威世科技 (VSH) 2013 Q1 法說會逐字稿

Good morning, name is Melissa and I will be your conference operator today. At this time, I would like to welcome everyone to the Vishay Q1 2013 earnings conference call. All lines have placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you. Mr. Henrici, you may begin your conference.

Thank you, Melissa. 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 first-quarter financial results. Dr. Gerald Paul will then give an overview of our business and discuss operational performance as well as segment results in more detail. Finally, we will 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 business and it 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 first-quarter this evening. On the investor relations section of our website, you can find the presentation of the Q1 2013 financial information containing some of the operational metrics Dr. Paul will be discussing. Johan Vandoorn, our Executive Vice President and Chief Technical Officer, will be presenting on Thursday, May 9, at the Raymond James spring investors conference in Boston. 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. I will focus on some highlights and key metrics.

Vishay reported revenues for Q1 of $554 million, at the high end of the guidance. EPS for Q1 of $0.19 included a one-time tax benefit of approximately $1 million related to the retroactive enactment of the American Taxpayer Relief Act of 2012 signed into law on January 2, 2013. Adjusted EPS for Quarter 1 was $0.18. Vishay signed a definitive purchase agreement to acquire MCB Industrie S.A., a specialty resistor company located in France. We expect the transaction to close during the second quarter. Revenues in the quarter were $554 million, up by 4.5% from previous quarter and up by 2.9% compared to prior year. Gross margin was 24.7%, operating margin was 8.2%, EPS was $0.19, adjusted EPS was $0.18. The adjusted EPS includes the one-time tax benefit related to the enactment of the American Taxpayer Relief Act.

Looking at the reconciliations versus prior quarter, operating income of Q1 2013 compared to operating income for prior quarter based on $24 million higher sales, or $21 million higher excluding exchange rate impacts, operating income increased by $24 million from $22 million in Quarter 4 2012 to $46 million in Q1 2013. The main elements were average selling prices, which had a negative impact of $5 million, representing a 0.8% ASP decline, volume increase with a positive impact of $16 million, the variable cost had a positive impact of $11 million, primarily related to lower material prices and volume-related efficiencies. Inventories increased with a positive impact of $4 million.

Versus prior year, operating income Q1 2013 compared to prior year based on $16 million higher sales, or $15 million higher excluding exchange rate impacts, operating income decreased by $5 million from $50 million in Q1 2012 to $46 million in Q1 2013. The main elements were -- average selling prices, which had a negative impact of $18 million, representing a 3.1% ASP decline; volume increased with a positive impact of $18 million, variable cost decreased with a positive impact of $5 million, again, primarily due to lower material prices and volume-related efficiencies; fixed costs increased with a negative impact of $9 million; this is higher than inflation, however, Q1 of 2012 includes more extreme temporary cost containment measures that we found reasonable to do this quarter.

Selling, general and administrative expenses for the quarter were $91 million. This included temporary cost reduction and containment measures such as temporary furloughs and delayed salary increases which will not repeat in quarter two. However, if economic conditions worsen, we may resume these temporary measures. For the second quarter of 2013, our expectations are approximately $93 million to $95 million of SG&A expenses at current exchange rates. This is also our expectations for the coming quarters. It is somewhat higher than last year due to currency impacts and bonus expectations.

The expected normalized tax rate for the year, excluding unusual items, is approximately 31%. This rate is based on [assumed mix] of income among our various taxing jurisdictions. A shift in income could result in significantly different results. The GAAP tax rate, which includes the tax impact of the retroactive enactment of the Taxpayer Relief Act, was 27.6% for the quarter. Total shares outstanding at quarter end were 144 million. The expected share count for EPS purposes for the second quarter of 2013, based on the same average stock price as in Quarter 1, is approximately 151 million shares. For a full explanation of our EPS share count and variables that impact that calculation, please refer to the 8-K we filed this morning.

