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

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

Thanks, Dan. Good morning, everybody. Before I start, I have a rather lengthy Safe Harbor statement, so bear with me if you would. Except for historical information in this conference call, the matters discussed, including any statements regarding the future impact of restructuring charges taken in June 2012, the timing of the closing of the acquisition of the Transpower magnetics business of TE Connectivity and the parties' abilities to satisfy all conditions of closing with respect to that acquisition, the impact of that acquisition on Bel's ICM business and sales, on Bel's cost structure and on Bel's competitive position. The expected accretive nature of that acquisition, the impacts of the Powerbox acquisition on the future growth of Bel's AC-DC power transformer business, the future revenue of Bel's AC-DC power transformer business and potential contribution of fiber optic products to Bel's future operating results, the potential growth in the Bel sales in the aerospace markets, the anticipated effects of the 3 aspects of Bel's growth plan on Bel's ability to achieve near-term improvements in profitability, on Bel's competitive position in the high-volume commodity product components, on Bel's technology base and on Bel's ability to expand its portfolio of non-commodity technologically advanced components and the potential for non-commodity technological events components to become the primary driver of Bel's future sales and earnings 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 who rely on our products; the effects of business and economic conditions; difficulties arising -- difficulties associated with integrating recently acquired companies; capacity and supply constraints or difficulties; product development; commercializing or technological difficulties; the regulatory and the…

And I'm going to turn it to Sharon to open up questions for us.

[Operator Instructions] Our first question is from the Zach Larkin of Stephens.

This is Chris Godby in for Zach. I guess first of all, on Transpower, how should we think about the revenue impact of that business in 2013. I know that they had about $75 million in 2012. Is that a fair number to think about for 2013? How should we think about that?

We're hoping $75 million is a good number, yes. However, what we don't understand that we are buying a competitor, how some of the customers might react. And so far, we have got pretty strong feedback that they're pleased with the consolidation in the industry. But again, we are targeting that $75 million and hopefully, we shouldn't lose too many customers. And the customers we would lose are customers that only have us and Transpower as the source and they might feel that they have to pick up another source to replace one of us.

Understood. That's good color there. And then also, how should we think of the margin profile of Transpower relative to Bel?

That one, up to Colin.

Thank you. Now we're -- from the diligence -- due diligence we've done and obviously, the numbers we pulled together, we expect their numbers to be somewhat similar to our numbers. For that business, their business is primarily integrated connectors and we're all in this business together. We've got the same labor costs, we've that the same material costs, and although we, at this time, don't know specific selling prices in the aggregate, we've got -- we understand what the numbers are, so we would expect that we're going to have very similar numbers where we hope to. You want to protect us?

No. I think, again, looking at the purchase price, we bought the company for the revenue that's there. I think it's safe to assume it's definitely not a home-run business and it's more of a single and a double. What we're hoping to do, within 6 months, with certain synergies and purchasing power using manufacturing efficiencies, looking at of the overhead structures of both companies, we're hoping to make it a good profitable business for the next 2 to 3 years. But I think at this point, it's -- the only thing we can say now, it's only accretive, but I think initially, it should take it 4 to 6 months until really find out how it's going to add to the bottom line. The only thing that we can say very profitably with our business is a lot stronger, substantially stronger with the Transpower that it was without Transpower.

Great. And then so I guess thinking about that, and so should we assume that the business should be accretive for the full year FY '13 but maybe slightly dilutive during the first half, is that maybe a fair way?

No, I think our goal is it should be accretive since day 1.

Since day 1.

Yes, but basically, I'm sure you're thinking in your mind about modeling purposes. We -- basically, from day 1 of Q2, it should kick in. The purchase price is really not going to be much goodwill. So it's going to be a -- you're not going to have that to worry about. So basically, the total purchase price is for assets we're buying.

[Operator Instructions] Our next question comes from Sean Hannan of Needham & Company.

So just to follow up on the Transpower acquisition and you had some comments earlier about your -- about the customer base and sourcing arrangements. Just want to get some clarity, how much of your ICM customer base today is actually exposed to only you and Transpower as that sourcing arrangement?

I would probably say, again, probably only maybe 10%, 15%. And I think maybe that's a pretty aggressive number. It could possibly be less than 10%. The problem you have, Sean, is -- what we can't really define very clearly is what part numbers are we -- well, I don't think there's many customers where it's just us and Transpower. But there might be certain part numbers where it's us and Transpower, and that's where the confusion might come in with the customer.

