Littelfuse Inc (LFUS) 2014 Q1 法說會逐字稿

Good day, everyone, and welcome to the Littelfuse first-quarter 2014 conference call.

Today's call is being recorded.

At this time I would now like to turn the call over to your Chairman, President and Chief Executive Officer, Mr. Gordon Hunter.

Please go ahead.

Thank you and good morning.

Welcome to the Littelfuse first-quarter 2014 conference call.

And as always, joining me today is Phil Franklin, our Senior Vice President and Chief Financial Officer.

As you saw in the news release we had a solid first quarter.

Our record sales were driven by good organic growth in our automotive and electronics businesses and by the Hamlin and SymCom acquisitions.

I'll discuss our first-quarter performance in more detail in a few minutes, but first I'll turn the call over to Phil, who will give the Safe Harbor statement and a brief summary of the news release.

Thanks, Gordon, and good morning, everyone.

Before we proceed let me remind everyone that comments made during this call include forward-looking statements based on the environment as we currently see it, and as such, do include various risks and uncertainties.

Please refer to our press release and SEC filings for more information on the specific risk factors that may cause actual results to differ materially from those expressed in forward-looking statements.

Sales for the first quarter of 2014 were $207 million, which was up 21% year over year and consistent with our preannouncement on April 10.

GAAP earnings for the first quarter of 2014 were $1.12 per diluted share.

This included purchase accounting adjustments related to the SymCom acquisition and non-cash foreign exchange gains.

Without these special items, earnings were $1.16 per diluted share, which was at the high end of our updated guidance.

These solid results in what is typically a seasonally weak quarter were driven by strong performance in our core fuse and semiconductor businesses.

As previously noted, our newer businesses such as sensors, commercial vehicle products and protection relays are not yet at these same levels of profitability.

Earlier this month, we announced that we will be consolidating SymCom's New York facility into its South Dakota location, which is expected to result in savings of approximately $2 million beginning in mid-2015.

In the coming months, we will be communicating additional margin improvement initiatives for other recently acquired businesses.

The Company continues to generate solid cash flow as cash from operating activities in the first quarter was $12 million.

This was after $13 million of 2013 incentive payouts and $10 million of voluntary pension contributions.

As usual, we expect cash flow to increase as we progress through the year.

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

Thanks, Phil.

I'll begin the segment reports with the electronics business, which accounts for about half of total Littelfuse sales.

First-quarter electronic sales of $95.7 million increased 21% over the prior-year quarter.

The increase was driven by higher sales of semiconductor products which had a very strong quarter, and the addition of the Hamlin electronic sensor business.

Excluding acquisitions, first-quarter electronic sales were up 9%.

Electronics channel inventories were flat to slightly reduced during the first quarter, which also showed solid end-customer sales growth.

We are comfortable that our channel inventories are at appropriate levels based on current market conditions.

Now let's look at growth in some of our focused market segments.

Demand for telecom equipment continues to grow, driven by the global deployment of 4G technology and its LTE base station needs.

Protection for the power supply lines has been a boost to our TVS diodes, SIDACtor, metal oxide varistors, and fuse products.

We also provide data line protection for many of these systems.

And while 4G deployment has been most prolific in China, the base station equipment comes from manufacturers in China, Europe, and North America, so we've seen revenue increases in all three regions.

Last quarter, we talked about kitchen appliances, such as coffee machines and blenders, as a good growth area for our thyristor, TVS diode, and diode array products.

The designs for these appliances also use now our fuses and metal oxide varistors, as well as our reed switch sensing products.

This diversity of products creates good cross-selling opportunities within our electronics business.

We had positive momentum in the kitchen appliance segment in the first quarter, which has continued into the second quarter.

It's been a while since we've talked about the television market, and as you may have already heard, the newest high-end models feature curved ultrahigh definition screens.

These screens create a panoramic effect with improved viewing angles, higher contrast, and even clearer picture quality.

One of the leading suppliers of these new TVs has designed in our thin-film fuses into their models with five fuses per TV.

