Vishay Intertechnology, Inc.
Q4 2008 Earnings Call Transcript

Published: 10 Feb 2009

[Operator:]

Good morning. My name is Elisha, and I will be your conference operator today. At this time. At this time, I would like to welcome everyone to the Vishay's Fourth Quarter Earnings Result Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you. Dr. Yahalomi you may begin your conference.

[Lior Yahalomi:]

Thank you. Good morning ladies and gentlemen, and welcome to Vishay's Fourth Quarter 2008 Earnings Call. On the line with me today are Dr. Gerald Paul, Vishay's President and CEO; Dr. Felix Zandman, Vishay's Executive Chairman and Chief Technical and Business Development Officer; and Lori Lipcaman, Vishay's Executive Vice President of Finance and Chief Accounting Officer. Before I start, Bill Clancy, Vishay's Senior Vice President and Corporate Controller will read our customary opening statement. Bill?

[Bill Clancy:]

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 risk 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.

[Lior Yahalomi:]

Thank you, Bill. I will make summary comments; Dr. Paul will add a more detailed analysis of our fourth quarter and our 2008 year. And finally, Dr. Zandman will update our R&D and acquisition activities and will make summary remarks. For the fourth quarter of 2008, Vishay reported revenues of $575 million, approximately 22% lower than the third quarter of 2008 and 21% lower than the fourth quarter of 2007. The decline in our revenues is attributed to the significant and rapid downturn in all Vishay's end markets. On a GAAP basis, our consolidated gross margins for the quarter were 14.8% as compared to 21.6% for the third quarter of 2008, and 22.9% for the fourth quarter of 2007. This was mainly the result of the lack of overall volume. The GAAP number for the fourth quarter of 2008 includes $6 million of losses on adverse purchase commitments primarily for copper and palladium. Excluding this charge, the gross margin would be 15.9%. SG&A expenses for this quarter were $98 million, or 17% of revenues compared to $112.8 million, or 15.3% of revenues for the third quarter of 2008, and $109.7 million or 15% for last year's fourth quarter. This quarter includes a net gain on sales of fixed asset of $4.5 million, compared to a net gain of $3.1 million for the fourth quarter of 2007. Restructuring and severance cost in our fourth quarter were $28.6 million. Total cash paid out for restructuring during Q4 2008 was $31 million. Other income consists mainly of $6.7 million interest income and $1.9 million foreign exchange gains. The effective adjusted tax rate for the year ended December 31, 2008 was 28%, an increase from the 26%, we expected at the end of our third quarter of 2008. The increase in annual tax rate is mainly due to the change in the mix of income in low versus high tax rate jurisdiction. Capital expenditures for the quarter were $53 million, compared to $41 million in our third quarter and $92 million in the fourth quarter of 2007. Depreciation and amortization for the quarter was $54 million compared to $56 million in our third quarter and $57 million in the fourth quarter of 2007. As announced in our press release, Vishay has reported additional goodwill impairment of $565 million in the fourth quarter of 2008. The total impairment of goodwill and indefinite-lived intangibles for 2008 is $1.668 billion net of tax. As of December 31, 2008, Vishay's goodwill is zero. In light of sustained decline in market capitalization for Vishay and its peers' group companies and year end assessment, Vishay determined that an impairment test was necessary as of the end of the fourth quarter of 2008. The charge is non-cash in nature and will not affect Vishay''s liquidity cash flows from operating activities or debt covenants and will not have any impact on our future operations. As announced in our press release, Vishay reported a loss from continuing operations of $3.47 per diluted share for the fourth quarter of 2008. A loss of $3.40 is attributed to the after tax impact of the non-cash goodwill impairment charge and other items, which I will describe. The adjusted net loss is $0.07 for the fourth quarter of 2008, as compared