UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




(Mark
One)





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended September 30,
2010




or





o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from __________to __________





Commission
File Number: 000-11676





BEL FUSE INC.


(Exact
name of registrant as specified in its charter)




NEW
      JERSEY
              22-1463699(State
      of other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)
  206
      Van Vorst Street
                  Jersey
      City, New Jersey
                07302(Address
      of principal executive offices)
                (Zip
      Code)


(201)
432-0463


(Registrant's
telephone number, including area code)






(Former
name, former address and former fiscal year, if changed since last
report)





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 and 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. x Yes o No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). o Yes o No Not
applicable to the registrant.





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





Large
      accelerated filer o
              Accelerated
      filer x
              Non-accelerated
      filer o
              Smaller
      reporting company o(Do
      not check if a smaller
                reporting
      company)




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


o Yes x No


At
November 4, 2010, there were 2,174,912 shares of Class A Common Stock, $0.10 par
value, outstanding and 9,527,943 shares of Class B Common Stock, $0.10 par
value, outstanding.







BEL
      FUSE INC.INDEX
  PagePart
      I
                
                Financial
      InformationItem
      1.
                Financial
      Statements
                
                
                1Condensed
      Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009
      (unaudited)
                
                
                2-3Condensed
      Consolidated Statements of Operations for the Three and Nine Months Ended
      September 30, 2010 and 2009 (unaudited)
                
                
                4Condensed
      Consolidated Statement of Stockholders' Equity for the Nine Months Ended
      September 30, 2010 (unaudited)
                
                
                5Condensed
      Consolidated Statements of Cash Flows for the Nine Months Ended September
      30, 2010 and 2009 (unaudited)
                
                
                6-7Notes
      to Condensed Consolidated Financial Statements (unaudited)
                
                
                8-20Item
      2.
                Management's
      Discussion and Analysis of  Financial Condition and Results of
      Operations
                
                
                21-31Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                
                
                31Item
      4.
                Controls
      and Procedures
                
                
                31Part
      II
                
                Other
      InformationItem
      1.
                Legal
      Proceedings
                
                
                32Item
      6.
                Exhibits
                
                
                33Signatures
                
                
                34





PART
I. Financial Information





Item 1. Financial Statements
(Unaudited)





Certain information and footnote
disclosures required under accounting principles generally accepted in the
United States of America have been condensed or omitted from the following
condensed consolidated financial statements pursuant to the rules and
regulations of the Securities and Exchange Commission.  The following
condensed consolidated financial statements should be read in conjunction with
the year-end consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
2009.





The results of operations for the three
and nine months ended September 30, 2010 are not necessarily indicative of the
results for the entire fiscal year or for any other period.





1




BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (dollars
in thousands, except share and per share data)
 (Unaudited)
 
 September
      30,
                  2010
                
                
                December
      31,
                  2009ASSETSCurrent
      Assets:Cash
      and cash equivalents
                
                $
                76,474
                
                
                $
                124,231Marketable
      securities
                
                
                1,414
                
                
                
                2Accounts
      receivable - less allowance for doubtful  accounts of $594 and
      $596 at September 30, 2010  and December 31, 2009,
      respectively
                
                
                55,294
                
                
                
                34,783Inventories
                
                
                57,345
                
                
                
                31,791Prepaid
      expenses and other current assets
                
                
                2,268
                
                
                
                953Refundable
      income taxes
                
                
                4,370
                
                
                
                3,255Deferred
      income taxes
                
                
                1,236
                
                
                
                815Total
      Current Assets
                
                
                198,401
                
                
                
                195,830Property,
      plant and equipment - net
                
                
                46,157
                
                
                
                35,943Restricted
      cash
                
                
                408
                
                
                
                250Deferred
      income taxes
                
                
                3,315
                
                
                
                4,516Intangible
      assets - net
                
                
                11,470
                
                
                
                551Goodwill
                
                
                4,526
                
                
                
                1,957Other
      assets
                
                
                9,885
                
                
                
                6,899TOTAL
      ASSETS
                
                $
                274,162
                
                
                $
                245,946
 
 See notes
to unaudited condensed consolidated financial statements.


2


BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS (Continued)
 (dollars
in thousands, except shares and per share data)
 (Unaudited)
 
 September
      30,
                2010
              
              
              December
      31,
                2009LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
              
              $
              23,165
              
              
              $
              17,194Accrued
      expenses
              
              
              16,307
              
              
              
              7,991Accrued
      restructuring costs
              
              
              158
              
              
              
              156Income
      taxes payable
              
              
              1,304
              
              
              
              1,863Dividends
      payable
              
              
              858
              
              
              
              793Total
      Current Liabilities
              
              
              41,792
              
              
              
              27,997Long-term
      Liabilities:Accrued
      restructuring costs
              
              
              387
              
              
              
              508Liability
      for uncertain tax positions
              
              
              3,029
              
              
              
              2,887Minimum
      pension obligation and unfunded pension liability
              
              
              6,173
              
              
              
              5,622Total
      Long-term Liabilities
              
              
              9,589
              
              
              
              9,017Total
      Liabilities
              
              
              51,381
              
              
              
              37,014Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock, no par value, authorized 1,000,000  shares; none
      issued
              
              
              -
              
              
              
              -Class
      A common stock, par value $.10 per share - authorized 10,000,000
      shares; outstanding 2,174,912 at each date (net of 1,072,769 treasury
      shares)
              
              
              217
              
              
              
              217Class
      B common stock, par value $.10 per share - authorized 30,000,000
      shares; outstanding 9,527,943 and 9,464,343 shares,
      respectively (net of 3,218,307 treasury shares)
              
              
              953
              
              
              
              946Additional
      paid-in capital
              
              
              23,370
              
              
              
              21,663Retained
      earnings
              
              
              197,296
              
              
              
              185,014Accumulated
      other comprehensive income
              
              
              945
              
              
              
              1,092Total
      Stockholders' Equity
              
              
              222,781
              
              
              
              208,932TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              274,162
              
              
              $
              245,946
 
 See notes
to unaudited condensed consolidated financial statements.
  3
 
 BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollars
in thousands, except share and per share data)
 (Unaudited)
 
 Three
      Months Ended
                September
      30,
              
              
              Nine
      Months Ended
                September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Net
      Sales
              
              $
              84,961
              
              
              $
              45,283
              
              
              $
              218,842
              
              
              $
              134,088Costs
      and expenses:Cost
      of sales
              
              
              64,795
              
              
              
              41,516
              
              
              
              173,524
              
              
              
              119,919Selling,
      general and administrative
              
              
              11,181
              
              
              
              6,813
              
              
              
              30,642
              
              
              
              22,067Impairment
      of goodwill
              
              
              -
              
              
              
              12,875
              
              
              
              -
              
              
              
              12,875Restructuring
      charges
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              413(Gain)
      loss on sale of property, plant and equipment
              
              
              (388
              )
              
              
              9
              
              
              
              (369
              )
              
              
              (4,643
              )75,588
              
              
              
              61,213
              
              
              
              203,797
              
              
              
              150,631Income
      (loss) from operations
              
              
              9,373
              
              
              
              (15,930
              )
              
              
              15,045
              
              
              
              (16,543
              )Realized
      gain on sale of investment
              
              
              -
              
              
              
              656
              
              
              
              -
              
              
              
              1,739Interest
      income and other, net
              
              
              87
              
              
              
              86
              
              
              
              325
              
              
              
              402Earnings
      (loss) before provision (benefit) for income taxes
              
              
              9,460
              
              
              
              (15,188
              )
              
              
              15,370
              
              
              
              (14,402
              )(Benefit)
      provision for income taxes
              
              
              (484
              )
              
              
              (4,436
              )
              
              
              699
              
              
              
              (3,194
              )Net
      earnings (loss)
              
              $
              9,944
              
              
              $
              (10,752
              )
              
              $
              14,671
              
              
              $
              (11,208
              )Earnings
      (loss) per share:Class
      A common share - basic and diluted
              
              $
              0.81
              
              
              $
              (0.90
              )
              
              $
              1.19
              
              
              $
              (0.95
              )Class
      B common share - basic and diluted
              
              $
              0.86
              
              
              $
              (0.94
              )
              
              $
              1.27
              
              
              $
              (0.98
              )Weighted-average
      shares outstanding:Class
      A common share - basic and diluted
              
              
              2,174,912
              
              
              
              2,174,912
              
              
              
              2,174,912
              
              
              
              2,175,322Class
      B common share - basic and diluted
              
              
              9,528,303
              
              
              
              9,324,472
              
              
              
              9,496,367
              
              
              
              9,343,088Dividends
      paid per share:Class
      A common share
              
              $
              0.06
              
              
              $
              0.06
              
              
              $
              0.18
              
              
              $
              0.18Class
      B common share
              
              $
              0.07
              
              
              $
              0.07
              
              
              $
              0.21
              
              
              $
              0.21
  See notes
to unaudited condensed consolidated financial statements.
 
 4





BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 (dollars
in thousands)
 (Unaudited)
  Total
                  
                  
                  Comprehensive
      Income
                  
                  
                  Retained
                    Earnings
                  
                  
                  Accumulated
      Other Comprehensive Income
                  
                  
                  Class
      A Common Stock
                  
                  
                  Class
      B Common Stock
                  
                  
                  Additional
      Paid-In Capital (APIC)Balance,
      January 1, 2010
                  
                  $
                  208,932
                  
                  
                  
                  
                  
                  $
                  185,014
                  
                  
                  $
                  1,092
                  
                  
                  $
                  217
                  
                  
                  $
                  946
                  
                  
                  $
                  21,663Cash
      dividends declared on Class A common stock
                  
                  
                  (391
                  )
                  
                  
                  
                  
                  
                  (391
                  )Cash
      dividends declared on Class B common stock
                  
                  
                  (1,998
                  )
                  
                  
                  
                  
                  
                  (1,998
                  )Issuance
      of restricted common stock
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  7
                  
                  
                  
                  (7
                  )Currency
      translation adjustment
                  
                  
                  (383
                  )
                  
                  $
                  (383
                  )
                  
                  
                  
                  
                  
                  
                  (383
                  )Unrealized
      holding gains on marketable securities arising during the year, net of
      taxes of $145
                  
                  
                  236
                  
                  
                  
                  236
                  
                  
                  
                  
                  
                  
                  
                  236Reduction
      in APIC pool associated with tax deficiencies related to restricted stock
      awards
                  
                  
                  (60
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (60
                  )Stock-based
      compensation expense
                  
                  
                  1,774
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,774Net
      earnings
                  
                  
                  14,671
                  
                  
                  
                  14,671
                  
                  
                  
                  14,671Comprehensive
      income
                  
                  
                  
                  
                  
                  $
                  14,524Balance,
      September 30, 2010
                  
                  $
                  222,781
                  
                  
                  
                  
                  
                  
                  $
                  197,296
                  
                  
                  $
                  945
                  
                  
                  $
                  217
                  
                  
                  $
                  953
                  
                  
                  $
                  23,370
 
 See notes
to unaudited condensed consolidated financial statements.
 
