What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-03-11 · 214 added, 120 removed, 245 unchanged (58% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The information in this MD&A should be read in conjunction with the Company's consolidated financial statements and the notes related thereto.

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 consolidated financial statements and the notes related thereto.

The discussion of results, causes and trends should not be construed to imply any conclusion that such results, causes or trends will necessarily continue in the future.

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All amounts and percentages are approximate due to rounding.

The Company has been (and is for purposes of this Form 10-K) a “smaller reporting company” under applicable SEC rules and regulations, permitting the Company to use the scaled disclosure requirements applicable to smaller reporting companies, including a reduced number of years covered by the consolidated financial statements in Item 8.

As a result of the measurement of the Company’s public float as of the June 30, 2023 determination date, the Company will no longer qualify as a smaller reporting company.

However, pursuant to Rule 12b-2 of the Securities Exchange Act of 1934, as amended, the Company is not required to reflect the change in its smaller reporting company status or comply with the non-scaled disclosure obligations until the Company’s first quarterly report on Form 10-Q for the quarter ending March 31, 2024.

In accordance with applicable rules, the Company is permitted to use the scaled disclosure requirements applicable to smaller reporting companies in this Form 10-K and has elected to do so.

See the “Explanatory Note” on the cover page of this Form 10-K.

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.

These products are primarily used in the defense, commercial aerospace, networking, telecommunications, computing, general industrial, high-speed data transmission, transportation and eMobility industries.

Bel's 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.

We operate through three product group segments.

In 2024 , 46% of the Company's revenues were derived from Power Solutions and Protection, 41% from Connectivity Solutions and 13% from our Magnetic Solutions operating segment.

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Such amounts are determined based upon the estimated stage of production and include labor cost and fringes and related allocations of factory overhead.

Our products are manufactured at various facilities in the U.S., Mexico, India, the Dominican Republic, the United Kingdom, Slovakia and the PRC.

Our products are manufactured at various facilities in the U.S., Mexico, Israel, India, the Dominican Republic, the United Kingdom, Slovakia and the PRC.

We have little visibility into the ordering habits of our customers and we can be subjected to large and unpredictable variations in demand for our products.

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Revenues – The Company's revenues decreased by $105.0 m illion, or 16.4%, in 2024 as compared to 2023.

By product segment, Power Solutions and Protection sales increased by 8.9% , Connectivity Solutions sales increased by 12.6% and Magnetic Solutions sales decreased by 35.6% .

By product segment, Power Solutions and Protection sales decreased by 21.8%, Connectivity Solutions sales increased by 4.7% and Magnetic Solutions sales decreased by 40.2%.

Backlog – Our backlog of orders totaled $381.6 million at December 31, 2024, representing a decrease of $8.5 million, or 2%, from December 31, 2023.

From 2022 to the 2023 year-end, the backlog for our Power Solutions and Protection products decreased by 37%, due to a reduction in demand within the networking end market and in the distribution channel.

From 2023 to the 2024 year-end, the backlog for our Power Solutions and Protection (excluding Enercon) products decreased by 44%, due to a reduction in demand within the networking end market and in the distribution channel.

Enercon backlog at December 31, 2024 was $119 million.

Our Magnetic Solutions backlog decreased by 13%, primarily due to reduced order volume from a large networking customer.

The backlog for our Connectivity Solutions products was the same as the year-end 2022 level, as restored demand from our direct and after-market commercial aerospace customers was fully offset by reduced demand from customers in the networking and industrial end markets.

The backlog for our Connectivity Solutions products decreased by $8.2 million (7%) in 2024 from the 2023 level, due to reduced demand from customers in the networking and industrial end markets partially offset by an increase in demand from our military customers.

Product Mix – Material and labor costs vary by product line and any significant shift in product mix between higher- and lower-margin product lines will have a corresponding impact on the Company’s gross margin percentage.

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See Note 14, "Segments" for profit margin information by product group.

P ricing and Availability of Materials – Dur ing 2023, while there has been some stabilization of raw materials pricing, overall our cost of materials remain elevated.

Supply constraints have eased related to components that constitute raw materials in our manufacturing processes, particularly with capacitors, resistors and copper.

P ricing and Availability of Materials – There has been some stabilization of raw materials pricing in 2024;

however overall, our cost of materials remains elevated.

Supply constraints have eased related to components that constitute raw materials in our manufacturing processes, particularly with capacitors, resistors and Integrated circuits ("IC's").

Sharp increases in metal commodity prices, particularly copper and gold over the years continues to impact cost structures and supplier pricing.

Lead times are still above normal though suppliers are now meeting the agreed delivery deadlines with more regularity.

Additionally, our access to parts or materials, and our ability to contract with suppliers utilized previously, may be limited or prohibited from time to time by trade restrictions or other legal or regulatory enactments.

We anticipate continued downward pressure on our Power sales given trade restrictions on one of our former suppliers previously utilized for this segment, which had historically supported approximately $3 to $4 million per quarter of our sales into the consumer end market.

We are currently evaluating alternative manufacturing options for the components previously supplied by this manufacturer.

To the extent our suppliers in the PRC are negatively impacted by new or amended regulations, any such negative implications could adversely impact our supply chain, including in the form of increased costs, disruptions, shortages or unavailability of product or component parts, and/or other deleterious consequences, which could materially adversely affect our business and operating results.

Further, governments may impose tariffs to raise domestic revenue, protect domestic industries or exert political leverage over another country.

We are a global organization with a material volume of shipments of raw materials, work in progress and finished goods into and out of the U.S.

to and from a number of other countries, including but not limited to the PRC, Mexico, India and throughout Europe.

Any new or increase in tariffs imposed either by the U.S.

government on foreign imports or by a foreign government on U.S.

exports related to the countries in which we transact business could lead to reduced margins or increased prices that could cause decreased customer demand.

The preceding discussion about pricing and availability of materials contains Forward-Looking Statements.

See "Cautionary Notice Regarding Forward-Looking Information."

