Bel Fuse Inc. (BELFA) Q3 2012 Earnings Report, Transcript and Summary

Good day, and welcome to the Bel Fuse Third Quarter 2012 Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Dan Bernstein. Please go ahead, sir.

Thank you, Latoya, and I'd like to welcome everybody to our conference call to review Bel's third quarter 2012 results. Before we start, I'd like to hand it over to Colin Dunn, our Vice President of Finance.

Thanks, Dan, and good morning, everybody. Before we begin, I'd like to read the following statement. Except for historical information discussed in this conference call, the matters discussed in today's press release, including -- this conference call, including the statements regarding anticipated impact to the Fibreco and Powerbox acquisitions, the possibility of Bel's effecting other -- another acquisition and the remaining costs to be incurred in and anticipated savings from Bel's corporate restructuring program, are forward-looking statements 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 arise -- associated with integrating recently acquired companies; capacity and supply constraints or difficulties; product development, commercializing or technological difficulties; the regulatory and trading environment; risks associated with foreign currencies; uncertainties associated with legal proceedings; the markets 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 review or revise any forward-looking statements. Now turning to the results. First of all, business acquired during the third quarter, Bel completed the acquisition of Fibreco Limited based in the U.K. on July 31, 2012, and Powerbox Italia and its subsidiary based in Italy on September 12, 2012. The results of these 2 companies have been included in our consolidated financial statements since their respective acquisition dates. However, except as I already noted in my comments, they have not yet had a material impact on our results. First, the sales. Sales for the third quarter of 2012 were $76.1 million, up slightly compared to the $75.9 million in the third quarter of 2011 and up 3.9% sequentially from the $73.2 million that we reported in the second quarter of this year. Third quarter sales 2012 in our core major product groups were as follows: magnetics, $29.8 million, up 29% over the third quarter of 2011, led by an increase of more than 45% in integrated connector module sales; interconnect, $28.4 million, an increase of 4.5% over last year's third quarter; circuit protection, $2.5 million, essentially flat from the prior year; and modules, $15.4 million, which is 34% well off than sales in the third quarter of 2011. As we told you in Q2, the modules product will continuously be affected by a change in the ordering pattern of 2 major customers. Of the above amounts, Fibreco contributed $700,000 of revenue to the interconnect group and Powerbox contributed $200,000 to the modules product group. Turning to cost of sales and net results. During Q3 2012, our gross margins improved slightly in comparison to the third quarter of last year mainly due to an improved product mix, including a rise in proportion of sales of magnetic and interconnect products. We also began to see savings resulting from various overhead cost-reduction measures that are being implemented at our facilities in Asia. The previously announced closure of our Cinch manufacturing facility in Vinita, Oklahoma and relocation of major portion of its operations to a new facility in McAllen, Texas is on target for completion by the end of this year. The combined Asian and North American restructuring programs are expected to reduce operating costs by approximately $5.5 million annually when fully implemented by the end of this year. We currently estimate up to an additional $2.9 million in pretax expenses associated with these steps in the fourth quarter of 2012. Selling, general and administrative expenses. Selling, general and administrative expenses during the 3 months ended -- period ended September 30, 2012, include a $657,000 of acquisition-related expenses associated with Fibreco, Powerbox and ongoing acquisition activities. Excluding these expenses, SG&A as a percentage of sales for the third quarter of 2012 was 12.1%, down from the 13% of sales during the third quarter of last year. Also, during the third quarter of 2012, after continued decreases in the market share of Pulse shares, we recorded an additional pretax impairment charge of $297,000 or $185,000 after tax to write down investment in Pulse shares through the September 30 value of $0.82 per share. Taxes. Bel recorded an income tax expense of $1.8 million for the 3 months ended September 30, 2012, compared to a tax expense of $1 million for the 3 months ended September 30, 2011. The large tax benefit in Q3 of this year reflects nearly $1.5 million of the net reversal of tax reserves due to the finalization of a multiyear IRS audit and the expiration of certain statutes of limitations. Excluding