Good day, everyone. And welcome to the Bel Fuse Incorporated First quarter 2018 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Dan Bernstein, President and Chief Executive Officer. Please go ahead, sir.

Thank you very much. Joining on the call today is Craig Brosious, our Vice President Finance; Lynn Hutkin, our Director of Financial Reporting. And before we begin, I'd like to ask Lynn to go over the Safe Harbor statement. Lynn?

Thank you, Dan. Good morning, everybody. Before we start, I would like to read the following safe harbor statement except for historical information contained on this call, the matters discussed on this call, such as statements regarding future acquisitions and increased labor cost in the PRC, our forward-looking statements as described under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Actual results could differ materially from those 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 difficulty; 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; our ongoing evaluation of the consequences of the U.S. Tax Cuts and Jobs Act; 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. We also may discuss non-GAAP results during this call, and reconciliations of our GAAP results to non-GAAP results have been included in our release. I would now like to turn the call back to Dan for a general business update.

Thank you, Lynn. Before going through the financials, I would like to provide a brief update on how the businesses did from an operational standpoint this quarter, and what we see going forward. Overall, we are being encouraged by the continued growth of our backlog, which reached $178.3 million as of March 31, 2018, representing a 29% increase from March 31, 2017, level. We believe our top line has finally turned around as gain in our backlog is now translating into sales. Following 9 consecutive quarters of year-over-year decline, this marks the second consecutive quarter with year-over-year sales growth. Sales during the first quarter were $118.3 million, up 4% from the first quarter of 2017, led by sales growth within our Magnetic Solutions group of $3.3 million and our Connectivity Solutions group of $1.2 million. Sales of Power Solutions and Protection products were the same as of first quarter 2017 levels. Despite a $1.6 million decline in sales related to the previously divested NPS business. When the sales have increased during the first quarter of last year, our margin and bottom line were unfavorably impacted by several factors. The continuing weakening of the U.S. dollar, we're up to local currencies where we manufacture our products created a downward pressure on our margins during the quarter. In addition, minimum wage increases in the PRC and supply constraints related to certain of our purchase components were also factors, leading to higher costs. Also, our Power Solutions business continues to have a negative impact on our bottom line. Our major focus has been to bring this group back to profitability, and we're doing everything possible to accomplish this goal. This restructuring effort initiated in late 2017, equated to $1.2 million of our annualized cost savings, and we begin to realize this benefit from…

Thanks, Dan. To provide a quick recap on sales, sales during the first quarter were $118.3 million. By geographic segment, North American sales were $59.5 million, Asian sales were $38.6 million and European sales were $20.2 million. By product group, Connectivity Solutions sales were $42.9 million, Magnetic Solutions sales were $38.2 million, and Power Solutions and Protection sales were $37.1 million. Gross profit margins declined to 17.9% in the first quarter of 2018 as compared with 20.6% in the first quarter of 2017. This was largely due to unfavorable exchange rate fluctuations related to the Chinese renminbi and the Mexican peso, which essentially increase the operating cost at our factories in those countries by approximately 8% over the last year's first quarter. We also had government mandated minimum wage increases take effect at one of our factories in China at the beginning of February. With regards to material costs, we've seen upward price pressures in the first quarter due to the continued supply constraints on certain purchase components, such as resistors, capacitors as well as increased pricing on certain commodities including copper. Our selling, general and administrative expenses were $20.7 million, or 17.5% of sales as compared with $21 million, or 18.5% of sales in the first quarter of 2017. This decline related to lower legal and professional fees of $900,000 and a decrease in depreciation and amortization expense of $200,000, largely offset by higher foreign exchange losses of $500,000 and increased salaries and fringe benefit costs of $300,000 compared to the 2017 period. On a go-forward basis, we would expect SG&A to run between $20 million and $21 million per quarter in the near term, barring any significant fluctuations in foreign currency. As a result of these factors, we generated income from operations of $437,000 in the first quarter…

Thank you. Can we open up the call for any questions people might have, please?

[Operator Instructions] We'll go first to Hendi Susanto with Gabelli & Company.

Dan, I have a question. How much exposure to raw materials that may potentially affect -- be affected by the tariff proposals?

To be honest, we've been listening to all the calls from our competitors and people out in the field. And at this point, nobody has been making any comments. They are all in a wait and see, so it's impossible for us to make a determination of how the tariffs are going to affect us. I think people are more concerned now with the long lead times of some capacitors and resistors and some semiconductors that have stretched out toour lead times of over 52 weeks. And then they had some very big price increases.

Also price increases have already taken places in the capacitors and resistors that you mentioned?

Yes, anything that has -- anything that stretch out long lead times, prices are going up, yes.

And then, theoretically, if there are increases of raw material costs, how fast can you pass them onto your customers?

Not as fast as I would like. In our distribution channel, it's substantially easier for our major OEM customers we have annual contracts, so we have to review it during our contract period. But it's something that we have had some price increases over the past couple of months. And when the opportunity comes, we are evaluating the cost of what the market allows.

And then, with regard to the strength in Magnetics, should we expect that to continue?

On the Power Supply group?

Magnetics…

I think we had very good growth. I don't think we can maintain that growth for the balance of the year, but not to that higher level.

And then, I think you seem enthusiastic again with regard to finding acquisition targets. How is the pipeline now?

The pipeline we have, I would think, we're looking at -- we have six NDAs signed and anywhere from $50 million of revenue up to $1 billion of revenue. So again, we are looking at all different types of companies.

[Operator Instructions] And we have no further questions at this time. I'll turn things back over to you for any additional or closing remarks.

I would have to say that's the easiest conference call I've had in my life. So thank you very much. And hopefully, we can improve the bottom line next quarter and also the top line. So thank you for your time.

And that will conclude today's conference call. Thank you, everyone, for your participation. You may now disconnect.