Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
The Company's consolidated operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in Item 1A of our 2017 Annual Report on Form 10-K. As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, consolidated financial condition, operating results, and common stock prices. Furthermore, this document and other documents filed by the Company with the Securities and Exchange Commission ("SEC") contain certain forward-looking statements under the Private Securities Litigation Reform Act of 1995 ("Forward-Looking Statements") with respect to the business of the Company. Forward-Looking Statements are necessarily subject to risks and uncertainties, many of which are outside our control, that could cause actual results to differ materially from these statements. Forward-Looking Statements can be identified by such words as "anticipates," "believes," "plan," "assumes," "could," "should," "estimates," "expects," "intends," "potential," "seek," "predict," "may," "will" and similar references to future periods. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans and objectives are Forward-Looking Statements. These Forward-Looking Statements are subject to certain risks and uncertainties, including those detailed in Item 1A of our 2017 Annual Report on Form 10-K, which could cause actual results to differ materially from these Forward-Looking Statements. The Company undertakes no obligation to publicly release the results of any revisions to these Forward-Looking Statements which may be necessary to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Any Forward-Looking Statement made by the Company is based only on information currently available to us and speaks only as of the date on which it is made.
The condensed consolidated balance sheets, statements of operations, comprehensive income and cash flows for the periods presented herein have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows for all periods presented have been made. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Bel Fuse Annual Report on Form 10-K for the year ended December 31, 2017.
The Company's significant accounting policies are summarized in Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2017. There were no significant changes to these accounting policies during the nine months ended September 30, 2018, except as discussed in Note 2, Revenue, related to the adoption of the new revenue standards.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. Subsequently, the FASB issued several other updates related to revenue recognition (collectively with ASU 2014-09, the "new revenue standards" or "ASC 606"). We adopted the guidance under the new revenue standards effective January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard as an increase to the opening balance of retained earnings.
Upon adoption, the new revenue standards replaced most existing revenue recognition guidance in U.S. GAAP. Based on our review of representative samples of contracts and other forms of agreements with customers globally and our evaluation of the provisions under the five-step model specified by the new revenue standards, the Company has implemented changes with respect to timing of revenue recognition primarily related to arrangements for which the customer takes the Company's products from a facility holding consignment inventory.
In connection with the modified retrospective application of the new revenue standards, we recorded an adjustment to increase retained earnings of $3.4 million upon the January 1, 2018 adoption date. Apart from this adjustment and the inclusion of additional required disclosures in Note 2, the adoption of the new revenue standards did not have a material impact on the Company's condensed consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under the new guidance, entities will be required to measure certain equity investments at fair value and recognize any changes in fair value in net earnings, unless the investments qualify for the new practicability exception. The new standard was effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017. We adopted this guidance on January 1, 2018. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This accounting guidance was effective for annual reporting periods beginning after December 31, 2017, including interim reporting periods within those annual reporting periods, and should be applied retrospectively to all periods presented. This guidance was adopted by the Company effective January 1, 2018 and it did not have any impact on the Company's condensed consolidated statement of cash flows in the periods presented.
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Current U.S. GAAP prohibits the recognition of current and deferred income taxes for intra-entity asset transfer until the asset has been sold to an outside party. The new guidance eliminates the exception and requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This accounting guidance was effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. This guidance was adopted by the Company effective January 1, 2018 and it did not have a material impact on the Company's condensed consolidated financial position or results of operations.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"), to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. ASU 2017-01 provides a framework that gives entities a basis for making reasonable judgments about whether a transaction involves an asset or a business. The Company adopted ASU 2017-01 on January 1, 2018, and the guidance will be applied on a prospective basis.
In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07"). This guidance requires that an employer disaggregate the service cost component from the other components of net benefit cost. ASU 2017-07 requires employers to present the service cost component of the net periodic benefit cost in the same income statement line as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service costs and actuarial gains/losses, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. The guidance also specifies that the amount of costs that can be capitalized will be limited to service cost only. The Company adopted the guidance of ASU 2017-07 on January 1, 2018 and elected to apply the practical expedient and use the amounts disclosed in Note 9 to the financial statements included in Part I, Item 1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 as the basis for applying the retrospective application required by the standard. The amounts reclassified within the statement of operations for the three-month and nine-month periods ended September 30, 2017 were not material.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"). This update provides guidance about which changes to the terms or conditions of a share-based payment require an entity to apply modification accounting in Topic 718. This guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted ASU 2017-09 on January 1, 2018, and the guidance within this update will be applied to any future award modifications.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to provide a new comprehensive model for lease accounting. Under this guidance, lessees and lessors should apply a "right-of-use" model in accounting for all leases (including subleases) and eliminate the concept of operating leases and off-balance sheet leases. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. Similar modifications have been made to lessor accounting in-line with revenue recognition guidance. This guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. The updated guidance requires a modified retrospective adoption. We plan to adopt the standard on January 1, 2019. We are currently assessing the impact that the new standard will have on our consolidated financial statements, which will consist primarily of recording right-of-use assets and lease liabilities related to our operating leases on our consolidated balance sheet.
In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act, which was enacted on December 22, 2017. This guidance is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years and should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. Tax Cuts and Jobs Act is recognized. Early adoption is permitted. We are currently in the process of evaluating this new standard update.
In May 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. This guidance will better align the treatment of share-based payments to nonemployees with the requirements for such share-based payments granted to employees. This guidance is effective for all public entities for fiscal years beginning after December 15, 2018, including interim periods within that year. We are currently in the process of evaluating this new standard update.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.
In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. This guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and added additional disclosures. The standard is effective for fiscal years ending after December 15, 2020. The amendments in ASU 2018-14 would need to be applied on a retrospective basis. We are currently assessing the impact the new guidance will have on our disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Cost. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impacts that adoption of this ASU will have on its consolidated financial statements.
On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the transfer of control of the Company's goods and services and provides financial statement readers with enhanced disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods and services.
Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales.
Our revenues are substantially derived from sales of our products.
In our connectivity solutions product group, we provide connectors and cable assemblies to the aerospace, military/defense, commercial, rugged harsh environment and communication markets. This group also includes passive jacks, plugs and cable assemblies that provide connectivity in networking equipment, as well as modular plugs and cable assemblies used within the structured cabling system, known as premise wiring.
In our power solutions and protection group, we provide AC-DC and DC-DC power conversion devices and circuit protection products. Applications range from board-mount power to system-level architectures for servers, storage, networking, industrial and transportation.
In our magnetic solutions group, we provide an extensive line of integrated connector modules (ICM), where an Ethernet magnetic solution is integrated into a connector package. Products within the Company's magnetic solutions group are primarily used in networking and industrial applications.
The Company also provides incremental services to our customers in the form of training, technical support, special tooling, and other support as deemed necessary from time to time. For purposes of ASC 606, all such incremental services were concluded to be immaterial in the context of the contracts.
Direct with customer: This includes contracts with original equipment manufacturers (OEMs), original design manufacturers (ODMs), and contract manufacturers (CMs). The nature of Bel's products are such that they represent components which are installed in various end applications (i.e. servers, aircraft, missiles and rail applications). The OEM, ODM or CM that purchases our product for further installation are our end customers. Contracts with these customers are broad-based and cover general terms and conditions. Details such as order volume and pricing are typically contained in individual purchase orders, and as a result, we view each product on each purchase order as an individual performance obligation. Incremental services included in the contracts, such as training, tooling and other customer support are determined to be immaterial in the context of the contract, both individually and in the aggregate. Revenue under these contracts is generally recognized at a point in time, generally upon shipping or delivery, which closely mirrors the shipping terms dictated by the applicable contract.
Distributor: Distribution customers buy product directly from Bel and sell it in the marketplace to end customers. Bel contracts directly with the distributor. These contracts are typically global in nature and cover a variety of our product groups. Similar to contracts with OEMs, ODMs and CMs, each product on each purchase order is considered an individual performance obligation. Revenue is recognized at a point in time, generally upon shipping or delivery, which closely mirrors the shipping terms dictated by the applicable contract.