to adjusted net earnings per share of $0.18 for the third quarter of 2008, and $0.19 for the fourth quarter of 2007. The reported GAAP earnings per share for the fourth quarter of 2008 include impairment of goodwill and indefinite-lived intangibles of $565 million, restructuring and severance costs of $28.6 million, related asset write-downs of $0.9 million, losses on adverse purchase commitment of $6 million, and a gain of $4.5 million on a sale of land. These items and the related tax consequences have a negative $3.40 per share effect on the loss from continuing operations. For the fiscal year ended 2008, Vishay reported revenues of $2.822 billion as compared to $2.833 billion for the first fiscal year ended 2007. 2008 was positively impacted by the International Rectifier PCS acquisition completed on April 1, 2007 and exchange rates. On a GAAP basis, our consolidated gross margins for the year were 21.2% as compared to 24.5% for the prior year. The GAAP number for the fiscal year 2008 includes $6 million of losses on adverse purchase commitment primarily from copper and palladium. Excluding this charge, the gross margin would be 21.4%. SG&A expense for the fiscal year 2008 were $450.8 million or 16% of revenues compared to $439 million or 15.5% of revenues for the fiscal year 2007. Restructuring and severance cost in fiscal year 2008 was $62.5 million; total cash paid out for restructuring during 2008 was $56 million. Other income consists mainly of interest income and other miscellaneous income. The effective adjusted tax rate for the year ended December 31, 2008 was 28% as compared to 24% for the fiscal year ended in 2007. The increase in annual tax rate is mainly due to the change in the mix of income in low versus high tax rate jurisdictions. Capital expenditures for the fiscal year 2008 were $152 million as compared to $200 million in the fiscal year 2007. Depreciation, amortization for the year 2008 was $221 million as compared to $215 million in fiscal year 2007. As announced in our press release, Vishay reported a loss on continuing operations of $9.03 per diluted share for the fiscal year of 2008, a loss of $9.56 is attributed for the asset tax impact of the non-cash goodwill impairment charge and other items. The company reported $0.53 of adjusted net earnings for the fiscal year of 2008. The reported GAAP earnings per share for the fiscal year 2008 include impairments of goodwill and indefinite leave intangibles of $1.723 billion or $1.668 billion net of tax restructuring and severance cost of $62.5 million, related asset write-down of $5.1 million, losses on adverse purchase commitment of $6 million; terminated tender offer expenses of $4 million; loss on early extinguishment of debt of $13.6 million, and a gain of $4.5 million on a sale of land. These items and their related tax consequences had negative $9.56 per share effect on the loss of continuing operations. Vishay had a total debt of $347 million as of the December 31, 2008. The debt consists predominantly of the following three segments; $105 million long-term note with 100 years maturity due on the December 21 of the year 2102 with interest rates of 90 day LIBOR plus 0%; $112.5 million of long term loan maturing on July 1, 2011 with payment spread over the next two and half years and interest rate of 30 day LIBOR plus 2.5%, and $250 million revolver maturing on April 20, 2012 with an interest rate of 30 day LIBOR plus 1%; $125 million of which was end used on December 31, 2008. As of December 31, 2008 Vishay had cash of $324 million. Total available credit line including the $125 million end user revolver in the U.S. was $148.4 million at year end. Vishay's total available liquidity measured by cash but all available credit line as of December 31, 2008 was $473 million. Some other key summary financials are; total inventory at quarter end was $538 million, working capital at quarter end was $900 million, free cash flow was $30 million for the fourth quarter of 2008, and $133 million for the year ended 31, 2008. Vishay's liquidity remained strong and our focus now is conserving and generating cash. I will now turn the call to Dr. Paul, our President and Chief Executive Officer. Dr. Paul.

