Littelfuse Inc (LFUS) 2002 Q2 法說會逐字稿

Good day.

Welcome to the Littelfuse Incorporated Earnings Conference Call.

Today's call is being recorded.

At this time I will turn the call over to the Chairman, President, and Chief Executive Officer, Mr. Howard Witt.

Please go ahead, sir.

Good morning, everybody, this is Howard, and we have our CFO, Phil Franklin.

Thank you for being online for our second quarter conference call.

This call will be approximately 45 minutes with a half hour of Phil and my comments and the balance for question and answers.

We would ask you as we have in the past for those on the call to limit your questions to one, if you could please.

One part question with follow ons after others have had an opportunity to ask their questions.

As noted in this morning's press release we are seeing positive signs in our electronic market and continuing strength in automotive.

Our electrical sales are bow low last year's second quarter, we have seen sales improvement each month this quarter, which is we think a good news issue.

Overall sales have increased in all of our markets, or higher production volumes in cost reductions is improving gross margins.

The addition of our just announced acquisition in Semitron in the UK, will enhance our position in the electronics going forward.

Phil will cover the second quarter details and I will talk more specifically about the three markets and acquisition.

And Phil will come in and close with outlook comments.

Phil.

Thanks, Howard.

Let me first read the safe harbor language.

Any forward-looking statements involved herein involve risks and uncertainties.

There are other risks which may be detailed in the company's filings with the SEC.

- 73.9 million up 13 percent sequentially and up 7 percent from the year ago quarter.

Earnings per share for the second quarter were 18 cents compared to the consensus estimate of 13 cents and 15 cents for the prior year period.

By market segment, second quarter sales were as follows: Electronics up 17 percent sequentially and up 9 percent year offer year reflecting improved fundamentals in Asia, and inventory restocking of distributors.

Automotive was up 9 percent sequentially and - or 8 percent sequentially, I am sorry, and 9 percent year over year reflecting stronger automotive build rates in North America.

The electrical market up 15 percent sequentially but down 5 percent year over year as the market remains weak but seasonal trends in market share gains are driving sequential improvement.

Geographically sales increased in all three regions versus the prior year with Asia up 16 percent, north up 14 percent, and Europe up 1 percent.

Although in local currency Europe was down 3 percent, as the European markets are the slowest to show signs of recovery.

Despite significant price pressure, cost gross margins continued to improve sequentially.

After 07 basis point improvement in the first quarter, gross margins in the second quarter were up 210 basis points reflecting increased production levels and on going cost reductions.

The manufacturing rationalization program which we have discussed in detail on our recent - last few conference calls is on target to deliver savings at the planned 10 million dollar run rate by the end 6 this year.

This should allow us to achieve further gross margin improvement in the second half.

Operating margin improved in the second quarter to 9.3 percent up from 4 and a half percent in Q1.

As in addition to better gross margin we were able to leverage our SG and A on higher sales.

Cash flow is another bright spot for the quarter.

Good working capital control, lower capital expenditures, and improving EBITDA, resulted in cash flow of over 10 million dollars putting us at 10.7 million for the year.

Note on the working capital control, our accounts receivable day sales outstanding were reduced from 62 in the first quarter to 58 in Q2. 58 is a really good number for us.

Generally we target 60.

Inventory turns also showed some nice improvement going from 4.0 turns up to 4.5 turns.

So real good progress on working capital.

It is expected that the second half free cash flow however will be substantially lower than the 10 million plus we have achieved in the first half due to two things.

Approximately 5 million dollars of spending against some existing restructuring reserves that you recall we have taken over the past several quarters going back into last year and then, secondly, higher capital expenditures in the second half than what we experienced in the first half.

We expect CAPEX in the second half to be somewhere in probably the 9 to 10 million dollar range versus the 3 to 4 million that we spent in the first half.

Now I would like to turn it back to Howard for some comments.

And then I'll finish up with some guidance looking forward.

