Bel Fuse (BELFB) - 2023 Q2 - Quarterly Report

Financial Performance - Revenue for the Power Solutions and Protection segment was $170.3 million for the six months ended June 30, 2023, compared to $129.8 million in the same period of 2022, reflecting a gross margin of 35.7%[85] - The Connectivity Solutions segment reported revenue of $108.2 million for the first half of 2023, up from $89.8 million in the same period of 2022, with a gross margin of 35.8%[85] - Sales of Magnetic Solutions products declined by $26.6 million (50%) and $25.1 million (29%) during the three and six months ended June 30, 2023, respectively, due to lower demand from networking customers[86] Order Backlog and Inventory - The company's backlog of orders decreased to $449.9 million as of June 30, 2023, down by $115.4 million, or 20%, from December 31, 2022[82] - The company experienced a decrease in inventory by $13.5 million at June 30, 2023, compared to December 31, 2022, with inventory turns improving to 2.9 from 2.6[256] Labor and Costs - Labor costs represented 6.6% of revenue in the first half of 2023, a decrease from 8.7% in the same period of 2022, primarily due to pricing actions and favorable exchange rates[83] - Foreign exchange fluctuations resulted in a $0.6 million reduction in labor and overhead costs for the first half of 2023 compared to the prior year, despite losses from the Mexican Peso[84] - SG&A expenses increased to $25.1 million in Q2 2023 from $24.0 million in Q2 2022, driven by higher salaries and litigation costs related to a patent infringement lawsuit[252] Tax and Compliance - The effective tax rate for the six months ended June 30, 2023, was 8.0%, compared to (5.7%) for the same period in 2022, attributed to increased income in North America and Europe[91] - As of June 30, 2023, the company was in compliance with its debt covenants, including the Fixed Charge Coverage Ratio, which is the most restrictive covenant[257] Credit and Financing - The company amended its Credit Support Annex (CSA) in January 2023, transitioning the reference rate from LIBOR to SOFR effective January 31, 2023[257] - The unused credit available under the credit facility at June 30, 2023, was $115.0 million, which the company could borrow without violating its Leverage Ratio covenant based on existing consolidated EBITDA[257] - The company recorded foreign exchange transactional losses of $0.5 million during the first half of 2023 due to currency fluctuations[84]