Littelfuse Inc (LFUS) 2016 Q4 法說會逐字稿

Good day, everyone, and welcome to the Littelfuse, Inc., fourth-quarter 2016 conference call.

Today's call is being recorded.

At this time, I will turn the call over to Executive Chairman Mr. Gordon Hunter.

Please go ahead, sir.

Thank you and good morning and welcome to the Littelfuse fourth-quarter 2016 conference call.

Joining me today are Dave Heinzmann, our President and CEO, and Meenal Sethna, our Executive Vice President and Chief Financial Officer.

Our fourth-quarter results exceeded the midpoint of our guidance and provided a strong finish to a very good year for Littelfuse.

Our sales surpassed the $1 billion milestone for 2016 and our earnings and cash flow also set new records for the year.

Our electronics segment had a strong fourth quarter and automotive was solid overall.

This offset continued weakness in our industrial segment, as well as in our commercial vehicle products business.

As you know, on January 1 of this year Dave Heinzmann became our President and CEO and I assumed a new role as Executive Chairman.

Dave has been with Littelfuse for 31 years.

He and I have worked together for the past 13 of those years, helping to transform Littelfuse from a fuse company into a global leader in circuit protection, with growing platforms in power control and sensing.

The CEO transition has been exceptionally smooth, due to a thoughtful, well-planned succession process that was similar to the CFO transition to Meenal a year ago.

It's really been an honor to lead this Company through a period of unprecedented growth and to work with Dave, Meenal, and our executive team.

Littelfuse is well positioned for our next stage of growth and I know that Dave will be an outstanding CEO.

I look forward to continuing to work with Dave, the executive team, and our Board, and I know Dave and Meenal look forward to continuing to work with all of you.

In my new role, I will no longer be participating in our quarterly earnings calls.

It has been great working with all of you and keeping you updated as we executed our growth strategies.

Thank you all for your confidence and support.

And with that introduction, I'll turn the call over to Meenal, who will give a brief summary of our fourth quarter and full year.

Meenal?

Thanks, Gordon.

Before we proceed, let me remind everyone that certain comments we make on this call contain forward-looking statements.

These forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties.

We refer you to the Company's Forms 10-K and 10-Q, as well as our other SEC filings, for more detail about important risks that could cause actual results to differ materially from our expectations.

In addition, our remarks today refer to the non-GAAP financial measures adjusted earnings per share and adjusted tax rate.

These non-GAAP measures are intended to supplement, but not substitute for, the most directly comparable GAAP measures.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided on our fourth-quarter earnings release, filed on Form 8-K today and available on our website.

Now some highlights from our fourth quarter and full-year 2016.

Sales for the fourth quarter were $285 million, up 29% year over year.

As you may recall, the fourth quarter of 2015 included an extra week.

Excluding the impact of that week, acquisition revenue, and the eHouse divestiture, organic sales growth was 6%.

On a constant-currency basis, organic sales growth over last year was 7%.

You can find growth by segment, excluding acquisitions, the divestiture, and the 2015 extra week, in the press release we issued this morning.

GAAP diluted EPS was $1.19 for the quarter.

Adjusted EPS was $1.57, which increased 38% year over year.

Looking at the full year, sales for 2016 were $1.056 billion and were up 22% year over year.

GAAP diluted EPS was $4.60; adjusted EPS was $6.26, which increased 26% year over year.

The adjusted effective tax rate for the full year was 18.1%, a 700 basis-point reduction versus last year.

We finished the year with record cash flow generation, as cash from operating activities was $180 million and capital expenditures were $46 million.

Free cash flow finished at $134 million for the year, a 10% increase over last year.

As we announced in December, we completed a private placement of approximately $350 million of senior notes.

The US dollar and euro notes range from five- to 12-year maturities and have an average interest rate of approximately 2.25%.

Putting in this fixed-rate debt limits our interest-rate exposure as rates rise, while providing us flexibility for the execution of our long-term strategy.

In summary, we closed 2016 with a solid fourth quarter and delivered record performance across all of our key financial metrics for the year.

Now I will turn it over to Dave for more color on business performance and market trends.

Thanks, Meenal.

