Bel Reports Declining Sales and Growing Margins
Bel Fuse Inc. today announced preliminary financial results for the fourth quarter and full year 2016. Fourth quarter 2016 highlights include: Net sales were $118.5 million for the fourth quarter of 2016, representing a 12.4% decline from $135.2 million in the fourth quarter of 2015. Gross profit margin improved to 20.7% in the fourth quarter of 2016, up from 19.3% in the fourth quarter of 2015. Net earnings increased to $3.4 million in the fourth quarter of 2016 compared to $2.9 million in the same period of 2015.
The fourth quarter 2016 results were favorably impacted by foreign currency gains of $2.7 million (compared to foreign currency losses of $0.5 million in the fourth quarter of 2015) and a $1.0 million gain on sale of our San Diego property. These factors were offset by $1.5 million in restructuring charges (compared to $0.8 million in the same period of 2015) and an increase in our effective tax rate during the quarter to 46.9% (compared to 9.4% during the fourth quarter of 2015).
Full year 2016 highlights include: Net sales were $500.2 million in 2016, representing a decline of 11.8% from $567.1 million in 2015. Gross profit margin improved to 20.0% in 2016, up from 19.2% in 2015. Net loss was $(64.8) million in 2016 compared to net earnings of $19.2 million in 2015. The full year 2016 results were unfavorably impacted by a $106.0 million impairment charge on goodwill and other intangible assets, offset by $18.2 million in acquisition-related settlements and $2.7 million of gains on sales of properties.
Daniel Bernstein, President and CEO, said, "With the operating efficiencies the Company identified in 2015 and 2016 and $17 million in annual cost savings now fully implemented, we are pleased with the financial performance that we achieved in the year, despite the sales decline. That said, we are working hard to pursue every path available to us to reinvigorate the top line and grow the business in 2017. The recent addition of Vincent Vellucci to the Board was key to the signing of our global agreement with Arrow in the fourth quarter. As the former President of Americas Components at Arrow, he has provided valuable insights as to how to improve our utilization of this channel to increase Bel's revenue.
â€œOur North American sales organization has been realigned to implement better accountability programs for our sales team and reward them for clearly defined performance. In Europe, we shifted from a single sales organization for all our products to two distinct groups, each with their own areas of concentration. One group will support the Cinch brand with focus on the military and aerospace markets; the other group will be under the Bel umbrella and will serve networking, data storage, industrial and telecommunications customers. Our pipeline for new opportunities is growing, which bodes well for future sales, and we will continue to invest in our R&D to meet this demand.
"This was a challenging year for our Power Solutions business as our engineering and sales teams worked hard to generate new design wins following missed design cycles due to pre-acquisition quality issues. Despite the decline in sales in the fourth quarter, we are pleased with our new design efforts made within our Power Solutions business this year. Much of our focus has been on data center initiatives, as well as in the area of e-Mobility, and these efforts have started to translate into a recent increase in our backlog for these products.
"Bel's Cinch Connectivity Solutions business saw sales decline in the fourth quarter as a result of general weakness within the military and industrial segments as well as through distribution where reduced demand from broadline distributors offset increases from our value-added distributors. We expect to see a slight improvement in sales of our connectivity products in 2017, primarily within the commercial aerospace segment, and to a lesser extent in the military segment. Our labor efficiencies continue to improve within this group, including the previously-announced closure of our Shanghai manufacturing facility in the fourth quarter of 2016. We anticipate profitability within this group to increase in 2017 on marginally improved sales.
"Bel's Magnetic Solutions group continues to be the market leader in the deployment of 10-gigabit Ethernet connector modules, though sales volumes were impacted by general market weakness during the fourth quarter. We have now completed initial development and are actively working with strategic customers to begin shipments of our next generation multi-gigabit Ethernet connector modules that now include 2.5 and 5-gigabit options. These new products address the need for a more flexible and cost effective solution between the currently available 1-gigabit and 10-gigabit devices on the market today," concluded Mr. Bernstein.