Good day, and welcome to the Bel Fuse Third Quarter 2013 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, Sayeed, and I'd like to welcome you to our conference call to review Bel's third quarter 2013 results. Before we start, I'd like to hand over to Colin Dunn, our Vice President of Finance. Colin?

Thanks, Dan. Good morning, everybody. Before we begin, I'd like to read the following statement. Except for historical information noted on this conference call, the matters discussed on this call, including the statements regarding further operating efficiencies and cost savings to be derived from the TRP acquisition, the accretive nature of the Array Connector Corporation acquisition and the timing of when that acquisition will become accretive to earnings and the implementation of price increases, 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 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 risk 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. Now moving to general comments. The results of the Transpower Magnetics business of TE, now known as TRP Connector, acquired in late March 2013 and the Array Connector Corporation, acquired in August 2013, have been included in our consolidated results, since their respective acquisition dates. In my discussion, I'll attempt to note where the inclusion of these acquired companies accounts for significant variance from prior periods. Sales. Third quarter 2013 sales were $101.2 million, which…

Thank you, Colin. Sayeed, we would like to open up the call for any questions people might have.

[Operator Instructions] And our first question comes from David Rold from Needham & Company.

David Rold on for Sean Hannan. Just wondering, during the quarter, how much of the revenue growth was tied to the price increases you were talking about versus a change in actual demand?

I would have to say that we haven't had the full effect of the price increases into the fourth quarter. So very...

Very minimal -- well less than -- I'd say well less than 2%.

Okay. And is there still headroom there in terms of price increases across the product lines? Or is some kind of as high as you can go?

I don't think there's much more headroom. The prices we put forth, again, weren't outrageous. It's just confirming that products that we sell we have to make a reasonable profit. I think anytime we have a price increase it really affects our relationship with our customers. Based on the industry, I think our customers somewhat accepted the price increases. But again, it's a very difficult task in this type of marketplace to ask for a price increases. And it's something we generally don't do too often.

Okay. So the increases that are coming are already in place. Now, you're just waiting for them to take effect? Is that accurate?

Yes. Because they're basically based off annual contracts. And they have contracts you negotiating maybe 1 month to 2 months before the contract ends.

Okay, got it. And then in terms of demand strength, what was the linearity of that demand? Was is it kind of consistent throughout the quarter? Do you have any commentary there?

No, I think, again, the big jump we had in our sales, I would say 90%, 95% of it came from the acquisition of TRP, from the sales we gained from them. So it wasn't a substantial increase in the marketplace.

Okay. Got it. And then in terms of the acquired businesses. How is the integration of Transpower and Array Connector going? And [indiscernible] on how you feel on how those businesses are doing?

We did a -- again, we had a transition agreement with TE for the past 6 months. The last step we had to do is remove ourselves from SAP and put their system on our system. That was completed 2 weeks ago and it went excellent. I think, so far we did a super job of consolidating TE, TRP with Bel, and that's 100% competed now, and we don't need any further transition services. Currently, at Array, we made many -- very little change, if at all. And the only thing we did is to reorganize the sales force so we have one sales force selling all our products. But we see very little synergy, initially, with Array, and pretty much they're our standalone company at this time.

Okay. And what is the timeline of kind of recognizing any synergy?

I think it's more from increased sales. And so -- again, we still -- I think the big thing that we'll see going forward -- again, Array only accounts for $10 million in sales. In the other hand, TE, TRP Connectors represent $75 million. We're in the initial stages of best practices, of manufacturing, how to take the best practices of manufacturing Bel in the MagJack area and see how we can combine that. I'm going through all our raw material vendors, how to streamline that. So we are projecting, if things do go well, over the next 6 to 9 months to see additional $2 million to $3 million in savings, with TRP and Bel coming together.

Okay. But for December, we should kind of assume flattish in [indiscernible]?

Maybe $100,000, $200,000. And that's more based off the transition agreement we. don't longer have to pay for.

Okay. So I guess in general for December, are you expecting any kind of margin expansion? Or are you expecting it to come down [ph] a little bit before [indiscernible]?

The problem we had with December is our -- generally, historically, the fourth quarter our sales are always lower than the third quarter. But we are, I think, somewhat confident that our margins and profits should be the same.

Yes, yes.

[Operator Instructions] Our next question comes from Lenny Dunn from Freedom Investors.

It looks to me like you've finally integrated things so we have a clean quarter that's easy to read, which I'm glad to see.

We're glad to see it also, trust us.

The acquisitions work well in a long-term strategy, but again, we're not Amazon and the market doesn't give us credit for some of these things. So if we can kind of just do little bolt-on acquisitions going forward, it would make for clean reading going forward. But certainly no complaints about the earnings. They're terrific.

Our next question comes from Mike Nery from Nery Asset Management.

Just a couple of quick questions. TRP, how is it comparing year-over-year in terms of revenue versus -- I know you didn't have it last year, but what kind of revenues did it do in the quarter?

