威世科技 (VSH) 2009 Q1 法說會逐字稿

Good morning. My name is Andrea and I will be your conference operator. At this time I would like to welcome everyone to the Vishay's first quarter 2009 earnings results conference call. (Operator instructions). Thank you.

Dr. Yahalomi, you may begin your conference.

Thank you. This is Loir Yahalomi, Vishay's Chief Financial Officer. Good morning, ladies and gentlemen, and welcome to Vishay's first quarter 2009 earning call. On the line with me today are Dr. Felix Zandman, Vishay's Executive Chairman and Chief Technical and Business Development Officer, Dr. Gerald Paul, Vishay's President and Chief Executive Officer 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 statements. Bill.

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 SEC.

Thank you, Bill. I will make summary comments, Dr. Paul will add a more detailed analysis of our first quarter 2009 and finally, Dr. Zandman will update our R&D and acquisition activities and will make summary remarks. For the first quarter of 2009, Vishay reported revenues of $450 million, 22% lower than the fourth quarter of 2008 and 39% lower than the first quarter 2008. The decline in our revenues is attributed to the significant and rapid downturn in all, in virtually all Vishay's end market. On a GAAP basis, our consolidated gross margins for the quarter were 15.1% as compared to 14.8% for the first quarter of 2008 and 23.5% for the first quarter of 2008. This was mainly the result of lack of overall volume.

SG&A expense for this quarter was $87.5 million, a decline of over 10% compared to $98 million for the first quarter of 2008 and the decline of 26% compared to the $119 million for last year's first quarter. Restructuring and severance cost in our first quarter 2009 were $18.9 million. Total cash paid out for restructuring during Q1 2009 was $16 million.

Our income for the first quarter of 2009 consists mainly of $1 million of interest income and $11.8 million of foreign exchange gains. Despite our pretax losses, we recorded a tax expense for the first quarter. This is attributable to the fact that a significant portion of these losses occurred in low tax jurisdictions where we recognize no substantial benefit.

Capital expenditures for the quarter were $11 million compared to $53 million in our fourth quarter of 2008 and $26 million in the first quarter of 2008. Depreciation, amortization for the quarter were $54 million, the same amount as in our fourth quarter 2008 and in the first quarter of 2008. As announced in our press release, we share reported a loss from continuing operations of $0.16 per diluted share for the first quarter of 2009. A loss of $0.08 is attributed to the after-tax impact of the restructuring and severance cost of $18.9 million, the adjusted net loss is $0.08 for the first quarter of 2009 as compared to adjusted net loss per share of $0.07 for the first quarter of 2008 and adjusted net earnings of $0.16 for the first quarter of 2008.

As previously disclosed, Vishay was required to adopt two new accounting standards on January 1, 2009, which required retrospective adjustment of previously issued financial statements. The retrospective application of FSPAPB14-1 increased previously reported interest expense by $6.1 million or $0.03 per diluted share for the first quarter of 2008. Vishay had a total debt of $361 million and cash and cash equivalence of $365 million as of March 28, 2009. The debt to be repaid within five years was $253 million of which $112.5 million of term loan maturing on July 1, 2011 with payments spread over the next 2 1/2 years with interest rate of 30 day LIBOR plus 2 1/2 %, $125 million of revolving debt maturing on 2012 with an interest rate of 30 day LIBOR plus 1%. At quarter end, $125 million of the revolving credit commitment off up to $250 million were not drawn upon. And at $15 million of long-term loan maturing on 2014 with payments spread over five years with interest rate of 30 day LIBOR plus 3.45%. Additionally, we have $105 million of exchangeable and secured notes with 100 years maturity due on 2102 with interest rate of 90 day LIBOR plus 0%. Total available credit line including the $125 million unused revolver in the US was $167.8 million at March 28th, 2009. Vishay's total available liquidity measured by cash plus all available credit lines as of March 28, 2009, was $533 million.