Labor Costs – Labor costs as a percentage of sales fluctuate based upon our product mix, with our Magnetic Solutions segment sales comprised largely of labor-intensive ICM products.

Any significant fluctuations in the exchange rates of the Chinese Renminbi versus the U.S.

dollar will have an impact on labor costs within our Magnetic Solutions and Power Solutions and Protection segments.

Similarly, any significant fluctuation in the exchange rate of the Mexican Peso versus the U.S.

dollar will have a corresponding impact on labor costs within our Connectivity Solutions segment.

Effective January 1, 2024, the statutory minimum wage rate in Mexico was increased by 20%, impacting labor costs at our Reynosa and Cananea, Mexico factories.

We estimate the additional cost associated with this increase will be approximately $1.4 million annually.

Also effective January 1, 2024, minimum wage increases which went into effect at our factory in Slovakia are expected to result in approximately $0.3 m illion of higher labor costs at that facility in 2024 as compared to 2023.

Further, our labor costs in the PRC, Mexico and Israel are largely paid in local currencies and any significant fluctuations in these exchange rates versus the U.S.

dollar will have an impact on our labor costs.

By segment, our Magnetic Solutions segment is most impacted by fluctuations in the exchange rates of the Chinese renminbi versus the U.S.

our Connectivity Solutions segment is most impacted by fluctuations in the exchange rate of the Mexican peso versus the U.S.

and our Power Solutions and Protection segment is most impacted by fluctuations in the exchange rates of the Chinese renminbi and the Israeli shekel versus the U.S.

In addition to foreign exchange rate exposure, our labor costs are also subject to government-regulated minimum wage increases in the countries in which we operate.

On January 1, 2025, minimum wage increases went into effect at our factory in PRC and are expected to result in approximately $0.4 m illion of higher labor costs at that facility in 2025 as compared to 2024.

The preceding discussion about labor costs, including our estimates of expected costs associated with increases, contains Forward-Looking Statements.

See "Cautionary Notice Regarding Forward-Looking Information."

Inflationary Pressures – Inflationary pressures could 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.

Restructuring – During the third quarter of 2022, a series of initiatives were launched to streamline our operational footprint.

Within our Magnetic Solutions group, our previously announced facility consolidation efforts in China were completed during the fourth quarter of 2023.

Further, during 2023, we completed the transitions of our Tempe, Arizona and Sudbury, UK sites, moving those operations into other existing Bel facilities.

The initiative related to our Connectivity site in Melbourne, Florida is substantially complete, with the final elements of the transition of these manufacturing operations to our existing site in Waseca, Minnesota scheduled for the first quarter of 2024.

Aggregate annual cost savings related to the four facility consolidations announced in 2022 were est imated at $6.9 million, with full savings to be realized beginning in the first quarter of 2024.

In a new restructuring initiative implemented in the fourth quarter of 2023, also within the Connectivity segment, certain manufacturing will transition from our Glen Rock, Pennsylvania facility to other existing Bel sites (the “Glen Rock initiative”) at an estimated cost to implement of $0.5 million.

We anticipate estimated annualized cost savings of approximately $1.0 million in connection with the Glen Rock initiative to be realized gradually over the course of 2024.

The Company will continue to review its operation s to optimize the business, which may result in restructuring costs being recognized in future periods.

The preceding sentences represent Forward-Looking Statements.

The amounts set forth in the foregoing including anticipated restructuring costs (including severance costs), incremental capital expenditures and annualized cost savings are the Company’s current estimates based on information presently available to the Company, assumptions and circumstances as they exist in each case at the time of filing of this Annual Report on Form 10-K, and are subject to change.

The preceding two sentences represent Forward-Looking Statements.

See "Cautionary Notice Regarding Forward-Looking Information."

Impact of Foreign Currency – As further described below in this "Impact of Foreign Currency" discussion, during 2023, labor and overhead costs were less than $0.1 million higher than in 2022 due to an unfavorable foreign exchange environment involving the Mexican peso, and Euro partially offset by favorable foreign exchange fluctuation due to Chinese renminbi as compared to the prior year period.

Also as described below in the discussion captioned "Inflation and Foreign Currency Exchange" , the Company realized foreign exchange transactional losses of $ 1.4 mi llion during 2023, due to the fluctuation of the spot rates of certain currencies in effect when translating our balance sheet accounts at December 31, 2023 versus those in effect at December 31, 2022.

Restructuring –In late 2023, we initiated a restructuring initiative within our Connectivity segment related to the transition of certain manufacturing from our Glen Rock, Pennsylvania facility to other existing Bel sites (the “Glen Rock initiative”).

During the third quarter of 2024, we initiated a restructuring initiative within our Power segment related to the transition of our fuse manufacturing to other existing sites (the "Fuse initiative").

In addition to the Fuse initiative and the Glen Rock initiative, the Company also implemented headcount reductions within our Magnetics segment in response to the lower sales volume in recent quarters within that segment.

In connection with these initiatives, the Company incurred $3.5 million of restructuring costs during the year ended December 31, 2024 which primarily consisted of severance costs.

The Glen Rock initiative was largely complete by the end of 2024 at a total cost to implement of $0.8 million (almost all of which was incurred during the year ended December 31, 2024).

Annual cost savings related to the Glen Rock initiative are estimated at $3.1 million (of this annualized amount, $1.5 million was realized throughout 2024, with the incremental $1.6 million to be realized in 2025).

The Fuse initiative is expected to be complete by the end of the first quarter of 2025 at a total cost to implement of $4.2 million (of which $2.0 million was incurred in the year ended December 31, 2024, with the balance to be incurred in early 2025).

Annual cost savings related to the Fuse initiative are estimated at $1.8 million and are expected to be realized beginning in the second quarter of 2025.

The Company will continue to review its operations to optimize the business, which may result in restructuring costs being recognized in future periods.

The preceding statements about restructuring initiatives, including our projections and estimates, represent Forward-Looking Statements.

See "Cautionary Notice Regarding Forward-Looking Information."

