Good day, everyone, and welcome to the Littelfuse Incorporated First Quarter 2010 Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Chairman, President and Chief Executive Officer, Mr. Gordon Hunter. Please go ahead, sir.

Thank you. Good morning and welcome to the Littelfuse first quarter 2010 conference call. Joining me today is Phil Franklin, our Vice President of Operation Support and Chief Financial Officer. The momentum from the fourth quarter of last year continued into the first quarter of 2010 with our results coming in as we indicated in our revised guidance on April 9th. Our sales and earnings grew at double digit rates, both sequentially and year-over-year where the improvement was especially significant. And market demand, particularly in electronics and automotive, exceeded our forecasts in all regions and our Startco business continued to perform at the high end of our expectations. Geographically, our strongest growth continued to be in Asia, where sales more than doubled from the first quarter of 2009. This was due to the more robust economic recovery in the region and the increasing consumer demand for automobiles and consumer electronic products, such as flat screen TVs and the latest Smart devices. Both gross margin and operating margin continued to improve. We achieved our target operating margin of 15% in the first quarter, demonstrating the leverage we are getting from our improved cost structure as sales continue to increase. As you know, we've made significant investments in simplifying our manufacturing footprint and reducing our breakeven point over the past few years. The strategy was to position Littelfuse to resume our growth when the economy picked up and while we aren't quite back to the levels of sales we had before the downturn, making very good progress. I'll now turn the call over to Phil Franklin who will give the Safe Harbor statement and a brief summary of the news release.

Thanks, Gordon. Before we proceed, let me remind everyone that comments made during this call include forward-looking comments based on the environment as we currently see it and as such, do include various risks and uncertainties. Please refer to our press release and SEC filings for more information on the specific risk factors that may cause actual results to differ materially from those expressed in forward-looking statements. Sales for the first quarter were $144.4 million, which was up 13% sequentially and 71% year-over-year. This strong performance was driven primarily by higher electronics and automotive sales in all geographies and continued strong growth at Startco. Earnings for the first quarter were $0.69 per share as we continued to benefit from our lower breakeven point and increased operating leverage as sales begin to approach pre-downturn levels. Gross margin for the quarter improved to 36.9%, compared to roughly 32% prior to the downturn, and operating margin reached 15% for the first time since we set this as a target several years ago. Cash provided by operating activities was $6.9 million for the first quarter, even after funding of $6 million pension contribution and increased working capital to support the ramp-up in sales. Even though working capital increased, working capital performance improved compared to the fourth quarter with accounts receivable [PSO] declining from 61 to 59 and inventory turns improving 6.3 to 6.4. Capital expenditures were $2.3 million for the first quarter of 2010, which was more than offset by proceeds from asset sales of $4.5 million. Free cash flow was $9.1 million for the quarter. The book-to-bill ratio for electronics for the first quarter was 1.3. We believe that this unusually strong book-to-bill was in part caused by distributors placing orders further into the future than normal to ensure product availability in the current high demand environment. Capacity utilization in our factories is averaging approximately 85%, although a few lines are currently capacity constrained. We are in the process of adding incremental work cells to those lines that are tight on capacity. We believe that with modest spending for additional work cells and other minor capacity additions, we can support quarterly sales of approximately $180 million. Now, I'll turn it back to Gordon for some color on market trends and business performance.

