Gordon Hunter - Chairman, President and Chief Executive Officer Meenal Sethna - Executive Vice President and Chief Financial Officer David Heinzmann - Chief Operating Officer.

Matthew Sheerin - Stifel Nicolaus Christopher Glynn - Oppenheimer & Co Inc. Shawn Harrison - Longbow Research Tim Wojs - Robert W. Baird & Co. John Franzreb - Sidoti & Company, LLC Garo Norian - Palisade Capital Management.

Good day, everyone, and welcome to the Littelfuse, Inc., Second Quarter 2016 Conference Call. Today's call is being recorded. At this time, I’d like to turn the call over to Chairman, President and Chief Executive Officer, Mr. Gordon Hunter. Please go ahead, Sir..

Thank you and good morning. And welcome to the Littelfuse second quarter 2016 conference call. Joining me today is Meenal Sethna, our Executive Vice President and Chief Financial Officer; and David Heinzmann, our Chief Operating Officer.

Overall, this was another solid quarter for Littelfuse both sales and earnings were above the midpoint of our guidance, despite a continued mixed macroeconomic environment where we saw some end market challenges in our commercial vehicle products business and parts of our industrial segment.

Our Electronics and Automotive segments performed well in spite of the challenging environment. However, we were disappointed with the performance of our industrial business and have taken recent actions to reduce our cost structure across this segment. This was also our first full quarter with the PolySwitch business as part of Littelfuse.

And last quarter we outlined our plans and progress for the business and I'm happy to report that we are on track. Sales and earnings were in line with expectations and we're making excellent progress on the integration. We will provide more details on some early design wins and our integration activities later on in the call.

First, I'll turn the call over to Meenal, who will give the Safe Harbor statement and a brief summary of the news release..

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.

Actual results may vary materially from those in forward-looking statements as a result of various factors. Factors that might cause such difference include but are not limited to those discussed in our Forms 10-Q and 10-K as well as other SEC filings.

In addition, our remarks today refer to the non-GAAP financial measures adjusted earnings and adjusted earnings-per-share. These non-GAAP measures are intended to supplement but not substitute for the most directly comparable GAAP measures. A reconciliation of these measures is provided in our press release filed today. Now, on to the second quarter.

Sales for the second quarter of 2016 were $272 million, which was up 22% year-over-year. Excluding PolySwitch revenue of $36.4 million, sales grew 6%.

GAAP earnings for the second quarter of 2016 were $1.20 per diluted share and included $5.5 million of special charges primarily related to purchase accounting and integration costs for the PolySwitch acquisition. Partially offset by non-operating foreign exchange gains.

Excluding these items adjusted earnings-per-share included the PolySwitch business were $1.44. Adjusted earnings-per-share increased 8% compared to the prior year quarter. Our PolySwitch business performed as we expected.

Sales and earnings were in line with our expectations and included favorability from operating expense management and lower amortization expense versus our prior estimates, offset by some non-recurring expenses relating to the acquisition.

Cash provided by operating activities was $26 million for the second quarter which was a decline versus last year. The year-over-year decline was primarily due to integration costs and other one-time cash items relating to the PolySwitch acquisition.

Capital expenditures were $11 million for the quarter about $3 million lower than last year mainly due to the completion of our new Philippine plant in 2015. In summary, we had a solid second quarter both across our core and PolySwitch business. Now I'll turn it back to Gordon for more color on business performance and market trends..

Thanks, Meenal. We'll start the segment review with electronics which accounts for nearly half of total Littelfuse sales. Second quarter electronic sales of $132.2 million were up 25%, excluding PolySwitch sales increased 2%. As we saw last quarter sales were strong in Europe and China and stable in North America. Japan and Korea remain sluggish.

Channel inventories for our core electronics business are in line with our expectations at this point in the year. We've talked before about our strategy to meet the needs of customers whose end products are smaller than ever before and at the same time require higher performance. This strategy generated a number of design wins in the second quarter.

For example we are seeing increased demand for our surface mount components that are used in low cost automated assembly. One win in this area was for our high voltage low profile NANO fuse with a major Chinese TV manufacturer. Another win for our NANO fuse was with a major consumer appliance make up for a high end hairdryer.