We won this business by developing a unique low-profile fuse that met the customer's specific requirements.

Estimated annual volume for this win is projected at 2 million fuses.

This should continue to grow as these models gain traction in the market and as their prices come down.

Miniaturization continues to be an important value proposition in consumer-electronics, and our technology innovation continues to win new business for us.

We recently designed a PTC resettable fuse into the next generation tablet from a leading US technology company.

We're the only supplier able to provide this customer with the required specifications for a low-height profile of the 0.6 millimeters.

We achieved this through a development in material science where the smaller footprint was achieved without compromising the electrical characteristics.

The initial program will use four PTCs in each detachable keyboard, and we believe the solution may expand to other accessories.

We continue to be very pleased with the acquisition of the Hamlin sensor business.

We are seeing broader applications for Hamlin sensors in the electronics area, including our base markets, such as consumer-electronics, small appliances and white goods.

We've started shipments for the reed sensor we designed into a leading rice cooker produced in Asia that we talked about last quarter.

And in the white goods segment, we recently designed a reed sensor for a global white goods manufacturer with multiple design platforms in different countries.

This sensor detects the freezer door position and sends a signal to the microcontroller unit to activate the LED light when the door is opened.

This win will deliver about $600,000 of revenues over the next 12 months and has the potential to be duplicated with other similar refrigerator manufacturers.

So to wrap up this section, the electronics business had a very good first quarter.

Our book to bill at the end of the first quarter was 1.11, excluding Hamlin, and orders to this point in the second quarter have been solid.

We're participating in many of the major trends in the industry and anticipate continued progress throughout this year.

Next is our automotive business, which was again our strongest-performing business segment in terms of sales growth.

Automotive sales increased 39% to $82.4 million for the first quarter compared to the prior-year quarter.

Excluding acquisitions, the first-quarter sales were up 18%.

This good performance was due to strong organic growth in passenger car fuses, commercial vehicle products and ACCEL sensors.

We also continue to benefit from the Hamlin sensor business we acquired last June.

Sales of passenger car fuses increased in all three geographies, Europe, Asia, and the US.

In total, we outperformed first-quarter global car production by an average of 9%.

This indicates that our strategy to grow faster than the overall market by providing more content per vehicle is working very well.

The largest first-quarter sales increase was in Europe, where car sales were stronger than expected.

Sales of high-end models for export, where we are well-positioned with high content, were especially strong.

These cars are produced by leading OEMs, such as Volkswagen, Audi, BMW, and Jaguar, Land Rover and are exported outside of Europe.

In Asia, our sales increased 14% in China and 5% in the other Asian countries.

A number of projects for both our master fuse and standard automotive fuses kicked in earlier than anticipated, and models with high Littelfuse content have won more market share.

In North America, our first-quarter sales were up 13% in spite of a delay in the ramp up of some of the major programs where we have master fuse and standard fuse content.

These new models will begin to ramp up in the second quarter, providing good future revenue growth as they reach anticipated production levels.

In addition to the strong sales, the first quarter was also noteworthy for our targeted growth area of high-voltage products.

Our low-current high-voltage fuses won new business from two large systems suppliers in China and Europe.

These wins are for electric vehicles and hybrid cars with production starting in late 2014 and 2015.

Another electric vehicle win is with a module manufacturer in Asia for surface mount fuses that will be used for sense line protection in high-voltage battery packs.

Production will start in 2016.

Depending on the growth rate for electric cars in the market this win could potentially generate sales of over $1 million per year.

As we have discussed on prior calls, last year several of our electronic product lines became qualified for automotive applications.

This was a significant step because expansion into automotive electronics is a key growth strategy for the electronics business.

During the first quarter, we shipped our first order of automotive-grade TVS diodes from the electronics business unit to one of our automotive customers in Europe for a xenon headlight application.

Additional product wins are in the pipeline and we are very pleased with the cooperation and cross-selling potential between our two largest business units.

The commercial vehicle products business also had a good first quarter with sales up 12% year over year.