Impact of Foreign Currency – As further described below in this "Impact of Foreign Currency" discussion, during 2024, labor and overhead costs were $0.4 million lower than in 2023 due to favorable foreign exchange environment involving the Chinese renminbi and the Mexican peso, partially offset by unfavorable foreign exchange fluctuations due to the Israeli shekel as compared to the prior year period.

Also as described below in the discussion captioned "Inflation and Foreign Currency Exchange" , the Company realized foreign exchange transactional losses of $1.9 million during 2024, due to the fluctuation of the spot rates of certain currencies in effect when translating our balance sheet accounts at December 31, 2024 versus those in effect at December 31, 2023.

Since Bel is a U.S.

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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 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.

We were favorably impacted by transactional foreign exchange gains in 2024 due to the depreciation of the Chinese renminbi and Mexican peso against the U.S.

dollar, which was largely offset by an appreciation of the Israeli shekel against the U.S.

dollar, as compared to exchange rates in effect during 2023.

We have significant manufacturing operations located in in the PRC and Mexico where labor and overhead costs are paid in local currency.

We have significant manufacturing operations located in the PRC, Mexico and Israel where labor and overhead costs are paid in local currency.

As a result, the U.S.

Dollar equivalent costs of these operations were approximately $2.6 million lower in the PRC, largely offset by higher costs in Mexico of approximately $2.3 million, in 2023 as compared to 2022.

dollar equivalent costs of these operations were approximately $0.7 million lower in the PRC, and $0.5 million lower in Mexico, largely offset by higher costs in Israel of approximately $0.8 million, in 2024 as compared to 2023.

The Company monitors changes in foreign currencies and has historically implemented additional foreign currency forward contracts, and may continue to implement pricing actions to help mitigate the impact that changes in foreign currencies may have on its consolidated operating results.

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See "Cautionary Notice Regarding Forward-Looking Information."

Potential Future Impacts of COVID – The Company continues to be focused on the safety and well-being of its associates around the world in light of COVID and the variants of COVID that have followed.

The combination of protective measures at our factories coupled with remote work arrangements have enabled us to maintain operations, including financial reporting systems, internal controls over financial reporting and disclosure controls and procedures.

We have not experienced a negative impact on our liquidity to date as a result of the COVID pandemic.

Our balance of cash on hand and held to maturity investments in U.S.

Treasury securities continues to be strong at an aggregate amount of $126.9 million at December 31, 2023 as compared to $70.3 million at December 31, 2022.

The Company also has availability under its current revolving credit facility;

as of December 31, 2023, the Company could borrow an additional $115 million while still being in compliance with its debt covenants.

COVID remains a potential supply continuity risk due to the unknown nature of future outbreaks including potential further variants.

For additional information, see Item 1A - "Risk Factors - Our global operations and demand for our products face risks related to health epidemics such as the coronavirus." Our statements regarding the potential future impact of COVID represent Forward-Looking Statements.

See “Cautionary Notice Regarding Forward-Looking Information.”

Effective Tax Rate – The Company's effective tax rate will fluctuate based on the geographic region in which the pretax profits are earned.

Of the jurisdictions in which the Company operates, the U.S.

Of the jurisdictions in which the Company operates, t he U.S.

and Europe's tax rates are generally equivalent;

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See Note 10 to the Company's Consolidated Financial Statements - "Income Taxes" .

As our focus on streamlining the organization continues its momentum with reaching material milestones achieved, we will reemphasize and dedicate our focus on top line growth.

We expect 2024 to start slow, with indications of a possible rebound in the second half of the year as inventory in the supply channel normalizes.

The preceding sentences represent Forward-Looking Statements.

See "Cautionary Notice Regarding Forward-Looking Information."

Results of Operations - Summary by Operating Segment

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Magnetic solutions

2024 as Compared to 2023

Power Solutions and Protection:

Sales of our Power Solutions and Protection products were higher by $25.7 mil lion in 2023 as compared to 2022.

Sales of our Power Solutions and Protection products were lower by $68.6 million in 2024 as compared to 2023.

This decrease was primarily due to lower sales of our front-end power products and board mount power products of $45.3 million and $9.5 million, respectively, both of which are used in networking and datacenter applications.

Sales of our CUI products were down by $21.2 million in 2024 as compared to 2023 due to the loss of sales in connection with a trade restriction placed on one of our suppliers in the PRC.

Further, sales of product into the eMobility end market decreased by $12.9 million as compared to 2023.

These decreases were offset in part by an increase in sales of our rail products by $11.8 million as compared to 2023.

Raw material expedite fee revenue for this segment totaled $0.1 million in 2024 as compared to $14.9 million in 2023.

Enercon contributed $20.8 million of military, aerospace and defense applications sales in the last two months of 2024.

Gross margin improved in 2024 as compared to 2023 as a result of the Enercon acquisition, 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.

Connectivity Solutions:

Sales of our Connectivity Solutions products increased by $9.8 million (4.7%) in 2024 as compared to 2023.

This increase was primarily due to an increase in sales into the commercial aerospace end market of $3.6 million (6.8%) in 2024 as compared to 2023.

Sales into our military end market also grew by $2.3 million (5.2%) in 2024 as compared to 2023.

We also experienced an increased volume of Connectivity Solutions products sold through our distribution channels in 2024 of $2.3 million (2.9%) compared to 2023.

Gross margin for 2024 was favorably impacted by pricing actions on certain contract renewals, operational efficiencies from the facility consolidations completed in 2023 and a favorable fluctuation in exchange rates between the U.S.

dollar and Mexican peso in 2024 versus 2023.

These factors were partially offset by higher wage rates in Mexico in 2024 as compared to 2023.

Magnetic Solutions:

Sales of our Magnetic Solutions products declined by $46.3 million during 2024 as compared to 2023.

Reduced demand for our ICM products from our networking customers and through our distribution channels was the primary driver as we believe these customers continue to work through inventory on hand.

Recent facility consolidations in the PRC, diligent cost management, product mix and a favorable exchange rate with the Chinese renminbi versus the U.S.

dollar, were the primary drivers of gross margin expansion for this product group in 2024 as compared with 2023, despite the decline in revenue.

