UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 (Mark
One)
 
 x           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
quarterly period ended September 30,
2009
 or
 
  ̈           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
transition period from to
 
 Commission
File Number: 0-F11676
  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).    ̈  Yes                     
 ̈  No      Not
applicable to the registrant.
 
 Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer  ̈
              
              Accelerated filer x
              
              Non-accelerated filer  ̈
              
              Smaller reporting company  ̈(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).
  ̈  Yes                      x  No
 
 At
November 5, 2009, there were 2,174,912 shares of Class A Common Stock, $0.10 par
value, outstanding and 9,464,843 shares of Class B Common Stock, $0.10 par
value, outstanding.
  
  BEL FUSE
INC.
 
 INDEX
 
 PagePart I
                                  
                                  Financial
      InformationItem
      1.
                                  Financial
      Statements
                                  1Condensed
      Consolidated Balance Sheets as of September 30, 2009and
      December 31, 2008 (unaudited)
                                  2-3Condensed
      Consolidated Statements of Operations for the Threeand
      Nine Months Ended September 30, 2009 and 2008 (unaudited)
                                  4Condensed
      Consolidated Statements of Stockholders' Equity forthe
      Year Ended December 31, 2008 and the Nine Months EndedSeptember
      30, 2009 (unaudited)
                                  5Condensed
      Consolidated Statements of Cash Flows for the NineMonths
      Ended September 30, 2009 and 2008 (unaudited)
                                  6-7Notes
      to Condensed Consolidated Financial Statements (unaudited)
                                  8-26Item
      2.
                                  Management's
      Discussion and Analysis ofFinancial
      Condition and Results of Operations
                                  27-44Item
      3.
                                  Quantitative
      and Qualitative Disclosures AboutMarket
      Risk
                                  44Item
      4.
                                  Controls
      and Procedures
                                  45Part II
                                  
                                  Other
      InformationItem
      1.
                                  Legal
      Proceedings
                                  47Item
      6.
                                  Exhibits
                                  47Signatures
                                  48
  
  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,
2008.
 
 The results of operations for the three
and nine months ended September 30, 2009 are not necessarily indicative of the
results for the entire fiscal year or for any other period.
  1
 
 BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (dollars
in thousands)
 (Unaudited)
 
 September
      30,
                  
                  
                  December
      31,2009
                  
                  
                  2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                  
                  $
                  116,008
                  
                  
                  $
                  74,955Marketable
      securities
                  
                  
                  9,976
                  
                  
                  
                  13,735Short-term
      investments
                  
                  
                  846
                  
                  
                  
                  4,013Accounts
      receivable - less allowance for doubtful accounts of $533 and $660 at
      September 30, 2009 and December 31, 2008,
respectively
                  
                  
                  30,437
                  
                  
                  
                  46,047Inventories
                  
                  
                  29,795
                  
                  
                  
                  46,524Prepaid
      expenses and other current assets
                  
                  
                  1,273
                  
                  
                  
                  859Refundable
      income taxes
                  
                  
                  2,862
                  
                  
                  
                  2,498Assets
      held for sale
                  
                  
                  -
                  
                  
                  
                  236Deferred
      income taxes
                  
                  
                  2,003
                  
                  
                  
                  4,752Total
      Current Assets
                  
                  
                  193,200
                  
                  
                  
                  193,619Property,
      plant and equipment - net
                  
                  
                  36,622
                  
                  
                  
                  39,936Restricted
      cash
                  
                  
                  250
                  
                  
                  
                  2,309Long-term
      investments
                  
                  
                  212
                  
                  
                  
                  1,062Deferred
      income taxes
                  
                  
                  4,577
                  
                  
                  
                  5,205Intangible
      assets - net
                  
                  
                  678
                  
                  
                  
                  926Goodwill
                  
                  
                  2,047
                  
                  
                  
                  14,334Other
      assets
                  
                  
                  6,907
                  
                  
                  
                  4,393TOTAL
      ASSETS
                  
                  $
                  244,493
                  
                  
                  $
                  261,784
 
 See notes
to unaudited condensed consolidated financial statements.
  2
 
 BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS - CONTINUED
 (dollars
in thousands, except per share data)
 (Unaudited)
 
 September
      30,
                  
                  
                  December
      31,2009
                  
                  
                  2008LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable
                  
                  $
                  13,983
                  
                  
                  $
                  14,285Accrued
      expenses
                  
                  
                  9,680
                  
                  
                  
                  9,953Accrued
      restructuring costs
                  
                  
                  155
                  
                  
                  
                  555Income
      taxes payable
                  
                  
                  1,947
                  
                  
                  
                  4,054Dividends
      payable
                  
                  
                  820
                  
                  
                  
                  787Total
      Current Liabilities
                  
                  
                  26,585
                  
                  
                  
                  29,634Long-term
      Liabilities:Accrued
      restructuring costs
                  
                  
                  547
                  
                  
                  
                  406Deferred
      gain on sale of property
                  
                  
                  -
                  
                  
                  
                  4,616Liability
      for uncertain tax positions
                  
                  
                  2,574
                  
                  
                  
                  3,445Minimum
      pension obligation and unfunded pension liability
                  
                  
                  6,515
                  
                  
                  
                  5,910Total
      Long-term Liabilities
                  
                  
                  9,636
                  
                  
                  
                  14,377Total
      Liabilities
                  
                  
                  36,221
                  
                  
                  
                  44,011Commitments
      and ContingenciesStockholders'
      Equity:Preferred
      stock, no par value, authorized 1,000,000 shares; none
      issued
                  
                  
                  -
                  
                  
                  
                  -Class
      A common stock, par value $.10 per share - authorized 10,000,000
      shares; outstanding 2,174,912 and 2,180,982 shares,
      respectively (net of 1,072,769 treasury shares)
                  
                  
                  217
                  
                  
                  
                  218Class
      B common stock, par value $.10 per share - authorized 30,000,000
      shares; outstanding 9,323,143 and 9,369,893 shares,
      respectively (net of 3,218,307 treasury shares)
                  
                  
                  932
                  
                  
                  
                  937Additional
      paid-in capital
                  
                  
                  21,375
                  
                  
                  
                  19,963Retained
      earnings
                  
                  
                  182,910
                  
                  
                  
                  196,467Accumulated
      other comprehensive income
                  
                  
                  2,838
                  
                  
                  
                  188Total
      Stockholders' Equity
                  
                  
                  208,272
                  
                  
                  
                  217,773TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  244,493
                  
                  
                  $
                  261,784
 
 See notes
to unaudited condensed consolidated financial statements.
  3
 
 BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollars
in thousands, except per share data)
 (Unaudited)
 
 Three
      Months Ended
                          
                          
                          Nine
      Months EndedSeptember
      30,
                          
                          
                          September
      30,2009
                          
                          
                          2008
                          
                          
                          2009
                          
                          
                          2008Net
      Sales
                          
                          $
                          45,283
                          
                          
                          $
                          66,964
                          
                          
                          $
                          134,088
                          
                          
                          $
                          200,287Costs
      and expenses:Cost
      of sales
                          
                          
                          41,516
                          
                          
                          
                          56,337
                          
                          
                          
                          119,919
                          
                          
                          
                          165,292Selling,
      general and administrative
                          
                          
                          6,813
                          
                          
                          
                          8,934
                          
                          
                          
                          22,067
                          
                          
                          
                          27,151Impairment
      of goodwill
                          
                          
                          12,875
                          
                          
                          
                          -
                          
                          
                          
                          12,875
                          
                          
                          
                          -Restructuring
      charge
                          
                          
                          -
                          
                          
                          
                          329
                          
                          
                          
                          413
                          
                          
                          
                          329Loss
      (gain) on sale of property, plant and equipment
                          
                          
                          9
                          
                          
                          
                          -
                          
                          
                          
                          (4,643
                          )
                          
                          
                          -61,213
                          
                          
                          
                          65,600
                          
                          
                          
                          150,631
                          
                          
                          
                          192,772(Loss)
      income from operations
                          
                          
                          (15,930
                          )
                          
                          
                          1,364
                          
                          
                          
                          (16,543
                          )
                          
                          
                          7,515Realized
      gain (loss/impairment charge) on investment
                          
                          
                          656
                          
                          
                          
                          (1,397
                          )
                          
                          
                          1,739
                          
                          
                          
                          (4,030
                          )Interest
      income and other, net
                          
                          
                          86
                          
                          
                          
                          528
                          
                          
                          
                          402
                          
                          
                          
                          2,045(Loss)
      earnings before benefit from income taxes
                          
                          
                          (15,188
                          )
                          
                          
                          495
                          
                          
                          
                          (14,402
                          )
                          
                          
                          5,530Income
      tax benefit
                          
                          
                          (4,436
                          )
                          
                          
                          (1,451
                          )
                          
                          
                          (3,194
                          )
                          
                          
                          (394
                          )Net
      (loss) earnings
                          
                          $
                          (10,752
                          )
                          
                          $
                          1,946
                          
                          
                          $
                          (11,208
                          )
                          
                          $
                          5,924(Loss)
      earnings per Class A common shareBasic
                          
                          $
                          (0.90
                          )
                          
                          $
                          0.16
                          
                          
                          $
                          (0.95
                          )
                          
                          $
                          0.47Diluted
                          
                          $
                          (0.90
                          )
                          
                          $
                          0.16
                          
                          
                          $
                          (0.95
                          )
                          
                          $
                          0.47Weighted-average
      Class A common shares outstandingBasic
                          
                          
                          2,174,912
                          
                          
                          
                          2,325,745
                          
                          
                          
                          2,175,322
                          
                          
                          
                          2,460,550Diluted
                          
                          
                          2,174,912
                          
                          
                          
                          2,325,745
                          
                          
                          
                          2,175,322
                          
                          
                          
                          2,460,550(Loss)
      earnings per Class B common shareBasic
                          
                          $
                          (0.94
                          )
                          
                          $
                          0.17
                          
                          
                          $
                          (0.98
                          )
                          
                          $
                          0.51Diluted
                          
                          $
                          (0.94
                          )
                          
                          $
                          0.17
                          
                          
                          $
                          (0.98
                          )
                          
                          $
                          0.51Weighted-average
      Class B common shares outstandingBasic
                          
                          
                          9,324,472
                          
                          
                          
                          9,373,347
                          
                          
                          
                          9,343,088
                          
                          
                          
                          9,344,234Diluted
                          
                          
                          9,324,472
                          
                          
                          
                          9,373,347
                          
                          
                          
                          9,343,088
                          
                          
                          
                          9,346,611
 
 See notes
to unaudited condensed consolidated financial statements.
  4
 
 BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 (dollars
in thousands)
 (Unaudited)
 
 Accumulated
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  AdditionalOther
                                  
                                  
                                  Class
      A
                                  
                                  
                                  Class
      B
                                  
                                  
                                  Paid-InComprehensive
                                  
                                  
                                  Retained
                                  
                                  
                                  Comprehensive
                                  
                                  
                                  Common
                                  
                                  
                                  Common
                                  
                                  
                                  CapitalTotal
                                  
                                  
                                  Loss
                                  
                                  
                                  Earnings
                                  
                                  
                                  Income
      (Loss)
                                  
                                  
                                  Stock
                                  
                                  
                                  Stock
                                  
                                  
                                  (APIC)Balance,
      January 1, 2008
                                  
                                  $
                                  244,527
                                  
                                  
                                  
                                  
                                  
                                  $
                                  214,580
                                  
                                  
                                  $
                                  (344
                                  )
                                  
                                  $
                                  255
                                  
                                  
                                  $
                                  929
                                  
                                  
                                  $
                                  29,107Exercise
      of stock options
                                  
                                  
                                  312
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  3
                                  
                                  
                                  
                                  309Tax
      benefits arising from the disposition of non-qualified incentive
      stock options
                                  
                                  
                                  39
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  39Cash
      dividends declared on Class A common stock
                                  
                                  
                                  (565
                                  )
                                  
                                  
                                  
                                  
                                  
                                  (565
                                  )Cash
      dividends declared on Class B common stock
                                  
                                  
                                  (2,619
                                  )
                                  
                                  
                                  
                                  
                                  
                                  (2,619
                                  )Issuance
      of restricted common stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  6
                                  
                                  
                                  
                                  (6
                                  )Termination
      of restricted common stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (1
                                  )
                                  
                                  
                                  1Repurchase/retirement
      of Class A common stock
                                  
                                  
                                  (11,002
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (37
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (10,965
                                  )Currency
      translation adjustment
                                  
                                  
                                  (355
                                  )
                                  
                                  $
                                  (355
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (355
                                  )Unrealized
      holding losses on marketable securities arising during the year, net
      of taxes
                                  
                                  
                                  (4,230
                                  )
                                  
                                  
                                  (4,230
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (4,230
                                  )Reclassification
      adjustment of unrealized holding losses for impairment charge
      included in net earnings, net of taxes
                                  
                                  
                                  5,551
                                  
                                  
                                  
                                  5,551
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  5,551Stock-based
      compensation expense
                                  
                                  
                                  1,478
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,478Change
      in unfunded SERP liability, net of taxes
                                  
                                  
                                  (434
                                  )
                                  
                                  
                                  (434
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (434
                                  )Net
      loss
                                  
                                  
                                  (14,929
                                  )
                                  
                                  
                                  (14,929
                                  )
                                  
                                  
                                  (14,929
                                  )Comprehensive
      loss
                                  
                                  
                                  
                                  
                                  
                                  $
                                  (14,397
                                  )Balance,
      December 31, 2008
                                  
                                  $
                                  217,773
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  196,467
                                  
                                  
                                  $
                                  188
                                  
                                  
                                  $
                                  218
                                  
                                  
                                  $
                                  937
                                  
                                  
                                  $
                                  19,963Cash
      dividends declared on Class A common stock
                                  
                                  
                                  (390
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (390
                                  )Cash
      dividends declared on Class B common stock
                                  
                                  
                                  (1,959
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (1,959
                                  )Termination
      of restricted common stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (2
                                  )
                                  
                                  
                                  2Repurchase/retirement
      of Class A common stock
                                  
                                  
                                  (92
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (1
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (91
                                  )Currency
      translation adjustment
                                  
                                  
                                  345
                                  
                                  
                                  $
                                  345
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  345Unrealized
      holding gains on marketable securities arising during the year, net
      of taxes
                                  
                                  
                                  3,985
                                  
                                  
                                  
                                  3,985
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  3,985Reclassification
      adjustment of unrealized holding gains included in net earnings, net
      of taxes
                                  
                                  
                                  (1,680
                                  )
                                  
                                  
                                  (1,680
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  (1,680
                                  )Reduction
      in APIC pool associated with tax deficiencies related to restricted
      stock awards
                                  
                                  
                                  (87
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (87
                                  )Unauthorized
      issuance of common stock
                                  
                                  
                                  812
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  812Return
      of unauthorized shares of common stock
                                  
                                  
                                  (456
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (3
                                  )
                                  
                                  
                                  (453
                                  )Stock-based
      compensation expense
                                  
                                  
                                  1,229
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,229Net
      loss
                                  
                                  
                                  (11,208
                                  )
                                  
                                  
                                  (11,208
                                  )
                                  
                                  
                                  (11,208
                                  )Comprehensive
      loss
                                  
                                  
                                  
                                  
                                  
                                  $
                                  (8,558
                                  )Balance,
      September 30, 2009
                                  
                                  $
                                  208,272
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  182,910
                                  
                                  
                                  $
                                  2,838
                                  
                                  
                                  $
                                  217
                                  
                                  
                                  $
                                  932
                                  
                                  
                                  $
                                  21,375
 
 See notes
to unaudited condensed consolidated financial statements.
  5
 
 BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollars
in thousands)
 (Unaudited)
 
 Nine
      Months EndedSeptember
      30,2009
                    
                    
                    2008Cash
      flows from operating activities:Net
      (loss) earnings
                    
                    $
                    (11,208
                    )
                    
