Greetings, and welcome to the Methode Electronics Fiscal 2011 Third Quarter Earnings Presentation. [Operator Instructions] This conference call does contain certain forward-looking statements, which reflects management's expectations regarding future events and operating performances, and speak only as of the date hereof. These forward-looking statements are subject to the Safe Harbor protection provided under the Securities Laws. Methode undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this conference call involve a number of risks and uncertainties. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the Securities and Exchange Commission, such as our annual and quarterly reports. Such factors may include, without limitations, the following: dependence on a small number of large customers, including two large Automotive customers; dependence on the Automotive, appliance, computer and communications industries; seasonal and cyclical nature of some of our businesses; dependence on the availability, price and risk of substitution or counterfeit of components and raw materials; rising crude oil prices may result in higher costs for resin and other petroleum-based material; ability to compete effectively; customary risks related to conducting global operations; ability to keep pace with rapid technological changes; ability to avoid design or manufacturing defects; currency fluctuations; ability to protect our intellectual property; ability to successfully benefit from acquisitions; unfavorable tax laws; the future trading price of our stock; and the risk of owning real property. It is now my pleasure to introduce your host, Don Duda, President and Chief Executive Officer for Methode Electronics. Mr. Duda, you may begin.

Thank you, Christine, and good morning, everyone. Thank you for joining us today for our fiscal 2011 third quarter financial results conference call. I'm joined today by Doug Koman, Chief Financial Officer; and Ron Tsoumas, Methode's Controller. Both Doug and I have comments today and afterwards, we will be pleased to take your questions. In the third quarter of fiscal 2011, Methode achieved solid sales improvement, with sales up 13.7% compared to the same period last year, and 10.4% for the nine-month period. In our Automotive segment, we experienced higher sales in our transmission lead frame, and steering-angle sensor products, as well as from the MyFord Touch center console program. Our Power Products segment also had strong sales. Interconnect sales were down, primarily as a result of Whirlpool, significantly reducing their requirements for TouchSensor products during the quarter, as a result of lower appliance sales. Adjusting the nine-month results for the loss of sales to Delphi, and planned lower sales of legacy Automotive products, which together totaled $24.3 million, consolidated sales in the nine months of fiscal 2011 increased 21%. As we announced this morning, Methode settled the Blue Angel matter for $2.1 million. This resulted in a $1.7 million reversal off the $3.8 million expense we recorded in the second quarter, resulting in a benefit to net income in the third quarter, but a negative impact on earnings in the nine-month period. Additionally, we have several expenses and benefits in the third quarter and nine-month period that make an apples-to-apples comparison a little difficult. Doug will expand upon these in his discussion. Consolidated gross margins were 19.2% compared to 17.2% a year ago. This was attributable mainly to higher sales, as well as margin improvement in our Automotive segment, partially offset by manufacturing inefficiencies related to multiple product launches,…

Thanks, Don. Good morning, everyone. Before I cover some of the more significant expense and benefit items that affected the quarter and nine-month period, let me walk you through the non-GAAP adjustments that we included in our earnings release. For the third quarter, we reported net income of $5.9 million or $0.16 per share. This compares to a net loss of $4.5 million or $0.12 per share in last year's third quarter. In the current quarter, we reversed $1.7 million of the Blue Angel expense that we recorded in this year's second quarter. By excluding this benefit, third quarter net income would be reduced to $4.1 million or $0.11 per share. In last year's third quarter results, if we excluded the negative impact of $600,000 of restructuring charges, last year's third quarter net loss would've been reduced to $3.8 million or $0.11 loss per share. Therefore, on an adjusted non-GAAP basis, our net income was $4.1 million this quarter compared to a loss of $3.8 million in last year's quarter, or $0.11 earnings per share this quarter versus an $0.11 per share loss last year. For the nine-month period, we reported net income of $9.4 million or $0.25 per share. This compares to a net loss of $2.4 million or $0.07 per share in last year's nine-month period. Excluding the $2.1 million expense for the Blue Angel matter and a negotiated program termination charge of $1.3 million that was recorded in the second quarter, the current nine-month period net income would have been $12.8 million or $0.34 per share. If last year's results excluded the negative effect of $7.3 million of restructuring charges and the offset in favorable effect of reversing a $1.7 million one-time pricing accrual, last year's nine-month period would have been a net income of $3.4 million…

Thank you, Doug. Christine, we are ready to take questions.

