UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q


(Mark
One)
 
 x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
      the quarterly period ended
              June 30,
2010
 or
 
 o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
      the transition period from
              
              to
 
 Commission
      File Number:
              000-11676
 
 BEL FUSE INC.(Exact
      name of registrant as specified in its
charter)
 
 NEW JERSEY
                
                22-1463699(State
      of other jurisdiction of incorporation or organization)
                
                (I.R.S.
      Employer Identification No.)
 
 206 Van Vorst Street
                        Jersey City, New Jersey
                        07302(Address
      of principal executive offices)
                        
                        (Zip
      Code)
 
 (201) 432-0463(Registrant's
      telephone number, including area
code)
 
 (Former
      name, former address and former fiscal year, if changed since last
      report)


Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. x  Yes      No





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





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




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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). o Yes    x No





At August
3, 2010, there were 2,174,912 shares of Class A Common Stock, $0.10 par value,
outstanding and 9,529,093 shares of Class B Common Stock, $0.10 par value,
outstanding.













BEL
      FUSE INC.INDEX
  PagePart I
                                
                                Financial
      InformationItem
      1.
                                Financial
      Statements
                                1Condensed
      Consolidated Balance Sheets as of June 30, 2010and
      December 31, 2009 (unaudited)
                                2-3Condensed
      Consolidated Statements of Operations for the Threeand
      Six Months Ended June 30, 2010 and 2009 (unaudited)
                                4Condensed
      Consolidated Statement of Stockholders' Equity forthe
      Six Months Ended June 30, 2010 (unaudited)
                                5Condensed
      Consolidated Statements of Cash Flows for the SixMonths
      Ended June 30, 2010 and 2009 (unaudited)
                                6-7Notes
      to Condensed Consolidated Financial Statements (unaudited)
                                8-19Item
      2.
                                Management's
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
                                20-29Item
      3.
                                Quantitative
      and Qualitative Disclosures AboutMarket
      Risk
                                29Item
      4.
                                Controls
      and Procedures
                                29Part II
                                
                                Other
      InformationItem
      1.
                                Legal
      Proceedings
                                30Item
      6.
                                Exhibits
                                31Signatures
                                32









PART
I.  Financial Information





Item
1.  Financial
Statements (Unaudited)





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





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





1





BEL
      FUSE INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETS(dollars
      in thousands, except share and per share data)(Unaudited)
  June
      30,
                        
                        
                        December
      31,2010
                        
                        
                        2009ASSETSCurrent
      Assets:Cash
      and cash equivalents
                        
                        $
                        75,655
                        
                        
                        $
                        124,231Accounts
      receivable - less allowance for doubtfulaccounts
      of $486 and $596 at June 30, 2010and
      December 31, 2009, respectively
                        
                        
                        50,140
                        
                        
                        
                        34,783Inventories
                        
                        
                        50,122
                        
                        
                        
                        31,791Prepaid
      expenses and other current assets
                        
                        
                        2,361
                        
                        
                        
                        955Refundable
      income taxes
                        
                        
                        3,361
                        
                        
                        
                        3,255Deferred
      income taxes
                        
                        
                        1,221
                        
                        
                        
                        815Total
      Current Assets
                        
                        
                        182,860
                        
                        
                        
                        195,830Property,
      plant and equipment - net
                        
                        
                        47,835
                        
                        
                        
                        35,943Restricted
      cash
                        
                        
                        401
                        
                        
                        
                        250Deferred
      income taxes
                        
                        
                        3,645
                        
                        
                        
                        4,516Intangible
      assets - net
                        
                        
                        11,480
                        
                        
                        
                        551Goodwill
                        
                        
                        4,548
                        
                        
                        
                        1,957Other
      assets
                        
                        
                        9,692
                        
                        
                        
                        6,899TOTAL
      ASSETS
                        
                        $
                        260,461
                        
                        
                        $
                        245,946See
      notes to unaudited condensed consolidated financial
      statements.


2




BEL
      FUSE INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETS (Continued)(dollars
      in thousands, except shares and per share data)(Unaudited)
  June
      30,
                                        
                                        
                                        December
      31,2010
                                        
                                        
                                        2009LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                                        
                                        $
                                        22,789
                                        
                                        
                                        $
                                        17,194Accrued
      expenses
                                        
                                        
                                        13,173
                                        
                                        
                                        
                                        7,991Accrued
      restructuring costs
                                        
                                        
                                        158
                                        
                                        
                                        
                                        156Income
      taxes payable
                                        
                                        
                                        2,029
                                        
                                        
                                        
                                        1,863Dividends
      payable
                                        
                                        
                                        836
                                        
                                        
                                        
                                        793Total
      Current Liabilities
                                        
                                        
                                        38,985
                                        
                                        
                                        
                                        27,997Long-term
      Liabilities:Accrued
      restructuring costs
                                        
                                        
                                        428
                                        
                                        
                                        
                                        508Liability
      for uncertain tax positions
                                        
                                        
                                        3,312
                                        
                                        
                                        
                                        2,887Minimum
      pension obligation andunfunded
      pension liability
                                        
                                        
                                        5,990
                                        
                                        
                                        
                                        5,622Total
      Long-term Liabilities
                                        
                                        
                                        9,730
                                        
                                        
                                        
                                        9,017Total
      Liabilities
                                        
                                        
                                        48,715
                                        
                                        
                                        
                                        37,014Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock, no par value, authorized 1,000,000shares;
      none issued
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Class
      A common stock, par value $.10 per share -authorized
      10,000,000 shares; outstanding 2,174,912at
      each date (net of 1,072,769 treasury shares)
                                        
                                        
                                        217
                                        
                                        
                                        
                                        217Class
      B common stock, par value $.10 per share -authorized
      30,000,000 shares; outstanding9,529,093
      and 9,464,343 shares, respectively(net
      of 3,218,307 treasury shares)
                                        
                                        
                                        953
                                        
                                        
                                        
                                        946Additional
      paid-in capital
                                        
                                        
                                        22,750
                                        
                                        
                                        
                                        21,663Retained
      earnings
                                        
                                        
                                        188,149
                                        
                                        
                                        
                                        185,014Accumulated
      other comprehensive (loss) income
                                        
                                        
                                        (323
                                        )
                                        
                                        
                                        1,092Total
      Stockholders' Equity
                                        
                                        
                                        211,746
                                        
                                        
                                        
                                        208,932TOTAL
      LIABILITIES ANDSTOCKHOLDERS' EQUITY
                                        
                                        $
                                        260,461
                                        
                                        
                                        $
                                        245,946See
      notes to unaudited condensed consolidated financial
      statements.





3
 
  BEL
      FUSE INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(dollars
      in thousands, except share and per share data)(Unaudited)
  Three
      Months Ended
                      
                      
                      Six
      Months EndedJune
      30,
                      
                      
                      June
      30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Net
      Sales
                      
                      $
                      77,732
                      
                      
                      $
                      44,934
                      
                      
                      $
                      133,881
                      
                      
                      $
                      88,805Costs
      and expenses:Cost
      of sales
                      
                      
                      61,676
                      
                      
                      
                      40,192
                      
                      
                      
                      108,729
                      
                      
                      
                      78,403Selling,
      general and administrative
                      
                      
                      10,299
                      
                      
                      
                      7,601
                      
                      
                      
                      19,461
                      
                      
                      
                      15,254Restructuring
      charges
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      413Loss
      (gain) on sale of property, plant and equipment
                      
                      
                      19
                      
                      
                      
                      13
                      
                      
                      
                      19
                      
                      
                      
                      (4,652
                      )71,994
                      
                      
                      
                      47,806
                      
                      
                      
                      128,209
                      
                      
                      
                      89,418Income
      (loss) from operations
                      
                      
                      5,738
                      
                      
                      
                      (2,872
                      )
                      
                      
                      5,672
                      
                      
                      
                      (613
                      )Realized
      gain on sale of investments
                      
                      
                      -
                      
                      
                      
                      1,081
                      
                      
                      
                      -
                      
                      
                      
                      1,083Interest
      income and other, net
                      
                      
                      116
                      
                      
                      
                      127
                      
                      
                      
                      238
                      
                      
                      
                      316Earnings
      (loss) before provision (benefit) for income taxes
                      
                      
                      5,854
                      
                      
                      
                      (1,664
                      )
                      
                      
                      5,910
                      
                      
                      
                      786Provision
      (benefit) for income taxes
                      
                      
                      1,159
                      
                      
                      
                      (392
                      )
                      
                      
                      1,183
                      
                      
                      
                      1,242Net
      earnings (loss)
                      
                      $
                      4,695
                      
                      
                      $
                      (1,272
                      )
                      
                      $
                      4,727
                      
                      
                      $
                      (456
                      )Earnings
      (loss) per share:Class
      A common share - basic and diluted
                      
                      $
                      0.38
                      
                      
                      $
                      (0.11
                      )
                      
                      $
                      0.38
                      
                      
                      $
                      (0.05
                      )Class
      B common share - basic and diluted
                      
                      $
                      0.41
                      
                      
                      $
                      (0.11
                      )
                      
