,       2023     2022     2023     2022                                     Net earnings available to common stockholders   $ 19,448     $ 16,548     $ 61,795     $ 38,649                                     Other comprehensive income (loss):                                 Currency translation adjustment, net of taxes of ($ 13 ), ($ 40 ), ($ 109 ) and ($ 83 ), respectively     ( 2,624 )     ( 8,372 )     ( 2,857 )     ( 16,352 ) Unrealized gains (losses) on interest rate swap cash flow hedge, net of taxes of $ 0 in all periods presented     96       2,070       ( 9 )     6,061   Unrealized holding (losses) gains on marketable securities, net of taxes of $ 0 in all periods presented     -       ( 1 )     1       ( 11 ) Change in unfunded SERP liability, net of taxes of ($ 4 ), ($ 18 ), ($ 12 ) and ($ 52 ), respectively     14       61       41       182   Other comprehensive loss     ( 2,514 )     ( 6,242 )     ( 2,824 )     ( 10,120 )                                   Comprehensive income   $ 16,934     $ 10,306     $ 58,971     $ 28,529     See accompanying notes to unaudited condensed consolidated financial statements.   4 Table of Contents     BEL FUSE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands, except per share data)   (unaudited)                       Accumulated                                                       Other     Class A     Class B             Additional               Retained     Comprehensive     Common     Common     Treasury     Paid-In       Total     Earnings     (Loss) Income     Stock     Stock     Stock     Capital                                                             Balance at December 31, 2022   $ 262,346     $ 237,188     $ ( 16,546 )   $ 214     $ 1,067     $ ( 349 )   $ 40,772   Net earnings     14,572       14,572       -       -       -       -       -   Dividends declared:                                                         Class A Common Stock, $ 0.06 /share     ( 128 )     ( 128 )     -       -       -       -       -   Class B Common Stock, $ 0.07 /share     ( 747 )     ( 747 )     -       -       -       -       -   Forfeiture of restricted common stock     -       -       -       -       ( 1 )     -       1   Foreign currency translation adjustment, net of taxes of $ 9     1,998       -       1,998       -       -       -       -   Unrealized losses on interest rate swap cash flow hedge, net of taxes of $ 0     ( 894 )     -       ( 894 )     -       -       -       -   Unrealized holding gains on marketable securities, net of taxes of $ 0     1       -       1       -       -       -       -   Stock-based compensation expense     902       -       -       -       -       -       902   Change in unfunded SERP liability, net of taxes of ($ 4 )     13       -       13       -       -       -       -   Balance at March 31, 2023     278,063       250,885       ( 15,428 )     214       1,066       ( 349 )     41,675                                                             Net earnings     27,775       27,775       -       -       -       -       -   Dividends declared:                                                         Class A Common Stock, $ 0.06 /share     ( 128 )     ( 128 )     -       -       -       -       -   Class B Common Stock, $ 0.07 /share     ( 742 )     ( 742 )     -       -       -       -       -   Issuance of restricted common stock     -       -       -       -       1       -       ( 1 ) Forfeiture of restricted common stock     -       -       -       -       ( 3 )     -       3   Foreign currency translation adjustment, net of taxes of ($ 105 )     ( 2,231 )     -       ( 2,231 )     -       -       -       -   Unrealized gains on interest rate swap cash flow hedge     789       -       789       -       -       -       -   Stock-based compensation expense     950       -       -       -       -       -       950   Change in unfunded SERP liability, net of taxes of ($ 4 )     14       -       14       -       -       -       -   Balance at June 30, 2023     304,490       277,790       ( 16,856 )     214       1,064       ( 349 )     42,627                                                             Net earnings     19,448       19,448       -       -       -       -       -   Dividends declared:                                                         Class A Common Stock, $ 0.06 /share     ( 128 )     ( 128 )     -       -       -       -       -   Class B Common Stock, $ 0.07 /share     ( 745 )     ( 745 )     -       -       -       -       -   Forfeiture of restricted common stock     -       -       -       -       ( 1 )     -       1   Foreign currency translation adjustment, net of taxes of ($ 13 )     ( 2,624 )     -       ( 2,624 )     -       -       -       -   Unrealized gains on interest rate swap cash flow hedge     96       -       96       -       -       -       -   Stock-based compensation expense     860       -       -       -       -       -       860   Change in unfunded SERP liability, net of taxes of ($ 4 )     14       -       14       -       -       -       -   Balance at September 30, 2023   $ 321,411     $ 296,365     $ ( 19,370 )   $ 214     $ 1,063     $ ( 349 )   $ 43,488                           Accumulated                                                       Other     Class A     Class B             Additional               Retained     Comprehensive     Common     Common     Treasury     Paid-In       Total     Earnings     (Loss) Income     Stock     Stock     Stock     Capital                                                             Balance at December 31, 2021   $ 208,743     $ 187,935     $ ( 18,863 )   $ 214     $ 1,038       -     $ 38,419   Net earnings     5,064       5,064       -       -       -       -       -   Dividends declared:                                                         Class A Common Stock, $ 0.06 /share     ( 129 )     ( 129 )     -       -       -       -       -   Class B Common Stock, $ 0.07 /share     ( 727 )     ( 727 )     -       -       -       -       -   Forfeiture of restricted common stock     -       -       -       -       ( 1 )     -       1   Foreign currency translation adjustment, net of taxes of ($ 12 )     ( 1,216 )     -       ( 1,216 )     -       -       -       -   Unrealized gains on interest rate swap cash flow hedge     2,984       -       2,984       -       -       -       -   Stock-based compensation expense     576       -       -       -       -       -       576   Change in unfunded SERP liability, net of taxes of ($ 17 )     61       -       61       -       -       -       -   Balance at March 31, 2022     215,356       192,143       ( 17,034 )     214       1,037       -       38,996                                                             Net earnings     17,038       17,038       -       -       -       -       -   Dividends declared:                                                         Class A Common Stock, $ 0.06 /share     ( 129 )     ( 129 )     -       -       -       -       -   Class B Common Stock, $ 0.07 /share     ( 726 )     ( 726 )     -       -       -       -       -   Forfeiture of restricted common stock     -       -       -       -       ( 1 )     -       1   Repurchase of treasury stock     ( 349 )     -       -       -       -       ( 349 )       Foreign currency translation adjustment, net of taxes of ($ 31 )     ( 6,764 )     -       ( 6,764 )     -       -       -       -   Unrealized gains on interest rate swap cash flow hedge     1,008       -       1,008       -       -       -       -   Unrealized holding losses on marketable securities, net of taxes of $ 0     ( 12 )     -       ( 12 )     -       -       -       -   Stock-based compensation expense     512       -       -       -       -       -       512   Change in unfunded SERP liability, net of taxes of ($ 17 )     61       -       61       -       -       -       -   Balance at June 30, 2022     225,995       208,326       ( 22,741 )     214       1,036       ( 349 )     39,509                                                             Net earnings     16,548       16,548       -       -       -       -       -   Dividends declared:                                                         Class A Common Stock, $ 0.06 /share     ( 128 )     ( 128 )     -       -       -       -       -   Class B Common Stock, $ 0.07 /share     ( 724 )     ( 724 )     -       -       -       -       -   Forfeiture of restricted common stock     -       -       -       -       ( 2 )     -       2   Foreign currency translation adjustment, net of taxes of ($ 40 )     ( 8,372 )     -       ( 8,372 )     -       -       -       -   Unrealized gains on interest rate swap cash flow hedge     2,070       -       2,070       -       -       -       -   Unrealized holding losses on marketable securities     ( 1 )     -       ( 1 )     -       -       -       -   Stock-based compensation expense     584       -       -       -       -       -       584   Change in unfunded SERP liability, net of taxes of ($ 18 )     61       -       61       -       -       -       -   Balance at September 30, 2022   $ 236,033     $ 224,022     $ ( 28,983 )   $ 214     $ 1,034     $ ( 349 )   $ 40,095     See accompanying notes to unaudited condensed consolidated financial statements.   5 Table of Contents     BEL FUSE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)       Nine Months Ended       September 30,       2023     2022                     Cash flows from operating activities:                 Net earnings   $ 61,795     $ 38,649   Adjustments to reconcile net earnings to net cash provided by operating activities:                 Depreciation and amortization     9,962       11,604   Stock-based compensation     2,712       1,672   Amortization of deferred financing costs     33       34   Deferred tax benefit     ( 4,894 )     ( 5,113 ) Net unrealized losses (gains) on foreign currency revaluation     130       ( 494 ) Gains on sale of properties     ( 3,819 )     ( 1,596 ) Gain on sale of Czech Republic business     ( 980 )     -   Other, net     ( 495 )     360   Changes in operating assets and liabilities:                 Accounts receivable, net     11,931       ( 17,851 ) Unbilled receivables     1,590       ( 317 ) Inventories     29,313       ( 32,574 ) Accounts payable     ( 18,674 )     4,884   Accrued expenses     4,536       6,678   Accrued restructuring costs     ( 148 )     3,628   Income taxes payable     2,008       6,380   Other operating assets/liabilities, net     ( 13,575 )     8,125   Net cash provided by operating activities     81,425       24,069                     Cash flows from investing activities:                 Purchases of property, plant and equipment     ( 9,659 )     ( 5,612 ) Payment for equity method investment     ( 9,975 )     -   Investment in related-party notes receivable     ( 1,905 )     -   Proceeds from sale of property, plant and equipment     5,403       1,833   Proceeds from sale of Czech Republic business     5,063       -   Net cash used in investing activities     ( 11,073 )     ( 3,779 )                   Cash flows from financing activities:                 Dividends paid to common stockholders     ( 2,490 )     ( 2,470 ) Repayments under revolving credit line     ( 40,000 )     ( 2,500 ) Borrowings under revolving credit line     5,000       -   Purchase of treasury stock     -       ( 349 ) Net cash used in financing activities     ( 37,490 )     ( 5,319 )                   Effect of exchange rate changes on cash and cash equivalents     ( 2,903 )     ( 5,832 )                   Net increase in cash and cash equivalents     29,959       9,139   Cash and cash equivalents - beginning of period     70,266       61,756   Cash and cash equivalents - end of period   $ 100,225     $ 70,895                                       Supplementary information:                 Cash paid during the period for:                 Income taxes, net of refunds received   $ 18,148     $ 7,496   Interest payments   $ 3,738     $ 2,129   ROU assets obtained in exchange for lease obligations   $ 5,887     $ 6,111     See accompanying notes to unaudited condensed consolidated financial statements.   