This growth was driven by slightly improved market conditions, as well as successful execution of our strategy to develop innovative new products for targeted markets.

During the first quarter, we started shipping an under-hood power distribution module to a major North American heavy duty truck manufacturer as part of the 2013 design win.

The CVP team also had a key design win in the first quarter with a custom-designed power distribution module for a European forklift manufacturer.

This win is with a new major account and has several benefits.

It leverages our design expertise and provides opportunities for additional wins with this customer, and it also moves us forward with our strategy to increase sales into the European commercial vehicles segment.

As I indicated earlier, the automotive sensor business was a strong contributor to the first-quarter results with a 45% increase in sales compared to the prior year, excluding Hamlin.

We have introduced more than 10 new seat buckle sensors so far this year.

These products are going into a variety of car platforms with OEMs, including Volvo, Ford, BMW, Jaguar, Alfa Romeo.

Once these platforms ramp up we are anticipating annual revenues will be more than $3 million.

New speed, position and direction sensors were also developed during the quarter for a major transmission box platform in China.

Although the revenue impact is relatively small this year, we expect sales to be in the multimillion dollar range by 2015.

It was also a good quarter in terms of new business.

Recent wins include supplying [fewer level] sensors to a large Scandinavian truck manufacturer and a tier 1 supplier for European passenger cars, as well as seatbelt sensors for a major European OEM.

Another significant win was for speed sensors that will be used across the entire range of transmissions for one of the world's leading manufacturers of electric vehicles.

The automotive sensor group continues to make progress on its goal of globalizing more of its major customer relationships as indicated by the new business wins and continued sales growth.

So in summary, our automotive business is well-positioned to benefit from global trends in the overall automotive market.

These include smarter cars, sophisticated electronic gadgets, sensing devices designed to improve safety and the growth in electric and hybrid vehicles.

So that brings us to the electrical business unit, which accounts for about 14% of total Littelfuse sales.

Total electrical sales were $28.7 million for the first quarter, an 11% decrease from the first quarter of last year.

The core electrical business performed well in the first quarter, but even with the addition of SymCom, we were not able to offset the continued sales decline in the mining segment.

Excluding SymCom, total electrical sales were down 25%.

The core electrical fuse business had a good first quarter in spite of a longer than normal winter weather in the US, which negatively affected the construction business.

The increase in sales was due to higher sales to OEMs in the HVAC segment and distributor conversions that were completed over the past year.

Solar continues to be a focus area for the electrical business unit.

We are beginning to see adoption of our new series of 1500 volt solar fuses in several new applications.

The 1500 voltage level is more efficient and less costly, and as a result, more and more solar manufacturers are evolving in this direction.

The global solar market continues to grow, and the US is leading this growth with a 41% increase in the market last year and anticipated growth of about 26% in 2014, according to Electrical Construction and Maintenance magazine.

Our first in the market solar product offerings are being recognized as industry leaders, giving us a solid platform to capitalize on the industry growth.

In contrast, and as we anticipated, the custom electrical products business remained soft due to the downturn in mining, and more specifically, potash mining in Canada.

The turmoil within the global potash market during the past year has negatively impacted short-term potash demand and has temporarily delayed mine expansion projects.

There appears to be some signs of stabilization in the market, and we expect mine expansions will ultimately return to a more normal pace, but the exact timeframe is uncertain.

In the meantime, we continue to quote our new business outside of potash mining and are developing a funnel of potential projects.

The custom products team has strengthened its capabilities and continues to work to diversify the business into other types of mining and other geographic regions.

Looking at protection relays, we continue to win new business for our industry-leading Arc-Flash relay technology.

We secured orders from new customers in a range of industries, including pulp and paper, mining, oil and gas, utility generation and distribution.

As we've discussed on prior calls, these products greatly enhance the safety of our customers' electrical systems.

And as part of our diversification strategy, we're also seeing increasing demand in emerging markets.

Overall, we expect the revenue from the Arc-Flash product line to grow by more than $500,000 this year.

We are also having good success with our innovative variable frequency ground fault detection relay.