                      $
                      0.41
                      
                      
                      $
                      (0.04
                      )Weighted-average
      shares outstanding:Class
      A common share - basic and diluted
                      
                      
                      2,174,912
                      
                      
                      
                      2,174,912
                      
                      
                      
                      2,174,912
                      
                      
                      
                      2,175,531Class
      B common share - basic and diluted
                      
                      
                      9,495,824
                      
                      
                      
                      9,343,090
                      
                      
                      
                      9,480,134
                      
                      
                      
                      9,352,550Dividends
      paid per share:Class
      A common share
                      
                      $
                      0.06
                      
                      
                      $
                      0.06
                      
                      
                      $
                      0.12
                      
                      
                      $
                      0.12Class
      B common share
                      
                      $
                      0.07
                      
                      
                      $
                      0.07
                      
                      
                      $
                      0.14
                      
                      
                      $
                      0.14See
      notes to unaudited condensed consolidated financial
      statements.
  4
  BEL
      FUSE INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(dollars
      in thousands)(Unaudited)
 Accumulated
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                AdditionalOther
                                                
                                                
                                                Class
      A
                                                
                                                
                                                Class
      B
                                                
                                                
                                                Paid-InComprehensive
                                                
                                                
                                                Retained
                                                
                                                
                                                Comprehensive
                                                
                                                
                                                Common
                                                
                                                
                                                Common
                                                
                                                
                                                CapitalTotal
                                                
                                                
                                                Income
                                                
                                                
                                                Earnings
                                                
                                                
                                                Income
      (Loss)
                                                
                                                
                                                Stock
                                                
                                                
                                                Stock
                                                
                                                
                                                (APIC)Balance,
      January 1, 2010
                                                
                                                $
                                                208,932
                                                
                                                
                                                
                                                
                                                
                                                $
                                                185,014
                                                
                                                
                                                $
                                                1,092
                                                
                                                
                                                $
                                                217
                                                
                                                
                                                $
                                                946
                                                
                                                
                                                $
                                                21,663Cash
      dividends declared on Class A common stock
                                                
                                                
                                                (261
                                                )
                                                
                                                
                                                
                                                
                                                
                                                (261
                                                )Cash
      dividends declared on Class B common stock
                                                
                                                
                                                (1,331
                                                )
                                                
                                                
                                                
                                                
                                                
                                                (1,331
                                                )Issuance
      of restricted common stock
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                7
                                                
                                                
                                                
                                                (7
                                                )Currency
      translation adjustment
                                                
                                                
                                                (1,455
                                                )
                                                
                                                $
                                                (1,455
                                                )
                                                
                                                
                                                
                                                
                                                
                                                
                                                (1,455
                                                )Unrealized
      holding gains on marketable securitiesarising
      during the period, net of taxes of $25
                                                
                                                
                                                40
                                                
                                                
                                                
                                                40
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                40Reduction
      in APIC pool associated with tax deficienciesrelated
      to restricted stock awards
                                                
                                                
                                                (60
                                                )
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                (60
                                                )Stock-based
      compensation expense
                                                
                                                
                                                1,154
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                1,154Net
      earnings
                                                
                                                
                                                4,727
                                                
                                                
                                                
                                                4,727
                                                
                                                
                                                
                                                4,727Comprehensive
      income
                                                
                                                
                                                
                                                
                                                
                                                $
                                                3,312Balance,
      June 30, 2010
                                                
                                                $
                                                211,746
                                                
                                                
                                                
                                                
                                                
                                                
                                                $
                                                188,149
                                                
                                                
                                                $
                                                (323
                                                )
                                                
                                                $
                                                217
                                                
                                                
                                                $
                                                953
                                                
                                                
                                                $
                                                22,750See
      notes to unaudited condensed consolidated financial
      statements.
   5
  BEL
      FUSE INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(dollars
      in thousands)(unaudited)
  Six
      Months EndedJune
      30,2010
                                      
                                      
                                      2009Cash
      flows from operating activities:Net
      earnings (loss)
                                      
                                      $
                                      4,727
                                      
                                      
                                      $
                                      (456
                                      )Adjustments
      to reconcile net earnings (loss) to netcash
      (used in) provided by operating activities:Depreciation
      and amortization
                                      
                                      
                                      4,195
                                      
                                      
                                      
                                      3,359Stock-based
      compensation
                                      
                                      
                                      1,154
                                      
                                      
                                      
                                      810Loss
      (gain) on sale of property, plant and equipment
                                      
                                      
                                      19
                                      
                                      
                                      
                                      (4,652
                                      )Realized
      gain on sale of investments
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (1,083
                                      )Other,
      net
                                      
                                      
                                      541
                                      
                                      
                                      
                                      821Deferred
      income taxes
                                      
                                      
                                      268
                                      
                                      
                                      
                                      2,335Changes
      in operating assets and liabilities (see below)
                                      
                                      
                                      (14,642
                                      )
                                      
                                      
                                      19,604Net
      Cash (Used in) Provided by Operating Activities
                                      
                                      
                                      (3,738
                                      )
                                      
                                      
                                      20,738Cash
      flows from investing activities:Purchase
      of property, plant and equipment
                                      
                                      
                                      (1,092
                                      )
                                      
                                      
                                      (1,122
                                      )Purchase
      of marketable securities
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (5,629
                                      )Payment
      for acquisition of business, net of cash acquired
                                      
                                      
                                      (40,424
                                      )
                                      
                                      
                                      -Proceeds
      from sale of marketable securities
                                      
                                      
                                      -
                                      
                                      
                                      
                                      4,680(Purchase
      of) proceeds from cash surrender value ofcompany-owned
      life insurance
                                      
                                      
                                      (1,571
                                      )
                                      
                                      
                                      1,518Proceeds
      from sale of property, plant and equipment
                                      
                                      
                                      6
                                      
                                      
                                      
                                      2,554Redemption
      of investment
                                      
                                      
                                      -
                                      
                                      
                                      
                                      1,945Net
      Cash (Used in) Provided by Investing Activities
                                      
                                      
                                      (43,081
                                      )
                                      
                                      
                                      3,946Cash
      flows from financing activities:Dividends
      paid to common shareholders
                                      
                                      
                                      (1,548
                                      )
                                      
                                      
                                      (1,544
                                      )Purchase
      and retirement of Class A common stock
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (92
                                      )Net
      Cash Used In Financing Activities
                                      
                                      
                                      (1,548
                                      )
                                      
                                      
                                      (1,636
                                      )See
      notes to unaudited condensed consolidated financial
      statements.
  6
  BEL
      FUSE INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(dollars
      in thousands)(unaudited)
  Six
      Months EndedJune
      30,2010
                      
                      
                      2009Effect
      of exchange rate changes on cash
                      
                      
                      (209
                      )
                      
                      
                      (27
                      )Net
      (Decrease) Increase in Cash and Cash Equivalents
                      
                      
                      (48,576
                      )
                      
                      
                      23,021Cash
      and Cash Equivalents - beginning of period
                      
                      
                      124,231
                      
                      
                      
                      74,955Cash
      and Cash Equivalents - end of period
                      
                      $
                      75,655
                      
                      
                      $
                      97,976Changes
      in operating assets and liabilities consist of:(Increase)
      decrease in accounts receivable
                      
                      $
                      (9,187
                      )
                      
                      $
                      13,760(Increase)
      decrease in inventories
                      
                      
                      (11,138
                      )
                      
                      
                      14,914Increase
      in prepaid expenses and other current assets
                      
                      
                      (812
                      )
                      
                      
                      (648
                      )Decrease
      (increase) in other assets
                      
                      
                      36
                      
                      
                      
                      (20
                      )Increase
      (decrease) in accounts payable
                      
                      
                      3,403
                      
                      
                      
                      (3,441
                      )Increase
      (decrease) in accrued expenses
                      
                      
                      2,469
                      
                      
                      
                      (3,249
                      )Cash
      payments of accrued restructuring costs
                      
                      
                      (78
                      )
                      
                      
                      (221
                      )Increase
      (decrease) in income taxes payable
                      
                      
                      665
                      
                      
                      
                      (1,491
                      )$
                      (14,642
                      )
                      
                      $
                      19,604Supplementary
      information:Cash
      paid during the period for:Income
      taxes, net of refunds received
                      
                      $
                      346
                      
                      
                      $
                      348Interest
                      
                      
                      14
                      
                      
                      
                      -Details
      of acquisition (see Note 3):Fair
      value of identifiable net assets acquired
                      
                      $
                      37,717
                      
                      
                      $
                      -Goodwill
                      
                      
                      2,764
                      
                      
                      
                      -Fair
      value of net assets acquired
                      
                      $
                      40,481
                      
                      
                      $
                      -Fair
      value of consideration transferred
                      
                      $
                      40,481
                      
                      
                      $
                      -Less:
      Cash acquired in acquisition
                      
                      
                      (57
                      )
                      
                      
                      -Cash
      paid for acquisition, net of cash acquired
                      
                      $
                      40,424
                      
                      
                      $
                      -See
      notes to unaudited condensed consolidated financial
      statements.
  7


