威世科技 (VSH) 2016 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the third-quarter 2016 earnings conference call.

(Operator Instructions)

Thank you. I would now like to turn the conference over to Mr. Peter Henrici. Please go ahead, sir.

Thank you, Paula. Good morning, and welcome to Vishay Intertechnology's third-quarter 2016 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 will 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 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 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 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. On the investor relations section of our website you can find a presentation of the third-quarter 2016 financial information containing some of the operational metrics Dr. Paul will be discussing.

In January 2017 Johan Vandoorn, Vishay's Executive Vice President and Chief Technical Officer, will be presenting at the Needham Growth Conference in New York. 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 quarter three of $592 million. GAAP EPS for the quarter was $0.24. Adjusted EPS was $0.25 for the quarter. The third quarter includes an impairment charge of $1.6 million and restructuring charges totaling $1.2 million. During the third quarter we purchased approximately 800,000 shares of our common stock for approximately $10.9 million pursuant to the $100 million share repurchase program announced in May. This brings the total for the program to date to 1.3 million shares for $17 million. Since quarter end we have purchased another approximately 400,000 shares of common stock pursuant to this program.

In connection with the preparation of our quarterly financial statements, and as a result of the review of recent financial results and outlook for our MOSFET business, we recorded an impairment charge related to our silicon [ex-trade names] in quarter three. Also this morning we announced an extension of the MOSFET's enhanced competitiveness cost reduction program. We expect to incur an additional $4 million to $8 million worth of severance costs and to realize annualized savings of $7 million to $10 million, predominantly in manufacturing fixed costs. The result of the plan will be the cessation of manufacturing operations at our Santa Clara, California facility and will be completed by the end of 2017. However, we will maintain our R&D and management presence in Silicon Valley. The restructuring charges will not be recorded until quarter four.

During the third quarter we received a favorable determination letter from the US IRS, which is the final major regulatory hurdle to terminate and settle our US qualified pension plan. The receipt of the favorable determination letter had no accounting consequence to the third quarter. We expect to complete the termination settlement of our US qualified pension plan in December, which will result in a significant non-cash charge in Q4, but will permanently reduce annual pension expense by about $5 million per year and significantly reduce our risk.

Revenues in the quarter were $592 million, up by 0.3% from previous quarter and up by 5.6% compared to prior year. Gross margin was 26%. Operating margin was 9.7%. Adjusted operating margin was 10.1%. EBITDA was $96 million, or 16.2%. Adjusted EBITDA was $99 million, or 16.7%. Reconciling versus prior quarter, adjusted operating income quarter three 2016 compared to adjusting operating income for prior quarter based on $2 million higher sales, or $4 million higher excluding exchange rate impacts, adjusted operating income increased by $6 million to $60 million in Q3 2016 from $54 million in Q2 2016. The main elements were average selling prices had a negative impact of $5 million, representing a 0.9% ASP decline. Volume increased with a positive impact of $5 million, equivalent to a 1.6% increase. Variable costs decreased with a positive impact of $4 million, primarily due to cost reduction efforts and manufacturing efficiencies. Disc costs decreased with a positive impact of $2 million, primarily coming from our announced cost reduction programs and seasonal plant shutdowns.

Reconciling versus prior year, adjusted operating income quarter three 2016 compared to prior year based on $31 million higher sales, or $30 million higher excluding exchange rate impacts, adjusted operating income increased by $19 million to $60 million in quarter three 2016 from $41 million in Q3 2015. The main elements were average selling prices had a negative impact of $19 million, representing a 3.1% ASP decline. Volume increased with a positive impact of $24 million, equivalent to 8.9% increase. Variable costs decreased with a positive impact of $14 million, primarily due to cost reduction efforts, lower metal and material prices and manufacturing efficiencies, which more than offset the increased labor cost. In terms of fixed costs, our announced cost reduction programs offset salary and wage increases. Inventory effects had a negative impact of $4 million caused by an inventory reduction versus net inventory build in prior year, primarily at MOSFETs.

Exchange rate effects has a positive impact of $4 million. Selling, general and administrative expenses for the quarter were $94 million, higher than expected primarily due to environmental remediation costs. For quarter four 2016, our expectations are approximately $92 million of SG&A expenses at current US (inaudible) exchange rates. For the year 2016 we expect approximately $369 million.

