U.S.
SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
  xQuarterly
      Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of
      1934For the Quarter Ended March 31,
      2005o Transition Report Pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of
      1934For the transition period
      from ________ to ________
 
 Commission
File Number 0-11676
 
 BEL FUSE
INC.
 (Exact
name of registrant as specified in its charter)
  New
      Jersey
    22-1463699(State
      or other jurisdiction of
    (I.R.S.
      Employerincorporation
      or organization)
    Identification
      No.)
 206 Van
Vorst Street, Jersey City, New Jersey 07302
 (201)
432-0463
 (Address
and telephone number, including area code, of registrant's principal executive
office)
 
 Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 
 Yes x No o
 
 Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Securities Exchange Act of 1934)
  Yes x No o
 
 At April
30, 2005, there were 2,702,677 shares of Class A Common Stock, $.10 par value,
outstanding and 8,775,089 shares of Class B Common Stock, $.10 par value,
outstanding.
  
 BEL
      FUSE INC.INDEXPagePart
      I
    
    Financial
      InformationItem
      1.
    Financial
      Statements
    1Consolidated
      Balance Sheets as of March 31, 2005(unaudited)
      and December 31, 2004
    2-3Consolidated
      Statements of Operations for theThree
      Months Ended March 31, 2005 and2004
      (unaudited)
    4Consolidated
      Statements of Stockholders' Equityfor
      the Years Ended December 31, 2004 and 2003 andthe
      Three Months Ended March 31, 2005 (unaudited)
    5-6Consolidated
      Statements of Cash Flows for the ThreeMonths
      Ended March 31, 2005 and 2004 (unaudited)
    7-9Notes
      to Consolidated Financial Statements (unaudited)
    10-25Item
      2.
    Management's
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
    26-41Item
      3.
    Quantitative
      and Qualitative Disclosures AboutMarket
      Risk
    41Item
      4.
    Controls
      and Procedures
    42Part
      II
    Other
      InformationItem
      1.
    Legal
      Proceedings
    43Item
      6.
    Exhibits
    44Signatures
    
    45
 
 
 PART I.  Financial
Information
 
 Item
1.  Financial
Statements
 
 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 consolidated financial statements pursuant to the
rules and regulations of the Securities and Exchange Commission. It is suggested
that the following consolidated financial statements 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,
2004.
 
 The
results of operations for the three months ended March 31, 2005 and 2004 are not
necessarily indicative of the results for the entire fiscal year or for any
other period.
 
 1
  **BEL
      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
      BALANCE SHEETS**March
      31,
    
    December
      31,2005
    
    2004(Unaudited)**ASSETS**Current
      Assets:Cash
      and cash equivalents
    
    $
    70,086,287
    
    $
    71,197,891Marketable
      securities
    
    
    18,470,549
    
    
    23,120,028Accounts
      receivable - less allowance for doubtfulaccounts
      of $1,766,000 and $1,610,000 as atMarch
      31, 2005 and December 31, 2004, respectively
    
    
    33,919,726
    
    
    33,247,911Inventories
    
    
    30,880,340
    
    
    29,101,060Prepaid
      expenses and other currentassets
    
    
    2,632,768
    
    
    2,404,718Assets
      for sale
    
    
    754,397
    
    
    696,013Total
      Current Assets
    
    
    156,744,067
    
    
    159,767,621Property,
      plant and equipment - net
    
    
    41,446,202
    
    
    41,244,759Intangible
      assets - net
    
    
    4,491,993
    
    
    2,691,682Goodwill
    
    
    22,483,054
    
    
    9,881,854Prepaid
      pension costs
    
    
    1,127,941
    
    
    1,127,941Other
      assets
    
    
    1,962,559
    
    
    3,062,714TOTAL
      ASSETS
    
    $
    228,255,816
    
    $
    217,776,571
 2
 
 **BEL
      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
      BALANCE SHEETS**March
      31,
    
    December
      31,2005
    
    2004(Unaudited)**LIABILITIES
      AND STOCKHOLDERS' EQUITY**Current
      Liabilities:Current
      portion of long-term debt
    
    $
    2,000,000
    
    $
    2,000,000Short-term
      debt
    
    
    8,000,000
    
    
    -Accounts
      payable
    
    
    14,477,652
    
    
    8,814,161Accrued
      expenses
    
    
    8,339,822
    
    
    10,293,576Deferred
      income taxes
    
    
    970,000
    
    
    3,322,000Income
      taxes payable
    
    
    7,153,751
    
    
    7,172,955Dividends
      payable
    
    
    544,000
    
    
    541,000Total
      Current Liabilities
    
    
    41,485,225
    
    
    32,143,692Long-term
      Liabilities:Minimum
      pension obligation
    
    
    2,481,583
    
    
    2,261,583Long-term
      debt - net of current portion
    
    
    4,000,000
    
    
    4,500,000Deferred
      income taxes
    
    
    532,000
    
    
    410,000Total
      Long-term Liabilities
    
    
    7,013,583
    
    
    7,171,583Total
      Liabilities
    
    
    48,498,808
    
    
    39,315,275Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock, no par value,authorized
      1,000,000 shares;none
      issued
    
    
    -
    
    
    -Class
      A common stock, par value$.10
      per share - authorized10,000,000
      shares; outstanding2,702,677
      and 2,702,677 shares, respectively(net
      of 1,072,770 treasury shares)
    
    
    270,268
    
    
    270,268Class
      B common stock, par value$.10
      per share - authorized30,000,000
      shares; outstanding 8,703,089and
      8,660,589 shares, respectively(net
      of 3,218,310 treasury shares)
    
    
    870,309
    
    
    866,059Additional
      paid-in capital
    
    
    22,877,540
    
    
    21,989,174Retained
      earnings
    
    
    153,718,648
    
    
    149,949,283Accumulated
      other comprehensiveincome
    
    
    2,020,243
    
    
    5,386,512Total
      Stockholders' Equity
    
    
    179,757,008
    
    
    178,461,296TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      EQUITY
    
    $
    228,255,816
    
    $
    217,776,571
 3
 
 **BEL
      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
      STATEMENTS OF OPERATIONS****(Unaudited)**Three
      Months EndedMarch
      31,2005
    
    2004Net
      Sales
    
    $
    45,438,285
    
    $
    42,357,023Costs
      and expenses:Cost
      of sales
    
    
    32,688,811
    
    
    29,791,014Selling,
      general and administrative
    
    
    7,221,303
    
    
    6,950,87239,910,114
    
    
    36,741,886Income
      from operations
    
    
    5,528,171
    
    
    5,615,137Interest
      expense
    
    
    (67,150
    )
    
    (56,766
    )Interest
      income
    
    
    225,344
    
    
    104,360Earnings
      before provision for income taxes
    
    
    5,686,365
    
    
    5,662,731Income
      tax provision
    
    
    1,373,000
    
    
    1,008,000Net
      earnings
    
    $
    4,313,365
    
    $
    4,654,731Earnings
      per common share - basic
    
    $
    0.38
    
    $
    0.42Earnings
      per common share - diluted
    
    $
    0.38
    
    $
    0.41Weighted
      average common sharesoutstanding
      - basic
    
    
    11,371,677
    
    
    11,203,536Weighted
      average common sharesoutstanding
      - diluted
    
    
    11,507,499
    
    
    11,454,606
 4
 **BEL
      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY**CumulativeOtherCompre-
    
    
    
    Compre-
    
    Class
      A
    
    Class
      B
    
    Additionalhensive
    
    Retained
    
    hensive
    
    Common
    
    Common
    
    Paid-InTotal
    
    Income
      (loss)
    
    Earnings
    
    Income
      (loss)
    
    Stock
    
    Stock
    
    CapitalBalance,
      January 1, 2003
    
    $
    130,659,147
    
    
    
    
    $
    115,632,819
    
    $
    (50,132
    )
    $
    267,623
    
    $
    826,149
    
    $
    13,982,688Exercise
      of stockoptions
    
    
    2,580,224
    
    
    
    
    
    
    
    
    
    
    
    2,544
    
    
    19,920
    
    
    2,557,760Tax
      benefits arisingfrom
      the disposition ofnon-qualifiedincentive
      stock options
    
    
    812,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    812,000Cash
      dividends on Class Acommon
      stock
    
    
    (322,234
    )
    
    
    
    
    (322,234
    )Cash
      dividends on Class Bcommon
      stock
    
    
    (1,667,586
    )
    
    
    
    
    (1,667,586
    )Currency
      translationadjustment
      - net of taxes
    
    
    1,014,808
    
    $
    1,014,808
    
    
    
    
    
    1,014,808Increase
      in unrealized gain onmarketable
      securities-net of taxes
    
    
    14,900
    
    
    14,900
    
    
    
    
    
    14,900Net
      earnings
    
    
    13,763,694
    
    
    13,763,694
    
    
    13,763,694Comprehensive
      income
    
    
    
    
    $
    14,793,402Balance,
      December 31, 2003
    
    
    146,854,953
    
    
    
    
    
    127,406,693
    
    
    979,576
    
    
    270,167
    
    
    846,069
    
    
    17,352,448Exercise
      of stockoptions
    
    
    3,891,266
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    19,990
    
    
    3,871,175Tax
      benefits arisingfrom
      the disposition ofnon-qualifiedincentive
      stock options
    
    
    765,551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    765,551Cash
      dividends on Class Acommon
      stock
    
    
    (430,707
    )
    
    
    
    
    (430,707
    )Cash
      dividends on Class Bcommon
      stock
    
    
    (1,748,292
    )
    
    
    
    
    (1,748,292
    )Currency
      translationadjustment
      - net of taxes
    
    
    386,257
    
    $
    386,257
    
    
    
    
    
    386,257Increase
      in unrealized gain onmarketable
      securities-net of taxes
    
    
    4,020,679
    
    
    4,020,679
    
    
    
    
    
    4,020,679Net
      earnings
    
    
    24,721,589
    
    
    24,721,589
    
    
    24,721,589Comprehensive
      income
    
    
    
    
    $
    29,128,525Balance,
      December 31, 2004
    
    
    178,461,296
    
    
    
    
    
    149,949,283
    
    
    5,386,512
    
    
    270,268
    
    
    866,059
    
    
    21,989,174

See notes to unaudited consolidated financial
statements
5
 **BEL
      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY**CumulativeOtherCompre-
    
    
    