                    $
                    5,924Adjustments
      to reconcile net (loss) earnings to net cash provided by operating
      activities:Depreciation
      and amortization
                    
                    
                    5,072
                    
                    
                    
                    5,439Stock-based
      compensation
                    
                    
                    1,229
                    
                    
                    
                    1,083Excess
      tax benefits from share-based payment arrangements
                    
                    
                    -
                    
                    
                    
                    (79
                    )(Gain)
      loss on sale of property, plant and equipment
                    
                    
                    (4,643
                    )
                    
                    
                    84Realized
      (gain) loss/impairment charge on investment
                    
                    
                    (1,739
                    )
                    
                    
                    4,030Impairment
      of goodwill
                    
                    
                    12,875
                    
                    
                    
                    -Other,
      net
                    
                    
                    648
                    
                    
                    
                    748Deferred
      income taxes
                    
                    
                    1,825
                    
                    
                    
                    (1,081
                    )Changes
      in operating assets and liabilities
                    
                    
                    27,738
                    
                    
                    
                    (3,021
                    )Net
      Cash Provided by Operating Activities
                    
                    
                    31,797
                    
                    
                    
                    13,127Cash
      flows from investing activities:Purchase
      of property, plant and equipment
                    
                    
                    (1,373
                    )
                    
                    
                    (5,279
                    )Purchase
      of intangible asset
                    
                    
                    -
                    
                    
                    
                    (300
                    )Purchase
      of marketable securities
                    
                    
                    (3,545
                    )
                    
                    
                    (12,524
                    )Payment
      for acquisition
                    
                    
                    (438
                    )
                    
                    
                    -Cash
      transferred to restricted cash
                    
                    
                    (250
                    )
                    
                    
                    -Proceeds
      from sale of marketable securities
                    
                    
                    8,914
                    
                    
                    
                    -Proceeds
      from sale of property, plant and equipment
                    
                    
                    2,555
                    
                    
                    
                    2,256Proceeds
      from cash surrender value of company-owned life
    insurance
                    
                    
                    1,518
                    
                    
                    
                    -Redemption
      of investment
                    
                    
                    4,174
                    
                    
                    
                    14,433Net
      Cash Provided by (Used in) Investing Activities
                    
                    
                    11,555
                    
                    
                    
                    (1,414
                    )
 
 See notes
to unaudited condensed consolidated financial statements.
  6
 
 BEL
FUSE INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 (dollars
in thousands)
 (Unaudited)
 
 Nine
      Months EndedSeptember 30,2009
                      
                      
                      2008Cash
      flows from financing activities:Proceeds
      from exercise of stock options
                      
                      
                      -
                      
                      
                      
                      312Dividends
      paid to common shareholders
                      
                      
                      (2,316
                      )
                      
                      
                      (2,362
                      )Purchase
      and retirement of Class A common stock
                      
                      
                      (92
                      )
                      
                      
                      (10,785
                      )Excess
      tax benefits from share-based payment arrangements
                      
                      
                      -
                      
                      
                      
                      79Net
      Cash Used In Financing Activities
                      
                      
                      (2,408
                      )
                      
                      
                      (12,756
                      )Effect
      of exchange rate changes on cash
                      
                      
                      109
                      
                      
                      
                      (61
                      )Net
      Increase (Decrease) in Cash and Cash Equivalents
                      
                      
                      41,053
                      
                      
                      
                      (1,104
                      )Cash
      and Cash Equivalents - beginning of period
                      
                      
                      74,955
                      
                      
                      
                      83,875Cash
      and Cash Equivalents - end of period
                      
                      $
                      116,008
                      
                      
                      $
                      82,771Changes
      in operating assets and liabilities consist of:Decrease
      in accounts receivable
                      
                      $
                      15,685
                      
                      
                      $
                      4,916Decrease
      (increase) in inventories
                      
                      
                      16,818
                      
                      
                      
                      (10,088
                      )Increase
      in prepaid expenses and other current assets
                      
                      
                      (410
                      )
                      
                      
                      (158
                      )Decrease
      (increase) in other assets
                      
                      
                      57
                      
                      
                      
                      (64
                      )(Decrease)
      increase in accounts payable
                      
                      
                      (320
                      )
                      
                      
                      2,222Decrease
      in income taxes payable
                      
                      
                      (3,354
                      )
                      
                      
                      (1,496
                      )Decrease
      in accrued restructuring costs
                      
                      
                      (259
                      )
                      
                      
                      -(Decrease)
      increase in accrued expenses
                      
                      
                      (479
                      )
                      
                      
                      1,647$
                      27,738
                      
                      
                      $
                      (3,021
                      )Supplementary
      information:Cash
      paid during the period for income taxes, net of refunds
                      
                      $
                      (1,676
                      )
                      
                      $
                      2,017
 
 See notes
to unaudited condensed consolidated financial statements.
  7
  BEL FUSE
INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  1.         BASIS
OF PRESENTATION AND ACCOUNTING POLICIES
 
 The
condensed consolidated balance sheet as of September 30, 2009, and the condensed
consolidated statements of operations, stockholders' equity and cash flows for
the periods presented herein have been prepared by Bel Fuse Inc. (the "Company"
or "Bel") and are unaudited. In the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary to present fairly
the financial position, results of operations, changes in stockholders' equity
and cash flows for all periods presented have been made. The results for the
three and nine months ended September 30, 2009 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, 2008 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 Annual Report on Form
10-K for the year ended December 31, 2008.
 
 2.           (LOSS)
EARNINGS PER SHARE
  The
Company utilizes the two-class method to report its (loss) earnings per share.
The two-class method is a (loss) earnings allocation formula that determines
(loss) earnings per share for each class of common stock according to dividends
declared and participation rights in undistributed (loss) earnings. 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 (loss)
earnings per share. In computing (loss) earnings 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 (loss) earnings per common share are computed by dividing
net (loss) earnings by the weighted-average number of common shares outstanding
during the period. Diluted earnings per common share, for each class of common
stock, are computed by dividing net earnings by the weighted-average number of
common shares and potential common shares outstanding during the period. In
periods in which a loss from continuing operations is presented, potential
common shares are not included in the diluted loss per common share calculation,
as they would be antidilutive. During the three and nine months ended September
30, 2008, potential common shares used in computing diluted (loss) earnings per
share relate to stock options for Class B common shares which, if exercised,
would have a dilutive effect on (loss) earnings per share. There were no stock
options outstanding during the three and nine months ended September 30, 2009
which would have had a dilutive effect on (loss) earnings per
share.
 
 As the
Company experienced a loss during the three and nine months ended September 30,
2009, 42,500 outstanding options and 49,462 outstanding options, respectively,
were not included in the calculation of diluted loss per Class B common share
during these periods as their effect would be antidilutive. During the three and
nine months ended September 30, 2008, 53,000 outstanding options were not
included in the foregoing computations for Class B common shares because their
effect would be antidilutive.
  8
  The
(loss) earnings and weighted-average shares outstanding used in the computation
of basic and diluted (loss) earnings per share are as follows (dollars in
thousands, except share and per share data):
  Three
      Months Ended
                  
                  
                  Nine
      Months EndedSeptember 30,
                  
                  
                  September 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Numerator:Net
      (loss) earnings
                  
                  $
                  (10,752
                  )
                  
                  $
                  1,946
                  
                  
                  $
                  (11,208
                  )
                  
                  $
                  5,924Less
      Dividends:Class
      A
                  
                  
                  130
                  
                  
                  
                  142
                  
                  
                  
                  390
                  
                  
                  
                  448Class
      B
                  
                  
                  650
                  
                  
                  
                  644
                  
                  
                  
                  1,959
                  
                  
                  
                  1,949Undistributed
      (loss) earnings
                  
                  $
                  (11,532
                  )
                  
                  $
                  1,160
                  
                  
                  $
                  (13,557
                  )
                  
                  $
                  3,527Undistributed
      (loss) earnings allocation - basic:Class
      A undistributed (loss) earnings
                  
                  
                  (2,096
                  )
                  
                  
                  222
                  
                  
                  
                  (2,460
                  )
                  
                  
                  707Class
      B undistributed (loss) earnings
                  
                  
                  (9,436
                  )
                  
                  
                  938
                  
                  
                  
                  (11,097
                  )
                  
                  
                  2,820Total
      undistributed (loss) earnings
                  
                  $
                  (11,532
                  )
                  
                  $
                  1,160
                  
                  
                  $
                  (13,557
                  )
                  
                  $
                  3,527Undistributed
      (loss) earnings allocation - diluted:Class
      A undistributed (loss) earnings
                  
                  
                  (2,096
                  )
                  
                  
                  222
                  
                  
                  
                  (2,460
                  )
                  
                  
                  707Class
      B undistributed (loss) earnings
                  
                  
                  (9,436
                  )
                  
                  
                  938
                  
                  
                  
                  (11,097
                  )
                  
                  
                  2,820Total
      undistributed (loss) earnings
                  
                  $
                  (11,532
                  )
                  
                  $
                  1,160
                  
                  
                  $
                  (13,557
                  )
                  
                  $
                  3,527Net
      (loss) earnings allocation - basic:Class
      A allocated (loss) earnings
                  
                  
                  (1,966
                  )
                  
                  
                  364
                  
                  
                  
                  (2,070
                  )
                  
                  
                  1,155Class
      B allocated (loss) earnings
                  
                  
                  (8,786
                  )
                  
                  
                  1,582
                  
                  
                  
                  (9,138
                  )
                  
                  
                  4,769Net
      (loss) earnings
                  
                  $
                  (10,752
                  )
                  
                  $
                  1,946
                  
                  
                  $
                  (11,208
                  )
                  
                  $
                  5,924Net
      (loss) earnings allocation - diluted:Class
      A allocated (loss) earnings
                  
                  
                  (1,966
                  )
                  
                  
                  364
                  
                  
                  
                  (2,070
                  )
                  
                  
                  1,155Class
      B allocated (loss) earnings
                  
                  
                  (8,786
                  )
                  
                  
                  1,582
                  
                  
                  
                  (9,138
                  )
                  
                  
                  4,769Net
      (loss) earnings
                  
                  $
                  (10,752
                  )
                  
                  $
                  1,946
                  
                  
                  $
                  (11,208
                  )
                  
                  $
                  5,924Denominator:Weighted-average
      shares outstanding:Class
      A - basic and diluted
                  
                  
                  2,174,912
                  
                  
                  
                  2,325,745
                  
                  
                  
                  2,175,322
                  
                  
                  
                  2,460,550Class
      B - basic
                  
                  
                  9,324,472
                  
                  
                  
                  9,373,347
                  
                  
                  
                  9,343,088
                  
                  
                  
                  9,344,234Dilutive
      impact of stock options
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,377Class
      B - diluted
                  
                  
                  9,324,472
                  
                  
                  
                  9,373,347
                  
                  
                  
                  9,343,088
                  
                  
                  
                  9,346,611(Loss)
      Earnings per share:Class
      A - basic
                  
                  $
                  (0.90
                  )
                  
                  $
                  0.16
                  
                  
                  $
                  (0.95
                  )
                  
                  $
                  0.47Class
      A - diluted
                  
                  $
                  (0.90
                  )
                  
                  $
                  0.16
                  
                  
                  $
                  (0.95
                  )
                  
                  $
                  0.47Class
      B - basic
                  
                  $
                  (0.94
                  )
                  
                  $
                  0.17
                  
                  
                  $
                  (0.98
                  )
                  
                  $
                  0.51Class
      B - diluted
                  
                  $
                  (0.94
                  )
                  
                  $
                  0.17
                  
                  
                  $
                  (0.98
                  )
                  
                  $
                  0.51
  9
 
 During
2009, the Company implemented an update to the accounting guidance related to
earnings per share. In accordance with this accounting guidance, unvested
share-based payment awards with rights to dividends are participating securities
and shall be included in the computation of basic earnings per share. The
Company adopted this guidance effective January 1, 2009 and in accordance with
the accounting guidance, all prior-period earnings per share data presented has
been adjusted retrospectively to conform to the provisions of the new guidance.
This adjustment did not have a material impact on prior periods
presented.
 
 3.           MARKETABLE
SECURITIES
 
 At
September 30, 2009 and December 31, 2008, the Company’s marketable securities
classified as available-for-sale had an adjusted cost basis of approximately
$6.3 million and $13.7 million and a fair market value of $10.0 million and
$13.7 million, respectively. During the three and nine months ended September
30, 2009, the Company recorded realized gains on its investments in the amount
of $0.7 million and $1.7 million, respectively. During the three and nine months
ended September 30, 2008, the Company recorded realized losses/impairment
charges on its investments in the amount of $1.4 million and $4.0 million,
respectively. At September 30, 2009 and December 31, 2008, respectively, gross
unrealized gains on other marketable securities of approximately $3.6 million
and $0.1 million are included, net of tax, in accumulated other comprehensive
income.
  Columbia Strategic Cash
Portfolio (“Columbia Portfolio”):
 
 At
September 30, 2009, the Company’s investment securities included privately
placed units of beneficial interests in the Columbia Portfolio, which is an
enhanced cash fund sold as an alternative to money-market funds. In December
2007, due to adverse market conditions, the fund was overwhelmed with withdrawal
requests from investors and it was closed with a restriction placed upon the
cash redemption ability of its holders. At the time the liquidation was
announced, the Company held 25.7 million units of the Columbia Portfolio at a
book value of $25.7 million.
 
 Since the
announcement of the liquidation in December 2007, the Company has received cash
redemptions totaling $23.1 million through September 30, 2009 (including $2.2
million and $4.2 million during the three and nine months ended September 30,
2009, respectively) at a weighted-average net asset value (NAV) of $.9449 per
unit. As of September 30, 2009, the Company holds 1.3 million units with a book
value of $1.1 million, which approximates the fair value of this investment at
that date. The Company recorded gains on redemptions of $0.1 million and $0.2
million during the three and nine months ended September 30, 2009, respectively,
for financial reporting purposes. As of September 30, 2008, the Company held 8.6
million units with a book value and fair value of $8.2 million. The Company
recorded minimal losses on redemptions in the comparable periods of 2008. Due to
the restrictions placed on these investments, the balance in the Columbia
Portfolio as of September 30, 2009 is categorized as an other investment on the
accompanying condensed consolidated balance sheet, allocated into short-term and
long-term based on the projected redemption schedule as issued by the portfolio
manager. The information and the markets relating to these investments remain
dynamic. There may be further declines in the value of these investments, in the
value of the collateral held by these entities, and in the liquidity of the
Company’s investments. To the extent that the Company determines that there is a
further decline in fair value, the Company may recognize impairment charges in
future periods up to the aggregate carrying amount of these
investments.
  10
 
 Toko, Inc.
(“Toko”):
 
 As of
September 30, 2009, the Company owned a total of 1,840,919 shares, or to the
Company’s knowledge approximately 1.9% of the outstanding shares, of the common
stock of Toko. Toko develops, manufactures and sells power supply related
components and radio frequency related components primarily in Japan. Toko had a
market capitalization of approximately $155.0 million as of September 30, 2009.
These shares are reflected on the Company’s condensed consolidated balance
sheets as marketable securities. These marketable securities are classified as
available for sale. During the nine months ended September 30, 2008, the Company
recorded impairment charges totaling $3.6 million related to this investment. At
September 30, 2009 and December 31, 2008, this investment had an adjusted basis
of $2.0 million at each date, and a fair market value of $2.9 million and $2.1
million, respectively. The gross unrealized gain of $0.9 million and $0.1
million at September 30, 2009 and December 31, 2008, respectively, is included,
net of tax, in accumulated other comprehensive income.
  Power-One, Inc.
(“Power-One”):
 
 As of
December 31, 2008, the Company owned a total of 7,338,998 shares of Power-One
common stock representing, to the Company’s knowledge, 8.4% of Power-One’s
outstanding common stock, at a total purchase price of $14.1 million ($1.92 per
share). Power-One’s common stock is quoted on the NASDAQ Global Market.
Power-One is a designer and manufacturer of power conversion and power
management products. During the nine months ended September 30, 2009, the
Company sold 3,725,425 shares of its Power-One common stock at an aggregate fair
market value of $6.1 million, resulting in a gain of $1.6 million for financial
reporting purposes. As of September 30, 2009, the Company owned 3,613,573 shares
of Power-One common stock, representing, to the Company’s knowledge, 4.1% of
Power-One’s outstanding common stock. At September 30, 2009, this investment had
an adjusted basis of $4.3 million ($1.19 per share) and a fair market value of
$7.0 million ($1.95 per share). The gross unrealized gain at September 30, 2009
of $2.7 million is included, net of income tax, in accumulated other
comprehensive income in stockholders’ equity.
  CDARS:
 
 As
December 31, 2008, the Company had a total of $4.9 million invested in
certificates of deposit (CDs) through Stephens, Inc., with whom the Company has
an investment banking relationship. These investments are part of the
Certificate of Deposit Account Registry Service (CDARS) program whereby the
funds are invested with various banks in order to achieve FDIC insurance on the
full invested amount. Due to the varying maturities of these CDs, $2.0 million
of the total investment was classified as cash equivalents at December 31, 2008.
As of September 30, 2009, these CDs had not been renewed and the related money
market funds were classified as a cash equivalent.
  4. FAIR
VALUE MEASUREMENT
 
 The
Company adopted the new accounting guidance for fair value measurements and
disclosures on January 1, 2008, for all financial 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. While the Company adopted the provisions of the new accounting
guidance for nonfinancial assets and liabilities that are recognized or
disclosed at fair value in the financial statements on a recurring basis, no
such assets or liabilities existed at the balance sheet date. As permitted by
the accounting guidance, the Company delayed implementation of this standard for
all nonfinancial assets and liabilities recognized or disclosed at fair value in
the financial statements on a nonrecurring basis and adopted these provisions
effective January 1, 2009.
 