I'd like to give you an overview of our cost reduction programs. This morning we announced an extension of our MOSFETs enhanced competitiveness restructuring program, which will result in additional cost savings of $7 million to $10 million when fully implemented. Charges for this program will be recorded beginning in Q4. Our previously announced ongoing global cost reduction programs are progressing as planned. As part of these programs we intend to lower costs by approximately $35 million annually when fully implemented at a cash cost of approximately $30 million. These programs include a plan to reduce SG&A by $17 million to be implemented at the end of 2016. The final run rate will only be achieved by the end of quarter four. The annualized run rate as of Q3 was $10 million.

We also plan to streamline and consolidate production of certain product lines, which we expect to reduce cost of products sold by approximately $18 million annually split 50/50 between variable and fixed costs. These production transfers will be completed in steps by the end of 2017. The amount of the [starting] expense recorded for these programs during quarter three was $1 million, or $20.7 million for the programs to date. More will follow in Q4. In total we made cash restructuring payments of approximately $8.3 million during quarter three and approximately $27.2 million year to date. We anticipate further cash restructuring payments in Q4, bringing the total for 2016 to $35 million to $40 million.

The year-to-date effective tax rate on a GAAP basis was approximately 28%. The normalized rate was approximately 30%. For the quarter's mathematically yield to GAAP tax rate of 28% and a normalized rate of approximately 30%. The normalized rate excludes the tax effects of the restructuring charges, impairment charge and the gains on early extinguishment of debt recorded in the first half of the year, and also includes $1.4 million for the quarter and $3.4 million year to date for the quarterly remeasurement of the deferred tax liability included for the cash repatriation program. We expect our normalized rate for the year to be approximately 30% as payments are normalized year-to-date rate. This rate is based on an assumed level and mix of income among our various taxing jurisdictions. A shift in income could result in significantly different results. The expected completion of the US pension plan settlement in December will result in significant non-cash pretax charges, which could in turn result in a significant change in the US GAAP effective tax rate.

Total shares outstanding at quarter end were 146 million. The expected share count for EPS purposes for the fourth quarter 2016 based on the same average stock price as the third quarter is approximately 149 million shares. Share repurchases during quarter four under our stock repurchase program would reduce this estimate. 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.

Cash flow from operations for the quarter was $118 million. Capital expenditures for the quarter were $30 million. Free cash generation for the quarter was $88 million. For the trailing 12 months cash from operations was $304 million. Capital expenditures were $142 million, but approximately for expansion $75 million, for cost reduction $14 million, for maintenance of business $53 million. Proceeds from the sales of property and equipment were $1 million. Free cash generation was $164 million. These shares consistently generated an excess of $100 million free cash in each of the past 10 years. Cash flow from operations were greater than $100 million for the last 21 years and greater than $200 million for the last 14 years.

Backlog at the end of quarter three was at $608 million, or 3.1 months of sales. Inventories decreased by $8 million quarter over quarter, excluding exchange rate impacts. Days of inventory outstanding were 86 days. Days of sales outstanding for the quarter were 45 days. Days of payables for the quarter were 32 days, resulting in a cash conversion cycle of 99 days.

We had a total liquidity $1.5 billion at quarter end. Cash and short-term investments comprised $1 billion and unused capacity on the credit facility was $484 million. Securing value of our debt of $361 million is net of the unamortized issuance cost of $12 million and includes $149 million outstanding on our credit facility and $224 million of convertible debentures net of unamortized discount issued in three tranches and due in 25, 26 and 27 years respectively. The principal amount of face value of the converts is $575 million. No principal payments are due until 2020. Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.

Good morning everybody, and thank you Lori. As we've seen, the third quarter for Vishay represented the continuation of a solid business year. Vishay achieved a gross margin of 26% of sales, adjusted operating margin of 10% of sales, adjusted earnings per share of $0.25 per share, and GAAP earnings per share of $0.24 per share. Despite substantial cash payments this year for our announced restructuring plans, we continue to generate free cash on a very good level.

Let me talk about the economic environment. In general markets in the third quarter remained friendly, with substantial variations between regions and industry segments. The major economic trends of the first half of the year to a large degree also in the third quarter remained unchanged. A relatively weak Europe continues to support European manufacturers, in particular the automotive and industrial segments. In historical perspective, overall growth in Asia and India and China remains relatively weak, but there are enough opportunities for growth also for Vishay. In the Americas the negative trends of segments related to oil and gas was relented. There is some stabilization, but no recovery yet. The US, on the other hand, continues to drive demand creation with fulfillment in Asia.