[Operator Instructions] Our first question is from Jeremy Hellman with Divine Capital Markets.

Hi, good morning, everybody. A couple of things here. You guys laid out a lot of detail. There's not a lot that leads a lot to the imagination. But on the new power award, the integrated power unit that you were talking about that's with a nice sub, you said here, with Eetrex and Methode, you mentioned several hundred thousand of expense to date on that. Where do you see that total expense shaking out, firstly? And then kind of looking at your ability to go and take this to other OEMs, how replicable is it from a cost basis to go sell that elsewhere? Or do you have to go through kind of a full development spectrum to do that, I guess..

That's a good question. Let me first answer the $700,000. We'll incur some additional cost, but I don't think they will be that notable. That expense is to really to develop the product line, such that we could take that charger to other OEMs, and present it to them. To our knowledge, it's one of the few 10-kilowatt chargers available. So we certainly have been speaking with others, and this first award was -- the first one is always the hardest one to get. So that helps greatly, and we have been talking with other OEMs. So it is very applicable to other opportunities.

Okay, great. And then secondly, for me, just some model details here just, because you had some things that work for and against you. In terms of the Auto segment gross margin, I think the vendor supply issue sounds like it was about 130 basis points or so in the quarter of a headwind. You mentioned that the inefficiencies involved, you can't really quantify. But kind of going forward, I guess, where my focus is, is that 18.5% to 19% still a reasonable basis to think about?

Yes, I would say that, that's reasonable. And we said in the past, we're going to have chappy quarters. We're going to have some things that don't go our way. I think we're very good at launching products. But as I said in my prepared remarks, we've got a record number of launches, and we're going to have some issues from time to time. The one issue that we had, the larger one -- I hope we don't have another issue like that, but we're going to have some choppiness as we launch these programs and move to production, but the percentage is probably -- that's a good number.

And then last one for me, and I'll hop out. Just looking at the SG&A line, you had the 1.7 that was a one-time reversal. Stock comp you covered, and then the legal now drops out, if I'm correct. Is that right?

Yes. The legal was down in both the nine month and...

Okay. So that ought to get you to somewhere around $16 million or so as a quarterly run-rate level? Does that sound right to you guys?

Yes, you're talking about the quarter SG&A?

Yes.

Yes, that's about -- yes, that's probably a conservative number to use, $16 million, $16.5 million is conservative. We just have to bake in the long-term incentive program that we just talked about. So that would be comparing last year to this year. Going forward, that LTI [ph] amortization will be a little bit higher.

[Operator Instructions] Our next question comes from David Leiker with Robert W. Baird.

Hi, good morning. This is Joe Vruwink, on the line for David. Hey, Don, can you just go over the clutch sensor award one more time? I was a little slow in catching all the detail on the add-on portion of that contract.

The award is for a 6-feet dual clutch transmission that the domestic OEM is having -- the transmission is being built domestically, and also in China via their joint venture. We're not at liberty to say who the OEM is, but it's a prominent domestic OEM. And we anticipated that they would first begin with the U.S. transmission and then ultimately would also be sourced in China. I can go through the numbers again for you. It starts out relatively slow at a couple of million per year and then by fiscal '16, I guess it's to $20 million. I just went back to that page. It's $2 million in '14, and then ramping to $20 million by '16.

And what was the original value with the...

The original was 1.5, but we didn't really add all that much in '14, but it doubled by '16. So it was originally 1.5 going to '10. Now it's 2 going to '20.

On these vendor supply costs, so with these cost, I guess it looks like you had about $600,000 last quarter and $1.3 million this quarter, and now you're saying that it's not going to be an issue going forward. Was the uptick in cost this quarter a result of actions Methode was taking to negate future costs, or what's a good way to think about this?

Uptick in cost in?

Well, uptick in the vendor supply costs, I believe, at the last part, you implied that they were $600,000. Now you're talking $1.3 million.

Yes, there was premium freight in there. There's overtime, so that all culminated in the third quarter.

And at the end of the prior quarter, I don't think it was a full quarter. I think...

No, I agree.

