Good morning, and welcome to the Sensata Technologies Holding N.V. Fourth Quarter and Full Year 2013 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded. [Operator Instructions] For opening remarks and introductions, I will turn the call over to Jacob Sayer, Vice President of Investor Relations and Corporate Communications. Mr. Sayer, you may begin.

Thank you, Andrea, and good morning, everyone. Earlier today, Sensata issued a press release describing our financial performance for the fourth quarter of 2013. If you did not receive a copy, you may obtain one from the Investor Relations section of our website at sensata.com. This call is being webcast live, and a replay will be also available in the Investor Relations section of our website. Before we begin, let me remind everyone that today's call -- today's discussion contains forward-looking statements based on the business environment as we currently see it and, as such, does include certain risks and uncertainties. Please refer to our press release and our 10-Q and 10-K filings for more information on the specific risk factors that could cause our actual results to differ materially from projections described in today's discussion. In addition to U.S. GAAP reporting, Sensata reports certain financial measures that do not conform to Generally Accepted Accounting Principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release, as well as in the Investor Relations section of our website under Financial Reports. Comments made during today's call will primarily refer to our non-GAAP financial results. On the call with me today are Martha Sullivan, our President and Chief Executive Officer; Paul Vasington, our incoming Chief Financial Officer; and Jeff Cote, our Chief Operating Officer. Martha will review some highlights and will discuss trends in the end markets that we serve. Jeff will then provide a more detailed review of our financial results, including segment data for our Sensors & Controls business units for the fourth quarter. He will also outline our financial guidance for the first quarter and full year 2014 and some of the estimates underlying that guidance. We'll hold questions until after our prepared remarks. [Operator Instructions] I'll now turn the call over to Martha Sullivan, our President and Chief Executive Officer. Martha?

Thanks, Jacob, and thank you all for joining our fourth quarter and full year 2013 conference call. Let me start this morning by welcoming Paul Vasington to the team here at Sensata. Paul is joining us from Honeywell International, where he most recently served as the CFO of Honeywell Aerospace, one of their largest divisions with $12 billion in sales. Paul is a strong operating finance leader with a great deal of related industry and M&A integration experience. He is a strategic thinker, and importantly, embraces leadership values, which will make him a great fit with our team. Paul is here with us today. And while he won't be taking questions, I am sure many of you will have a chance to meet him in person over the coming months. I'd like to offer my sincere thanks to Jeff Cote for serving as Interim CFO during this transition, and look forward to having him 100% focused on his responsibilities as Chief Operating Officer going forward. Now on to our results. I am very pleased with our results during the fourth quarter. We delivered net revenue at the high end of our expectations and adjusted net income for diluted share above our expectations for the quarter. Financial highlights include: net revenue for the fourth quarter was $505 million, an increase of approximately 13% from net revenue of $445 million in the fourth quarter of 2012. Adjusted EBITDA for the fourth quarter of 2013 was a record $144 million, an increase of approximately 16% from the fourth quarter last year. Adjusted net income for the fourth quarter was also a record $105 million or $0.59 per diluted share, a substantial increase of approximately 26% from adjusted net income per diluted share of $0.47 in the same quarter last year. Sensata's earnings per…

