Welcome to the Methode Electronics Fiscal 2012 First Quarter Earnings Presentation. [Operator Instructions] As a reminder, this conference is being recorded. This conference call does contain certain forward-looking statements, which reflect 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 report. Such factors may include, without limitations, the following: dependence on a small number of large customers, including 2 large Automotive customers; dependence on the Automotive, appliance, computer and communications industries; further downturns in the Automotive industry or the bankruptcy of certain Automotive customers; Automotive program launches may be delayed or have lower than anticipated volumes; ability to compete effectively, customary risks related to conducting in global operations; dependence on the availability and price of raw materials; dependence on our supply chain; ability to keep pace with rapid technological changes; ability to avoid design or manufacturing defects; ability to protect our intellectual property; ability to withstand price pressure; the usage of a significant amount of our cash and resources to launch new North American Automotive programs; location of a significant amount of cash outside of the U.S.; currency fluctuation; ability to successfully benefit from acquisitions and divestitures; ability to withstand business interruptions; unfavorable tax laws; ability to implement and profit from newly acquired technology; and the future trading price of our stock. It is now my pleasure to introduce your host, Don Duda, President and CEO of Methode Electronics. Thank you. Mr. Duda, you may begin.

Thank you, Christine, and good morning, everyone. Thank you for joining us today for our fiscal 2012 first quarter financial results conference call. I am joined today by Doug Koman, Chief Financial Officer; and Ron Tsoumas, Controller. Both Doug and I have comments and afterwards, we will be pleased to take your questions. Our 2 business segments have showed year-over-year higher sales in fourth quarter of 2011, namely Automotive and Power Products, continue to experience revenue improvement in the first quarter of fiscal 2012. These results reflect the impact of our new product introductions and higher market penetration. On a consolidated basis, net sales grew nearly 12% to $111 million, driven by organic growth in our North American and Asian Automotive businesses, improved safety rating remote control sales in both Europe and Asia and increased power product demand in North America as well as Asia. We continue to rebuild Methode's revenue from a 6-year low of $378 million in fiscal 2010 despite the reduction of legacy Automotive products and the unplanned loss of the Delphi business. On the earnings front, we posted net income of $1.5 million or $0.04 per share compared to $4.1 million or $0.11 per share in the first quarter of fiscal 2011. As we detailed in the press release this morning, there were a number of items which negatively affected our net income, Doug will address each of these in more details in a few minutes. However, I'd like to discuss the 2 major items that have impacted our results. First, costs related to the vendor production delivery issues, as well as cost related to the design, development and launch of 2 large Automotive programs; and secondly, the new product development expenses in our Power Products segment. In total, these costs lowered our first quarter net…

Good morning, everyone. Let me briefly review the results of our reporting segments. In Automotive, we had first quarter sales of $62.7 million, up from $50 million last year. North American sales were up 123%, primarily due to the launch of the Ford center console program. We also saw a 19% increase in sales in Asia as primarily related to increased sales of the transmission lead-frame and steering angle sensor products. The increase in Europe was primarily due to the strengthening of the euro versus the USD. In the quarter, the currency translation increased foreign sales by approximately $2.6 million. In the first quarter, Automotive gross margins were $9.3 million compared to $10.1 million last year. As a percentage of sales, gross margins decreased to 14.8% this quarter compared to 20.2% last year. Gross margin percentage was negatively impacted by $1.2 million for the cost related to design, development and launch of programs in North America, also, $600,000 for costs related to vendor production and delivery issues. We also had increased sales of product that currently has high prime costs due to the high purchased content. And lastly, we are starting to see a higher utility cost in Malta due to increased caused of fuel used to generate electricity. Selling and administrative expense for Automotive in the quarter was $7.1 million compared to $7.2 million in last year's quarter. As a percentage of sales, selling and administrative was 11.3% compared to 14.4% last year. The current quarter, we had lower Delphi legal expense by $600,000. However, this was offset by higher non-executive performance-based compensation. In the Interconnect segment, we had sales of $32.4 million in the first quarter, which is down from $34.6 million last year. In North America, the decrease is due to weaker sales in the white goods…

Thank you very much. Christine, we are ready to take questions.