We also won new business for our high surge Varistor disc that has been designed into a space saving residential electrical surge protection unit developed for the China market. The Internet of Things is another growth area for us. One of our most recent wins in this space is for the Ring Video Doorbell system.

This system offers high definition video and audio, smart motion detection and cloud recording that is streamed over your home Wi-Fi to your mobile device. We work with Ring to designing our NANO fuse TVS diodes and power switching thyristors to provide safe and reliable functionality. Estimated revenues for the first year of the program of $500,000.

LED outdoor street lighting continues to be an excellent market for us with sales expected to reach approximately $10 million in 2016. This is on top of the approximately $8 million to $10 million we expect to ship into the indoor LED lighting market this year. Last quarter we highlighted some design wins in the automotive electronics business.

Building on that success our fast acting Subminiature PICO fuse was recently designed into a truck lighting assembly to prevent overheating.

Our fuse was selected due to its small size and the design was completed in several design centers in Europe and Japan, this win is expected to contribute approximately $500,000 in annual revenues with production starting in the third quarter.

Our ultralow capacitance diode array is a design to provide ESD protection and end products requiring high speed data transmission. We had six design wins for these products in the second quarter that will contribute approximately $4.7 million in annual revenue.

One of these wins is for our diode arrays that will be used to protect the HDMI ports on a new gaming console. We also won new business and multiple customers in the U.S. and Taiwan to protect Ethernet, HDMI and USB ports in data com applications. Last quarter we talked about our expansion into the power control market.

During the second quarter we introduced a new ultrafast silicon carbide diode designed for power conversion at higher frequencies and higher temperatures in standard silicon thereby increasing the efficiency for our customers.

We're continuing to leverage our technology expertise by launching new products that differentiate us in the market and enable us to expand into new market segments. An example is our TVS diode product line. We are growing in this relatively mature market with several new products designed for high power applications.

Four new business wins in the second quarter are expected to generate about $1.7 million in annual revenues. One weightiness for our surface mount load dump diode that protects automotive electrical systems when a large voltage spike is discharged from the alternator if the battery is disconnected.

Another win is for our unique surface mount diode that is designed for very compact applications. Our device will be used in the telecom infrastructure market as part of a small profile base station for cellular phones. I’d also like to highlight some positive trends in our electronic sensor business.

We've completed the transfer of our reed switch sensors from Wisconsin to the Philippines which has eased our previous capacity constraints and enables us to better serve our customers. This plan transfer is also a key step in improving the profitability of this business.

We continued our success in custom sensors with 11 design wins this quarter primarily in small appliances. We were selected as the sole source on a next generation blender from a major appliance maker. Our custom sensor is unique in the way it prevents the blender from operating when the led is not secured properly.

This is the third consecutive sole source design win with this manufacturer and is a direct result of our engineering expertise and high level of customer service. As these highlights illustrate, the strength of our electronics business is our ability to design into a broad variety of end markets and market segments.

We are continuing to win new business and introduce new products in targeted growth areas including power control, automotive electronics, and custom sensors. Automotive electronics is particularly attractive high growth end market that allows us to leverage our core strengths in both electronic and automotive.

Many of our electronic component technologies have applications within automotive electronics and we have been launching enhanced automotive versions of these products.

We are having good success in leveraging our strong relationships with automotive OEM’s and Tier 1 suppliers to get our electronic devices designed into their automotive electric systems. To accelerate our growth, we are increasing our investments into this space and recently created a dedicated automotive electronics team.

I’ll now turn the call over to Dave, who will cover our industrial and automotive segments and provide an update on PolySwitch.

Dave?.

Thanks, Gordon. The Industrial segment accounts for about 10% of our total sales. Second quarter industrial sales of $28.4 million were down 7%. After four quarters of growth, our fuse sales were down slightly in the second quarter. The fuse business showed pockets of strength in both Asia and Europe, but North America was soft.

As many of you know, our fuse business has benefited from a strong U.S. solar market for some time. However, the market slowed in the second quarter. As Congress extended the tax credit stimulus late last year, MINI solar OEM’s pushed out their projects to focus on scale and efficiencies.

Sales in both our Protection Relays and Custom Products businesses continued to be impacted by weakness in the heavy industrial markets particularly mining and oil and gas as those customers restrict their capital spending. To offset these slower end markets, we are focusing on growth in other general industrial end market.

