Vishay Intertechnology, Inc. (VSH) Q1 2010 Earnings Report, Transcript and Summary

Good morning. My name is Latricia [ph] and I will be your conference operator today. At this time, I would like to welcome everyone to Vishay's First Quarter 2010 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remark, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Dr. Yahalomi. Please go ahead, sir.

Thank you, Latricia. Good morning. This is Lior Yahalomi, Vishay's Chief Financial Officer. Ladies and gentlemen, you're welcome to Vishay's first quarter 2010 earnings call. On the line with me today are Dr. Felix Zandman, Vishay's Executive Chairman and Chief Technical and Business Development Officer; Dr. Gerald Paul, Vishay's President and Chief Executive Officer; Lori Lipcaman, Vishay's Executive Vice President and Chief Accounting Officer; and Dave Tomlinson, Vishay's Senior Vice President, Corporate Controller. Before I start, Dave Tomlinson will read our customary opening statement. Dave?

You should be aware that in today's conference call we'll be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ, please see today's press release and Vishay's Form 10-K and Form 10-Q filings with the SEC.

Thank you, Dave. I will make summary remarks. Dr. Paul will add a more detailed analysis of our first quarter 2010. And finally Dr. Zandman will update our R&D and acquisition activities and will add summary remarks. Quarterly results; for the first quarter of 2010, Vishay reported revenues of $640.5 million, 5.5% higher than the fourth quarter of 2009 and 42.5% higher than the first quarter of 2009. Our consolidated gross margin for the quarter was 26.1%, as compared to 22.6% for the fourth quarter of 2009, and 15.1% for the first quarter of 2009. The increase from the fourth quarter of 2009 reflects the continued recovery from the historical global economic crisis, with increased sales and the cost reduction initiatives implemented by the Company. SG&A expenses for this quarter were 101.9 million, or 15.9% of revenues, as compared to 98.3 million or 16.2% of revenues for the fourth quarter of 2009, and 87.1 million or 19.5% for last year's first quarter. Other income and expense for the first quarter 2010 consists of $2.4 million of interest expense. The effective tax rate for the first quarter of 2010 was 27%. Capital expenditures for the quarter were $18.1 million, compared to 24 million in our fourth quarter of 2009 and 11.3 million in our first quarter of 2009. Depreciation and amortization for the quarter was $50.4 million as compared to 60.1 million, in the fourth quarter of 2009 and 54.6 million, in the first quarter of 2009. As announced in the press release Vishay reported earnings attributable to Vishay stock holders of $0.24 per diluted share for the first quarter of 2010. There were no unusual items for the first quarter of 2010, earnings per share of $0.24 for the quarter represents improvement as compared to net earnings per share of $0.15, for the fourth quarter of 2009, and net loss per share of $0.16 for the first quarter of 2009. Vishay liquidity. Vishay had a total debt of 335 million, as of April 3, 2010. The debt consists predominantly of the following four segments. 105 million, of long-term notes with 92 years maturity, due on December 12, 2102 with interest rate of 90 day LIBOR plus 0%. $87.5million of long-term loan maturing on July 1, 2011, with payments spread over the next 1.25 years, with interest rate of 30-day LIBOR plus 2.5%. 250million revolving credit facility maturing on April 20, 2012 with interest rate of 30-day LIBOR plus 1.4%, 125 million of which was used April 3, 2010. And finally, 13.5 million of long-term loan maturing on January 27, 2014, with payments spread over five years with interest rates of 30-day LIBOR plus 3.45%. As of April 3, 2010, Vishay had cash and cash equivalence of $613 million. Total available credit line including the 125 million end used revolver in the U.S. was $170 million, at April 3rd, 2010. Vishay total available liquidity measured by cash plus all available credit lines as of April 3, 2010, was $783 million, while our total debts payable over the next five years is only $230 million. Some other key summary financials are, total inventory at quarter end was $443 million, working capital at quarter end was approximately 1 billion, free cash flow was $50 million for the first quarter of 2010, as compared to 92 million, for the fourth quarter of 2009, and 42 million for the first quarter of 2009. Vishay’s total liquidity is 783 million and our continuous focus on earning growth and free cash generation will further improve our liquidity throughout 2010. I will now turn the call over to Dr. Paul our President and Chief Executive Officer. Dr. Paul.

