Good day, ladies and gentlemen, and welcome to the First Quarter 2013 EnerSys Earnings Conference Call. My name is Chequana and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Mr. John Craig, Chairman, President and CEO. Please proceed, sir.

Thank you. Good morning, and thank you for joining us for our call this morning. Last night, we posted on our website slides that we're going to be referring to during the call this morning. So if you didn't get a chance to see this information, you may want to go to our website at www.enersys.com and view the slides. Before we get into the details of our first quarter results, I'm going to ask Mike Schmidtlein, our Chief Financial Officer, to cover information regarding forward looking statements. Mike?

Thank you, John, and good morning to everyone. As a reminder, we will be presenting certain forward-looking statements on this call that are based on management's current expectations and are subject to uncertainties and changes in circumstances. Our actual results may differ materially from the forward-looking statements for a number of reasons. Our forward-looking statements are based on management's current views regarding future events and operating performance and are applicable only as of the dates of such statements. For a list of the factors which could affect our future results, including our earnings estimates, see forward-looking statements included in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in our quarterly report on Form 10-Q for the quarter ended July 1, 2012, which was filed with the U.S. Securities and Exchange Commission. In addition, we will also be presenting certain non-GAAP financial measures. For an explanation of the differences between the comparable GAAP financial information and the non-GAAP information, please see our company's Form 8-K, which includes our press release dated August 8, 2012, which is located on our website at www.enersys.com. Now let me turn it back to you, John.

Thanks, Mike. I'd like to start by saying that we're very pleased with our accomplishments and financial results for the first quarter. As many of you know from our historical results, our first quarter sales are normally lower sequentially when compared to our fourth quarter. The first quarter is an exception, as you can see on Slide 3, our sales of $594 million are an all-time record for any quarter in the company's history. And this is in spite of a $12 million sequential foreign exchange headwind. You also notice on Slide 3 that this is the first time in 8 years that we are able to reach our minimum target of 25% gross profit. The higher gross profit has allowed us to exceed our minimum target of 10% operating earnings. In fact, our $71 million in adjusted operating earnings for the quarter is equal to 11.9% of net sales, which is an all-time record. The net effect of the above points resulted in record first quarter earnings of $0.95 per share, which is $0.27, or 41% higher than the previous first quarter record. We also reported last night our second quarter fiscal quarter guidance of $0.85 to $0.89 earnings per share. As you may remember, historically, our second quarter is our least profitable quarter due to the impact of vacation seasons in Europe and the Americas. However, even if we hit the lower end of our guidance of $0.85, we still report an EPS increase of $0.27, or 47% higher than our previous second quarter record. In the Americas, we continue to see good growth and profitability in both our Motive and Reserve Power business. Our Asia results are fantastic and driven by strong sales in Reserve Power and Motive Power. We don't anticipate any changes to these trends…

Thank you again, John. I am starting with Slide 5 of the webcast. Our first quarter net sales increased 4% over the prior year to $594 million, primarily from volume adding 7%, along with solid growth from acquisitions of 3%, offset by a 6% decline in currency translation. On a regional basis, our sales in the Americas increased 11% in the first quarter to $289 million, and our Asia business increased 19% to $68 million, while Europe's first quarter net sales decreased 6% to $237 million, all compared to the prior year. Europe's revenue decline was due to a negative 12% currency impact. On a product line basis, net sales for Reserve Power increased 9% to $289 million, while Motive Power increased marginally to $305 million. Both product lines absorbed a 6% currency decline. Please now refer to Slide 6. On a sequential quarterly basis, first quarter net sales were up slightly to the fourth quarter with 2% from higher volume and 1% from acquisitions offset by declines in currency of 2% and 1% from lower pricing. Asia experienced a strong sequential increase in revenue of 28%. The Americas' organic volume was slightly higher and remains at historical highs. Europe was down 5% primarily from a 4% currency decline. On a product line basis, our Motive Power business was down sequentially 2%, while sales in our Reserve Power product line increased 2% sequentially. Both product lines absorbed a 2% currency decline. Now a few comments about our adjusted consolidated earnings performance. As you know, we've utilized certain non-GAAP measures in analyzing our company's operating performance, specifically excluding highlighted items. Accordingly, my following comments concerning operating earnings and my later comments concerning diluted earnings per share exclude all highlighted items. Please refer to our company's Form 8-K, which includes our press…

Thank you, Mike. And with that, let me open the lines up for questions.

