Vishay Intertechnology, Inc.
Q1 2016 Earnings Call Transcript

Published: 3 May 2016

[Operator:]

Good morning, my name is Leah and I will be your conference operator today. At this time I would like to welcome everyone to the Q1 2016 Earnings Conference Call. [Operator Instructions]. Thank you. Peter Henrici, you may begin.

[Peter Henrici:]

Thank you, Leah. Good morning and welcome to Vishay Intertechnology's first quarter 2016 conference 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 will start today's call with the CFO who will review our first 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. On the Investor Relations section of our website, you can find a presentation of the Q1 2016 financial information containing some of the operational metrics Dr. Paul will be discussing. On June 7 we will be presenting at the Stifel Technology Internet and Media conference in San Francisco and on June 9 at the Baird Global Consumer Technology and Services conference in New York. Now, I turn the discussion over to Chief Financial Officer, Lori Lipcaman.

[Lori Lipcaman:]

Thank you, Peter. Good morning, everyone. I am 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 for Q1 of $571 million. GAAP EPS for the quarter was $0.19. Adjusted EPS was $0.19 for the quarter. The first quarter includes a gain on early extinguishment of debt of $4 million and restructuring charges totaling $7 million. Yesterday, we announced that our Board has authorized a $100 million share repurchase program which is expected to be implemented over the next year. As previously announced on March 31, we repurchased some of our exchangeable notes in a privately negotiated transaction. The notes repurchased had been exchangeable for approximately 1.7 million shares of common stock. Revenue from the quarter was $571 million, up by 2.6% from previous quarter and down by 3.8% compared to prior year. Gross margin was 24.1%. Operating margin was 7.1%. Adjusted operating margin was 8.2%. EBITDA with $84 million or 14.7%, adjusted EBITDA with $87 million or 15.2%. Reconciling versus prior quarter, adjusted operating income quarter one 2016 compared to adjusted operating income for prior quarter, based on $15 million higher sales or $13 million excluding exchange rate impact, our adjusted operating income increased by $7 million to $47 million in Q1 2016 from $40 million in Q4 2015. The main elements were, average selling prices had a negative impact of $7 million, representing a 1.2% ASP decline, volume increased with a positive impact of $13 million, equivalent to a 3.8% increase. Variable cost decreases along with positive exchange rate impacts offset fixed cost increases. Versus prior year, adjusted operating income quarter 1 2016 compared to prior year, based on $23 million lower sales or $19 million excluding exchange rate impact, adjusted operating income decreased by $2 million to $47 million in Q1 2016 from $49 million in Q1 2015. The main elements were, average selling prices had a negative impact of $19 million, representing a 3.1% ASP decline; variable costs decreased with a positive impact of $8 million, primarily due to cost reduction efforts, efficiencies, lower metal and material prices which more than offset the increase of labor cost. Fixed cost decreased with a positive impact of $7 million, primarily coming from our announced cost reduction programs which more than offset salary and wage increases, as well as lower amortization intangibles of $3 million. Inventory effects had a negative impact of $4 million, due to a lower inventory build versus prior year. Exchange rate effects had a positive impact of $6 million. Selling general and administrative expenses for the quarter were $90 million, slightly higher than expected primarily due to increased R&D expenses. For quarter 2 2016, our expectations are approximately $90 million of SG&A expenses at current U.S.D to euro exchange rates. For the year 2016 we expect approximately $360 million. This includes the now anticipated increase in R&D spending. Let's give you an overview of our cost reduction programs. As announced, we're implementing global cost-reduction programs intended to lower costs by approximately $35 million annually when fully implemented, with a cash cost of approximately $30 million. These programs include a plan to reduce