this large benefit, the company's effective tax rate, which is the income tax provision as a percentage of earnings before income taxes, was a negative 43% for the 3 months ended September 30, 2012, down from a positive 51% for the same period in 2011. The company's effective tax rate fluctuates based on the geographic segments in which the pretax profits are earned. Of the geographic segments in which Bel operates, the U.S. has the highest tax rates. Europe's tax rates are generally lower than U.S. tax rate, and Asia has the lowest tax rates. The very favorable effective rate in 2012 was primarily due to a combination of pretax loss in the U.S. and lower earnings in Europe, which resulted in tax benefits, and strong earnings in Asia, where the tax rates are lowest. In 2011, we earned pretax profits in the U.S. and Europe, while litigation charges and other factors resulted in losses in Asia with minimal income tax benefit. On an unaudited GAAP basis, Bel reported income from operations of $1 million and after-tax net earnings of $2.6 million for the third quarter of 2012. Last year, we reported income from operations of $1.9 million and after-tax net earnings of $1 million for the third quarter of 2011. To state these results on a comparable basis, non-GAAP income from operations for the third quarter of 2012 was $3.9 million compared to non-GAAP income from operations of $2.4 million for the third quarter of 2011. Acquisition costs and restructuring, reorganization and severance charges have been excluded from non-GAAP income from operations for the third quarter of 2012, while litigation charges are being excluded from the comparable 2011 non-GAAP income from operations. The increase in third quarter 2012 versus 2011 non-GAAP operating income is primarily attributable to the favorable sales mix and the reduction in SG&A expenses described above. A reconciliation of GAAP to non-GAAP measures is included in our press release that was issued this morning. Turning to the balance sheet. Cash and equivalents. At the end of September 2012, our cash, cash equivalents and investment securities were $74.8 million, which was $19.2 million less than the December 2011 balance of $94 million. The decrease in cash resulted primarily from the combined net payment of $19.2 million, the acquisition of Gigacom Interconnect in Q1 and Fibreco and Powerbox Italy in Q3; $3.4 million of capital expenditures; $1.7 million for the repurchase of common stock; and $2.3 million in year-to-date dividend payments, partly offset by earnings and favorable operating cash flows. Receivables and payables. Receivables net of allowances were $46.5 million at September 30, 2012, compared to $39.1 million at December 31, 2011, an increase of $7.4 million. Approximately $3.8 million of this increase resulted from the inclusion of accounts receivables of acquired businesses. Our accounts payable at September 30, 2012, were $20.5 million, an increase of $2.1 million from December 31, 2011. Approximately $1.7 million of this increase resulted from the inclusion of the accounts payable of acquired businesses. Inventories. At the end of September 2012, our inventories were $56.3 million, up $2.9 million from the December 2011 level. Approximately $1.1 million of this increase resulted from the inclusion of the inventories of acquired businesses. Goodwill and intangible assets. The allocation of the purchase price of Gigacom, Fibreco and Powerbox Italy have not yet been completed. Accordingly, as of September 30, 2012, $18 million has been reported as combined goodwill for these 3 businesses. We expect a portion of this math to be reclassified primarily to intangible assets, as well as small amounts to tangible assets upon completion of the purchase price allocation and exercise. Stock buyback. The Bel Board of Directors had approved the buyback of up to $10 million of Bel's Class B stock in the open market. During the 3 months ended September 30, 2012, Bel repurchased 89,991 shares at a total cost of $1.7 million. Other balance sheet comments. Our capital spending for the 3 months ended September 30, 2012, was $1.1 million, while depreciation and amortization was $2.2 million. Our per book share value at September 30, 2012, was $18.87, including goodwill and intangibles. And when we exclude the intangibles and goodwill, our per share value was $16.08. Just a little brief outlook comment. We have continued our plan to reduce costs worldwide, although the majority of these actions will be in the fourth quarter 2012. These plans involve significant expenses and cash outlays during the second half of 2012. So the benefits will begin immediately but will likely not be fully realized until 2013. In addition, we're exploring several potential acquisitions representing over $60 million in additional revenue, on which we expect final decisions commencing in the fourth quarter of 2012. That's the end of my comments. Now I'll hand the call back to Dan.

