Good morning, and welcome to the Vishay Intertechnology Third Quarter 2012 Earnings Call. My name is Melissa, and I will be your conference moderator today. [Operator Instructions] I will now 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 2012 Earnings 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 today. On the Investor Relations section of our website, you can find a presentation of the Q3 2012 financial information containing some of the operational metrics Dr. Paul will be discussing, as well as a presentation on Vishay's Growth Plan. Dr. Paul will be presenting on Wednesday, January 16, at the Needham Growth Conference in New York. Now I'll turn the discussion over to Chief Financial Officer Lori Lipcaman.

Thank you, Peter. Good morning, everyone. I'm 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 at the low end of the guidance. Our pretax results were as we would expect at these revenue levels, according to our business model. Due to a significant shift in the assumed mix of income among our various taxing jurisdictions for the year 2012, the expected annual tax rate increased to approximately 33%. At the end of the second quarter, we had anticipated a normalized annual tax rate of approximately 29%. This increase of the expected annual tax rate to 33% resulted mathematically in an effective tax rate of 45% for quarter 3. We see these relatively high tax rates as a temporary situation. An improvement in our pretax income, particularly an improvement in the profitability of our MOSFET segment, would result in a return to our typical consolidated tax rate in the mid-to-high 20s. Vishay generated free cash of $53 million in the quarter despite the lower profit level. This was supported by an inventory reduction. We paid down our revolving credit facility by $74 million. The carrying value of our debt is now in line with the carrying value before we issued the third tranche of converts in May 2012. Looking at the P&L, revenues in the quarter were $573 million, down by 2.6% from previous quarter and down by 10.2% compared to prior year. Gross margin was 23.3%. Operating margin was 7.8%. EPS was $0.15. We recorded no unusual items in quarter 3. Reconciling operating income quarter 3 2012 compared to adjusted operating income for prior quarter, based on $15 million lower sales, or $11 million lower excluding exchange rate impacts, operating income…

Thank you, Lori, and good morning, everybody. With the Asian markets missing their seasonal upturn, the third quarter became disappointing. Sales and, in particular, orders were clearly below expectations. Mostly due to its disciplined cost control, Vishay nevertheless achieved decent operational results and remained within its business model. Our gross margin were 23% of sales, and operating margin was 8% of sales. As Lori pointed out, the overproportional pressure on the MOSFET results burdened tax rate and earnings per share in the quarter. We achieved earnings per share of $0.15. The free cash generation of year-to-date $107 million remains solid. $53 million of free cash was generated in the third quarter. Let me talk about the economic environment. In the course of the third quarter, the economic situation in most of our markets deteriorated, following the weak trend of consumer goods in Asia visible already at the end of the second quarter. This obviously is a consequence of broad anxieties for the macro economy that have started to influence the end customers and also the supply chain. Growth perspectives in Europe are weak, driven also by the unresolved problems concerning the euro. This reduced optimism even in Central Europe, resulting in a further weakening of mainly the industrial segment. And of course, in Europe, also the seasonality of the business did not help in quarter 3. Generally, the U.S. market remains stable. There is a quite weak performance of Asian consumer markets like TV, notebooks, handsets and gaming. There's declining GNP growth in China and other Asian countries. We have seen the substantial cautiousness of Asian distributors. Despite principally reasonable inventory levels, inventory turns in quarter 3 were 3.4 worldwide versus 3.5 in the second quarter; 2.4 in the Americas versus 2.5; 3.5 in Europe versus 3.7; 4.7 in Asia…

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

Your first question comes from Jim Suva.

One question, and then the follow-up is just more of a detailed housekeeping one. On the first question, you talked about Asia kind of missing its seasonal uptick and a lot about gaming and things like that. Can you also talk about some of the other end markets, whether it be automotive and industrial? Are those seeing significant softening also? And then the follow-up question would probably be on the tax rate of 45%, if I heard correctly, that was a catch-up. So I believe that would be kind of a 1 quarter uptick in tax rate, if I'm correct. And if so, should we expect it to go back to the normal rate in Q4 and going forward, or we have a different tax rate going forward given what's happening in the economy?

Jim, do you refer to Asian markets only? Or just -- or across-the-board in your first question?