Starting with the electronics segment, fourth-quarter sales of $156 million increased 60%.

For the full year, sales of $535 million were up 32%.

This was an exceptionally strong quarter for our electronics segment, with sales up 6% sequentially over the third quarter.

This is unusual as our fourth-quarter sales are typically lower than the third quarter.

Some of that was driven by customers placing additional orders and taking shipments in December due to the earlier Chinese New Year.

Overall, our fourth-quarter sales were strong in China and showed solid growth in Europe and North America.

Sales were particularly strong in the mobile phone charging and electric vehicle markets.

Fourth-quarter margins also continued to be strong, due to better leverage from the higher revenues, as well as favorable product and regional mix.

Electronics channel inventories were in line with our expectations for the quarter.

As discussed at our analyst day in December, each business has target markets that we believe offer exceptional growth opportunities.

I'll highlight our progress in four of these markets across the electronics segment.

They are battery protection, appliances, telecom infrastructure, and automotive electronics.

We have stabilized the battery protection business and are focusing on opportunities for growth.

For example, we are moving beyond smartphone batteries into adjacent markets.

One of these is a higher current charging system for portable Wi-Fi devices where our polymer PTC products are used within the cable to prevent overheating.

These portable Wi-Fi devices are designed for growing markets in India and other countries where Wi-Fi coverage is not as broad as in developed countries.

Also in the battery market, we are continuing to gain share with our bimetal mini-breakers that ensure the safety of lithium-ion batteries used in devices such as smartphones, tablets, and digital cameras.

Our two newest programs are with a key mobile computing OEM where our strong local technical support at the customer's design site and with the customer's subcontractors and battery suppliers enabled us to secure this win.

Small appliances continue to be a growing market for our electronic components and sensors.

We recently won new business with one of the largest single-shot espresso coffee makers in Europe, where our sensor assemblies detect the position of cartridge-loading trays in their next-generation coffeemakers.

Telecommunication equipment is another market where we are continuing to build momentum.

We had multiple wins with telecommunication equipment suppliers globally for a new protection thyristor we developed to provide overvoltage protection for sensitive telecom circuits that transmit data through telephone lines.

These wins contributed over $1 million in sales in 2016.

We are also generating significant new business for our high-powered TVS diode to protect the power supply in cellphone base stations.

This application added $2 million of revenue in the fourth quarter, primarily in Korea and Europe, and we expect to see continued growth in 2017.

Looking at automotive electronics, battery sense line protection is a growing category with significant opportunities.

Sense lines measure the voltage in a battery to ensure the health of individual cells or clusters.

A recent win was with a Chinese electric truck battery maker that selected our ceramic chip fuse to protect the sense line against short-circuit failures in the event of an accident.

Our leadership in fuse technologies and understanding of the specific application helped the customer get its product to market sooner.

In addition to fuses, our diode array products are also well positioned in various automotive electronics applications, including infotainment, communications networks, and GPS antennas.

We realized $1.5 million of revenue for these applications in 2016 and expect revenues to reach $4 million in 2017.

At our analyst day, we also talked about expanding our position in power control semiconductors as part of our growth strategy.

We took our first step in entering the silicon carbide market in late 2015 through our investment in Monolith Semiconductor, an Austin, Texas, based startup company with a team of experienced silicon carbide and power semiconductor experts that are developing this technology.

Silicon carbide product have inherent advantages over silicon-based devices, allowing them to switch faster and provide even more power -- even more efficient power conversion.

Monolith has been making good progress with their development and we expect to start releasing silicon carbide products this year.

As part of this strategy, we began funding additional development efforts for Monolith late in the fourth quarter.

You will be hearing more from us on this growth area in the coming months.

In summary, we believe our broad product line and focus on targeted growth markets, such as battery protection, appliances, telecom, and automotive electronics, will continue to drive the future growth of the electronics segment.

Next is the industrial segment.

Our fourth-quarter sales of $22 million were down 33%.

For the full year, sales of $106 million were down 14%.

The decreases were primarily due to continued weakness across many of our key end markets, including heavy industrial, mining, and solar.

In the fuse business, we faced a difficult comparison against a strong fourth quarter of 2015, when our customers were in ramp-up mode as they expected the US solar tax credit stimulus to end.

