Good morning. My name is Clea [ph], and I will be your conference operator today. At this time, I would like to welcome everyone to the Q2 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there would be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn the call over to our host, Peter Henrici. Please go ahead.

Thank you, Clea. Good morning, and welcome to Vishay Intertechnology’s Second Quarter 2015 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 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 question and answers. This call is being webcast from the Investor Relations section of our website at ir.vishay.com. The replay for this call will be publicly available for approximately 30 days. You should be aware that in today’s conference call we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of factors that could cause results to differ, please see today’s press release and Vishay’s Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared according to Generally Accepted Accounting Principles. We use non-GAAP measures, because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with GAAP measures that we also provide. This morning, we filed a Form 8-K that outlines the various variables that impact the diluted earnings per share computation. On the Investor Relations section of our website, you can find a presentation of the second quarter 2015 financial information containing some of the operational metrics Dr. Paul will be discussing. Now, I turn the discussion 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 Q2 of $590 million, below the range of our guidance. GAAP EPS for the quarter was $0.17. Adjusted EPS was $0.20 for the quarter. The second quarter includes pretax charges of $5.7 million related to our cost reduction programs. Yesterday we announced global cost reduction programs intended to lower cost by approximately $35 million annually when fully implemented. During the second quarter, we began the process of terminating and settling our U.S. Qualified Pension plan. All planned participants will have their benefits either converted into a lump sum cash payment on annuity contract placed with an insurance carrier. The completion of this process is contingent on receipt of a favorable determination letter from the IRS and in certain IRS and PDGC requirements which is expected to take at least one year. The primary purpose of this transaction is to reduce interest rate and investment risk associated with the plan that will offset results and some cost savings. There are no significant accounting consequences until final settlement occurs. Revenues in the quarter were $590 down by 0.5% from previous quarter and down by 8.0% compared to prior year. Gross margin was 24.0%. Operating margin was 7.50%. Adjusted operating margin was 8.4%. EBITDA was $89 million or 15.1%. Adjusted EBITDA was $95 million or 16.0%. Reconciling versus prior quarter, adjusted operating income quarter two 2015 compared to adjusted operating income for prior quarter, based on $3 million lower sales or $1 million higher exchange rate impacts. Adjusted operating income increased by $1 million to $50 million in quarter two 2015, from $49 million in Q1 2015.…

Thank you, Lori, and good morning, everybody. In general, Vishay in the second quarter experienced substantially less friendly economic environment than anticipated. We did not reach the projected growth of the top-line, what was achieved was a repetition of the first quarter which has shown solid results though. Vishay in Q2 achieved gross margin of 24% of sales and adjusted operating margin of 8% of sales, adjusted earnings per share of $0.20 and GAAP earnings per share of $0.17. We continued to expect for the year a generation of substantially over $100 million of free cash. Let me comment on the economic environment. After a reasonably strong first quarter several markets starting at the end of April weakened noticeably, respectively remained below our expectations. Asia did not deliver expected growth, impacted mainly by a significant suffering of the computer business and by unstable macro-economic conditions in China. In Americas, we still see an overall stable economy but a severe weakness in the oil and gas sector. European channel continues to benefit from a weaker Euro in particular exports of industrial products, but there are some concerns for a slowdown in automotive due to drops of exports to China. The inventory turns at distribution remained at a reasonable level of 3.4, some regional details in the Americas we have seen 2.3 after 2.3 in Q1. In Asia, 4.6 turns after 4.4 and in Europe 3.8 turns after 3.9. The POS of distribution dropped slightly quarter-over-quarter by 2%. What we see is some cautiousness across the board. We see a mixed picture for the industrial markets, with strength in Europe in particular for industrial, automotive and safety equipment quite solid in the U.S. except for oil and gas associate. But we do see some slowdown in Asia, whereby niche-size in smaller businesses…

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

Your first question comes from the line of Jim Suva.

Thank you very much. It’s Jim Suva from Citi. Could you mention briefly about the restructuring, if the restructuring is primarily due to the softer-end demand or more the integration of the acquisitions or what is always planned or just new because of the softness of demand?

It was really, as I said, it’s due to the softening of demand as a matter of fact. The integration is unrelated to that. We do have two major areas of restructuring. The first one, unchanged as we announced for MOSFETs and now it is additional and broader restructuring program in Vishay which goes against SG&A and other costs of goods sold cost.

