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Good morning, my name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vishay Intertechnology First Quarter 2018 Earnings Conference Call.
[Operator Instructions] I would now like to turn the conference over to Peter Henrici, Senior Vice President Corporate Communications. Sir, you may now begin.
Thank you, Regina. Good morning, and welcome to Vishay Intertechnology's First Quarter 2018 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'll start today's call with the CFO, who will review our first quarter 2018 financial results. Dr. Gerald Paul will then give an overview on 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 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 per share computation. On the Investor Relations section of our website, you can find a presentation of the first quarter 2018 financial information, containing some of the operational metrics Dr. Paul will be discussing. On June 12, Johan Vandoorn, Executive Vice President, Chief Technical Officer and Deputy to the CEO, will present at the Stifel 2018 Cross Sector Conference in Boston.
Now, I turn the call 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 1 of $717 million, at the upper end of our guidance, when adjusted for exchange impacts of $10 million and a recent acquisition.
In February, we acquired substantially all of the assets of UltraSource Inc., a U.S.-based thin film circuit and thin film interconnect manufacturer, which contributed about $3 million of revenues to the quarter.
EPS was $0.39 for the quarter, adjusted EPS was $0.40 for the quarter. The difference between GAAP EPS and adjusted EPS for the first quarter of 2018 are income tax-related items. There are no pretax reconciling items.
Yesterday, Vishay announced an increase of the quarterly dividend of 26% to $0.085 per share or $0.34 annualized. The significant increase demonstrates our commitment to return capital to Vishay's stockholders and shows confidence in the strength of Vishay's ongoing cash flows.
Effective January 1, 2018, we adopted several new accounting standards. Where required by the applicable new standards, prior periods have been recast to retrospectively reflect the impact of the standards. Recast statements of operations for each quarter of 2017 and the full year's 2017 and 2016 are included in the financial tables within our earnings press release. The impact of these new accounting standards on income before taxes was not material. Though the new standards impacted various individual line items, which slightly changed historical gross margin and operating margin calculations.
More detailed discussion of the impact of these new accounting standards will be included in our quarterly report on Form 10-Q, when it is filed.
During the first quarter, we did not repurchase any shares of our common stock, though we currently have an open purchase authorization. The open stock repurchase program does not obligate the company to acquire any particular amount of common stock.
Revenues in the quarter were $717 million, up by 6.4% from previous quarter and up by 18.5% compared to prior year. Gross margin was 28.6%. Operating margin was 14.5%. There were no reconciling items to arrive at adjusted operating margin.
EPS was $0.39. Adjusted EPS was $0.40. EBITDA was $138 million or 19.3%. There were no reconciling items to arrive at adjusted EBITDA. Let me reconcile versus prior quarter. Adjusted operating income quarter 1, 2018 compared to adjusted operating income for prior quarter, based on the $43 million higher sales or $33 million higher, excluding exchange rate impacts. Adjusted operating income increased by $22 million to $104 million in Q1 2018 from $82 million in Q4 2017.
The main elements were: average selling prices had a negative impact of $1 million, representing a 0.2% ASP decline; volume increased with a positive impact of $22 million, equivalent to a 5.0% increase in volume, which includes the UltraSource contribution; variable cost decreased for the positive impact of $4 million due to manufacturing efficiencies and cost reductions, which more than offset increases in labor costs, materials and metal prices; fixed cost increased with a negative impact of $6 million primarily due to wage increases, incentive compensation and more working days.
Inventory impacts had a positive effect of $4 million. Reconciling versus prior year, adjusted operating income quarter 1, 2018 compared to prior year, based on $112 million higher sales or $80 million higher, excluding exchange rate impacts. Adjusted operating incomes increased by $35 million to $104 million in Q1 2018 from $69 million in Q1 2017. The main elements were: average selling prices had a negative impact of $6 million, representing a 0.9% ASP decline; volume increased to the positive impact of $45 million, representing a 13.7% increase, again, including the UltraSource contribution; variable cost decreased with a positive impact of $4 million, again due to manufacturing efficiencies and cost reductions, which more than offset increases in labor cost, materials and metal prices.
