Bel Fuse Inc. — FY 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; comparisons are with FY 2021. This filing reports annual results, not a separate fourth-quarter financial statement. Bel designs and manufactures electronic power, protection, magnetic and connectivity products serving industrial, networking, aerospace, military, transportation and other markets.
Financial and operating highlights
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Net sales | $654.2 million | $543.5 million |
| Gross profit / margin | $183.5 million / 28.0% | $134.4 million / 24.7% |
| Operating income | $65.1 million | $31.3 million |
| Net earnings | $52.7 million | $24.8 million |
| Net earnings per share | Class A $4.01; Class B $4.24 | Class A $1.90; Class B $2.02 |
| Cash from operating activities | $40.3 million | $4.6 million |
- Sales rose 20.4%; net earnings more than doubled. Approximate operating and net margins were 10.0% and 8.1%, respectively.
- By product group, sales were Power Solutions and Protection $288.4 million (up 32%), Connectivity Solutions $187.1 million (up 13%), and Magnetic Solutions $178.8 million (up 12%). Gross margins were 30.5%, 25.9% and 27.6%, respectively.
- Cash and cash equivalents were $70.3 million at year-end. Current assets were $381.4 million and current liabilities $136.3 million; the reported current ratio was 2.8:1.
- Revolver borrowings were $95.0 million, down from $112.5 million; $80.0 million of additional borrowing capacity was available at year-end. The facility matures September 2026, and Bel was in covenant compliance. Net debt, using reported cash, was approximately $24.7 million.
- Capital expenditures were $8.8 million; dividends paid were $3.4 million. Cash increased $8.5 million for the year.
- Working capital absorbed cash: accounts receivable increased $20.7 million and inventory increased $36.6 million. DSO rose to 58 days from 54; inventory turns declined to 2.6 from 3.1.
Material changes versus FY 2021
- Sales and gross margin improved, with higher volume, pricing actions, favorable product mix and foreign exchange contributing. Material costs fell to 45.4% of sales from 46.2%, and labor costs to 8.3% from 9.0%.
- Operating income increased despite SG&A rising to $92.3 million from $86.6 million and restructuring charges increasing to $7.3 million from $1.2 million. R&D declined to $20.2 million from $21.9 million.
- Property-sale gains were $1.6 million, compared with $6.6 million in 2021. Other expense, net increased to $2.7 million from $0.4 million, including a $2.2 million loss on SERP-related investments versus a $1.3 million gain.
- Bookings declined 10% to $751.9 million. Power bookings increased 7%, including $38.5 million of raw-material expedite fees; Connectivity bookings increased 10%; Magnetic bookings fell 51%, largely reflecting lower networking demand.
- Year-end backlog increased 21% to $565.4 million. Bel estimated $25–$30 million related to orders due to ship in Q4 2022 slipped, largely because of supply constraints. Backlog was approximately $526.9 million at February 28, 2023; management cautions it may not reliably predict sales timing.
Outlook, risks and unusual items
- No formal numerical revenue or earnings guidance is provided. Management said its focus is profitable growth and expected lower networking bookings in 2023 to be offset by demand in commercial aerospace and eMobility.
- Management expected macroeconomic and supply-chain challenges to continue through at least the first half of 2023. Component availability and costs, inflation, customer demand, labor costs and foreign exchange remain important uncertainties.
- Management estimated restructuring costs of approximately $12 million, including $7.3 million incurred through year-end, incremental capital expenditures of approximately $5 million, and annualized savings of approximately $5 million once initiatives are complete. Savings and timing are estimates subject to execution risk.
- Bel cited substantial China concentration: 56% of associates and 68% of manufacturing facilities by square footage were in the PRC at year-end. COVID-related closures, labor availability, trade and geopolitical developments, and supply-chain disruptions could affect operations.
- One direct customer represented 12.8% of 2022 sales; sales to one ultimate end-user through intermediaries represented approximately 17.6%. Loss of either relationship could materially affect results.
- Uncertain tax-position liabilities were $24.8 million; management could not reasonably estimate their future cash-settlement timing. A separate approximately $12 million Italian tax claim is indemnified by ABB under the acquisition agreement.
- Bel reported no goodwill impairment. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Goodwill valuation was identified as a critical audit matter involving significant forecast and discount-rate assumptions.
- After year-end, Bel invested €8.0 million (approximately $8.8 million) for a one-third interest in innolectric AG; additional acquisition commitments may arise if specified profitability thresholds are met. The credit agreement and interest-rate swaps transitioned from LIBOR to SOFR in January 2023.
Important facts for investors to verify
- Whether backlog converts to shipments and sales, particularly given slipped orders, lower Magnetic bookings and the limits of backlog as a sales indicator.
- Whether operating cash generation can sustain working-capital needs as receivables and inventories rise, and whether inventory is recoverable without additional reserves.
- Progress, total costs and realized savings from the China, U.S. and U.K. facility consolidations.
- Customer concentration and demand trends in networking, commercial aerospace and eMobility.
- Debt covenant headroom, variable-rate exposure and liquidity after the additional January 2023 borrowing and innolectric investment.
- Resolution and cash implications of uncertain tax positions and other contingencies; the filing does not provide a clear expected settlement date for the tax-position liabilities.