KEM
#Yes.
[Let's go with that].
I'm guiding up.
We did $177 million, so I'm guiding up to where we ended this quarter.
And I ---+
But it is ---+ I can see what the Asian orders look like, of course.
And if I take that out, we still have strong order growth at this point.
So I do believe that the markets that the Q1 will be stronger, and I am putting out maybe cautionary guidance here, but I do think that we will see revenue growth in the quarter.
We will see the distribution channel returning to more normalcy, and we will also see the margins improving slightly.
The book-to-bill now, of course, since the bookings are very, very strong right now, and I say we are actually 21%, actually, if I were to be more precise, ahead of last quarter.
So the book-to-bill is kind of very high at this point.
But I'm discounting that a little bit because the bookings may come in a little early.
But I see continued activity, I see very strong design activity across the board, and I feel better about our prospects in this quarter than I did in the past.
So all these things I think are adding to a more optimistic view of where we see business going.
For ---+.
The segment is actually right at maybe a couple ---+ $10,000, $20,000 below breakeven.
But we expect that that will ---+ we will get to a breakeven position this quarter.
I think we are seeing revenue growth in that segment, and Europe actually is one of the areas where we are seeing revenue growth coming in.
And you're going to see some of these activities that we have taken in the F&E space have of course rolled into inventory.
So that's ---+ as they roll out inventory that will come and hit the bottom line as well.
I can't go into the detail on an individual basis, but of course what's left, if you looked at what's been announced between the US and Taiwan, of course we have the EU remains, Japan remains, China remains, Korea remains.
Brazil and Singapore remain.
And so the reserve estimate does take into account what the advisors are advising NEC TOKIN in regards to the potential liability associated with those jurisdictions that have not yet formally replied to the company.
So they have taken that into account when they've looked at this entire process for reserves.
No, if you add the ---+ what we actually added $20 million to the reserve ---+ or they added $20 million to their reserve this quarter.
They added $30 million originally in March of last year.
So that's in total reserves in dollar terms is approximately $50 million.
This accrual, of course, of $20 million is included in their results for the quarter, so that's a big piece.
They also have continuing legal costs as well that has been in every quarter throughout the fiscal year.
Let me just add some color to that.
Operationally, they continue to perform well, but of course the legal expenses are very high, as you can imagine.
And of course, the accrual hit is also substantial.
So the underlying operational performance is still as we expected when we started the year.
So that's a bit of good news in this whole spectacle, if you like.
Let me start trying to answer that.
We've seen of course an inventory correction, and what that actually means is that their POS sales are actually performing better than what we were able to stock into the channel.
So they haven't been stocking at what we would call POS levels.
But as the business now starts to stabilize, and actually we believe the POS is heading in the right direction for this quarter, that destocking process can't continue.
And in our conversations with our distribution partners, we definitely believe that our distribution business this coming quarter will improve.
And that is driven by stabilized to slight improvement in the POS and an inventory correction returning to more ---+ the inventory activity returning to more normal where POS and POA needs to be in balance.
So our comments are all based on POS/POA balance going forward.
And thus we can see an improvement in our distribution business coming relatively quickly here.
I gave you some dollars numbers as well to help you understand where those numbers are coming from.
But clearly if you look at a year ago, our distribution business was 43% of our total revenue; this quarter, it was 40% of our total revenue.
So you can clearly from that sense that the destocking process has occurred ---+ is occurring.
No, I think we are a very distributor-friendly organization.
We have excellent relationships with our distribution partners.
And we've been working with them for a lot of years, and we pride ourselves of being a real good partner to them in all areas across the globe.
We have made one change in how we approach this, and we have given the regional directors or the area directors, vice presidents across the globe, a more direct responsibility for their POS business.
Meaning that we will make sure that what the people in the field is pushing is not the POA of this business, but the POS.
And of course that will drive our POA business as well.
That was a volume issue.
Only volume issue.
You're going to see that returning again next quarter.
I think we will hear from one major country very shortly, and another major country within a month or so.
So I think we believe that the current accruals that we are taking is based on a lot less guesswork than maybe people will believe.
So I think we feel that these accruals are correctly placed.
And I don't know if we talked about that, but also in the Taiwanese case, that $18 million in fines will be paid out over time.
We see this ---+ the change in the tantalum business from Mn02 to polymer is of course happening, and then we see our polymer business growing and our Mn02 business declining slightly.
And I think we've seen that over the past quarters.
We think the Mn02 decline is somewhat stabilizing and the growth ---+ but the growth we will see will happen in our polymer business, which now account for more than half of our tantalum business.
I think the ---+ any power management solution is of course where we play best.
So anything that has to do with the cloud, anything that has to do with new applications in the automotive sector I think are areas where we are going to be very strong going forward.