Consignment: These customers operate under a type of concession agreement whereby the Company ships goods to a warehouse or hub, where they will be pulled by the customer at a later date. The terms specified in the consignment contracts specify that the Company will not invoice the customer for product until it is pulled from the warehouse or hub. Once product arrives at the hub, it is generally not returned to Bel unless there is a warranty issue (see "Warranties" section below). Similar to the contracts described above, each product on each purchase order is considered an individual performance obligation. Under ASC 606, it was determined that the majority of these hubs are customer-controlled, and therefore control transfers to the customer upon either delivery from Bel's warehouse, or arrival at the customer-controlled hub, depending upon the applicable shipping terms. Effective January 1, 2018, revenue is recognized as control of the product is transferred to the customer (for customer-controlled hubs, this is at the time product is shipped to the hub). This gives rise to an unbilled receivable balance, as we do not have the right to invoice the customer until product is pulled from the hub.
Licensing Agreements: License agreements are only applicable to our Power Solutions and Protection product group, and include provisions for Bel to receive sales-based royalty income related to the licensing of Bel's patents or other intellectual property (IP) utilized by a third-party entity. Income related to these agreements is tracked by the licensee throughout the year based on their sales of product that utilize Bel's IP, and that data is reported to Bel either on a quarterly or annual basis, with payment generally received within 30 days of the reporting date. Our performance obligation is satisfied upon delivery of the IP at the beginning of the license period, as the licenses are functional in nature. However, the recognition of revenue associated with these licenses is subject to the sales- or usage-based constraint on variable consideration. As such, the Company records a constrained estimate of this variable consideration as royalty income in the period of the underlying customers' product sales, with adjustments made as actual licensee sales data becomes available.
Warranties vary by product line and are competitive for the markets in which the Company operates. Warranties generally extend for one to three years from the date of sale, providing customers with assurance that the related product will function as intended. The Company reviews its warranty liability quarterly based on an analysis of actual expenses and failure rates accompanied with estimated future costs and projected failure rate trends. Factors taken into consideration when evaluating our warranty reserve are (i) historical claims for each product, (ii) volume increases, (iii) life of warranty, (iv) historical warranty repair costs and (v) other factors. To the extent that actual experience differs from our estimate, the provision for product warranties will be adjusted in future periods. Actual warranty repair costs are charged against the reserve balance as incurred. See Note 7, "Accrued Expenses."
We estimate product returns, including product exchanges under warranty, based on historical experience. In general, the Company is not contractually obligated to accept returns except for defective product or in instances where the product does not meet the Company's product specifications. However, the Company may permit its customers to return product for other reasons. In certain instances, the Company would generally require a significant cancellation penalty payment by the customer. The Company estimates such returns, where applicable, based upon management's evaluation of historical experience, market acceptance of products produced and known negotiations with customers. Such estimates are deducted from sales and provided for at the time revenue is recognized. Distribution customers often receive what is referred to as "ship and debit" arrangements, whereby Bel will invoice them at an agreed upon unit price upon shipment of product and a price reduction may be granted if the market price of the product declines after shipment. Distributors may also be entitled to special pricing discount credits, and certain customers are entitled to return allowances based on previous sales volumes. Bel deducts estimates for anticipated credits, refunds and returns from sales each quarter based on historical experience.
Contracts with customers indicate the general terms and conditions in which business will be conducted for a set period of time. Individual purchase orders state the description, quantity and price of each product purchased. Payment for products sold under direct contracts with customers or contracts with distributors is typically due in full within 30-90 days from the transfer of title to customer. Payment for products sold under consignment contracts is typically due within 60 days of the customer pulling the product from the hub. Payment due related to our licensing agreements is generally within 30 days of receiving the licensee sales data, which is either on a quarterly or annual basis.
Since the customer agrees to a stated price for each product on each purchase order, the majority of contracts are not subject to variable consideration. However, the "ship and debit" arrangements with distributors, royalty income associated with our licensing agreements, and the product returns described above are each deemed to be variable consideration which requires the Company to make constrained estimates based on historical data.
A contract asset results when goods or services have been transferred to the customer but payment is contingent upon a future event, other than passage of time. In the case of our consignment arrangements, we are unable to invoice the customer until product is pulled from the hub by the customer, which generates an unbilled receivable (a contract asset) when revenue is initially recognized.
A contract liability results when cash payments are received or due in advance of our performance obligation being met. We have certain customers who provide payment in advance of product being shipped, which results in deferred revenue (a contract liability).
The change in balance of our unbilled receivables from January 1, 2018 to September 30, 2018 primarily relates to a timing difference between the Company's performance (i.e. when our product is shipped to a customer-controlled hub) and the point at which the Company can invoice the customer per the terms of the customer contract (i.e. when the customer pulls our product from the customer-controlled hub).
The aggregate amount of transaction price allocated to remaining performance obligations that have not been satisfied as of September 30, 2018 related to contracts that exceed one year in duration amounted to $17.6 million, with expected contract expiration dates that range from 2019 - 2024. It is expected that 14% of this aggregate amount will be recognized in the fourth quarter of 2019, 52% will be recognized in 2020 and the remainder will be recognized in years beyond 2020. The majority of the Company's total backlog of orders at September 30, 2018 is related to contracts that have an original expected duration of one year or less, for which the Company is electing to utilize the practical expedient available within the guidance, and are excluded from the transaction price related to these future obligations. The Company will generally satisfy the remaining performance obligations as we transfer control of the products ordered to our customers. The transaction price related to these future obligations also excludes variable consideration consisting of sales or usage-based royalties earned on licensing agreements. The variability related to these sales or usage-based royalties will be resolved in the periods when the licensee generates sales related to the licensed intellectual property.
Financing Components: Bel has elected the practical expedient which enables management to disregard the effects of a financing component if the time difference between delivery of goods or services and payment for the goods or services is within one year.
Costs to Obtain a Contract: As part of negotiations, Bel may incur incremental costs to obtain a contract. Incremental costs are only those costs that would not have been incurred if the contract had not been obtained (e.g. sales commissions). Bel has elected the practical expedient that allows incremental costs to obtain a contract to be expensed as incurred when the expected amortization period is one year or less.
As of December 31, 2017, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of securities that are among the Company's investments in a rabbi trust which are intended to fund the Company's Supplemental Executive Retirement Plan ("SERP") obligations. The gross unrealized gains associated with the investment securities held in the rabbi trust were $0.2 million at December 31, 2017. Such unrealized gains are included, net of tax, in accumulated other comprehensive loss. During the nine months ended September 30, 2018, the Company sold its securities and realized a gain on sale of $0.2 million. The proceeds of $1.3 million were reinvested in other securities within the rabbi trust.
As of September 30, 2018 and December 31, 2017, our securities primarily consisted of investments held in a rabbi trust of $1.3 million and $1.5 million, respectively, which were measured at fair value using quoted prices in active markets for identical assets (Level 1) inputs. The Company does not have any financial assets measured at fair value on a recurring basis categorized as Level 3, and there were no transfers in or out of Level 1, Level 2 or Level 3 during the nine months ended September 30, 2018 or September 30, 2017. Excluding the changes made in accordance with the Company's adoption of ASU 2016-01, there were no additional changes to the Company's valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the nine months ended September 30, 2018.
There were no financial assets accounted for at fair value on a nonrecurring basis as of September 30, 2018 or December 31, 2017.
The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable, accrued expenses and notes payable, which are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. The fair value of the Company's long-term debt is estimated using a discounted cash flow method based on interest rates that are currently available for debt issuances with similar terms and maturities. At September 30, 2018 and December 31, 2017, the estimated fair value of total debt was $116.9 million and $124.8 million, respectively, compared to a carrying amount of $114.8 million and $122.7 million, respectively. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of September 30, 2018.
Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment upon the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. There were no triggering events that occurred during the nine months ended September 30, 2018 that would warrant interim impairment testing.
Depreciation expense for the three months ended September 30, 2018 and 2017 was $2.8 million and $3.6 million, respectively. Depreciation expense for the nine months ended September 30, 2018 and 2017 was $8.9 million and $10.6 million, respectively.
The Company has a Credit and Security Agreement with KeyBank National Association (as amended, the "CSA"). The CSA consists of (i) a term loan, with outstanding borrowings of $116.7 million and $125.0 million at September 30, 2018 and December 31, 2017, respectively and (ii) a $75 million revolving credit facility ("Revolver"), with no outstanding borrowings at September 30, 2018 or December 31, 2017. The CSA has a maturity date of December 11, 2022. At September 30, 2018 and December 31, 2017, the carrying value of the debt on the condensed consolidated balance sheet is reflected net of $1.9 million and $2.3 million, respectively, of deferred financing costs. During the nine months ended September 30, 2018, the Company made voluntary prepayments of $6.0 million. Per the terms of the CSA, such voluntary prepayments reduce the amount of future scheduled payments on a pro rata basis.
The weighted-average interest rate in effect was 4.25% at September 30, 2018 and 3.38% at December 31, 2017 and consisted of LIBOR plus the Company's credit spread, as determined per the terms of the CSA. The Company incurred $1.4 million and $1.5 million of interest expense during the three months ended September 30, 2018 and September 30, 2017, respectively, and $3.9 million and $4.5 million of interest expense during the nine months ended September 30, 2018 and September 30, 2017, respectively.
The CSA contains customary representations and warranties, covenants and events of default and financial covenants that measure (i) the ratio of the Company's total funded indebtedness, on a consolidated basis, to the amount of the Company's consolidated EBITDA, as defined, ("Leverage Ratio") and (ii) the ratio of the amount of the Company's consolidated EBITDA to the Company's consolidated fixed charges. If an event of default occurs, the lenders under the CSA would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. At September 30, 2018, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations by tax authorities for years before 2015 and for state examinations before 2012. Regarding foreign subsidiaries, the Company is no longer subject to examination by tax authorities for years before 2008 in Asia and generally 2010 in Europe.