[Operator Instructions] The first question comes from the line of Zach Larkin, representing Stephens.

First off, I wondered if we can talk a little bit about margins. Obviously, very, very solid this quarter. And it looks as if we should see this trend continuing, but could you talk us through maybe the puts and takes on how we might want to think about gross and operating margins as we move forward through the year?

Zach, I think the biggest impact on this is that we've seen stability in lead. And as I've said many times in the past, whether lead is at $0.25 pound or $1.25 a pound, it really doesn't matter a lot to us because our marketplace has the ability to pass it on to the end users. But that being said, the volatility in lead has been the real issue that we've been fighting for a lot of years here. Since January this year, and looking through July, the spread on lead has been between about $0.85 to $0.95 a pound. So it's been relatively consistent. So we've been able to level this off. And with that, we've been able to maintain fair pricing to the market and it's really helped our margins. Or stated a different way, if we saw a major increase in lead, we're going to be playing catch-up on pricing and margins would go down. If we saw a major decrease in lead, hopefully we could hold the pricing and margins would go up. If it stays in the range it's in, I'm hoping that we can maintain around the 25% GP level going forward.

Okay. And then talking about the record backlog and everything that's going on, are you seeing, given the macro uncertainty, any changes in order patterns among your kind of different key markets or things kind of trucking along maybe irregardless of a lot of the headlines we're seeing?

Well, I think that the only area that we pointed out in our prepared remarks was a little bit of concern in Western Europe in the Motive Power arena. The OEMs, the sales of new fork trucks are down slightly compared to how it's been running in prior quarters. And we do have a concern on that. And as I mentioned also, we have plans in place to address that. From the standpoint of how we load our European factories, further expansion into other regions outside of Western Europe. So what our plan is, is that if we see a major softening take place, that we should be able to offset that with expansions that we're making in other geographic areas.

Your next question comes of the line of Michael Gallo, representing CL King. Michael W. Gallo - CL King & Associates, Inc.: John, the Motive products and thin plate pure lead, that starts shipping in the first quarter?

Yes. And just for a little background for others on the phone, our thin plate pure lead product that we've expanded into a lot of different areas, a number of different areas, we have introduced the 2 volt cells for larger fork trucks. The idea behind this is what's called opportunity charging. Meaning, that on a typical fork truck battery, electric fork truck, what you would do is pull the battery out when it's discharged, put a charged battery in and keep rotating through. Our thin plate pure lead technology is so superior compared to other lead batteries, that we believe that you can opportunity charge this. So in other words, during breaks and between shifts, you would charge the battery and not have to take it out. We're treading slowly with this, we built 500 batteries. We have them out right now. The results are looking very good. The reason we're going slow with it, we want to be sure that we're giving our customers top quality and we want to have a proven design. I've authorized the next stage of investments to making that, to increase the capacity. So we're at the early stages of it, Michael, but I'm expecting really good results to come out of this in the near future. Michael W. Gallo - CL King & Associates, Inc.: Yes, but I guess the point I wanted to drive here was, assuming it continues to go well, do you believe that scenario that even if European Motive slows, you'll be able to garner significant market share there with that thin plate product?

I think it's going to take time to do that. It's a more expensive product. It's a higher-margin product. And it's one that requires substantial capital investment. I would say in the next 2 or 3 quarters, I wouldn't look for a big pickup in that area. I wouldn't rely on that, in total, in putting in your model. I would see some increase in it, but I don't think it's one that's going to move the barometer. Michael W. Gallo - CL King & Associates, Inc.: Okay, great.

Now, you go on a year or two, I will change on that. You go on the future, I think it's got some real opportunities, but not in the near future.