Cash from operations for the quarter was $23 million, capital expenditures for the quarter were $20 million, proceeds from the sale of assets were $1 million, free cash generation for the quarter was $4 million. For the trailing 12 months, cash from operations was $288 million, capital expenditures were $154 million, approximately 82 -- for expansion, $82 million; for cost reduction, $16 million; for maintenance of business, $56 million. Proceeds trailing 12 months from the sales of property and equipment were $8 million. Free cash generation was $143 million. Vishay has consistently generated in excess of $100 million free cash in each of the past seven years. Cash flows from operations were greater than $100 million for last 18 years and greater than $200 million for the last 11 years.

Backlog at the end of Quarter 1 was at $ 578 million, or 3.1 months of sales. Inventories increased quarter over quarter by $12 million, or by $16 million excluding exchange rate impacts. Days of inventory outstanding were 90 days, days of sales outstanding for the quarter were 42 days, days of payables outstanding for the quarter were 31 days, resulting in a cash conversion cycle of 101 days.

We had liquidity of $1.4 billion at quarter end. Cash and short-term investments comprised $985 million and unused capacity on the credit facility was $430 million. The breakdown of our debt of $395 million was $90 million outstanding on our credit facility, 95 of exchangeable unsecured notes due in 90 years. $210 million of convertible debentures net of unamortized discount issued and three tranches and due in 27, 28 and 29 years, respectively. The principal amount or face value of the converts is $575 million. No principal 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. The first quarter, after a quite difficult second half of 2012, showed clear signs of an economic recovery. Vishay's results benefited from better economic conditions as well as from improved efficiencies and some temporary measures to save fixed costs. We achieved gross margin of 25% of sales, operating margin of 8% of sales, adjusted earnings per share of $0.18 and GAAP earnings per share of $0.19. Not unlike prior year, we had the slow start in terms of free cash generation; we made $4 million in the quarter, but we nevertheless expect for this year the continuation of our traditionally strong performance.

Let me talk about the economic environment as we see it. After very slow fourth quarter, our markets began to recover in the course of Q1, driven by some restocking in distribution but also by improving end customer demand. All regions show improvements in business climate, in particular, Asia expects a normal cycle. Automotive continues to be strong in general. The [Asian] exception as we see it in France and southern Europe. Vishay's traditionally strong industrial market sector shows a recovery across-the-board, which of course is encouraging for us. Computing continues to be weak, in particular for notebooks. For consumer, we do expect a normal seasonality in 2013.

Distribution inventories continued to reduce by 7% versus the fourth quarter. Disti turns have normalized, 3.7 worldwide versus 3.2 in the fourth quarter. 2.5 turns in the Americas versus 2.3 turns in the fourth quarter, 4.8 turns in Asia, versus 4.5, 4.1 turns in Europe versus 3.5. The POS is up by 8% versus the fourth quarter, and I'd like to highlight that there is a positive book-to-bill ratio of distributors.

Talking about our business development, sales due to a strong month of March came in well within our guidance. We achieved sales of $554 million in the quarter versus $531 million in prior quarter and $539 million in prior year. Excluding exchange rate effects, sales were up versus prior quarter by $21 million, or 4%, and up versus prior year by $15 million, or by 3%. We saw a strong book-to-bill ratio in the quarter, was 1.14, 1.14, 1.24 for distribution, 1.04 for OEMs, 1.22 for actives, 1.07 for passives, 1.08 for the Americas, 1.26 for Asia, 1.07 for Europe. The Quarter 1 recovery was mainly for actives in Asian distribution, which has been the main area of decline in the second half of 2012. Our backlog has grown to 3.1 months, 3.4 in actives and 2.9 in passives. Order cancellations continued on a very low level.

We have seen a decrease in price pressure in the commodity part of the business; for Vishay in total, we have seen minus 0.8% versus prior quarter, minus 3.1% versus prior year. The decrease of the price decline was primarily due to actives; minus 0.9% versus prior quarter, minus 4.5% versus prior year. You will remember that this decline was much heavier in the last quarter. We continue to see relative stability in terms of prices in passives; minus 0.7% versus prior quarter, minus 1.6% versus prior year.

