Q2 2021 Bel Fuse Inc Earnings Call
[music].
Okay.
Please standby.
Good day and welcome to the Bel Fuse, Inc. Second quarter 2021 results Conference call. Today's conference is being recorded at this time like to turn the conference over to Dan Bernstein, President and Chief Executive Officer. Please go ahead.
Thank you James.
Joining me on the call today is farooq to.
Our CFO, Craig Brosious, our vice President of finance and they huckins, our director of financial reporting.
Before we begin the call I'd like to ask Lynn to go over the Safe Harbor statement Lynn.
Thank you Dan Good morning, everybody before we start I would like to read the following safe Harbor statement.
Except for historical information.
Non contained on this call the matters discussed on this call such as statements regarding anticipated cost savings, resulting from the closure of Bel modules design and technical support center on Maidstone U K.
Expectations concerning pricing adjustments, taking effect and their impact on offsetting labor and material cost increases.
The work of the company's plans intentions expectations.
In connection with profit improvement and maximization operational efficiencies on the pursuit of certain opportunities in market.
Expectations regarding backlog is an indicator of sale.
Supply constraints and the companys ability to manage them.
And anticipated future trends plans and results for the business, including for the second half of 2021 are all forward looking statements as described under the private Securities Litigation Reform Act of 1095 that involves risks and uncertainties actual results could differ materially from bels projections.
Among the factors that could cause actual results to differ materially from such statements are the market concerns facing our customers the continuing viability of sectors that rely on our products the impact of public health crises, such as the governmental social and economic effects of COVID-19, the effects of business and.
Net conditions.
Difficulties associated with integrating recently acquired company <unk>.
Paucity and supply constraints or difficulties.
Product development commercialization or technological difficulties.
The regulatory and trade environment.
Risks associated with foreign currency.
Uncertainties associated with legal proceedings.
The market's acceptance of the company's new products and competitive responses to those new products.
The impact of changes to U S trade and tariff policies and the risk factors detailed from time to time in the company's SEC reports.
In light of the risks and uncertainties.
There can be no assurance that any forward looking statement will in fact prove to be correct.
We enter takes no obligation to update or revise any forward looking statements. We also may discuss non-GAAP results. During this call and reconciliations of our GAAP results to non-GAAP results have been included in our release.
I would now like to turn the call back to.
Per our general business update.
Thank you Lynn.
And thank you for joining our call today first I'd like to provide an update on COVID-19, all on manufacturing sites globally are operational throughout the second quarter the day.
Alta variant is prevalent in regions in which Bel operates particularly.
Dan and India U K and now the U S.
We continue to stay vigilant in our protective measures in place to safeguard our associates I would once again like to thank all our global manufacturing associates for their ongoing dedication to balance these difficult conditions turning to our results.
We are pleased with our financial reason.
<unk>. This quarter. This is our second consecutive quarter of meaningful year over year sales growth as increased orders over the past 6 months continue to translate into sales.
<unk> during the second quarter reached a new record high and our backlog of orders of magnitude $314 million at June.
30th 2021 an increase of 75 per cent from a year ago.
Most importantly, these increases in sales and bookings were seen across all our major product groups, which is an indication of general market strength.
Sales within our power solutions and protection group were up 23%.
From the second quarter of 2020 increase was largely driven by a 55% growth in a few sales of 53% growth in our products that support growing E mobility end markets and a 30% improvement in <unk> sales compared to last year's second quarter.
These increases.
Our offense.
We offset in part by lower sales of our custom modular products as we exit these low margin products.
And in connection with this exit on modular designs on it and Maidstone U K will be closing during the third quarter with an estimated annual cost savings of 400000.
Our power solution.
<unk> Protection group finished the second quarter on robust backlog, which is up $92 million or 143% from year end.
Sales of our connected connectivity solution products increased by 11% from last year's second quarter.
With a continued rebound on the commercial aerospace end market.
Which improved by $2.9 million on 114% from last year's second quarter.
Sales of our connectivity products through distribution channels were also strong.
Reflecting a $1.7 million on a 12% increase from last year's second quarter, the backlog of orders for our connectivity products grew.
<unk> 1 million or <unk> 45 per cent since.
Since year end.
On the magnetic solution group, our sales growth of 8% over last year's second quarter led by higher shipments of our integrated connector modules that are using next generation switching applications.
During the first half.
Of 2021 our backlog of all of our magnetic products grew by $45 million or 105% since year end.
Our first quarter acquisition on RMS ears are now fully integrated into Bell's businesses and both were immediately accretive to our results contributing.
A combined $8.7 million in sales sensor with respective acquisition dates.
Yeah.
