Good day, ladies and gentlemen, and welcome to the Stoneridge First Quarter 2012 Conference Call. [Operator Instructions] I would now like to turn the presentation over to Mr. Ken Kure, Corporate Treasurer and Director of Finance. Please proceed.

Good morning, everyone, and thank you for joining us on today's call. By now, you should have received our first quarter earnings release. The release has been or will shortly be filed with the SEC and has been posted on our website at www.stoneridge.com. Joining me on today's call are John Corey, our President and Chief Executive Officer; and George Strickler, our Chief Financial Officer. Before we begin, I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties and actual results may differ materially. Additional information about such factors and uncertainties that could cause results to differ may be found in our 10-K filed with the Securities and Exchange Commission under the heading Forward-Looking Statements. During today's call, we will also be referring to certain non-GAAP financial measures. Please see the Investor Relations' section of our website for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. John will begin the call with an update on the current market conditions, operating performance in the first quarter, growth strategies, business development and his thoughts on future initiatives, including our 2012 guidance. George will discuss the financial and operational details of the quarter and details of our 2012 guidance. After John and George have finished their formal remarks, we will then open up the call to questions. With that, I'll turn the call over to John.

Good morning. Revenue for the first quarter was $262.3 million, an increase of $69.2 million or 35.9% over the first quarter of 2011. This result includes $53.7 million for PST's consolidated sales. Excluding the effect of PST sales of $53.7 million, Stoneridge's core business sales increased by $15.6 million during the first quarter of 2012 or 8.1% compared to the first quarter of 2011. The Stoneridge core business results continue due to the revenue growth experienced during 2011 and were primarily driven by North American commercial vehicle and agricultural markets. Our overall growth was moderated somewhat by the decline in the European commercial vehicle sector. We reported earnings per share of $0.22 for the first quarter which was $0.10 per share or 83% above the prior year's first quarter earnings per share, driven primarily by our operational and financial improvement of our North American wiring business. The benefit of PST's first quarter earnings was a wash as non-cash purchase accounting adjustment for inventory of $1.8 million and other assets' step-up values of $1.4 million offset PST's first quarter operating income of $3.5 million. The total purchase price accounting was a non-cash charge of $3.2 million or $0.06 a share. Without this charge, our operational earnings per share would have been $0.28 per share. PST's charges were in line with our first quarter expectations for purchase accounting adjustments, as discussed during our last call. George will provide more detail on the purchase accounting effects for the quarter and for the rest of the year. Our first quarter sales increase over the prior year was slightly below our internal expectations due to lower sales to a large commercial vehicle customer in North America and lower sales in Europe due to the general market softness in commercial vehicle. While below our expectations, sales…

Thank you, John. As we've been sharing with you over the past several quarters. We have been addressing our 2011 operating issues and wiring business. Based on our teams' efforts, we expect to improve financial performance in 2012. In our last call, we shared with you that our first quarter is progressing consistent with our plans. We're pleased that our first quarter was consistent with our plans. We benefited from improved operating performance in the wiring business along with more favorable copper cost and improved Mexico peso exchange rates from a weaker Mexican peso of which is partially offset by increased raw material cost. Raw material cost increases to net sales continue to be an area we're working to address, as our raw materials to sales in the first quarter 2012 was 2.2% higher than the first quarter of last year. We're working to address the raw material cost increases through pricing actions, redesigns of our products collaborating with our suppliers and pursuing our older net materials source, part of our raw material cost, percentages of net sales increases just due to product and customer mix in our controlled device segment. We've also been pleased with the progress integrating PST into Stoneridge after completing the final phase of the transaction on January 5, 2012. Last year, we reviewed with you quarterly the negative cost impacts for operational issues, higher copper prices, the financial impact of the Mexico peso and the startup of our new facility in Saltillo, Mexico. As a result of the actions has taken the wiring operations improved significantly during 2011 and is well-positioned for this year. We saw the improvement in our financial and operating results as gross margins return to more levels in the first quarter. As you recall, the wiring business was adversely impacted in…

[Operator Instructions] And our first question comes from the line of Matthew Mishan with KeyBanc.

Outside of the purchase accounting, are there any cost headwinds we should be looking out for over the next several quarters? And George, what are you paying most, closest attention to?

I think the number one issue is what we share today is that we have continue to see raw material increases especially in the third, fourth quarter and then we also recognized those in the first quarter and, Matt, a lot of those were on the control device side which happened to be precious metals, magnets are a big item and our resin cost. We have implemented price increases which will start to roll-in in the second quarter and the third quarter, so by the time we get to the fourth quarter I think we've offset most of the cost increases we've seen in the control device side. And we've done the same thing in our wiring business which we will incur the same kind of trend that we'll see some improvement in the second quarter, by third and fourth quarter we will offset most of those increases.