That's across-the-board.

Across-the-board. Okay, in Europe, I'll try to summarize. Europe, I'm talking Central Europe. You will forgive me, it's for us by far the most part of Europe, by far. And still the situation is not bad at all. Automotive continues to pull. They talk about a better year 2013 even 2012 has been. What has declined is industrial, which is also important for us. These are the most relevant, I would say, markets for us, at least in Europe. So a plus in automotive and a minus in a way in industrial. In the U.S., we see quite stable situation across-the-board. We see steady little growth, so we are quite confident in the U.S. And in Asia, as I said, these markets, which I named, were the disappointment of the quarter. And the remainder, industrial, I think it's still okay. But this is exactly the markets we want to get in more with our Growth Plan, Jim. Now maybe I'll try to answer the second question. Indeed, it was a catch-up. If you have more detailed questions, I will give it to my CFO. It's -- was catch up, indeed. From now on, you will see a more normal tax rate, north of 45%. And it's also clear, whenever we get to a normal income situation, geographically normal and product-wise normal, then we will go back to the 27% automatic. It's really automatic which we are used to.

Your next question comes from Matt Sheerin. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: So a question, Dr. Paul, on your commentary about distribution. It sounds like from the book-to-bill, and you had your OEM customers in EMS, it certainly sounds weak, but certainly not as bad as distribution. And is your sense that the distribution sell-through or point-of-sale, either in the last quarter or in the coming quarter, will be greater than what the distributors are taking on? So are you expecting another inventory reduction because they're being cautious here? And does that not reflect a true end demand?

I believe, at the moment, the true end demand is higher than what we ship to distributions, no question. They are reducing inventory. But -- and there is a limit for everything. I believe that, especially starting in the new year, there will be some push from distribution quite automatically. In Asia, it will not happen in January, February, but then it should come. And we count a little in this. It's not really a question on the European seasonality, which helps us normally in the beginning of the year. But principally answering your question, I believe distribution can only reduce so and so much. There will be an inflection point, relatively speaking. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And you talked about the gross margin erosion in the MOSFET business despite an up quarter sequentially. It sounds like ASPs have been hit. So the question is, are you chasing volume business at the expense of margin, being a cost leader there? Or are you trying to be more disciplined? And does that reflect your book-to-bill, where you're backing away from some of these lower-margin deals?

Matt, really, it's misleading. If you look at the gross margin development between the second and the third quarter -- I did it myself, as you can imagine. This is inventory-related. We reduced inventories there. And what you see that's relative, this decline of gross margins between the 2 quarters is heavily, practically, exclusively related to the inventory reduction, in this case. But your question is more principal, I would say. More principally speaking, we do not intend to be the price leader. We do not intend to and buy ourselves into the low end markets. In fact, all our efforts to get into the high-voltage MOSFET market is exactly the attempt to go the other direction. And this is ongoing. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then let's see. So you talked about sort of the -- given the revenue guidance for the fourth quarter, is that sort of a normal margin contribution? So would we expect in that 45% to 48% range in terms of impacts, so the gross margin will be lower by, what, 100 to 200 basis points or something?

Just take -- yes, we expect the regular contributive margin, yes. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then on the -- it sounds like SG&A is creeping up. There was -- could you maybe, Lori, break out that environmental liability issue?

Yes, she did. She did. It was $2 million. $2 million. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: $2 million. Is that recurring in the next quarter?

No, it's just a singularity. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So then net, you're looking at an add of about $3 million to $4 million in SG&A. Is that sort of in line with that expansion you talked about in terms of beefing up technical sales and that sort of thing?

No. I said at today's exchange rates. So Q3 was at a different exchange rate than we're experiencing, I think -- that we expected. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So the higher -- you're always pushing that number up, is that right?

Yes, correct. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Basically. Okay. And then, so -- and also, your commentary about the seasonality maybe playing out a little bit differently, where this quarter sounds like it's terrible. Is your sense that this could be the bottom here, particularly at distribution, industrial markets, more selling days, et cetera, and the March quarter will potentially be up sequentially?

Matt, as I said before, the visibility that the firm thinks that it can rely on is not too high. But it is indeed my feeling that it's the fourth quarter represents the low point. But that's my personal feeling.