One of the other benefits, Mike, that we see is that we think it will be fairly effective in blocking other technologies or other chemistries from entering the Motive Power market as well. So fuel cells or lithium cells we think with the thin plate pure lead and high-frequency opportunity charging that you will have a very tough component to penetrate that market if you're in some other chemistry or technology. Michael W. Gallo - CL King & Associates, Inc.: John, you had a, I think, the best operating margin you've had in Asia in some time. Obviously you're ramping up the facility there. Can you maintain those kinds of margins or should we still think about that business at a 10% operating margin?

Well, let me go through what's happened there and why it's changed so much and then we can try to answer your question. The bottom line, none of us know where the future is going to go. But we can look at the dynamics and what's made the change and ask ourselves will it continue? First off, the areas that I mentioned with China, when you take a look at lead this morning on the LME, it's at $0.87 a pound. When you look at lead in the Shanghai Exchange, it's $0.92 a pound. So you got a $0.05 premium right there. But what happens as you build a battery in China and you ship it out, and you've got a VAT tax that goes onto it. So on an apples-to-apples comparison, you're looking at $1.08 a pound this morning versus $0.87 a pound, a $0.21 spread. That's a real premium -- a real problem in shipping that out. So what's happened is, the product coming out of China, which has become more expensive because of the reasons I mentioned, what's taken place with it is raised the pricing in other areas. And with the pricing going up and we're shipping more product to other regions in all Singapore, Japan, and taking some products actually out of Europe and shipping over those areas, it's really helped us. Or in other words, the percentage of business that we did in China in the past, compared to now, it's less. When you look at our Asia business, we're actually shipping -- or are doing less business in China. At one point a number of years ago, about 90% of our business was in China. It's way down from where it was. So the diversification we put in place has really helped our Asia business. The second point is because of the environmental problems that has happened in China, and pricing has gone up in the China market. So that's helped us also. So I think the -- to get to the heart of your question, do we think we can maintain it? I'm hoping we can. I think the dynamics are such that we should be able to do that. And I hope on the future, but things change. But it's been a big impact to what's happened in China. It's really affected our markets globally. And fortunately, we've been in a position that we've been able to move production from one plant to another and capitalize on this opportunity.

Your next question comes of the line of Jesse Pichel, representing Jefferies. Jesse Pichel - Jefferies & Company, Inc., Research Division: First -- you answered my question on Asia. The operating margin in Europe was also relatively good. We were expecting more of a decline. Is it sustainable at these levels? Could you give us what the puts and takes would be in that market?

Well, it's a tough market. And we've -- I've said many times in the past, we have a plan to get to 10% operating earnings and it's become much tougher in recent quarters. But one thing we won't do, is we will not give up on that 10% plan. And we've modified it, and a lot of what we're looking at doing right now is that we've increased our expansion or increased our geographic expansion in areas like Russia, Ukraine, Turkey. We've added additional offices on the continent of Africa. Yes, the problems of Western Europe, they're real, but we are planning on offsetting those with -- going into different regions. Jesse Pichel - Jefferies & Company, Inc., Research Division: How should we think about Motive versus Reserve? What's more at risk in Europe at this point, given the macro environment there?

It changes almost every 6 months, it seems. We were talking Motive Power and how well it was going 6 to 9 months ago, and Reserve Power was hurting. Our reserve power business right now is going extremely well and the motive power is down slightly. I think that right now, we're going to plan for the worst and hope for the best. And our plan is that we will see further reduction in Motive Power. By the way, I hope I'm wrong on that. But we will offset it with the areas I mentioned earlier about rail, mining, geographic expansion, port handling equipment. Net effect, I think, we will be okay through this. And if the market doesn't turn down, we'll be in really good shape with it. Jesse Pichel - Jefferies & Company, Inc., Research Division: And in the renewable market specifically in photovoltaics, many companies are now offering storage solutions, mostly lithium ion, but there's some lead acid there. Do you think this could be a viable market for EnerSys in the future and could it even be a needle mover?

I don't know about the second part on the needle mover. There's a lot of controversy on that. And obviously, we're not the ones who are going to control that. I've always described it as we're kind of the tail on the dog on this thing. If it takes off, we're prepared for it. We will have some announcements in the future about what our plans are in that arena. It's something we're spending quite a bit of time on right now and -- but we haven't, have something -- or anything that we want to formally announce yet today.

