Vishay Intertechnology, Inc. (VSH) Q3 2012 Earnings Report, Transcript and Summary

Good morning, and welcome to the Vishay Intertechnology Third Quarter 2012 Earnings Call. My name is Melissa, and I will be your conference moderator today. [Operator Instructions] I will now turn the call over to Peter Henrici, Senior Vice President, Corporate Communications. You may begin.

Thank you, Melissa. Good morning, and welcome to Vishay Intertechnology's Third Quarter 2012 Earnings Call. With me today are Dr. Gerald Paul, Vishay's President and Chief Executive Officer; and Lori Lipcaman, our Executive Vice President and Chief Financial Officer. As usual, we'll start today's call with the CFO, who will review our third quarter financial results. Dr. Gerald Paul will then give an overview of our business and discuss operational performance as well as segment results in more detail. Finally, we'll reserve time for questions and answers. This call is being webcast from the Investor Relations section of our website at ir.vishay.com. The replay for this call will be publicly available for approximately 30 days. You should be aware that in today's conference call, we will 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 Securities and Exchange Commission. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared according to Generally Accepted Accounting Principles. We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with GAAP measures that we also provide. This morning, we filed a Form 8-K that outlines the various variables that impact the diluted earnings per share computation. We expect to file our Form 10-Q for the third quarter today. On the Investor Relations section of our website, you can find a presentation of the Q3 2012 financial information containing some of the operational metrics Dr. Paul will be discussing, as well as a presentation on Vishay's Growth Plan. Dr. Paul will be presenting on Wednesday, January 16, at the Needham Growth Conference in New York. Now I'll turn the discussion over to Chief Financial Officer Lori Lipcaman.

Thank you, Peter. Good morning, everyone. I'm sure that most of you have had a chance to review our earnings press release. I will focus on some highlights and key metrics. Vishay reported revenues at the low end of the guidance. Our pretax results were as we would expect at these revenue levels, according to our business model. Due to a significant shift in the assumed mix of income among our various taxing jurisdictions for the year 2012, the expected annual tax rate increased to approximately 33%. At the end of the second quarter, we had anticipated a normalized annual tax rate of approximately 29%. This increase of the expected annual tax rate to 33% resulted mathematically in an effective tax rate of 45% for quarter 3. We see these relatively high tax rates as a temporary situation. An improvement in our pretax income, particularly an improvement in the profitability of our MOSFET segment, would result in a return to our typical consolidated tax rate in the mid-to-high 20s. Vishay generated free cash of $53 million in the quarter despite the lower profit level. This was supported by an inventory reduction. We paid down our revolving credit facility by $74 million. The carrying value of our debt is now in line with the carrying value before we issued the third tranche of converts in May 2012. Looking at the P&L, revenues in the quarter were $573 million, down by 2.6% from previous quarter and down by 10.2% compared to prior year. Gross margin was 23.3%. Operating margin was 7.8%. EPS was $0.15. We recorded no unusual items in quarter 3. Reconciling operating income quarter 3 2012 compared to adjusted operating income for prior quarter, based on $15 million lower sales, or $11 million lower excluding exchange rate impacts, operating income decreased by $16 million from $61 million in quarter 2 2012 to $45 million in Q3 2012. The main elements were: average