Thank you, Martha. Fourth quarter 2013 net revenue of $505 million increased 13.4% compared to the fourth quarter of 2012. Sequentially, revenue increased 1.2% from the third quarter of 2013. For the full year 2013, net revenue of $1,981,000,000 increased 3.5% compared to 2012. Adjusted EBITDA for the fourth quarter was $144.3 million or 28.6% of net revenue. Adjusted net income was $104.5 million or 20.7% of net revenue, inside our target range of 20% to 23%. For the full year 2013, adjusted EBITDA was $550.2 million, or 27.8% of net revenue; and adjusted net income was $384.8 million or 19.4% of net revenue. Profitability indices were better than in 2012, primarily due to increased volumes, benefits from cost-reduction programs, and synergies from acquisitions. Cash taxes for the fourth quarter were approximately $5.4 million or 4.1% of adjusted EBIT. We expect cash taxes for the full year 2014 to be in the range of 4% to 6% of adjusted EBIT. During the fourth quarter, restructuring and special add-backs of $2.7 million, related primarily to the movement of manufacturing lines from Korea, offset somewhat by insurance proceeds. Including insurance proceeds expected in 2014, we continued to expect restructuring add-backs due to the events in Korea to be close to 0 overall. Cash at December 31, 2013 was $318 million. For the fourth quarter, we generated $60 million in free cash flow. During the fourth quarter, cash provided by operating activities was $86 million -- excuse me, $87 million, cash used in investing activities totaled $38 million, and cash used in financing activities totaled $79 million. Capital expenditures in the fourth quarter were $27 million. Capital allocation is very important to Sensata. We continue to believe that acquisitions have the potential to provide the highest return for shareholders. Even after closing the…

Despite 2013 being a year of below-ideal revenue growth for Sensata, we believe economic headwinds are now, for the most part, behind us, and we are confident in Sensata's ability to grow substantially. Sensata is and will remain a world leader and early innovator in mission-critical centers and electrical protection. The underlying drivers of growth for Sensata, including the world's ongoing need for improved safety, energy efficiency and a cleaner environment remain strong. By wisely deploying the significant capital that this business generates between research and development, expanding capacity, acquiring logical adjacent businesses and share repurchases, we believe Sensata will return to double-digit net revenue and earnings per share growth for the foreseeable future. We would now like to open the line for questions. Andrea, please introduce the first question.

[Operator Instructions] Your first question comes from the line of Wamsi Mohan.

Martha, as we look at your commentary here about the stronger fourth quarter driven by content growth, how much of that was Euro 6-related in the fourth quarter? I know last call quarter you were thinking that that was tracking sort of at a lower rate going into '14. Did that change? And what sort of benefits, if any, are you expecting from the Euro 6 implementation in 2014? And I have a follow-up.

Hi, Wamsi. Yes, very little of that content growth at this point is coming from Euro 6. And as we talked about on the last call, we're seeing Euro 6 diesel engine offerings in the marketplace, but they're really at the discretion of the consumer. And when you look at what that added cost is to the European consumer in the marketplace they're facing, we're not seeing much in the way of take rate on the Euro 6 engines. As we look into 2014, we're expecting about a 10% take rate, averaged across the year, on those diesel engines options. So not expecting a lot of lift in '14, a little more than what we would have seen in the back end of '13, but not a lot. So our expectation is that much of that incremental revenue associated with the higher requirement will come in 2015.

Okay, great. And we've seen some M&A of sensor assets now by connector companies, and I was wondering if you could talk a little bit about if you think this could change the pricing landscape at all given that these connector companies are coming to market with lower aggregate margin structures than your margin structure?

Sure. I think the first comment I would make is that I think it's quite validating of the opportunity-rich environment for sensors. And as a company has been in sensors for 30 years, we think that's just amplification of the excitement we have in the overall marketplace. We're disciplined. We have not seen, I would say, a lot of sort of irrational bidding on sensor companies. The fact is we're very clear on what we're looking for. Alignment to our business is very important to us. Not sure that there is a great deal of alignment with existing sensor assets inside of connector companies, but not overly concerned about their entry into the market via M&A.

Your next question comes from the line of Shawn Harrison.

Just I wanted to, I guess, first get back to the point of growth in Europe for the year or production growth. You're expecting 2x the market growth, I believe it was the statement. Maybe if you could just elaborate on that?

Yes, our comment there is, right now, when you look at what third-party forecasters are calling for, it's just a little over 1% improvement in production. And we think that's a bit light, just given where replacement rates are in Europe, how long that market's been down, and what we're seeing in overall backlog. So we're a little more robust on our outlook for production in Europe closer to the 2.5% to 3%.