SG&A by $17 million, to be implemented by the end of 2016. The final run rate will be achieved in Q4. The annualized run rate of Q1 was $8 million. We also plan to streamline and consolidate production costs of certain product lines which we expect to reduce the costs of products sold by approximately $18 million annually, split 50/50 between variable and fixed costs. These production transfers will be completed in steps by the end of 2017. The amount of restructuring expense recorded for these programs during Q1 was $2.6 million or $16.3 million for the program to date. More will follow in 2016. Our previously announced program in the MOSFETs segment continues as planned. The production transfer has been substantially completed. An additional $3.9 million of expense was recorded in Q1 which includes some other exit costs for contract termination and related activities, in addition to the usual severance costs which were recorded ratably over the implementation period. We expect in-line cost savings of approximately $23 million per year beginning in Q3. The effective tax rate on a GAAP basis was approximately 27%. The normalized rate was approximately 29%. The normalized rate excludes the tax effects of the restructuring charges and a gain on early extinguishment of debt and it also includes a remeasurement of the preferred tax liability recorded for the cash repatriation program announced in Q4 of $800,000. We expect our normalized rate for the year to be approximately 29%. This rate is based on an assumed level and mix of income among our various taxing jurisdictions. A shift in income could result in significantly different results. The timing of the completion of the pending U.S. pension plan settlement which is contingent upon receipt of a favorable IRS determination letter, will result in significant non-cash pretax charges which could in turn result in a significant change in effective tax rate. Total shares outstanding at quarter-end were 148 million. The expected share count for EPS purposes for the second quarter 2016, based on the same average stock price as the first quarter, is approximately 149 million shares which reflects a reduction in potentially diluted shares after repurchase of some exchangeable notes on March 31. Share repurchases during quarter 2 under the plan announced yesterday would reduce this estimate. 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. Cash from operations for the quarter was $20 million. Capital expenditures for the quarter were $20 million. Free cash generation for the quarter was $1 million. The first quarter includes an unusual contribution of $17 million to our high-relief pension plans to improve the funded status of those plans. For the trailing 12 months, cash from operations was $252 million, capital expenditures were $147 million, split approximately. For expansion, $76 million; for cost reduction, $14 million; for maintenance of business, $57 million. Proceeds from the sales of property and equipment were $1 million. Free cash generation was $106 million. Vishay consistently generated an excess of $100 million free cash in each of the past 10 years. Cash flows from operations were greater than $100 million for the last 21 years and greater than $200 million for the last 14 years. Backlog at the end of quarter 1 was at $572 million or 3 months of sales. Inventories were flat quarter-over quarter, excluding exchange rate impacts. Days of inventory outstanding were 89 days. Days of sales outstanding for the quarter were 45 days. Days of payables outstanding for the quarter were 32 days, resulting in a cash conversion cycle of 102 days. We had a total liquidity of $1.5 billion at quarter-end. Cash and short term investments comprised $1.076 billion and unused capacity on the credit facility was $455 million. The curing value of our debt of $400 million is net of unamortized issuance cost of $12 million and includes, $178 million outstanding on our credit facility, $12 million of exchangeable unsecured notes due in 88 years, $222 million of convertible debentures, net of unamortized discounts, issued in three traunches and due in 25, 26 and 27 years respectably. The principal amount or face value of the converts is $575 million. No principal payments are due until 2020. Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.