 11
 
 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 include: Level 1, defined as
observable inputs such as quoted market prices in active markets; Level 2,
defined as inputs other than quoted prices in active markets that are either
directly or indirectly observable; and Level 3, defined as unobservable inputs
about which little or no market data exists, therefore requiring an entity to
develop its own assumptions.
  As of
September 30, 2009, the Company held certain financial assets that are measured
at fair value on a recurring basis. These consisted of the Company’s investments
in Toko stock and Power-One stock (categorized as available-for-sale
securities). In addition, the Company holds certain investments in a Rabbi Trust
which are intended to fund the Company’s SERP obligations. These are also
categorized as available-for-sale securities, and are included as other assets
in the accompanying condensed consolidated balance sheet at September 30, 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 2 or Level 3
during the nine months ended September 30, 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 nine months ended September 30,
2009.
 
 The
following table sets forth by level, within the fair value hierarchy, the
Company’s financial assets accounted for at fair value on a recurring basis as
of September 30, 2009 (dollars in thousands).
  Assets at Fair Value as of September 30, 2009
      UsingTotal
                    
                    
                    Quoted Prices in
                      Active Markets
                      for Identical
                      Assets (Level1)
                    
                    
                    Significant
                      Other
                      Observable
                      Inputs
                      (Level 2)
                    
                    
                    Significant
                      Unobservable
                      Inputs
                      (Level 3)Available-for-sale
      securities:Marketable
      securities
                    
                    $
                    9,976
                    
                    
                    $
                    9,976
                    
                    
                    
                    -
                    
                    
                    
                    -Investments
      held in Rabbi Trust
                    
                    
                    3,696
                    
                    
                    
                    3,696
                    
                    
                    
                    -
                    
                    
                    
                    -Total
                    
                    $
                    13,672
                    
                    
                    $
                    13,672
                    
                    
                    
                    -
                    
                    
                    
                    -
 
 The
following table sets forth by level, within the fair value hierarchy, the
Company’s financial assets accounted for at fair value on a nonrecurring basis
as of September 30, 2009 (dollars in thousands). These consisted of the
Company’s investment in the Columbia Portfolio (categorized as an other
investment in the table below). The fair value of these investments was
determined based on the net asset value as issued by the portfolio manager as of
September 30, 2009. The Company has categorized this as a significant other
observable input (Level 2). These investments are included as short-term
investments and long-term investments in the accompanying condensed consolidated
balance sheet at September 30, 2009, in accordance with the current liquidation
schedule of the remaining investments.
  12
 
 Assets at Fair Value as of September 30, 2009
      Using
                        
                        
                        Total GainsTotal
                        
                        
                        Quoted Prices in
                          Active Markets
                          for Identical
                          Assets
                          (Level 1)
                        
                        
                        Significant Other
                          Observable
                          Inputs
                          (Level 2)
                        
                        
                        Significant
                          Unobservable
                          Inputs
                          (Level 3)
                        
                        
                        Three Months
                          Ended
                          September 30,
                          2009
                        
                        
                        Nine Months
                          Ended
                          September 30,
                          2009Other
      investments
                        
                        $
                        1,131
                        
                        
                        $
                        -
                        
                        
                        $
                        1,131
                        
                        
                        $
                        -
                        
                        
                        $
                        137
                        
                        
                        $
                        158Total
                        
                        $
                        1,131
                        
                        
                        $
                        -
                        
                        
                        $
                        1,131
                        
                        
                        $
                        -
                        
                        
                        $
                        137
                        
                        
                        $
                        158
 
 The
Company has other financial instruments, such as accounts receivable, accounts
payable and accrued expenses, which have been excluded from the tables above.
Due to the short-term nature of these instruments, the carrying value of
accounts receivable, accounts payable and accrued expenses approximate their
fair values. The Company did not have any other financial liabilities within the
scope of the fair value disclosure requirements as of September 30,
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 upon the
occurrence of a triggering event or in the case of goodwill, on at least an
annual basis.  While there were signs of improvement at the
beginning of the third quarter, the Company’s actual revenue stream for the nine
months ended September 30, 2009 was significantly lower than the financial
projections utilized in the annual goodwill impairment analysis (performed in
the fourth quarter of 2008), and is not projected to rebound to those levels in
2009. The Company determined that current business conditions, and the resulting
decrease in the Company’s projected cash flows, constituted a triggering event
which required the Company to perform interim impairment tests related to its
long-lived assets and goodwill during the third quarter of 2009. The Company’s
interim test on its long-lived assets indicated that the carrying value of its
long-lived assets was recoverable and that no impairment existed as of the
testing date.
  During
the third quarter of 2009, the Company conducted an interim impairment test
related to its goodwill by reporting unit, as a result of continued market
declines.  As of the testing date, only the Company’s Asia and Europe
reporting units had goodwill associated with them. The Company’s fair value
analysis related to the interim test was supported by a weighting of two
generally accepted valuation approaches, the income approach and the market
approach, as further described in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008. These approaches include numerous
assumptions with respect to future circumstances, such as industry and/or local
market conditions, that might directly impact each of the operating segment’s
operations in the future, and are therefore uncertain. These approaches are
utilized to develop a range of fair values and a weighted average of these
approaches is utilized to determine the best fair value estimate within that
range.
  13
 
 Detailed
below is a table of key underlying assumptions utilized in the fair value
estimate calculation for the interim test performed in the third quarter of 2009
as compared to those assumptions utilized during the 2008 annual
valuation. Assumptions may vary by reporting unit. The table below
shows the range of assumptions utilized across the various reporting
units.
 
 Goodwill
      Impairment AnalysisKey Assumptions2009 - Interim
                      
                      
                      2008 - AnnualIncome
      Approach - Discounted Cash Flows:Revenue
      growth rates
                      
                      
                      8.8%
      - 18.7%
                      
                      
                      
                      (8.9%)
      - 10.3%Cost
      of equity capital
                      
                      
                      13.8%
      - 14.8%
                      
                      
                      
                      13.0%
      - 13.6%Cost
      of debt capital
                      
                      
                      6.0%
      - 6.2%
                      
                      
                      
                      4.9%
      - 7.7%Weighted
      average cost of capital
                      
                      
                      12.6%
      - 13.4%
                      
                      
                      
                      11.0%
      - 13.3%Market
      Approach - Multiples of Guideline Companies (a):EBIT
      multiples used
                      
                      
                      7.9
      - 8.9
                      
                      
                      
                      6.0
      - 10.7EBITDA
      multiples used
                      
                      
                      6.3
      - 7.1
                      
                      
                      
                      5.0
      - 7.5DFNI
      multiples used
                      
                      
                      12.2
      - 13.7
                      
                      
                      
                      9.3
      - 13.5DFCF
      multiples used
                      
                      
                      8.7
      - 11.0
                      
                      
                      
                      6.4
      - 7.4Control
      premium (b)
                      
                      
                      16.2%
      - 32.0%
                      
                      
                      
                      27.5%
      - 31.7%Weighting
      of Valuation Methods:Income
      Approach - Discounted Cash Flows
                      
                      
                      75%
                      
                      
                      
                      75%Market
      Approach - Multiples of Guideline Companies
                      
                      
                      25%
                      
                      
                      
                      25%Definitions:EBIT
      - Earnings before interest and taxesEBITDA - Earnings before interest, taxes, depreciation and
      amortizationDFNI
      - Debt-free net incomeDFCF
      - Debt-free cash flow
 
 (a)
Multiple range reflects multiples used throughout the North America, Asia and
Europe reporting units
 (b)
Determined based on the industry mean control premium as published each year in
MergerStat Review
 
 The
interim impairment test related to the Company's goodwill was performed by
reporting unit.  The valuation test, which heavily weights future cash flow
projections, indicated that the goodwill associated with the Company’s Asia
reporting unit was fully impaired and, as a result, the Company recorded an
impairment charge of $12.9 million during the third quarter of 2009. The
Company’s goodwill associated with its Asia reporting unit originated from
several of Bel’s prior acquisitions, primarily e-Power, APC and Lucent (which
represented $8.0 million, $2.0 million and $1.5 million, respectively, of the
carrying value of goodwill at the testing date). The carrying value of the
Company's goodwill was $14.3 million at December 31, 2008. The remaining
goodwill as of September 30, 2009 has a carrying value of $2.0 million and
relates solely to the Company’s Europe reporting unit.
  14
  5. OTHER
ASSETS
 
 At
September 30, 2009, the Company has obligations of $6.5 million associated with
its supplemental executive retirement plan (“SERP”). As a means of informally
funding these obligations, the Company has invested in life insurance policies
related to certain employees and marketable securities held in a Rabbi Trust. At
September 30, 2009, these assets had a combined fair value of $6.4
million.
  Company-Owned Life
Insurance
 
 Investments
in company-owned life insurance policies (“COLI”) were made with the intention
of utilizing them as a long-term funding source for the Company’s SERP
obligations. However, the cash surrender value of the COLI does not represent a
committed funding source for these obligations. Any proceeds from these policies
are subject to claims from creditors. The fair market value of the COLI at
December 31, 2008 was $3.8 million. During the second quarter of 2009, the
Company surrendered certain of the policies within the COLI at a cash surrender
value of $1.5 million and purchased an additional $0.3 million in new COLI
policies. During the nine months ended September 30, 2009, significant
volatility in global equity markets had a significant effect on the cash
surrender value and as a result, the Company recorded income to account for the
increase in cash surrender value in the amount of $0.3 million during the three
and nine months ended September 30, 2009. This increase in cash surrender value
was allocated between cost of sales and selling, general and administrative
expenses on the condensed consolidated statements of operations for the nine
months ended September 30, 2009. The allocation is consistent with the costs
associated with the long-term employee benefit obligations that the COLI is
intended to fund. At September 30, 2009, the fair market value of the COLI was
$2.7 million and is included in other assets in the accompanying condensed
consolidated balance sheets.
  Other
Investments
 
 During
the second quarter of 2009, the Company invested $3.5 million in various
marketable securities. Together with the COLI described above, these investments
are intended to fund the Company’s SERP obligations and are classified as other
assets in the accompanying condensed consolidated balance sheets. These
investments are classified as available for sale and the Company monitors these
investments for impairment on an ongoing basis. At September 30, 2009, the fair
market value of these investments was $3.7 million. The unrealized gain of $0.2
million at September 30, 2009 has been included in accumulated other
comprehensive income.
 
 6.           INVENTORIES
 
 The
components of inventories are as follows (dollars in thousands):
 
 September
      30,
                        
                        
                        December
      31,2009
                        
                        
                        2008Raw
      materials
                        
                        $
                        20,483
                        
                        
                        $
                        25,527Work
      in progress
                        
                        
                        1,472
                        
                        
                        
                        1,650Finished
      goods
                        
                        
                        7,840
                        
                        
                        
                        19,347$
                        29,795
                        
                        
                        $
                        46,524
  15
 
 7.           
BUSINESS SEGMENT INFORMATION
 
 The
Company operates in one industry with three reportable segments. The segments
are geographic and include North America, Asia and Europe. The primary criteria
by which financial performance is evaluated and resources are allocated are
revenues and operating income. The following is a summary of key financial data
(dollars in thousands):
 
 Three
      Months Ended
                            
                            
                            Nine
      Months EndedSeptember 30,
                            
                            
                            September 30,2009
                            
                            
                            2008
                            
                            
                            2009
                            
                            
                            2008Total
      segment revenuesNorth
      America
                            
                            $
                            13,499
                            
                            
                            $
                            17,980
                            
                            
                            $
                            37,391
                            
                            
                            $
                            64,993Asia
                            
                            
                            36,098
                            
                            
                            
                            50,505
                            
                            
                            
                            105,016
                            
                            
                            
                            145,879Europe
                            
                            
                            4,213
                            
                            
                            
                            7,516
                            
                            
                            
                            13,936
                            
                            
                            
                            21,926Total
      segment revenues
                            
                            
                            53,810
                            
                            
                            
                            76,001
                            
                            
                            
                            156,343
                            
                            
                            
                            232,798Reconciling
      items:Intersegment
      revenues
                            
                            
                            (8,527
                            )
                            
                            
                            (9,037
                            )
                            
                            
                            (22,255
                            )
                            
                            
                            (32,511
                            )Net
      sales
                            
                            $
                            45,283
                            
                            
                            $
                            66,964
                            
                            
                            $
                            134,088
                            
                            
                            $
                            200,287Loss
      (income) from operations:North
      America
                            
                            $
                            (1,877
                            )
                            
                            $
                            118
                            
                            
                            $
                            479
                            
                            
                            $
                            2,862Asia
                            
                            
                            (13,864
                            )
                            
                            
                            1,095
                            
                            
                            
                            (16,731
                            )
                            
                            
                            3,399Europe
                            
                            
                            (189
                            )
                            
                            
                            151
                            
                            
                            
                            (291
                            )
                            
                            
                            1,254$
                            (15,930
                            )
                            
                            $
                            1,364
                            
                            
                            $
                            (16,543
                            )
                            
                            $
                            7,515
 
 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 gross
profit less operating expenses.
 
 8.    
DEBT
 
 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 and, as such, there was no balance outstanding as of September 30,
2009. At that date, the entire $20 million line of credit was available to the
Company to borrow. The credit agreement bears interest at LIBOR plus 0.75% to
1.25% based on certain financial statement ratios maintained by the Company. The
Company is in compliance with its debt covenants as of September 30,
2009.
 