6 Table of Contents   BEL FUSE INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)     1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES   The condensed consolidated balance sheets and statements of operations, comprehensive income, stockholders’ equity and cash flows for the periods presented herein have been prepared by the Company and are  unaudited . In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows for all periods presented have been made.  The results for the three and  nine months ended September 30, 2023  are not necessarily indicative of the results to be expected for the full year.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Bel Fuse Annual Report on Form 10 -K for the fiscal year ended  December 31, 2022 .   Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted from these condensed consolidated financial statements pursuant to the rules and regulations, including the interim reporting requirements, of the U.S. Securities and Exchange Commission (“SEC”).  The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates.   The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10 -K for the fiscal year ended December 31, 2022 .  There were no significant changes to these accounting policies during the nine months ended September 30, 2023 , except as discussed in “Recently Adopted Accounting Standards” below and as follows:   Investments   We account for non-marketable investments using the equity method of accounting if the investment gives us the ability to exercise significant influence over, but not control, of an investee. Significant influence generally exists if we have an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions.   Equity in earnings of unconsolidated affiliates, in the consolidated statements of operations, reflects our proportionate share of the investee's net income, including any associated affiliate taxes. Our proportionate share of the investee’s other comprehensive income (loss), net of income taxes, is recorded in the consolidated statements of stockholders’ equity and consolidated statements of comprehensive income. In general, the equity investment in our unconsolidated affiliates is equal to our original equity investment plus our share of those entities' undistributed earnings subsequent to our investment .   We evaluate our equity method investments for impairment at least annually or whenever events or changes in circumstances indicate, in management’s judgment, that the carrying value of an investment may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline in value to be other than temporary, the excess of the carrying value over the estimated fair value is recognized in the financial statements as an impairment. See Note 2, "Investment in Innolectric", below, for our discussion on specific equity method investments.   Where we are unable to exercise significant influence over the investee, or when our investment balance is reduced to zero from our proportionate share of losses, the investments are accounted for under the cost method. Under the cost method, investments are carried at cost and adjusted only for other-than-temporary declines in fair value, distributions of earnings, additional investments, or in the case of an observable price change in an orderly transaction for an identical security.   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 March 2020, the FASB issued ASU 2020 - 04,   Reference Rate Reform (Topic 848 ): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020 - 04" ). ASU 2020 - 04 provides temporary optional guidance on contract modifications and hedging accounting to ease the financial reporting burdens of the market transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. In January 2021, the FASB issued ASU 2021 - 01, which refined the scope of Topic 848 and clarified some of its guidance as part of the FASB’s monitoring of global reference rate activities. This updated guidance was effective upon issuance, and the Company was initially allowed to elect to apply the amendments prospectively through December 31, 2022.  In December 2022, the FASB issued ASU 2022 - 06, Reference Rate Reform (Topic 848 ), Deferral of the Sunset Date of Topic 848 , which extended the date by which companies could elect to apply the amendments to December 31, 2024. During January 2023, the Company amended its credit agreement and related interest rate swap agreements to transition the reference rate from LIBOR to a Secured Overnight Financing Rate ("SOFR") effective January 31, 2023. In connection with these amendments, the Company adopted ASU 2020 - 04 in the first quarter of 2023 and elected to apply the relevant practical expedients within the guidance. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.   7 Table of Contents    In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments (“ASU 2016 - 13” ) , as amended.  The new guidance broadens 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.  On January 1, 2023, the Company adopted ASU 2016 - 13. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.   2. INVESTMENT IN INNOLECTRIC   On February 1, 2023, the Company closed on a noncontrolling ( one - third ) investment in Germany-based innolectric AG (“innolectric”) for consideration of €8.0 million (approximately $ 8.8 million as of the February 2023 closing). Transaction costs associated with the Company's investment in innolectric amounted to $ 1.3 million and these costs have been recorded as part of the carrying value of the investment. Under the terms of the investment agreement, if innolectric achieves certain EBITDA thresholds within a specified timeframe, the Company would be committed to acquiring the remaining shares of innolectric at that time. The accompanying condensed consolidated balance sheet reflects the fair value as of the February 2023 closing of the initial one - third equity method investment, inclusive of transaction costs, of $ 11.0 million, and an other liability of $ 1.0 million associated with the net fair value of the put and call options related to the remaining shares pursuant to the agreement in the event certain profitability thresholds are met.   This passive investment creates a strategic alliance that is focused on Electric Vehicles (“EV”) on-board power electronics, and in particular next generation fast-charging technology. With no product overlap, this relationship expands the Bel eMobility Power portfolio, further enhancing Bel's competitive position in this emerging field. Our investment in innolectric is accounted for using the equity method and we have determined that the innolectric investment is not a variable interest entity (VIE). Results from this investment have been included in Bel's Power Solution and Protection segment and amounted to losses of $ 0.3 million and $ 0.7 million during the three and  nine months ended September 30, 2023, respectively. The Company adopted a policy to record its share of innolectric's results on a one -month lag on a consistent basis to allow time for innolectric to provide its financial statements to Bel.   Related Party Transactions   From time to time, the Company provides cash loans to innolectric to fund working capital needs and further business development. During the first nine months of 2023, the Company provided loans to innolectric in the aggregate amount of €1.8 million (approximately $ 1.9 million at the September 30, 2023 exchange rate). These loans bear interest at a rate of 5 % per annum. This balance is shown as a related-party note receivable on the accompanying condensed consolidated balance sheet at September 30, 2023 .      3. DIVESTITURE OF SUBSIDIARY   On June 1, 2023, t he Company completed its divestment of Bel Stewart s.r.o., a former subsidiary in the Czech Republic which has historically been reported within Bel’s Connectivity Solutions segment. The business was sold to PEI Genesis (“PEI”) for total consideration of $ 5.1 million, subject to working capital adjustments. The divestment of this non-core business was a strategic decision which allows the Connectivity Solutions segment to focus on its main product categories serving customer end markets such as commercial air, defense, industrial and networking which better align with its long-term growth objectives.   The carrying amounts of the major classes of assets and liabilities included as part of the sale were as follows:       Total   Cash and cash equivalents   $ 2,072   Accounts receivable     1,030   Inventories     1,310   Property, plant and equipment     326   Other assets     48   Accounts payable     ( 441 ) Accrued expenses     ( 126 ) Income taxes payable     ( 100 ) Other current liabilities     ( 13 ) Other long-term liabilities     ( 23 ) Total net assets transferred     4,083   Consideration received     5,063   Gain on sale recognized   $ 980     8 Table of Contents      4. 