The recent pricing adjustments to our customers' focus on margin improvement coupled with our highest backlog on bels history. The return of the aerospace demand and our participation in growth markets.
Markets like a T V Iot and 5 day allows us to be strongly optimistic about <unk> future.
Craig can you go forward.
Sure Thanks, Dan moving.
Moving on to the financial update.
Sales by product segment for the second quarter.
2021 were as follows.
Our solutions and protection sales were $55.4 million up 22, 9% from last year's second quarter.
Connectivity solutions sales were $43 million, an increase of 10, 6%.
And magnetic solutions sales.
<unk> for $43 million up 8.3% from last year's second quarter.
Preliminary gross margin by product segment for the second quarter of 2021 was as follows.
Power solutions and protection had a gross margin of 25, 9% in the second quarter of 2021 up from 23.
3.5% in last year's second quarter.
Activity solutions gross margin was 33% up from 29, 6% in the 2020 quarter.
And magnetic solutions gross margin was 23, 2% down from 25, 4% in last year's second quarter.
On a consolidated basis.
Gross profit margin decreased to 24, 7% in the second quarter of 2021 as compared with 25, 8% in the second quarter of 2020.
Bel implemented price increases earlier in 2021 to offset rising input costs with a portion of these.
Price increases taking effect in the second quarter.
In addition to industrywide increases on raw material pricing labor costs are higher due to wage rate increases and unfavorable foreign exchange fluctuations in the second quarter of 2021 as compared to the same quarter of 2020.
The margin comparisons were also.
Expected by $1 million in Covid related subsidies received in last year's quarter that did not repeat.
Excluding the subsidy gross margin in the second quarter of 2021 would have been.
<unk> been more comparable with last year's second quarter.
Research and development costs were $5.
$5 million during the second quarter of 2021, a decline of $650000 from the second quarter of 2020, primarily due to the closure of our Switzerland R&D facility in mid 2020.
Our selling general and administrative expenses were $21.8 million or $15.
Also what percent of sales up $2.7 million from a dollar perspective.
From the second quarter of last year, but the same as a percentage of sales.
Okay.
G&A salaries and fringe benefits were $1.3 million higher as compared to the second quarter of 2020.
Legal professionals.
Fees were up by 467000, and we incurred $317000 in acquisition related costs.
These factors resulted in income from operations of $6.6 million in the second quarter of 2021 as compared to $6.1 million in the second quarter of 2020.
Other income and expense net was income of $113000 for the second quarter of 2021 as compared to income of $1.2 million during the second quarter of 2020.
Income in the second quarter of 2020, largely related to a $1.5 million dollar gain on the company's surf investment.
Investments, which are included in this line item.
Interest expense was $721000 in the second quarter of 2021 down from $1.3 million in the same quarter last year as a result of decreases in both LIBOR the company's spread on its credit facility driven by EBITDA improvements.
<unk> and the overall reduction in our outstanding debt balance.
We had a benefit from income taxes of $1.9 million from the second quarter of 2021 compared to a provision of $423000 during last year's second quarter. The.
The benefit in the second quarter of 2021, primarily resulted from.
The expiration of statutes alumina of limitations on certain tax reserves.
Earnings per share for club for the class a common shares was earnings of 61 per share in the second quarter of 'twenty 'twenty 1.
As compared with earnings of 43 per share in the second quarter of 2020.
Earnings per share for the class B common shares.
Earnings of 64 cents per share in the second quarter of 2021 as compared with earnings of 46 per share in the second quarter of 2020.
On a non-GAAP basis, which excludes certain unusual and other nonrecurring items.
Yes.
Where class a shares.
With a 64 cents per share in the second quarter of 2021 as compared with earnings of 43 per share in the second quarter of 2020.
On a non-GAAP basis EPS for class B shares was earnings of 68 per share in the second quarter of 2021.
1 as compared with earnings of 46 pence per share in the second quarter of 2020.
And now I'd like to turn the call over to Farooq to go through some balance sheet and cash flow items farooq.
Thank you Craig beginning with some balance sheet items, our cash on cash equivalents balance as of June 32020.
1 was $66.4 million a decrease of $18.5 million from December 31, 2020.
During the first half of 2021, we made net payments of $14.8 million in connection with the acquisitions of RMS and Eos <unk>.
3 million 3 <unk> million towards our outstanding.
Balance and used cash for capital additions of $2.5 million dividend payments of $1.6 million and interest payments of 627000.
These items were partially offset by $6.7 million in proceeds received from the sale of property.
Accounts receivable were 80.
Adding debt <unk> 9 million at June 32021, as compared with $71.4 million at December 31, 2020.