This product was recently selected for several new heavy industrial projects, including a mining project in South Africa.

The trends for this relay line are very positive as safety standards that drive the use of this technology continue to be adopted in more countries around the world.

The integration of SymCom, which we acquired in January, continues to progress on schedule.

SymCom produces motor and pump protection relays that are used primarily in the industrial market.

The acquisition is a key step forward in our strategy to diversify the relay line beyond the mining.

We've already merged the SymCom and Littelfuse sales teams and are starting to leverage the complete product offering to our existing distributors.

We are also beginning to experience the benefits of having more product choices to offer protection relay customers of both companies.

It's still early, but we expect to see significant growth in this product line later this year.

To put this all together, the electrical fuse business is performing well.

And while we are continuing to be impacted by the global mining downturn, we are making progress in diversifying the custom products business, growing sales of innovative new product protection relay products and leveraging the SymCom acquisition.

In addition to covering sales by business unit, I'd like to comment on our sales by geography.

While the Americas region was negatively impacted by the Canadian mining weakness, our organic growth in Europe was 22%, and in Asia, 10%.

Europe was strong in both automotive and electronics.

And this continues the trend we saw at the end of last year.

In Asia, China was strong, also for both automotive and electronics.

And Taiwan and Korea, which were soft last year in consumer-electronics, but we've started to see a rebound in the first quarter of this year.

Southeast Asia grew nicely in 2013 at about 10% and shows the same level of momentum in 2014.

A lot of that is across general industrial segments, like hand dryers, vacuum cleaners and uninterruptible power supplies, as well as share gains at contract electronic manufacturers.

So in addition to our diversity of products and markets, our geographical diversity is also contributing to our improved performance.

We are now in the second year of our five-year strategy to double our business by 2017.

We're on track with our goal to achieve 5% organic growth and 10% growth through acquisitions each year.

In fact, for the first time, we overachieved in both areas this quarter, from 6% organic growth and 15% growth from acquisitions.

The driving force behind our organic growth is developing new products and new technologies.

We talked about a few of these today: a new solar fuse line; our successful master fuse products; power distribution modules for commercial vehicles; and electronic devices such as our TVS diodes that can be used in both electronic and automotive applications.

On the acquisition side, we are very pleased with the Hamlin and SymCom acquisitions and the ACCEL and Terra acquisitions prior to those.

All of these businesses are a very good strategic fit for Littelfuse.

They expand our portfolio in the target areas of sensing, protection relays and commercial vehicle products, and have made solid contributions to sales right from the start.

We are continuing to look for additional acquisitions like these that will further expand our product line and our presence in targeted markets.

So in conclusion, we are pleased with our first-quarter performance, 2014 is off to a good start, and we are cautiously optimistic about the remainder of the year.

With that, I'll turn the call over to Phil, who will provide the second-quarter outlook, and then we will take your questions.

Thanks, Gordon.

We expect the second quarter of 2014 to show a fairly typical sequential sales increase, mostly driven by the electronics business, as we began the quarter with a strong book to bill and distributor inventories at appropriate levels.

Specifically, sales for the second quarter are expected to be in the range of $216 million to $226 million.

At the midpoint, this represents 7% sequential growth and 18% growth compared to the prior year.

Earnings for the second quarter are expected to be in the range of $1.23 to $1.37.

Capital expenditures for the year are expected to be in the $35 million to $40 million range and free cash flow is expected to exceed $100 million.

This concludes our prepared remarks.

Now we would like to open it up for questions.

(Operator Instructions).

Shawn Harrison, Longbow Research.

This is Gausia Chowdhury calling on behalf of Shawn.

My first question was just about the book to bill in the first quarter.

It appears to be a bit lower than it's been in the prior three years at least.

Is that because the first quarter was so strong or is it due to tough comps?

I don't think the book bill is at all out of the norm.

In fact, we think a 1.11 book to bill going into Q2 is a pretty good book to bill and pretty consistent with historical trends.

Now I think last year, we had an unusually strong book to bill, in part because we were having, I think, some large distribution orders that were being placed out pretty far into the future.