BEL FUSE
INC. AND SUBSIDIARIES


NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




1. BASIS OF
PRESENTATION AND ACCOUNTING POLICIES







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





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





Recent Accounting
Pronouncements





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





2. EARNINGS
(LOSS) PER SHARE





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




8




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




Three
      Months Ended
                                    
                                    
                                    Six
      Months EndedJune
      30,
                                    
                                    
                                    June
      30,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009Numerator:Net
      earnings (loss)
                                    
                                    $
                                    4,695
                                    
                                    
                                    $
                                    (1,272
                                    )
                                    
                                    $
                                    4,727
                                    
                                    
                                    $
                                    (456
                                    )Less
      Dividends:Class
      A
                                    
                                    
                                    131
                                    
                                    
                                    
                                    128
                                    
                                    
                                    
                                    261
                                    
                                    
                                    
                                    260Class
      B
                                    
                                    
                                    667
                                    
                                    
                                    
                                    654
                                    
                                    
                                    
                                    1,331
                                    
                                    
                                    
                                    1,308Undistributed
      earnings (loss)
                                    
                                    $
                                    3,897
                                    
                                    
                                    $
                                    (2,054
                                    )
                                    
                                    $
                                    3,135
                                    
                                    
                                    $
                                    (2,024
                                    )Undistributed
      earnings (loss) allocation - basic and diluted:Class
      A undistributed earnings (loss)
                                    
                                    
                                    698
                                    
                                    
                                    
                                    (373
                                    )
                                    
                                    
                                    562
                                    
                                    
                                    
                                    (367
                                    )Class
      B undistributed earnings (loss)
                                    
                                    
                                    3,199
                                    
                                    
                                    
                                    (1,681
                                    )
                                    
                                    
                                    2,573
                                    
                                    
                                    
                                    (1,657
                                    )Total
      undistributed earnings (loss)
                                    
                                    $
                                    3,897
                                    
                                    
                                    $
                                    (2,054
                                    )
                                    
                                    $
                                    3,135
                                    
                                    
                                    $
                                    (2,024
                                    )Net
      earnings (loss) allocation - basic and diluted:Class A allocated earnings (loss)
                                    
                                    
                                    829
                                    
                                    
                                    
                                    (245
                                    )
                                    
                                    
                                    823
                                    
                                    
                                    
                                    (107
                                    )Class
      B allocated earnings (loss)
                                    
                                    
                                    3,866
                                    
                                    
                                    
                                    (1,027
                                    )
                                    
                                    
                                    3,904
                                    
                                    
                                    
                                    (349
                                    )Net
      earnings
                                    
                                    $
                                    4,695
                                    
                                    
                                    $
                                    (1,272
                                    )
                                    
                                    $
                                    4,727
                                    
                                    
                                    $
                                    (456
                                    )Denominator:Weighted-average
      shares outstanding:Class
      A common share - basic and diluted
                                    
                                    
                                    2,174,912
                                    
                                    
                                    
                                    2,174,912
                                    
                                    
                                    
                                    2,174,912
                                    
                                    
                                    
                                    2,175,531Class
      B common share - basic and diluted
                                    
                                    
                                    9,495,824
                                    
                                    
                                    
                                    9,343,090
                                    
                                    
                                    
                                    9,480,134
                                    
                                    
                                    
                                    9,352,550Earnings
      (loss) per share:Class
      A common share - basic and diluted
                                    
                                    $
                                    0.38
                                    
                                    
                                    $
                                    (0.11
                                    )
                                    
                                    $
                                    0.38
                                    
                                    
                                    $
                                    (0.05
                                    )Class
      B common share - basic and diluted
                                    
                                    $
                                    0.41
                                    
                                    
                                    $
                                    (0.11
                                    )
                                    
                                    $
                                    0.41
                                    
                                    
                                    $
                                    (0.04
                                    )





3. ACQUISITION





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





Cinch
manufactures a broad range of interconnect products for customers in the
military and aerospace, high-performance computing, telecom/datacom, and
transportation markets.  The Company believes that the addition of
Cinch’s well-established lines of connector and cable products and extensive
customer base will provide Bel with immediate access to the large and growing
aerospace and military markets.  In addition to these strategic
synergies, there is a significant opportunity for expense reduction and the
elimination of redundancies.  The combination of these factors, and
Bel’s ability to leverage its existing product line, have given rise to the
provisional amount of goodwill detailed below.




9


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




MeasurementPeriod
                            
                            
                            January
      29, 2010January
      29, 2010
                            
                            
                            Adjustments
                            
                            
                            (As
      adjusted)Cash
                            
                            $
                            57
                            
                            
                            $
                            -
                            
                            
                            $
                            57Accounts
      receivable
                            
                            
                            6,910
                            
                            
                            
                            -
                            
                            
                            
                            6,910Inventories
                            
                            
                            7,548
                            
                            
                            
                            -
                            
                            
                            
                            7,548Other
      current assets
                            
                            
                            803
                            
                            
                            
                            85
                            
                            
                            
                            888Property,
      plant and equipment
                            
                            
                            7,822
                            
                            
                            
                            6,996
                            
                            
                            
                            14,818Intangible
      assets
                            
                            
                            2,528
                            
                            
                            
                            8,887
                            
                            
                            
                            11,415Other
      assets
                            
                            
                            1,715
                            
                            
                            
                            (375
                            )
                            
                            
                            1,340Total
      identifiable assets
                            
                            
                            27,383
                            
                            
                            
                            15,593
                            
                            
                            
                            42,976Accounts
      payable
                            
                            
                            (2,320
                            )
                            
                            
                            -
                            
                            
                            
                            (2,320
                            )Accrued
      expenses and other current liabilities
                            
                            
                            (2,932
                            )
                            
                            
                            (7
                            )
                            
                            
                            (2,939
                            )Total
      liabilities assumed
                            
                            
                            (5,252
                            )
                            
                            
                            (7
                            )
                            
                            
                            (5,259
                            )Net
      identifiable assets acquired
                            
                            
                            22,131
                            
                            
                            
                            15,586
                            
                            
                            
                            37,717Goodwill
                            
                            
                            18,371
                            
                            
                            
                            (15,607
                            )
                            
                            
                            2,764Net
      assets acquired
                            
                            $
                            40,502
                            
                            
                            $
                            (21
                            )
                            
                            $
                            40,481Cash
      paid
                            
                            $
                            39,755
                            
                            
                            
                            (79
                            )
                            
                            $
                            39,676Assumption
      of change-in-control payments
                            
                            
                            747
                            
                            
                            
                            58
                            
                            
                            
                            805Fair
      value of consideration transferred
                            
                            $
                            40,502
                            
                            
                            $
                            (21
                            )
                            
                            $
                            40,481




The
preliminary measurements of fair value set forth above are subject to change and
such changes could be significant.  The Company expects to finalize
the valuation and complete the purchase price allocation as soon as practicable
but no later than one year from the Acquisition Date. While the purchase price
allocation is not complete, the Company did receive additional information
during the second quarter of 2010 related to the Acquisition Date fair values of
certain property, plant and equipment, and intangible assets
acquired.  These updates to the purchase price allocation are noted as
measurement period adjustments in the above table.





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





10







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




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




The
preliminary fair value of identifiable intangible assets noted above consists of
the following:





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




Of the
$2.8 million of goodwill noted above, $1.7 million has been allocated to the
Company’s North America reportable operating segment and $1.1 million has been
allocated to the Company’s Europe reportable operating segment.  This
allocation was determined based on those reportable operating segments expected
to benefit from the acquisition of Cinch and was based primarily on the location
of Cinch operations and associated revenue generation at the Acquisition
Date.  The Company expects $1.7 million of the goodwill and $8.8
million of intangible assets allocated to the North America reportable operating
segment to be deductible for tax purposes over a period of 15
years.





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





Cinch’s
results of operations have been included in the Company’s condensed consolidated
financial statements for the periods subsequent to the Acquisition
Date.  During the three and six months ended June 30, 2010, Cinch
contributed revenues of $14.9 million and $24.8 million, respectively, and
estimated net earnings of $0.8 million and $0.2 million, respectively, to the
Company since the Acquisition Date.  The unaudited pro forma
information below presents the combined operating results of the Company and
Cinch.  The unaudited pro forma results are presented for illustrative
purposes only and include the effects of headcount reductions that were effected
on the Acquisition Date.  They do not reflect the realization of any
other potential cost savings, or any related integration costs. Certain cost
savings may result from the acquisition; however, there can be no assurance that
these cost savings will be achieved. These pro forma results do not purport to
be indicative of the results that would have actually been obtained if the
acquisition had occurred as of January 1, 2009, nor is the pro forma data
intended to be a projection of results that may be obtained in the
future.