    Compre-
    
    Class
      A
    
    Class
      B
    
    Additionalhensive
    
    Retained
    
    hensive
    
    Common
    
    Common
    
    Paid-InTotal
    
    Income
      (loss)
    
    Earnings
    
    Income
      (loss)
    
    Stock
    
    Stock
    
    CapitalExercise
      of stockoptions
    
    
    776,900
    
    
    
    
    
    
    
    
    
    
    
    -
    
    
    4,250
    
    
    772,650Tax
      benefits arisingfrom
      the disposition ofnon-qualifiedincentive
      stock options
    
    
    115,716
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,716Cash
      dividends on Class Acommon
      stock
    
    
    (107,000
    )
    
    
    
    
    (107,000
    )Cash
      dividends on Class Bcommon
      stock
    
    
    (437,000
    )
    
    
    
    
    (437,000
    )Currency
      translationadjustment
      - net of taxes
    
    
    (190,527
    )
    $
    (190,527
    )
    
    
    
    
    (190,527
    )Decrease
      in unrealized gain onmarketable
      securities-net of taxes
    
    
    (3,175,742
    )
    
    (3,175,742
    )
    
    
    
    
    (3,175,742
    )Net
      earnings
    
    
    4,313,365
    
    
    4,313,365
    
    
    4,313,365Comprehensive
      income
    
    
    
    
    $
    947,096Balance,
      March 31, 2005
    
    $
    179,757,008
    
    
    
    
    $
    153,718,648
    
    $
    2,020,243
    
    $
    270,268
    
    $
    870,309
    
    $
    22,877,540
 6
 **BEL
      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
      STATEMENTS OF CASH FLOWS****(Unaudited)**Three
      Months EndedMarch
      31,2005
    
    2004Cash
      flows from operatingactivities:Net
      earnings
    
    $
    4,313,365
    
    $
    4,654,731Adjustments
      to reconcile netearnings
      to net cash providedby
      operating activities:Depreciation
      and amortization
    
    
    2,039,027
    
    
    2,231,510Other
    
    
    335,716
    
    
    190,000Deferred
      income taxes
    
    
    (118,000
    )
    
    219,000Changes
      in operating assetsand
      liabilities (net of acquisitions)
    
    
    5,844,168
    
    
    1,247,516Net
      Cash Provided byOperating
      Activities
    
    
    12,414,276
    
    
    8,542,757Cash
      flows from investing activities:Purchase
      of property, plantand
      equipment
    
    
    (824,843
    )
    
    (672,388
    )Purchase
      of marketablesecurities
    
    
    (643,424
    )
    
    (646,445
    )Payment
      for acquisitions - net ofcash
      acquired
    
    
    (18,803,978
    )
    
    (74,539
    )Proceeds
      from repaymentby
      contractors
    
    
    -
    
    
    7,250Net
      Cash Used InInvesting
      Activities
    
    
    (20,272,245
    )
    
    (1,386,122
    )See notes to unaudited consolidated financial
statements

7

**BEL
      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)****(Unaudited)**Three
      Months EndedMarch
      31,2005
    
    2004Cash
      flows from financingactivities:Proceeds
      from borrowings
    
    
    8,000,000
    
    
    -Loan
      repayments
    
    
    (1,360,694
    )
    
    (500,000
    )Proceeds
      from exercise ofstock
      options
    
    
    776,900
    
    
    1,146,498Dividends
      paid to commonshareholders
    
    
    (541,000
    )
    
    (530,000
    )Net
      Cash Provided ByFinancing
      Activities
    
    
    6,875,206
    
    
    116,498Effect
      of exchange rate changes on cash
    
    
    (128,841
    )
    
    (47,660
    )Net
      Increase (Decrease) inCash
      and Cash Equivalents
    
    
    (1,111,604
    )
    
    7,225,473Cash
      and Cash Equivalents-
      beginning of period
    
    
    71,197,891
    
    
    57,461,152Cash
      and Cash Equivalents-
      end of period
    
    $
    70,086,287
    
    $
    64,686,625Changes
      in operating assetsand
      liabilities (net of acquisitions) consist of:Decrease
      in accounts receivable
    
    $
    2,586,069
    
    $
    766,031Decrease
      in inventories
    
    
    799,766
    
    
    155,746Increase
      in prepaidexpenses
      and othercurrent
      assets
    
    
    (160,393
    )
    
    (554,873
    )Decrease
      in other assets
    
    
    124,490
    
    
    23,609Increase
      in accounts payable
    
    
    3,780,810
    
    
    1,004,960Increase
      (decrease) in income taxes payable
    
    
    (20,288
    )
    
    444,827Decrease
      in accrued expenses
    
    
    (1,266,286
    )
    
    (592,784
    )$
    5,844,168
    
    $
    1,247,516
See notes to unaudited consolidated financial
statements

8
**BEL
      FUSE INC. AND SUBSIDIARIES****CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Concluded)****(Unaudited)**Three
      Months EndedMarch
      31,2005
    
    2004Supplementary
      information:Cash
      paid during the three months for:Income
      taxes
    
    
    
    
    $
    1,296,000
    
    $
    269,000Interest
    
    
    
    
    $
    67,000
    
    $
    56,000Details
      of acquisitions:Fair
      value of assetsacquired
      (excluding cash of $92,702in
      2005)
    
    
    
    
    $
    4,088,383
    
    $
    -Intangibles
    
    
    
    
    
    2,114,395
    
    
    74,539Goodwill
    
    
    
    
    
    12,601,200
    
    
    -Cash
      paid for acquisitions
    
    
    
    
    $
    18,803,978
    
    $
    74,539
See notes to unaudited consolidated financial
statements

9
 BEL FUSE
INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  1.
    BASIS
      OF PRESENTATION AND ACCOUNTING POLICIES
  The
consolidated balance sheet as of March 31, 2005, and the consolidated statements
of operations 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 and
cash flows for all periods presented have been made. The information for the
consolidated balance sheet as of December 31, 2004 was derived from audited
financial statements.
 
 Accounting
Policies
  DESCRIPTION
OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Bel
Fuse Inc. and subsidiaries operate in one industry with three geographic
reporting segments and are engaged in the design, manufacture and sale of
products used in local area networking, telecommunication, business equipment
and consumer electronic applications. The Company manages its operations
geographically through its three reporting units: North America, Asia and
Europe. Sales are predominantly in North America, Europe and Asia.
  PRINCIPLES
OF CONSOLIDATION - The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries including the businesses acquired since their
respective dates of acquisition. All intercompany transactions and balances have
been eliminated.
 
 USE OF
ESTIMATES - The
preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
 
 CASH
EQUIVALENTS - Cash
equivalents include short-term investments in U.S. treasury bills and commercial
paper with an original maturity of three months or less when purchased. At March
31, 2005 and December 31, 2004, cash equivalents approximated $31,782,000 and
$38,355,000, respectively.
 
 MARKETABLE
SECURITIES - The
Company classifies its equity securities as "available for sale", and
accordingly, reflects unrealized gains and losses, net of deferred income taxes,
as other comprehensive income.
 
 The fair
values of marketable securities are based on quoted market prices. Realized
gains or losses from the sale of marketable securities are based on the specific
identification method.
  10
 
 ACQUISITION
EXPENSES - The
Company capitalizes all direct costs associated with proposed acquisitions. If
the proposed acquisitions are consummated, such costs will be included as a
component of the overall cost of the acquisition. Such costs are expensed at
such time as the Company deems the consummation of a proposed acquisition to be
unsuccessful.
 
 FOREIGN
CURRENCY TRANSLATION - The
functional currency for some foreign operations is the local currency. Assets
and liabilities of foreign operations are translated at balance sheet date rates
of exchange and income, expense and cash flow items are translated at the
average exchange rate for the period. Translation adjustments are recorded in
Other Comprehensive Income. The U.S. Dollar is used as the functional currency
for certain foreign operations that conduct their business in U.S. Dollars. A
combination of current and historical exchange rates is used in measuring the
local currency transactions of these subsidiaries and the resulting exchange
adjustments are included in the statement of operations. Current exchange rates
are used for all foreign subsidiaries except for two subsidiaries in the Far
East which use both current and historical exchange rates. Realized foreign
currency (gains) losses were $(83,000) and $42,000 for the three months ended
March 31, 2005 and 2004, respectively, and are included in Selling, General and
Administrative expenses in the consolidated statement of operations.
 
 
 CONCENTRATION
OF CREDIT RISK - Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of accounts receivable and temporary cash investments.
The Company grants credit to customers that are primarily original equipment
manufacturers and to subcontractors of original equipment manufacturers based on
an evaluation of the customer's financial condition, without requiring
collateral. Exposure to losses on receivables is principally dependent on each
customer's financial condition. The Company controls its exposure to credit risk
through credit approvals, credit limits and monitoring procedures and
establishes allowances for anticipated losses.
 
 The
Company places its temporary cash investments with quality financial
institutions and commercial issuers of short-term paper and, by policy, limits
the amount of credit exposure in any one financial instrument.
 
 INVENTORIES
- Inventories
are stated at the lower of weighted average cost or market.
 
 REVENUE
RECOGNITION - The
Company recognizes revenue in accordance with the guidance contained in SEC
Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements"
("SAB 104"). Revenue is recognized when the product has been delivered and title
and risk of loss has passed to the customer, collection of the resulting
receivable is deemed probable by management, persuasive evidence of an
arrangement exists and the sales price is fixed and determinable. Substantially
all of the Company's shipments are FCA (free carrier) which provides for title
to pass upon delivery to the customer's freight carrier. Some product is shipped
DDP/DDU with title passing when the product arrives at the customer's
dock.
  11
 For
certain customers, the Company provides consigned inventory, either at the
customer’s facility or at a third party warehouse. Sales of consigned inventory
are recorded when the customer withdraws inventory from consignment **.**
 
 The
Company typically has a twelve-month warranty policy for workmanship defects.
Warranty returns have historically averaged at or below 1% of annual net sales.
The Company establishes warranty reserves when a warranty issue becomes known as
warranty claims have historically been immaterial. No general reserves for
warranties have been established.
 
 The
Company is not contractually obligated to accept returns except for defective
product or in instances where the product does not meet the customer's quality
specifications. However, the Company may permit its customers to return product
for other reasons. In these instances, the Company would generally require a
significant cancellation penalty payment by the customer. The Company estimates
such returns, where applicable, based upon management's evaluation of historical
experience, market acceptance of products produced and known negotiations with
customers. Such estimates are deducted from gross sales and provided for at the
time revenue is recognized.
 
