Good morning and welcome to the Vishay Intertechnology second quarter 2012 earnings call. My name is Melissa and I will be your conference moderator today. (Operator Instructions) After the speakers’ remarks, there will be a question-and-answer session. I will now turn the call over to Peter Henrici, Senior Vice President, Corporate Communications. You may begin.

Thank you, Melissa. Good morning. 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 second 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 discussion of factors that could cause the 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 that provides 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 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 second quarter this evening. On the Investor Relations section of our website, you can find the presentation of the Q2 financial information containing some of the operational metrics Dr. Paul will be discussing as well as a presentation on Vishay’s growth plan. Dr. Gerald Paul, will be presenting on Wednesday, September 5th, at the Citi’s Annual Technology Conference in New York. Now, I turn the discussion over to Chief Financial Officer, Lori Lipcaman.

Thank you, Peter. Good morning. I am sure that most of you have had a chance to view our earnings press release. I will focus on some highlights and key metrics. Adjusted EPS of $0.24 increased $0.03 quarter-over-quarter. We successfully sold a property vacated due to our restructuring activities recognizing a gain of $12 million. In the second quarter, we completed the repurchase of 13.9 million shares of our common stock. Including this most recent repurchase, we have spent $575 million to repurchase 44.3 million shares of our common stock since the fourth quarter of 2010. This represents 24% of our shares outstanding before we began the initiative. We pay a fixed cash interest of 2.25% on the face value during the lifetime of the convertible debentures. We chose converts as the more efficient way to finance and to execute substantial share repurchases rather than repay trading cash or using other forms of debt. Looking at the P&L; revenues in the quarter were $588 million, up by 9.2% from previous quarter, and down by 17.1% compared to prior year. Gross margin was 25.1%. Operating margin was 12.4%. Adjusted operating margin was 10.3%. EPS was $0.29. Adjusted EPS was $0.24. Our adjusted operating margin excludes a gain of $12.2 million recorded on the sale of a manufacturing facility in Belgium previously vacated as part of our restructuring activities. Our adjusted EPS excludes the after-tax effective this gain. In our press release, we have included a table which reconciles GAAP EPS to adjusted EPS. Reconciling adjusted operating income quarter two 2012 compared to operating income for prior quarter based on $50 million higher sales or $53 million higher excluding exchange rate impact, the adjusted operating income increased by $11 million from $50 million in Q1 2012 to $61 million in Q2 2012.…

Thank you, Lori, and good morning, everybody. Despite the fact that Q2 did not fulfill all expectations in terms of a further improving business environment, Vishay’s results continue to be solid and improved versus prior quarter. We achieved the gross margin of 25% of sales and operating margin of 10% of sales and earnings per share, adjusted earnings per share of $0.24. Our generational free cash is back to normal as expected as Lori pointed out, we have generated $53 million year-to-date and $45 million alone in quarter two. Let me talk about the economic environment. As all of us know, most markets currently are suffering increasingly from macro economic anxieties. And of course most of these are the concerns about the Euro. Its stability and its existence longer-term that seemingly starts to influence our customers. There are signs of a weakening even in the presently still prospering Central Europe in industrial and recently also in automotive market segments. There is principally an improved situation in the United States, but the positive trend of Q1 did not continue. We are currently seeing stability there. After a quite steep recovery of the Asian markets in quarter one, I reported about it, we now miss the seasonal order increase of June and July. The traditional Asian market segments of consumer and computing are suffering from weakening exports to the United States and to Europe. There is also a cooling of governmental spending in China. Governments globally have cut pecks on alternative energy programs but no question long-term the prospects are still good there. Distribution inventories continued trending downward by 3% in the second quarter after a 10% decrease in the first quarter. POS after a major improvement of 7% in Q1 remained virtually unchanged. The distribution inventory terms were in the second…

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

Your first question comes from Matt Sheerin [Stifel Nicolaus].

So a question Dr. Paul on your outlook guiding sort of flattish which is not big surprise certainly. Are we to assume though that you are expecting your active business to be up somewhat seasonally given the Asia exposure and some of the product exposure there in the passive business will be down seasonally?

Passives business was down somewhat only and on the actives I believe we would not see the same seasonal increase which we have seen every year because the order intake in the last 8 weeks especially in actives out from Asia was relatively disappointing, must say that. This is the time of the year where actives should really get the orders. So there will be more sales in actives. This is seasonal, but we do not see the same seasonality as in the years before.

