Good day, everyone, and welcome to the Littelfuse Inc. First Quarter 2013 Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Chairman, President and Chief Executive Officer, Mr. Gordon Hunter. Please go ahead, sir.

Thank you, and good morning, and welcome to the Littelfuse First Quarter 2013 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, we have had a very good start to the year, with solid performance in all businesses and all geographies. Sales and earnings were consistent with the updated guidance we've provided on April 10. I'll discuss our first quarter performance and provide more details on our recently announced agreement to acquire Hamlin Incorporated 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. 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 first quarter of 2013 were $170.9 million, which was up 6% year-over-year and consistent with our most recent guidance. GAAP earnings for the first quarter of 2013 were $0.66 per diluted share, which included a $0.29 charge related to the write-off of our remaining investment in Shocking Technologies. Excluding this charge, earnings were $0.95 per share, which was at the high end of our most recent guidance and well above the $0.80 we earned in the prior year quarter, primarily reflecting increased sales across all businesses. Cash performance was very strong in what is normally our weakest cash flow quarter. Cash from operating activities was $16.0 million for the quarter, compared to $7.9 million for the last year's first quarter, primarily reflecting excellent working capital performance. Receivables DSO dropped to 57 days from 61 in the prior year and inventory turns improved to 6.0, compared to 5.1 in the prior year. Capital expenditures increased to $5.5 million in the first quarter of 2013 from $3.2 million in last year's first quarter as a result of spending on several capacity-related projects. Now I will turn it back to Gordon for some color on business performance and market trends.

Thanks, Phil. I'll begin my remarks with a review of the 3 business units, starting with electrical. Electrical sales account for about 19% of our total sales and sales of $32.1 million for the first quarter increased 4% compared to the first quarter of 2012. Electrical Fuse product sales increased 11%. Sales of custom products and protection relays were down slightly due to the general slowdown in the global mining market. The increased sales in the Electrical Fuse business were driven by continued strength in the OEM segment and incremental sales from the multiple distributor conversions we have discussed in previous calls. Many of these conversions have been driven by the added value of our protection relay offering, a competitive advantage that sets us apart. Key wins in the solar and HVAC markets continue to drive the OEM segment. This was a record quarter for our solar business and the sixth consecutive quarter of strong quarter-over-quarter growth. The improvement was due in large part to the success of our new products designed specifically for solar applications. To keep the momentum going, we're already working on our next-generation solar products that will further solidify our leadership position in the solar market. The solar business continues to shift from the traditional European market to North America and emerging markets, such as India and China. With our global sales force and global product approvals, we've been able to successfully follow this business into the emerging markets. This new business more than offsets any decrease in the traditional markets. During the first quarter, we won new business with a large white goods manufacturer that expanded our circuit protection product into additional platforms. We expect to realize more than $300,000 in additional revenues from this win this year. The increased penetration into the electrical distribution…

Thanks, Gordon. Our guidance for the second quarter of 2013 is as follows. Sales are expected to be in the range of $177 million to $187 million. At the middle of the range, this represents 3.5% growth over 2012. Earnings for the second quarter are expected to be in the range of $1.03 to $1.18 per diluted share. This implies an operating margin in the 18% range and a tax rate of approximately 26%. The above guidance excludes Hamlin. If Hamlin closes on schedule at the end of May, it is expected to add approximately $7 million to sales and be slightly accretive to earnings, excluding acquisition-related costs. This concludes our prepared remarks. Now we'd like to open it up for questions.

[Operator Instructions] Our first question comes from Matt Sheerin from Stifel, Nicolaus. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: First, on your guidance, your outlook, 1% to 6%, sequentially. As we look at each of the 3 core segments, are you...

Wait, wait, Matt, excuse me, that was 1% to 6% year-over-year. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: I'm sorry. That's right. So sequentially, it's a higher number. And yes, that's right. So are you expecting the electronics business to be up stronger than the other businesses on a sequential basis? or you're expecting to see growth in all those segments?