With the sustained weakness in the major end markets for our protection relays and custom products, we are continuing our focus on reducing costs and improving profitability.

While the ongoing market headwinds remain a challenge, we are continuing to manage through this historic downturn in several important markets.

We believe the industrial segment will continue to provide good growth opportunities for us over the long term.

We are working to convert additional fuse distributors to Littelfuse products and add new customers in the relay business.

Looking beyond the individual markets for this segment, our industrial product technologies have a broader and key role in supporting our growth in strategic markets such as electric vehicles and energy storage.

That brings us to the automotive segment, where fourth-quarter sales of $106 million were up 19% over the prior-year quarter.

For the full year, automotive sales of $415 million increased 22%.

Our passenger car fuse and sensors businesses had another solid quarter, while our core commercial vehicle products continue to be impacted by market weakness.

During the quarter, the automotive segment won new business that will contribute approximately $17 million of new annual revenues at peak production.

Worldwide car builds were up 8% for the fourth quarter, led by China, where production increased 19%.

Total passenger car fuse sales increased 11% for the quarter, excluding the 2015 extra week and currency impacts.

Strong performance in China was somewhat offset by lower sales in Europe as programs were transferred to China.

We continue to benefit from the Chinese government's tax incentives for smaller cars, which were set to expire at the end of 2016.

These incentives will continue at a lower level in 2017.

Sales in China from new programs for GM, where we have high current -- high content, ramped up.

We also benefited from new business wins resulting from our strong relationships with local OEMs and Tier 1 customers.

In December, we discussed multiple growth opportunities from the electrification of vehicles.

We won a new masterpiece program with GM in China for a new line of hybrid vehicles that will contribute approximately $500,000 in new revenue at peak production.

Additional wins in China included standard fuses for Ford and our high-current JCASE fuse for a new compact SUV manufactured by GAC, a leading Chinese OEM.

Outside of China, new fuse programs for Ford and Renault ramped up during the quarter and we won new master fuse programs in North America with Chrysler and GM.

These wins will contribute approximately $5 million in new revenue at peak production.

We also secured a notable design win with a large Tier 1 supplier for our polymer PTC pluggable device that protects the motor circuits of a power window.

This is a seven-year lifecycle program starting in early 2017 with annual revenues of $2.1 million at peak.

We continue to have good design-in activities with our customers around opportunities for 48-volt systems, and we expect OEMs globally to increase their focus on these vehicles in 2017.

In December, we also talked about our automotive sensor business being a key growth area for us.

We introduced two new innovative sensor designs in the fourth quarter and we expect to deliver new revenues over the next two or three years.

These include several speed, position, and direction sensors based on enhanced magnetoresistive technology and an innovative new mirror-mounted sensor cluster that measures rain, humidity, temperature, and solar all in one package.

Two notable wins during the quarter were for next-generation advanced seatbelt buckle sensors and sensors for fuel heater applications with two leading OEMs.

Both wins support our strategy of growth in selected target markets and will contribute nearly $4 million in revenue at peak production.

Our automotive sensor business had a successful year with sales growing 16% and meaningful improvement in margins as we migrated to a better mix of business.

We had particular strength across our occupant safety, efficiency, and comfort applications, such as power tailgates and dual clutch transmissions.

As we head into 2017, we expect the customer transitions out of the legacy programs to continue in the first half of the year, dampening the growth rate.

However, we expect sales growth to pick up later in the year as these transitions are completed and new programs are launched.

Sales of our commercial vehicle products, or CVP, were up 18% in the fourth quarter.

Excluding the Menber's acquisition, sales were down about 10% due to the continued weakness in the North America heavy truck market, as well as the general global softness in agriculture, construction, and mining.

One of our targeted markets is the bus segment, where we secured strategic wins for our power distribution modules with two North America OEMs; both programs will launch in 2017.

In summary, we continue to see strength across our passenger car products, including fuses, sensors, and the PolySwitch product.

The Menber's acquisition is helping expand our CVP sales geographically, which is one of the growth strategies for the business.

Now I'd like to give you a quick update on acquisitions.

The integration of the ON product portfolio is progressing as planned.