Your next question comes from Chris Danely. Sameer Kalucha - JP Morgan Chase & Co, Research Division: This is Sameer Kalucha calling in for Chris Danely. So, Dr. Paul, just sort of a historical perspective on things. You talk about inventories in the channel that are pretty lean right now and this dis [ph] would need -- I'm just curious, how did that pattern play out in 2008-'09 downturn? How does inventory in the channel compare to what it was in that downturn? And as you mentioned, you expect this dis [ph] to restock inventories. What do you think is the probability of a rapid snapback, so to speak, as we saw in -- after '08 or '09?

In the meantime, we got used to rapid snapback, so to speak. We had to get -- so at the low point of 2008 -- I talk out of memory, so don't quote me at that level -- the turns were around 3. At the moment, we are talking 3.4, which is a different world in all distribution. And 4.7 in Asia is not really something where they should step on the brakes, but it's their decision. I think they are destabilized also about the macro economy, and this is more than just electronics. I believe, principally speaking, I do not expect that the Asian distribution jumps in and gives enormous orders in the first quarter. I only try to say that I believe that during the first -- the fourth quarter, we have reached kind of a really low level for distribution, and I do not see much room for further inventory reductions. Sameer Kalucha - JP Morgan Chase & Co, Research Division: Got it. And just to follow up, in terms of -- you mentioned that the book-to-bill is point -- just below 1. I'm just curious about the linearity of the orders during the quarter. It clearly has weakened from, say, July, August to September. Given you have already seen the month of October, how does the linearity trend in October compare to what you saw in Q3?

The book-to-bill, basically, the disappointment in the third quarter was in September, to say it. Because normally, in this special quarter, you wait for September. This is by far the most relevant month in the quarter. And September came in as a disappointment, obviously, as you -- as it materialized in our sales. In October, things are slightly better but not tremendously better.

[Operator Instructions] Your next question comes from Steve Smigie. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: I was wondering if you could talk a little bit about how we should think about OpEx going forward? Should it stay at sort of December levels? Or would we expect to see that continue to creep up as revenue moves up? Let's say, assuming that you're correct, December is the bottom, would that move up through 2013?

No. In our case, we don't go with reps. That means our SG&A costs are really independent, real fixed costs. They are independent of the sales level. So what could influence? It is, of course, inflation, wage increases around the world, exchange rate, of course, as Lori indicated before, which can go in both directions, as you can imagine. And then, of course, we have some programs. That is true. We have some programs to put in more R&D people -- we already have put in more R&D people, and some more sales people in Asia. On the other side, we also tend to say fixed costs in order to -- if we take out administration and we are used to do that. And maybe we are also have too much sales, too much salesforce in certain traditional segments. So there are movements in all directions. So there is no intention for us, absolutely no intention to bring up SG&A systematically. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Okay. If I look at revenue and go back to like June of '11, I have you at about $710 million of revenue. Would you say that declines here are pretty much entirely related to macro? Or are you exiting certain businesses that you wouldn't want to be in?

No. No, absolutely not. It's -- you are comparing it with which quarter, you said? Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Well, I just looked -- I don't have that -- obviously, roughly 1 year ago you had much higher revenue.

Oh, yes. This is purely economy, purely economy. We did not -- we are not aware that we lost major accounts. We did not give up any product lines, nor did we give up any customers or something like that. It's really the reflection of the economy. And you see, we are not completely alone in this development, obviously. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: I guess, looking at MOSFETs, if I look at the chart right, it looks like that business is up revenue-wise despite a pretty negative environment. So assuming we get some sort of computing recovery into the next year, would you expect to continue to see that business accelerate pretty nicely some time?

Yes. And especially on the MOSFETs, I would like to -- first of all, yes, complete yes. We were at very low end -- and we're starting to have new products in the low-voltage arena qualified. So I expect a recovery, not only by the economy, also by our own doing. And on top of everything, we want -- we are getting established in the high-voltage arena, so I definitely see Siliconix to trend up -- our MOSFET business to trend up in the quarters to come. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: And on the high-voltage side, obviously, there are some existing competitors, and we saw a press release from another competitor out there. Are there particular parts of that market that you think that you're specifically targeting, or will there be a certain amount of efforts to take share from other folks?

