Good day, everyone, and welcome to the Littelfuse Incorporated Fourth Quarter 2012 Conference Call. Today's call is being recorded. At this time, I would now like to turn the call over to Chairman, President and Chief Executive Officer, Mr. Gordon Hunter.

Thank you, and good morning, and welcome to the Littelfuse Fourth Quarter 2012 Conference Call. And joining me today is Phil Franklin, our Vice President of Operations Support and Chief Financial Officer. As you saw in the news release, our fourth quarter sales and earnings came in as we expected, excluding the special charges that Phil will cover in a few minutes. While there were some bright spots, the overall electronics market remained weak and we also experienced the normal fourth quarter seasonal decline. Our automotive sales benefited from the acquisition of Accel last June and growth in the passenger car market. However, the core automotive business continued to be impacted by slowdowns in Europe and in commercial vehicle sales. In the electrical business, both major product lines had another very good quarter. I'll discuss our performance and 2013 outlook in more detail in a few minutes, but first, I'll turn the call over to Phil, who will give the Safe Harbor Statement and a brief summary of the news release.

Thanks, Gordon, and good morning, everyone. Before we proceed, let me remind everyone that comments made during this call include forward-looking statements 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 fourth quarter of 2012 were $158.8 million, which was up 8% year-over-year and consistent with our guidance. Earnings for the fourth quarter of 2012 were $0.44 per share, compared to $0.70 in the fourth quarter of 2011. As detailed in the press release, the fourth quarter of 2012 included $13 million of noncash charges primarily related to impairment of the Shocking Technologies investment and partial settlement of our U.S. pension liabilities. Excluding these charges, earnings were $0.81 per share, which was consistent with our guidance. For the full year 2012, sales and gross margin were essentially flat with 2011. However, operating profit declined slightly year-over-year due to higher operating expenses related primarily to our recent acquisitions. Although we executed well across most of our businesses, it was difficult to overcome the combined effects of the poor European economy, weakness in the global electronics markets and the second half slowdown in the U.S. commercial vehicle market. A notable bright spot for the year was cash flow. Even after making $10 million of voluntary contributions to our U.S. pension plan, we generated $116 million of operating cash flow. This put us in a net cash position of over $150 million at the end of 2012 and positioned us well to pursue our growing acquisition pipeline in 2013. Now I'll turn it back to Gordon for some color on market trends and business performance.

Thanks, Phil. Now let's move on to the review of our 3 business units. I'll cover the financial results, major new business wins and new products for each business and describe how these relate to our growth strategies and market position. I'll also comment on the outlook for each business. Let's start with electrical, which accounted for 20% of total Littelfuse sales in 2012. Electrical sales were $33.4 million for the fourth quarter, a 15% increase from the fourth quarter of 2011. For the full year, electrical sales of $132.2 million were up 17% over 2011. Sales of our custom electrical products continued to lead both the fourth quarter and year-over-year growth, with increases of 37% and 36%, respectively. Protection Relays were up 20% for the year, including Selco, which we acquired in August, 2011, but we're down about 7% in the fourth quarter. And our core electrical fuse business had another good quarter of sales up 9%, and for the full year, electrical fuse sales increased 5%. The decline in fourth quarter Protection Relays sales was due to the general slowdown in the global mining market. But within this environment, our sales remained relatively strong as a result of our strategy to expand our relay products, markets and geographical presence. We've talked in prior calls about our new line of Arc-Flash Relays, which continue to spark interest around the world as potential customers experience serious electrical incidents in their facilities. Our product is an easy-to-use solution that detects an arc flash within a fraction of a second so that power can be quickly disconnected before extensive damage occurs. The benefits can be very significant. For example, an Oklahoma-based customer recently prevented an estimated $1 million in damages by installing our Arc-Flash Relays just days before an actual arc-flash occurred.…

Thanks, Gordon. The first quarter is always difficult to forecast with the uncertain effects of Chinese New Year. That said, our guidance is as follows: Sales for the first quarter of 2013 are expected to be in the range of $158 million to $168 million. Earnings for the first quarter of 2013 are expected to be in the range of $0.75 to $0.88 per diluted share. This implies an operating margin in the 15% range and a tax rate of approximately 26%. The full year of 2013 is shaping up to look much like 2012 but with different cross currents by business unit. We expect sales and margins in our electronics and automotive businesses to improve as the year progresses, but as Gordon said, we expect this to be offset by second half weakness in our electrical business resulting from the temporary downturn in our custom products business. This guidance does not contemplate any further acquisitions, which we believe are reasonably likely over the coming quarters. This concludes our prepared remarks, but before I conclude, I'd like to mention that Gordon and I are at the Stifel, Nicolaus conference today, so we'll not be available for questions by phone later on today, but if you have anything that's time-sensitive or urgent, send me an e-mail and I'll try to respond. Otherwise, we'll be back in the office tomorrow. Now we'd like to open it up for questions.