Do think that accelerates throughout the year, Martha, or is that something that we should see -- you've baked into the guidance already here in the first quarter?

It's a comparison over prior quarter. And so by the time we got to late third quarter and into the fourth quarter, you began to see registrations improving in Europe, and so the production aligning with that. So expectations are probably in the -- in the quarter-over-quarter comp. Those would be a little stronger in the first half of the year.

Okay, and there is a follow-up. The heavy vehicle business, I think the comment was market growth of maybe mid-single digits. Sensata saw substantially better growth in that last year. How do you expect Sensata's performance to be in that market for 2014?

We've recognized HVOR will continue to be a strong content driver for us. We've seen some very, very significant quarters recently that's not sustainable when you look at 70% growth. But we expect it to be a very strong double-digit content growth driver for Sensata.

Your next question comes from the line of Amit Daryanani.

This is Karl Ackerman filling in for Amit. I'm just curious -- Martha, you had talked about 6% to 7% content growth for the full year. I'm just curious how we should think about that on a linear basis as we work our way through year? And then additionally, is that an organic basis, including the recent acquisition?

So you recall that we've moved to guidance on content for the year. And the reason we did that is the content growth does not come in a linear way. It can be very, very lumpy. It's very much subject to the actual customer programs, the take rates on those programs, so not really going to be able to guide to what that means in every particular quarter. The acquisition are embedded in our guides. We're not expecting a lot of content growth on the very recent acquisitions. Part of our play is that we will introduce content growth and global opportunity into those businesses; and so not a lot of increase, from a content perspective, on the acquired revenue in 2014.

And if I just one follow-up. Just curious, how should we think about the margin potential for the recently Wabash Technologies business? And then additionally, I think past acquisitions you've talked about, it's kind of giving a 28% to 30% in EBITDA margin target in about 2 years of closing. Just curious if that margin target still holds for the current acquisition and if that time period is still relevant here?

So one. On the acquisitions, we do target businesses that have a profile around the quality of the business that will get them to approximately around the Sensata margins, right. So we believe the margin index is a proxy for the quality of the business. And the businesses that we have in the past acquired and the ones that we will target in the future will meet that criteria. So we do expect them to approach Sensata margins over time, once they're fully integrated.

And I think, just to get back to Wamsi's earlier question, when you look at the synergies that Sensata can bring to sensor companies, it allows us to be really competitive in the marketplace and still return a great return to our shareholders.

Your next question comes from the line of Steven Fox.

A couple of questions from me. First of all, just getting back to the heavy vehicle equal numbers, your revenue growth for the year was 34%. And I'm just curious. I understand the outlook that you talked about, but looking back at the year, can you sort of break down that growth rate among content versus unit growth and talk about where you were most successful in driving such a good top line? And I have a follow-up.

I think we would just say, again, and that it's overwhelmingly content. When we look at what the drivers are, some of that is regulation-based and very similar to what we see in diesel engines in the passenger car market. So the need for things like selective catalyst reduction in the exhaust of diesel engines that drive sensor content for us are the drive to improve energy efficiency. We see opportunity for pressure sensors and fuel rail systems, oil pressure sensing. So it's quite a range of applications that we're bringing into that marketplace. And I'd say, significantly, we're seeing that extend beyond the on-highway piece to off-road and construction, and that's been another play for us.

And then just longer term, there has been a lot of news around potential U.S. regulations on crash avoidance systems in the last couple of days. Can you talk about your play there, and any expectations of how that could benefit sales in the next couple of years?

When you look at those systems, those are primarily sensors that are external to the vehicles with things like radar sensing, lidar sensor. We don't play in that space today. It does integrate them with active safety systems like vehicle stability control, which we are in. For the most part, installation rates of vehicle stability control systems are fairly high in mature markets. We're seeing some growth of that system, for example, in Korea and other parts of Asia. And so the fact that you need to have that onboard before you can have a collision avoidance is something that indirectly helps our business.

Your next question comes from the line of Robert Wertheimer.