11




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




Three
      Months Ended
                                    
                                    
                                    Six
      Months EndedJune
      30,
                                    
                                    
                                    June
      30,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009Revenue
                                    
                                    $
                                    77,732
                                    
                                    
                                    $
                                    57,184
                                    
                                    
                                    $
                                    137,550
                                    
                                    
                                    $
                                    115,627Net
      earnings
                                    
                                    
                                    5,151
                                    
                                    
                                    
                                    (959
                                    )
                                    
                                    
                                    5,090
                                    
                                    
                                    
                                    331Earnings
      per Class A common share - basic and diluted
                                    
                                    
                                    0.42
                                    
                                    
                                    
                                    (0.09
                                    )
                                    
                                    
                                    0.41
                                    
                                    
                                    
                                    0.02Earnings
      per Class B common share - basic and diluted
                                    
                                    
                                    0.45
                                    
                                    
                                    
                                    (0.08
                                    )
                                    
                                    
                                    0.44
                                    
                                    
                                    
                                    0.03





4.   FAIR
VALUE MEASUREMENTS





The
Company utilizes the accounting guidance for fair value measurements and
disclosures for all financial assets and liabilities and nonfinancial assets and
liabilities that are recognized or disclosed at fair value in the condensed
consolidated financial statements on a recurring basis or on a nonrecurring
basis during the reporting period.  The fair value is an exit price,
representing the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants based
upon the best use of the asset or liability at the measurement
date.  The Company utilizes market data or assumptions that market
participants would use in pricing the asset or liability.  The
accounting guidance establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value.  These tiers are
defined as follows:





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





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




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





As of
June 30, 2010 and December 31, 2009, the Company held certain financial assets
that are measured at fair value on a recurring basis.  These consisted
primarily of the Company’s investments in a Rabbi Trust, which are intended to
fund the Company’s SERP obligations.  These are categorized as
available-for-sale securities and are included as other assets in the
accompanying condensed consolidated balance sheets at June 30, 2010 and December
31, 2009. The fair value of these investments is determined based on quoted
market prices in public markets and is categorized as Level 1.  The
Company does not have any financial assets measured at fair value on a recurring
basis categorized as Level 2 or Level 3, and there were no transfers in or out
of Level 1, Level 2 or Level 3 during the three or six months ended June 30,
2010 and 2009.  There were no changes to the Company’s valuation
techniques used to measure asset fair values on a recurring or nonrecurring
basis during the three or six months ended June 30, 2010.




12





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




Assets
      at Fair Value UsingTotal
                                                            
                                                            
                                                            Quoted
      Prices
                                                              in
      Active
                                                              Markets
      for
                                                              Identical
      Assets
                                                              (Level
      1)
                                                            
                                                            
                                                            Significant
                                                              Other
                                                              Observable
                                                              Inputs
                                                              (Level
      2)
                                                            
                                                            
                                                            Significant
                                                              Unobservable
                                                              Inputs
                                                              (Level
      3)As of June 30, 2010Available-for-sale
      securities:Investments
      held in Rabbi Trust
                                                            
                                                            $
                                                            3,721
                                                            
                                                            
                                                            $
                                                            3,721
                                                            
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -Marketable
      securities
                                                            
                                                            
                                                            3
                                                            
                                                            
                                                            
                                                            3
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Total
                                                            
                                                            $
                                                            3,724
                                                            
                                                            
                                                            $
                                                            3,724
                                                            
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -As of December 31, 2009Available-for-sale
      securities:Investments
      held in Rabbi Trust
                                                            
                                                            $
                                                            3,656
                                                            
                                                            
                                                            $
                                                            3,656
                                                            
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -Marketable
      securities
                                                            
                                                            
                                                            2
                                                            
                                                            
                                                            
                                                            2
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Total
                                                            
                                                            $
                                                            3,658
                                                            
                                                            
                                                            $
                                                            3,658
                                                            
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -





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





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





5. INVENTORIES





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




June
      30,
                        
                        
                        December
      31,2010
                        
                        
                        2009Raw
      materials
                        
                        $
                        33,480
                        
                        
                        $
                        22,431Work
      in progress
                        
                        
                        5,864
                        
                        
                        
                        1,478Finished
      goods
                        
                        
                        10,778
                        
                        
                        
                        7,882$
                        50,122
                        
                        
                        $
                        31,791


13





6. BUSINESS
SEGMENT INFORMATION





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




Three
      Months Ended
                                          
                                          
                                          Six
      Months EndedJune
      30,
                                          
                                          
                                          June
      30,2010
                                          
                                          
                                          2009
                                          
                                          
                                          2010
                                          
                                          
                                          2009Net
      sales to external customers:North
      America
                                          
                                          $
                                          27,393
                                          
                                          
                                          $
                                          9,420
                                          
                                          
                                          $
                                          48,491
                                          
                                          
                                          $
                                          19,119Asia
                                          
                                          
                                          40,348
                                          
                                          
                                          
                                          31,125
                                          
                                          
                                          
                                          68,861
                                          
                                          
                                          
                                          60,578Europe
                                          
                                          
                                          9,991
                                          
                                          
                                          
                                          4,389
                                          
                                          
                                          
                                          16,529
                                          
                                          
                                          
                                          9,108$
                                          77,732
                                          
                                          
                                          $
                                          44,934
                                          
                                          
                                          $
                                          133,881
                                          
                                          
                                          $
                                          88,805Total
      segment revenues:North
      America
                                          
                                          $
                                          31,531
                                          
                                          
                                          $
                                          12,585
                                          
                                          
                                          $
                                          55,777
                                          
                                          
                                          $
                                          23,891Asia
                                          
                                          
                                          49,950
                                          
                                          
                                          
                                          35,120
                                          
                                          
                                          
                                          84,721
                                          
                                          
                                          
                                          68,918Europe
                                          
                                          
                                          10,273
                                          
                                          
                                          
                                          4,684
                                          
                                          
                                          
                                          17,049
                                          
                                          
                                          
                                          9,724Total
      segment revenues
                                          
                                          
                                          91,754
                                          
                                          
                                          
                                          52,389
                                          
                                          
                                          
                                          157,547
                                          
                                          
                                          
                                          102,533Intersegment
      revenues
                                          
                                          
                                          (14,022
                                          )
                                          
                                          
                                          (7,455
                                          )
                                          
                                          
                                          (23,666
                                          )
                                          
                                          
                                          (13,728
                                          )Net
      sales
                                          
                                          $
                                          77,732
                                          
                                          
                                          $
                                          44,934
                                          
                                          
                                          $
                                          133,881
                                          
                                          
                                          $
                                          88,805Income
      (Loss) from operations:North
      America
                                          
                                          $
                                          1,236
                                          
                                          
                                          $
                                          (215
                                          )
                                          
                                          $
                                          1,098
                                          
                                          
                                          $
                                          2,356Asia
                                          
                                          
                                          4,110
                                          
                                          
                                          
                                          (2,674
                                          )
                                          
                                          
                                          4,243
                                          
                                          
                                          
                                          (2,867
                                          )Europe
                                          
                                          
                                          392
                                          
                                          
                                          
                                          17
                                          
                                          
                                          
                                          331
                                          
                                          
                                          
                                          (102
                                          )$
                                          5,738
                                          
                                          
                                          $
                                          (2,872
                                          )
                                          
                                          $
                                          5,672
                                          
                                          
                                          $
                                          (613
                                          )





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




Acquisition of Cinch
– The above figures for the three and six months ended June 30, 2010 include
sales volume and expenses of Cinch since the acquisition date of January 29,
2010.  During the three months ended June 30, 2010, the Cinch
acquisition contributed sales to external customers of $11.8 million and income
from operations of $0.8 million to the Company’s North America operating segment
and sales to external customers of $3.1 million and income from operations of
$0.1 million to the Company’s Europe operating segment. During the six months
ended June 30, 2010, the Cinch acquisition contributed sales to external
customers of $19.8 million and income from operations of $0.3 million to the
Company’s North America operating segment and sales to external customers of
$5.0 million and an immaterial amount of income from operations to the Company’s
Europe operating segment.




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




14




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





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





7. INCOME
TAXES





As of
June 30, 2010 and December 31, 2009, the Company has approximately $5.2 million
and $4.7 million, respectively, of liabilities for uncertain tax positions ($1.9
million and $1.8 million, respectively, included in income taxes payable and
$3.3 million and $2.9 million, respectively, included in liability for uncertain
tax positions) all of which, if reversed, would reduce the Company’s effective
tax rate.





The
Company and its subsidiaries file income tax returns in the U.S. federal
jurisdiction and various states and foreign jurisdictions.  The
Company is no longer subject to U.S. federal examinations by tax authorities for
years before 2006 and for state examinations before
2005.   Regarding foreign subsidiaries, the Company is no longer
subject to examination by tax authorities for years before 2002 in Asia and
generally 2004 in Europe.  The Company is not currently being audited
by any tax authorities.





As a
result of the expiration of the statute of limitations for specific
jurisdictions, it is reasonably possible that the related unrecognized benefits
for tax positions taken regarding previously filed tax returns may change
materially from those recorded as liabilities for uncertain tax positions in the
Company’s condensed consolidated financial statements at June 30,
2010.   A total of $1.9 million of previously recorded
liabilities for uncertain tax positions relates to the 2006 tax
year.  The statute of limitations related to this liability is
scheduled to expire on September 15, 2010.