 5
  BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollars
in thousands)
 (unaudited)
 
 Nine
      Months EndedSeptember
      30,2010
              
              
              2009Cash
      flows from operating activities:Net
      earnings (loss)
              
              $
              14,671
              
              
              $
              (11,208
              )Adjustments
      to reconcile net earnings (loss) to net cash (used in) provided by
      operating activities:Depreciation
      and amortization
              
              
              6,486
              
              
              
              5,072Stock-based
      compensation
              
              
              1,774
              
              
              
              1,229Gain
      on sale of property, plant and equipment
              
              
              (369
              )
              
              
              (4,643
              )Realized
      gain on sale of investment
              
              
              -
              
              
              
              (1,739
              )Impairment
      of goodwill
              
              
              -
              
              
              
              12,875Other,
      net
              
              
              220
              
              
              
              648Deferred
      income taxes
              
              
              601
              
              
              
              1,825Changes
      in operating assets and liabilities (see below)
              
              
              (24,663
              )
              
              
              27,738Net
      Cash (Used in) Provided by Operating Activities
              
              
              (1,280
              )
              
              
              31,797Cash
      flows from investing activities:Purchase
      of property, plant and equipment
              
              
              (1,536
              )
              
              
              (1,373
              )Purchase
      of marketable securities
              
              
              (1,191
              )
              
              
              (3,545
              )Payment
      for acquisition of business, net of cash acquired
              
              
              (40,424
              )
              
              
              (438
              )Cash
      transferred to restricted cash
              
              
              -
              
              
              
              (250
              )Proceeds
      from sale of marketable securities
              
              
              -
              
              
              
              8,914(Purchase
      of) proceeds from cash surrender value of company-owned life
      insurance
              
              
              (1,571
              )
              
              
              1,518Proceeds
      from sale of property, plant and equipment
              
              
              586
              
              
              
              2,555Redemption
      of investment
              
              
              -
              
              
              
              4,174Net
      Cash (Used in) Provided by Investing Activities
              
              
              (44,136
              )
              
              
              11,555Cash
      flows from financing activities:Dividends
      paid to common shareholders
              
              
              (2,324
              )
              
              
              (2,316
              )Purchase
      and retirement of Class A common stock
              
              
              -
              
              
              
              (92
              )Net
      Cash Used In Financing Activities
              
              
              (2,324
              )
              
              
              (2,408
              )
 
 See notes
to unaudited condensed consolidated financial statements.
 
 6


BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 (dollars
in thousands)
 (unaudited)
  Nine
      Months EndedSeptember
      30,2010
              
              
              2009Effect
      of exchange rate changes on cash
              
              
              (17
              )
              
              
              109Net
      (Decrease) Increase in Cash and Cash Equivalents
              
              
              (47,757
              )
              
              
              41,053Cash
      and Cash Equivalents - beginning of period
              
              
              124,231
              
              
              
              74,955Cash
      and Cash Equivalents - end of period
              
              $
              76,474
              
              
              $
              116,008Changes
      in operating assets and liabilities consist of:(Increase)
      decrease in accounts receivable
              
              $
              (13,930
              )
              
              $
              15,685(Increase)
      decrease in inventories
              
              
              (17,901
              )
              
              
              16,818Increase
      in prepaid expenses and other current assets
              
              
              (681
              )
              
              
              (410
              )Decrease
      in other assets
              
              
              10
              
              
              
              57Increase
      (decrease) in accounts payable
              
              
              3,660
              
              
              
              (320
              )Increase
      (decrease) in accrued expenses
              
              
              5,515
              
              
              
              (479
              )Cash
      payments of accrued restructuring costs
              
              
              (119
              )
              
              
              (259
              )Decrease
      in income taxes payable
              
              
              (1,217
              )
              
              
              (3,354
              )$
              (24,663
              )
              
              $
              27,738Supplementary
      information:Cash
      paid during the period for:Income
      taxes, net of refunds received
              
              $
              1,375
              
              
              $
              (1,676
              )Interest
              
              
              14
              
              
              
              -Details
      of acquisition (see Note 3):Fair
      value of identifiable net assets acquired
              
              $
              37,938
              
              
              $
              24Goodwill
              
              
              2,543
              
              
              
              468Fair
      value of net assets acquired
              
              $
              40,481
              
              
              $
              492Fair
      value of consideration transferred
              
              $
              40,481
              
              
              $
              492Less:
      Cash acquired in acquisition
              
              
              (57
              )
              
              
              -Amount
      held back on acquisition payment
              
              
              -
              
              
              
              (54
              )Cash
      paid for acquisition, net of cash acquired
              
              $
              40,424
              
              
              $
              438
  See notes
to unaudited condensed consolidated financial statements.
 
 7




BEL FUSE
INC. AND SUBSIDIARIES


NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1.
            BASIS
      OF PRESENTATION AND ACCOUNTING
POLICIES




The
condensed consolidated balance sheet as of September 30, 2010, and the condensed
consolidated statements of operations, stockholders' equity and cash flows for
the periods presented herein have been prepared by Bel Fuse Inc. (the "Company"
or "Bel") and are unaudited. In the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
the financial position, results of operations, changes in stockholders' equity
and cash flows for all periods presented have been made.  The results
for the three and nine months ended September 30, 2010 should not be viewed as
indicative of the Company’s annual results or the Company’s results for any
other period.  The information for the condensed consolidated balance
sheet as of December 31, 2009 was derived from the audited financial
statements.  These financial statements should be read in conjunction
with the consolidated financial statements and footnotes thereto included in the
Bel Fuse Inc. Annual Report on Form 10-K for the year ended December 31,
2009.





On
January 29, 2010, the Company completed its acquisition of 100% of the issued
and outstanding capital stock of Cinch Connectors, Inc. (“Cinch U.S.”), Cinch
Connectors de Mexico, S.A. de C.V. (“Cinch Mexico”) and Cinch Connectors Ltd.
(“Cinch Europe”) (collectively, “Cinch”) from Safran
S.A.  Accordingly, as of January 29, 2010, all of the assets acquired
and liabilities assumed were recorded at their preliminary fair values and the
Company’s condensed consolidated results of operations for the nine months ended
September 30, 2010 include Cinch’s operating results from January 29, 2010
through September 30, 2010.





Recent Accounting
Pronouncements





The
Company’s significant accounting policies are summarized in Note 1 of the
Company’s Annual Report on Form 10-K for the year ended December 31,
2009.  There were no significant changes to these accounting policies
during the nine months ended September 30, 2010 and the Company does not expect
that the future adoption of other recent accounting pronouncements will have a
material impact on its condensed consolidated financial statements.




2.
            EARNINGS
      (LOSS) PER SHARE





The
Company utilizes the two-class method to report its earnings per
share.  The two-class method is an earnings allocation formula that
determines earnings per share for each class of common stock according to
dividends declared and participation rights in undistributed earnings
(loss).  The Company’s Certificate of Incorporation, as amended,
states that Class B common shares are entitled to dividends that are at least 5%
greater than dividends paid on Class A common shares, resulting in the two-class
method of computing earnings per share.  In computing earnings (loss)
per share, the Company has allocated dividends declared to Class A and Class B
based on amounts actually declared for each class of stock and 5% more of the
undistributed earnings (loss) have been allocated to Class B shares than to the
Class A shares on a per share basis.  Basic earnings (loss) per common
share are computed by dividing net earnings (loss) by the weighted-average
number of common shares outstanding during the period.  There were no
potential common shares outstanding during the three or nine months ended
September 30, 2010 or 2009 which would have had a dilutive effect on earnings
per share.


8





The
earnings (loss) and weighted-average shares outstanding used in the computation
of basic and diluted earnings per share are as follows (dollars in thousands,
except share and per share data):





Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Numerator:Net
      earnings (loss)
              
              $
              9,944
              
              
              $
              (10,752
              )
              
              $
              14,671
              
              
              $
              (11,208
              )Less
      Dividends:Class
      A
              
              
              130
              
              
              
              130
              
              
              
              391
              
              
              
              390Class
      B
              
              
              667
              
              
              
              650
              
              
              
              1,998
              
              
              
              1,959Undistributed
      earnings (loss)
              
              $
              9,147
              
              
              $
              (11,532
              )
              
              $
              12,282
              
              
              $
              (13,557
              )Undistributed
      earnings (loss) allocation - basic and diluted:Class
      A undistributed earnings (loss)
              
              
              1,634
              
              
              
              (2,096
              )
              
              
              2,199
              
              
              
              (2,460
              )Class
      B undistributed earnings (loss)
              
              
              7,513
              
              
              
              (9,436
              )
              
              
              10,083
              
              
              
              (11,097
              )Total
      undistributed earnings (loss)
              
              $
              9,147
              
              
              $
              (11,532
              )
              
              $
              12,282
              
              
              $
              (13,557
              )Net
      earnings (loss) allocation - basic and diluted:Class A allocated earnings (loss)
              
              
              1,764
              
              
              
              (1,966
              )
              
              
              2,590
              
              
              
              (2,070
              )Class
      B allocated earnings (loss)
              
              
              8,180
              
              
              
              (8,786
              )
              
              
              12,081
              
              
              
              (9,138
              )Net
      earnings
              
              $
              9,944
              
              
              $
              (10,752
              )
              
              $
              14,671
              
              
              $
              (11,208
              )Denominator:Weighted-average
      shares outstanding:Class
      A common share - basic and diluted
              
              
              2,174,912
              
              
              
              2,174,912
              
              
              
              2,174,912
              
              
              
              2,175,322Class
      B common share - basic and diluted
              
              
              9,528,303
              
              
              
              9,324,472
              
              
              
              9,496,367
              
              
              
              9,343,088Earnings
      (loss) per share:Class
      A common share - basic and diluted
              
              $
              0.81
              
              
              $
              (0.90
              )
              
              $
              1.19
              
              
              $
              (0.95
              )Class
      B common share - basic and diluted
              
              $
              0.86
              
              
              $
              (0.94
              )
              
              $
              1.27
              
              
              $
              (0.98
              )





3.
            ACQUISITION





On
January 29, 2010 (the “Acquisition Date”), the Company completed its acquisition
of 100% of the issued and outstanding capital stock of Cinch from Safran
S.A.  As of September 30, 2010, Bel paid $39.7 million in cash and
assumed an additional $0.8 million of expenses in exchange for the net assets
acquired. The transaction was funded with cash on hand.  Cinch is
headquartered in Lombard, Illinois and has manufacturing facilities in Vinita,
Oklahoma; Reynosa, Mexico; and Worksop, England.





Cinch
manufactures a broad range of interconnect products for customers in the
military and aerospace, high-performance computing, telecom/datacom, and
transportation markets.  The addition of Cinch’s well-established
lines of connector and cable products and extensive clientele has enabled Bel to
broaden its customer base to include aerospace and military
markets.  The acquisition of Cinch has also created the opportunity
for expense reduction and the elimination of redundancies.  The
combination of these factors has given rise to the provisional amount of
goodwill detailed below.


