Leanne Sievers - IR Keh-Shew Lu - President and CEO Rick White - CFO Mark King - SVP of Sales and Marketing.

Steve Smigie - Raymond James Gary Mobley - Benchmark Christopher Longiaru - Sidoti & Company Justin Lee - Robert Baird Shawn Harrison - Longbow Research.

Good afternoon, and welcome to Diodes Incorporated’s First Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today’s conference call, instructions will be given for the question-and-answer session.

[Operator Instructions] As a reminder, this conference call is being recorded today, Thursday, May 5, 2016. I would now like to turn the call over to Leanne Sievers of Shelton Group, Investor Relations. Leanne, please go ahead..

Good afternoon and welcome to Diodes first quarter 2016 financial results conference call. I am Leanne Sievers, Executive Vice President of Shelton Group, Diodes’ Investor Relations firm. Joining us today are Diodes’ President and CEO, Dr.

Keh-Shew Lu; Chief Financial Officer, Rick White; and Senior Vice President of Sales and Marketing, Mark King; and Director of Investor Relations, Laura Mehrl. Before I turn the call over to Dr.

Lu, I would like to remind our listeners that management’s prepared remarks contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions.

Therefore the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today and therefore we refer you to a more detailed discussion of the risks and uncertainties in the company’s filings with the Securities and Exchange Commission. In addition, any projections as to the company’s future performance represent management’s estimates as of today May 5, 2016.

Diodes assume no obligation to update these projections in the future as market conditions may or may not change. Additionally, the company’s press release and management’s statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms.

Included in the company’s press release are definitions and reconciliation of GAAP to non-GAAP items, which provide additional details. Also throughout the company’s press release and management’s statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income.

As a reminder, the results announced today are preliminary and are subject to Diodes finalizing its closing procedures and customary quarterly review by the company’s independent registered public accounting firm.

As such, these results are subject to revision until the company files its quarterly report on Form 10-Q for the quarter ending March 31, 2016. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 60 days in the Investor Relations section of Diodes’ website at www.diodes.com.

And now I’ll turn the call over to Diodes’ President and CEO, Dr. Keh-Shew Lu. Dr. Lu, please go ahead..

Thank you, Leanne. Welcome, everyone, and thank you for joining us today. During the first quarter, we achieved a 370 basis point sequential improvement in non-GAAP gross profit margin as a result of a full quarter of Pericom and improved product mix due to strong growth in our industrial and automotive end markets.

In fact, revenue from our automotive market grew over 60% from the first quarter 2015, reaching a record at 6% of revenue. As we further expand our presence in this growing market. The broader semiconductor market experienced greater than typical negative seasonality in the quarter due primarily to weakness in PC’s and smartphones.

Diodes’ revenue excluding Pericom performed better than the market due to increased content at key customers. The integration of Pericom remains on schedule from both a business unit and sales perspective, with these initiatives complete in North America and Europe.

Our efforts are now focused on China and the rest of Asia, which should be completed within the second half of this year. We are working very closely with customers and the sales channel in order to maintain consistent work flow and production throughout this process.

Overall, I am very pleased with the progress we have made so far and expect to further capitalize on cross-selling opportunities across a broader product portfolio and expanded customer base.

As we look to the second quarter, we expect to grow revenue sequentially and reduce operating expenses as a percentage of the sales as we benefit from additional cost synergies and operational efficiencies.

Diodes has a proven track record of integrating acquisitions and realizing the full value of the combined businesses to drive long-term profitable growth, and we have made great strides towards achieving this success with Pericom.

With that I will now turn the call over to Rick to discuss our first quarter financial results as well as second quarter guidance in more detail..

Thanks, Dr. Lu and afternoon everyone. Revenue for the first quarter 2016 was $222.7 million which included the first full quarter of revenue contribution from the Pericom acquisition, increasing 8% from the $206.2 million in the first quarter 2015 and 3.9% from the $214.4 million in the fourth quarter of 2015.

Excluding the revenue from Pericom, Diodes’ first quarter 2016 revenue was down 4.4% sequentially due to softness in the computing and communication markets in the quarter along with weak domestic demand in China.

