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

Thank you, and good morning. And welcome to the Littelfuse Third Quarter 2013 Conference Call. And joining me today is Phil Franklin, our Vice President of Operations Support and Chief Financial Officer. So as you saw in the news release, this was another very good quarter for Littelfuse. The record sales were on track with our guidance, and our margins and cash flow were at near record levels. Our Electronics, Automotive and Electrical Fuse businesses all performed very well this quarter, helping to offset the impact of the continued downturn in global mining. I'll discuss our third quarter performance 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 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 third quarter of 2013 were $201 million, which was up 16% year-over-year and as Gordon said, consistent with our guidance. GAAP earnings for the third quarter were $1.19 per diluted share. This included a foreign exchange loss from balance sheet revaluation and costs related to the Hamlin acquisition. Without these special items, earnings were $1.26 per diluted share, which was near the high end of our guidance. We had another strong margin performance in the third quarter as margins improved in both the Automotive and Electrical businesses and continued strong in Electronics. The main drivers of these high margins were excellent execution across most of our businesses, operating leverage in what is typically our peak seasonal quarter and help from both the strong euro and relatively low commodity prices. Cash flow was outstanding for the third quarter as we generated almost $47 million of cash from operations to bring the 9 month total to $86 million, which is 13% ahead of last year. Capital expenditures through 9 months are $25 million compared to $12.8 million last year, the increase due to several capacity expansion projects in support of the company's growth plans and new product introductions, which Gordon will give some more color on in a moment. So now I'll give it back to Gordon for some color on the businesses and performance and market trends.

Thanks, Phil. I'll begin the segment reports with the Electrical business unit. Electrical sales account for about 15% of total Littelfuse sales and there are 2 parts to our Electrical business: The Electrical Fuse business that's been part of Littelfuse for many years, and the Protection Relay and Custom Products business that we built through acquisitions over the past 5 years. Total Electrical sales were $29.6 million in the third quarter, a 10% decrease from the third quarter of last year. Our core Electrical Fuse business had another very strong quarter with a double-digit increase in third quarter sales year-over-year. Unfortunately, this excellent performance wasn't enough to offset the decrease in sales of Protection Relays and Custom Products, which I'll cover in a few minutes. The strong performance in Electrical Fuses was driven by continued growth in our focus areas of solar and HVAC, as well as additional distributor conversions. During the quarter, we received initial orders for the first-in-the-market line of 1,500-volt DC solar string fuses that we've discussed on prior calls. The orders came from several industry-leading inverter, combiner box and wire harness manufacturers, and we expect to see the order flow continue to ramp up as this product gains traction in the market. On the distributor side, we added a large broad line electrical distributor in the Midwest during the quarter that's expected to generate full year revenues of about $500,000. Distributor conversions are a major growth strategy for the Electrical Fuse business and we are benefiting from our growing product line, product availability and excellent reputation for end-user customer support. In addition to these positive developments, the construction market appears to be improving somewhat and industrial activity is better than has been this time last year. So overall, the outlook for the Electrical Fuse business is…

Thanks, Gordon. For the fourth quarter, we expect our core business to exhibit normal seasonality, which historically would have resulted in a high-single digit sequential decline. However, our diversification into power control and sensing is helping to moderate the seasonality such that the sequential decline this year is expected to be in the mid-single digits. With that said, our guidance for the fourth quarter is as follows: Sales are expected to be in the range of $185 million to $195 million. At the midpoint, this represents a 5% sequential decline but 20% growth compared to the prior year. Earnings for the fourth quarter are expected to be in the range of $0.96 to $1.10 compared to prior year earnings before special items of $0.81. At the midpoint, this represents 27% year-over-year growth. This concludes our prepared remarks. Now we'd like to open it up for questions.

[Operator Instructions] Our first question comes from Peter Lisnic from Robert W. Baird. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: First question, Gordon, if you could just clarify on Electronics, I think you mentioned the inventory position in that business. It sounded like maybe it was a bit high or did I just -- did I misread that? Is the inventory position with distributors at a normal level, given what you're saying with order rates or is there some excess there?