And are you getting a sense that customers will just keep inventories at pretty low levels here and that we may not see much seasonality going into the fourth quarter, obviously realizing that there is not a lot of visibility right now?

Well, I think people if I understood the question right, people at the moment have tendency to reduce inventories even more is very limited. I think we have come down to a healthy level of inventories and distribution; visibility through the fourth quarter is low given the environment of course.

And do you see the pricing pressure that you seem to be seeing in most segments of your business; are you seeing that into the next quarter as well; you look like you are maintaining gross margins at the current level, but with some increased ASP pressure, what are you doing to offset that pressure?

Well, the ongoing cost reduction that we always had and at the moment part of the surprise decline which I reported about was due to our decision. So we took more higher volume business intentionally especially in resistors which normally doesn't so much price decline historically. So we decided to get into some additional volume business and at a lower price, I must say that, but beneficially for the bottomline. On the semiconductors yeah, I could imagine that somewhat more price decline will continue, but I do believe it will not continue at the rate which we have seen in the second quarter. There were some singularities also there.

And lastly, on the capacity expansion and could you be specific about where you are adding capacity; I believe it’s more in the active side, right?

Well, it’s everywhere. Its in our strategic product line, its in our specialty inductors like in the wirewound’s like in thin film resistor chips, like of course in MOSFETs, like in Diodes; its across the board, but only in specific product lines where we feel strong, where we feel ourselves to be a very important supplier to the market. We want to provide going forward capacity there.

But are there areas that you have excess capacity given that year-over-year a decline in revenue or you may need to cut capacity?

Well, from a [manning] standpoint, these are basically older products where the depreciation has come down dramatically already and from a [manning] standpoint we have adapt to the needs normally.

Your next question comes from Jim Suva [Citigroup].

I have two questions. The first is, can you just help us understand your capital structure and use of cash going forward and I believe in the last two years you did two converts you know, anymore need to do converts there, it seems like the converts was the function of the stock buyback but what are your cash flow kind of capital needs that you are seeing in the company going forward? And then the second question is can you just talk about raw material pricing like on the tantalum side what are your expectations for tantalum pricing going into your cost of sales? Thank you.

Well, Jim, it's obvious that going forward we continue to be, we will continue to be free cash producer like we always have been. On the other hand, it's true we are going to invest strategically more, this was part of our gross plan and I believe but you can also, you can mention the acquisitions also. All together we are going to spend more than we did in the past on equipment in this critical lines which I just talked about and we continue to look for strategic acquisitions mainly also in specialty products. But altogether if this was your question you will not see a change of our behavior. We are going to continue to be very reliable and predictable cash generator. What was this order second question was concerning about raw materials in tantalum. Well, tantalum prices tantalum powder prices continue relatively flat these days, since prior to time, simple to say a few month, we haven’t seen a big change. Normally, we would expect that prices decline a little these days, because of lower requirements but this is not the case as it appears. The manufacturing capacity in tantalum powders are adapted to the needs. So the prices stay relatively flat. This is our observation.

The next question comes from Shawn Harrison [Longbow Research].

Hi, it is Joe Wittine on line for Shawn. I wanted to ask about gross margins first. It looks like maybe just a little bit below expectation this past quarter, so I just want to be crystal clear that the key driver for that was ASP erosion maybe being a little bit higher than your expectations?

It's also inventory driven a little bit, total inventory. So really, if you want to look a little deep and I think Miss Lipcaman had said it before. It was really the selling prices which came down some what more than normal. It’ a little bit fixed cost which also minor. We could not completely and we said so. Part of the fixed cost savings in the first quarter were of temporary nature. So a little contribution of higher fixed cost came from there also as expected and then as I said, we reduced the inventories. There were some inventory related issues and all that may have led to one point if I could guess. I think it led to a point of gross margin which it would have been better. It's no secret also no mystery.

So a number of factors. So with inventories looking pretty washed out here and no expectations for significant more ASP erosions, you just kind of as look out beyond the third quarter, is your expectation for "typical" incremental gross margins in the low to mid-40s for the businesses or any other reason why would ---

There is principally no change, this is our incremental performance. So if we don’t reduce inventories dramatically, if we don’t add fixed costs dramatically, this is it that’s exactly the incremental performance 40%, 45%.