Within the Relays business, a bright spot is our growing line of Arc-Flash Relay. Our newest Arc-Flash Relay has been winning awards since it was launched last year and was recently selected as one of the best new products in 2016 by readers of Consulting-Specifying Engineer magazine.

We recently had a design win with a crane manufacturer that installed our Relays on switchgear used for heavy industrial crane at a shipping port in Canada. In our Custom Products business, we continue to see a decline in our potash market. The continued steep drop in potash pricing has led to further slowdowns on delays and investment.

To offset this decline, we increased our focus on E-House used in the heavy industrial and utility market. However, profitability for these products is lower than our potash products, which has impacted our operating margin. Given the sustained weakness in key industrial end markets, we recently restructured the business to reduce our cost.

The restructuring is expected to generate approximately $1 million savings in the second half of 2016. We expect the weekend markets to continue through the year and are assessing other opportunities to improve margins across the segment.

Overall, the primary near-term focus of our Industrial segment is on resizing our cost structure to improve profitability, while expanding our global reach and increasing our focus on more attractive end markets such as Alternative Energy and HVAC.

That brings us to the Automotive segment, which contributed approximately 40% of total Littelfuse sales. Second quarter automotive sales of $111.4 million increased 30% excluding PolySwitch sales grew 15%. Sales increased in all three geographic regions.

Passenger car fuse sales were up 9% over last year outperforming global car production, which increased 2% in the second quarter. Passenger car fuse sales had strong growth in the America. The increase was driven by sales of Masterfuse and standard fuse products on new models, as well as extensions of existing programs.

Strong sales of the Chevrolet S10 and TrailBlazer trucks in Brazil where we have high content also contributed. European sales were also up as we benefited from a strong increase in the car build particularly at Renault and PSA.

Our strongest growth in passenger car fuse sales this quarter was again in Asia, where we have content on newly introduced platforms in China. SUVs including the Buick Envision and the Fiat K4 where we have both Masterfuse and standard fuse content are also selling well. In addition, we won new business in India for several automotive fuse products.

We are working with OEMs in Tier 1 suppliers in all three geographic regions on a number of projects for our newly developed high performance MIDI, MEGA fuses that are designed for the new 48-volt battery architecture.

This new architecture responds to the increasing demand for higher power electrical systems and engine boost systems that reduce fuel consumption of vehicles. The 48-volt architecture provide good content growth opportunities for Littelfuse with our new fuse is being used in many new programs beginning in the second half of 2017.

We are also seeing increased sales and design in opportunities for high voltage fuses for battery management systems and hybrid and full electric vehicles. We expect to see an increased demand for electric vehicles, plug-in hybrids and gas electric hybrids. And are well-positioned to participate in this growth.

Our high current fuses or a target growth area for us as we continue to win new business with these innovative products. One recent win is for our high current MEGA fuse with a large lithium ion battery manufacturer and North America. Peak sales are expected to reach $1 million annually.

We also want to our first program for our high current fuses at Hyundai with a program starting in late 2017 that is expected to generate $400 in annual sales at peak in 2019.

We believe the trends and projects highlighted today along with many others will continue to drive opportunities for increased passenger car fuse content over the next several years. While we anticipate continued growth - content growth in the second half of the year we do expect seasonally lower passenger car fuse revenues.

This was another strong quarter for the automotive sensor business with growth of 21% over last year. Sales were slightly lower than the first quarter where we benefited from customer inventory build associated with our exit from low margin legacy projects from a previous acquisition.

Our second quarter sales growth was driven primarily by strong sales into the occupant safety market as well as fuel and fuel filter related sensor applications. We continue to win new business with second quarter design wins that will contribute $5.2 million in annual revenues at peak and approximately $40 million over the life of the program.

Several of these programs extend longer than we've traditionally seen and also include in aftermarket components both of which are beneficial to us. These wins highlight our ability to gain significant new business in the market segments we choose to participating which in turn is generating a higher than market growth rate of our sensor business.

A major win during the second quarter is with the large European OEM for solar sensors. This new business is significant because it opens the door to other opportunities with this key manufacture.

We also won new water and fuel and fuel heater business in the European heavy truck market that is expected to generate total sales of $20 million over the life of the program including the aftermarket replacement business.