[Gerald Paul:]

Thank you, Lori and good morning, everybody. I think Vishay had a promising start into 2016. We have seen a nice recovery of orders across-the-board and they helped to exceed expectations for the first quarter. We achieved a gross margin of 24% of sales, an adjusted operating margin of 8% of sales, adjusted earnings per share of $0.19 and GAAP earnings per share also of $0.19. We did better than last year in terms of free cash and we do expect a decent performance in this respect also in the year 2016. Let me talk about the economic environment we see. The world markets in general to a degree remain cautious, but there are improvements over the fourth quarter levels. The fears of a drastic drop in Asian markets may have been exaggerated, but of course growth in China continues to be a principle concern. The markets in Europe remain healthy with a relatively weak euro continuing to support exports. The automotive segment and several industrial product sectors continue to do well. The Americas were stable in general, but a very weak energy sector still burdens the industrial segment. Automotive is the bright spot of all market segments, with substantial growth expected also for the year 2016. American car sales appear healthy and also for China continued growth is foreseen. Europe is stable. The industrial market, in particular in North America, still suffers from a weak energy sector. The market for industrial automation equipment develops nicely and also solar energy equipment shows a strong recovery. In China major investments by the government in the power infrastructure and the continued push to eCars supports the market. Growth in smartphones has come down to a historically low level, maybe a sign of beginning maturity. The market for computers and computer related equipment continues to be weak. In the consumer segment, wearables, virtual reality projects and gaming support growth. The military market remains stable and medical stays on its growth path. The POS of distributors, in particular in the Americas and in Europe, recovered nicely during the first quarter and Asia is expected to improve in the second quarter. The book-to-bill ratio of 1.03 of our distributors in the quarter remains encouraging. Inventory turns of distributors improved to 3.3, coming from 3.1 in the last quarter. Some regional details in the Americas inventory turns were 2.3 after 2 in the fourth quarter. In Asia 4.2 after 4.4. In Europe 3.8 after 3.2. Now we come to the business development of Vishay. In the quarter, sales came in above the mid-point of our guidance. We achieved sales of $571 million versus $556 million in prior quarter and $593 million in prior year. Excluding exchange rate effects, sales in the first quarter were $13 million or 2% above the prior quarter but down by $19 million with 3% versus prior year. Book-to-bill ratio in the quarter was 1.08. 1.06 for distribution after 1.02 in the fourth quarter. 1.12 for OEMs after 0.91. 1.09 for actives after 0.94 in the fourth quarter. 1.07 for passives after 1.02. 1.05 for the Americas after 0.92. 1.10 for Asia after 0.98. 1.09 for Europe after 1. So what we have seen is a broad rebound after a weak fourth quarter. The backlog increased to 3 months for both actives and passives. The order cancellations remain at the normal level. We have seen some decrease of the price pressure versus prior year, coming mainly from a normalization in passives. For the whole company, we're seeing a price decline of 1.2% versus prior quarter and of 3.1% versus prior year. For actives, 1.4% price decline versus prior quarter and 4.4% versus prior year. For passes, price decline of 0.9% versus prior quarter and of 1.7% versus prior year. Some highlights for our operations. The contributive margin in the first quarter came in at the mid-point of our normal range of between 45% and 47% at current exchange rates, looking specifically at the euro. The SG&A costs in the quarter were $90 million, slightly above expectations, mainly due to higher R&D expenses in semiconductors. Manufacturing fixed costs for the quarter were $121 million according to expectations. Total employment at the end of the first quarter was 22,345, slightly below prior quarter and prior year. The fixed headcount in the quarter went down by 96 heads and as a consequence of the restructuring projects. Excluding exchange rate impacts, inventories in the quarter were flat versus prior quarter and the inventory turns improved to 4. Capital spending in the first quarter was $20 million, on the same level as last year, $12 million for expansion, $3 million for cost reduction and $5 million for maintenance of business. For 2016 we expect CapEx of about $130 million, in line with the midterm requirements of our growth plan. We generated in the first quarter cash from operations of $20 million versus $14 million in prior year, $252 million on a trailing 12 month basis. And we generated in the first quarter free cash of $1 million versus a use of cash of $6 million in prior year. We generated $106 million on a trailing twelve-month basis. The generation of free cash in 2016 will be impacted by the cost of our restructuring projects of approximately $45 million payouts this year, but we nevertheless anticipate a respectable performance. Coming to resistors and inductors, Vishay's traditionally most profitable business continues on a good level and there is a noticeable recovery across the board. With resistors and inductors we enjoy a very strong position in the industrial auto and Mil markets. HiRel is very well-positioned in the medical segment. We continue to see opportunities for growth in the Asian, predominantly in the Chinese industrial market, despite some recent cooling of the economy there. Sales in the quarter were at $182 million, up by 10% versus prior quarter but slightly down by 1% versus prior