2023 as Compared to 2022

Power Solutions and Protection:

Sales of our Power Solutions and Protection products were higher by $25.7 million in 2023 as compared to 2022.

This increase was primarily due to higher sales of our front-end power products and board mount power products of $42.7 million and $6.9 million, respectively, both of which are used in networking and datacenter applications.

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Sales into our military end market also grew by $8.8 million (24%) in 2023 as compared to 2022.

We also experienced an increased volume of Connectivity Solutions products sold through our distribution channels in 2023 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 $11.0 million (29.0%) as compared to the prior year.

We also experienced an increased volume of Connectivity Solutions products sold through our distribution channels in 2023 compared to 2022.

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 $11.0 million (29.0%) for 2023 as compared to 2022.

Gross margins for the 2023 periods presented above were favorably impacted by the higher overall sales volume, pricing actions and operational efficiencies implemented during 2023, partially offset by higher wage rates in Mexico and an unfavorable fluctuation in exchange rates between the U.S.

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Magnetic Solutions:

Sales of our Magnetic Soluti ons products declined by $63.6 million during 2023 as compared to 2022.

Sales of our Magnetic Solutions products declined by $63.6 million during 2023 as compared to 2022.

Reduced demand for our Magnetic Solutions products from our networking customers and through our distribution channels has been the primary driver as we believe these customers continue to work through inventory on hand.

The lower sales volume and favorable exchange rates with the Chinese renminbi versus the U.S.

dollar, was the primary driver of gross margin reduction for this product group compared with 2022.

dollar, were the primary drivers of gross margin reduction for this product group in 2023 compared with 2022.

Cost of Sales

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Total cost of sales

2024 as Compared to 2023

Material costs as a percentage of sales during 2024 were lower compared to 2023, due to a shift in product mix, the stabilization of raw material pricing, shorter lead times, and better procurement efforts.

Labor costs in 2024 as a percentage of sales have increased compared to 2023 due to lower sales volume, a shift in product mix in 2024 compared to the previous year, and the increase in statutory minimum wage rate in Mexico.

This increase in labor cost was partially offset by lower labor costs in the PRC due to the favorable fluctuation in the Chinese renminbi exchange rate versus the U.S.

The other expenses noted in the table above include fixed cost items such as support labor and fringe, depreciation and amortization, and facility costs (i.e.

rent, utilities, insurance).

In total, these other expenses within cost of sales have decreased by $1.5 million in 2024 as compared to 2023.

As a percentage of sales, other expenses increased due to the lower sales volume in 2024 as compared to 2023.

2023 as Compared to 2022

Material costs as a percentage of sales during 2023 came down compared to 2022, as pricing actions helped 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 the PRC due to the favorable fluctuation in the Chinese Renminbi exchange rate versus the U.S.

Labor costs in 2023 as a percentage of sales decreased significantly from 2022 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 the PRC 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 versus the 2022.

dollar in 2023 versus 2022.

The other expenses noted in the table above include fixed cost items such as support labor and fringe, depreciation and amortization, and facility costs (i.e.

rent, utilities, insurance).

In total, these other expenses were largely the same in 2023 as compared to 2022 as the benefits realized on cost savings initiatives were offset by higher costs from the redundant operations in China that were in place while our facility consolidation project was underway for much of 2023.

In total, these other expenses were largely the same in 2023 as compared to 2022 as the benefits realized on cost savings initiatives were offset by higher costs from the redundant operations in the PRC that were in place while our facility consolidation project was underway for much of 2023.

Research and Development ("R&D")

R&D expenses were $ 22.5 million and $20.2 million for the years ended December 31, 2023 and 2022, respectively.

The increase noted in R&D expenses during 2023 is largely due to higher salaries, benefits and product development costs.

R&D expenses were $23.6 million, $22.5 million and $20.2 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The increase noted in R&D expenses during 2024 compared to 2023 is largely due to higher salaries, benefits, product development costs and R&D expense of the 2024 Enercon acquisition, which have been included in Bel's results since its acquisition date.

The increase noted in R&D expenses during 2023 compared to 2022 is largely due to higher salaries, benefits, and product development costs.

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

2024 as Compared to 2023

SG&A expenses were $110.6 million in 2024 as compared with $99.1 million in 2023 .

Within SG&A, increases in salaries and fringe benefits of $6.1 m illion, legal and professional fees of $2.4 million, and travel of $1.0 million were partially offset by a $1.3 million reduction in commissions to outside sales representatives, and a $1.2 million reduction in depreciation and amortization as compared to 2022.

The primary drivers for the increase in SG&A during 2024 related to acquisition-related costs within SG&A of $10.9 million in connection with the acquisition of Enercon, and $2.5 million of SG&A expenses attributable to the acquired business for the two months of 2024 under Bel ownership.

Excluding these items related to Enercon, legacy-Bel SG&A expenses declined due to lower legal fees, as well as lower incentive compensation, commissions and business promotion expenses in 2024, as compared to 2023 due to the lower sales base in the 2024 period.

2023 as Compared to 2022

S G&A expenses were $99.1 million in 2023 as compared with $92.3 million in 2022.

Within SG&A, increases in salaries and fringe benefits of $6.1 million, legal and professional fees of $2.4 million, and travel of $1.0 million were partially offset by a $1.3 million reduction in commissions to outside sales representatives, and a $1.2 million reduction in depreciation and amortization as compared to 2022.

Restructuring Charges

The Company recorded $10.1 million of restructuring charges in 2023 largel y in connection with the four facility consolidation projects in the U.S., UK and PRC, as further described in "Overview - Key Factors Affecting our Business - Restructuring" above.

In 2022, the Company recorded $7.3 million of restructuring charges related to these same initiatives.

The Company recorded $3.5 million of restructuring charges in 2024 largely in connection with the Glen Rock initiative and the Fuse initiative, as further described in "Overview - Key Factors Affecting our Business - Restructuring" above.

