The Company's quarterly and annual operating results are impacted by a wide variety of factors that could materially and adversely affect revenues and profitability, including the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2008. 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, financial condition, operating results, and stock prices. Furthermore, this document and other documents filed by the Company with the Securities and Exchange Commission (the "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. These Forward-Looking Statements are subject to certain risks and uncertainties, including those detailed in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2008, 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 such statements are made or to reflect the occurrence of unanticipated events. An investment in the Company involves various risks, including those which are detailed from time to time in the Company's SEC filings.

Overview

Our Company

Bel is a leading producer of electronic products that help make global connectivity a reality. The Company designs, manufactures and markets a broad array of magnetics, modules (including power conversion and integrated modules), circuit protection devices and interconnect products. While these products are deployed primarily in the computer, networking and telecommunication industries, Bel's expanding portfolio of products also finds application in the automotive, medical and consumer electronics markets. Bel's products are designed to protect, regulate, connect, isolate or manage a variety of electronic circuits.

Bel's business is operated through three geographic segments: North America, Asia and Europe. During the six months ended June 30, 2009, 68% of the Company's revenues were derived from Asia, 22% from North America and 10% from its Europe operating segment. Sales of the Company's magnetic products represented approximately 46% of the Company's total net sales for the six months ended June 30, 2009. These sales are primarily driven by working closely with the Company's customers' engineering staffs and aligning them with industry standards committees and various integrated circuit (IC) manufacturers. The remaining revenues related to sales of the Company's modules products (32%), interconnect products (17%) and circuit protection products (5%).

The Company's expenses are driven principally by the cost of labor where Bel's factories are located and the cost of the materials that it uses. As labor and material costs vary by product line, any significant shift in product mix has an associated impact on the Company's costs of sales. Bel generally enters into processing arrangements with several independent third party contractors in Asia. Costs are recorded as incurred for all products manufactured either at third party facilities or at the Company's own manufacturing facilities. Such amounts are determined based upon the estimated stage of production and include labor cost and fringes and related allocations of factory overhead. The Company manufactures finished goods at its own manufacturing facilities in Glen Rock, Pennsylvania, Inwood, New York, the Dominican Republic, Mexico, and the Czech Republic.

Trends Affecting our Business

The Company believes the key factors affecting Bel's second quarter 2009 and future results include the following:

· Increasing pressures in the U.S. and global economy related to the global economic downturn, the credit crisis, volatility in interest rates, investment returns, energy prices and other elements that impact commercial and end-user consumer spending are creating a highly challenging environment for Bel and its customers.

· These weakening economic conditions have resulted in reductions in capital expenditures by end-user consumers of our products, resulting in a decreased backlog of orders in 2009.

· With the overall reduction in demand in our industry, competition will continue to increase. As a result, Bel is being faced with pricing pressures, which will impact Bel's future profit margins.

· Commodity prices, especially those pertaining to gold and copper, have been highly volatile. Fluctuations in these prices and other commodity prices associated with Bel's raw materials will have a corresponding impact on our profit margins.

· The costs of labor, particularly in the People's Republic of China where several of Bel's factories are located, have risen significantly as a result of government mandates for new minimum wage and overtime requirements (effective April 2008). These higher labor rates will continue to have a negative impact on Bel's profit margins.

· The global nature of Bel's business exposes Bel to earnings volatility resulting from exchange rate fluctuations.

These factors are expected to continue into the foreseeable future. With reduced demand for Bel's products, coupled with maintaining competitive pricing and the challenge of curbing internal costs, the Company anticipates that its results of operations for the remainder of 2009 will be materially adversely affected by the continuing economic crisis.

Overview of Financial Results

The current market conditions have impacted the Company considerably during the six months ended June 30, 2009.

· Net Sales. The Company's sales decreased by $27.5 million and $44.5 million or 38.0% and 33.4% during the three and six months ended June 30, 2009 as compared to the same periods of 2008, primarily due to a reduction in demand across all product lines related to weakening global economic conditions.

· Loss from Operations. During the six months ended June 30, 2009, income from operations decreased $6.8 million from income of operations of $6.2 million for the six months ended June 30, 2008 to a loss from operations of $0.6 million for the six months ended June 30, 2009, primarily due to the decrease in sales noted above. Other factors impacting the Company's loss from operations for the six months ended June 30, 2009 were as follows:

† Rising Bill of Material Costs. Bel manufactures a particular product line within the modules group that is comprised of a larger percentage of purchased components than most of the Company's other products. The proportion of total sales represented by this product line has increased in the six months ended June 30, 2009 as compared to the same period of 2008, resulting in reduced gross margins.

† Restructuring Charges. The Company ceased manufacturing at its Bel Power manufacturing facility in Westborough, Massachusetts as of December 31, 2008. Related to this closure, the Company incurred severance costs of $0.1 million and costs associated with its facility lease obligation of $0.3 million during the six months ended June 30, 2009.