[Operator Instructions] Our first question is from David Leiker with Robert W. Baird. David Leiker - Robert W. Baird & Co. Incorporated: I wanted to start to just put something in perspective and know the seasonality in the business going from here, fourth quarter versus first quarter. Will you look at that and the margins? Can you adjust for some of these extra costs that you're incurring right now? How would you say the performance of that sequentially was relative to what we've seen in past years?

In general, the fourth quarter is a better revenue quarter than the first, really July. I would say that sales, probably, the past 2 years have been -- not as impacted by the seasonality as in the past. I mean, we're still doing changeovers in July but it's not as significant, I think. David Leiker - Robert W. Baird & Co. Incorporated: Okay. And then the European slowdown, that sounds a little different than what we've been seeing and the production rates has been pretty strong. What exposure do you have? What OEs are you primarily shipping to in the European market today? I know Ford is fairly large.

In the part of Europe, we've got Volkswagen, Fiat, a little bit of Peugeot. Those would -- and then a couple of the premiums, Aston. I would say that would be the largest premium there. David Leiker - Robert W. Baird & Co. Incorporated: But BMW and Mercedes were just really driving the upside volume.

There's nothing to Mercedes. David Leiker - Robert W. Baird & Co. Incorporated: Okay. So the mix, the -- your customer mix there...

It's enough for us to take note and take some string of actions. We know that Malta has a number of launches coming up next fiscal year, so the revenues will increase. I just -- I don't want to be caught offguard there. David Leiker - Robert W. Baird & Co. Incorporated: I understand. I mean, we've been cautious in Europe and have been surprised by the export volumes and the books you're listing there, other than Volkswagen, really don't have a lot of export business, so you're not benefiting from that. And then as we look at these items that you've listed in terms of impacting the numbers and can you give us some insights for the balance of the year as it relates to the launch costs of vendor production problems and the Ford products. The other items, those presumably are the same roughly at those levels or is there some characterization we should look at in terms of what those numbers are going to look like going forward.

In particular, David, which... David Leiker - Robert W. Baird & Co. Incorporated: The compensation related ones, the non-executive performance bonuses on the stock awards.

Yes. I think going forward you want to see the -- it was just a -- converting year-over-year, we have some anomalies that we don't expect to continue the rest of the year. I think also if you look at the -- we commented on the higher stock award amortization expense, it was Q2 of last year the new long-term incentive Plan as awarded so as we start looking at the second quarter, year-over-year, you shouldn't see that delta. So that one goes away. And obviously, the other item that we mentioned that doesn't reoccur is in last year's quarter. We benefited from some life insurance gain, so. David Leiker - Robert W. Baird & Co. Incorporated: And then the last item, and I'll circle back here. As we look at from the onboard charger investment costs here in terms of engineering lab. I mean, those numbers seem to be running higher than what I believe you were talking about last quarter on that. It's the scale of that, it's getting larger that the investment is becoming larger or do we just misunderstand that?

The overall opportunity is getting larger. I don't -- one particular one that we announced, I don't think that is getting larger from what we've announced in previous calls. That launch has been delayed. So I think what you're -- we are shipping product not at the rate that we expected so we're not absorbing those costs into costs of goods sold the way we had planned on, so the costs are up, but I think more importantly, that's a one-time product that will result of the suite of products that's applicable to a number of applications. So we're not pleased that we're not at the full launch yet and we're still incurring cost but we are pleased with the progress we've made technically. David Leiker - Robert W. Baird & Co. Incorporated: What does that pipeline look for new awards on that charter going forward?

I really don't want to say yet. We've had a lot of, I'd say, preliminary conversations with other OEs. So right now that's the only 10 kilowatt charger out there that is Automotive grade. But all of those, I would say -- are I won't say embryonic but enough that I don't really want to trend up. David, just go back on the expense. Keep in mind that our investment in key tracks is now at 80% so it started much lower than we were only picking up a lower percentage from prior quarters. David Leiker - Robert W. Baird & Co. Incorporated: And then, Don, you said 10-kilowatt charger here. What are the other charges? What's the size of the other chargers?

6 kilowatt, we've seen. David Leiker - Robert W. Baird & Co. Incorporated: Does that cut that charge time in half?

Theoretically, yes. And this is going on an E-van, so the battery bank is also larger.

Our next question comes from Jeremy Hellman with Divine Capital Markets.