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 September 30, 2023     Nine Months Ended September 30, 2023       Power Solutions and Protection     Connectivity Solutions     Magnetic Solutions     Consolidated     Power Solutions and Protection     Connectivity Solutions     Magnetic Solutions     Consolidated                                                                     By Geographic Region:                                                                 North America   $ 55,262     $ 42,841     $ 12,980     $ 111,083     $ 182,183     $ 130,086     $ 34,680     $ 346,949   Europe     13,759       7,500       1,545       22,804       43,266       25,462       6,976       75,704   Asia     5,841       1,430       17,524       24,795       19,685       4,462       53,003       77,150       $ 74,862     $ 51,771     $ 32,049     $ 158,682     $ 245,134     $ 160,010     $ 94,659     $ 499,803                                                                     By Sales Channel:                                                                 Direct to customer   $ 52,507     $ 31,369     $ 25,021     $ 108,897     $ 174,143     $ 101,063     $ 70,700     $ 345,906   Through distribution     22,355       20,402       7,028       49,785       70,991       58,947       23,959       153,897       $ 74,862     $ 51,771     $ 32,049     $ 158,682     $ 245,134     $ 160,010     $ 94,659     $ 499,803         Three Months Ended September 30, 2022     Nine Months Ended September 30, 2022       Power Solutions and Protection     Connectivity Solutions     Magnetic Solutions     Consolidated     Power Solutions and Protection     Connectivity Solutions     Magnetic Solutions     Consolidated                                                                     By Geographic Region:                                                                 North America   $ 60,267     $ 37,877     $ 13,490     $ 111,634     $ 155,022     $ 105,189     $ 38,616     $ 298,827   Europe     8,779       9,327       2,535       20,641       29,264       26,895       8,128       64,287   Asia     7,387       3,049       35,028       45,464       21,961       7,978       91,977       121,916       $ 76,433     $ 50,253     $ 51,053     $ 177,739     $ 206,247     $ 140,062     $ 138,721     $ 485,030                                                                     By Sales Channel:                                                                 Direct to customer   $ 48,765     $ 29,974     $ 40,362     $ 119,101     $ 130,210     $ 84,571     $ 105,619     $ 320,400   Through distribution     27,668       20,279       10,691       58,638       76,037       55,491       33,102       164,630       $ 76,433     $ 50,253     $ 51,053     $ 177,739     $ 206,247     $ 140,062     $ 138,721     $ 485,030   The balances of the Company’s contract assets and contract liabilities at  September 30, 2023 and December 31, 2022 are as follows:       September 30,     December 31,       2023     2022                     Contract assets - current (unbilled receivables)   $ 16,654     $ 18,244   Contract liabilities - current (deferred revenue)   $ 2,940     $ 8,847     The change in balance of our unbilled receivables from December 31, 2022 to September 30, 2023 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). Our deferred revenue balance at  December 31, 2022  and  September 30, 2023  primarily relates to customer prepayments on invoices related to surcharges and expedite fees, which will be r ecorded as revenue in the period in which the related finished goods are shipped to the customer.   9 Table of Contents      5. EARNINGS PER SHARE   The following table sets forth the calculation of basic and diluted net earnings per common share under the two -class method for the three and  nine months ended September 30, 2023 and 2022 :       Three Months Ended     Nine Months Ended       September 30,     September 30,       2023     2022     2023     2022                                     Numerator:                                 Net earnings   $ 19,448     $ 16,548     $ 61,795     $ 38,649   Less dividends declared:                                 Class A     128       128       385       386   Class B     745       724       2,235       2,176   Undistributed earnings   $ 18,575     $ 15,696     $ 59,175     $ 36,087                                     Undistributed earnings allocation - basic and diluted:                                 Class A undistributed earnings   $ 2,989     $ 2,587     $ 9,522     $ 5,941   Class B undistributed earnings     15,586       13,109       49,653       30,146   Total undistributed earnings   $ 18,575     $ 15,696     $ 59,175     $ 36,087                                     Net earnings allocation - basic and diluted:                                 Class A net earnings   $ 3,117     $ 2,715     $ 9,907     $ 6,327   Class B net earnings     16,331       13,833       51,888       32,322   Net earnings   $ 19,448     $ 16,548     $ 61,795     $ 38,649                                     Denominator:                                 Weighted-average shares outstanding:                                 Class A - basic and diluted     2,142       2,142       2,142       2,144   Class B - basic and diluted     10,636       10,340       10,636       10,358                                     Net earnings per share:                                 Class A - basic and diluted   $ 1.46     $ 1.27     $ 4.63     $ 2.95   Class B - basic and diluted   $ 1.54     $ 1.34     $ 4.88     $ 3.12        6. 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.   10 Table of Contents   As of September 30, 2023  and December 31, 2022 , our equity 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 and amounted to $ 0.4 million at  September 30, 2023  and  $ 0.1 million at December 31, 2022 .    Throughout 2023  and 2022 , the Company entered into a series of foreign currency forward contracts, the fair value of which was ( $ 0.7 ) million at  September 30, 2023  and  $ 0.4  million at  December 31, 2022 .  The estimated fair value of foreign currency forward contracts is based on quotes received from the applicable counterparty, and represents the estimated amount we would receive or pay to settle the contracts, taking into consideration current exchange rates which can be validated through readily observable data from external sources (Level 2 ).   The Company is a party t o  two interest rate swap agreements as fu rther described in Note   10, "Derivative Instruments and Hedging Activities".  The fair value of the interest rate swap agreements was $ 5.5 million at each of  September 30, 2023  and December 31, 2022 , which was based on market data, and represents the estimated amount we would receive or pay to settle the agreements, taking into consideration current and projected future interest rates as well as the creditworthiness of the parties, all of which can be validated through readily observable data from external sources.   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  nine months ended September 30, 2023 or  September 30, 2022 .  There were no changes to t he Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the  nine months ended September 30, 2023  or  September 30, 2022 .   There were no financial assets accounted for at fair value on a nonrecurring basis as of  September 30, 2023 or December 31, 2022 .   The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, 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  September 30, 2023 and December 31, 2022 , the estimated fair value of total debt was $ 60.0 million and $ 95.0 million, respectively, compared to a carrying amount of $ 60.0 million an d $ 95.0 million , respectively.  The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of September 30, 2023 .   Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets, long-lived assets and the net liability related to the put/call options pursuant to the innolectric investment agreement, 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.  Based on the Company's assessment, it was concluded that no triggering events occurred during the  nine months ended September 30, 2023  or September 30, 2022 .     During the second quarter of 2023 , t he Company completed its preliminary valuation of the innolectric equity method investment including the valuations of the put and call options noted in the related investment agreement. To estimate the fair value of the put and call options conditional on certain thresholds related to innolectric's EBITDA, a variation of the income approach, known as the real options method was used, where innolectric’s EBITDA and equity were simulated in a risk-neutral framework using Geometric Brownian Motion.      7. INVENTORIES   The components of inventories are as follows:       September 30,     December 31,       2023     2022   Raw materials   $ 62,646     $ 74,572   Work in progress     46,002       44,397   Finished goods     31,349       53,496   Inventories   $ 139,997     $ 172,465        8.   PROPERTY, PLANT AND EQUIPMENT   Property, plant and equipment consist of the following:       September 30,     December 31,       2023     2022   Land   $ 1,015     $ 1,098   Buildings and improvements     22,157       21,529   Machinery and equipment     109,524       118,358   Construction in progress     2,349       4,239         135,045       145,224   Accumulated depreciation     ( 96,852 )     ( 108,391 ) Property, plant and equipment, net   $ 38,193     $ 36,833     Depreciation expense was $ 2.2   million and $ 2.1 million, respectively, for the three months ended  September 30, 2023 and 2022 , and $ 6.5 million and $ 6.8 million, respectively, for the nine months ended September 30, 2023  and 2022 . 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.   At December 31, 2022, a total of $ 1.5  million of property was classified as assets held for sale on the accompanying condensed consolidated balance sheets related to our corporate headquarters in Jersey City, New Jersey. The Company closed on the sale of this property during the second quarter of 2023 for $ 5.9 million, resulting in a gain on sale of $ 3.8  m illion, which is reflected in the condensed consolidated statement of operations for the nine  months ended September 30, 2023 .      11 Table of Contents      9. ACCRUED EXPENSES   Accrued expenses consist of the following:       September 30,     December 31,       2023     2022   Salaries, bonuses and related benefits   $ 30,683     $ 27,422   Deferred revenue     2,940       8,847   Accrued restructuring costs     6,655       6,796   Sales commissions     2,388       2,521   Subcontracting labor     1,680       1,875   Warranty accrual     1,440       1,287   Other     9,470       2,125       $ 55,256     $ 50,873     The change in warranty accrual during the nine months ended September 30, 2023 primarily related to repair costs incurred and adjustments to pre-existing warranties.  There were no new material warranty charges incurred during the nine months ended September 30, 2023 .   Restructuring Activities:   Activity and liability balances related to restructuring costs for the  nine months ended September 30, 2023 are as follows:               Nine Months Ended                       September 30, 2023               Liability at             Cash Payments     Liability at       December 31,     New     and Other     September 30,       2022     Charges     Settlements     2023   Severance costs   $ 3,390     $ 5,115     $ ( 5,951 )   $ 2,554   Other restructuring costs     3,406       1,191       ( 496 )     4,101   Total   $ 6,796     $ 6,306     $ ( 6,447 )   $ 6,655     During the third quarter of 2022, a series of initiatives were launched to streamline our operational footprint. In a project substantially complete with final transitions expected by late 2023 , two of our Magnetic Solutions manufacturing facilities in Zhongshan and Pingguo, China, are being largely consolidated into a single centralized site in the Binyang county of Southwestern China (the new Bel Guangxi facility). Further, facility consolidation actions within our Connectivity Solutions group have been underway in both the U.S. and Europe. During the first half of 2023, we completed the transition out of our Tempe, Arizona and Sudbury, UK facilities into other existing Bel sites. Our Melbourne, Florida site is in the process of transitioning its manufacturing operations into our existing site in Waseca, Minnesota, scheduled for completion by the end of 2023. The $ 6.3   m illion of restructuring charges incurred during the nine months ended September 30, 2023 , and the accrued restructuring costs of $ 6.7   million at  September 30, 2023 , are associated with these collective initiatives.      