9





The
following table summarizes the consideration paid and the preliminary allocation
of the assets acquired and liabilities assumed as of the close of the
acquisition (in thousands):





Measurement
              
              
              January
      29,January
      29,
              
              
              Period
              
              
              20102010
              
              
              Adjustments
              
              
              (As
      adjusted)Cash
              
              $
              57
              
              
              $
              -
              
              
              $
              57Accounts
      receivable
              
              
              6,910
              
              
              
              (263
              )
              
              
              6,647Inventories
              
              
              7,548
              
              
              
              169
              
              
              
              7,717Other
      current assets
              
              
              803
              
              
              
              414
              
              
              
              1,217Property,
      plant and equipment
              
              
              7,822
              
              
              
              6,996
              
              
              
              14,818Intangible
      assets
              
              
              2,528
              
              
              
              8,887
              
              
              
              11,415Other
      assets
              
              
              1,715
              
              
              
              72
              
              
              
              1,787Total
      identifiable assets
              
              
              27,383
              
              
              
              16,275
              
              
              
              43,658Accounts
      payable
              
              
              (2,320
              )
              
              
              -
              
              
              
              (2,320
              )Accrued
      expenses and other current liabilities
              
              
              (2,932
              )
              
              
              (21
              )
              
              
              (2,953
              )Noncurrent
      deferred tax liability
              
              
              -
              
              
              
              (447
              )
              
              
              (447
              )Total
      liabilities assumed
              
              
              (5,252
              )
              
              
              (468
              )
              
              
              (5,720
              )Net
      identifiable assets acquired
              
              
              22,131
              
              
              
              15,807
              
              
              
              37,938Goodwill
              
              
              18,371
              
              
              
              (15,828
              )
              
              
              2,543Net
      assets acquired
              
              $
              40,502
              
              
              $
              (21
              )
              
              $
              40,481Cash
      paid
              
              $
              39,755
              
              
              
              (79
              )
              
              $
              39,676Assumption
      of change-in-control payments
              
              
              747
              
              
              
              58
              
              
              
              805Fair
      value of consideration transferred
              
              $
              40,502
              
              
              $
              (21
              )
              
              $
              40,481


Subsequent
to the Acquisition Date, the Company received additional information related to
the Acquisition Date fair values of the net assets
acquired.   These updates to the purchase price allocation are
noted as measurement period adjustments in the above table.  While the
purchase price allocation related to the Cinch acquisition is substantially
complete, certain items remain unresolved as of September 30,
2010.  The Company expects to finalize these items and complete the
purchase price allocation as soon as practicable but no later than one year from
the Acquisition Date.





During
the ongoing valuation process, the Company is utilizing the income, cost, and
market approaches in determining the fair values of the assets acquired and
liabilities assumed. The fair value measurements are primarily based on
significant inputs that are not observable in the market. The income approach is
primarily being utilized to value the intangible assets, consisting primarily of
trademarks, customer relationships and technology. The income approach indicates
value for a subject asset based on the present value of cash flows projected to
be generated by the asset. Projected cash flows are discounted at a required
market rate of return that reflects the relative risk of achieving the cash
flows and the time value of money. The cost approach, which estimates value by
determining the current cost of replacing an asset with another of equivalent
economic utility, is being utilized as appropriate for plant, property and
equipment. The cost to replace a given asset reflects the estimated reproduction
or replacement cost for the asset, less an allowance for loss in value due to
depreciation.




10




The
preliminary fair value of property, plant and equipment (as adjusted) acquired
from Cinch consists of the following:




Weighted-Average
      Estimated
                Useful
      Life
              
              
              Acquisition-Date
                Fair
      ValueLand
              
              Indefinite
              
              
              $
              166Buildings
      and improvements
              
              11.7
      years
              
              
              
              2,464Machinery
      and equipment
              
              5.0
      years
              
              
              
              11,539Construction
      in progress
              
              
              N/A
              
              
              
              649Total
      property, plant and equipment acquired
              
              
              
              
              
              $
              14,818


The
preliminary fair value of identifiable intangible assets noted above (as
adjusted) consists of the following:





Weighted-Average
      Life
              
              
              Acquisition-Date
                Fair
      ValueTrademarks
              
              Indefinite
              
              
              $
              7,000Customer
      relationships
              
              16.5
      years
              
              
              
              2,600Technology
              
              9.8
      years
              
              
              
              1,700Licensing
      agreements
              
              10.0
      years
              
              
              
              75Non-compete
      agreements
              
              2.0
      years
              
              
              
              40Total
      identifiable intangible assets acquired
              
              
              
              
              $
              11,415




Of the
$2.5 million of goodwill noted above, $1.4 million has been allocated to the
Company’s North America reportable operating segment and $1.1 million has been
allocated to the Company’s Europe reportable operating segment.  This
allocation was determined based on those reportable operating segments expected
to benefit from the acquisition of Cinch and was based primarily on the location
of Cinch operations and associated revenue generation at the Acquisition
Date.  The Company expects $1.4 million of the goodwill and $8.8
million of intangible assets allocated to the North America reportable operating
segment to be deductible for tax purposes over a period of 15
years.





During
the nine months ended September 30, 2010, the Company expensed approximately
$0.3 million of acquisition-related costs.  These costs are included
in selling, general and administrative expenses in the accompanying condensed
consolidated statement of operations.





Cinch’s
results of operations have been included in the Company’s condensed consolidated
financial statements for the periods subsequent to the Acquisition
Date.  During the three and nine months ended September 30, 2010,
Cinch contributed revenues of $15.5 million and $40.3 million, respectively, and
estimated net earnings of $1.2 million and $1.9 million, respectively, to the
Company since the Acquisition Date.  The unaudited pro forma
information below presents the combined operating results of the Company and
Cinch.  The unaudited pro forma results are presented for illustrative
purposes only and include the effects of headcount reductions that were effected
on the Acquisition Date.  They do not reflect the realization of any
other potential cost savings, or any related integration costs. Certain cost
savings may result from the acquisition; however, there can be no assurance that
these cost savings will be achieved. These pro forma results do not purport to
be indicative of the results that would have actually been obtained if the
acquisition had occurred as of January 1, 2009, nor is the pro forma data
intended to be a projection of results that may be obtained in the
future.




11




The
following unaudited pro forma consolidated results of operations assume that the
acquisition of Cinch was completed as of January 1, 2009 (dollars in
thousands except per share data):





Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Revenue
              
              $
              84,961
              
              
              $
              58,635
              
              
              $
              222,529
              
              
              $
              174,262Net
      earnings
              
              
              9,944
              
              
              
              (10,520
              )
              
              
              15,474
              
              
              
              (11,583
              )Earnings
      per Class A common share - basic and diluted
              
              
              0.81
              
              
              
              (0.88
              )
              
              
              1.26
              
              
              
              (0.98
              )Earnings
      per Class B common share - basic and diluted
              
              
              0.86
              
              
              
              (0.92
              )
              
              
              1.34
              
              
              
              (1.01
              )





4.
            FAIR
      VALUE MEASUREMENTS





The
Company utilizes the accounting guidance for fair value measurements and
disclosures for all financial assets and liabilities and nonfinancial assets and
liabilities that are recognized or disclosed at fair value in the condensed
consolidated financial statements on a recurring basis or on a nonrecurring
basis during the reporting period.  The fair value is 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.  The Company utilizes market data or assumptions that market
participants would use in pricing the asset or liability.  The
accounting guidance establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value.  These tiers are
defined as follows:





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


Level 3
      -
              Unobservable
      inputs about which little or no market data exists, therefore requiring an
      entity to develop its own
  assumptions
  As of
September 30, 2010 and December 31, 2009, the Company held certain financial
assets that are measured at fair value on a recurring basis.  These
consisted primarily of the Company’s investments in a Rabbi Trust, which are
intended to fund the Company’s SERP obligations.  These are
categorized as available-for-sale securities and are included as other assets in
the accompanying condensed consolidated balance sheets at September 30, 2010 and
December 31, 2009.





During
the third quarter of 2010, the Company purchased marketable securities on the
open market at a purchase price of $1.2 million.  As of September 30, 2010,
the fair market value of this investment was $1.4 million and the resulting
unrealized gain of $0.2 million is included net of tax in accumulated other
comprehensive income in the accompanying condensed consolidated balance
sheet.  This investment is classified as available-for-sale and is included
in the below table as marketable securities.





The fair
value of these investments is determined based on quoted market prices in public
markets and is categorized as Level 1.  The Company does not have any
financial assets measured at fair value on a recurring basis categorized as
Level 2 or Level 3, and there were no transfers in or out of Level 1, Level 2 or
Level 3 during the three or nine months ended September 30, 2010 and
2009.  There were no changes to the Company’s valuation techniques
used to measure asset fair values on a recurring or nonrecurring basis during
the three or nine months ended September 30, 2010.




12





The
following table sets forth by level, within the fair value hierarchy, the
Company’s financial assets accounted for at fair value on a recurring basis as
of September 30, 2010 and December 31, 2009 (dollars in thousands).





Assets
      at Fair Value UsingTotal
              
              
              Quoted
      Prices in Active Markets for Identical Assets (Level
    1)
              
              
              Significant
      Other Observable Inputs (Level 2)
              
              
              Significant
      Unobservable Inputs (Level 3)As of September 30,
      2010Available-for-sale
      securities:Investments
      held in Rabbi Trust
              
              $
              3,816
              
              
              $
              3,816
              
              
              $
              -
              
              
              $
              -Marketable
      securities
              
              
              1,414
              
              
              
              1,414
              
              
              
              -
              
              
              
              -Total
              
              $
              5,230
              
              
              $
              5,230
              
              
              $
              -
              
              
              $
              -As of December 31,
      2009Available-for-sale
      securities:Investments
      held in Rabbi Trust
              
              $
              3,656
              
              
              $
              3,656
              
              
              $
              -
              
              
              $
              -Marketable
      securities
              
              
              2
              
              
              
              2
              
              
              
              -
              
              
              
              -Total
              
              $
              3,658
              
              
              $
              3,658
              
              
              $
              -
              
              
              $
              -


The
Company has other financial instruments, such as accounts receivable, accounts
payable and accrued expenses, which have been excluded from the tables
above.  Due to the short-term nature of these instruments, the
carrying value of accounts receivable, accounts payable and accrued expenses
approximate their fair values.  The Company did not have any other
financial liabilities within the scope of the fair value disclosure requirements
as of September 30, 2010.





There
were no financial assets or liabilities accounted for at fair value on a
nonrecurring basis as of September 30, 2010 and December 31,
2009.  Nonfinancial assets and liabilities, such as goodwill and
long-lived assets, are accounted for at fair value on a nonrecurring
basis.   These items are tested for impairment on the occurrence
of a triggering event or in the case of goodwill and intangible assets with
indefinite useful lives, on at least an annual basis.  There were no
triggering events that occurred during the nine months ended September 30, 2010
that would warrant interim impairment testing.