GAAP gross profit for the first quarter 2016 was $64.2 million or 28.8% of revenue including $3.1 million of inventory valuation adjustments related to the Pericom acquisition. Non-GAAP gross profit excluding the inventory adjustment was $67.3 million or 30.2% of revenue compared to 26.5% last quarter.

This compares to GAAP gross profit in the first quarter 2015 of $63.9 million or 31% of revenue and $53.6 million or 25% of revenue in the fourth quarter 2015. The 370 basis point sequential increase in non-GAAP gross profit margin was due primarily to improved product mix and a full quarter of Pericom.

GAAP operating expenses for the first quarter 2016 were $62.8 million or 28.2% of revenue including $6 million for the Pericom and previous acquisitions related purchase price accounting adjustments. Excluding these expenses, non-GAAP operating expenses were $56.8 million or 25.5% of revenue.

This compares to GAAP operating expenses of $47 million or 22.8% of revenues in the first quarter 2015 and $60.4 million or 28.2% of revenue in the fourth quarter 2015.

Looking specifically at selling, general and administrative expenses for the first quarter, SG&A was approximately $39.5 million or 17.7% of revenue compared to $31.7 million or 15.4% of revenue in the first quarter 2015 and $41 million or 19.1% of revenue for the fourth quarter 2015.

Investment in research and development for the first quarter was approximately $18.1 million or 8.1% of revenue compared to $13.3 million for 6.5% of revenue in the first quarter 2015 and $16.4 million or 7.6% of revenue in the fourth quarter 2015.

Combined, SG&A plus R&D was $57.6 million or 25.9% revenue compared to $57.4 million or 26.8% of revenue in the fourth quarter 2015. Total other expense amounted to approximately $3.5 million for the quarter including $2.5 million of interest expense and $1.3 million of currency losses.

Income before taxes and non-controlling interest in the first quarter 2016 amounted to a loss of $2 million compared to income of $16 million in the first quarter of 2015 and a loss of $6.9 million in the fourth quarter of 2015. Turning to income taxes, our effective income tax rate for the first quarter was approximately 27.1%.

First quarter 2016 GAAP net loss was $1.7 million or a loss of $0.04 per share compared to GAAP net income of $11.1 million or $0.23 per diluted share in the first quarter 2015 and GAAP net loss of $4.8 million or a loss of $0.10 per share in the fourth quarter 2015.

The share count used to compute GAAP diluted EPS for the first quarter 2016 was 48.3 million shares. Non-GAAP adjusted net income was $5.9 million or $0.12 per diluted share which excluded net of tax $3.5 million of purchase price accounting costs and $4.2 million of non-cash acquisition related intangible asset amortization cost.

This compares to non-GAAP adjusted net income of $12.7 million or $0.26 per diluted share in the first quarter 2015 and $6.7 million or $0.14 per diluted share in the fourth quarter of 2015. We have included in our earnings release a reconciliation of GAAP net income to non-GAAP net income which provides additional details.

Included in the first quarter 2016 GAAP and non-GAAP adjusted net income was approximately $2.9 million net of tax, non-cash, share-based compensation expense. Excluding share-based compensation expense, both GAAP and non-GAAP adjusted EPS would have increased by $0.06 per diluted share in the first quarter.

Cash flow generated from operations was $25.5 million for the first quarter. Free cash flow was $11.9 million for the first quarter which included $13.6 million of capital expenditures primarily for the Chengdu site expansion.

Net cash flow for the quarter was a positive $18.6 million including the pay down of approximately $14 million of long-term debt. Turning to the balance sheet, at the end of the first quarter, cash and cash equivalents totaled approximately $237 million and short-term investment totaled $43 million. Working capital was approximately $571 million.

At the end of the first quarter, inventory increased by approximately $2 million from the end of fourth quarter 2015 to approximately $205 million, including Pericom's inventory and purchase price accounting adjustments of approximately $3 million.

Excluding the fourth quarter purchase accounting adjustments, inventory was up approximately $5 million with increases of $2 million in both raw materials and work-in-process and $1 million in finished goods. Inventory days were 117 in the quarter compared to the 115 days last quarter.