Okay. And did you still plan on perhaps going down the road where there could be a separation of your products and parts versus Transpower, so some further disruption is -- doesn't materialize on customers?

No, our I think our goal initially is to have separate -- 2 separate companies. It's our understanding from our customers if we can maintain the 2 different manufacturing companies, the 2 different part numbers that then they will not look for another source. So our intention is really to focus on bringing each company out from a manufacturing efficiency standpoint and then how best to use our vendors and we think there should be a substantial opportunity from cost savings there, that we don't have to combine both operations. Now again, within 6 months or a year, we find out that our customers are looking for a third source or second source, then we have to reevaluate it. But initially, our intention is to have 2 manufacturing companies with 2 separate part numbers and 2 -- and 2 different company names.

Okay. And then if you can just comment on what the lead times are within that ICM product category today.

Sean, you're such a character, aren't you? Today, it could be changing very rapidly because of the Chinese New Year, so there's no question before Chinese New Year that you do lose both companies. Anybody in China loses work for us, so historically, before Chinese New Year, lead times do stretch out from anywhere from your standard lead time from 8 to 12 weeks. Now because of Chinese New Year, from 12 to 16 weeks. And the key would be on the first 3 or 4 weeks back, how much of the workforce can you bring back and can you bring back more. So we really won't get the visibility on the lead times until 3 weeks after Chinese New Year. However, now we are hoping that we do spend a lot of time with our customers in September and October, telling them that it should be wise that during this time, they develop buffer stock and that they protect themselves and hopefully, time comes, they might listen to us.

Sure, Dan it's helpful. Actually where I was going with that I was looking to see if I can compare where these times are, these lead times are today versus kind of similar period last year as we were about to enter Chinese New Year.

I think it's probably -- just roughly about the same time. I think it's just, again, when you lose 500 people 2 weeks before Chinese New Year and then you jive back, fill it with overtime, it does get a little confusing. So we're looking at our backlog chart, it's about the same as last year for ICMs so our lead times are going to be the same.

AC-DC is up a bit.

Okay. And then last question here. So you certainly have been building some scale around your Cinch business adding to that. You put some comments around your press release in looking to really grow the exposure to Military and Aerospace. So I was looking to see if we can get a little bit more clarification there if you can help us walk through what the exposure of Military Aerospace is today. And then to what degree are you involved in program qualifications? Are you seeing a lot of activity today? How do we think about that? And then -- the visibility in terms of growing that into -- through to your business over the next 5 years?

Okay, I think the first thing is again, what are we doing about the business today to be competitive? And I think that we will adjust that with how we've streamlined the organization over the past 12 to 18 months and what we're going to finish up with in the first quarter. So we think that we do have a pretty low cost model and that we took out as much fat as we can. Then we adjust ICMs, the integrated connector modules, a major product over the past 5 years has faced tremendous price pressure over the past 2 years and the sales have come down. And with the sales coming down the profits have come down. So we think again, with the addition of Transpower, that should be come back to a substantially more profitable business than it has been over the past year and that should remain profitable for the next 2 to 3 years, we hope. In addition to that, I think the thing that you jumped over, Sean, and I'll be remiss not to mention it is the Powerbox acquisition where again that we took DC-DC converters. And within the 6-, 7-year period, we made into a $50 million business. Now we feel that we have the customer base well established, that we're well respected in the DC power industry that they'll be more willing to look at our AC-DC portfolio. So then again, the second or third year, we're looking at starting getting substantial sales there and hopefully, by the third or fourth year, hit $30 million to $40 million. So now we get to aerospace military where again, I think we just at the infancy stage for us. We're in the process now to reorganize our whole sales force, add Cinch to address…

I'm showing no further questions at this time. I would like to turn the conference back over to Mr. Bernstein for closing remarks.

No one has any further questions, we do appreciate you joining the call. And I think from our standpoint, I think this is the most positive we've been at Bel in a long time. Generally, when we look at the game plan, historically, our game plan has been 3 or 4 months, but I think we feel very comfortable that we have a plan that can really support Bel for the next 5 years on top line and bottom line growth. So I think we're, hopefully, knocking on wood, that we can deliver on these acquisitions and hopefully, we can have some additional ones that can support this even further. So again, I think we're kind of pleased with ourselves that the future does look pretty bright for us. So hopefully, again, I appreciate your call and lending us an opportunity to speak to you. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day.