威世科技 (VSH) 2011 Q3 法說會逐字稿

Good morning and welcome to the Vishay Intertechnology Third Quarter 2011 Earnings Call. My name is Melissa and I will be your conference moderator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. (Operator Instructions) Thank you.

I will turn the call over to Peter Henrici, Senior Vice-President Corporate Communications. You may begin.

Thank you, Melissa. Good morning and welcome to Vishay Intertechnology's Third Quarter 2011 Conference Call. With me today are Dr. Gerald Paul, Vishay's President and Chief Executive Officer, and Lori Lipcaman, our Executive Vice President and Chief Financial Officer. As usual, we'll start today's call with the CFO, who will review our third quarter financial results. Dr. Gerald Paul will then give an overview of our business and discuss operational performance, as well as segment results in more detail. Finally, we'll reserve time for questions and answers. This call is being webcast from the investor relations section of our website at IR.Vishay.com. The replay for this call will be publicly available for approximately 30 days.

You should be aware that in today's conference call, we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ, please see today's press release and Vishay's Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared according to generally accepted accounting principles. We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with GAAP measures that we also provide.

This morning, we filed a Form 8-K that outlines the various variables that impact the diluted earnings per share computation. We expect to file our Form 10-Q for the third quarter this evening. On the investor relations section of our website, you can find the presentation of the Q3 2011 Financial Information containing some of the operational metrics Dr. Paul will be discussing, as well as a presentation on Vishay's growth plan. Now, I turn the discussion over to Chief Financial Officer, Lori Lipcaman.

Thank you, Peter. Good morning, everyone. I am sure that most of you have had a chance to review our earnings press release. As you have seen, revenues were significantly down quarter-over-quarter, but in line with our revised guidance. Margins for the quarter reflected primarily the lower volume, but also higher metal prices and an inventory reduction. I will focus on some highlights and key metrics.

In the third quarter, we amended our credit agreement to permit up to $300 million of share repurchases. We are now well-positioned for quick execution should the Board authorize another share repurchase. The cost was 5 basis points. Full details are available in our 8-K filed September 9, 2011. We also completed the acquisition of the resistor businesses of Huntington Electric. The purchase price for these businesses was approximately $19 million, subject to customary post-closing adjustments. This niche acquisition fits well into our recently announced growth plan. Dr. Paul will elaborate further in his discussion of the resistor segment. We expect a payback of less than 8 years.

Cash from operations for year-to-date September came in at $288 million. Capital expenditures were $90 million and proceeds from the sales of property and equipment were $2 million, yielding a free cash generation of $200 million for the 9 months. Backlog at the end of quarter 3 was $655 million or 3.1 months of sales. Looking at the P&L, revenues for the quarter were $638 million, down by 10.2% versus prior quarter and down by 8.2% compared to prior year. Gross margin was 26.3%. Operating margin was 11.8%. Adjusted operating margin was 12.1%. EPS was $0.31 and our adjusted EPS was $0.32. I'd like to walk through our unusual items. Our adjusted operating margin excludes a pretax charge of $1.9 million related to costs incurred upon the resignation of our former Chief Financial Officer, Dr. Lior Yahalomi. Our adjusted EPS excludes after tax effect of this charge. In our press release, we included a table which reconciles GAAP EPS to adjusted EPS.

Let me reconcile the adjusted operating income for quarter 3, 2011 compared to the prior quarter. Based on $72 million lower sales or $69 million lower including to exchange rate impacts, the adjusted operating income decreased by $42 million from $119 million in Q2 2011 to $77 million in Q3 2011. The main elements were - - average selling prices had a negative impact of $7 million, representing 1.1% ASP decline. Volumes decreased with a negative impact of $27 million. Costs increased for a negative impact of $6 million, $4 million of which relates to a higher metal prices and our inventory reduction had a negative impact of $3 million.

Reconciling the adjusted operating income for quarter 3 2011 compared prior year, based on $57 million lower sales or $75 million excluding exchange rate impacts, the adjusted operating income decreased by $54 million from $131 million in quarter 3 2010 to $77 million in quarter 3 2011. The main elements were - - volume decreased with a negative impact of $40 million, costs increased for negative impact of $9 million, $17 million were related to higher metal prices, $9 million from tantalum alone. These increases were partially offset by cost reduction efforts and fixed and variable costs. Exchange rates had a negative impact of $4 million erosion. Selling, general and administrative expenses for the quarter were $90 million. This included a positive impact related to the realignment of bonuses and profit sharing to our current expectation for the year 2011.