10.      DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES   Our primary objective for holding derivative financial instruments is to manage foreign currency exchange rate risk and interest rate risk, when deemed appropriate. We enter into these contracts in the normal course of business to mitigate risks and not for speculative purposes.   Foreign Currency Forward Contracts   Under our risk management strategy, we periodically use foreign currency forward contracts to manage our short-term exposures to fluctuations in operational cash flows resulting from changes in foreign currency exchange rates. These cash flow exposures result from portions of our forecasted operating expenses, primarily compensation and related expenses, which are transacted in currencies other than the U.S. dollar, most notably the Chinese renminbi and the Mexican peso.   These foreign currency forward contracts generally have maturities of no longer than  twelve months, although occasionally we will execute a contract that extends beyond  twelve months, depending upon the nature of the underlying risk.    We held outstanding foreign currency forward contracts with notional amounts of $ 25.9   million and $ 25.7 million as of September 30, 2023  and December 31, 2022 , respectively.  The Company's foreign currency forward contracts related to the Chinese renminbi are designated as cash flow hedges for accounting purposes and as such, changes in their fair value are recognized in accumulated other comprehensive loss in the consolidated balance sheet and are reclassified into the statement of operations within cost of goods sold in the period in which the hedged transaction affects earnings.  12 Table of Contents   Interest Rate Swap Agreements   To partially mitigate risks associated with the variable interest rates on the revolver borrowings under the Company's credit agreement (as defined and described in Note 11, "Debt" , below), in November 2021, we executed a pay-fixed, receive-variable interest rate swap agreement with each of two mu ltinational financial institutions under which we, prior to the January 2023 amendment described below which transitioned the reference rate from LIBOR to SOFR, (i) paid interest at a fixed rate of   1.3055 % a nd received variable interest of one -month LIBOR on a notional amount of $ 30.0  million and (ii) paid interest at a fixed rate of  1.3180 % and received variable interest of one -month LIBOR on a notional amount of  $30.0  million (as amended to date, the “2021 Swaps”).  The effective date of the 2021 Swaps was December 31, 2021, and settlements with the counterparties began on January 31, 2022 and occur on a m onthly basis. The 2021 Swaps will terminate on August 31, 2026. In January 2023, and in connection with related changes to its credit agreement, the Company amended the 2021 Swaps to transition the related reference rates in these agreements from LIBOR to SOFR, effective January 31, 2023.  Under the amended 2021 Swaps, the Company is required to pay interest on the notional amount at the rate of 1.334 % and 1.348 %, resp ectively, in exchange for the daily SOFR rate plus 10 basis points.    The 2021 Swaps are designated as cash flow hedges for accounting purposes and as such, changes in their fair value are recognized in accumulated other comprehensive loss in the consolidated balance sheet and are reclassified into the statement of operations within interest expense in the period in which the hedged transaction affects earnings.    Fair Values of Derivative Financial Instruments   The fair values of our derivative financial instruments and their classifications in our condensed consolidated balance sheets as of September 30, 2023  and December 31, 2022  were as follows:     Balance Sheet Classification   September 30, 2023     December 31, 2022   Derivative assets:                   Foreign currency forward contracts:                   Designated as cash flow hedges Other current assets   $ -     $ 359   Non designated as hedging instruments Other current assets     114       -   Interest rate swap agreements:                   Designated as a cash flow hedge Other assets     5,529       5,539   Total derivative assets   $ 5,643     $ 5,898                       Derivative liabilities:                   Foreign currency forward contracts:                   Designated as cash flow hedges Other current liabilities   $ 782     $ -   Total derivative liabilities   $ 782     $ -     Derivative Financial Instruments in Cash Flow Hedging Relationships   The effects of derivative financial instruments designated as cash flow hedges on accumulated other comprehensive loss (“AOCL”) an d on the c ondensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022  were as follows:        Three Months Ended     Nine Months Ended       September 30,     September 30,       2023     2022     2023     2022   Net gains (losses) recognized in AOCL:                                 Foreign currency forward contracts   $ ( 385 )   $ ( 671 )   $ ( 1,837 )   $ ( 1,196 ) Interest rate swap agreements     698       2,206       1,641       5,939       $ 313     $ 1,535     $ ( 196 )   $ 4,743                                     Net gains (losses) reclassified from AOCL to the consolidated statement of operations:                                 Foreign currency forward contracts   $ ( 311 )   $ ( 308 )   $ ( 197 )   $ ( 381 ) Interest rate swap agreements     602       136       1,650       ( 122 )     $ 291     $ ( 172 )   $ 1,453     $ ( 503 )   13 Table of Contents   The losses related to the foreign currency forward contracts are included as a component of currency translation adjustment on the accompanying condensed consolidated statements of comprehensive income for the three and nine months ended  September 30, 2023 and 2022.        Derivative   Financial Instruments   Not Designated as Hedging Instruments   Gains recognized on derivative financial instruments not designated as hedging instruments in our condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022  were as follows:          Three Months Ended     Nine Months Ended         September 30,     September 30,     Classification in Consolidated Statements of Operations   2023     2022     2023     2022   Foreign currency forward contracts Other (expense) income, net   $ 54     $ 17     $ 88     $ 58         $ 54     $ 17     $ 88     $ 58        11.  DEBT   The Company has a Credit and Security Agreement with KeyBank National Association (as amended, the "credit agreement" or the "CSA").  The CSA provides a $ 175 million 5 -year senior secured revolving credit facility ("Revolver"), with a sublimit of up to $ 10 million available for letters of credit and a sublimit of up to $ 5 million available for swing line loans .  The Company had $ 60 million and $ 95.0 m illion in outstanding borrowings under the Revolver at  September 30, 2023 and  December 31, 2022 , respectively.  Revolving loans borrowed under the CSA mature on   September 1, 2026. During January 2023, the Company amended its CSA and related interest rate swap agreements to transition the reference rate from LIBOR to SOFR effective January 31, 2023.           The weighted-average interest rate in effect for the variable-rate portion of our outstanding borrowing s ($ 35.0 million at December 31, 2022 ) was  5.51 % at December 31, 2022 and consisted of LIBOR plus the Company’s credit spread at December 31, 2022 , as determined per the terms of the CSA. No outstanding borrowings were subject to a variable interest rate at  September 30, 2023 . In order to manage our interest rate exposure on the remaining borrowings, and as further described in Note 10, "Derivative Instruments and Hedging Activities", the Company is party to the 2021 Swaps, each with an aggregate notional amount of $ 30  million, or $ 60 million in the aggregate, the effect of which is to fix the SOFR port ion (or, for periods prior to January 31, 2023, the LIBOR portion) of the interest rate on our outstanding debt on our Revolver (or such portion thereof up to the aggregate $ 60 million not ional amount of the 2021 Swaps). In periods prior to January 31, 2023, the 2021 Swaps required the Company to pay interest on the notional amount at the rate of  1.3055 % and 1.3180 %, respectively, in exchange for the one -month LIBOR rate. Effective January 31, 2023, in connection with the Company's transition of its reference rate from LIBOR to SOFR as further described in Recently Adopted Accounting Standards in Note 1, "Basis of Presentation and Accounting Policies", the 2021 Swaps require the Company to pay interest on the notional amount at the rate o f 1.334 % and 1.348 %, re spectively, in exchange for the daily SOFR rate plus 10 basis points.   The effective rate of interest for our outstanding borrowings, including the impact of the 2021 Swaps, w as 2.47 % a nd 3.57 %, r espectively, as of  September 30, 2023 and December 31, 2022 . The Company incurred $ 0.5 million and $ 0.9   million of interest expense during the three months ended September 30, 2023 and 2022 , respectively, and $ 2.4 million during each of the  nine month periods ended September 30, 2023 and 2022,  in connection with interest due on its outstanding borrowings under the CSA during each period,  including  the effects of the 2021 Swaps and amortization of deferred financing costs.       The CSA contains customary representations and warranties, covenants and events of default.  In addition, the CSA contains financial covenants that measure (i) the ratio of the Company’s total funded indebtedness, on a consolidated basis, less the aggregate amount of all unencumbered cash and cash equivalents, to the amount of the Company’s consolidated EBITDA (“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 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 September 30, 2023 , the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio.    14 Table of Contents      12. INCOME TAXES   The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions.  The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2019 and for state examinations before 2016.   Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2012 in Asia and generally 2014 in Europe.    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 condensed consolidated financial statements at September 30, 2023 .  The Company’s liabilities for uncertain tax positions totaled $ 19.6 million and  $ 24.8 million at September 30, 2023  and December 31, 2022 , respectively, of which $ 5.3 million that was included in other current liabilities at December 31, 2022  was resolved during 2023 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  nine months ended September 30, 2023 and 2022 , the Company recognized $ 0.3   million and $ 0.4 million, respectively, in interest and penalties in the condensed consolidated statements of operations.  