Talking about distribution. In general distribution across the board remains fairly confident. POS was flat versus prior quarter with some regional slowdown in Europe and strengthening in Asia. In particular in the Americas minus 2%, in Asia plus 7%, and in Europe POS went down by 7% in local currency. Inventory turns of distributors continue to run on a reasonable level of 3.2 vis-a-vis 3.3 turns in prior quarter. Some regional detail. In the Americas, 2 turns after 2.2 in the second quarter. In Asia, 4.5 turns after 4.2. In Europe, 3.4 turns after 3.8. Orders to distributors were slightly down versus prior quarter by 2% but substantially ahead of prior year by 9%.

Automotive in general remains strong globally. The industrial segment in general strong in Europe with some seasonal cooling in the third quarter, has stabilized in the US, and continues to be supported right governmental infrastructure programs in Asia in particular in the areas of power transmission and electric cars. Computers show a seasonal recovery. Mobile phones are soft in general with low cost manufacturers gaining share. Fixed telecom shows a split picture. Chinese suppliers enjoy strong growth, obviously at the costs of Western manufacturers. Medical markets remains strong. And AMS is stable. A remark finally about the consumer market. Air conditioning equipment after several quarters of inventory correction shows growth now.

Let me talk about our business. Sales came in in Q3 above the midpoint of our guidance. We achieved $592 million sales in the quarter versus $590 million in the prior quarter and $561 million in prior year. Excluding exchange rate effects sales in quarter three were $4 million, or 0.6% above prior quarter.

Sales were above prior year by $30 million, or by 5%. And by the third quarter of the 2015 had been negatively affected by the explosion in the Tiajin Harbor, you may recall. Book-to-bill in Q3 was 1.03 -- 1.1 for distribution after 1.03 in the second quarter, 0.98 for OEMs after 1.02, 1.03 for actives after 1.02, 1.06 for passives after 1.02, 0.97 for the Americas after 1.04 in the second quarter, 1.11 for Asia after 1.09, 1.02 for Europe after 0.98

Major orders for power capacitors were booked in the quarter to be shipped over the next several quarters. Backlog increased to 3.1 month from 2.9 months in the second quarter, actives 3.0 month and passes 3.1 months Order cancellations remain on a normal level We have seen normal price decline of 0.9% down versus prior quarter, and 3.1% down versus prior year. For the actives minus 1.5% down vis-a-vis prior quarter and minus 4.8% vis-a-vis prior year. For the passives 0.2% down vis-a-vis prior quarter and 1.1% vis-a-vis prior year, low price decline for the passives as usual.

Some highlights concerning operations. The contributative margin in the third quarter came in above the midpoint of our normal range of between 45% and 47% of sales. Efficiencies were good in general. And the restructuring project for MOSFETs reported good performance. SG&A costs in the quarter were at $94 million, above expectations, Q2 singularities is explained as before by the CFO. Manufacturing fixed costs for the quarter were $150 million according to expectations. Total employment at the end of the third quarter was 22,000, below prior quarter which were -- where the employment was 22,150 and below prior year where the employment was 22,650. As a consequence of our restructuring projects, fixed headcount continues to go down by 45 heads in the quarter after the reduction of 140 heads in the first half.

Excluding exchange rate effects inventories in the quarter went down by $8 million, $7 million in work in process and finished goods mainly in the MOSFET area, and $1 million in raw materials. Inventory turns in the quarter were stable at 4.2. Capital spending in the third quarter was $30 million vis-a-vis $37 million last year, $15 million for expansion, $3 million for cost reduction and $12 million for maintenance of business. For 2016 we continue to expect CapEx of about $135 million. We generated in the third quarter cash from operations of $118 million vis-a-vis $61 million in the prior year, $304 million generation on a trailing 12--month basis. We generated in the third quarter free cash of $88 million vis-a-vis $24 million in prior year, $164 million on that trailing 12-month basis. Despite anticipated $35 million to $40 million payouts for our restructuring projects this year, Vishay also in 2016 will show a respectable performance in terms of free cash generation.

Let me talk about our product lines. And I start out with resistors and inductors. Vishay's traditional and most profitable business continues on a good level. With resistors inductors we enjoy a very strong position in the industrial, auto and mill markets. HiRel Is very well positioned in the medical segment. We continue to grow in the Asian, predominately Chinese, industrial market as we planned for. Sales in the quarter were $191 million, virtually on the level of prior quarter but 10% above prior year and excluding exchange impacts. Book-to-bill in the quarter was 0.99 after 1.02 in prior quarter. And the backlog remains on a good level of 2.9 months. Gross margin improved to 31% of sales from 30% in the prior quarter, supported by better efficiencies in general. Inventory turns in the quarter were at very satisfactory 4.4 after 4.6 in prior quarter. The price decline for inductors and resistors remains low, minus 0.3% versus prior quarter and minus 1.7% versus prior year. And we continue to invest in the expansion of manufacturing capacities for power inductors, FinFet resistors and shunt resistors.