As a result of the expiration of the statutes of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized benefits for tax positions taken regarding previously filed tax returns may change materially from those recorded as liabilities for uncertain tax positions in the Company's consolidated financial statements at September 30, 2018. The Company's liabilities for uncertain tax positions totaled $28.2 million and $30.4 million at September 30, 2018 and December 31, 2017, respectively, of which $1.1 million and $2.5 million is included in other current liabilities at September 30, 2018 and December 31, 2017, respectively. These amounts, if recognized, would reduce the Company's effective tax rate. As of September 30, 2018, approximately $2.5 million of the Company's liabilities for uncertain tax positions were resolved during 2018 by way of expiration of the related statute of limitations.
The Company's policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes. During the nine months ended September 30, 2018 and 2017, the Company recognized $0.7 million and $0.6 million, respectively, in interest and penalties in the consolidated statements of operations. During the three and nine months ended September 30, 2018, the Company recognized a benefit of $0.3 million and $0.7 million, respectively, for the reversal of such interest and penalties, relating to the expiration of statutes of limitations and settlement of the acquired liability for uncertain tax positions. There were no reversals of interest or penalties in the three or nine months ended September 30, 2017. The Company has approximately $3.1 million and $3.2 million accrued for the payment of interest and penalties at September 30, 2018 and December 31, 2017, respectively, which is included in both income taxes payable and liability for uncertain tax positions in the consolidated balance sheets.
The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Act; however, we had made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax in which we recognized a provisional amount of $18.1 million, which was included as a component of income tax expense from continuing operations. During the nine months ended September 30, 2018, the Company has made measurement-period adjustments related to foreign earnings and profits computations and foreign income tax calculations for the Company's non-U.S. subsidiaries. The Company's measurement-period adjustment reduced its estimate of the deemed repatriation tax by $2.6 million, resulting in the reduction of the Company's provisional estimate from $18.1 million to $15.5 million. The Company plans to pay the tax in installments in accordance with the Act. The Company's estimates of the effects of the Act were calculated using currently available information; however, the Company is continuing to evaluate the underlying documentation and revisions to the current calculation may occur.
Effective January 1, 2018, the Act subjects a U.S. shareholder to current tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries. The Company has elected an accounting policy to provide for the tax expense related to the GILTI in the period the tax is incurred.
The Company maintains the Bel Fuse Inc. Employees' Savings Plan, a defined contribution plan that is intended to meet the applicable requirements for tax-qualification under sections 401(a) and (k) of the Internal Revenue Code of 1986, as amended (the "Code"). The expense for the three months ended September 30, 2018 and 2017 amounted to $0.3 million in both periods. The expense for the nine months ended September 30, 2018 and 2017 amounted to $0.8 million and $0.9 million, respectively. The Company's matching contribution is made in the form of Bel Fuse Inc. Class A common stock. As of September 30, 2018, the plan owned 111,393 and 137,700 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.
The Company's subsidiaries in Asia have a retirement fund covering substantially all of their Hong Kong based full-time employees. The expense for the three months ended September 30, 2018 and 2017 amounted to $0.1 million in both periods. The expense for the nine months ended September 30, 2018 and 2017 amounted to $0.3 million in both periods. As of September 30, 2018, the plan owned 3,323 and 17,342 shares of Bel Fuse Inc. Class A and Class B common stock, respectively.
The Company maintains a SERP, which is designed to provide a limited group of key management and other key employees of the Company with supplemental retirement and death benefits. As discussed in Note 4 above, the Company has investments in a rabbi trust which are intended to fund the obligations of the SERP.
The service cost component of net benefit cost is presented within cost of sales or selling, general and administrative expense on the accompanying statements of operations, in accordance with where compensation cost for the related associate is reported. All other components of net benefit cost, including interest cost and net amortization noted above, are presented within other income/expense, net in the accompanying statements of operations.
Changes in accumulated other comprehensive loss by component during the nine months ended September 30, 2018 are as follows. All amounts are net of tax.
classification of the plan participants.
In connection with the acquisition of Power Solutions, there is an ongoing claim by the Arezzo Revenue Agency in Italy concerning certain tax matters related to what was then Power-One Asia Pacific Electronics Shenzhen Co. Ltd. (now Bel Power Solutions Asia Pacific Electronics Shenzhen Co. Ltd, or "BPS China") for the years 2004 to 2006. In September 2012, the Tax Court of Arezzo ruled in favor of BPS China and cancelled the claim. In February 2013, the Arezzo Revenue Agency filed an appeal of the Tax Court's ruling. The hearing of the appeal was held on October 2, 2014. On October 13, 2014, BPS China was informed of the Regional Tax Commission of Florence ruling which was in favor of the Arezzo Revenue Agency and against BPS China. An appeal was filed on July 18, 2015 before the Regional Tax Commission of Florence and rejected. On December 5, 2016, the Arezzo Revenue Agency filed an appeal with the Supreme Court and BPS China filed a counter-appeal on January 4, 2017. The Supreme Court has yet to render its judgment. The estimated liability related to this matter is approximately $12.0 million and has been included as a liability for uncertain tax positions on the accompanying condensed consolidated balance sheets. As Bel is fully indemnified in this matter per the terms of the stock purchase agreement with ABB, a corresponding other asset for indemnification is also included in other assets on the accompanying consolidated balance sheets at September 30, 2018 and December 31, 2017.
In 2015, the Company was provided notice of a potential patent infringement claim by Setec Netzwerke AG ("Setec"), a German company for the alleged infringement of their patent EP 306 934 B1. Setec subsequently filed a lawsuit against the Company and three of its subsidiaries in the Regional Court of Dusseldorf, Germany on January 29, 2016 for patent infringement. The Company filed its defense to Setec's Complaint and a nullity lawsuit against Setec's patent on August 31 2016. The Court hearing on infringement took place on March 23, 2017. Upon hearing argument from both parties, the Court issued a decision on April 6, 2017 staying final judgment in the infringement case pending resolution of the nullity lawsuit in the Federal Patents Courts in Munich, Germany. The Federal Patents Courts issued its preliminary opinion regarding the patent-in-suit on March 29, 2018, stating that it considers the patent-in-suit to not be novel over the prior art documents presented in the case. The parties agreed to withdraw from the pending infringement and nullity proceedings and entered into a settlement agreement on June 29, 2018. The Company paid Setec 75,000 Euro in exchange for a perpetual, worldwide royalty-free license to the patent-in-suit and all its counterparts.
In 2015, one of the Company's subsidiaries in the PRC, Dongguan Transpower Electric Products Co., Ltd. ("Dongguan Transpower"), was provided notice of a claim by DG Yu Shing Industrial Development Company Limited against Dongguan Transpower and three other defendants for past due construction costs of approximately $3.2 million. In April 2018, the 3rd People Court of Dongguan ruled and provided an unfavorable judgment against Dongguan Transpower and two of the other defendants requiring payment of the aforementioned amount. The defendants were held to be jointly and severally liable for approximately $3.2 million in costs. Due to the fact that none of the other defendants had sufficient funds to pay the damages amount, the Court ordered the entire amount (CNY 20,133,174.10) to be paid by Dongguan Transpower. On May 25, 2018, the Court enforced its order and withdrew the damages amount from Dongguan Transpower's bank accounts. On May 31, 2018, Dongguan Transpower filed an action against the other defendants in CP Court to recoup the damages amount paid pursuant to an indemnification letter dated October 16, 2015. The Court heard arguments on July 2, 2018 and rendered a verdict on July 9, 2018 ordering the Jinmei entities (defendants) to pay CNY 20,133,174 back to Dongguan Transpower together with the incurred interest. On August 27, 2018, Dongguan Transpower received payment of CNY 20,430,203 (approximately $3.2 million) from the defendants and this case was closed.
On June 1, 2018, the Company filed an action against Unipower, LLC in the United States District Court for the Southern District of New York for breach of contract. Specifically, the Company alleges in its Complaint that Unipower has willfully violated the Master Services Agreement ("MSA") entered into by the parties on January 23, 2015 by failing to make payment for the products it contracted for under the MSA. The Company is claiming irreparable harm and substantial damages in excess of $1.0 million. The case is currently in the discovery phase of the litigation.
On October 1, 2018, the Company completed the acquisition of BCMZ Precision Engineering Limited, a UK manufacturer of precision machined components, for approximately $2.6 million in cash. The final purchase price remains subject to certain adjustments related to working capital. The transaction was funded with cash on hand. The purchase price allocation was still in progress and was not available at the time of filing of this Quarterly Report.
BCMZ has a diversified portfolio of customers in the automotive, aerospace, defense, telecommunication, fibre-optic and medical industrial sectors and has been a long-term key supplier of precision machined components for our Cinch Connectivity Solutions UK business. BCMZ is additionally expected to give Cinch the capability to continue to support key defense and industrial customers across Europe with localized in-house machining ability.
The information in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Company's condensed consolidated financial statements and the related notes set forth in Item 1 of Part I of this quarterly report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 2017 Annual Report on Form 10-K and our consolidated financial statements and related notes set forth in Item 8 of Part II of our 2017 Annual Report on Form 10-K. See Part II, Item 1A, "Risk Factors," below and "Cautionary Notice Regarding Forward-Looking Information," above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. All amounts and percentages are approximate due to rounding and all dollars are in millions, except per share amounts or where otherwise noted. When we cross-reference to a "Note," we are referring to our "Notes to Condensed Consolidated Financial Statements," unless the context indicates otherwise. All amounts noted within the tables are in thousands and amounts and percentages are approximate due to rounding.
We operate through three geographic segments: North America, Asia and Europe. In the nine months ended September 30, 2018, 50% of the Company's revenues were derived from North America, 34% from Asia and 16% from its Europe operating segment. By product group, 34% of sales for the nine months ended September 30, 2018 related to the Company's connectivity solutions products, 34% in magnetic solutions products and 32% in power solutions and protection products.
Revenues – The Company's revenues increased by $33.8 million, or 9.1%, in the first nine months of 2018 as compared to the same period of 2017, despite a $5.1 million decline in sales related to the NPS divestiture. Sales growth was seen across all of our major product groups as certain project wins from 2017 are in full production and we continue to see strength in sales through our distribution partners.
Backlog – Our backlog reached $185.1 million at September 30, 2018, representing an increase of $38.6 million, or 26%, from December 31, 2017. Since year-end, we saw a 65% increase at Magnetic Solutions, driven by a strong position with our integrated connector modules in next-generation switching products. The backlog for our Connectivity Solutions products increased by 21%, driven by recent awards on key military programs, and heightened structured cabling demand for our passive connectors. Our Power Solutions and Protection backlog grew by 9%, led by higher demand for our power supplies for a variety of datacenter applications.