The tax rate for the year-to-date period, excluding unusual items, is based on our expected rate for the full year and is approximately 27%. This resulted in an effective tax rate, again excluding unusual items, of approximately 30% for the third quarter. The expected share count for EPS purposes for the fourth quarter, based on an average stock price of below $15, is approximately 164 million shares. For a full explanation of our EPS share count and variables that impact the calculation, please refer to the 8-K we filed this morning. Let's review the key metrics we use to evaluate our performance at Vishay. Free cash year-to-date September was $200 million compared to $254 million, excluding the spin-off of Vishay Precision Group last year.

As already mentioned, year-to-date capital expenditures were $90 million; approximately $54 million for expansion, $8 million for cost reduction and $28 million for maintenance of business. DSO, or days of sales outstanding, for the quarter, were 46 days. DPO, or days of payables outstanding, for the quarter were 32 days. DIO, or days of inventory outstanding, were 90 days, resulting in a cash conversion cycle of 104 days. Inventories decreased quarter-over-quarter by $19 million or $10 million, excluding exchange rate impacts.

Wrapping up for the look at our liquidity in debt, we had a total liquidity of $1.3 billion at quarter end. Cash and short-term investments comprised just over $1 billion and unused capacity on the credit facility was $262 million. The breakdown of our debt of $423 million was $180 million outstanding on our revolving credit facility, $95 million of exchangeable unsecured notes due in 91 years and $148 million of convertible debentures, net of unamortized discount and due in 29, [respectively] 30 years. The principle amount or (technical difficulty) is $425 million. I would like to remind you that no principle payments are due until 2015.

Now, I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.

Thank you, Lori, and good morning, everybody. In quarter 3, we see the entire industry has been surprised by a sudden downturn of demand. Vishay has adapted manufacturing capacities quickly, as you've heard. We didn't build inventories actually, we reduced inventories. We have achieved a gross margin of 26% of sales and adjusted operating margin of 12% of sales and adjusted earnings per share of $0.32. We continued to generate free cash in a healthy way. Year-to-date, we have generated $200 million. The present low order rates, on the other hand, in particular from distribution, indicate a softer fourth quarter.

Let me talk about the economic environment next. We already had started into the third quarter with widely normalized lead times and sufficient inventory in the supply chain. During the quarter, the economy softened further for consumer products, mainly computers; affecting predominantly our Asian business. On the other hand, also some macro economic concerns seemingly started to influence business decisions in many markets. In particular, distribution stepped on the brakes. Industrial remained generally stable, seeing some softening towards quarter end. The economy in automotive remains good. Vehicle sales and orders continued strong.

The inventory build at distribution has continued in the third quarter, but at a reduced rate. Inventories at distribution came up by 5%. But in September, inventories at distribution started to drop. POS in the quarter was 8%, down quarter-over-quarter, contributing, of course, to lower inventory turns at distribution. We see 3.3 turns world-wide after 3.9 in the second quarter, 2.4 in the Americas versus 2.6 in the second quarter, 3.7 in Europe versus 4.7 in the second quarter -- which was a high number -- and 4.1 in Asia, vis-a-vis 4.8 in the second quarter.

Let me refer to Vishay's business development in the third quarter. Quarter 3 sales missed the originally expected range to a lack of short-term orders in combination with an increased level of order cancellations. We achieved sales of $638 million in the quarter, vis-a-vis $710 million in prior quarter and vis-a-vis $694 million in prior year. Excluding exchange rate effects, sales versus prior quarter were down by $69 million or 10% and down versus prior year by $75 million or 11%. The book-to-bill ratio of the quarter was relatively soft -- 0.67, 0.55 for distribution, 0.82 for OEMs, 0.60 for actives, 0.75 for passives, 0.76 for the Americas, 0.59 for Asia, 0.69 for Europe. All in all, you can say consumer in Asia was weak and distribution inventories were high. So, this is really the short message of all these numbers.