At the end of the first quarter accounts receivable was approximately $217 million, a decrease of $2 million from the fourth quarter. AR days were 89 compared to 90 last quarter. Our long-term debt totaled approximate $450 million, which includes $391 million borrowed for the acquisition of Pericom.

Capital expenditures for the first quarter were $13.6 million or 6.1% of revenue. Going forward, Chengdu will be included in our target model for CapEx, which will be 5% to 9% of revenue for the full year 2016. Depreciation and amortization expense for the first quarter was $25.1 million. Now, let's turn to our outlook.

For the second quarter 2016, we expect to grow revenue to a range between $230 million and $240 million or up 3.3% to 7.7% sequentially. We expect GAAP and non-GAAP gross margin to be 31.5% plus or minus 2%. Non-GAAP operating expenses are expected to be approximately 25% of revenue plus or minus 1%.

We expect interest expense to be approximately $2.5 million and our income tax rate to be 28% plus or minus 3%. Shares used to calculate diluted EPS for the second quarter are anticipated to be approximately 49.5 million.

Please note that purchase accounting adjustments for Pericom and previous acquisitions of $4.4 million after tax are not included in these non-GAAP estimates. With that said, I will now turn the call over to Mark King..

Thank you, Rick and good afternoon. Revenue for the quarter was up 3.9% sequentially, including the first full quarter of Pericom. Diodes' standalone business was down 4.4% quarter-over-quarter. OM sales were down 11%, while distributor POP was down 1% and POS declined 9%. Distributor inventory increased 2% in the quarter.

On a positive note, sales in Europe were up over 30% sequentially with record POS due to strong automotive and industrial sales. North America was also positive in the quarter. Going forward, we will report these numbers with Pericom included, now that we will have full quarter comparisons.

Turning to global sales, Asia represented 80% of revenue; Europe 11% and North America 9%. In terms of our end-markets, consumer represented 30% of revenue; communications 24%; industrial 21%; computing 19% and automotive was 6%.

The computing market remained soft in the quarter along with communications market in general weak domestic demand in China. On a positive side, we continue to make progress on our automotive and industrial initiatives with both end markets increasing sequentially. Let me now provide more detail within each of our end markets.

For the consumer market, we released a number of new products, including a 3.2 watt Class D amplifier for portable audio applications, a demux high-speed switch for display port and HDMI 2.0 video applications, a USB port detection device that can detect a wide variety of chargers currently available in the market as well as a dual differential mux/demux switch solution for the emerging USB Type C standard.

Also in the consumer space, we are beginning to see virtual reality become a hot emerging application this year with gaming driving the development of 3-D glasses and virtual reality goggles. We currently have HDMI and USB 3 ReDrivers designed into several market leading virtual reality systems.

Other key design wins in the consumer market include USB 2 mux and demux sockets in a USB flash drive, HDMI and DisplayPort switches for consumer display systems, a packet switch in UART for an advanced digital camera application as well as several RF LDOs and hall centers for wearables and IoT modules.

Design win activity was also strong in the communications market with key smartphone wins on super speed mux and demux USB switch, several hall sensors and a low voltage DC-to-DC converter.

We continue to see strong market acceptance of our CMOS LDOs for smartphone use in applications such as fingerprint sensors, hall sensor adoption for holster and cover detection as well as use of our broad portfolio of standard logic devices.

New product introductions for the communication space include a 2 megahertz high efficiency synchronous buck converter that offers excellent line and load regulation in a family of RF LDOs, specifically designed for the high volume China smartphone market.

For mobile communication applications, including portable device charging, we released a family of 200 volt devices based on Diodes' innovative, synchronous controller platform, targeting a low to medium power AC charges and adapters.

Also aimed at improving the efficiencies of chargers and adapters, Diodes launched two new SPR devices in the PowerDI5 package with leading Class DF and leakage performance. Additionally, we introduced two high voltage MOSFETs and a family of 30 volt shielded gate MOSFETs targeting the wireless charging space.

And lastly, building on our close relationship with several smartphone customers, Diodes released several surge protection devices in Q1, two of which have industry leading performance.

For the computing market, we introduced a new 8 channel differential 10 Gigabit Ethernet ReDriver, an 8 channel PCIe ReDriver and a 4 bit auto sensing translator to support high-performance computing application.