 The
Company’s Hong Kong subsidiary had an unsecured line of credit of $2 million
which was unused as of September 30, 2009. The line of credit expired on January
31, 2009 and was renewed on February 10, 2009. Any borrowing on the line of
credit will be guaranteed by the U.S. parent. The line of credit bears interest
at a rate determined by the bank as the financing is extended.
  In July
2009, the Company established a standby letter of credit with the State of New
Jersey as a performance guarantee related to environmental cleanup associated
with the Jersey City, New Jersey property sale. In connection with this
agreement, the Company has a compensating balance of $0.3 million which has been
classified as restricted cash as of September 30, 2009.
  16
 
 9.           
INCOME TAXES
 
 As of
September 30, 2009 and December 31, 2008, the Company has approximately $4.4
million and $7.3 million, respectively, of liabilities for uncertain tax
positions ($1.8 million and $3.9 million, respectively, included in income tax
payable and $2.6 million and $3.4 million, respectively, included in liability
for uncertain tax positions) all of which, if recognized, 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
2003 in the Far East and generally 2005 in Europe.
  During
the nine months ended September 30, 2009, certain statutes of limitations
expired which resulted in a reversal of a previously recognized liability for
uncertain tax positions in the amount of $3.9 million. This was offset by an
increase in the liability for uncertain tax positions in the amount of $0.9
million during the nine months ended September 30, 2009. Additionally, the
Company settled a lawsuit during the third quarter of 2009 which resulted in a
tax benefit of $0.8 million. During the nine months ended September 30, 2008,
certain statute of limitations expired which resulted in a reversal of a
previously recognized liability for uncertain tax positions in the amount of
$2.3 million. This was offset by certain changes in estimates for prior year
taxes arising from the finalization of the 2007 tax returns together with the
resolution of the Bel Fuse, Inc. State of New Jersey tax examination in the
total amount of $0.5 million.
 
 As a
result of the expiration of the statute of limitations for specific
jurisdictions, it is reasonably possible that the related unrecognized benefits
for tax positions taken regarding previously filed tax returns may change
materially from those recorded as liabilities for uncertain tax positions in the
Company’s condensed consolidated financial statements at September 30, 2009. A
total of $1.8 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 the
nine months ended September 30, 2009 and 2008, the Company recognized $0.1
million and $0.3 million, respectively, in interest and penalties in the
condensed consolidated statements of operations. The Company has approximately
$1.0 million and $1.6 million accrued for the payment of interest and penalties
at September 30, 2009 and December 31, 2008, respectively, which is included in
both income taxes payable and liability for uncertain tax positions in the
condensed consolidated balance sheets. During the quarters ended September 30,
2009 and 2008, $0.7 million and $0.3 million, respectively, of interest and
penalties was reversed from the liability for uncertain tax positions. These
amounts are included in the reversals of previously recognized liabilities for
uncertain tax positions discussed above.
  17
 
 10.           ACCRUED
EXPENSES
 
 Accrued
expenses consist of the following (dollars in thousands):
  September
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008Sales
      commissions
                    
                    $
                    1,359
                    
                    
                    $
                    1,598Contract
      labor
                    
                    
                    1,560
                    
                    
                    
                    2,939Salaries,
      bonuses and related benefits
                    
                    
                    2,684
                    
                    
                    
                    2,834License
      fee
                    
                    
                    2,100
                    
                    
                    
                    -Other
                    
                    
                    1,977
                    
                    
                    
                    2,582$
                    9,680
                    
                    
                    $
                    9,953
 
 See Note
19 for discussion and details associated with restructuring
accruals.
 
 11.           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
retirement benefits for plan participants. The expense for the nine months ended
September 30, 2009 and 2008 amounted to approximately $0.3 million in each
period. The expense for the three months ended September 30, 2009 and 2008
amounted to approximately $0.1 million in each period. As of September 30, 2009,
the plans owned 17,086 and 174,334 shares of Bel Fuse Inc. Class A and Class B
common stock, respectively.
 
 The
Company's subsidiaries in Asia have a retirement fund covering substantially all
of their Hong Kong based full-time employees. The expense for the nine months
ended September 30, 2009 and 2008 amounted to approximately $0.2 million and
$0.3 million, respectively. The expense for the three months ended September 30,
2009 and 2008 amounted to approximately $0.1 million in each period. As of
September 30, 2009, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc.
Class A and Class B common stock, respectively.
 
 The
Supplemental Executive Retirement Plan (the "SERP" or the “Plan”) is designed to
provide a limited group of key management and highly compensated employees of
the Company with supplemental retirement and death benefits.
  The
components of SERP expense are as follows (dollars in thousands):
  Three
      Months Ended
                      
                      
                      Nine
      Months EndedSeptember 30,
                      
                      
                      September 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008Service
      cost
                      
                      $
                      96
                      
                      
                      $
                      73
                      
                      
                      $
                      288
                      
                      
                      $
                      220Interest
      cost
                      
                      
                      88
                      
                      
                      
                      76
                      
                      
                      
                      264
                      
                      
                      
                      227Amortization
      of adjustments
                      
                      
                      37
                      
                      
                      
                      33
                      
                      
                      
                      110
                      
                      
                      
                      100Total
      SERP expense
                      
                      $
                      221
                      
                      
                      $
                      182
                      
                      
                      $
                      662
                      
                      
                      $
                      547
  18
  September
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008Balance
      sheet amounts:Minimum
      pension obligation and unfunded pension liability
                    
                    $
                    6,515
                    
                    
                    $
                    5,910Accumulated
      other comprehensive (loss) income
                    
                    
                    (1,588
                    )
                    
                    
                    (1,588
                    )
 
 12.
SHARE-BASED COMPENSATION
 
 The
Company records compensation expense in its condensed consolidated statements of
operations related to employee stock-based options and awards. The aggregate
pretax compensation cost recognized in net (loss) earnings for stock-based
compensation (including incentive stock options and restricted stock, as further
discussed below) amounted to approximately $1.2 million and $1.1 million,
respectively, for the nine months ended September 30, 2009 and 2008. For the
three months ended September 30, 2009 and 2008, the aggregate compensation cost
recognized in net earnings amounted to $0.4 million in each period. The Company
did not use any cash to settle any equity instruments granted under share-based
arrangements during the nine months ended September 30, 2009 and
2008.
  Stock
Options
 
 The
Company has an equity compensation program (the "Program") which provides for
the granting of "Incentive Stock Options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, non-qualified stock options and
restricted stock awards. No stock options were granted during the nine months
ended September 30, 2009 and 2008.
 
 Information
regarding the Company’s stock options for the nine months ended September 30,
2009 is as follows. All of the stock options noted below relate to options to
purchase shares of the Company’s Class B common stock.
  WeightedAverageWeighted
                    
                    
                    Remaining
                    
                    
                    AggregateAverage
                    
                    
                    Contractual
                    
                    
                    IntrinsicOptions
                    
                    Shares
                    
                    
                    Exercise Price
                    
                    
                    Term
                    
                    
                    Value (000's)Outstanding
      at January 1, 2009
                    
                    
                    53,000
                    
                    
                    $
                    31.48Granted
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -Forfeited
      or expired
                    
                    
                    (14,000
                    )
                    
                    
                    37.00Outstanding
      at September 30, 2009
                    
                    
                    39,000
                    
                    
                    $
                    29.50
                    
                    
                    0.73 years
                    
                    
                    $
                    -Exercisable
      at September 30, 2009
                    
                    
                    39,000
                    
                    
                    $
                    29.50
                    
                    
                    0.73 years
                    
                    
                    $
                    -
 
 No stock
options were exercised during the nine months ended September 30, 2009. During
the nine months ended September 30, 2008, a nominal amount of stock options were
exercised and, as a result, the amount received from the exercise of stock
options and the associated intrinsic value and tax benefits related to these
exercises were minimal. Stock compensation expense applicable to stock options
was minimal for the nine months ended September 30, 2009 and 2008.
 
 19
  A summary
of the status of the Company's unvested stock options as of December 31, 2008
and changes during the nine months ended September 30, 2009 is presented
below:
 
 Weighted-AverageGrant-DateUnvested Stock Options
                            
                            Shares
                            
                            
                            Fair ValueUnvested
      at December 31, 2008
                            
                            
                            15,000
                            
                            
                            $
                            29.50Granted
                            
                            
                            -
                            
                            
                            
                            -Vested
                            
                            
                            (15,000
                            )
                            
                            
                            29.50Forfeited
                            
                            
                            -
                            
                            
                            
                            -Unvested
      at September 30, 2009
                            
                            
                            -
                            
                            
                            
                            -
 
 Restricted
Stock Awards
 
 The
Company provides common stock awards to certain officers and key associates. The
Company grants these awards, at its discretion, from the shares available under
the Program. Unless otherwise provided at the date of grant or unless
subsequently accelerated, the shares awarded vest in 25% increments on the
second, third, fourth and fifth anniversaries of the award, respectively, and
are distributed provided the employee has remained employed by the Company
through such anniversary dates; otherwise the unearned shares are forfeited. The
market value of these shares at the date of award is recorded as compensation
expense on the straight-line method over the fiveyear periods
from the respective award dates, as adjusted for forfeitures of unvested awards.
No common stock awards were granted by the Company during the nine months ended
September 30, 2009. During the nine months ended September 30, 2008, the Company
issued 56,300 Class B common shares under a restricted stock plan to various
employees. In connection with awards granted in prior years, the Company
recorded pre-tax compensation expense of $1.2 million and $1.1 million for the
nine months ended September 30, 2009 and 2008, respectively, and $0.4 million
for each of the three months ended September 30, 2009 and 2008.
  A summary
of the activity under the Restricted Stock Awards Plan as of January 1, 2009 and
for the nine months ended September 30, 2009 is presented below:
  WeightedWeighted
                            
                            AverageAverage
                            
                            RemainingRestricted
      Stock
                            
                            
                            
                            
                            Award
                            
                            ContractualAwards
                            
                            Shares
                            
                            
                            Price
                            
                            TermOutstanding
      at January 1, 2009
                            
                            
                            202,900
                            
                            
                            $
                            32.58
                            
                            3.06
      yearsGranted
                            
                            
                            -
                            
                            
                            
                            -Vested
                            
                            
                            (20,550
                            )
                            
                            
                            35.52Forfeited
                            
                            
                            (19,550
                            )
                            
                            
                            31.73Outstanding
      at September 30, 2009
                            
                            
                            162,800
                            
                            
                            $
                            32.31
                            
                            2.30
      years
 
 As of
September 30, 2009, there was $3.0 million of total pre-tax unrecognized
compensation cost included within additional paid-in-capital related to
non-vested stock based compensation arrangements granted under the restricted
stock award plan; that cost is expected to be recognized over a period of 3.6
years. The Company's policy is to issue new shares to satisfy Restricted Stock
Awards and incentive stock option exercises. In calculating the stock-based
compensation expense related to stock awards, the Company has estimated that 5%
of the outstanding unvested stock awards will forfeit each year related to
employee attrition.
 
 20
  The
Company has calculated the hypothetical additional paid-in capital (“APIC”) pool
which represents excess tax benefits related to historical stock option
exercises.  In future periods, excess tax benefits resulting from
disqualifying dispositions of incentive stock options and the vesting of
restricted stock awards will be recognized as additions to APIC in the period
the benefit is realized.  In the event of a shortfall (that is, the tax
benefit realized is less than the amount previously recognized through periodic
stock-based compensation expense recognition and related deferred tax
accounting), the shortfall would be charged against APIC to the extent of
previous excess benefits, if any, including the amounts included in the
hypothetical APIC pool and then to tax expense. During the nine months ended
September 30, 2009, the Company recorded a $0.1 million reduction to the APIC
pool associated with tax deficiencies related to restricted stock
awards.
 
 13.
COMMON STOCK
 
 During
2000, the Board of Directors of the Company authorized the purchase of up to ten
percent of the Company’s outstanding common shares. As of September 30, 2009,
the Company had purchased and retired 23,600 Class B common shares at a cost of
approximately $0.8 million and had purchased and retired 527,817 Class A common
shares at a cost of approximately $16.8 million. No shares of Class B common
stock were repurchased during the nine months ended September 30, 2009 and 6,070
shares of Class A common stock were repurchased during the nine months ended
September 30, 2009 at a cost of $0.1 million.
  As of
September 30, 2009, to the Company’s knowledge, there were two shareholders of
the Company’s common stock with ownership in excess of 10% of Class A
outstanding shares with no ownership of the Company’s Class B common stock. In
accordance with the Company’s certificate of incorporation, the Class B
Protection clause is triggered if a shareholder owns 10% or more of the
outstanding Class A common stock and does not own an equal or greater percentage
of all then outstanding shares of both Class A and Class B common stock (all of
which common stock must have been acquired after the date of the 1998
recapitalization). In such a circumstance, such shareholder must, within 90 days
of the trigger date, purchase Class B common shares, in an amount and at a price
determined in accordance with a formula described in the Company’s certificate
of incorporation, or forfeit its right to vote its Class A common shares. As of
September 30, 2009, to the Company’s knowledge, these shareholders had not
purchased any Class B shares to comply with these requirements. In order to vote
their shares at Bel’s next shareholders’ meeting, these shareholders must either
purchase the required number of Class B common shares or sell or otherwise
transfer Class A common shares until their Class A holdings are under 10%. As of
September 30, 2009, to the Company’s knowledge, these shareholders owned 17.0%
and 15.6%, respectively, of the Company’s Class A common stock in the aggregate
and had not taken steps to either purchase the required number of Class B common
shares or sell or otherwise transfer Class A common shares until their Class A
holdings fall below 10%.
  There are
no contractual restrictions on the Company's ability to pay dividends provided
the Company is not in default immediately before such payment and after giving
effect to such payment. Dividends paid during the nine months ended September
30, 2009 and 2008 were as follows:
  21
 
 Dividend per Share
                    
                    
                    Payment (in thousands)Class A
                    
                    
                    Class B
                    
                    
                    Class A
                    
                    
                    Class BNine
      Months Ended September 30, 2009:February
      1, 2009
                    
                    $
                    0.06
                    
                    
                    $
                    0.07
                    
                    
                    $
                    130
                    
                    
                    $
                    642May
      1, 2009
                    
                    
                    0.06
                    
                    
                    
                    0.07
                    
                    
                    
                    130
                    
                    
                    
                    642August
      1, 2009
                    
                    
                    0.06
                    
                    
                    
                    0.07
                    
                    
                    
                    131
                    
                    
                    
                    641Nine
      Months Ended September 30, 2008:February
      1, 2008
                    
                    
                    0.06
                    
                    
                    
                    0.07
                    
                    
                    
                    153
                    
                    
                    
                    638May
      1, 2008
                    
                    
                    0.06
                    
                    
                    
                    0.07
                    
                    
                    
                    152
                    
                    
                    
                    638August
      1, 2008
                    
                    
                    0.06
                    
                    
                    
                    0.07
                    
                    
                    
                    151
                    
                    
                    
                    640
 
 14.        
COMPREHENSIVE (LOSS) INCOME
  Comprehensive
(loss) income for the three and nine months ended September 30, 2009 and 2008
consists of the following (dollars in thousands):
  Three
      Months Ended
                    
                    
                    Nine
      Months EndedSeptember 30,
                    
                    
                    September 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Net
      (loss) earnings
                    
                    $
                    (10,752
                    )
                    
                    $
                    1,946
                    
                    
                    $
                    (11,208
                    )
                    
                    $
                    5,924Currency
      translation adjustment
                    
                    
                    332
                    
                    
                    
                    (810
                    )
                    
                    
                    345
                    
                    
                    
                    (6
                    )Increase
      (decrease) in unrealized gain on marketable securities - net of
      taxes
                    
                    
                    1,924
                    
                    
                    
                    (2,123
                    )
                    
                    
                    3,985
                    
                    
                    
                    (3,460
                    )Reclassification
      adjustment for gains included in net loss, net of
      tax
                    
                    
                    (1,022
                    )
                    
                    
                    -
                    
                    
                    
                    (1,680
                    )
                    
                    
                    -Reclassification
      adjustment for impairment charge included in net earnings, net
      of tax
                    
                    
                    -
                    
                    
                    
                    783
                    
                    
                    
                    -
                    
                    
                    
                    2,242Comprehensive
      (loss) income
                    
                    $
                    (9,518
                    )
                    
                    $
                    (204
                    )
                    
                    $
                    (8,558
                    )
                    
                    $
                    4,700
 
 The
components of accumulated other comprehensive income as of September 30, 2009
and December 31, 2008 are summarized below (dollars in thousands):
 
 September
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008Foreign
      currency translation adjustment
                    
                    $
                    2,091
                    
                    
                    $
                    1,746Unrealized
      holding gains on available-for-sale securities under SFAS No. 115, net of
      taxes of $1,442 and $23 as of September 30, 2009 and December 31, 2008,
      respectively
                    
                    
                    2,335
                    
                    
                    
                    30Unfunded
      SERP liability, net of taxes of ($606) as of September 30, 2009 and
      December 31, 2008
                    
                    
                    (1,588
                    )
                    
                    
                    (1,588
                    )Accumulated
      other comprehensive income
                    
                    $
                    2,838
                    
                    
                    $
                    188
  22
 
 15.           SALE
OF PROPERTY
  During
May 2007, the Company sold a parcel of land located in Jersey City, New Jersey
for $6.0 million. In December 2007, the Tidelands Resource Council voted to
approve the Bureau of Tideland Management’s recommendation for a Statement of No
Interest. On March 14, 2008, the Commissioner of the Department of Environmental
Protection signed a letter to approve the Statement of No Interest. As final
approval of the Statement of No Interest was still pending as of December 31,
2008, the Company continued to defer the estimated gain on sale of the land, in
the amount of $4.6 million. Of the $6.0 million sales price, the Company
received cash of $1.5 million before closing costs, and $4.6 million (including
interest) was being held in escrow pending final resolution of the State of New
Jersey tideland claim and certain environmental costs. During 2007, the Company
paid $0.4 million related to environmental costs, which approximated the maximum
amount of environmental costs for which the Company is liable. During May 2008,
the title company released $2.3 million of the escrow and, as such, $2.3
remained in escrow and had been classified as restricted cash as of December 31,
2008. In February 2009, the final approval of the Statement of No Interest was
received from the State of New Jersey. In March 2009, the title company released
the remaining escrow of $2.3 million and corresponding guarantees and the
Company recognized the gain associated with the sale of this property in the
amount of $4.6 million. In July 2009, the Company established a standby letter
of credit for the State of New Jersey as a performance guarantee related to
environmental cleanup associated with the Jersey City, New Jersey property sale.
In connection with this agreement, the Company has a compensating balance of
$0.3 million which has been classified as restricted cash as of September 30,
2009.
 