In 2023, the Company recorded $10.1 million of restructuring charges largely in connection with the four facility consolidation projects in the U.S., UK and PRC.

In 2022, the Company recorded $7.3 million of restructuring charges related to these same four facility consolidation projects in the U.S., UK and PRC.

Gain on Sale of Properties

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Interest Expense

2024 as Compared to 2023

The Company incurred interest expense of $4.1 million in 2024 and $2.9 million in 2023 primarily due to its outstanding borrowings under the Company's credit agreement.

The reduction in interest expense during 2023 related to a lower debt balance throughout 2023 as compared to 2022.

The increase in interest expense during 2024 related to a increase in debt balance in the fourth quarter of 2024 due to Enercon acquisition (see Note 3, “ Acquisition and Divestiture ” for additional details).

See "Liquidity and Capital Resources" and Note 11, "Debt" for further information on the Company's outstanding debt.

Other Income/Expense, Net

Other income/expense, net was a net expense of $2.8 million in 2023 compared to a net expense of $2.7 million in 2022.

2023 as Compared to 2022

The Company incurred interest expense of $2.9 million in 2023 and $3.4 million in 2022 primarily due to its outstanding borrowings under the Company's credit agreement.

The lower interest expense during 2023 related to a lower debt balance throughout 2023 as compared to 2022.

Interest Income

The Company earned interest income of $4.8 million in 2024, $1.7 million in 2023, and $0.2 million in 2022, primarily related to its investments in U.S.

Treasury Bills during the 2023 and 2024 periods.

Other Expense, Net

2024 as Compared to 2023

Other expense, net was a net expense of $3.2 million in 2024 compared to a net expense of $4.5 million in 2023.

The net expense in 2024 was comprised of a foreign exchange loss of $1.9 million, $0.6 million of losses associated with Bel's investment in innolectric and $2.0 million of stamp duty fees related to Enercon;

partially offset by a gain of $1.3 million related to the Company's SERP investments.

The net expense in 2023 was comprised of a foreign exchange loss of $1.4 million, the loss on liquidation of a foreign subsidiary of $2.7 million, $0.8 million of losses associated with Bel's investment in innolectric and $0.8 million of other expense;

partially offset by $1.7 million of interest income and a gain of $1.2 million related to the Company's SERP investments.

The net expense in 2022 was comprised of a loss of $2.2 million in 2022 related to the Company's SERP investments and $1.0 million of other expense;

partially offset by foreign exchange gains of $0.3 million and $0.2 million of interest income.

partially offset by a gain of $1.2 million related to the Company's SERP investments.

2023 as Compared to 2022

Other expense, net was a net expense of $4.5 million in 2023 compared to a net expense of $2.9 million in 2022.

partially offset by a gain of $1.2 million related to the Company's SERP investments.

The net expense in 2022 was comprised of a foreign exchange loss of $2.2 million in 2022 related to the Company's SERP investments and $1.0 million of other expense;

partially offset by foreign exchange gains of $0.3 million.

The Company’s effective tax rate will fluctuate based on the geographic regions in which the pretax profits are earned.

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The provision for income taxes for the years ended December 31, 2024 and 2023 was$12.6 million and $9.5 million, respectively.

The Company’s earnings before income taxes for the year ended December 31, 2023 were approximately $24.2 m illion higher as compared with the year ended December 31, 2022, primarily attributable to an increase in income in the Asia and North America regions.

The Company’s earnings before income taxes for the year ended December 31, 2024 were approximately $21.5 million lower as compared with the year ended December 31, 2023, primarily attributable to a decrease in income in the Asia and North America regions.

The Company’s effective tax rate was 20.5% and 11.4% for t he years ended December 31, 2024 and 2023, respectively.

The change in the effective tax rate during the year ended December 31, 2023 as compared to fiscal year 2022 is primarily attributable to a n increase in U.S.

tax expense resulting from higher U.S.

The change in the effective tax rate during the year ended December 31, 2024 as compared to 2023 is primarily attributable to an increase in tax expense relating to valuation allowances and prior period accruals, as well as a decrease in the tax benefit relating to the reversal of uncertain tax positions resulting from the expiration of certain statutes of limitations.

2023 as Compared to 2022

The provision for income taxes for the years ended December 31, 2023 and 2022 was $9.5 million and $6.4 million, respectively.

The Company’s earnings before income taxes for the year ended December 31, 2023, were approximately $24.2 million higher as compared with the year ended December 31, 2022, primarily attributable to an increase in income in the Asia and North America regions.

The Company’s effective tax rate was 11.4% and 10.8% for t he years ended December 31, 2023 and 2022, respectively.

The change in the effective tax rate during the year ended December 31, 2023, as compared to 2022 is primarily attributable to an increase in tax expense resulting from higher U.S.

income, which was offset by a benefit resulting from the impact of permanent differences on U.S.

activities, was well as an increase in the tax benefit relating to the reversal of uncertain tax positions resulting from the expiration of certain statute of limitations.

activities, as well as an increase in the tax benefit relating to the reversal of uncertain tax positions resulting from the expiration of certain statutes of limitations.

Other Tax Matters

The Company has a portion of its products manufactured on the mainland of the PRC where Bel is not subject to corporate income tax on manufacturing services provided by third parties.

Hong Kong has a territorial tax system which imposes corporate income tax at a rate of 16.5% on income from activities solely conducted in Hong Kong.

Hong Kong has a territorial tax system which imposes corporate income tax at a rate of 16.5% on inco me from activities solely conducted in Hong Kong.

The Company holds an offshore business license from the government of Macao.

With this license, a Macao offshore company named Bel Fuse (Macao Commercial Offshore) Limited has been established to handle the Company’s sales to third-party customers in Asia.

With this license, a Macao offshore company named Bel Fuse (Macao Commercial Offshore) Limited ("Bel Fuse Macao") has been established to handle the Company’s sales to third-party customers in Asia.

Sales by this company primarily consist of products manufactured in the PRC.

The Macao corporate profit taxes imposes a tax rate of 12% on income from activitie s solely conducted in Macao.