[Gerald Paul:]

Thank you, Lior, good morning everybody, as you could hear from Lior, Vishay's 2008 results have been impacted by economically extremely difficult fourth quarter, which due to an unprecedented decrease of demand showed negative operating profit and earnings per share. The earnings for the entire year remained on the level of 2005. Thanks to good discipline and quick reaction, Vishay again generated free cash in the respectable way and unprecedented measures, and I will report more about it, unprecedented measures for cutting fixed costs have been implemented or are under way. Let me talk about the economic environment, starting in September the world economy step-by-step went into a deep recession. The problem really was not caused by electronics but our industry clearly is one of the victims. All geographies and most of the market statements are hurt by an unprecedented decline of demand. In particular laptops, mobile phones and automotive suffer. Avionics, military and space and industrial, especially in Europe are still holding up to a degree. The inventory turns distribution are low due to drastically reduced POS levels. Worldwide inventory turns and distribution dropped to 3.0, Americas at 2.7, Europe at 3.1, and Asia dropped to 3.1. There is of course a strong push to decrease inventories, and this burdens the POL. All together Asia by far concerning distribution is the most problematic. Management for cash became a broad trend, we see plant shutdowns at suppliers and customers. We see layoffs, reduction of inventories into supply chain. This is a difficult time for projections. We have not reached the bottom yet, at least as it relates to shipments. Our business development was quite disappointing. In quarter four sales and orders are far below our original expectations. We have seen substantial cancellations and push outs of orders. It has to be stated that discrete actives are hurt in a much more dramatic way than the passives. As Lior said, we achieved sales of $575 million in the quarter versus $739 million in prior quarter and $730 million in prior year. Excluding exchange rate effect, sales versus prior quarter were down by $138 million or 19% and down versus prior year by $139 million also 19%. Steep drop, book-to-bill was very weak at 0.74; some details 0.65 book-to-bill for distribution, 0.83 for OEMs, 0.59 for the actives, 0.88 for passives, 0.92 for the Americas, 0.78 for Europe, and just 0.59 for Asia. You can clearly see that there was an extreme weakness in quarter four for the actives in Asian distribution. The backlog has been further reduced in the fourth quarter to 2.4 months and it has to be stated that this is measured at the present lower sales levels. The variable price decline continued in the fourth quarter, we have not seen practically any price decline versus prior quarter vis-à-vis prior year or Vishay was at 2.3% price decline whereby the passives dropped by just 1%, practically price stability and we have seen 4% year-over-year for the actives. Let me talk about the reconciliation of our results vis-à-vis prior quarter. Based on $164 million lower sales and $138 million lower excluding exchange rate impact, the adjusted operating margin decreased by $58 million from 47 to minus $11 million. The real driving force of our debt was volume which caused a drop of research price of $62 million. The fixed cost based on our activities were better than in the third quarter by $8 million. Talking about the reconciliation of our results, vis-à-vis fourth quarter of 2007, we can say that based on $154 million lower sales, $139 million lower excluding exchange rate impact, the adjusted operating margin decreased by $66 million from $55 million to minus $11 million. In this case, it's practically exclusively the volume which caused the drop, $50 million drop out of the $66 million in operating margin was just because of lower volume. Now let's take a look at the comparison of the entire year 2008 versus 2007. Based on $11 million lower sales, which was $86 million lower excluding the exchange rate impact. The adjusted operating margin decreased by $105 million from $253 million to $148 million. Price decline of $84 million negative as well as a severe impact from exchange rate year-over-year of $33 million patent results, whereas our fixed cost altogether they are lower by $8 million. It has to be stated that these fixed cost include an increase of $18 million from acquisitions, so actually on an apples-to-apples basis, fixed cost went down by $26 million year-over-year. Some highlights from operations excluding exchange rate effects, inventories in the quarter decreased by $20 million, $9 million from raw materials and the $11 million from in process and finished goods. We are quite proud of it because it shows that we really reacted fast because the demand dropped very sudden. Nevertheless, due to the lower cost of goods sold, the inventory turns dropped to 3.4. Capital spending in the quarter was $53 million as compared to $41 million in prior quarter and $92 million in prior year. Depreciation was $48 million, capital spending as Lior indicated in 2008 was down to $152 million. Our original plan as you will recall has been spending level of $170 million to $180 million. In 2009, we expect much lower capital spending of about $70 million. During the quarter, about 2600 employees were let go, equivalent to more than 9%. This includes the reduction of 356 that’s equivalent to 5%, and more reductions are to come. In January alone, we had reduced another 700 people. The share of employment in high labor countries remain close to 25%. We minimized the usage of foundries and of subcons, introduced short work, Europe in particular and temporary plant shut down in other places. We have seen weak capacity load as you can imagine mainly in actives, in general lead-times on the market are really short. We are aiming at further consolidation, in 2008 we closed the factory in Breda and the Netherlands, in Roeselare, in Belgium and in Avery in Belgium and in Brazil also a factory. And we are in process to close factory in Monroe, Connecticut, and in Westbury, in New York and there is more to come. We generated $76 million cash from operations in the quarter as compared to $89 million in prior quarter and $144 million in prior year. We generated $30 million free cash in the quarter as compared to $55 million in prior quarter and to $56 million in prior year. Now let me comment on the main product groups we have, and I would like to start as always with resistors and inductors. Also our traditional and successful business with resistors and inductors has started to suffer. Sales in the quarter were $139 million, 11% below prior quarter and 13% below prior year, disregarding exchange rate effects. We have seen the fourth quarter for resistors and inductors relatively weak book-to-bill ratio of just 0.85. Backlog has dropped to 2.4 months, just