The Company has approximately $ 2.0 million and $ 4.0 million accrued for the payment of interest and penalties at  September  30, 2023 and  December  31, 2022 , respectively, which is included in liability for uncertain tax positions in the condensed consolidated balance sheets.     13. RETIREMENT, SAVINGS AND DEFERRED COMPENSATION PLANS   The Company maintains the Bel Fuse Inc. Employees’ Savings Plan, a defined contribution plan that is intended to meet the applicable requirements for tax-qualification under sections 401 (a) and (k) of the Internal Revenue Code of 1986, as amended. The expense for the three months ended September 30, 2023 and 2022 amounted to $ 0.3 million for each period. The expense for the nine months ended September 30, 2023 and 2022  amounted to $ 1.0 million during each period .  The Company’s matching contribution is made in the form of Bel Fuse Inc. Class A common stock. As of September 30, 2023 , the plan owne d 302,074 and 69,485 sh ares of Bel Fuse Inc. Class A and Class B common stock, respectively.     The Company also maintains a Nonqualified Deferred Compensation Plan (the "DCP").  With certain exceptions, the Company's contributions to the DCP are discretionary and become fully vested by the participants upon reaching age 65 .  The expense amounted to less than $ 0.1   mil lion during each of the three month periods ended  September 30, 2023 and 2022  and amounted to $ 0.1   million during each of the  nine month periods ended September 30, 2023 and 2022 . As the plan is fully funded, the assets and liabilities related to the DCP were in equal amounts of $ 0.8 million at September 30, 2023  and $ 0.7  m illion at December 31, 2022 .  These amounts are included in other assets and other liabilities, respectively, on the accompanying condensed consolidated balance sheets as of each date.      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 September 30, 2023 and 2022 amounte d to $ 0.3   million and $ 0.4  million, respectively .  The expense for the nine months ended September 30, 2023 and 2022  amounted to $ 1.2  million and $ 1.3 million, respectively. As of December 31, 2021, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc. C lass A and Class B common stock, respectively. During the second quarter of 2022, the Company repurchased all shares back from the Asia retirement plan and no shares were owned by the plan as of September 30, 2023  or December 31, 2022 .   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 6   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     Nine Months Ended       September 30,     September 30,       2023     2022     2023     2022   Service cost   $ 92     $ 126     $ 277     $ 377   Interest cost     221       159       664       477   Net amortization     18       78       53       234   Net periodic benefit cost   $ 331     $ 363     $ 994     $ 1,088     15 Table of Contents   The service cost component of net benefit cost is presented within cost of sales, research and development costs 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 expense, net in the accompanying condensed consolidated statements of operations.   The following amounts are recognized net of tax in accumulated other comprehensive loss:       September 30,     December 31,       2023     2022   Prior service cost   $ 242     $ 334   Net loss     ( 2,177 )     ( 2,216 )     $ ( 1,935 )   $ ( 1,882 )      14. ACCUMULATED OTHER COMPREHENSIVE LOSS   The components of accumulated other comprehensive loss at  September 30, 2023 and December 31, 2022 are summarized below:       September 30,     December 31,       2023     2022                     Foreign currency translation adjustment, net of taxes of ($ 260 ) at September 30, 2023 and ($ 369 ) at December 31, 2022   $ ( 25,964 )   $ ( 23,107 ) Unrealized gains on interest rate swap cash flow hedge, net of taxes of $ 0 at September 30, 2023 and $ 0 at December 31, 2022     5,530       5,539   Unrealized holding gains on marketable securities, net of taxes of ($ 7 ) at September 30, 2023 and ($ 7 ) at December 31, 2022     19       18   Unfunded SERP liability, net of taxes of $ 891 at September 30, 2023 and $ 879 at December 31, 2022     1,045       1,004                     Accumulated other comprehensive loss   $ ( 19,370 )   $ ( 16,546 )   Changes in accumulated other comprehensive loss by component during the nine months ended September 30, 2023 are as follows.  All amounts are net of tax.               Unrealized     Unrealized                         Foreign Currency     Gains (Losses) on     Holding Gains                         Translation     Interest Rate Swap     on     Unfunded                 Adjustment     Cash Flow Hedge     Marketable Securities     SERP Liability       Total                                               Balance at December 31, 2022   $ (23,107 )   $ 5,539     $ 18     $ 1,004       $ (16,546 ) Other comprehensive (loss) income before reclassifications     ( 3,054 )     1,641       1       -         ( 1,412 ) Amount reclassified from accumulated other comprehensive loss     197       ( 1,650 )     -       41   (a)     ( 1,412 ) Net current period other comprehensive (loss) income     ( 2,857 )     ( 9 )     1       41         ( 2,824 )                                             Balance at September 30, 2023   $ (25,964 )   $ 5,530     $ 19     $ 1,045       $ (19,370 )   (a) This reclassification relates to the amortization of prior service costs and gains/losses associated with the Company's SERP Plan. This expense is reflected in other expense, net on the accompanying condensed consolidated statements of operations.   16 Table of Contents      15. COMMITMENTS AND CONTINGENCIES   Legal Proceedings   The Company is party to a number of legal actions and claims, none of which individually or in the aggregate, in the opinion of management, are expected to have a material adverse effect on the Company's consolidated results of operations or consolidated financial position.   On June 23, 2021, a patent infringement lawsuit styled Bel Power Solutions, Inc. v. Monolithic Power Systems, Inc. , Case Number 6:21cv00655, was filed in the United States District Court for the Western District of Texas (Waco Division) by Bel Power Solutions, Inc. against Monolithic Power Systems, Inc. ("MPS") for infringement of various patents directed towards systems, methods and articles of manufacture that provide a substantial improvement in power control for circuits, including novel and unique point-of-load regulators. On July 27, 2023, the Western District of Texas court filed an Order granting MPS’s motion for summary judgment of non-infringement. The Court’s memorandum and opinion is forthcoming. The Company is evaluating its options for appeal.   In connection with the Company's 2014 acquisition of the Power-One Power Solutions business ("Power Solutions") of ABB Ltd., 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 a nd has been included as a liability for uncertain tax positions on the accompanying condensed consolidated balance sheets at September 30, 2023   and December 31, 2022 . 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 September 30, 2023  and December 31, 2022 .   In connection with the Company's 2021 acquisition of EOS Power ("EOS"), there is an ongoing claim asserted with respect to EOS by the Principal Commissioner of Customs (Preventive), Mumbai related to customs duties and imposed fines and penalties dating back to 1994. The original demand was in the amount of approximately $ 1.4  million, of which EOS has paid $ 0.5 million.   E OS filed an Appeal in 2016 which is pending with the Customs, Excise and Service Tax Appellate Tribunal in Mumbai related to the $ 0.9 million balance of the original demand net of EOS' payment. As part of the EOS acquisition agreement entered into in March 2021, the Company is indemnified for this matter for a period of 7 years from the acquisition date. The Company is unable to determine at this time what amount, if any, may ultimately be due in connection with this claim. As such, no estimate was accrued as of  September 30, 2023 .    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 consolidated results of operations.      16. 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 Connectivity Solutions, Power Solutions and Protection, Magnetic Solutions and the aforementioned 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 September 30, 2023       Power Solutions     Connectivity     Magnetic     Corporate               and Protection     Solutions     Solutions     Segment     Total   Revenue   $ 74,862     $ 51,771     $ 32,049     $ -     $ 158,682   Gross Profit     31,206       18,510       7,051       ( 1,302 )     55,465   Gross Profit %     41.7 %     35.8 %     22.0 %     nm       35.0 %       Three Months Ended September 30, 2022       Power Solutions     Connectivity     Magnetic     Corporate               and Protection     Solutions     Solutions     Segment     Total   Revenue   $ 76,433     $ 50,253     $ 51,053     $ -     $ 177,739   Gross Profit     24,801       13,099       15,501       ( 1,867 )     51,534   Gross Profit %     32.4 %     26.1 %     30.4 %     nm       29.0 %       Nine Months Ended September 30, 2023       Power Solutions     Connectivity     Magnetic     Corporate               and Protection     Solutions     Solutions     Segment     Total   Revenue   $ 245,134     $ 160,010     $ 94,659     $ -     $ 499,803   Gross Profit     92,010       57,218       21,814       ( 6,376 )     164,666   Gross Profit %     37.5 %     35.8 %     23.0 %     nm       32.9 %       Nine Months Ended September 30, 2022       Power Solutions     Connectivity     Magnetic     Corporate               and Protection     Solutions     Solutions     Segment     Total   Revenue   $ 206,247     $ 140,062     $ 138,721     $ -     $ 485,030   Gross Profit     60,775       37,414       37,476       ( 4,719 )     130,946   Gross Profit %     29.5 %     26.7 %     27.0 %     nm       27.0 %   17 Table of Contents        Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operation   The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 2022 Annual Report on Form 10-K and our consolidated financial statements and related notes set forth in Item 8 of Part II of our 2022 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 anticipated or likely impact of COVID-19 including regarding the continuing, lasting, consequential or related impacts and uncertainties resulting from the associated pandemic c onstitute 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.   Overview   Our Company   We design, manufacture and market a broad array of products that power, protect and connect electronic circuits.  These products are primarily used in the networking, telecommunications, computing, general industrial, high-speed data transmission, military, commercial aerospace, transportation and eMobility industries.  Our portfolio of products also finds application in the automotive, medical, broadcasting and consumer electronics markets.   We operate through three product group segments, in addition to a Corporate segment. In the nine months ended September 30, 2023, 49% of our revenues were derived from Power Solutions and Protection, 32% from Connectivity Solutions and 19% from our Magnetic Solutions operating segment .   