The
Company’s policy is to recognize interest and penalties related to uncertain tax
positions as a component of the current provision for income
taxes.  During each of the six months ended June 30, 2010 and 2009,
the Company recognized $0.2 million and $0.1 million, respectively, in interest
and penalties in the condensed consolidated statements of
operations.  The Company has approximately $0.8 million and $0.6
million accrued for the payment of interest and penalties at June 30, 2010 and
December 31, 2009, respectively, which is included in both income taxes payable
and liability for uncertain tax positions in the condensed consolidated balance
sheets.





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




15




The
President of the United States has presented a budget to the United States
Congress which contains various modifications to international tax
provisions.  Some of the proposed changes might affect taxation
regarding the transfer of intangible property and subject the Company to, among
other things, additional income taxes and restrictions on how foreign tax
credits would be calculated.  The Company cannot ascertain at this
time what the final outcome of this proposed legislation will be or the effect,
if any, on the Company's results of operations or financial
condition.  Additionally, the Internal Revenue Service ("IRS")
released a draft tax schedule and instructions that provide additional details
on its proposal to require companies with assets of $10.0 million or more to
report their uncertain tax positions annually, beginning with the 2010 tax year,
on their business tax returns.





8. ACCRUED
EXPENSES AND RESTRUCTURING COSTS





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




June
      30,
                      
                      
                      December
      31,2010
                      
                      
                      2009Sales
      commissions
                      
                      $
                      1,779
                      
                      
                      $
                      1,506Contract
      labor
                      
                      
                      3,264
                      
                      
                      
                      2,615Salaries,
      bonuses and related benefits
                      
                      
                      5,017
                      
                      
                      
                      1,475Other
                      
                      
                      3,113
                      
                      
                      
                      2,395$
                      13,173
                      
                      
                      $
                      7,991




Accrued Restructuring
Costs





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




Liability
      at
                  
                  
                  New
                  
                  
                  Cash
      Payments &
                  
                  
                  Liability
      atDecember
      31, 2009
                  
                  
                  Charges
                  
                  
                  Other
      Settlements
                  
                  
                  June
      30, 2010Facility
      lease obligation
                  
                  $
                  664
                  
                  
                  $
                  -
                  
                  
                  $
                  (78
                  )
                  
                  $
                  586




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




16




9. RETIREMENT
FUND AND PROFIT SHARING PLAN





The
Company maintains a domestic 401(K) plan, which consists of profit sharing,
contributory stock ownership and individual voluntary savings to provide
non-defined retirement benefits for plan participants.  The expense
for the three months ended June 30, 2010 and 2009 amounted to approximately $0.1
million in each period.  The expense for the six months ended June 30,
2010 and 2009 amounted to approximately $0.3 million and $0.2 million,
respectively. As of June 30, 2010, the plans owned 16,558 and 189,890 shares of
Bel Fuse Inc. Class A and Class B common stock, respectively.





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





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





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




Three
      Months Ended
                                            
                                            
                                            Six
      Months EndedJune
      30,
                                            
                                            
                                            June
      30,2010
                                            
                                            
                                            2009
                                            
                                            
                                            2010
                                            
                                            
                                            2009Service
      cost
                                            
                                            $
                                            85
                                            
                                            
                                            $
                                            96
                                            
                                            
                                            $
                                            170
                                            
                                            
                                            $
                                            192Interest
      cost
                                            
                                            
                                            84
                                            
                                            
                                            
                                            88
                                            
                                            
                                            
                                            168
                                            
                                            
                                            
                                            176Amortization
      of adjustments
                                            
                                            
                                            33
                                            
                                            
                                            
                                            37
                                            
                                            
                                            
                                            66
                                            
                                            
                                            
                                            74Total
      SERP expense
                                            
                                            $
                                            202
                                            
                                            
                                            $
                                            221
                                            
                                            
                                            $
                                            404
                                            
                                            
                                            $
                                            442
  June
      30,
                              
                              
                              December
      31,2010
                              
                              
                              2009Balance
      sheet amounts:Minimum
      pension obligationand
      unfunded pension liability
                              
                              $
                              5,990
                              
                              
                              $
                              5,622Amounts
      recognized in accumulatedother
      comprehensive income, pretax:Prior
      service cost
                              
                              $
                              1,276
                              
                              
                              $
                              1,276Net
      gains
                              
                              
                              (176
                              )
                              
                              
                              (176
                              )$
                              1,100
                              
                              
                              $
                              1,100




17





10. COMPREHENSIVE
INCOME




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




Three
      Months Ended
                                          
                                          
                                          Six
      Months EndedJune
      30,
                                          
                                          
                                          June
      30,2010
                                          
                                          
                                          2009
                                          
                                          
                                          2010
                                          
                                          
                                          2009Net
      earnings (loss)
                                          
                                          $
                                          4,695
                                          
                                          
                                          $
                                          (1,272
                                          )
                                          
                                          $
                                          4,727
                                          
                                          
                                          $
                                          (456
                                          )Currency
      translation adjustment
                                          
                                          
                                          (790
                                          )
                                          
                                          
                                          538
                                          
                                          
                                          
                                          (1,455
                                          )
                                          
                                          
                                          13Increase
      (decrease) in unrealizedgain
      on marketable securities-
      net of taxes
                                          
                                          
                                          (46
                                          )
                                          
                                          
                                          3,307
                                          
                                          
                                          
                                          40
                                          
                                          
                                          
                                          2,061Reclassification
      adjustment for gainsincluded
      in net loss, net of tax
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (658
                                          )
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (658
                                          )Comprehensive
      income
                                          
                                          $
                                          3,859
                                          
                                          
                                          $
                                          1,915
                                          
                                          
                                          $
                                          3,312
                                          
                                          
                                          $
                                          960





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





June
      30,
                            
                            
                            December
      31,2010
                            
                            
                            2009Foreign
      currency translation adjustment
                            
                            $
                            334
                            
                            
                            $
                            1,789Unrealized
      holding gains on available-for-salesecurities,
      net of taxes of $67 and $42 as ofJune
      30, 2010 and December 31, 2009
                            
                            
                            102
                            
                            
                            
                            62Unfunded
      SERP liability, net of taxes of ($341) asof
      both June 30, 2010 and December 31, 2009
                            
                            
                            (759
                            )
                            
                            
                            (759
                            )Accumulated
      other comprehensive (loss) income
                            
                            $
                            (323
                            )
                            
                            $
                            1,092





18




11. COMMITMENTS
AND CONTINGENCIES





Leases





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




Years
      EndingJune 30,2011
                                
                                $
                                2,9222012
                                
                                
                                2,3362013
                                
                                
                                1,8392014
                                
                                
                                1,1692015
                                
                                
                                858Thereafter
                                
                                
                                354$
                                9,478





Other
Commitments





The
Company submits purchase orders for raw materials to various vendors throughout
the year for current production requirements, as well as forecasted
requirements.  Certain of these purchase orders relate to special
purpose material and, as such, the Company may incur penalties if the order is
cancelled.  The Company had outstanding purchase orders related to raw
materials in the amount of $34.0 and $19.9 million at June 30, 2010 and December
31, 2009, respectively.  Of the $14.1 million increase, the addition
of Cinch commitments accounts for $5.7 million and the remaining $8.4 million
increase relates to new purchase orders of raw materials to accommodate the
increased demand for Bel’s products.  The Company also had outstanding
purchase orders related to capital expenditures in the amount of $2.0 million
and $1.4 million at June 30, 2010 and December 31, 2009,
respectively.





Legal
Proceedings





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





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




12. RELATED
PARTY TRANSACTIONS





As of
June 30, 2010, the Company has $2.0 million invested in a money market fund with
GAMCO Investors, Inc., a current shareholder of the Company, with holdings of
its Class A stock of approximately 23.1%.




19




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


The
Company’s quarterly and annual operating results are impacted by a wide variety
of factors that could materially and adversely affect revenues and
profitability, including the risk factors described in the Company's Annual
Report on Form 10-K for the year ended December 31, 2009. As a result of these
and other factors, the Company may experience material fluctuations in future
operating results on a quarterly or annual basis, which could materially and
adversely affect its business, financial condition, operating results, and stock
prices.  Furthermore, this document and other documents filed by the
Company with the Securities and Exchange Commission (the “SEC”) contain certain
forward-looking statements under the Private Securities Litigation Reform Act of
1995 (“Forward-Looking Statements”) with respect to the business of the
Company.  These Forward-Looking Statements are subject to certain
risks and uncertainties, including those detailed in Item 1A of the Company’s
Annual Report on Form 10-K for the year ended December 31, 2009, which could
cause actual results to differ materially from these Forward-Looking
Statements.  The Company undertakes no obligation to publicly release
the results of any revisions to these Forward-Looking Statements which may be
necessary to reflect events or circumstances after the date such statements are
made or to reflect the occurrence of unanticipated events.  An
investment in the Company involves various risks, including those which are
detailed from time to time in the Company’s SEC filings.