I got it. With Automotive, Jeremy kind of touched on it, but even if you consider -- take out the positive reversal of the Blue Angel expense, and then offset that with the vendor supply cost, so just consider those netting out, you still did a 10% margin at the pretax line, which is pretty strong, considering you're still going through obvious manufacturing efficiencies. And I'm just wondering with the new business that you've launched in Automotive over the past year, as we get this Ford volume coming on, the transmission lead frame business. Is sort of this 10% level kind of structurally what we can expect, going forward, with the obvious give and takes with things that may happen in the supply chain, and as you launch these programs certain costs related to those?

I would agree with that, except we're going to incur costs for launching the GM [General Motors] program. So I think you have to model that in a bit. That's the largest launch, I think, Methode has probably ever done. So we're going to have some costs to put that into production, but I think I would temper with that. On the gross margin line, though, I think we will stick with what we said in the past, it's the high teens.

Okay. And then did you pay down the amount you had outstanding on your prior revolver, that $18 million, I believe, you had out last quarter?

Yes. That was paid off at the end of the quarter.

Our next question is a follow-up question from Jeremy Hellman with Divine Capital Markets.

Just following up on your comment right there on the GM launch cost, just to make sure I'm kind of thinking about this correctly, where, I guess, when and how much do you see that becoming significant through the P&L? Is that going to kind of crescendo up into the 2013 period? Am I thinking about that right?

I would use -- we're seeing about $100,000. My view is about $300,000 a quarter. It's not insignificant, but it's not -- it's noteworthy. It may increase slightly. So we ramp down our engineering quite a bit during the downturn.

Right, but that's all -- it's fairly levelized quarter-to-quarter?

Yes, with the said amount.

Now, as we get closer to launch, you'll see some inventory increases and the normal stuff that occurs as you go through the launch, but we're a year away from returning on that closet.

Right, okay. The other one for me is more kind of longer term strategy oriented, just around the Power segment. Kind of looking at this topic we're talking about before with the power unit, can you give us any kind of perspective on what you see, if you want to call it addressable market or addressable opportunities? Certainly, $2 million in fiscal '12, going to $10 million in fiscal '14. I'm just trying to get a sense of how much -- whether that's just scratching the surface of what could be a nine-figure revenue opportunity or what. Just kind of some sense of that would be helpful.

Let me make two comments. You've heard me say that the Power segment, I get fairly excited about that, because we're in a unique position in that we have been in high-current power apparatus for probably over 20 years. And we're also in the Automotive business, and you're seeing -- what's happening in the marketplace is the high-current systems are being used on hybrid and pure electric vehicles. And we're in somewhat of a unique position, as we have our Automotive manufacturing pedigree. So there's a lot of companies that can provide onboard chargers and power management systems, but not that many that have Methode's credentials in power, so that are in manufacturing and Automotive. So that puts us, I think, in a nice position. Now trying to peg the market, even look at any market study on electric vehicles, and so how long do you see a hockey-stick type ramp, so it's hard to peg that. I'm not really happy with the price of gas and oil, but it does tend to push more companies towards the alternative fuel vehicles. So, Jeremy, it is really hard to say. I mean, I've read one report, where if we just took a small percentage of that market, we'd have a huge business. The quick answer is I think it's probably too soon to tell. We do know that these programs are in the $5 million to $10 million, $15 million range. So if you pick off $3 million, $4 million, $5 million of those, that makes for a nice business. And the technology is what we developed, and we spent some money on is applicable to other customers. So we're excited about it, but it's hard to peg a number.

Right. Well, maybe one way of looking at it from my end, is this a situation where they come to you completely, and I guess the question is how proactive are you or can you be in kind of like showing them kind of what's out there and what they can do from a product solution perspective?

And that is why we wanted to an alliance with Eetrex, because it's Eetrex that has the engineering capability or the reputation, [indiscernible], but they are known in the marketplace. So linking up with a company like Methode allows our customers to -- okay, I can get this technology, and I can get it manufactured by a pro, so I guess, through their own hardware [ph], but that's a nice combination. So Eetrex does have people that come to them, but we're also being very proactive. Now that we have a charger and probably, it's really at the prototype or the P&D [Prototype & Design] stage. We are laying it out and talking to other accounts. So it's a combination of both.

Mr. Duda, there are no further questions at this time. I would now like to turn the floor back to you for closing comments.

Thank you, Christine. We will wish everyone a very good day, and thank you for calling in. Good day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.