I think we'd say it's at normal level. We just like to mention it because I think we monitor it very carefully and it's such a factor in the volatility of our business has always been caused by distributor corrections. And so we monitor that very carefully and it's normal pattern to see it developing at this time of year, and we expect to see that sort of declining through the end of the quarter into January. So I think that, it's a normal pattern. We'd expect to see that get back down by the end of the year as usually happens.

Pete, part of the reason that we almost always see a kind of a low-double digit sequential decline in the Electronics business is because almost every year in the fourth quarter, that inventory position comes in at our distributors. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Right. Okay. And so by extension, that actually was -- what I was wondering was if you look at the fourth quarter sequentially, that revenue number x the Hamlin impact ought to be down, correct? Consistent with prior years?

Yes. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay. Perfect. All right. Then just switching to Auto, the strong growth there and then the -- when you look at 2014 and some of the content wins that you talked about, Gordon, both for '14 and '15. With auto production, let's say it's up mid-single digits. Is it -- are you feeling comfortable that next year is another year where you've got the opportunity to grow the top line in excess of a mid-single digit, call it, global automotive production number?

Yes. I feel very comfortable. I did summarize the Automotive business to say that we're gaining confidence all the time in this being a healthy growth business for the foreseeable future. I think we are with the right OEMs, particularly the European OEMs that are doing very well in Asia, and the critical Chinese OEMs. China is certainly driving a lot. The forecasts for 2014, 2015 is still very strong for sales in China, and that's both locally made and also exported, but especially from Germany. So we see this as a very healthy growth business for the next couple of years, combined with all the new products that we've designed in. Usually when we are talking about those at a quarterly call, they're not going to come through to revenues until 18 months after we've won that design when it starts to ramp up. So I think we're very confident about next year and the year after in our automotive business. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then if we look at Hamlin, you've talked about the sensor platform being a double-digit growth platform. And now that you've had it in the portfolio for a little bit here, any leaning one way or the other, maybe a little bit stronger growth, not as strong? I mean, it sounds like you've gotten some content wins there in the platforms being leverage well. So I just want to make sure that the comments on double-digit growth there are pretty consistent.

Yes, Pete, I think we're -- yes, we still feel confident about the growth prospects of Hamlin. I think double-digit growth for next year on the top line seems very achievable based on everything we see now. So really no real change from the guidance we've given there. We have indicated that we believe we have some opportunities over the next few years to improve profitability there. The profit margins aren't as high as we'd like them to be or as high as we think they ultimately can be and we'll be working on that. But -- and they're not as high as our core business at the moment. So we do feel confident of the growth, but we have some work to do on the margin side.

Our next question comes from Christopher Glynn of Oppenheimer. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: A question or 2 about the margins. The sequential margin lifted Automotive and Electrical very nice. The magnitude, somewhat counterintuitive just given the Hamlin acquisition in one case and the lower revs in the other. So I was wondering if we could just peel back the onion on that nice movement.

So the -- I think on the Electrical side, most of what we saw there was just kind of a bounce back to more normal margin levels. As you may recall, we had somewhat depressed margins in Electrical in Q2, in part, because we had some one-time items that came through there. And with those being largely behind us at this point, we saw the Power Fuse business, which is where those one-time items were, they affected that business, that business bounced back to more normal levels. And so I think on the Electrical side, we're going to be somewhat dependent on our ability to get the Custom business back, and back and growing again. But we think the margin levels kind of in the lower 20s to maybe even a little bit higher than that. I mean, in the better quarters is we think that that's very doable and sustainable. On the Automotive side, we did see some improvement, both year-over-year and sequentially there, as well. That was largely driven by the Automotive Circuit Protection business. The Fuse business there did -- they had an extremely good quarter, very strong on the top line. We were able to leverage that into very positive margins on the bottom line. And I think that we -- that, that business will continue to be very profitable. I think we've mentioned we do have some work to do on the Commercial Vehicle business where the margins aren't kind of similar to the Sensor business. That's a newer business for us, the margins aren't where we would like them to be and where we ultimately think they can be. And we think over the next couple of years, we have opportunities to move those margins up to be more consistent with the overall company margins. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Okay. And do you have the Hamlin impact on margins?