 GOODWILL
AND OTHER INTANGIBLES - The
Company tests goodwill for impairment annually (fourth quarter), using a fair
value approach at the reporting unit level. A reporting unit is an operating
segment or one level below an operating segment for which discrete financial
information is available and reviewed regularly by management. Assets and
liabilities of the Company have been assigned to the reporting units to the
extent that they are employed in or are considered a liability related to the
operations of the reporting unit and were considered in determining the fair
value of the reporting unit.
 
 DEPRECIATION
- Property,
plant and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are calculated primarily using the
declining-balance method for machinery and equipment and the straight-line
method for buildings and improvements over their estimated useful lives.
 
 INCOME
TAXES - The
Company accounts for income taxes using an asset and liability approach under
which deferred income taxes are recognized by applying enacted tax rates
applicable to future years to the differences between the financial statement
carrying amounts and the tax bases of reported assets and
liabilities.
 
 Except
for a portion of foreign earnings, an income tax provision has not been recorded
for U.S. federal income taxes on the undistributed earnings of foreign
subsidiaries as such earnings are intended to be permanently reinvested in those
operations. Such earnings would become taxable upon the sale or liquidation of
these foreign subsidiaries or upon the repatriation of earnings.
  The
principal items giving rise to deferred taxes are unrealized gains on marketable
securities available for sale, the use of accelerated depreciation methods for
machinery and equipment, timing differences between book and tax amortization of
intangible assets and goodwill, the assumed repatriation of a portion of foreign
earnings and certain expenses which have been deducted for financial reporting
purposes which are not currently deductible for income tax purposes.
 
 12
 
 STOCK-OPTION
PLAN - The
Company accounts for equity-based compensation issued to employees in accordance
with Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees". APB No. 25 requires the use of the intrinsic value method,
which measures compensation cost as the excess, if any, of the quoted market
price of the stock at the measurement date over the amount an employee must pay
to acquire the stock. The Company makes disclosures of pro forma net earnings
and earnings per share as if the fair-value-based method of accounting had been
applied as required by SFAS No. 123, "Accounting for Stock-Based Compensation".
 
 The
Company grants stock options with exercise prices at fair market value at the
date of the grant. The Company will continue to account for stock-based employee
compensation under the recognition and measurement principle of APB Opinion No.
25 and related interpretations through December 31, 2005. Thereafter, the
Company will account for stock based compensation under Statement on Financial
Accounting Standards ("SFAS") No. 123 (R), "Share Based Payment" (revised). The
Company is currently evaluating its position and will make its determination to
account for the compensation costs either prospectively or retroactively at the
time of adoption.
 
 The
Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation". Had compensation cost for the Company's stock
option plan been determined based on the fair value at the grant date for awards
in 2005 and 2004 consistent with the provisions of SFAS No. 123, the Company's
net earnings and earnings per share would have been reduced to the pro forma
amounts indicated below:
 March
      31,2005
    
    2004Net
      earnings - as reported
    
    $
    4,313,365
    
    $
    4,654,731Deduct:
      Total stock-basedemployee
      compensation expensedetermined
      under fair value basedmethod
      for all awards
    
    
    160,868
    
    
    309,899Net
      earnings- pro forma
    
    $
    4,152,497
    
    $
    4,344,832Earnings
      per common share -basic-as
      reported
    
    $
    0.38
    
    $
    0.42Earnings
      per common share -basic-pro
      forma
    
    $
    0.37
    
    $
    0.39Earnings
      per common share -diluted-as
      reported
    
    $
    0.37
    
    $
    0.41Earnings
      per common share -diluted-pro
      forma
    
    $
    0.36
    
    $
    0.38
 The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2004: dividends yield of .9%, expected volatility
of 35% for Class B; risk-free interest rate of 5% and expected lives of 5 years.
No options were granted during the three months ended March 31,
2005.
  13
 
 RESEARCH
AND DEVELOPMENT - Research
and development costs are expensed as incurred, and are included in cost of
sales. Generally all research and development is performed internally for the
benefit of the Company. The Company does not perform such activities for others.
Research and development costs include salaries, building maintenance and
utilities, rents, materials, administration costs and miscellaneous other items.
Research and development expenses for the three months ended March 31, 2005 and
2004 amounted to $1.9 million and $1.8 million, respectively.
 
 EVALUATION
OF LONG-LIVED ASSETS - The
Company reviews property and equipment for impairment whenever events or changes
in circumstances indicate the carrying value may not be recoverable in
accordance with guidance in SFAS No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.” If the carrying value of the long-lived asset
exceeds the present value of the related estimated future cash flows, the asset
would be adjusted to its fair value and an impairment loss would be charged to
operations in the period identified.
 EARNINGS
PER SHARE - Basic
earnings per common share are computed by dividing net earnings by the weighted
average number of common shares outstanding during the period. Diluted earnings
per common share are computed by dividing net earnings by the weighted average
number of common shares and potential common shares outstanding during the
period. Potential common shares used in computing diluted earnings per share
relate to stock options and warrants which, if exercised, would have a dilutive
effect on earnings per share.
 
 The
following table includes a reconciliation of shares used in the calculation of
basic and diluted earnings per share:
 Three
      Months EndedMarch
      31,2005
    
    2004Weighted
      average shares outstanding - basic
    
    
    11,371,677
    
    
    11,203,536Dilutive
      impact of options outstanding
    
    
    135,822
    
    
    251,070Weighted
      average shares oustanding - diluted
    
    
    11,507,499
    
    
    11,454,606
 During
the three months ended March 31, 2005 and 2004, respectively, 24,000 and -0-
outstanding options were not included in the foregoing computations because they
were antidilutive.
 
 FAIR
VALUE OF FINANCIAL INSTRUMENTS - For
financial instruments, including cash, accounts receivable, accounts payable and
accrued expenses, it was assumed that the carrying amount approximated fair
value because of the short maturities of such instruments. Interest rates that
are currently available to the Company for issuance of debt with similar terms
and remaining maturities are used to estimate fair value for bank debt.
Management believes that the carrying amount of bank debt is a reasonable
estimate of its fair value.
  14
 
 2.
    ACQUISITION
 
 On March
22, 2005, the Company acquired the common stock of Galaxy Power Inc. ("Galaxy")
for approximately $18.8 million in cash including transaction costs of
approximately $.2 million. Galaxy is a designer and manufacturer of high-density
dc-dc converters for distributed power and telecommunication applications.
Purchase price allocations have been initially estimated by management and are
subject to adjustment. Management is in the process of obtaining independent
valuations and independent formal appraisals and will adjust the purchase price
allocations accordingly.. Management has estimated approximately $12.6 million
of goodwill and $2.0 million of identifiable intangible assets arose from the
transaction. The identifiable intangible assets will be amortized on a straight
line basis over their estimated useful lives..
 
 The
Company expects the purchase of Galaxy’s Power Group to be a logical strategic
fit with Bel’s current Power Products group. The products are highly
complementary with minimal overlap. The customer base is similar but still
affords ample opportunity for cross-selling. While Bel will offer Galaxy a
much-needed cost competitive manufacturing base in
 
 China,
Galaxy brings a portfolio of products and technologies aimed at higher end
markets. In
 addition
to these strategic synergies, the Company expects significant opportunities for
expense reduction and the elimination of redundancies.
 
 The
acquisition has been accounted for using the purchase method of accounting and,
accordingly, the results of operations of Galaxy have been included in the
Company's financial statements from March 23, 2005.
 
 There was
no in-process research and development acquired as part of this
acquisition.
 
 The
following unaudited pro forma summary results of operations assume that Galaxy
had been acquired as of January 1, 2004 (in thousands, except per share
data):
 Three
      Months EndedMarch
      31,2005
    
    2004Net
      sales
    
    $
    49,732
    
    $
    46,515Net
      earnings
    
    
    4,039
    
    
    4,827Earnings
      per share - diluted
    
    
    0.35
    
    
    0.42
 The
information above is not necessarily indicative of the results of operations
that would have occurred if the Galaxy acquisition had been consummated as of
January 1, 2004. Such information should not be construed as a representation of
the future results of operations of the Company.
  15
 
 A
condensed balance sheet of the major assets and liabilities of Galaxy at the
acquisition date is as follows:
 **Cash
    
    $
    92,702Accounts
      receivable
    
    
    3,352,007Inventories
    
    
    2,635,763Prepaid
      expenses
    
    
    90,510Property,
      plant andequipment
    
    
    1,159,391Other
      assets
    
    
    32,083Goodwill
    
    
    12,601,200Intangible
      assets
    
    
    2,000,000Notes
      payable
    
    
    (860,694
    )Accounts
      payable
    
    
    (1,882,681
    )Accrued
      expenses
    
    
    (436,912
    )Income
      taxes payable
    
    
    (1,084
    )Net
      assets acquired
    
    $
    18,782,285**
 
 3.
    GOODWILL
      AND OTHER INTANGIBLES
 
 Goodwill
and intangible assets deemed to have indefinite lives are not amortized, but are
subject to, at a minimum, an annual impairment test which is performed during
the fourth quarter. If the carrying value of goodwill or intangible assets
exceeds its fair market value, an impairment loss would be recorded.
 
 Other
intangibles include patents, product information, covenants not-to-compete and
supply agreements. Amounts assigned to these intangibles have been determined by
management. Management considered a number of factors in determining the
allocations, including valuations and independent appraisals. Other intangibles
are being amortized over 4 to 10 years. Amortization expense was $315,000 and
$284,000 for the three months ended March 31, 2005 and 2004, respectively.
 