year when you exclude exchange rate impacts. The book-to-bill ratio for resistors and inductors in the quarter was 1.1 after 1.03 in prior quarter and the backlog increased to a good level of three months. The gross margin came in at 31% of sales in the quarter after 28% in prior quarter, mostly due to higher volume. Inventory turns in the quarter were at 4.4. The price decline we have seen was 1.2% versus prior quarter and 1.8% versus prior year. We continue to invest for expanding manufacturing capacities in power inductors and thin film resistors. Coming to capacitors, our business with capacitors is based on a broad range of technologies with s strong positions in American and European market niches. Capacitors presently continue to suffer from the decline of the oil gas sector, the weakness in computers and the general economic situation in Asia. Sales in the first quarter were at $88 million, up by 7% versus prior quarter but 6% below prior year which excludes exchange rate effects. The book-to-bill ratio in the quarter was 1.01 after 0.99 in previous quarter and the backlog remains stable at 2.9 months. The gross margin for capacitors came in at 19% of sales, at the same level as in the prior quarter. The inventory turns in the quarter improved to 3.8. We have seen normal price decline of 0.3% versus prior quarter and of 1.5% versus prior year. For the midterm we remain confident for capacitors in view of our opportunities in Asia in power caps and for polymer tantalum capacitors in MAP technology. We experienced quite encouraging signs for both product lines. Coming to Opto products, Vishay's business with Opto products consists of infrared emitters, receivers, sensors and couplers, as well as LEDs for automotive applications. The business with infrared Opto production represents one of Vishay's opportunities for growth, especially the segment of sensors that we will be even more competitive going forward by having an all-competency chip design. Sales in the quarter were $63 million, 8% below prior quarter and 8% below prior year which again excludes exchange rate effects. We have seen in the first quarter in this encouraging business principally, a temporary weakness as we believe. Book-to-bill in the quarter was 1.09 after 0.91 in prior quarter. The backlog increased to 3.2 months. Gross margin recovered to a more historical level of 31% of sales. As you may remember, the prior quarter was burdened product mix and some temporary inefficiencies. There are quite excellent inventory turns of 5.7 in the quarter and we have seen normal price decline of 2.1% versus prior quarter and of 4.6% versus prior year. Diodes, diodes represent a broad and growing commodity business where we're the largest supplier worldwide. Vishay offers virtually all technologies, as well as the most complete product portfolio and we're in particular strong and leading in power applications. The business in the quarter still was impacted by the general weakness of the Asian economy. We have reached sales of $135 million which is on the same level as in prior quarter and in prior year, when excluding, again, exchange rate effects. The book-to-bill ratio was 1.05 in the quarter after 0.97 in prior quarter. The backlog increase to 2.9 months. The gross margin in the quarter improved to 24% of sales after 23% in prior quarter, mainly due to the non-repetition of negative-inventories-related impacts. Inventory turns continue on a very satisfactory level of 4.5 in the quarter. Price decline was normal, 1.2% decline versus prior quarter and 3.6% decline versus prior year. Coming to MOSFETs, Vishay continues to be one of the market leaders in MOSFET transistors. MOSFETs continue to suffer from the weakness of the computer segment and of the Asian economy in general. Over the last years, we on the other hand developed a good position in automotive which helps to stabilize the business. Sales in the quarter were $101 million, 3% percent below prior quarter and 5% below prior year, excluding exchange rate impacts. A slow start, but the book-to-bill ratio in the quarter was quite encouraging. We had a book-to-bill ratio for MOSFETs of 1.14 versus 0.9 in prior quarter and the backlog increased to 3.1 months. The gross margin in the quarter remained at 13% of sales and the inventory turns we had were 3.1 in the quarter. The quite substantial price decline in this product line continues, 1.2% decline versus prior quarter and 5.4% decline versus prior year. We finalized our major cost reduction project according to plan. We stopped wafer production at the Santa Clara plant and will have adapted staffing completely by the end of the second quarter. Manufacturing was transferred to our modern fab in Germany. Going forward we will enjoy substantial cost reduction of $6 million per quarter as we projected. The results of the second quarter to a degree will still be influenced by general cleanup costs and of course by the sale of inventory. Let me summarize. Vishay had a good start into 2016, with orders from basically all market segments recovering. Financial expectations for the first quarter were exceeded and we foresee further improvements for the current quarter. We finalized the production move of MOSFETs and will enjoy major cost benefits going forward which will make MOSFETs a better contributor to Vishay's results. We continue to control our fixed cost tightly, implementing the announced restructuring plans. We're confident for the success of our new product, namely of sensors and tantalum polymer caps and will continue to increase our selling efforts in Asia, in particular in China. Vishay continues to focus on shareholder value by establishing another meaningful stock buyback program. For the second quarter, we guide to a sales range between $565 million and $605 million at gross margins between 23% and 25% of sales. Thank you.