Thank you Lior, and good morning everybody. I think we had a good quarter and I believe also the upturn of Vishay’s business during this quarter accelerated further with orders clearly exceeding pre crisis levels, due to stable prices, manufacturing efficiencies, and impertinently [ph] to reduced fixed costs. We in the first quarter achieved higher profits than before the crisis despite the lower sales 10 to 15%. Reported $0.24 per share adjusted as well as GAAP as Lior said, there were no unusual items reported for the quarter thus no adjustments to our GAAP earnings per share. The cash generation was strong again, free cash in the quarter was 50 million. A very strong order book indicates the continuation of the upturn. Let's talk about the economic environment. The overall market demand for electronic components accelerated versus an already substantially improved fourth quarter. There are shortages of supply and continuously increasing lead times. We also see an increasing nervousness of the buyers. There is an extremely low level of inventory in the supply chain as manufacturing up to now has not caught up with demand. This whole situation is more severe semiconductors, but also noticeable at passives. We have seen a strong POS up by 13% vis-à-vis the last quarter and very high inventory turns at distribution. Worldwide we have seen 5.0 turns after 4.2 turns in the fourth quarter, in the Americas 3.4 turns and 3.0 turns. In Europe up to 5.2 turns after 3.9 turns, in Asia up to 6.7 turns after 5.8 turns. So you see the inventories are down by another 6% at our distribution despite the POS is up by 10%. All markets and all regions were strong. I would even say Asia was overheated driven by lot of netbooks in the consumer industry. Automotive is further accelerating, there is some really comeback of mid sized and larger cars. And we see the continuation of steady upturn of the industrial segment, which I talked about already last time. And nearly consequently I say there is low price pressure to be seen in the market. Talking about our business development in the first quarter, sales in the quarter increased according to our expectation of cost limited by some manufacturing capacities. The exchange rates had some negative impact. We have achieved sales of 641 million in the quarter, after 6 or 7 million in prior quarters and 450 million in the prior year. Excluding exchange rate effects, sales versus prior quarter were up by 46 million or 8%, and up by versus prior year by 179 million, or 39%, based on extremely strong book to bill ratio of 1.46 versus 1.22 in the fourth quarter '09. Some details of book to bill, we have seen 1.67 for distribution, 1.22 for OEMs, 1.57 for actives and 1.35 for passives. Regionally now 1.30 for Americas, 1.31 for Europe and 1.70 for Asia. You see there is really broad optimism in all markets all regions. The extreme situation we have noticed -- experienced in Asian -- in Asia, distributors in actives. The strong demand from distribution is supported by POS and book-to-bill and what we do is we try to manage the distribution backlog with our colleagues from distribution. Vishay’s backlog has grown to 4.3 months in the first quarter to 4.8 for actives and to 3.7 for passives. All this supports our expectation for higher sales in the second quarter, also as our manufacturing capacities will have increased there. Selling prices at Vishay were virtually stable. We've seen a slight decline versus prior quarter of point 5%, and 1.5% decline versus prior year. In passives there was no price decline. In the actives, the price decline has reduced 2.8%, versus prior quarter and to 2.9% versus prior year. Some highlights of operations. Inventory returns in the quarter have increased to 4.2, and further improvement can be expected with growing sales at substantially constant inventories going forward. We have increased inventories in the quarter slightly by 10 million, when you exclude exchange rate effects by 6 million in raw materials and by 4 million in finished goods and WIP. Capital spending in quarter one remained on relatively low level of 18 million, versus 24 million in prior quarters and 11 million in prior year. For 2010, we currently expect to spend approximately 135 million, 85 million out of this for expansion and cost reduction. During the quarter, employment increased further by 1,100 heads to a total of 23,400 due to the increase of manufacturing capacities. But I would like to highlight that fixed cost personnel out of this number even went down slightly during the quarter -- during this quarter. No major new restructuring projects to be seen at this point. We do not expect to report material restructuring costs in 2010. We generated 68 million cash from operations in the quarter, as compared to 112 million in prior quarter, and to 53 million in the prior year. And we generated 50 million free cash in the quarter as compared to 92 million in prior quarters and to 42 million in the prior year. Altogether we expect another very good year of cash generation despite higher capital expenditures which we will have due to various substantial improvement of profitability due to substantially stable inventories, no material restructuring costs, and further improved cash collection. Let's talk about the result and reconcile the first quarter of 2010 vis-à-vis prior quarter. Based on 34 million higher sales, 46 million higher sales excluding exchange rate impacts, the adjusted operating margin increased by 26 million from 39 million to 65 million. The elements were as follows and slightly negative impact of selling prices of 3 million, and very positive impact of volume of 27 million. Now let's look to the first quarter in comparison to a year ago. Here we can say that based on 191 million higher sales, 179 million excluding exchange rate impacts, the adjusted operating margin increased by 84 million from minus 19 million, to 65 million. The main reasons were; a negative impact of ASP's of 10 million, a very positive impact of volume of 80 million, variable costs were better by 24 million, and fixed costs were worse by 9 million, but this is really due to the reinstatement of bonuses. Now let me go to the various product lines we have [ph] and let me start out as always with resistors and inductors. At this time, I will report without the foil resistors which will become part of the spin-off. So, Vishay’s traditional and most successful business continues to be in a phase of a steep upturn. This is supported by, I would say, heated demand from automotive in combination with a solid and broad rebound of the industrial segment of worldwide. Sales in the quarter were 149 million, which is 13% above prior quarter, and 42% above prior year. This is all on an apples-to-apples basis and also excludes foil resistors. The