Your next question comes from the line of Tom Daniels, representing Stifel, Nicolaus. Thomas Daniels - Stifel, Nicolaus & Co., Inc., Research Division: Just back on pricing, I guess, my question is, on your lead price escalator contracts, could you remind us, do those differ on geography? And with lead coming down this much over the past couple of quarters, should we expect pricing to come down in the future, or how do you guys hold pricing given what's happened with lead?

Well, the escalators that we have, which are 35% to 40% of our total business runs on escalators and those are predominantly in our European segment where it's probably as high as 60%. Yes, you will see pricing going down particularly in that region and it was at a flat level, we would say in the future quarters, you'd start to see it negative because lead costs have been going down and so it's just an inescapable fact that the pricing will follow it. So now having said that, that's not such a bad thing as long as lead prices stay relatively flat or continue to decline. But I would say starting in this upcoming quarter, you will see pricing pressure, I'll call it very slight, but you'll see a little bit of it. Thomas Daniels - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. In terms of your acquisitions, you made a couple last year, could you provide an update with how those are going from an integration perspective?

They're going as planned, I would say, right now. And usually when we do our acquisitions, many of the companies that we buy, right on the front end, they're dilutive. And these are marginally dilutive for us for right now. But we have a track record of making them accretive in a relatively short period of time. And I would expect the same on these. Thomas Daniels - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. And then just the last question. A very strong cash balance under-levered. I don't think you bought back any stock during the quarter. Could you just update us on your plans for stock buybacks or acquisition or use of cash in general?

Okay. There's really 4 areas that we look at and #1 and by far and away, is what I call investing in ourselves. And what that means are new products, and we're investing heavily into new products right now. And obviously, I'm not going into details on those because we haven't announced them, but we're going to continue to invest in engineering and providing best value for our customers and in the cost reductions in automations, computer system upgrades. I call that investing in ourselves and that's our #1 priority, that's what we've been successful at doing over the years. #2 is acquisitions. We are very active in that arena, as we have been in the past and we will continue to be in the future. Third, if the market does not recognize the true value -- of what we think the value of the stock is, that we're going to do a buyback. And if our stock is below what we think it's worth, we're going to buy it back. And fourth is potentially a dividend down the road.

Your next question comes from the line of Doug Thomas [ph].

Just a couple quick questions, John. Are things in Europe opening up in terms of acquisitions, are people -- seems like the sentiment is changing and folks who might not otherwise have considered selling a year ago, are perhaps reconsidering at this point. Obviously, I know it depends on the individual circumstances of the seller, but are you seeing things open up a little bit?

Well, for competitive reasons, I really don't want to get into any details on that particular part. I'm just going to say that we continue to look for opportunities. We don't plan on overpaying for companies and we're -- we continue to be very aggressive in looking at anything and everything that's out there that would fit our portfolio of companies. And if the price is right and if it's the right thing for our shareholders, we will invest in it.

And then I was thinking of you last week when the Indian situation occurred and I was obviously been doing some reading about what Germany is planning. One of the positives, it seems to me, for you guys in Europe and particularly some of these countries that are going to be -- that have already shuttered their nuclear facilities and are looking to close traditional coal plants and so forth and move to alternative energy is obviously the reserve power requirements will go up significantly. Can you talk about what the opportunities are there for you in terms of that marketplace?

Well, you hit the nail right on the head, at where we're making investments and looking for areas because those particular things, we've had a number of phone conversations with our Asia management about taking advantage of those opportunities. Same thing in Europe. A lot of the investments that we're making right now, in fact if you look at our SG&A, it's gone up slightly. And if you look at it, it's because of looking at the engineering and investments that are needed today to get good returns 2 to 3 years out and we are investing in those areas. We're not looking for the short-term big hit, were looking for the longer term. I think there's opportunity in those arenas. We're spending a lot of time on it. The power outage that took place in India you referred to, I wish that our organization would have been larger than we are right now to capitalize on that opportunity. And we are capitalizing on it, but not at the level I'd like to see it. And we've got a lot of growth opportunity in India, we're going to be investing more there and taking advantage of these opportunities.