Speaking to each of our three markets, electrical, then automotive and then electronic.

Electrical sales refer to power guard decreased 5 percent compared to second quarter of last year, we are performing better than the other manufacturers.

We are seeing their business down 7 percent year to date.

Contributing to the better than market performance is aggressive field sales work such as our sample to savings multiphase marketing program March started in April.

This uses an array of approaches, as well as an interactive website, and demonstrates (indiscernible) by the use of our patent indicating fuses.

The electrical team is also managing their business with monthly metrics that have allowed us to improve customer fill rates while reducing inventory investments by approximately 15 percent.

Cost reduction efforts are also leading to the sequentially improving operating profits each quarter this year.

The current heat wave is adding near term demand for fuse usage in air conditioning systems.

The in the electrical business we feel good that this unit has the ability to profitably react to gains and market share and overall increase in fuse demand as the economy recovers and factory utilization increases.

In the second of our markets automotive, the demand for our market leading products continues strong as Phil has indicated in all regions with total sales up 9 percent compared to prior year.

In fact several of our product lines are running 7 days a week, 24 hours a day to meet the surprisingly strong demand.

As Phil indicated with CAPEX increasing in the second half of the year some of this is related to new equipment on order so we can build more efficiently to meet the higher customer demand as well as demand in the future.

U.S. car build is projected at 16.4 million vehicles.

This is up approximately 5 percent.

And though Europe will build - build is projected to be down approximately 3 to 4 percent for the year, our sales, in fact, this quarter were up 9 percent in Europe in part due to the strong Euro that Phil related to, and resulting from strength from customers like BMW where sales are up 18 percent.

Sales in Europe are skewed to manufacture for such as BMW.

Italy, for example, is actually positive at this point in time since the Italian car producers are getting hit the worse in terms of car build for Europe.

(indiscernible).

Looking ahead in automotive demand is continuing at high levels in early quarter 3 which is a good near term sign as factories are just coming back on line after the traditional July shutdowns.

And our conversion to lower cost plastics is projected to be complete by year-end which will allow us to compensate for some of the price pressures in this marketplace.

Lastly, electronics, this week's electronic trade journal, EBN, looking at business news, characterizes the market as maintaining a steady recovery.

Our business reflects this.

With sales growth in the U.S. and Far East.

Only slow market being Europe, and this is exacerbate bid a shift in demand as well as production base from Europe to the Far East.

Rewarding the new products we are beginning to see start ups in production ramp ups for products that use our new design and devices.

These include our post guard ESD, electronic discharge device in our new patented TMOV designed in Ireland at the former Harris Labs.

Growing products manufactured in the Far East include cell phones, and personal data assistants, and we are seeing a continued shift to the products of customer products, and in China where we are ready with production and supply capability.

We are seeing stocking up by U.S. distributors though their forecast don't call for growth until Q3 or Q4.

Regarding the important EMS or contract manufacturers, overall business for this industry will be flat compared to 2001.

With more of the production volume shifting to the CENs and factories in the Far East.

Primarily China where we have a presence.

Regarding long-term future the EMS providers are projecting significant growth starting in 2003 with a doubling of their revenue by 2006.

Related to U.S. distribution, we are pleased to announce yesterday in conjunction with TTI their appointment is our distributor.

TTI is a leading U.S. based distributor of electronic devices.

This special partnership will enhance our linkage with major distributors worldwide.

With the addition of TTI we are now represented by all of the six top distributors in the interconnect and passive marketplace which is really our electronic market.

Some brief comments on the Semitron acquisition.

We are clearly excited about the acquisition of this company announced yesterday.

The acquisition of this company strengthens our position in the over voltage certain protection market areas adding a wide array of products sold into consumer electronics, telecommunications, as well as importantly the automotive markets and we have talked before about the issue of when we are looking at acquisitions we are looking at those that add to one market but add to the automotive market as well.