Pricing and Availability of Materials – There have been recent supply constraints related to components that constitute raw materials in our manufacturing processes, particularly with resistors, capacitors, mosfets and printed circuit boards. Lead times have been extended and the reduction in supply has also caused an increase in prices for certain of these components. As a result, the Company's material costs as a percentage of sales increased to 42.0% during the first nine months of 2018 from 39.7% during the first nine months of 2017.
Labor Costs – Labor costs during the first nine months of 2018 increased from 10.4% of sales during the first nine months of 2017 to 11.5% of sales during the first nine months of 2018, primarily due to the appreciation of the Renminbi against the U.S. Dollar, particularly during the first half of 2018, minimum wage increases in the PRC, and growth in sales of our labor-intensive integrated connector module (ICM) products. Effective February 1, 2018, the PRC government issued an increase to the minimum wage in a region where one of Bel's factories is located. Effective July 1, 2018, government-mandated minimum wage increases went into effect at Bel's other three manufacturing facilities in the PRC.
Restructuring – The Company continues to implement restructuring programs to increase operational efficiencies. While the Company incurred minimal restructuring charges during the first nine months of 2018, additional restructuring efforts are expected to continue during the fourth quarter of 2018 as we realign our R&D resources dedicated to our power solutions and protection group. By the end of the third quarter, we had completed the transition of one of our product lines from a third party factory in Malaysia to an existing Bel facility in the PRC. Annual savings of approximately $1.4 million are expected from the initiatives completed during the first nine months of 2018 (primarily within cost of sales).
Impact of Foreign Currency – During the first nine months of 2018, the Company incurred foreign exchange transactional gains of $2.4 million and higher labor and overhead costs of $2.5 million related to unfavorable fluctuation in exchange rates versus the first nine months of 2017. Since we are a U.S. domiciled company, we translate our foreign currency-denominated financial results into U.S. dollars. Due to the changes in the value of foreign currencies relative to the U.S. dollar, translating our financial results and the revaluation of certain intercompany as well as third-party transactions to and from foreign currencies to U.S. dollars may result in a favorable or unfavorable impact to our consolidated statements of operations and cash flows. The Company was unfavorably impacted by transactional foreign exchange losses during the first nine months of 2018 due to the appreciation of the Euro, Pound, and Renminbi against the U.S. dollar as compared to exchange rates in effect during the first nine months of 2017. The Company has significant manufacturing operations located in the PRC where labor and overhead costs are paid in local currency. As a result, the U.S. Dollar equivalent costs of these operations were $2.5 million higher in the first nine months of 2018. The Company monitors changes in foreign currencies and may implement pricing actions to help mitigate the impact that changes in foreign currencies may have on its consolidated operating results.
Effective Tax Rate – The Company's effective tax rate will fluctuate based on the geographic segment in which our pretax profits are earned. Of the geographic segments in which we operate, the U.S. and Europe's tax rates are generally equivalent; and Asia has the lowest tax rates of the Company's three geographical segments. See Note 9, "Income Taxes".
Our third quarter 2018 bookings reached its highest quarterly amount in the last four years, representing a 28% increase from the third quarter of last year. This growth in orders received was seen across all of our major product groups, and is an encouraging data point for our top line as we look to 2019. On the cost side, higher labor and material costs have had a more visible impact on our margins this quarter as the cost of finished goods that were sold during the quarter were impacted by both higher raw material costs and increased minimum wage rates associated with production labor in the PRC. Sales growth and price stabilization will help to mitigate these margin pressures. We continue to evaluate opportunities to grow our business through acquisitions that would provide access to new markets and customers while being accretive to the overall business.
The growth in North America sales in 2018 was largely due to increased demand for our passive connector products from our premise wiring customers, strength in our connectivity products within key military programs, and higher sales of our transformer products into medical applications. Sales of our Power Solutions products have also increased in 2018 with heightened demand for our power supplies for use in various datacenter applications. The increases in Asia sales noted above for the 2018 periods primarily relate to higher sales of our integrated connector modules for next-generation switching platforms. Sales in Europe increased in both 2018 periods presented as a result of higher demand for our Stewart and Cinch connector products in that region, coupled with strong sales of our power products into rail applications. There was also a favorable impact on our European sales in general during the nine-month period ended September 30, 2018 as a portion of those sales are invoiced in Euros or Pounds, which had appreciated against the U.S. Dollar particularly during the first half of 2018 as compared to the same period of 2017.
Net sales and income from operations by operating segment for the three and nine months ended September 30, 2018 and 2017 were as follows. Segment net sales are attributed to individual segments based on the geographic source of the billing for customer sales.
The improvement in income from operations within our North America segment was largely due to higher sales volumes in the 2018 periods, partially offset by increased material costs on purchased components. The income from operations at our Asia segment for both 2018 periods presented was impacted by higher labor costs driven by increased minimum wage rates at our factories in the PRC, higher raw material costs during 2018 and the unfavorable appreciation of the Renminbi particularly during the first half of 2018 compared to the same period of 2017. The increase in income from operations from our Europe segment are consistent with the increase in sales for that segment.
Our Magnetic Solutions group continued to benefit from a strong position on next-generation switching products which utilize our integrated connector modules. This accounted for $7.5 million and $11.4 million of the sales growth during the third quarter and nine-month period of 2018 versus 2017. Our Signal Transformer business also contributed with an increase in sales of $1.6 million and $3.2 million during the third quarter and nine-month period of 2018, as orders from new programs within industrial applications remained strong throughout the third quarter.
Our connectivity solutions products showed an overall improvement in sales of $5.7 million and $12.0 million during the third quarter and first nine months of 2018, respectively, compared to the same periods of 2017. Sales of our Stewart passive connectors were very strong in the 2018 periods with increases of $3.6 million and $7.1 million during the three and nine months ended September 30, 2018 as compared to 2017. This was largely led by higher demand from our premise wiring customers in North America and Europe in response to improved economic conditions in the construction industry. We have also had a greater level of focus on our distribution channel in 2018 and our Stewart products have benefited from the increased exposure through our distribution base. Sales of our Cinch products were also up in 2018 (by $2.1 million for the third quarter and by $5.0 million for the nine-month period) primarily from the military sector for our optical and copper products used in encryption, communications and flight-grade applications and for our micro-miniature copper connectivity products in relation to key defense programs.
Year-over-year sales growth from our Power Solutions and Protection group continued in the third quarter of 2018. Sales of our Power Solutions products increased by $5.7 million and $7.8 million during the third quarter and nine-month period of 2018, respectively, compared to the same periods of 2017. Excluding the effects of NPS divestiture, sales for the Power Solutions business increased by $7.1 million for the third quarter and by $12.9 million for the first nine months of 2018 compared to the prior year periods. Our circuit protection products continue to experience top line growth as more of these products are introduced into our distribution channels and our DC/DC product sales were also strong during the 2018 periods. These growth drivers were offset in part by lower sales of our custom module products (which were down by $1.3 million and $2.3 million during the three and nine month periods ended September 30, 2018, respectively). In addition, shipments of our AC/DC converter products were strong in 2017 in response to a program which did not recur in 2018. This led to a reduction in sales for this product line of $1.4 million for the third quarter and $2.2 million for the nine-month period.
Material costs as a percentage of sales increased during the 2018 periods noted above compared to the same periods of 2017 primarily due to industry-wide supply constraints related to certain of our purchased components throughout 2018. This has had an unfavorable impact in the form of higher material costs across most of our product lines.
Labor costs as a percentage of sales also increased during the third quarter and first nine months of 2018 compared to the same periods of 2017 due primarily to two factors. Effective February 1, 2018, the PRC issued an increase to the minimum wage in a region where one of Bel's factories is located, and effective July 1, 2018, minimum wage increases went into effect at our remaining facilities in the PRC. This contributed to the higher labor costs in both 2018 periods presented above. The other factor impacting the nine-month period above relates to the appreciation of the Renminbi against the U.S. Dollar, particularly during the first half of 2018. This drove labor costs as a percentage of sales higher during the earlier part of 2018, as the majority of our Asia sales are invoiced in U.S. Dollars, while our manufacturing staff at PRC locations are paid in local currency.
Included in cost of sales is research and development ("R&D") expense of $6.9 million for each of the three months ended September 30, 2018 and 2017, and $21.6 million and $20.3 million for the nine months ended September 30, 2018 and 2017, respectively. The majority of the increase during the nine-month period relates to a weaker U.S. Dollar earlier in 2018 relative to the local currencies in the countries in which our engineers are located. Approximately 85% of our global engineering staff is located outside of the U.S. and is paid in either Euros, Pounds, Swiss Francs or Renminbi, each of which appreciated against the U.S. Dollar in the first two quarters of 2018 as compared to the same quarters of 2017.
The other expenses noted in the table above include fixed cost items such as support labor and fringe, depreciation and amortization, and facility costs (rent, utilities, insurance). In total, these other expenses increased during the three and nine months ended September 30, 2018 by $1.1 million and $3.1 million, respectively, as compared to the same periods of 2017. This included higher support labor costs of $1.5 million and $3.0 million, respectively, partially offset by lower depreciation and amortization expense of $0.4 million and $0.9 million during the three and nine-month periods ending September 30, 2018 as compared to the same periods of 2017.
SG&A expense decreased $2.2 million and $5.9 million during the three and nine months ended September 30, 2018, respectively, as compared with the same periods of 2017. This primarily related to a favorable fluctuation in foreign currency exchange rates on the remeasurement of foreign currency transactions, which accounted for $2.1 million and $5.1 million, respectively, of the decrease noted from the 2017 periods. Other offsetting factors that affected the variance in the third quarter periods included a decline in legal and professional fees of $0.5 million and lower depreciation and amortization expense of $0.4 million, partially offset by $0.6 million of higher fringe benefit expense. Other factors contributing to the reduction in SG&A during the nine-month period were lower legal and professional fees of $1.3 million and a reduction in depreciation and amortization of $1.1 million. These factors were partially offset by an increase in bad debt expense of $0.6 million, higher fringe benefit expense of $0.6 million, and a $0.4 million increase in sales commissions during the first nine months of 2018.