due to lower sales volume gross margin dropped to 21% of sales. Selling prices for the resistors and inductors were stable vis-à-vis prior quarter and also vis-à-vis prior year. The inventory turns remained at an excellent level of 4.3. And all announced restructuring projects have been finalized last year according to plan. Coming to capacitors. Due to the strength of power and tantalum capacitors, the business is not fully exposed to the economic crisis. Sales in the quarter were $121 million, down by 4% versus prior quarter and down by 0.5% versus prior year. Book-to-bill was at 0.95. The backlog in this product group is still at a comfortable level of 3.4 months. As projected, gross margin recovered to 14% of sales. Price decline in capacitors continue to be very modest, just 1% versus prior year. Inventory turns remained at 3.0. The closing of the Monroe multi-layer capacitors factory is on plan. All other announced restructuring projects have been finalized and we are evaluating further steps to consolidate. We also have integrated in the fourth quarter quite successfully the acquired line of tantalum Wets. Coming to Measurements Group. The economic downturn started to impact also the principally stable business with strain gauges, load cells and weighing systems, which is quite a unique situation. Sales in the quarter were 43 million as compared to 51 million in prior quarter and to 54 million in prior year. The backlog is rather weak, it's 2.1 month. The book-to-bill ratio as well at 0.81, due to lower volume and the unfavorable impact of exchange rates in this case, the British pound, the gross margin decreased to 27% of sales. Inventory turns; we have seen at 2.5 in the quarter. As I mentioned before, the factory in Breda and the Netherlands has been closed. Coming to reactors and starting with Diodes and Opto products, the business suffers in a broad way from the present economic crisis. The weakness in Asian consumer accounts and in European Automotive as well as high inventories at Asian distributors are a burden. Sales in the quarter were $152 million, 26% below prior quarter and 27% below prior year. Book-to-bill ratio was weak at 0.74, backlog of 2.2 months for this product group. Due to lower volume, again exclusively due to lower volume, gross margin dropped to 13% of sales. Inventory turns remained good at 3.7. We have seen normal price pressure on this product group minus 1.1% versus prior quarter and minus 3.8% versus prior year. We already have reduced about 20% of all personnel related to this product group. And we are evaluating additional plant closures and further consolidation. Last but not least, Siliconix. Also the market leader in MOSFET, Siliconix suffers the most of all Vishay business. High inventory levels at Asian distributors, the substantial weakness of Siliconix's main markets, mobile phones and laptops have to be stated. Sales in the quarter were $121 million, down by 33% versus prior quarter, down by 31% versus prior year. We have seen in the fourth quarter an extremely weak book-to-bill ratio of 0.41. Backlog has dropped to 1.8 months which required temporary plant shutdowns in California and other packaging units. Due to low volume, gross margin dropped to 12% of sales. Price decline remained normal. We have seen 4.2% year-over-year. Due to somewhat higher inventories and much lower cost of good sold, inventory turns dropped to 3.2. We are in process to minimize the usage of foundries and of subcons in order to maximize the load for the own plants. The move of IR, International Rectifier packaging operations out of Mexico has been finalized. And the fab transfer from IR facility will be finalized within the second quarter of '09 just according to plan. And we are in process to close packaging in Israel and the volume will be consolidated into the Shanghai plant. There is a severe problem for overhead streamlining on the way which will be fully established during the first quarter of this year. Let me give you an overview of what we are doing operationally to cope with the downturn. First of all, there is a strict adaptation of manufacturing capacities to the salable volume, we want to avoid at any account the increase of inventories. We do this by layoffs, plant shutdown, short work, minimization of foundries and subcons usage and I think we have achieved that. You will remember that inventory has been down in the fourth quarter by $20 million. As a next step in the course of this year, we want to adapt the inventories to the lower level of sales, regaining inventory turns of about 3.5. In such a way, we will reduce inventories of Vishay between $50 million to $100 million in the course of 2009. We minimized capital spending to below 70 million which is on the way, of course this is a temporary measure. We have designed and established a reduction of all fixed cost by $150 million year-over-year at current exchange rates, which is equivalent to 15%. Excluding depreciation and amortization, the reduction is even 17%, manufacturing fixed will be reduced as part of it by 14%, our focus is SG&A which we will reduce by 19%. All this is a combination of permanent and temporary measures, in order to quantify approximately 65% of the measures are permanent, we have 35% I would classify as temporary. Permanent measures contain, of course, layoffs, closing of factories, reduction of fees. Temporary measures contain lower or no bonuses, short work or plant shutdowns, etcetera. We expect cash cost for these restructuring measures in 2009 of below $50 million which will cover all the existing plants. Let me summarize. Vishay like our industry, currently experiences economic conditions which none of us has seen during his carrier. Global demand for electronics has virtually collapsed. As a consequence, we now manage Vishay strictly for cash adapting quickly production capacities, reducing fixed costs, minimizing capital spending, and reducing inventories. We achieved this target in the fourth quarter and manage to have another respective year of free cash generation, as was mentioned before on the level of $133 million. Operating profits and earnings per share of 2008 were burden by a difficult fourth quarter when volumes dropped in an unprecedented way. Vishay in 2008 achieved earnings per share of $0.53 which is above 2005. The fourth quarter on the other hand showed negative earnings of $0.07. Based on disappointing orders in the fourth quarter ended January '09 to a degree, we have not reached the bottom yet, at least not concerning shipments. We decided to establish as I said before, year-over-year fixed cost cuts of $150 million or 15% and have to emphasize that we are ready for additional debts if they require. Altogether, difficult times, but I am personally convinced that Vishay will emerge out of this crisis stronger then it was, than it entered into the crisis. Thank you very much and I would like to transfer to Dr. Zandman.