Some other key summary financials are total inventory at quarter end was $505 million compared to $538 million at quarter end of the fourth quarter 2008. Working capital at quarter end was $855 million. precash flow was $42 million for the first quarter of 2009 as compared to $30 million for the fourth quarter of 2008 and $13 million for the first quarter of 2008. Vishay's liquidity remains strong and our focus has been and will be conserving and generating cash. I will now turn the call over to Dr. Paul, our President and Chief Executive Officer. Dr. Paul?

Thank you, Loir. Good morning, everybody. As you've heard, Vishay's first quarter results in a major way have been impacted by the present global economic crisis. Operating profits and earnings per share were negative due to a continued dramatic and broad decline of volume. But thanks to our quick reaction, drastic measures and a good discipline in Vishay, we continue to generate free cash quite respectably as I believe, $42 million in the quarter. Fixed costs and inventories have been brought down ahead of our announced plan.

Let me talk first about economic environment as we see it. The economy in quarter one continued to be in an extremely deep recession, hurting all geographies and virtually all market segments. What we lived through is an unprecedented crisis I believe since World War II. Nevertheless, for the electronic industry, the sequence of events of the recession is quite familiar. The recession started in Asia at commodity products mainly in distribution. We know that. Then Americas and Europe, they follow with a certain time lag in the industrial segment. We also know this one. What is really unusual this time is that automotive was hit so hard. This is unusual. But principally speaking, the sequence of events is quite familiar. It's only the recession deeper. Distribution in the quarter, we have seen low inventory turns, 2.7% worldwide and the Americas 2.5%, in Europe 3.0%, in Asia, very low at 2.8%. On the other hand, during the quarter inventory at distributors have been reduced quite substantially, we estimate by about 10% and this starts to support the POA already. Since March we have seen some signs of recovery, mainly in Asia. The short-term orders, for instance, were increasing recently. On the other hand, Europe and the US are still slightly deteriorating. In total, I think we have reached the bottom. This is quite likely.

Let's talk about Vishay's business. Vishay in the first quarter has experienced the historic low for sales and orders, as we expected it to be. All regions and virtually all market segments were depressed, industrial has followed consumer down relatively quickly. There was a steep decline of automatic also in Europe and Asia, which was unprecedented. Military, on the other hand, holds up quite nicely and infrastructure programs around the world helped selectively.

We achieved sales of $450 million in the quarter versus $575 million in prior quarter and $733 million in prior year. Excluding exchange rate effects, sales versus prior quarter we are down by $124 million or 22% and down versus prior year by $262 million or 37%. Book-to-bill improved to .89, coming from .74 in Q4 '08 but of course it was still below 1. Now in April it, appears that we are approaching the 1 book-to-bill. Some details for the quarter, book-to-bill was .84 for distribution, .93 for OEMs, .96 for actives, .84 for passives, .81 for the Americas, .88 for Europe and .97 for Asia. So what you can see from these numbers is clearly some signs of stabilization, maybe slightly recovering Asia for the actives in particular. But on the other hand for passives in Europe and the Americas, they are still quite depressed. Backlog, it was at 2.7% month, measured of course at the present low sales levels.

The low level of price decline for Vishay at least continues in total vis-a-vis prior quarter we have seen a price decline of 1.0% versus prior year of 2.2%. For the passives we have seen price increases .8%, .8% vis-a-vis prior quarter and prior 6% vis-a-vis prior year, for the actives there have been price decline, 3.1% versus prior quarter and 5.4% versus prior year. There is some acceleration of ASP plan for the actives but we feel it's quite moderate.

Let me talk about the reconciliation of results of the quarter vis-a-vis prior quarter. Based on $126 million lower sales, $124 million lower excluding exchange rate impacts, the adjusted operating margin decreased by $8 million, namely from minus $11 million to minus $19 million. The main elements were relatively low price decline of $5 million, a substantial loss in volume impacting the P&L about $45 million, much lower costs, mostly fixed costs often total $30 million down vis-a-vis prior quarter and $12 million positive impact from a combination of exchange rate impacts and inventory impacts vis-a-vis prior quarter. If you look at the comparison vis-a-vis prior year, we see the following picture based on $284 million lower sales, $262 million lower excluding exchange rate impact, the adjusted operating margin decreased by $73 million from $54 million to minus $19 million. Main elements, again, a very modest price decline of $10 million, substantial volume loss impacting the P&L by $109 million, better costs mainly fixed costs of $45 million. These are the main elements of this development.