Fixed cost increased with a negative impact of $4 million, primarily due to wage increases and incentive compensation. Inventory impacts had a negative impact of $2 million. Selling, general and administrative expenses for the quarter were $101 million. Our guidance of $100 million would have been $98 million when adjusting for the adoption of the new accounting standards. The increase in actual SG&A versus our guidance was primarily due to exchange rate impacts and incentive compensation.
For quarter 2, 2018, our expectations are approximately $103 million of SG&A expenses and approximately $408 million for the full year at constant exchange rates. We continue to evaluate the effect of U.S. tax reform on Vishay. Our U.S. GAAP tax rate for quarter 1 was approximately 32%. This includes amounts for the new U.S. tax on certain foreign income known as GILTI, and the limitation on deductibility of some of our interest expense.
As we disclosed at year-end 2017, we changed our permanent reinvestment assertion regarding unremitted earnings in certain key countries, which totaled approximately $1.1 billion at current exchange rates and have accrued appropriate incremental foreign taxes to repatriate those amounts. Even though the taxes accrued, the actual repatriation of those amounts is expected to be at a measured pace. Our U.S. GAAP tax expense for the first quarter includes an adjustment of $1.3 million for the remeasurement of the deferred tax liability, related to this incremental foreign taxes payable upon repatriation, primarily due to foreign currency effects. A similar remeasurement will recur quarterly until such amounts have been repatriated.
Our normalized effective tax rate excludes this remeasurement of the deferred tax liability and was approximately 31% for quarter 1, which is our expected normalized effective tax rate for the year. The net impact of the U.S. tax reform is an increase on our effective tax rate. This increase is higher than anticipated, primarily due to GILTI and a limitation on deductibility of some of our interest expense.
We continue to evaluate the provisions of the new U.S. tax law. We may, prospectively, adjust our financial and capital structure to reduce our effective tax rate. Our consolidated effective tax rate is based on the assumed level and mix of income among our various taxing jurisdictions. A shift in income could result in significantly different results.
Total shares at quarter -- outstanding at quarter end were 144 million. The expected share count for EPS purposes for the second quarter 2018, based on the same average stock price as the first quarter, is approximately 160 million shares.
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 $47 million. Capital expenditures for the quarter were $28 million. Free cash generation for the quarter was $19 million.
For the trailing 12 months, cash from operations was $372 million. Capital expenditures were $182 million, split approximately: for expansion, $90 million; for cost reduction, $20 million; for maintenance of business, $72 million. Proceeds from the sale of property and equipment were $1 million for the trailing 12 months. Free cash generation for the trailing 12 months was $191 million.
Vishay has consistently generated in excess of $100 million free cash in each of the past 12 years. Cash flows from operations were greater than $100 million for the last 23 years and greater than $200 million for the last 16 years.
Backlog at the end of the quarter 1 was at $1,499,000,000 or 6.3 months of sales. Inventories increased quarter-over-quarter by $27 million, excluding exchange rate impacts. Days of inventory outstanding were 79 days, days of sales outstanding for the quarter were 46 days, days of payables outstanding for the quarter were 37 days, resulting in a cash conversion cycle of 88 days.
We had a total liquidity of $1.8 billion at quarter end. Cash and short-term investments comprised $1.3 billion, and unused capacity on the credit facility was $452 million. The carrying value of our debt of $406 million is net of the unamortized issuance cost of $9 million and includes $184 million outstanding on our credit facility and $231 million of convertible debentures, net of unamortized discount issued in 3 tranches and due in 22, 23 and 24 years, respectively. The principal amount or face value of the converts is $575 million. No principal payments are due until 2020. However, the convertible debentures may be redeemed if certain stock price thresholds are met.
At the end of Q1, 2018, the convertible debentures due 2040 and 2042 are redeemable for the next quarter. Accordingly, for those tranches, we have reclassified the difference between the carrying value and the principal amount from stockholders equity to a separate line between liabilities and equity on our consolidated balance sheet.