Yes, the electronic business will be the main driver of the sequential increase. The -- typically, the automotive business is pretty strong in the first quarter. Usually, Q1 and Q2 are about similar. And the electrical business generally is a little bit more positive, at least the fuse business is more positive in Q2, usually exhibiting some sequential growth, but -- then there's going to be some offset to that, as we mentioned, the custom products business is starting to show sequential decline, so that will be an offset. So the main driver of the Q1 to Q2 growth, sequential growth is going to be electronics. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay, so that -- it looks like then -- and looking at the seasonality in past quarters or past years, you could be up in high single-digits to low double-digits, is that fair?

Yes, that's fair. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then the other question, just regarding the electrical business and the commentary about some of that mining business rolling off in Q3. And I'm also noticing that your operating margin in that business was down sequentially. Is that mix going to work against you through the year in terms of operating margin in the electrical business? Or are there other things you can do to offset that? Well, I mean, other things being equal, it will.. we'll lose some operating leverage there because we're still going to be investing in sales in that business and -- because we have -- I mean, we think we have a lot of long-term opportunities there. So you're going to have pretty flat SG&A on lower sales in the custom business. However, we also talked about some things we're doing to improve margins in some of the other areas. I think we talked about a price increase in the electrical fuse business. That should help with improving margins there. The relay business, we're expecting to see some sequential growth through the next couple of quarters there, which should create some operating leverage that should help margins there. So on balance, I think we should be able to offset most of the negative effects of the custom business on, at least, on the margin line.

Your next question comes from Peter Lisnic from Robert W. Baird. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: First question on Hamlin, if I could. The -- just on the automotive piece. Can you give us a feel for or a rule of thumb as to what it does to content-per-vehicle, if there's any sort of metric that you might be able to identify for us?

Yes. I wouldn't say there's a rule of thumb. It's -- From our experience already with ACCEL that I talked about last quarter, where we're starting to see where we would have talked sort of an average of maybe $3 to $4 of content from circuit protection that we were trying to move with high-current circuit protection. We were bringing at least as much from ACCEL. We're on the same platform. So we start getting from being in the $3 to $5 range to going into the $10 to $15 range. And Hamlin is going to help us to get in that direction and some specific platforms we see that we are going to be supplying low-current fuses, high-current fuses and solar sensors and seat buckle sensors. We're going to be over $20 per car in some programs. So that's sort of a direction that we're getting to and it's going to really depend platform-by-platform. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay. All right, That's perfect, on that front. And then, as we kind of look forward, balance sheet still looks -- I mean, obviously, it's still in pretty good shape even with acquisition. Can you give us a feel for what capital allocation might look like from 2 different perspectives, one, appetite for incremental deals post-Hamlin, but, two, kind of where you might go if there are deals in the pipeline? Is it -- are we focusing more down that sensor path? Or are there other opportunities in some of the other businesses to kind of increase scale in those businesses?

Yes, absolutely. I mean, we're -- on the balance sheet, even after spending $145 million for Hamlin, is still going to look very strong, very clean. So we have plenty of appetite and plenty of capacity to do additional deals and we fully intend to do that. So the areas that we're looking in, they really haven't changed. We will be looking in the sensor area. We like to build on that very nice platform that we have now. We feel pretty good about the organic growth there. But certainly, we'd be very interested in adding additional sensor companies to that, and we're looking. We have some in our pipeline right now. Commercial vehicles is another area we've talked about. There are just a large number of relatively small companies, many of them private, that play in that space that have products that would be very complementary to ours, and we're -- we have a fairly large number of those that we have in our funnel. And then, the other areas are -- is our Protection Relays, Custom Products area, building on the Startco acquisition. We followed that on a few years ago with Selco, and we'd like to do other M&A in that space as well. We see that as a very attractive space and space that we'd like to grow through acquisition, as well as organically. So those are the 3 main focus areas. And as we've talked about, we're always interested and open to any consolidation plays in circuit protection that may come our way. Typically, those would be bigger deals because we're not really interested in consolidating $10 million-, $20 million-, $30 million-companies. It will be more some of our major competitors there, unless they were to come available, we'd be very interested in that. So expect to see us not slow down on the acquisition front at all. Post-Hamlin, we're still pushing hard in that area. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay. That's perfect color there. And then, last question, Gordon, if I could, just on the LED business, can you give us a sense as to what sorts of pressures that you might be facing that would be comparable to call the chip manufacturers in that space where you got significant price declines? Are you kind of subject to the same sorts of price pressures on some of your LED products? Or are you a little bit more insulated, just given the niche component that you actually manufacture?