I'm sorry, if I missed it but is it possible for you to quantify what the impact was in the first quarter?

What we did Matt, as if you look at the equivalent is, if you look at our raw material cost of sales, it's up roughly about 2.2%. And if you just take at our annual sales level that would equate to roughly about $5 million increase. So to speak, if you look at the relation between raw material costs to sales the programs we have in place, that we've recover nearly about the $4 million in pricing in control devices over the course of the year. We have about half of that amount in the electronic side, so we end up recovering most of those increases through the course of the second, third and fourth quarter.

And then moving on to, you've had an EGT award with Tenneco and China, which in the mid-2013, is that that's for commercial vehicle not light vehicle, correct?

Right. It's commercial on the side. But that award is being pushed out, it was supposed to launch this year. It's been pushed out because the Chinese government has changed, the implementation date for the Euro standard. So we're probably pushed out to 2013. It was an 18 month push out from the government.

Tenneco has about I think 7 to 8 Chinese commercial vehicle customers for emissions regulations there, are you launching on all of those customers or just the select couple.

We're not launching on all of them. I'm not sure which of these specific customer is, as product goes to Tenneco.

And I believe the emission systems are a fairly similar globally from China to Brazil to North America, is there a potential for you to be launching EGT with Tenneco across the board at some point.

Well, we would hope that we do some EGT business with them here. And we would hope that we would be able to launch that in other places as we demonstrate our capabilities. So yes, the difference is of course the timing of the emission standard, North America and Europe. Europe, 4-standard Europe, 5-standard and the North American standards and the Chinese are following the Euro-standards.

And I know you've reclassified some of your sales as class 8 versus Class 5 through 7 over the last quarter. I was just curious, how we should think about your Class 8 exposure and Navistar as a percentage of sales. And what you're seeing with the Navistar Class 8 schedules?

Well, I think overall, we've seen that Navistar has not advanced their market share as quickly as I think some of the market forecast are. We still believe that they will gain share during the course of the year. And we've taken somewhat of a position that is conservative in relation to our forecast for the year.

My last question, I think you mentioned some, especially in the press release, incremental near-term weakness in Brazil and Europe. Is that 1Q weakness or is that incremental to 1Q weakness? And in your sense is the second quarter going to be weaker than the first quarter? And with your PST guidance for instance, you had mentioned that seasonally it would be increasing in the third quarter and the fourth quarter, but you didn't mention second quarter versus the first quarter.

In Europe, we were just back from there, and we see there is reset. We see the second half strengthening. As a matter of fact, we see kind of flattening happening in the second quarter here. So we don't see any further decline. So we see then a gradual improvement there in the third and the fourth quarter. In Brazil as we look at that market, the issue for us is really the currency exchange rate and the slowdown in the general economy there, which will impact PST and how quickly distributors adjust to that. I mean this is new channel for us, so to speak, in terms of how fast people adjust to things. And so we expect to see continued weakness in the second quarter, with the third quarter strengthening and the fourth quarter strengthening. I think the target rate that the government put out that they wanted the real to be was around BRL 1.80. That's what they wanted to be. Because of their actions are strange, the real is going up to BRL 1.88, BRL 1.89. We expect it'll some of the actions that will drive that back down again, and try to stimulate growth of the economy at the same time. So if I look there is really where we have the greatest question, as to how the market's going to react, it is in Brazil.

And, Matt, just as a follow-up to the Brazil issue, and we shared with you in today's report that January and February were weaker in the aftermarket especially in the alarm system business. And then we had a very good March, which we really brought the level back in the first quarter. We experienced the same thing in April. It was actually a little weaker in the month of April. And I think it's our dealers adjusting for what they're seeing in the marketplace. And the real question is, is this really just the market adjusting to what the government economic policies are trying to implement to at least slowdown the economy without putting a severe slowdown. But as you know, our seasonality is much stronger in the third and the fourth quarter. So our forecast is still showing that we believe there will be stronger demand in the third and the fourth quarter versus the second quarter. In fact the second quarter looks like it may be flat with the first quarter in Brazil.

And our next question comes from the line of Robert Kosowsky with Sidoti & Company.

Just a couple of quick questions. First of on control devices, did you have any price increases in the first quarter or are they really just going to hit more meaningfully here in the second quarter?