Some highlights of our operations, contributive margin at Vishay recovered nicely vis-a-vis prior quarter and came in well within our traditional range of between 46% and 48%. SG&A costs continue to be well under control; you have heard it, $91 million in the quarter is expected. Manufacturing fixed costs in the quarter were $121 million on the level of prior quarter. In the quarter, fixed costs in general, manufacturing fixed plus G&A, were favorably impacted by temporary cost saving measures, like for instance, the postponement of salary increases by one quarter wherever possible. Total employment at Vishay at the end of the first quarter of was 22,100, which represents an increase in the quarter of 2% due to increased production rates. We are in the process to expand our sales organization in Asia, namely in China, and we in the meantime have hired approximately 75% of the targeted additional headcount.

Inventory turns in the quarter were at 4.0, which is on the satisfactory level of 2012. Excluding exchange rate impacts, inventories in the first quarter increased slightly by $16 million, 1-6 million, equally in raw materials and in [dip] and finished goods, driven, of course, by higher production rates in the first quarter and expectation for the second quarter. Capital spending in Q1 was $20 million. We continue to expect capital expenditures of about $165 million in 2013 following the midterm requirements of our growth plan. It will be in the traditional split, more than $100 million for expansion and cost reduction. We generated in the first quarter cash from operations of $23 million, like prior year, we generated in the first quarter free cash of $4 million, as I mentioned at the beginning, versus $9 million in prior year. On a trailing 12 month basis, Vishay generated cash from operations of $288 million and free cash of $143 million. So, I think we can say Vishay remains a very reliable generator of free cash.

Let me come to resistors and inductors. Vishay's traditional and most profitable business has bottomed out in the fourth quarter and now shows recovery. We do enjoy a very strong position in the industrial and mill markets and are intensively penetrating the medical segment. Sales in the quarter were $165 million, which is 7% above prior quarter and 4% above prior year. The book-to-bill ratio in the quarter was 1.07, which is substantially improved from prior quarter where book-to-bill was 0.94. The backlog is on a quite normal level of 2.7 months. The gross margin improved quite nicely to 32% of sales, which is up by 3 percentage points from prior quarter due to better volume and of course, related to that, to better efficiencies. We have seen practically priced stability minus 0.1% versus prior quarter minus 1.5% versus prior year. Inventory turns, we had quite excellent 4.7 and as indicated by Ms. Lipcaman before, after the successful acquisition of the speciality businesses Huntington and HiRel, we recently signed a definitive purchase agreement to acquire MCB in France. A well-established manufacturer of specialty resistors and sensors with sales of about 3-0, $30 million. The acquisition expense, our European market position in the industrial segment and will -- quite well synergize with our successful [Spanish] divisions.

Talking about capacitors, our businesses is based on a broad range of technologies with a strong position in European and American market niches. It has a obviously bottomed out in the first quarter and starts to see signs of an upturn. Sales in the quarter were $106 million, 1% below prior quarter and 7% below prior year. Book-to-bill was 1.06, improved from 0.93 in the prior quarter. The backlog is on a normal level of 3.2 months. The gross margin came up. We have seen 23% of sales in the quarter, which is a 5% improvement versus prior quarter, which was depressed by temporary inefficiencies. Positive impacts came from improving yields as well as from a temporary inventory build. Selling prices in capacitors were burdened by some singularities versus prior quarter, but the long-term trend remains normal. We have seen minus 1.6% versus prior quarter and minus 1.7% versus prior year. Inventory turns at capacitors were at quite normal 3.1. We do remain confident for the midterm in view of increasing power and green energy applications.

Coming to opto products, Vishay's opto business consists of infrared sensors, couplers and LEDs, mainly for automotive applications. It contains a substantial share of customer design products, mainly sold to automotive and to industrial markets. The business has shown a high degree of stability during the recent downturn and is now back to growth. Sales in the quarter were $56 million, which is 11% above prior quarter and prior year. Book-to-bill was 1.08 after 1.03 in the prior quarter; the backlog is at normal three months. The gross margin improved further to 35% of sales, actually an improvement of 2% vis-a-vis prior quarter, mostly due to higher volume. This line has quite excellent turns of 5.4. The ASP decline year-over-year is normal. We have an seen increase of 0.8% versus prior quarter and a decrease of 2.8% versus prior year.