We will complete our systems integration this quarter and we have started the capital expansion at our Wuxi facility.

Our customer base is enthusiastic about our expanded product offering, which is very encouraging.

Looking at PolySwitch, this is the last time we will provide separate comments on this acquisition.

The integration was completed ahead of schedule and we are on track to achieve the more than $10 million in annual synergies we anticipated.

As we noted last quarter, we started realizing synergies in the third quarter of 2016, with a further ramp-up in the fourth quarter and into 2017.

The transition for customers, employees, and distributors has gone smoothly.

Our combined product line is being well received in the market; we are winning new business and new customers.

We are very pleased with this acquisition and look forward to the many benefits it will bring to Littelfuse in the years ahead.

That concludes the business review; next is an update on our growth strategy.

At our December analyst day, we talked about our successes in the previous five-year strategy and launched our updated strategy for the next five years.

Over the past four years, we largely achieved our goal of double-digit sales growth, 5% organic growth excluding currency impact, and 10% annualized revenue growth through acquisitions.

We also achieved our targets for operating margin, operating cash flow, and capital allocation.

Our go-forward strategy over the next five years focuses on building on these achievements.

We plan to do that by leveraging global mega-trends, including the safety of people and equipment, energy efficiency, and the connected world.

We expect to grow revenues and earnings at double-digit annual rates over the next five years, with an accelerated organic growth rate of 5% to 7% and acquisition growth of another 5% to 7%.

We will provide you quarterly updates on many of the strategic growth initiatives we highlighted.

Acquisitions are still a key element of our strategy.

We have a wide set of various product, market, and technology focus areas and I look forward to sharing future updates on our progress.

Ultimately, our strategy is to continue to grow our core circuit protection business, accelerate sales of our power control products, and double the sales of our sensor platform.

These are just the highlights.

There's much more detail and information in our analyst day presentation and webcast that are posted on the investor relations section of our website.

Shifting topics, we have received many questions about the new administration's proposed policies and their potential impact on our business.

At this point, we believe it's too preliminary to have a view until there is greater clarity on which of these proposed policies may actually be passed into legislation, and, if so, in what final form.

We will continue to monitor events and provide updates when appropriate.

Finally, I'd like to thank Gordon for his leadership over the past 13 years.

He is both a mentor and a friend to me and our entire executive team.

I know many of you already and look forward to working with all of our analysts and investors in the months and years ahead.

I'll now turn the call back to Meenal, who will provide the outlook for the first quarter, then we will take your questions.

Great, thanks, Dave.

As we enter 2017, we are off to a good start, with continued solid demand across our electronics and automotive segments, but continued softness in end markets impacting our commercial vehicle business and industrial segments.

In addition, we see ongoing volatility across foreign currency rates and commodity prices and expect that to continue.

Based on the current economic environment and foreign exchange rates, we expect the following for the first quarter of 2017.

Sales are expected to be in the range of $278 million to $288 million.

The midpoint of the sales guidance reflects a 4% constant-currency organic growth rate, which excludes acquisitions, the eHouse divestiture, and currency effects.

Adjusted earnings per diluted share are expected to be in the range of $1.56 to $1.70.

This includes $0.03 of expense to fund development activities with Monolith Semiconductor.

For the full year, we are forecasting an adjusted effective tax rate in the range of 17% to 19%.

Also for the full year, we are expecting capital expenditures of approximate $70 million.

This includes about $20 million of the investment we are making in our semiconductor fab capacity relating to the manufacturing transfer of the ON product portfolio.

As Dave highlighted in his closing comments, we expect our updated strategy to result in double-digit annual revenue growth, coupled with double-digit earnings-per-share growth.

We are confident in our ability to execute on the strategy that will get us there.

This concludes our prepared remarks.

Now we would like to open it up for questions.

Paulette?

(Operator Instructions).

Christopher Glynn, Oppenheimer.

Thank you.

Good morning.

Just wondering how you think about the glide path for the automotive margin for the next year or so, just given that the fourth quarter was kind of below the trend and it's been a little depressed, arguably, but just dealing with the Menber's acquisition, the CV cycle, and some product transitions, and particularly in the context where you've indicated maybe the electronics margins have been overachieving a little bit.