 Under the
terms of the E-Power and Current Concepts, Inc. acquisition agreements of May
11, 2001, the Company is required to make contingent purchase price payments up
to an aggregate of $7.6 million should the acquired companies attain specified
sales levels. E-Power will be paid $2.0 million in contingent purchase price
payments when sales, as defined, reach $15.0 million and an additional $4.0
million when sales reach $25.0 million on a cumulative basis through May 2007.
No payments have been required through March 31, 2005 with respect to E-Power.
Current Concepts will be paid 16% of sales, as defined, on the first $10.0
million of sales through May 2007. During the three months ended March 31, 2005
and 2004, the Company paid approximately $114,000 and $75,000, respectively, in
contingent purchase price payments to Current Concepts. The contingent purchase
price payments are accounted for as additional purchase price and as an increase
intangible assets when such payment obligations are incurred.
  16
  The
changes in the carrying value of goodwill classified by geographic reporting
units, net of accumulated amortization, for the three months ended March 31,
2005 and the year ended December 31, 2004 are as follows:
 Total
    
    Asia
    
    North
      America
    
    EuropeBalance,
      January 1, 2004
    
    $
    9,881,854
    
    $
    6,407,435
    
    $
    2,869,092
    
    $
    605,327Goodwill
      allocationrelated
      to acquisitions
    
    
    -
    
    
    -
    
    
    -
    
    
    -Balance,
      December 31, 2004
    
    
    9,881,854
    
    
    6,407,435
    
    
    2,869,092
    
    
    605,327Goodwill
      allocationrelated
      to acquisitions
    
    
    12,601,200
    
    
    -
    
    
    12,601,200
    
    
    -Balance,
      March 31, 2005
    
    $
    22,483,054
    
    $
    6,407,435
    
    $
    15,470,292
    
    $
    605,327
 The
components of intangible assets other than goodwill by geographic reporting unit
are as follows:
 December
      31, 2004Total
    
    Asia
    
    North
      AmericaGross
      Carrying
    
    Accumulated
    
    Gross
      Carrying
    
    Accumulated
    
    Gross
      Carrying
    
    AccumulatedAmount
    
    Amortization
    
    Amount
    
    Amortization
    
    Amount
    
    AmortizationPatents
      and ProductInformation
    
    $
    2,935,000
    
    $
    1,338,765
    
    $
    2,653,000
    
    $
    1,188,654
    
    $
    282,000
    
    $
    150,111Covenants
      not-to-compete
    
    
    3,523,516
    
    
    2,428,069
    
    
    3,523,516
    
    
    2,428,069
    
    
    -
    
    
    -Supply
      agreement
    
    
    2,660,000
    
    
    2,660,000
    
    
    1,409,800
    
    
    1,409,800
    
    
    1,250,200
    
    
    1,250,200$
    9,118,516
    
    $
    6,426,834
    
    $
    7,586,316
    
    $
    5,026,523
    
    $
    1,532,200
    
    $
    1,400,311March
      31, 2005Total
    
    
    Asia
    
    
    North
      AmericaGross
      Carrying
    
    
    Accumulated
    
    
    Gross
      Carrying
    
    
    Accumulated
    
    
    Gross
      Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationPatents
      and ProductInformation
    
    $
    4,935,000
    
    $
    1,457,293
    
    $
    2,653,000
    
    $
    1,300,132
    
    $
    2,282,000
    
    $
    157,161Covenants
      not-to-compete
    
    
    3,637,969
    
    
    2,623,683
    
    
    3,637,969
    
    
    2,623,683
    
    
    -
    
    
    -$
    8,572,969
    
    $
    4,080,976
    
    $
    6,290,969
    
    $
    3,923,815
    
    $
    2,282,000
    
    $
    157,161
 17
 
 Estimated
amortization expense for intangible assets for the next five years is as
follows:
 
 EstimatedYear
      Ending
    
    AmortizationDecember
      31,
    
    Expense2005
    
    $
    1,217,0002006
    
    
    806,0002007
    
    
    417,0002008
    
    
    153,0002009
    
    
    14,000
 
 4.
    MARKETABLE
      SECURITIES
 
 The
Company has acquired a total of 2,037,500 shares of the common stock of Artesyn
Technologies, Inc. (“Artesyn”) at a total purchase price of $16,331,469. These
purchases are reflected on the Company's consolidated statement of cash flows as
purchases of marketable securities and are reflected on the Company's
consolidated balance sheet as marketable securities. As of March 31, 2005, the
Company has recorded an unrealized gain, net of income taxes, of approximately
$1,415,000, which is included in accumulated other comprehensive income as
stated in the Consolidated Statement of Stockholders' Equity. In connection with
this transaction, the Company is obligated to pay an investment banker's
advisory fee to a third party of 20% of the appreciation in the stock of
Artesyn, or $1 million, whichever is lower. As of March 31, 2005, the Company
has accrued a fee in the amount of approximately $283,000. Such amount has been
classified within other assets. The Company has proposed to Artesyn that the
Company acquire Artesyn, but to date Artesyn has not indicated any interest in
negotiating such a transaction with the Company. If the proposed acquisition of
Artesyn is consummated, the fee will be capitalized as part of the acquisition
costs. Such amount will be expensed at such time as the Company deems the
consummation of the proposed acquisition to be unsuccessful.
 
 At March
31, 2005 and December 31, 2004, respectively, marketable securities have a cost
of approximately $17,071,000 and $16,428,000, an estimated fair value of
approximately $18,470,000 and $23,120,000 and gross unrealized gains of
approximately $1,399,000 and $6,692,000. Such unrealized gains are included in
other comprehensive income.
 
 5.
    INVENTORIES
 
 The
components of inventories are as follows:
 March
      31,
    
    December
      31,2005
    
    2004Raw
      material
    
    $
    17,228,703
    
    $
    15,236,393Work
      in progress
    
    
    1,827,821
    
    
    1,607,052Finished
      goods
    
    
    11,823,816
    
    
    12,257,615$
    30,880,340
    
    $
    29,101,060
 18
 
 6.
    Business
      Segment Information
 
 The
Company operates in one industry with three reportable segments. The segments
are geographic and include 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:
 
 Three
      Months EndedMarch
      31,2005
    
    2004Intersegment
      RevenuesNorth
      America
    
    $
    17,960,953
    
    $
    19,613,333Asia
    
    
    31,135,372
    
    
    30,485,269Europe
    
    
    3,998,422
    
    
    3,784,100Total
      intersegment revenues
    
    
    53,094,747
    
    
    53,882,702Reconciling
      items:Intersegment
      revenues
    
    
    (7,656,462
    )
    
    (11,525,679
    )Total
      Consolidated Revenues
    
    $
    45,438,285
    
    $
    42,357,023Income
      from Operations:North
      America
    
    $
    1,284,654
    
    $
    1,384,986Asia
    
    
    4,084,950
    
    
    3,855,152Europe
    
    
    158,567
    
    
    374,999$
    5,528,171
    
    $
    5,615,137
 7.
    DEBT
 
 a.  Short-term
debt
 
 The
Company has one domestic line of credit amounting to $10 million. During March
2005, the Company borrowed $8 million against the line of credit to partially
finance the acquisition of Galaxy. The $10 million line of credit expires on
March 21, 2006 and is in addition to the Company’s $10 million term loan
described below. Borrowings under this $10 million line of credit are secured by
the same assetsthat secure the term loan described below. The line of credit
bears interest at LIBOR plus 1.50 percent (4.5% at March 31, 2005).
 
 19
  b.  Long-term
debt
 
 On March
21, 2003, the Company entered into a $10 million secured term loan. The loan was
used to partially finance the Company's acquisition of Insilco's Passive
Components Group. The loan is payable in 20 equal quarterly installments of
principal with a final maturity on March 31, 2008 and currently bears interest
at LIBOR plus 1.50 percent (4.5 percent at March 31, 2005) payable quarterly.
The rate may vary based upon the Company's performance with respect to certain
financial covenants. In addition, the note may be prepaid in certain
circumstances. The loan is collateralized with a first priority security
interest in and lien on 65% of all the issued and outstanding shares of the
capital stock of certain of the foreign subsidiaries of Bel Fuse Inc. and all
other personal property and certain real property of Bel Fuse Inc. The Company
is required to maintain certain financial covenants, as defined in the loan
agreement. As of March 31, 2005, the Company was in compliance with all
financial covenants. As of March 31, 2005, the balance due on the term loan was
$6.0 million. For the three months ended March 31, 2005 and 2004, the Company
recorded interest expense of approximately $67,000 and $57,000,
respectively.
 
 8.
    ACCRUED
      EXPENSES
 
 Accrued
expenses consist of the following:
 March
      31,
    
    December
      31,2005
    
    2004Sales
      commissions
    
    $
    1,347,600
    
    $
    1,431,169Investment
      banking commissions
    
    
    283,031
    
    
    1,000,000Subcontracting
      labor
    
    
    1,587,060
    
    
    1,624,963Salaries,
      bonuses andrelated
      benefits
    
    
    2,163,272
    
    
    3,480,213Other
    
    
    2,958,859
    
    
    2,757,231$
    8,339,822
    
    $
    10,293,576
 9.
    RETIREMENT
      FUND AND PROFIT SHARING PLAN
 
 The
Company maintains a domestic profit sharing plan and a contributory stock
ownership and savings 401(K) plan, which combines stock ownership and individual
voluntary savings provisions to provide retirement benefits for plan
participants. The plan provides for participants to voluntarily contribute a
portion of their compensation, subject to certain legal maximums. The Company
will match, based on a sliding scale, up to $350 for the first $600 contributed
by each participant. Matching contributions plus additional discretionary
contributions will be made with Company stock purchased in the open market. The
expense for the three months ended March 31, 2005 and 2004 amounted to
approximately $123,000 and $109,000, respectively. These expenses are included
as a component of cost of sales and selling, general and administrative expenses
on the accompanying Consolidated Statement of Operations. As of March 31, 2005,
the plans owned 19,936 and 128,230 shares of Bel Fuse Inc. Class A and Class B
common stock, respectively.
 
 20
 
 The
Company's Far East subsidiaries have a retirement fund covering substantially
all of their Hong Kong based full-time employees. Eligible employees contribute
up to 5% of salary to the fund. In addition, the Company may contribute an
amount up to 7% of eligible salary, as determined by Hong Kong government
regulations, in cash or Company stock. The expense for the three months ended
March 31, 2005 and 2004 amounted to approximately $104,000 and $107,000,
respectively. As of March 31, 2005, the plan owned 3,323 and 15,256 shares of
Bel Fuse Inc. Class A and Class B common stock, respectively.
 