It is an interesting world, though, right? You've got part of the world going -- you have the developed world moving towards alternative energies, which are going to help your business and you've got other parts of the world that are going towards clean coal. All of this seems to be positive for you. So -- which I just thought I wanted to point out. The other thing was, you mentioned about the forklift, that the negative 5% backlog number for Europe in terms of Motive Power forklift orders and so forth, typically, we've been through this before, what is the, when you go through periods of time like this, what is the pent-up demand build look like? And obviously, this is not -- this quarter in particular is always traditionally weaker in Europe, but going forward, what are those types of numbers tend to forecast down the road?

Well a couple of points on it. This time of year, and this happens every year, it's very hard to really read the tea leaves on where things are going because you have the impact in there of the summer vacations. So things do slow up and it happens every year because of summer shutdowns. This particular year, though, even with that slowdown taking place, we are projecting a record quarter for us in the second quarter. So back to your question, let's say that isn't just the summer, let's say that this is really a truly slowdown because of economic impact, it has nothing to do it summer. Historically what happens is when it goes down 3%, 4%, 5%, 10%, whatever the number is, it will come back double-digit growth, because there is a big pent-up demand it takes, and the swings on these things are big. The thing -- the other side to it is, if we see a 10% reduction in fork truck orders, we don't feel the full 10% impact of that because of the aftermarket. So typically, if the fork truck orders go down 10%, our business might go down 5%, just to try to frame it. But if it does slow down and if it -- this isn't just because of vacations, then I would expect that it would come back very strong, because of pent-up demand.

Your next question comes from the line of Tim Mulrooney, representing William Blair.

I know -- it sounds like Motive might be a little weaker in Europe in the fiscal second quarter, but it sounds like you expect Reserve to remain strong in that region. Could you just talk -- and I know you touched on this a little bit, but could you talk about the specific end markets regions or verticals that are driving the strength in Europe -- in reserve, sorry.

It's telecommunications and UPS business, they still -- because of power quality and the UPS side, adding systems and we are seeing a good flow of business from that and the Telecommunications mainly is on replacement. The telecom business, and I think it's very significant, and as I mentioned in the prepared remarks, when you take a look at 4G deployment globally, about 60% of it's in the U.S., 30% is a combination of Korea and Japan and about only 2% is in Europe. And I think what we're going to see sometime in the future is that 4G is going to be happening in Europe. And when it takes place, I would expect that we'll see a real pickup. Mostly what we're working off right now is replacement batteries and a few increases in sites on the Telecommunications side. So I think that there's, eventually, and I don't know when it's going to happen, but I believe it's going to happen in the future. We'll see 4G go into Europe.

Okay, that's great. And then I know we can't predict foreign currency movements and we wouldn't try to do that, but assuming they stay the same, do you expect to stay similar foreign currency headwinds in Europe in the second quarter on a year-over-year basis?

Well, certainly our top line will be depressed because of that. The bottom line doesn't have nearly the same impact, and as John pointed out in his remarks, when it comes to Chinese competition, having a weak euro, helps us -- given that we have a European manufacturing footprint, helps us to compete against those Chinese imports much more effectively. So in general, we'd like to say that we're fairly naturally hedged and as long as the euro doesn't implode, I think we're going to be in good shape.

One thing to keep in mind here, when we talk about China and about currency, about the lead, premium of lead coming in lead batteries, to lead acid batteries coming out of China, and also about the environmental situation, which is adding more cost to our competitors, that impacts us also. And it actually turns out to be a good thing because the product that we typically ship out of China, the cost of that has gone up, as has it for our competitors. So we can now build that product in Europe, Eastern Europe, and ship it to other parts of the world. So what I was trying to say earlier is, if the economy in Europe really gets bad, what we could do is take product from our European plants and keep those plants loaded and avoid the heavy manufacturing variances. We would keep those plants running at a higher level and shipping the product from Europe to places like Australia and other parts of Asia. So it really works out pretty well with us, with the currency being down and what's happened with lead and what's happening with the lead cleanup in China.