First question for me about the business that you're acquiring on the vertical integration, couple questions on that. First off, is that a completely independent company where you're acquiring the totality of it or is that a division from someone or is it altogether? And then, secondly on that, you mentioned the need to add some additional equipment. Is that a function of increasing the capacity of that operation or just filling in some missing pieces?

I can probably can answer the second one. But your I think -- the first question, let us get that closed and we will do a release on and then answer those questions. I'm uncomfortable giving too much information. We wanted to put it in the release because it's significant and that we are on our way to solving that problem. Anyway, we're anticipating closing it very shortly here. I really can't provide too much detail until we close it but to answer your second question, there is some additional capital that we're going to put in mainly because of the type of painting we're going to be doing, it certainly makes our capital expenditure less and helps us with our timing but there is some equipment that still needs to be put and that would be on the painting side.

And so that $27 million you drew on the revolver, is that going to be sufficient to close the transaction and also provide for the working capital needs you're anticipating or is that just a first tranche, if you will?

Yes, Jeremy, that should be sufficient. But again, as we roll out and it requires some new equipment to supplement the acquired equipment, we may have increased the revolver. The revolver though, will really be more of a function of our ability to bring back cash from offshore and we do have some vehicles that are in place right now to bring in some of that cash. So it will really be a borrowing where we really just depend on our ability to get cash back offshore, and if that's sufficient there. I want to bring it back and use up our NOL or pay taxes. So that's driving that otherwise. Otherwise, this is something that if cash were all in the U.S., we'd be able to handle that capital in, without our borrowing.

Just going back to the fiscal 2014 trajectory, I just want to make sure I've got all the moving pieces coming and going correctly. You said, once you get to fiscal '14, the GM program should add an incremental $100 million in revenue and then T-76, so that's $18 million to $20 million annually. So if I kind of lump those 2 together, take the high side, that's $120 million fiscal '14 relative to fiscal '13. I want to make sure I'm right on that. And then second or kind of a second part of that, are there any other programs that are going to be rolling off that will have a negative effect as we go from '13 to '14?

Okay. On the -- you're correct on the General Motors, that's a significant add to '14. If you subtract what we had in the fourth quarter of '13, which was around $8 million to $10 million in GM business. But T-76 is a full launch in '13, so I wouldn't add that to '14. I think '14 is incremental to put today, that incremental to '14. And I would refer back to the revenue model that we put out last fall that we will ultimately update here. And that's where -- when we're talking about these launches, that's really what we're referring back to.

I mean, there's a bigger thing that I wanted to make sure I understood whether or not there were any other substantively sized platforms that essentially would be terminating or running down the end of '13. So if I say, okay, there's $100 million delta from '13 to '14, roughly, maybe subside that, I would call it $90 for a more conservative number. If there's a $90 million positive delta, are there any other negative deltas of $10 million or 20 million due to an existing platform that is due to roll off there?

Good question. In those projections that we put out, we took all that into account, so the number that we show for '14, which is over $500 million. That takes into account anything that's rolling off.

[Operator Instructions] Our next question is a follow-up question from David Leiker with Robert W. Baird. David Leiker - Robert W. Baird & Co. Incorporated: Don, as we look at the MyFord Touch launch, you've got a couple of vehicles in production today. I don't think that, that competes with that award is in production yet. Is that correct?

No, it's not. David Leiker - Robert W. Baird & Co. Incorporated: And is the scale of that relative to the first one? Are those relatively equal in terms of revenue or is one larger than the other?

I would say they're close to being equal. David Leiker - Robert W. Baird & Co. Incorporated: And are you, if you look at what your engineering costs are to bring that to market other than supplier issues they're dealing with, just the engineering piece of it, did that pretty much flow the way that you expected it to?

The engineering? David Leiker - Robert W. Baird & Co. Incorporated: Yes.

Absolutely. That was we had an issue with the vendor but the technology went exactly where we wanted it. David Leiker - Robert W. Baird & Co. Incorporated: And then my sense is that, that the take rates that Ford is seeing on that are pretty good. It would imply that your revenue off of that is running higher than what you originally thought, is that accurate?

Yes, it is, and normally that's good news but when you got a supplier issue, that works other way. But it's running higher than the plan. David Leiker - Robert W. Baird & Co. Incorporated: And are there -- is there any insight you can share as it relates to additional follow-on awards beyond those two?

