Good day ladies and gentlemen and welcome to the Stoneridge First Quarter 2017 Conference Call. Currently at this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] At this time I’d like to turn the call over to your host to Matt Horvath. Sir you may begin.

Good morning everyone and thank you for joining us to discuss our first quarter. The release and accompanying presentation as well as our 10-Q has been filed with the SEC and is posted on our website at www.stoneridge.com in the Investor section. Joining me on today's call are Jon DeGaynor, our President and Chief Executive Officer and Bob Krakowiak, our Chief Financial Officer. Before we begin I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning our future result or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found in our 10-Q filed with the Securities and Exchange Commission under the heading forward-looking statements. During today's call we will also be referring to certain non-GAAP financial measures. Please see the Investor Relations section of our website or the Appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. After Jon and Bob have finished their formal remarks, we will open the call up for questions. With that I will turn the call over to Jon.

Thanks Matt and good morning everyone. Yesterday evening we released results for the first quarter. Our company continues to drive financial performance through topline growth and operational execution, which has resulted in growth in each segment and our ten consecutive period of improved quarter over quarter performance. On Page 3 let me briefly cover our first quarter results. Please note that for comparability to prior quarters and due to the fact that Orlaco only contributed for a portion of the first quarter, I will be discussing our financial performance excluding Orlaco, which is included in our electronic segment for consolidation purposes. Bob will be discussing our results inclusive of Orlaco later in this call. Going forward, we will discuss only our results on a consolidated basis as Orlaco will be included with our electronic segment for financial reporting purposes. While our control devices segment led our first quarter growth, I'm pleased that each of our business segments exceeded our expectations in the first quarter which resulted in not only 19% sales growth, but margin improvement across all segments. As we've discussed previously, our PST segment continues to contribute positive operating profit resulting in the third consecutive quarter of break even or better operating performance. This morning we're also increasing our 2017 guidance based on an updated view of our financial performance for the remainder of the year as well as the addition of Orlaco as part of our electronics segment. Bob will provide an additional detail on our revised guidance later in his discussion. Page 4 provides a summary of key financial metrics for the first quarter compared with the first quarter of 2016 excluding Orlaco for comparability purposes. Sales increased by 19% or $193.2 million for the quarter, an increase of $30.6 million relative to the first quarter 2016.…

Thank you Jon. Turning to Slide 12, inclusive of Orlaco’s financial performance as part of the electronic segment, net sales in the first quarter were 204.3 million with a gross profit of 29.9% of sales or $61.2 million. Operating income was 15.2 million or 7.4% of sales and EBITDA was 21.6 million or 10.6% of sales. Earnings per share was $0.32. Considering an effective tax rate of 33.3%. Adjusted EPS was $0.38. Adjusted for transaction costs related to the acquisition as well as the expense related to the step up of acquired inventory. More specifically, the control device segment net sales increased by $26.5 million primarily as a result of new products sales in the North American automotive market and increased sales volume in China. Control devices operating income increased primarily due to an increase in sales which was partially offset by warranty settlement cost and higher SG&A. The electronics segment net sales increased primarily due to the increase in European off-highway vehicle products related to the acquired Orlaco business as well as an increase in sales volume in our European commercial vehicle products. Electronics operating income increased primarily due to higher sales resulting from the Orlaco acquisition and lower material costs, which were partially offset by higher SG&A and design and development costs related to Orlaco. PST segment net sales increased by $4 million or 22.8% including the impact of favorable foreign currency exchange rates. PST’s operating performance improved primarily due to higher sales, favorable sales mix, lower material costs and overall cost reductions throughout the business. PST’s improved operating performance is expected to continue throughout the remainder of 2017. This morning we are providing revised guidance on our 2017 financial performance inclusive of Orlaco’s financial contribution and considering our revised view for the remainder of 2017. We expect…

[Operator Instructions] Our first question comes from Brian Colley of Stephens. Question, sir.

So I appreciate all the details in the slides, just giving the numbers, excluding Orlaco and including Orlaco, but I was curious if you could just provide any details on how much of the $0.10 to $0.15 increase to your EPS guidance was driven by Orlaco versus an improved outlook or just outperformance in the quarter from the other segments?

Sure, Brian. Thanks for the question. So, Brian, the way that we're looking at this is with the acquisition of Orlaco, we're really focused on running this as one company. So when we’ve updated our guidance, our guidance is inclusive of the improvement of the underlying business, prior to the Orlaco acquisition plus the Orlaco acquisition. We're not breaking out the guidance separately.

Okay. That's fair. So just given you realized $0.05 of accretion from Orlaco in the first quarter, your guidance would imply that that number comes down a bit over the rest of the year. Could you just talk about what's driving that, whether that's seasonality in Orlaco’s business or just a slightly lower amount of accretion you’re expecting?

Yes. So, Brian, with respect to your question, there's a limited amount of seasonality in the business in terms of the annual impact. Again, I don't want to go down the path of talking about Orlaco separately from the overall business. Again what I can reiterate for you is that the guidance that we've provided for the remainder of the year takes into account the acquisition plus the improvement in the underlying business as well and it's meant to be inclusive.