Bel Fuse Macao is subject to Macao's corporate tax rate of 12% on income from activities solely conducted in Macao.

Due to the practicality of determining the deferred taxes on outside basis differences in our investments in our foreign subsidiaries, management has not provided for deferred taxes on outside basis differences at December 31, 2024 and deemed that these basis differences will be indefinitely reinvested.

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During the past two years, we do not believe the effect of inflation was material to our consolidated financial position or our consolidated results of operations.

We are exposed to market risk from changes in foreign currency exchange rates.

We are ex posed to market risk from changes in foreign currency exchange rates.

Fluctuations of the U.S.

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Most significant expenses, including raw materials, labor and manufacturing expenses, are incurred primarily in U.S.

dollars, Mexican pesos, or the Chinese renminbi, and to a lesser extent in British pounds, or I ndian ru pees.

The Mexican pesos appreciated by 12%, Euro appreciated by 3%, British pound ap preciated by 1 %, the Indian rupee and the Chines e renminbi each depreciated by 5% versus the U.S.

dollars, Mexican pesos, the Chinese renminbi or the Israeli shekel, and to a lesser extent in British pounds, or I ndian ru pees.

The Mexican pesos depreciated by 3%, the Euro was flat, the British pound appreciated by 2%, and the Indian rupee and the Chinese renminbi each depreciated by 2% versus the U.S.

dollar in 2024 compared to 2023.

To the extent the renminbi or peso appreciate in futu re periods, it could result in the Company's incurring higher costs for most expenses incurred in the PRC and Mexico.

To the extent the renminbi, peso or shekel appreciate in future periods, it could result in the Company's incurring higher costs for most expenses incurred in the PRC, Mexico and Israel.

The Company periodically uses foreign currency forward contracts to manage its short-term exposures to fluctuations in operational cash flows resulting from changes in foreign currency exchange rates as further described in Note 13 , "Derivative Instruments and Hedging Activities" .

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dollars and British pounds.

Such transactions, as well as those related to our multi-currency intercompany payable and receivable transactions, resulted in a net realized and unrealized currency exchange loss of $1.4 million in 2023 and a gain of $0.3 million in 2022 which were included in other expense, net on the consolidated statements of operations.

Such transactions, as well as those related to our multi-currency intercompany payable and receivable transactions, resulted in a net realized and unrealized currency exchangeloss of $1.9 million in 2024, a loss of $1.4 million i n 2023 and a gain of $0.3 million in 2022 which were included in other expense, net on the consolidated statements of operations.

Translation of subsidiaries' foreign currency financial statements into U.S.

dollars resulted in translation adjustments, net of taxes, o f $6.7 mi llion and ($8.2) million for the years ended December 31, 2023 and 2022, respectively, which are included in accumulated other comprehensive loss on the consolidated balance sheets.

dollars resulted in translation adjustments, net of taxes, of ($5.5) million and $6.7 million for the years ended December 3 1, 2024 and 2023, respectively, which are included in accumulated other comprehensive loss on the consolidated balance sheets.

Liquidity and Capital Resources

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Cash Flow Summary

During the year ended December 31, 2023, the Company's cash and cash equivalents increased by $19.1 million.

This increase was primarily due to the following:

During the year ended December 31, 2024, the Company's cash and cash equivalents decreased by $21.1 million.

This decrease was primarily due to the following:

payment for Enercon acquisition of $320.5 million;

purchase of common stock of $16.1 million;

repayment of long-term debt of $15 million;

dividend payments of $3.5 million;

deferred financing costs of $1.7 million;

purchases of property, plant and equipment of $14.1 million;

purchases of held to maturity and marketable securities of $131.3 million;

partially offset by

● net cash provided by operating activities of $74.1 million;

● proceeds of long-term debt of $242.5 million;

● proceeds from held to maturity securities o f $167.9 millio n;

● proceeds from the sale of property, plant and equipment of $0.9 million.

proceeds from held to maturity securities of $19.9 million;

proceeds from the sale of our business in the Czech Republic of $5.1 million;

partially offset by

• purchases of held to maturity and marketable securities of $60.0 million;

• payments for our equity method investment in innolectric of $10.3 million;

• purchases of property, plant and equipment of $12.1 million;

• dividend payments of $ 3.5 million;

• net repayments under our revolving credit line of $35.0 million.

D uring the year ended December 31, 2024 , accounts receivable decreased by $6.8 million primarily due to the lower sales volume in 2024 as compared to 2023.

Days sales outstanding (DSO) increased to 68 days at December 31, 2024 from 55 days at December 31, 2023 .

Inventories increased by $24.8 million from the December 31, 2023 level primarily due to the inclusion of Enercon's inventory balance at December 31, 2024 of $42.7 m illion .

Inventory turns were 2.1 times for the year ended December 31, 2024 and 3.1 times for the year ended December 31, 2023 .

Given the nature of Enercon’s manufacturing process and low unit quantity per order, a higher value of inventory is kept on hand for longer periods of time, with Enercon’s inventory turns being 1.6 times, bringing Bel’s consolidated inventory turn level down substantially.

During the year ended December 31, 2023, the Company's cash and cash equivalents increased by $19.1 million.

This increas e was primarily due to cash provided by operating activities of $108.3 million, proceeds from the sale of property, plant and equipment of $6.0 million, proceeds from held to maturity securities of $19.9 million, and proceeds from the sale of our business in the Czech Republic of $5.1 million;

partially offset by the purchases of held to maturity and marketable securities of $60.0 million, payments for our equity method investment in innolectric of $10.3 million, purchases of property, plant and equipment of $12.1 million, dividend payments of $3.5 million, and net repayments under our revolving credit line of $35.0 million.

During the year ended December 31, 2023, accounts receivable decreased $22.5 million primarily due to the lower sales volume in the second half of 2023 as compared to the same period of 2022.

DSO decreased to 55 days at December 31, 2023 from 58 days at December 31, 2022.

Inventories decreased by $33.6 million from the December 31, 2022 level.

Inventory turns were 3.1 times for the year ended December 31, 2023 and 2.7 times for the year ended December 31, 2022.