[Operator Instructions] And our first question comes from Shawn Harrison from Longbow Research.

Just wanted to follow up on the electrical business and the commentary there. With the weakness expected in the second half in the custom products business, do you expect overall electrical sales to be down then for fiscal '13? Was that the implication?

They could be. I mean, certainly, as you know, Shawn, that's been a big driver of our growth there and it's not exactly clear how much sales are going to decline in that segment because we're working on some things to try to bolster those sales and we do expect growth in the power fuse business, but it's certainly possible that if we have a meaningful downturn in that custom business that overall electrical sales could be down.

And if I'm correct, the custom business is running at somewhere between $70 million to $80 million of annual revenues?

Yes, that would be the custom and relay business together would be at that, right. So the custom business is a little less than that, but that's -- it's the bulk of the $70 million to $80 million.

Okay. And then 2 clarifications, capital spending expectations, I guess, for the first quarter and for the year.

Yes, so we have talked about some of these bigger facility-related expansions that got a little bit pushed out although we did see some of that spending occur in the fourth quarter as you saw our CapEx tick up. For the year, CapEx should be a little bit higher than 2012. It's probably somewhere in the $25 million to $30 million range. We're not going to try to break that out by quarter because it's pretty difficult to forecast the exact timing of that, but figure on a $25 million to $30 million annual pace and you can probably divide that by 4, would be about our best guess.

Okay, and then the final follow-up, more of clarification. The above-the-line charges, your acquisition, the pension and then the settlement of liabilities, was that -- how is that broken up between SG&A and COGS?

It would have all been in SG&A.

Our next question comes from John Franzreb from Sidoti & Company. John Franzreb - Sidoti & Company, LLC: Around the commentary about the electronics book-to-bill running significantly above 1, can you put that in context on a year-over-year basis? Concerning Chinese New Year, I'm sure there's some advance ordering. How does it look on a year-over-year January versus January?

I'm not sure that it's significantly different than it was last year. I mean, we saw orders pick up last year as well. It's not atypical, what we're seeing right now -- but it is at least encouraging that with the weakness that we saw particularly early in the fourth quarter that things have ticked up meaningfully and I think it's a reasonable indicator that we'll see an uptick in sales coming out of Chinese New Year like we would typically expect. John Franzreb - Sidoti & Company, LLC: Some of the large distributors are out there making commentary along the lines that they [indiscernible] return to normal season order trends in 2013. Is that what you're planning for in 2013 certainly in the electronics side of the business, Gordon or Phil?

I think so. I think we -- we think we're sort of back to normal. We clearly feel the inventories were at the appropriate levels given the sort of flat performance in the second half of the year and then we're seeing this uptick in orders that we just discussed. And I think the feeling in the industry is we're sort of back to normal and should have normal seasonal patterns. And I think a little bit like last year, there's sort of optimism about the second half, but I think people haven't really been able to define quite where that optimism is coming from. It was a little bit the same last year and the feeling that we might have Windows 8 and new Ultrabooks in the second half of 2012 and that never happened. So I think there's a little bit of a redo of the optimism at the beginning of 2012, but a little undefined exactly which segments it's coming from and which geographies it's coming from. John Franzreb - Sidoti & Company, LLC: And can you just talk a little bit about the Shocking Technologies investment? I think you made 2 in the last couple of years, investments in that business, and why the write-down? Can you just give us a little bit of background on what happened there?

Yes. Well, so we've invested -- we've made an equity investment of $16 million there and that invest -- and we just wrote that down by about 50% and really what that relates to is the fact this is a technology that we've been talking about for a while. It's kind of right within our core. It's ESD protection technology. The technology actually is proven to work quite well and provide benefits to the customer. The challenge is getting conversion of big mobile phone customers while we're really targeting this technology, where Shocking is targeting the technology and that adoption has been slower than what was originally expected. So with the timeline there pushed out, we thought it appropriate to write that investment down. We also indicated in a note -- in the press release that they are looking to obtain additional financing as their timeline is stretched out and depending on the success or not of that, we could potentially see further write-downs over the coming quarters there. But we do believe in the technology, but it's going to take longer to get it commercialized and we need to get over this funding hurdle that the company has right now, that Shocking has. John Franzreb - Sidoti & Company, LLC: Now you're involved in the last 2 financings, are you not going to be involved in the third one?