Coming to diodes, diodes represent a broad commodity business where we are the largest supplier worldwide. Vishay offers virtually all technologies, as well as the most complete product portfolio, and we are leading in particular in power applications. The business in the course of Q1 recovered quite drastically. With Asian distributions starting to restock, and business conditions in general improved. Sales in the quarter were $125 million, which was 7% above prior quarter and 4% above prior year. Book-to-bill came in at fairly surprising 1.28 after 1.01 in the prior quarter, and the backlog consequently has grown to 3.4 months. We are in process to increase manufacturing capacities to quickly work down the lead times. Gross margin was at 22% of sales, which is a substantial improvement again of 5 percentage points versus prior quarter, mainly due to higher volume and again, related to this higher volume, better efficiencies. The inventory turns were at quite excellent 4.6, price decline was normal minus 2.1% versus prior quarter and minus 3.8% versus prior year.

Last but not least, our MOSFETs line. Vishay continues to be one of the market leaders in the segment of low voltage MOSFETs, and we are process to complete our product offering also in high-voltage products. The predominantly Asian business with our customers in computers and phones in Q1 started to benefit from the recovery of Asian distribution and better economic conditions in general. Sales in the quarter were at $101 million, still 3% below prior quarter, 6% above prior year. Book-to-bill was strong though, at 1.22 after 0.9 in prior quarter, and the backlog has grown to 3.5 months. Gross margin was at 13% of sales, a 3% improvement versus prior quarter. Due to higher efficiencies, better product mix and lower fixed costs. Inventory turns were at 3.6, the price decline year-over-year was normal, vis-a-vis prior quarter it was minus 0.1% and vis-a-vis prior year minus 6.4%. The qualification of a new generation of high-voltage MOSFETs is ongoing, and we see beginning revenues there.

Let me summarize. I think Vishay has delivered a good first quarter with results above its business model. We for a contributive margins are back within our traditional range, mainly due to improved efficiencies. Fixed costs are kept well under control and benefited from temporary cost saving measures. The business conditions have recovered from a very slow fourth quarter and the majority of our customers, including distribution, is confident for the year 2013. We expect a normal business cycle this year, quite in contrast to the years 2011 and 2012.

Vishay, while maintaining its [doubled] earnings power, continues to work on its growth plan by expanding manufacturing capacities in critical lines, by strengthening R&D and designing efforts, by expanding its sales presence in Asia, by acquiring specialty businesses like recently MCB in France. Also, we are confident for the current year and expect for the second quarter further improved results. Based on current order trends, we guide to a range of sales of between $570 million and $610 million and similar gross margin percent and an improved operating margin. Thank you. We are open for questions.

(Operator Instructions)

Your first question comes from Matt Sheerin.

Thank you, from Stifel. Good morning, Dr. Paul. First question, you just mentioned in your guidance, I think you said that gross margin is going to be a similar percentage; does that mean it's going to be flat or will you see the normal contribution margin that you see on higher volumes?

We will see the same contributive margin, but as I said, the fixed costs in quarter one were favorably impacted by temporary fixed cost savings measures which automatically means, in our case, that we expect the same percentage while the sales will be growing, but of course the operating margin will improve in terms of percent. Gross margin will improve in absolute numbers, of course.

Okay, and that SG&A that you talked about going up a little bit, and also I think Lori mentioned that that SG&A number off of that $93 million to $95 million guidance, that will be sort of that level that you're expecting for the rest of the year; is that correct?

Precisely, yes.

Okay, and in your commentary regarding distribution, you said distribution inventories were down, I believe you said 7%, but sell out was up I think 8%. At this point, are you starting to see restocking take place? And is that the reason for that high book to bill in distribution which was over 1.2?