But I would not view the 1.11 as anything other than pretty positive and pretty typical.

Okay, perfect.

And then second, just if you could delve in a little bit about the electrical business.

First, you mentioned that despite the cold, it was still an okay quarter.

So, did the cold have any impact at all?

And obviously Canada had some impact.

And then second, you mentioned that you're seeing some stabilization.

Is there a sense that there could be a bottom the second half of this year, or is it looking more like a 2015 story?

Where are you with that?

Well, two separate things.

One, the cold I referred to was really for our electrical fuse business, where a lot of those products are used in the construction industry and with an extreme long winter, the construction season started a little bit later.

So that sort of was a negative impact on our fuse business.

But despite that, our electrical fuse business did very well.

And mainly two of those segments I mentioned, the HVAC where we are selling to the OEMs that make that equipment; and also our solar program, which we constantly talked about.

So our fuse business, despite the cold weather, did very well.

The second thing, I think it's always cold and winter up in Canada, but in those potash mines, which are 3,000 feet underground, the temperature is pretty stable.

There's just not much activity at the moment.

And we had a tremendous benefit over a few years from the potash expansion, those mines that were really expanding a few years ago.

And really that's pretty much come to the end of that cycle.

And no doubt there will be potash expansion starting again, but quite when, I think it's very difficult for us to predict.

We obviously follow the major customers, the producers of potash, the mining companies up in Canada.

And I think they are talking about eventually the mining expansion will begin again, but no one is really committing to any dates.

So I think we are very much in a wait-and-see of when potash mining will start the expansion projects again and I think very difficult to predict that.

Okay, perfect.

And just one quick last one for me.

Regarding SG&A, why did it decline this quarter?

And what would be a good go-forward run rate for us to use?

You know, SG&A has been pretty stable, and we actually expect it to probably tick up some in Q2.

We have some timing issues with things like stock option expense.

We usually tend to take a significant lump into Q2 for accounting reasons that I won't go into.

But I would -- so I would expect -- and I would expect some increase during the year as we do have some planned headcount adds to support some of our strategic growth initiatives.

So, I would look at the first quarter as probably being the low point of the year in SG&A.

Great.

I'll hop back into queue.

Thank you so much.

Matt Sheerin, Stifel.

A question on the electronics business -- your operating margin was very strong on sort of flattish revenue, up sequentially and up year over year.

In the June quarter, you're going to be coming up against some pretty tough comps, where you had very strong operating margin last year.

So the question is, were you benefiting from mix last quarter?

And is there still any sort of drag from the acquisitions and integration that may enable you to continue to grow it going forward?

So, yes, a couple things.

I think normally, and this year should be no exception, we would expect some sequential improvement in operating margins, in electronics, going from Q1 to Q2, largely due to operating leverage, as we get that typical sequential ramp-up.

I think as we've said in the past, we've seen very good performance in our electronics factories due to some of the lean initiatives and some of those plants that we had transferred products into several years ago, are really starting to ramp up and hit their stride.

So I think that momentum is a tailwind right now, and at some point, that trend will flatten out, but it really hasn't yet.

In terms of impact from acquisitions on the margins in electronics, we do have a negative impact from the Hamlin acquisition.

The piece of that that goes into the electronics business, I would not expect any improvement in that this year, although we have stated several times that we expect significant improvements in the overall Hamlin margins, but that's going to be further out.

That's going to be more of a 2015, 2016 kind of event.

Okay, that's helpful.

And then, in your opening comments, opening comments, Phil, you talked about $2 million in savings from consolidation of operations at the SymCom acquisition.

You also talked about other initiatives aimed at improving costs.

Could you elaborate on that?

Not at this point, other than to say those initiatives will be targeted in some of the areas like sensors that we know we have margin improvement opportunities, but we don't have any specifics at this point.

Okay.

And just a question on the automotive business, where your organic growth is very strong and obviously well above production unit growth.

Given the acquisitions and given your expansion of your own internal portfolio, could you give us a ballpark of the electronic content or the content opportunity within automotive at Littelfuse today versus let's say three years ago and going forward?