selling prices, which had a negative impact of $4 million, representing a 0.7% ASP decline; volume decreased, with a negative impact of $3 million; variable cost increased, with a negative impact of $3 million due to lower volume-related inefficiencies; higher fixed cost had a negative impact of $4 million, $2 million of which was related to an increase in an environmental liability; and inventory reduction had a negative impact of $3 million, representing a $6 million reduction to inventory, or $12 million excluding exchange rate effects. Reconciling operating income quarter 3 2012 compared to prior year, adjusted. Based on $65 million lower sales, or $43 million lower excluding exchange rate impacts, operating income decreased by $33 million from $77 million in quarter 3 2011 to $45 million in Q3 2012. The main elements were: average selling prices, which had a negative impact of $24 million, representing a 4.1% ASP decline; volume decreased, with a negative impact of $7 million; higher fixed costs had a negative impact of $8 million, $6 million coming from acquisitions; and exchange rates had a positive impact of $4 million. Selling, general and administrative expenses for the quarter were $89 million. This was in line with our expectations despite the increase of the environmental liability of $2 million, which was partially offset by a positive exchange rate impact. For the current quarter, our expectations are approximately $90 million at today's exchange rates. Total shares outstanding at quarter end were 143 million, the same as at the end of quarter 2. The expected share count for EPS purposes for the fourth quarter based on an average stock price of below $12 is approximately 150 million shares. This is the same as for quarter 3. For a full explanation of our EPS share count and variables that impact the calculation, please refer to the 8-K we filed this morning. Looking at some selected key metrics. Cash from operations for year-to-date September was $186 million. Capital expenditures for year-to-date were $87 million, with approximately $49 million for expansion, $10 million for cost reduction and $28 million for maintenance of business. Proceeds from the sales of property and equipment were $8 million. Free cash generation was $107 million. This compares to $200 million prior year. Vishay has consistently generated in excess of $100 million free cash in each of the past 6 years. Cash flows from operations were greater than $100 million for the last 17 years, and greater than $200 million for the last 10 years. We expect cash generation for 2012 in line with this history despite the difficult economic environment. Backlog at the end of quarter 3 was at $526 million or 2.8 months of sales. Inventories decreased quarter-over-quarter by $6 million, or by $12 million excluding exchange rate impacts. Days of inventory outstanding were 89 days. Day of sales outstanding for the quarter were 46 days. Days of payables outstanding for the quarter were 30 days, resulting in a cash conversion cycle of 105 days. We had a total liquidity of $1.4 billion at quarter end. Cash and short-term investments comprised $941 million, and unused capacity on the credit facility was $434 million. The breakdown in our debt of $389 million was: $86 million outstanding on our credit facility; $95 million of exchangeable unsecured notes, 90 years; $208 million of convertible debentures, net of unamortized discount issued in 3 tranches and due in 28, 29 and 30 years, respectively. The principal amount or face value of the converts is $575 million. As already mentioned, in the third quarter, we paid down our revolving credit facility by $74 million, and the carrying value of our total long-term debt is now in line with the carrying value before we issued the third tranche of converts in May 2012. I would like to remind you that no principal payments are due until 2015. Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.