Significant new design wins include a USB bus switch in a major notebook platform, a wide input range display port for a new PC workstation application as well as several new load switches and eFuse wins in storage devices and notebook. The Pericom acquisition will completely reposition Diodes in this market going forward.

As part of our focus on expanding our industrial market penetration, we introduced several key new products during the quarter, including our latest LED drivers for offline TRIAC mobile lighting applications. Additionally, our Pericom team released several new 8 and 16 bit GPIO expanders.

These devices provide higher drive capability, lower supply current and higher frequency operation in a small foot pin for applications such as power switches, push buttons, sensors and lighting.

We also released a family of new PCI UART IO bridges targeted for a variety of industrial applications such as factory automation, process control, instrumentation and multi-port data communication.

There was significant design win activity in the industrial space with key wins including a hall sensor and a Universal Level Shifter into smart e-metering applications as well as several large wins in the industrial control system.

We also had a very active quarter with new LED lighting wins, including more than 10 large sockets for LED retrofit bulbs plus wins for smart lighting, panel lighting and safety lighting applications.

For the automotive market, we continue to make great progress on our auto initiatives as indicated by our achievement of 60% year-over-year growth and reaching a record 6% of total revenue.

Our MOSFET, SPR and TVS product portfolios have gained strong traction across an expanding customer base, which is only further enhanced by the addition of the Pericom products.

During the quarter, Diodes further extended our range of automotive qualified MOSFETs with the addition of 60-volt and 80-volt rated products, featuring shielded-gate technology. Additionally, we launched automotive qualified versions of our industry-leading bipolar transistor products.

We also generated strong demand for our constant current, linear LED drivers launched last quarter for interior, ambient and courtesy lighting. These LED drivers offer a range of fixed output current options as well as excellent temperature stability and continue to find strong acceptance in a number of automotive lighting applications.

Overall, we continue to focus on the automotive segment through investment in new products as well as targeted customer development and we're well on our way to achieving our long-term goal of 10% of revenue.

In summary, we remain focused in the coming year to complete the integration of Pericom across our organization and sales channel, while capitalizing on cross-selling opportunities and cost efficiencies.

We are well-positioned with customers in each of our end markets with an expanded product portfolio and have achieved strong design win momentum to support our continued growth. With that, I'll open the floor to questions.

Operator?.

[Operator Instructions] Our first question comes from the line of Steve Smigie from Raymond James. Your line is open..

Great. Thanks a lot guys. Just want to say great job on the numbers here, with the PC and the handset weakness out there, surprised to see how strong the results were there.

I was hoping you could comment a little bit on any surprises, now that you had a full quarter of Pericom, any new thinking about what you have there, either revenue or margin opportunities?.

I think we did a pretty thorough investigation before we purchased it. So I don't think there is really any surprises. It's a little bit more deliberate business, a little slower to grow than our business, a little bit longer design cycle, but quite frankly, the product mix is quite good.

The customer interest and the customer interface in the key Pericom customers is quite good. Their penetration in the computer segment and their view of the computer segment is quite different from ours. So I think it's going to give us some very solid perspective where we can kind of position ourselves differently in that marketplace going forward.

So I think that's a very positive note. We're quite excited about the product line. We see some opportunities to drive their crystals a little bit differently than they've been driving them in the past years, and so far that fits well in to our standard products business and so on.

So actually we're quite excited about the organization and the people that we've brought aboard and so forth. So, so far, so good..

Great, thanks. And just wondering if you could talk about how you think about R&D spending going forward, are there more improvements to be made there or elsewhere in terms of overall dollars or juts curious how you're thinking about that as a percentage of revenue, say as we get in to later in the year and in to future years. Thanks..

Well, the R&D as a percent of their revenue is higher than ours. But when we're not intent to get rid of people, that’s not astrology, but what we do, we try to grow the revenue as fast as we can, so gradually bring down the percent, R&D as a percent of the revenue.

And it might take a little bit longer to get to 5% but it's not going to be much higher than our basic model, it just need to take time when the revenue or cost saving, all those start to effect and our revenue growth is going much faster than at the end as a percent it will go back to our biggest model..

