Good day. And welcome to the Bel Fuse Fourth Quarter [2014] Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to introduce your host for today conference Mr. Dan Bernstein. Please go ahead, sir.

Thank you, Charlotte. I would like to welcome you to our conference call to review Bel's Unaudited Preliminary Fourth 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 would like to read the following Safe Harbor statements. Except for historical information discussed in this call the matters discussed in this call including the statements regarding reduce lead times, Bel’s ability to offset the increase in labor -- direct labor cost in China, the impact of Bel’s new R&D center will have on Bel’s product cycle and on Bel’s response time to customers and Bel’s acquisition plans are forward-looking statement 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 statement are the market concerns facing our customers, the continue availability of sectors that rely on products, the effects of business and economic conditions, difficulties associate with integrating recently acquired companies, capacity and supply constraints or difficulties, product development, commercialization of technological difficulties, the regulatory and trade environment, risk associated with foreign currencies, uncertainties associated with legal proceedings, the market acceptance of the company 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 statement will in fact prove to be correct. We undertake no obligation to update or revise any forward-looking statements. That’s the end of the Safe Harbor statement. Results of the transformer and magnetic 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 will attempt to noteworthy inclusion of these acquired companies account for significant variance from prior periods. First, we will start with…

Thank you, Colin. Charlotte, can we open up the phone call for questions please.

(Operator Instructions) Our first question will come from the line of Sean Hannan from Needham & Company. Your line is open. Sean Hannan - Needham & Company: Yeah. Thanks. Good morning. Can you hear me?

Yes, we can hear you.

Yes, we can. Sean Hannan - Needham & Company: Okay. Great. So congratulations on the good earnings between the quarter. First question, want to see if we can get a little bit more color, in terms of demand environment that you’d seen within the December quarter and into date thus far in March. So in contrast to September, can you go through each of your segments discussed the demand trends that you saw for each of those, and then the extent that those continued to change thus far? Thanks.

I think for us, a good portion of our products now with the TRP acquisition. Roughly, 65% probably are going to networking, telecommunication market segments. As Cisco mentioned yesterday, they projected basically in networking where we supply one of their products in the hardware, that they see a 10% reduction from the next quarter. So, I think that it's too early to tell but we have to expect that we will see softening the same because Cisco is, as we would like to say, the 800-pound gorilla. And we don’t see much different from a lot of the networking companies at this time. Sean Hannan - Needham & Company: Okay. That's helpful. Dan, I was looking so if I could get as color a little bit more in terms of say, magnetics, interconnect, Circuit Protection in modules and didn’t know if there was additional color you can provide around that.

At this time, I don't -- I think that now it’s just so much because of the TRP acquisition that they control so much. Our aerospace, military business, which is probably roughly around 25%, we still hear very strong things from Boeing, one of the major player on the 737. And they are predicting I think they are going from 36 to 41 planes. Is that right, Colin?

Yeah.

So we did baked in. We do see increase. Boeing still predicting increases for next year, so that’s a strong sign. So military, aerospace --

Yeah. The Boeing number is scheduled to increase to 42 per month. This is on the 737 program by the second quarter of 2014 and so.

And that should help us. And the military, I think with the budgets and everything, it is so unpredictable what’s going to happened with the military. So, I think if you were to look, those are probably our three largest segments now. Sean Hannan - Needham & Company: Okay. Now in terms of -- in terms of your acquisition strategy, I mean it really help provide some growth years as well as the additional leverage on the OpEx. Are you folks currently positioned now where you can organically get to double-digit operating income in time, or how much help would be required through additional M&A as you look at your model today?

Collin, I would like you to take that one.

