Bel Fuse Inc. (BELFB)

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Bel Fuse, Inc. (BELFB)

Q4 2008 Earnings Call

February 12, 2009, 11:00 a.m. ET


Dan Bernstein – President and CEO

Collin Dunn – VP, Finance


Todd Cooper – Stephens, Inc.

Sean Hannan – Needham & Company



Ladies and gentlemen thank you for standing by. Welcome to the Bel Fuse Incorporated Fourth Quarter Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator instructions)

As a reminder, this conference is being recorded Thursday, February 12, 2009. I would now like to turn the conference over to Dan Bernstein, President and CEO. Please go ahead, sir.

Dan Bernstein

Thank you, James. And I would like to welcome everybody to our conference call to review of Bel’s Fourth Quarter 2008 results. Before we start, I would like to hand it over to Collin Dunn, our Vice President of Finance, Collin?

Colin Dunn

Good morning everybody. Thanks Dan. I will start with forward-looking statements.

Except for historical information contained in today's news release and in this conference call, as matters discussed including statements regarding the impact of price increases, cost reductions, and acquisition possibilities are forward-looking statements that involve risks and uncertainties.

Among the factors that could cause actual results to differ materially from such statements are; the market concerns facing our customers, the continuing viability of the sectors that rely on our products, the effect of business and economic conditions, capacity and supply constraints or difficulties, product development, commercializing or technological difficulties, the regulatory and trade environment, risk associated with foreign currencies, uncertainties associated with legal proceedings, the market's acceptance of the Company's new products and competitive responses to those new products, and the risk factors detailed from time to time in the Company's SEC reports.

In light of the risks and uncertainties, there can be no assurance that any forward-looking statement will in fact prove to be correct. We undertake no obligation to update or revise any forward-looking statements.

That is end of the Safe Harbor statement. I will now turn to our results. First with the sales. In the fourth quarter of 2008, our sales were $58.1 million, which was 16% lower than the $69.3 million that we reported in the fourth quarter 2007 and 13% lower than the $67 million reported in the preceding quarter ended September 2008.

Sales for the fourth quarter 2008, all product groups were lower than the same period in 2007. In the fourth quarter 2008 versus a third quarter 2008, sales were also down all products groups except for modules.

Net loss and cost of sales, going in of the quarter on a GAAP basis with the net after-tax loss of $20.9 million following non-cash pre-tax charges of $14.1 million for impairment of goodwill in North America. Charges related to the closure of our manufacturing facility in Westborough, Massachusetts, included $793,000 for restructuring and $739,000 for impairment of fixed assets and a $6.3 million charge primarily related to the other the temporarily impairment of our investment in Power One.

Restructuring charges in Westborough consisted of severance costs and future lease obligations. These results will below the net earnings of $10.3 million for the fourth quarter of 2007. And in that period, it included $3.4 million that’s net of tax from a sale of property in Macau.

All those gross margins as a percentage of sales during the fourth quarter of 2008 was lower than the same period last year. Labor costs have begun to stabilize in the high level of experience in the third quarter of 2008. Primarily due to a major reduction of the time worked during the fourth quarter.

In addition, while the exchange rate as the Renminbi against the U.S. dollars unfavorable as compared to a year ago was relatively stable for the quarter. A little history in January 2008, the exchange rate was 7.29. In September 1, 2008 it was 6.86, and in December 31, 2008 it was 6.85.

Turning to SG&A. The percentage relationship with selling, general and administrative expenses to net sales increased from 12.7% during the three months ended December 31, 2007 to 15.4% during the three months ended December 31, 2008. The increase in the dollar amount of selling, general and administration expenses to the three months ended December 2008 compared to the three months ended December 2007 was approximately $200,000 and was the result of the following factors.

Order fees increase by $600,000 primarily due to an adjustment in the fourth quarter of 2007 resulting from a change in timing of the recognition of expenses, which did not recur in 2008. As a result of the strengthening of the U.S. dollar versus European currencies during the three months ended December 2008, the Company’s currency exchange loss is increased by $400,000. Certain other company -- European purchases are denominated in U.S. dollars.

Sales and marketing expenses decreased by $500,000, and incentive compensation expense decreased by $200,000 consistent with lower sales and our net loss during the fourth quarter of 2008 compared to the same period of last year. Decrease in various salary expenses totaled $200,000, which were not individually significant.

Turning to interest income. Interest income earned on cash and cash equivalence decreased by approximately $700,000 during three months ended December 2008 as compared to the comparable period in 2007. The decrease is due primarily to significantly lower interest rates on invested balances during the period.

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