The backlog, due to low orders and increased cancellations, has normalized at Vishay to 3.1 months, 3.2 in actives and 3.0 in passives. Cancellations seemingly have peaked in the quarter. [Filling] prices are on the level of prior year, but price decline has returned. We see a price decline of 1.1% vis-a-vis prior quarter and a slight up of 0.2% versus prior year. The actives, as part of our product portfolio, are back to normal. Our ASP declined 1.9% loss versus prior quarter, 3.1% lower than prior year. The passives, may I say, as always, were stable on an increased level, minus 0.1% versus prior quarter, but up 4.1% versus prior year.

Like to talk about some highlights of operations -- due to a lower cost of goods sold, the inventory turns in the quarter reduced slightly to 4.0. Excluding exchange defects, inventories decreased by $10 million, as Ms. Lipcaman said, by $7 million in raw materials and by $3 million in wear and process and finished goods. May I emphasize all that happened despite a quite abrupt drop of the volume. The SG&A costs that at Vishay were well under control; we reported $90 million in the quarter. Capital spending year-to-date is at $90 million, as compared to $76 million in prior year excluding VPG. We continue to expect capital spending of $175 million in 2011, whereby approximately $95 million will be spent for expansion, $25 million for cost reduction and $55 million for the maintenance of business. We continue to focus on expanding critical manufacturing capacities at our leading products, in order to exploit market chances during sudden increases of demand. However, we expect reduced capital spending next year.

Our employment came down from 22,500 to 21,900 people, which obviously is the consequence of a lower capacity load in general. But let me emphasize that we plan to keep our trained work force, even at lower activity levels, by using short work, plant shut downs and the lower utilization of sub-cons and foundries. We had a good cash generation, as was said before. We generated $288 million cash from operations year-to-date versus $330 million in prior year, without VPG. And 2011 will be another solid year for the free cash flow. We generated $200 million free cash year-to-date, as compared to $254 million in prior year, which, on the other hand, has been our best year ever.

Now, let me come to the various product lines and I would like to start, as always, with resistors and inductors. Vishay's traditionally most successful business with a strong position in industrial and automotive demonstrated another time success and strength. Sales in the quarter were $156 million, which is 7% below prior quarter and 5% below prior year, when you exclude the impact of exchange rates. Book-to-bill ratio was 0.85. Back log is at a normal of 2.8 months. Gross margin came in at 33% of sales, which is slightly down from the prior quarter due to lower volume. Selling prices in resistors another time, stable, 0.2% down versus prior quarter and on the level of the prior year.

The inventory turns in resistors and inductors were at 4.6; quite excellent as I think. We expect a solid continuation of the business with slightly declining volumes in the fourth quarter. We further strengthened the product line by acquiring Huntington businesses, it's a well-established producer of high power wirewound resistors, which is quite nice for us. It complements our product portfolio and it gives us some potential for growth and synergies going forward. Coming to capacitors, this business is based on a broad range of technologies with a strong position in the European and American market niches in particular. We are well-positioned in renewable energy. This business suffers currently from high inventory levels at distribution after a phase of tight supply, as all of you know.

Sales in the quarter were $142 million, down by 8% versus prior quarter and by 2% versus prior year. The reduction in sales versus prior quarter is mainly driven by tantalum capacitors. Book-to-bill was 0.65 in the quarter, which brings our backlog down to a relatively normal level of 3.3 months; still, somewhat on the high side. Gross margins were at 25% of sales, down from prior quarter due to lower volume and increased costs for metals. The selling prices were stable quarter-over-quarter, but substantially above prior year by 9%. The inventory turns remain at 3.1. We expect another soft quarter for capacitors, mainly in the area of tantalum caps, due to still high distribution inventories.

Coming to our Opto products, Vishay's Opto business consists of infrared sensors, couplers and LEDs and besides commodity, contains a substantial share of customer-designed products, mainly in the area of automotive and industrial. We are the largest supplier of infrared devices. The business is negatively impacted by the present weakness in consumer goods, which is partially offset by continued strength in the automotive segment. Sales in the quarter were $56 million, which is 12% below prior quarter and 5% below prior year. Book-to-bill was 0.77 which brought backlog down to a normal level of 3.1 months. The gross margin in Opto products continued at a satisfactory level of 31% of sales, negatively impacted to a degree in the quarter by inventory reduction. Inventory turns of 5.2 would classify as quite excellent. There was a substantial decline of selling prices in the quarter vis-a-vis prior quarter, but this represents a peak. We have seen a price reduction versus prior quarter of 1.9% vis-a-vis prior year, we have seen a more normal number of 3.6% price decline. Also, the fourth quarter will suffer from the present weakness in consumer goods.