5.
            INVENTORIES





The
components of inventories are as follows (dollars in thousands):





September
      30,
              
              
              December
      31,2010
              
              
              2009Raw
      materials
              
              $
              36,755
              
              
              $
              22,431Work
      in progress
              
              
              6,085
              
              
              
              1,478Finished
      goods
              
              
              14,505
              
              
              
              7,882$
              57,345
              
              
              $
              31,791  13





6.
            BUSINESS
      SEGMENT INFORMATION





The
Company operates in one industry with three reportable operating segments, which
are geographic in nature.  The segments consist of North America, Asia
and Europe.  The primary criteria by which financial performance is
evaluated and resources are allocated are revenues and operating
income.  The following is a summary of key financial data (dollars in
thousands):





Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Net
      sales to external customers:North
      America
              
              $
              30,522
              
              
              $
              11,395
              
              
              $
              79,014
              
              
              $
              30,514Asia
              
              
              45,251
              
              
              
              29,923
              
              
              
              114,112
              
              
              
              90,501Europe
              
              
              9,188
              
              
              
              3,965
              
              
              
              25,716
              
              
              
              13,073$
              84,961
              
              
              $
              45,283
              
              
              $
              218,842
              
              
              $
              134,088Total
      segment revenues:North
      America
              
              $
              34,214
              
              
              $
              13,499
              
              
              $
              89,991
              
              
              $
              37,391Asia
              
              
              55,660
              
              
              
              36,098
              
              
              
              140,381
              
              
              
              105,016Europe
              
              
              9,511
              
              
              
              4,213
              
              
              
              26,560
              
              
              
              13,936Total
      segment revenues
              
              
              99,385
              
              
              
              53,810
              
              
              
              256,932
              
              
              
              156,343Intersegment
      revenues
              
              
              (14,424
              )
              
              
              (8,527
              )
              
              
              (38,090
              )
              
              
              (22,255
              )Net
      sales
              
              $
              84,961
              
              
              $
              45,283
              
              
              $
              218,842
              
              
              $
              134,088Income
      (Loss) from operations:North
      America
              
              $
              925
              
              
              $
              (1,877
              )
              
              $
              2,023
              
              
              $
              479Asia
              
              
              7,691
              
              
              
              (13,864
              )
              
              
              11,935
              
              
              
              (16,731
              )Europe
              
              
              757
              
              
              
              (189
              )
              
              
              1,087
              
              
              
              (291
              )$
              9,373
              
              
              $
              (15,930
              )
              
              $
              15,045
              
              
              $
              (16,543
              )


The
following items are included in the income (loss) from operations presented
above:





Acquisition of Cinch
– The above figures for the three and nine months ended September 30, 2010
include sales volume and expenses of Cinch since the acquisition date of January
29, 2010.  During the three and nine months ended September 30, 2010,
the Cinch acquisition contributed sales to external customers of $12.2 million
and $32.1 million, respectively, and income from operations of $1.4 million and
$2.3 million, respectively, to the Company’s North America operating
segment.   During the three and nine months ended September 30,
2010, the Cinch acquisition contributed sales to external customers of $3.3
million and $8.2 million, respectively, and income from operations of $0.5
million and $0.7 million, respectively, to the Company’s Europe operating
segment.





Restructuring Charges
– In connection with the closure of its Westborough, Massachusetts facility in
2008, the Company incurred $0.4 million of restructuring charges during the nine
months ended September 30, 2009, including $0.1 million of severance costs and
$0.3 million related to its facility lease obligation.These charges impacted the
operating profit of the Company’s North America operating segment for the nine
months ended September 30, 2009.




14





Gain on Sale of Property,
Plant & Equipment – During the nine months ended September 30, 2009,
the Company recognized a previously-deferred $4.6 million pre-tax gain in the
North America operating segment from the 2007 sale of a property in Jersey City,
New Jersey.





Net Sales – Net sales
to external customers are attributed to individual segments based on the
geographic source of the billing for such customer sales.  Transfers
between geographic areas include finished products manufactured in foreign
countries which are then transferred to the United States and Europe for sale;
finished goods manufactured in the United States which are transferred to Europe
and Asia for sale; and semi-finished components manufactured in the United
States which are sold to Asia for further processing. Income from
operations represents net sales less operating costs and expenses.





7.
            INCOME
      TAXES





As of
September 30, 2010 and December 31, 2009, the Company has approximately $4.0
million and $4.7 million, respectively, of liabilities for uncertain tax
positions ($1.0 million and $1.8 million, respectively, included in income taxes
payable and $3.0 million and $2.9 million, respectively, included in liability
for uncertain tax positions) all of which, if reversed, would reduce the
Company’s effective tax rate.





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 2006 and for state examinations before
2006.   Regarding foreign subsidiaries, the Company is no longer
subject to examination by tax authorities for years before 2003 in Asia and
generally 2005 in Europe.  During September 2010, the Company was
notified of an Internal Revenue Service ("IRS") Tax Audit for the years ended
December 31, 2006 and 2008.  The Company believes the audit is a
result of a foreign tax credit carryback claim to the year ended December 31,
2006.  As the statute of limitations for the year 2006 has expired,
any tax adjustment proposed by the IRS would be limited to the amount of the
carryback claim of approximately $0.3 million.





During
the nine months ended September 30, 2010, certain statutes of limitations
expired which resulted in a reversal of a previously recognized liability for
uncertain tax positions in the amount of $1.8 million. This was offset by an
increase in the liability for uncertain tax positions in the amount of $1.1
million during the nine months ended September 30, 2010.  During the
nine months ended September 30, 2009, certain statutes of limitations expired
which resulted in a reversal of a previously recognized liability for uncertain
tax positions in the amount of $3.9 million. This was offset by an increase in
the liability for uncertain tax positions in the amount of $0.9 million during
the nine months ended September 30, 2009. Additionally, the Company settled a
lawsuit during the third quarter of 2009 which resulted in a tax benefit of $0.8
million.





As a
result of the expiration of the statute 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,
2010.   A total of $1.0 million of previously recorded
liabilities for uncertain tax positions relates to the 2007 tax
year.  The statute of limitations related to this liability is
scheduled to expire on September 15, 2011.





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 each of the nine months ended September 30, 2010 and
2009, the Company recognized $0.1 million in interest and penalties in the
condensed consolidated statements of operations.  The Company has
approximately $0.4 million and $0.6 million accrued for the payment of interest
and penalties at September 30, 2010 and December 31, 2009, respectively, which
is included in both income taxes payable and liability for uncertain tax
positions in the condensed consolidated balance sheets.




15





In
connection with the Cinch acquisition, the Company acquired the following tax
assets and liabilities.  Cinch Europe had net operating loss and
capital loss carryforwards in the amounts of $0.6 million and $0.2 million,
respectively, as of the acquisition date.  The related tax benefits
were $0.2 million and $0.1 million, respectively.  The capital loss
carryforward was acquired with a valuation allowance, which the Company
maintained at September 30, 2010.  During the nine months ended
September 30, 2010, the entire $0.6 million net operating loss was
utilized.  Additionally, Cinch Europe had a deferred tax liability in
the amount of $0.1 million for various timing differences.  Cinch U.S.
had a deferred tax asset in the amount of $0.3 million relating to vacation
accruals, $0.1 million of net refundable income tax and a deferred tax asset
related to inventory capitalization in the amount of $0.2 million at the time of
the acquisition.  Of these amounts, a deferred tax asset of $0.2
million related to the vacation accrual and refundable income taxes of $0.1
million remain on the condensed consolidated balance sheet as of September 30,
2010.  Cinch Mexico was acquired with a refundable income tax in the
amount of $0.1 million, which should be collected or applied to current year
income tax by December 31, 2010.  The Company has received a
preliminary fair market value report of property, plant and equipment, and
intangibles related to Cinch Europe and Cinch Mexico which resulted in the
establishment of deferred tax liabilities at the date of acquisition in the
amounts of $0.4 million and an immaterial amount, respectively. At September 30,
2010, the deferred tax liability of $0.4 remains on the condensed consolidated
balance sheet.  None of the reversals of the deferred tax asset or
deferred tax liabilities or use of net operating loss carryforwards acquired
from the Cinch acquisition will impact the condensed consolidated statement of
operations.





The
President of the United States has presented a budget to the United States
Congress which contains various modifications to international tax
provisions.  Some of the proposed changes might affect taxation
regarding the transfer of intangible property and subject the Company to, among
other things, additional income taxes and restrictions on how foreign tax
credits would be calculated.  The Company cannot ascertain at this
time what the final outcome of this proposed legislation will be or the effect,
if any, on the Company's results of operations or financial
condition.  Additionally, the IRS released a draft tax schedule and
instructions that provide additional details on its proposal to require
companies with assets of $100 million or more to report their uncertain tax
positions annually, beginning with the 2010 tax year, on their business tax
returns.





8.
            ACCRUED
      EXPENSES AND RESTRUCTURING COSTS





Accrued
expenses consist of the following (dollars in thousands):




September
      30,
              
              
              December
      31,2010
              
              
              2009Sales
      commissions
              
              $
              2,019
              
              
              $
              1,506Contract
      labor
              
              
              3,097
              
              
              
              2,615Salaries,
      bonuses and related benefits
              
              
              7,694
              
              
              
              1,475Other
              
              
              3,497
              
              
              
              2,395$
              16,307
              
              
              $
              7,991
  16




Accrued Restructuring
Costs





Activity
and liability balances related to restructuring charges for the nine months
ended September 30, 2010 are as follows (these charges are associated with the
2008 closure of the Company’s facility in Westborough, Massachusetts) (dollars
in thousands):





Liability
      at
                  December
      31,
                  2009
                
                
                New
      Charges
                
                
                Cash
      Payments & Other Settlements
                
                
                Liability
      at
                  September
      30,
                  2010Facility
      lease obligation
                
                $
                664
                
                
                $
                -
                
                
                $
                (119
                )
                
                $
                545


The
Company has included the current portion of $0.2 million in accrued
restructuring costs in the condensed consolidated balance sheet at September 30,
2010, and has classified the remaining $0.4 million of the liability related to
the facility lease obligation as noncurrent.  During the nine months
ended September 30, 2009, the Company recorded $0.4 million in restructuring
charges, including $0.1 million of severance charges and $0.3 million related to
its facility lease obligations.





9.
            RETIREMENT
      FUND AND PROFIT SHARING PLAN





The
Company maintains a domestic 401(k) plan, which consists of profit sharing,
contributory stock ownership and individual voluntary savings to provide
non-defined retirement benefits for plan participants.  The expense
for the three months ended September 30, 2010 and 2009 amounted to approximately
$0.2 million and $0.1 million, respectively.  The expense for the nine
months ended September 30, 2010 and 2009 amounted to approximately $0.4 million
and $0.3 million, respectively. As of September 30, 2010, the plans owned 16,558
and 198,375 shares of Bel Fuse Inc. Class A and Class B common stock,
respectively.





The
Company's subsidiaries in Asia have a non-defined retirement fund covering
substantially all of their Hong Kong-based full-time employees.  The
expense for each of the three months ended September 30, 2010 and 2009 amounted
to approximately $0.1 million in each period. The expense for each of the
nine months ended September 30, 2010 and 2009 amounted to approximately $0.2
million in each period. As of September 30, 2010, the plan owned 3,323 and
17,342 shares of Bel Fuse Inc. Class A and Class B common stock,
respectively.