And then last question, no one's really asked about the Americas region yet, but humming along really well. Can you just talk about how things are moving in the Americas region? Specifically, how is it going in Motive versus Reserve?

Well, when you take a look at -- and we've talked about the ITA data and we've talked about the negative side of Europe being down 5% -- new truck orders, when you take a look at the United States, it's up 5% on new truck orders. Now that's looking at the June orders compared to the rolling 3-month average, the 3 months prior. Okay, so when we look at the -- prior to the month of June, look at the average fork truck orders, and then look what June did, in the United States, it's up 5%. So we're still seeing real good results in the U.S. Reserve power business in the U.S., very similar trend. In fact, the U.S -- I won't give you the exact number, but the orders are way up compared to prior year. I mean, they're very strong compared to prior year.

Your next question comes from the line of Bill Dezellem, representing Tieton Capital Management.

A group of questions. First of all, relative to China, would you please discuss the competitive landscape given that we're now -- it sounds like at least 1 year into the whole environmental shutdowns and reviews, et cetera?

I would say that it's got tougher, it has become tougher, not easier. They are very serious, the Chinese government is very serious on the lead factories, lead acid battery factories. At one point, I'd read there's roughly 2,000 manufacturers and about 1,500 of them had problems. Either they were shut down temporarily or shut down permanently. So I think it's had a real impact on it. I see the -- or believe that the Chinese government is going to continue to be very strict on this, which is a good thing for us. We put in the environmental equipment on the front end, our plants are all running and they're running well, they're very clean. And we were at a competitive disadvantage on the front end. When we had to make the investments in this equipment to keep it safe and others didn't, it put us at a competitive disadvantage. Those are changing. Either -- the companies that were running not to standard, they're either making -- being forced to make the capital investment or they're being shut down. So that is having a positive impact on pricing also for us in just the China market. So as I said earlier, part of the reason that our Asia business is doing better than the past, it's because of export products, we talked about that, but it's also because of products built within China, sold in China, and we've got better pricing on it.

And relative to Europe, you mentioned that the European restructuring benefits did flow through in the first quarter. Are there incremental benefits to flow through in the second quarter, and if so, shed some light on that if you would, please?

Yes. Mike, I believe we have a $0.04 that we said for restructuring for next quarter, we put that in our press release, am I right on that?

Yes. So we do plan to continue to spend money on restructuring in the quarter as we have been. In terms of incremental, our expectation right now, and this is not just from actions that we'll take in this last quarter or the second quarter upcoming, but from previous years and the bulk of the savings is going to come from actions that were taken in fiscal year '11 and fiscal year '12, we would expect another $5 million of savings to occur this year from those actions. So we will continue to spend money and generally, we get a better return and I'm talking about when we spend cash on restructuring, the savings that we get generally exceeds that cash number over time and it starts to pay pretty healthy dividends. So I would say, expect about $5 million this year in additional cash benefits.

And then in that same vein, you made reference to the acquisitions that you've recently done being dilutive, which is normal. However, you have acquisitions as you have done previous to recent times, and presumably, some of those are shifting to being accretive and that's also part of what's driving the results?

I would say that every acquisition that we've done with the exceptions of the ones we did last year, everything prior to that, they're all accretive.

And the ones that would be done in the intermediate time period, presumably that level of accretion is increasing as they move from dilutive, to modestly accretive, to fully accretive?

Yes, but you have to keep in mind that it's a relatively small investment compared to the total amount of the company. We look at the total on it, it's $2.2 billion, $2.3 billion that these acquisitions we did this last year. I call them planting seeds. Take India as an example. We planted the seed there, which we plan on growing. And these investments that we've made, in the short run, they're not adding a lot to us. In the long run, they will. In fact, if you look at our earnings today, and the reason our earnings are where they are today is not what we did necessarily in the last 6 months, it's what we did 2, 3, 4 years ago to position ourselves to capitalize on those. As an example, when you look at our FIAMM Motive Power business that we bought, that was dilutive $0.04 a year when we acquired it, it's very accretive today. And I think that applies to all those acquisitions we did back then.