Coming to our product group diodes, diodes represent a broad commodity business where we are largest supplier worldwide. We offer virtually all technologies, as well as the most complete product portfolio and we are leading, in particular, in power applications. The business in the quarter suffered more than expected from greatly reduced orders from Asian distributors. Sales in the quarter were $151 million which is 11% below prior quarter and 6% below prior year. The book-to-bill ratio was at 0.62, reducing our backlog to a still high level of 3.4 months. Gross margin reduced to 24% of sales, due to lower volume. The inventory turns were good at 4.6. Also diodes are back to a moderate ASP decline, 0.4% down versus prior quarter, 0.7% down versus prior year. We have continued success with our trench diodes, where we practically are still in a sole-source position. But we do expect also the fourth quarter to be negatively impacted by a continued low demand from distribution.

Last, but not least, MOSFETs -- Vishay continues to be one of the market leaders in the segment of low-voltage MOSFETs. This predominantly Asian business is hurt the most by the current weakness in consumer goods in combination with high inventories at distributors. Sales in the quarter were $132 million, down by 14% versus prior quarter and down by 28% versus prior year. Book-to-bill was weak at 0.5. Backlogs have been quite rapidly reduced to a normal level of 3.0 months. Gross margin is at 21% of sales, mainly due to lower volume and also to some impact of lower selling prices. Inventory turns at MOSFETs are at satisfactory level of 3.7. The price decline year-over-year has normalized, but was substantial versus prior quarter.

Vis-a-vis prior quarter, we have seen a price decline of 3.5% vis-a-vis prior year of 5.4%. So, the price increases of recent months turned out to be not defendable. There is a continued healthy demand in the market and especially in the industrial segment for high-voltage MOSFETs where Vishay is still a small player. There is capacity expansion on the way for a new and competitive high-voltage super junction technologies in Vishay and we continue to expect to start into a volume production in the first quarter of 2012. Also, for the MOSFETs, we expect another difficult quarter due to lower sales, but we currently see, especially in MOSFETs, an improved book-to-bill ratio.

Let me summarize -- for Vishay, like for most of its peer companies, the third quarter presented some surprises and some challenges. Driven by too high inventories in supply chain, but ultimately triggered by macro economic uncertainties, as I believe. Vishay has reacted promptly, demonstrating, another time, the benefits of its restructuring efforts during recent years. We will continue to push the main elements of our growth plan, in particular in the field of new product and process development, design-in and selected acquisitions, preferably in the field of specialty products. As you've heard, we recently have closed the small but beneficial acquisition of Huntington Electric resistor businesses and we are evaluating further steps.

For quarter 4, we expect a continuation of the present adaptation process, mainly in distribution, which impacts our sales outlook. We guide for quarter 4 to a sales range between $555 million and $595 million at lower gross margins, mainly due to lower volume. But having said this, let me emphasize that, especially in such times of uncertainty, we, of course, continue to be very confident in electronics channel and in the unbroken growth of our end markets, so we remain to be quite confident, very confident for our future. Thank you very much. You can now turn back to Peter.

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

(Operator Instructions) Matt Sheerin, Stifel Nicolaus.

A couple of questions -- Dr. Paul, do you have any sense of whether or not the bookings trends here, which obviously are weak, the book-to-bill as weak as it's been in a couple of years, is your sense that bookings are starting to bottom out here and do you get a sense that revenues could bottom out here? Or could it take another quarter into the March quarter for this correction to play out?

Well, Matt, what we have seen is kind of a turnaround since the beginning of October. So orders, in absolute numbers, come back and get stronger, which also means something else, of course, for the book-to-bill ratio. Really, September, in my appreciation, was a low point. Future will tell, of course, but as we see a continued trend, still relatively weak order rates, but definitely better than they were in September. To which degree this will continue to be, hard to say, but I think personally that unless the world economy offers another surprise, the worst may be over.

Okay. In terms of the pricing environment, it looks like that's starting to crack a little bit. But your gross margin guidance seems to be predicated mostly on volumes and you didn't really talk about pricing. Is your sense that pricing will sort of be where it is now because orders are soft and then perhaps more pricing pressure when volumes come back and when orders start to come back? Is that how you see it playing out?