Coming to some highlights in operations for Vishay. Well, after adaptation of the manufacturing capacities to current record low demands in the fourth quarter, an inventory reduction program has been started in the first quarter. Excluding exchange rate effects, inventories in the quarter decreased by $27 million, by $11 million in raw materials and by $16 million (inaudible) and finished goods. Due to the lower costs of goods sold, inventory turns dropped to 2.8%. But we do expect to come back to historical sales levels of between 3.5% and 4% in the course of 2009, mainly by further inventory reduction.

Capital spending in the quarter has been dramatically reduced to $11 million versus $53 million in prior quarter and versus $26 million in prior year. We expect 2009 spending at about $50 million, $50 million as compared to $152 million in 2008.

During the quarter, 2,650 employees were let go, equivalent to more than 10% including 360 fixed heads. About the same reduction as we had already in the fourth quarter 2008. Since September 2008, therefore, approximately 20% of all employees and more than 10% of all fixed heads have been reduced and more terminations are going to come.

Continuing, we are continuing with short time work and plant shutdowns for every client. We also announced the closing of two smaller facilities in the US. We will consolidate the manufacturing volume into existing plants. And we have started to consolidate opto product's packaging within Asia. All in all we are in process to define further consolidation but we continue to expect cash costs of $50 million for all restructuring in 2009.

We generated $53 million cash from operations in the quarter as compared to $76 million in prior quarter and to $38 million in prior year. And we generated quite -- as I said, quite respectable, $42.3 million cash in the quarter as compared to $30 million in prior quarter and to $13 million in prior year.

Well, last time I talked to you, I presented a plan for restructuring and right sizing within Vishay in view of the deep crisis we are in and I would like to update this program and talk about the status. Let's start with inventories. We talked about a target to reduce within the year inventories by $50 to $100 million. As you will remember, we have already reduced $27 million in the first quarter and from a target standpoint, we raised the target to more than $100 million reduction this year. So instead of $50 million to a $100 million, we want to be above $100 million reduction in inventories this year, which helps the cash, of course. The other target was to reduce capital spending to below $70 million, in quarter 1. Again, if you remember, we spent $11 million. For the year the outlook has been decreased to $50 million. Most important, we wanted to reduce all fixed costs at Vishay by $150 million year over year. In the first quarter we already have reduced $54 million vis-a-vis the first quarter of prior year, $22 million from manufacturing fixed and $32 million from SG&A. The outlook is higher than we had before. Also the target was raised to reduce $200 million of fixed costs year over year with $95 million in manufacturing fixed and $105 million reduction in SG&A. Which means that we would defend the present run rate. Finally, we wanted to limit the cash costs for restructuring to $50 million. We have spent cash by $16 million in the first quarter and our outlook remains at the level of $50 million.

Let me come to the various product lines and I would like to start with resistors and inductors. This traditional and successful business of Vishay suffers substantially in volume, but it defends quite a decent level of profitability. Sales in the quarter were bound to $110 million, sales 20% below prior quarter and 32% below prior year. Book-to-bill ratio in the quarter was weak, only .87. The backlog was at 2.6 months. Despite a very low volume, gross margin improved to 23% of sales. Reasons were excellent efficiencies and the major reduction in fixed costs. No ASP decline in resistors and inductors prices were slightly up vis-a-vis prior quarter and prior year. The inventory turns remained at a good level of 3.5%.

Capacitors also suffered and started to suffer in a major way from the economic crisis. A good product mix, fixed cost reductions, selective price increases, on the other hand, helped to defend the profitability also in capacitors. Sales in the quarter were $105 million, down by 12% versus prior quarter and prior year. Book-to-bill ratio weak at .76. Backlog at three month, gross margin improved to 18% of sales despite the low volume. No price decline also in capacitors. Prices were up by 1% versus prior quarter and prior year.

There was a substantial inventory reduction, but (inaudible) lower costs of goods sold inventory turns declined to 2.7%. All our factory closings are on plan and more consultation especially in capacitors is going to come.