We continue to build on our relationship with leading all electric auto OEM with a win for seatbelt buckle sensors and also added new business for level sensors as part of a selective catalytic reduction system for two French automakers.

As we've discussed previously we expect flat to declining automotive sensor revenues in the back half of this year as we act at the low margin legacy business. This transition is a key part of our margin expansion strategy along with more cost effective designs, choosing applications where we add more value and higher production volumes.

We have a solid funnel of new business wins opportunities and look forward to long-term profitable growth in our sensor business. Sales of our commercial vehicle products or CVP were up 22% which included the members' acquisition completed in early April.

Excluding the acquisition sales were down 10% for the quarter as we saw continued weakness in North America heavy truck, construction and agriculture end markets. As we announced last quarter we took a major step in our strategy to expand our CVP business beyond North America with the acquisition of members.

The integration is underway and our combined sales force is actively pursuing new business. We recently won new business for a Master Disconnect Switch which with one of the members customers a large heavy duty truck many in Italy.

We also won new business for one of our standard Power Distribution Modules with the European agriculture OEM with shipments beginning later this year. Both opportunities will add approximately $500,000 in annual revenues when the programs ramp-up. In summary, our passenger car fuse business remains strong.

Automotive sensors continue to profitably grow and the member’s acquisition will help to broaden our geographic reach in our CVP business. Next is the update on PolySwitch as Gordon mentioned we have owned the business for four months now.

During that time we have learned much more about the PolySwitch operations, technologies and growth opportunities. One of the many reasons we are excited about the acquisition is the opportunity we have to leverage the products and customers of both companies. Our combined sales teams generated several new business wins in the second quarter.

One is in the smartphone lithium-ion battery protection space, while some manufacturers are using semiconductor based protection solutions. Others still prefer polymer PTC devices due to their high reliability and total cost effectiveness.

We won new business for a small form factor low profile surface mount PolySwitch PTC used for battery protection in two new smartphone models in Korea. The value of these wins is $1.5 million annually beginning in the third quarter. PolySwitch has a strong presence in Japan, which provides another good growth opportunity for the combined business.

As a result of the acquisition we have greater visibility among OEM customers in Japan that allowed us to get early design involvement for next generation programs in two major markets gaming and mobile phones.

Two industry leading gaming customers in Japan have designed both our Littelfuse, sensor and fuse and resettable PolySwitch PTC device into their gaming consoles.

This solution is a great example of cross-selling opportunity between Littelfuse and PolySwitch as it offers both over current and thermal protection and is expected to generate over $1 million in annual revenue. Additionally we recently designed in our surface mount PTC which is embedded into a USB Type C cable used for charging mobile phones.

These cables are designed to carry higher charging current and therefore also need better thermal protection. Our PTC is a perfect solution as it detects high temperature and prevents damaging case of malfunction or fault conditions.

This program will be launched by one of the largest mobile electronics companies based in Japan and is expected to generate over $1.3 million in annualized revenue. The integration of PolySwitch into Littelfuse is well underway and is progressing well. Our initial focus has been on our key stakeholders, employees, customers and distributors.

Key employee activities such as aligning our organizational structures are moving forward, while others such as the payroll system migrations have been completed. The consolidation of the sales force is moving forward on schedule and we have exited almost all of TE sales offices.

We completed the consolidation of our manufacturers rep network during the second quarter and we are on track to complete the consolidation of our distribution channels in the third quarter. We are also making good progress on consolidating various IT systems and back office functions. The biggest IT related activities are for ERT implementations.

We have completed three successful conversions to date but more planned over the next few quarters. On our last call we mentioned that PolySwitch distributors have been carrying approximately four months of inventory compared to our model of about 2.5 months.

We're pleased to report that the inventory levels of PolySwitch products are now generally aligned to our core business inventory levels in every region. Overall we're pleased with the progress we've made in the PolySwitch integration and the initial design wins we've achieved by leveraging the combined product line.

That concludes the business review I will now turn the call back to Gordon..

Thanks, Dave. Two weeks ago we were pleased to announce a 13.8% increase in our cash dividend. This is our sixth consecutive year of double-digit growth in the dividend rate a very nice track record for our investors.