Now let me come to capacitors. Our business with capacitors is based on of broad range of technologies with a strong position in American and European market niches. Capacitors continue to suffer from the decline of the oil/gas sector, but enjoy increasing opportunities in the fields of power transmission and electric cars, namely in Asia and in particular in China. Sales in the third quarter at $84 million, virtually on the level of prior quarter and of prior year when excluding exchange rate effects. Book-to-bill in the quarter was 1.2 after 1.03 in the second quarter. I repeat that these numbers were substantially influenced by major orders for [thin] power caps for power transmission projects in China. The backlog increased quite drastically to 3.6 months. Gross margin remained at 21% of sales. Inventory turns were at 3.6, no change to prior quarter. We didn't see any price decline. In fact prices went up a little by 0.2% versus prior quarter and by 0.4% versus prior year. And we remain positive for the future growth of our capacitor business.

Coming to opto products. Vishay's business with opto products consists of infrared emitters, receiver, sensors and couplers as well as any [needs] for automotive applications. The business with infrared opto products represents one of Vishay's opportunities for growth, especially the segment of sensors where we now are even more competitive by having an owned competence in chip design. Sales in the quarter recovered further to $73 million, 7% above prior quarter and 4% above prior year, again excluding exchange rate impacts. The book-to-bill ratio of the quarter was 0.98 after 1.15 in prior quarter. Backlog decreased to 3.1 months from 3.4 months in prior quarter, mainly due to higher volume, gross margin increased to 33% of sales from 32% in prior quarter. We have caught up in opto products to traditionally good levels in terms of profitability. (Inaudible) excellent inventories turns we have seen here of 6.3 after 6.4 in prior quarter. We have continued relatively low price decline, with 1.1% decline versus prior quarter and 3.9% down versus prior year. We are very confident for this line growing steadily and profitably, in particular the segment of IR sensors.

Diodes. Diodes for Vishay represents a product commodity business where we are largest supplier worldwide. Vishay offers virtually all technologies, as well as the most complete product portfolio. We in particular are leading in power applications. The business has a strong position in the automotive and industrial market segments, and keeps growing steadily and profitably since years. We reached sales of $141 million in Q3, virtually on the level of prior quarter but 13% above prior year when excluding exchange rate impacts. The third quarter 2015, I say it again, had been impacted negatively by the explosion of the Tiajin Port, though. Book-to-bill ratio in the quarter was 1.06 after 1.02 in the prior quarter. Backlog is at 3 months, slightly up from prior quarter 2.8 months. Gross margin in Q3 remained at a quite excellent level of 26% of sales Inventory turns were at the very satisfactory level of 4.7 after 4.6 in prior quarter. At diodes we see normal price decline, 1.4% down versus prior quarter and 3.6% down versus prior year. Diodes over the years have developed into a very relevant and reliable contributor to P& L as well as to free cash.

Coming to MOSFETs. Vishay continues to be one of the market leaders in MOSFET transistors. MOSFETs in a few years suffer from the weakness of the computer segment and recently from a slowdown in mobile phones. Over the last years we, on the other hand, developed a good and growing position in automotive. Sales in the quarter were $102 million, virtually on the level of prior quarter but 7% below prior year when excluding exchange rate impacts. The book-to-bill ratio in the quarter was 1.03 after 0.94 in prior quarter. Backlog increased slightly to 3 months from 2.9 months in prior quarter. As a result of our restructuring program for MOSFETs, gross margin in the quarter improved nicely to 16% of sales from 12% in Q2. Without the impact of inventory reduction, gross margin despite still relatively low sales already, would have been above 18% of sales. Inventory turns in Q3 improved to 3.4 from 3.2 in prior quarter We have seen continued ASP decline of 1.9% decline versus prior quarter and 7% versus prior year.

After the successful completion of our announced cost reduction project which improved the cost structure of the line, we will now concentrate on accessing auto and industrial markets even more. Additionally we vigorously will exploit further opportunities for cost reduction. Please see the announcement of an extension of the MOSFET restructuring program in this context.