The
Supplemental Executive Retirement Plan (the "SERP" or the “Plan”) is designed to
provide a limited group of key management and highly compensated employees of
the Company with supplemental retirement and death benefits.





The
components of SERP expense are as follows (dollars in thousands):





Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Service
      cost
              
              $
              85
              
              
              $
              96
              
              
              $
              255
              
              
              $
              288Interest
      cost
              
              
              84
              
              
              
              88
              
              
              
              252
              
              
              
              264Amortization
      of adjustments
              
              
              33
              
              
              
              37
              
              
              
              99
              
              
              
              110Total
      SERP expense
              
              $
              202
              
              
              $
              221
              
              
              $
              606
              
              
              $
              662




17




September
      30,
                
                
                December
      31,2010
                
                
                2009Balance
      sheet amounts:Minimum
      pension obligation and unfunded pension liability
                
                $
                6,173
                
                
                $
                5,622Amounts
      recognized in accumulated other comprehensive income,
    pretax:Prior
      service cost
                
                $
                1,276
                
                
                $
                1,276Net
      gains
                
                
                (176
                )
                
                
                (176
                )$
                1,100
                
                
                $
                1,100





10.
            COMPREHENSIVE
      INCOME (LOSS)




Comprehensive
income (loss) for the three and nine months ended September 30, 2010 and 2009
consists of the following (dollars in thousands):




Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Net
      earnings (loss)
              
              $
              9,944
              
              
              $
              (10,752
              )
              
              $
              14,671
              
              
              $
              (11,208
              )Currency
      translation adjustment
              
              
              1,072
              
              
              
              332
              
              
              
              (383
              )
              
              
              345Increase
      in unrealized gain on marketable securities, net of
    taxes
              
              
              195
              
              
              
              1,924
              
              
              
              236
              
              
              
              3,985Reclassification
      adjustment for gains included in net loss, net of
    taxes
              
              
              -
              
              
              
              (1,022
              )
              
              
              -
              
              
              
              (1,680
              )Comprehensive
      income (loss)
              
              $
              11,211
              
              
              $
              (9,518
              )
              
              $
              14,524
              
              
              $
              (8,558
              )





The
components of accumulated other comprehensive income as of September 30, 2010
and December 31, 2009 are summarized below (dollars in thousands):





September
      30,
            
            
            December
      31,2010
            
            
            2009Foreign
      currency translation adjustment
            
            $
            1,406
            
            
            $
            1,789Unrealized
      holding gains on available-for-sale securities, net of taxes of $187 and
      $42 as of September 30, 2010 and December 31, 2009,
      respectively
            
            
            298
            
            
            
            62Unfunded
      SERP liability, net of taxes of ($341) as of both September 30, 2010 and
      December 31, 2009
            
            
            (759
            )
            
            
            (759
            )Accumulated
      other comprehensive income
            
            $
            945
            
            
            $
            1,092


18




11.
            COMMITMENTS
      AND CONTINGENCIES





Leases





The
Company leases various facilities under operating leases through
2015.  Some of these leases require the Company to pay certain
executory costs (such as insurance and maintenance).  With the
acquisition of Cinch in January 2010, the Company’s future commitments related
to lease obligations have increased significantly since December 31,
2009.  At September 30, 2010, future minimum lease payments for
operating leases are approximately as follows (dollars in
thousands):





Years
      EndingSeptember
      30,2011
              
              $
              2,7852012
              
              
              2,3472013
              
              
              1,6842014
              
              
              1,1352015
              
              
              814Thereafter
              
              
              177$
              8,942


Other
Commitments





The
Company submits purchase orders for raw materials to various vendors throughout
the year for current production requirements, as well as forecasted
requirements.  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 $35.3 and $19.9 million at September 30, 2010 and
December 31, 2009, respectively.  Of the $15.4 million increase, the
addition of Cinch commitments accounts for $5.8 million and the remaining $9.6
million increase relates to new purchase orders of raw materials to accommodate
the increased demand for Bel’s products.  The Company also had
outstanding purchase orders related to capital expenditures in the amount of
$1.8 million and $1.4 million at September 30, 2010 and December 31, 2009,
respectively.





Legal
Proceedings





The
Company is, from time to time, a party to litigation arising in the normal
course of its business, including various claims of patent
infringement.  See the Company’s Annual Report on Form 10-K for the
year ended December 31, 2009 for the details of Bel’s material pending
lawsuits.  Updates to pending lawsuits since the Company’s Form 10-K
filing are described below.





Cinch, a
wholly-owned subsidiary of the Company, was defendant in a lawsuit captioned
Engelbrecht v. Motorola, et. al. brought in the Circuit Court of
the State of Oregon for the County of Douglas (the “Complaint”) on January 10,
2010.  With respect to this action, the plaintiff claimed that Cinch was
engaged in the manufacture and sale of asbestos-containing radio components
which allegedly caused him to sustain personal injuries due to his exposure
to asbestos.  Cinch filed an answer to the Complaint, denying any legal
liability or fault for the damages alleged in the Complaint, and affirmatively
pleaded, among other defenses, that the plaintiff’s alleged damages, if
any, were caused by persons for whom Cinch is not
responsible.  Cinch was dismissed as a party to this case through a
limited judgment of dismissal which was filed by the Douglas County Circuit
Court on July 19, 2010.




19





The
Company is a defendant in a lawsuit captioned Synqor, Inc. v. Artesyn
Technologies, Inc., Astec America, Inc., Emerson Network Power, Inc., Emerson
Electric Co., Bel Fuse Inc., Cherokee International Corp., Delta Electronics,
Inc., Delta Products Corp., Murata Electronics North America, Inc., Murata
Manufacturing Co., Ltd., Power-One, Inc., Tyco Electronics Corp. and Tyco
Electronics Ltd. brought in the United States District Court, Eastern District
of Texas in November 2007.  With respect to the Company, the plaintiff
claims that the Company infringed its patents covering certain power products.
Synqor is seeking an unspecified amount of damages.  The Company filed
an Answer to Synqor’s complaint, denying the allegations of infringement and
asserting invalidity of Synqor’s patents.  In October 2010 the Company
attended a court ordered mediation related to this case; however, a settlement
was not reached.  A trial date for this case has been set for December
2010.





The
Company is a plaintiff in a lawsuit captioned Bel Fuse Inc.  v. Halo
Electronics, Inc. brought in the United States District Court of New Jersey
during June 2007.  The Company claims that Halo has infringed a patent
covering certain integrated connector modules made by Halo.  The
Company is seeking an unspecified amount of damages plus interest, costs and
attorney fees.  A trial date for this case has been set for March 14,
2011.





The
Company cannot predict the outcome of its unresolved legal proceedings; however,
management believes that the ultimate resolution of these matters will not have
a material impact on the Company’s consolidated financial condition or results
of operations.  As of September 30, 2010, no amounts have been accrued
in connection with contingencies related to these lawsuits, as the amounts are
not estimable.




12.
            RELATED
      PARTY TRANSACTIONS





As of
September 30, 2010, the Company has $2.0 million invested in a money market fund
with GAMCO Investors, Inc., a current shareholder of the Company, with holdings
of its Class A stock of approximately 26.1%.


20


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




The
Company’s quarterly and annual operating results are impacted by a wide variety
of factors that could materially and adversely affect revenues and
profitability, including the risk factors described in the Company's Annual
Report on Form 10-K for the year ended December 31, 2009. 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, financial condition, operating results, and stock
prices.  Furthermore, this document and other documents filed by the
Company with the Securities and Exchange Commission (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.  These Forward-Looking Statements are subject to certain
risks and uncertainties, including those detailed in Item 1A of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2009, which could
cause actual results to differ materially from these Forward-Looking
Statements.  The Company undertakes no obligation to publicly release
the results of any revisions to these Forward-Looking Statements which may be
necessary to reflect events or circumstances after the date such statements are
made or to reflect the occurrence of unanticipated events.  An
investment in the Company involves various risks, including those which are
detailed from time to time in the Company’s SEC filings.




Overview





Our
Company





Bel is a
leading producer of electronic products that help make global connectivity a
reality. The Company designs, manufactures and markets a broad array of
magnetics, modules (including power conversion and integrated modules), circuit
protection devices and interconnect products. Bel's products are designed to
protect, regulate, connect, isolate or manage a variety of electronic
circuits and are deployed primarily in the computer, networking and
telecommunication industries. Bel’s expanding portfolio of products also finds
application in the medical and consumer electronics markets.  New
products brought on through the Cinch acquisition in January 2010 enhanced Bel’s
existing interconnect product line and allowed Bel to broaden into the military,
aerospace and transportation industries.





Bel’s
business is operated in one industry with three reportable operating
segments, which are geographic in nature.  The segments consist of
North America, Asia and Europe.  The acquisition of Cinch
affected the Company’s North America and Europe reportable operating
segments as further discussed in the Summary by Reportable Operating Segment
section below.





The
Company’s expenses are driven principally by the cost of labor where Bel’s
factories are located and the cost of the materials that it uses.  As
labor and material costs vary by product line, any significant shift in product
mix has an associated impact on the Company’s costs of sales.  Costs
are recorded as incurred for all products manufactured either at third-party
facilities or at the Company's own manufacturing facilities.  Such
amounts are determined based upon the estimated stage of production and include
labor cost and fringes and related allocations of factory overhead. The Company
manufactures products at its manufacturing facilities in the People’s Republic
of China (“PRC”); Glen Rock, Pennsylvania; Inwood, New York; the Dominican
Republic; Cananea, Mexico; the Czech Republic; and, subsequent to the Cinch
acquisition, in Vinita, Oklahoma; Reynosa, Mexico; and Worksop,
England.




21





In the
PRC, where the Company generally enters into processing arrangements with
several independent third-party contractors and also has its own manufacturing
facilities, the availability of labor is cyclical and is significantly affected
by the migration of workers in relation to the annual Lunar New Year holiday as
well as economic conditions in the PRC.  In addition, the Company has
little visibility into the ordering habits of its customers and can be subjected
to large and unpredictable variations in demand for its products. 
Accordingly, the Company must continually recruit and train new workers to
replace those lost to attrition each year and 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 demand, can add
volatility to the costs incurred by the Company for labor in the
PRC.





Trends
Affecting our Business





The
Company believes the key factors affecting Bel’s 2010 and/or future results
include the following:





·
            With
      the acquisition of Cinch in January 2010, a more stable and efficient
      workforce in China and improved availability of components, Bel
      experienced record sales for the third quarter of
      2010.   Bel’s backlog of orders was $118.5 million at
      September 30, 2010, reflecting a 10% decrease from June 30,
      2010.  Approximately 50% of this decrease was due to the
      Company’s ability to manufacture and deliver our products with shorter
      lead times during the third quarter, while the remaining 50% of the
      reduction was due to the cancellation of orders by customers during the
      third quarter.