If the debentures are converted, we would fund the principal amount with borrowings on our revolving credit facility and net share settled amount in addition to the principal amount. This criteria is measured quarterly and measured separately for each tranche and the amounts presented as temporary equity will revert to regular equity if the criteria are not met for that particular tranche of debentures.
Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.
Thank you, Lori, and good morning, everybody. Vishay continues to enjoy very excellent business conditions in virtually all of its markets. Record volume and good efficiencies supported the further substantial increase of profitability. We are also continuing to expand critical manufacturing capacities.
Vishay in the first quarter achieved a gross margin of 29% of sales, an operating margin of 15% of sales, GAAP EPS of $0.39 and adjusted EPS of $0.40. 2018 is also expected to be another strong year in terms of cash generation. Talking about the economic environment. Economic environment in the first quarter continued to be very friendly in particularly -- in all aspects. No major changes to prior quarters were to be seen.
In particular, our key markets, automotive and industrial, keep growing fast. Market demand continues to exceed available manufacturing capacities in several product areas, leading to shortages of supply. High order levels continue to be driven by distribution in all regions. Economic environment creates new business opportunities and allows more stable pricing. Concerning the regions, all regions continue to do well. In the Americas, the economic outlook remains strong and looks favorable for the remainder of the year 2018. Many industrial segments like robotics, lighting and energy metering do enjoy healthy growth. The oil and gas business rebounds.
The European market remains very strong and continues to be driven by the automotive and industrial segments, as strengthening euro does not seem to weaken growth in this markets. We see very strong Asian markets, mainly for industrial equipment, energy, infrastructure and automotive electronic equipment. The strong results in the first quarter defied the normal seasonality in Asia.
Talking about distribution. Worldwide distribution, also in the first quarter, enjoyed quite excellent business conditions. The POS increased by 14% quarter-over-quarter and by 22% year-over-year. Despite an inventory increase of 6% in the quarter, inventory turns of distributors increase to an excellent level of 3.8 in the first quarter as compared to 3.6 in prior quarter and to 3.6 in prior year.
In the Americas, to 2.2 turns after 2.1 in the fourth quarter and 2.2 in prior year. In Asia, to 5.1 turns after 4.9 in Q4 and 4.9 in prior year. And in Europe, to 4.5 after 3.9 in Q4 and 4.3 in prior year. The general confidence of distributors for the year 2018 is unchanged.
Commenting on the industry segments. Automotive continues to be the main driver of growth in our industry, with general electrification of the vehicle driving new programs in several sectors. Also, industrial markets remain strong across all regions and across a wide range of product segments. No change to prior quarters.
Fixed telecom shows some signs of recovery. Smartphones had some softening recently. AMS and medical continue to look positive, with steady growth expected for 2018.
Commenting on Vishay's development of the business. In the first quarter, sales, excluding exchange rate impacts and our recent acquisition, UltraSource, came in at the high end of our guidance. We achieved sales of $770 million versus $670 million in prior quarter and versus $605 million in prior year. Excluding exchange rate effects, sales in Q1 were up versus prior quarter by $33 million or by 4.8%, and up versus prior year by $80 million or 12.5%. The acquisition, UltraSource, contributed $3 million in the quarter. Book-to-Bill of 1.22 in the first quarter again was strong across the board. 1.28 for distribution after 1.4 in Q4. 1.16 for OEMs after 1.13 in the fourth quarter. 1.26 for actives after 1.40. 1.18 for passives after 1.15. 1.25 for the Americas after 1.14. 1.22 for Asia after 1.40. 1.23 for Europe after 1.23 in Q4.
Backlog in the first quarter increased further to an extremely high level of 6.3 months, coming from 5.9 months in the fourth quarter, 7.3 months in actives and 5.1 in passives. We currently see very low price decline, just 0.2% negative versus prior quarter and 0.9% negative versus prior year.