This company established market position in Europe a modest presence in the U.S. and Far East.

Areas where we can bring our strength and sales team in distribution systems to bear.

Strategically this is a very good fit for Littelfuse.

Let me mention a couple of the logical points.

It strengthens our position as the world's most complete circuit production provider by filling in the last gaps in the product line.

And provides a semiconductor engineering team to develop new products.

The Steve Whitney is in England will be there part of the summer working with a new team.

If we are not able to gain this team through the acquisition, we would have had to build our own by recruiting.

So we gain an experienced team in the UK.

Thirdly, this allows us to replace an outside source for silicon, though provided product limited our ability to sell in Asia.

So one we can expand our sales activities in Asia and provide assurance supply silicon in high demand period.

Fourth, this provides joint ownership with a way for [fad] manufacturing team at a reasonable cost to Littelfuse.

All in all a small but significant step for our future.

Phil will wrap up with comments on the balance of 2002, and then we'll take questions.

First focusing on the third quarter.

Let me talk a little bit by market segment and then I will make overall comments.

We expect electronic sales in Q3 to be roughly flat with Q2.

And this is all excluding Semitron.

As the market stabilizes at the higher second quarter levels.

In our few there does not seem to be a long-term catalyst to drive the markets at this time.

Automotive likely see the typical third quarter seasonal softness.

Remember, this is the quarter for north American plant shutdowns for automotive OEMs and the European holiday season.

Industry projections call for U.S. car build to be down 3 percent sequentially versus Q3 to Q2.

While the electrical market remains weak, the third quarter is typically our strongest quarter seasonally.

This combined with the additional market share gains which we do expect to continue is expected to result in a quarter that is up both sequentially and year over year.

So putting that altogether for Littelfuse overall, again, excluding Semitron sales should be flat to down slightly sequentially.

As mentioned earlier, gross margins should continue to improve as the cost savings from our manufacturing rationalization begin to kick in, in a bigger way in the third quarter.

And then earnings per share for Q3 we expect to be equal to or slightly above the 18 cents that we just reported for the second quarter.

For quarter 4 we would expect the typical seasonal drop in sales and earnings due primarily to the thanksgiving and Christmas holidays that we see almost every year.

And Semitron is expected to add about probably two and a half million dollars in sales in the third quarter and a little bit more in the fourth quarter probably in the 3 million dollar range because in the fourth quarter we'll have a whole quarter where we will have all but about two weeks of Semitron in the third quarter.

It should be roughly neutral to earnings for the remainder of this year and we are expecting it to be slightly accretive as we get into 2003.

That's our - that ends our prepared remarks.

At this time we will open it up for questions.

Thank you.

Today's question and answer session will be conducted electronically.

If you would like ask a question, please press star one on your telephone.

We will go first to Alexander Paris with Barrington Research.

Couple questions on the Semitron.

From your comments it looks like you - most of the new products was in the newer over voltage.

And I just wonder, what specifically is the area that this finally filled in and is your - I think - was there 23 million in sales the company had, Semitron?

12 million, Alex.

We are looking forward to the future of 23 million.

Does that increase the - because you are in new products does it increase the potential size of the market you are addressing by significantly more than what their sales are?

That would speak to what their share of the market is of the products they are in.

Their shares are fairly modest as I mentioned to you in the U.S. and Far East.

They are a - probably a fourth or fifth line distributor, manufacturer in Europe.

Let me mention on the devices technically they had - they are in the over voltage area exclusively as I mentioned earlier.

And these are devices that are both actually in service mount diodes, [thiristors], and lastly gas discharged products basically.

The GDTs we did not have at all in our line.

That fills, if you have seen our road show charts, that was the one gap we had in the overall chart that was not covered.

This covers that last space.

We did have access to some of the other products, some diodes through either other partnerships and/or other cooperative silicon manufacturers.

We are not able to produce basically those products in-house.

Another point, while we had to sell in those areas, we had very narrow product offerings.