And I think you need to keep in mind the timing, as John said, the FIAMM Motive Power transaction occurred in 2005, the Energia business that we -- gave us our Bulgarian footprint, I think, was 2008. But the years 2009, 2010, we did not see a lot of acquisition activity and then it got heavier in 2011 and '12. So there's a couple of years where you might expect to see an incremental benefit, but there were no acquisitions to speak of, of any size in that timeframe, so your premise that some ought to be turning -- swinging positive because of the normal cycle, there aren't a whole lot in that queue so we've got the ones that are more recent that are -- we'll say they are not accretive yet as a whole. Those haven't turned yet, obviously, but there aren't any from 2 years prior that are swinging around.

Points well taken. And 1 additional question, if I may, please. Your accounts receivable was up and yet your inventory was down sequentially. And sales were flattish. So I guess we're curious, does this imply that business ticked up at the end of the quarter, and hence, led to a pull down in inventory and customers had not yet paid for product and therefore A/R went up?

We tend to look at it in terms of how fast the inventory is turning. Actually, inventory turns improved from the first -- or from the fourth quarter, the end of the fourth quarter to the first quarter of this year. So even though the balances may have changed, the turns were steady and slightly positive. On the receivables side, I would say that the normal cycle of our year, the end of the year tends to be our low point in terms of receivables as a function of the number of days of sales outstanding. So what we're seeing in this first quarter, we would say is the normal seasonal pattern that is established for our working capital. So we're sitting at 25.2% of sales at the end of June compared to 24.5% at the end of last year. That is well within our normal cycles.

They're trying to extrapolate that there was a pick up in business at the end of the quarter, is really a stretch since...

June -- the month 3 of any quarter is always going to be your strongest month of sales because, for us, it always has 5 weeks. So you can make that assertion that you're going to see the bulk of your sales come in the latter half of the quarter.

Your next question comes from the line of Howard Rosencrans, representing Value Advisory.

You provided a lot of helpful color, particularly on China and Europe, which were both -- I'm really impressed by the 9% bump in your reserve business there, but you threw out a couple of other words that you don't use that much: buyback and dividend. Can you tell me sort of what the criteria will be as to how you're assessing that? Regardless of what's transpired in the past, up or down, you had 1 buyback at -- with the depth of the lows last year of about 1 million shares, if I recollect. But maybe you can give us some additional color as to -- I sense there's some sort of change there in your thinking.

Well, I would disagree with that. I think that the positions I've taken, the 4 points I've been communicating there for a number years, it's something that -- we've stated that over and over and over again, the 4 points and 4 areas, and again, it's -- we're open to buybacks and if the market doesn't recognize what we think is the value of the stock, then we bought back, I believe, it was like $57 million worth last year. And I won't tell you the number, but it was a good buyback and we were very pleased with the return that we've had on that. And if the market doesn't recognize the value of it, we've said all along, we will buy it back. At dividend, when we get to a point that we think that we've exhausted all possibilities of growth through acquisitions and growth through investing in ourselves and the buybacks aren't there, we would consider a dividend. But that isn't in the cards right now because I think there's just a lot of opportunity for this company to grow and I stated it before, that we're asking ourselves, "What's it take in 5 years to double the size of the business?" And that's the way we think and we're going to need capital to do that, to double the size of the business. So again, I go back to the 4 priorities of investing in ourselves, acquisition, buyback, dividends, in that order, and we're right now sticking with #1 and #2 unless the market doesn't recognize the value of our stock and then we'll buy it back. Mike, you want to add to it?

Yes, and on the dividends last year, we really had 2 programs. One was the buyback that we did in the...

Mike, excuse me, you said dividends. You meant to say...

Share repurchase, buy back stocks, sorry. So we bought back about 300,000 shares, call it $9 million in the June/July timeframe, and that was really to compensate for the normal dilutive effect that our normal employee stock grants might have. And then about this time 1 year ago, you might recall our share started to trade well below what we thought was the intrinsic value of the stock. And as you know, it was trading as low as $17 a share. And at that point, we bought back another 2.1 million shares. So all told, we bought back about nearly 2.5 million shares, which was nearly 5% of the shares outstanding and totaled about $58 million. So we currently have an authorization for $50 million of share repurchases. Now, with the prices that the shares are trading at right now, we don't think that that's the appropriate time to be buying shares back. But if we were to see a market decline similar to what we experienced a year ago, then you should expect that we'd probably be in the market for that.