Coming to measurements group. Measurements group is also impacted severely by the downturn which for this business is quite unique. Nevertheless, the group maintains an excellent level of profitability due to substantial cost improvements. Sales in the quarter were $35 million as compared to $43 million in prior quarter and to $51 million in prior year. Measurements group has a backlog of 2.4 months and show the book-to-bill ratio in the quarter of .94. Despite a very low volume, again, gross margin also on this line has improved to 32% of sales. The inventory turns on the other hand, of only 1.9% suffered from low cost of goods sold.

Coming to the actives and I would like to start there with diodes and opto products, this business continues to suffer severely from the weakness in Asian consumer and European automotive. Asia distributors, on the other hand, I am processed to lower inventory levels. Sales in the quarter were $115 million, 24% below prior quarter and 46% below prior year. Book-to-bill was at .90, which is an improvement from .74 in the fourth quarter. Backlog of this group is at 2.5 month.

Due to very low volume and despite major activities in cost reduction, in fixed cost reduction namely, gross margin dropped to 9% of sales. Inventory turns remained quite good at the level of 3.1%. The pressure on the ASP was normal, I would say. 1.7% decline vis-a-vis prior quarter and 3.9% vis-a-vis prior year. Also for this group we are evaluating additional plant closings and further consolidation. Finally, Siliconix, the market leader. Siliconix is the market leader in low voltage fits. They suffer the most of all Vishay businesses, which I think is typical for the industry segment that is geared towards mobile phones and notebooks. On the other hand, there are first signs of a recovery since March as the distributors were reducing inventory. The inventories are down by 25% for Siliconix products since November. Profitability suffered in an unprecedented way from historically low volume. Further reductions of fixed costs are on the way for Siliconix and will already impact the second quarter. Sales in the quarter were $84 million, down by 31% versus prior quarter and down by 51% versus prior year. Book-to-bill ratio was at 1.03 in the quarter but April we have seen above 1.3. The backlog of Siliconix is 2.7 month, gross margin dropped to only 3% of sales. Price decline was increased but we would say still normal. We see a level of 7% to 8% year over year. The inventory turns due to low cost of goods sold dropped to 2.5%.

Well, a lot of detail. Let me summarize and give you an outlook. Like the global economy and our entire industry, Vishay currently lives through a very severe economic crisis. There's no doubt. But having reacted quickly to this unprecedented challenge, we were able to minimize the impact on Vishay's performance to the greatest possible extent as we believe. We are ahead of our program to cut $150 million fixed costs and factors you heard. We are going to achieve more. Have reduced capital spending to a minimum, and are reducing inventories after having adapted our worldwide manufacturing capacities already in the fourth quarter. Doing so, we in the quarter have generated $42 million of free cash and limited operational losses to $19 million or $0.08 per share. Our business in the first quarter '09 seemingly has bottomed out, actives already show first signs of a recovery, whereas passives with their strong exposure to automotive and to industrial in Europe may still decline slightly. We will continue our programs, expecting strong free cash generation even in this year of a recession and target at an improved business model for Vishay based, and I would like to emphasize that based on a substantially reduced breakeven sales level. So all in all, we are confident, we remain confident for the future. May I -- thank you. May I transfer to Dr. Zandman.

Good morning. I would repeat more or less the same thing Gerald said, maybe in a different context. The electronic industry is subject to a very severe recession, so is Vishay as everybody knows. However I am pleased to see that in spite of the violate drop in orders, we have responded fast, adjusting our operations with the strategic focus on creating free cash. This was the key and is the key. We achieved in Q1 free cash of $42 million and our available liquidity is $533 million. That's the most important. This way we're secure for the future. It shows that the company is disciplined and is performing in an excellent way in spite of the recession. We start to see some optic orders in our Siliconix division and hope that the market is now stabilizing. In past recessions, and we had several of them, we have seen always the same pattern. Is at first a drop in orders, our semiconductors, especially the advanced semiconductors like Siliconix, followed later by passives. The recovery is also -- has also the same pattern. First semiconductors recover followed by passive and that's what's the hope will happen now. Let's hope that it is our start in recovery or at least that everything is stabilizing now.