The increase is consistent with our capital allocation strategy, which is to build a balanced strategic acquisition with a return of capital to shareholders. On a final note as we complete an update of our strategies for the next five years, we will be hosting an Investor Day on Friday December 9, in New York City.

We will provide more information as we get closer to the date. With that, I’ll turn the call back to Meenal, who will provide the outlook for the third quarter and then we will take your questions..

Thanks, Gordon. Now looking ahead to the forecast. Sales in the third quarter of 2016 are expected to be in the range of $262 million to $272 million. The midpoint of the range represents 24% growth over the prior year. This forecast includes approximately $40 million in revenue from our PolySwitch business for the third quarter.

Revenue growth over last year would be 5% at the midpoint of the range excluding PolySwitch sales. Third quarter adjusted earnings are expected to be in the range of a $1.36 to a $1.50 per diluted share. The forecast includes some tailwinds from currency, but at lower levels than what we saw in the second quarter.

We now expect PolySwitch amortization expense to be about $8.5 million per year which equates to about $0.30 per diluted share on an annual basis. This revised estimate is included in the third quarter adjusted earnings guidance. Our effective tax rate assumption continues to be 22% including the PolySwitch business.

We are pleased with the benefit of the structures we've implemented over the past few years and we expect to see further reductions in the effective rate over subsequent period. Looking at cash flow, the core fundamentals of our business remain the same as the acquisitions we've made this year align well with our existing business models.

We continue to focus on working capital management and our cash conversion metrics remain strong. For 2016, we have several one-time acquisition related cash impacts primarily driven by the extensive integration activity we have for our PolySwitch business and other acquisition related items.

Given these activities, we are expecting our operating cash flow to be 12% to 14% of revenue for this year versus our typical target of 16% to 18% per year. We expect 2017 operating cash flow to be back to historical run rates.

We are pleased with our overall performance to date, while we continue to see some volatility and challenging end market trends in certain areas of our business. We remain committed to expanding our operating margins excluding acquisition by 150 basis points for the year. Now, I'll turn it back over to Gordon for some last comments..

Thanks, Meenal. We performed well in the first half of the year and we are on track with the PolySwitch integration. And as I look back through the past few years of macroeconomic and end market shifts, our team has delivered 15 quarters of consecutive year-over-year revenue growth in constant currency.

I am proud of what our teams have accomplished as they have continued to profitably grow the business through some challenging periods. So this concludes our prepared remarks. And with that, we'd be happy to take any questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] From Stifel Financial, we have Matt Sheerin on the line. Please go ahead sir..

Yes. Thanks and good morning, everyone. Just a few questions for me.

First off just on your margin guidance going forward with the lower amortization expenses, we were modeling something like $13 million which you had previously guided to and it’s now less than that yet your margins in terms of your near-term guidance look a little bit lower than we have been forecasting.

I know there's a lot of moving parts within the various divisions here and you're still backing your 150 basis point increase in margins for the core business for the year.

So just trying to figure out what's going on in terms of near-term margin headwinds?.

Sure, Matt. Hey, how are you? So maybe just some comments on margin. I did just mention 150 basis points margin expansion excluding acquisitions and we had always talked about this with PolySwitch given general amortization expense just with what we're doing this year, margins would be a bit lower for PolySwitch.

In the core business excluding PolySwitch, as we mentioned there's a few different puts and takes. You’ve heard from Gordon and Dave our electronics and automotive businesses are doing well even though we're seeing a little bit of softness in the end markets in the commercial vehicle products side of that business.

But at the same time, we are seeing continued end market challenges on the industrial segment especially in our relay and our custom business. And we've seen even a little bit further downturn during the second quarter within potash piece of the custom and the relay business.

So that’s taking our margins down a bit as that’s taking revenue down a bit as well..

Okay. That's helpful. And just jumping around a little bit.

You talked about the opportunity with higher voltage batteries in automotive and sounds like there's some good wins there? Could you talk about the electronic content the fuse opportunity, because I know you've been running sort of in the mid-single-digits more or less in terms of fuse content? Could you tell us as you get to the next generation programs what the content may look like?.

Thanks Matt. This is Dave. What I would say is in our traditional passenger car fuse business as you stated we're kind of you know an average car is going to be in that mid-single-digit sort of range. We've had really nice content increase over the last two or three years and continue to see it with high current devices.