book-to-bill ratio of resistors and inductors was very strong at 1.27 in the quarter. The backlog has reached a level of 3.3 month which is high for this business. There are shortages of supply at inductors and power resistors. Due to higher volume, manufacturing efficiencies and a favorable product mix, gross margin increased to 35% of sales. I think we can say that this is one of the best results we ever had in resistors and inductors and 4 percentage points above the prior quarter. Prices were virtually stable, 0.4% down vis-à-vis prior quarter, 1.1% down vis-à-vis prior year. Inventory turns were quite excellent. They improved further to a record level of 5.1. We in resistors and inductors are expanding manufacturing capacities selectively, while also optimizing further the cost structure of this business. Coming to capacitors. Also capacitors continue to experience a broad upturn. But power capacitors as part of that only during quarter one started to improve in terms of orders. This is the normal sequence of events which we have seen before. Sales in the quarter were 117 million, down by 2%, vis-à-vis prior quarter, but up by 8% versus prior year. A very significant increase of book-to-bill ratio from 1.07 to 1.54 indicate and accelerating recovery also for capacitors now. We expect substantial sales growth in capacitors in the second quarter. Backlog has grown quite dramatically to 4.7 months. Gross margin at capacitors was 20% of sales, which will increase with growing volume. The selling prices due to an ongoing optimization program continued to increase slowly but steadily. We have raised prices by 0.4% versus prior quarter and prices are up by 1.4% versus prior year, the inventory turns at capacitors were at 3.3. Let me now talk about our diodes business. And going forward we’ll report separately diodes and opto products for better transparency. Diodes represents a broad commodity business with limited volatility where Vishay is the largest supplier worldwide. May I say that the keys for success in this business are efficiency and service. Vishay offers virtually all technologies there as well as the broadest product portfolio and we are technically leading in particular in power applications. After the steep recession diodes are in the phase of an extremely steep recovery. Book-to-bill in the quarter was 1.63, of course, including some over reactions by the markets. Sales in the quarter were 140 million, 11% above prior quarter and 70% above prior year. The backlog has grown to 4.4 months, which is record level in this business. Gross margin has improved from 15% in the fourth quarter to 20% of sales mostly due to higher volume. The business has excellent inventory turns this time at 5.4. Price decline continues to decrease. Prices went down 5.7% [ph] versus prior quarter and by 2.3% versus prior year. We have quite extraordinary success in this business with our new trench power diodes and we are expanding the manufacturing capacities. Let me come to our opto business. Vishay’s opto business consists of infrared sensors, couplers and special LED's. It contains relatively high share of custom design products especially in the segment of sensors. Vishay is the largest supplier of infrared components worldwide, and we are also here in a substantial recovery since the fourth quarter ’09. Sales in the quarter were 58 million, 23% above prior quarter and 64% above prior year. Book-to-bill is also strong in this case 1.25. Backlog solid has grown to 3.3 month. The gross margin increased to 35 -- excuse me to 34% of sales from 25% in the fourth quarter, we have seen higher volume and low fixed costs there also. Inventory turns of 6.2 are plainly good. Price decline is on historic leverage minus 1.2% versus prior quarter and minus 3.2% versus prior year. We too enjoyed a higher innovation rate, we are quite application oriented. We just introduced a smallest IR receiver on the market. MOSFET, Siliconix main product continued to experience the continuation there of an over heated upturn. There are extremely long lead times these days for MOSFET, due to broad capacity allocations limitations, which also we’re leading to allocations in the meantime. The inventory levels in the pipeline are extremely low. There is a broad shortage of supply. Sales in the quarter were 128 million up by 3% versus prior quarter and up by 55.0% versus prior year. We too expect a significant capacities that now in the second quarter. The book-to-bill ratio of MOSFET was very strong 1.65 and this has increased a backlog to 5.9 months. The gross margin of MOSFET has improved to 21% of sales, and we continue to expect the range for gross margin between 25-27% of sales at historical volumes. The price pressure is low. As you would expect it, it's 0.7% versus prior quarter, lower prices and 3.5% lower vis-à-vis prior year. The inventory turns were at 3.8. And they will improve with growing volume. We have now the fourth shift for six inch wafers in Santa Clara and now up and running. We expect a full output of the fourth shift and steps in the second quarter. Our 8-inch expansion in Germany is on target and the impact it will see in the second half. We have introduced the one gig cell end channel now after having done the same for the one gig p channel before. Finally, I would like to talk about the Vishay precision group now, which continues which consists now of the measurements group and the foil resistor and also they are starting to see better economic conditions now. Sales in the quarter increased to 48 million, 6% above prior quarter and 7% above prior year. The backlog has grown to 2.3 months from 2.1 to book-to-bill ratio of 1.12 indicates further recovery gross margin of this group is and at an excellent level of 35% of sales in the inventory turns are at 2.7. Let me summarize. The first again demonstrates like Q4 did already, that Vishay after three challenging years a successfully we focused on profitability. We are performing better than during the time before the crisis at still substantially lower sales. We will be clearly in the position to reach new levels of profitability as sales return to pre-crisis levels. We continue to be a strong and reliable generator of free cash, contributing further to our very solid financial position, the spin-off of our Vishay precision group is progressing well. We continue to expect completion by mid-year and as I said before it's my conviction that both companies will benefit from this move. Vishay continues to be one of the largest and technically leading enterprises in electronic components and I believe that we think long-term. For the second quarter of this year, we guide to sales range between 660 and 700 million at further improved results. Thank you for your attention. Felix, may I turn it to you.