No, we had some modest price increases going on, as we've been working on this program. But as you know, it's difficult to pass through price increases to customers. So we've had an ongoing program to push that forward. But then, I would say probably $400,000 probably would be impact of what we were able to push through.

It's rather small in the first quarter, Rob, but we'll start to see improvement. In fact our percent of sales start to narrow dramatically in the second quarter and then gets much better in third and fourth quarter.

So given like the improvement that you might be seeing relative to pricing and Control Devices, plus continued improvements in Mexican operations. Do you think this low 21% gross margin is kind of a low point for the legacy business and you might see a step-up as the year progresses?

Yes, and that's what we've sort of indicated over the year that we would tend it more towards the middle or above the middle of that range in the third and the fourth quarter, and our forecast are still showing that.

What's the total second quarter purchase accounting impact and it'll be added up to about $3.5 million, is that correct or did I miss something?

Because we have $1.5 million of inventory and then the $1.1 million in cost of goods sold will be steadily even throughout the year. So it's like $350,000 a quarter that we talked about in cost of goods sold. And on the SG&A, we talked about $4.1 million spread evenly over the balance of the year as well.

Yes, that's very close, Rob, we'll see in the second quarter.

Then finally, just with regards to medium duty, how do you see that market playing out as the year progresses? And maybe some of the optimism must on the improvement in housing sentiment, is that kind of playing affected at all?

We haven't seen that. I don't think the forecast has been adjusted upward significantly for anything that's happening there. So I'd say we've seen anything in that segment.

So pretty consistent with what you saw 3 months ago?

Yes.

And our next question comes from the line of Stefan Mykytiuk with Pike Place Capital.

Maybe starting with the big picture, you know part of the reason for buying in a bigger chunk of PST was to try, develop a business down there in Brazil for truck and ag, and construction equipment. Where do you stand there in terms of developing those relationships either with existing customers or new customers such we can expand PST in the commercial?

We are talking to our customers about our capabilities. Currently though, for anyone of our customers with the exception of electronics and expectation if we want to go on the wiring business we had to set up a wiring facility down there. So we're in the early stages of doing that. What we'll do is we will start to put more focus on that and have a more direct alignment with sales organizations and the PST organization. So we have a link between our customers here and there. We've had conversations with some of customers telling them of our ownership position and so it's starting to be initial interest phase right now. But I don't expect to see anything this year in that regard.

I'm not sure that Q1, George, you had offer a lot of numbers. It was $5 million, was the hit from the higher raw materials in Q1?

Yes, and that's what I was explaining the math. It's sort of a number that, when you look at it our raw material cost net sales was up 2.2%. So that says it effectively that our raw material lift that is coming from a couple of different really 2T sources. Raw materials are up roughly above that $5 million, about a little over $4 million, and the other million is being influenced by mix of products in the first quarter mostly in control devices.

And you're saying you got $400,000 back in pricing in Q1 and you're going to get more in Q2?

Yes, it's actually when price is going over really the last 3 quarters that essentially mitigates in almost all of that that increase that we're looking at in the first quarter.

So you're saying by Q4, basically you get $4 million back in terms of pricing.

Right.

And then just again, I'm sorry, some of these numbers you just went through so quick, but you're saying the amortization related to PST is how much a quarter?

Their amortization for the year, for depreciation is $18 million for the year, or are you talking about the purchase pricing accounting?

Yes, just a bit. It sounds like there is 3 pieces of the purchase price accounting. Right, you got the inventory step up which is $1.5 million you're saying in Q2 and then another $350,000 a quarter for some other assured assets that stepped-up, right?

Yes. The assets stepped-up, that's being depreciated. And then the other $4.1 million over the last 3 quarters of the year is in our SG&A.

So it's essentially, it's going to be about $3.2 million in the second quarter to $1.5 million for inventory and $1.7 million for the other 2 pieces. And that will be $1.7 million in the third quarter $1.7 million in the fourth quarter. So that's your $9.9 million and we amortize $3.2 million in the first quarter.

And the decline versus the '13 was what? It seems like that the bulk of that was in the inventory step up?

That was mostly in the inventory side. And you know we went through a lot of detail in terms of doing that evaluation, so the biggest change is really in that line.

And our next question is from the line of Jimmy Baker with B. Riley & Company.

The most of my question has been answered already. But I did have one kind of high level on the quarterly savings of your 2012 sales guidance, obviously lot of puts and takes with regard to the yearend markets and in some ramping your business. But if I look at the North American builds, both CV and light duty, they look to be a bit front-end loaded this year, maybe more so than we would have thought a few months ago. And yet your guidance implies the average quarterly sales for the balance of the year should, at least slightly exceed Q1. Of course, the PST seasonality helps there, but I just like to hear you elaborated a little beyond your prepared remarks on what gives you confidence in your sales outlook in your core operation?