Our operating expenses are driven principally by the cost of labor where the factories that we use 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 materials, labor cost and fringes and related allocations of factory overhead. Our products are manufactured at various facilities in the United States, Mexico, Dominican Republic, United Kingdom, Slovakia, India 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.   The Effects of COVID-19 on Bel’s Business   We continue to be focused on the safety and well-being of our associates around the world in light of COVID-19 and the variants of COVID that have followed. Our management team closely monitors the situation at each of our facilities and protective measures, where possible and as applicable under governing regulations, remain in place throughout our facilities.    Throughout 2022, pandemic-related issues created additional port congestion and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of critical parts. In order to better control our costs, the expediting of raw material deliveries has been generally reserved for customer-specific requests for expedited timing whereby our end customer has agreed to pay the incremental fee. The requests to expedite shipments has continued into the first nine months of 2023 but to a lesser extent.   Upon the discontinuation of COVID protocols in the PRC in late 2022, we experienced approximately 3-4 weeks between December 2022 and January 2023 where the attendance rate of workers at our factories in the PRC were very low due to COVID outbreaks in the regions in which we operate. As of September 30, 2023 , attendance rates at all of our factories in the PRC were at normal levels. We do not believe the aforementioned low attendance rates had a material impact on Bel's financial results during the first nine months of 2023. To date, the COVID-related transportation delays and local outbreaks have not materially impacted our ability to operate our business or achieve our business goals.      18 Table of Contents   Based on our analysis of Accounting Standards Codification ("ASC") 350 and ASC 360 during the nine months ended September 30, 2023, we are not aware of any potential triggering events for impairment of our goodwill, indefinite-lived intangible assets or finite-lived assets.  We 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  we have not experienced a negative impact on our liquidity to date.  Our balance of cash on hand continues to be strong at $100.2 million at September 30, 2023 as compared to $70.3 million a t December 31, 2022. We also have availability under our current revolving credit facility; as of September 30, 2023, we could borrow an additional $115.0 m illion while still being in compliance with our debt covenants.  However, any significant negative impact to our financial results related to COVID or otherwise 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.  Our management team closely monitors the ongoing COVID situation and i ts continuing and consequential or related effects and uncertainties including upon our industry, suppliers and customers, and has developed plans which could be implemented to minimize the impact to our Company in the event prior or similar pandemic conditions reemerge or recur or the current situation otherwise deteriorates.   Our statements regarding the future impact of COVID-19  including regarding the continuing, lasting, consequential or related impacts and uncertainties resulting from the associated pandemic represent Forward-Looking Statements.  See “Cautionary Notice Regarding Forward-Looking Information.”   Other Key Factors Affecting our Business     We believe that, in addition to uncertainties around COVID- 19 and resulting pandemic-related uncertainties and effects , recent global inflationary pressures on the costs of goods and services in general, and ongoing conflicts/political unrest in or near the countries in which Bel operates, the key factors affecting and/or potentially affecting our results for the nine months ended September 30, 2023 and/or future results include the following:     • Revenues  – Our revenues in the first  nine months of 2023 were up $14.8 million, or 3.0%   as compared to the same period of 2022 .  The increase wa s primarily seen within our Power Solutions and Protection group from higher sales of our power products  utilized in networking and eMobility end applications. Our Connectivity Solutions group was also a significant contributor to our sales growth in the first nine months of 2023, driven by increased sales to customers in the commercial aerospace and military end markets. These increases were offset in part by a decline in sales of our Magnetic Solutions products during the first nine months of 2023 as compared to the same period of 2022, we believe primarily due to our Magnetic Solutions networking customers continuing to work through inventory on hand.     • Backlog  – Our backlog of orders amounted to $407.6 million at September 30, 2023 , a decreaseof $157.8 million, or 27.9%, from December 31, 2022 .  From year-end 2022 to September 30, 2023 , we saw a 28.5% decrease in the backlog for our Power Solutions and Protection business, a decline in backlog of 2.0% in our Connectivity Solutions business and a 59.2% decrease in backlog level at our Magnetic Solutions business.  Order volumes in general have been lower in recent quarters which we believe to be due in part to our customers' working through inventory on hand.   19 Table of Contents     • Product Mix  – Material and labor costs vary by product line and any significant shift in product mix between higher- and lower-margin product lines will have a corresponding impact on our gross margin percentage.   In general, our Connectivity products have historically had the highest-contribution margins of our three product groups given the harsh environment and high-reliability nature of these products and the end markets they serve.  Our Power products have a higher-cost bill of materials and are impacted to a greater extent by changes in material costs.  As our Magnetic Solutions products are more labor-intensive in nature, margins on these products are impacted to a greater extent by minimum and market-based wage increases in the PRC and fluctuations in foreign exchange rates between the U.S. Dollar and the Chinese Renminbi.  Fluctuations in revenue volume among our product groups will have a corresponding impact on our profit margins.  See "Results of Operations - Summary by Operating Segment - Revenue and Gross Margin" below for further details.     • Pr icing and Availability of Materials  – Over the second half of 2023 to date , while there has been some stabilization of raw materials pricing, overall our cost of materials remain elevated. With the exception of discrete semiconductors,  supply constraints have eased related to components that constitute raw materials in our manufacturing processes, particularly with capacitors, resistors and copper.  Lead times are still above normal though suppliers are now meeting the agreed delivery deadlines with more regularity .  Our material costs as a percentage of revenue were 41.8% of sales during the first nine months of 2023 , down from 45.9% during the same period of 2022  as a result of a favorable shift in product mix and the impact of our pricing actions over the past year, offset in part by higher material costs in 2023 .     • Labor Costs  – Labor costs represented 6.5% of revenue during the first nine months of 2023  as compared to 8.4% of revenue during the same period of 2022 .  The reduction in labor costs as a percentage of sales for the first nine months of 2023 was largely impacted by various internal initiatives  taken by our Company over the past year to mitigate the increase in wage rates at our factories that we had absorbed over the past several years.  Effective October 1, 2023, the PRC issued a regulation mandating an 18.2% increase to the minimum wage in a region where two of Bel's factories are located. We anticipate this increase in minimum wage to result in higher labor costs of approximately $0.5 million per year in the aggregate at these facilities going forward. This and any future increases in minimum wage rates will have an unfavorable impact on Bel's profit margins.  The preceding two sentences represent Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."         • Inflationary Pressures - Inflationary pressures could continue to result in higher input costs, including those related to our raw materials, labor, freight, utilities, healthcare and other expenses. Our future operating results will depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings initiatives and sourcing decisions. The preceding two sentences represent Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."     • Restructuring  – During the third quarter of 2022, we launched a series of initiatives to simplify our operational footprint. Within our Connectivity Solutions group, facility consolidation actions have been underway in both the U.S. and Europe. During the nine months ended September 30, 2023, we completed the transitions our of our Tempe, Arizona and Sudbury, UK sites, moving those operations into other existing Bel facilities. Our Connectivity site in Melbourne, Florida is in the process of transitioning its manufacturing operations to our existing site in Waseca, Minnesota and this initiative is scheduled for completion by the end of 2023. Within our Magnetic Solutions group, our facility consolidation efforts in China were largely complete by the end of the third quarter of 2023 with the final aspects expected to transition by year-end. Aggregate annual cost savings are estimated at approximately $6.9 million, of which we anticipate to realize approximately $1.6 million in the fourth quarter of 2024. We will co ntinue to review our operations to optimize our business, which may result in restructuring costs being recognized in future periods. The preceding sentences represent Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."     • Impact of Foreign Currency  – As further described below, during the nine months ended September 30, 2023, labor and overhead costs were $0.4 million lower than the corresponding 2022 period primarily due to a favorable foreign exchange environment involving the Chinese Renminbi, largely offset by an unfavorable foreign exchange fluctuations in the Mexican Peso, as compared to the prior year period.  We realized foreign exchange transactional losses of $0.1 million during the nine months ended September 30, 2023 , due to the fluctuation of the spot rates of certain currencies in effect when translating our balance sheet accounts at September 30, 2023  versus those in effect at December 31, 2022. Since we are a U.S. domiciled company, we translate our foreign currency-denominated financial result s into U.S. dollars.  Due to the changes in the value of foreign currencies relative to the U.S. dollar, translating our financial results and the revaluation of certain intercompany as well as third-party transactions to and from foreign currencies to U.S. dollars may result in a favorable or unfavorable impact to our consolidated statements of operations and cash flows.  