That's -- we're not going to comment on that right now. It's an evolving situation and we're continuing to evaluate it and we'll talk about that at the next -- probably at the end of the next quarter.

Our next question comes from Param Singh from Stifel, Nicolaus. Paramveer Singh - Stifel, Nicolaus & Co., Inc., Research Division: This is Param Singh on for Matt Sheerin. So firstly, on your margin, obviously, you guys have incremental SG&A costs and [indiscernible] acquisitions, so what are you guys doing to curtail your costs there? And now that you think that the electrical markets are going to be weaker, especially in the second half, what leverage do you have to actually maintain those margins? I mean, you got to be negatively impact by mix as well.

Yes, as Gordon mentioned, we've got a whole range of lean activities in our factories, as well as our office areas that we think will lead to more efficient cost structures and continuing to lean out the organization. We are not intending to do any major cost cuts. We believe that this downturn in electrical is temporary. As Gordon said, we're still very bullish on the long-term market there, and we believe that, that will be a growth market for us. It's going to be a -- we believe it to be a temporary situation and while we'll be watching our costs very carefully, we're not going to take big chunks of cost out of that business because we feel like we need to continue to invest in some of the initiatives that we've been talking about for the last couple of years there. Paramveer Singh - Stifel, Nicolaus & Co., Inc., Research Division: And I mean, do you think you can maintain or get back to the operating margin level you had in 2011 for the last year [ph]?

Well, if see -- depending on how big the decline is there. I mean, we still see very, we're still going to see very strong margins in that segment, but with a -- if there's a big decline, it will be difficult to hold the same margin levels that we were at in 2011. It just depends on the volume really more than anything. Paramveer Singh - Stifel, Nicolaus & Co., Inc., Research Division: I had one more question. And what are you guys seeing on the commercial vehicle side right now? The comments from Caterpillar and other major manufacturer are still a little dicey, so are you seeing any change there?

No. I think we'll go along with that. I think what we said for North America and probably Europe too feel that the first half of the year is going to be a little down. And I think I've mentioned in the comments the sort of optimism that things will pick up in the second half of the year.

We have seen orders tick up a little bit, but they're still below where they would have been a year ago.

Our next question comes from Anthony Kure from KeyBanc. Gregory M. Macosko - Lord, Abbett & Co. LLC: I just want to round up the discussion on growth. Could you just talk about or comment what your normal seasonality on a sequential basis is in both automotive and electrical into the first quarter?

Yes, so our seasonality has changed a little bit in those segments with a mix of business, but generally speaking, automotive is a little bit stronger in the first half of the year than it is in the second half. It could be a little bit different this year if the commercial vehicle market plays out, like Gordon described, with that strengthening further as we get into the year. So that can offset some of the normal seasonality there, but there's not a huge amount of seasonality typically in automotive. The electrical business -- the core fuse business tends to peak in the summer months, particularly the third quarter is generally our best quarter and as we get closer to the end of the year, and generally in the early parts of the following year, it generally tends to be weaker. The custom and relay business, there tends to not be a lot of seasonality there. I think we might see some seasonality due maybe to the shortened quarters due to holidays, but that will be about it. Gregory M. Macosko - Lord, Abbett & Co. LLC: So if I were to -- if we're talking about, you mentioned an earlier question, the expectation for electrical on a full year basis and then given all the commentary, you still expect organically to grow the automotive segment and the electronic segment in 2013, would that be a fair expectation?

That will be a fair expectation. Gregory M. Macosko - Lord, Abbett & Co. LLC: And then as far as book-to-bill, just about a little bit of visibility, and electronics obviously provide that. That's 1 quarter visibility, is that correct?

Yes, that's pretty much it. I mean, we -- we're typically -- in the semiconductor business, the semiconductor products we probably -- we generally would have about a quarter of orders in backlog in the passive components piece of electronics, it would be less than that. It would be -- we're generally maybe going into a quarter. We might only have half of the quarter booked. Gregory M. Macosko - Lord, Abbett & Co. LLC: Okay. And then just to round out a question from -- you mentioned last quarter, the ramp-up of a project with Tata Motors, I think you said it would be significant revenue when that ramps. Is that a 2013 event or can you just comment on the progress on that?