Thank you, Lori, and good morning, everybody. With the Asian markets missing their seasonal upturn, the third quarter became disappointing. Sales and, in particular, orders were clearly below expectations. Mostly due to its disciplined cost control, Vishay nevertheless achieved decent operational results and remained within its business model. Our gross margin were 23% of sales, and operating margin was 8% of sales. As Lori pointed out, the overproportional pressure on the MOSFET results burdened tax rate and earnings per share in the quarter. We achieved earnings per share of $0.15. The free cash generation of year-to-date $107 million remains solid. $53 million of free cash was generated in the third quarter. Let me talk about the economic environment. In the course of the third quarter, the economic situation in most of our markets deteriorated, following the weak trend of consumer goods in Asia visible already at the end of the second quarter. This obviously is a consequence of broad anxieties for the macro economy that have started to influence the end customers and also the supply chain. Growth perspectives in Europe are weak, driven also by the unresolved problems concerning the euro. This reduced optimism even in Central Europe, resulting in a further weakening of mainly the industrial segment. And of course, in Europe, also the seasonality of the business did not help in quarter 3. Generally, the U.S. market remains stable. There is a quite weak performance of Asian consumer markets like TV, notebooks, handsets and gaming. There's declining GNP growth in China and other Asian countries. We have seen the substantial cautiousness of Asian distributors. Despite principally reasonable inventory levels, inventory turns in quarter 3 were 3.4 worldwide versus 3.5 in the second quarter; 2.4 in the Americas versus 2.5; 3.5 in Europe versus 3.7; 4.7 in Asia versus 4.6. The POS, after a major improvement in the first quarter, in the face of stability in the second quarter reduced slightly in the third quarter, reduced by 2%. In general, we must say that the visibility remains rather short. Now, the business of Vishay. Due to unexpectedly low orders throughout the third quarter, sales came in at the low end of the expected range. We achieved sales of $573 million in the quarter versus $588 million in prior quarter and $638 million in prior year. Excluding exchange rate effects, sales were down versus prior quarter by $11 million or by 2% and down versus prior year by $43 million or by 7%. When excluding the impact of acquisitions, they were down versus prior year by $60 million or by 9%. Orders versus prior quarter were down by 16%. Our relatively weak book-to-bill rate of 0.87 in the third quarter does not indicate a short-term recovery of revenues. We have seen 0.79 for distribution. Asian distributors alone were down 2.66. And we have seen 0.94 book-to-bill for OEMs, 0.82 for actives, 0.91 for passives, 0.92 for the Americas, 0.80 for Asia and 0.90 for Europe. The backlog is at 2.8 months, 2.7 in the actives and 2.9 in the passives. The order cancellations remained on a low level. The ASP decline year-over-year continued to accelerate but slowed down versus prior quarter. Prices were down by 0.7% versus prior quarter and by 4.1% versus prior year. Passives are on the way back to price stability, minus 0.2% versus prior quarter, minus 0.9% versus prior year. The substantial price decline at actives, in particular, versus prior year driven by the MOSFETs, minus 1.2% versus prior quarter and minus 6.7% versus prior year. Let me talk about some operational highlights. Our contributive margin in the third quarter was slightly below our traditional range of between 46% and 48%. This is a temporary effect, mainly due to some inefficiencies related to the volume drop. Fixed costs, in general, continued to be well under control. Manufacturing fixed costs remained slightly below $120 million, and SG&A costs were at $89 million in the quarter, including acquisition-related amortization. Total headcount in the quarter decreased from 22,100 to 21,925, or by 1%. The inventory turns of Vishay in the third quarter remained at 4.0. And excluding the effect of exchange rates, inventories decreased in the quarter by $12 million or by 3%, virtually all in the area of reinforcements [ph] and finished goods. Capital spending in quarter 3 was $39 million. For the year, we expect capital expenditures of $150 million to $160 million, whereby approximately 50% will be for capacity expansion and 15% for cost reduction projects. Year-to-date, we generated $186 million cash from operations and $107 million free cash, and we continue to be, therefore, a long-term stable performer in terms of delivery of free cash. Let me go to our product lines. Let's start, as always, with Resistors and Inductors. Vishay's most traditional business, after quite a substantial recovery in the first quarter, continued to perform fairly well. We enjoy a very strong position in the industrial and automotive markets, have benefited from their strength in recent quarters, but now do feel some slowdown mainly in the industrial segment. Sales in the quarter were $163 million, 1% below prior quarter and 10% above prior year. Without acquisitions, it would be 1% below prior quarter and 2% below prior year. The book-to-bill ratio was 0.94. The backlog is at a quite normal level of 2.7 months. Gross margin in Resistors and Inductors continues on a high level, at 32% of sales versus 33% in prior quarter. The selling prices were fairly stable, minus 1.5% versus prior quarter -- repeat, minus 0.5% versus prior quarter, and minus 1.6% versus prior year. The inventory turns were quite excellent, 4.6. Our 2 acquisitions, Huntington and HiRel, continue to be successful, with gross margin above 30%. Just a remark, the move of HiRel in Asia to larger premises has been completed. Coming to Capacitors. This business of Vishay is based on a broad range of technologies, with