During the year ended December 31, 2022, the Company's cash and cash equivalents increased by $8.5 million.

This increase was primarily due to cash provided by operating activities of $40.3 million, and proceeds from the sale of property, plant and equipment of $1.8 million;

partially offset by the purchase of property, plant and equipment of $8.8 million, dividend payments of $3.4 million, and repayments under our revolving credit line of $17.5 million.

D uring the year ended December 31, 2023 , accounts receivable decreased $22.5 million primarily due to the lower sales volume in the second half of 2023 as compared to the same period of 2022.

Days sales outstanding (DSO) decreased to 55 days at December 31, 2023 from 58 days at December 31, 2022 .

Inventories decreased by $33.6 million from the December 31, 2022 level .

Inventory turns, excluding R&D, were 3.1 times for the year ended December 31, 2023 and 2.7 times for the year ended December 31, 2022 .

During the year ended December 31, 2022, accounts receivable increased $20.7 million primarily due to the higher sales volume in 2022 as compared to 2021.

DSO increased to 58 days at December 31, 2022 from 54 days at December 31, 2021.

Inventories increased by $36.6 million from the December 31, 2021 level as raw material supply constraints hindered our ability, and our end customers' ability, to fully manufacture our respective finished goods.

Inventory turns were 2.6 times for the year ended December 31, 2022 as compared to 3.1 times for the year ended December 31, 2021.

Cash and cash equivalents, held to maturity U.S.

Treasury securities and accounts receivable comprised approximatel y 36.9% and 31.7 % of the Company's total assets at December 31, 2023 and December 31, 2022, respectively.

Treasury securities and accounts receivable comprised approxima tely 19.0% and 36.9 % of the Company's total assets at December 31, 2024 and December 31, 2023, respectively.

The Company's current ratio (i.e., the ratio of current assets to current liabilities) was 2.9 to 1 and 3.4 to 1 at December 31, 2024 and December 31, 2023, respectively.

At December 31, 2024 and 2023, $48.4 million and $40.9 million, respectively (or 71% and 46%, respectively), of cash and cash equivalents was held by foreign subsidiaries of the Company.

During 2023, the Company repatriated $47.2 m illion of funds from outside of the U.S., with minimal incremental tax liability.

During 2024, the Company repatriated $48 million of funds from outside of the U.S., with minimal incremental tax liability.

We continue to analyze our global working capital and cash requirements and the potential tax liabilities attributable to further repatriation, and we have yet to make any further determination regarding repatriation of funds from outside the U.S.

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The Company's material cash requirements arising in the normal course of business primarily include:

Debt Obligations and Interest Payments - The Company had $60 m illion outstanding under its revolving credit facility at December 31, 2023, as further described below and in Note 11, "De bt" .

Debt Obligations and Interest Payments - The Company had $287.5 million outstanding under its revolving credit facility at December 31, 2024, as further described below and in Note 11, "Debt" .

There are no mandatory principal payments due on the credit facility borrowings during 2025.

The current balance of $60 mi llion is due upon expiration of th e credit facility on September 1, 2026.

The current balance of $287.5 million is due upon expiration of the credit facility on September 1, 2026.

Ant icipated interest payments due amount to $28.7 million, of which $17.2 million is expected to be paid in 2025 based on our debt balance and interest rate in place at December 31, 2024.

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There are also operating and finance leases related to manufacturing equipment, office equipment and vehicles.

As of December 31, 2023, the Company was contractually obligated to pay future operating lease payments of $22.6 m illion, of which $ 6.7 million is expected to be paid in 2024, and future financing lease obligations o f $2.1 million, of which $0.7 millio n is expected to be paid in 2024.

As of December 31, 2024, the Company was contractually obligated to pay future operating lease payments of $29.0 million, of which $9.1 million is expected to be paid in 2025, and future financing lease obligations of $3.0 million, of which $0.8 million is expected to be paid in 2025.

See Note 18, "Leases," for further information.

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Certain of these purchase orders relate to special purpose material and, as such, the Company may incur penalties if an order is cancelled.

The Company had outstanding purchase orders related to raw materials in the amount of $57.7 million at December 31, 2023 , of which $50.6 million is expected t o be paid in 2024.

The Company also had outstanding purchase orders related to capital expenditures which totaled $5.8 m illion at December 31, 2023, all of which is expected to be paid in 2024.

The Company had outstanding purchase orders related to raw materials in the am ount of $82.2 million at December 31, 2024, of which $75.1 million is expected to be paid in 2025.

The Company also had outstanding purchase orders related to capital expenditures which totaled $4.7 million at December 31, 2024, all of which is expected to be paid in 2025.

Pension Benefit Obligations - As further described in Note 15, "Re tirement Fund and Profit Sharing Plan" , the Company maintains a Supplemental Executive Retirement Plan ("SERP").

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The timing and actual number of shares repurchased will depend on a variety of factors including price, market conditions, corporate and regulatory requirements and the consideration of other uses of cash including other investment opportunities.

At December 31, 2024, the Company had an aggregate amount of $9.0 million of authorized repurchases under the plan that had not yet been executed upon.

Tax Payments - At December 31, 2024, we had liabilities for unrecognized tax benefits and related interest and penalties of $18.1 million, all of which is included in other liabilities on our consolidated balance sheet.

At December 31, 2024, we cannot reasonably estimate the future period or periods of cash settlement of these liabilities.

S ee Note 10, "Income Taxes", for furthe r discussion.

See Note 10, "Income Taxes", for further discussion.

Also included on our consolidated balance sheet at December 31, 2024 is $2.0 million of liabilities for transition tax associated with the 2017 U.S.

tax reform, of which $2.7 million is expected to be paid in 2024.

tax reform, all of which is expected to be paid in 2025.