Thanks, Phil. I'll begin with a report on our three businesses and then provide an update on several other key areas of interest. Electronic sales were $88.7 million, a 73% increase over the first quarter of 2009 and a 12% sequential increase from the fourth quarter. The strength was across the board in all product lines and all geographies. As we experienced in the fourth quarter, the strongest area was the end market demand for consumer electronic products, such as LCD TVs, computers, and other digital consumer goods which also drove the increase in Asia sales. As we indicated in the news release, we believe we have bounced back faster than many of our competitors due to a number of factors, including the significant design wins we've talked about in the last few quarters, our ability to quickly ramp-up production in response to the sharp turnaround in some of our end markets, and inventory replenishment in the distribution channel. Orders and shipments continue to be strong as distributors, contract manufacturers and OEMs respond to increased end market demand. As we indicated in the press release, some of this activity resulted from customers placing orders further out in response to increasing industry lead times. The longer lead times are more notably on the semi-conductor component side rather than the passive products such as fuses and varistors. Our lead times are acceptable at this point. And I believe it's safe to say that on a broad basis, we are still under the lead time of the competition and in some cases we've been well under the lead time of our competitors. After the low point of 2009, responding to a rapid increase in demand is a nice problem to have. The increase in our first quarter sales reflected the improvement in our…

Thanks, Gordon. The following is our guidance for the second quarter along some with some additional comments about the remainder of the year. Sales for the second quarter of 2010 are expected to be in the range of $148 million to $153 million, which represents 2% to 6% sequential growth. Operating expenses are expected to continue at similar levels to the first quarter before trending down in the second half of the year. Operating margin for the second quarter is expected to be similar to the first quarter before trending up in the second half of the year. Earnings for the second quarter of 2010 are expected to be in the range of $0.69 to $0.77 per diluted share, assuming a tax rate of 29%. Cost savings from the closures of manufacturing facilities in Irving, Texas, Matamoros, Mexico and Dunsen, Germany will be in excess of $15 million on an annual run rate basis, and it will begin to show up in the third quarter of this year. Cost savings from the closure of the Yangmei, Taiwan manufacturing facility will be in excess of $2 million and will begin to show up in the first quarter of 2011. Capital spending is expected to increase over the next several quarters as we add incremental capacity to certain lines. Capital spending for 2010 is now expected to be approximately $20 million, up from previous guidance of $16 million to $19 million. This concludes our prepared remarks. Now, we'd like to open it up for questions.

(Operator Instructions).We'll take our first question from Reik Read with Robert Baird and Company. Reik Read - Robert W. Baird & Co: Just on the -- I guess the distributor question first. It still sounds like they are preparing for increased demand and are placing future orders. Is that going at a relatively consistent rate, or you starting to see those patterns start to look more where sell in equals sell out?

We think it's been fairly consistent. They have really provided us very strong POS data and really the end markets have continued to be very strong for them. So, I think we've seen continuing momentum in almost all geographies in the end market demand, so the POS demands on the distribution channels, and we've -- I think felt that inventory levels have been very appropriate for the level of business that we have, so that's been one of the key questions that we really been monitoring.

And Reik, while book-to-bills have come down a little bit in the month of April, they're still significantly above one. Reik Read - Robert W. Baird & Co: Sure. And do you guys expect that they will -- are they just trying to maintain their inventory levels with that good demand, Gordon, or are they still building?

I think there has been certainly replenishment, but I think we now feel that they're at the appropriate levels now, but there certainly has been from a very low level of inventory. Too low for the increased end market demand, there has been inventory replenishment. But our channel checks really believe that they're at the appropriate levels now. We're very comfortable with that. Reik Read - Robert W. Baird & Co: So, is it fair to say as we look into the next couple of quarters that they will try to maintain that level and the POS sell-out that you're talking about will probably be relatively equal to what you sell in to the channels?

That's what we would expect, yes. Reik Read - Robert W. Baird & Co: And then, just -- if you guys could go over again the transfers. It sounds like all the tech or transports are still unplanned, but Dunsen is the one that's delayed?

Not significantly delayed, but I think some of the ramp-in demand that we saw forced us to push that out a little bit. I think we -- but we still are expecting that to be substantially completed in the second quarter with benefits showing up in the third quarter, which is not far behind what our original plan was. Reik Read - Robert W. Baird & Co: So, you will see the benefits, it's just a little bit more elongated is what you're suggesting.