For actives, indeed, there was no price decline versus prior quarter and 0.9% versus prior year. For passives, 0.4% price decline versus prior quarter and 0.9% price decline versus prior year.
Some highlights concerning operations. In the first quarter, we were able to more than offset the negative impact of inflation and price decline on the contributive margin by cost reduction in innovation. SG&A costs in the quarter came in at $101 million, practically in accordance with expectations, when adjusted for accounting changes and exchange rates. Manufacturing fixed costs in the quarter were at $127 million, also according to expectations.
Total employment at the end of the first quarter was 23,400, 1.5% up from prior quarter, no surprise is the consequence of capacity increases for most of our product lines. Excluding exchange rate impacts, inventories in the quarter increased by $27 million, raw materials by $10 million and [indiscernible] finished goods by $17 million, again the consequence of a generally increased production output.
Inventory turns in the first quarter remained at a very satisfactory level of 4.6; capital spending in the quarter was $28 million versus $17 million in prior year, $15 million for expansion, $3 million for cost reduction and $10 million for MOB. For 2018, we expect CapEx of approximately $225 million, somewhat up versus prior expectations, due to exchange rate effects and some customer-specific requirements. We generated, in the first quarter, cash from operations of $47 million versus $44 million in prior year, $372 million on a trailing 12 months' basis. And we generated in Q1, free cash of $19 million versus $28 million in prior year; $191 million on a trailing 12 months' basis, despite higher than normal CapEx.
Coming to the product lines. I start as usual with resistors and inductors, which are Vishay's traditional and, since years, most profitable business and they continue to grow steadily. With the resistors and inductors, we enjoy a very strong position in the industrial, auto, military and medical market segments. Sales in Q1 were $245 million, whereby $3 million came from the acquisition of UltraSource, up versus prior quarter by $25 million or 11% and up versus prior year by $32 million or 15%, again excluding exchange rate impacts. All this, of course, reflects our efforts to increase manufacturing capacities substantially. The book-to-bill ratio in Q1 was 1.15 after 1.19 in prior quarter. This indicates continued growth, of course.
The backlog remained at a very high level of 5.1 months, indicating an unbroken high demand for SMD and fixed wire wound resistors as well as for power inductors. Supported by higher sales and some inventory build, gross margin in the quarter increased to 32% of sales after 29% in prior quarter.
Inventory turns in Q1 were at a very satisfactory level of 4.6. We have seen normal price decline minus 0.8% versus prior quarter and minus 1.1% versus prior year.
We continue to invest in manufacturing capacities of power inductors, metal strip resistors and thin film resistor chips as well as MELFs. And we continue to strengthen this product family by acquiring specialty businesses like, recently, UltraSource, a producer of thin film circuits focused on [ mill ] products with quite excellent profitability.
Coming to capacitors. Our business with capacitors is based on a broad range of technologies with a strong position in American and European market niches. We enjoy increasing opportunities in the fields of power transmission and of electro cars, namely in Asia, especially in China.
Sales in Q1 were at $106 million, 1% below prior quarter, but 10% above prior year, which excludes exchange rate effects. There was a strong book-to-bill ratio for capacitors in quarter 1 at 1.26 after 1.08 in previous quarter. The backlog for capacitors increased substantially to 5.1 months from 4.3 months in prior quarter. Gross margin in the quarter increased to 23% of sales from 19% in prior quarter, supported by some inventory build after an inventory reduction in Q4 and supported by a more normal product and customer mix.
Inventory turns in the quarter were at 3.7. Price decline was low. In fact, vis-a-vis prior quarter, there were price increases of 0.8% and versus prior year, there's a price decline of 0.6%. We continue to see numerous opportunities for growing the capacitor business, especially in Asia.