Yes, I think that -- well, I think we always are a little more protected, being a little more of a niche. I certainly think that it will apply to what is the very exciting $10 lightbulb. I expected anything that's become -- going into the residential area and to get the lightbulb down in price, there's going to be inevitable, aggressive competition in price pressure in that one segment, but it's very high volume as we start to see the converting over to LED bulbs. LED street lighting, much less price pressure, where we've got several products and build into our module. These are more really robust modules that the need to work maintenance-free for many years. Commercial lighting, much less pressure. So it's across-the-board. I would say that the more it's industrial and commercial, the less the price pressure. But certainly, in consumer electronics, we always expect to see much more price pressure, but higher volumes.

Our next question comes from Shawn Harrison from Longbow Research.

A clarification on Hamlin, if in case I missed it. What is the split between auto and electronics right now in their business?

We haven't given that precise split. We will as we get closer and close the deal. But what we have said is that, automotive is more than half the business. And then -- but they it does have a meaningful component that is kind of electronics and industrial applications. But -- so it's more than half and I think the automotive piece, we think has very substantial growth potential. The electronics piece, maybe a little less do, but still, it's a -- it'll be a meaningful piece of business and very synergistic with some of our distribution channels and our electronics business overall.

Okay. Then on commercial vehicle products, getting some, I guess, mixed commentary on expectations for that market going, I guess, into the second half of the year. What is your expectation in terms of when that business will begin to rebound on a year-over-year basis?

Well, we obviously started to see some good, sequential rebound, as Gordon mentioned, off a very, very weak fourth quarter. I mean, things really -- for us, things really fell off in a pretty significant way in the back half of last year. So we're still -- we had a reasonably good first half in 2012 and a very weak back half. So we'll -- even though things are improving sequentially, we're going to -- we'll be at negative growth levels. Certainly through the second quarter, we could start to turn positive and would expect to turn positive sometime in the second half on a year-over-year basis.

Okay. And then 2 more questions. Just, I guess, within the electronics guidance, how much, I guess, restocking activity, if at all, are you expecting out of the distribution channel for the second quarter? And then just -- I believe, there was about $1 million of other income in the results this quarter. Does that repeat into the June quarter?

Electronics, I think, we said pretty clearly that we are very carefully tracking inventories. It's been the challenge of this business when we have inventory corrections and a sudden downturn. So we're much more diligent at tracking that. And what we feel is inventory levels are at the right level. We've seen some uptick in the first quarter, but we expect it to be supporting the end market growth that we get information from our distributors. And as one of the earlier questions, electronics will have the strong growth in the second quarter, double-digit growth for sure. And that inventory increase, I think, is appropriate for the end market growth that we see, and the double-digit growth we certainly expect in the second quarter. And usually, our third quarter is an increase from the second quarter. So we feel we're in pretty good shape in terms of the growth projections on electronics and the inventory in the channel.

On the other income comment, yes, we did -- other income, we did have a $900,000 of income on that line. The biggest piece to that was foreign exchange balance sheet translation. Hard to say whether that's going to continue. I would expect. Generally, we expect that kind of the non-operating part of our P&L to be pretty -- to net out for the year to be fairly close to 0. So we have some interest expense. We generally have some -- a few other miscellaneous gains and losses and then we have balance sheet translation. So it really depends on the foreign exchange, but I would not expect it to continue at $900,000 of income. I think that's -- that will probably be start to approach something more neutral over the next couple of quarters.