Overview





Our
Company





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





Bel’s
business is operated in one industry with three reportable operating
segments, which are geographic in nature.  The segments consist of
North America, Asia and Europe.  The acquisition of Cinch primarily
affects the Company’s North America reportable operating segment with a lesser
effect on the Company’s Europe reportable operating segment.





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




20




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





Trends
Affecting our Business





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





·
            With
      the acquisition of Cinch in January 2010 and the return to historical
      demand levels by legacy-Bel customers, the Company’s sales volume for the
      three and six months ended June 30, 2010 has rebounded to 2008 levels for
      the comparable periods.   Bel continues to have a strong
      backlog of orders, but is still faced with the challenges of component
      pricing and availability, as well as labor shortages in the
      PRC.  These factors could cause either loss or deferral of
      revenues for specific products.





·
            The
      increase in industry demand for components and the limited availability of
      components has given rise to commodity price increases across the
      board.  If Bel is unable to pass along these increased costs to
      our customers, this increase in commodity prices for Bel’s raw materials
      will have a negative impact on Bel’s profit
  margins.





·
            The
      increase in customer demand in late 2009 and into the first half of 2010
      resulted in the Company’s hiring approximately 2,483 additional workers
      during 2010, with a goal of hiring 2,800 new workers to accommodate a
      substantial increase in demand for Bel’s products.   The
      Company experienced higher labor costs through the first half of 2010 due
      to training costs, overtime and production inefficiencies associated with
      hiring these new workers.





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





·
            One
      of Bel’s significant customers had a reduced sales volume by approximately
      $5.6 million during the first half 2010 as compared to the first half of
      2009.  The products associated with this customer have a very
      high material content, which results in lower gross margins than the
      Company’s other product lines.  The decline in sales to this
      customer resulted in an overall increase in Bel’s gross profit margin
      percentage, as the reduced revenue was offset by a significant reduction
      in material costs. The sales volume associated with this customer began to
      rebound in the second quarter of 2010 and the Company anticipates a
      further increase in this sales volume throughout the remainder of
      2010.  An increase in sales volume to this customer would have
      an unfavorable impact on the Company’s profit margin
      percentage.




21




·
            Some
      of the Company’s products, particularly certain products brought over with
      the Cinch acquisition, are reaching the end of their product
      life.  While there are new products in development to replace
      these products, the new products may not be ready for commercial sale
      until 2011.  As a result, the Company anticipates that there may
      be a decrease in revenue volume later in 2010 as old products phase
      out.





·
            In
      connection with the acquisition of Cinch in January 2010, the Company
      incurred $0.3 million in acquisition-related costs and $0.8 million in
      inventory-related purchase accounting adjustments during the six months
      ended June 30, 2010.  In addition, the Company recorded
      additional depreciation and amortization expense of $0.3 million in the
      second quarter of 2010 associated with the measurement period adjustments
      to the fair value of fixed assets and intangibles
      acquired.





These
factors are expected to continue into the foreseeable future.  Given
the need to maintain competitive pricing while incurring higher labor costs to
accommodate the recent increase in demand, the Company anticipates that its
results of operations for the remainder of 2010 will be materially adversely
affected by the factors noted above.





Summary
by Reportable Operating Segment





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




Three
      Months Ended
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              Six
      Months EndedJune
      30,
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              June
      30,2010
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              2009
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              2010
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              2009North
      America
                                                                                                                                              
                                                                                                                                              $
                                                                                                                                              27,393
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              35
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              $
                                                                                                                                              9,420
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              21
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              $
                                                                                                                                              48,491
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              36
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              $
                                                                                                                                              19,119
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              22
                                                                                                                                              %Asia
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              40,348
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              52
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              31,125
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              69
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              68,861
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              52
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              60,578
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              68
                                                                                                                                              %Europe
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              9,991
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              13
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              4,389
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              10
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              16,529
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              12
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              9,108
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              10
                                                                                                                                              %$
                                                                                                                                              77,732
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              100
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              $
                                                                                                                                              44,934
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              100
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              $
                                                                                                                                              133,881
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              100
                                                                                                                                              %
                                                                                                                                              
                                                                                                                                              $
                                                                                                                                              88,805
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              
                                                                                                                                              100
                                                                                                                                              %




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





Three
      Months Ended
                                            
                                            
                                            Six
      Months EndedJune
      30,
                                            
                                            
                                            June
      30,2010
                                            
                                            
                                            2009
                                            
                                            
                                            2010
                                            
                                            
                                            2009Income
      (Loss) from Operations:North
      America
                                            
                                            $
                                            1,236
                                            
                                            
                                            $
                                            (215
                                            )
                                            
                                            $
                                            1,098
                                            
                                            
                                            $
                                            2,356Asia
                                            
                                            
                                            4,110
                                            
                                            
                                            
                                            (2,674
                                            )
                                            
                                            
                                            4,243
                                            
                                            
                                            
                                            (2,867
                                            )Europe
                                            
                                            
                                            392
                                            
                                            
                                            
                                            17
                                            
                                            
                                            
                                            331
                                            
                                            
                                            
                                            (102
                                            )$
                                            5,738
                                            
                                            
                                            $
                                            (2,872
                                            )
                                            
                                            $
                                            5,672
                                            
                                            
                                            $
                                            (613
                                            )




The shift
in net sales among the Company’s reportable operating segments was primarily due
to the Cinch acquisition, which brought in an additional $14.9 million in sales
during Bel’s second quarter 2010 and an additional $24.8 million in sales during
the first half of 2010, primarily in the North America operating segment and to
a lesser extent in the Europe operating segment.  See Note 6 to the
notes to condensed consolidated financial statements contained in this Quarterly
Report on Form 10-Q for additional segment discussion.




22




Overview
of Financial Results





The acquisition of Cinch in late
January 2010 and the rebound of market conditions have impacted the Company
considerably during the three and six months ended June 30, 2010.





During the second quarter of 2010, the
Company experienced a 73.0% increase in sales as compared to the second quarter
of 2009.  This was primarily due to legacy-Bel growth of 39.8% due to
a rebound in demand for Bel’s products.  The addition of Cinch’s sales
volume accounted for the remaining 33.2% increase in sales from Bel’s second
quarter of 2009.  While sales increased 73.0% as compared to the
second quarter of 2009, cost of sales increased by only 53.5% compared to last
year’s second quarter.  A shift in sales among Bel’s product groups
has resulted in a significant decrease in overall material costs, as the Company
manufactured a reduced volume of product with high material
content.  As an offsetting factor, the Company experienced a surge in
labor costs in the first quarter of 2010, due to training expenses, production
inefficiencies and overtime associated with the hiring of a large volume of new
workers to meet the increased customer demand for Bel’s
products.  This increase in labor costs continued into the second
quarter of 2010.  Selling, general and administrative expenses
increased by $2.7 million during the second quarter 2010 as compared to the
second quarter of 2009.  This increase primarily related to the
additional personnel, office expenses and other costs associated with the
recently acquired Cinch facilities.  Additional details related to
these factors affecting the second quarter results are described in the Results
of Operations section below.





During the six months ended June 30,
2010, the Company experienced a 50.8% increase in sales as compared to the first
half of 2009.  This was primarily due to the addition of Cinch’s sales
volume since its acquisition on January 29, 2010, which accounted for a 27.9%
increase from Bel’s first half of 2009.  The remaining 22.9% increase
in sales relates to legacy-Bel sales growth due to a rebound in demand for Bel’s
products.  While sales increased 50.8% as compared to the first half
of 2009, cost of sales increased by only 38.7% compared to 2009 due to the same
factors described above.  Selling, general and administrative expenses
increased by $4.2 million during the first half of 2010 as compared to the first
half of 2009, primarily due to the additional personnel, office expenses and
other costs associated with the recently acquired Cinch
facilities.  Additional details related to these factors affecting the
six-month results are described in the Results of Operations section
below.