This gives us a better product offering in the [thiristors].

And a reasonably full product offering in the diode category that we didn't have before.

We have broadened our product offering in diodes and [thiristors] significantly.

We have added a new technology, gas discharge tubes that Howard mentioned that we didn't have at all before.

And so we believe we are much better positioned in the billion dollar plus over voltage market than we ever were before.

And we believe Semitron under the previous ownership was not able to - and their owners admitted they were not able to sufficiently leverage these sales because they didn't have the right distribution channels.

And we clearly do.

Prior parent was a manufacturer - and highly respected manufacturer in electronic relays really sold to a totally different customer base and through different channels.

We feel very confident certainly as we add this line to ours in the states saying in the Far East with our now sales force and engineering staff, they can certainly handle their market share which is certainly probably less than 5 percent.

And just related to that, how big is the potential over current market relative to the over billion dollar over voltage market.

The over voltage market is probably the way most people define is probably closer to a billion and a half to two billion.

We now have the ability to serve the majority of that market.

Whereas the over current market is probably more in the three quarters of a build, 700, 750 billion range.

The over voltage market roughly speaking is roughly the size.

Next to Michael Schneider with Robert W. Baird.

Good morning.

First, I guess just on the electronics market.

We saw [Boast Advent and Narrow] come out and announce in the last week here and there they are certainly taking at least the sequential expectations down for that market.

There seems to be somewhat of a disconnect.

I understand it is inventory restocking because their inventories are low.

But maybe you could give us more perspective on where the disconnect might be, if indeed the electronics market for you actually may be deteriorated through the quarter rather than accelerated.

Just thoughts on it.

We tracked fairly carefully the top seven current distributors.

This is before the addition of TTI.

Comparing quarter 2 to quarter 1, the contributors POS, or their point of sale was roughly flat.

However, our net booking was up by about 5 percent.

The book to build quarter 2 - quarter 1 was 1.5, actually reasonably strong.

The second quarter was 1.15.

Still you know, higher than 1.

So we still see at least in our part of what they sell a positive book to build.

They are - their inventory is fairly flat, Mike, as we record the numbers.

And basically we are seeing them still being conservative about inventory, and therefore the orders are very fast turn around.

They are continuing to book and basically ship our products in the same month with very little inventory build.

Those characteristics we see.

And again there is slices and dices of this industry.

You have to slice off the semis, and even in the past the area you have to carve out the commodity capacitors, and resistors.

But our numbers at this point don't reflect that negative (indiscernible) you just showed.

Partly because I think we are getting share of these products.

Another significant issue, Mike, is you look where our real strength came in the quarter, big part of it came from Asia.

And a lot of these guys really don't have that much of a position over there.

So I think that they may be missing out on some of that volume.

In fact, that moved Asia - I followed the contract manufacturers as well, and it is clear these guys are in a mad dash to put up facilities over there, and shut down the European and more importantly the U.S. operations.

Even from Mexico.

I guess discuss the implications for you on a number of fronts.

You have presence over there, but I don't think you have the share over there you would have in the U.S. and Europe.

So what does that imply?

And secondly, in terms of delivery, cost of order fulfillment, etc., what does it imply for margins?

I will take the first part and let Phil handle the margin piece of the equation.

Without being flippant, our role is to serve our customer base wherever they are and wherever they move and not to fight or do things against those trends.

Clearly the move is to China.

You know the whole country may sink into the sea with all of the manufacturers moving over there.

But we are following that trend.

We have as a case in point but in the [Sujoe] industrial park we are one of the first companies in the industrial park ten years ago.

And now in there is [Selectron], and perhaps other contract manufacturers.

We have the presence in the move to China.

We are fully able to adjust to the other - the other issues.

We have built up and modified our networks.

In the overall Far East with design centers and people in Hong Kong and our [Sujoe] facility, a new enhanced facility in Taiwan as well as Singapore.