Good morning. I'm Felix Zandman Executive Chairman of the Board of Vishay and Chief Technical Officer and CBDO. Good morning. It is interesting to examine the earnings per share for the past five quarters, which include calendar year 2009 and the first quarter of 2010. We went from minus or negative $0.08 per share for the first quarter of 2009 to minus $0.10 per share second quarter of 2009, and started recovery we have rebound. Plus $0.03 per share for the third quarter of 2009 to $0.16 per share for fourth quarter of 2009, and finally to $0.24 per share for this quarter Q1 2010. The present running quarter Q2 of 2010, also looks very good. Our gross margin also increased from 15% in Q1 2009 to 26% in Q1 2010. This 26% of gross margin is already better than the gross margin in 2010, pre-recession. Q2, gross margins should further increase in spite of increasing sales exceeded not to increase fixed cost not to increase as a matter of fact that this cost will slightly down. Vishay is now functioning at the higher plateau. The sales bookings and general activities are very brisk. We continue to generate free cash $50 million for this quarter. I would like the congratulate our President and CEO, Dr. Gerald Paul, on his excellent leadership during the recent global economic crisis during which he restructured the company in order to position it for the current and future earnings growth as exhibited during the past three quarters. Reduction of fixed overhead and other measures have positioned the company for yet better earnings per share in the future. Congratulations are also due to Mr. Ziv Shoshani who most recently has been the COO of the corporation and General Manager of the Vishay Precision Group that we are spinning. He will be the COO of the Vishay Precision Group, we called VPG. He has done as a great job preparing VPG to be a standalone company and spin it off successfully. Ziv have exhibited first class leadership, management characteristics and business acumen. I'm certain he will take VPG to new heights. The separation of VPG from Vishay should occur in mid 2010. Our R&D activities continue as planned. A few examples of new design in our products in data market industry for future cars and then as our savings have shown as of today on Vishay's website as part of our corporate presentation. We're asking to you looking for acquisitions in both positive and negative components. All in all the company is doing well and we expect even better results in the immediate future. Thank you. You are not invited to ask questions. Please.