I mean, Hamlin would have been -- it would have certainly been dilutive to the operating margins. In part, because the fundamental margins are just running lower and part because there's a pretty good slug of amortization that related to that acquisition that comes into play there. But I think without Hamlin, the margins would have been -- the operating margins would have been at least 100 basis points higher than where they ended up.

And our next question comes from Shawn Harrison of Longbow Research.

This is Gausia Chowdhury calling on behalf of Shawn. Just piggybacking on the last question about Hamlin. Could you maybe give us an update in terms of reaching corporate averages, where you are with the margins then? Is this more of a second half of the year story, for 2014? Or would it be achievable to improve those margins in the first half of the year?

Actually I think it's a longer-term story than even the second half of '13. We're just beginning some of the integration activities, the initial focus has certainly been more on the sales opportunities and the sale synergies. And I think if we get the growth, ultimately we're going to get the margin. So we're very focused there. I wouldn't expect to see significant margin improvement in 2014. I think that's probably -- it's probably out in '15 where we should just expect to start to see meaningful improvement there. Hopefully, we'll see -- we may start to see that, start to show up a little bit in the second half. But it's mostly going to be at least a year out from now.

Okay. And then also you mentioned some trends in distribution. You exited the quarter with a book-to-bill that was below parity. Has that improved at all in October?

Yes, a book-to-bill below parity, but it's actually a better book-to-bill than is -- than we've seen in the last couple of years going into the fourth quarter. So actually, it's relatively positive on the book-to-bill and it's -- relative to prior years, it stayed, I would say, positive on a relative basis.

And our next question comes from John Franzreb from Sidoti & Company. John Franzreb - Sidoti & Company, LLC: Gordon, you mentioned competitive pricing in the customs products market. Can you talk a little bit about that pricing environment? And you also mentioned that you want to move into some adjacent markets such as oil and gas. What is the competitive landscape like there?

Yes. Clearly, we are moving into a new segment. We've had a great reputation and a leading position from those start core Custom Products in the potash mining area. And as we try to diversify that to those other segments, we are clearly taking time, we're a new player, there's incumbents in there, and we have to show that the products that we've made very successfully for potash can be used or we can make the products that are needed in the oil and gas segment. So it's a more competitive market and we're having to establish ourselves there. So naturally, that's taking a little longer and it's more competitive and the margins are more challenging than the position that we had in potash, where we were clearly the leader for and still are the leader for many years being situated there in Saskatoon, in the middle of the potash mining area. So we expect that as we diversify to other industries, and the oil and gas would be a good example, we're going to have to take a long-term view for that business and expect to be building it gradually in a more competitive environment. And it may well be a little bit lower margins than what we've had in the past. But we still think we can have a very healthy business there. John Franzreb - Sidoti & Company, LLC: So I guess then, considering Phil's comments about the ability to get that business in general to the mid-20% margin level, we're talking about this is unlikely to be a 2014 event then?

2014 to get the Electrical margins up? John Franzreb - Sidoti & Company, LLC: Yes, backup to the mid-20s...

Well, yes, I'm not sure that -- it really depends on kind of the mix of the Custom versus the -- the Fuse business is a very profitable business mix. Those margins have typically run in the low to mid-20s. And as I said, they dropped off temporarily and back up to those levels. I think where the Relay and Custom business ends up, it's going to depend some on the success -- landing the volumes in the new projects that Gordon talked about, but also on -- at what margin we're able to get those. I mean, fundamentally, it's still a very attractive business as Gordon said. I think as we look for other areas outside of potash to grow that business, the margins are not quite as high there. So I wouldn't necessarily plug-in a mid-20s operating margin for the electrical segment in the very near future. I think we need to see a little bit more what develops on the custom side. John Franzreb - Sidoti & Company, LLC: Right. Okay, that makes sense, Phil. Now you mentioned the R&D consolidation that you're undergoing, Gordon. Should we expect R&D expense to come down going forward?