Well, let me say, we think that the European markets have hit the bottom and will start based on what our European business group is seeing from there. It will start to see improvements in the third and fourth quarter. So we are expecting that positive trends. And then, when we looked at the North American market so we continue to see strength in the ag markets going across the whole year, so from our customer perspective. As we look at the commercial vehicle market, I think the real question is just one is perhaps does how much growth and vibe is in the market. It was forecasted to Class 8 at of 300, now down to 275. We think that that trend will hold in the marketplace going forward. And so medium, I think we haven't seen any upper-tick in that beyond what we've forecast. I think what we've adjusted for in our forecast is some opportunities for Europe that were in our original forecast, offset somewhat by at least maybe perhaps a little more of weakness in North American market.

And just as a follow-up, here with your Q1 commercial vehicle sales, it's kind of lagging industry growth as you highlighted, is that simply a function of your largest customer losing a good deal of share that you kind of discussed or you have some any negative content trends or other developments that would have cause you to lose share?

No. we haven't had any negative content trends in there. We haven't lost anything, as a matter of fact that all our other programs are doing well.

And our next question comes from the line of Robert Kosowsky with Sidoti & Company.

Just one last question, what's the total net new business wins or net new business revenue that you're going to have in 2012 and what's it look like for 2013?

I think compared or before we had $195 million for the 4 years and we had about 20% of that for 2012. But right now we're seeing that's going to be down roughly about $12 million in 2012. Then that jumps up, Rob, to that range of about $40 million to $45 million next year, 2013.

So 20% of $200 million, less $12 million.

Right.

And our next question comes from the line of Rhem Wood with BB&T Capital Markets.

Just to kind of summarize, it seems to me that you guys in your top line forecast is taking kind of a conservative approach, lenient things were off, you feel like you're going to adjust your cost structures so that you can improve margins sequentially going forward, is that fair?

That it's fair, we have in fact John mentioned, the actions taken in Brazil, and that fact that's actually split, most of the actions we've taken a lot of in April. We've already reduced 300 people in the direct and indirect and our plan with outsource the wiring harness business that was accomplished in April already. We've taken other actions since we've seen the softness of the market in May that we're going to take probably another $2 million to $3 million of cost out of Brazil side. And then, we have sort of in our manufacturing side, we're driving continuous improvements. I mean we've actually sort of migrated from lean and calling continuous improvement to drive efficiency levels. And so we've got upside coming and we're doing really the assessing of all the indirect labor, direct labor in our wiring plants. So that's showing great progress. And so I think, we'll benefit from that. And Europe with their downside, they're taking cost actions very similar what they did back in '08 and '09 when they saw the market going down. And the other key thing that we have still is, we're monitoring the customer platforms. And we have forecasted we'd have an increase in development expense in the last 9 months. And we're clearly temper that based on what we see with the volume coming from our customer. So we'll balance the cost structure as long as the market stays really close to where it is. I think we can manage our cost in a way to drive profitability.

Phil, just another added point on the wiring operations we have, the ramp up of a Saltillo facility which as that gives more efficient as it's finished its ramp up base. That will improve our cost structure there.

And then last, you talked about mid-year core products into Brazil, into the PST area, what is the timing for taking the PST products kind of overseas. You mentioned, bringing the audio line to Europe and India and elsewhere. Is the timing that's changed?

I think we're more of it, looking at the alarm segment first. We've designed and they've designed a new alarm system with an A6 chip that we believe we're start to look at the first in China market and go into that market and then perhaps the Indian market. We have looked at the European market, alarm systems are not as an attractive, that market proposition over their just because the demand is not there. So that will start to roll out as we look at this. We've got to do our market studies in China and India. I think that again that will be over. I don't see any benefit from those things this year in our plans.

Ladies and gentlemen, that's concludes today's question-and-answer session. I would now like to turn the call back over to Mr. John Corey for closing remarks.

Well, great. Thank you for joining us on today's call. As we said in our announcement, we are pleased with the improvement that we have in our businesses. We still have a lot of work to do with our businesses. And our team is aligned around those things. And as I think as many of the questions came on today's call, we have some initiatives that we will be undertaking over the next several months to drive market performance or those things will roll out over, not benefit this year should benefit also 2013 and beyond. So it's an unstable market, but we're doing. We're managing it and our organization is managing to control our cost and continue to focus on driving the efficiencies into our business. Thank you, very much.

Ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation. And you may now disconnect. Have a good day.