† Reduced Labor Costs. The Company experienced a significant increase in customer demand after the Lunar New Year in early February 2008, leading to large number of new workers being hired, which resulted in associated training costs, production inefficiencies and excessive overtime. Due to reduced demand in the first half of 2009, additional workforce was not needed.

† Reduction in Selling, General and Administrative ("SG&A") Expenses. SG&A expenses were $3.0 million lower during the six months ended June 30, 2009 as compared to the same period of 2008. This reduction was primarily due to lower commissions from the reduced sales volume, administrative headcount reductions and travel restrictions put in place during the first quarter of 2009.

† Gain on Sale of Property. The Company recorded a $4.6 million gain on the sale of property in Jersey City, New Jersey in early 2009. This gain was an offsetting factor to the loss from operations.

· Net Loss. The Company's net earnings decreased significantly from income of $4.0 million for the six months ended June 30, 2008 to a loss of $0.5 million for the six months ended June 30, 2009. In addition to the factors impacting loss from operations discussed above, the following non-operating factors impacted net earnings during the six months ended June 30, 2009:

† Gain on Sale of Investment. During the six months ended June 30, 2009, the Company sold 3.0 million shares of its investment in Power-One stock resulting in a book gain of $1.1 million.

† Reduced Interest Rates. Interest income decreased from $1.5 million during the six months ended June 30, 2008 to $0.3 million during the six months ended June 30, 2009 as a result of significantly lower interest rates earned on invested balances during 2009.

† Income tax expense of $1.7 million was recognized related to the gain on sale of property described above, partially offset by the tax benefit associated with operating losses in the U.S.

Critical Accounting Policies

The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, intangible assets, investments, SERP expense, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a discussion of the Company's critical accounting policies, see the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

Results of Operations

The following table sets forth, for the periods presented, the percentage
relationship to net sales of certain items included in the Company's condensed
consolidated statements of operations.

                                               Percentage of Net Sales             Percentage of Net Sales
                                                 Three Months Ended                   Six Months Ended
                                                      June 30,                            June 30,
                                               2009               2008             2009               2008

Net sales                                         100.0 %            100.0 %          100.0 %            100.0 %
Cost of sales                                      89.4               81.9             88.3               81.7
Selling, general and administrative
expenses                                           16.9               12.8             17.2               13.7
Restructuring charge                                  -                  -              0.5                  -
Gain on sale of property, plant and
equipment                                             -                  -              5.2                  -
Realized gain (loss/impairment charge)
on investment                                       2.4               (3.2 )            1.2               (2.0 )
Interest income                                     0.3                0.8              0.3                1.1
Earnings before (benefit) provision for
income taxes                                       (3.7 )              2.9              0.9                3.8
Income tax (benefit) provision                     (0.9 )              0.4              1.4                0.8
Net (loss) earnings                                (2.8 )              2.5             (0.5 )              3.0

The following table sets forth the year over year percentage increase or decrease of certain items included in the Company's condensed consolidated statements of operations.

                                                              Increase (decrease) from      Increase (decrease) from
                                                                    Prior Period                  Prior Period
                                                                 Three Months Ended             Six Months Ended
                                                                   June 30, 2009                 June 30, 2009
                                                                   Compared with                 Compared with
                                                                 Three Months Ended             Six Months Ended
                                                                   June 30, 2008                 June 30, 2008

Net sales                                                                         (38.0 )%                      (33.4 )%

Cost of sales                                                                     (32.2 )                       (28.0 )

Selling, general and administrative expenses                                      (18.1 )                       (16.3 )

Net loss                                                                         (170.2 )                      (111.5 )

THREE MONTHS ENDED JUNE 30, 2009 VERSUS
THREE MONTHS ENDED JUNE 30, 2008

Sales

Net sales decreased 38.0% from $72.5 million during the three months ended June 30, 2008 to $44.9 million during the three months ended June 30, 2009. The Company attributes the decrease principally to a reduction in demand across all major product groups as a result of the weakening economic conditions.

The significant components of the Company's revenues for the three months ended June 30, 2009 were magnetic products of $20.9 million (as compared with $31.8 million during the three months ended June 30, 2008), interconnect products of $8.0 million (as compared with $14.2 million during the three months ended June 30, 2008), module products of $13.7 million (as compared with $22.0 million during the three months ended June 30, 2008), and circuit protection products of $2.3 million (as compared with $4.5 million during the three months ended June 30, 2008).