The negative P&L of $0.08 cents per share is regrettable, but not catastrophic. The most important for us is free cash generation and that was achieved $42 million in a quarter, which we consider a substantial number.

Our R&D programs are on target. We have postponed some long-term programs which do not impede presently our day-to-day introduction of new products. As soon as the recession is over and the long-term programs will be re-evaluated and Vishay again will plan an aggressive R&D with long-term benefits. Our activity in acquisition stopped temporarily. We will restart vigorously again acquisitions once the recession is over.

A small summary here. In spite of catastrophic statements about the state of the economy as reported daily by the media, TV and newspapers, everybody is exposed to that, Vishay in spite of that, Vishay handles itself well. Free cash generation is the most important in situations believed now and this we handle quite well. Also, our operations are handled very well in spite of lower volumes of orders. Once the recession is over, we will emerge stronger than ever. I feel optimistic about the future. Thank you. Well, I think now we should probably pass now to questions.

(Operator instructions). Your first question comes from the line of Matt Scheerin.

Yes. Thank you. So, Dr. Paul, you gave somewhat of a vague outlook and I appreciate the fact that visibility is limited, but it sounds like you expect your semiconductor business to be up slightly and the passive business to be down slightly. So are we to sort of conclude that you're looking at sort of flattish overall sales?

Yes. Principally this is what we expect. But as you said, this is a time of maybe already some kind of recovery, predictability is relatively low. But principally this is the mechanic. We will say actives should be up for -- very likely. And passives shows still some signs of decline, especially in Europe.

And in automotive, are you seeing any light at the end of the tunnel there? Are you seeing any signs that you're seeing a little bit of a pickup, inventory restocking or anything like that?

Unfortunately at the moment automotive, I see mainly Europe, as you can imagine, there are no too encouraging signs, unfortunately. This is the case.

Okay. And then on the margin front, well, two questions. One, are you expecting margins to be flat or up because of continued cost cutting? And you talked about a lower revenue level for breakeven. Could you tell us what that revenue level would be for breakeven?

Didn't want to be that quantitative, but as you can imagine, we were bringing down fixed costs dramatically in the first quarter as we announced previously and we wanted to work for it. When things get better, we will be very careful to add back any fixed costs, you understand. So therefore it's really an easy prediction in that sense. We are going to lower the breakeven point of Vishay by hundreds of millions of US dollars. I don't want to be more specific, but I think I'm clear enough.

Okay. So you're expecting a little bit of at least margins to be flat to up, then?

Yes. For the profitability standpoint quarter over quarter, I didn't give any guidance, but you should understand the following. If the economy will develop the way I expect it, we are going to have a somewhat bad mix impact because some specialty products in passes especially in Europe will be relatively down whereas actives with somewhat lower contributive margins will be up. So, on the other hand, we are going to continue to work on our costs in general. So anyway, as you said, we expect them flattish.

Just one more question, if I may. Your balance sheet certainly is improving. Your cash position is going up. Vishay is historically, is it a inquisitive company. What is your outlook in terms of acquisitions? Are you just focusing on kind of getting the business on track or also looking at acquisition opportunities?

Well, I think, Felix, you should answer but just before you say it, I just wanted to emphasize what our Chairman has said. At the moment our focus is on cash but as you also said, Vishay always looks for acquisitions. Felix, maybe it was your question.

We are not looking actively to acquire large companies or small, but if something comes along the way which is a very good situation, quite cheap, we may look at it but there is no major effort now, no major standing of our companies what to acquire (inaudible). So at this point it's kind of quiet in this area.

Okay. Thank you.

Your next question comes from the line of Steve Smigie.

Great. Thanks. I was hoping you could talk a little bit about Siliconix's gross margin and what it takes to get that back up. What happened that it got to where it is? I mean, is it just you guys have been adding capacity? Because that's generally pretty solid business and didn't want to cut back or could you just talk about that a little bit?