a strong position in European and American market niches. It suffers more than Resistors from the economic slowdown in Europe. Sales in the quarter were $111 million, 3% below prior quarter and 18% below prior year. Book-to-bill was 0.87. The backlog is at a normal level of 3.1 month. The gross margin of Capacitors reduced to 22% of sales from 23% in the second quarter, mostly due to lower volume. The selling prices were constant versus prior quarter and versus prior year, and we will continue to apply a quite conservative pricing policy in Capacitors. Inventory turns were at 3.0. Some operational remarks: tantalum powder continues to be no problem to be purchased, it's available; and our business with higher power capacitors are enjoying -- is enjoying another strong year, and we're also in process to expand there in Asia. Coming to the Opto products. Vishay's Opto business consists of infrared sensors, couplers and LEDs, and it contains a major share of customer-designed products mainly sold to automotive and industrial markets. Mostly due to the weakness of the consumer markets and of Asian distribution, sales in the third quarter decreased to $50 million, which is 13% below prior quarter and 7% below prior year. The book-to-bill ratio was 0.95, which leads to a normal backlog of 3 months. The gross margin of Opto products continues at a good level of sales. We achieved 31% of sales in the third quarter, which is slightly down from prior quarter, which was at 32%, mainly due to lower volume. The inventory turns also of this line are quite excellent, 5.3. After a spike in the first quarter, the ASP decline continues to normalize. We have seen minus 1.3% versus prior quarter and minus 2.8% versus prior year. Next in line are Diodes. Diodes represent a broad commodity business where we are largest supplier worldwide. We are leading, especially in our power applications, and Vishay offers virtually all technologies as well as the most complete product portfolio. The business with Diodes in the third quarter suffered from depress and cautiousness of Asian distribution. Sales in the quarter were $124 million, which is 8% below prior quarter and 16% below prior year. Book-to-bill was 0.88. The backlog is at 2.6 months. Gross margin came out at 20% of sales, slightly below prior quarter, impacted again by somewhat lower volume. The inventory turns were quite excellent, 4.4. And the moderate rate of price decline continues. We have seen minus 0.4% versus prior quarter and minus 3.2% versus prior year. Coming to the MOSFETs. Vishay continues to be one of the market leaders in the segment of low-voltage MOSFETs, and we are on the way to establish ourselves as a larger player also at high-voltage MOSFETs. The business concerning volume and profitability this year is in a difficult position, but principally has started to trend up as a consequence of substantially enhanced product innovation activities. Sales in the quarter were $123 million, 11% up versus prior quarter but 5% below prior year. Book-to-bill was quite weak. It was 0.7 in the quarter, mainly driven by the present weakness in notebooks and by Asian distribution holding back. There's a relatively low backlog of 2.6 months. The gross margin versus prior quarter mainly suffered from the impact of inventory reduction. We achieved 14% gross margin, after 17% in the second quarter. The inventory turns were at 3.9. ASP decline remains high, especially versus prior year: minus 2% versus prior quarter, minus 11% versus prior year. The customer qualifications of new and competitive generations of high-voltage MOSFETs is ongoing. There's a good reception by the market. But the high-voltage market, like the low-voltage market, is relatively weak at the moment, which slows down to a degree our efforts. I would like to say a few words about our Growth Plan. We have decided in Vishay to push internal growth and growth through acquisitions in order to improve earnings per share going forward. And all this is independent of the fast changes of the economic environment. We have acquired specialty product businesses of HiRel and Huntington, and we are currently pursuing the acquisition of a specialty resistor producer in Europe. And there are further plans that can be pursued. We have increased our technical staff in R&D and engineering by 15% since December 2009, and more additions have been decided on. We are in process to proactively expand critical manufacturing capacities like high-voltage MOSFETs, met [ph] Tantalum caps, power inductors, power metal strip resistors and IR SMD receivers. And we have decided to substantially enlarge our technical field sales force in Asia by about 25% in order to push the sign-in of our portfolio, mainly in local industrial markets. We are also adding sales offices in the north of China. Let me summarize. No question, time in a rather unexpected way became more difficult again. Vishay's third quarter, on top of lower-than-expected sales, has been burdened by singularities like inventory reduction and the required catch-up for the tax rate. In view of all adverse influences, Vishay continues to perform according to its drastically improved performance standards, and we continue to generate free cash in a quite reliable way and we are safe financially. Vishay is in the position to follow its plan for midterm growth steadily. And let's keep in mind that every slowdown in our industry is followed by a steep upturn. Long-term electronics continue to be a growth market, and we remain confident. However, the fourth quarter still will be difficult. We expect sales in the range between $500 million and $540 million at gross profits in line with the lower volumes. Despite current low visibility, there is more optimism for the first quarter and the first half of next year, as the supply chains are principally lean and the European seasonality should help us. Thank you very much, and I'll turn the call back to Peter Henrici.

