Good morning, everyone, and welcome to the LGL Group Full Year and Q4 2013 Earnings Report. [Operator Instructions] This call also has a visual PowerPoint component in addition to the conference call. To view the PowerPoint, please click on the Join the Meeting link you received in your invitation and included in the press release announcing today's call. [Operator Instructions] And it is now my pleasure to turn the conference over to the company's Chief Financial Officer, Mr. LaDuane Clifton. Please go ahead.

Good morning, and thank you for joining our call today. With me is our President and CEO, Mr. Greg Anderson; and LGL's Vice Chairman, Michael Ferrantino. We prepared a slide presentation for your reference that may be viewed as part of today's web conference. The presentation materials are also available on our website, which is www.lglgroup.com. Please locate these and use them as a reference for today's call. This call will be recorded and will be available for playback later today or tomorrow on our website. Other financial information and recent press releases are posted on our website as well. Please note that our comments are covered by the Safe Harbor Statement. [Operator Instructions] At this time, I would like to introduce Mr. Anderson.

Good morning, everyone, and thank you for joining our Fourth Quarter and FY 2013 Earnings Call. I'll start, if you take a look at Slide 13, I've just got a couple of slides that help background the company. From a snapshot perspective, we've been around a long time. Our 2013 annual revenues were just at $26 million. We got a good mix of in- and outside the United States. Stock price ranged over the 52 weeks of $5.20 up to $6.50. Market cap runs at right under $15 million. Cash and cash equivalents are under $9 million, and we serve a very large market. LGL's subsidiary, at present, is MtronPTI. And it's a B2B OEM kind of business, really serving communications for both Internet, as well as Aerospace and Defense. We've got a nice balanced demand between about 2/3 Aerospace and Defense and about 1/3 Internet communications. Our IP really centers around our crystal technology, really getting into what's called low noise oscillators and our, really, our higher frequency filtering capability. We've got a nice platform. It's global, we have multiple U.S. sites, some international sales locations and supply around the world. And we do have in India manufacturing presence. It really gives us some advantages for cost, especially in the performance product end of our market. Our margins. We can protect those really by staying in sort of this high-performance, high-value, high realm [ph] kinds of products. We strive for long product life cycles, with repeat revenue streams. And we've got a management team with a good experience based around supply around the world. Our growth opportunities. We really focus on these long-standing relationships that we have with our large OEMs, these industry leaders. And of course, we're always after share gain opportunities as we develop new products and…

[Operator Instructions] We'll take our first question from Hendi Susanto.

Greg, what is your current expectation on software-defined radio in terms of timing of sampling by customers in your shipment and outlook for 2013? And it will be great if we can learn like how many customers are evaluating your software-defined radio products.

Good question, Hendi. I know I've talked a lot about, in these calls, about our software-defined radio offerings. I would say at present, we have sampled, I'm going to say, maybe not quite a half dozen, maybe 5 specific applications with several more on the drawing board today that are variance of the initial samples that we have in the marketplace. With confidence, we're getting good feedback on the performance. It's difficult to predict revenue. And I wish I could, but the time it takes for these products to get through the qualification and the incubation period and gain the clients' confidence into things that I would probably talk about in this call, I mean it's no less than 1 year, and sometimes it can be 3. And so at this point, we do expect some impacts in 2014. I would say that I'm not going to quantify that as being notable at present.

And then in light of healthy growth in the commercial Aerospace market, would you be able to share percentage or the amount of revenue coming from Aerospace and how was the number in 2013 compared to 2012?

So I'll verbalize that. Yes, I can Hendi. So I mentioned that our company is about 65% Aerospace and Defense. And I would expect, of that 65%, 20% to 25% is commercial avionics. We certainly saw a double-digit growth in that in '13. And we've just got strong backlog again for '14. So and that's split largely between radio and radar communications for things that fly, as well as this flight controls kinds of applications for our timing devices. So it's an area that we're certainly focused on. We do a lot of prototyping. We've got good client positions, and we are growing. I would say we're growing that segment equivalent to what that industry overall is growing.

And then LaDuane, how should we think of operating expenses in 2014, considering that -- considering the benefit of the restructuring in Q4? The restructuring will supposedly reduce your operating expenses by 10%. I'm wondering how much of that saving may go to reinvestment and how much is like pure reduction? Furthermore, how should we think of gross margin in 2014?