Cost of Sales

Cost of sales as a percentage of net sales increased from 81.9% during the three months ended June 30, 2008 to 89.4% during the three months ended June 30, 2009. The increase in the cost of sales percentage is primarily attributable to the following:

¨ Material costs as a percentage of sales have increased from 50.4% during the three months ended June 30, 2008 to 58.7% during the three months ended June 30, 2009. Bel manufactures a particular product line within the modules group that consists of a larger percentage of purchased components than most of the Company's other products. The proportion of total sales attributable to this product has increased to 15% of total sales for the three months ended June 30, 2009 as compared to 11% of total sales in the same period in 2008, mainly due to relatively larger revenue declines in other product lines. While these products are strategic to Bel's growth and important to total earnings, they return lower gross profit margins due to their higher material content, and the Company's average gross profit percentage will likely decline as these sales continue to account for an increasing proportion of total sales.

¨ While other fixed costs within cost of sales, such as support labor and depreciation and amortization, have decreased in dollar amount during the second quarter of 2009 as compared to 2008, as a percentage of sales these costs have increased due to the lower sales volume in 2009.

As a partially offsetting factor, the Company experienced a reduction in labor costs during the three months ended June 30, 2009 (9.8% of sales as compared to 16.1% of sales for the three months ended June 30, 2008). A significant increase in customer demand after the Lunar New Year in February 2008 resulted in the hiring of approximately 5,000 new workers, which resulted in training expenses, production inefficiencies and excessive overtime. With lower customer demand in 2009, additional manpower was not needed after Lunar New Year and Bel has effectively eliminated overtime costs. In addition, the Company continues to transition the labor intensive assembly operations to lower cost regions of the PRC.

Included in cost of sales are research and development expenses of $2.0 million for each of the three month periods ended June 30, 2009 and 2008, respectively.

Selling, General and Administrative Expenses ("SG&A")

The percentage relationship of selling, general and administrative expenses to net sales increased from 12.8% during the three months ended June 30, 2008 to 16.9% during the three months ended June 30, 2009. While the percentage of sales increased from the comparable period last year, the dollar amount of selling, general and administrative expense for the three months ended June 30, 2009 was $1.7 million lower as compared to the same period of 2008. The overall reduction in dollar amount was the result of the following factors:

¨ Sales commissions decreased by $0.8 million due to the 2009 lower sales volume.

¨ Travel expenses were reduced by $0.3 million, as management implemented travel restrictions during the first quarter of 2009.

¨ General and administrative salaries and fringe benefits decreased as compared to the second quarter of 2008 as a result savings of approximately $0.7 million from company-wide reductions in headcount and a of reduction of $0.3 million in bonus expense, partially offset by severance expense of $0.3 million.

¨ The Company recorded charges totaling $0.6 million for compensation and fees related to the unauthorized issuance of stock.

¨ Other reductions in SG&A of $0.5 million included reductions in various expense categories that were not individually significant.

Gain on Sale of Investment

During the three months ended June 30, 2009, the Company sold 3,041,393 shares of Power-One Inc. common stock. As the sales proceeds exceeded the Company's adjusted cost basis in this investment, the sale resulted in a gain of $1.1 million which was recorded during the second quarter of 2009.

Interest Income

Interest income earned on cash and cash equivalents decreased by approximately $0.5 million during the three months ended June 30, 2009, as compared to the comparable period in 2008. The decrease is due primarily to significantly lower interest rates on invested balances during the three months ended June 30, 2009 as compared to 2008.

(Benefit) Provision for Income Taxes

The benefit from income taxes for the three months ended June 30, 2009 was $(0.4) million compared to a provision for income taxes of $0.3 million for the three months ended June 30, 2008. The Company incurred a loss before income taxes for the three months ended June 30, 2009 versus earnings before income taxes for the three months ended June 30, 2008 which resulted in $3.8 million lower earnings before income taxes during the three months ended June 30, 2009 compared to the three months ended June 30, 2008. The Company's effective tax rate, the income tax (benefit) provision as a percentage of earnings (loss) before (benefit) provision for income taxes, was (23.6)% and 13.9% for the three months ended June 30, 2009 and June 30, 2008, respectively. The Company's effective tax rate will fluctuate based on the geographic segment the pretax profits are earned in. Of the geographic segments in which the Company operates, the U.S. has the highest tax rates; Europe's tax rates are generally lower than U.S. tax rates; and the Far East has the lowest tax rates. The tax (benefit) for the three months ended June 30, 2009 is attributable to losses in the U.S. and capital loss and foreign tax credit carryback claims offset in part by losses in the Far East with minimal tax benefit compared to the three months ended June 30, 2008.

SIX MONTHS ENDED JUNE 30, 2009 VERSUS
SIX MONTHS ENDED JUNE 30, 2008

Sales

Net sales decreased 33.4% from $133.3 million during the six months ended June 30, 2008 to $88.8 million during the six months ended June 30, 2009. The Company attributes the decrease principally to a reduction in demand across all major product groups as a result of the weakening economic conditions.