·
            While
      the Company has seen component pricing and availability stabilize during
      the third quarter for most of Bel’s product lines, the Company continues
      to experience component shortages in it modules product line which limits
      Bel’s ability to deliver its DC-DC products.  In addition, the
      costs of certain commodities associated with our raw materials, such as
      gold and copper, have increased.  Fluctuations in these prices
      and other commodity prices associated with Bel’s raw materials will have a
      corresponding impact on Bel’s profit
margins.





·
            Bel
      increased its workforce by over 4,000 workers during late 2009 and into
      2010 to accommodate the substantial increase in demand for Bel’s
      products.  The Company experienced higher labor costs through
      the first half of 2010 due to training costs, overtime and production
      inefficiencies associated with hiring these new workers.  These
      increased labor costs stabilized during the third quarter, as the training
      periods ended and production efficiencies were
  restored.





·
            In
      addition to increases in labor costs due to the new workforce, the costs
      of labor, particularly in the PRC where several of Bel’s factories are
      located, have been higher in recent years as a result of government
      mandates for new minimum wage and overtime requirements.  The
      PRC government increased minimum wage levels by 21% in the areas where
      Bel’s factories are located effective May 1, 2010.  Bel has
      implemented price increases to its customers during 2010 to offset
      increases in labor and material costs. The Company anticipates that any
      additional increases to the minimum wage levels would have a negative
      impact on Bel’s profit margins in future
  quarters.





·
            One
      of Bel’s significant customers had a reduced sales volume by approximately
      $6.1 million during the nine months ended September 30, 2010 as compared
      to the nine months ended September 30, 2009.  The products
      associated with this customer have a very high material content, which
      results in lower gross margins than the Company’s other product
      lines.  The decline in sales to this customer resulted in an
      overall increase in Bel’s gross profit margin percentage, as the reduced
      revenue was offset by a significant reduction in material costs. The sales
      volume associated with this customer continued to be lower in the third
      quarter of 2010 as compared to 2009.  Any future increase in
      sales volume to this customer would have an unfavorable impact on the
      Company’s profit margin percentage.




22




·
            Some
      of the Company’s products, particularly certain products brought over with
      the Cinch acquisition, are reaching the end of their product
      life.  While there are new products in development to replace
      some of these products, the new products may not be ready for commercial
      sale until 2011.  As a result, the Company anticipates that
      there may be a decrease in the revenue associated with these Cinch
      products as old products phase out.





·
            In
      connection with the acquisition of Cinch in January 2010, the Company
      incurred $0.3 million in acquisition-related costs and $0.8 million in
      inventory-related purchase accounting adjustments during the nine months
      ended September 30, 2010.




Summary
by Reportable Operating Segment





Net sales
to external customers by reportable operating segment for the three and nine
months ended September 30, 2010 and 2009 were as follows:





Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009North
      America
              
              $
              30,522
              
              
              
              36
              %
              
              $
              11,395
              
              
              
              25
              %
              
              $
              79,014
              
              
              
              36
              %
              
              $
              30,514
              
              
              
              23
              %Asia
              
              
              45,251
              
              
              
              53
              %
              
              
              29,923
              
              
              
              66
              %
              
              
              114,112
              
              
              
              52
              %
              
              
              90,501
              
              
              
              67
              %Europe
              
              
              9,188
              
              
              
              11
              %
              
              
              3,965
              
              
              
              9
              %
              
              
              25,716
              
              
              
              12
              %
              
              
              13,073
              
              
              
              10
              %$
              84,961
              
              
              
              100
              %
              
              $
              45,283
              
              
              
              100
              %
              
              $
              218,842
              
              
              
              100
              %
              
              $
              134,088
              
              
              
              100
              %




Income
(loss) from operations by reportable operating segment for the three and nine
months ended September 30, 2010 and 2009 were as follows (dollars in
thousands):





Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Income
      (Loss) from Operations:North
      America
              
              $
              925
              
              
              $
              (1,877
              )
              
              $
              2,023
              
              
              $
              479Asia
              
              
              7,691
              
              
              
              (13,864
              )
              
              
              11,935
              
              
              
              (16,731
              )Europe
              
              
              757
              
              
              
              (189
              )
              
              
              1,087
              
              
              
              (291
              )$
              9,373
              
              
              $
              (15,930
              )
              
              $
              15,045
              
              
              $
              (16,543
              )




The shift
in net sales among the Company’s reportable operating segments was primarily due
to the Cinch acquisition. During the three months ended September 30, 2010, the
Cinch acquisition contributed sales to external customers of $12.2 million and
income from operations of $1.4 million to the Company’s North America operating
segment and sales to external customers of $3.3 million and income from
operations of $0.5 million to the Company’s Europe operating segment. During the
nine months ended September 30, 2010, the Cinch acquisition contributed
sales to external customers of $32.1 million and income from operations of
$2.3 million to the Company’s North America operating segment and sales to
external customers of $8.2 million and income from operations of $0.7 million to
the Company’s Europe operating segment..


23


Overview
of Financial Results





The acquisition of Cinch in late
January 2010 and the rebound of market conditions have impacted the Company
considerably during the three and nine months ended September 30, 2010. The
Company generated higher margins in the third quarter of 2010 resulting from
several factors, including price increases for certain products that went into
effect on July 1, 2010; improved productivity in our factories in China; the
addition of the relatively high-margin Cinch product lines; and a favorable mix
of product sales in both the Cinch and legacy Bel businesses.





During the third quarter of 2010, the
Company experienced an 87.6% increase in sales as compared to the third quarter
of 2009.  This was primarily due to legacy-Bel growth of 53.5% due to
a rebound in demand for Bel’s products.  The addition of Cinch’s sales
volume accounted for the remaining 34.1% increase in sales from Bel’s third
quarter of 2009.  While sales increased 87.6% as compared to the third
quarter of 2009, cost of sales increased by only 56.1% compared to last year’s
third quarter.  A shift in sales among Bel’s product groups has
resulted in a significant decrease in material costs as a percentage of sales,
as the Company manufactured a reduced volume of product with high material
content.  Selling, general and administrative expenses increased by
$4.4 million during the third quarter of 2010 as compared to the third quarter
of 2009.  This increase primarily related to personnel expenses,
office expenses and other costs associated with the recently acquired Cinch
facilities.  Additional details related to these factors affecting the
third quarter results are described in the Results of Operations section
below.





During the nine months ended September
30, 2010, the Company experienced a 63.2% increase in sales as compared to the
same period of 2009.  This was primarily due to legacy-Bel growth of
33.2% due to a rebound in demand for Bel’s products.  The addition of
Cinch’s sales volume accounted for the remaining 30.0% increase in sales from
2009.  While sales increased 63.2% as compared to the nine months
ended September 30, 2009, cost of sales increased by only 44.7% compared to 2009
due to the same factors described above.  Selling, general and
administrative expenses increased by $8.6 million during the nine months ended
September 30, 2010 as compared to the same period of 2009, primarily due to
personnel expenses, office expenses and other costs associated with the recently
acquired Cinch facilities.  Additional details related to these
factors affecting the nine-month results are described in the Results of
Operations section below.





Critical Accounting
Policies





The Company’s discussion and analysis
of its financial condition and results of operations are based upon the
Company’s consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires the Company to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to product returns, bad debts, inventories, goodwill,
intangible assets, investments, SERP expense, income taxes, contingencies and
litigation. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.


24





Recent Accounting
Pronouncements





The
Company’s significant accounting policies are summarized in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009.  There were
no significant changes to these accounting policies during the nine months ended
September 30, 2010 and the Company does not expect that the adoption of other
recent accounting pronouncements will have a material impact on its financial
statements.





Results of
Operations





The following table sets forth, for the
periods presented, the percentage relationship to net sales of certain items
included in the Company’s condensed consolidated statements of
operations.





Percentage
      of Net Sales
            
            
            Percentage
      of Net SalesThree
      Months Ended
            
            
            Nine
      Months EndedSeptember
      30,
            
            
            September
      30,2010
            
            
            2009
            
            
            2010
            
            
            2009Net
      sales
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %
            
            
            100.0
            %Cost
      of sales
            
            
            76.3
            
            
            
            91.7
            
            
            
            79.3
            
            
            
            89.4Selling,
      general and administrative ("SG&A") expenses
            
            
            13.2
            
            
            
            15.0
            
            
            
            14.0
            
            
            
            16.5Impairment
      of goodwill
            
            
            -
            
            
            
            28.4
            
            
            
            -
            
            
            
            9.6Restructuring
      charges
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            0.3Gain
      on sale of property, plant and equipment
            
            
            (0.5
            )
            
            
            -
            
            
            
            (0.2
            )
            
            
            (3.5
            )Realized
      gain on sale of investment
            
            
            -
            
            
            
            1.4
            
            
            
            -
            
            
            
            1.3Interest
      income and other, net
            
            
            0.1
            
            
            
            0.2
            
            
            
            0.1
            
            
            
            0.3Earnings
      (loss) before provision (benefit) for income taxes
            
            
            11.1
            
            
            
            (33.5
            )
            
            
            7.0
            
            
            
            (10.7
            )(Benefit)
      provision for income taxes
            
            
            (0.6
            )
            
            
            (9.8
            )
            
            
            0.3
            
            
            
            (2.4
            )Net
      earnings (loss)
            
            
            11.7
            
            
            
            (23.7
            )
            
            
            6.7
            
            
            
            (8.4
            )




The following table sets forth the year
over year percentage increase of certain items included in the Company's
condensed consolidated statements of operations.





Increase
      from Prior Period
                  
                  
                  Increase
      from Prior PeriodThree
      Months Ended
                    September
      30, 2010
                    Compared
      with
                    Three
      Months Ended
                    September 30, 2009
                  
                  
                  Nine
      Months Ended
                    September
      30, 2010
                    Compared
      with
                    Nine
      Months Ended
                    September 30, 2009Net
      sales
                  
                  
                  87.6
                  %
                  
                  
                  63.2
                  %Cost
      of sales
                  
                  
                  56.1
                  
                  
                  
                  44.7SG&A
      expenses
                  
                  
                  64.1
                  
                  
                  
                  38.9Net
      earnings
                  
                  
                  192.5
                  
                  
                  
                  230.9


25




Sales





Net sales increased 87.6% from $45.3
million during the three months ended September 30, 2009 to $85.0 million during
the three months ended September 30, 2010. The increase in sales during the
third quarter related primarily to improved market conditions, leading to a
growth in legacy-Bel revenue of $24.2 million.  The remaining increase
for the third quarter related to the addition of Cinch revenue of $15.5
million.





Net sales increased 63.2% from $134.1
million during the nine months ended September 30, 2009 to $218.8 million during
the nine months ended September 30, 2010.  The increase in sales
during the nine months ended September 30, 2010 related primarily to improved
market conditions, which resulted in an increase in legacy-Bel revenue of $44.4
million.  The remaining increase for the nine months related to the
addition of Cinch revenue of $40.3 million.