Yes. I think as I explained before, Siliconix' performance, which of course is very bad at the moment, a 3% margin, no discussion, is really only and exclusively impacted by the low volume, unheard of volume, 50% down year-ago. Like other semiconductor makers, I think it's typical for people in the industry at the moment. On the other hand, as I also tried to say, Siliconix has a good variable margin so when sales come back nearly 50%, not quite, but close to 50% flow to the bottom line automatically and on top of everything, we are going to continue to cut fixed costs in Siliconix. So also for Siliconix and also history shows that Siliconix recoveries are always deep, unfortunately also declines. It's the nature of the beast, as it looks in semiconductors. Siliconix will have, you will see, a steep recovery when volume comes back, especially in profits.

And is it more the computing side or the handset side that's driving the book-to-bill above one?

At the moment it's basically the computing side which I've set up but in reality the following happens. At the moment what we see clearly is a normalization in the distribution channel. Distribution, as you will know, was at the beginning of this unprecedented downturn was stuffed with inventory and we have -- since November as I tried to say for Siliconix, inventory has dropped distribution by 25%. Therefore what we see at the moment, is also partially a normalization.

Okay. Assuming that we have sort of bottomed here and let's just say we had some sort of seasonal uptick in September, you guys have a little more industrial mix so maybe it's not as much as seasonal uptick in September quarter but, just in general if we see any sort of recovery, with all the cost cutting you've done, what kind of fall-through would you expect to see on the gross margin line in recovery period?

Vishay historically has close to 50% variable margin, close to. That means this is what definitely will fall through, because we are not -- we are -- as I said before, we will be very careful adding back fixed costs.

And in terms of the fixed costs reduction, can you talk a little bit about how you think about your facilities? You have a large number of facilities and admittedly you've had a number of acquisitions. And I guess I'm just trying to understand what's the -- what makes the most sense for you guys in terms of footprint to try to consolidate facilities or do you just have certain R&D talent in multiple regions so you can't really do that? Can you talk about how you think about that?

Historically as you indicated, we are sitting on a lot of plants but this is of course partially also because of the fact that we have lots of specialty products. So this is connected and specialty products have advantages. So what we do since years and of course we do it now even in an accelerated way, we try to consolidate volumes. On the other hand, there is limitations. The real -- the bug of the cost reduction comes really from cutting down -- from cutting down resources, as a matter of fact. So the cost reduction by consolidating plants by nature of things is a longer term program, and this is what we do, we continue to do. But we don't want to lose business doing so. So we go step by step.

Okay. And my last question was basically, where are we now in terms of headcount and where do you think we are going?

There will be still reductions. First of all on the variable side, variable direct workers. We adapt to the need so we do it partially by layoffs, partially by short time work, partially by plant shutdowns. In this case, we adapt to the volume including our target of inventory reduction, which we have. So this one goes in quotes automatically of course, we have to work for it. On the fixed cost side I'm going to continue, maybe not at the same speed as we had in the first two quarters, but we are going to selectively also reduce fixed cost personnel going forward, but not at the same speed at in quarter 1 and 2, --quarter 4 and 1. Sorry.

I'm sorry. Can you give us like a specific headcount where you are currently, though?

What is that? Yes, we do but I don't want to --

Give it out?

Make it public.

All right. Thank you.

Your next question comes from the line of Jim Suva.

Great. Thanks very much. On the profitability, you've made a lot of progress on reducing SG&A. I believe it was -- it went down about $15 million in the March quarter compared to December quarter. Given that it seems like you're going to reduce some employees some more and a little bit more restructuring actions. Can you give us a little bit of help as far as what we should expect out for the June and kind of outlook quarter run rates so it's been declining so much?

As a matter of fact, we were by far faster than we thought. This is also why I said before our targets for the year in comparison to last year was raised from $150 million savings, $150 million to $200 million savings. Just to keep the present run rate already will bring us there, so to speak. And on top of that, we will have some more moderate but moderate cuts. So basically just defending the run rate brings us to the $200 million. But you shouldn't be misled. The part of these savings which we had up to now is by nature is temporary. Right? That means a short work and plant closings, et cetera. So along the way, we have to replace this temporary measures by permanent measures. You understand?