And then just last question, can you talk about any updated thoughts on what you think seasonality might look like on a sequential basis going forward now that you've got the two businesses combined?.

Well, I think that seasonality is probably - go back to the same - no, last year but in the past, 1Q is low, second Q is higher, third Q is even higher than 4Q either slightly down, slightly down or perhaps that is you know last year is very strength year third Q, 4Q all the sudden is softer than it used to be but so far my feeling, personal feeling is we got that to all seasonalities..

Thank you. Our next question comes from the line of Gary Mobley from Benchmark. Your line is open..

In 2014 and '15 and even prior years, Q2 normally brought on a sequential sales gain of somewhere around 6% or 6.5% and that of course being driven by seasonality and here is the mid-point of your guide today for Q2 is 5.5%.

So I guess I would have expected a little bit more favorable seasonality in this particular Q2 just because of how drawn down inventories where in the channel presumably with your distributors directly to your end customers and what not.

So just talking about puts and takes in achieving the high-end of the guidance based on some sort of inventory restocking?.

Well, on the guidance, we get to is a 5.5% but we sure hoping we are - better number. But the overall market in the second quarter is still somehow soft then before, especially computing and the sales from market is still not really fully recovered and therefore we guide our growth at 5.5%..

Relating to smartphones and I'm not trying to get you to disclose a certain customer by any stretch of the imagination but the smartphone weakness that you’re seeing is it tied to one specific customer or is it more broadly based on market conditions?.

I would say that a little bit of both, it's hard to say, I mean, our smartphone penetration has been more narrow to a couple of the big names and big share things but we'll start to see that change because our position in China is changing going forward.

So, I would say when you have big customers and their cyclical then that is going to affect your numbers.

So we are not as strong, we've been more focused outside of China in our smartphone development previously but we are working on rounding that out a little bit this year and we think we have some great opportunities with some of our newer products..

Dr. Lu in the past, you talked about a goal of achieving 35% gross margin on $1 billion in annual revenue, if normal seasonal trends play out and market conditions don't deteriorate, one would expect you to be at that billion dollar threshold in 2017.

Is that the year when we see 35% gross margin?.

I sure hope so, if you look at 1Q, we are getting 30% and then we guidance second quarter 31.5% and if we’re thinking 3Q can continue growth, then this year we'd probably hit to higher than that, okay probably somewhere around you know I don't know the point yet but third quarter would probably should be up another notch compared with second quarter.

Then after that with the revenue growth, with capacity utilization improve, if you continue growth then I hope our next year we should be getting to that kind of amounts..

Last question I promise, I know the markets you compete in are very fragmented but if I'm not mistaken, you've had at least two or three competitors combining with other companies and you have a couple of Japanese IDMs either completely get out of the market or certainly reduce their emphasis on the markets in which you compete.

So are you seeing better pricing environment as a result of fewer competitors and maybe less aggressive competitors?.

Well, if you thinking - if you look at what we say, we say product mix right and that is really indicate something, okay and I'll let Mark to answer you the rest of the questions..

I think we see the potential for that. I think some of the acquisitions are relatively new and the market has been relatively soft.

So I don't think we've really seen a big impact of the ASP yet, but we have started to see is the impact of the access to customers and specifically some places in the automotive marketplace where there is overlapping competitive space where now they're looking - there is a solid reason for them to make a shift to a new vendor or to add a new vendor.

Now those aren't going to happen overnight but in the long run, in some of our key products we see that as a very, very significant opportunity. So both the two big ones in our space should have a positive impact on some customers that may have been less than excited to add a new vendor, so yeah we see it as an opportunity.

But we're not seeing any positive stuff on ASP line yet; I think there still has to be a tightening of the marketplace before we'll start to see that. And then over time, then we might never go back but we still have - that still has to play out..

Thank you. Our next question comes from the line of Christopher Longiaru from Sidoti & Company. Your line is open..

My big question has to just do with, can you tell us where Diodes’ process utilization rates were for the quarter, where did they improve, where did they maybe get worse and kind of what you're expectation is for how high you have to be to get to that 35% gross margin goal?.