The Company’s net sales by major
product line as a percentage of consolidated net sales for the three and
nine months ended September 30, 2010 and 2009 were as follows:





Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Magnetic
      products
              
              $
              37,963
              
              
              
              45
              %
              
              $
              21,865
              
              
              
              48
              %
              
              $
              92,317
              
              
              
              42
              %
              
              $
              62,717
              
              
              
              47
              %Interconnect
      products
              
              
              27,724
              
              
              
              33
              %
              
              
              8,254
              
              
              
              18
              %
              
              
              74,593
              
              
              
              34
              %
              
              
              23,677
              
              
              
              18
              %Module
      products
              
              
              15,434
              
              
              
              18
              %
              
              
              12,578
              
              
              
              28
              %
              
              
              41,900
              
              
              
              19
              %
              
              
              40,720
              
              
              
              30
              %Circuit
      protection products
              
              
              3,840
              
              
              
              4
              %
              
              
              2,586
              
              
              
              6
              %
              
              
              10,032
              
              
              
              5
              %
              
              
              6,974
              
              
              
              5
              %$
              84,961
              
              
              
              100
              %
              
              $
              45,283
              
              
              
              100
              %
              
              $
              218,842
              
              
              
              100
              %
              
              $
              134,088
              
              
              
              100
              %


The
portfolio of products acquired through the Cinch acquisition has enabled Bel to
broaden its interconnect product offerings to address new markets such as
military, aerospace and transportation.  As a result, there was a
significant increase in interconnect product sales volume during 2010. The
legacy-Bel product lines experienced increases in sales across all of Bel’s
major product groups during 2010 as the improvement in component availability
and the stabilized workforce in the PRC allowed for a greater volume of product
to be manufactured.





Cost of
Sales





The Company’s cost of sales as a
percentage of consolidated net sales for the three and nine months ended
September 30, 2010 and 2009 were comprised of the following:





Three
      Months Ended
              
              
              Nine
      Months EndedSeptember
      30,
              
              
              September
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009Material
      costs
              
              
              42.0
              %
              
              
              53.5
              %
              
              
              43.9
              %
              
              
              56.4
              %Labor
      costs
              
              
              14.3
              %
              
              
              13.2
              %
              
              
              14.4
              %
              
              
              10.5
              %Research
      and development expenses
              
              
              3.1
              %
              
              
              4.3
              %
              
              
              3.6
              %
              
              
              4.6
              %Other
      expenses
              
              
              16.9
              %
              
              
              20.7
              %
              
              
              17.4
              %
              
              
              17.9
              %Total
      cost of sales
              
              
              76.3
              %
              
              
              91.7
              %
              
              
              79.3
              %
              
              
              89.4
              %
  26


The decrease in material costs as a
percentage of consolidated net sales in 2010 resulted from a shift in legacy-Bel
product mix to those products with a lower material content and the addition of
Cinch products, which have a lower average material cost as compared to
legacy-Bel products.  Labor costs as a percentage of consolidated net
sales increased during the nine months ended September 30, 2010 as a result of
training expenses, production inefficiencies and additional overtime charges
associated with the hiring of over 4,000 new production workers over the past 14
months, which was necessary to accommodate the increase in demand for Bel’s
products.  In addition, labor costs for the third quarter of 2010
included the 21% increase in the minimum wage levels in the PRC, as discussed in
“Trends Affecting our Business” above.  The Company also manufactured
a higher volume of its magnetic and interconnect products, in part due to the
addition of Cinch products, during the three and nine months ended September 30,
2010 as compared to the respective periods of 2009, and these product lines have
a higher assembly labor requirement.  While R&D expenses decreased
as a percentage of sales, the dollar amount increased to $2.6 million and $7.9
million, respectively, for the three and nine months ended September 30, 2010 as
compared to $2.0 million and $6.1 million, respectively, for the comparable
periods of 2009, primarily related to the inclusion of Cinch’s R&D expenses
since its acquisition in January 2010.





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





While the percentage relationship of
SG&A expenses to net sales decreased during 2010, the dollar amount of
SG&A expense was higher for both the three and nine months ended September
30, 2010 as compared to the same periods of 2009.  The overall
increase in dollar amount was the result of the following factors (dollars in
thousands):





(Favorable)
      Unfavorable Variances in SG&AThree
      Months Ended
              
              
              Nine
      Month EndedSeptember
      30, 2010 vs. 2009
              
              
              September
      30, 2010 vs. 2009Consolidated
              
              
              Legacy-Bel
                Only
              
              
              Cinch
              
              
              Consolidated
              
              
              Legacy-Bel
                Only
              
              
              CinchSales
      commissions
              
              $
              573
              
              
              $
              397
              
              
              $
              176
              
              
              $
              1,621
              
              
              $
              1,055
              
              
              $
              566Salaries
      and fringes
              
              
              1,149
              
              
              
              74
              
              
              
              1,075
              
              
              
              2,369
              
              
              
              (267
              )
              
              
              2,636Incentive
      compensation
              
              
              1,540
              
              
              
              1,540
              
              
              
              -
              
              
              
              2,132
              
              
              
              2,132
              
              
              
              -Fraud-related
      costs
              
              
              40
              
              
              
              40
              
              
              
              -
              
              
              
              (518
              )
              
              
              (518
              )
              
              
              -Acquisition-related
      costs
              
              
              (44
              )
              
              
              (46
              )
              
              
              2
              
              
              
              207
              
              
              
              149
              
              
              
              58Travel
      expenses
              
              
              244
              
              
              
              146
              
              
              
              98
              
              
              
              642
              
              
              
              409
              
              
              
              233Office
      expenses
              
              
              463
              
              
              
              3
              
              
              
              460
              
              
              
              1,096
              
              
              
              1
              
              
              
              1,095Other
      legal and professional fees
              
              
              38
              
              
              
              (49
              )
              
              
              87
              
              
              
              491
              
              
              
              314
              
              
              
              177Severance
      charges
              
              
              (2
              )
              
              
              (2
              )
              
              
              -
              
              
              
              (208
              )
              
              
              (389
              )
              
              
              181Fair
      value of COLI investments(SG&A
      portion only)
              
              
              88
              
              
              
              88
              
              
              
              -
              
              
              
              (40
              )
              
              
              (40
              )
              
              
              -Other
              
              
              279
              
              
              
              86
              
              
              
              193
              
              
              
              783
              
              
              
              (89
              )
              
              
              872$
              4,368
              
              
              $
              2,277
              
              
              $
              2,091
              
              
              $
              8,575
              
              
              $
              2,757
              
              
              $
              5,818


As Cinch SG&A expenses have been
included in Bel’s results only since the Acquisition Date, 100% of such Cinch
expenses are included in the variances above.  The variances in the
“Legacy-Bel Only” column above show an increase in sales commissions due to an
increase in Bel sales as compared to the comparable periods of 2009, a bonus
accrual based upon financial results in 2010, acquisition-related costs
associated with the acquisition of Cinch, and increased legal fees related to
patent litigation, offset by a reduction in salaries and fringes due to
headcount reductions.





Impairment of
Goodwill





During the third quarter of 2009, the
Company performed an interim valuation of the Company’s goodwill.  In
connection with this analysis, it was determined that the goodwill associated
with the Company’s Asia operating segment was impaired, primarily due to a
reduction in estimated future cash flows.  The Company recorded a
$12.9 million charge within its Asia operating segment related to this
impairment, which is reflected in the Company’s operating results for the three
and nine months ended September 30, 2009.


27





Gain on Sale of
Investments





During
the three and nine months ended September 30, 2009, the Company realized a gain
on sale of investments in the amount of $0.7 and $1.7 million, respectively,
primarily related to the sale of Power-One Inc. common
stock.





Restructuring
Charges





In connection with the closure of the
Company’s Westborough, Massachusetts facility in December 2008, the Company
incurred $0.1 million of termination benefit charges and $0.3 million related to
its facility lease obligation during the nine months ended September 30,
2009.





Gain on Sale of Property,
Plant and Equipment





During the third quarter of 2010, the
Company sold property in Hong Kong at a gain of $0.4 million.  During
the nine months ended September 30, 2009, the Company realized a
previously-deferred gain from the sale of property in Jersey City, New Jersey in
the amount of $4.6 million.





(Benefit) Provision for
Income Taxes





The benefit from income taxes for the
three months ended September 30, 2010 was $0.5 million compared to a benefit of
$4.4 million for the three months ended September 30, 2009.  The
Company incurred a profit before income taxes for the three months ended
September 30, 2010 versus a loss for the three months ended September 30, 2009,
which resulted in $24.6 million higher earnings before income taxes during the
three months ended September 30, 2010 compared to the three months ended
September 30, 2009.  The Company’s effective tax rate, the income tax
provision or benefit as a percentage of income or loss before provision or
benefit for income taxes, was (5.1)% and 29.2% for the three months ended
September 30, 2010 and September 30, 2009, respectively.  The
Company’s effective tax rate will fluctuate based on the geographic segment in
which the pretax profits are earned.  Of the geographic segments in
which the Company operates, the U.S. has the highest tax rates; Europe’s tax
rates are generally lower than U.S. tax rates; and Asia has the lowest tax
rates.  The decrease in the effective tax benefit for the three months
ended September 30, 2010 compared to the three months ended September 30, 2009
is principally attributable to higher earnings in all geographic segments during
the three months ended September 30, 2010 as compared to the same period in
2009. This was offset, in part, by the expiration of certain statutes of
limitations which resulted in a reversal of a previously recognized liability
for uncertain tax positions in the amount of $1.8 million offset in part by an
increase in the liability for uncertain tax positions in the amount of $0.6
million during the quarter ended September 30, 2010.  During the
quarter ended September 30, 2009, certain statutes of limitations expired which
resulted in a reversal of a previously recognized liability for uncertain tax
positions in the amount of $3.9 million offset, in part, by an increase in the
liability for uncertain tax positions in the amount of $0.9
million.  Additionally, the Company settled a lawsuit during the
quarter ended September 30, 2009 which resulted in a tax benefit of $0.8
million.




28




The
provision for income taxes for the nine months ended September 30, 2010 was $0.7
million compared to a tax benefit of $3.2 million for the nine months ended
September 30, 2009.  The Company incurred a profit before income taxes
for the nine months ended September 30, 2010 versus a loss for the nine months
ended September 30, 2009 which resulted in $29.8 million higher earnings before
income taxes during the nine months ended September 30, 2010 compared to the
nine months ended September 30, 2009.  The Company’s effective tax
rate, the income tax provision (benefit) as a percentage of earnings (loss)
before provision (benefit) from income taxes, was 4.5% and 22.2% for the nine
months ended September 30, 2010 and September 30, 2009,
respectively.  The Company’s effective tax rate will fluctuate based
on the geographic segment in which the pretax profits are earned, as discussed
above.  The increase in the effective tax rate during the nine months
ended September 30, 2010 as compared to the nine months ended September 30, 2009
is principally attributable to higher earnings before taxes in all geographic
segments during the nine months ended September 30, 2010 as compared to losses
(or very modest earnings) in all geographic segments during the same period in
2009.  During the nine months ended September 30, 2010, certain
statutes of limitations expired which resulted in a reversal of a previously
recognized liability for uncertain tax positions in the amount of $1.8
million.  This was offset, in part, by an increase in the liability
for uncertain tax positions in the amount of $1.1 million during the nine months
ended September 30, 2010.  During the quarter ended September 30,
2009, certain statutes of limitations expired which resulted in a reversal of a
previously recognized liability for uncertain tax positions in the amount of
$3.9 million offset, in part, by an increase in the liability for uncertain tax
positions in the amount of $0.9 million.  Additionally, the Company
settled a lawsuit during the quarter ended September 30, 2009 which resulted in
a tax benefit of $0.8 million.  The tax benefit was also affected by a
gain on the sale of property in North America during the nine months ended
September 30, 2009.