Coming to the Opto product line. Vishay's business with Opto products consists of infrared emitters, receivers, sensors and couplers as well as LEDs for automotive applications. The business represents one of Vishay's opportunities for mid- and longer-term growth. Sales in the quarter were $72 million, 2% above prior quarter and 4% above prior year, which excludes exchange rate impacts. There's a continued, strong book-to-bill ratio seen in Q1 of 1.24 after 1.22 in prior quarter. The backlog increased substantially to 5.2 month coming from 4.6 month in the fourth quarter. Supported by some inventory build, gross margin in the quarter came to a record level of 38% of sales after a dip to 30% in the fourth quarter. As you may remember, the previous quarter was burdened by inventory reduction in some unfavorable singularities. There are excellent inventory turns of 5.3 and a low price decline of 0.7% versus prior quarter and 2.4% versus prior year. We remain confident for this line growing steadily and profitably also in future.
Coming to diodes. Diodes for Vishay represents a broad commodity business, where we are largest supplier worldwide. Vishay offers virtually all technologies as well as most -- as well 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 [Audio Gap] after 1.34 in the fourth quarter. Backlog further increased to a record level of 8 months from 7.3 months in prior quarter. There are long lead times and there is -- there are shortages [Audio Gap] supply. Gross margin in the quarter remained at [Audio Gap] for the product line. Inventory turns remained at very satisfactory 4.8. Currently, we see no price decline in this line, a little increase of 0.1% versus prior quarter and an increase of 0.3% versus prior year.
We are expanding manufacturing capacities for all critical lines as fast as possible.
Finally, MOSFETs. Vishay continues to be one of the market leaders in MOSFET transistors. MOSFETs, over the last years, developed a strong and growing position in automotive. [Audio Gap] Sales in the quarter were $128 million, [indiscernible] above prior year without exchange rate impacts. Continued strong book-to-bill ratio of 1 [Audio Gap] 23, after a spike of 1.59 [Audio Gap] .3. Like for the diodes, we see long lead times and shortages of supply. Impacted by some inventory reduction, gross margin in the quarter was at 25% of sales after 26% [Audio Gap] turns of 4.6, price decline is very much reduced for the MOSFETs, a little increase of 0.2% versus prior quarter and then decrease of 1.5% versus prior year.
Also for MOSFETs, we are in process to expand manufacturing capacities.
Let me summarize. Vishay, after a very successful year 2017, had a very promising start into the current year. Approaching historical profitability records in stellar years like the year 2000 and the year 2010 [Audio Gap] a few applications like in the year 2000, nor a recovery from a general crisis like in the year 2010. We trust in an accelerated gross trend of our markets, in particular, of automotive and industrial for the years to come. And we prepare ourselves and continue to raise critical manufacturing capacities quite ambitiously, while remaining careful in adding operational fixed costs. Like our [Audio Gap] main customers and distributors, we expect another successful year 2018 concerning profits and free cash flow.
For the second quarter, we guide [Audio Gap] for the sales range between $740 million and $780 million, at gross margins of 28.5% to 29.5% of sales. Being confident about the continuation of a strong free cash flow also in the years to come, we decided to raise the cash dividend by 26%.
Thank you very much. I pass it back to Peter.
[Audio Gap]
A little concern on this elongated backlog and some [Audi Gap] record book-to-bills, any concerns on cancellations coming up or do you think it's just the lead time environment we're in? We're not going to see any easing in your backlog statistics for a number of quarters?
In order to answer your question, also in [Audio Gap] April, we had a very positive backlog of [Audio Gap] effect. We see broad and, of course, you can imagine that we [Audio Gap] at this point in time we have no reason to believe that this [ request is ] high demand will come down. There are shortages for so many product, for [Audio Gap] because at the moment the backlog is simply high and of course, there will be some double ordering included, but this does not concern me.
How much -- is there a way to think about, on a percentage basis, how much your capacity is increasing across the company, given the increase in CapEx forecast for the year?
It's, of course, just an example. We are going to invest for -- in -- for expansion this year about $120 million, which should be good for $150 million to $180 million sales depending on the product we invest for and whether we fix bottlenecks or we have to invest across the board for a line.