Because it looks like your opportunity or the dollar content continues to grow for you.

Absolutely.

If you go back five years ago, we would be talking single-digit, $3.00 to $5.00, of fuse content in a vehicle.

And then as we started to ramp up the master fuse product line, we started to think that we could get up to maybe to $10.00, but $10.00 five years ago would've been a tremendous content.

Now with the sensors that we have and master fuse products really ramping, there are examples where we have over $20 mid-$20's on some major platforms.

And so we have really become a much more significant part of a vehicle and much more important to the OEMs.

So clearly, the strategy to have much more content still within the electrical system and very much around protection and sensing, we think that that's really paying off.

Okay.

Thanks a lot, Gordon.

John Franzreb, Sidoti & Company.

Just to stick with the automotive theme, can you give us a sense of how much the growth is sensor based versus circuit protection based and maybe even mix-based?

Because I know, Gordon, you mentioned that the European side benefited from exports.

Can you put better color onto those three buckets there?

Yes, well, they are all good stories.

They've all had a tremendous quarter and have tremendous momentum.

Circuit protection, particularly this master fuse product line, we've been talking about for some years, but we often talk about that when it's a design win, but it's going to be two years before the start of production.

And a lot of those programs are really coming into growth now.

So master fuse, which is the high current system that we talked about in vehicles, is really proliferated globally and has tremendous growth and is, I would say the real driver of circuit protection, is in the high current segment.

And then, the sensor platform, the ACCEL sensors had a tremendous growth in the first quarter.

You know, even without the Hamlin acquisition, which obviously we didn't have the comparison from a year ago, but year over year, the ACCEL sensors, and these are the seatbelt buckle sensors and the solar sensors that we've talked about; and then we are bringing these further speed and position sensors from Hamlin.

So, very high-growth on the existing ACCEL sensors and then of course the acquisition of Hamlin adds even more to that.

So the sensor business certainly outperformed circuit protection in total for the quarter, but the circuit protection business was very, very strong.

Like we said it was up 16% year over year on an organic basis.

So, I wouldn't take that number and run with it, because I don't think we can grow that fast every quarter, but we've had several quarters in a row and probably in the second quarter, we would also expect at least kind of a low double-digit kind of organic growth number in the circuit protection business.

And longer term, it's probably more like a high single digit number, but certainly significantly higher than our historical growth rates on the fuse side.

And geographically, very strong in all geographies.

China has been, for many years now, from a small base, very strong for us, continues to be.

And the point we've made the last year, really, that Europe has continued to be very, very strong for automotive.

We have very good relationships with almost all the major OEMs in Europe.

And although the automotive industry for sales in Europe has been weak in the last year -- it's starting to pick up.

But the real driver is the export of these vehicles.

The high-end vehicles from Europe are very much in demand around the world, and that's what people in China aspire to have, is a high-end German car, and we have a lot of content there.

So that's really driving the European sales for us.

Got it.

And just sticking with the sensor theme for a second here, how much is sensors as percent of sales of the automotive business unit?

And how much is sensors as percent of sales of total Littelfuse revenue?

Well we've said of total, we expect the sensor business to run at about -- in total about $120 million on a run-rate basis this year.

It's -- right now it's of the total automotive segment, because remember we've also got commercial vehicle products in there.

It's about -- it's a little over 20% of the overall automotive segment.

In fact, it's actually more like 25% of the automotive segment.

And just one last question I guess, I want to shift to the electrical side of the business.

With SymCom in the mix, Gordon, you seemed to allude to the fact that you expect maybe an uptick in the second half in the mining side of the market; maybe I'm just misreading that.

But including SymCom would you expect electrical sales to be down year over year based on current trends or flat or up modestly?

Well, I think, first of all to clarify, I think we are just one quarter with SymCom.

We are very pleased with it.

We expect that as we integrate the sales forces, we think that the SymCom relays and our own relays, that we are going to have some benefit from a combined sales force and a much broader product offering.