Just on content next year, is there anything that's an abnormal drag with obsolescence or otherwise, maybe tailing that down towards the lower end of maybe what you could do.

Rob, the obsolescence had run very fast [ph] in 2013, which is driven by a wind-down of our occupant weight sensor revenue extends into 2014. And so it's really interesting. If you look at this quarter, on the quarter we just finished, the fourth quarter, it happens to be a quarter where, when you compare the run rate of that OWS program in '13 to fourth quarter '12, very similar run rate. And so in a quarter where you saw very little obsolescence, you can see what happens from a content growth perspective. But we will continue to see that obsolescence through 2014. It continues to wind down through the year. We actually expect a bigger impact from that effect in the second half of 2014 versus the first.

And then I hope this isn't a silly question, but are any of the issues that cause content to underperform a little bit over the past 2 years with pushouts, with people not choosing the launch or develop certain option sets, is any of that pent up and then it will come back stronger than average, or is the opportunity gone and there's just a normal content ahead of you?

We called out the impacts of Euro 6, in particular, because that will be a very strong driver of content growth. And so to the extent that there were reduced launch volumes on Euro 6 engines, when that is fully played out, we expect that to be much stronger than our average content growth.

Your next question comes from the line of Rich Kwas.

Just a couple of items here. On the Euro 6 follow-up, Martha, you talked about kind of a 10% adoption rate as it relates to $75 million to $100 million. Should we think of this as kind of $10 million benefit in '14 and then the remainder of that in '15? Is that the right way to think of that in terms of impact on content growth?

Yes, I haven't actually dollarized the '14 impact. So it's probably back of the envelope we still need to do. But -- so your thinking is right. There'll be some of that in '14 way below what that impact will be when it's fully played out. So the number we gave you, the incremental $75 million to $100 million, is sort of from 0 installation on Euro 6 to 100% played out.

Okay. And then back on the obsolescence, is that still assumed within the revenue outlook to be a 1 point incremental headwind versus your normal obsolescence for '14?

Yes, it's 1.5 to 2 is what we saw in '13. We think it's going to be similar in '14. And so when you look at the guide on our content growth, that is net of that obsolescence.

Okay. And then on the -- just to clarify on the European light vehicle. Is that -- the 1.5 growth or thereabouts, that third-party -- 1 to 1.5, the third-party you're using and then your assumption for 2.5 to 3, is that your view of the market or is that what you're seeing from your platforms that you're exposed to?

That's our view of the market. And so it's a bit of a combination of the 2, Rich. When we look at our backlog and what we're exposed to, and then we triangulate that to a total production rate, we think the production rate in the market is stronger than what IHS just have called out.

And just last one for me. On the integration cost, that $11 million to $13 million, that excludes any revenue benefit from -- or profit benefit from Wabash, right? So we should think about that as there is some base level of operating income contribution that nets some of that integration cost, correct? Is that the right way to think about it?

That is the correct way to think about it. But we did state that the profitability level of that business, combined with the integration cost, will make that business slightly dilutive for the year for us in terms of profitability. But that is the right way to look at it. The $11 million to $13 million is integration cost only.

Your next question comes from the line of Jim Suva.

If we were to take a big step back and look at strategically kind of your long-term organic growth rates, can you help us understand that a little bit? If I do my math, and maybe I'm missing something here or maybe it's right, it looks like 2014 organic growth, when you take out the acquisition, would kind of be in the range of, say, 3% to 8% with the midpoint of maybe 5% to 6%? Are those accurate -- and are those type of long-term organic growth rates you're looking at? Or is it, like earlier you mentioned in a question, being pulled back little bit by obsolescence or pushed up a little bit because of the Euro standards? Can you just help us with the organic growth rates long term strategically?