[Felix Zandman:]

Good morning. This is Felix Zandman, just a few words to summarize that. Due to the present economic crisis, we revised many of our plans. The main focus will be on creation of free cash. We want to hold as much liquidity as possible. Free cash this quarter was $30 million and $133 million for 2008. We will push into this direction. Presently, there will be no major acquisitions. All activities in this direction of major acquisitions have been stopped temporarily, small acquisitions only, if it pays back within a very short period of time and if they are absolutely necessary. R&D programs will continue as in the past, except that some long-term programs with fruition longer than five years will be postponed. However, the focus continues on R&D and the rollout of new products. We have announced fixed cost savings of $150 million you heard Gerald talking about it, and we will be evaluating additional savings by pushing more and more cost reductions. Holding on, Vishay is well positioned to weather the crisis and will come out of it stronger then ever. Thank you We are open now for questions.

[Operator:]

(Operator Instructions). Your first question comes from the line of Shawn Harrison.

[Joe Whitene:]

Hi, good morning this is Joe Whitene on the line for Shawn. Can you hear me, okay.

[Gerald Paul:]

Yes, I can.

[Joe Whitene:]

I wanted to talk about the restructuring. Specifically, I am trying to understand first off the split in the P&L, how we should be modeling it versus as far as cost of goods sold versus SG&A. I think you mentioned that SG&A you are focusing on a 19% year-on-year decline. So, my quick math is about $85 million, $86 million.

[Gerald Paul:]

I guess you are right. Yes if you did the math, 19% correct.

[Joe Whitene:]

So little bit half of it on the SG&A line and the remainder on cost of goods sold.

[Gerald Paul:]

Right.

[Joe Whitten:]

And then what about the timing, if anything you can add to that, SG&A dollars came down in the fourth quarter, has any of that been incurred three year end and then how should we expect the time it should take to?

[Gerald Paul:]

So if you compare over the savings quarter-by-quarter going forward and compare to the equivalent quarter of prior year this is how to do it, right. Approximately 60% of the savings below curve within the first six months.

[Joe Whitene:]

Okay. I would assume of that relatively minimal impact in the March quarter?

[Gerald Paul:]

You will see something in the March quarter already. It's not exactly equal but it has already a substantial contribution in the March quarter.

[Joe Whitene:]

Okay. Any idea I mean once all the actions are complete which will be in six months like you said substantially, 60% of it will be complete.

[Gerald Paul:]

But 40% stand still, it will all be completed by the end of the year obviously, but it's approximately 60% in the first half and 40% in the second.

[Joe Whitene:]

Okay, maybe just jumping off of that, gross margin. I mean what's a good target to focus on maybe -- any kind of guide along the way would be helpful, maybe what kind of gross margins could you maybe generate, once the 60% is achieved and how much after?

[Gerald Paul:]

It totally depends on the sales level, which I am not ready to project at this point, it totally depends. But it’s a very major contribution to stabilize gross margin, no question.