Thank you, Dr. Paul. We will now open the call to questions. Melissa, please take the first question.

Your first question comes from Jim Suva.

One question, and then the follow-up is just more of a detailed housekeeping one. On the first question, you talked about Asia kind of missing its seasonal uptick and a lot about gaming and things like that. Can you also talk about some of the other end markets, whether it be automotive and industrial? Are those seeing significant softening also? And then the follow-up question would probably be on the tax rate of 45%, if I heard correctly, that was a catch-up. So I believe that would be kind of a 1 quarter uptick in tax rate, if I'm correct. And if so, should we expect it to go back to the normal rate in Q4 and going forward, or we have a different tax rate going forward given what's happening in the economy?

Jim, do you refer to Asian markets only? Or just -- or across-the-board in your first question?

That's across-the-board.

Across-the-board. Okay, in Europe, I'll try to summarize. Europe, I'm talking Central Europe. You will forgive me, it's for us by far the most part of Europe, by far. And still the situation is not bad at all. Automotive continues to pull. They talk about a better year 2013 even 2012 has been. What has declined is industrial, which is also important for us. These are the most relevant, I would say, markets for us, at least in Europe. So a plus in automotive and a minus in a way in industrial. In the U.S., we see quite stable situation across-the-board. We see steady little growth, so we are quite confident in the U.S. And in Asia, as I said, these markets, which I named, were the disappointment of the quarter. And the remainder, industrial, I think it's still okay. But this is exactly the markets we want to get in more with our Growth Plan, Jim. Now maybe I'll try to answer the second question. Indeed, it was a catch-up. If you have more detailed questions, I will give it to my CFO. It's -- was catch up, indeed. From now on, you will see a more normal tax rate, north of 45%. And it's also clear, whenever we get to a normal income situation, geographically normal and product-wise normal, then we will go back to the 27% automatic. It's really automatic which we are used to.

Your next question comes from Matt Sheerin. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: So a question, Dr. Paul, on your commentary about distribution. It sounds like from the book-to-bill, and you had your OEM customers in EMS, it certainly sounds weak, but certainly not as bad as distribution. And is your sense that the distribution sell-through or point-of-sale, either in the last quarter or in the coming quarter, will be greater than what the distributors are taking on? So are you expecting another inventory reduction because they're being cautious here? And does that not reflect a true end demand?

I believe, at the moment, the true end demand is higher than what we ship to distributions, no question. They are reducing inventory. But -- and there is a limit for everything. I believe that, especially starting in the new year, there will be some push from distribution quite automatically. In Asia, it will not happen in January, February, but then it should come. And we count a little in this. It's not really a question on the European seasonality, which helps us normally in the beginning of the year. But principally answering your question, I believe distribution can only reduce so and so much. There will be an inflection point, relatively speaking. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And you talked about the gross margin erosion in the MOSFET business despite an up quarter sequentially. It sounds like ASPs have been hit. So the question is, are you chasing volume business at the expense of margin, being a cost leader there? Or are you trying to be more disciplined? And does that reflect your book-to-bill, where you're backing away from some of these lower-margin deals?

Matt, really, it's misleading. If you look at the gross margin development between the second and the third quarter -- I did it myself, as you can imagine. This is inventory-related. We reduced inventories there. And what you see that's relative, this decline of gross margins between the 2 quarters is heavily, practically, exclusively related to the inventory reduction, in this case. But your question is more principal, I would say. More principally speaking, we do not intend to be the price leader. We do not intend to and buy ourselves into the low end markets. In fact, all our efforts to get into the high-voltage MOSFET market is exactly the attempt to go the other direction. And this is ongoing. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then let's see. So you talked about sort of the -- given the revenue guidance for the fourth quarter, is that sort of a normal margin contribution? So would we expect in that 45% to 48% range in terms of impacts, so the gross margin will be lower by, what, 100 to 200 basis points or something?

Just take -- yes, we expect the regular contributive margin, yes. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then on the -- it sounds like SG&A is creeping up. There was -- could you maybe, Lori, break out that environmental liability issue?

Yes, she did. She did. It was $2 million. $2 million. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: $2 million. Is that recurring in the next quarter?

No, it's just a singularity. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So then net, you're looking at an add of about $3 million to $4 million in SG&A. Is that sort of in line with that expansion you talked about in terms of beefing up technical sales and that sort of thing?

No. I said at today's exchange rates. So Q3 was at a different exchange rate than we're experiencing, I think -- that we expected. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So the higher -- you're always pushing that number up, is that right?

Yes, correct. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Basically. Okay. And then, so -- and also, your commentary about the seasonality maybe playing out a little bit differently, where this quarter sounds like it's terrible. Is your sense that this could be the bottom here, particularly at distribution, industrial markets, more selling days, et cetera, and the March quarter will potentially be up sequentially?

