Bel Fuse (BELFA) - 2024 Q3 - Quarterly Report

Financial Performance - Revenues for the first nine months of 2024 decreased by $114.9 million, or 23.0$26.2 million (35.0%) and $77.7 million (31.7$3.9 million (7.6%) and $7.8 million (4.9$12.8 million (40.0%) and $45.0 million (47.6$287.4 million, a decrease of $85.7 million, or 23$1.1 million and 1.8 million in restructuring costs during the third quarter and nine months ended September 30, 2024, respectively, related to initiatives in the Connectivity and Power segments [114]. - SG&A expenses increased to 26.7 million in Q3 2024 from $23.7 million in Q3 2023, primarily due to a$4.3 million increase in professional fees related to the acquisition of Enercon [125]. - R&D expenses remained steady at $5.4 million for Q3 2024, compared to$5.3 million in Q3 2023 [124]. Tax and Foreign Exchange - The effective tax rate will fluctuate based on geographic regions, with Asia having the lowest tax rates among the regions where the company operates [115]. - The effective tax rate increased to 27.8% for Q3 2024 from 18.2% in Q3 2023, primarily due to increased tax expense related to prior period accruals [130]. - Foreign exchange fluctuations resulted in a transactional foreign exchange loss of $1.3 million during the nine months ended September 30, 2024, with favorable impacts from the depreciation of the Chinese Renminbi against the U.S. dollar [115]. Cash and Liquidity - Cash and cash equivalents increased by$44.9 million during the nine months ended September 30, 2024, primarily due to net cash provided by operating activities of $65.7 million [135]. - The company expects to utilize its liquidity of$134.3 million for operating expenses, investments, and potential acquisitions in future periods [133]. - As of September 30, 2024, cash and cash equivalents represented approximately 41.0% of total assets, while held to maturity U.S. Treasury securities and accounts receivable accounted for 36.9% [137]. - The current ratio improved to 4.0 to 1 at September 30, 2024, compared to 3.4 to 1 at December 31, 2023 [137]. - $50.5 million (38$11 million repatriated during the nine months ended September 30, 2024 [137]. Acquisition and Financing - The company entered into a definitive Share Purchase Agreement to acquire an 80% stake in Enercon Technologies for $320 million, with an enterprise value of$400 million, expected to close in Q4 2024 [110]. - The company expects to fund the acquisition of an 80% stake in Enercon with approximately $80 million in cash and$240 million in incremental borrowings, with potential earnout payments of $10 million for 2025-2026 [139]. - The unused credit available under the credit facility was$115.0 million as of September 30, 2024, which can be borrowed without violating the Leverage Ratio covenant [144]. - The company amended its Existing Credit Agreement in January 2023 to transition the reference rate from LIBOR to SOFR [140]. - The company entered into a Commitment Letter to increase the Maximum Revolving Amount under the Existing Credit Agreement by $150 million to a total of$325 million [141]. - The company remains in compliance with its debt covenants, including the Fixed Charge Coverage Ratio, as of September 30, 2024 [144]. - There have been no material changes in future cash requirements during the nine months ended September 30, 2024, aside from those related to the Enercon acquisition [138]. Market Risks - The company anticipates continued downward pressure on Power sales due to trade restrictions affecting a former supplier, which historically contributed $3 to$4 million per quarter in sales [114]. - The company uses foreign currency forward contracts and interest rate swap agreements to manage market risks associated with foreign currency exchange rates and interest rates [148].