Critical Accounting
Policies





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




23





Recent Accounting
Pronouncements





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





Results of
Operations





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




Percentage
      of Net Sales
                                
                                
                                Percentage
      of Net SalesThree
      Months Ended
                                
                                
                                Six
      Months EndedJune
      30,
                                
                                
                                June
      30,2010
                                
                                
                                2009
                                
                                
                                2010
                                
                                
                                2009Net
      sales
                                
                                
                                100.0
                                %
                                
                                
                                100.0
                                %
                                
                                
                                100.0
                                %
                                
                                
                                100.0
                                %Cost
      of sales
                                
                                
                                79.3
                                
                                
                                
                                89.4
                                
                                
                                
                                81.2
                                
                                
                                
                                88.3Selling,
      general and administrative ("SG&A") expenses
                                
                                
                                13.2
                                
                                
                                
                                16.9
                                
                                
                                
                                14.5
                                
                                
                                
                                17.2Restructuring
      charge
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                0.5Gain
      on sale of property, plant and equipment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                5.2Realized
      gain on investment
                                
                                
                                -
                                
                                
                                
                                2.4
                                
                                
                                
                                -
                                
                                
                                
                                1.2Interest
      income and other, net
                                
                                
                                0.1
                                
                                
                                
                                0.3
                                
                                
                                
                                0.2
                                
                                
                                
                                0.3Earnings
      (loss) before provision (benefit) for income taxes
                                
                                
                                7.5
                                
                                
                                
                                (3.7
                                )
                                
                                
                                4.4
                                
                                
                                
                                0.9Provision
      (benefit) for income taxes
                                
                                
                                1.5
                                
                                
                                
                                (0.9
                                )
                                
                                
                                0.9
                                
                                
                                
                                1.4Net
      earnings (loss)
                                
                                
                                6.0
                                
                                
                                
                                (2.8
                                )
                                
                                
                                3.5
                                
                                
                                
                                (0.5
                                )





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




Increase
      from
                              
                              
                              Increase
      fromPrior
      Period
                              
                              
                              Prior
      PeriodThree
      Months Ended
                              
                              
                              Six
      Months EndedJune
      30, 2010
                              
                              
                              June
      30, 2010Compared
      with
                              
                              
                              Compared
      withThree
      Months Ended
                              
                              
                              Six
      Months EndedJune 30, 2009
                              
                              
                              June 30, 2009Net
      sales
                              
                              
                              73.0
                              %
                              
                              
                              50.8%
                              %Cost
      of sales
                              
                              
                              53.5
                              
                              
                              
                              38.7SG&A
      expenses
                              
                              
                              35.5
                              
                              
                              
                              27.6Net
      earnings
                              
                              
                              469.1
                              
                              
                              
                              1,136.6


24




Sales





Net sales increased 73.0% from $44.9
million during the three months ended June 30, 2009 to $77.7 million during the
three months ended June 30, 2010. Net sales increased 50.8% from $88.8 million
during the six months ended June 30, 2009 to $133.9 million during the six
months ended June 30, 2010.  The Company attributes a portion of these
increases to the additional sales volume associated with the acquisition of
Cinch, which was effective January 29, 2010.  Cinch contributed
revenues of $14.9 million and $24.8 million to Bel’s consolidated net sales
during the three and six months ended June 30, 2010,
respectively.  The remainder of the increase in each period is due to
improved market conditions as compared to the respective periods of
2009.





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




Three
      Months Ended
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          Six
      Months EndedJune
      30,
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          June
      30,2010
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          2009
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          2010
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          2009Magnetic
      products
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          32,697
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          42
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          20,881
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          46
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          54,354
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          41
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          40,852
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          46
                                                                                                                                          %Interconnect
      products
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          26,963
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          35
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          8,029
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          18
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          46,869
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          35
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          15,422
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          17
                                                                                                                                          %Module
      products
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          14,616
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          19
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          13,773
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          31
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          26,465
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          20
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          28,142
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          32
                                                                                                                                          %Circuit
      protection products
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          3,456
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          4
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          2,251
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          5
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          6,193
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          4
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          4,389
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          5
                                                                                                                                          %$
                                                                                                                                          77,732
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          100
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          44,934
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          100
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          133,881
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          100
                                                                                                                                          %
                                                                                                                                          
                                                                                                                                          $
                                                                                                                                          88,805
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          
                                                                                                                                          100
                                                                                                                                          %


The
portfolio of products acquired through the Cinch acquisition has enabled Bel to
broaden its interconnect product offerings to address new markets such as
military, aerospace and transportation.  As a result, there was a
significant increase in interconnect product sales volume during
2010.  The decrease in module sales as compared to 2009 relates to the
drop in sales volume from one of Bel’s major customers.  See “Trends
Affecting our Business” above for additional information.





Cost of
Sales





Cost of sales as a percentage of net
sales decreased from 89.4% during the three months ended June 30, 2009 to 79.3%
during the three months ended June 30, 2010.  Cost of sales as a
percentage of net sales decreased from 88.3% during the six months ended June
30, 2009 to 81.2% during the six months ended June 30, 2010. The decrease in the
cost of sales percentage is primarily attributable to a decrease in material
costs as a percentage of sales from 58.7% for the second quarter of 2009 to
43.7% for the second quarter of 2010 and from 57.9% for the first half of 2009
to 45.1% for the first half of 2010.  This decrease in material costs
in 2010 resulted from a shift in legacy-Bel product mix to those products with a
lower material content and the addition of Cinch products, which have a lower
average material cost as compared to legacy-Bel products.





The decrease in cost of sales noted
above was partially offset by higher labor costs during 2010 as a result of
training expenses, production inefficiencies and additional overtime charges
associated with the hiring of 2,483 new production workers, which was necessary
to accommodate the increase in demand for Bel’s products.  In
addition, the Company manufactured a higher volume of its magnetic and
interconnect products, in part due to the addition of Cinch products, during the
three and six months ended June 30, 2010 as compared to the respective periods
of 2009, and these product lines have a higher assembly labor
requirement.  As a result of these factors, labor costs as a
percentage of sales have increased from 9.8% for the second quarter of 2009 to
14.9% for the second quarter of 2010 and from 9.1% for the first half of 2009 to
14.4% for the first half of 2010.




25




Included in cost of sales are research
and development (“R&D”) expenses of $2.7 million and $2.0 million for the
three-month periods ended June 30, 2010 and 2009, respectively, and $5.3 million
and $4.2 million for the six-month periods ended June 30, 2010 and 2009,
respectively.  The increase in R&D expenses primarily related to
the inclusion of Cinch’s R&D expenses since its acquisition in January
2010.





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





The percentage relationship of SG&A
expenses to net sales decreased from 16.9% during the three months ended June
30, 2009 to 13.2% during the three months ended June 30, 2010 and from 17.2%
during the six months ended June 30, 2009 to 14.5% during the six months ended
June 30, 2010.  While the percentage of sales decreased from the
comparable periods last year, the dollar amount of SG&A expense for the
three and six months ended June 30, 2010 was $2.7 million (or 35.5%)
higher  and $4.2 million (or 27.6%) higher, respectively, as compared
to the same periods of 2009.  The overall increase in dollar amount
was the result of the following factors (dollars in thousands):




(Favorable)
      Unfavorable Variances in SG&AThree
      Months Ended
                                                                                  
                                                                                  
                                                                                  Six
      Month EndedJune
      30, 2010 vs. 2009
                                                                                  
                                                                                  
                                                                                  June
      30, 2010 vs. 2009Consolidated
                                                                                  
                                                                                  
                                                                                  Legacy-Bel
      Only
                                                                                  
                                                                                  
                                                                                  Cinch
                                                                                  
                                                                                  
                                                                                  Consolidated
                                                                                  
                                                                                  
                                                                                  Legacy-Bel
      Only
                                                                                  
                                                                                  
                                                                                  CinchSales
      commissions
                                                                                  
                                                                                  $
                                                                                  579
                                                                                  
                                                                                  
                                                                                  $
                                                                                  346
                                                                                  
                                                                                  
                                                                                  $
                                                                                  233
                                                                                  
                                                                                  
                                                                                  $
                                                                                  1,049
                                                                                  
                                                                                  
                                                                                  $
                                                                                  659
                                                                                  
                                                                                  
                                                                                  $
                                                                                  390Salaries
      and fringes
                                                                                  
                                                                                  
                                                                                  686
                                                                                  
                                                                                  
                                                                                  
                                                                                  (198
                                                                                  )
                                                                                  
                                                                                  
                                                                                  884
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,068
                                                                                  
                                                                                  
                                                                                  
                                                                                  (493
                                                                                  )
                                                                                  
                                                                                  
                                                                                  1,561Incentive
      compensation
                                                                                  
                                                                                  
                                                                                  592
                                                                                  
                                                                                  
                                                                                  
                                                                                  377
                                                                                  
                                                                                  
                                                                                  
                                                                                  215
                                                                                  
                                                                                  
                                                                                  
                                                                                  592
                                                                                  
                                                                                  
                                                                                  
                                                                                  377
                                                                                  
                                                                                  
                                                                                  
                                                                                  215Fraud-related
      costs
                                                                                  
                                                                                  
                                                                                  (558
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (558
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (558
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (558
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -Acquisition-related
      costs
                                                                                  
                                                                                  
                                                                                  15
                                                                                  
                                                                                  
                                                                                  
                                                                                  11
                                                                                  
                                                                                  
                                                                                  
                                                                                  4
                                                                                  
                                                                                  
                                                                                  
                                                                                  251
                                                                                  
                                                                                  
                                                                                  
                                                                                  171
                                                                                  
                                                                                  
                                                                                  
                                                                                  80Travel
      expenses
                                                                                  
                                                                                  
                                                                                  273
                                                                                  
                                                                                  
                                                                                  
                                                                                  183
                                                                                  
                                                                                  
                                                                                  
                                                                                  90
                                                                                  
                                                                                  
                                                                                  
                                                                                  399
                                                                                  
                                                                                  
                                                                                  
                                                                                  265
                                                                                  
                                                                                  
                                                                                  
                                                                                  134Office
      expenses
                                                                                  
                                                                                  
                                                                                  400
                                                                                  
                                                                                  
                                                                                  