Then on the operating expense line that was a big positive this quarter. I think you were expecting $90 million plus I think you said you took down some bonus accruals, so I guess the question is assuming sales kind of trend flat over the next few quarters like a lot of people are anticipating, what would you expect operating expenses to do, could there be a step of sales reach a certain level that kind of thing?

We believe as Lipcaman said our CFO, next quarter to go that the SG&A cost go up a little to $90 million which I think in our history is still a very good number, and I think we can keep it there. I also see the possibility if the business should go down which not necessarily is the case and we do have some room to go back to the scenario of the first quarter say 85 to 90 somewhere.

And then finally a quick modeling question, just with the changes in the capital structure do have an interest expense target for the third quarter at this point?

Interest expense.

Interest expense should be about $6 million in quarter three.

Your next question comes from Steve Smigie [Raymond James].

My first question Dr. Paul seem like in the past you might have been more negatively impacted by (inaudible) in the past so you guys brought down your Euro exposure to revenue, may be this cycle versus some previous cycles where you seem like you had a little bit more?

No. Well we always said that we have a natural hitch concerning on the line of operating margin vis-à-vis the Euro. Of course if the Euro gets weak and you report in dollars, then the sales will go down inevitably, right. But on the operating margin, in the first approximation, we have a natural hedge because our distribution and sales between the two currencies, euro and the US dollar is approximately like the distribution in costs. Therefore and this was always the case. It came you know say more or less by chance in a way. It's like that, but it's the case since all times so to speak since I can remember.

With regard to MOSFET business, what would you say your peak gross margin could be if you had full utilization on the MOSFET, assuming the current mix. So you know what could you get up to in the current mix?

I will let (inaudible) to get back to you with this.

Okay and if you had a really successful ramp of the high voltage products, would it be higher.

The mid-20s, this was a range. Of course if the high voltage -- but the high voltage depends – the successive high voltage depends of course very much of the situation in the market segments we are selling these two, which is also which basic is industrial and of course if industrial does well, there is no law of nature that we should be limited at 25% gross margin. But this is our – I would say visible target to go back to higher volume with the new products to the mid-20s.

Okay within the low voltage space, have you seen any competitors become less aggressive in that market or try to back out little bit or is it pretty much?

I wish I could say that. I wish I could say that. No, it's tough competition, but it's not untypical. We have seen it in the past. If I compare the situation to previous times, I would say that the price pressure in MOSFETs, in low voltage MOSFETs has not gone up. I would even say from our standpoint, it's less stringent. But still it exists, no question.

And with regard to the auto business, I think you talked about some weakness there. Do you perceive that as being sort of temporary or is it some fundamental change. I mean I guess I would look at and China has been ultimately a big buyer of a lot of the cars and they've had some sort of negative stimulus several months back and then they sort of seem to reignite their -- some of their stimulus plan. So do we see a short-term wall here and then as the new stimulus comes back on line, for the overall economy, do you see those autos pick back up, any characterization will be helpful?

Well, I see when we talked about these record numbers of the last quarters, we basically referred for the most part to the Central European say the German car makers. They were so extraordinarily high that it would be a miracle if this was to be sustained forever. So it means at the moment what we see is something which goes from excellent to very good. This is how we see it at the moment. On the other hand it has to be remarked that the US car industry has and you know it better -- likely has recovered quite nicely which is then of course in the other direction. So when I say that it's some cooling of the car industry, that is a very careful first statement. I do not see there a substantial decline as we go forward, kind of falling off the cliff, not at all. It's only I would call it normalization, coming from historically high levels in Europe in particular.

Could you give some color just on ordering in Europe, would you say its, as we are approaching the month of August, are you seeing typical European order patterns ahead of at least a holiday or are they stronger or softer?

To judge business in summer, in Europe is always -- it's not completely easy. That you have seen Europe, the book-to-bill of 995 in the second quarter, was somewhat weak. And I do not expect a major recovery in the third quarter. It would be absolutely untypical. Is it worse than it was before. Well, not really from automotive what we discussed before, but from industrial I must admit we see signs of weakening which somewhat – but we are talking shades of grey somewhat stronger than normal than seasonal.

And then with regard to the softness we are seeing. Does this give you increase opportunities to get some good deals on some acquisitions?

Well don't want to be too precise about it. We have a few acquisitions under consideration and of course some slowdown can help for the price, but not for the principle bid, people must sell.

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

Thank you for your interest in Vishay Intertechnology. Melissa?

This concludes today's conference call. You may now disconnect.