Revenue 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 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 decrease of approximately 18.5%[328]. - Total revenue for the year ended December 31, 2024, was $534.8 million, a decrease from $639.8 million in 2023, representing a decline of approximately 16.5%[328]. Sales Breakdown - 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]. - Power Solutions and Protection product sales increased by $25.7 million in 2023 compared to 2022, driven by a $42.7 million increase in front-end power products and a $6.9 million increase in board mount power products[167]. - eMobility end market sales rose by over $7.5 million (40%) and rail end market sales increased by $7.5 million (33%) in 2023 compared to 2022[167]. Financial Position - Total assets increased significantly to $949.789 million in 2024, up 66.1% from $571.631 million in 2023[255]. - Long-term debt rose sharply to $287.500 million in 2024, compared to $60.000 million in 2023, indicating a substantial increase in leverage[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[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 company expects to meet future liquidity needs through existing cash, cash equivalents, and anticipated cash flows from operations[197]. Expenses and Costs - 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]. - 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]. - Interest expense rose to $4.1 million in 2024 from $2.9 million in 2023, mainly 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% in 2024 compared to 11.4% in 2023[185]. - 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]. Acquisitions and Investments - On November 14, 2024, the Company acquired an 80% stake in Enercon Technologies, Ltd for a total purchase price of $324 million, with recorded assets including noncontrolling interest, trade names, and customer relationships valued at $72.3 million, $21.9 million, and $130.3 million respectively[242]. - Enercon Technologies, Ltd. accounted for 15.9% of total assets and 3.9% of net sales in the consolidated financial statements as of December 31, 2024[251]. - The company incurred $12.9 million in acquisition-related costs associated with the Enercon transaction, primarily for investment banker fees and legal expenses[311]. - 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]. Shareholder Returns - The company declared dividends of $3.5 million in 2024, consistent with previous years[201]. - The company repurchased treasury stock amounting to $16,053 million in 2024, a significant increase compared to $105 million in 2023[267]. - 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]. - The company authorized a share repurchase program of up to $25 million, with $9.0 million of authorized repurchases not yet executed as of December 31, 2024[202]. Impairments and Valuations - The Company conducted its annual goodwill impairment test as of October 1, 2024, and no impairment was identified[222]. - 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 Company identified and recorded a $0.4 million impairment charge related to its CUI tradename during its annual impairment tests[223]. - The fair value of the Company's four reporting units exceeded their respective carrying values by a margin ranging from 44% to 500%[221]. - The estimated fair values exceed the carrying values for the reporting units as follows: Power Solutions and Protection (excluding CUI) at 500.5%, Connectivity Solutions at 156.0%, and CUI at 43.6%[339]. 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]. Risk Management - 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]. - The Company employs various strategies to manage foreign exchange risks, including strategic factory locations and hedging contracts[229]. - The Company does not engage in speculative trading and maintains strong relationships with financial institutions to minimize exposure risks[229]. - The Company has adequate primary and secondary sources for each of its key materials to mitigate potential volatility in metal prices[230].
Bel Fuse (BELFA) - 2024 Q4 - Annual Report