Let me summarize. Vishay continues on its way of steadily improving its results by growing organically while controlling tightly its costs in all segments. Free cash generation remains strong since many years, which provides the means for cash dividends, stock buyback programs, forward rejuvenating and continuously upgrading the organization, and for exploiting opportunities for accelerated growth through acquisitions. Our traditional focus on the automotive and industrial market segments has been extended to China, a move which starts to bear fruit and we feel really encourage in. There is a steady flow of new products coming from our R&D activities. We are well positioned to face the upcoming opportunities and challenges of our markets. For the fourth quarter we guide to a sales range between $560 million and 600 million and gross margin between 24% and 25%. Thank you for your attention. I turn back the call to Peter Henrici.

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

Ruplu Battacharya, Bank of America Merrill Lynch.

Good morning. Thank you for taking my questions. The first question is on gross margins. Can you just help bridge the 150 basis points decline sequentially, the guidance for 4Q? How much of that is because of lower revenue and how much of that is because of mix?

You mean from quarter three to quarter four?

Yes.

From quarter three from quarter four. First of all, the basic reason is lower sales, obviously. That is lower volume.

Okay. Is that accounting for all the 150 basis points or is there also a mix issue?

And of course we have some negative product mix vis-a-vis a very good third quarter.

Okay. Okay.

So basically -- so volume and mix both.

All right. Okay. Just wanted to also touch on the POS. I think you mentioned that the POS in Europe was down 7%. Just wanted to get some more color on that Was there any particular end market that was weak? What you think accounted for that?

It's very normal. It's very seasonal, very seasonal. The third quarter in Europe is really one of the more modest quarters of the year. It's very different from the United States and also Asia. But really in Europe we see it every year that the third quarter is down. Southern Europe is on vacation [where we see] it like that.

Okay. And then just the last one from me. You've announced a new MOSFET restructuring program What should we take as the new target gross margin for MOSFETs? And the $7 million to $10 million savings, is that a step function? Should we expect a step function layering of that, or how does it layer into your savings over the next year?

We had some considerations about that. With quite a modest growth, which we assume at the moment maybe too pessimistically even 2% per year, we could imagine to be noticeably above the 20% gross margin.

So is that (multiple speakers)?

After everything is implemented. No, after everything is implemented. Without taking -- taking out the impact of inventory reduction, we in this quarter already would have been at 18%-point something, 18.5% roughly. And I believe this with new target we can, even with modest growth expectations, these will be substantially above 20%.

So that 20% is the target for the end up next year? Is that excluding any inventory correction or is that even with inventory corrections?

This has nothing to do with inventory. It's at constant inventory. At constant inventory. And just to take a point in time, it would be really what we had in mind when calculating it the [first] quarter of 2018. So after everything is done.

Great. And sorry, this the last one. My question, is it a step function, layering of the $7 million to $10 million or is it a gradual (multiple speakers)?

It goes in steps. It actually goes in steps. So it's not gradual, but there are quite a few measures to be taken. And a few of them will of course kick in at a certain point in time. But it's not everything at the end.

Okay. Thank you.

Shawn Harrison, Longbow Research.

Good morning. This is [Gathia Chadry] on behalf of Shawn. Just piggybacking off the last question. Can you give us a little bit more color on why the additional MOSFET restructuring? And is any other restructuring being considered?

MOSFET is a commodity product. And we have seen that our traditional markets like in the telephones and in the computers, they were suffering in the last years and they do not really recover. In order to beef up profitability, we decided to take this next step in manufacturing, which in fact you can do without adding risk. It was a matter of sequence. So in the back of our minds we may have heard it before, but now we feel it's the right time to implement.

Okay. And are any other restructuring programs being considered right now?

The MOSFET manufacturing, this is what we intend to do. This really conclude any manufacturing in Santa Clara. And moving to a more beneficial places, financially, more beneficial places.

Great. And then with regard to the gross margin for this quarter, any specific factors behind that strong gross margin?

As I said, we had good efficiencies and also good volume And of course the MOSFET program helps The MOSFET programs in quarter three kicked in already to the full extent, really. And I believe that this all help together to have a 26%. So that's it.

All right. Thank you.

Jim Suva, Citi.

Thank you very much. On the restructuring and the impairment, are they completely unique items or are they related? And is there an impact to forward-looking gross and operating margins?