Okay. And then, I don't know if this is a question for you Dr. Paul, or Lori, but [ indiscernible ] your stock is up sharply this morning -- or up nicely this morning, and you had such a robust quarter and robust guidance. Maybe one could do the thinking of why there wasn't any buyback during the March quarter and kind of the comment on metered activity going forward, given the robust cash position.
Do you allow me to answer to the extent? So as a matter of fact, we just increased the dividend substantially. And of course, there are all kinds of considerations going on all the time. Dividend increase, I think, was a good first contribution to shareholder value, based on the -- this environment we have in any respect.
Is there a thought going forward? I know the -- bringing back cash to the U.S. was talked about on a slow basis, but is -- when should we expect that to accelerate, maybe?
Okay, so let me pass it on to Lori now.
Excuse me. So as you know, we announced the repatriation that we're planning of the $1.1 billion in quarter 4. We explained that we would like to do it at a measured pace, but we do plan to begin some activity already as early as a quarter 2. But it steps through several countries, as you know. So for it to come back to the U.S, it's likely to be in the second half of the year.
Our next question will come from the line of Ruplu Bhattacharya with Bank of America.
Dr. Paul, just to build on the capacity adds that you're having, can you kind of describe for us which areas you're adding capacity? And what I'd like to understand is, based on the demand that you see now, how quickly do you think your supply comes in line with demand? Is that in the next quarter? Or do you think that's -- it'll take significantly longer than that for supply to match demand?
Let me first of all give you the cheap answer, this depends on the demand of course also. But we add capacity successively. Every quarter, you see it from our sales numbers, since we started to invest in an -- at an accelerated pace. It was a first quarter last year when we started. We add capacity in many, many of our most popular lines, if I can call it like that, quarter after quarter. And at the moment, as we talk, we have many programs running, and so basically, what I said is $120 million approximately this year for expansion is just a snapshot. So we started programs that have been started last year come to fruit now. And you have seen our guidance. We -- our guidance goes up to midpoint of $760 million in the second quarter. This of course is fed by capital, which we have spent over the last 12 months. There is a focus -- we invest into diodes, we invest into the MOSFET capacity, very much also into resistors and inductors. So these are the focus points of the investments, but this is not new, and by the way, we will need this capacity going forward, regarding -- this regarding how the demand of short term will come, but at the moment, there is no weakening to be seen.
Okay, that's helpful. And then, can you talk a little bit about the pricing environment? Have you been able to raise prices on various different product lines? And are you seeing any pushback from your customers? Are you -- do you think you can raise prices even further?
Vishay produces specialty products and commodity products. We are talking really the commodity product area, which in worse times and less good times are always subject to price decline. And it's true, we are able to keep prices overall very stable at this times, which includes, of course, also price increases. On the other hand, we have some contracts -- we have continuous contracts which call for ongoing price reduction. But as the total is very close to 0 in many of these commodity lines, we also are able to implement price increases naturally, partially to distribution.
Okay. And then, maybe for my last question, I'd like to ask about the margins in Opto and MOSFETs. The Opto margins came back quite strong, but how sustainable is it at this level? And then, can you clarify what happened with the MOSFETs. I mean, I think revenue was up sequentially, but the margins were down a little bit. So was there any onetime items in the quarter?
No, it was inventory. First of all, it was practically the same. It was 1 percentage point difference, at -- basically driven by inventory movements. I'm very happy with MOSFETs, our history in the last years and our turnaround which we had for the MOSFETs. And what we have now is sustainable, no question. In fact, we want to increase capacity, which is never bad for the gross margin as a matter fact, right? This was one and what was the other product line. Opto?
Opto.
But we announced that practically. Opto's normal performance is around, don't quote me, by a point on 35%, 34%, 35%. Last time we were under and we had some singularities and an inventory reduction. This time it was the -- first of all, we had no negative singularities and we had some inventory increase. So all this circulates, oscillates around this 35%. So no surprise in any direction. Opto is a very profitable line and the average performance is around this 35% gross.
Our next question will come from the line with Jim Suva with Citi.