The primary driver of the increase related to the higher sales volume in the second quarter of 2021 as compared to the fourth quarter of 2020, the 2021 acquisitions on Rms.
RMS and <unk> also contributed to the increase from AAR from year end accounting for $4.7 million to our receivables balance at June 30.
Days sales outstanding was 56 days at June 32021, comparable with the DSO at December 31.2020.
Inventories were $116.2 million at June 32021 up $16 million from December 31, 2020, the increase was seen in raw materials and work in progress and was largely due to increased raw material purchases to accommodate our higher backlog of.
As well as the inclusion of $3 million from 2021 acquired company.
Accounts payable were $53 million at June 32021 up $13.2 million from its level at December 31, 2020, the increase in <unk> was in line with the heightened purchasing volume of raw.
Raw materials during the first half of the year.
In addition, the 2021 acquired companies accounted for $3.2 million of this increase from the year end level.
Bels total outstanding debt balance was $112.9 million as of June 32021, net of deferred financing costs.
Order a decrease of $2.7 million since the 2020 year end balance.
And with that I'll turn the call back over to Deb Deb. Thank you before I open the call for questions I'd like to think take a moment to thank Craig for his nearly 18 years of service to Bel fuse Craig came to the valve family through our.
Acquisition of Stewart connector in 2003.
Since then assume a number of positions with the end of the financial Department.
Ultimate rising to lead the group in 2017.
These instrument is instrumental in helping helping guide Bel through somebody's most transformer, yes, I'll also I can now acknowledges generous.
Cost efforts and ensuring the transition well farooq and is smooth.
Moving to non eventful.
Craig will be retiring from the company at the end of September and he will be missed but we wish him. The best in his retirement. Thank you Craig.
James can we open the call for questions now.
Thank you Mr Bernstein, if you'd like to ask.
<unk> Chen please signal by pressing star 1 on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to Larson on free Char equipment again press star 1 to ask the question from a pause for a moment.
Yes.
And we'll take our first question of day from.
Jim Ricchiuti with Needham <unk> company.
Hi, good morning.
Yes, congratulations on the quarter itself. The demand is clearly strong across the board.
I'm just wondering if you could comment a little bit about lead times.
How concerned are true just.
Just a general.
Some of the what we're hearing.
Hearing any of that.
Component availability and the potential for that day.
Disruptive at all to the business later on as you look out over the balance of the year.
As we stated I think we manage the situation very well over the over this quarter.
I think if you look at our materials I think we have a ballpark figure of about $2.5 million, we could've, maybe add and greater sales. If we received all the materials.
Lead times have stretched out you're looking at some semiconductor companies are going out to 18 months to 2 years. So it's very.
I forgot to put a finger on it but so far I think we've done a good job and I think that we can manage it just as we've done in the past there might be a couple of shortfalls.
Again, all of a sudden you're looking at.
Component shortage, and then you have a situation in Malaysia, where because of call. It the factories are.
Dan on for 2 weeks. So you are going to have these hiccups.
It is a concern, but so far we've been able to manage that concerned pretty well so far.
Got it.
Of the.
The impact of Covid.
Sounds like you've managed that fairly well is there.
Any meaningful costs associated with Covid as you've had too.
Secure all of your official reduce debt, maybe contributing to some additional costs that we don't see necessarily.
I don't think Theres substantial number if you look at mass.
I missed that.
Temperature gauge temperature measuring devices.
Making this the place ace by putting plastic walls between spacing cafeteria, all those costs I think were taken out.
So I think going forward, we do have I can't see any.
Anything more than minimum costs going.
Okay. Your SG&A is running a little higher than we were anticipating I assume that's just a function also of your volumes, but I don't know if theres any additional color you could provide on that and then I have 1 other question and I'll jump back on that okay. Thanks.
Alright, I'll, let Craig.
Craig you want to take the SG&A you want from us to do it.
Yes, I think I can I can take that 1 day.
We are you're seeing from incremental SG&A related to the volume as you said Jim.
There's also.
Some additional expense was as we noted in our in our remarks here.
But I think it's still it's still in line with with what are.
And what our expectations were maybe a little bit maybe on the high end, but I think we're it's nothing nothing unusual in there.
Got it and just with respect to some of the pricing actions that you've taken have you.
Have you realize the benefits of debt.
More fully or are some of those.
To flow in over the next quarter or so and I don't know if you could give us any kind of sensors.
How those actions yet.
I think if he you know and this is just ballpark to give you a rough idea I think in this quarter, we probably maybe picked up 15% of the price increases that we put out there and then the balance.
Those would be I think divided pretty evenly between the third and fourth quarter.
But I would I would think they would all be flushed out by the middle of the fourth quarter.