Wherever these folks are is the shift in fact of not only production but some of their design activity to the Far East.

We are there selling to them in their local languages and local currency basically.

So we are not fighting the trends.

We are moving with it because we have been positioned over there many years.

We feel quite good about our ability to handle that.

Regarding when they do shift over to the other sites, we certainly maintain relationships with all of the CMs in this - based in the U.S. and Taiwan and other areas, plus some of the new ones like [Foxcom] in the Far East.

So our job then is to hand off these relationships, being cognizant in this that there are local manufacturers and that will attempt to gain some market share or market shares as you mentioned are in the 20, 30 percent kind of range over in that part of the world.

So we see that as an opportunity as a shift - they shift the base and relate it to local manufacturers they are still going to want the quality, the ISOs, all of the qualifications, just in time delivery bar code, and we feel well positioned to handle that.

That's kind of a blanket statement.

I think the jury is still out a little bit there on the margin side.

I think what we are seeing at least with some contract manufacturers is really a move towards truly trying to pair down their supplier base on a worldwide basis and align themselves with strategic suppliers that can support them around the world and to the extent they move that direction and move further that direction that's obviously going to play well to us not only for market share standpoint but it will protect us a little bit on the margins because we won't necessarily be competing as directly with the small Chinese or Taiwanese manufacturers.

On the other hand, there are still some guys that pretty much let the local operations make decisions on purchasing.

And to the extent those guys are willing to buy from Chinese and Taiwanese fuse manufacturers, that will put more pressure on prices for us.

And ultimately cause these guys some problems.

But some may have to learn from the school of hard knocks.

I think that depends on which way it goes.

Our sense it will gravitate for the better contract manufacturers to more strategic relationships which I think in this case we will be just fine.

[Julie Centrello] with Morgan Stanley.

I was wondering if perhaps you have a number on the percentage of revenue from new products in the quarter?

And I am also wondering if part of the margin improvement that you did see was related to any shift in sales mix aside from volume and cost initiatives.

The first part, roughly 26, 27 percent on the new products.

We haven't run the math for the quarter.

But it certainly is that to north of that as we are beginning to see - as I mentioned in my comments the start up of some newer programs over in the Far East.

In terms of sales mix, I don't think that we didn't really have any real significant impacts on margins from sales mix.

It was predominantly just cost reductions and volume improvement.

We may have trend a little bit more towards higher margin semiconductor products.

I think we did see a little bit of an increase in Q2 there.

Overall it didn't impact the overall margin more than a tenth or two.

A quick follow up.

Were there signs that versus stabilized in the quarter then?

I wouldn't say stabilized.

I would say the erosion - a quarter ago we had talked about erosion that was pushing up towards 10 percent on an annual basis.

I think we have seen that start to moderate some.

But we are still seeing higher than historical trend line type of price erosion, which I think we have typically characterized on electronics in the 3 to 5 percent range.

We are probably - we are less than 10 but probably more in the 6, 7, maybe even 8 percent range right now.

It is still above the trend line but it is coming down closer to the trend line I guess is how I would characterize that.

On the automotive side, you know, it is in the range although I would say over the last year it probably has been a little bit toward the higher end of the range more on the 4 to 5 percent range more than the 3 to 4 than we have seen historically.

We will go next to [Eric Wyman] with [Sherman Oil Capital Management.]

Can you we view the long-term normalized margins for the company?

What's your best guesstimate as to when we might reach that?

I will mean if we look at over time where we have tended to settle out, I think it has been in the high 30s on a gross margin from a gross margin standpoint from operating margins probably in the - something in the 15 percent range.

We have been a little bit higher than that from time to time.

But if you looked over time, 15 percent would be about our average.

Coming from almost nothing to close to 10 percent, so we have made good strides, certainly back in that direction.

But I think it is really for us to get back to kind of 15 percent or so operating margin range, it is gonna take kicking in of the savings for the manufacturing rationalization program which as we said will hit 10 million dollar run rate by the end of this year.