Let me answer some questions then I'll let Rick to answer the remaining, okay. Our business model is getting is 95% assembly and 80% wafer fab that's our business model. If we can get that and then press some of the ASP stabilization, we should be able to get to 35% model.

Now, 1Q actually is softer than 4Q from - if you look at that and so our utilization actually still goes down some but what we do in the Shanghai fab, we actually on Feb 1, we shut down one whole month of Chinese New Year month, which is February, so our Shanghai BCD Feb, 1 would shut down one full month to improve the utilization of the other two months.

And on the S Fab 2, we take a little bit longer Chinese New Year vacation. So a lot of action was taken right to improve the utilization in 1Q.

Then in 2Q, obviously the loading is getting better because we put in the growth in there, okay and so unfortunately Pericom growth would not help our loading because Pericom, the wafer is outside and the assembly still today, still outside.

The growth - the loading improvement will be coming from Diodes, so I know second quarter will be improved far and that is the answer..

This is Rick, I don't have those specific numbers for the life of fab and the assembly tests here right in front of me. So, I would get those and Chris I'll give them to you..

My only other question is, you talked about revenue expansion as the key to kind of driving the SG&A and R&D down as a percentage of overall sales, how much of kind of just the low hanging fruit did you - where you able to cut out in the March quarter, meaning just some overlapping general and administrative costs et cetera from Pericom and is there anything left on that front that's kind of included in the June guide or is the June guide kind of Diodes' proper?.

In the March quarter, actually the only thing we can eliminate is the overall cost, okay. Their Board Member is no longer there, that is the only cost we can really eliminate.

Now, going through in the second quarter, we will try to do something, but don’t forget we are not going to just do the consolidation and get the people, that’s not our objective. And some of the step, for example, we moved our office from our Diodes office to Pericom office.

But this office, we can now really get rid of it, so we settled these at much lower price. So [indiscernible] we can step more. For example, the [indiscernible] together, but they were one year contract. So for the long-term, allow the consolidation happen, we can get rid of a lot of SG&A.

But the problem is it cannot really happen over short period of time. So in short, 1Q not too much, but just the some of the bulk cost. Second quarter have a little bit, it still would take time to get major savings from acquisition of consolidations..

That’s very helpful. Thank you very much. I’ll jump out. Thanks for answering my questions..

[Operator Instructions] Our next question comes from the line Tristan Gerra from Robert Baird. Your line is open..

Hi, thanks for allowing me to ask a question. This is Justin Lee calling for Tristan Gerra.

So could you provide an update on the ramp of Fab 2 at BCD?.

The ramp of Fab 2 in BCD..

The ramp on the BCD Fab 2. We actually have two separate efforts. One is 6-inch portions. And 6-inch portion, it’s a new product start to ramp. And I remember the last time I looked at it, about two weeks ago, if I remember right, it’s about 70% of the utilization, two 6-inch line.

What we did is moved some of the capacity of 6-inch space to put in the 8-inch, so we are developing the 8-inch capability and production in the Fab 2 and currently we are in the DOE stage.

The process is almost there and equipment is already installed and we are doing the DOE and we believe we can qualify, and should go to production in 4Q this year and first capacity will be 3,000 wafer per month, and then we will kick off the second phase to go to about 12,000 8-inch wafer per month capacity.

So basically, we by shrinking the 6-inch then we can really improve the 6-inch loading, but at the same time, we are going to install 8-inch capacity and so we have a lot of 8-inch requirement on site and we can move in..

Thanks. That’s very helpful. And then my second question is about, in the guidance, there is 4.4 million accounting adjustment.

So could you explain where does that come from, because we have the same gross margin at GAAP and non-GAAP basis? So I guess that 4.4 million, does that fall into the operation expense?.

Yes, so are you talking about second quarter or first quarter?.

The second quarter guidance..

Yes, the second quarter guidance, that’s all asset amortization cost, intangible asset amortization cost after-tax..

I see. Thanks. And then my last question is about Samsung.

Could you give us an estimate of how many percent of revenue is coming from Samsung in the past quarter?.

We don’t really give those details, but they are not a 10% customer..

All right. Thanks..

Thank you. Our next question comes from the line of Shawn Harrison for Longbow Research. Your line is open..