And the SymCom products are sold into much more general industrial applications and very little into mining.

So we are very interested to be able to expand into segments beyond mining.

In terms of electrical sales, it's very much going to depend on the Canadian potash mining.

We had such a benefit from that for a while, and it's really on its back right now.

There is not the mine expansions happening, and, as I said to the question earlier, it's very difficult to predict when we are going to see potash mining expansion happen.

I think we are in a very favorable position when it does happen, but it's very possible that we are not going to see that happening during the course of this year.

And just to follow up, is the competitive landscape tougher in these kind of conditions?

I don't think so.

I think we've got a very strong relationship.

We are, I'd say, a preferred supplier to many of the mining companies.

They are just simply not doing the mining expansion right now that they had been doing before.

And I think that we've got to continue our close relationships, try and diversify the product offering, maintain our capability, but I don't think the competitive environment is stronger.

And we have to make sure that when we start to see the uptick that we are ready for it and we have all of our capability.

One thing that I will say, John, is that as we expand outside of potash which we are doing, and you've heard Gordon talk about some of the other areas that we are targeting, both non-potash mining and outside of mining, some of those areas will not be at quite the margin levels of what we have been able to achieve in the potash markets, because there is more competition once you get outside of potash than we see in the potash markets.

So, attractive margins, but not quite as high as the historic ones.

Got it.

Right, okay.

Thank you very much.

I appreciate it.

Thank you guys for taking my questions.

Christopher Glynn, Oppenheimer.

So, it sounds like electronics, we are looking at pretty normal seasonality.

If we think about auto, would we just kind of, in terms of linearity, we kind of expect the 1Q run rates to kind of tell the story for the year?

Or would that continue to ramp up a little bit?

I would say Q1 is usually one of the strongest quarters.

We don't have a lot of seasonality, let me start with that, in automotive.

But Q1 is generally among the stronger quarters if not the strongest quarter.

But we'll have new programs coming on stream in some of the other -- to help.

So I would say you're going to see levels probably fairly similar to Q1 as we go out through the year.

But, it could be a tad below, just because there is some seasonal effects there, and Q1 is typically the strongest.

Okay.

But pretty linear I guess is -- to your supposition there; that gets you in the ballpark.

Okay.

And then maybe I missed some of the syntax, but could we apply the same question to the electrical segment?

Well, so the electrical segment is a little bit different in that we've got seasonality that is probably fairly similar to the electronic seasonality and the electrical fuse business.

But then the relay and custom business is not particularly seasonal, and that was really going to depend on -- and it could be fairly lumpy if we can land a couple of larger custom jobs -- that could give us some lumpy sales during the year.

So I wouldn't necessarily look at that business as being particularly seasonal.

It's really going to be more driven by how successful we are in getting new business in the non-fuse part of that segment.

Tim Wojs, Baird.

Nice job.

Just sticking with electrical a little bit, the margins this quarter are around 14%.

Would you characterize that as a low point for the year and that margins should get better?

Or how should we think about margins just relative to what you guys reported in Q1?

Yes, you know, it's going to depend largely on operating leverage, I think.

And you know, we would expect, certainly the fuse business, to be stronger in Q2 and Q3 due to seasonal reasons.

So that would help the overall electrical margin.

And then within the relay and custom piece, again, it depends on our ability to land some new jobs, but I would say it's unlikely that the sales will be much lower than Q1.

So, those were pretty low levels.

So, I think if anything, the sales in electrical should be slightly better as we progress through the year, and that would positively affect the margins as well.

Okay.

Okay, that's helpful, thanks.

And then just, you mentioned in your prepared remarks that April order trends in electronics were pretty solid.

I was wondering if you can give a little bit more color around that maybe relative to Q1.

I think only to say that we saw similar book to bills as what we saw through the first quarter.

Okay, okay.

That's all I had.

Thanks, guys.

Gary Prestopino, Barrington Research.

Just a small -- or just some questions on the tax rate.

What will the tax rate be that we should be modeling for this year?

Yes.