Yes. Latoya, if possible, can we open up the call for questions, please?

[Operator Instructions] The first question is from Chris Godby of Stephens Inc.

Can you give us an idea how much in annual revenue did Fibreco and Powerbox represent?

Just a minute. Yes, Powerbox, about...

I would say about $4 million, and Fibreco is around $7 million.

Great, that's very helpful. And then how should we think about taxes going forward? Obviously, you had the reversal there that added to -- that led to a nice benefit. How should we think about your tax rate going forward?

Well, part of the -- just to sort of cut through what I said before, there are 2 major issues are going on. We've had some significant expense in North America with the shutdown of the Vinita operation and the relocation of that manufacturing to McAllen, Texas, primarily. We will have more of those expenses in the fourth quarter, and they, of course, will flow through to the P&L and will, in fact, impact the tax rate. So that will be a significant expense that will lower the North American tax rate, which is quite high. When we go to Asia, we've made some cost reductions there also. They were -- the first round of those were very much completed by the end of August, and so we're starting to see benefits there. We've also got a better job against streamlining operations and continue to work on those streamlining. And so what's happening there is we're getting more profit in Asia at much lower tax rates. So that's going to continue. We're not going to have the release of any more expiring tax provisions, if you will, or FIN 48 changes, significant FIN 48 changes for the rest of this year. Going to 2013, I think that's going to depend on how the market holds up, but we would expect the tax rate -- I would expect the tax rate to be more back around the -- round about the 20%, blended 20% rate. We'll just have to wait and see, but it's really very hard to pin down a number.

Certainly, certainly. And then also just kind of turning to margins, on a pro forma level, we continue to see a nice margin improvement there. Obviously, a lot of that is due to your cost-reduction initiatives. But can you give us a little bit more color into what's driving that and what your expectations are going forward?

I think what's really driving that, again, is the change of the product mix also. Again, we had a substantial decrease in modulars, where these are value-added products where with the bill of materials can go up to $500. And so those products went down in sales, and we had a higher sales in the magnetic area. So I think in the magnetic area, where we deal with components that have a lot of labor and the material costs aren't that high, our margins tend to be substantially greater. So that, I think as much as the cost savings, the product mix really had a great factor into it.

Okay, great. And then just on an operating level, is there a specific target that you guys are striving to hit?

From a margin point of view?

Correct.

Well, we'd like to have operating income up in the 6% and 7% range. We normalized it at the moment. It's a little under 5%, so we have a ways to go to get that up there.

Okay, great. And one cleanup question, and I'll let you go. You mentioned this, but I missed it. What was the contribution of Fibreco in the quarter?

Fibreco was -- I've got a lot of other charts, so if the numbers are slightly different from what I just gave you a minute ago, I apologize. But Fibreco, we had -- in the quarter, we had sales of $740,000 and earnings of about $116,000.

And just to note, when we acquired Fibreco, Gigacom, Powerbox, again, we weren't really buying them for their sales. We're buying them for, again, the growth potential and the technology. Again, with Fibreco and Gigacom, they really have positions in Cinch more into the fiber technology, expanded beam technology and getting away from our dependence on copper connectors. So again, we look at both Fibreco and Gigacom as a major growth opportunity for Cinch Connector in the coming years going forward.

The next question is from Sean Hannan of Needham & Co.

I wanted to see, Colin and Dan, if we could get a little bit of color around what you're seeing for order rates thus far, a few weeks into the December quarter.

Again, our backlog is, I think, slightly up. But there's just so much uncertainty in the marketplace, a, due to the elections; and b, due to the uncertainty in Europe. I'm even looking at other companies' visibility out there. It's just going [indiscernible] basically, I think durable equipment is flat. I think at this point, everybody is basically sitting on their hands. One of the things that concerns us -- and we're putting out a memo that we hope that people start preparing for Chinese New Year and put their orders in a lot quicker, so this way, it gives us a lot better chance of planning our labor situation in China. But at this point, still very, very limited visibility out there. And we just see -- not all our customers are overly the positive, however, they're not overly negative. No one can see past January.

Okay, Dan, and to dive deeper into that for a moment, lead times and backlogs for the quarter and how that's changed?

Again, we're having some -- because, as we mentioned, our magnetic sales are up and a large part of that is the ICM's integrated connector modules that are very labor-intensive. So because of that product and the labor that's involved with it, yes, lead times are stretching out on that product. And also, I think there might be some uncertainty in the marketplace regarding Pulse engineering, and then maybe some of our customers are looking at maybe pulling business away from Pulse.

Okay. So are we processing 16-, 18-week range?

Yes, I think we're averaging about 8 to 12, and I think now we're edging up from 12 to 16.