The benefits are still going to be the same as we originally anticipated, and it's probably only a couple months behind the original schedule. Reik Read - Robert W. Baird & Co: And is there any change -- when you talk about the $15 million, Phil, is there any change in terms of how much will really be realized and I guess what I'm getting at is there's always factors out there whether it's commodity pricing or your own pricing or other things that tend to absorb those. Has anything changed there?

So, the real question is are there negative factors that will eat into some of those savings, and I guess the -- I mean the two things that we would -- well, there are a few things we'd look at in exchange rates, what's happened there, commodities, what's happened there and our own pricing, what's happened there. I think generally speaking and Gordon alluded to this, our own pricing is probably if anything more favorable than normal, as you would expect in this kind of an environment where mentioned that we're seeing selective opportunities to actual put prices up. In many cases we're able to hold the line better than we would under normal circumstances where lead times were more normal and there weren't any shortages in the market. So, all this strong demand and pushing out of lead times has obviously helped us from a pricing perspective. So if anything, I think the pricing is more favorable than what we would have expected when we started talking about these savings and the benefits to us. Commodities, it depends on the week really. A month ago, or even two or three weeks ago, we would have said commodities are ramping-up faster than we thought, and they're eating into some of the savings and some of our margin improvements. But over the last two weeks, zinc prices have dropped by 15%, 20% and copper's probably down over 10%. So, we've gotten some favorable impact there. The one thing that has moved against us significantly has been the Euro up, and that will have a negative impact with the weakness of the Euro down into the 120s. The expectation going into this was more kind of a €135, €140 and that will be a drag. So, I think there's some puts and takes in some of this macro exogenous trends that are outside of our control, but I'd say net-net they're probably fairly neutral, or close to what we would have expected when we factor them all together. Reik Read - Robert W. Baird & Co: Okay, and then just on the transition costs, you'd previously said that those would likely peak in the first quarter. Has that been the case and what would the slope of the curve look like as we go through the year?

Yes, so the transition costs I think we said they peak in the first quarter. They will still be significant in the second quarter. That's still a true statement. The one thing that has happened that is partly related to the transition, it's more related to the ramp-up in demand as we indicated in our press release, we did have higher operating expenses due to freight and distribution costs going up due to a lot of premium freight and higher logistics cost because we're trying to make sure that we didn't disappoint customers where we were -- we got caught short on a few lines on capacity. That is continuing as we indicated into the second quarter, and will be a negative impact on Q2, not relative to Q1 but relative to our original expectations. Everything else is pretty much on track and even those freight and logistic costs we would expect to come down significantly as we get towards the end of the second quarter.

We'll go next to John Franzreb with Sidoti & Company. John Franzreb - Sidoti & Co: Could we just go back to the -- where you're tight on capacity. Could you provide a little color on what product lines you're tight on? And Gordon, did I hear you correctly in saying that you're going to be -- the amount of capacity you're adding is going to take you to about a $180 million quarterly run rate?

Yes, a couple things, John, yes. As we look at kind of our overall capacity that we talked about the space that we built in our factories. We talked about the systems that we put in there to support higher volumes than what we had in our previous manufacturing footprint, even though we have fewer numbers of plants. Those are all true statements. And the comment about $180 million is that we think that $180 million a quarter-to-quarter we can get to. It's going to require some incremental investments in work cells and other minor capacity-related things that's in the millions of dollars, not in the tens of millions of dollars to get up to that level, but we're adding those capacity additions in and within the context of the spending plan we just articulated we believe we can get to something in the $180 million a quarter level. So fundamentally, we have about 20% more capacity than what we're producing and selling at right now. But within that, we do have as the demand has ramped-up quickly we've had some constraints on certain lines and it's been primarily in the automotive part of our business. That in not across the board, but on specific lines where demand ramped-up unusually fast and surprisingly fast in a few areas we got caught short and we're in the process of addressing those areas and should have those aligned by the time we get into the third quarter, but it has caused us some short-term pain. John Franzreb - Sidoti & Co: Now is there any concern that the auto dealers have essentially restocked to a comfort level and you might be adding -- I hate to say it, a little late?