Yes. So if we look at an organic piece of data, about 3% to 4% of the overall '14. So the balance of the organic at, call it 6% to 7%, we think that's low for Sensata. And we recognize why that is. We've talked about an additional 2% headwind, 1.5% to 2% headwind that we saw in 2013 associated with obsolescence. We know that, that continues into '14. We looked at the fact that a lot of our design end has been around in the intermediate term, has been around European compliance. That has become more discretionary than we've seen in past rollouts. So that's tended to reduce a bit our overall content expectation. When that comes back, we expect it's over average on content and then get back to the organic rates of -- in total of 7%, 8% to 10%, which is what we've been guiding to in the past. So I would describe '13, and even the outlook on '14 organically as below our average expectations.

Your next question comes from the line of William Stein.

I'm hoping if you could comment on the Wabash acquisition integration cost. It sounds like those are coming in a bit faster than I expected. Should the company be completed in that integration throughout the year, or perhaps, even less than 1 year, or is that going to continue for second year?

Yes, it will take a couple of years for this to be fully integrated. But typically, the upfront cost associated with initiating that activity does tend to be a little bit more front-end loaded. Obviously, it's different depending on where the synergies are coming from. But we wouldn't expect this to be different. The types of products that they have are very similar in terms of requiring customer qualification and so forth to allow us to extract the synergies. So the timeframe would be consistent with prior acquisitions.

Great. And in your prepared remarks, you commented, Martha, on -- I think you called out fleet buying ahead of new requirements for trucks? Did I get that right? And to what effect would you estimate that had on the quarter and on the outlook that pull in a particularly dollar amount we can think about?

We did reference that, and that's primarily a U.S. phenomena that we saw. We think they're just trying to do a little bit of, again, back of the envelope on that. Again, the content piece, overwhelmingly, was what's driving us up in HVOR, probably a 70-30 split on that, if you look at our overall growth in HVOR for the quarter.

Your next question comes from the line of Mark Delaney.

This is Gabriela Borges on behalf of Mark. I wanted to follow-up on your prepared remarks on appliances business. Could you give us some update on growth trajectory for this business in 2014, especially given that some of the macro data out of the U.S. and China has been a little bit weaker recently?

So if you look at global, appliance has been a growth vector for us and we continue. It's a single-digit grower in the Controls business. We expect that to continue in 2014. It's an area where we're actually taking share in the marketplace. So it's, I would say, more secular growth driven for Sensata in overall macro market. In terms of dissolved economies -- so it is an area where we've seen some rebound, particularly in North America. So most of what we ship into appliances actually gets built in China and comes back to mature market. The U.S. market is an end [ph] dynamic that's been a positive for us in appliance business.

And then as a follow-up, if I may. I believe last quarter you talked about some of your customers anticipating a slight inventory correction in the automotive supply chain. Did that play out as you expected? And could you give us an update on what you're hearing from your customers today with respect to inventory in the channel?

I think that may have been a concern for us earlier in the year. But by the time we entered the quarter, we felt that inventories were pretty well controlled, and that appears to be the case. I'd say the one area of concern to keep an eye on, if you look at the data that just came out in the U.S. on January auto sales, came in a little bit weaker and you saw corresponding increase of vehicle inventory that I would not characterize as alarming. It's just something to keep our eyes on. And as we move to February and March, it's probably the one area where we've seen a little bit of an uptick in inventories.

Your next question comes from the line of Ambrish Srivastava.

This Gabriel Ho calling in for Ambrish. Just a question on the fill rate. Could you please put this 93% fill rate in context with historical patterns? It seems on the higher side. What was driving that?

It is on the higher side of our fill rate compared to prior quarters when we've announced. But we are a little bit later in our announcement this quarter. So when you compare that and adjust for that, it's pretty close to where it needs to be. So we feel good about the fill rate in the first quarter against that revenue guide that we provided.

As a follow-up, then. Also on the guidance for the Q1, it seems, if you exclude Wabash, is up around 3% to 4%. It appear to be below seasonality. Can you give more color on this?

On a sequential basis or...

Yes, on a sequential basis.