Matt, as I said before, the visibility that the firm thinks that it can rely on is not too high. But it is indeed my feeling that it's the fourth quarter represents the low point. But that's my personal feeling.

Your next question comes from Chris Danely. Sameer Kalucha - JP Morgan Chase & Co, Research Division: This is Sameer Kalucha calling in for Chris Danely. So, Dr. Paul, just sort of a historical perspective on things. You talk about inventories in the channel that are pretty lean right now and this dis [ph] would need -- I'm just curious, how did that pattern play out in 2008-'09 downturn? How does inventory in the channel compare to what it was in that downturn? And as you mentioned, you expect this dis [ph] to restock inventories. What do you think is the probability of a rapid snapback, so to speak, as we saw in -- after '08 or '09?

In the meantime, we got used to rapid snapback, so to speak. We had to get -- so at the low point of 2008 -- I talk out of memory, so don't quote me at that level -- the turns were around 3. At the moment, we are talking 3.4, which is a different world in all distribution. And 4.7 in Asia is not really something where they should step on the brakes, but it's their decision. I think they are destabilized also about the macro economy, and this is more than just electronics. I believe, principally speaking, I do not expect that the Asian distribution jumps in and gives enormous orders in the first quarter. I only try to say that I believe that during the first -- the fourth quarter, we have reached kind of a really low level for distribution, and I do not see much room for further inventory reductions. Sameer Kalucha - JP Morgan Chase & Co, Research Division: Got it. And just to follow up, in terms of -- you mentioned that the book-to-bill is point -- just below 1. I'm just curious about the linearity of the orders during the quarter. It clearly has weakened from, say, July, August to September. Given you have already seen the month of October, how does the linearity trend in October compare to what you saw in Q3?

The book-to-bill, basically, the disappointment in the third quarter was in September, to say it. Because normally, in this special quarter, you wait for September. This is by far the most relevant month in the quarter. And September came in as a disappointment, obviously, as you -- as it materialized in our sales. In October, things are slightly better but not tremendously better.

[Operator Instructions] Your next question comes from Steve Smigie. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: I was wondering if you could talk a little bit about how we should think about OpEx going forward? Should it stay at sort of December levels? Or would we expect to see that continue to creep up as revenue moves up? Let's say, assuming that you're correct, December is the bottom, would that move up through 2013?

No. In our case, we don't go with reps. That means our SG&A costs are really independent, real fixed costs. They are independent of the sales level. So what could influence? It is, of course, inflation, wage increases around the world, exchange rate, of course, as Lori indicated before, which can go in both directions, as you can imagine. And then, of course, we have some programs. That is true. We have some programs to put in more R&D people -- we already have put in more R&D people, and some more sales people in Asia. On the other side, we also tend to say fixed costs in order to -- if we take out administration and we are used to do that. And maybe we are also have too much sales, too much salesforce in certain traditional segments. So there are movements in all directions. So there is no intention for us, absolutely no intention to bring up SG&A systematically. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Okay. If I look at revenue and go back to like June of '11, I have you at about $710 million of revenue. Would you say that declines here are pretty much entirely related to macro? Or are you exiting certain businesses that you wouldn't want to be in?

No. No, absolutely not. It's -- you are comparing it with which quarter, you said? Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Well, I just looked -- I don't have that -- obviously, roughly 1 year ago you had much higher revenue.

Oh, yes. This is purely economy, purely economy. We did not -- we are not aware that we lost major accounts. We did not give up any product lines, nor did we give up any customers or something like that. It's really the reflection of the economy. And you see, we are not completely alone in this development, obviously. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: I guess, looking at MOSFETs, if I look at the chart right, it looks like that business is up revenue-wise despite a pretty negative environment. So assuming we get some sort of computing recovery into the next year, would you expect to continue to see that business accelerate pretty nicely some time?

Yes. And especially on the MOSFETs, I would like to -- first of all, yes, complete yes. We were at very low end -- and we're starting to have new products in the low-voltage arena qualified. So I expect a recovery, not only by the economy, also by our own doing. And on top of everything, we want -- we are getting established in the high-voltage arena, so I definitely see Siliconix to trend up -- our MOSFET business to trend up in the quarters to come. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: And on the high-voltage side, obviously, there are some existing competitors, and we saw a press release from another competitor out there. Are there particular parts of that market that you think that you're specifically targeting, or will there be a certain amount of efforts to take share from other folks?