I don't think so. I think that there was certainly a very lower level of inventory everywhere and I think the -- a lot of what we saw in the first quarter was really replenishment. I mean particularly I think in China, distribution channels had got really low and they're really trying to supply the local Chinese manufacturers. We saw aftermarket in some places where there was replenishment in the channel. So, I think we just -- we saw a tremendous growth in the first quarter more than expected, a lot of which was replenishment. John Franzreb - Sidoti & Co: And in the pricing environment, is some of the ability to push through pricing. Is it better in some markets versus others? Can you kind of give us some granularity there?

Yes, certainly it's better in some markets, in some geographies and its better with some product lines and it often sort of really depends on the availability and the competitive environment. Some of semiconductor products, our competition has clearly got much longer lead times than we have and so we're in a very strong position to supply in a lot of places and there are really -- I'd say a lot of examples where our competition is just unable to supply, particularly I think in some of the smaller accounts, and we're able to get back to very favorable pricing. John Franzreb - Sidoti & Co: And I don't know if you have this data, but I thought it was kind of -- it might be an interesting question considering, Gordon, some of your comments. Do you have a sense of how much of your revenue is based on new product wins or new design wins? What sort of percent of sales that kind of represents?

Yes, absolutely. We track that intensely inside the Company. We have metrics to track that and definitions of what constitutes a new product and new design wins and it varies across the company. In some of our more mature business like our electrical fuses, although we've in the last few years seen that ramping up, but that's been significantly less than 10%, but up into our automotive business it's a high teens number that we're seeing. And in some of our electronics areas it's well into the 20's, so it really depends, but it's certainly something that we track intensively. And as you'd expect in the fast changing electronics area in our silicon products, you'd expect to see that be a higher percent there.

I think the important point here is, John, that it's the trend in every case is on the upside in all three of our businesses. We're seeing a higher percentage of revenue from new products than we did at any time in the last three, four, five years. John Franzreb - Sidoti & Co: I guess that kind of helps in context of -- even versus normalized times, your design wins are just doing substantially better.

Absolutely.

(Operator Instructions). We'll take our next question from Shawn Harrison with Longbow Research.

First question with the electronics business and the book-to-bill of one point of at least 1.3, does that mean the quarter is essentially fully booked now for you, or is there potential for upside to demand?

No, it's not fully booked. I mean a typical quarter we would have -- it depends on the business. But like our electronic fuse business, we would get up to 50% of our revenue from stuff that books during the quarter, and of that 1.3, as we indicated in our press release, more of that is out further than it be would typically be as well. So, we have a bigger backlog out in Q3 than we would normally expect to have this time in the quarter.

Second; going back to your earlier point on the Euro, what conversion number do you have assumed in the guidance right now, conversion ratio in terms of the Euro to dollar?

I think we probably -- it would be something in the 130's, certainly not something in the 120's.

I guess the point is if it stays down in the 120's there's probably going to be some pressure on both sales and profitability, but I guess that we'll wait and see how the dollar shapes up here.

Yes. No, that's a fair statement. I think you have to look at the whole picture though. While that would clearly be an accurate statement, at the same time we talked about commodities we've seen significant at the same time that we've seen the Euro collapse, we've seen significant declines in both zinc and copper and some other commodities as well that would be some offset to that. But clearly, a Euro in the 120's would ultimately not be good for us.

And you should still benefit from the Canadian dollar, [its depreciating]?

Right; we've got some benefit from the Canadian dollar, at least in the last few weeks some of our short currencies like Mexican peso and Philippine peso have weakened against the dollar, so that's good for us. So, there are some offsetting things, but the Euro is our biggest exposure and it's something we watch carefully.