Matt, let me emphasize once more this all relates only to our actives business. I said it before. On the passives, except a few exceptions, we normally see, and you will remember this very well, constant prices, even in downturns, because we have such a high share of specialty products there. On the actives, clearly the situation has normalized and at the beginning of such a change, it always overshoots a little. So I would expect that we already are in the midst of very normal price decline. But we, in the past, were able to cope with it, so I am not worried that we wouldn't be able do it going forward. We also see, of course, by nature, that some material costs come down. There is cost reduction effort. But directly speaking, yes, we are in the midst of a quite normal developments concerning prices at actives.

Okay. Lastly, on your current production levels, I know you're working to bring inventory down, so do you plan to bring production levels down in both businesses in Q4?

Well, we always adapt to the need. Vishay, as you know, is quite proud to be a relatively, I would say a very, reliable supplier of free cash and the major element of that is not to let inventory get out of hand. We have demonstrated that, in the past, we will adapt our levels and honestly, we are relatively experienced in that and this is what we do at the moment. But what I tries to say before is my ambition is not to lose trained work force. We will use all other tools which you have like short work in parts of Europe, like plant shut downs, et cetera, just to adapt to the volume of production, not building inventory, in fact reducing inventory further, but not lose the work force.

Okay. Thank you, Dr. Paul.

Joe Whitney.

It's Joe from Longbow on the line for Shawn Harrison. First question -- you alluded to it that the MOSFETs book-to-bill has improved here in October. Can you get a little bit more specific? What kind of book-to-bills you saw throughout the month of October and by business? If you'd do that, that would be helpful.

It won't be that precise, but in the quarter it was 0.5. Let me highlight it substantially better than that, but still not on the level we would like to see, as you can imagine. But substantially better, especially on the MOSFETs.

Okay. And then maybe secondly here, you mentioned automotive market is holding up. Obviously, there's a lot of questions about global production slowing down a little bit here with issues in the supply chain. Are you seeing any incremental slowdown in the fourth quarter or do you expect that to taper off? It's been an area of strength throughout the third quarter (multiple speakers).

I'm talking mainly Europe, I must admit. But at the moment, people are still extremely optimistic in that. What we have seen in automotive may be here and there is some accumulation of inventories in the pipeline which needs a correction. But this correction is underway. But from a standpoint of the vehicle production, there is no slow down as they say. As they indicate is a longer-term trend, the mid-term trend. They are continuing to be confident on it.

Okay. Thank you.

Steve Smigie.

I don't think your results and guidance are all that different from your comparable companies. So, my question is more about what things look like as we come up out of this. I look last cycle coming 2008, maybe a little bit different drivers, but you had 2 quarters there where you grew 14% sequentially in 3Q and then 15% sequential the following quarter, which does not necessarily square with your seasonality in those periods. As we come out of this, do you think the recovery would take place fairly dramatically like it did last time? Meaning, is this just mostly inventory correction? By looking at distribution, it seems like that could be the factor. And if it is going to be that dramatic, again, is it more related just to returning to end demand versus any real seasonal impact probably?

I may be an old man, but have I no crystal ball. Let me say the following -- I suspect that this time it's heavily inventory-driven, this time. Last time, we know what has happened. But this time, it appears to be more likely inventory-driven, which means, indeed as you said, that there's no inventory that lasts forever. That means there should be a recovery, a relatively quick recovery; relatively, if I'm right. But our politicians do the best currently to de-stabilize the world. This we know.

Actually on that point, since you over there in Germany, just sort of curious, your color on recent developments with this deal and specifically stuff today and just the feeling of the mood there in Germany?

Excuse me, sorry. I didn't catch that with Germany. Sorry.

Just your feeling on the mood in Germany about the whole bank bailout and how that would affect your business?

Okay. Germany is not the most important part of the world, but the economy continues very strong here, as you know. All segments, we are close to full employment for our situation. But of course, there is concern there. You know the situation in southern Europe and people get kind of angry in a way, in my country at least. It's not so specific for electronics. But overall, the industrial production in Germany runs high. But we know if the world does badly, then Germany will not be an island. That's also true.

Okay. There's been lots of questions flying around about Thailand. There's been some comments from some tantalum capacitor players over there that's got some exposure to Thailand. Just curious if you can give us color on how impacted you may be by what's happening in Thailand?

