Bel Fuse Inc. (BELFA) Earnings Call Transcript & Summary

Hi, I am Dan Bernstein, President and Chief Executive Officer of Bel Fuse Inc. Before we begin, I hope you and your family are doing well during these difficult times. I would now like to welcome you to the reconvening of Bel Fuse Inc. Annual Meeting of Shareholders, which was adjourned on May 19, 2020. I shall act as Chairman of the meeting, and I request John Tweedy to act as secretary of the meeting. In addition to John Tweedy, I'm joined remotely by directors Mark Segall, Rita Smith, Peter Gilbert, Eric Nowling and Tom Dooley; and by the following officers and representatives of Bel Fuse Inc., Craig Brosious, Vice President of Finance; Dennis Ackerman, Vice President of Operations and President of our Power Solutions and Protection Business; and Lynn Hutkin, Director of Financial Reporting. In addition, Jeff Minick of Deloitte & Touche LLP is present remotely and is available to answer audit-related questions from shareholders. Later in the call, we will have an opportunity to answer questions that have been submitted. Only validated Class A shareholders will be able to ask questions at the designated field on the web portal. We will attempt to answer as many questions as time allows, but only questions that are relevant to the meeting will be addressed. Holders of Class B common stock that have questions may submit them to us at [email protected], and we would do our best to respond either during or after the meeting. I will now ask John Tweedy to present proof of the due calling of this meeting and to review certain procedural matters. John?

Mr. Chairman, this is John Tweedy. I present a copy of the notice of annual meeting and proxy statement dated April 9, 2020, the additional proxy materials dated May 8, 2020, and the notice of the reconvening of this meeting dated May 26, 2020, which together state the time, place and purpose thereof. These documents have been posted on the company's virtual annual meeting webcast site and are also available at www.belfuse.com. I further submit the completed list certified by Continental Stock Transfer and Trust Company, the transfer agent for the company's stock, of the holders of Class A common stock as of the close of business on the record date fixed by the Board of Directors for shareholders entitled to notice of and to vote at the company's annual meeting. This shows that at the close of business on the record date, there were 2,144,912 shares of Class A common stock of the company outstanding, of which under the company's charter, 1,684,674 shares are eligible to vote. I further submit the affidavit of the representative of Continental Stock Transfer and Trust Company, showing that it caused to be mailed to each of the shareholders of record a copy of the notice of meeting and reconvened meeting, proxy materials and Bel's annual report to shareholders, which contain the consolidated financial statements of Bel Fuse Inc. and its subsidiaries for the year ended December 31, 2019. Please note that the company's bylaws provide that any business brought before an annual meeting by a stockholder which is not specified in the notice of meeting must be submitted in writing in advance to the company and that the notice meets certain requirements. Other than with respect to proposal 5 described in the proxy statement, the company did not receive any such notice, and as such, voting will be confined to the 5 proposals outlined in the proxy statement. Please note that any nonhistorical statements that the company will make today will constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from these statements as a result of a number of risks and uncertainties, including the risks that the company has cited in its most recent 10-K and 10-Q filings with the Securities and Exchange Commission and that Bel Fuse typically cites in its press releases. Also, I would like to remind everyone that this meeting is not a public forum for the purposes of the SEC's Regulation FD. As a result, while the company would be happy to provide you with general background information about the company, we will not be able to provide you with material nonpublic information at this meeting.

Thank you, John. Mr. Tweedy is directed to incorporate a copy of the notice of the annual meeting and proxy statement dated April 9, 2020, the additional proxy materials dated May 8, 2020, and the notice of the reconvening of this meeting dated May 26, 2020, together with the affidavit of mailing as part of the minutes of this meeting. Continental Stock Transfer and Trust Company has been appointed inspector of the election and is qualified by taking subscribing to an oath faithfully to execute the duties of the inspector at this meeting. I direct that the oath be filled with the minutes of the meeting and that the inspector takes a poll of the shares represented at this meeting in person on this webcast or by proxy.

This is Stacy Aqui from Continental Stock Transfer. Mr. Chairman, there are present in person on this webcast or by proxy at this meeting substantially more than 1/2 of all of the shares of Class A common stock outstanding and entitled to vote at this meeting.

Thank you, Stacy. By the reason and the fact that the holders of record of a majority of the outstanding Class A common stock of the company entitled to vote at the meeting are present in person or on this webcast or by proxy, a quorum is present for all purposes. I declare the meeting lawfully and properly convened and now confident to proceed to the transaction of business for which it has been called and as stated in the notice thereof. The next order of business at this meeting is to elect 2 directors for 3-year terms or until their successor are elected or qualified. Mr. Segall will present the nomination of the Board of Directors.

This is Mark Segall. I nominate Thomas Dooley and Rita Smith, each for a 3-year term to expire at the 2023 annual meeting.

This is John Tweedy. I second the motion.

There being no other nominations under provision in our bylaws, I declare the nomination for directors closed. The Chair recognize Mr. Tweedy.