 The
Supplemental Executive Retirement Plan (the “Plan” or "SERP") is designed to
provide a limited group of key management and highly compensated associates of
the Company supplemental retirement and death benefits. The Plan was established
by the Company in 2002. Employees are selected at the sole discretion of the
Board of Directors of the Company to participate in the Plan. The Plan is
unfunded. The Company utilizes life insurance to partially cover its obligations
under the Plan. The benefits available under the Plan vary according to when and
how the participant terminates employment with the Company. If a participant
retires (with the prior written consent of the Company) on his normal retirement
date (65 years old, 20 years of service, and 5 years of Plan participation), his
normal retirement benefit under the Plan would be annual payments equal to 40%
of his average base compensation (calculated using compensation from the highest
5 consecutive calendar years of Plan participation), payable in monthly
installments for the remainder of his life.
  If a
participant retires early from the Company (55 years old, 20 years of service,
and 5 years of Plan participation), his early retirement benefit under the Plan
would be an amount (i) calculated as if his early retirement date were in fact
his normal retirement date, (ii) multiplied by a fraction, with the numerator
being the actual years of service the participant has with the Company and the
denominator being the years of service the participant would have had if he had
retired at age 65, and (iii) actuarially reduced to reflect the early retirement
date. If a participant dies prior to receiving 120 monthly payments under the
Plan, his beneficiary would be entitled to continue receiving benefits for the
shorter of (i) the time necessary to complete 120 monthly payments or (ii) 60
months.
  If a
participant dies while employed by the Company, his beneficiary would receive,
as a survivor benefit, an annual amount equal to (i) 100% of the participant’s
annual base salary at date of death for one year, and (ii) 50% of the
participant’s annual base salary at date of death for each of the following 4
years, each payable in monthly installments. The Plan also provides for
disability benefits, and a forfeiture of benefits if a participant terminates
employment for reasons other than those contemplated under the Plan. The expense
for the three months ended March 31, 2005 and 2004 amounted to approximately
$220,000 and $94,000, respectively.
  21
  The
components of SERP expense are as follows:
 Three
      Months EndedMarch
      31,2005
    
    2004Service
      cost
    
    $
    99,000
    
    $
    35,000Interest
      cost
    
    
    77,000
    
    
    40,000Amortization
      of adjustments
    
    
    44,000
    
    
    19,000Total
      SERP expense
    
    $
    220,000
    
    $
    94,000
 March
      31,
    
    December
      31,2005
    
    2004Balance
      sheet amounts:Accrued
      pension liability
    
    $
    2,481,583
    
    $
    2,261,583Intangible
      asset
    
    
    1,127,941
    
    
    1,127,941
 10.
    COMMON
      STOCK
 
 During
2000, the Board of Directors of the Company authorized the purchase of up to ten
percent (10%) of the Company’s outstanding Class B common shares. As of March
31, 2005, the Company had purchased and retired 23,600 Class B common shares at
a cost of approximately $808,000 which reduced the number of Class B common
shares outstanding.
 
 The
Company maintains two classes of outstanding common stock, Class A Common Stock
(“Class A”) and Class B Common Stock (“Class B”). The following is a summary of
the pertinent rights and privileges of each class outstanding:
 
 ·
    Voting
      - Class A receives one vote per share; Class B is
    non-voting;
 
 ·
    Dividends
      (cash) - Cash dividends are payable at the discretion of the Board of
      Directors and is subject to a 5% provision whereby cash dividends paid out
      to Class B must be at least 5% higher per share annually than Class A. At
      the discretion of the Board of Directors, Class B may receive a cash
      dividend without Class A receiving a cash
dividend.
 
 ·
    Dividends
      (other than cash) and distributions in connection with any
      recapitalization and upon liquidation, dissolution or winding up of the
      Company - Shared equally among Class A and Class B;
 
 ·
    Mergers
      and consolidations - Equal amount and form of consideration per share
      among Class A and Class B;
  22
 
 ·
    Class
      B Protection - Any person or group that purchases 10% or more of the
      outstanding Class A (excluding certain shares, as defined) must make a
      public cash tender offer (within 90 days) to acquire additional shares of
      Class B to avoid disproportionate voting rights. Failure to do so will
      result in forfeiture of voting rights for those shares acquired after the
      recapitalization. Alternatively, the purchaser can sell Class A shares to
      reduce the purchaser's holdings below 10% (excluding shares owned prior to
      recapitalization). Above 10%, this protection transaction is triggered
      every 5% (i.e., 15%, 20%, 25%, etc.);
 
 ·
    Convertibility
      - Not convertible into another class of Common Stock or any other security
      by the Company, unless by resolution by the Board of Directors to convert
      such shares as a result of either class becoming excluded from quotation
      on NASDAQ, or if total outstanding shares of Class A falls below 10% of
      the aggregate number of outstanding shares of both classes (in which case,
      all Class B shares will be automatically converted in Class A
      shares).
 
 ·
    Transferability
      and trading - Both Class A and Class B are freely transferable and
      publicly traded on NASDAQ National Market;
 
 ·
    Subdivision
      of shares - Any split, subdivision or combination of the outstanding
      shares of Class A or Class B must be proportionately split with the other
      class in the same manner and on the same
basis.
 
 11.
    COMPREHENSIVE
      INCOME
  Comprehensive
income for the three months ended March 31, 2005 and 2004 consists
of:
  Three
      Months EndedMarch
      31,2005
    
    2004Net
      earnings
    
    $
    4,313,365
    
    $
    4,654,731Currency
      translation adjustment-net
      of taxes
    
    
    (190,527
    )
    
    (222,438
    )Increase
      (decrease) in unrealizedgain
      on marketable securities-
      net of taxes
    
    
    (3,175,742
    )
    
    15,700Comprehensive
      income
    
    $
    947,096
    
    $
    4,447,993
 12.
    ASSET
      HELD FOR SALE
 
 On July
15, 2004, the Company entered into an agreement for the sale of a certain parcel
of land located in Jersey City, New Jersey. The sales agreement is subject to a
due diligence period by the buyer. The seller and buyer are aware that a portion
of the property may be subject to tidelands claims by the State of New Jersey.
The Company has reclassified the asset as available for sale with a net book
value of $754,397 and $696,013 on the Company's balance sheet at March 31, 2005
and December 31, 2004, respectively.
  23
 
 13.
    NEW
      FINANCIAL ACCOUNTING STANDARDS
 
 In
December 2004, the FASB issued SFAS No. 123(R), that will require compensation
costs related to share-based payment transactions to be recognized in the
financial statements. With limited exceptions, the amount of compensation cost
will be measured based on the grant-date fair value of the equity or liability
instruments issued. In addition, if granted, liability awards will be remeasured
each reporting period. Compensation cost will be recognized over the period that
an employee provides service in exchange for the reward. The statement also
amends SFAS No. 95, "Statement of Cash Flows", to require that excess tax
benefits be reported as a financing cash inflow rather than as a reduction of
taxes paid. SFAS No. 123(R) is effective as to the Company as of the beginning
of the 2006 fiscal year. The Company is currently evaluating its position and
will make its determination to account for the compensation costs either
prospectively or retroactively at the time of adoption. The adoption of SFAS
123(R) is expected to have a material effect on the Company's results of
operations.
 
 In
December 2004, the FASB staff issued FASB Staff Position ("FSP") FAS 109-1,
"Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004" to provide guidance on the application of Statement 109 to
the provision within the American Jobs Creations Act of 2004 (the "Act") that
provides tax relief to U.S. domestic manufacturers. The FSP states that the
manufacturers', deduction provided for under the Act should be accounted for as
a special deduction in accordance with FASB Statement No. 109 and not as a tax
rate reduction. The FSP is effective upon issuance. The adoption of FAS 109-1
could have a material effect on the Company's results of operations and
financial position.
 
 In
December 2004, the FASB staff issued FSP FAS 109-2, "Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision Within the American
Jobs Creation Act of 2004" to provide accounting and disclosure guidance for the
repatriation provisions included in the Act. The Act introduced a special
limited-time dividends received deduction on the repatriation of certain foreign
earnings to a U.S. taxpayer. The FSP is effective upon issuance. The adoption of
FAS 109-2 could have a material effect on the Company's results of operations
and financial position.
 
 In
December 2004, the FASB issued SFAS No. 153, an amendment of APB Opinion No. 29
"Exchanges of Nonmonetary Assets". SFAS No. 153 amends APB Opinion No. 29 by
eliminating the exception under APB No. 29 for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS No. 153 is effective for
periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not
expected to have a material effect on the Company's financial position or
results of operations.
  24
 
 In
November 2004, the FASB issued SFAS No. 151, an amendment to ARB No. 43 chapter
4 "Inventory Costs". SFAS No. 151 requires that abnormal costs of idle facility
expenses, freight, handling costs and wasted material (spoilage) be recognized
as current-period charges. SFAS No. 151 is effective for fiscal years beginning
after June 15, 2005. Adoption of SFAS No. 151 is not expected to have a material
impact on the Company's results of operations or financial
position.
 
 25
  Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
  The
Company’s quarterly and annual operating results are affected by a wide variety
of factors that could materially and adversely affect revenues and
profitability, including the risk factors described in the Company's Annual
Report on Form 10-K for the year ended December 31, 2004. 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 1 of the Company’s Annual Report on Form 10-K
for the year ended December 31, 2004, 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
 
 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, circuit protection devices and interconnect products. While
these products are deployed primarily in the computer, networking and
telecommunication industries, Bel’s expanding portfolio of products also finds
application in the automotive, medical and consumer electronics markets. Bel's
products are designed to protect, regulate, connect, isolate or manage a variety
of electronic circuits.
 
 During
the first three months of 2005, approximately $.5 million of the sales increase
compared to the first three months of 2004 is attributable to the acquisition by
the Company of Galaxy Power, Inc. (“Galaxy”) which occurred on March 22, 2005.  Gross
profit margins were lower during the first quarter of 2005 compared to 2004
principally due to increased raw material costs due to changes in the Company’s
product mix and additional inventory obsolescence adjustments.
  26
  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, intangible assets, investments, income taxes and contingencies and
litigation. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
 
 The
Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
 
 Allowance
for Doubtful Accounts
 
 The
Company maintains allowances for doubtful accounts for estimated losses from the
inability of its customers to make required payments. The Company determines its
reserves by both specific identification of customer accounts where appropriate
and the application of historical loss experience to non-specific accounts. If
the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.
 
 Inventory
 
 The
Company makes purchasing decisions principally based upon firm sales orders from
customers, the availability and pricing of raw materials and projected customer
requirements. Future events that could adversely affect these decisions and
result in significant charges to the Company’s operations include miscalculating
customer requirements, technology changes which render certain raw materials and
finished goods obsolete, loss of customers and/or cancellation of sales orders,
stock rotation with distributors and termination of distribution agreements. The
Company writes down its inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon the aforementioned assumptions. If actual
market conditions are less favorable than those projected by management,
additional inventory write-downs may be required.
  27
 
 When
inventory is written-off, it is never written back up; the cost remains at zero
or the level to which it has been written-down. When inventory that has been
written-off is subsequently used in the manufacturing process, the lower
adjusted cost of the material is charged to cost of sales. During 2001 the
Company wrote down or reserved $12 million of inventory, including non
cancelable purchase commitments. At December 31, 2004, approximately $1.4
million of inventory (at original cost before the write-down or reserve in 2001)
was on hand. During 2003 and 2004 approximately $2.5 million and $7.0 million of
this inventory was scrapped. Management intends to retain the balance of this
inventory for possible use in future orders. Should any of this inventory be
used in the manufacturing process for customer orders, the improved gross profit
will be recognized at the time the completed product is shipped and the sale is
recorded.
 