Got it okay I'll jump back on the queue and Craig I just want to wish you the best.
Thanks, I appreciate it Jeff.
Next we'll hear from Theodore O'neill with Litchfield Hills research.
Thanks very much.
Congratulations on a good quarter.
About seasonality.
Given the strong sort of the strong demand here and longer lead times.
And your 2 recent acquisitions do you think Q4.
Seasonality will continue or do you have any thoughts about that 1 way or the other if there is a potential.
Central change I.
I think with Covid, you know everything is blown out the window.
So again I don't know again, because you know in North America, because of the Christmas holiday and Thanksgiving you lose.
Anywhere from 5 to 10 days, where people don't need parts, but.
But I think if this situation where the backlog is so strong and people are so desperate to get materials in.
I'd be shocked that we see.
And now we see that the downward churn we've seen in the past.
Yeah, and just didn't come up in the last quarter conference call.
Ask again here are you concerned about double bookings and how are you how are you managing that.
Thanks for that.
Yeah, that's a great question and it's.
As you know we have a you probably know we have Vinnie vellucci.
From a president of our zone.
Of Arrow on Americas of Arrow, and that's a question we address all the time at this point everything we hear is we're getting the impression that there isn't double booking out there, but you just you don't know.
And I would think that you would probably see it more on the semiconductor.
Yeah.
It really stretched out long lead times, and then our product line.
But it is but it is a concern that you know our people bring in too much inventory just as Mike I think it just is a concern is bringing in.
You know the double booking as people, bringing in inventory too soon so why bring it.
They are hard and 20 weeks, if youre not going to get the IC and 45 weeks on.
That's a concern that we try to look at and you can leave your do you have noncancelable orders do you have non schedule change orders.
You know we looked at that.
Well, we havent implemented at this time.
Okay.
Thanks very much.
Yeah.
We'll take our next question from Hendi <unk> with Gabelli funds.
Good morning, Dan Farrell and Craig. Thank you Craig for all day interactions.
Alright.
Georgia.
Oh, Yeah, Dan I would like to ask you questions about like south trends.
Let's say in the absence of lets say like unforeseen coffee impact and given the strong bookings.
Will it be reasonable to expect revenue will.
Julie improve every quarter throughout the end of the year.
I think again I think for the next quarter should improve and then again they start.
Eric I think the fourth quarter would be substantially better than last year's fourth quarter, but generally I don't know if it would be better than the third quarter because historically.
Greg third quarter. It has always been a strong quarter for Bel.
I see yeah.
And then would you be able to share what the revenue contribution from our M. S. N E O S. In Q2, and then whether your expected revenue contributions from those 2.
Our hydro given strong performance in Q2.
They are cranking on a dresser Rand.
Contribution for the year.
Okay Greg.
When I think he is better equipped to address it.
Passing them.
Oh, sorry, I was on mute there so youre looking for the quarter.
Yeah.
And do we have a forecast.
Yeah.
Okay. So for the for the second quarter Rns contributed $2.7 million I'm, sorry for looking at train counts $2.5 million.
On a fail and <unk> contributed $3.5.
Our sales.
And.
Just to give you a little more color and I would say that.
Again, they supply the aerospace people. So historically if you looked over the you know before Covid, that's a very weak month for them.
Okay.
I'm just looking at.
The first half of 2021 rns contributed $4.6 million net sales and the ear. So it's the same $3.5 million since they were acquired on March 31st.
And then how much revenue forecast for 2021 day.
Are you expecting higher.
I would say yeah, I would say, yes, but we don't have a I don't think we're ready to share I figure with you, though sorry, okay. Yeah, no that's fair.
And then this is like a book keeping questions. The point 4 million cost saving from the U K facility.
Deconsolidation, we let go toward our bottom line or will you reinvest that somewhere else.
Yeah.
I think there's only 400000 is the cost savings for shutting down the Maidstone facility.
Yes, so we would expect to see that.
The drop to the bottom line Hendi, Okay, Yep and net.
Any insight into like price increases are not the deferral and or where they're at.
Whether it's like a single digit mid single digit high single day, No I think I think on the average the price increases are falling.
Smaller ones on some higher ones.
But overall I think it's probably falling into the 5 to 12 per cent range.
Got it okay. Thank you so much.
Thank you.
As a reminder press star 1 if you have a question at this time, we'll pause for a moment.
[noise].
Yeah.
Sure.
Exactly quantify from that.
Also.
On <unk>.
Yeah.
By that time.
James.
So are there any other calls.
Hello, There are no further questions at this time I'll turn the conference over to Mr. Bernstein for any additional closing remarks.