I would not overestimate this impact. But it's true what you indicate. We do have some additional business because of the situation and I think we're not the only ones in the west that have additional business these days. But I would not build any forecast or any confidence on that one.

Okay. Last question was just with regard to gross margin, I think you indicated it would be down sequentially here, mostly volume-related. Can you give us some sense of the magnitude? Would a couple hundred basis points be unreasonable to think about?

Our variable margin is between 45% and 47%. So, you see our sales down, then you can definitely calculate it.

Okay. Great. Thank you.

Jim Suva.

Can you give a little bit more detail, as you'd mentioned, about the cancellations in Asia? Are those primarily on the consumer side, handset side, TV side, some of the end market cancellations that you're seeing?

First of all, most of that comes from distribution in our case, which, to a degree, Jim, we expected it, because we knew, all along, that, of course, they had the high backlog, the order rate before, out of many reasons was high. We expected some correction. Anyway, and I think I said this before a few times, and so it happened, but it happened admittedly more abrupt seems to be typical for our industry, more abrupt than we thought. For the mainly it comes from distribution in our case, but effectively, this is indirectly consumer. This is consumer-driven, I believe.

And any end markets consumer through distribution that you're seeing?

The computers are relatively weak these days, relatively weak. So normally, hand phones, normally, not the smartphones, normal phones are weak. But I think this has much to do with overstocking everywhere. But okay, in this case, maybe the end sales have suffered already, the end market sales.

Then my follow-up is, as we look at tantalum pricing, typically if my memory is correct, it's this time of year when the tantalum powder companies start looking at contracting pricing for the future year out. Is that the case now and what type of pricing are we looking at for 2012 versus 2011? I believe 2011 was up pretty sharp versus 2010. What type of price of tantalum should we be considering for your cost to goods sold increase? Are you back in the market or do you have quite a bit of inventory you can work through.

We did not believe in the shortages, since a long time. We never believed the story with the shortage. But, and therefore we don't have so much inventory, as well. This is not the environment for substantial price increases in tantalum powder, I would say.

Thank you very much to you and your team.

Shawn Harrison.

Just a few brief follow-ups and hopefully I'm not re-asking these -- but the commentary on point of sale being down about 8% sequentially for the third quarter, with October coming back, are you seeing that increase? Did it increase sequentially, the point of sale, for the month of October, through distribution?

I have reliable information this case for a quarter, so I would rather not comment on a month on POS. But obviously, as orders have come back to a (technical difficulty), I would say that the POS, for sure, will not have gone down further. I think this is what I would compute from that.

Within that comment, your view on the inventory that we will have essentially passed the deepest part of this trough exiting the calendar year and we should be close to parity as we come into 2012?

Maybe a little longer. Maybe this just takes a little longer than that. It all depends, obviously, on the POS, which is the world economy in a way. But I would say, if you ask me, I think quarter 4 for sure, as we also guide to, (inaudible) as our guidance will be impacted by inventory reduction at distribution. I would suspect you will see something also still in quarter 1.

Okay. Then within the MOSFETs business as well, you just briefly talked about continued or weakness within regular phones as well as notebook PCs. I know a big driver of that business is those 2 end markets. Does that, after we get through this inventory correction, mean that you may not see a bounce back within that business, just because the demand for those products isn't as strong as it has been?

Why not? Why not? I think as soon as things are normal, then why should this not be go back to normal? But what we count on is a better participation in the high-voltage MOSFETs, where Vishay historically hasn't been, really and now we will have probably see light at the end of the tunnel, in a way. We see products which can compete with everybody and we are going to start manufacturing them next year, beginning of next year, in larger quantities. So I see for MOSFETs for sure the return to normal conditions. Why not? There's no obsolescence in that sense and neither the applications nor of the product. But I see an additional chance for us entering this high-voltage market, where we haven't been, really, there, only a little.

Very, very helpful. The final question, you guys did a very good job of controlling operating expenses this quarter. In case I missed it, where are they expected to go on a dollar basis for the fourth calendar quarter?

Yes. They approximately will be maybe $91million, $92 million, something like that. Depends, of course, on the exchange rate, also.

Thanks so much.

(Operator Instructions) There are no further questions. I will now turn the call back over to Mr. Henrici.

This terminates our quarter 3 conference call. Thank you for your interest in Vishay Intertechnology.

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