But that will begin the plateau in the next couple of years as that adoption is really kind of fully integrated across the segments and across the regions.

The next big driver as you mentioned is really the higher voltage systems particularly areas like 48-volt systems, which are really getting a lot of design activity from our customers across the globe.

We estimate that moving to a 48-volt system although it will be a small percentage of cars, but a very fast growing percentage of cars will increase the content opportunity for us by 25%, 30% within a vehicle. So it's a really nice content increase driven out - just even the 48-volt systems.

And then if you go up in to hybrids or electric vehicles that increases even dramatically from there..

Okay. And just lastly on the automotive sensor business. You talked about sort of flattish growth because you are deselecting some lower margin products.

When does that start to show growth again when do you start to see acceleration of growth in that business?.

Yes. I think we'll see most of that kind of dampening in the back half of this year, but with the number of design wins we win - that we already have and we are continuing to win, we do expect next year for growth rates to pick back up to kind of more normal rates we've been expecting from the sensor business..

Okay. Thank you very much..

From Oppenheimer, Christopher Glynn on the line. Please go ahead..

Thanks. Good morning..

Good morning..

So on light vehicle I think you had previously talked about a little slower 2016 content and ramping back in 2017.

Did that pull forward in kind of flip the cadence a little bit?.

I don't know that it’s particularly as pull forward, but sometimes the mix between regions and OEMs as it shifts from month-to-month, quarter-to-quarter can kind of influence that a little bit. But yes we've had very solid content growth in the passenger car fuse side in the first half of the year.

But we do expect to continue to see the content growth to drive better than market performance from that business..

Okay. And then on the PolySwitch as we think about the bridge to the synergies target run rates by the second half of 2017. I think this year you're working a lot through the transition services agreements and creating some new expense structures.

How do we think about that timing? Do you see a meaningful kind of drop through start to hit by year-end this year for instance?.

Hi Chris. It's Meenal.

Yes, what I would say is you know what we talked about we're well underway on the integration, we're on track with what our goals were I would say we've still got to get some heavy lifting this year, the big part these days with any integration is really all the IT systems and all the work that's got to be done around that and we're making good progress but we've got work to do around that and where that impacts expenses is just the spend to make sure that we're getting it done right with the right resources and then building up our internal capabilities.

While we're still on the TSAs to take over all that work ourselves. So I guess you know bottom line I'd say you should still see a mixed bag of expenses coming through this year, but we'll start to get some synergies I would say probably second quarter next year you will start to see the effect of that..

Okay. Thanks. That's helpful.

And last one is just an update on the pipeline and with all the work going on, on PolySwitch, how are you viewing the organizational bandwidth against your pipeline opportunities?.

Yes. It’s a good question. I think that there's obviously a lot of resources being used in the integration with PolySwitch, but there's other parts of the company I mean this is very much around mostly our positive electronics team and somewhat our automotive team, but there's other parts of the company that are not really impacted by this.

So, we have still got a very active program, a very active pipeline of targets that we're looking at. So it hasn't really slowed us in those areas. We're obviously going to be selective in terms of what makes sense for us, but it's still very much an active part of our strategy..

Great. Thanks, everybody..

Thank you..

From Longbow Research, we have Shawn Harrison on the line. Please go ahead..

Hi, good morning..

Good morning..

I don’t know if it was my newborn waking up last night or what, but I can't figure out your guidance into the third quarter and so I know you gave some commentary in the math, but sales only being slightly lower into the third quarter where we're at right now, but having some synergies either related to PolySwitch or related to the industrial restructuring, EPS drop is substantially greater than I would anticipate.

So if you could just walk me through some of the moving pieces to help clarify it. That would be helpful..

Sure. Shawn. So I’d say it’s a few things largely in the core excluding PolySwitch. So you're right from a sales perspective. It doesn't look like it's down as much.

So what we talked about - what Dave mentioned is a little bit of the mix shift where our custom sales, we’ve seen a pretty significant decline on the potash side both in the Custom business and the Relay business and that's historically been a pretty nice profitable business for us.

What we've seen are some of the increases and what we call this E-House business part of Custom, but that's at a much lower margin. So you get some margin shift there as well.