It should hit something like 15 million dollar run rate by sometime in 2003, probably the third quarter of 2003.

I would expect at that time with particularly with some help from the recovery, have seen a little bit more sign from the recovery than what we see right now.

We ought to see the margins get back to historical levels.

We will go next to [Amit Dollin] with [William Company.]

Good morning.

A few of my questions have already been answered.

One question that I was interested in, I was wondering where the capacity utilization rates are?

You didn't mention - you did mention automotive being strong.

But maybe go through the different segments.

Quickly, automotive we are in many lines really at capacity.

As I mentioned to you, literally at 100 percent.

Couple of lines probably in the 80s.

But that capacity is really stressed to say the least at this point in time.

But we are adding the work cells to relieve that, not just to relieve it but to get down to more efficient level of operating on a five to five and a half day basis.

In electronics it is mixed by category.

But basically in a five day, three shift basis, we are in the 50, 60 percent area.

So we have been - the good news there is and we mentioned on the last call, even though things were pretty quiet at that time and things are beginning to ramp up on some of our lines there as well, that we have asked our fellas and ladies do look at what would happen if demand basically doubles.

And we feel pretty well positioned without addition of significant CAPEX to be able to handle the electronic demand.

Again we are being very careful as we have shifted manufacturing, the capacity to Mexico, the Philippines, and China to be sure the work cells were not on the truck when the product was needed.

So we are carefully patterning that program make sure we don't cause ourselves any difficulty.

But suffice to say, in the electronic area we have more than adequate capacity.

In the electrical side, that is running at a lower level probably 50 percent again kind of numbers.

Electrical too, there aren't a lot of physical constraints there.

We generally just have to add people to add capacity there.

So it is a little hard to gauge that.

But we have plenty capacity on the electrical side.

One other point on electronics, Howard mentioned that we are relatively low capacity utilization levels.

There are a few isolated areas where we are much closer to capacity.

There are also some new products coming on that we will be spending money for - to put manufacturing capability in place.

So we will be spending a second half of this year in the neighborhood of a million and a half, two million dollars on various electronic projects that have to do with new products or in some cases with new processes that we are putting in place.

Related to the demand side, we are seeing in some product categories, some competitors with some delivery issues.

That is leading to some short-term spot increases and we are able to pick up that volume and handle it wherever the demand might be.

The spotty demand is somewhat in the U.S. but heavily in the Far East.

We will go next to John Franzreb with Sidoti and Company.

I was wondering about the shift that's going on in production from Europe to China, if you have sufficient manufacturing capacity, if the shift needs to go forward or are you now planning to add something maybe next year?

Good question.

We have announced the closure of our UK factory and have been moving that production over to the Philippines and China.

That's on the schedule.

Though we have added square footage in China.

This is leased space not build space at this point in time.

Now as the products settle in the volume demand settles in the Far East and we are clear where it is, we may in fact add additional space in China.

We won't do that this year.

That is most likely a 2003 issue.

Again we feel - we were a little stressed in the first quarter on some of the very mature products, we call five by twenty.

These are the last two traditional fuses.

We were stretched there.

But we have recently been able to cover up - not cover up but cover the backlog that was created during the first quarter.

And the currency that is going on right now, the exchange rate between the dollar and the Euro, how is that impacting your bottom line?

We have a number of natural offsetting currency positions that provide natural hedges for us.

We are not exposed on the bottom line.

I can tell you for the quarter, second quarter, you didn't have to - positively, our sales by half a million dollars is all.

Probably on the earnings side we - you know, we do get some modest benefit generally from a weaker dollar, the weaker the dollar is, the better it is for us.

But it is not a dramatic impact.

If I would estimate for the second quarter, we probably had about a penny a share in favorable impact due to currency.

Now that could get slightly better in Q3 as the currencies have gone further that direction.