And then I'd like to get in a discussion around if you're at that new level of maximum capacity, $180 million in quarterly sales, where do you think EBIT margins could go because running the math it suggests you could potentially do EBIT margins north of 20% for a cycle. I just wanted to kind of get into a discussion of where you think margins are maybe at the midpoint of the cycle toward the upper end of the cycle, and where you bottom out now as well because it looks like maybe that's in the low double digits?

Yes, I mean certainly you could model from where we are now. You could model $180 million and then come to something in the 20's, there's no question about that, but we're not going to speculate on that or sign up for that. But what we have said in the past and we'll say again is our target really, this 15% EBIT margin target that we put other there is really to average 15% through the cycle. So again, not knowing exactly where we are in the cycle now, but it seems as things are ramping-up as they clearly are now we'd have to overachieve the 15% on the upside and presumably get to something ultimately up in at least the higher teens kind of numbers so that we could average through the cycle. We know when things go down that it's going to go down below 15% even with our current cost structure, and but I think what we've also said and still believe is that even on the downside as we model in kind of a typical 20% to 25% cyclical downturn, we believe we can still maintain double digit EBIT margins even in that kind of a downturn with the cost structure as it will be by the end of this year.

And then I guess a two part question on cash flow. What will be the cash restructuring cost for the next, I guess the second quarter and the second half of 2010? And then the other question has to go with cash usage. Is the acquisition environment getting any better in terms of just what companies are looking for in evaluation or getting companies potentially looking to sell now?

Well on the first question, the restructuring charge. You're just looking at it from a cash perspective?

Yes, solely from a cash perspective.

Yes, so I don't know what the exact number is, but it's probably in the neighborhood of $5 million or $6 million I would guess of expenses that we have accrued where cash would go out in the back half of this year.

And then just the acquisition environment?

I'm not sure that we've seen dramatic change, Shawn. We continue to monitor companies. We've said several times that you know we are constantly looking for the right fit. We cited Startco as an example that we made even when the markets were starting to really collapse in September 2008, and it's turned out to be a really great addition. We're very pleased with that acquisition and we're constantly looking for companies, and something like that would be a good example, and it's a question of when they're available. I don't think we've seen dramatic changes in either availability or in you know in pricing.

(Operator Instructions). We'll take our next question from Matt Sheerin with Thomas Weisel.

Just a quick question on your comments on automotive and your expectations for softer quarter after obviously very strong quarters, three or four in a row. Is this sort of a normal seasonality, Gordon or is hard to tell what seasonality is given and what's happened in the last year, and is it just orders that are coming off, or are you seeing any cancellations due to the fact that perhaps the auto guys built a little bit too much inventory?

I don't think there was too much, but it was just a very strong rebound. We certainly would have normal seasonality in production. It's forecast to be down 5% in the second quarter, but I think that the first quarter saw really quite a big replenishment in a lot of the channels, and as we see Asia and the emerging markets having larger part of the automotive production it's a little bit different, I think the structure compared to the U.S. where there's been a very efficient supply chain, a pull system of a very quick delivery to the automotive plants. I think in China there's a little bit more of an inventory buildup and there was a replenishment of that in the first quarter that we saw, and that area like the aftermarket we saw a very big bounce back and we cited the Off-Road truck and bus segment that just got absolutely decimated in 2009. And certain segments of that are really starting to come back strongly like construction equipment, agricultural equipment.

So, I think the way to look at it, Matt, is that the first quarter for the reasons Gordon mentioned was unusually strong and stronger than we would have expected it to be. It's not so much that the second quarter is going to be dramatically worse than we would have thought going into the year, it's just that we had this big blip off in the first quarter and we're not going to see that repeat in the second quarter.

That's helpful.

And with no further questions, I'd like to turn the conference back over to Gordon Hunter for any closing or additional remarks.

Well, thank you for joining us on our call this morning. We made very good progress in the first quarter and we look forward to talking with you again next quarter. And as always, we appreciate your interest in Littelfuse. Have a good day.

That does conclude today's conference. We thank you for your participation.