We certainly believe -- the way for us going forward is still traditional acquisitions. Lot of the product lines we are in, showing are in areas that are fairly flat and with not a lot of growth. And while we continue to come out with new products and pass the products, we don’t think we are going to get there fast enough. So we really need to continue to add-on products either, things that we are putting in our manufacturing facilities or go to our existing customers. So that's the only way we going to be able to continue to keep up a fairly plus rates. So we are continuing to focus, trying to run the businesses as best we can and milk what we've got. But we certainly do see the only way forward is to continue a fairly aggressive M&A program. Sean Hannan - Needham & Company: Okay. And on that front, can you elaborate a little bit on the opportunities that you're looking at from an M&A perspective?

I think because of our track record over the past, having five acquisitions over the past two years I think we are getting the opportunity to look at many different companies. Again, I think, we have been really somewhat focused on the connector area because we would like to diversify. We have so much evolved with the networking, telecommunication and we do believe aerospace and military is a market and an industrial market that we want to get involved with. So, I think we focus a lot on the connector side to support military aerospace. However, we can see products like TRP. If you ask me on a year ago that I want to buy an ICM company that support networking, I will say that would be the last thing on my acquisition list, but in reality it is probably our best acquisitions because of what it did to our core structure and our profitability. So, again, I think the only thing we really focus on, I don't think we want to go too flat on a box. But I think that makes, I think that’s very good value or even that can support REO connector our, connector, our aerospace, military we look at. Sean Hannan - Needham & Company: Okay. That's helpful. And then one more question here then I will jump back into the queue. So, rising wages in China have certainly been a challenge for or time for you guys as far as everybody else. You've done a great job in terms of the finding your own efficiencies and offsetting some of this. How should we consider the higher Chinese wage impacts in your model from this point forward? Is there a path toward a gross margin degradation perhaps that you are expecting, or should this continue to be something that you are able to offset? Thanks.

I think we are hoping with our best practices that we are implementing by combining the best practices of TRP and Bel that we should be able to offset any labor increases over the next 12 months to 18 months. In addition to that we are moving more of the operation to Western China. We have sent people into Vietnam and other local areas to investigate that. We know that, in our business you can’t stand still, so if we can’t automate the processes, we have to look for less expensive labors, so either moving more Western China or other areas outside of China. So I think, we are doing everything we can I guess to freeze labor rate that is it is today either through efficiencies or looking at lower cost areas. Sean Hannan - Needham & Company: Okay. Thanks very much for the color Dan and Collin.

Collin, do you want to add anything regarding that question?

No. I think the other thing to make sure is that we got to be competitive with our competitors. Now, if we are all, if everybody is manufacturing in basically the same geographical area then we should be competitive. But it does remain difficult, but I think we are doing pretty good job at the moment.

And also it should be noted with the acquisition of TRP, I would say in the market segment that we are supporting ICM, we are by and far the largest supplier by 35%, 40% and you would hope that we are so much bigger than our competitors that we should have tremendous economies of scale that should allow us to be the, I would think, most cost competitive of supplier out there. So I think we are so much confident over the ICM business over the next 18 months to two years. Sean Hannan - Needham & Company: Great. Thanks very much.

Thank you. (Operator Instructions) Our next question comes from the line of Mike Hughes from SGF Capital. Your line is open.

Yeah. On the SG&A line, axial items it looks like it was down or little over a $1.5 million sequentially, is the number from the fourth quarter good run rate to model into 2014 at the $10.6 million a quarter?

Yes. It is a good run rate. It’s fairly clean. Yes.

Okay. And then CapEx for 2014, do you have rough number?

It should continue where we are at the moment. I don’t see it changing materially. Now I just leave it exactly where it is right now.

And what would be a good book tax rate to use for ’14?

That’s a billion dollar question. We -- typically we would expect to be in the 13%, 14%, 15% range, percentage range, effective tax rate. But again we have picked up quite a lot of tax credits with different acquisitions particularly relating to North America. So they continue to keep the things like the credits we got now. So but I think the planning purposes, low-teens is a good place to have a number.

Okay. And then one last question for you, TRP was down sequentially in the December quarter? How should we -- I don’t think we have a lot of information on that given you haven’t owned it for that long? How does that typically look into the March quarter from revenue prospective?