And once again I'd like to thank Craig for his tremendous job and I wish everybody a nice weekend and hopefully we can keep these numbers calling from thank you everybody for participating.
That will conclude today's conference. Thank you for your participation you may now disconnect.
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Good day and welcome to the Bel Fuse, Inc. Second quarter 2021 results Conference call. Today's conference is being recorded at this time like to turn the conference over to Dan Bernstein, President and Chief Executive Officer. Please.
Net.
Thank you James joining me on the call today is farooq to work on our CFO, Craig Brosious, Our Vice President of Finance and then how can our director of financial reporting.
Before we begin the call I like to ask Lynn to go over the Safe Harbor statement Lynn.
Thank you Dan good morning, everybody.
Before we start I would like to read the following safe Harbor statement.
Except for historical information contained on this call. The matters discussed on this call such as statements regarding anticipated cost savings, resulting from the closure of Bel module design and technical support center on based on U K.
Net patients concerning pricing adjustments.
Adjustments, taking effect and their impact on offsetting labor and material cost increases.
The company's plans intentions expectations and efforts in connection with profit improvement and maximization operational efficiencies and the pursuit of certain opportunities in markets.
Spectation regarding backlog.
Backlog is an indicator of sales.
Slide constraints and the companys ability to manage them and.
And anticipated future Trenton plans and results for the business, including for the second half of 2021 are all forward looking statements as described under the private Securities Litigation Reform Act of 1095 that income.
Involves risks and uncertainties actual results could differ materially from balance projections.
Among the factors that could cause actual results to differ materially from such statements are the market concerns facing our customers the continuing viability of sectors that rely on our products the impact of public health crises.
Such as the governmental social and economic effects of COVID-19.
So if business and economic conditions.
<unk> associated with integrating recently acquired companies.
Capacity and supply constraints or difficulties.
Product development commercialization or technological difficulties.
The regulatory and trade environment.
Risks associated with foreign currency on.
On certainties associated with legal proceedings.
The market's acceptance of the company's new products and competitive responses to those new products.
The impact of changes to U S trade and tariff policies and the risk factors detailed from time to time.
And the Companys SEC reports.
In light of the risks and uncertainties Circumvene now with warrants at any forward looking statement will in fact prove to be correct.
We undertake no obligation to update or revise any forward looking statements. We also may discuss non-GAAP results. During this call and reconciliations of our GAAP results.
The non-GAAP results have been included in our release.
I would now like to turn the call back to Dan for a general business update.
Thank you Lynn.
And thank you for joining our call today.
First I'd like to provide an update on COVID-19.
All our manufacturing sites globally are operational throughout the second.
Second quarter the day.
Alta variant is prevalent in regions in which Bel operates particularly in India U K and now the U S. We.
We continue to stay vigilant and have protective measures in place to safeguard our associates I would once again like to thank all our global manufacturing associates for their ongoing dedication to balance it.
These difficult conditions turning to our results.
We are pleased with our financial results for this quarter. This is our second consecutive quarter of meaningful year over year sales growth as increased orders over the past 6 months continue to translate into sales bookings during the second quarter reached a new record.
Hi, and our backlog of orders of magnitude $314 million at June 32021, an increase of 75 per cent from a year ago.
Most importantly, these increases in sales and bookings were seen across all our major product groups, which is an indication of general market strength.
Sales within our power solutions and protection group were up 23% from the second quarter of 2020, the increase was largely driven by a 55% growth in a few sales of 53% growth in our products that support growing E mobility end markets and a 30% improvement in <unk> sales.
Compared to last year's second quarter. These.
These increases.
Were offset in part by lower sales of our custom modular products as we exit these low margin products.
And in connection with this exit.
Modular designs on it and made zone U K will be closing during the third quarter.
With an estimated annual cost savings of 400000.
Our power solutions and protection group finished the second quarter on robust backlog, which is up $92 million or 143% from year end.
Sales of our connected connectivity solution products increased by 11% from last.
Last year's second quarter.
Does it continue to rebound on the commercial aerospace end market, which improved by $2.9 million or 114% from last year's second quarter.
Sales of our connectivity products through distribution channels were also strong reflecting a $1.7 million 12 per cent increase.
Last year's second quarter, the backlog of orders for our connectivity products grew by 21 million or <unk> 45 per cent since since year end on.
On the magnetic solution group, our sales growth of 8% over last year's second quarter led by higher shipments of our integrated connector module.
From using next generation switching applications.
During the first half of 2021 our backlog of all of our magnetic products grew by $45 million or 105% since year end.
Our first quarter acquisition on RMS Eos are now fully integrated.
The balance businesses and both were immediately accretive to our results contributing a combined $8.7 million in sales sensor with respective acquisition dates.