 The
following is a quarterly schedule of material reintroduced into production since
the initial $12 million charge.
 Prior
      Quarters
    
    
    
    
    $
    164,3291st
      Quarter
    
    
    2002
    
    
    4,5382nd
      Quarter
    
    
    2002
    
    
    68,0983rd
      Quarter
    
    
    2002
    
    
    38,9144th
      Quarter
    
    
    2002
    
    
    271,1631st
      Quarter
    
    
    2003
    
    
    77,0692nd
      Quarter
    
    
    2003
    
    
    80,0463rd
      Quarter
    
    
    2003
    
    
    28,8514th
      Quarter
    
    
    2003
    
    
    98,2631st
      Quarter
    
    
    2004
    
    
    31,0512nd
      Quarter
    
    
    2004
    
    
    78,2323rd
      Quarter
    
    
    2004
    
    
    72,8574th
      Quarter
    
    
    2004
    
    
    53,2951st
      Quarter
    
    
    2005
    
    
    777$
    1,067,483
 Acquisitions
 
 On March
22, 2005, the Company acquired the common stock of Galaxy Power Inc. for
approximately $18.8 million in cash including transaction costs of approximately
$.2 million. Purchase price allocations have been initially estimated by
management and are subject to adjustment. Management is in the process of
obtaining independent valuations and independent formal appraisals and will
adjust purchase price allocations accordingly. Management has estimated that
approximately $12.6 million of goodwill and $2.0 million of the identifiable
intangible assets arose from the transaction. The identifiable intangible assets
will be amortized on a straight-line basis over their estimated useful
lives.
  28
  The
Company believes that the purchase of Galaxy’s Power Group is a logical
strategic fit with Bel’s current Power Products group. The Company believes that
the products are highly complementary with minimal overlap. The customer base is
similar but still affords ample opportunity for cross-selling. While Bel will
offer Galaxy a much-needed cost competitive manufacturing base in China, Galaxy
brings a portfolio of products and technologies aimed at higher end markets. In
 
 addition
to these strategic synergies, there is significant opportunity for expense
reduction and the elimination of redundancies.
 
 This
acquisition was accounted for using the purchase method of accounting and
accordingly, the results of operations of Galaxy have been included in the
Company’s financial statements from March 23, 2005.
 
 The
following unaudited proforma summary results of operations assumes that Galaxy
had been acquired as of January 1, 2004 (in thousands except per share
data):
 
 Three
      Months EndedMarch
      31,2005
    
    2004Net
      sales
    
    $
    49,732
    
    $
    46,515Net
      earnings
    
    
    4,039
    
    
    4,827Earnings
      per share-diluted
    
    
    0.35
    
    
    0.42
 
 The
information above is not necessarily indicative of the results of operations
that would have occurred if the acquisition had been consummated as of January
1, 2004. Such information should not be construed as being a representation of
the future results of operations of the Company.
  29
  A
condensed balance sheet of the major assets and liabilities of Galaxy at the
acquisition date is as follows:
  Cash
    
    $
    92,702Accounts
      receivable
    
    
    3,352,007Inventories
    
    
    2,635,763Prepaid
      expenses
    
    
    90,510Property,
      plant andequipment
    
    
    1,159,391Other
      assets
    
    
    32,083Goodwill
    
    
    12,601,200Intangible
      assets
    
    
    2,000,000Notes
      payable
    
    
    (860,694
    )Accounts
      payable
    
    
    (1,882,681
    )Accrued
      expenses
    
    
    (436,912
    )Income
      taxes payable
    
    
    (1,084
    )Net
      assets acquired
    
    $
    18,782,285
 Income
Taxes
 
 The
Company files income tax returns in every jurisdiction in which it has reason to
believe it is subject to tax. Historically, the Company has been subject to
examination by various taxing jurisdictions. To date, none of these examinations
has resulted in any material additional tax. Nonetheless, any tax jurisdiction
may contend that a filing position claimed by the Company regarding one or more
of its transactions is contrary to that jurisdiction's laws or
regulations.
 
 Revenue
Recognition
 
 The
Company recognizes revenue in accordance with the guidance contained in SEC
Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements”
(“SAB 104”). Revenue is recognized when the product has been delivered and title
and risk of loss have passed to the customer, collection of the resulting
receivable is deemed probable by management, persuasive evidence of an
arrangement exists and the sale price is fixed and determinable.
 
 Historically
the Company has been successful in mitigating the risks associated with its
revenue recognition. Some issues relate to product warranty, credit worthiness
of its customers and concentration of sales among a few major
customers.
 30
 
 The
Company is not contractually obligated to accept returns except for defective
product or in instances where the product does not meet the Company’s quality
specifications. If these conditions existed, the Company would be obligated to
repair or replace the defective product or make a cash settlement with the
customer. If the financial conditions of the Company’s customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances for bad debt may be required which could have a material
adverse effect on the Company’s results of operations and financial condition.
The Company has a significant amount of sales with several major customers. The
loss of any one of these customers could have a material adverse effect on the
Company’s results of operations and financial position.
 
 
 Results
of Operations
 
 The
following table sets forth, for the first quarters of 2005 and 2004, the
percentage relationship to net sales of certain items included in the Company’s
consolidated statements of operations.
  Percentage
      of Net SalesThree
      Months EndedMarch
      31,2005
    
    2004Net
      sales
    
    
    100.0
    %
    
    100.0
    %Cost
      of sales
    
    
    71.9
    
    
    70.3Selling,
      general andadministrative
      expenses
    
    
    15.9
    
    
    16.4Interest
      income - net
    
    
    0.3
    
    
    0.1Earnings
      before provision forincome
      taxes
    
    
    12.5
    
    
    13.4Income
      tax provision
    
    
    3.0
    
    
    2.4Net
      earnings
    
    
    9.5
    
    
    11.0
 31
  The
following table sets forth the year over year percentage increase or decrease of
certain items included in the Company's consolidated statements of
operations.
  Increase
      (decrease) fromPrior
      PeriodThree
      Months EndedMarch
      31, 2005compared
      with ThreeMonths
      Ended March31,
      2004Net
      sales
    
    
    7.3
    %Cost
      of sales
    
    
    9.7Selling,
      general andadministrative
      expenses
    
    
    3.9Net
      earnings
    
    
    (7.3
    )
 Sales
 
 Net sales
increased 7.3% from $42.4 million during the first quarter of 2004 to $45.4
million during 2005. The Company attributes the increase to strong demand for
interconnect sales, resulting in an increase of $2.6 million in such sales, and
increased module sales of $1.1 million of which $.5 million is from the
acquisition of Galaxy offset in part by decreases in circuit protection sales of
$.3 million and magnetic sales of $.4 million.
 
 The
significant components of the Company's first quarter 2005 sales were from
magnetic products of $28.9 million (as compared with $29.3 million during the
first quarter of 2004), circuit protection products of $4.6 million (as compared
with $4.9 million during the first quarter of 2004), interconnect products of
$8.3 million (as compared with $5.7 million during the first quarter of 2004),
and module products of $3.6 million (as compared with $2.5 million during the
first quarter of 2004).
 
 Net sales
for the first quarter of 2005 were approximately $3.8 million less than net
sales for the fourth quarter of 2004. In both 2003 and 2004, the first quarter
has been the Company's weakest revenue quarter.
 
 32
 
 Based on
conflicting opinions the Company received from customers and competitors in the
electronics industry pertaining to revenue growth during 2005, the Company can
not predict with any degree of certainty sales revenue for 2005. Although the
Company's backlog has been stable, the Company feels that this is not a good
indicator of revenues.. The Company continues to have limited visibility as to
future customer requirements. The Company had two customers with sales in excess
of 10% (14.4% and 11.1%) of total sales during the quarter ended March 31, 2005.
The loss of any one of these customers could have a material adverse effect on
the Company's results of operations, financial position and cash flows.
 
 The
Company cannot quantify the extent of sales growth arising from unit sales mix
and/or price changes. Given the change in the nature of the products purchased
by customers from period to period, the Company believes that neither unit
changes nor price changes are meaningful. Over the past year, newer and more
sophisticated products with higher unit selling prices have been introduced.
Through the Company's engineering and research effort, the Company has been
successful in adding additional value to existing product lines, which tends to
increase sales prices initially until that generation of products becomes mature
and sales prices experience price degradation. In general, as products become
mature, average selling prices decrease.
 
 Cost
of Sales
 
 Bel
generally enters into processing arrangements with five independent third party
contractors in the Far East. Costs are recorded as incurred for all products
manufactured either at the Company's third party contractors 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 finished goods at its
own manufacturing facilities in Glen Rock, Pennsylvania, Inwood, New York, the
Dominican Republic and Mexico. See "Critical Accounting Policies" above for
information regarding the use of inventories in the manufacturing process that
have been written down in prior years.
 
 Cost of
sales as a percentage of net sales increased from 70.3 % during the first
quarter of 2004 to 71.9 % in 2005. The increase in the cost of sales percentage
is primarily attributable to a 1.6 % increase in material costs as a percentage
of sales. The increase in raw material costs is principally related to increased
manufacturing of value-added products which has a higher raw material content
than the Company’s other products and increases in obsolescence reserves. In
addition, the Company's results for the first quarter of 2004 benefited from a
reversal of certain 2003 year-end reserves for raw material
obsolescence.
 
 Included
in cost of sales are research and development expenses of $1.9 million and $1.8
million for the first quarters of 2005 and 2004, respectively. The Company has
experienced minor increases in research and development expense throughout its
domestic facilities offset in part by lower research and development costs in
the Far East as many of these jobs were moved by the Company from Hong Kong to
China and several positions were eliminated.
 