Outstanding is the same amount that we actually had in the prior quarter; we didn't use any of the revolver for the year.
So it's about $38 million was outstanding during the quarter and about $22 million of availability.
It actually does assume some paydown of the revolver.
We are working on how much that will be as we approach the end of the fiscal year.
But yes, we expect to pay down some on the revolver.
First we have a few more jurisdictions that have to report and we get the final ---+ the final judgments on that.
And of course, it's a little hard to predict how long that will take.
We are seeing that happening sooner rather than later, but it may take more than a couple of months.
I think as we get clarity, which is the word we have used, we have a clear path to making the merger happen.
But for me to say more than I've said before that I think it is months rather than years, but exactly when that can happen will depend on what happens in the regulatory areas.
I certainly hope that we can close this in the calendar year.
We did.
I said that we thought that the full year would be somewhere between an $18 million to $21 million number.
We were at a little excess of $14 million year to date.
So somewhere in that, call it, $4 million to $6 million range for the fourth fiscal quarter.
We do.
We will plan ---+ we are planning to be in the same range next year.
That's correct.
We had, as you recall, if we go back to at least the first half the fiscal year, we had substantial amount of restructuring expenses, severance expenses, moving costs of equipment, etc.
, that did absorb quite a bit of cash.
That will not repeat in the next fiscal year, so we do expect to build more cash next fiscal year.
I won't say whether it's purchasing debt at discount as much as it is I think we need to be in a position ---+ we would like to be in a position I think as we go into the next round of restructuring of the balance sheet to have less debt on our balance sheet.
How we accomplish that is of course we will look at that at the time, but the goal would be to have less debt than we have today.
You know, there's always a lot of discussion about whether buying back stock is the right thing to do or not.
I think while we are at the level we are with our cash balance and with our debt balance, and with the cost of that debt, it may or may not be to the Company's best interest to do that.
But it's ---+ everything is always on the table.
So I'm not going to say the Company won't, but I am not going to put us in a position where it's something that I think shareholders should count on either.
It's certainly ---+ again, we always have those discussions, and it's a matter of looking at our cash and our cash flow.
And I think it ---+ since we haven't done it, I think you conclude that at the moment we've concluded that it's better for us to build some cash as we come out of a year where we had to have fairly significant demands on our cash from restructuring, to get out of that situation, built some cash and then determine whether ---+ what's the best direction for the use of that cash that we have on the balance sheet.
And I think we will determine that as we build some additional cash and take a look and see what's the best ---+ what creates the best value for the use of that cash.
Whether it's buying back bonds, whether it's to the previous questioner's ---+ to <UNK>'s question, is it stock, is it another investment.
What creates the best value for the Company for the use of that cash.
And also I think also when you look at all these things, what of course we take into our calculus is our view of the upcoming NT merger.
So that's always plays into all of these questions whether we should ---+ how we should spend the cash we have.
We believe at this point that we have a playbook, and I've said that I can't go into the details of what the playbook looks like.
But clearly it is our view that we do not need the capital markets to take the next step in this process.
I think we've said all along what our tantalum model is and what we need to ---+ we want to get our gross margins up to a 25% level.
And there is still stuff to do or stuff that will hit the bottom line coming into the F&E business.
And we are seeing some additional revenue opportunities in F&E coming to fruition.
The design activity is very intense, particularly in that space.
So I think we are seeing a path in our F&E business to improve that gross margin to what we previously have been expecting.
There are more stuff that will hit the P&L clearly.
Some have already been implemented, but have ---+ you know, has not made its way to the bottom line as yet.
And there are other activities that are being planned for the next couple quarters that will also have a positive impact on our F&E business in particular.
And I think the move from Mn02 to polymer is also positive track for us.
The polymer business is more profitable than the Mn02 business.
And therefore as we see the polymer business grow, that's going to have a positive effect on our bottom line.
Also we are now at a little less than 70% of usage of our vertical integration process for the [anos] that we need.
And we still believe we have at least another 10 percentage points of activity in that area that will come to impact our bottom line as well.
So I think we will ---+ yes.
Clearly when we look at these projections, we need to look what is the new normal revenue rate that we are going to see, given the FX situation in Europe and whatever we see in the market.
And as you can probably tell, at these revenue levels, A being profitable, B having a gross margin over 22% of these rates, and the new actions coming, we believe that we can get to a 25% gross margin level as ---+ with some revenue growth, but not significant revenue growth.
All right.
Thank you very much for being on the call and thank you for your interest in the Company.
And we are looking forward to this quarter; we are looking forward to seeing some increases in the demand across the board and an improvement in our bottom-line performance as well.
And hopefully we will close out ---+ we believe we will close out the year strong and looking forward to our next fiscal, when we hope many good things will happen to the Company.
So with that, I wish you all a good day and thank you very much.