Yes. It's beginning -- at the end of 2013. And we are very pleased with our relationships with Tata Motors. We have a very good team of people now in India. That was one of the places we invest in building a team. And I mentioned earlier the success also in the 2-wheeler segments. So we're still investing in India.

[Operator Instructions] Our next question comes from Peter Lisnic from Robert W. Baird. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: I guess first question, is there anything unusual from a pricing perspective in the electronics business that you saw in the quarter or that you're seeing in the bookings to-date?

No real trend change there. I mean, it's always our toughest business from a pricing perspective and as we've mentioned before particularly in some of the consumer areas, it's the toughest, it's a little more favorable in some of our kind of broadly distributed products through distribution, but we haven't really seen any change in that trend at all. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay, pretty consistent. All right. And then, just circling back on electrical with some of the puts and takes you talked about from a revenue perspective, I just -- I'd like to get a better feel for what the incremental profitability might look like or detrimental I guess. Can you give us a little bit of a feel as to how mix should work if indeed the back half of the year is pressured by some of the issues or some of the product?

Yes, I mean, as we've talked about, Pete, the electrical segment overall is our highest margin, most profitable segment. The custom products piece of that is quite profitable. I mean, it has margins that are fairly consistent with the overall segment there, maybe not quite as high as fuses or relays, but it's still very attractive margin business. So it will -- and then the margins there, particularly operating margins, are well above our average operating margin that are up into the 20s. So it will have an impact, a mix impact on the back half of the year. We will replace that volume with -- hopefully with some growth at least to replace -- with some growth in some of our other product lines, but it is a relatively high margin segment for us. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay, all right. And then if I understood the top line commentary right, it sounded like that slowdown there is more projects being deferred versus canceled for lack of a better term or just demand not being there. Is that the right way if thinking about it? Is that what you're hearing from your customers?

Yes, I think particularly, it was a big expansion over the last couple of years that was really planned for the out years with the long-term growth in potash. And some of those new mine expansions are just sort of coming to an end. So I think a lot of the very feverish activity over the last couple of years is tailing back to more normal levels. There are some greenfield projects that are planned that will come online in the next couple of years, but I think the market's just sort of going through a little bit of a pause. They've put a lot of extra capacity in place, a lot of new mines, and now we're sort of just seeing a pause before the next wave of expansion comes. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: And then last question, two-parter just cash flow. Should we expect similar kind of conversion in 2013 from a cash flow perspective? You gave us a little color on CapEx. But I'm just wondering working capital and what that might look like and then...

Yes, I would say operating cash flow should look quite similar to the 2012 number. We'll have a little bit higher CapEx, so maybe free cash flow might be a tad lower, but it's going to be -- it's going to look pretty similar to 2012. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: And is there anything material from a pension contribution prospective?

Our pension -- we're in pretty good shape on our pension. Our plan right now is to probably contribute about $5 million a year, which we've -- so we will almost certainly do that each year for the next several years. Ultimately, over the next several years, we'd like to get out of the pension business, and that's really our goal, is to wind this thing up, sell it off and get rid of it, but we need to -- we're going to do that at the most favorable time and the interest rate environment for annuities and for selling those kinds of liabilities off to insurance companies not so favorable right now, but we're going to get ourselves in the position over the next couple of years at the right time to get out of that business and -- but expect about $5 million a year of contributions.

Our next question comes from Gregory Macosko from Lord, Abbett. Gregory M. Macosko - Lord, Abbett & Co. LLC: Just with regard to sensors and Accel, when was that growth on a comparable basis?

Well, the sensor business was a business that we acquired during 2012. So we didn't have that business a year ago. We had -- I'm sure if we went back and looked at that business, they would have been down in the fourth quarter versus where they were prior-year relating almost to exclusively to the -- just the weakness in the European market, which is the biggest part of their revenue stream. Gregory M. Macosko - Lord, Abbett & Co. LLC: Okay. So the point being that it was -- there was a relatively easy comp there and that was -- how much of the business is in Europe, would you say?

I think it's 55%, maybe 60%. Gregory M. Macosko - Lord, Abbett & Co. LLC: Okay. And is the idea to basically see those sales move or move more sales oversea -- or into the United States?

Yes, absolutely. United States and Asia as well. I mean, we're working on that through -- I mean, we have obviously very good relationships in the U.S. and in China as well and places like India. And we're looking to use those relationships to begin to penetrate sensor markets where the prior company really didn't have those kind of capabilities. Gregory M. Macosko - Lord, Abbett & Co. LLC: Any success so far?