Okay, that's helpful. And so part of what I think has happened here, and you talked about this number quarters ago, there was an intentional shift on your end to really mix up to the really higher-complexity MagJack, sort of the products' availability through your customers. It's seems like some of that has been -- or continues to, that effort, continues to be successful. Just wanted to get your color around how long you think that, that effort is sustainable before maybe some larger competitors elbow into a little bit more in terms of volume, or any perspective there would be helpful.

I think again, I think the so-called, we call MagJack ICM business, I think, still -- even though our sales increase is not as profitable as it once was, we believe very strongly there has to be consolidation in the industry. With the total -- we believe the total available market for this product line, probably $450 million, $400 million -- anywhere from $400 million to $500 million. And we really don't believe that it really can support the supplies that are out there today. So again, I think where we're going to see greater opportunity, I believe it's in consolidation, not the product development. Did I kind of -- so I think what you're trying to say, are you guys developing all these new products? When are we going to see the sales? And are you going to see competition? And I'm saying before, I think, before that happens, I think we're going to see consolidation in the industry. And with that consolidation, that's going to affect the pricing more than anything and then new product development.

Yes, a different angle than the where I was going, but it's still helpful. That's still helpful. So in terms of the -- I just want to make sure I have the right perspective on the charges you excluded from the non-GAAP results. What should we expect for acquisition-related costs in any quarter? And should we expect something similar in 4Q as to what we backed out in the September quarter?

Well, we had $2.2 million in restructuring, severance and related charges in Q3.

I apologize, Colin. I actually focused more around the legal and the acquisition-related costs.

The legal and acquisition...

I think if we haven't done an acquisition in the fourth quarter, it should be the same or a little higher. And I think if we don't have an acquisition in the fourth quarter, it should be a lot less.

Yes. And we're running a lot of legal costs on non-acquisition stuff at the moment.

Okay. And then in terms of the $5.5 million annualized savings based on charges you've already incurred, what are you starting to see -- how much did you actually recognize of those savings in 3Q? And how much of the pie do we accomplish by the time we exit 4Q?

Very little. We had a fairly significant restructuring in Asia, but that was completed at the end of August. Basically, we only have one month in August. And North America is -- we only issued the WARN notices on a lot of the restructuring about 30 days ago or less than that. So that's going to run through the end of the quarter, and the way those costs get -- they get amortized from the date of notice through the time of layoff. So that's going to be by the end of the year. So most of those -- we're going to continue to run those costs through mostly rest of the year. So we're really not going to see anything significant in the fourth quarter.

And I think that also, we didn't see an overabundance of our profitability coming from...

Restructuring.

Restructuring in the third quarter. And again, we probably won't see it in the fourth quarter because we are running 2 operations in the same thing, one in Vinita and one in Texas.

The next question is from Lenny Dunn of Freedom Investors Company.

I took about 45 minutes to read your report before I could thoroughly understand it. And as a large shareholder -- or representing a lot of large shareholders, we're forced to do this. But somebody new looking at this is not likely to want to buy stock until they have a clearer picture. Now will this quarter that we're in be the last time that we'll have substantial restructuring charges?

No, we're going to have substantial restructuring charges in the fourth quarter.

Apparently, I understand that. But going into calendar 2013, will we have...

Our goal, if at all possible, is to clean up our situation, as much as possible, by the end of this year. The only thing that we do not know about is possible acquisitions with opportunities to consolidate.

That, I understand, and you...

So again, our goal is to clean up everything by the fourth quarter.

That will be very good because I think you could get newer investors interested in this once you have cleaner reports.

It's a new rule. So many docu. It doesn't help us out too much when it comes to this stuff. It's a lot easier report.

I completely understand. But now there has been kind of an illusion to -- I shouldn't say there's been kind of. There's been an illusion regrettably to a large acquisition as the rationale for not raising the dividend, and we keep seeing it put off to maybe the next quarter. Certainly, in the current interest rate environment, it would seem like there would be room to do both, to raise the dividend slightly, which sends the message out there that the future is bright, and still do a serious acquisition. And I've mentioned it to you and you keep telling me that the board will consider it, but I don't see anything really done. I mean, I wouldn't -- I don't know if it's -- go ahead.

Lenny, I think what the board has done again -- and we're a lot more active buying back the stock. And again, we look at, again, with our surplus of cash, again, looking at acquisitions, looking at dividend, looking at buyback. And I think, again, for a company to make a major move in buying back stock and being very active, we felt that was a better way to go than dividends. And that was just put in play in the last -- our last quarter. So I think what the board probably most likely like to see is how the cash buyback is working out and then review the dividend again. And as I mentioned to you, as a large shareholder, I'm all for dividends. So you don't have a problem with me on that one.

Well, again, agreeing with me and getting it done are 2 different things. But I'm certainly glad that you're buying back stock, particularly the B stock in the past. The A stock seems to be the only thing that you guys bought back. And I certainly encourage the $10 million buyback and hope that when that's completed, if we're still trading at around book or below book, that you will have to authorize another, and hopefully, we'll be trading there where it would make less sense.

Lenny, let me you, we're trading below book, around book. I will -- I think it's a very undervalued opportunity, and I think if the company doesn't have faith in Bel, then why should shareholders have faith in Bel?

I definitely agree. We're definitely on the same page there. I'm not against the buyback. I'm all for it. I think there's room for buyback, acquisitions and a small increase in the dividend. In this current interest rate environment, the cash is of negligible value on the balance sheet. And even if you had to borrow a slight amount of money, short term, at the current interest rate, that would not harm the company.

You mentioned that B word, be careful there, Lenny. You're doing good until you mentioned the B word. No, we understand. And again, and that's why I think we're a lot more active. And I think, again, with the buyback, we've been very aggressive buying what we're allowed to buy every day permissible by law.

Okay. Now we don't want to sell you any, but with share buybacks, if somebody did call you to buy back away from the market, could you buy more shares that way?

Yes. I think we're open for anything, but we do have rules and regulations. And again, to be honest, it just has to be done properly through our SEC lawyers.

But we would put you in touch with whoever we've got running the program and it varies from time to time. We would put you in touch with whoever the appropriate group or -- because it's a block.

I have no desire to sell you shares. I'm just asking if some institution out there wanted to sell you 100,000 shares, obviously, that's more than you could buy in the open market in any given day, would you have that ability?

Yes.

Okay, that's all. And I don't mind having this on the call because if somebody's listening and wants to sell you their shares at these prices, it would make me happy.

It'd make us happy also.

Okay. Well, again, I do, after careful reading, understand the quarter. And I understand that I'll have to do some careful reading with the next quarter, but hopefully, starting in 2013, it's an easier read.

I hope it would be, Lenny. I have the same problem you have, too.

The next question is from Mike Cikos of Sidoti & Company.

I guess the first question, more housekeeping. I know, Colin, that you had given the number out, but can you please repeat the, I guess, the accounts receivable balance that you guys had at the end of the third quarter?

Sure. Accounts receivables net of allowances at the end of the third quarter were $46.5 million.

Okay. Okay, terrific. I know you gave the AP and inventories, but that was the one I was missing. And as for the restructuring plans that you guys are working on right now, I just want to make sure I'm thinking about this properly. So as of the third quarter, we started seeing some savings out of your Asian operations and facilities, but nothing substantial. And even in the fourth quarter, we're not looking at any substantial savings either because that's where you're going to be taking care of most of the U.S. cost savings that you're looking at, correct?

And we're running redundant operations as we speak today. And of those redundant operations, I would say, 95% should come to an end by the end of the year. In Asia, so you have a perspective. I think 110 people have left the company at our wishes, I think, probably 90 from China and maybe 10 from -- 10 or 15 from Hong Kong. In addition to that, a lot of people that do leave China, because we do employ a lot of people, the indirect, we're not replacing them.

And I guess as we look at 2013, we're saying, at least, your goal is to have all those restructuring costs out of the way by the end of 2012. There might be some restructuring costs in 2013 based on any potential acquisitions you make. Is that...

That is my strongest goal, and that's the best use I've put through at the company. So if you have any kitchen sinks in the closet you want to get rid of, just throw those kitchen sinks out now.

Now my other question for you is if we're looking to have all these restructuring efforts made by the fourth quarter 2012, when do you think we'll start seeing the full-fledged impact of that $5.5 million savings on an annual run rate? Should we expect that, let's say, second, third quarter of 2013? Or will it be sooner or later than that?

We're hoping we'd be pretty much of there by the first quarter. Again, the only other thing that we have mentioned is this acquisition that could possibly, again, throw a little monkey wrench in here.