 16.           NEW
FINANCIAL ACCOUNTING STANDARDS
 
 During
2009, the Company implemented an update to the accounting guidance related to
earnings per share. In accordance with this accounting guidance, unvested
share-based payment awards with rights to dividends are participating securities
and shall be included in the computation of basic earnings per share. The
Company adopted this guidance effective January 1, 2009 and in accordance with
the accounting guidance, all prior-period earnings per share data presented has
been adjusted retrospectively to conform to the provisions of the new guidance.
This adjustment did not have a material impact on prior periods
presented.
 
 During
the second quarter of 2009, the Company implemented additional interim
disclosures about fair value of financial instruments in accordance with the
accounting guidance for fair value of financial instruments. Prior to
implementation, disclosures about fair values of financial instruments were only
required to be disclosed annually. See Note 4 for the Company’s disclosures on
fair value measurements.
 
 Beginning
in the second quarter of 2009, the Company must disclose the date through which
subsequent events have been evaluated, in accordance with the requirements in
FASB ASC Paragraph 855-10-50-1. With regard to the condensed consolidated
financial statements and notes to those financial statements contained in this
Form 10-Q, the Company has evaluated all subsequent events through November 6,
2009 (the date the Company’s financial statement are issued).
  23
  During
the third quarter of 2009, the Company adopted the FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles in
accordance with FASB ASC Topic 105, “Generally Accepted Accounting Principles”
(the “Codification”). The Codification has become the source of authoritative
U.S. generally accepted accounting principles (GAAP). Effective with the
Company’s adoption on July 1, 2009, the Codification has superseded all prior
non-SEC accounting and reporting standards. All other non-grandfathered non-SEC
accounting literature not included in the Codification has become
non-authoritative. As the adoption of the Codification only affected how
specific references to GAAP literature have been disclosed in the notes to the
Company’s condensed consolidated financial statements, it did not result in any
impact on the Company’s results of operations, financial condition or cash
flows.
 
 Updates totheFASB Codification Applicable
to the Company
 
 The FASB
has published an update to the accounting guidance on fair value measurements
and disclosures as it relates to investments in certain entities that calculate
net asset value per share (or its equivalent). This accounting guidance
permits a reporting entity to measure the fair value of certain investments on
the basis of the net asset value per share of the investment (or its
equivalent). This update also requires new disclosures, by major category of
investments, about the attributes of investments included within the scope of
this amendment to the Codification. The guidance in this update is effective for
interim and annual periods ending after December 15, 2009. The Company does not
expect the adoption of this standard to have an impact on the Company’s results
of operations, financial condition or cash flows.
 
 17.         
 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 2008 Annual Report on Form 10-K for the details of all of Bel’s
pending lawsuits. Updates to pending lawsuits since the Company’s Form 10-K
filing are described below.
 
 The
Company is a defendant in a lawsuit captioned “Murata Manufacturing Company,
Ltd. v. Bel Fuse Inc. et al.,” brought in Illinois Federal District Court. The
plaintiff claims that its patent covers all of the Company's modular jack
products. That party had previously advised the Company that it was willing to
grant a non-exclusive license to the Company under the patent for a 3% royalty
on all future gross sales of ICM products; payment of a lump sum of 3% of past
sales including sales of applicable Insilco products; an annual minimum royalty
of $0.05 million; payment of all attorney fees; and marking of all licensed
ICM's with the third-party's patent number. The Company had expected this case
to proceed to trial. In order to eliminate future legal fees related to this
case, a settlement was negotiated with Murata in October 2009 whereby the
Company will pay a lump sum licensing fee of $2.1 million in exchange for a
licensing agreement covering the past and future sales of the Company’s modular
jack products. As $2.0 million of this fee was deemed to relate to product sales
from prior periods, the Company included this expense in cost of sales in the
accompanying condensed consolidated statements of operations for the three and
nine months ended September 30, 2009.
 
 18.           RELATED
PARTY TRANSACTIONS
 
 As of
September 30, 2009, the Company has $2.0 million invested in a money market fund
with GAMCO Investors, Inc. (“GAMCO”). GAMCO is a current shareholder of the
Company, with holdings of its Class A stock of approximately 15.6%. However, as
discussed in Note 13, GAMCO’s voting rights are currently
suspended.
  24
  19.      
RESTRUCTURING ACTIVITY
 
 During
July 2008, the Company announced that it would cease all manufacturing
operations at its Bel Power Inc. facility in Westborough, Massachusetts as of
December 31, 2008. The costs associated with this closure are being accounted
for in accordance with the accounting guidance related to exit or disposal cost
obligations. The Company incurred $0.4 million of restructuring charges during
the nine months ended September 30, 2009, including $0.1 million related to
severance and related benefits. The Company has been unable to sublease the
facility in Westborough, Massachusetts and in light of the current real estate
market, it is not anticipated that a sublease can be reasonably obtained for
this facility. As a result, the Company recorded an additional charge of $0.3
million related to its facility lease obligation during the first quarter of
2009. The Company incurred $0.3 million of restructuring charges related to
severance and related benefits during the three months and nine months ended
September 30, 2008. These charges impacted the operating profit of the Company’s
North America operating segment.
  Activity
and liability balances related to the restructuring charges for the nine months
ended September 30, 2009 are as follows:
 
 Liability
      at
                    
                    
                    New
                    
                    
                    Cash
      Payments &
                    
                    
                    Liability
      atDecember
      31, 2008
                    
                    
                    Charges
                    
                    
                    Other
      Settlements
                    
                    
                    September
      30, 2009Termination
      benefit charges
                    
                    $
                    437
                    
                    
                    $
                    121
                    
                    
                    $
                    (558
                    )
                    
                    $
                    -Facility
      lease obligation
                    
                    
                    524
                    
                    
                    
                    292
                    
                    
                    
                    (114
                    )
                    
                    
                    702$
                    961
                    
                    
                    $
                    413
                    
                    
                    $
                    (672
                    )
                    
                    $
                    702
 
 The
Company has included the current portion of $0.2 million in accrued
restructuring in the condensed consolidated balance sheet at September 30, 2009,
and has classified the remaining $0.5 million of the liability related to the
facility lease obligation as noncurrent.
 
 20.      
UNAUTHORIZED TRANSACTIONS
  In April
2009, as part of the March 31, 2009 quarter-end review, the Company's internal
accounting personnel identified a questionable entry in the Company's stock
option exercise records. After questioning by management, a Company employee
(the "Employee") responsible for certain aspects of the Company's benefit plan
administration admitted fabricating certain Company records for his own benefit
in order to enable him to exercise stock options that had not been granted to
him by the Company's Compensation Committee. The Company's management
immediately terminated the employment of the Employee and reported the matter to
the Company's Audit Committee. The Audit Committee, in turn, directed internal
accounting personnel to investigate this matter and directed counsel to engage a
forensic accounting firm to supplement the Company's internal
review.
  The
Company's review has focused on the Employee's role in the administration of the
Company's stock option plan, 401(k) plan and profit-sharing plan. The following
determinations have been made:
  ·
              With
      respect to the stock option plan, the Company has determined that over a
      period of approximately eight years, the Employee exercised options
      covering 30,000 shares of Class B Common Stock on the basis of
      documentation that the Employee fabricated. The fair value of these 30,000
      shares at the times of issuance approximated $0.8 million. Option
      exercises covering an additional 1,000 shares are questionable but have
      not, as yet, been determined to be based on fabricated documentation. At
      this time, the Company does not believe that it will be able to obtain
      sufficient evidentiary documents to conclusively determine that these are
      fraudulent transactions. The Employee has returned 30,000 shares to the
      Company for cancellation with a fair market value on the dates of their
      return of approximately $0.4
million.
  25
  ·
              With
      respect to the Company's 401(k) plan, the Company has determined that over
      the same approximate eight-year period, the Employee fraudulently
      increased the balance in his 401(k) account by a total of $44,300. The
      Employee has not been permitted to withdraw any funds in his 401(k)
      account. Accordingly, in July 2009, the Company recouped the $44,300
      directly from the Employee's 401(k) account. In addition, the Employee
      initiated special 401(k) stock distributions directly into the Employee’s
      IRA account representing 3,420 shares of Class B Common Stock and 65
      shares of Class A Common Stock. The fair value of these shares at the time
      of transfer approximated $0.1 million. The Employee has returned 1,200
      shares of Class B Common Stock to the Company for cancellation with a fair
      market value on the dates of their return of approximately $16,000. The
      Company contends that the withdrawal of these shares constituted a
      withdrawal of his Plan funds and intends to use the current balance of 6
      Class A and 864 Class B shares plus $33,156 associated in the Plan with
      his account as partial payment of an over withdrawal from his account. The
      Company has demanded that the Employee return the balance to the
      Plan.
 
 ·
              With
      respect to the Company's profit-sharing plan, the Company has determined
      that the Employee diverted to his account a total of $3,600 credited to
      the account of an employee whose employment had terminated and who
      therefore was about to forfeit his profit-sharing interest. The Employee
      has not been permitted to withdraw any funds from his profit-sharing
      account. The Company intends to recoup such $3,600 directly from the
      Employee.
 
 The
review by the Company's internal accounting personnel and forensic accounting
firm is complete. The Company has reported this matter to the appropriate
governmental authorities, which may take further action with respect to the
Employee. The Company's forensic accounting firm performed an email search
designed to ascertain whether there was any evidence that the Employee's actions
extended beyond his own personal accounts or whether other employees were
directly involved in such actions. To date, the Company has not discovered any
evidence that suggests that the fraudulent practices identified pursuant to the
internal investigation extended beyond the Employee's personal accounts or
directly involved Company personnel other than the Employee.
 
 During
the second quarter of 2009, the Company recorded an unauthorized issuance of
common stock charge of $0.9 million related to this theft. This charge was
offset by $0.5 million related to the fair market value of shares returned by
the Employee during the second quarter of 2009. In addition, the Company
incurred $0.2 million in legal and professional fees related to this activity.
These charges are included within selling, general and administrative expenses
in the accompanying condensed consolidated statement of operations for the nine
months ended September 30, 2009.
  26


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, 2008. 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, 2008, 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.  While these products
are deployed primarily in the computer, networking and telecommunication
industries, Bel’s expanding portfolio of products also finds application in the
automotive, medical and consumer electronics markets.   Bel's
products are designed to protect, regulate, connect, isolate or manage a variety
of electronic circuits.





Bel’s
business is operated through three geographic segments:  North
America, Asia and Europe.  During the nine months ended September
30, 2009, 67% of the Company’s revenues were derived from Asia, 23% from North
America and 10% from its Europe operating segment.  Sales of the
Company’s magnetic products represented approximately 47% of the Company’s total
net sales for the nine months ended September 30, 2009.  These sales
are primarily driven by working closely with the Company’s customers’
engineering staffs and aligning them with industry standards committees and
various integrated circuit (IC) manufacturers.  The remaining revenues
related to sales of the Company’s modules products (30%), interconnect products
(18%) and circuit protection products (5%).





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.  Bel
generally enters into processing arrangements with several independent third
party contractors in Asia.  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, Mexico, and the Czech
Republic.


27





Trends
Affecting our Business





The
Company believes the key factors affecting Bel’s third quarter 2009 and/or
future results include the following:





·
            Increasing
      pressures in the U.S. and global economy related to the global economic
      downturn, the credit crisis, volatility in interest rates, investment
      returns, energy prices and other elements that impact commercial and
      end-user consumer spending are creating a highly challenging environment
      for Bel and its customers.





·
            These
      weakening economic conditions have resulted in reductions in capital
      expenditures by end-user consumers of our products.  While we
      have seen an increase in the backlog of orders at the end of the third
      quarter, we do not anticipate a full rebound to the 2008 level of sales
      volume until 2011.





·
            With
      the reduction in sales within certain of Bel’s product groups, competition
      will continue to increase. As a result, Bel is being faced with pricing
      pressures, which will impact Bel’s future profit
  margins.





·
            Commodity
      prices, especially those pertaining to gold and copper, have been highly
      volatile.  Fluctuations in these prices and other commodity
      prices associated with Bel’s raw materials will have a corresponding
      impact on Bel’s profit margins.





·
            The
      costs of labor, particularly in the PRC where several of Bel’s factories
      are located, have risen significantly as a result of government mandates
      for new minimum wage and overtime requirements (effective April
      2008).  These higher labor rates will continue to have a
      negative impact on Bel’s profit
margins.





·
            The
      global nature of Bel’s business exposes Bel to earnings volatility
      resulting from exchange rate
fluctuations.





·
            Toward
      the end of the third quarter of 2009, there has been an increase in
      customer demand and the Company is currently in the process of hiring
      additional workers to meet this increased demand for Bel’s
      products.   Management anticipates that this will lead to
      higher labor costs in the fourth quarter of 2009 and into 2010 due to
      training costs and production inefficiencies related to these new
      workers.





·
            As
      overall demand in our industry begins to increase, our competitors have
      not been able to meet increased customer demand which has resulted in
      additional time sensitive demand for Bel’s products.  This will
      likely become another factor contributing to rising labor costs in future
      quarters, as excess overtime may be incurred to achieve these additional
      customer demands on a timely basis.





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 2009 will be materially adversely
affected by the continuing economic crisis.


28





Overview
of Financial Results





The current market conditions have
impacted the Company considerably during the three and nine months ended
September 30, 2009.





During the third quarter of 2009, the
Company experienced a 32.4% decrease in sales as compared to the third quarter
of 2008.  This was primarily due to a reduction in demand across all
product lines related to weak global economic conditions.  The Company
also recorded a goodwill impairment charge of $12.9 million related to its Asia
reporting unit and a $2.1 million license fee in connection with a lawsuit
settlement.  These items were offset, in part, by a 23.7% reduction in
selling, general and administrative expenses and a reversal of a previously
established tax liability of $3.9 million during the third quarter of
2009.  The reduction in sales coupled with these and other factors
resulted in a net loss of $10.8 million for the three months ended September 30,
2009.  Additional details related to these factors affecting the third
quarter results are described in the Results of Operations section
below.