We were favorably impacted by transactional foreign exchange gains in the  nine months of 2023 due to the depreciation of the Chinese Renminbi against the U.S. dollar, which was largely offset by an appreciation of the Mexican Peso against the U.S. dollar, as compared to exchange rates in effect during 2022 .  We have significant manufacturing operations located in in the PRC and Mexico where labor and overhead costs are paid in local currency.  As a result, the U.S. Dollar equivalent costs of these operations were approximately $2.5 million lower in the PRC, largely offset by higher costs in Mexico of approximately $1.8 million, in the nine months ended September 30, 2023  as compared to the comparable period in  2022 .  We monitor changes in foreign currencies and have historically implemented foreign currency forward contracts, and may continue to implement pricing actions to help mitigate the impact that changes in foreign currencies may have on our consolida ted operating results. The preceding sentence represents a Forward-Looking Statement.  See "Cautionary Notice Regarding Forward-Looking Information."     • Effective Tax Rate  – Our effective tax rate will fluctuate based on the geographic regions in which our pretax profits are earned.  Of the geographic regions in which we operate, the U.S. and Europe’s tax rates are generally equivalent; and Asia has the lowest tax rates of our three geographical regions.  See Note 12, “Income Taxes”.   20 Table of Contents   Results of Operations - Summary by Operating Segment   Revenue and Gross Margin     Our revenue and gross margin by operating segment for the three and nine months ended September 30, 2023 and 2022 were as follows:       Three Months Ended     Nine Months Ended       September 30,     September 30,       Revenue     Gross Margin     Revenue     Gross Margin       2023     2022     2023     2022     2023     2022     2023     2022   Power solutions and protection   $ 74,862     $ 76,433       41.7 %     32.4 %   $ 245,134     $ 206,247       37.5 %     29.5 % Connectivity solutions     51,771       50,253       35.8 %     26.1 %     160,010       140,062       35.8 %     26.7 % Magnetic solutions     32,049       51,053       22.0 %     30.4 %     94,659       138,721       23.0 %     27.0 %     $ 158,682     $ 177,739       35.0 %     29.0 %   $ 499,803     $ 485,030       32.9 %     27.0 %   Power Solutions and Protection:     Sales of our Power Solutions and Protection products were lower by $1.6 million (2.1%) during the third quarter of 2023 compared to the same period of 2022. The decrease resulted primarily from a decline in sales of our CUI products of $8.1 million and a reduction in sales of our circuit protection products by $2.2 million during the third quarter of 2023 compared to the same period of 2022, both of which categories were largely impacted by lower demand from our distribution customers as we believe they continue to work through excess inventory on hand. Further, raw material expedite fee revenue for our Power segment totaled $1.0 million in the third quarter of 2023 as compared to $9.4 million in the third quarter of 2022.These areas of decline were partially offset by higher sales of our front-end power products of $7.5 m illion and board mount power products of $1.9 million during the third quarter of 2023 compared to the same period of 2022, both of which are used in networking and datacenter applications. Further, sales of product into the eMobility end market increased by $3.8 million (119%) and sales of products into the rail end market increased by $2.5 million (66%) in the third quarter of 2023 as compared to the third quarter of 2022.    Power Solution and Protection s ales were up by $38.9 million (18.9%) during the first nine months of  2023 as compared to the same period of 2022 . This increase was primarily due to higher sales of our front-end power products and board mount power products of $39.5 million and $7.9 million, respectively, both of which are used in networking and datacenter applications . Further, sales of product into the eMobility end market increased by $9.8 million (79.2%) and sales of product into the rail end market increased by $5.3 million (33.0%) in the first nine months of 2023  as compared to the same period of 2022 . These increases were offset in part by a reduction in sales of our CUI products of $8.7 million and a decline in sales  of our circuit protection products of $7.4 million,  both of which were largely impacted by the lower demand from our distribution customers as noted above.   Raw material expedite fee revenue for this segment totaled $14.4 million in the nine months ended September 30, 2023 as compared to $22.0 million in the same period of 2022.   Gross margin improved in the  2023 periods presented versus those from the same periods of  2022 as pricing actions, higher sales volume, favorable exchange rates with the Chinese Renminbi versus the U.S. dollar, a lower volume of low-margin expedite fees and a favorable shift in product mix offset the impact of increased material costs.   Connectivity Solutions:   Sales of our Connectivity Solutions products increased by $1.5 million (3.0%) and $19.9 million (14.2%) during three and  nine months ended September 30, 2023 , respectively, as compared to the same periods of 2022 .  These increases were primarily due to an increase in sales into the commercial aerospace end market of $3.3 million (41.1%) during the third quarter of  2023 and $19.7 million (89.4%) during the first nine months of  2023 as compared to the same periods of 2022 . Sales into our military end market also grew in the  2023 periods by $3.6 million (44.5%) during the third quarter and $7.0 million (25.9%) during the first nine months of 2023  as compared to the same periods of 2022 . We also experienced an increased volume of Connectivity Solutions products sold through our distribution channels in the  2023 periods compared to last year.  These sales increases were offset in part by a decline in sales of passive connector and cabling products used in the industrial premise wiring and 5G/IOT markets of $4.4 million (39.6%) during the three months ended September 30, 2023 and a decline of $8.2 million (28.0%) during the nine months ended September 30, 2023 as compared to the prior year periods. Gross margins for the 2023  periods presented above were favorably impacted by the higher overall sales volume, pricing actions and operational efficiencies implemented during the first nine months of 2023 , partially offset by higher wage rates in Mexico and an unfavorable fluctuation in exchange rates between the U.S. dollar and Mexican peso in the 2023 periods as compared to the 2022 periods presented.     Magnetic Solutions:   Sales of our Magnetic Solutions products declined by $19.0 million (37.2%) and $44.0 million (31.8%) during the three and nine months ended September 30, 2023 , respectively, as compared to the same periods of 2022 . Reduced demand for our Magnetic Solutions products from our networking customers and through our distribution channels has been the primary driver of the lower demand as we believe by these customers continue to work through inventory on hand. The lower sales volume, partially offset by pricing actions and favorable exchange rates with the Chinese Renminbi versus the U.S. dollar, were the primary drivers of gross margin reduction for this product group from last year's periods.     Cost of Sales   Cost of sales as a percentage of revenue for the three and nine months ended September 30, 2023 and 2022 consisted of the following:       Three Months Ended     Nine Months Ended       September 30,     September 30,       2023     2022     2023     2022   Material costs     40.5 %     46.1 %     41.8 %     45.9 % Labor costs     6.2 %     7.9 %     6.5 %     8.4 % Other expenses     18.3 %     17.0 %     18.8 %     18.7 % Total cost of sales     65.0 %     71.0 %     67.1 %     73.0 %   Material costs as a percentage of sales during the three and  nine months ended September 30, 2023  were down compared to the same periods of 2022 , as pricing actions taken over the past year are helping to offset the continued heightened cost of certain raw materials.   Labor costs in  2023 as a percentage of sales have decreased significantly from the  2022 periods presented due to a variety of factors, including the shift in product mix resulting in a lower consolidated percentage of sales from of our labor-intensive Magnetic products, lower labor costs in China due to the favorable fluctuation in the Chinese Renminbi exchange rate versus the U.S. Dollar, and the restructuring and efficiency programs implemented throughout 2023 in our Connectivity Solutions segment. The reduction in labor costs were partially offset by the unfavorable fluctuation of the Mexican Peso exchange rate versus the U.S. Dollar in the  2023 periods presented versus the prior year periods.      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 ex penses decreased by $1.5 million in the three months ended September 30, 2023 as compared to the same period of 2022. The declines were largely related to reductions in support labor and overhead costs as a result of efficiency programs implemented at several of our factories throughout 2023.  For the nine months ended September 30, 2023, other expenses increased by $2.4 million as compared to the same period of 2022 , as prior to the implementation of efficiency-related programs at our factories, g lobal wage rate increases, both inflationary and government-mandated increases to minimum wage rates, coupled with increased overhead costs to accommodate additional demand from our commercial aerospace customers led to higher fixed costs in the  2023 period as compared to  2022 .   21 Table of Contents   Research and Development ("R&D") Expense   R&D expense amounted to $5.3 million and $4.9 million for the three months ended  September 30, 2023 and 2022 , respectively, and $16.5 million and $14.4 million for the nine months ended September 30, 2023 and 2022 , respectively. The increases noted for the  2023 periods were primarily due to higher salaries, benefits and product development costs.   Selling, General and Administrative Expense (“SG&A”)   SG&A expenses were $23.7 million for the third quarter of 2023, up from $22.2 million in the third quarter of 2022.  This increase in SG&A was largely the result of higher SG&A salaries and fringe benefits of $1.1 million and incremental litigation costs of $0.5 million. SG&A expenses were $74.1 million for the first nine months of 2023 , up from $67.2 million in the same period of 2022, primarily due to higher SG&A salaries and fringe benefits of $5.3 million and litigation costs of $2.9 million primarily associated with the MPS patent infringement lawsuit further described in Note 15, "Commitments and Contingencies".   