The recent pricing adjustments to our customers' focus on margin improvement coupled with our highest backlog.
On balance history, the return of the aerospace demand and our participation in growth markets like HED Iot in 5 years allows us to be strongly optimistic about <unk> future.
Craig can go forward.
Sure. Thanks, Dan.
Moving on to the.
The financial update.
Sales by product segment for the second quarter of 2021 were as follows.
Power solutions and protection sales were $55.4 million up 22, 9% from last year's second quarter.
Connectivity solutions sales were 43 million.
An increase of 10, 6%.
And magnetic solutions sales were $43 million up 8.3% from last year's second quarter.
Preliminary gross margin by product segment for the second quarter of 2021 was as follows.
Power solutions and protection.
Margin of 25, 9% in the second quarter of 2021 up from 23, 5% in last year's second quarter.
Connectivity solutions gross margin was 33% up from 29, 6% in the 2020 quarter.
Magnetic solutions gross margin was $23.
Gross percent down from 25, 4% in last year's second quarter.
On a consolidated basis.
Gross profit margin decreased to 24, 7% in the second quarter of 2021 as compared with 25, 8% in the second quarter of 2020.
Bel implement.
2 price increases earlier in 2021 to offset rising input costs with a portion of these price increases taking effect in the second quarter.
In addition to the industrywide increases on raw material pricing labor costs are higher due to wage rate increases and unfavorable foreign exchange fluctuations in the second quarter of 2020.
Implementing on.
That's compared to the same quarter of 2020.
The margin comparisons were also affected by $1 million in Covid related subsidies received in last year's quarter debt did not repeat.
Excluding the subsidy gross margin in the second quarter of 2021 would have been.
<unk> been more per.
Comparable with last year's second quarter.
Research and development costs were $5.5 million during the second quarter of 2021, a decline of $650000 from the second quarter of 2020, primarily due to the closure of our Switzerland R&D facility in mid 2020.
Our selling general and administrative expenses were $21.8 million or 15, 7% of sales up $2.7 million from a dollar perspective.
From the second quarter of last year, but the same as a percentage of sales.
G&A salaries and fringe benefits.
For $1.3 million higher as compared to the second quarter of 2020.
Legal professional fees were up by 467000, and we incurred $317000 in acquisition related costs.
These factors resulted in income from operations of $6.6 million in the second quarter of <unk>.
'twenty 1.
As compared to $6.1 million in the second quarter of 2020.
Other income and expense net was income of $113000 for the second quarter of 2021 as compared to income of $1.2 million during the second quarter of 2020.
The income in the second quarter of 2020, largely related to a $1.5 million gain on the company's certain investments which are included in this line item.
Interest expense was $721000 in the second quarter of 2021 down from $1.3 million in the same quarter last year.
As a result of decreases in both LIBOR the company's spread on its credit facility driven by EBITDA improvements.
And the overall reduction in our outstanding debt balance.
We had a benefit from income taxes of $1.9 million from the second quarter of 2021 compared to a provision of 4.
$423000 during last year's second quarter.
The benefit in the second quarter of 2021, primarily resulted from the expiration of statutes of limited of limitations on certain tax reserves.
Earnings per share for the class a common shares was earnings of 60.
<unk> per share in the second quarter of 2021.
As compared with earnings of 43 per share in the second quarter of 2020.
Earnings per.
Share for the class B common shares.
Was earnings of 64 cents per share in the second quarter of 2021 as compared with earnings of 46.
The ones that are in the second quarter of 2020.
On a non-GAAP basis, which excludes certain unusual and other nonrecurring items.
P S where class a shares.
Was <unk> 64 per share in the second quarter of 2021 as compared with earnings of 43 per share in the second quarter.
Per share <unk> 20.
On a non-GAAP basis EPS for class B shares was earnings of 68 per share in the second quarter of 2021 as compared with earnings of 46 per share in the second quarter of 2020.
I'd now like to turn the call over to Farooq to go through some balance sheet.
On cash flow lines true.
Thank you Craig beginning with some balance sheet items, our cash on cash equivalents balance as of June 32021 was $66.4 million a decrease of $18.5 million from December 31.2020 during.
During the first half of 2021, we.
20th payments of $14.8 million in connection with the acquisitions of RMS and Eos.
3 point million 2.1 million towards our outstanding debt balance and used cash for capital additions of $2.5 million dividend payments of $1.6 million and interest payments of 627.
Made months these.
These items were partially offset by $6.7 million in proceeds received from the sale of property.
Accounts receivable were $86.9 million at June 30, 'twenty, 1 as compared with $71.4 million at December 31.2020.
The primary driver of.