You're going to see some variation as we go through the year, but what we've typically said is that it's probably going to be between 25% and 26% for the year.

So, you know, I would probably model something probably closer to 25.5% rather than the 24.9% that we did in the first quarter.

That was probably a little bit lower than what we would expect for the full year.

And then I may have missed this, but when you said you are outperforming on the auto side, you've said you outperformed by about 9%, the build.

How are you measuring that?

Is that the build versus the increase in your dollar content?

It would be the build versus our revenue increase.

Okay, build versus revenue increase.

You know in the automotive -- in the part that goes into passenger vehicle we have some of our automotive segment that doesn't really touch passenger vehicle, the commercial vehicle piece.

And then, are you doing any direct or sales to any of the Chinese manufacturers, the domestic manufacturers in China?

Yes.

Absolutely.

We have some good shares with those domestic manufacturers.

Okay.

Thanks.

That's all I have.

Edison Chu, G2 Investment Partners.

It's Josh Goldberg for Edison.

Just two quick things.

One is your gross margins at 38.6%, was that a function of some of the SymCom acquisition or product mix?

And how should we look at margins going forward?

Are we going to see an ability for you to get back to closer to 40% gross margins as we go through the year, with the leverage in your model?

Thanks.

Yes, so, typically, we see margins that are better in Q2 and Q3 because of the operating leverage we get based off the seasonality, primarily driven by the electronics business.

So, yes, I would expect margins to pick up in Q2 and Q3 and then come down in Q4, again, because of operating leverage.

We've talked about some of the margin improvement opportunities we have in some of our newer businesses.

I would say that there may be some that will start to give us some benefit as we get towards the end of the year, but the majority of those initiatives, some of which we haven't even announced yet, will really be more impactful in 2015 and 2016.

So I wouldn't expect, other than from kind of the normal seasonal operating leverage, I wouldn't expect significant margin improvements this year.

Okay.

And just so I can just tease that out a little more, last year with the Hamlin acquisition, you hit about a 40% gross margin in the June quarter.

And I know Hamlin I think was not accretive to your gross margin percentage.

Is it fair to say that your gross margins should be at that level, at least in the second quarter this year?

I wouldn't say that's fair to say, in large part because we're going to be substantially below last year in our electrical segment because of the weakness in the mining, the year over year comparison in Q2 will be pretty negative.

It will start to get better in Q3, so, that would probably result in it being slightly below that number.

I think we'll have similar margin levels, if not slightly better in electronics.

Automotive should be similar, but the electrical margins will be down compared to the prior year.

And you expect electrical to pick up in the back half of the year?

Not the mining part.

What we've said is, we expect the fuse part of electrical to show normal seasonality, which would result in sequential improvements in Q2, and then maybe a slight sequential improvement in Q3, but the mining segment, we're not predicting any increase -- any uptick there.

It would -- if we land some of the jobs that we are bidding on, we could see a little bit of an increase.

But we would have to land those jobs to show that.

Okay.

Last question for me, just on the balance sheet, it looks like your cash per share went down.

Was that a function of the SymCom acquisition?

How much did you actually pay for that versus some of the pension funding and some of the other things that you spent on this quarter?

Thank you.

So the SymCom acquisition, I believe was $52 million, and that all came out of either cash or off our bank lines.

Okay, great.

How much was SymCom growing when you bought them?

How much were they growing?

I mean I think how much -- what we said is we expect that particularly as we start to integrate that with our sales organization and get leverage from our distribution relationships that SymCom really didn't have -- we expect substantial growth there but it's going to take us a while to achieve that.

So I think this year I wouldn't expect tremendous growth there, but going forward that should be a faster than average growing business, with higher than average margins once we execute on some of the integration activities.

Got you.

Okay, great.

Thank you so much.

(Operator Instructions).

We have no further questions at this time.

I would now like to turn the call over to Mr. Gordon Hunter.

Thank you for joining us on today's call.

We are pleased with our first-quarter results and our strong organic and acquisition growth.

And we look forward to updating you again next quarter.

Thank you.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.