Thank you. [Operator Instructions] Your first question comes from Shawn Harrison. Shawn Harrison – Longbow Research: Hi. Good morning. Looking at the capacity constraints this quarter, how much revenue do you think you left on the table particularly given that inventories at distribution sale 6% sequentially, which I guess underscores the capacity constraints in the shortages in the market?

There would have been no question that we could have sold at pre-crisis levels if we had the pre-crisis capacity already in place. It means something like 10 to 15% more. Shawn Harrison – Longbow Research: Okay. I guess, the follow-up to that is looking at the backlog now of $903 million how much of that do you think is actually shippable versus maybe overheated supply chain out there, given I don't think I’ve seen these book-to-bill ratios in a decade across many of the market segments. So just trying to get an idea of how you’re reading through the sky high book-to-bill ratios with the backlog in orders that you have to what is true demand and what is shippable over the next say, two to three quarters.

I think we are very well set for the next quarters. So the guidance which we give is very much on solid grounds, the remainder is speculation. I do believe because of the inventory, in the supply chain is that low, objectively that low, that the share of the questionable backlog if you want to call it like that is relatively small. But whole pipeline as far as we can judge is really empty. Shawn Harrison – Longbow Research: Okay. And then I guess two quick follow-ups and I’ll get back in to the queue. The new business breakouts the diodes and opto business. What should we look at as incremental gross margin for each of those businesses? You mean the variable margin. Shawn Harrison – Longbow Research: Yes.

Variable margin approximately I would say the diodes between 40 and 43%. and opto business is better, it's around 50. Shawn Harrison – Longbow Research: And then the variable margin for the new or I guess, the resisters business that you’re holding on to.

It doesn't change really. Shawn Harrison – Longbow Research: Okay. Thank you.

Your next question comes from Jim Suva. Jim Suva – Citigroup: Great. Thank you very much. You're approaching – are you at basically peak gross margin levels since we've seen since eight years ago or so. With sales increasing it appears that your margins should see some more upside here and you've restructured the business extremely well. Can you let us know kind of optimally what type of gross margins it seems like the Vishay should be running now at this post restructuring level.

Well, last time you may remember we talked about sustainable gross margins per product line. And we thought about the same question in the light of first quarter to which degree does this leave, even upside vis-à-vis what we said before. And as it looks especially resisters inductors seem to contain upside for the future, where as the numbers we said before we you may remember just to repeat them. We have said something like 30% for resisters inductors sustainable gross margin capacitors between 23 and 25%, Siliconix 25 to 27% and semi between – which is the combination of diodes and opto is just between 22 and 24%. I mean, we are – Siliconix in particular far away still from that we are sure that we're going to get there with growing volume. So altogether, you're right the gross margin of 26% is not the end of the story. It will be higher in this combination depending how the mix will be. We'll not be surprised if this could be another say 2%. Jim Suva – Citigroup: Great. And then just a quick housekeeping item, just kind of 27% tax rate a good tax rate and when we look at breaking out the Precision Group's when the spin actually occurs is that how we kind of should account for it in the Vishay remaining business?

We do expect the tax rate to be in the mid to high 20s, moving forward and it is as we estimate 27% for the year. And that is including the expected spin-off. Jim Suva – Citigroup: The spin-off will not change that.

Not change that. Jim Suva – Citigroup: No, but as far as your accounting and the way you will communicate post spin will be at the time of date going forward you won't consider a discontinued op.