Hello, Jim. This is Lori. Of course in reviewing our financial situation at the end of the quarter and the results and the outlook of the MOSFET business, we determined that we wanted to undertake some additional or extend the restructuring program, as Dr. Paul explained. But the impairment was due to the outlook for lower volume than originally anticipated.

Okay. And is there a future impact on gross and operating margins?

Yes, an improvement.

As I tried to say before, at the moment we are running normalizing for inventory reductions of 18.5% gross. And we have in mind that we can calculate that, and we did so. After the completion of this new program we will be noticeably over 20% gross margin. And the timing is next year. That means in the first quarter 2018 we believe and everything is implemented, and we did not put a lot of hope for the sales can come. Hopefully (inaudible). We were only concerned with this time. So I think it's the right thing. Just to say, it also cost reduction opportunities we always explore it whenever we think they exist. So we would have done that anyway, this cost reduction as a matter of fact. Now was the time, and now we do it.

Great. And another quick follow-up. In a slower growth environment economically, which we are seeing, does that change your capital allocation priorities? Like does M&A become more interesting, or internal focused of improving profitability become more interesting? Or how should we think about your priorities for your capital allocation and management use of time? Thank you

First of all, I never saw this entire context. We always look for good acquisitions, and this is an opportunistic approach as it always has been. And to keep Vishay afloat, so to speak, even in bad times was always our strength. So we always look at these opportunities independently of the economic situation. But I must admit, when we acquire a company there is a cash payback calculation and it could be that in worse times the enterprises are more cheaply to pick up.

Thank you very much for the details.

Matt Sheerin, Stifel.

Thanks. Good morning, everyone. Just a couple questions from me, Dr. Paul. Regarding the strength that you saw in Asia, I think you said that was up 7% sequentially. And sounds like end markets there, particularly China. But how much of that do you think is a function of restocking or inventory replenishment? And are their concerns at all that you may see that decline in the next couple of quarters as customers bring inventory down?

I would say a part of it is seasonal, clearly. The same way as Europe in the third quarter is always suffering seasonally, the same you always tend to have a stronger third quarter in Asia. The trends I completely agree with you, there will be a normalization. It will not go through the roof.

Okay. And then on your overall cash position was up again. Could you remind us how much of that is offshore? And I know on the cash repatriation program that you have talked about, where are you in terms of, I think the target was $300 million? Where we on that program?

So Jim (sic), substantially all of our cash is offshore. I think it's a -- excuse me. Substantially all of our cash is offshore. And on the cash repatriation program that we announced in January, we brought back approximately $50 million this year. And we plan to continue the process for the next three years or so for $300 million.

Okay. $50 million so far, okay. And then on the MOSFET business, you talked about the margin expansion program through cost cutting. But that business has also continued to be weak. I know some of the end markets that you sell into there are weak. Were there other decisions to make, Dr. Paul, at some point about further restructuring or perhaps walking away from certain end markets that are just not growing, because if you look at your margins relative to other commodities, some of the other lines are still pretty weak, even with the 20%-plus target that you have?

On the other hand the MOSFETs is an important -- we have broad lineup by design. And the MOSFET business is an important addition to our portfolio, Matt. When I am with a commodity business, if you really reached the lower 20%s, but substantially above the 20%, then this is where diodes have been for a long time. Only now are diodes, they saw them coming up to 25%, 26%. But 20%, say 22% or something like that, is already something which brings value to Vishay, no question about it. And from a growth standpoint, I share your concern about the midterm growth of telephones and computers. But this is why we want to be strong in automotive. And in automotive historically we have never been. And now we are there. And we are ready have some 25% in automotive and we can grow that, I believe.

Okay. And just lastly, if you look at the [semi-auto] landscape you've seen, as you know, the massive consolidation, and even including many of your competitors that play in the automotive space, companies like IRF and others Fairchild. Is that trend that you are seeing, does that create competitive concerns or more competitive positions for Vishay? Or perhaps benefits because you continue to be focused with your product areas? What you think about that consolidation and what does that mean to Vishay?

Honestly. I am not so super concerned. I believe this concentration may even help to a degree an independent source like we are. I don't want to say too much more. But I would call it more an opportunity for us in particular than a threat. I don't want to comment too much more, but I think it's obvious.

Okay. All right. Thanks a lot.

This concludes the question-and-answer session for today's conference. I will now turn the floor back over to management for any additional or closing remarks.

Thank you for your interest in Vishay Intertechnology. That concludes our third-quarter conference call.

Thank you. This concludes your conference. Thank you for your participation in today's call. You may now disconnect.