And Brian what we can say is both sides for Orlaco and the base business are both performing very well. So this isn't just an Orlaco impact that's in our improved guidance.

Okay. That's fair. And then just looking at the OEM volumes for some of your Shift-by-Wire platforms, it looks like they’re seeing some declines. Could you just talk about how the Shift-by-Wire volumes are performing relative to your expectations?

Well, Brian, as we talked multiple times, we use external sources of data to forecast our volumes over the longer period of time being IHS and LMCA depending on the specific product or the specific end market and then we adjust based on customer requirements. What I can say to you is over the year, we have improvements in certain pieces of the Shift-by-Wire volume, one platform being ahead or behind and we adjust those on the fly based on releases from the customer. So at this point, Shift-by-Wire is effectively ahead of plan for this year and we will adjust as our customers make changes. But right now, it's ahead of our plan.

Okay. That's helpful. And then I wanted to shift over to your ELD product that you’ve talked about in the past. Just curious if you could give an update on where we stand with that product and when you think that could start generating revenue, just curious if you think it's something that could be meaningful, either this year or next, given the mandate goes into effect at the end of this year?

Yes. So thanks for asking the question, Brian. We have just finished FMCSA approval of that product and started to see very limited sales in Q2. Our view is that it won't have material sales for us in 2017 that the opportunity is greater in 2018, but we are very confident in the product. We're one of the first to get the FMCSA approval and we're looking forward to the impact that it can have on the end of this year and into next year.

Thank you. Our next question comes from Jimmy Baker of B. Riley. Your question, sir.

Yea. Good morning. This is Austin Drake on for Jimmy. I just wanted to touch on the Orlaco operating margin in Q1. I think it was below their 2016 unaudited financials. If there is seasonality applied to that or if there's an accounting adjustment or just what would cause that change? Think you.

Yes. With respect to Orlaco’s performance in the first quarter relative to the 2016 results, again, there isn't a significant amount of seasonality with respect to Orlaco’s volumes during the course of the year. So we did have some adjustments for amortization and interest expense as well that impacted that during the quarter. And also we have the inventory step-up as well, Austin that impacted it. So you have to take those things into account as well as a result of the purchase price adjustments.

But Austin, let us reiterate one more time that the base business is performing very well. It’s -- we are -- that business is performing at or above our expectations as we’re reporting the deal together.

And not sure if I’ve missed this, but last quarter, you guys provided the backlog, just wondered if you could provide that again?

So the backlog is something, Austin that we will provide, but we will provide it on an annual basis going forward. We're not going to provide it on a quarterly basis. It's something that we’ll update annually based upon our business wins.

Thank you. [Operator Instructions] Actually, our next question comes from Brian Colley of Stephens. Question, sir.

Hey, guys. I had a quick follow-up on PST. Just thinking about the PST business and the potential for demand in Brazil to rebound at some point, how should we be thinking about the incremental operating margins for that segment after all the cost reductions you've made over the past several years?

So Brian, we haven’t given specific guidance relative to contribution margins for PST, but we have said for the Stoneridge business, our contribution margins are 2.5 to 3 times our EBITDA margin and that’s a reasonably proxy to use for PST. And with the structural changes that we’ve made Brian that’s where the business is, that’s a great proxy. Again, we spend a lot of time talking about PST over the different calls and it’s nice not to have to talk about performance misses and really to be able to talk about the performance of the business and its potential for growth, particularly as the market starts to come back.

Right. That’s helpful color there. And then lastly, I just wanted to ask about acquisitions. I know you're just complaining Orlaco, but I was curious just looking forward, if you're less likely to deploy capital towards another deal in the near term or if you’re still actively looking for M&A opportunities?

I think Brian we’ve talked about this multiple times and hopefully the Orlaco acquisition is an example of the sort of acquisitions that we would do, ones that help us from a technology standpoint, one that help us from a market and a customer diversification standpoint and also ones that makes financial sense. We are evaluating multiple deals currently and we will continue to look at it and we still believe between our organic growth opportunities and inorganic opportunities like M&A that that's the right way for us to deploy our leadership capabilities and our capital.

That's helpful. And then any color on the deals you're looking on now, are you looking to add businesses that would fit more under the control devices or electronics business?

Brian, I can't talk about anything specific because they're way too early in the process, but what we look at as we look at both sides and we have a pretty clear matrix of what any individual deal will do to strengthen our business or fill what we see our technology or other strategic gaps. So there isn't one side of the business versus the other where we are specifically targeting. There are challenges in each of those or opportunities in each of those to bolster those businesses and that's how we look at M&A opportunities, but I can tell you that we are looking outbound as well as taking inbound information on a regular basis with regard to M&A opportunities.

Thank you. I show no further questions in the queue at this time. I’d now like to turn the call over to Jon DeGaynor. Sir you may continue.

Thank you and thank you everybody for the questions. Let me just summarize and say I can assure you that our company is committed to continuing to drive shareholder value through strong operating results, profitable new business and focused deployment of our available capital. We are confident that our actions will result in continued success in 2017 and beyond and we look forward to speaking to you on our next quarterly call. Thank you.

Thank you, ladies and gentlemen for attending today’s conference. This concludes the program. You may all disconnect. Good day.