Yes, there's a few. It's still early days. Those things take some time to actually win the designs and certainly takes some time before the -- those platforms start production. But we did talk about the example of one of the leading customers. This was a Swedish-originated company and very good success with Volvo. And with Volvo being acquired by Geely, we now have a very good partner in China. So that is a good example and we could have a very strong automotive team in China. I talked about us getting to a record levels of sales in China automotive industry. So we are very bullish about the opportunities for winning more designs with the sensor product into the OEMs that we already have very good relationships. Gregory M. Macosko - Lord, Abbett & Co. LLC: And just, again, within the auto business. How is the business with VW and have you seen any wins there recently?

Yes, VW is one of our largest customers, very strong relationships of designing in, particularly we've talked on many calls about Masterfuse wins on multiple VW platforms as they kind of standardize the electrical system across many VW and Audi vehicles, some very high volume platforms. And we've become a very strong partner with VW particularly in China. And it's the leading -- one of the leading manufacturers, if not the leading volume manufacturer in China with great ambitions for its own volumes to get to a #1 position. So very, very important customer for us, and we have, I'd say extremely good relationship there.

And opportunity for sensors potentially as well.

Yes. Gregory M. Macosko - Lord, Abbett & Co. LLC: Okay, good. And then finally, could you help me with regard to acquisition versus core growth, just overall. I don't believe I heard that. What if we take the whole year or in the fourth quarter, what was core growth and versus the total growth that you called out?

Yes. I mean, I don't have those numbers right in front of me. But basically, the year was -- the year-over-year was just about flat. If I take the acquisition revenue that we got and it gets just about offset by currency effects. So kind of on a core organic growth basis, excluding currency effects, it's pretty flat as well year-over-year. Gregory M. Macosko - Lord, Abbett & Co. LLC: And fourth quarter?

Yes, I don't have those numbers specifically in the fourth quarter, but we were up overall in the fourth quarter. I believe we were up slightly on core growth but most of the growth would have been related to acquisition revenue.

And we have a follow-up question from John Franzreb from Sidoti & Company. John Franzreb - Sidoti & Company, LLC: I'm sorry if I missed this, but I think you mentioned the capacity expansion and I was just trying to put that in context with maybe lower second half revenues in electrical and a weak European automotive market. Where is the capacity expansion being directed?

Yes, so we have a few that we've been working on, one that we've recently completed up in Canada for the Startco business, and obviously, we're making these capacity investments for the long term. We're not obviously doing it based on what's happening in the next few quarters, but that -- we believe enough in that business that even with a downturn that we're expecting in the back half of this year, we still believe we're going to need additional capacity there and so we've invested in that. And we built on our site down in Mexico. We have a new building there that we're using to consolidate operations into -- from more disparate operations that we have today as well. We need some capacity for the automotive business that we're expanding there, and that's something that we'll be spending money on, on the back half of this year. And then, we're also -- we also have an expansion planned over in the Philippines for our electronics business, and that probably isn't going to happen until late in 2013. John Franzreb - Sidoti & Company, LLC: Okay. And shifting gears, in the sensor market, could you talk a little bit about -- your thoughts on Accel and is it performing up to your initial expectations? And also the opportunity pipelines in the sensor market, do you think you're going to go through a digestive process with Accel before you continue some more M&A. Just a little color along those lines would be great.

Yes, we're very pleased with Accel. Obviously, since -- as Phil mentioned, the majority of that business is in Europe with European platforms and it's a specific custom product for a given platform. The downturn in European production has obviously impacted it. So the numbers are not as great as we would like, but we fully understand the programs and the volumes on those programs. More important has been the new design wins and the new product developments, which we're very encouraged by. And these products are becoming more sophisticated, having more features built into them and the team there is really developing new products. And as the question came earlier, are we able to take those products to other platforms in North America, in Asia, very encouraged by that. And in terms of doing further M&A, do we need to digest this? I don't think so. This business is pretty well run. It's pretty standalone. It's up and running, and I don't think it requires a digestion period too much. So we are very actively looking for complementary sensor products that would fit with Accel, fit into the strategy, fit with the existing customer relationships we have. So we're very actively working on that and think we've done a pretty good digestion. We've got a very good management team with that business, which is very important and we're going to be moving that forward pretty quickly.

We have no further questions at this time. I would now like to turn the call back over to Mr. Gordon Hunter.

Okay. Well, thank you for joining us in today's call. We appreciate your interest in Littelfuse, and we look forward to updating you on our progress again next quarter. So have a great day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.