[Joe Whitene:]

Okay. And then my follow-up, I guess, I want to move over to inventory, I mean you are focusing on $50 million to $100 million of inventory reduction. How much of that if any will be centered around tantalum powder reduction?

[Gerald Paul:]

Approximately, I would say $20 million will come from the tantalum powder sale, approximately, good guess so to speak.

[Joe Whitene:]

Okay and then lastly on inventory, Lior I mean you mentioned your Asia distribution channel continues to be problematic. I mean what's your general thoughts on how long that inventory will take you, if you worked down based on the current booking rate?

[Gerald Paul:]

For Vishay, they have approximately 60 million too much inventory.

[Joe Whitene:]

68?

[Gerald Paul:]

Approximately 60 million too much inventory, a loan for the actives, but this is the Lion's share of our business in Asia. I would say this will take at least a quarter, maybe two. It all depends of course on their orders and their book-to-bill is below 1 also, so let's count I would say on half a year.

[Joe Whitene:]

Okay. And then lastly maybe a quick modeling question, interest expense jumped during the quarter is that 6.7, I guess the net interest expense is that what we should expect going forward?

[Gerald Paul:]

Lior?

[Lior Yahalomi:]

About the same, yes.

[Joe Whitene:]

Okay, I will jump out and let someone else get in, thank you.

[Gerald Paul:]

Thank you.

[Operator:]

Your next question comes from the line of Ingrid Aja.

[Ingrid Aja:]

Good morning. Do you mind if we can go back to the inventory, how much of the inventory work down will impact gross margins this year?

[Felix Zandman:]

Approximately $10 million P&L-wise.

[Ingrid Aja:]

10 million P&L-wise, okay, great. And then in terms budgeting SG&A dollar is down next couple of quarters, do you have in a map besides the restructuring in manner, you are also budgeting down those dollars?

[Gerald Paul:]

Now we are going to reduce according to our plan year-over-year by 19%.

[Ingrid Aja:]

And that's both, restructuring and just reducing?

[Gerald Paul:]

This is just SG&A. This is the SG&A portion.

[Ingrid Aja:]

Okay, and that’s not just restructuring, that’s just cutting cost as well?

[Gerald Paul:]

It is restructuring, we call it restructuring, in fact this is really cutting people, most of it.

[Ingrid Aja:]

Okay, cutting people. And then, I guess the lastly, are you getting, or do you expect pricing pressures will increase as you see some restocking, is that your expectation?

[Gerald Paul:]

The characteristics of Vishay's business will remain the same also in the crisis. You may remember that approximately half of our volume, which is the passives and measurements group, is not really subject to price pressure because it's a high share of specialty products, which we sell. In this case, I expect no change, I don’t think there will be price pressure on specialties, It never has been like that past five, six years. But what do we have to expect of course is an increased price pressure on the discretes on the actives side. But at least in quarter four, we haven't seen it yet. There will be some more, but I don’t think it will be chaotic.

[Ingrid Aja:]

Okay, great. Thank you.

[Operator:]

Your next question comes from the line of Steve Smigie.

[Steve Smigie:]

Great, thank you. I was hoping you could talk about the difference between the active and passive in terms of the book-to-bill ratios, and what you think explains that, is it having reliance and distribution in Asia for actives, I was hoping you could characterize it a little bit?

[Gerald Paul:]

Yes, it's very true what you are saying. The share of actives in Asia for Vishay is much higher than for the passives, and this is exactly where our distribution has too much inventories, so it goes hand-in-hand. But in the end it's the industry. In passives, we're quite strong in European industrial, quite strong there. And in the fourth quarter, the decline of the overall economy was much stronger in laptops, in cars, etcetera, in mobile phones than in especially European part of industrial. So, it's not necessarily the difference between actives and passives. It is really the industry where we sell to.

[Steve Smigie:]

Okay, great. If I look at your book-to-bill, I think overall, if I remember correct, I think it was a 0.75?

[Lior Yahalomi:]

It was 0.74, yes.

[Steve Smigie:]

Okay, sorry. So I mean I know you didn’t give revenue guidance, but if I look at sort of a comparable companies who you have guided, it's been roughly down 25% from March, you have got a book-to-bill 0.74. Is it something in order of a down 25%, plus or minus 4 points, is that sort of reasonable to think that way?