Okay. And when you think about when you’re done with your restructuring, assuming end-demand remains kind of stable going forward and does that materially improve or dedicate. Would you put your gross margins comparable to what the company is normally operating at or higher or lower or how should we think about accident restructuring roll-out with what we are operating in gross margins?

No, as a matter of fact, it’s constant headcount. You’re always exposed to inflation to wage increases every year. So, until all this is impacted of course if volume came back to where it was at the moment immediately if we could take out the cost immediately, it would lead to an improvement of gross margin above trading margin. But by the end of 2017 we have to reduce the impact of inflation on wages and also non-people related costs. So less spend than the impact of the $35 million of course.

Great. Thank you. Thank you very much.

Your next question comes from the line of Steve Smigie.

Thanks a lot guys. So, just following up on the last question. So, if I were just to take $17 million from SG&A checking for the annual number, you used to buyback by 4, if that’s same this quarter, $94 million of SG&A if I’m billing straight for September. So, let’s just say, when the quarter after this is completed, the quarter year before benefit, would that be essentially $90 million except for what the inflation that you mentioned?

Of course, yes, that’s exactly true.

Okay, great. Okay. Just on the business outlook you talked about auto being strong but also about some fears about China. I was hoping you could talk about those fears about China. On the one hand I guess we’re seeing certain guys, maybe BMW something like that being light, but at the same time Mercedes being strong. Is this is a share shift or is this just overall just China being weak or maybe longer term?

That’s exactly it. If this weakness came - relative weakness came surprising for us, you see. We missed our guidance. So, in the course of the last 8 weeks, not only rumors but also rumors grew that China is weakening. And of course also the automotive part, which historically in the last years was the strongest market we served to is starting to question more than they did before the future in China. The actual numbers do not show that at this point in time yet, but there is a growing concern of the natural car manufacturers to high class car manufacturers that there may be some slowdown. Nobody talks about earlier capacity around the corner but some slowdown. And this is relatively new. But as you say, the general impression about the Chinese economy is less optimistic today I must say than it was a quarter ago.

It seemed like - I think the continental numbers were out this morning, I think they were actually pretty decent. So is this, at the same time it’s not related, it did a lot of other folks. So I’m just curious is it, are they just reducing say internal inventories like we’ve heard about the supply chain at this point and that’s causing the miss or?

I think automotive, actually if you took personal situation, we’re quite strong. We are talking about the hypothetical weakening which they fear more than they have feared say a quarter ago. We are really, Asia has weakened in this industrial area and the distribution is more cautious. This impacted our numbers in the second quarter. Automotive is more a concern going forward.

Okay. And then, same time I think your book-to-bill that you put out for China is above 1 so it seems like it’s slower but not necessarily all that bad. Is that fair?

That is fair.

Okay. And one last one, it looks like the Opto business is doing quite well I think, excluding, you said I think you adjusted the acquisitions and so forth about 7%. Can you, would you consider doing more acquisitions there or is it just the strength of what you acquired? It just seems like double down on that maybe.

As a matter of fact acquisitions are an opportunistic business. We constantly look and we feel that what we have done in the last years to complement certain divisions by specific acquisitions partially synergetic, partially due to new technologies we don’t have, is a successful way. And we are going to continue on this route.

Okay, great. All right, thank you.

Your next question comes from the line of Matt Sheerin.

Yes. Thanks. Good morning everyone. Just a couple of questions. Regarding the comments on the weakness in North America, the book-to-bill 0.93, I know Dr. Paul you talked about oil and gas weakness and distribution weakness. How much exposure do you have to oil and gas? And are you getting a sense that that’s bottoming out or could that get worse?

I had to guesstimate. But for us the weakness in distribution was more severe than what we have seen in the oil and gas sector, this is a very temporary effect. It was a decision of some distributors to lower obviously to come up to higher inventory turns which we have to respect. But we are talking about - in a certain form these distributors can channel into your supply to this sector oil and gas. So we just connected. Under distribution side of this, just temporary on the oil and gas. Here this is an entity to be seen at the moment of what is replaced.

Okay and it sounds like your sell into distribution was weaker than sell out, although you said point of sale was also weak. Are you getting a sense of distribution and maybe other customer inventories will be fairly low or lean leading into Q4 or perhaps Q1 of next year and we might get, maybe this is a little getting ahead of myself, but in terms of obviously these mini cycles where you have people over-correct on the downside where you could get better than seasonal quarter as people come and refresh. Are you getting any sense that that could play out?

