Bel Fuse Inc (NASDAQ:BELFA) Q1 2016 Earnings Conference Call - Final Transcript

May 06, 2016 • 11:00 am ET

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Bel Fuse Inc (NASDAQ:BELFA) Q1 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Bel Fuse Incorporated First Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded.

At this time, I would like to turn the conference over to Dan Bernstein, President and Chief Executive Officer. Please go ahead, sir.

Executive
Daniel Bernstein

Thank you, James. Joining me on the call today is Colin, our VP of Finance; and Frank, our Manager of Finance. Before we begin the call, I'd like to ask Colin to go over the safe harbor statement. Colin?

Executive
Colin Dunn

Thank you, Dan, and good morning, everybody. Except for the historical information contained in this call, the matters discussed on this call, including the statements regarding stronger sales for Bel Power Solutions in the second half of 2016 and potential growth in the Commercial Aerospace business, are forward-looking statements as described under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties.

Actual results could differ materially from Bel's projections. Among the factors that could cause actual results to differ materially from such statements are the market concerns facing our customers, the continuing viability of sectors that rely on our products, the effects of business and economic conditions, difficulties associated with integrating recently acquired companies, capacity and supply constraints or difficulties, product development, commercialization or technological difficulties, the regulatory and trade environment, risks associated with foreign currencies, uncertainties associated with legal proceedings, the market's acceptance of the Company's new products and competitive responses to those new products, and the risk factors detailed from time-to-time in the Company's SEC reports.

In light of the risks and uncertainties, there can be no assurance that any forward-looking statement will in fact prove to be correct. We undertake no obligation to update or revise any forward-looking statements. We also may discuss non-GAAP results during this call and reconciliations of our GAAP results to non-GAAP results that have been included in our release.

Now turning to our results. I would like to first spend some time discussing the goodwill impairment charge we recorded in the first quarter of 2016. On the U.S. GAAP, we test goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter and review these intangible assets on an interim basis each quarter and at times when there maybe events or circumstances that may indicate additional testing is necessary.

As a result of the continuing challenging macroeconomic conditions during the beginning part of April 2015, we revised our forecast downward, which resulted in lower-than-anticipated growth rates. As a result, we identified an impairment in our free reporting units, North America, Europe and Asia.

We subsequently performed an impairment valuation during the first quarter of 2016, which resulted in an estimated impairment charge of $108.6 million. Of this charge, $104.3 million was attributable to the goodwill and $4.3 million was attributable to certain trademark indefinite-lived intangible assets. The impairment review and resulting charge will be finalized in the second quarter of 2016, which may result in a revision of the amount originally recorded in this first