Mr. Chairman, I also move the ratification of the designation of Deloitte & Touche LLP to audit Bel's books and accounts for 2020.

This is Rita Smith. I second the motion.

The Chair recognize Mr. Tweedy.

Mr. Chairman, as set forth in the proxy statement as proposal 3, I move a vote for the approval of the following advisory resolution: resolved, that the compensation paid to the company's named executive officers as disclosed in the company's 2020 proxy statement pursuant to Item 402 of Regulation SK, including the compensation discussion and analysis, compensation tables and narrative discussion, is hereby approved.

This is Mark Segall. I second the motion.

The Chair recognize Mr. Tweedy.

Mr. Chairman, as set forth in the supplementary proxy materials as proposal 4, I move a vote for the approval of the Bel Fuse Inc. 2020 Equity Compensation Plan as amended.

This is Rita Smith. I second the motion.

As you know, a shareholder proposal was included in our proxy statement. Is there anyone from GAMCO who would like to present their proposal?

Mr. Chairman, this is George Maldonado from GAMCO here to present the proposal.

Okay. Please, go ahead.

Good afternoon. My name is George Maldonado, Director of Proxy Voting Services at GAMCO Asset Management, Inc. GAMCO, on behalf of its clients and certain affiliates are beneficial owners of approximately 463,000 shares of Bel Fuse's Class A common stock. GAMCO hereby presents the following proposal for consideration at today's meeting: resolved, that the shareholders of Bel Fuse Inc. request that the Board of Directors take all necessary steps, including amending the company's bylaws and/or certificate of incorporation, subject to any required shareholder vote, to provide the company's Class A common shareholders with the right to convert their shares into the company's Class B common stock at their option at any time. As of the close of trading on December 11, 2019, the date prior to the submission of this proposal, the company's Class A common shares were trading at an approximately $4 discount to the company's Class B common shares. Bel Fuse's Class A common shares have 1 vote per share. The company's Class B common shares generally have no voting rights. GAMCO, on behalf of its clients, would like to see strategic thinking focused on making the company's Class A voting stock, which we believe is a superior asset, trade consistently at a premium to the nonvoting shares. GAMCO urges all shareholders to vote for this proposal. I thank you all for the time.

Thank you, George. You've heard the nominations and the proposals. If there are any registered holders of Class A common stock or a person who holds legal proxies from such registered holders who desires to vote who haven't already done so, or who wish to change their vote, this can be done through the remote annual meeting webcast site at this time. While we allow time for any final voting to take place in the web portal, I'd be glad to answer questions submitted to us. I would like to ask Lynn Hutkin to read any questions that have come through the web portal. Lynn?

Thank you. This is Lynn Hutkin. The first question that has come through the web portal reads as follows. How does the Board view research and development as a value service? And how is the research and development budget set? In other words, is it a percentage of sales? There's a second part of the question, which reads, what percentage of future sales for the next 12 months were not available for sale on January 1, 2020?

Okay. I'll take the third part of the question. I'll let Craig Brosious unpack the first 2 parts of the question. Basically, we will run about 8% to 10% of sales. New sales come from samples and prototypes we've done a year before, and that's historically how we tracked. Craig?

Okay. This is Craig Brosious. Generally, R&D at Bel Fuse is viewed as essential to successfully engage with our OEM customers, where together, we develop the technologies for their next-generation products. It's also key to the company's strategy of increasing our revenues through our distribution partners by expanding the number of products we offer through those channels. We do not set fixed budgets for R&D spending. The spend is managed at the business unit level based on targeted opportunities. Our historical spend has averaged about 5% of annual revenues.

At this time, there are no further questions in the web portal. I would like to ask Craig Brosious to check for any questions that may have been submitted to the [email protected] e-mail account.

I have not seen any questions submitted at the [email protected] e-mail account. So let the minutes reflect that no questions were submitted through that source.

Okay. There being no other business before the shareholders, I will pause momentarily and then close the polls. The polls are now closed. The Chair recognize Mr. Tweedy.

Mr. Chairman, the inspector of election has presented a preliminary report of the voting. That report reflects that holders of a substantial majority of the shares of Class A common stock voted at this meeting have voted in favor of the Board's nominees to serve as directors, in favor of the ratification of Deloitte & Touche LLP to audit Bel's books for 2020, in favor of the advisory resolution approving the compensation of Bel's named executive officers, and in favor of the approval of the Bel Fuse Inc. 2020 Equity Compensation Plan as amended. In addition, holders of a substantial majority of the shares of Class A common stock voted at this meeting have voted against the shareholder proposal reflected as proposal 5 in the company's proxy statement.

Thank you for your participation in this meeting -- in our meeting today. The final voting results will be published by the company in an 8-K to be filed by the company in the next few days. I instruct Mr. Tweedy to file the shareholders' list, proxies and ballots among the records of the company. At this time, I would entertain a motion to adjourn.

This is John Tweedy. I move the meeting be adjourned.

This is Mark Segall. I second the motion.

Thank you. I would like to thank everybody for joining the meeting today, and the meeting is now adjourned. Have a good day.