Bel Fuse (BELFB)2025-02-28 19:12Revenue and Sales Performance - The company's revenues decreased by $105.0 million, or 16.4%, in 2024 compared to 2023, with Power Solutions and Protection sales down by 21.8% and Magnetic Solutions sales down by 40.2%[160] - Net sales for Power Solutions and Protection were $245.6 million in 2024, down from $314.1 million in 2023, while gross margin improved to 42.4% from 38.1%[163] - Connectivity Solutions sales increased by $9.8 million, or 4.7%, in 2024, driven by a $3.6 million increase in commercial aerospace sales[165] - Magnetic Solutions sales declined by $46.3 million in 2024, primarily due to reduced demand from networking customers[166] - Net sales for 2024 decreased to $534.792 million, down 16.4% from $639.813 million in 2023[257] - Revenue from North America for 2024 was $362.2 million, down from $447.8 million in 2023, indicating a decrease of about 19.2%[328] - Revenue from direct sales to customers was $357.8 million in 2024, down from $439.3 million in 2023, a decline of about 18.5%[328] Financial Position and Assets - Total assets increased significantly to $949.789 million in 2024, compared to $571.631 million in 2023, marking a growth of 66.1%[255] - The company had $68.3 million in cash and cash equivalents and $1.0 million in held-to-maturity investments as of December 31, 2024, supporting its liquidity position[191] - The company had $287.5 million outstanding under its revolving credit facility as of December 31, 2024, with no mandatory principal payments due in 2025[197] - The total stockholders' equity increased to $360.576 million in 2024, up from $340.558 million in 2023, indicating a growth of 5.9%[255] - The company reported a total of $111.4 million in accounts receivable, net, for 2024, an increase from $84.1 million in 2023, representing a growth of approximately 32.4%[331] Expenses and Costs - The company incurred $3.5 million in restructuring costs in 2024, with annual cost savings from the Glen Rock initiative estimated at $3.1 million[162] - R&D expenses were $23.6 million in 2024, up from $22.5 million in 2023, primarily due to higher salaries and costs related to the Enercon acquisition[175] - SG&A expenses increased to $110.6 million in 2024 from $99.1 million in 2023, driven by acquisition-related costs of $10.9 million[176] - Interest expense rose to $4.1 million in 2024 from $2.9 million in 2023, primarily due to increased debt from the Enercon acquisition[180] - The provision for income taxes was $12.6 million in 2024, up from $9.5 million in 2023, with an effective tax rate of 20.5% compared to 11.4% in 2023[185] Acquisitions and Investments - The Company acquired an 80% stake in Enercon Technologies, Ltd. for a total purchase price of $324 million, with recorded assets including noncontrolling interest valued at $72.3 million, trade names at $21.9 million, and customer relationships at $130.3 million[242] - The total cash paid at closing for the Enercon acquisition was approximately $325.6 million, funded by $85.6 million in cash on hand and $240 million from incremental borrowings[309] - Enercon contributed $20.8 million in revenue and approximately $1.0 million in net earnings to the company's consolidated financial results for the period from November 1, 2024, to December 31, 2024[318] - The company divested its Czech Republic subsidiary for total consideration of $5.1 million, allowing the Connectivity Solutions segment to focus on core product categories[320] Inventory and Backlog - The backlog of orders totaled $381.6 million at December 31, 2024, a decrease of $8.5 million, or 2%, from December 31, 2023, with Power Solutions and Protection backlog decreasing by 44%[160] - Inventories increased by $24.8 million in 2024, including Enercon's inventory balance of $42.7 million, resulting in inventory turns of 2.1 times compared to 3.1 times in 2023[193] Shareholder Returns and Equity - The company declared dividends of $3.5 million in 2024, consistent with previous years, and anticipates additional payments in 2025[201] - The company authorized a share repurchase program of up to $25 million in February 2024, with $9.0 million of repurchases not yet executed as of December 31, 2024[202] - Dividends paid to common shareholders decreased to $3,453 million in 2024 from $3,492 million in 2023, reflecting a reduction of approximately 1.1%[267] Impairments and Goodwill - The Company recorded reserves for excess or obsolete inventory of $14.5 million as of December 31, 2024, an increase from $13.7 million in 2023[213] - The fair value of the Company's goodwill exceeded the associated carrying value by a margin ranging from 44% to 500% as of October 1, 2024[221] - The Company identified a $0.4 million impairment charge related to its CUI tradename during its annual impairment tests conducted on October 1, 2024[223] - The company completed its annual goodwill impairment test in October 2024, concluding that the fair value of its reporting units exceeded their carrying values, indicating no impairment[338] Currency and Commodity Risks - The Company faced significant exposure to foreign currencies, particularly the euro, Chinese renminbi, Mexican peso, and Indian rupee, with intercompany loans at risk valued at approximately $152 million and potential losses of $15.2 million projected from a hypothetical 10% decline in currency rates[229] - The Company actively monitors commodity price risks, particularly for metals such as copper, zinc, tin, gold, and silver, and anticipates increased material costs while implementing strategies like price adjustments and productivity improvements[230] Tax and Regulatory Matters - The effective tax rate will fluctuate based on the geographic region of pretax profits, with Asia having the lowest tax rates among the company's operational regions[162] - The effective tax rate includes the effect of tax contingency liabilities, which are analyzed quarterly and adjusted based on changes in facts and circumstances[294] - The Company has established valuation allowances for deferred tax assets that are not likely to be realized, impacting the provision for income taxes[294]