So I'd say generally you should expect to see an improvement in our margins, the automotive margins, in 2017.

You mentioned a few of the different issues that we've had in 2016 that have depressed margin, the Menber's acquisition, also the PolySwitch acquisition a little bit, so as the synergies start coming through more, we will get a benefit from that as well.

And then, also, we will be completing the exit of the low-margin business in the sensor business.

So as all that continues through the year, we will see an uptick in margins.

Okay, and the electronics revenues really kind of blew through expectations here.

How would you kind of toggle that upside versus either a perfect storm versus really a groundswell from all your long-term efforts at market segmentation and expansion coming to fruition in the run rates?

I think there's actually a couple things at play here, and we talked a little bit about it.

Certainly, Chinese New Year falling earlier and at the end of January, rather than in February, probably pulled some demand forward into December that we would maybe historically view as more normal in January.

So I think that kind of drove a higher level of growth in the fourth quarter.

But also I would say, particularly North America, but our demand cycle in the fourth quarter in North America was pretty robust, Europe as well.

And I think that reflects a fairly positive view of kind of the electronics business -- overall electronics business moving into 2017.

And I also think many of our distributors had inventory positions that were appropriate, so there was kind of no reason to try to drive inventories down in the back end of the year, which sometimes happens.

So I think all those things really kind of helped to make a pretty robust fourth quarter for us, kind of abnormal increase in revenues in the fourth quarter compared to the third quarter.

Okay.

And with the Chinese New Year, I'm wondering if you expect an air pocket at some point on a linear basis.

Given the electronics book-to-bill and the 1Q guidance, it doesn't really look like you are seeing that for the first quarter, but maybe the second.

I don't think we see an abnormal air pocket being created by that.

I think our planning normally expects during the first quarter to have some gap particularly in Asian revenues and electronics.

So we don't see that as particularly unusual for this first quarter.

Maybe because it's pulled forward more into December, that's maybe a little softer in the first quarter than we might see sequentially; however, so far we are off to a pretty solid start.

Sounds good.

Great year, thanks.

Matt Sheerin, Stifel.

Thanks, good morning.

Just a couple of questions from me.

Just regarding, Dave, your growth targets of organic growth of 5% to 7% over the next few years, looking at this year, as you pointed out earlier, there are potential headwinds on the automotive business.

The heavy truck commercial business still continues to be weak, so the question there is, do you expect that to be down again?

And then, electronics, obviously tough comps on a year-over-year basis as you start the year here.

So what's your comfort level in terms of hitting those targets this year?

Certainly long term over the five-year horizon, we feel comfortable, and December kind of laid out that 5% to 7% accelerated organic growth rate.

We still feel very comfortable over the five-year horizon to do that.

We haven't given specific guidance for the full year in 2017.

However, I think some of the challenges that we face in 2017 are FX, so certainly currencies are not supporting the organic growth as strongly, particularly in Europe and also in China.

Those probably have a stronger influence on our automotive business than they do electronics, but that certainly is a bit of a challenge.

You mentioned the commercial vehicle space for us.

We certainly do not see that as a robust market in 2017, although we believe perhaps overall that is beginning to flatten out a little bit, but we don't see general market increases in 2017, but perhaps declines are slowing a bit there.

So we do face some of these headwinds in 2017.

But overall, we feel pretty good about the position we have taken in areas like automotive electronics that will drive organic revenue over the horizon of our strategy.

Thanks.

And just regarding that commentary on auto electronics, my follow-up basically is that you have obviously increased your exposure to the auto business through acquisitions within your electronics segment.

So could you talk about if you roll that out between auto, the fuse business, and electronics, the content opportunity and the cross-selling opportunity between your legacy auto business and some of the new products that you've acquired through acquisitions in terms of cross-selling that into your existing customer base, and what's the long-term opportunity there?

I think -- because much of our automotive electronics rolls up from a reporting standpoint into our electronics business, it's a meaningful portion of our electronics revenues.

It's probably in that range of maybe 15% of the revenues.

And in the electronics segment, they're actually being driven by automotive parts of the application.