                                                                                  35
                                                                                  
                                                                                  
                                                                                  
                                                                                  365
                                                                                  
                                                                                  
                                                                                  
                                                                                  634
                                                                                  
                                                                                  
                                                                                  
                                                                                  (1
                                                                                  )
                                                                                  
                                                                                  
                                                                                  635Other
      legal and professional fees
                                                                                  
                                                                                  
                                                                                  224
                                                                                  
                                                                                  
                                                                                  
                                                                                  192
                                                                                  
                                                                                  
                                                                                  
                                                                                  32
                                                                                  
                                                                                  
                                                                                  
                                                                                  453
                                                                                  
                                                                                  
                                                                                  
                                                                                  363
                                                                                  
                                                                                  
                                                                                  
                                                                                  90Severance
      charges
                                                                                  
                                                                                  
                                                                                  (302
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (346
                                                                                  )
                                                                                  
                                                                                  
                                                                                  44
                                                                                  
                                                                                  
                                                                                  
                                                                                  (238
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (419
                                                                                  )
                                                                                  
                                                                                  
                                                                                  181Fair
      value of COLI investments(SG&A
      portion only)
                                                                                  
                                                                                  
                                                                                  135
                                                                                  
                                                                                  
                                                                                  
                                                                                  135
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (128
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (128
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -Other
                                                                                  
                                                                                  
                                                                                  654
                                                                                  
                                                                                  
                                                                                  
                                                                                  209
                                                                                  
                                                                                  
                                                                                  
                                                                                  445
                                                                                  
                                                                                  
                                                                                  
                                                                                  685
                                                                                  
                                                                                  
                                                                                  
                                                                                  29
                                                                                  
                                                                                  
                                                                                  
                                                                                  656$
                                                                                  2,698
                                                                                  
                                                                                  
                                                                                  $
                                                                                  386
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,312
                                                                                  
                                                                                  
                                                                                  $
                                                                                  4,207
                                                                                  
                                                                                  
                                                                                  $
                                                                                  265
                                                                                  
                                                                                  
                                                                                  $
                                                                                  3,942


As Cinch
SG&A expenses have been included in Bel’s results only since the Acquisition
Date, 100% of such Cinch expenses are included in the variances
above.  The variances in the “Legacy-Bel Only” column above show an
increase in sales commissions due to an increase in Bel sales as compared to the
comparable periods of 2009, a bonus accrual based upon financial results in
2010, acquisition-related costs associated with the acquisition of Cinch, and
increased legal fees related to patent litigation, offset by a reduction in
salaries and fringes due to headcount reductions. In addition, the Company
recorded a non-recurring expense of $0.6 million during the second quarter of
2009 for fraud-related compensation expense and professional fees.




26




Gain on Sale of
Investment





During
the three months ended June 30, 2009, the Company sold 3,041,393 shares of
Power-One Inc. common stock.  As the sales proceeds exceeded the
Company’s adjusted cost basis in this investment, the sale resulted in a gain of
$1.1 million which is included in the condensed consolidated statements of
operations for the three and six months ended June 30, 2009.





Restructuring
Charge





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





Gain on Sale of Property,
Plant and Equipment





During the six months ended June 30,
2009, the Company realized a previously-deferred gain from the sale of property
in Jersey City, New Jersey in the amount of $4.6 million.





Provision for Income
Taxes





The provision for income taxes for the
three months ended June 30, 2010 was $1.2 million compared to an income tax
benefit of $0.4 million for the three months ended June 30, 2009.  The
Company's earnings before income taxes for the three months ended June 30, 2010
are approximately $7.5 million higher than the same period in
2009.  The Company’s effective tax rate, the income tax provision
(benefit) as a percentage of earnings (loss) before provision (benefit) for
income taxes, was 19.8% and (23.6)% for the three months ended June 30, 2010 and
June 30, 2009, respectively.  The Company’s effective tax rate will
fluctuate based on the geographic segment in which pretax profits are
earned.  Of the geographic segments in which the Company operates,
North America has the highest tax rates; Europe’s tax rates are generally lower
than North America tax rates; and Asia has the lowest tax rates.  The
increase in the effective tax rate during the three months ended June 30, 2010
is principally attributable to higher earnings in all geographic segments during
the three months ended June 30, 2010 as compared to a loss or very modest
earnings in all geographic segments during the same period in 2009.




The
provision for income taxes for the six months ended June 30, 2010 and 2009 was
$1.2 million for each period.  The Company's earnings before income
taxes for the six months ended June 30, 2010 are approximately $5.1 million
greater than the same period in 2009.  The Company’s effective tax
rate was 20.0% and 158.0% for the six months ended June 30, 2010 and June 30,
2009, respectively.   The decrease in the effective tax rate during
the six months ended June 30, 2010 is primarily attributable to the gain on sale
of property in North America during the six months ended June 30, 2009 as
discussed above and a pretax profit in Asia during the six months ended June 30,
2010 versus a pretax loss during the same period in 2009.





Liquidity and Capital
Resources





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




27





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





The Company's Hong Kong subsidiary has
an unsecured line of credit of approximately $2 million, which was unused at
June 30, 2010 and December 31, 2009.  Borrowings on the line of credit
are guaranteed by the U.S. parent.  The line of credit bears interest
at a rate determined by the lender as the financing is extended.





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





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





The following table sets forth at June
30, 2010 the payments due under specific types of contractual obligations,
aggregated by category of contractual obligation, for the time periods described
below.  The Company had outstanding purchase orders related to raw
materials in the amount of $34.0 and $19.9 million at June 30, 2010 and December
31, 2009, respectively.  Of the $14.1 million increase, the addition
of Cinch commitments accounts for $5.7 million and the remaining $8.4 million
increase relates to new purchase orders of raw materials to accommodate the
increased demand for Bel’s products.  The Company also had outstanding
purchase orders related to capital expenditures in the amount of $2.0 million
and $1.4 million at June 30, 2010 and December 31, 2009, respectively.. This
table excludes liabilities recorded relative to uncertain income tax positions,
amounting to $1.9 million included in income taxes payable and $3.3 million
included in liability for uncertain tax positions, as of June 30, 2010, as the
Company is unable to make reasonable reliable estimates of the period of cash
settlements, if any, with the respective taxing authorities.




28




Payments
      due by period (dollars in thousands)Contractual Obligations
                          
                          Total
                          
                          
                          Less
      than 1 year
                          
                          
                          1-3
                            years
                          
                          
                          3-5
                            years
                          
                          
                          More
      than
                            5
      yearsCapital
      expenditure obligations
                          
                          $
                          2,010
                          
                          
                          $
                          2,010
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Operating
      leases
                          
                          
                          9,478
                          
                          
                          
                          2,922
                          
                          
                          
                          4,175
                          
                          
                          
                          2,027
                          
                          
                          
                          354Raw
      material purchase obligations
                          
                          
                          34,043
                          
                          
                          
                          33,896
                          
                          
                          
                          147
                          
                          
                          
                          -
                          
                          
                          
                          -Total
                          
                          $
                          45,531
                          
                          
                          $
                          38,828
                          
                          
                          $
                          4,322
                          
                          
                          $
                          2,027
                          
                          
                          $
                          354


Cash
Flows





During the six months ended June 30,
2010, the Company's cash and cash equivalents decreased by $48.6 million. This
resulted primarily from $40.4 million paid in connection with the acquisition of
Cinch, $1.1 million for the purchase of property, plant and equipment, $1.6
million for the purchase of COLI, $1.5 million for payments of dividends, and
$3.7 million used in operating activities.  During the six months
ended June 30, 2009, the Company had cash provided by operating activities of
$20.7 million as compared to cash used in operating activities of $3.7 million
for the six months ended June 30, 2010.  This $24.4 million reduction
in operating cash flow related primarily to the significant fluctuations in
accounts receivable and inventory levels in both the first half of 2009 and
2010, as customer demand and the related manufacturing and sales volumes
fluctuated.  In the first half of 2009, customer demand for Bel’s
products was down, which resulted in decreased accounts receivable and inventory
levels during the first half of 2009.  With demand recovering during
the latter part of 2009 and into 2010, inventory levels have increased as Bel is
purchasing raw materials and increasing its manufacturing
accordingly.





Cash and cash equivalents, marketable
securities, short-term investments and accounts receivable comprised
approximately 48.3% and 64.7% of the Company's total assets at June 30, 2010 and
December 31, 2009, respectively. The Company's current ratio (i.e., the ratio of
current assets to current liabilities) was 4.7 to 1 and 7.0 to 1 at June 30,
2010 and December 31, 2009, respectively.





Item
3.  Quantitative and Qualitative
Disclosures About Market Risk





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







Item
4.   Controls and
Procedures





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




29





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





PART
II. Other Information





Item
1. Legal
Proceedings





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





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





30





Item
6.  Exhibits




(a)
Exhibits:





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.




31




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 OfficerBy:
                        /s/
      Colin DunnColin
      Dunn, Vice President of Finance





Dated:
August 6, 2010





32





EXHIBIT
INDEX





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





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





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





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





33