Liquidity and Capital
Resources





Historically, the Company has financed
its capital expenditures primarily through cash flows from operating activities
and has financed acquisitions both through cash flows from operating activities
and borrowings.  Management believes that the cash flow from
operations after payments of dividends combined with its existing capital base
and the Company's available lines of credit will be sufficient to fund its
operations for at least the next twelve months.  Such statement
constitutes a Forward Looking Statement.  Factors which could cause
the Company to require additional capital include, among other things, a
softening in the demand for the Company’s existing products, an inability to
respond to customer demand for new products, potential acquisitions of
businesses requiring substantial capital, future expansion of the Company's
operations and net losses that would result in net cash being used in operating,
investing and/or financing activities which result in net decreases in cash and
cash equivalents.  Net losses may result in the loss of domestic and
foreign credit facilities and preclude the Company from raising debt or equity
financing in the capital markets on affordable terms or otherwise.





The Company has an unsecured credit
agreement in the amount of $20 million, which expires on June 30,
2011.  There have not been any borrowings under the credit agreement
during 2010 or 2009 and, as such, there was no balance outstanding as of
September 30, 2010 or December 31, 2009.  At those dates, the entire
$20 million line of credit was available to the Company to
borrow.  The credit agreement bears interest at LIBOR plus 0.75% to
1.25% based on certain financial statement ratios maintained by the
Company.  The Company is in compliance with its debt covenants as of
September 30, 2010.





The Company has $0.4 million and $0.3
million of restricted cash at September 30, 2010 and December 31, 2009,
respectively.  This primarily relates to a standby letter of credit
established with the State of New Jersey in July 2009 as a performance guarantee
related to environmental cleanup associated with the Jersey City, New Jersey
property sale.  In connection with this agreement, the Company has a
compensating balance of $0.3 million which has been classified as restricted
cash as of September 30, 2010 and December 31, 2009.




29





On January 29, 2010, the Company
completed its acquisition of 100% of the issued and outstanding capital stock of
Cinch Connectors, Inc., Cinch Connectors de Mexico, S.A. de C.V. and Cinch
Connectors Ltd. from Safran S.A.  As of September 30, 2010, Bel paid
$39.7 million in cash and assumed an additional $0.8 million of expenses in
exchange for the net assets acquired.  The transaction was funded with
cash on hand.  Cinch is headquartered in Lombard, Illinois and has
manufacturing facilities in Vinita, Oklahoma; Reynosa, Mexico; and Worksop,
England. In connection with this acquisition, the Company incurred $0.3 million
in acquisition-related costs (included in selling, general and administrative
expenses) and $0.8 million of inventory-related purchase accounting adjustments
(included in cost of sales) during the nine months ended September 30,
2010.





The following table sets forth at
September 30, 2010 the payments due under specific types of contractual
obligations, aggregated by category of contractual obligation, for the time
periods described below.  The Company had outstanding purchase orders
related to raw materials in the amount of $35.3 and $19.9 million at September
30, 2010 and December 31, 2009, respectively.  Of the $15.4 million
increase, the addition of Cinch commitments accounts for $5.8 million and the
remaining $9.6 million increase relates to new purchase orders of raw materials
to accommodate the increased demand for Bel’s products.  The Company
also had outstanding purchase orders related to capital expenditures in the
amount of $1.8 million and $1.4 million at September 30, 2010 and December 31,
2009, respectively. This table excludes liabilities recorded relative to
uncertain income tax positions, amounting to $1.0 million included in income
taxes payable and $3.0 million included in liability for uncertain tax
positions, as of September 30, 2010, as the Company is unable to make reasonable
reliable estimates of the period of cash settlements, if any, with the
respective taxing authorities.





Payments
      due by period (dollars in thousands)Contractual Obligations
              
              Total
              
              
              Less
      than
                1
      year
              
              
              1-3
                years
              
              
              3-5
                years
              
              
              More
      than
                5
      yearsCapital
      expenditure obligations
              
              $
              1,837
              
              
              $
              1,837
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Operating
      leases
              
              
              8,942
              
              
              
              2,785
              
              
              
              4,031
              
              
              
              1,949
              
              
              
              177Raw
      material purchase obligations
              
              
              35,317
              
              
              
              35,300
              
              
              
              17
              
              
              
              -
              
              
              
              -Total
              
              $
              46,096
              
              
              $
              39,922
              
              
              $
              4,048
              
              
              $
              1,949
              
              
              $
              177




Cash
Flows





During the nine months ended September
30, 2010, the Company's cash and cash equivalents decreased by $47.8 million.
This resulted primarily from $40.4 million paid in connection with the
acquisition of Cinch, $1.5 million for the purchase of property, plant and
equipment, $1.2 million for the purchase of marketable securities, $1.6 million
for the purchase of COLI, $2.3 million for payments of dividends, and $1.3
million used in operating activities, offset by $0.6 million of proceeds from
the sale of property, plant and equipment.  During the nine months
ended September 30, 2009, the Company had cash provided by operating activities
of $31.8 million as compared to cash used in operating activities of $1.3
million for the nine months ended September 30, 2010.  This $33.1
million reduction in operating cash flow related primarily to the significant
fluctuations in accounts receivable and inventory levels in both 2009 and 2010,
as customer demand and the related manufacturing and sales volumes
fluctuated.  In 2009, customer demand for Bel’s products was down,
which resulted in decreased accounts receivable and inventory levels during
2009.  With demand recovering during the latter part of 2009 and into
2010, inventory levels have increased as Bel is purchasing raw materials and
increasing its manufacturing accordingly.




30





Cash and cash equivalents, marketable
securities, short-term investments and accounts receivable comprised
approximately 48.6% and 64.7% of the Company's total assets at September 30,
2010 and December 31, 2009, respectively. The Company's current ratio (i.e., the
ratio of current assets to current liabilities) was 4.8 to 1 and 7.0 to 1 at
September 30, 2010 and December 31, 2009, respectively.





Item
3. Quantitative
and Qualitative Disclosures About Market Risk





The Company is exposed to market risk
primarily from changes in foreign currency exchange rates. There have not been
any material changes with regard to market risk during the nine months ended
September 30, 2010.  Refer to Item 7A, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2009 for further
discussion of market risks.




Item
4. Controls and
Procedures





Disclosure controls and
procedures  As of the end of the Company’s most recently
completed fiscal quarter covered by this report, the Company carried out an
evaluation, with the participation of the Company’s management, including the
Company’s Chief Executive Officer and Vice President of Finance, of the
effectiveness of the Company’s disclosure controls and procedures pursuant to
Securities Exchange Act Rule 13a-15.  Based on that evaluation, the
Company’s Chief Executive Officer and Vice President of Finance concluded that
the Company’s disclosure controls and procedures were effective as of the end of
the period covered by this report.





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


31





PART II.
Other Information





Item 1.
Legal
Proceedings





The
Company is, from time to time, a party to litigation arising in the normal
course of its business, including various claims of patent
infringement.  See the Company’s Annual Report on Form 10-K for the
year ended December 31, 2009 for the details of Bel’s material pending
lawsuits.  Updates to pending lawsuits since the Company’s Form 10-K
filing are described below.





Cinch, a
wholly-owned subsidiary of the Company, was a defendant in a lawsuit captioned
Engelbrecht v. Motorola, et. al. brought in the Circuit Court of
the State of Oregon for the County of Douglas (the “Complaint”) on January 10,
2010.  With respect to this action, the plaintiff claimed that Cinch was
engaged in the manufacture and sale of asbestos-containing radio components
which allegedly caused him to sustain personal injuries due to his exposure
to asbestos.  Cinch filed an answer to the Complaint, denying any legal
liability or fault for the damages alleged in the Complaint, and affirmatively
pleaded, among other defenses, that the plaintiff's alleged damages, if
any, were caused by persons for whom Cinch is not
responsible.  Cinch was dismissed as a party to this case through a
limited judgment of dismissal which was filed by the Douglas County Circuit
Court on July 19, 2010.





The
Company is a defendant in a lawsuit captioned Synqor, Inc. v. Artesyn
Technologies, Inc., Astec America, Inc., Emerson Network Power, Inc., Emerson
Electric Co., Bel Fuse Inc., Cherokee International Corp., Delta Electronics,
Inc., Delta Products Corp., Murata Electronics North America, Inc., Murata
Manufacturing Co., Ltd., Power-One, Inc., Tyco Electronics Corp. and Tyco
Electronics Ltd. brought in the United States District Court, Eastern District
of Texas in November 2007.  With respect to the Company, the plaintiff
claims that the Company infringed its patents covering certain power products.
Synqor is seeking an unspecified amount of damages.  The Company filed
an Answer to Synqor’s complaint, denying the allegations of infringement and
asserting invalidity of Synqor’s patents.  In October 2010 the Company
attended a court ordered mediation related to this case; however, a settlement
was not reached.  A trial date for this case has been set for December
2010.





The
Company is a plaintiff in a lawsuit captioned Bel Fuse Inc.  v. Halo
Electronics, Inc. brought in the United States District Court of New Jersey
during June 2007.  The Company claims that Halo has infringed a patent
covering certain integrated connector modules made by Halo.  The
Company is seeking an unspecified amount of damages plus interest, costs and
attorney fees.  A trial date for this case has been set for March 14,
2011.





The
Company cannot predict the outcome of its unresolved legal proceedings; however,
management believes that the ultimate resolution of these matters will not have
a material impact on the Company’s consolidated financial condition or results
of operations.  As of September 30, 2010, no amounts have been accrued
in connection with contingencies related to these lawsuits, as the amounts are
not estimable.




32





Item
6.  Exhibits





(a)
Exhibits:




31.1
              
              Certification
      of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-
      Oxley Act of 200231.2
              
              Certification
      of the Vice President of Finance pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              
              Certification
      of the Chief Executive Officer pursuant to Section 906 of the Sarbanes -
      Oxley Act of 2002.32.2
              
              Certification
      of the Vice President of Finance pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.




33





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.By:
              /s/
      Daniel BernsteinDaniel
      Bernstein, President and
                Chief
      Executive Officer
  By:
              /s/ Colin
      DunnColin
      Dunn, Vice President of Finance





Dated:
November 5, 2010




34





EXHIBIT
INDEX





Exhibit
31.1 - Certification of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.





Exhibit
31.2 - Certification of the Vice President of Finance pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.





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





Exhibit
32.2 - Certification of the Vice President of Finance pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.




35