It's not really a cost saving. When we moved from our manufacturing facility that we used to have a few miles from here, we had sort of 3 fragmented small R&D facilities because we're not in an ideal office building for real lab equipment. So it's really been a bit of a catch up to get back to having a real tech center. So it's done to improve, have people work together rather than being fragmented in different locations, improve the efficiency and have a better working environment, not expected to be cutting R&D spending. If we have the right programs and -- we very much do our R&D based on customer input, developing things that customers really want. If we have the right programs from our customers, and a lot of the examples I talked about in the automotive area where we've developed products custom-made for the emerging high-current segment of the automotive passenger car business, we are very prepared to invest more, if we have to, if they're customer-driven programs. So this was not a cost-saving opportunity. Looking at next year, I don't think R&D spending is going to be dramatically different from this year. We did have a record number of new products released in both Electronics and Automotive this year and we'd expect to continue to drive that. John Franzreb - Sidoti & Company, LLC: Okay. And one last question. Could you just give me a sense of what the geographic distribution is on the Automotive business?

The Automotive business overall? Including commercial vehicles? John Franzreb - Sidoti & Company, LLC: Yes.

I can tell you what that is. Including commercial vehicles and including the Automotive Sensor business, it is -- let me grab this here. It's about -- it's a little bit more heavily weighted towards the Americas than the passenger car businesses because some of our newer businesses, particularly the commercial vehicle business, is much more U.S.-centric. So it's about 45% Americas, it's about 1/3 Europe and the rest Asia.

[Operator Instructions] Our next question comes from Gary Prestopino from Barrington Research.

Most of the questions have been answered. But Gordon, you mentioned that -- you said the Custom Products appears to be bottoming? Could you just -- go ahead.

Yes, that's true. I did say it very clearly that we -- this was a business that, from the last couple of years, has been a tremendous growth business based on a lot of potash mining expansion, and a lot of those programs came to an end. And we've been talking for a year about this diversification into other segments. There is still some ongoing maintenance programs and some small expansions being completed still in potash. But we get quite a good lead time and a look into the quarterly shipments of that because there's a lot of engineering goes on ahead of time from the time that you win the quote and then you start to do the engineering before you build and ship the equipment. So we get quite good visibility going into a quarter. So very confident that the fourth quarter will be above the third quarter and we've got that building backlog for next year.

And our next question comes from Garo Norian from Palisade Capital Management.

I just wanted to get a sense of where things stand on the M&A side and utilizing your balance sheet?

Yes, Garo, as Gordon said, we're very active working on a number of different projects there. I think that -- and we can't say a whole lot other than that, but we feel like we set some pretty aggressive goals 1.5 years ago, 1 year ago for our M&A program. And while we're not quite up to those levels yet, we feel pretty confident that we're going to be on track as we go through 2014 with some of the -- with what we have in the pipeline and some of the things that we're currently working on. So I think we're making good progress, we're happy with where we are and we've obviously got plenty of cash to fund those programs.

And just size wise and kind of management talent wise, how do you feel you guys are positioned?

Size wise, I think -- I mean, the ones that we've done historically have been more in the $20 million to $50 million range in revenue size. I think Hamlin was a little bit bigger than that. I still think you'll see the majority of -- the majority of things we're working on and the majority of things that I think we'll close in the next few years will probably be in that same range. As we've said before, to really -- to make our 10% M&A target number by 2017, we'll have to find another couple of Hamlin-sized deals or 1 larger deal to get there. But I think the bread-and-butter will continue to be the $20 million to $50 million revenue companies and we have quite a few of those that we're working on.

And talent wise, the last 2, Accel gave us some very good talent, very much a European organization, so from Sweden and Lithuania, we got some very talented people. And that really helped us in building the next part of that platform, which was Hamlin, where we get more global people. We get people in all areas with Hamlin. So very pleased with the talent that we've got from Hamlin and with Accel. That's a critical part of our strategy. So when we are looking at acquisitions, certainly the talent is a critical part of it.

At this time, we have no further questions. I would like to turn the call back over to Mr. Gordon Hunter for closing remarks.

Well, thank you for joining us on today's call. With the new products and the new business wins and our strong financial position, we believe we are very well positioned for continued improvement in the fourth quarter, and we look forward to talking with you then. 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.