Yes, But in doing so, a lot of the cuts in Q1 I imagine were nonlinear, meaning they didn't take effect for the entire quarter.

You are right.

So that should be SG&A to come down again in the June quarter?

Well, again, it's a combination of temporary and permanent measures. Not all the temporary measures can be made permanent immediately. So we count basically first of all to defend this -- defending this quick progress which we have between the fourth and first quarter.

But on the flat sales rate, would we expect SG&A to be down slightly, then, still?

Only slightly.

Okay. And then on the other income line, you had a foreign exchange benefit of about $11.8 million. Is there anything special in that line item that we should expect going forward or should it revert back to a more normalized level.

Loir, do you want to answer? Loir?

Yes, this is Loir. We would expect more normal level moving forward.

Yes

Great. Thank you very much, gentlemen.

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

Hi. Good morning. Getting back to the cost reduction program, I know when it was initially announced, there was kind of a long -- or the final goal of a certain percentage being permanent. Now that that number has increased to $200 million, what percentage of that do you see being permanent reductions in terms of your fixed costs?

A major portion of it, obviously. So we are still working on additional plans. You can imagine the economy turned down enter dramatically and we had to cut left and right as fast as we could. And by nature of things, a few things had to be temporary. It had to be implemented quickly. In Europe, if you want to lay people off, it takes time. Short work and things like that go fast. So this is why we combined it like that. Now we are working on the plan to convert as much of the temporary into permanent cuts, but this is on the way. I do not want to be completely specific, but we want to maximize the permanent portion. I said half -- last time I said 2/3 is permanent and 1/3 is fixed. You can work from the assumption that more than 2/3 is permanent.

Okay. And then trying to maybe drill down on the cost of goods sold line in terms of the incremental benefits there, is it safe to assume that exiting 2009, given the uptick in actions that you've implemented, you should be at least to breakeven given, if revenues don't recover from here? Is that a safe assumption?

Well, if revenue stayed at the same level, we would be close to breakeven, yes. Closer to breakeven, not completely, I think, but I have really calculated it that way.

Okay.

May I add to that?

Yes.

We in the first quarter also have enjoyed some positive mix effects as I tried to say during my presentation on the passives, which may also not completely be repeatable all the time. So it's -- but your assumption is right, we are approaching breakeven on the same sales level, that is true.

And that positive mix benefit was just primarily due to seeing better relative sales in the passives business and the specialty business in --

No. Particularly in capacitors we have sold more specialty products.

Okay. And then turning to Siliconix, what was the pricing on a sequential basis? I think year over year you said it was down 7% to 8%.

Yes, it was down by I think 4% or something. Yes, 4% down quarter over quarter but you have to see that in quarter 4, between quarter 3 and quarter 4, we had price increases on a sequential basis. So there must have been some year end effects that some crews were released et cetera. This is why I reduce my statement to the level year over year. But in principal I have Ken look it up it is close to 5% if you took it seriously 5% quarter over quarter.

It seemed --

But this is after a quarter when prices have gone up which is not typical for Siliconix.

It seem more like a normalization than the actual, your competitors getting negative on price.

On the other hand, to say it also clearly, as soon as recovery will come about and it will come about first at Siliconix, that's for sure, we will see more price pressure. There's no question about it.

Okay. And then just in terms of the dynamics you're seeing here in April, with the book-to-bill above 1.3% or -- in April, it seems like you're stating most of that is a restocking and not underlying demand comeback through distribution or am I reading that correctly?

It's a combination. What I wanted to point out is that the restocking, the normalization of in the chain, the supply chain, plays an important role and cannot be forgotten in this context. But it's as well on both sides.

The point of sale versus the point of purchases is essentially reaching equilibrium here in April on the active components business?

Yes, we were -- I think the whole industry was depressed before quite heavily through this sudden downturn that everybody wanted to get rid of his inventory.

Okay. Thanks a lot.

Thank you.

At this time there are no further questions. Dr. Yahalomi, do you have any closing remarks?

Thank you. I would like to thank -- thank you for participating in our call. We appreciate the interest in Vishay and we look forward to your continued interest in the future. Thank you all.

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