Yes, yes. Jim Suva – Citigroup: Great, thank you, and congratulations everyone to you and your team for a very well job done.

Thank you.

Thank you.

Your next question comes from Matthew. [ph]

Great, thank you. Just wondering you could talk a little bit about how you are thinking about operating expenses here. Last quarter you were thinking maybe $98 million, and I think it was a little bit higher than this quarter. Is that just you're preparing for…

We are -- we stick to our forecast about 400 -- about 200 -- excuse me…

You said…

400 million per year. About 400. So no change of our forecast.

Okay. So I shouldn’t…

This slightly increase came from exchange rate for the most part.

Okay. All right. And then with regard to the capacity step upcoming for Siliconix. How should we think about how that works with relation to potential jump there in revenue and change in gross margin? So seems like there is plenty of demand there, you guys have some very good parts in that space. Does that mean you get a potentially significant sequential increase there in revenue? And then since you had that extra capacity coming online, will there be extra cost that’s coming on line? While I understand that we will see a gross margin improvement there is that pushed out of couple of quarters?

As a matter of fact it goes straightly -- strictly with volume, because the fixed cost will be fixed. We will not change the fixed cost, not increase the fixed cost on top of what we have now. So really what you see in terms of sales increase, will go straight to gross margin -- excuse me, sorry, 50% about to gross margin.

Okay. And is it reasonable for those to expect to see a big revenue jump there sequentially?

Will be through the order of 10% or more.

Okay. All right. Great. Thank you.

The next question comes from Matt Sheerin.

Hi, this is Mike Levinson [ph] in for Matt Sheerin. I was hoping you could talk about if you are concerned about what's double ordering? Are you seeing any signs of double ordering right now?

Nobody can exclude at this point in time double ordering. On the other hand the order book is really full. We are very solid in quarter two and my additional -- as I said before, additional remark is that the pipeline is very empty. This makes this situation quite unique and gives us quite a confidence also for a second half of the year.

Okay. Thanks. And then if you could talk a little bit more about the pricing environment and if you were able to put in price increases?

Yeah, selectively, this is a time for price increases, no question about it. On the other hand there are contracts which we always honor. On the other hand for sure, unless you have seen from what I have said before the price decline already has slowed down dramatically vis-à-vis historic levels. All this is not a step function of course. This, of course, we have contract. It’s a mixture of price increases in contracts, which are there. I think it’s fair to forecast that the price decline will go down further.

(Operator Instructions). Your next question is a follow-up question from Shawn Harrison. Shawn Harrison – Longbow Research: Hi. It’s just a follow-up to the incremental capacity coming on line at Siliconix. I want to be clear on the statement. It sounds like you're adding more, I guess, variable capacity, outsourced capacity versus installed?

Yes, it’s inside and outside both. So as I mentioned in my speech, we have started to establish a full shift in Siliconix in November or so. And now in the course of the second quarter this becomes fully operational. And this is one of the sources of higher capacity and then of course through -- from the outside from foundries we also getting ways we have continued to qualify new sources. Shawn Harrison – Longbow Research: Okay. But at the same time you may still be constrained in terms of wafer availability?

I think like everybody at the moment in MOSFET, all of us could sell more if we could make more for all of us through I would say. Shawn Harrison – Longbow Research: Okay. And then in terms of the guidance, with the dollar strengthening lately, I guess what exchange rate versus the Euro is I guess…

It’s really the XO1 -- it’s one -- I mean the average was one, but I don't know by heart but it must have been 1.33 or something. It was 1.33. Shawn Harrison – Longbow Research: Okay.

Dollar to the Euro. This is approximately it. Shawn Harrison – Longbow Research: So a relatively real-time.

Yeah. Shawn Harrison – Longbow Research: Okay. And then finally just, maybe some update on the cash usage, you are going to be generating a significant amount in free cash flow. I know last quarter you talked about looking at smaller types of acquisitions. Maybe you could just talk about what you are seeing out there in the market environment? Are prices getting better? Just how you would look to deploy the cash going forward?

Felix, do you want to talk about this.