We feel in our traditional automotive fuse business, our market share is such that really our growth story there is driven out of content increase, not so much share gain opportunity.

We think in the automotive electronics it actually enhances our ability to do both content increase, but also a market-share opportunity for us to grow over the longer term.

So in general, we think the automotive electronics focus that we have will perhaps create more opportunity for our organic growth driven at automotive.

Great, thanks a lot, and best of luck this year.

Shawn Harrison, Longbow Research.

Good morning, everybody.

I wanted to touch on auto as well, if you were just looking for maybe hazard of an expectation of auto production this year, particularly in the context of the strength in the back half of 2016 related to the China auto stimulus and whether you're concerned of any air pocket in China auto at any point in 2017.

Sure.

Clearly, there's a lot of data out there as to what the projections are, but I think our viewpoint towards car builds is it won't be as robust as it was in 2016; however, we -- I think our view and the market data that we see is global car builds is between 1% and 2% sort of overall growth, with moderate growth in North America and Europe, and our current view on China, which is a big part of our driver, is somewhat flat.

Some people are projecting a little bit of growth over the year, but where they've had meaningful growth year over year, that certainly is flattening out because of the pull forward that really took place with the incentives in the back half of the year.

However, the incentives do remain in 2017.

They're somewhere in the range of half of what they were in 2016.

So we don't think they'll drive high levels of increase, but I think probably China is reasonably flat.

Very helpful.

Meenal, in terms of, or I guess Dave as well, the acquired business from TE in terms of the synergies that are still to come, I know you're looking north of $10 million, but maybe if you could speak to how many of the synergies have been achieved so far and when you should see that full run rate in 2017.

As Dave mentioned, we pretty much now have completed the integration work that's going on, so this will be, I would say, the run rate you can start counting on in Q2 for that.

We've got a partial quarter still as we are finishing up some things, but a full run rate will be baked in starting in Q2.

And just to recall, we really started seeing some of the synergy impact starting in Q3, Q4, etc., so some of it's already been baked in.

Are you one-third of the way there so far coming into 2017, halfway there, in terms of --

I think probably entering the year probably about two-thirds of the way in.

In terms of synergies realization.

Yes, mainly because we ended up finishing about a quarter sooner than we were originally projecting and forecasting out.

We were thinking it was going to be closer to midyear.

But with the great job our teams did, we really got about two-thirds of the way through it by the end of 2016.

Okay.

And then lastly, just the investments with Monolith, the $0.03 that's tied in or buried within the earnings number this quarter, if you could just maybe speak about how that investment flows through the rest of 2017.

Does it lessen?

Will you see an increase in investment?

Maybe kind of the expected payoff timeframe associated with that as well.

At this point, what I think you can assume for the rest of the year is you can assume about a $0.03 impact for the quarter.

As we mentioned, we have a minority interest investment right now in Monolith, and as we talked about when we made that investment is that as they achieve certain milestones, we will look at increasing our investment in the company.

So in the meantime, I would say you should bake in about $0.03 a quarter for that.

Okay.

Thanks so much and congrats on the good results.

John Franzreb, Sidoti & Company.

Yes.

I'd like to go back to the better-than-expected results in the electronics business.

With [fours] being pulled forward and still having the [105] book-to-bill, was there one particular end market that was stronger in that book-to-bill, especially in light of the Chinese New Year being a little bit earlier this year?

I would say there's not really a particular end market; I would say that the book-to-bills kind of in North America and Europe are probably driving that, for the most part.

I think the book-to-bills in Asia are kind of normal right now for this time.

But it's always a little challenging to catch the book to bill during the Chinese New Year and approaching that.

But generally, pretty solid sort of bookings coming in for North America and Europe as well.

Okay.

And we haven't really touched on the industrial business.

Last quarter, you kind of suggested that the mid-20s was kind of the bottom and you expect it going forward to be improving from there.

It took a step down sequentially, sizably.

Can you kind of talk to what end market might've been the biggest impact there?

And are you willing to suggest now that we've hit bottom in industrial?

Yes, I think for the fourth quarter one of the sequential declines was we divested our eHouse business in the early part of the fourth quarter, so that led to -- that was a big chunk of the decline there, but on $25 million or so of revenue.