During the nine months ended September
30, 2009, the Company experienced a 33.1% decrease in sales as compared to the
same period of 2008.  In addition to the third quarter 2009 items
noted above, the Company incurred $0.4 million in restructuring charges related
to the closure of its Westborough, Massachusetts facility and experienced an
increase in the cost of materials due to a shift in product
mix.  Interest income also decreased by $1.7 million due to lower
interest rates on invested balances.  These items were offset, in
part, by an 18.7% reduction in selling, general and administrative expenses,
lower labor costs in 2009, a $4.6 million gain on sale of property and a gain
for financial reporting purposes of $1.6 million related to the sale of the
Company’s investment in Power-One common stock during the nine months ended
September 30, 2009.  The reduction in sales coupled with these and
other factors resulted in a net loss of $11.2 million for the nine months ended
September 30, 2009.  Additional details related to these factors
affecting the nine month results are described in the Results of Operations
section below.





Critical Accounting
Policies





The Company’s discussion and analysis
of its financial condition and results of operations are based upon the
Company’s consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires the Company to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to product returns, bad debts, inventories, goodwill,
intangible assets, investments, SERP expense, income taxes and contingencies and
litigation. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.  For a discussion of all of the Company’s
critical accounting policies, see the Company’s Annual Report on Form 10-K for
the year ended December 31, 2008.  Significant changes to critical
accounting policies since the Company’s Form 10-K filing are described
below.


29





Goodwill and Intangible
Assets





The assets and liabilities of acquired
businesses are recorded under the purchase method of accounting at their
estimated fair values at the dates of acquisition.  Goodwill
represents costs in excess of fair values assigned to the underlying net assets
of acquired businesses.





Goodwill and intangible assets deemed
to have indefinite lives are not amortized, but are subject to annual impairment
testing.  Management has reviewed the carrying value of goodwill and
other indefinite-lived intangible assets as required by the Intangibles –
Goodwill and Other Topic of the Codification (as defined herein).  The
identification and measurement of goodwill impairment involves the estimation of
the fair value of geographic reporting units.  The estimates of fair
value of geographic reporting units are based on the best information available
as of the date of the assessment, which primarily incorporate management
assumptions about expected future cash flows and consider other valuation
techniques.  Future cash flows can be affected by changes in industry
or market conditions or the rate and extent to which anticipated synergies or
cost savings are realized with newly acquired entities.





During the third quarter of 2009, the
Company conducted an interim impairment test related to its goodwill by
operating segment, as a result of continued market declines.  As of the
testing date, only the Company’s Asia and Europe operating segments had goodwill
associated with them.  The Company’s fair value analysis related to
the interim test was supported by a weighting of two generally accepted
valuation approaches, the income approach and the market approach, as further
described in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.  These approaches include numerous assumptions with
respect to future circumstances, such as industry and/or local market conditions
that might directly impact each of the operating segment’s operations in the
future, and are therefore uncertain.  These approaches are utilized to
develop a range of fair values and a weighted average of these approaches is
utilized to determine the best fair value estimate within that
range.


30





Detailed
below is a table of key underlying assumptions utilized in the fair value
estimate calculation for the interim test performed in the third quarter of 2009
as compared to those assumptions utilized during the 2008 annual
valuation.  Assumptions may vary by reporting unit.  The
table below shows the range of assumptions utilized across the various reporting
units.





Goodwill Impairment AnalysisKeyAssumptions2009-Interim
                                                                                
                                                                                
                                                                                2008-AnnualIncome
      Approach - Discounted Cash Flows:Revenue
      growth rates
                                                                                
                                                                                8.8%
      - 18.7%
                                                                                
                                                                                
                                                                                (8.9)%
      - 10.3%Cost
      of equity capital
                                                                                
                                                                                13.8%
      - 14.8%
                                                                                
                                                                                
                                                                                13.0%
      - 13.6%Cost
      of debt capital
                                                                                
                                                                                6.0%
      - 6.2%
                                                                                
                                                                                
                                                                                4.9%
      - 7.7%Weighted
      average cost of capital
                                                                                
                                                                                12.6%
      - 13.4%
                                                                                
                                                                                
                                                                                11.0%
      - 13.3%Market
      Approach - Multiples of Guideline Companies (a):EBIT
      multiples used
                                                                                
                                                                                7.9
      - 8.9
                                                                                
                                                                                
                                                                                6.0
      - 10.7EBITDA
      multiples used
                                                                                
                                                                                6.3
      - 7.1
                                                                                
                                                                                
                                                                                5.0
      - 7.5DFNI
      multiples used
                                                                                
                                                                                12.2
      - 13.7
                                                                                
                                                                                
                                                                                9.3
      - 13.5DFCF
      multiples used
                                                                                
                                                                                8.7
      - 11.0
                                                                                
                                                                                
                                                                                6.4
      - 7.4Control
      premium (b)
                                                                                
                                                                                16.2%
      - 32.0%
                                                                                
                                                                                
                                                                                27.5%
      - 31.7%Weighting
      of Valuation Methods:Income
      Approach - Discounted Cash Flows
                                                                                
                                                                                75%
                                                                                
                                                                                
                                                                                75%Market
      Approach - Multiples of Guideline Companies
                                                                                
                                                                                25%
                                                                                
                                                                                
                                                                                25%Definitions:EBIT
      - Earnings before interest and taxesEBITDA
      - Earnings before interest, taxes, depreciation and
      amortizationDFNI
      - Debt-free net incomeDFCF
      - Debt-free cash flow





(a)
Multiple range reflects multiples used throughout the North America, Asia and
Europe reporting units


(b)
Determined based on the industry mean control premium as published each year in
MergerStat Review


31





The valuation test, which heavily
weights future cash flow projections, indicated that the goodwill associated
with the Asia reporting unit was fully impaired as of the valuation date. 
The reduction in expected future cash flows in Asia related to an overall
reduction in projected future sales coupled with a significant decrease in
projected cash flow related to working capital changes as of the third quarter
2009 testing date as compared to that utilized in the 2008 annual
valuation.   Sales are projected to return to 2008 levels in
2011, with moderate growth in subsequent years.  This statement
constitutes a Forward Looking Statement.  Actual results may differ,
depending in part on the timing associated with the current economic recession
and the impact of that recession on Bel’s customers.  Based upon the
results of the interim impairment test, the Company recorded a goodwill
impairment charge of $12.9 million during the third quarter of
2009.





No impairment existed at the assessment
date for the Company’s Europe reporting unit; however, there can be no
assurances that goodwill impairments will not occur in the
future.  The valuation model utilizes assumptions which represent
management’s best estimate of future events, but would be sensitive to positive
or negative changes in each of the underlying assumptions as well as to an
alternative weighting of valuation methods which would result in a potentially
higher or lower goodwill impairment expense.  Specifically, a
continued decline in demand for Bel’s products and a corresponding revenue
decline at rates greater than management’s expectations, may lead to additional
goodwill impairment charges.  Furthermore, a continued decline in the
guideline company multiples may also lead to additional goodwill impairment
charges.  After the impairment charge, the balance in goodwill was
$2.0 million and $14.3 million at September 30, 2009 and December 31, 2008,
respectively.





Results of
Operations





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





Percentage of Net Sales
                  
                  
                  Percentage of Net SalesThree Months Ended
                  
                  
                  Nine Months EndedSeptember 30,
                  
                  
                  September 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Net
      sales
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %Cost
      of sales
                  
                  
                  91.7
                  
                  
                  
                  84.1
                  
                  
                  
                  89.4
                  
                  
                  
                  82.5Selling,
      general and administrative expenses
                  
                  
                  15.0
                  
                  
                  
                  13.3
                  
                  
                  
                  16.5
                  
                  
                  
                  13.6Impairment
      of goodwill
                  
                  
                  28.4
                  
                  
                  
                  -
                  
                  
                  
                  9.6
                  
                  
                  
                  -Restructuring
      charge
                  
                  
                  -
                  
                  
                  
                  0.5
                  
                  
                  
                  0.3
                  
                  
                  
                  0.2Gain
      on sale of property, plant and equipment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (3.5
                  )
                  
                  
                  -Realized
      gain (loss/impairment charge) on investment
                  
                  
                  1.4
                  
                  
                  
                  (2.1
                  )
                  
                  
                  1.3
                  
                  
                  
                  (2.0
                  )Interest
      income and other, net
                  
                  
                  0.2
                  
                  
                  
                  0.8
                  
                  
                  
                  0.3
                  
                  
                  
                  1.0Earnings
      before benefit from income taxes
                  
                  
                  (33.5
                  )
                  
                  
                  0.7
                  
                  
                  
                  (10.7
                  )
                  
                  
                  2.8Income
      tax benefit
                  
                  
                  (9.8
                  )
                  
                  
                  (2.2
                  )
                  
                  
                  (2.4
                  )
                  
                  
                  (0.2
                  )Net
      (loss) earnings
                  
                  
                  (23.7
                  )
                  
                  
                  2.9
                  
                  
                  
                  (8.4
                  )
                  
                  
                  3.0




32





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 (decrease) from
                  
                  
                  Increase (decrease) fromPrior Period
                  
                  
                  Prior PeriodThree Months Ended
                  
                  
                  Nine Months EndedSeptember 30, 2009
                  
                  
                  September 30, 2009Compared with
                  
                  
                  Compared withThree Months Ended
                  
                  
                  Nine Months EndedSeptember30,2008
                  
                  
                  September30,2008Net
      sales
                  
                  
                  (32.4
                  )%
                  
                  
                  (33.1
                  )%Cost
      of sales
                  
                  
                  (26.3
                  )
                  
                  
                  (27.5
                  )Selling,
      general and administrative expenses
                  
                  
                  (23.7
                  )
                  
                  
                  (18.7
                  )Net
      loss/earnings
                  
                  
                  (652.5
                  )
                  
                  
                  (289.2
                  )





THREE MONTHS ENDED SEPTEMBER
30, 2009 VERSUS


THREE MONTHS ENDED SEPTEMBER
30, 2008





Sales





Net sales decreased 32.4% from $67.0
million during the three months ended September 30, 2008 to $45.3 million during
the three months ended September 30, 2009. The Company attributes the decrease
principally to a reduction in demand across all major product groups as a result
of the weak economic conditions.





The significant components of the
Company's revenues for the three months ended September 30, 2009 were magnetic
products of $21.8 million (as compared with $33.9 million during the three
months ended September 30, 2008), interconnect products of $8.3 million (as
compared with $12.2 million during the three months ended September 30, 2008),
module products of $12.6 million (as compared with $17.0 million during the
three months ended September 30, 2008), and circuit protection products of $2.6
million (as compared with $3.9 million during the three months ended September
30, 2008).





Cost of
Sales





Cost of sales as a percentage of net
sales increased from 84.1% during the three months ended September 30, 2008 to
91.7% during the three months ended September 30, 2009. The increase in the cost
of sales percentage is primarily attributable to the following:





 ̈
            In
      order to eliminate future legal fees related to the Murata patent
      infringement claim against the Company, a settlement was negotiated with
      Murata in October 2009 whereby the Company will pay a lump sum license fee
      of $2.1 million in exchange for a licensing agreement covering past and
      future sales of Bel’s modular jack products.  As $2.0 million of
      this amount was deemed to relate to product sales from prior periods, this
      portion is included in cost of sales for the three months ended September
      30, 2009.


33





 ̈
            Material
      costs as a percentage of sales have increased from 48.2% during the three
      months ended September 30, 2008 to 53.5% during the three months ended
      September 30, 2009, primarily due to an increase in the proportion of
      sales of a lower-margin product line within the magnetics product
      group.





 ̈
            During
      the three months ended September 30, 2009, support labor and depreciation
      and amortization were $1.3 million and $0.2 million lower, respectively,
      than the comparable period of 2008.  However, due to the
      reduction in 2009 sales volume, these fixed costs increased as a
      percentage of sales by 0.1% and 0.8%, respectively, as compared to the
      three months ended September 30,
2008.





As a
partially offsetting factor, the Company experienced a reduction in labor costs
during the three months ended September 30, 2009. After the Lunar New Year in
February 2008, there was a significant increase in customer demand which led to
the hiring of approximately 5,000 new workers, which resulted in training
expenses, production inefficiencies and excessive overtime.  This
drove labor costs as a percent of sales up to 18.1% during the three months
ended September 30, 2008.  With lower customer demand in 2009, along
with a transition of its labor intensive manufacturing operations to lower cost
regions of the PRC, labor costs as a percentage of sales decreased to 13.2%
during the three months ended September 30, 2009.





Included
in cost of sales are research and development expenses of $2.0 million and $1.9
million for the three month periods ended September 30, 2009 and 2008,
respectively.





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





The percentage relationship of selling,
general and administrative expenses to net sales increased from 13.3% during the
three months ended September 30, 2008 to 15.0% during the three months ended
September 30, 2009.  While the percentage of sales increased from the
comparable period last year, the dollar amount of selling, general and
administrative expense for the three months ended September 30, 2009 was $2.1
million (or 23.7%) lower as compared to the same period of 2008.  The
overall reduction in dollar amount was the result of the following
factors:





 ̈
            Sales
      commissions decreased by $0.4 million due to the 2009 lower sales
      volume.


 ̈
            Travel
      expenses were reduced by $0.2 million, as management implemented travel
      restrictions beginning in the first quarter of
  2009.


 ̈
            Legal
      and professional fees were $0.2 million lower during the third quarter of
      2009 as compared to 2008 as Bel had increased legal activity in the third
      quarter of 2008 associated with the closure of Bel’s Westborough, MA
      facility and the related lawsuit against former stockholders and key
      employees of Galaxy.


 ̈
            General
      and administrative salaries and fringe benefits decreased as compared to
      the third quarter of 2008 as a result of savings of approximately $0.5
      million from company-wide reductions in headcount and a reduction of $0.2
      million in bonus expense, partially offset by severance expense of $0.1
      million.


 ̈
            Other
      reductions in SG&A of $0.7 million included reductions in various
      expense categories that were not individually
  significant.


34





Goodwill
Impairment





During the third quarter 2009, the
Company performed an interim valuation of the Company’s goodwill.  In
connection with this analysis, it was determined that the goodwill associated
with the Company’s Asia operating segment was impaired, primarily due to a
reduction in estimated future cash flows.  The Company recorded a
$12.9 million charge within its Asia operating segment related to this
impairment during the third quarter of 2009.





Restructuring
Charge





In July 2008, the Company announced
that it would cease all manufacturing operations at its Bel Power Inc. facility
in Westborough, Massachusetts in December 2008.  The Company incurred
$0.3 million of restructuring charges related to severance and related benefits
during the three months ended September 30, 2008.  See “Liquidity and
Capital Resources” for further information on the restructuring
charges.





Realized Gain
(Loss/Impairment Charge) on Investment





During the three months ended September
30, 2009, the Company sold 684,032 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 for financial reporting
purposes of $0.5 million which was recorded during the third quarter of
2009.  The Company also realized $0.1 million in gains associated with
redemptions of its investment in the Columbia Portfolio during the three months
ended September 30, 2009.  During the three months ended September 30,
2008, the Company recorded pre-tax other-than-temporary impairment charges
associated with its investments in Toko, Inc. and the Columbia Portfolio of $1.3
million and $0.1 million, respectively, and minimal realized losses related to
its investment in the Columbia Portfolio.





Interest Income and Other,
Net





Interest income earned on cash and cash
equivalents decreased by approximately $0.4 million during the three months
ended September 30, 2009 as compared to the comparable period in 2008. The
decrease is due primarily to significantly lower interest rates on invested
balances during the three months ended September 30, 2009 as compared to
2008.