Well, we are looking at many acquisitions in small size and average size. Pricing is about -- it’s difficult to comment because on one hand some of them prices are higher, some of them are willing to sell now, but we are very careful with that. Acquisitions you don't buy like on this like in a store certain products. You have to negotiate that, you have to see that, but companies are available and we are looking at that. Pricing is about constant. We didn't see any major increases in prices, no major growth. Shawn Harrison – Longbow Research: Okay. Thank you. And congratulations again on the quarter.

Thank you.

Your next question is a follow-up question from the line of Steve Smigie. Steve Smigie – Raymond James: Great, thanks for the follow-up question. Dr. Paul, I was hoping you can talk a little bit more about you mentioned some over-heating in Asia. I know you guys are looking at being very careful about understanding what true demand is. But you did mention overheating, so is that -- when you mean that, do you just think that the orders are coming in earlier than they should because of lead times or -- I’m just -- I was hoping you could sort of give…

It is principally speaking the same mechanism. All of us, and Vishay is no exception, have problems to meet demand. The recovery from the crisis, like the crisis itself, happened very abruptly, very abruptly. And all of -- especially distribution, which is to a degree understandable in the crisis, minimized their inventory and so did OEMs so all of them did. And crisis really came back more in terms of business came back after the crisis is within the quarter I'd say. They are completely but it went up very drastically which caused all of us in the [inaudible] supply chain by surprise. Then of course the lead times went out, then of course a next step the systems that command the orders, the systems themselves get nervous and of course order even more. So it's like circle, it's like -- which happens all the time principally. In the meantime, all this is especially dramatic in Asia because as we know in Asia the inventory levels people are ready to tolerate are very low. Whatever happens everywhere is there particularly drastic but this is not the first time, because it is always like that. Because they have low buffers they don't believe in buffers. This time only say I'm 30 years in this business I've never seen increase so steep and I believe my colleagues more or less feel the same way. Steve Smigie – Raymond James: Right. So how do you approach that from management's perspective? I mean you got this feedback little bit keeps ramping up. You just haircut all the orders or we got to have external inventory to be ready for whatever?

I'm talking only MOSFET. For the remainder it's been relatively okay. But for MOSFET no question about it. Of course, we work together with our distributors on inventory what is reasonable what is maybe not reasonable. So we try to distribute our available capacity which grows in a reasonable form, that everybody -- if you don't let down anybody is possible. Steve Smigie – Raymond James: Last question just, if you talk a little bit about cash for you guys, cash flow very good cash flow generators change a little bit from last quarter, talk a little bit about what stepped down and how we should are going to be thinking about your cash flow potential going forward?

First of all you shouldn't compare to the fourth quarter. In this case more meaningful to compare quarter with one year ago and in this case we are even a little better as you've seen. It's up free cash. I see approximately the same performance as prior year. Steve Smigie – Raymond James: Okay. Good. Thanks a lot.

Your next question is a follow-up from Jim Suva. Jim Suva – Citigroup: Thank you. A quick clarification what were you expecting for CapEx now that we are coming out of the recession for the year, and then you maybe you can help us with what you mentioned that work orders above pre-crisis, how much excess orders are overheated do you think like 5-10% or -- I know everyone is just worried on double ordering.

[Technical difficulty] Order book is so full and the pipeline was so empty that nobody should be scared that the situation if sales level breaks down immediately or quickly. We're feel very safe for the foreseeable future. Some booking must be there by principal but we try to minimize within working with our distributors in working with the OEM's. I feel solid. Some overheated some impact of the overheated situation of cause exists but you know it doesn't change the picture.

I have been at the conference this is Dr. Zandman I have been at the conference for distributors few months ago and at that time there was a vote taken in the audience who believes in V upturn or in a W [ph], well the majority was for W. Today they don't speak more about W. Everybody is for V. And there is some voted for square root and V stabilization. Now most of the people we talk to speak about a V as they don't see too many major drop. And it is because of what Gerald said inventories are empty, demand is very brisk. Jim Suva – Citigroup: Thank you, congratulations again.

Thank you.

Thank you there are no further questions at this time. I will now turn the conference back over to Dr. Lior Yahalomi for closing remarks.

Thank you for your participation in our call. We appreciate your interest and look forward for your continued interest at Vishay. Thank you.

Thank you for participating in today's conference call, you may now disconnect