Okay, thank you. Operating expenses, we were on track and did reduce probably a little better than 10% of our operating expenses based on the run rate through Q3. Coming into '14, of course, that will improve. We will reinvest some of those savings as an example, the addition of Conrad Jordan, which is notable to improve our or lift up our R&D efforts. But I still believe that we'll end up being at a 10% reduction, so it's an improvement of almost $2 million to operating expenses as we go into 2014. In terms of margins, gross margin will benefit as well from the restructuring. But frankly, most gains in gross margins will have to come on higher volumes. We've already, as Greg mentioned, been operating pretty lean. We had 26% gross margin in '13, which was flat versus '12. And so we've been managing that as well as we can. Going into '14 we might see some gains, maybe a few points above 26 perhaps. So -- but that's going to be tied primarily to volumes, I believe.

Okay, Greg. You have been talking about sales opportunities in India for quite some time. May I inquire what markets you are targeting, the current status and expectation for 2014?

Most of it is defense-related. Indirectly, of course, we do business as avionics, whether the Boeings and those folks are selling airplanes to the country of India. So, I don't know that I would call that quite so much indigenous content. So most of our indigenous content is really at this time, in the defense side, we are continuing to work on the offset opportunities with our major OEMs, to provide them some relief in that regard and we hope that, that could end up leading us to some share gains. So it all ends up, frankly, as goods into that country, really between some defense and certainly some avionics as well.

Greg, would you be able to share some new products that are in your R&D?

I'll -- we're -- it's probably a little bit early, but -- on some things, but we are working on some very sensitive, we'll call it G-sense and vibration sensitive oscillators, and I'm not going to quantify that for you other than the market potential is large compared to a company like ours. And really what that would do would enhance things like radar in things that might be moving around, so if airplanes or UVs are moving around and they're really trying to get a clearer image, the noise of the oscillator, it's just extremely inherent to the value add that the performance of the radar can see. So we've got a couple, 3 offerings there that we're, I'll call it looking at strongly for a large investment. A number of new filter offerings as well. We have one that's called switched filter banks. We actually have begun the sampling of that and essentially, you're getting into the sort of high-power kinds of filtering in, a lot of times, things that fly as well. And so that market potential looks real as well. And we've got that technology available for sampling. So those are probably 2 of the bigger ones at present, besides the number of the tunable filter offerings that we have and are working on.

Okay. And then my last question, would you be able to share the revenue run rate that you are expecting from the acquisition of Trilithic's assets?

Well, we knew that was coming, Hendi, from someone. At this point, I think we obviously, we've publicly shared the purchase price, and I think at this point I'll stay away from giving revenue expectations. I would say it's certainly, it's probably even slightly ahead of our initial business plan that when we acquired the assets, so it's, at present, running strong. It certainly been, as I mentioned, it's accretive immediately. And it appears that it's going to fit this asset-light kind of model. So it appears that we're going to be able to get in and use our existing structure, retain these clients and build these products inside of our existing facilities without really having to make lots of additional either people or machine investments. So we do expect it to have the kind of contribution margin that maybe is even the equivalent to what our existing filter line has or maybe even has the potential to outdo that. So I'll probably, for this call, Hendi, I'm going to probably stay away from revenue expectations other than saying it's on plan from the internal plans that we put together and modeled when we looked to acquire.

And then if I may approach it differently, may I ask like what the historical run rate of that Trilithic assets?

They're bouncy, like we are. More than 1 and less than 3, Hendi.

[Operator Instructions] And it appears we have no further questions at this time.

Okay. Well, thank you, all, for joining our call this morning. 2013 was certainly a difficult year, and it led us into this strategic review process. We made a number of changes within the company, primarily really on how we allocate our capital and leadership changes. We're sharpening our focus on where we can create greater value with our -- with these RF and microwave kinds of offerings. We like our start to 2014. I'm not going to proclaim victory yet, but we certainly like our start. We've got the restructuring behind us. We were able to identify the acquisition early on in the year and execute. And we've got a couple of notable leadership adds, one to the Board of Directors, Mike Ferrantino, as well as Conrad Jordan joining us as our VP of our Timing Products area, and he's just got a real strong RF and microwave kind of background. So we like our start. We look forward to sharing those results as we work through the year and appreciate you joining the call this morning. Thank you.

Thank you, This ends the LGL Group's Full Year and Q4 2013 Earnings Report Call. If you have any further questions, please send an e-mail to Greg Anderson at ganderson@lglgroup.com or to LaDuane Clifton at lclifton@lglgroup.com. Once again, thank you for your participation. This does conclude today's conference. You may disconnect at any time, and have a great day.