In addition to its cash requirements arising in the normal course of business described above, the Company has potential future cash requirements related to its acquisition of Enercon, whereby the Company has recorded earnout liabilities having a fair value as of December 31, 2024 in the amount of $3.5 million that would be paid over 2025 and 2026 in the event certain financial thresholds are achieved by the acquired business based on the Purchase Agreement provision which provides for potential earnout payments of up to $5 million for each of the fiscal 2025 and fiscal 2026 earnout periods subject to the achievement of the financial thresholds.

Further, there are put-call options associated with the redeemable noncontrolling interest in early 2027.

As described elsewhere in this Annual Report, we have the current intention to purchase the remaining 20% interest in Enercon by early 2027 in accordance with the terms and subject to the conditions of the shareholders' agreement.

At December 31, 2024, the redemption value related to the redeemable noncontrolling interest was $80.6 million.

See Note 3, "Acquisition and Divestiture" and Note 6, "Fair Value Measurements" for further information.

Contractual Obligations

The following table sets forth at December 31, 2024 the amounts of payments due under specific types of contractual obligations, aggregated by category of contractual obligation, for the time periods described below.

Payments due by period (dollars in thousands)

Contractual Obligations

Less than 1 year

More than 5 years

Long-term debt obligations(1)

Interest payments due on long-term debt(2)

Capital expenditure obligations

Operating leases(3)

Raw material purchase obligations

First quarter 2025 quarterly cash dividend declared

Represents the principal amount of the debt required to be repaid in each period.

Includes interest payments required under our CSA related to our revolver balance.

The interest rate in place under our Credit and Security Agreement on December 31, 2024 was utilized and this calculation assumes obligations are repaid when due.

Represents estimated future minimum annual rental commitments primarily under non-cancelable real and personal property leases as of December 31, 2024.

Credit Facility

The Company is a party to a credit agreement, as further described in

The Company is a party to a credit agreement, as further described in Note 11,

The credit agreement contains customary representations and warranties, covenants and events of default.

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The unused credit available under the credit facility at December 31, 2024 was $37.5 million, of which we had the ability to borrow the full amount without violating our Leverage Ratio covenant based on the Company's existing consolidated EBITDA.

At December 31, 2023, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio.

At December 31, 2024, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Leverage Ratio.

At December 31, 2024, the Company was also a party to two pay-fixed, receive-variable interest rate swap agreements covering the full amount of its then variable interest exposure through August 2026.

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Our reserve calculations are based on historical experience related to slow-moving inventory in addition to specific known concerns in the case of products going end-of-life or customer cancellations.

As of December 31, 2023 and 2022, the Company had reserves for excess or obsolete inventory o f $13.7 million and $1 4.5 million, respectively.

With the recent decrease in demand for ou r products, our value of inventory on hand has decreased by $35.9 mi llion from December 31, 2022 to December 31, 2023.

As of December 31, 2024 and 2023, the Company had reserves for excess or obsolete inventory o f $14.5 m illion and $1 3.7 million, respectively.

With the recent acquisition of Enercon our value of inventory on hand has increased by $24.8 mi llion from December 31, 2023 to December 31, 2024.

In the event of a sudden decrease in demand for our products, or a higher incidence of inventory obsolescence, the Company could be required to increase its inventory reserve, which would have an unfavorable impact on our gross margin.

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If the implied control premium is not reasonable in light of these recent transactions, we will reevaluate our fair value estimates of the reporting units by adjusting the discount rates and/or other assumptions.

We applied a combined weighting of 25% to the market approach when determining the fair value of these reporting units.

As indicated i n Note 5, "Goodwill and Other Intangible Assets" , the fair value of each of our four reporting units exceeded their respective carrying values by a large margin (ranging from 71% to 169%).

If m arket factors change and the discount rate utilized in the fair value calculation changes, it would result in a higher or lower fair value of our reporting units.

We applied a combined weighting of 25% to the market approach when determining the fair value of our reporting units.

As indicated in Note 5, "Goodwill and Other Intangible Assets" , the fair value of each of our four reporting units exceeded their respective carrying values by a very large margin (ranging from 44% to 500%) .

If market factors change and the discount rate utilized in the fair value calculation changes, it would result in a higher or lower fair value of our reporting units.

The discount rates utilized in our October 1, 2024 impairment test ranged from 10.0% to 14.5%.

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The Company tests indefinite-lived intangible assets for impairment annually on October 1, or upon a triggering event, using a fair value approach, the relief-from-royalty method (a form of the income approach).

The Company conducted its annual impairment tests as of October 1, 2023 and 2022, a nd no impairment was identified at either testing date.

The Company conducted its annual impairment tests as of October 1, 2024 and in connection with its analysis, identified and recorded a $0.4 million impairment charge related to its CUI tradename.

This charge is reflected in the accompanying statement of operations during the year ended December 31, 2024.

No impairment was identified at the Company's October 1, 2023 testing date.

Management has also concluded that the fair value of its trademarks exceeds the associated carrying values at December 31, 2024 and that no impairment existed as of that date.

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Pension Benefit Obligations

Net periodic benefit cost for the Company's SERP totaled $1.3 million in 2 023 and $1.5 million in 2022.

Net periodic benefit cost for the Company's SERP totaled $1.4 million in 2 024, $1.3 million in 2023, and $1.5 million in 2022.

Benefit plan information for financial reporting purposes is calculated using actuarial assumptions including a discount rate for plan benefit obligations.

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The discount rate utilized for the net periodic benefit cost was 4.75% at December 31, 2024 and 5.0% at December 31, 2023.

An increase in this 2023 discount rate assumption of 25 basis points would have decreased the 2023 periodic benefit cost by $0.1 million.

A decrease in this 2023 discount rate assumption of 25 basis points would have increased the 2023 periodic benefit cost by $0.2 million.

An increase or decrease in this 2024 discount rate assumption of 25 basis points would have increased/decreased the 2024 periodic benefit cost by less t han $0.1 million.

T he discount rate utilized for the pension benefit obligation was 5.50% at December 31, 2024 and 4.75% at December 31, 2023.

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The discussion of new financial accounting standards applicable to the Company is incorporated herein by reference to Note 1, "Description of Business and Summary of Significant Accounting Policies."

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, for purposes of this Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis