Good day, and welcome to the Bel Fuse Second 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, Jamie. I would like to welcome everybody to our conference call to review Bel's second quarter 2012 results. Before we start, I'd like to hand it over to Colin Dunn, our Vice President of Finance.

Good morning, everybody. Thanks, Dan. Before we begin, I'd like to read the following Safe Harbor statement. Except for historical information discussed in this conference call, the matters discussed, including statements regarding the effects and cause [ph] of and the anticipated savings resulting from Bel's streamlining activities, the time required to implement such streamlining activities, Cinch's place in the aerospace market, anticipated changes in product offerings and the company's ability to support more effectively its growing international customer base are forward-looking statements that involve risks and uncertainties. Actual savings from the streamlining activities and the relocation from Vinita could materially differ from the amounts that the company has projected due principally to uncertainties associated with modifying existing approaches to operations. Among the factors that could cause actual results to differ materially from such statements are: the market concerns facing our customers; the continuing volatility of sectors that rely on our products; the effects of business and economic conditions; capacity and supply constraints or difficulties; product development; commercializing 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 the 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. And before we move forward, I just wish to apologize about the wrong telephone number in today's press release. Obviously, if you're on the call, we've got that sorted out. I'll move forward, talking about sales. Sales for the second quarter of 2012 were $73.2 million, it's down 7.5% compared to…

Thank you, Colin. Jamie, if possible, can we open up the call for any questions that are out there?

[Operator Instructions] Our first question comes from Chris Godby from Stephens.

First of all, could you possible break out the segment revenues for the quarter?

Segments.

Do you have an idea, Colin?

Yes.

Okay. For the modular group was $18,608,000; for the magnetics was $24,558,000; for interconnect was $27,367,000; and for fuses $2,688,000, which would give us a total of $73,221,000.

Great. And then next question. Could you go into a little bit more detail on the restructuring program? In particular, how should we think about how the costs will be spread out between 3Q and 4Q '12, the $4.1 million?

I think we're -- the plan is we're mending out -- the 4.2 plan deals with North American operations, and that's mainly with the Cinch operation in Vinita. And I would [indiscernible] at this time, we're trying to build of actual buffer stock. We have received a lot of orders coming in from Boeing, so that's affecting some of our timing. So I think it's too early to tell when people are leaving or when people are not leaving, but it's our goal by the end of the year that the operation should be totally moved to Texas.

I would think that most of it is severance and to get the people to stay on until -- while we want them and also it's part of the severance package. The incentives are for them to stay on through, mostly through end of the fourth quarter. So we expect the actual bulk of payments will be made in the fourth quarter.

Okay, fair enough. All right. And this was the second straight quarter of margin expansion quarter-over-quarter. Can you maybe talk about what your expectations are for margins for the remainder of the year?

Well, this part of the exercise towards really taking a very hard approach to overhead reductions. So we've got to get more costs out. While we still got fairly high maturity cost, there is a little bit of softening in the marketplace. It just takes a little while on material costs to flush through the system, and we're hopeful that'll help a little bit. But primarily, we're still -- the pricing is still not where it needs to be.

But from a margin standpoint, we're are going to be running at a certain period of time, 2 factories building the same product. So again, for the third and fourth quarter, our goal is to clean up everything as we can, and then start the beginning of next year fresh, and that's our -- hopefully we start back with substantially greater margins than we have today.

And again, the other aspect is going be the mix we've got. And some of the lower-mixed products have been down a little bit over the last quarter. If they come back strong in the later part of the third quarter or the fourth quarter, that will slow down the margin a little bit, but we can -- our approach is really more what ends up on the bottom line, quite frankly. And sometimes, if that's going to give us a lower margin, then were happy with that. But the bottom line is what really counts at the end of the day.

The next question comes from Hendi Susanto from Gabelli & Company.

First, could you provide business insight into inventories at your customer and distribution channels? And also what Europe looks like in the second quarter?

I don't think anybody's jumping up and down regarding Europe, that's for sure. I think again, there's so much uncertainty out in the market today. I mean yesterday, I guess UPS reported their earnings, and I don't think you can find a better barometer than UPS. And they see soft sales going forward to the second half of this year. Then you see Cisco laying off 1,300 people, and Cisco is our largest customer. So again, we are not overly -- you would say we're very pessimistic, I would say the next 6 months and at least until after the European situation and the presidential election is resolved. So again, we don't see any bright lights or anything shining into the beginning of next year most likely.

And then how about inventories at your customers and distribution channels?

I think -- sorry, Hendi, what was that?

Inventories?

Inventories? As usual, we don't have a huge amount of insight. But I think they're sort of fairly normalized at this point. One thing that we do have going on is some of the larger customers have put more emphasis on, well, hubs, inventory hubs in their factories, in their contract as factories, so that what we have in the marketplace today is a lot of the manufacturers have inventory sitting in the -- on their books but they're at their customers' factories. So that's in effect increase the inventory for most of us, I think. But when we have that in place, there's less incentive certainly for our customer to have inventory on their books. So that being the case, particularly for the manufacturers who we deliver to, particularly the processes, the manufacturing -- contract manufacturers in Asia, I think the inventory is down from where it might have been previously, and we're seeing a fairly strong demand. We don't do an enormous amount of business through the typical distributor channels, but we are seeing a fairly healthy demand through those channels. So that would tend to indicate that most folks aren't carrying high levels of inventory.

Okay. And then without giving too much detail about your potential acquisitions, would You give some insight whether you are targeting more of products in your core area or whether you're targeting to expand your product portfolio?

I think our goal -- as we said all along, we have a couple of goals. One goal has always been since acquiring Cinch, we felt that Cinch is a good footprint to entree [ph] into the aerospace military business with the recent acquisition of Gigacom allows us to move up the technology ladder. I think anything that can support the aerospace military business, we will focus on. The other area we spend a tremendous amount time is our DC-DC converter, which is considered our power division. Most power companies have the AC-DC to round out their product lines. Our customers have been requesting for the last 2 or 3 years, "Bel, you made DC-DC, why don't you make AC-DC?" So that's been a major focus for us. And then any acquisition that can help us with our overheads and where we see a great opportunity synergies, we always take a hard look at that company. So again, we're looking within the basket of products, only to add products that fit very nicely into that basket. And then again, we, I mean we branch out into our, what we call, mature Bel product line, and there's opportunities for synergies to make us a lot more cost competitive.

Okay, got it. And with regard to the operating cost saving of $4.2 million that you are targeting, could you give some breakdown where we would see that in terms of line item, whether it would be more in R&D or SG&A for example?

Colin?

Okay. It will -- most of it will come through cost of sales. It'll come through the labor cost. That's primarily labor -- manufacturing labor costs reductions. Plus some of them will come through overhead. But again, most of that overhead is manufacturing overhead, so it's all going to come through on the operating line and not through the G&A.

Okay. And then in light of some potential acquisitions in the near future and then also the share repurchase that you may engage, I mean, what would be the ideal cash balance -- cash amount in your balance sheet going forward?

I think, again, for us, I think we always felt that we had way too much cash. I would tend to think that the board has -- feels, again, I don't think we, if we found the right acquisition, I don't think we'd have a problem with taking debt on. I was looking at the past history over the past 8 years, in a down market that cash is king. I think our goal is to try to strive to have -- get down to $15 million or $20 million. And I think we would feel comfortable running the company with $15 million to $20 million on hand.

And one thing I should clarify. I think I wasn't clear before when I was talking about when we would have the expense. The cash outlay will be in the fourth quarter for most of the restructuring. However, the expense will be spread through the third and fourth quarters, but the actual cash will go out in the fourth quarter.

[Operator Instructions] The next question comes from Mike Cikos from Sidoti and Company.

All my questions were answered previously.

[Operator Instructions] The next question comes from Ted Moreau from Knight Capital.

Forgive me if you've covered this a little bit, Dan and Colin, but can you just walk me through the product -- new product timetable and what it might mean in terms of your margins and perhaps revenue contribution? Is this something that's coming in the next 1 or 2 quarters? Or are we looking out '12 or...

I think, again, from our standpoint, new product development, I think we're not going to see anything that's going to give us a major hit in the near 6 months to a year. I think again, we believe very strongly that we're focusing more in acquisitions for the growth of the company. The stuff we're doing today with Cinch and things that we're trying to do with Boeing and Airbus, generally, that takes anywhere from 4 to 5 years for traction, so that's definitely a lot longer perspective. But then again, we just signed a Boeing contract last week, and that contract was for 6 years. And our average -- historically, with the Ciscos, Junipers and the HPs of the world, we're gearing on quarterly to 6-month pricing. So again, to get to the margins that we're seeing at Cinch, we don't really see some substantial growth without acquisitions for probably 4 years. With acquisitions, again, we're really focusing on that, so we'd like to get that group up $100 million as quick as we can.

Right. And, Dan, is it fair to say though that the -- I assume you do accretive acquisitions but...

I hope so. No, but just being honest. With the Gigacom acquisition, because it was a technology startup, it wasn't -- I don't think it was accretive, but it was only $3 million. Then again, it gave us technology that allowed us to participate in a lot of the committees that are developing new cutting-edge products for the planes. So when we looked -- I would probably say that generally, I think with the interest rates 0.5% and $80 million in the bank, I would hope most acquisitions would be accretive.

Right. And would it be fair to say that between the acquisitions and new products as you would look out let's say, over a 5-year period or so. I mean, you would expect that your profitability profile, I'm sure you're doing things that are -- that's got positive rates of return so that your profit profile would gradually improve over this time period. That's what I would...

Our goal and the mandate that the board set for us is a bare minimum, our goal is to shoot for $0.25 a share. And that's what -- that's what we start just as a bare minimum. And I think generally, our bonus structure doesn't kick in until it gets above that number. And I think that's -- initially, that's what we're striving with all managers in a worldwide basis when we go through this analysis of saying what cuts we have to make, what cuts we can't make is basically we have to get this company to that point as quick as possible. And then we're -- hopefully our goal, again was, I don't know, psychologically, that's bare minimum, but I'd really feel comfortable if we got to $2 a share per year. I think is a reasonable profit for us.

At this time, I show no further questions. [Operator Instructions] And there do appear to be no further questions. I would now like to turn the call back over to you, Mr. Bernstein.

Thank you, Jamie. Once again, we're sorry for the confusion that we put out there. Again, I think we are very excited at this time with Bel. I think the buyback represents that. I think, hopefully, I'll knock on wood that we are hopefully should be announcing some acquisitions shortly, and I think you're going be very pleased on how this company moves forward. And thank you for your support during these difficult last 3 or 4 quarters. That's it.

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.