Hi, everyone. Mark, I guess I wanted to make sure I heard this right.

Asset distribution was down 9% sequentially, is that correct?.

Yes..

Okay.

Did it improve during April or I guess what was the linearity of that as the quarter went on and how has April been?.

I have to tell you, I haven’t seen April yet, and actually POS was quite reasonable. I mean, it’s a narrow customer base that drove the POS down in Asia, very communicated based and computer based. And so we didn’t look at it.

And then again, in the first quarter, the China local was also our - China domestic was also soft, so it wasn’t that unexpected, but the good sign was that the POS remained relatively flat, so that people see the change going over. So we are expecting to see - I don’t know if I really - I guess, it’s in our guidance.

I think we expect to see an improvement of somewhere between 7% and 10% POS in the Asian marketplace. And again, in Europe, we had a record quarter with the highest POS month we’ve ever had and North America was solid and reasonably up slightly I believe. So it was very kind of expected from a POS perspective..

Well, don’t forget in the Asia, the first quarter had the Chinese New Year and most of our customers, which is a CM, they shut down for a long-term during the Chinese New Year. So if you look at one week or two week out of the whole quarter, that will give you a big drop on the POS point of view..

But the balance post the New Year holiday was generally what you anticipated coming into the quarter?.

Yes..

Okay. Second, I guess going back to an earlier question on Pericom, I think last quarter, there was an accretion forecast thrown out of around $0.05 to $0.08 for the year.

Is there an update to that $0.05 to $0.08 forecast?.

Yes, so I went back and looked that in detail and if you take out the purchasing accounting adjustments, all the fair market value, inventory write-ups, all of those, the accretion looks to be about $0.14 for the year.

Now that assumes that the - we don’t use their cash to pay-off any of the debt, it assumes we borrowed the full amount to purchase them. And so if you said - well, if you used their cash to pay off the debt, there is probably another $0.03 to $0.05 impact in there, and so it would be somewhere around $0.14 to $0.20.

So I kind of under-cited last time..

Sometimes it’s going to have an upside right?.

Yes..

We always look for upsides..

And then I guess on the debt repayment, should we expect all free cash generated going forward at least for the near-term to be utilized toward debt reduction?.

That’s the goal. I mean, we also have a stock repurchase plan out there, so we will determine whether we want to pay-off the debt or buy stock back. But if we don’t buy stock back, we will use the free cash flow to pay-off the debt..

Okay. And lastly, just I guess I would jag my memory.

Share count was down at least on a diluted basis sequentially, was that stock bought back during the quarter or is there some type of accounting dynamic that affected the diluted share count?.

Yes, it’s the accounting dynamic. When you have a loss, you can’t use your fully diluted shares because that would decrease the loss, so you have to use just the basic share count..

Perfect. Thank you..

So, Chris asked a question about utilization, and so I have got the numbers here right now. So the wafer fabs are running K Fab and O Fab are between 87% and 93%, so the two fabs. S Fabs are, S Fab 1 is about 55% and S Fab 2 is about 70%..

Yes, so S Fab 2 - S Fab 1, the reason 50% or low is because we shut down the whole February, the whole month, so only working two months..

And then SAT was about 75% and CAT was 95%. So we are - regarding CAT is Chengdu, SAT is the Shanghai Assembly Test..

And Shanghai, the reason is that revenue in 1Q is going down so the loading is softer. And again, it’s a Chinese New Year, hope that affected [ph]..

Right, it’s about where it was in the fourth quarter, I think we said 80% in the fourth quarter, so it’s pretty close to where were in the fourth quarter..

So we have a lot of potential upside if we can get to the loading up, when it start growing and we can get the loading up, our GP should be improving..

Improving, that’s correct..

Yes, and that’s why we were confident, if we can go back to the revenue - the growth should go back and the revenues there, we should be able to get 35%, as our business model is there..

That’s all the questions that we have in the queue at this time. So I would like to turn the call back over to management for any closing remarks..

Thank you for your participation today. Operator, you may now disconnect..

Ladies and gentlemen, thank you again for your participation in today’s conference call. This now concludes the program, and you may all disconnect your telephone lines at this time. Everyone have a great day..