Good day and welcome to Bel Fuse First 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, Bel's President and Chief Executive Officer. Please go ahead.

Thank you, Latoya. And I would like to welcome, everybody, to our conference call to review Bel's first quarter 2013 results. Before we start, I would like to hand it over to Colin Dunn, our Vice President of Finance.

Thank you, Dan. Good morning, everybody. I'll start by reading a Safe Harbor statement. Except for historical information contained in this call, the matters discussed in this call, including the statements regarding the impact of manufacturing efforts on overall operating expenses, future operating expenses, the ability to reduce those expenses, the timing of when restructuring efforts will result in cost savings, the timing of price increases, the ability of Bel to implement additional cost savings in the future, the accretive nature of the TRP acquisition, and the timing of when benefits from that active transaction can be expected to materialize, 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 macro 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 originally acquired companies, capacity to supply constraints or difficulties, product development, commercializing or technological difficulties, the regulatory and trade environment or 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 risks and uncertainties, there can be no assurance that any forward-looking statements will, in fact, prove to be correct. We undertake no obligation to update or revise any forward-looking statement. Now moving to our comments. First off, I'll start with business acquired during 2012 and 2013. Bel completed the acquisition of Gigacom based in Sweden in March 2012, Fibreco Limited based in the U.K. in July 2012, and Powerbox Italia based in Italy in September 2012. The results…

Latoya, if possible, can we open the call for any questions people might have?

[Operator Instructions] We have a question from Sean Hannan of Needham & Company.

So, Dan and Colin, I was looking to see if you could provide us a little bit of color this morning around the pricing environment, and particularly, if there's any focus you could provide on ICMs?

All right. Currently, our lead times have been stretched out to 18 weeks. And the problem that we're facing is we do have product in that 8-week lead time that have low margins. So our concern now is, it's historic in our industry when lead times stretch out, it's always an ideal time to increase price. And if you're going to build product, you want to build product with good margins. So our hope is that if we can increase price, hopefully we get our lead time back down to 12 weeks. And again if we do increase price that will give us the flexibility that we have to increase our labor price to attract more work as we can do it. So at this point in time, I think our circuit protection product line, our passive connector, our ICMs have longer than standard lead times. And that's in the range of the 17 to 18 weeks.

Okay. And so in the release that you've provided, in being able to see a lot of these increases by August 1, so that's really across your product portfolio?

Yes, on those 3 major products. And then again we focus -- in our industry, we tend to focus more on lead times when it comes to price increasing and almost, I hate to say it, the bill of materials. But historically, again, when lead times are stretched out, it does give you a lot more flexibility with the customer in regarding your pricing structure.

Now would you be able to implement similar types of price increases for the recently acquired Transpower business, number one? And then kind of as a follow-on to that because I believe that is slightly better margin business, and so looking to see if you'd be able to build on that.

Again, if products have good margins, it's not our intention to increase price. Our focus on -- it's really on low-margin product, and that's what we're focusing our attention. In the past, we have done across-the-board 5% price increases. And after '12, we realized that wasn't the best idea. Again we really have to be able to build product that has good margins, and that's what we're focused on. So back to your question, if TRP has products that have good margins and we don't foresee any price increases.

Okay. And then next question. In terms of the modules in the Power business, can you update us on what you're seeing there today? Highlight, perhaps, any notable OEM wins, if any, or new activity underway. Now you have really some more substantial scale, any color on how that's unfolding would be helpful.

Yes, I think -- I really don't like to give names. But for example, in the power business, our sales are up -- hold on 1 second, I'll give you a better idea. Our sales are up for power -- hold on, let me see, is up about $1.2 million. So we're seeing overall sales growth in power. In addition with the AC to DC that we brought into it, that's up $936,000. I think -- I'm sorry, that's up about $700,000. So we are seeing some good benefits from power. The big problem we have on the module side, in more of our CE contract manufacturing side is that the hit we took is pretty big. They're both substantial customers, and it's tough to make up for that. But one thing, we just got an order, our first order from a robotic vacuum cleaning company. That could be $2 million or $3 million. We are looking at other companies in the smart grid area as really good possibility. So I think by the end of this year, I think we will pick up maybe 50% to 60% of those sales we lost, and that's just a ballpark figure. And if those 2 customers can come back, then we'd have larger sales.

[Operator Instructions] We do have a follow-up question from Sean Hannan.

So, Dan, if I could also now just follow-up on the outlook within your Cinch business today, you have the transfer that had disrupted a little bit of the manufacturing there. So just wanted to get an understanding of how some of that business may come back based on kind of what had already been, perhaps, some pushout. And do you recapture some of that demand? And then the general demand outlook, any detail there would also be helpful.

From what everything we hear about the aerospace industry, with India and the Far East and the Middle East, and looking at Airbus and Boeing, we still believe that the commercial aerospace business is very strong. However, you have this tremendous amount of uncertainty with the military business. So however, we -- as you know, we are extremely committed to the future growth of the company is to focus on Cinch and better bringing in products for them. The problem that we did have is because we didn't execute the move as well as we thought we should have. Some of our customers had to bring in product from other competitors. Now we're hoping we get that business back, but we're not positive. But I would be surprised if we don't regain 80%, 90% of pushback orders that we had. So we are very still very bullish. We just have to get through the storm very quickly. Again, we are -- there's no question we are extremely disappointed with our performance on the transfer of this move.

Okay. That's helpful. And then the last question I have here might be a little bit more specific toward Colin. But if I back out the impacts that you had to margins there with the startup costs, I look at, probably, kind of a pro forma 17% gross margin. So wanted to confirm if the thought process is accurate. And then, separately, as we look to the remainder of the year, considering that there is still restructuring benefits by the time that we get to kind of more a full run rate in September, in the September quarter, as well as what should be accretive coming through TRP, is there any reason why we shouldn't be able to see a 20% gross margin quarter, or is it too early to tell?

I don't think I'm going out on a limb in saying, no, there's no reason why we -- into the third quarter we shouldn't have a 20% margin. We've got -- Cinch will come back, and we'll get our margins where they should be. Obviously, in the second quarter, we're going to be impacted by the -- particularly with the -- the business, by the way, we renamed the business. We're now calling it TRP Connector, and that's the business name that it's operating under. So we've got approximately 6 to 8 weeks in this second quarter, whereby, we don't get to book any of the profits because you have to mark up the inventory that they had, and that goes against the purchase price, that's against our P&L. So I think by the end of -- pretty much by the time we get to June, we'll know how we're doing as we go into the third quarter but not -- back to your question, I would feel quite comfortable with the 20%.

And at this time, there are no further questions in the queue. I'd like to turn the call back over for closing remarks.

We appreciate everybody joining us on this call, and we're looking forward to showing better results over the next 2 quarters. Thank you again.

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