Yes. So I think fourth quarter was a great quarter in terms of the revenue rate. So it's a little bit lower. I think normally we would see a 5% to 6% increase. So it's not at a range that would be alarming to us. It's still an increase. But it's in line with sort of historical averages of what we've seen around the sequential growth.

And your next question comes from the line of Wamsi Mohan.

Martha, can -- you sized this incremental opportunity of $75 million to $100 million for Euro 6. Can you maybe give us some high-level thoughts around what sort of share assumption you expect? Is this some sort of share gain versus market, or this just in line with market, and how that breaks out between diesel and non-diesel?

Sure, Wamsi. It really is a diesel play. And so the thing that becomes important is what are the diesel take rates in Europe. Those take rates have been averaging between 42% to 45%. It's important that diesel insulation stay at that same rate in order for us to drive in the range that I described. From a share perspective, this is a phenomena of getting in early into those applications and winning the design end. And we've done that. So it's not a battle that's ahead of us. We are designing the Euro 6 engines. Many of those are on the market already, offered it optionally. More will be launching. But we've already secured the positions that we need in order to deliver that revenue. Now what becomes important is vehicles sold in Europe, somewhat the OEM mix, but most importantly, the diesel engine installation rate.

Your next question comes from the line of Christopher Glynn. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: Jeff, you gave a little commentary on the normal seasonal patterns that you've cited historically, those ranges and relative to first quarter guidance. Just wondering if, as we go through the year, there are some considerations we might have in the linearity with respect to the seasonal ranges you've talked about in the past?

Yes, I think it seems like things are getting to a point where there is more regularity around the seasons. I think, if you look back over the last couple of years, there have been so many events, it's been hard to create a pattern. But when we look back, call it 10 years, typically the first quarter is up versus fourth, we see second quarter up again a little bit, and then the third quarter goes down from the second, and then back up a tiny bit. And so percentage wise, I think the sequence goes somewhere in the neighborhood of 5% or 6% up, another couple of percent, 2% to 3% up into the second quarter, down, and then back up a couple of points into the fourth. So not a huge amount of swing from a seasonal standpoint. And that may change as the mix of the business changes, but that's what I would expect. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: And then if we could just do a big picture review of the tax structure, how long do you expect to have the cash tax rate in the single-digit range, and then how that ramps up?

Yes. So we keep a close eye on this. And as you know, our tax rate really comes from the fact that we have a number of tax shields in the form of intangible assets that we get a tax deduction for. And that's still a very large number. It's $1.5 billion to $1.7 billion tax shield as we go forward. And that's really in the form of additional intangibles, but also NOLs that exist at the end of the year. The second part of this is around tax structure and where profits land and the tax in those jurisdictions. And we'll continue to modify that and tweak that to optimize that tax advantage that we have. Obviously, we want to be good citizens in the environment that we operate, but we want to take advantage of all of the tax laws to basically minimize the cash output. We feel strong and comfortable about the continued 4% to 6% over the next 5 to 7 years. And we'll keep you posted as we progress on our tax planning and actual tax going forward.

The next question comes from the line of Robert Wertheimer.

Excuse me. My follow-up was just answered right there. So thank you very much.

And your next question comes from the line of Rich Kwas.

Just a quick follow-up on the content growth. So the 6% to 7% is comparable to the 5.5% for '13, correct? That is with the obsolescence -- the incremental obsolescence being roughly equal year-over-year? Is that the right way to think about it?

That's right, Rich.

I just want to make sure that was the case.

As there are no more questions, I'd like to turn the conference back over to Mr. Sayer for closing remarks. Mr. Sayer?

Thank you, Andrea. I'd like to thank you all for joining our Fourth Quarter and Full Year 2013 Financial Results Call today. Later in the quarter, Sensata will be participating in Barclays Industrial Investor Conference in Miami on February 19 and Goldman Sachs Leveraged Finance Conference in New York on March 19. We appreciate your continued interest and support to Sensata and look forward to speaking with you on the road and again next quarter. Thank you very much, and goodbye.

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