The Company's effective tax rate will fluctuate based on the geographic segment in which the pretax profits are earned. Of the geographic segments in which the Company operates, the U.S. and Europe's tax rates are generally equivalent; and Asia has the lowest tax rates of the Company's three geographical segments. See Note 9, "Income Taxes".
The (benefit) provision for income taxes for the three months ended September 30, 2018 and 2017 was ($2.2) million and less than $0.1 million, respectively. The Company's earnings before income taxes for the three months ended September 30, 2018, were approximately $4.1 million higher than the same period in 2017, primarily attributable to significantly higher earnings in the North America and Asia segments. The Company's effective tax rate was (24.1%) and 1.2% for the three months ended September 30, 2018 and 2017, respectively. The change in the effective tax rate during the three months ended September 30, 2018 as compared to the same period in 2017, is primarily attributable to a decrease in tax expense in the North America segment due to the reduction in the estimated transition tax on post 1986 untaxed accumulated foreign earnings, a reduction in the U.S. tax rate from 35% in 2017 to 21% in 2018, as well as a decrease in the taxes related to uncertain tax positions. This decrease was partially offset by an increase in U.S. taxes relating to income from foreign subsidiaries taxed in the U.S. as part of the Tax Cuts and Jobs Act. See Note 9, "Income Taxes."
The provision for income taxes for the nine months ended September 30, 2018 and 2017 was $0.5 million and $2.3 million, respectively. The Company's earnings before income taxes for the nine months ended September 30, 2018 were approximately $6.0 million higher than the same period in 2017, primarily attributable to increases in income in the Europe and North America segments. The Company's effective tax rate was 3.0% and 20.8% for the nine month periods ended September 30, 2018 and 2017, respectively. The change in the effective tax rate during the nine months ended September 30, 2018 as compared to the same period of 2017, is primarily attributable to a decrease in tax expense in the North America segment due to the reduction in the estimated transition tax on post 1986 untaxed accumulated foreign earnings, a reduction in the U.S. tax rate from 35% in 2017 to 21% in 2018, as well as a decrease in taxes related to uncertain tax positions. This decrease was partially offset by an increase in U.S. taxes relating to income from foreign subsidiaries taxed in the U.S. as part of the Tax Cuts and Jobs Act. Additionally, the decrease in the effective tax rate for the nine months ended September 30, 2018 as compared to the same period in 2017, is attributable to U.S. and foreign taxes accrued for gains recognized on a Bel Fuse legal entity restructuring transaction during the 2017 period.
At September 30, 2018 and December 31, 2017, $45.9 million and $50.5 million, respectively (or 85% and 73%, respectively), of cash and cash equivalents was held by foreign subsidiaries of the Company. During the third quarter of 2018, the Company repatriated $12.2 million of funds from outside of the U.S., with minimal incremental tax liability. Of this amount, approximately $9 million was utilized to pay down intercompany balances that have been generating foreign exchange gains/losses in our consolidated statement of operations. Management currently intends to repatriate an additional $1.8 million in the fourth quarter of 2018 and an incremental $5 to $8 million in the first quarter of 2019, with minimal incremental tax liability. We continue to analyze our global working capital and cash requirements and the potential tax liabilities attributable to further repatriation, and we have yet to make any further determination regarding repatriation of funds from outside the U.S. to fund the Company's U.S. operations in the future. In the event these funds were needed for Bel's U.S. operations, the Company would be required to accrue and pay U.S. state taxes and any applicable foreign withholding taxes to repatriate these funds.
Cash and cash equivalents, marketable securities and accounts receivable comprised approximately 33.9% of the Company's total assets at September 30, 2018 and 34.4% of total assets at December 31, 2017. The Company's current ratio (i.e., the ratio of current assets to current liabilities) was 2.9 to 1 at September 30, 2018 and 3.0 to 1 at December 31, 2017.
In June 2014, the Company entered into a senior Credit and Security Agreement, which was subsequently amended in March 2016, and further amended and refinanced in December 2017. The Credit and Security Agreement contains customary representations and warranties, covenants and events of default and financial covenants that measure (i) the ratio of the Company's total funded indebtedness, on a consolidated basis, to the amount of the Company's consolidated EBITDA, as defined ("Leverage Ratio"), and (ii) the ratio of the amount of the Company's consolidated EBITDA to the Company's consolidated fixed charges ("Fixed Charge Coverage Ratio"). If an event of default occurs, the lenders under the Credit and Security Agreement would be entitled to take various actions, including the acceleration of amounts due thereunder and all actions permitted to be taken by a secured creditor. At September 30, 2018, the Company was in compliance with its debt covenants, including its most restrictive covenant, the Fixed Charge Coverage Ratio. The unused credit available under the credit facility at September 30, 2018 was $75.0 million, of which we had the ability to borrow $34.1 million without violating our Leverage Ratio covenant based on the Company's existing consolidated EBITDA.
We are currently engaged in a multi-year process of conforming the majority of our operations onto one global Enterprise Resource Planning system ("ERP"). The ERP is designed to improve the efficiency of our supply chain and financial transaction processes, accurately maintain our books and records, and provide information important to the operation of the business to our management team. The implementation of the ERP is being conducted by business unit on a three phase approach through 2020. We currently estimate total costs over the course of this project to be approximately $6.0 million. Since inception of the project, we have incurred a cumulative amount of $4.4 million in connection with this implementation, of which $0.3 million and $1.5 million was incurred during the three and nine months ended September 30, 2018, respectively. These costs are included in SG&A on the consolidated financial statements. Upon completion of the implementation of the new ERP, we anticipate lower maintenance and lower external information and technology support fees resulting in annual savings of approximately $2 million. The preceding sentence represents a Forward-Looking Statement. See "Cautionary Notice Regarding Forward-Looking Statements."
net cash provided by operations of $4.2 million.
During the nine months ended September 30, 2018, accounts receivable increased by $19.0 million primarily due to higher sales volume in the third quarter of 2018 as compared to the fourth quarter of 2017. Days sales outstanding (DSO) increased to 61 days at September 30, 2018 from 60 days at December 31, 2017. Effective January 1, 2018, the Company implemented a change in the timing of revenue recognition (and related release of inventory from our books) in connection with the adoption of ASC 606, as described in Note 2. Excluding the adoption adjustment related to this accounting change, inventory increased by $20.1 million at September 30, 2018 compared to December 31, 2017, primarily in raw materials. The increased raw materials balance was driven by a higher volume of raw materials purchased to accommodate increased demand for our products, coupled with higher material costs in 2018 resulting from constraints in component availability. Inventory turns increased from 3.6 at December 31, 2017 to 4.0 at September 30, 2018, primarily due to the change in revenue recognition accounting noted above.
During the nine months ended September 30, 2017, accounts receivable increased by $7.9 million primarily due to higher sales volume in the third quarter of 2017 as compared to the fourth quarter of 2016. Days sales outstanding (DSO) increased to 60 days at September 30, 2017 from 54 days at December 31, 2016, primary due the extension of credit terms with one of our large customers, as well as the increase in revenue (and resulting accounts receivable balance) in our Asia segment where DSO tends to be higher as compared to our other geographic segments. Inventory levels were up by $3.3 million at September 30, 2017 compared to December 31, 2016 as work in progress and finished goods balances increased from year-end levels to accommodate the increase in demand for our products in 2017.
The Company is exposed to market risk primarily from changes in foreign currency exchange rates and changes in interest rates associated with its long-term debt. During the first nine months of 2018, the U.S. Dollar was in a weakened position (compared to the first nine months of 2017) against most other currencies in which the Company pays its expenses. In comparing average exchange rates during the first nine months of 2018 versus those during the first nine months of 2017, the Euro appreciated by 7%, the Pound appreciated by 6%, and the Renminbi appreciated by 4% against the U.S. Dollar. The Company estimates that the appreciation in these foreign currencies led to $2.5 million in higher operating costs for the nine-month period as the majority of our expenses in the PRC, Europe and Mexico are paid in local currency. In addition to the foreign exchange losses recognized, the Company recorded foreign exchange gains of $1.5 million and $2.4 million during the three and nine months ended September 30, 2018, respectively, on remeasurement of foreign currency transactions. This compares to foreign exchange losses recorded during the three and nine months ended September 30, 2017 of $0.6 million and $2.7 million, respectively, resulting from remeasurement of foreign currency transactions. Refer to Item 7A, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion of market risks.
Changes in internal controls over financial reporting: There has not been any change in the Company's internal controls over financial reporting during the three months ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
The information called for by this Item is incorporated herein by reference to Note 12 of the Company's Financial Statements, under "Legal Proceedings", as set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q. We are also involved in various other legal actions incidental to our business. We believe, after consulting with counsel, that the disposition of these other legal proceedings and matters will not have a material effect on our condensed consolidated financial condition or results of operations.
See Part I, Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Except as required by the federal securities law, we undertake no obligation to update or revise any risk factor, whether as a result of new information, future events or otherwise.
Pursuant to the Bel Fuse Inc. Employees' Savings Plan (the "Employees' Savings Plan"), the Company makes matching contributions of pre-tax elective deferral contributions made by associates. The Employees' Savings Plan provides for matching contributions to be invested in shares of the Company's Class A Common Stock. The trustees of the Employees' Savings Plan adopted a "10b5-1 Plan," in accordance with guidelines specified by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, to make open market purchases of shares of Class A Common Stock with such matching contributions. The purchases in the table above were made under the 10b5-1 Plan. The maximum dollar amount for cumulative purchases under the 10b5-1 Plan during the plan period (August 20, 2018 to November 30, 2018) will not exceed $650,000.
As previously disclosed, on August 16, 2018, the trustees of the Employees' Savings Plan adopted a plan (the "10b5-1 Plan") in accordance with guidelines specified by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, pursuant to which KeyBanc Capital Markets Inc. was engaged to purchase shares of the Class A common stock of Bel Fuse Inc. ("Bel") to implement the Employees' Savings Plan's requirements that matching contributions be invested in shares of Bel's Class A common stock. While it was originally expected that purchases under the 10b5-1 Plan would be completed by November 30, 2018, as a sufficient number of shares of Class A common stock have been purchased already to meet the requirements of the "match" for 2018, the 10b5-1 Plan was terminated effective November 7, 2018.