Our next question comes from John Franzreb from Sidoti & Company. John Franzreb - Sidoti & Company, LLC: Could you just remind me the mix switch from PCs to the tablets and handhelds? What does that do to do margins in electronics?

I don't think margins really change much. I mean, that's a very -- like one of the earlier questions about competitive segments, the consumer electronics. It's all designed in Taiwan, made in Taiwan, or China. It's a very price-competitive. That's probably the most competitive part of our business. And frankly, if it's going into a PC, an ultrabook, a tablet, a smartphone, I don't think there's any real difference in the price pressure. Sometimes, if we're able to be the first to market with a new product, which sometimes the smaller form factor demands us to be, especially sometimes in new chargers that require more power and yet a smaller size product into that, sometimes we can get a price premium for a certain period of time. So an evolving market is good for us, but ultimately, that's a segment that will always be price-competitive. John Franzreb - Sidoti & Company, LLC: Okay, great. Gordon, do I hear you correctly that you said that you would expect normal seasonal electronic order trends that would suggest the September quarter would be stronger than the June quarter?

I think so. I think we're sort of shaping up to what seems like a more normal electronics year. Solid book-to-bill in the first quarter, steadily building throughout the quarter, good sell at the first quarter and a predictable, healthy second quarter. And the end market information, that's very diverse. I mean, we pick out some, such as tablet and smartphones, but remember, our products are going into multiple verticals of end markets. And across the world, the geographies all seem to be doing fairly well. So I think it would be normal to expect sort of a normal year, which we'd see in the third quarter. And then, a decline in the fourth quarter would also be normal for us.

Yes. So before that, sequential gain in electronics will help us offset whatever decline we end up seeing in the electrical business. So normally, we would expect a small uptick sequentially from Q2 to Q3, and I think we could still see a small one this year, but it will be muted by the decline in Q3 electrical sales. John Franzreb - Sidoti & Company, LLC: Okay. And in the automotive segment, can you give us a sense of what the sales were up by geographies, by major geographies? You're down, obviously, in Europe, but yes.

In automotive, yes, I mean, I don't have the calculations right in front of me, but rough order of magnitude, it's probably -- at one point, in kind of in -- before the downturn, Europe was about 45% of our automotive business. It's probably down to 40%, or maybe in a little below 40% right now. Asia is about 25%, and that would leave the U.S. around 30%, 35%. John Franzreb - Sidoti & Company, LLC: Okay. And in the margin mix in automotive, is ACCEL a margin benefit? Is that what you're saying here? Can you just talk a little bit about the mix benefit by having the sensor business in there?

Well, yes, not -- I wouldn't say at this point, not really a benefit. I mean, we're -- we have that business position for growth. Basically, we're winning -- we're working and winning new platforms there. So we're spending on the SG&A line for future growth there. We also -- so we're -- right now, the operating margins there are going to be lower than the Littelfuse average. Ultimately, we think those margin should be in the high-teens. And as you can gather from some of the information we've given on Hamlin, that's kind of where the Hamlin business has typically run, in the kind of in the mid- to high-teens kind of operating margin. So that's a good place for -- I think a comfortable place for the sensor business to be. ACCEL is just not there yet. John Franzreb - Sidoti & Company, LLC: Got it, got it. And one last question. Did you mention what your price increase was in the electrical business?

No. It varied. But it was -- and it wasn't -- it isn't across-the-board on all of our business. Like, it didn't go through solar and some of our OEM business. It was in our distribution business. But it -- and we can't really tell you that because we don't know how much of it is going to stick, but it could be a couple of percent on maybe half of our business, something like that.

[Operator Instructions] Our next question comes from Gerry Heffernan from Lord, Abett & Co.

Just a couple of things here. As the sensor business grows, do expect this to become it's own reporting segment?