I think this relative cautiousness of distribution will apply to change earlier this year than before. And I would agree with you that they help us not to have the same effect which we had two years in 2014 and 2013. So, part of this normalization may I say may take place now already. And in that sense I would agree with what you said.

And the guidance does that factor in continued ASP pressures? It looked like the price erosion you saw in passives particularly capacitors was as weak as I can remember. Are you factoring in continued pricing pressure?

We will not see as major change there at the moment. The second quarter was relatively high end as PD side, so I would suspect this maybe better in the next quarter. But principally speaking there is price pressure around.

Okay. And then could you remind us how much of your cash is offshore versus here and any, given where the stock is, any plans for doing another buyback or increasing the dividend? Or is that constrain because of the fact that most of your cash is offshore?

That’s what we normally do, things that’s what should be decided by the board I would say. But principally speaking, we hit the nail on the top. We are indicating certain form such positions because our cash is offshore. At the moment there are no plans in inventory share, the dividend as a matter of fact, stock buybacks are always possible and we would find ways if we decided so to finance them, there is no question like we did in the past. But there are no concrete plans at this point in time.

Got you. Okay. Thanks a lot.

Your next question comes from the line of Harlan Sur.

Hi, good morning. Thank you for taking my question. Backlog entering Q3 is pretty similar to Q2, but your revenue outlook is about $10 million lower here in the third quarter. So is the team just assuming, being a bit more conservative and assuming less turns business here in the third quarter?

It’s somewhere in Europe may I say, it’s somewhere in Europe. And especially passive entity, the European business does have this weakness in summer. It’s a modest reduction vis-à-vis the second quarter but we felt that especially Southern Europe is always will be somewhat softer in the third quarter. This is the real reason. We do not want to indicate a further softening of the environment. It’s more the expression of the fact that we go into summer.

Got it. Thank you for that, Dr. Paul. And then second quarter I would assume is usually pretty linear in terms of order trends. Can you just talk about the order linearity in Q2? And then can you just give us a sense for kind of current booking trends or book-to-bill here thus far in the third quarter?

I was sitting here three months ago and was really convinced that quarter two is going to be whatever we guided to, that means substantially stronger than in the first quarter. So, it’s absolutely true that shortly after that or around the kind we were talking that was starting a decline of orders. And out of this weakness as I said came from Asia in particular and from other places but Asia in particular which was not considered. So it’s really true what you say. That continuity of the order intake was not given in the second quarter. We had deterioration after April which was substantial. Now we are running at around book-to-bill of - slightly over 1 at the moment.

Okay thank you for that. And here’s my last question on the global cost reduction program, I think you said in answer to a prior question SG&A probably around kind of $90 million range in Q1, right, post SG&A restructuring. Now this is going to be on top of the $5.75 million per quarter in savings from the MOSFET manufacturing initiative which, yes.

Absolutely, all these programs are totally additive as a matter of fact. So whatever we are going for and we announced it in some time, in MOSFETs, it’s clearly sacred and traditional to the new program what we announced now which goes against SG&A. But also against other parts of manufacturing not the MOSFETs right. MOSFET is already ongoing the restructuring program, its additive.

Okay, great. Thank you.

Your next question comes from the line of Shawn Harrison.

Hi, good afternoon, everybody. Couple of follow ups to Matt’s previous questions, was the sell through of distribution was down 2%, how much was selling down then?

Selling down, POS is down 2% quarter-over-quarter, POS is down 2%?

What was the POA I guess?

Okay, POA let me see. It’s inventory this is what you really want to know right, inventory went still up slightly or until that’s slightly by I would say 2% approximately.

And then, it sounds from your previous comments, Dr. Paul, that you don’t expect much further inventory reduction in the September quarter based upon where the book to bill is right now?

I think we, there should be no further programs in Asia for instance. It’s certain the distribution, that could be that there will be further reductions of inventory but not dramatic.

And then I, the two of these seem interrelated, but within capacitors what exactly is driving the pricing pressures, is it increased competition, is there market weakness and do margins bounce back into the September quarter even if pricing remains weak?

We have seen weakness of price reduction for the most part in Tantalum capacitors by nature. This is the place where we say it’s really in the main commodity fields still. Normally we are more and complain in the special pieces, in resistors, inductors but especially also in capacitors. This really brought down the price. But this is an opportunistic pricing, you can have it both ways. This time we were suffering from lower prices, we can definitely beat it in the next quarter, it can normalize in the price decline. This goes up and down.