[Lior Yahalomi:]

Don’t want to comment but 25% is of course a lot.

[Steve Smigie:]

Yeah, its lot as in too much or as in those unfortunately yes, I'm sorry?

[Lior Yahalomi:]

As you said.

[Steve Smigie:]

Okay. And than I guess this finally in terms of Siliconix business, do you think you are substantially under shipping demand there. And I think if you look generally at some of the OEMs, they are not down as much in terms of their end demand, or there have been shipping, so obviously there is the distributors in there, do you think they are having distributors that creates that? Thanks a lot.

[Lior Yahalomi:]

Absolutely right. I mean Siliconix is very much focused on Asia, and also they are focused on distribution. So, they are at the most by this mechanism that Asian distributors have too much.

[Steve Smigie:]

Okay, so is there a quarter that comes where you have an up 20% revenue quarter is that snapback quarter or something like that? I mean I guess obviously we can't predict.

[Lior Yahalomi:]

I think it will go like that. This will come back gradually when nobody knows really.

[Steve Smigie:]

Okay.

[Lior Yahalomi:]

But what we have seen really is kind of a stabilization of orders since December, and things are not as bad anymore as they looked in December, so to speak in terms of orders.

[Steve Smigie:]

Okay. And to follow-up, apologies, one more question just to follow-up on that, is that any special change in orders post Chinese New Year, and do you think it's just restocking the channel in certain instances or do you think there is some actual demand out there?

[Lior Yahalomi:]

Really hard to say, because what can be seen -- a small change is matter of fact, but restocking, I don't know whether this is needed. I think they are very, very quick these days.

[Steve Smigie:]

Okay, all right. Thanks very much.

[Lior Yahalomi:]

Thank you.

[Operator:]

Your next question comes from the line of Jim Suva.

[Asiya Merchant:]

Hi, this is Asiya Merchant on behalf of Jim. Can you hear me?

[Lior Yahalomi:]

Yes.

[Asiya Merchant:]

Great.

[Lior Yahalomi:]

Good morning.

[Asiya Merchant:]

Good morning. Can you talk a little bit about just a raw pricing environment, please? particularly it relates to tantalum.

[Lior Yahalomi:]

Raw material pricing, yes. Principally speaking, raw material especially metals year-over-year came down last year substantially. And I think things have normalized except for the gold as a matter of fact. Gold keeps up and we all understand why. So in this case there is no real release in the gold, but altogether metal prices in particular came down. Of course we expect more success this time in talking to our vendors than we had in the two years before, no question.

[Asiya Merchant:]

Okay. And one other follow-up on the end market, any color you can provide on the auto and consumer end markets going forward if you had any design wins there?

[Lior Yahalomi:]

Well, we are quite strong in this case, what we are suffering from is not a lack of design wins. You know that even Europe in automobiles, which was always a stabilizing factor in the past has dropped enormously. We had plant shutdowns at all the major end users there, and so we suffered like everybody suffered, even there. What is relatively good as I am trying to say, relatively good is European industrial. This is especially in Germany, so this is the backbone of the economy and this is still doing relatively well, I am not saying well, but relatively well. On the other side, laptops and mobile phones, I can not see any turnaround at this point.

[Asiya Merchant:]

Okay, thank you.

[Operator:]

(Operator Instructions) your next question is a follow-up from the line of Shawn Harrison.

[Joe Whitene:]

Hi, back to me again, this is Joe Whitene for Shawn, my only additional question, and I suppose just asking the guidance question in a different way, but I mean based on the bookings you have seen in January, you said you have seen slight sequential improvements in December, if you were to multiply January by 3, maybe what kind of sequential decline in sales we will be looking at for the March quarter? Thank you.

[Lior Yahalomi:]

I don't want to project that. One thing is for sure, as I said in my presentation, concerning shipment at least, the fourth quarter was not the low point. We expect in concerning shipments in the first quarter based on the very low orders of Q4 decline in shipments no question about it. It was estimated before 25% down and I said this was aggressive. Hello.

[Joe Whitene:]

Okay. Thank you very much.

[Operator:]

There are no further questions at this time. Dr. Yahalomi, do you have any closing remarks.

[Lior Yahalomi:]

Thank you. I want to thank you for participating in our call. We appreciate the interest in Vishay, and we look forward to a continued the interest in the future. Thank you.

[Operator:]

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