I think that we wouldn't envision that in the near future. But certainly, we've talked about a goal of having it be 15 percent of our total business or more. And with the Hamlin, we're not that far from that right now. So it's conceivable, but we could envision that becoming its own segment. I wouldn't expect that to happen in the next couple of years though.

Okay, fair enough. And with Mr. Franzreb there, you were just talking about the margin profile for sensors. Longer-term, from this -- as you call it a platform or part of your business, do you think the upper teens is the longer-term arena for the operating margins?

That's what we think right now based on what we've seen, what we can project out for the ACCEL business and what we've seen in the Hamlin business -- I mean, the Hamlin business is already running in that kind of a range. It sort of depends, too, on how successful we are on the growth. We talked about Hamlin, we're targeting double-digit growth out, as far as we can see into the future in that business. So if we were successful with that, we could double the business in 5 or 6 years, certainly, there'd be potentially some opportunity to see that margin, that operating margin improve. I mean, if you look at a company like Sensata, they've got operating margins up into the 20s. So it's not impossible that we could get there.

Yes. It can be this can be a very -- the sensor business can be a very profitable business. What's been the effect of the yen currency move on you guys? And is there anything we should be looking to in the next couple of reporting periods in regards to the yen currency move?

Yes. Certainly, the net -- the yen, it's been a modest negative to us. Net-net, currency year-over-year was really not very impactful at all on the P&L other than a little bit of the balance sheet revaluation that we talked that shows up in other income. But really, I think -- I mean, the yen, a stronger yen or a weaker yen is a negative, but it's not -- we don't have a big exposure there. Certainly, the biggest exposure is on currency or the biggest is the euro. A strong euro is good. So the euro has been hanging in there. That's good. If that gets stronger, it will help us. If it gets weaker, it'll be a drag on margins. And then the other currencies to watch are some of the emerging market currencies, where we have our manufacturing sites, those being Mexico, China and the Philippines. We like those currencies to be as weak as possible, but -- and so far, in the last couple of quarters, they've been relatively neutral to the P&L.

Okay. All right, great. And last question, if I could. The repurchase authorization is -- has been re-upped. Can you just review your plans for execution of this plan and if you wouldn't mind, give us a review of what the original -- what previous plan was? How much was executed on that, et cetera?

Yes, sure. The -- so the -- on the -- let me start with the previous plan. We had 1 million share authorization in -- for the last year, going back 12 months from April and we didn't purchase anything on that authorization. The prior year, I think we used most of the million share authorization. We used it all in like just a -- in a 1 quarter time frame when the stock was at a low $30, $40 range. And I think that's typical of what you'll see from us. You may see us go a year or more without doing any repurchase, then you may see us get pretty aggressive. If the stock drops, and we think it's -- then we think it's a value, so we'll look at that opportunistically. We'll also look at it, trading off that against use of cash for other things like M&A, if we have -- we think we've got some pretty significant M&A, and then that would affect our decision as well. But the major thing affecting our decision is just, we tend not to buy as a regular course to be repurchasing. We tend to buy when we think the stock is unusually well-valued, on the low side, poorly valued, I guess, in where it's an unusually good buy and it's near -- it's 52-week low, we would be a buyer on those circumstances, but probably not in many others.

Our next question comes from John Lopez from Vertical.

I just have 2 quick ones. I'm probably covering ground you've covered, so I apologize if I am. But on the electronic side, did you guys quantify what the increase in distributor inventory was? Or can you speak to that at all?

We did in quantify. We said we'd track it very carefully. There was a modest increase appropriate with what we would what expect for the increased POS data that we have for the end markets of our distribution channels and the strong book-to-bill that we have going into the second quarter. So we clearly stated that we think it's at appropriate levels.

Very good. And just seasonally, is that -- if you look back, say, the last 2, 3 years, is that typically what you see is an increase commensurate of what you've seen this quarter in the calendar Q1 period?