And then also we talked about the end markets as well on the commercial vehicle side, so sales were down a little bit there, offset by some of the small acquisition that we made and things like that. So excluding PolySwitch it’s still - sales look up a little bit, but there is some acquisitions and other things going on there.

And then the other thing that I had mentioned as part of my comments were that the FX benefits that we were getting in the first half of the year. We're still going to get some FX benefits, but it's lower in the third quarter and actually commodity prices are starting to increase and that starting to [split] for us..

How much did FX help you in the second quarter and will the industrial business be above breakeven in the third quarter?.

On FX, we have so many moving rates now and they also are moving in different, the euro is - now you still have the pound in there and so many different things that. We generally know we have a benefit that’s just tough to quantify at this point.

And in terms of industrial, I would say especially because we talked about some of the restructuring and we're looking at what else we can do around that business. We will see margins that are better than they were in the first half..

Okay. And then two brief follow-ups, if I may. What was the dilution associated with PolySwitch for the second quarter and do you have an expectation for the third quarter? And then my other one would just be there's been a lot of rumblings now are peaking auto market domestically and now concerns about Brexit.

Just maybe what you're hearing from customers on that?.

So I'll take the first part, on PolySwith, the challenge we have and the good news, bad news pieces.

We’re well on track, in a couple places we’re ahead on our integration and the faster we integrate, and faster we commingle, it's just hard to separate the expenses and how much is PolySwitch versus how much is our core business? Let me tell you directionally, excluding amortization expense PolySwitch was right around breakeven-ish which is what we talked about maybe a little bit ahead.

And for the third quarter we had talked about excluding amortization a little bit better than that and so we're on track for that..

And regarding peak order, I think that that's a little bit of a North America focus, which we have to understand, is only about 20% of global production.

And certainly our focus in Asia which is more than 50% of global production and growing faster is really paying off for us, but really as David said it’s a lot of it is about content and maybe Dave can just add a little bit about the trends in the content area..

Sure. Again, lot of for us recently here particularly in North America is our kind of peeking out and leveling off comments and others. So those things clearly will have some impact on us, but very much a global business for us and content increase story continues to be solid.

As I mentioned earlier as higher loads continue to proliferate in the vehicles and the architecture of the vehicles. Our high current devices continue to show growth and that’s the content increase for us. And then as I mentioned the 48-volt systems and higher voltage systems as well as automotive electronics.

Our growth drivers for us to continue to drive increases in content and grow beyond what carved on this..

All right. That’s definitely very helpful. Thanks so much..

Thanks, Shawn..

From Robert W. Baird & Company we have Tim Wojs on the line. Please go ahead sir..

Good morning, everybody.

I guess just on electronics Gordon, I mean the book-to-bill there I think includes the PolySwitch, but it's one of the stronger book-to-bill in Q2 that we've seen in the last couple years, so I guess is there a way to think about what the book-to-bill looks like organically and just how you feel about the revenue growth in the back half of the year in electronics organically?.

Yes. I'd say it's a little bit stronger than our historical we are looking back over the last six years, mean over the last six years is 102, so it's a bit stronger than that, but there is some noise in there.

I think we're a little bit stronger than historical, healthy, but I think as we've sort of shifted a little bit more into sort of I'd say light industrial areas that the consumer build phenomenon of years ago is probably less prevalent here now and get some more solid broader business that electronic segment sell into.

So I think we feel pretty strong about that. The noise that we get from PolySwitch is one that we have to keep taking out of that. So I think that along with very careful monitoring our distributors, the sell through from them and the inventory levels around the world, we feel we're in pretty good position on the inventory level..

Okay.

And then in the press release I think you said the semiconductor business in electronics was down and is that just a weakness in Japan and Korea that you cited and I guess it's that - would that help you on the margin side from a mix perspective?.

Well, it was down, but we are looking at that business actually being very healthy in the second half of the year, certainly be in Korea and Japan as for all of our business it’s being weaker there, but we're starting to see our semiconductor business look very healthy and generally when that business picks up, the margins are very healthy..

Okay. And then just in automotive just given some of the moving parts around your acquisitions and some of the low margin work they are exiting.

Could you just give us maybe a little bit more granular idea of what that business should grow organically in the back half of this year?.