The increase related to the higher sales volume in the second quarter of 2021 as compared to the fourth quarter of 2020.
2021 acquisitions of RMS and <unk> also contributed to the increase in AR from year end accounting for $4.7 million to our receivables balance at June 30.
Days sales outstanding was 56 days at June 32021, comparable with the DSO at December 31.2020.
Inventories were $116.2 million at June 32021 up $16 million from December 31, 2020.
The increase was seen in raw materials and work in progress and was largely due to increased raw material purchases to accommodate our higher backlog of orders as well as the inclusion of $3 million from 2021 acquired company.
Accounts payable were $53 million at June 32021.
Up $13.2 million from its level at December 31, 2020, the increase in AP was in line with the heightened purchasing volume of raw materials during the first half of the year.
In addition, the 2021 acquired companies accounted for $3.2 million of this increase from the year end level.
Bels total outstanding debt balance was $112.9 million as of June 32021, net of deferred financing costs, a decrease of $2.7 million since the 2020 year end balance.
And with that I'll turn the call back over to Dan Dan.
Before I open.
On the call for questions I'd like to think take a moment to thank Craig for his nearly 18 years of service to Bel fuse Craig came to the <unk> family through our acquisition of Stewart connector in 2003.
Since then you assume a number of positions within the financial Department Detour ultimately rising to lead the group in 2017.
He's internet, he's instrumental and helping hoping god, though through somebody's most transformer, yes, I'll also like you know knowledge as generous efforts and ensuring the transition well farooq and has smoothed it was smooth and uneventful.
Craig will be retiring from the company at the end of September and he will be missed.
Based on the best in his retirement, thank you Craig.
James can we open the call for questions now.
Thank you Mr. Bernstein, if you'd like to ask a question. Please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to Larry will treat dry equipment again price star 1 to ask.
A question from a pause for a moment.
And we'll take our first question of day from Jim Ricchiuti with Needham <unk> Company.
Hi, good morning.
Yes, congratulations on a quarter channel demand is clearly strong across the board.
But we wouldn't just wondering if you could comment a little bit about lead times.
How concerned are true.
Just a general.
Some of the what we're hearing about.
Ponant availability and the potential for that to be disruptive at all to the business later on as you look out.
Balance of the year.
As we stated I think we manage the situation very well over the over this quarter I think if you look at our materials I think we have a ballpark figure of about $2.5 million, we could have maybe add greater sales. If we received all the materials and.
Over the.
Lead times have stretched out you're looking at some semiconductor companies that are going out to 18 months to 2 years. So it's very difficult to put a finger on it but so far I think we've done a good job and I think that we can manage it just has to be done in the past there might be a couple of shortfalls.
Again, all of a sudden you're looking at.
Component shortage and then you have a situation in Malaysia.
Now because of call. It the factories are shut down for 2 weeks. So you are going to have these hiccups.
It is a concern, but so far we've been able to manage that concerned pretty well so far.
Got it.
Terms of the impact of Covid.
It sounds like you've managed that fairly well is there any meaningful.
Costs associated with Covid as you had to.
Secure all of your official lease debt maybe contributing to.
Additional costs that we don't see necessarily.
I don't think a substantial number if you look at mass thermostats temperature gauge temperature measuring devices.
Making the play safe by putting plastic walls between spacing no cash.
Terry.
So all those costs I think were taken out.
So I think going forward you know, we do have I can't see any anything more than minimum costs going forward.
Okay.
G&A is running a little higher than we were anticipating.
So that's just a function also of your volumes because I don't know if theres any additional color you could.
You're right on that and then I have 1 other question and I'll jump back on the okay. Thanks.
Alright, I'll, let Craig.
Craig you want to take the SG&A you want for route to do it.
Yes, I think I can I can take that 1 day.
We are you're seeing from incremental SG&A related to the volume as you said Jim.
<unk>.
So.
We did have some additional expense was as we noted in our in our remarks here.
Sure.
I think it's still still in line with with what are what our expectations were maybe a little bit maybe on the high end, but I think we're it's nothing nothing unusual in there.
Got it and just with respect to.
Provide where the pricing actions that you've taken have you.
Have you realize the benefits of debt.
More fully or are some of those expected to flow in over the next quarter or so and I don't know if you could give us any kind of sense as to how those I think actually yeah.
I do.
2.
And this is just ballpark to give you a rough idea I think in this quarter, we probably maybe picked up 15% of the price increases that we put out there and then the balance would be I think divided pretty evenly between the third and fourth quarter.
But I would I would think they would all be flushed out by the middle of the fourth quarter.
Got it okay I'll jump back in the queue and Craig I just want to wish you the best.
Yeah.