Well, we have expected some restocking already taking place in quarter one, which did not take place, obviously. Now, of course, there will be some restocking, but I think it's modest at this point. The sell through is not bad

Okay, and just lastly, I think you mentioned in your opto business that lead times were stretching. Could use talk about lead times generally? Your cost, your business, and is it stretching out in any other businesses?

Basically, we see stretching lead times on the semiconductor side. In diodes, as I mentioned, to a degree also in MOSFETs. Opto was one of the example also, but I think I highlighted really diodes and the MOSFETs. And we are going to expand our capacities, as we always do; not necessarily by increased capital, but we bring people back in short work wherever we add it. So, we are increasing, we hope quickly. In total, we have lead times, if you asked that, over 10 weeks for sure, depending on the line very strong

10 weeks on the active side?

Excuse me, sorry?

That's on the semiconductor side?

Yes, indeed.

Okay, all right, thanks very much

Thank you.

Your next question Shawn Harrison.

Hi, just wanted to get back to the temporary fix cost dynamic in the March quarter. How much on a dollar basis were the temporary fixed cost savings that will come back, I guess split both between non cost of goods sold and SG&A?

My safe (inaudible) indicates $7 billion -- okay, yes, $7 million

Okay, got you. And then looking back -- looking at the MOSFETs business the book to bill's a lot higher, but the PC market, at least the outlook for that business is still kind of weak. Could you maybe describe how you think about that business over the next 12 months in terms of whether you may need to take some additional cost-cutting actions. How quickly the high-voltage products will ramp to maybe offset some of the ongoing weakness within the PC portfolio?

Well, to be honest with you, we expected a more quick impact of the high-voltage business on our overall business in MOSFETs, but industrial markets were slow as you know, in the last, I would say half a year. And this didn't help our attempts to qualify, as a matter-of-fact. We have qualifications now, we will see increased revenues, and we continue to be confident that high-voltage will become a major part, or say a strong part of our MOSFET business altogether. We will see increasing revenues throughout the year. We do not plan to cut further fixed cost at this point in time in MOSFETs. We bet sale on the fact that we can -- we need more technical personnel to continue with our efforts to develop new products and to design in.

Okay, and then finally on the acquisition, is there a revenue aspect of that within the guidance for the quarter?

It will not -- excuse me? Well, it is not closed yet, it's not -- the $30 million are not taken into account, the $30 million per year.

Okay, so that's not within the guidance. And the margins on that business would similar to your existing resistor portfolio?

Yes, absolutely

And then I guess just on M&A, how is the landscape looking for other deals potentially this year?

We are pursuing other potentials, but we are looking, as you know, at this point for sure, for specialty businesses. And it is quite some work, it presents some work to find candidates, to evaluate them; but they exist, so we will continue on this route

Thanks so much, and congratulations on the improved results

Thank you

Your next question comes from Steve Smigie.

Great, thanks a lot. Just going back to gross margin, curious why you might not see some better leverage there. Wouldn't utilization go up and get better cost absorption on the guidance?

Basically, we expect this same relative margin, but we have to take in people now, obviously, and this is always a retraining effort also. But I think we are very well within our normal range already, but the real reason for the lower than maybe theoretically to be expected incremental performance is clearly the fact that we have to add back the end to temporary fixed cost savings. And this is the real reason, nothing else. It's not lack of efficiency, I was only commenting that you don't see even more of it's increased volume. Maybe, but at the point in time we have trained these additional people, but this is future. But for the second quarter, it's clearly the increased fixed cost which limits our incremental performance.

So, if theoretically, let's say you went to Q3 and you had flat revenue, would you see margin up there because you wouldn't have any of those temporary costs coming back?

The contributive margin depends on so many things. It's not only deficiency, it's the price, it's the mix. So, at constant mix and at constant price, it's obvious that people that you take in and train are better if the volume holds, which we believe

Okay, great. Can you talk a little bit about the competitive environment from a manufacturing perspective on high-voltage and low voltage out there? A lot of, I think folks are adding facilities or shutting down other facilities; just curious how you see that on the MOSFET side for the voltage, high-voltage FETs?