Pricing was better, which is great. Do you think this sustains for the next, say, 1, 2, 3 quarters? Or given the book-to-bill and backlog's so strong, it kind of seems like stronger than normal historical pricing should be sustained for quite a while.
Well, looking at the backlog level, I would agree that we will see good pricing, stable pricing for some time. It depends, of course, on the development of the economy, no question. On the other hand, given the situation as we see it, I would agree with you that we would see a more stable -- much more stable price environment for some time.
Okay, great. And then, for Lori, again, can you just help us better understand, you've got a stock buyback and your dividend increase is very strong, but not buying back any stock in the quarter was just kind of very interesting. Should we -- how should we think about that?
Okay. So as a matter of fact, I think, with some of our new tax laws in the U.S. and the fact that we announced a repatriation of cash, we're giving some careful consideration to how we want to deploy that cash when it arrives in America. And then, we are likely to continue with some activities in one form or another that would prospectively modify, potentially, our capital structure.
Okay. And my last question, Lori, did I hear correctly, you said it gets back to the U.S. kind of second half of this year?
Yes, yes. It -- I think you -- we explained that it goes through several countries on its way to the U.S. and it -- we would expect that the first flow of cash into the U.S. is likely to be in the second half.
Our next question will come from the line of Calvin Park with Stifel.
Question on the capacity expansion. I think you mentioned, of the [ 2025 ] for fiscal year $120 million will be devoted for capacity expansion. Could we just go over to what...
Approximately.
Approximately, yes. But could you be able to outline what that actually comes in terms of top line sales and unit capacity? And even looking further, if the current trends continue and looking into the first half of fiscal year '19, if you might potentially increase that level? Maintain the same? Just to get a gauge of what -- how the management team is strategizing that right now.
Well, on the average, but this is very different from line to line. For instance, if you have a foundry, you do not have to invest objectively as much if you want to increase your sales, but on average, it's not wrong to say that based on $120 million sales, you'll get between $150 million -- excuse me, $120 million capital, you get something like incremental $150 million to $180 million sales on average. And this will kick in as we go. Already the present increases from quarter-to-quarter were determined by capital spending of 2017. So of course it's a process, kind of. But if you ask me about the impact of these additional $120 million in the calendar year, then I would say, yes, between $150 million, $180 million more sales, depending really where we invest in the detail, yes.
And then, potentially into fiscal year 2019?
Yes. By nature of things, this will carry on. The impact of the present capital -- or the capital of 2018 will be seen then and available in the course of 2019. This course -- it's a consistent increase of our capacity quarter-by-quarter, really. So the second half of -- the second half of this year from a capacity output standpoint will be -- not from a sales necessarily, but because there are the working days also, but from an output standpoint per day will be higher than in the first half. For sure, this is a continuous program.
Right. And to follow up on the pricing program -- the pricing leverage, I know you mentioned distribution, you have levers to pull to increase pricing there, but long-term contracts have stipulated price declines. I know for some of the certain segments, you've actually seen increases in ASP. Do you see distribution pricing power? Do you -- to potentially increase in the coming quarters? And are there potential levers to pull in your fixed term [indiscernible] contracts to realize less of an ASP decline, given the current supply shortages situation?
First of all, when we have -- when we go for a contract and have concluded the contract, we honor that. We don't go back and renegotiate the prices on OEMs long -- longer-term contracts, we don't do that. Concerning distribution, for sure, I foresee, given the present situation, I have to foresee stable pricing for the quarters to come. There's no question about it. Maybe even price increases to a degree. Depends on the case and depends on the product line, of course. This is what I see, so I see quite stable pricing environment for some time to come, I do. Of course, if the economic conditions would change abruptly, which we cannot see at this point in time, this would have an impact by nature of things on the pricing of commodity products, especially starting in distribution, right?
I will now turn the program back over to management for any further remarks.
Thank you. This concludes our first quarter conference call. Thank you for your interest in Vishay Intertechnology.
Ladies and gentlemen, this concludes today's conference. Thank you all for joining and you may now disconnect.