Thanks, I appreciate it Jim.
Next we'll hear from Theodore O'neill with Litchfield Hills research.
Thanks very much.
Congratulations on a good quarter a question about season.
Thank you Emily.
Given the strong sort of the strong demand here and longer lead times.
And your 2 recent acquisitions do you think Q4 seasonality will continue or do you have any thoughts about that 1 way or the other if there's a potential.
Central change.
I think with Covid you know everything.
Things blown out the window.
So again I don't you know generally because you know in the in North America, because of the Christmas holiday and Thanksgiving, you'll lose anywhere from 5 to 10 days.
Where people don't need parts.
But I think if this situation where the backlog is so strong and people are so desperate to get more.
<unk>.
I'll be shocked that we see.
And now we see the downward churn we've seen in the past.
Yeah and.
This didn't come up on the last quarter conference call.
I'll ask you again here are you concerned about double bookings and how are you.
<unk> managing that from.
Yeah.
That's a that's a great question and it's you know I you know we're you know as you know we have a you probably know we have Vinnie vellucci from a president of a zone.
Of Arrow on the Americas of Arrow and that's a question we address all the time at this point everything we.
We're getting the impression that there isn't double booking out there, but you just you don't know.
And I would think that you would probably see it more on the semiconductor area that are really stretched out long lead times than our product line.
But it is but it is a concern.
Here on people, bringing too much inventory just as Mike I think it just is a concern is bringing in.
You know the double booking as people, bringing in inventory too soon so why bringing a bel part and 20 weeks, if youre not going to get the IC and 45 weeks on <unk>.
That's the concern that we try to look at and you can leave your you know do you.
Have noncancelable orders do you have non schedule change orders.
We looked at that but we havent implemented at this time.
Okay. Thanks very much.
Yeah.
We'll take our next question from Hendi <unk> of Santo.
With Gabelli funds.
Good morning, Dan Farrell and Craig. Thank you Craig for all day interactions.
Yeah.
Alright.
Georgia.
Hum.
Yeah Dan.
I would like to ask you questions about south trend.
Let's say in the absence of lets say like unforeseen cockpit impact and given the strong bookings.
Will it be reasonable to expect revenue will gradually improve every quarter throughout the end of the year.
I think again I think for the next.
Florida should improve and then again based on historically I think the fourth quarter would be substantially better than last year's fourth quarter, but generally I don't know if it would be better than the third quarter, because historically the third quarter. It has always been a strong quarter for Bel.
Yeah.
And then would you be able to share what the revenue contribution.
Share from our M. S N E O S. A in Q2 and then what are your expected revenue contributions from those 2 are higher given the strong performance in Q2.
Great.
For the year.
Okay Greg.
And I think it's better equipped to address.
Passing them.
Oh, sorry, I was on mute there.
So Andy Youre looking for the quarter.
Yeah.
And do we have a forecast.
Yeah.
Okay. So for the.
For the second quarter Rns contributed $2.7 million I'm, sorry for living on trade sales $2.5 million on a sale.
<unk> contributed $3.5 million of sales.
And just.
Just to give you a little more color and I would say that again.
They supply the aerospace people.
So historically if you looked over the you know before Covid, that's a very weak month for them.
Okay.
Looking at the first half of 2021 on RMS contributed $4.6 million of sales and the E. O. So it's the same.
$3.5 million since they were acquired on March 31st.
And then how much revenue forecast for 2021 day.
Are you expecting higher.
I would say I would say, yes, but we don't have it.
I don't think we're ready to share I figure with you, though sorry, okay. Yeah, no that's fair.
And then this is like a book keeping questions. The point 4 million cost saving from the U K facility consolidation.
We let go toward our bottom line.
Or will you reinvest that somewhere else.
I think it's only 400000 is the cost savings for shutting down the Maidstone facility.
Yes, so we would expect to see that.
Dropped to the bottom line Hendi, Okay Yep.
Mine site into like price increases are not the detail and on whether it.
Whether it's like a single digit mid single digit high single day, No I think.
On the average the price increases are falling.
Some smaller ones on some io loans, but overall I think it's probably falling into the 5 to 12 per cent range.
Okay. Thank you so much.
Thank you.
Yeah.
As a reminder press star 1 if you have a question at this time, we'll pause for a moment.
[noise].
Yeah.
[noise] James are there any other calls.
Hello, There are no further questions at this.
This time I'll turn the conference over to Mr. Bernstein for any additional or closing remarks.
And once again I'd like to thank Greg for his tremendous job and I wish everybody now.
Nice weekend in and hopefully we can keep these numbers calling from thank everybody for participating.
That will conclude today's conference. Thank you for your participation you may now disconnect.