We believe that the competitive landscape has not changed dramatically. We see the same people we have faced since a long time. We see again, and everybody, all of us, we attempt to reduce our variable costs and quite successfully. You see that despite the fact that the prices go down in MOSFETs quite substantially, at least we can keep our variable margin percent quite nicely. And we do believe that our move towards high-voltage products will support that even. So, I do not see major changes in the environmental arena -- excuse me, the competitive arena.

Okay. And overall, you guys had very nice revenue for the quarter and then the guidance, it's been some mixed signals out there in terms of what's strong and what's not. It seems like some of the IT spending stuff is a little bit softer. It would seem to me typically industrial categories tend to lag an improvement in PC or IT-based activities. In this case, it almost seems like it's leading -- I'm just curious if this is sort of what you'd say is a typical pattern. Or help me understand the environment from your perspective.

At the moment, you know that Vishay, vis-a-vis others, is relatively stronger in industrial and automotive and maybe not so strong in other segments like computers, et cetera. At the moment, the overall market development helps us, let's face it. Industrial is quite strong, gets stronger everywhere, and automotive holds its place, especially for our customers. It's not so that automotive is beautiful around -- across-the-board, but in this case, we were -- our major customers have their major focus premium cars, and these are exactly -- this is exactly the segment which goes well at the moment. So, we see improvements in industrial and we see, at least for our customers, quite a stable situation in automotive also. So, it plays a little towards us in our favor at the moment.

Great. If I can ask just one last one, on the automotive segment you talked about, as you said, you guys have seen decent strength there, as have other folks. That's despite the, as you mentioned in your comments, despite the weakness in France and elsewhere in the auto market. Is the dynamic just that what's doing well out there is the high-end cars? We have a lot of the semi-content and once we --

Yes, exactly. Well, first of all, our main customers at the moment, I cannot name them, but is clear who, I suspect they are winners. They gain market share, which is good that we are aligned with the right people. Secondly, these people are focused very much on the premium cars, exactly as you say. And these premium cars, by nature, is not so strong, this segment, in the southern part of Europe. So, Vishay, in this case, sits in the -- on the right horse, so to speak, no question about it.

Okay, great, and congratulations on the nice revenue, guys. Thanks.

Your next question comes from Jim Suva.

Thank you, and congratulation to you and your team at Vishay. You were nice and clear and you said that, if I remember correctly, that the revenue outlet does not include any of the revenues from the pending acquisition.

No, it doesn't.

I just wanted to make sure. I think there were some comments made on the SG&A and the comments made for the remainder part of the year in that $93 million to $95 million. Am I accurate that that also does not include the pending acquisition?

Absolutely.

Okay. And then in doing so, with that acquisition, is the provide of the part of the company that you're buying, that company, is the SG&A profile similar to Vishay's, or is it a little bit more cost heavy because you're a much bigger company and work that down? Or how should we think about once we put that acquisition into the Vishay mode?

Can I say in general, it's typical. Smaller companies by nature have more overhead costs than bigger companies by nature if they produce about the same products. So, they -- of course there's the potential for synergies in this case, of course. On the other hand, we will have a very close look on the technical abilities of this company, and they're quite promising, so we will not cut in the wrong place, for sure not. But for sure, in total, it represents the potential for synergies.

Great, and then my follow-up is, with this acquisition, it's been a little while since Vishay's done in acquisition, now this one's pending and definitive agreement. Is it fair to say you're looking at folding this one in before making additional tuck-in acquisitions, or (multiple speakers) continue to do more.

Jim, really, I think our new strategy to go towards and go for specialty houses of limited size has the advantage that not only one division is burdened by an acquisition. That means really you can do a lot of things at the same time because different people have to deal with it. So, it would not limit our possibility to have at the same time another acquisition.

Great, thank you very much, and congratulations to you and your team.

Thank you, Jim

Your next question comes from Chris Stanley.

-- calling in for Chris Danley. Dr. Paul, you mentioned this quarter was strong on book to bill of 1.14. With one month under the new quarter, I wonder how the book to bill this tracking for the second quarter so far?