Okay. And with this -- I guess my last question is regarding the acquisition. With this target that you're looking at currently, is it -- are you guys continuing to focus then on building up your fiber optic product offering? Or is this going in a different direction compared to what you guys have been buying out over the last couple of targets you've made?

I think this is going in a different direction, and I don't want to say any more than that.

[Operator Instructions] We have one further question from Ted Moreau of Knight Capital.

I just wanted to, Dan and Colin, get back to the margin question that was asked earlier. Obviously, recovery in volume and the significant cost containment and restructure are going to be major drivers on operating leverage to get to your margin targets. How much would new products contribute to that, and what might be the timeline there? And also, do you need an acquisition to reach your margin targets, or might that allow you, if it's accretive, favorable situation to maybe even exceed those margin targets?

I don't think we -- certainly, acquisitions are going to help with the overhead, and it all adds to it. But I -- we really believe that the target I threw out earlier on our operating margin as a percentage of sales is achievable from the current business we've got if we continue in the direction we're heading at the moment.

And would the new products -- do they help the margins? Are they going to be higher-margin products, or sometimes when you...

We're going to hope so. We're hoping they are. It seems to us. Now we're doing a lot of work in 10 gig. These margins are a lot better, but again, the sales won't increase as rapidly. But I think now, I just saw product mix are getting so broad. It's difficult to determine. But we would -- but historically, in our industry, when new products come out, you generally have pretty good margins for the first 6 to 18 months, and then after that, they get beat up pretty bad.

Is the timetable for new products over the next 12 months, would you say, or is it out longer...

To be honest, they're constantly going on. There's no -- always starting to come out, with another batch, new widget. The only way that happens in our Modular group, where we really look at maybe 5 customers we work with. But all of a sudden, we hit on one product, we can pick up $5 million, $7 million of sales. So that's the only group that when we look at new products, that it really can have a great effect from a sales standpoint. The only problem with Modular products, because the material content is so great, generally, the margins tends not to be that high compared to other products.

Right, great. One other thing on the acquisition, I know -- and the ones that you've made. I know you can't say much, but is the motivation behind it customer, maybe acquisition, new markets or new products or all of the above? I mean, is there any driver aside from...

I think again, I think the 2 drivers we have, again, is we realize that the networking telecommunication industry is very price-sensitive. And we understand clearly through the Cinch acquisition that the aerospace, military, even though they're are going to have cuts within rubbers in what happened in the states, but we should have long-term viability, quality, delivery service. It plays a lot of greater factor with those customers and in the telecommunication customers, networking customers that we deal with. So again, that's why we have spent a tremendous amount of time with the Cinch, looking at how we can strengthen them. In addition to that, we feel strongly now with the acquisition of Powerbox, allowing our DC-DC converter group having the abilities to also sell AC-DC, that there's tremendous amount of opportunity within our customer base to grow that business. So we're pretty well set, I think, on both options. However, when it comes to focusing, I think there's 2 areas we're really focusing on now. One is any piggyback we can have with the Cinch that help us with Cinch, supporting the Boeings and Airbuses out there. And the second focus is on any competitors out in any marketplace that can help us with our overhead structure. Again, with the price demands we have out in the industry, there's no way we can meet those price demands internally. I don't think anybody can meet those price demands internally, and the only way you can do it is by consolidation in the industry. So again, focusing on Cinch family of products, and any competitor that can offer us opportunities to synergy, we will look at it.

And is the domestic market versus the international market a motivation at all, or is it wherever your OEMs happen to...

I think, again, you look at Powerbox, if you ask me a year ago, would you be looking at buying a company in Italy for power, I'd say you're absolutely nuts. What do I want to be in Italy for? But then again, once you look at the company, and they had -- I don't know. Powerbox was a part of the company that has 6 operations throughout Europe, and we were able to pick up the Italian group, 3 of my top 3 customers are located for power in Italy. And we met the group, and they were great people, and we felt that they could help us design products for American customers. So again, we just look for the best opportunity, and if that's in Asia or if that's in Europe or if that's in North America, we really don't care.

Thank you. There are no further questions in the queue at this time.

Thank you, Latoya. I thank everybody for joining our call. We do appreciate your time, and we look forward, hopefully, to showing better results next quarter. Thank you.

Ladies and gentlemen, this concludes today's program. You may now disconnect. Good day.