We had a much stronger revenue with TRP. And the only problem is we don't know if it came at Bel's expense. TRP has a lead time roughly of 8 to 10 weeks. Bel Fuse's lead time is 18 weeks. So we did persuade some customers that were upset with our long lead times at Bel that it might have made more sense to go to TRP. So, again, that sales are up from what was projected to us, probably 10%, 15%. We don't know if that can continue. But so far, we've been very pleased with the sales at TRP, surprisingly pleased.

Okay. So last year, if I recall, TRP did roughly $75 million in revenue, and this year is 10% or so ahead of that, is that something...

It look -- for the quarter, we did $25 million for the quarter. But I think we just had a tremendous quarter from them.

All right. Okay. And in terms of -- can you tell if there was a lot of preordering in terms of people trying to get their orders in before the price increases that went into effect?

No. I don't think that's effect at all. I don't -- I'll be surprised if that number is at all significant.

Okay. And then the price increase you put through, if I recall, it was roughly 3% to 5% on a volume basis across all, is that about right?

No. Just on the -- I think most of our price increases came in the MagJack ICM, which is the magnetics, which accounts for probably $75 million to $80 million of sales without TRP. And again, it's -- across-the-board it's 3% or 5%, but what happens is, historically, what we did in the past, we did it that way. This one we had some we decreased price and others that we increased price by 10%. So the problem that we have today is we don't know if we've lost business or not with the price increases. But if you average that across-the-board, it would fall into the 3% to 5% range.

Okay. And do you have a sense -- so we'll see a bump up in terms of margins partly from that, but do you have...

Only if the sales remain strong and our customers have no other place to go.

Right. But in terms of the rapidity of your cost increases, is this something that we'd need to look at where your margins would start deteriorating again in about 1 year or 6 months? Or how long do you think will this hold...

There's so many different variables that affect it. The RMB in China, the labor in China, how much cost savings we can get out by the combined companies. It's just -- how the marketplace changes, what new technology comes out. It's just -- whatever number we gave you, we wouldn't feel comfortable because it's just -- there's just too many balls up in the air at the same time.

Yes. Okay. And your stock buyback, the dollar amount, I can't recall. Did you buy any shares in this quarter or not?

I think...

No. We haven't bought any shares since January.

And we don't -- I think, we used up all the money we had, and the board hasn't...

We had a buyback of, I think, it was $10 million, and we used the last of that up in January. And the board has not reapproved any additional buyback at this time.

Okay. And it looks like we have $12.5 million of short-term debt now. Is that good rates, I guess, it was available and so you took it?

Yes. And that was just a matter where we had -- we've -- as you can see, we've got plenty of cash. It was just where the cash was at the time we needed it. And that was purely that. And we intend to pay that back, all things being equal, within 12 months.

And our interest rate is?

Low.

And last question, you talk a bit about acquisitions in the letter. We have roughly $30-some million in net cash now in the balance sheet. And you've talked before in the past that you'd be comfortable using that on acquisitions. Can you talk a little bit about the pricing environment? TRP, seems like it was a great deal. On the other hand, prices for lots of other assets seems to be going up pretty dramatically. What are you guys seeing? Are things available that you're interested? Or is it not like that?

It's -- I think we're seeing, for example, aerospace, military, a very high multiple for that arena. Our arena where -- has historically been to the networking, telecommunication. We see that selling at 50%, 60% of sales. Ericsson got out of the power business, Power-One. So I think it's more of the market you want to participate in. So there's no hard fast rule. We know there's still private equity people out there that sometimes tend to be drunken sailors. However -- so I think it just depends on where the products and when the markets you want to support. And again, aerospace, military, definitely are much higher multiple than companies that are supplying the networking industries.

We have a follow-up from David Rold from Needham & Company.

Just wondering what you've seen in terms of demand so far this quarter, the first few weeks? At least that you can comment has that held up? In terms of...

It's held up pretty steady. I think what happens now is I think people are going to start panicking about Chinese New Year. So we would hope that they place their orders very quickly so they get in the pipeline. Historically, if you start placing orders after the New Year, Chinese New Year, Chinese New Year is going to bite you in the ass. So again, we should have a -- I think our backlog should be strong, because generally people do put in orders protecting themselves after Chinese New Year, which is probably -- it is in the beginning of February when it's done.

Okay. And then just lastly, can you just comment a little bit on how the Cinch, Fibreco and Gigacom businesses are performing?

Fibreco is doing very well. Cinch, we probably, I think, got most of all the problems with the move behind us. Our relationship at Boeing is improving everyday, with better shipments and deliveries. With the Gigacom and the new technology of fiber, we're participating a lot more on committee meetings. I think we're very fortunate with the acquisition that gave common[ph] fiber, it gives us tremendous amount of knowledge and expanded [indiscernible] going forward. In addition to that, our relationship we had with Radiall, which is the standard that Boeing's using for most of their planes for connectors, the EX,P, that has given us a tremendous amount of visibility. Again, however, because we're supplying aerospace and military, we know that it's a long haul. And we really won't see substantial sales increases for 3 or 4 years. But we are very pleased with the groundwork that we have amongst those companies.

[Operator Instructions] Gentlemen, I am showing no one in queue at this time.

Thank you very much, Sayeed. And we'd like to thank everybody for their calls. And once again, we're very pleased to have, I think, very positive results. And we look forward to maintaining them. Thank you for your time.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.