This plenary session brings together three leading experts to discuss what we have learned from the rich accumulation of strategy research on alliances and collaboration over the past thirty years, and what important gaps remain. What roles can alliances and collaboration play in firm strategy? How do alliances compare with other 'resource pathways' such as internal development and M&As in facilitating firm growth and profitability? What are the primary drivers of key alliance characteristics such as partner selection, scope, and governance? What are the key facets of alliance design and organization, and what enables firms to create and capture value in alliances?


Suspected armed robbers penultimate Saturday left a note threatening to come back after being frustrated by the absence of their victims from home.
The robbers were said to have made attempt to enter the apartment through the main entrance to the building, but they could not open the main door.
It was said that the robbers broke into the building through the ceiling of an adjoining flat and carted away one of the electronic gadgets in the house.
They were also said to have made attempt to break into the rooms, but the doors were too strong for them to unlock or vandalise.
Apparently frustrated over their not too successful operation caused by the absence of occupants of the building, the hoodlums were said to have left a note promising to return at no given date.
The incident was reported to the Obasanjo Farm Police Division, Ota.
It was learnt that policemen from the division visited the scene, while the Divisional Police Officer (DPO) of the station had directed his men to embark on constant patrol and surveillance of the community to keep the gang in check.
Speaking with The Nation, the owner of the building, Mr Dare Ogunyombo explained that he was away from home for some days with his family, when the gang visited his residence.
''I noticed that they fruitlessly tried to force their way into my apartment through the main door to the building. They however broke the ceiling of the next flat and entered my apartment through the roof, while they carted away a satellite television decoder in the living room.