The significant components of the Company's revenues for the six months ended June 30, 2009 were magnetic products of $40.9 million (as compared with $56.7 million during the six months ended June 30, 2008), interconnect products of $15.4 million (as compared with $26.2 million during the six months ended June 30, 2008), module products of $28.1 million (as compared with $41.9 million during the six months ended June 30, 2008), and circuit protection products of $4.4 million (as compared with $8.5 million during the six months ended June 30, 2008).

Cost of Sales

Cost of sales as a percentage of net sales increased from 81.7% during the six months ended June 30, 2008 to 88.3% during the six months ended June 30, 2009. The increase in the cost of sales percentage is primarily attributable to the following:

¨ Material costs as a percentage of sales have increased from 51.7% during the six months ended June 30, 2008 to 57.9% during the six months ended June 30, 2009. Bel manufactures a particular product line within the modules group that consists of a larger percentage of purchased components than most of the Company's other products. The proportion of total sales attributable to this product has increased to 15% of total sales for the six months ended June 30, 2009 as compared to 11% of total sales in the same period in 2008, mainly due to relatively larger revenue declines in other product lines. While these products are strategic to Bel's growth and important to total earnings, they return lower gross profit margins due to their higher material content, and the Company's average gross profit percentage will likely decrease as these sales continue to account for an increasing proportion of total sales.

¨ Included in cost of sales are research and development expenses of $4.2 million and $3.9 million for the six months ended June 30, 2009 and 2008, respectively. The increase in research and development expenses during the six months ended June 30, 2009 was primarily related to Bel's power products and new integrated connector modules.

¨ While other fixed costs within cost of sales, such as support labor and depreciation and amortization, have decreased in dollar amount during the six months ended June 30, 2009 as compared to 2008, as a percentage of sales these costs have increased due to the lower sales volume in 2009.

¨ As a partially offsetting factor, the Company experienced a reduction in labor costs during the six months ended June 30, 2009 (9.1% of sales as compared to 13.8% of sales for the six months ended June 30, 2008). A significant increase in customer demand after the Lunar New Year in February 2008 resulted in the hiring of approximately 5,000 new workers, which resulted in training expenses, production inefficiencies and excessive overtime. With lower customer demand in 2009, additional manpower was not needed after Lunar New Year and Bel has effectively eliminated overtime costs. In addition, the Company continues to transition the labor intensive assembly operations to lower cost regions of the PRC.

Selling, General and Administrative Expenses

The percentage relationship of selling, general and administrative expenses to net sales increased from 13.7% during the six months ended June 30, 2008 to 17.2% during the six months ended June 30, 2009. While the percentage of sales increased from last year, the dollar amount of selling, general and administrative expense for the six months ended June 30, 2009 was $3.0 million lower as compared to the same period of 2008. The overall reduction in dollar amount was the result of the following factors:

† Sales commissions decreased by $1.5 million due to the 2009 lower sales volume.

¨ Travel expenses were reduced by $0.5 million, as management implemented travel restrictions during the first quarter of 2009.

¨ General and administrative salaries and fringe benefits decreased as compared to the first half of 2008 as a result of savings of approximately $0.9 million from company-wide reductions in headcount and a reduction of $0.3 million in bonus expense, partially offset by severance expense of $0.3 million.

¨ The Company recorded charges totaling $0.6 million for compensation expense and fees related to the unauthorized issuance of stock.

¨ Other reductions in SG&A of $0.7 million included reductions in various other expense categories that were not individually significant.

Restructuring Charge

In connection with the closing of the Company's Westborough, Massachusetts facility in December 2008, the Company incurred $0.1 million of termination benefit charges and $0.3 million related to its facility lease obligation during the six months ended June 30, 2009. See "Liquidity and Capital Resources" for further information on the restructuring charges.

Sale of Property, Plant and Equipment

During the six months ended June 30, 2009, the Company realized the gain from the sale of property in Jersey City, New Jersey in the amount of $4.6 million.

Realized (Gain) Loss/Impairment Charge on Investment

During the six months ended June 30, 2009, the Company sold 3,041,393 shares of Power-One Inc. common stock. As the sales proceeds exceeded the Company's adjusted cost basis in this investment, the sale resulted in a book gain of $1.1 million which was recorded during the second quarter of 2009. During the six months ended June 30, 2008, the Company recorded a pre-tax other-than-temporary impairment charge of $2.4 million associated with its investment in Toko, Inc. The Company also recorded an other-than-temporary impairment charge of $0.3 million related to its investment in the Columbia Strategic Cash Portfolio during the six months ended June 30, 2008. See "Liquidity and Capital Resources" for further information on these impairment charges. The Company did not record any impairment charges during the six months ended June 30, 2009.

Interest Income

Interest income earned on cash and cash equivalents decreased by approximately $1.2 million during the six months ended June 30, 2009, as compared to the comparable period in 2008. The decrease is due primarily to significantly lower . . .