But it won't be a huge impact any time this year.

Phil, is that incorporated in your outlook.

Yes.

It is incorporated that the rates would stay similar to where they are today, not that they - that the dollar would weaken further.

And we will go next to [Allen Roska] at LJR Great Lakes Review.

One question, are you giving any consideration to expensing stock options in view of the newest trend?

I am surprised it took this long for the question to come up in the call.

We started a program before the activities were going on here to kind of revisit our stock option program to be sure, in fact, we were goading the value add that we look for by creating really ownership with our associates at our business.

And we are actually offering that revised list up to our board next week.

We have somewhat reduced the number of options that we will be offering.

It is not significant.

But we reduced the number and we are focusing the options on the people that we look at as high potential, the next generation managers of the business.

Overall, the overall number won't change significantly.

The overall options issue this year will be slightly less than what it was last year.

And very focused on the people that can really impact the business.

Okay.

Thank you.

Once again that is star one to ask a question.

And we will go back to Michael Schneider with Robert W. Baird for a follow-up.

Can you give us some sense on the gross margins by segment.

You have been restructuring in a number of geographies and businesses, where have you made the most gains and where do you believe you can restore the peak margins of 2000, and if you could speak by segment it would be helpful even if you don't use specifics.

I can give you some sense there.

If we look at when things turned down, as you would expect the business that got hit by far the hardest was the electronics business as we had the deleveraging effect of the entire business as sales dropped dramatically.

Electronics is also the business that we saw the highest price erosion numbers.

And so clearly electronics was impacted pretty severely.

Both the gross margin and operating margin level.

And it is also the business benefiting the most now as we are ramping up volume.

It is also the business where we have the most significant cost reduction opportunities.

And we have talked about the manufacturing rationalization.

That's largely an electronics play.

And so we will see the fastest and greatest positive impact coming from electronics.

Having said that, with a price erosion we have seen there, it will still be a challenge to get back to 2000 operating margin levels, which were slightly higher than the company average in 2000.

But certainly we believe that our electronics business will be the big driver of our margin improvement going forward.

Automotive has remained steady throughout the time frame.

And the electrical business also saw a bit of a decline as their sales dropped off over the last year or so.

We are seeing that margin come back to more historical numbers.

But is it realistic even at the same volume, let's say you get those volumes in the electronics 12 months out, is it realistic to see the same gross margins in 2000, or was the pricing never going to be sustainable.

It is obvious we will never see the prices again.

We have taken a hell of a lot of cost out of the business.

I think we are obviously taking that out at a rapped rate.

I think, Mike, the answer to your question, it really depends on how successful we are with some of our new products and how successful we are in really leveraging some of the things on the over voltage stuff.

Obviously new products have considerably higher margins.

But I mean your question is a good one.

It will be a significant challenge to - even at those volume levels to get back to that kind of margin again.

Going back to an earlier question about the 15 percent normalized operating margin for the business, assuming a steady mix presumably even a growing mix of electronics, what do you believe the revenue - what level of revenue do you believe is needed to hit the 15 percent given the cost savings that are coming on board, etc.

I mean we are at - I mean we are going to be obviously below the 300 million dollar level this year.

I think even with.

But we would - and in the peak I think we hit 300 in 2000 - 370 million as a company.

You know, we don't need to get back to 370 million but we are certainly going to need to be moving pretty considerably in that direction.

Do you think the number is over 325?

You know, yeah, if I were to peg a number right now it would probably be in the 320 to 340 range.

Okay.

Did you work on the DEEP THROAT movie or something? [LAUGHTER] Take them to range and pin them down.

That does conclude our question and answer session.

At this time I will turn the call back over to Mr. Witt for closing remarks.

We appreciate your time on the call and clearly we feel positive about Littelfuse's position in future with the balance in our marketplaces.

Thanks for being on the call.

This concludes today's conference call.

You may disconnect at this time.

We do appreciate your participation.