[Operator Instructions] You have a question from the line of William Bremer.

I apologize for that, our new telecom system is faltering already. Many of my questions have been answered at this point. I'd like to go right into your premium products. Can you give us a sense of how that's progressing and what percent of top line that's currently making up right now?

It's in the zip code of 20%. When you look -- that would be just thin plate pure lead. So if we added on the other products, you're probably looking at about the 25% range. And it's progressing well. We're very pleased with it, it is a more expensive product, but the performance justifies the price.

And can I take that a step further, John? How much of that is impacting your margins in the Asia Pacific Rim there?

It is a sizable amount. I'm not going to give an exact amount out, but part of the reason that we're seeing the improvements is because of our premium products that we're taking into different Asia -- taking into the Asia market. It is helping us.

Right. And then, okay, going into restructuring, you pulled out $0.04, that's approximately $1.9 million, what should I...

After tax, yes.

Right, right. What should I be estimating for '12? And can you give us a little more color on exactly the plan in Western Europe and will there be closing of factories or is this -- can you give us some color on your plan for restructuring?

Yes. Bill, as you know in Western Europe, with the social laws and different things, we can't give out the details on some of the things that we're looking at doing right now. But all I can say is that we're going to continue on the same course that we've been on and that's the look at how we improve productivity efficiency to reduce overall cost. We bought over 30 different companies over the years and we've picked a lot of the low hanging fruit to start with and then we've got the middle of the tree and we're at the middle of the tree right now. There's still a lot of additional opportunities and things that we can do. If we were a company that 30 or 40 years we've been together and haven't done any acquisitions, the opportunities would be far less. But putting these companies together, it takes time, it takes capital, and we're on a good path to continue to integrate and improve productivity.

Right. And then my final question is on the Americas' second consecutive quarter above the target of 15%. Where is the next target?

Well, that's a tough question because I think what you're really asking is that -- our target as a company is to hold -- is to be above 10% operating earnings. And obviously, we're doing a lot better than that in the Americas. And I think what we have to look at -- the market is going to set the pricing and they're going to look at -- the market looks at it and says, "Geez, you've got a product out there you're selling for $1. And you've got another product out there you're selling for $1.35, and can you justify that premium? Is it there? Is the service there? Are you standing behind it? Does the product outperform? Does the product last longer than competitors'?" The marketplace is going to set that. Thus far, the market has looked at what we call best value and has been willing to pay a premium on the front end, to save money from the total installation or total job. Because yes, we're a little bit more expensive on the front end, but when you look at the total cost, I think that, to the end user, they will actually save money by going with our premium products. Mike you want to...

Yes, and keep in mind, Bill, we're blessed with having a stable yet slowly declining lead cost basis, which -- and pricing generally follows a quarter behind. So you get a little bit of a benefit if you're -- you're getting pricing from a higher lead cost basis than what you're incurring in cost in your P&L. And that's just the normal cycle where the price curve trails the cost curve. So if lead were to flatten out, you're going to -- you're not going to see an expansion. So I don't think we're going to be setting 15% and change going to 16% or more. I think that business is running on all cylinders right now. All of the plants are running very well. It is doing quite well, so I don't -- I can't say that we're going to be seeing that bar set too much higher.

I think the opportunity -- and I agree with Mike, what you said there on the percentage. But I think the opportunity is that over the years, our customers have seen the best value and understand it and they've come to us. And that's why we picked up market share with good pricing. I think the real opportunity is to keep going to new customers and new applications and having those customers see the added advantage of buying our premium products and the service and looking at it in terms they're going to save money in the long run by going with our products.

[Operator Instructions] At this time, there are no further audio questions. I would now like to turn the call back over to Mr. John Craig for closing remarks.

Well, thank you very much. We do appreciate everyone taking the time this morning. We know everybody's busy, especially during this time of year. But to call in and really the interest in our company, we really do appreciate it. So everyone have a good day. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.