 33
 
 Selling,
General and Administrative Expenses
 
 The
percentage relationship of selling, general and administrative expenses to net
sales decreased from 16.4% during the three months ended March 31, 2004 to 15.9%
during the three months ended March 31, 2005, in part as a result of the
Company's ability to leverage general and administrative expenses over a larger
revenue base. The Company attributes the $.3 million increase in the dollar
amount of such expenses primarily to increased selling expenses of approximately
$.1 million which includes salaries, commissions and related expenses. This
increase relates to increased sales. In addition, the Company incurred a $.1
million increase in employee benefit costs and other various net selling,
general and administrative expenses of $.1 million.
 
 During
2006, the Company will be required to expense share based compensation costs in
accordance with SFAS No. 123(R). This charge will be principally included in
selling, general and administrative expenses. See "New Financial Accounting
Standards" included in Management's Discussion and Analysis of Financial
Condition and Results of Operations for information regarding SFAS No.
123(R).
 
 Interest
Income - net
 
 Interest
income earned on cash and cash equivalents increased by approximately
$121,000 during the first three months ended March 31, 2005 compared to
2004. The increase is due primarily to increased earnings on higher cash and
cash equivalent balances.
 
 Interest
Expense
 
 A $10
million term loan was entered into on March 21, 2003 which was borrowed for the
acquisition of Insilco's Passive Components Group. The loan bears interest at
LIBOR plus 1.50% (4.50% at March 31, 2005) payable quarterly. Interest expense
increased by approximately $10,000 during the three months ended March 31, 2005
compared with 2004. The increase is attributable in part to higher interest
rates charged on the loan for the first three months of 2005 compared to 2004
and in part due to the fact that during March 2005, the Company borrowed $8.0
million against its domestic line of credit to partially finance the acquisition
of Galaxy. The loan bears interest at LIBOR plus 1.5% (4.5% at March 31, 2005).
 34
 
 Provision
for Income Taxes
 
 The
provision for income taxes for the three months ended March 31, 2005 was $1.4
million compared to $1.0 million during the first three months of 2004. The
Company's earnings before income taxes for the three months ended March 31, 2005
and 2004 are comparable. The income tax provision is higher than the prior
quarter's provision primarily due to higher foreign taxes. Recent developments
in Hong Kong suggest that the authorities are applying different standards in
the treatment of offshore income.
 
 The
Company conducts manufacturing activities in the Far East. More specifically,
the Company manufactures the majority of its products in the People’s Republic
of China (“PRC”), Hong Kong and Macau and has not been subject to corporate
income tax in the PRC. The Company's activities in Hong Kong have generally
consisted of administration, quality control and accounting, as well as some
limited manufacturing activities. Hong Kong imposes corporate income tax at a
rate of 17.5 percent solely on income sourced to Hong Kong. That is, its tax
system is a territorial one which only seeks to tax activities conducted in Hong
Kong. Since the Bel entity in Hong Kong conducts most of its manufacturing and
quality control activities in the PRC, a portion of this entity’s income is
deemed “offshore” and thus not fully taxable in Hong Kong. Although the
statutory tax rate in Hong Kong is 17.5 percent, the Company generally pays an
effective Hong Kong rate of less than 4 percent.
 
 The
Company also conducts manufacturing operations in Macau. Macau has a statutory
corporate income tax rate of 16 percent. However, the Company, as a result of
investing in a certain location in Macau, was able to obtain a 10-year tax
holiday in Macau, thereby reducing its effective Macau income tax rate from 16
percent to 8 percent. The tax holiday in Macau expired in April 2004. Since most
of the Company's operations are conducted in the Far East, the majority of its
profits are sourced in these three Far East jurisdictions. Accordingly, the
profits earned in the U.S. are comparatively small in relation to its profits
earned in the Far East. Therefore, there is generally a significant difference
between the statutory U.S. tax rate and the Company’s effective tax rate.
  
 Net
Income
 
 The
Company's net income for the first quarter of 2005 reflected a $341,000 decrease
from the first quarter of 2004 and a $1.7 million decrease from the fourth
quarter of 2004. The decrease from the first quarter of 2004 reflects the
Company's lower gross margin in 2005 and increased taxes in 2005.
  35
 
 The
Company has historically followed a practice of reinvesting a portion of the
earnings of foreign subsidiaries in the expansion of its foreign operations. If
the unrepatriated earnings were distributed to the parent corporation rather
than reinvested in the Far East, such funds would be subject to United States
Federal income taxes. Through March 31, 2005, management has identified a
minimum of approximately $26 million of foreign earnings that will be
repatriated during 2005 and will be eligible for the reduced tax rate of 5.25%
under the American Jobs Creations Act of 2004.
 
 Inflation
and Foreign Currency Exchange
 
 During
the past two years, the effect of inflation on the Company's profitability was
not material. Historically, fluctuations of the U.S. Dollar against other major
currencies have not significantly affected the Company's foreign operations as
most sales have been denominated in U.S. Dollars or currencies directly or
indirectly linked to the U.S. Dollar. Most significant expenses, including raw
materials, labor and manufacturing expenses, are either incurred in U.S. Dollars
or the currencies of the Hong Kong Dollar, the Macau Pataca or the Chinese
Renminbi. Commencing with the acquisition of the Passive Components Group, the
Company's European entity has sales transactions which are denominated
principally in Euros and British Pounds. Conversion of these transactions into
U.S. dollars has resulted in currency exchange (gains) losses of $(83,000) and
$42,000 for the three months ended March 31, 2005 and 2004, respectively, which
are included in selling, general and administrative expense and approximately
$190,000 and $222,000 for the three months ended March 31, 2005 and 2004,
respectively, in unrealized exchange losses relating to the translation of
foreign subsidiary financial statements which are included in other
comprehensive income. Any change in linkage of the U.S. Dollar and the Hong Kong
Dollar, the Chinese Renminbi or the Macau Pataca could have a material effect on
the Company's consolidated financial position or results of operations.
  36
 
 Liquidity
and Capital Resources
 
 Historically,
the Company has financed its capital expenditures primarily through cash flows
from operating activities. Currently, due to the recent acquisitions of the
Passive Components Group of Insilco Technologies, Inc. and Galaxy, the Company
has borrowed money under a secured term loan and line of credit and has unused
lines of credit as described below. Management believes that the cash flow from
operations after payments of dividends and scheduled repayments of its bank
debt, combined with its existing capital base and the Company's available lines
of credit, will be sufficient to fund its operations for the near term. 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 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.
 
 The
Company has one domestic line of credit amounting to $10 million. During March
2005, the Company borrowed $8 million against the line of credit to partially
finance the acquisition of Galaxy. The $10 million line of credit expires on
March 21, 2006 and is in addition to the Company’s $10 million term loan
described below. Borrowings under this $10 million line of credit are secured by
the same assets, which secure the term loan described below. The line of credit
bears interest at LIBOR plus 1.50 percent (4.5% at March 31, 2005).
 
 On March
21, 2003, the Company entered into a $10 million secured term loan. The loan was
used to partially finance the Company's acquisition of Insilco's Passive
Components Group. The loan agreement requires 20 equal quarterly installments of
principal with a final maturity on March 31, 2008 and bears interest at LIBOR
plus 1.50 percent (4.50% percent at March 31, 2005) payable quarterly. The loan
is collateralized with a first priority security interest in 65% of all the
issued and outstanding shares of the capital stock of certain of the foreign
subsidiaries of Bel Fuse Inc. and all other personal property and certain real
property of Bel Fuse Inc. The Company is required to maintain certain financial
covenants, as defined in the agreement. For the three months ended March 31,
2005 and 2004, the Company recorded interest expense of approximately $67,000
and $57,000, respectively, and was in compliance with all of the covenants
contained in the loan agreement as of March 31, 2005.
 
 The
Company's Hong Kong subsidiary has an unsecured line of credit of approximately
$2 million, which was unused at March 31, 2005. This line of credit expired on
April 30, 2005. Borrowing on this line of credit was guaranteed by the Company.
 
 For
information regarding further commitments under the Company's operating leases,
see Note 15 of Notes to the Company's Consolidated Financial Statements in its
Annual Report on Form 10-K for the year ended December 31,
2004.
 37
 
 As
previously announced, the Company has acquired a total of 2,037,500 shares of
the common stock of Artesyn Technologies, Inc. at a total purchase price of
$16,331,469. These purchases are reflected on the Company's consolidated
statement of cash flows as purchases of marketable securities and are reflected
on the Company's balance sheet as marketable securities. As of March 31, 2005,
the Company has recorded an unrealized gain, net of income taxes, of
approximately $.8 million. In connection with this transaction the Company is
obligated to pay an investment banker's advisory fee to a third party. As of
March 31, 2005, the Company has accrued a fee in the amount of approximately $.3
million.The Company has proposed to Artesyn that the Company acquire Artesyn,
but to date Artesyn has not idicated any interest in negotiating such a
transaction with the Company. During the first quarter ended March 31, 2005 the
gross unrealized gain on marketable securities decreased $5.3 million from
December 31, 2004.
 
 The
Company is constructing a 117,000 square foot manufacturing facility in
Zhongshan City, PRC for approximately $2.3 million. As of March 31, 2005, the
Company has paid approximately $.4 million toward the construction. The Company
expects to complete the construction during 2006.
 
 On July
15, 2004, the Company entered into an agreement for the sale of a certain parcel
of land located in Jersey City, New Jersey. The sales agreement is subject to a
due diligence period by the buyer. The seller and buyer are aware that a portion
of the property may be subject to tidelands claims by the State of New Jersey.
The Company has classified the asset as held for sale with a net book value of
$754,000 on the Company's consolidated balance sheet at March 31, 2005.
 
 Under the
terms of the E-Power and Current Concepts, Inc. acquisition agreements of May
11, 2001, the Company will be required to make contingent purchase price
payments up to an aggregate of $7.6 million should the acquired companies attain
specified related sales levels. E-Power will be paid $2.0 million in contingent
purchase price payments when sales reach $15.0 million and an additional $4.0
million when sales reach $25.0 million on a cumulative basis through May, 2007.
No payments have been required to date with respect to E-Power. Current Concepts
will be paid 16% of related sales on the first $10.0 million in sales through
May 2007. During the three months ended March 31, 2005 and 2004, the Company
paid approximately $114,000 and $75,000, respectively, in contingent purchase
price payments to Current Concepts. The contingent purchase price payments have
been accounted for as additional purchase price and as an increase other
intangibles when such payment obligations are incurred.
 