Don't want to talk about, but --

Would be strong, I would suppose.

Listen, I wouldn't sound this confident if this would be a disaster. It was, of course, not, so --

But it would be similar levels or better?

It's still strong, still strong

Got it, and then the second question is along the inventory levels. You mentioned they were low and you're seeing some restocking. If you were to split the improvement between restocking and end demand, what you think is contributing more to the improvement? Is it end demand or is it restocking?

There is no restocking, actually, because the inventories at distribution in quarter one went down, actually. So there was --

Overall?

Overall.

In terms of the improvement you're seeing in the business from the overall high-level perspective, you think it's more to do with restocking or more to do with end demand?

I think quarter two, by nature of things, will see more restocking than quarter one; quarter one was a decline in inventories. I could not imagine that quarter two we'll see another decline in inventories in that sense, and I'm talking distribution only. Concerning the remainder of the business, we don't have that visibility by nature. I can only guess. I think that inventories in the pipeline altogether, after a quite soft second half of last year, are limited, and distribution's not a singularity. I think we are not drowning in inventories in the complete supply chain

How does the overall inventory compare with the 2008, '09 timeframe? Is it close to that, below that, or?

No, there was a time in -- I don't know by heart, at the moment inventories are lower than that for sure.

Lower, okay. And how do see pricing --

May I say one more? Inventories, per se, is not the only criteria. What really -- it all depends on the POS level, obviously. So, if the business is higher, distribution for sure will afford higher -- has to afford higher inventory levels. So, just a comparison of the inventories would say that much, I think.

Got it, makes sense. And then how do you see the pricing environment evolving through the rest of the year so far?

Quarter four wasn't nice. You know that --

Right, right

In the commodity part of the business at all. Quarter one came in much better, as I tried to say. Passives, again, when I talk price decline, I really, in Vishay, I always am repetitive on that. I always talk about semiconductors. Our passives have developed, and we drove this into more a specialty kind of business where price decline is not such a subject. But of course, on the semiconductor side, we are exposed, like everybody else. It's true, the price decline has softened in the quarter one. We also suspected that to happen after such a big pressure, which we have seen substantial pressure in quarter four. Going forward, it depends all on the economy. If our predictions and the expectation of so many people hold, then I think we will continue to see just normal price decline. If it heats up, then we have seen situations that even price increases were possible in 2010. So, it depends very much on the economic environment, which we see positive.

Got it. And then the last question I had was on the lead time that you mentioned on the opto side. So, my question on there is, is it because there were some stronger orders in unique to improve capacity there, or is it that the customers are sensing that they need to put in orders to secure supplies before anyone else does? I'm trying to guess -- I'm trying to get an idea whether it's company specific or whether it's some behavior from the customers.

Well, first of all, it's really not so much opto. Where we see it, it is diodes and MOSFETs. But -- and book to bill ratio of 1.28, like we have seen in quarter one, you just cannot follow. Nobody can follow such a abrupt order intake, especially if things were escalating the second half of the quarter.

By nature of things, in a certain phase of an upturn, you always see people that just place orders to reserve capacity. That is not normal. But I do not think that this is the case at this point. I believe it's really so that people have reduced their inventories and it continued to reduce, and people just place orders to get the product first of all. And what we do in raising capacities is not that I start to build machines. This would be too late anyway. We really bring back people what they had to let go, we had to work short -- let work short in the time of the decline, which was basically six months. So, we will react quickly. It's part of our growth plan that we want in future to react more quickly to changes in the market. We do have some spare capacities built for certain critical lines, we have done that. So, we are quite confident that we can react to this sudden demand. The nature of the beast obviously more and more this sudden demand in commodities more quickly than we were able to a few years ago when it happened before.

Got it. Thank you.

(Operator Instructions)

There are no further questions at this time. I will turn the conference over to Mr. Henrici for closing remarks.

Thank you for your interest in Vishay Intertechnology. This terminates our quarter one 2013 conference call.

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