[Peter Henrici:]

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

[Operator:]

[Operator Instructions]. Your first question comes from the line of Shawn Harrison with Longbow Research.

[Shawn Harrison:]

Just wanted to speak on the quarter and how that translates into the first half of the year. If my impression is right, it seems to be maybe there were some, I don't know if the right term is restocking or just a better feeling of distribution for Vishay and its products and fled led to a relatively strong first quarter that leads into the second quarter. So maybe if you could just comment on what you are seeing at distribution and how point of sale versus point of acquisition moved throughout the quarter?

[Gerald Paul:]

Well, the encouraging part of all that is that the inventory at distribution contained flat and the POS went up, so we do see, as I tried to say, further improvement as we go. I must admit that we in the fourth quarter, looking at the first quarter, were more pessimistic on the situation of the supply chain, but now looking at the real numbers of the first quarter, it's quite encouraging. And we do believe that also Asia, where the POS in the first quarter was still not so good, slight decline vis-a-vis the fourth quarter, should get better there. So altogether, I believe the supply chain is in good shape, so we do expect a better second quarter and this is what we also need to guide to.

[Shawn Harrison:]

Okay, I guess on a follow-up to that, why does Asia get better into the second quarter? Is it something you are seeing in specific end-markets or there's specific booking signs that you're seeing that gives you the sign of confidence?

[Gerald Paul:]

We basically believe that internally, especially in China, the business will get better. There are government-driven programs and I believe that they will impact the business positively. This is how we see it and I believe we're not alone in that.

[Shawn Harrison:]

Okay and then two pre-follow-ups, maybe if you could speak to the SG&A increase in terms of R&D. What products is that focused in on? And second, if memory serves me right, CapEx maybe came down by around $10 million for the year from $140 million to $130 million, it's just highlighting where that delta's tied to?

[Gerald Paul:]

It's very true, your observation is true. We came in slightly higher than we thought in SG&A and when we traced it down, it was really in R&D for the most part. And we found that more R&D expenditures, especially for external programs and not on the semiconductor side, mainly in the sensor area, but also in diodes, made sense and we felt that this was worthwhile doing. What was the second part of your question?

[Shawn Harrison:]

I thought CapEx was a little higher for the year when you guys--

[Gerald Paul:]

Observation is right. We reviewed the situation and we felt that this number is good enough for our growth plan, so it's a slight decline, has no big meaning in that sense. It's an adaptation to reality.

[Operator:]

Your next question comes from the line of Matt Sheerin of Stifel.

[Matt Sheerin:]

Just a few questions for me. First on the gross margin guidance, mid-point is basically flattish, but you do have volume growth in the quarter and you also have costs coming out of the MOSFET business and other restructuring. So I'm wondering is that a reflection of mix or just trying to be conservative? Why wouldn't expect margins to go up at this point?

[Gerald Paul:]

Well it's somewhat better. It really disappears somewhat in the rounding, as a matter of fact, we think. When you go a little deeper you see that across margins in the second quarter, vis-a-vis the first.

[Matt Sheerin:]

And on the SG&A, I know Lori talked about I think it was $360 million for the year which implies basically kind of flattish year-over-year, despite all these cost-cutting and Op Ex coming out. I know it sounds like R&D is going up, but how do you explain that flat number versus all the costs coming out?

[Gerald Paul:]

I guess I will answer the question myself, because I decided for this increased R&D spending for the year, but there's more to it than that. It's not that our savings would meet our savings goals, but the cycle of the savings we regarded a little bit too optimistic, so this is really the reason why it's up to $360 million. There is also, it's adjusted for some impacts because of exchange rates, yes, but altogether these are the real operational reasons, number one is more R&D spending makes sense, secondly the cycle is also a little aggressive for what we assumed which does not mean we would not meet our cost target eventually and there's some impact of exchange rates also.

[Matt Sheerin:]

Okay, you mean the better demand environment means you need to put more support in place?

[Gerald Paul:]

Yes.

[Matt Sheerin:]

Okay. So given that and it sounds like gross margin is moving in the right direction, can we assume that operating margin should be up for the year then as you move forward?

[Gerald Paul:]

Yes, sure.

[Matt Sheerin:]

Okay. And just looking, well first of all in the book-to-bill, I know you talked about book-to-bills in various regions in the quarter, here we're a month later into the June quarter. The book-to-bill level is similar to that? Or are they better? Could you tell us where they are now generally?