 On May 9,
2000, the Board of Directors authorized the repurchase of up to 10% of the
Company’s outstanding common shares from time to time in market or privately
negotiated transactions. As of March 31, 2005, the Company had purchased and
retired 23,600 Class B shares at a cost of approximately $808,000, which reduced
the number of Class B common shares outstanding.
 
 38
 
 During
the three months ended March 31, 2005, the Company's cash and cash equivalents
decreased by approximately $1.1 million, reflecting approximately $18.8 million
used principally for the purchase of Galaxy, $1.4 million for loan repayments,
$.9 million for the purchase of property, plant and equipment, $.6 million for
the purchase of marketable securities and by $.5 million for payments of
dividends offset by $12.5 million provided by operating activities (principally
as a result of net income of $4.3 million, changes in operating assets and
liabilities of $5.8 million and depreciation expense of $2.0 million, borrowings
of $8.0 million and proceeds of $.8 million from the exercise of stock
options.
 
 Cash,
marketable securities and cash equivalents and accounts receivable comprised
approximately 53.6% and 58.6% of the Company's total assets at March 31, 2005
and December 31, 2004, respectively. The Company's current ratio (i.e., the
ratio of current assets to current liabilities) was 3.8 to 1 and 5.0 to 1 at
March 31, 2005 and December 31, 2004, respectively.
 
 The
following table sets forth at March 31, 2005 the amounts of payments due under
specific types of contractual obligations, aggregated by category of contractual
obligation, for the time periods described below.
  Payments
      due by periodContractual
      Obligations
    
    Total
    
    Less
      than
      1
      year
    
    1-3
      years
    
    3-5
      years
    
    More
      than
      5
      yearsShort-term
      debt
    
    $
    8,000,000
    
    $
    8,000,000
    
    $
    -
    
    $
    -
    
    $
    -Long-term
      debt
    
    
    6,000,000
    
    
    2,000,000
    
    
    4,000,000
    
    
    -
    
    
    -Capital
      expenditure obligations
    
    
    1,874,000
    
    
    1,874,000
    
    
    -Contingent
      purchase pricecommitments
    
    
    953,000
    
    
    953,000
    
    
    -
    
    
    -
    
    
    -Operating
      leases
    
    
    2,186,858
    
    
    1,121,985
    
    
    820,902
    
    
    243,971
    
    
    -Raw
      material purchase obligations
    
    
    16,862,091
    
    
    16,862,091
    
    
    -
    
    
    -
    
    
    -Total
    
    $
    35,875,949
    
    $
    30,811,076
    
    $
    4,820,902
    
    $
    243,971
    
    $
    -
 The
Company is currently obligated to fund the Company's SERP. As of March 31, 2005
the SERP had an unfunded benefit obligation of approximately $2.8 million.
 
 Other
Matters
 
 The
Company believes that it has sufficient cash reserves to fund its foreseeable
working capital needs. It may, however, seek to expand such resources through
bank borrowings, at favorable lending rates, from time to time. Should the
Company pursue additional acquisitions during 2005, the Company may be required
to pursue public or private equity or debt transactions to finance the
acquisitions and to provide working capital to the acquired
companies.
  39
 
 New
Financial Accounting Standards
 
 In
December 2004, the Financial Accounting Standard Board (“FASB”) issued Statement
on Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment"
(revised), that will require compensation costs related to share-based payment
transactions to be recognized in the financial statements. With limited
exceptions, the amount of compensation cost will be measured based on the
grant-date fair value of the equity or liability instruments issued. In
addition, liability awards will be remeasured each reporting period.
Compensation cost will be recognized over the period that an employee provides
service in exchange for the reward. The statement also amends SFAS No. 95,
"Statement of Cash Flows", to require that excess tax benefits be reported as a
financing cash inflow rather than as a reduction of taxes paid. SFAS No. 123(R)
is effective as to the Company as of the beginning of the 2006 fiscal year. The
Company is currently evaluating its position and will make its determination to
account for the compensation costs either prospectively or retroactively at the
time of adoption. The adoption of SFAS 123(R) is expected to have a material
effect on the Company's results of operations.
 
 In
December 2004, the FASB staff issued FASB Staff Position ("FSP") FAS 109-1,
"Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004" to provide guidance on the application of FASB Statement
No. 109 to the provision within the American Jobs Creations Act of 2004 (the
"Act") that provides tax relief to U.S. domestic manufacturers. The FSP states
that the manufacturers' deduction provided for under the Act should be accounted
for as a special deduction in accordance with Statement 109 and not as a tax
rate reduction. The FSP is effective upon issuance. The adoption of FAS 109-1
could have a material effect on the Company's results of operations or financial
position.
 
 In
December 2004, the FASB staff issued FSP No. FAS 109-2, "Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision Within the
American Jobs Creation Act of 2004" to provide accounting and disclosure
guidance for the repatriation provisions included in the Act. The Act introduced
a special limited-time dividends received deduction on the repatriation of
certain foreign earnings to a U.S. taxpayer. The FSP is effective upon issuance.
The adoption of FAS 109-2 could have a material effect on the Company's results
of operations and financial position.
 
 In
December 2004, the FASB issued SFAS No. 153, an amendment of APB Opinion No. 29
"Exchanges of Nonmonetary Assets". SFAS No. 153 amends APB Opinion No. 29 by
eliminating the exception under APB No. 29 for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS No. 153 is effective for
periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not
expected to have a material effect on the Company's financial position or
results of operations.
 
 40
 
 In
November 2004 the FASB issued SFAS No. 151, an amendment to ARB No. 43 chapter 4
"Inventory Costs". SFAS No. 151 requires that abnormal costs of idle facility
expenses, freight, handling costs and wasted material (spoilage) be recognized
as current-period charges. SFAS No. 151 is effective for fiscal years beginning
after June 15, 2005. Adoption of SFAS No. 151 is not expected to have a material
impact on the Company's results of operations or financial
position.
 
 Quantitative
and Qualitative Disclosures About Market Risk
 
 Fair
Value of Financial Instruments — The following disclosure of the estimated fair
value of financial instruments is made in accordance with the requirements of
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments". The estimated fair values of financial
instruments have been determined by the Company using available market
information and appropriate valuation methodologies.
  However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
  The
Company has not entered into, and does not expect to enter into, financial
instruments for trading or hedging purposes. The Company does not currently
anticipate entering into interest rate swaps and/or similar
instruments.
  The
Company's carrying values of cash, marketable securities, accounts receivable,
accounts payable and accrued expenses are a reasonable approximation of their
fair value.
  The
Company enters into transactions denominated in U.S. Dollars, Hong Kong Dollars,
the Macau Pataca, the Chinese Renminbi, Euros and British Pounds. Fluctuations
in the U.S. dollar exchange rate against these currencies could significantly
impact the Company's consolidated results of operations.
  The
Company believes that a change in interest rates of 1% or 2% would not have a
material effect on the Company's consolidated statement of operations or balance
sheet.
 
 41
  Item 4. Controls
and Procedures
 
 a)
    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 chief financial officer, of the effectiveness of the
      Company’s disclosure controls and procedures pursuant to Securities
      Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s chief
      executive officer and chief financial officer concluded that the Company’s
      disclosure controls and procedures are effective in ensuring that
      information required to be disclosed by the Company in the reports that it
      files or submits under the Securities Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the SEC’s
      rules and forms.
 
 b.)
    Changes
      in internal controls over financial reporting:
      There have been no 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
      reasonable likely to materially affect, the Company internal control over
      financial reporting.
  42
 
 PART II.
Other Information
  Item
1.  Legal
Proceedings
 a)
    The
      Company had been a party to an ongoing arbitration proceeding related to
      the acquisition of its Telecom business in 1998. The Company believes that
      the seller breached the terms of a related Global Procurement Agreement
      dated October 2, 1998 and was seeking damages related thereto. During
      2004, the Company and the seller settled the matter. The settlement
      resulted in a payment to the Company and an unconditional release by the
      seller of all counterclaims against the Company. The net gain of
      $2,935,000 from the settlement of the lawsuit is included in the Company's
      consolidated statement of operations for the year ended December 31, 2004.
 
 b)
    The
      Company is a defendant in a lawsuit, captioned Murata Manufacturing
      Company, Ltd. v. Bel Fuse Inc et al and brought in Illinois Federal
      District Court. Plaintiff claims that its patent covers all of the
      Company's modular jack products. That party had previously advised the
      Company that it was willing to grant a non-exclusive license to the
      Company under the patent for a 3% royalty on all future gross sales of ICM
      products; payment of a lump sum of 3% of past sales including sales of
      applicable Insilco products; an annual minimum royalty of $500,000;
      payment of all attorney fees; and marking of all licensed ICM's with the
      third party's patent number. The Company is also a defendant in a lawsuit
      , captioned Regal Electronics, Inc. v. Bel Fuse Inc. and brought in
      California Federal District Court. Plaintiff claims that its patent covers
      certain of the Company's modular jack products. That party had previously
      advised the Company that it was willing to grant a non transferable
      license to the Company for an up front fee of $500,000 plus a 6% royalty
      on future sales. The District Court has granted summary judgment in the
      Company's favor dismissing Regal Electronics' infringement claims, while
      at the same time the Court dismissed the Company's invalidity counterclaim
      against Regal Electronics. As of the date hereof, the Company has not been
      advised as to whether Regal will appeal the Court's rejection of its
      infringement claims. The Company believes that none of its products are
      covered by these patents and intends to vigorously defend its position and
      no accrual has been provided in the accompanying consolidated financial
      statements.
 The
      Company is not a party to any other legal proceeding, the adverse outcome
      of which is expected to have a material adverse effect on the Company's
      consolidated financial condition or result of
operations.
 .
 43
  Item 6. Exhibits
 
 (a)
Exhibits:
 
 2.1
    Agreement
      and Plan of Merger dated as of March 4, 2005 by and among Bel Fuse Inc.,
      Bel Westboro, Inc. and Galaxy Power, Inc. - Incorporated by reference to
      the Registrant's Current Report on Form 8-K dated March 7,
      2005.
 
 31.1
    Certification
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
 
 31.2
    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.
  44
 
 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:
May 9, 2005
  45
  EXHIBIT
INDEX
 
 Exhibit
2.1 - Agreement and Plan of Merger dated as of March 4, 2005 by and among Bel
Fuse Inc., Bel Westboro, Inc. and Galaxy Power, Inc. - Incorporated by reference
to the Registrant's Current Report on Form 8-K dated March 7, 2005.
  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.
  46