Yes, hey, Tim. I’m going to have to come back to you. We’ll put something out there. I'm with all the bits and pieces, but then shipping out the acquisition stuff I've to come back to you on that..

It should still grow, right?.

Yes. It will still grow.

I mean directionally, generally we've talked about the automotive business growing mid-to-upper single-digits when you take into the bland of passenger car and automotive sensor, but with what we've talked about with sensor is being down as we are exiting the low margin legacy business and then also as part of the mix CDP has been down flattish to down, so that what taking that back down..

Okay. That's helpful. Good luck on the third quarter. Thank you..

Thank you..

Thank you..

[Operator Instructions] From Sidoti & Company, we have John Franzreb on the line. Please go ahead sir..

Yes, maybe just ask that sensor question in different way.

How much in revenue contribution do you expect from the low margin senor business for all of 2016?.

But don't really understand the question. So are you looking for specifically how much revenue we're walking away from? That’s a question..

Yes..

We haven't given guidance on the specific number we are walking away from, what we have said is the back half of this year where we've been enjoying pretty significant growth in that space the back half of this year compared to the back half of last year will look flat.

And so it's kind of counteracting the organic growth we're getting by stepping away from these pieces of business. However, we’ll begin to laugh ourselves on that going into next year and more normal growth rates will begin to rebound..

I guess Dave if we just have to tally easier for us to strip it out and figure out what the organic number looks like. That’s kind of what was back into there..

Sure, yes..

You mentioned Dave that you look for normal seasonality in the second half of the year on the auto side and Gordon I think mentioned a little bit about the electronic side of the business being more manageable and that’s pronounced in Q3s years pass because the new end markets that you're entering.

My question really is with the addition of PolySwitch the seasonality is Q4 versus Q3 historically its down 5% to 7%. Is that become a little bit more flattish or is it still normal seasonal trends in Q4 versus Q3..

I think it's probably going to be normal seasonal trends I think the PolySwitch end markets you know that significantly different from our core electronics business. So we haven't really thought that it would affect the seasonality of the business..

Okay..

I think - as we've gotten the PolySwitch business better and we continue to do so, it’s very consistent, very similar to our existing electronics business. So we're generally starting to see many of the same trends.

We just having to work through as we’re working on integrating the business, there’s just some different things are working through on couple of quarters. So you might see some unevenness this year but generally the trends would be about the same..

Okay. All right. All my other questions were answered. Thank you..

Thanks John..

From Palisade Capital Management we have Garo Norian on the line. Please go ahead..

Hi, guys.

Can you help me understand I think through the industrial segments and let's call the intermediate term, kind of think about the last few years post the real strength in the potash market, margins declined into kind of a single-digit - high single-digit in 2014 and we kind of bounced up into the mid double-digit and now looks like we’re probably going back down.

And I just challenge to try to figure out what normal is for that segment over the next kind of two or three years?.

Yes. It is a challenge and one of the big drivers of that kind of volatility and the view there has really been driven around this heavy potash piece of our business. And as a reminder that is our custom business that’s driving into potash as well as a lot of relays - protection relays being sold into that space.

And we gone through the big ramp and then you know again dropped off dramatically and began to see improvement.

But what we've seen is with potash prices further falling and just you know week and a half ago as the Chinese sign their contract on potash at $219 a ton which from the peak times where we were really having dramatic you know performance there was over $700 of ton.

The spending out of our core customer base in the potash side has dropped off dramatically. They've literally shuttered two or three of the key mines that we support there. So I think that volatility did come back this year more than we anticipated and it’s certainly worse and that's really pulled down the margin profile of that business..

Okay. And so is it kind of a safer expectation to you know not assume improvement for the foreseeable future in that business..

Yes, Garo I would say for the rest of this year. That's one of the things we talked about is that you know we don't - in the end markets we don't see anything changing and so that's why we took some actions around restructuring. We continue to look at other opportunities to improve profitability but it's going to take us some time..

Got it. Thank you..

We have no further questions at this time. I’ll now turn the call back to Mr. Gordon Hunter for closing remarks..

Well, thank you all for joining us on today’s call. We look forward to continued progress and to updating you again next quarter. Thank you and have a good day..

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may not disconnect..