I think Vishay is present in very many segments of the industrial market with other products. And I think this will help us to introduce high-voltage MOSFETs to a broad segment -- a broad part of this industrial market. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Okay. And then just the last question is, just in terms of the overall pricing, do you think that sort of firms up going forward, or are you thinking that, that will still be under pressure for the next couple of quarters?

We are talking in our case primarily MOSFETs, right, primarily MOSFETs. Not -- past history is nothing, in fact, historically, nothing. It continues to be not much at all. So we are talking to MOSFETs. In the fourth quarter, we see a continuation of the price pressure. But as you say, it's a typical commodity business. That means as soon as distribution starts to order, as soon as we have left the low area of business, the low level of business, then automatically the prices will stabilize, as they have done in the past.

The next question comes from Jim Suva.

A quick follow-up. On your M&A strategy, can you just extrapolate a little bit more on that? Meaning, are you looking at small tuck-ins, maybe carve-outs from other companies versus more strategic acquisitions or public companies? Or how should we think about your M&A strategy and the focus areas of that?

We did -- nearly have said we are not picky. But there is, of course, a strategy behind. First of all, we concentrate on specialty products businesses. And we want to focus very much on mid-size and smaller companies in order to strengthen our various divisions. So we are not out to position ourselves, again, in a major way in the commodity arena. This is not the purpose of our doing. Our doing is really to get specialty businesses on board, which we did already and maybe there's a third one soon. So anyway, that means really if we are -- the form in which we can get it, whether it's a carve-out or a separate company, that is a matter of chance. It depends. And there is no preference on our side.

And relatively size expectations, any preferences there?

Our preference, as we indicated in our Growth Plan, is around, say, but this is a broad range, say, $50 million to $200 million or something like that per piece, so to speak.

The next question comes from Shawn Harrison.

I had a few follow-ups here. Sorry, I was late getting on. I wondered if you just had kind of an approximate percentage of what notebook PCs, tablet PCs and smartphones all separately represent as kind of a percentage of sales currently?

In our case, altogether?

Or even separately, just kind of a ballpark figure.

On the MOSFETs, I would say this is about 1/3 of our sales. And this is the most we -- MOSFETs is the most we sell into the notebooks. Tablets is lower than that, obviously. And what else?

Smartphones.

Smartphones. Look, I don't have these numbers exactly for you. But we can definitely discuss it in a smaller group.

Okay. Then my follow-up. I apologize if I missed this, but I know historically you've taken kind of some temporary cost-cutting actions in terms of periods of weaker demand. Do you see the need to do something like that going into the end of the year? Or is it kind of your belief that the market's bottoming out, that you don't need to implement short work weeks or turn back expenses as you...

In a way, we have done so. Of course we are affecting capacities. And whenever we can work short, we do work short. It normally takes fixed cost personnel together with the plant. And whenever we can close a plant by 1 week or 2, we do the same. This already is happening, but we would enforce it more and as -- if my optimism for the first quarter would not come true.

Okay. There's no permanent fixed cost reduction efforts that...

No, no, no. We are pursuing -- there is a shift change -- there is a shift between the fixed costs. We are bringing in more technical people. And as I tried to explain in the context of the Growth Plan, on the other hand, we are reducing it on the side of administration.

Your next question comes from Matt Sheerin. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Yes. I actually -- I was just going to follow up on the question that Shawn asked regarding your exposure to the notebook and PC markets. And just a question there in terms of your sense of that market. Obviously, we've had tablets taking share and then also there's Ultrabook and Windows 8 ramp. It seems like it's been stalled somewhat. And is your sense that, that market will -- is a -- is stalled somewhat, and that the Asian distributors and OEMs are taking a more cautious approach? Or do you think that's going to be a driver or a catalyst for that MOSFET business next year?

We are on such a low level that I cannot imagine that this will not be a driver just by normalizing to a degree. I know there's a lot of skepticism around the notebook future. I know that, of course. And maybe it will suffer because of the competing solutions. But what we have at the moment is such a low level that it may, I say, automatically, we will recover.

There are no further questions at this time. I will turn the call back over to Mr. Henrici for closing remarks.

Thank you for your interest in Vishay Intertechnology.