Okay, and then lastly maybe if you could help me out with the MOSFET business in terms of the key end market exposure. Historically I thought of it mainly being PCs and tablets and the other majority being smart phones and cell phones maybe both in pricing 40% of the business. Is that a right range, or is it shifted considerably?

I didn’t catch that, how much did you, it’s quite motive, became a nice part of it.

I thought each were maybe one-third to 40% of the business being?

Not quite, automotive, it’s somewhat less than what you assume for automotive. So we are still more than you thought in the computer business and in the telephone business. But automotive grows since years.

Okay. Automotive is a quarter of that business or something? Is it that?

Approximately.

Okay. Very helpful. Thank you very much, Dr. Paul.

Thank you.

Your next question comes from the line of Ruplu.

This is Ruplu from Bank of America.

Hi Ruplu.

Dr. Paul, hi how are you? Just to start, and just another question on inventory and distribution. When you look at this current level of inventory versus a year ago would you say that inventory is more now? I thought in the press release I thought I read that you’re anticipating an inventory reduction in distribution. Maybe if you could just talk about if there was an inventory build where was it, which product line, and do you expect that this fee would remain cautious or would that actually reduce more inventory?

That was great read, which I have in front of me. If I compare to a year ago, the inventory went down by approximately 3%. But we have to take into account the Euro, the weakness of the Euro which impact, which I would have to calculate now that. Listen, let me go through various inventories, so we would have in the Americas, we would have the same inventory level so there may be some room for further reductions. In Asia, we have approximately let’s see, slightly, very tiny more, a little more than so there is, so maybe in some room for production. And European Euro, is in Europe itself, have to compare because of the exchange rate changes. Europe is down substantially say by approximately 15%. But this can be effective for the devaluation of the Euros, so I would suspect Euro is quite stable if you took constant currencies, constant exchange rates.

That’s helpful. And would you say that there is, is there more inventories, in any one product line or is it just equal across the board?

I would say that changes. First of all I’m not so dramatic and that’s not so dramatic. But I would not highlight any of these lines, no, we would not highlight any.

Okay. And then just on the commentary in response to one of the questions you said that you’re not expecting any further, you’re not guiding to any further weakness per se in the macro. It’s basically it’s more it’s been weak and you’re stable. But in the prepared remarks you also talked about moderate growth expectations for some quarters to come. And you’re also asking for another voluntary retirement program. I just wanted to clarify overall in the macro what you’re seeing. Is there any incremental weakness in auto and industrial which are your two main markets? Are they incrementally worse going into the second half than what you would have expected? Or versus the second quarter are they you think they’ll be weaker or what’s your expectations?

At least our major customers and you know them. One of them was highlighted in our discussion are still quite optimistic. It’s a general concern vis-à-vis China which you hear more and more in my country but this is obviously also typical candidate for this country. Germany in this case for a mid-term cooling, you would not see this placement numbers they’re not in the second quarter.

Okay, okay, got it. And then…

In the second half, it’s used in the second half.

And then. Just on acquisitions, can you remind us like what size of acquisitions would you target in terms of either purchase size of multiple of EBITDA, like what are you looking for?

As we said, it’s an opportunistic business. So, it will limit our chances completely if I was too tight on that. But we are not pursuing at this point in time, a big acquisition, which is a major share for our sales. So, I would say, the typical acquisitions made, with sales of up to $100 million the most likely candidates also going forward.

Okay. And the last one from me, in terms of the pricing environment just to clarify, are you seeing, is the pricing environment as of today better than what you saw in 2Q or is it pretty much the same, as the same?

Ruplu I could not nail it down to such short times. I would not see a major change now. It could be, we will find after the third quarter that the price declined, which was quite substantial in the second quarter. It will not repeat itself to the full extent, this can be regulatory. It was a relatively half price decline but it’s come to its customer mix, yes, really of this customer mix. So as a matter of fact, I couldn’t tell you what the price decline this week is, I cannot say that.

Okay. No, I appreciate the details. Thank you.

And there are no further audio questions.

Clea?

There are no further audio questions.

Then, we thank you for your interest in Vishay. And we terminate our second quarter conference call.

Thank you ladies and gentlemen, that does conclude today’s conference call. You may now disconnect.