Nothing yet. I don't think there's anything we could talk about. David Leiker - Robert W. Baird & Co. Incorporated: Are you aware of them awarding similar type technology to other suppliers at this stage yet?

No. There's been center console business that's been -- led to other competitors but not that I know of with Touch. It would be in capacitance. We do know that keyless entry is capacitance and that was actually quite a while ago. David Leiker - Robert W. Baird & Co. Incorporated: And then as we look at the capital spending, we would have been thinking your capital spending would run $15 million, $20 million a year or so. It sound like that number is going to step up. Can you give us some insight on where that number might end up this running this year?

Sure, David. Just leaving the protocol integration separate. We're at a run rate right now of $4.5 million. That's probably a good run rate for the full year because we are, in addition to our normal capital run rate, we're looking at bringing in a plating process into the Power Products group in North America. And we're also looking at bringing in some stamping/plating in Asia and bring some product that's currently outsourced.

That's with the T-76 business that I think you saw. So with those, we'll probably be close to -- closer to $19 million. David Leiker - Robert W. Baird & Co. Incorporated: And than the vertical integration. I don't think -- have you put a number on -- what that's going to cost you?

I think roughly we might have mentioned a range. I mean, it depends on if we close a deal versus the transaction that Don talked about or we don't. I mean, that could be anywhere from an additional, let's say, $12 million to $17 million depending on whether we are able to acquire this business or not. David Leiker - Robert W. Baird & Co. Incorporated: And the business you are looking at, could you talk about what kind of products they're doing or what kind of business they're in today? You said you want the process, but it sounds like there's a revenue stream that comes along with that as well.

Yes. We really just can't talk about it now. And first of all, the deal is not done, so if doesn't close, it doesn't close. And so it would be premature to give any detail. And as Don said, we will put out a release when we do close it and provide some information at that time. David Leiker - Robert W. Baird & Co. Incorporated: And then the last item here. You've been running margins other than this quarter and I think maybe it's up to the numbers probably in that 4% to 6% EBIT range, and I think when this is all up and running, it should be running closer to a 10% EBIT margin. Is there some trajectory you can get us in terms of how we step up there, a couple of small steps and then it's a larger step in 2014 when all of this is launched? Is there any thoughts you can give us in that regard?

Well, as we go through '13, we should see some meaningful improvement, but '14 is really the larger year because of the GM launch. But if you... David Leiker - Robert W. Baird & Co. Incorporated: I'm looking qualitatively, I'm not trying to pull numbers from you.

It is not a straight line to our margin projections. As I said, we're going to have some choppy quarters. We're going to have some issues. These programs are large Automotive programs. The T-76 goes into transmission. You saw the line in Shanghai. So we're going to have some issues as we go forward. But once you get to launch, you're absorbing a lot of the costs that we're detailing here. So if you overlay the launch with our numbers and so on, you'll see the trajectory. Do we solve the vendor issue by the end of the fourth quarter of this year or is it still over in the first quarter? We want to get it behind us before we enter '13 but that impact first quarter of '13, it could. We're not planning on that. This acquisition would certainly make that more likely because we don't have the greenfield. David Leiker - Robert W. Baird & Co. Incorporated: But it sounds like some of these choppiness as you go through some of these issues and launches and investments, that the choppiness in the numbers probably continues into the first half of calendar '12. Do you think it carries into the second half of calendar '12?

I know of nothing that would cause that, but I'm cautiously optimistic because of the significant revenue ramp, which is, that's all good news but it's what I don't know that concerns me. But again, I mean, we know how to launch product. We know we're meeting the General Motors deliverables. Our teams are doing an excellent job. The T-76 launch in Mexico has gone really ahead of schedule. The problem there is that our customer who's also brining up a plant has been behind. So we certainly know how to launch these programs. They're just big programs that can take some twists and turns. But once they're launched, they are launched. David Leiker - Robert W. Baird & Co. Incorporated: And then the last item here is the balance of the -- I think, your legacy products are pretty much rolled off because there's still some programs that go into play. You're not really expecting any unusual cost as they go to end-of-life here, are you over the next 18, 12 -- 18 months?

No. We've got some service business left and I think some Honda Clock-Spring business. That's not notable.

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

Okay. Well, Christine, we'll thank everyone for joining us this morning and wish everyone a safe holiday.

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