Benefit from Income
Taxes





The benefit from income taxes for the
three months ended September 30, 2009 was $4.4 million compared to a benefit of
$1.5 million for the three months ended September 30, 2008.  The
Company incurred a loss before income taxes for the three months ended September
30, 2009 versus a profit for the three months ended September 30, 2008 which
resulted in $15.7 million lower earnings before income taxes during the three
months ended September 30, 2009 compared to the three months ended September 30,
2008.  The Company’s effective tax rate, the income tax (benefit) as a
percentage of (loss) income before benefit from income taxes, was (29.2)% and
(293.1)% for the three months ended September 30, 2009 and September 30, 2008,
respectively.  The Company’s effective tax rate will fluctuate based
on the geographic segment in which the pretax profits are earned.  Of
the geographic segments in which the Company operates, the U.S. has the highest
tax rates; Europe’s tax rates are generally lower than U.S. tax rates; and the
Far East has the lowest tax rates. The tax benefit for the three months ended
September 30, 2009 is principally attributable to the expiration of certain
statutes of limitations which resulted in a reversal of a previously recognized
liability for uncertain tax positions in the amount of $3.9 million offset in
part by an increase in the liability for uncertain tax positions in the amount
of $0.9 million during the quarter ended September 30,
2009.  Additionally, the Company settled a lawsuit during the quarter
ended September 30, 2009 which resulted in a tax benefit of $0.8
million.  This was offset, in part, by losses in the Far East,
principally related to the impairment of goodwill, with minimal tax
benefit.  During the quarter ended September 30, 2008, certain
statutes of limitations expired which resulted in a reversal of a previously
recognized liability for uncertain tax positions in the amount of $2.3
million.  This was offset, in part, by certain changes in estimates
for prior year taxes arising from the finalization of the 2007 tax returns
together with the resolution of the Bel Fuse, Inc. State of New Jersey tax
examination in the total amount of $0.5 million.


35





NINE MONTHS ENDED SEPTEMBER
30, 2009 VERSUS


NINE MONTHS ENDED SEPTEMBER
30, 2008





Sales





Net sales decreased 33.1% from $200.3
million during the nine months ended September 30, 2008 to $134.1 million during
the nine months ended September 30, 2009. The Company attributes the decrease
principally to a reduction in demand across all major product groups as a result
of the weak economic conditions.





The significant components of the
Company's revenues for the nine months ended September 30, 2009 were magnetic
products of $62.7 million (as compared with $90.5 million during the nine months
ended September 30, 2008), interconnect products of $23.7 million (as compared
with $38.5 million during the nine months ended September 30, 2008), module
products of $40.7 million (as compared with $58.9 million during the nine months
ended September 30, 2008), and circuit protection products of $7.0 million (as
compared with $12.4 million during the nine months ended September 30,
2008).





Cost of
Sales





Cost of sales as a percentage of net
sales increased from 82.5% during the nine months ended September 30, 2008 to
89.4% during the nine months ended September 30, 2009. The increase in the cost
of sales percentage is primarily attributable to the following:





 ̈
            In
      order to eliminate future legal fees related to the Murata patent
      infringement claim against the Company, a settlement was negotiated with
      Murata in October 2009 whereby the Company will pay a lump sum license fee
      of $2.1 million in exchange for a licensing agreement covering past and
      future sales of Bel’s modular jack products.  As $2.0 million of
      this amount was deemed to relate to product sales from prior periods, this
      portion is included in cost of sales for the nine months ended September
      30, 2009.





 ̈
            Material
      costs as a percentage of sales have increased from 50.6% during the nine
      months ended September 30, 2008 to 56.4% during the nine months ended
      September 30, 2009.  Bel manufactures a particular product line
      within the modules group that consists of a larger percentage of purchased
      components than most of the Company’s other products.  The
      proportion of total sales attributable to this product has increased to
      13% of total sales for the nine months ended September 30, 2009 as
      compared to 11% of total sales in the same period in 2008, mainly due to
      relatively larger revenue declines in other product
      lines.  While these products are strategic to Bel’s growth and
      important to total earnings, they return lower gross profit margins due to
      their higher material content, and the Company’s average gross profit
      percentage will likely decrease as these sales continue to account for an
      increasing proportion of total
sales.


36





 ̈
            Included
      in cost of sales are research and development expenses of $6.1 million and
      $5.6 million for the nine months ended September 30, 2009 and 2008,
      respectively.   The increase in research and development
      expenses during the nine months ended September 30, 2009 was primarily
      related to Bel’s power products and new integrated connector
      modules.





 ̈
            During
      the nine months ended September 30, 2009, support labor and depreciation
      and amortization were $2.3 million and $0.4 million lower, respectively,
      than the comparable period of 2008.  However, due to the
      reduction in 2009 sales volume, these fixed costs increased as a
      percentage of sales by 1.3% and 0.9%, respectively, as compared to the
      nine months ended September 30,
2008.





 ̈
            As
      a partially offsetting factor, the Company experienced a reduction in
      labor costs during the nine months ended September 30, 2009. After the
      Lunar New Year in February 2008, there was a significant increase in
      customer demand which led to the hiring of approximately 5,000 new
      workers, which resulted in training expenses, production inefficiencies
      and excessive overtime.  This drove labor costs as a percent of
      sales up to 14.8% during the nine months ended September 30,
      2008.  With lower customer demand in 2009, along with a
      transition of its labor intensive manufacturing operations to lower cost
      regions of the PRC, labor costs as a percentage of sales decreased to
      10.5% during the nine months ended September 30,
  2009.





Selling, General and
Administrative Expenses





The percentage relationship of selling,
general and administrative expenses to net sales increased from 13.6% during the
nine months ended September 30, 2008 to 16.5% during the nine months ended
September 30, 2009.  While the percentage of sales increased from last
year, the dollar amount of selling, general and administrative expense for the
nine months ended September 30, 2009 was $5.1 million (or 18.7%) lower as
compared to the same period of 2008.  The overall reduction in dollar
amount was the result of the following factors:





 ̈
            Sales
      commissions decreased by $1.8 million due to the 2009 lower sales
      volume.


 ̈
            Travel
      expenses were reduced by $0.7 million, as management implemented travel
      restrictions beginning in the first quarter of
  2009.


 ̈
            General
      and administrative salaries and fringe benefits decreased as compared to
      the same period in 2008 as a result of savings of approximately $1.4
      million from company-wide reductions in headcount and a reduction of $0.4
      million in bonus expense, partially offset by severance expense of $0.4
      million.


 ̈
            Other
      selling costs were $0.4 million lower as compared to the same period in
      2008 due to a reduction in sales and marketing expenses in Europe as well
      as lower freight expenses globally.


 ̈
            The
      Company recorded charges totaling $0.5 million for compensation expense
      and fees related to the unauthorized issuance of
  stock.


 ̈
            Other
      reductions in SG&A of $1.3 million included reductions in various
      other expense categories that were not individually
      significant.





Goodwill
Impairment





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


37





Restructuring
Charge





In July 2008, the Company announced
that it would cease all manufacturing operations at its Bel Power Inc. facility
in Westborough, Massachusetts in December 2008.  The Company incurred
restructuring charges consisting of $0.1 million of termination benefit charges
and $0.3 million related to its facility lease obligation during the nine months
ended September 30, 2009 and $0.3 million of severance and related benefits
during the nine months ended September 30, 2008.  See “Liquidity and
Capital Resources” for further information on the restructuring
charges.





Sale of Property, Plant and
Equipment





During the nine months ended September
30, 2009, the Company recognized a previously deferred gain from the sale of
property in Jersey City, New Jersey in the amount of $4.6 million.





Realized Gain
(Loss/Impairment Charge) on Investment





During the nine months ended September
30, 2009, the Company sold 3,725,425 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 for financial reporting
purposes of $1.6 million which was recorded during the nine months ended
September 30, 2009. The Company also realized $0.2 million in gains
associated with redemptions of its investment in the Columbia Portfolio during
the nine months ended September 30, 2009.  During the nine months
ended September 30, 2008, the Company recorded a pre-tax other-than-temporary
impairment charges associated with its investments in Toko, Inc. and the
Columbia Portfolio of $3.6 million and $0.4 million, respectively, and minimal
realized losses related to its investment in the Columbia
Portfolio.





Interest Income and Other,
Net





Interest income earned on cash and cash
equivalents decreased by approximately $1.7 million during the nine months ended
September 30, 2009, as compared to the comparable period in 2008. The decrease
is due primarily to significantly lower interest rates on invested balances
during the nine months ended September 30, 2009 as compared to
2008.





Benefit from Income
Taxes





The benefit from income taxes for the
nine months ended September 30, 2009 was $3.2 million compared to $0.4 million
for the nine months ended September 30, 2008.  The Company incurred a
loss before income taxes for the nine months ended September 30, 2009 versus a
profit for the nine months ended September 30, 2008 which resulted in $19.9
million lower earnings before income taxes during the nine months ended
September 30, 2009 compared to the nine months ended September 30,
2008.  The Company’s effective tax rate, the income tax (benefit) as a
percentage of (loss) income before benefit from income taxes, was (22.2)% and
(7.1)% for the nine months ended September 30, 2009 and September 30, 2008,
respectively.  The Company’s effective tax rate will fluctuate based
on the geographic segment in which the pretax profits are earned.  Of
the geographic segments in which the Company operates, the U.S. has the highest
tax rates; Europe’s tax rates are generally lower than U.S. tax rates; and the
Far East has the lowest tax rates. The increase in the effective tax benefit
during the nine months ended September 30, 2009 as compared to the nine months
ended September 30, 2008 is attributable to a disproportionately high amount of
earnings before taxes in North America due to the gain on sale of property
described above and losses in the Far East, principally related to the
impairment of goodwill, with minimal tax benefit as compared to the nine months
ended September 30, 2008.  During the nine months ended September 30,
2009, certain statutes of limitations expired which resulted in a reversal of a
previously recognized liability for uncertain tax positions in the amount of
$3.9 million.  This was offset, in part, by an increase in the
liability for uncertain tax positions in the amount of $0.9 million during the
nine months ended September 30, 2009.  Additionally, the Company
settled a lawsuit during the third quarter of 2009 which resulted in a tax
benefit of $0.8 million.  During the nine months ended September 30,
2008, certain statutes of limitations expired which resulted in a reversal of a
previously recognized liability for uncertain tax positions in the amount of
$2.3 million.  This was offset, in part, by certain changes in
estimates for prior year taxes arising from the finalization of the 2007 tax
returns together with the resolution of the Bel Fuse, Inc. State of New Jersey
tax examination in the total amount of $0.5 million.


38





Inflation and Foreign
Currency Exchange





During the past two years, the effect
of inflation on the Company's profitability was not
material.  Historically, fluctuations of the U.S. dollar against other
major currencies have not significantly affected the Company's foreign
operations as most sales have been denominated in U.S. Dollars or currencies
directly or indirectly linked to the U.S. dollar.  Most significant
expenses, including raw materials, labor and manufacturing expenses, are either
incurred in U.S. Dollars or the currencies of the Hong Kong Dollar or the
Chinese Renminbi.  The Chinese Renminbi appreciated in value
(approximately 2.2%) during the nine months ended September 30, 2009 as compared
with the same period of 2008.  Further appreciation of the Renminbi
would result in the Company’s incurring higher costs for all expenses incurred
in the PRC.  The Company's European entities, whose functional
currencies are Euros, Czech Korunas, and U.S. dollars, enter into transactions
which include sales which are denominated principally in Euros, British Pounds
and various other European currencies, and purchases that are denominated
principally in U.S. dollars.  Settlement of such transactions resulted
in net realized and unrealized currency exchange gains of $0.1 million and
losses of $0.3 million for the nine months ended September 30, 2009 and 2008,
respectively, which were included in income from
operations.  Translation of subsidiaries’ foreign currency financial
statements into U.S. dollars resulted in translation gains of $0.3 million for
the nine months ended September 30, 2009 and a minimal amount of losses for the
nine months ended September 30, 2008.  These amounts are included in
accumulated other comprehensive income.  Any change in the linkage of
the U.S. dollar and the Hong Kong Dollar could have a material effect on the
Company's consolidated financial position or results of
operations.


39


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 further
softening in the demand for the Company’s existing products, an inability to
respond to customer demand for new products, potential acquisitions requiring
substantial capital, future expansion of the Company's operations and net losses
that would result in net cash being used in operating, investing and/or
financing activities which result in net decreases in cash and cash
equivalents.  Net losses may result in the loss of domestic and
foreign credit facilities and preclude the Company from raising debt or equity
financing in the capital markets on affordable terms or otherwise.





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





The Company's Hong Kong subsidiary had
an unsecured line of credit of approximately $2 million, which was unused at
September 30, 2009.  The line of credit expired on January 31, 2009
and was renewed on February 10, 2009. Borrowing on the line of credit was
guaranteed by the U.S. parent.  The line of credit bears interest at a
rate determined by the lender as the financing is extended.





For information regarding further
commitments under the Company's operating leases, see Note 15  of
Notes to the Company's consolidated financial statements in the Company's 2008
Annual Report on Form 10-K.





During May 2007, the Company sold a
parcel of land located in Jersey City, New Jersey for $6.0
million.  In December 2007, the Tidelands Resource Council voted to
approve the Bureau of Tideland’s Management’s recommendation for a Statement of
No Interest.  On March 14, 2008, the Commissioner of the Department of
Environmental Protection signed a letter to approve the Statement of No
Interest.  As final approval of the Statement of No Interest was still
pending as of December 31, 2008, the Company continued to defer the estimated
gain on sale of the land, in the amount of $4.6 million.  Of the $6.0
million sales price, the Company received cash of $1.5 million before closing
costs, and $4.6 million (including interest) was being held in escrow pending
final resolution of the State of New Jersey tideland claim and certain
environmental costs.  During 2007, the Company paid $0.4 million
related to environmental costs, which approximated the maximum amount of
environmental costs for which the Company is liable.  During May 2008,
the title company released $2.3 million of the escrow and as such, $2.3 remained
in escrow and had been classified as restricted cash as of December 31,
2008.  In February 2009, the final approval of the Statement of No
Interest was received from the State of New Jersey.  In March 2009,
the title company released the remaining escrow of $2.3 million and
corresponding guarantees and, during the first quarter of 2009, the Company
recognized the gain associated with the sale of this property in the amount of
$4.6 million.   In July 2009, the Company established a standby
letter of credit for the State of New Jersey as a performance guarantee related
to environmental cleanup associated with the Jersey City, New Jersey property
sale.  In connection with this agreement, the Company has a
compensating balance of $0.3 million which has been classified as restricted
cash as of September 30, 2009.


40





Columbia Strategic Cash
Portfolio (“Columbia Portfolio”):





At September 30, 2009, the Company’s
investment securities included privately placed units of beneficial interests in
the Columbia Portfolio, which is an enhanced cash fund sold as an alternative to
money-market funds.  In December 2007, due to adverse market
conditions, the fund was overwhelmed with withdrawal requests from investors and
it was closed with a restriction placed upon the cash redemption ability of its
holders.  At the time the liquidation was announced, the Company held
25.7 million units of the Columbia Portfolio at a book value of $25.7
million.





Since the announcement of the
liquidation in December 2007, the Company has received cash redemptions totaling
$23.1 million through September 30, 2009 (including $2.2 million and $4.2
million during the three and nine months ended September 30, 2009, respectively)
at a weighted-average net asset value (NAV) of $.9449 per unit.  As of
September 30, 2009, the Company holds 1.3 million units with a book value of
$1.1 million, which approximates the fair value of this investment at that
date.  The Company recorded gains on redemptions of $0.1 million and
$0.2 million during the three and nine months ended September 30, 2009,
respectively, for financial reporting purposes.  As of September 30,
2008, the Company held 8.6 million units with a book value and fair value of
$8.2 million.  The Company recorded minimal losses on redemptions in
the comparable periods of 2008.  Due to the restrictions placed on
these investments, the balance in the Columbia Portfolio as of September 30,
2009 is categorized as an other investment on the accompanying condensed
consolidated balance sheet, allocated into short-term and long-term based on the
projected redemption schedule as issued by the portfolio manager.  The
information and the markets relating to these investments remain
dynamic.  There may be further declines in the value of these
investments, in the value of the collateral held by these entities, and in the
liquidity of the Company’s investments.  To the extent that the
Company determines that there is a further decline in fair value, the Company
may recognize impairment charges in future periods up to the aggregate carrying
amount of these investments.