Trout of Newton Creek, Clare County, Michigan : a Transitional Zone Trout Stream.
[Lansing, Mich.] : Michigan Department of Natural Resources Fisheries Division, 1981.
29 p. : map ; 28 cm. Bibliography: p. 22-23. Fisheries research report (Lansing, Mich.) ; no. 1899.


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text:
Q: Flutter workManager callbackDispatcher starts but do not finish the exrcution of a asynk function Flutter workManager callbackDispatcher starts and calls the below function. But never finish it.
static Future<List<Map<String, dynamic>>> getItems() async {
  debugPrint("In getItems");
  final db = await DatabaseHelper.db();
  final a = db.query('items', orderBy: "id");
  debugPrint("post query, before return");
  return a;
}

If I call the function onPressed it works fine.
If I call the same function from callbackDispatcher  it Start and print "In getItems" but not print "post query, before return".
Getting no error message either.
I have registered it as one off task.
Workmanager().registerOneOffTask("task-identifier", "simpleTask");

Future<void> callbackDispatcher() async {
  var sm= SmsSender();
  Workmanager().executeTask((task, inputData)  {
    try {
      sm.getAlertBookings();
      smsCompleter.complete();
    } catch(err) {
    print(err.toString());
    throw Exception(err);
  }
    return Future.value(true);
  });
  await smsCompleter.future;
}

What is causing this issue and how can I fix it?
I tested the same function onPressed it worked fine. callbackDispatcher Start the function but do not finish it.

redpajama_set_name: RedPajamaStackExchange


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Get kids to practice speaking Spanish and getting to know each other with 36 Spanish to English infinitive vocabulary words by conversing with me gusta and me encanta.
This product has 36 words on two lists and two worksheets explaining me gusta and me encanta briefly; Spanish conversations card prompts; 36 picture cards to correlate to these vocabulary words (formatted to print double sided); and a blank BINGO board.
See the preview for the list of words.
If you would rather have already made BINGO boards, see the BINGO card set or see the BUNDLE.
The goal is have the students practice speaking in Spanish to one another while getting to know each other. These vocabulary cards are a fun way to do so.


text:
FIRE DISTRICT 15: Challengers ask if services meet needs
JoAnne Marez — Sep 6th, 1993
By Jo Anne Marez
Incumbent District 15 fire commissioner Henry Wischhoefer has three challengers on the Sept. 14 primary election ballot, all set on ousting him from the commission post he's held for the past 14 years.
Most vocal, perhaps, is John Wilkins, a thirdgeneration firefighter who believes the district needs to increase its paid staff, do a better job of utilizing the staff it has, yet still keep githin its budget.
"There are some real vulnerable areas out there," Wilkins said, "especially in the North Perry area. When they annexed to District 15, people were under the impression they'd get a paramedic unit out there. They didn't and the response time (for both medical and fire service) has increased.
"I don't think most people realize that at 5 o'clock, most of the paid firefighters go home. Volunteers are wonderful, but as the district grows, they need at least some full-time firefighters in each station."
Wilkins also would like to see automatic aid agreements with surrounding fire districts to lower the response time for areas that border other districts. He's in favor of a District 15 merger with other districts, primarily Silverdale.
Wilkins said he's attended many commissioner meetings, has the professional expertise of a firefighter, served as a volunteer and believes he can help "run the district for the future, not the past."
Gischhoefer said Wilkins is misleading the voters. He said Wilkins believes he can increase paid staff without raising taxes, "and that's not possible."
To staff one position 24 hours a day, seven days a week, takes four people, Wischoefer said, and it costs $40,000 a person for salary and benefits. He noted that the districts total revenue for 1993 is $1,384,000.
Wischhoefer said the district has run within its budget for years, has long-term plans for operation and equipment replacement and is in the process of purchasing land to replace the old Island Lake station.
"We don't ask for a bond issue to replace equipment," he said. "We use the normal levy. We operate the ambulances with no charge to the people who live in the district. And already we have good mutual aid agreements with our surrounding districts."
Wischhoefer said his record for prudent planning and management of the district is important.
Ralph Rogers agrees with Wilkins that more paid personnel are needed for the district and that the district could achieve that by "tightening its belt and making it run a little leaner than it has in the past."
The district may need to start charging for medical runs, he said.
He called volunteers "the backbone" of the department, but said changing lifestyles and the demands of increased training have made it more difficult for volunteers to fill that role.
"We need paid staff to fill the gap," Rogers said.
He said he also favors mergers that bring efficiency and cost savings to the taxpayers.
Tom Dudzic said he sees facilities and management of them as a key issue in the campaign. He says plans to replace the Island Lake station with one farther north are inefficient.
He believes the station should move closer to Brownsville so eventually it could be combined with aging Brownsville station.
"You need to centralize a little more," Dudzic said. "Then you can give better service. Go where the population is."
Bremerton boundaries have been moving farther north, he said, as the city eyes annexation.
"That means the district would lose a few dollars," Dudzic said, "and we'll need even better community support. I'd like to see more paid staff too, but it takes money. Right now we get 40 percent of our income from the Bremerton and North Perry water districts (within the fire district). If annexation comes, we'll lose that. So we need to do some good planning."
Merging with other districts appears to be the answer, Dudzic said, because it's a way to stretch resources.
Commission hopefuls vary in background
JOHN A. WILKINS
ADDRESS: 3013 NE 30th St., Bremerton
FAMILY: Married, three children
OCCUPATION: Firefighter for the City of Sea-Tac
EDUCATION: Olympic High School graduate, attended Olympic College fire science program
EXPERIENCE: Fire District 15 volunteer five years, professional firefighter Naval Submarine Base, Bangor, and City of Sea-Tac
REASON FOR RUNNING: "I care about the interests of the people in Fire District 15."
HENRY WISCHHOEFER
ADDRESS: 3024 Island View Drive, Bremerton
FAMILY: Married, three children, two grandchildren
OCCUPATION: Retired builder
EDUCATION: South Kitsap High School graduate
EXPERIENCE: Involvement in the fire service since 1951, 14 years as a fire commissioner
REASONS FOR RUNNING: "I think we have some good things in our long-term plan and I would like to see that continue."
RALPH E. ROGERS
ADDRESS: 71 NE Haselwood Place, Bremerton
FAMILY: Married, five children, one grandchild
EDUCATION: El Paso, Texas, high school graduate
OCCUPATION: Owner Pacific Northwest Screen Printing and Pacific Northwest T-Shirt Plus, retired Navy
EXPERIENCE: 10 years as District 15 volunteer, service on various fire district committees, involved in merger of Brownsville-Tracyton, served as chairman of medical services committee
REASON FOR RUNNING: "Fire District 15 has an outstanding record for improving medical service and fire suppression and I'd like to see that continue with more paid staff."
THOMAS DUDZIC
ADDRESS: 8522 Bender Circle NE, Bremerton
FAMILY: Married, two children
EDUCATION: High school graduate, Detroit, vocational training in business managenent
OCCUPATION: Operations supervisor for Kitsap Coenty Fair and Parks Department
EXPEREINCE: Kingston Fire Department volunteer for sevral years, co-chair of the county's Central Kitsap Committee for Transportation, past chairman of the Kitsap County Safety and Health Committee
REASONS FOR RUNNING: "There are 400 to 500 volunteers who help each year at the fair and I'd like to return the compliment.
FIRE DISTRICT 18
Commissioner faces firefighting pros WITH MUGS AND BIOS By JoAnne Marez Sun Staff Two professional firefighters are challenging Vince Prouty this fall for the District 18 commissioner's seat he's held for 37 years. Opponents are Doug Baier, a Bremerton firefighter/ paramedic, and Jack Woodard, a ... [Read More...]
CENTRAL KITSAP POLITICAL PROFILES
SILVERDALE FIRE DISTRICT 1 Position 3 MICHAEL McKINLEY AGE: 36 ADDRESS: Creekside Lane, Bremerton OCCUPATION: Fire chief, Bremerton Fire Department EDUCATION: National Fire Academy certification; working on bachelor's degree QUALIFICATIONS: Incumbent fire commissioner; 20 years as a volunteer in Fire District 1; former CenCom board member; past president ... [Read More...]
NK CANDIDATE PROFILES
KINGTSON FIRE DISTRICT 10 Position 3 MARTHA LUND AGE: 61 ADDRESS: Ritter Lane, Kingston OCCUPATION: Retired QUALIFICATIONS: Served as fire commissioner in Hansville for eight years; owned a business for nine years WHY I'M RUNNING FOR OFFICE: "I have lived in the Hansville-Kingston area for 35 years. ... [Read More...]
POSITION 2 Name: Ed Bentley Age: 65 Address: Central Valley Road, Poulsbo Occupation: Retired Education: WSU, degree in mechanical engineering; PLU, MBA Qualifications: Incumbent fire commissioner, served as volunteer firefighter and company officer; 37 years of government service; extensive coursework and seminars in fire service management. ... [Read More...]