Yes. I think it's fair to say, in an average year, a good year, sometimes the last few years had been a little unusual. But I would say in an average, predictable good year, we would expect to see solid growth throughout the first quarter, ending with a strong book-to-bill going into good sequential growth for the second quarter and a little pickup in distribution inventories to be ready for that.

Understood. And then -- sorry, just segueing on that. Can you just -- and I know you did some of these, so I apologize, but the end market that you deem as sort of the principal drivers of the activity into Q2, can you just repeat those quickly, just what sort of the main end market consumption drivers are?

Well, I gave some examples. I think it's fair to say the good thing about our electronics business is there's so many end markets, multiple end markets, the little things like test and measurement, industrial controls, process control, equipment, all of which -- they're not that very fancy, but the ones we talked about, LED lighting, for example, is very significant for us now and we think that's at the early stages of a long growth, both street light, commercial lighting and now, residential lighting happening. Obviously, the movement in tablets and smartphones, all of the battery protection, the chargers, the move to miniaturization in that area, that's an important segment for us. Set-top boxes, we talked about as being important. The whole cloud computing and broadband infrastructure, there's growth in those segments. So no one segment really dominates our business. We just try to pick out a few and see where there's a trend that maybe lends itself to us, developing a new product, such as higher-energy density batteries and higher-power consuming wall chargers that require better circuit protection in a smaller package, and we've been able to win some unique designs.

Understood. And sorry, just a last one on electronics. Have you quantified or could you -- just what your total PC market exposure is relative to that segment?

PC is probably -- I think, total consumer electronics is only about 40% of the electronics segment. PCs would probably be no more than 20%, 25% of that. So it's probably 10% or less.

Yes, 10%.

10% of total or...

10% of electronics.

It's PC, specifically?

Yes, which is 5% of our total business.

Sure. Okay, great. Sorry, last one. On a year-on-basis, the operating margin being down a bit, is just that mix shift with the electrical segment likely to underperform a little bit? Or is there something else driving that?

Are you talking about '13 versus '12? Or '12 versus '11? Or just quarter-over-over?

No, sorry. I'm looking Q2 '13, your guidance implies about an 18% operating margin. If I look Q2 '12, it was closer to 18.3%. Sales are higher obviously in aggregate by about 4% between those 2 periods.

I wouldn't -- I think we're looking at a an operating margin very similar to last year's operating margin. I think the comment I made on 18%, it was 18%, give or take. But without rounding error, I think it's going to be very close to last year's operating margin.

Okay. So I'm sorry, I guess, the thrust of my question was sales higher year-on-year, what's preventing a little more leverage in the business?

Well, yes. But the main reason there -- the main reason they're higher is because we have a full quarter of -- partly it's due to the full quarter of acquisitions, which brings SG&A and other costs along with it. So that's part of the reason. It's only I think corrected for operating leverage. You're talking about tenths of a point. So it's hard to really pin that one down too precisely. But I think the way we look at it, it's a very similar to last year, even corrected for the operating leverage and the acquisition that we did.

We have a question from Shawn Harrison from Longbow Research.

Just a brief follow-up. The kind of informal talking on the third quarter, with the revenues potentially being stable, with electronics offsetting the decline in the custom products. Does that also mean you think you could hold gross profit and EBIT stable, with the 2 offsetting each other?

Stable with Q2?

Yes, yes.

Yes, I would -- I'm expecting Q3 to look a lot like Q2, actually. I think that the margins will be -- the sales -- you said, we indicated -- we think sales could be slightly better than Q2, but not significantly so because of the offsetting things, like margin typically in Q3 is a little bit better, but that's usually because of operating leverage. So I would say similar to maybe slightly better margins as well. But it's not going to look a lot different than Q2, we don't think.

I would now like to turn the call over to Gordon Hunter. Please go ahead.

Well, thank you for joining us on the call today. So 2013 is off to a very good start, and with our improved financial performance and the Hamlin acquisition agreement. So we look forward to updating on our progress again next quarter. So have a great day. Thank you.

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