[Gerald Paul:]

It's a continuation. Let's say in March. In March, book-to-bill became less attractive, but in April it looks good again.

[Matt Sheerin:]

Okay and then lastly, looking at the last four years, relative to what you had last year -- but you had relatively strong margins June quarters and then September, inevitably becomes a miss, I think three or four years in a row here, particularly on Asia. Do you think maybe it's the seasonality has changed and looking at the back half of the year, you may not have as much growth? Or any opinions on that at this point?

[Gerald Paul:]

Matt, this is exactly the question we're dealing with ourselves. I'm totally aware of the cycle of the last years, but I do believe it could be better this year. It could be better this year because Asia may come a little later this time and that there are these governmental programs which may help. We see no signs of weakening in our very important industry, especially in automotive, so could be better this year, but I don't have the crystal ball, unfortunately. So I don't know exactly.

[Operator:]

Your next question comes from the line of Steve Smigie of Raymond James.

[Unidentified Analyst:]

This [indiscernible] in for Steve. So you seem pretty optimistic about the outlook for auto in 2016. So can you talk a little more about your prominent applications within the space and what areas are you trying to expand more into at this point?

[Gerald Paul:]

They're not much places we're not, so to speak, in components in automotive. In reality of course, it's very fashionable these days to mention the eCars. In China in particular, I do believe there will be a push into eCars. When it will come exactly, I'm not sure, but for sure we will be there. But we're traditionally and practically all the applications, not only in Germany which of course is our strongest market, but also in Japan. So any increase of the car sales or electronic content, we're brought to. So I don't want to highlight any of them specifically, I think. If yes, that a new trend could be eCars, charging stations which could help us in China.

[Unidentified Analyst:]

And then as far as the new share repurchase program, it looks like you had repurchased shares in the past year, I think 2012 was around the last time. So wondering kind of what's changed in your outlook and does this impact any kind of dividend increase that you see going forward?

[Lori Lipcaman:]

No, at this point we recently increased our dividend. And at this point in time, it's not impacted at all.

[Operator:]

Your next question comes from the line of Jim Suva of Citi.

[Jim Suva:]

I have two questions and I will ask them at the same time. First on gross margins and outlook, can you give us a little bit of color of what are the pluses or minuses to your gross margin? I'm only assuming it's volume-based is the big driver or is it more mix now? It seems like the mix of smartphone seeing basically low growth and PCs declined, that mix may not be as important going forward and maybe it's more volumes. And then second follow-up and then can you talk about the ASP trend you are seeing in your different components or your different products? Thank you.

[Gerald Paul:]

Absolutely. Well, Jim, the following is true for us, the product mix is not the most relevant thing for the gross margin. You imagine that the variable margin, contributive margin of our products, is not so dissimilar. So we're not that mix-sensitive. It is really what drives us, the gross margin is mainly the volume. This is number one, as you have said yourself. But secondly our cost reduction programs, we do have cost reduction across the board, also in manufacturing, as we just had by finalizing our MOSFET program and by moving the MOSFETs from Santa Clara, the fab manufacturing to German and a more modern fab. This has an impact, obviously. This is straight cost reduction. So fixed cost, manufacturing fixed cost, as well as variable efficiency, as a matter of fact. What was your second question, Jim, sorry?

[Jim Suva:]

On average selling prices of your various products? The trends?

[Gerald Paul:]

Well it's always falls in Vishay into two parts, really. It's not new. I mean in passives, it's a very moderate price pressure which we see. Of course if you expand what we do to the far East and add new customers, I think this has also been discussed before, when you add new customers which we see as profitable, but not as profitable as some of our Western customers, you may see something which looks like a price decline which effectively is the only area which shows like a price decline. Overall, in passives we have a relatively stable environment since many years. On the active side, it's very clear. On the active side, I believe we have quite normal conditions everywhere, as a matter of fact. In MOSFETs, this is a very competitive market and we also have more cost reduction there. Otherwise, I would not comment that what we see today is really especially harsh for us.

[Operator:]

There are no further questions at this time.

[Peter Henrici:]

Thank you for your interest in Vishay Intertechnology. This ends our first quarter 2016 conference call.

[Operator:]

This concludes today's conference call. You may now disconnect.