At this point, we feel like generally between the mining industry and even with the oil and gas, it generally bottomed out.

So, really, what we're looking for is some sort of uptick in those end markets.

And just sticking with industrial, are you seeing pricing pressure or pricing relief in that market as the end markets tend to improve?

I would say overall we are not seeing particular price pressures overall.

Certainly with commodity costs up in some of those products, there's -- in some ways, there's some pressure to push prices up to cover commodity impact in that space.

So I don't think they've changed dramatically.

Obviously in some of the more OEM-specific sort of business, when there's lesser business to be had, some people -- sometimes the competition gets a little rougher.

But, in general, we don't see a big change in dynamics on price pressure there right now.

Okay, and one last question.

On the CapEx budget, $70 million, how much is that due to the ON transfer and how long will that take to fully play out?

So of the $70 million, I mentioned that about $20 million of it is related to the ON manufacturing transfer.

We had talked about it will be close to a $30 million investment, so the bulk of it is going to happen in 2017, and we would expect the rest to largely be in 2018.

Great.

Thanks for taking my questions.

Gary Prestopino, Barrington Research.

Good morning, everyone.

Meenal, I'm just trying follow this.

The automotive was down 22% on an operating-income basis.

Was that entirely due to the acquisition or the integration you're going through there?

I would say it's a couple of things.

So some of that is with between the combination of PolySwitch coming in, as well as the Menber's acquisition, especially I'd say the Menber's acquisition, definitely lower margins than we had on average for that business.

I'd say that's one.

The other thing is the decline in our commercial vehicle products business, because of the end markets that we've been talking about.

Unfortunately, that also had an impact to declining margins as well.

I'd say those are the bigger drivers.

Okay.

And then, it looks like the delta between GAAP and adjusted was about $0.38 for Q4.

Could you give us an idea just for modeling purposes what that GAAP would be in Q1, or maybe give us some indication of what some of these line items are going to total so we can get to a GAAP and get to a proper adjusted number?

So what I would say is in the fourth quarter, we had more unusual, larger items related to foreign exchange, but foreign exchange on what I would call nonoperating items, like intercompany loans, as an example.

That, because of the volatility in the exchange rate, that was a pretty big number going through this quarter, about $8 million or so.

So I would say normally what you see through the run rate is a lot of our integration expenses, and that's probably going to be the bulk of it.

I don't have an estimate for you, but I would say if you strip out that $8 million, it probably gives you a little bit more of a reasonable run rate.

Okay, thank you.

Christopher Glynn, Oppenheimer.

Sorry if I missed it in the press release, but could you just give us the organic results on the topline for the year by segments?

We didn't put that in there.

There have been so many puts and takes on acquisitions, etc.

For the total Company, we were -- excluding FX, excluding acquisitions, we were in the neighborhood of about 4%.

Okay.

Thank you.

Shawn Harrison, Longbow Research.

Two brief modeling questions.

One, just being kind of the OpEx numbers seen in the fourth quarter, is there any kind of big investments, other than what's going on with Monolith, that should take that total OpEx dollar number significantly higher in, say, the first half of the year?

Nothing outside of a normal run rate, as you mentioned, other than Monolith, which will add a little bit to the R&D side.

Okay.

And then, second, just in trying to model cash flow for 2017, working capital days, the numbers moved around a little bit with some of the M&A over last year.

Are you looking for any particular day improvement in working capital days or a target number of days that you'd like to have with that cash cycle exiting 2017?

Sure.

We finished the year from a working capital perspective in the low 60s on DSO, mid-60s on inventory.

I would say I would expect us to track to that maybe a little bit better as we continue to work on improvements, and then I would say on payables we are getting close to the 50-day mark on days payable, and that's one that we're spending a lot of time focusing on and we would expect to see some improvements there.

Okay, helpful.

Thank you.

We have no further questions at this time.

I will now turn the call over to Mr. Dave Heinzmann.

Please go ahead.

Thank you for joining us today for the call.

2016 was a record year for Littelfuse, and we believe we are well positioned to build on these achievements in the year ahead.

We look forward to updating you on our progress in the next quarter.

Thank you.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating and you may now disconnect.