Toko, Inc.
(“Toko”):





As of
September 30, 2009, the Company owned a total of 1,840,919 shares, or to the
Company’s knowledge approximately 1.9% of the outstanding shares, of the common
stock of Toko.  Toko develops, manufactures and sells power supply
related components and radio frequency related components primarily in
Japan.  Toko had a market capitalization of approximately $155.0
million as of September 30, 2009.   These shares are reflected on
the Company’s condensed consolidated balance sheets as marketable
securities.  These marketable securities are classified as available
for sale.  During the nine months ended September 30, 2008, the
Company recorded impairment charges totaling $3.6 million related to this
investment.  At September 30, 2009 and December 31, 2008, this
investment had an adjusted basis of $2.0 million, and a fair market value of
$2.9 million and $2.1 million, respectively.  The gross unrealized
gain of $0.9 million and $0.1 million at September 30, 2009 and December 31,
2008, respectively, is included, net of tax, in accumulated other comprehensive
income (loss).


41





Power-One, Inc.
(“Power-One”):





As of
December 31, 2008, the Company owned a total of 7,338,998 shares of Power-One
common stock representing, to the Company’s knowledge, 8.4% of Power-One’s
outstanding common stock, at a total purchase price of $14.1 million ($1.92 per
share).  Power-One’s common stock is quoted on the NASDAQ Global
Market.  Power-One is a designer and manufacturer of power conversion
and power management products.  During the nine months ended September
30, 2009, the Company sold 3,725,425 shares of its Power-One common stock at an
aggregate fair market value of $6.1 million, resulting in a gain of $1.6 million
for financial reporting purposes.  As of September 30, 2009, the
Company owned 3,613,573 shares of Power-One common stock, representing, to the
Company’s knowledge, 4.1% of Power-One’s outstanding common stock.  At
September 30, 2009, this investment had an adjusted basis of $4.3 million ($1.19
per share) and a fair market value of $7.0 million ($1.95 per
share).  The gross unrealized gain at September 30, 2009 of $2.7
million is included, net of income tax, in accumulated other comprehensive
income in stockholders’ equity.





CDARS:





As
December 31, 2008, the Company had a total of $4.9 million invested in
certificates of deposit (CDs) through Stephens, Inc., with whom the Company has
an investment banking relationship.  These investments are part of the
Certificate of Deposit Account Registry Service (CDARS) program whereby the
funds are invested with various banks in order to achieve FDIC insurance on the
full invested amount.  Due to the varying maturities of these CDs,
$2.0 million of the total investment was classified as cash equivalents at
December 31, 2008.  As of September 30, 2009, these CDs had not been
renewed and the related money market funds were classified as a cash
equivalent.





Stock
Repurchases





During 2000, the Board of Directors of
the Company authorized the purchase of up to ten percent of the Company’s
outstanding common shares. As of September 30, 2009, the Company had purchased
and retired 23,600 Class B common shares at a cost of approximately $0.8 million
and had purchased and retired 527,817 Class A common shares at a cost of
approximately $16.8 million.  No shares of Class B common stock were
repurchased during the nine months ended September 30, 2009 and 6,070 shares of
Class A common stock were repurchased during the nine months ended September 30,
2009 at a cost of $0.1 million.





Cash
Flows





During the nine months ended September
30, 2009, the Company's cash and cash equivalents increased by $41.1 million,
reflecting approximately $31.8 million provided by operating activities. This
resulted primarily from a reduction in 2009 sales volume and the associated
decrease in purchasing of raw materials and overall reduction in manufacturing
of finished products which led to a $15.7 million decrease in accounts
receivable and a $16.8 million decrease in inventory on hand as compared to
those balances at December 31, 2008.  Other factors contributing to
the overall increase in cash and cash equivalents at September 30, 2009 included
$4.2 million from the partial redemption of the Columbia Portfolio, $1.5 million
of proceeds from the cash surrender value of company-owned life insurance
policies, $8.9 million from the sale of marketable securities and $2.6 million
of proceeds from the sale of property, plant and equipment, offset, in part, by
$1.4 million for the purchase of property, plant and equipment, $0.1 million for
the repurchase of the Company’s common stock, $3.5 million for the purchase of
marketable securities, $0.4 million for payment of an acquisition and $2.3
million for payments of dividends.  The remaining reduction in cash
and cash equivalent relates to $0.2 million which was reclassified as restricted
cash as of September 30, 2009.


42





Cash and cash equivalents, marketable
securities, short-term investments and accounts receivable comprised
approximately 64.3% and 53.0% of the Company's total assets at September 30,
2009 and December 31, 2008, respectively. The Company's current ratio (i.e., the
ratio of current assets to current liabilities) was 7.3 to 1 and 6.5 to 1 at
September 30, 2009 and December 31, 2008, respectively.





During the current worldwide financial
downturn, the Company believes that several of its vendors, particularly those
located in Asia, are seeking to shorten established credit terms or eliminate
credit entirely.





During the nine months ended September
30, 2009, the Company paid $0.7 million in cash for severance and related
benefits in connection with the closure of the Company’s Westborough,
Massachusetts facility in December 2008, and recorded additional restructuring
charges of $0.3 million related to  charges associated with its
facility lease obligation and $0.1 million of severance and related
benefits.





New Financial Accounting
Standards





During
2009, the Company implemented an update to the accounting guidance related to
earnings per share.  In accordance with this accounting guidance,
unvested share-based payment awards with rights to dividends are participating
securities and shall be included in the computation of basic earnings per
share.  The Company adopted this guidance effective January 1, 2009
and in accordance with the accounting guidance, all prior-period earnings per
share data presented has been adjusted retrospectively to conform to the
provisions of the new guidance.  This adjustment did not have a
material impact on prior periods presented.





During
the second quarter of 2009, the Company implemented additional interim
disclosures about fair value of financial instruments in accordance with the
accounting guidance for the fair value of financial
instruments.  Prior to implementation, disclosures about fair values
of financial instruments were only required to be disclosed
annually.  See Note 4 in the notes to condensed consolidated financial
statements for the Company’s disclosures on fair value
measurements.





Beginning
in the second quarter of 2009, the Company must disclose the date through which
subsequent events have been evaluated, in accordance with the requirements in
FASB ASC Paragraph 855-10-50-1.  With regard to the condensed
consolidated financial statements and notes to those financial statements
contained in this Form 10-Q, the Company has evaluated all subsequent events
through November 6, 2009 (the date the Company’s financial statement are
issued).





During
the third quarter of 2009, the Company adopted the FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles in
accordance with FASB ASC Topic 105, “Generally Accepted Accounting Principles”
(the “Codification”).  Effective with the Company’s adoption on July 1,
2009, the Codification has superseded all prior non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification has become non-authoritative. As the adoption of
the Codification only affected how specific references to GAAP literature have
been disclosed in the notes to our condensed consolidated financial statements,
it did not result in any impact on the Company’s results of operations,
financial condition or cash flows.


43





Updates totheFASB Codification Applicable
to the Company





The FASB
has published an update to the accounting guidance on fair value measurements
and disclosures as it relates to investments in certain entities that calculate
net asset value per share (or its equivalent). This accounting guidance
permits a reporting entity to measure the fair value of certain investments on
the basis of the net asset value per share of the investment (or its
equivalent). This update also requires new disclosures, by major category of
investments, about the attributes of investments included within the scope of
this amendment to the Codification. The guidance in this update is effective for
interim and annual periods ending after December 15, 2009. The Company does not
expect the adoption of this standard to have an impact on the Company’s results
of operations, financial condition or cash flows.





Item
3.    Quantitative and Qualitative
Disclosures About Market Risk





Fair
Value of Financial Instruments — The estimated fair values of financial
instruments have been determined by the Company using available market
information and appropriate valuation methodologies.




The
Company has not entered into, and does not expect to enter into, financial
instruments for trading or hedging purposes. The Company does not currently
anticipate entering into interest rate swaps and/or similar
instruments.





The
Company's carrying values of cash, marketable securities, accounts receivable,
accounts payable and accrued expenses are a reasonable approximation of their
fair value.





The
Company’s investment in the Columbia Portfolio has also been sensitive to market
volatility.  As of September 30, 2009, the Company owned 1.3 million
units in the Columbia Portfolio with a fair market value of $1.1
million.  While the NAV associated with this investment has remained
consistent over the nine months ended September 30, 2009, the portfolio manager
of this fund has extended the projected timeline of liquidations for
approximately 1% of the original unit balance beyond September 30, 2010, noting
that no reliable estimate of the schedule for redemption for that portion of the
assets can be provided, including when or if it will occur.  Most of
the remaining securities in this category are comprised of securities that are
in default, extremely impaired or have significantly extended weighted-average
lives.  While the NAV at September 30, 2009 was $0.8829 per share, the
Company cannot predict the NAV at which the remaining units will ultimately be
redeemed.  If the NAV were to decline by $0.09 per unit (10% of the
NAV at September 30, 2009), the net impact to the Company’s results of
operations and cash flows would be a decrease of income before provision for
income taxes and cash flows from operating activities of approximately $0.1
million.





The Company enters into transactions
denominated in U.S. Dollars, Hong Kong Dollars, the Chinese Renminbi, Euros,
British Pounds and the Czech Koruna.  Fluctuations in the U.S. dollar
exchange rate against these currencies could significantly impact the Company's
consolidated results of operations.





The
Company believes that a change in interest rates of 1% or 2% would not have a
material effect on the Company's condensed consolidated statement of operations
or balance sheet.


44





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.  As part of the March 31, 2009
quarter-end review, the Company's internal accounting personnel identified a
questionable entry in the Company's stock option exercise records. After
questioning by management, a Company employee (the "Employee") responsible for
certain aspects of the Company's benefit plan administration admitted
fabricating certain Company records for his own benefit in order to enable him
to exercise stock options that had not been granted to him by the Company's
Compensation Committee. The Company's management immediately terminated the
employment of the Employee and reported the matter to the Company's Audit
Committee. The Audit Committee, in turn, directed internal accounting personnel
to investigate this matter and directed counsel to engage a forensic accounting
firm to supplement the Company's internal review.





The
Company's review has focused on the Employee's role in the administration of the
Company's stock option plan, 401(k) plan and profit-sharing plan. The following
determinations have been made:





·
            With
      respect to the stock option plan, the Company has determined that over a
      period of approximately eight years, the Employee exercised options
      covering 30,000 shares of Class B Common Stock on the basis of
      documentation that the Employee fabricated.  The fair value of
      these 30,000 shares at the times of issuance approximated $0.8
      million.  Option exercises covering an additional 1,000 shares
      are questionable but have not, as yet, been determined to be based on
      fabricated documentation. At this time, the Company does not believe that
      it will be able to obtain sufficient evidentiary documents to conclusively
      determine that these are fraudulent transactions.  The Employee
      has returned 30,000 shares to the Company for cancellation with a fair
      market value on the dates of their return of approximately $0.4
      million.





·
            With
      respect to the Company's 401(k) plan, the Company has determined that over
      the same approximate eight-year period, the Employee fraudulently
      increased the balance in his 401(k) account by a total of $44,300. The
      Employee has not been permitted to withdraw any funds in his 401(k)
      account. Accordingly, in July 2009, the Company recouped the $44,300
      directly from the Employee's 401(k) account.  In addition, the
      Employee initiated special 401(k) stock distributions directly into the
      Employee’s IRA account representing 3,420 shares of Class B Common Stock
      and 65 shares of Class A Common Stock.  The fair value of these
      shares at the time of transfer approximated $0.1 million.  The
      Employee has returned 1,200 shares of Class B Common Stock to the Company
      for cancellation with a fair market value on the dates of their return of
      approximately $16,000.  The Company contends that the withdrawal
      of these shares constituted a withdrawal of his Plan funds and intends to
      use the current balance of 6 Class A and 864 Class B shares plus $33,156
      associated in the Plan with his account as partial payment of an over
      withdrawal from his account.  The Company has demanded that the
      Employee return the balance to the
Plan.





·
            With
      respect to the Company's profit-sharing plan, the Company has determined
      that the Employee diverted to his account a total of $3,600 credited to
      the account of an employee whose employment had terminated and who
      therefore was about to forfeit his profit-sharing interest. The Employee
      has not been permitted to withdraw any funds from his profit-sharing
      account. The Company intends to recoup such $3,600 directly from the
      Employee.


45





The
review by the Company's internal accounting personnel and forensic accounting
firm is complete. The Company has reported this matter to the appropriate
governmental authorities, which may take further action with respect to the
Employee.  The Company's forensic accounting firm performed an email
search designed to ascertain whether there was any evidence that the Employee's
actions extended beyond his own personal accounts or whether other employees
were directly involved in such actions. To date, the Company has not discovered
any evidence that suggests that the fraudulent practices identified pursuant to
the internal investigation extended beyond the Employee's personal accounts or
directly involved Company personnel other than the Employee.





Based
upon the information discovered to date:





·
            The
      Company does not believe that the Employee's actions have had or will have
      a material effect on the Company's consolidated financial
      statements.





·
            The
      Audit Committee directed the Company's internal audit staff to assess
      whether existing controls should be enhanced to assure that employees
      engaged in benefit plan administration do not have the ability to allocate
      employment benefits to themselves absent a third party
      approval.  The Company’s internal audit staff has completed this
      assessment and has implemented certain enhancements to the Company’s
      internal control structure related to the Company’s benefit plan
      administration.





·
            Management
      recommended to the Company's Compensation Committee that no stock options
      or restricted stock be granted by the Company until such time as the Audit
      Committee determines that enhanced controls have been implemented or are
      not necessary. The Company’s Audit Committee has reviewed the enhancements
      to the control procedures implemented during the second quarter of 2009
      and cleared the Company for future issuances of stock options and
      restricted stock.





·
            The
      Company's Chief Executive Officer and Vice President - Finance have
      concluded that the Company’s disclosure controls and procedures are
      effective in ensuring that information required to be disclosed by the
      Company in the reports that it files or submits under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and
      forms.





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.


46





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 2008 Annual Report on Form 10-K for
the details of all of Bel’s pending lawsuits.  Updates to pending
lawsuits since the Company’s Form 10-K filing are described below.





The
Company is a defendant in a lawsuit captioned “Murata Manufacturing Company,
Ltd. v. Bel Fuse Inc. et al.,” brought in Illinois Federal District Court. The
plaintiff claims that its patent covers all of the Company's modular jack
products. That party had previously advised the Company that it was willing to
grant a non-exclusive license to the Company under the patent for a 3% royalty
on all future gross sales of ICM products; payment of a lump sum of 3% of past
sales including sales of applicable Insilco products; an annual minimum royalty
of $0.05 million; payment of all  attorney  fees;
and  marking of all  licensed ICM's with
the  third-party's patent number. The Company had expected this case
to proceed to trial.  In order to eliminate future legal fees related
to this case, a settlement was negotiated with Murata in October 2009 whereby
the Company will pay a lump sum licensing fee of $2.1 million in exchange for a
licensing agreement covering the past and future sales of the Company’s modular
jack products.  As $2.0 million of this fee was deemed to relate to
product sales from prior periods, the Company included this expense in cost of
sales in the accompanying condensed consolidated statements of operations for
the three and nine months ended September 30, 2009.




Item 6.
                    
                    Exhibits(a) Exhibits:31.1
                    Certification
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                    Certification
      of the Vice President of Finance pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                    Certification
      of the Chief Executive Officer pursuant to Section 906 of the Sarbanes -
      Oxley Act of 2002.32.2
                    Certification
      of the Vice-President of Finance pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.


47





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





Dated:
November 6, 2009


48





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.


49