It will be, we expect it, well, business is little soft as we sort of put in our announcement today. It’s off a little bit and I just explained a few minutes ago. We would expect that TRP business to be in line with that from the fourth quarter. What we had is, we had a real kick up in the third quarter TRP. It ran much higher than we expected and I think that seems to settle now and I think they are back to the regular run rate. They are -- in the fourth quarter they did run at the rate that we acquired them at so we would expect them to continue at about that level.

Okay.

I think the run rate we project is probably $15 million to $18 million, Collin?

Yes, yes.

Okay. And then if I could just sneak one more. So were some of the short term revenue softness you are seeing, just thinking about your operating model, what kind of impact does that have on the gross margin, can you still keep the gross margin at round 19.5% or would there be some degradation?

There should not be a lot of degradation. We have still got a little. We still got some efficiencies we are going to pull up. One of the issues we have to deal with is, in the first quarter we always have the Lunar New Year shutdown. So the factories are shutdown. So that usually gives us some additional expense and as we startup again after the Lunar New Year although we did get a very good return rate on labor this year. So we are quite optimistic about that but normally I would expect to, particularly in the first quarter to lose 1.5 to 2 percentage point.

And when you say return rate on labor meaning your existing employees, the percentage coming back this year was higher, so the training cost is lower?

Yes. Yes.

Okay. Thank you very much.

Thank you. (Operator Instructions) We have a question from the line of Sean Hannan from Needham & Company. Your line is open. Sean Hannan - Needham & Company: Great. Thanks for the follow-up opportunity here. So just trying to get a better sense of the modules business, incrementally from the current levels, do you expect much further degradation or is that kind of ramp down effectively done and perhaps we can see a steady-state sequentially from here. Any color around that and then kind of the follow-up to that. Can you update us on how you’re redeploying some of the capital that you would commit it to that -- to that customer for that business? Thanks.

Sean, we basically went on that group. We went from 55 million to 33 million to 13 million. We might have hopefully will get them very close to rock bottom. We feel very confident. We’re fortunate with TRP had a small modular group also and we thought that we could pick that up and now we add a substantial sales from 5 million to 10 million, probably starting within six months to a year. And so, I think we’re confident that we’re pretty close to rock bottom. And I would hope going forward that we would get back to you, 10% to 15% growth at least the next three years and get the group up back to -- We expect our groups be about 45 million, 50 million at least. And so basically, now we have the equipment, lot of equipment, we do have -- we use to add our factories for the jobs. So it’s not a complete dedicated operation. Sean Hannan - Needham & Company: Okay, that's helpful. And then lastly, can we get a little bit of color around the lead times you're looking at presently for ICM's and any additional insight in terms of Europe due to backlog?

I hate to say that the lead times are not profit at all. And that’s again with lead times, they are getting this short than you worry about the pricing pressure because people try to buy business. However, so our lead times, I think, should be very competitive based on our current backlog. And when I mean competitive, we think anywhere within 8 to 12 weeks. And I think what’s really been fortunate with the TRP, the way they manufacture historically as their lead times have been a lot shorter. So we had situations where customers are coming in and asking for product and because of our long lead times, we've been able to switch the customer over to TRP. And they’ve been able to pick up that business. So I’m pretty confident going forward and that lead time shouldn’t be a corporate problem with the two operations we have. Sean Hannan - Needham & Company: Okay. All right. Thanks very much for the color.

Thanks Sean. Appreciate your time.

Thank you. (Operator Instructions) And at this time, I’m not showing any questions.

All right. Thank you, Sean. We appreciate everybody joining us and hopefully everybody can travel. People in New York East Coast area, please travel safely and I wish you a safe drive home. And thanks again for your time. I appreciate it.

Thank you. Ladies and gentlemen that does conclude today's program and you may all disconnect. Everyone have a wonderful day.