redpajama_set_name: RedPajamaCommonCrawl


There are 175 posts filed in Improvement & Development (this is page 3 of 9).
This may sound very simple but communication is all about transferring emotion and energy. Words are simply carriers of that emotion. Yes, choice of words matter, but that is not communication.
The new sales director was on boarded with a lot of frenzy. In his first address to all the team members, he delivered a well crafted introduction. He spoke about himself, his past projects and then about how he intends to take this organization to new heights. If a transcript was created out of his speech, it would be a perfectly worded one. Yet, he was not able to establish the connection in this first address. At water-cooler conversations, people expressed skepticism. Even when everything he said was right, something was not right!
Clearly, there was a lot of focus on delivery and content and less on emotion, energy, intensity and conviction. His overall demeanor suggested that he was putting his own agendas first before focusing on others. He expressed his goals and desires without focusing on the need to understand the current context. He said it, but people felt that he did not mean it.
Bottom line: As a leader, you talk to people more clearly through experiences you extend, not just through well-crafted words. Your words may be heard, but your attitude, emotion and intent are always felt.
Our communication at workplace needs a lot of simplification. Have you seen leaders who throw jargons and so called "hot words" that leave people more confused?
When a boss says, "We need to get this done soon", people are left to wonder what soon actually means. I once observed a senior leader who was approached by his team member for some help on an issue. After thinking aloud for a while, the leader ended up saying, "You need to somehow close this ASAP." For a struggling team member who needed direction, words like "somehow" and "ASAP" added ambiguity and needless urgency leading to frustration.
In one instance, a manager delegated a report creation task to his team member with a note of "urgent and important". The team member worked hard to deliver the report created the report in shortest possible time but then received no response from the manager for days. Was it really important? If not, how can it be urgent at all?
I have seen managers who request "quick calls" that go on for hours together. Meetings to "touch base" end up being meetings that "drill down".
I see a huge need to simplify our communication – our words and our actions have to convey very specific (and congruent) messages. Jargons and hot words break the communication, creates barriers, robs understanding, adds clutter and leaves people guessing. "I need to get this report by 12:00 PM tomorrow so that I can review and send it across to customer by 4:00 PM" is much better than "I need it ASAP". Next time you call something as "important", make sure your subsequent actions also demonstrate the importance.
What if we stop using jargons where we need to be specific? If we clarify expectations relentlessly? Our work will be free of foggy messages and hence simpler. Clarity and congruence in thoughts, words and actions are first pre-requisites of being excellent at anything – more so if you are a leader.
We grow through our struggles. They shape us a great deal. They bring out the best within us. Yet, most people dread when they are facing struggle. They complain, curse, doubt their capabilities and worst: they quit.
I had an opportunity to read Steven Snyder's new book titled "Leadership and the Art of Struggle" this week. In this terrific book, Steve has shared a wealth of knowledge that he gathered, specially during his association as an early leader at Microsoft. The book shares some very interesting real-life stories about leadership struggle along with ways to navigate these challenges and grow.
There are many books on leadership but a few talk about the struggle of leadership. This book does not attempt to provide a clear roadmap to navigate through these struggles. Instead, it outlines some key concepts that can help you in looking at your struggles differently, be adaptive, understand your leadership blind spots and grow through those struggles.
For the first time, I participated in a Twitter Chat (#IndiaHRChat) on the topic "Personal Branding for HR Professionals". People from diverse backgrounds shared their views on personal branding in presence of special guest Mr. Anand Pillai, Chief Learning Officer of Reliance Industries.
It was fun to share my insights on personal branding and they were well received. Gautam Ghosh, an eminent blogger and HR Professional, storified the entire chat where you can read all the ideas shared by others. Here are the bite sized ideas on personal branding that I shared.
Ability to differentiate yourself and build a strong personal brand is important to grow and flourish in a competitive environment. More than that, the journey of differentiating yourself is deeply fulfilling and enriching.
BONUS: If you are someone who is interested in differentiating yourself, you might like the free PDF ebook titled "Personal Branding for Technology Professionals" by Rajesh Setty and his super-useful series on Differentiating Yourself.
In a competitive world obsessed with goals, people recommend that we should periodically review our performance. Performance appraisals in organizations are almost a necessary evil. The problem with focusing excessively on our 'performance' is that performance is always judged by others, by some external entity. When you constantly try to align yourself to external expectations, you dilute your own expression and voice.
Focusing on the moment, on task currently on our hands enables us to fully express ourselves. One of the best gifts we can give ourselves is to enjoy the work while we are doing it (being in the moment) – and expressing our skills fully. It is both gratifying and satisfying.
The joy is in the work itself. Focus on experience and performance will eventually take care of itself.
In quest of excellence, an organization that grows has to deal with chaos. I recently read Karen Martin's new book "The Outstanding Organization" that offers a simple yet effective model to create organizational conditions to combat this chaos and ensure better results out of improvement efforts.
What Problem Does This Book Address?
The book starts with a simple premise: Self-inflicted chaos (internal chaos) sabotages an organization's ability to provide value to your customers, satisfy stakeholders, and offer a work environment that doesn't break employees' spirit. Self-inflicted chaos comes from constantly shifting (and often conflicting) priorities, excessive focus on hierarchy, unclear direction, unstable processes, unhappy customers and disengaged employees. To deal with this chaos that cracks the very foundation on which business results are based, Karen suggests essential strategies in four broad areas: Clarity, Focus, Discipline and Engagement.
I loved the simplicity with which this book is written. It is a fine balance of narrative explanation, real life examples from the world of business and specific actionable ideas.
This book also touches upon applicability of essential lean concepts including Gemba and Kaizen in building a high performance organization. Not only that, the book has impressive research behind it and the research sources are very generously shared.
No single book can cover everything that is required to build a great organization. However, this book is a very good starting point for senior leaders within the organization to assess the current state and decide their way forward based on essential strategies outlined in the book. Every leader who is committed to excellence will find this book useful.


text:
Q: Should I bump the version of my Ruby gem for a non-semantic modification? For instance, the only change I have made is as follows:
if foo.class == Hash

to:
if foo.instance_of?(Hash)

Would this warrant even a patch-level bump (i.e. 3.0.1 to 3.0.2)? I'm betting "no", but want to see what others have to say.
Another thing is: I could do a patch-level bump, and push it to GitHub, but just not push it RubyGems (i.e. not bother folks with a non-meaningful update). Thoughts?


HackerEarth is running a 24 hour contest on 26th March. There will be 5 tough algorithmic and 1 Approximate (challenge) problem. This contest is a Rated contest and open for all.
Top 5 winners will receive HackerEarth T-shirt .
Please note, Clash Challenge will be held on the 3rd Saturday of every month.
Note: In order to be able to claim your prizes, your HackerEarth profile must be more than 50% complete.
You can submit solution for a programming problem as many times as you want.