I think Vishay is present in very many segments of the industrial market with other products. And I think this will help us to introduce high-voltage MOSFETs to a broad segment -- a broad part of this industrial market. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Okay. And then just the last question is, just in terms of the overall pricing, do you think that sort of firms up going forward, or are you thinking that, that will still be under pressure for the next couple of quarters?

We are talking in our case primarily MOSFETs, right, primarily MOSFETs. Not -- past history is nothing, in fact, historically, nothing. It continues to be not much at all. So we are talking to MOSFETs. In the fourth quarter, we see a continuation of the price pressure. But as you say, it's a typical commodity business. That means as soon as distribution starts to order, as soon as we have left the low area of business, the low level of business, then automatically the prices will stabilize, as they have done in the past.

The next question comes from Jim Suva.

A quick follow-up. On your M&A strategy, can you just extrapolate a little bit more on that? Meaning, are you looking at small tuck-ins, maybe carve-outs from other companies versus more strategic acquisitions or public companies? Or how should we think about your M&A strategy and the focus areas of that?

We did -- nearly have said we are not picky. But there is, of course, a strategy behind. First of all, we concentrate on specialty products businesses. And we want to focus very much on mid-size and smaller companies in order to strengthen our various divisions. So we are not out to position ourselves, again, in a major way in the commodity arena. This is not the purpose of our doing. Our doing is really to get specialty businesses on board, which we did already and maybe there's a third one soon. So anyway, that means really if we are -- the form in which we can get it, whether it's a carve-out or a separate company, that is a matter of chance. It depends. And there is no preference on our side.

And relatively size expectations, any preferences there?

Our preference, as we indicated in our Growth Plan, is around, say, but this is a broad range, say, $50 million to $200 million or something like that per piece, so to speak.

The next question comes from Shawn Harrison.

I had a few follow-ups here. Sorry, I was late getting on. I wondered if you just had kind of an approximate percentage of what notebook PCs, tablet PCs and smartphones all separately represent as kind of a percentage of sales currently?

In our case, altogether?

Or even separately, just kind of a ballpark figure.

On the MOSFETs, I would say this is about 1/3 of our sales. And this is the most we -- MOSFETs is the most we sell into the notebooks. Tablets is lower than that, obviously. And what else?

Smartphones.

Smartphones. Look, I don't have these numbers exactly for you. But we can definitely discuss it in a smaller group.

Okay. Then my follow-up. I apologize if I missed this, but I know historically you've taken kind of some temporary cost-cutting actions in terms of periods of weaker demand. Do you see the need to do something like that going into the end of the year? Or is it kind of your belief that the market's bottoming out, that you don't need to implement short work weeks or turn back expenses as you...

In a way, we have done so. Of course we are affecting capacities. And whenever we can work short, we do work short. It normally takes fixed cost personnel together with the plant. And whenever we can close a plant by 1 week or 2, we do the same. This already is happening, but we would enforce it more and as -- if my optimism for the first quarter would not come true.

Okay. There's no permanent fixed cost reduction efforts that...

No, no, no. We are pursuing -- there is a shift change -- there is a shift between the fixed costs. We are bringing in more technical people. And as I tried to explain in the context of the Growth Plan, on the other hand, we are reducing it on the side of administration.

Your next question comes from Matt Sheerin. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Yes. I actually -- I was just going to follow up on the question that Shawn asked regarding your exposure to the notebook and PC markets. And just a question there in terms of your sense of that market. Obviously, we've had tablets taking share and then also there's Ultrabook and Windows 8 ramp. It seems like it's been stalled somewhat. And is your sense that, that market will -- is a -- is stalled somewhat, and that the Asian distributors and OEMs are taking a more cautious approach? Or do you think that's going to be a driver or a catalyst for that MOSFET business next year?

We are on such a low level that I cannot imagine that this will not be a driver just by normalizing to a degree. I know there's a lot of skepticism around the notebook future. I know that, of course. And maybe it will suffer because of the competing solutions. But what we have at the moment is such a low level that it may, I say, automatically, we will recover.

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

Thank you for your interest in Vishay Intertechnology.