Other Expense, Net   Other expense, net was $0.1 million and $0.4 million for the three months ended September 30, 2023  and 2022 , respectively. The year-over-year change within this line item was largely driven by the Company recording  $0.3 million of losses associated with its investment in innolectric during the third quarter of 2023 . Other expense, net was $0.3 million and $2.9 million for the nine months ended September 30, 2023  and 2022 , respectively. The year-over-year fluctuation was primarily due to market fluctuations in our SERP investments which resulted in a gain of $0.3 million in the  nine months ended September 30, 2023 versus a loss of $2.9 million in the  nine months ended September 30, 2022 .    Provision for Income Taxes   The Company’s effective tax rate will fluctuate based on the geographic regions in which the pretax profits are earned.  Of the jurisdictions in which the Company operates, the U.S. and Europe’s tax rates are generally equivalent; and Asia has the lowest tax rates of the Company’s three geographic regions.  See Note 12, “Income Taxes”.   The provision for income taxes for the three months ended September 30, 2023 and 2022 was $4.3 million and $4.1 million, respectively.  The Company’s earnings before income taxes for the three months ended September 30, 2023, were $3.1 million higher when compared with the same period in 2022, primarily attributable to an increase in income from the North America and Europe regions, offset by a decrease in the Asia region. The Company’s effective tax rate was 18.2% and 20.0% for the three months ended September 30, 2023 and 2022, respectively.  The change in the effective tax rate during the three months ended September 30, 2023 as compared to the same period in 2022, is primarily attributable to a net benefit resulting from the impact of permanent differences on U.S. activities, as well as a decrease in the U.S. tax credits. See Note 12, “Income Taxes.”   The provision for income taxes was $8.0 million and $3.0 million for the nine months ended September 30, 2023 and 2022, respectively. The Company’s earnings before income taxes for the nine months ended September 30, 2023, were approximately $28.2 million higher than the same period in 2022, primarily attributable to an increase in income in North America and Europe regions, offset by a decrease in the Asia region. The Company’s effective tax rate was 11.5%  and 7.1%  for the nine months ended September 30, 2023 and 2022, respectively.  The change in the effective tax rate during the nine months ended September 30, 2023 as compared to the same period in 2022, is primarily attributable to a decrease in the tax benefit resulting from the reversal of valuation allowances in 2023 compared to 2022. See Note 12, “Income Taxes.”   Liquidity and Capital Resources   Our principal sources of liquidity include $100.2 million of cash and cash equivalents at September 30, 2023, cash provided by operating activities and borrowings available under our credit facility.  We expect to use this liquidity 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, both in the next twelve months and in the longer term.   22 Table of Contents   Cash Flow Summary   During the nine months ended September 30, 2023, our cash and cash equivalents increased by $30.0 million.  This increase was primarily due to the following:     • net cash provided by operating activities of $81.4 m illion;   • proceeds from the sale of property, plant and equipment of $5.4 million   • proceeds from the sale of our business in the Czech Republic of $5.1 million; partially offset primarily by   • net repayments under our revolving credit facility of $35.0 million; and   • payments for our equity method investment in innolectric of $10.0 million;   • purchases of property, plant and equipment of $9.7 million; and   • dividend payments of $2.5 million   During the nine months ended September 30, 2023, our a ccounts receivable decreased by $11.9 million due to lower sales volume in the third quarter. Days sales outstanding (DSO) was 55 days at September 30, 2023 as compared to 58 days at December 31, 2022.  Inventory decreased by $29.3 million at September 30, 2023 compared to December 31, 2022, as component availability has started to ease and we have worked to consume our inventory on hand.  Inventory turns wer e 2.9  a t September 30, 2023 as compared to 2.6 at December 31, 2022.   Cash and cash equivalents, marketable securities and accounts receivable comprised approximately 34.8% of our total assets at September 30, 2023 and 31.7% of total assets at December 31, 2022. Our current ratio (i.e., the ratio of current assets to current liabilities) was 3.1  to 1 at September 30, 2023 and 2.8 to 1 at December 31, 2022. At September 30, 2023 and December 31, 2022, $45.6 million and $50.1 million, respectively (or 45% and 71%, respectively), of our cash and cash equivalents was held by our foreign subsidiaries.  We repatriated $33.5  million from outside of the U.S. during the nine months ended September 30, 2023. 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 our U.S. operations in the future.  In the event these funds were needed for our U.S. operations, we would be required to accrue and pay U.S. state taxes and any applicable foreign withholding taxes to repatriate these funds.   Future Cash Requirements   We expect foreseeable liquidity and capital resource requirements to be met through existing cash and cash equivalents and anticipated cash flows from operations, as well as borrowings available under our revolving credit facility, if needed.  Our material cash requirements arising in the normal course of business are outlined in Item 7A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.  There were no material changes to our future cash requirements during the nine months ended September 30, 2023.   Credit Facility   In September 2021, we entered into the CSA, as further described in Note 11, "Debt".  During January 2023, we amended our CSA and related interest rate swap agreements to transition the reference rate from LIBOR to a Secured Overnight Financing Rate ("SOFR") effective January 31, 2023. The CSA contains customary representations and warranties, covenants and events of default.  In addition, the CSA contains financial covenants that measure (i) the ratio of our total funded indebtedness, on a consolidated basis, less the aggregate amount of all unencumbered cash and cash equivalents, to the amount of our consolidated EBITDA (“Leverage Ratio”) and (ii) the ratio of the amount of our consolidated EBITDA to our consolidated fixed 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 September 30, 2023, we were in compliance with our debt covenants, including the most restrictive covenant, th e Fixed Charge Coverage Ratio.  The u nused credit available under the credit facility at September 30, 2023 was $115.0 million, all of which we had the ability to borrow without violating our Leverage Ratio covenant based on our existing consolidated EBITDA.   Critical Accounting Policies and Estimates   Our condensed consolidated financial statements include certain amounts that are based on management's best estimates and judgments.  We base our estimates on historical experience and on various other assumptions, including in some cases future projections, that are believed to be reasonable under the circumstances. The results of these estimates 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.  Different assumptions and judgments could change the estimates used in the preparation of the condensed consolidated financial statements, which, in turn, could change the results from those reported.  Management evaluates its estimates, assumptions and judgments on an ongoing basis.   Based on the above, we have determined that our most critical accounting estimates are those related to business combinations, inventory valuation, goodwill and other indefinite-lived intangible assets, and those related to our pension benefit obligations. For a detailed discussion of our critical accounting estimates, refer to “Critical Accounting Estimates” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes in our critical accounting policies, judgments and estimates, including assumptions or estimation techniques utilized, as compared to those disclosed in our 2022 Annual Report on Form 10-K.   23 Table of Contents   Recent Accounting Pronouncements   The discussion of new financial accounting standards applicable to our Company is incorporated herein by reference to Note 1 to the Company’s Financial Statements, “Basis of Presentation and Accounting Policies,” included in Part I, Item 1 of this Quarterly Report on Form 10-Q.   Item 3.  Quantitative and Qualitative Disclosures About Market Risk   The Company is not required to provide the information called for by this Item as it is a "smaller reporting company," as defined in Rule 12b-2 of the Exchange Act.   Item 4.   Controls and Procedures   Disclosure controls and procedures :  As of the end of the period covered by this report, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, 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 Chief Financial Officer 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 has not been any change in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.   PART II.     Other Information   Item 1.   Legal Proceedings   The information called for by this Item is incorporated herein by reference to Note 15, "Commitments and Contingencies" of the Company’s Condensed Consolidated Financial Statements, under “Legal Proceedings”, as set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q. We are also involved in various other legal actions incidental to our business. We believe, after consulting with counsel, that the disposition of these other legal proceedings and matters will not have a material effect on our condensed consolidated financial condition or results of operations.   Item 1A. Risk Factors   The risk factors described in Part I, Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 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 Quarterly Report on 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.   24 Table of Contents   Item 2.  Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities   Not applicable.   Item 3.  Defaults Upon Senior Securities   Not applicable.   Item 4.  Mine Safety Disclosures   Not applicable.   Item 5.  Other Information   Not applicable.   25 Table of Contents   Item 6.  Exhibits       Exhibits:       3.1 Amended and Restated By-Laws of Bel Fuse Inc. (Adopted October 25, 2023), are incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on October 25, 2023.     31.1* Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.     31.2* Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.      32.1** Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.      32.2** Certification of Principal Financial 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 Exhibits 101)   *   Filed herewith. ** Submitted herewith.   26 Table of Contents   SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.     BEL FUSE INC. November 3, 2023   By: /s/ Daniel Bernstein   Daniel Bernstein   President and Chief Executive Officer (Principal Executive Officer)     By: /s/ Farouq Tuweiq   Farouq Tuweiq   Chief Financial Officer (Principal Financial Officer)   27