Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2016 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Peter Henrici. Please go ahead, sir.

Thank you, Paula. Good morning and welcome to Vishay Intertechnology's third quarter 2016 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 will start today's call with the CFO, who will review our third quarter financial results. Dr. Gerald Paul will then give an overview of our business and discuss operational performance as well as segment results in 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 discussions 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 that providing 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 sections of our website you find a presentation of the third quarter 2016 financial information containing some of the operational metrics Dr. Paul will be discussing. In January 2017, Johan Vandoorn, Vishay’s Executive Vice President and Chief Technical Officer, will be presenting at the Needham Growth Conference in New York. 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 quarter three of 592 million. GAAP EPS for the quarter was $0.24. Adjusted EPS was $0.25 for the quarter. The third quarter includes an impairment charge of 1.6 million and restructuring charges totaling 1.2 million. During the third quarter we purchased approximately 800,000 shares of our common stock for approximately $10.9 million, pursuant to the $100 million share repurchase program announced in May. This brings the total for the program to date to 1.3 million shares for $17 million. Since quarter end, we have purchased another approximately 400,000 shares of common stock pursuant to this program. In connection with the preparation of our quarterly financial statements and as a result and to review our recent financial results and outlook for our MOSFET business, we recorded an impairment charge related to our silicon ex-trading [ph] in quarter two. Also in this morning we announced an extension of the MOSFETs enhanced competitive cost reduction program. We expect to incur an additional $4 million to $8 million worth of severance cost and to realize annualized savings of 7 million to 10 million predominantly in manufacturing fixed cost. Result of the plan will be the cessation of manufacturing operation at our Santa Clara, California facility and will be completed by the end of 2017. However, we will maintain our R&D and management presence in Silicon Valley. The restructuring charges will not be recorded until quarter four. During the third quarter we received a favorable determination letter from the U.S. IRS, which was the final major regulatory hurdle to terminate and settle our U.S. qualified pension plan. The receipt…

Good morning, everybody, and thank you, Lori. As foreseen, the third quarter for Vishay presented the continuation of a solid business here. Vishay achieved the across margin of 26% of sales, adjusted operating margin of 10% of sales, adjusted earnings per share of $0.25 per share and GAAP earnings per share of $0.24 per share. Despite substantial cash payments this year for our announced restructuring plans, we continue to generate free cash on a very good level. Let me talk about the economic environment. In general, markets in the third quarter remained friendly with substantial variations between regions and industry segments. The major economic trends of the first half of the year to a large degree, also in the third quarter remained unchanged. A relatively weak euro continues to support European manufacturers, in particular the automotive and industrial segments. In historical perspective, overall growth in Asia and in China remains relatively weak, but there are enough opportunities for growth also for Vishay. In the Americas, the negative trend of segments related to oil and gas was relented, faced some stabilization of no recovery yet. The U.S on the other hand continues to drive demand creation with fulfillment in Asia. Talking about distribution, in general, distribution across the board remains fairly confident. POS was flat versus prior quarter with some regional slowdown in Europe and strengthening in Asia, in particular in the Americas, minus 2%, in Asia plus 7% and in Europe POS went down by 7% in local currency. Inventory turns of distributors continue to run on a reasonable level of 3.2 vis-à-vis 3.3 turns in prior quarter. Some regional detail, in the Americas 2.0 turns after 2.2 in the second quarter. In Asia, 4.5 turns after 4.2. In Europe 3.4 turns after 3.8. Orders to distributors were slightly down…

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

Your first question comes from the line of Ruplu Bhattacharya of Bank of America Merrill Lynch.

Yes. Good morning. Thank you for taking my questions. The first question is on gross margins. Can you just help bridge the 150 basis points decline sequentially the guidance for 4Q? How much of that is because of lower revenue and how much of that is because of mix?

You mean - you mean from quarter three to quarter four?

Yes.

From quarter three to quarter four, first of all, the basic reason is lower sales obviously, that is, lower volume.

Okay. Is that accounting for all of the 150 basis points? Or is there also a mix issue?

And, of course, we have some negative product mix vis-à-vis a very good third quarter.

Okay, okay.

The basic reason is, so volume and mix both.

All right, okay. Just wanted to also touch on the POS, I think you mentioned that the POS in Europe was down 7%, just wanted to get some more color on that. Was there any particular end market that was weak? What do you think accounted for that?

It's very normal. It's very seasonal, very seasonal. The third quarter in Europe is really one of the more modest quarters of the year. It’s very different from the United States and also Asia. But really in Europe, we received every year that the third quarter is down. It's - Southern Europe is on vacation may I say it’s like that.

Okay. And then just the last one from me. On the - you’ve announced a new MOSFET restructuring program. What should we take as the new target gross margin from MOSFET? And the 7 million to 10 million savings, is that a step function? Should we expect the step function layering of that? Or how does it layer into your savings over the next year?

We had some considerations about that. And with quite a modest growth, which we assume at the moment may be too pessimistically even 2% per year. We could imagine to be noticeably above to 20% gross margin.

So, is that - is that a target?

After everything - after everything is implemented. No, after everything is implemented. Without taking - taking out the impact of inventory reduction, we in this quarter already would have been at 18 point something, 18.5% roughly. And I believe it is low target. We can, even with modest growth expectations, these will be substantially above 20.

So, that 20% is a target for the end of next year. Is that excluding any inventory correction? Or is that even with inventories?

This has nothing to do with inventory. It's a constant inventory. It’s a constant inventory. And just to take - to take a point in time, it would be really what we had in mind when calculating it the four quarter of 2018 really roughly [indiscernible].

Great, I’m sorry. This is the last one. My question on - is it a step function layering of the 7 million to 10 million? Or is it a gradual –?

It goes in steps. It actually goes in steps. So, it's not gradual, but there are quite a few measures to be taken and a few of them will, of course kick in at a certain point in time. But it's not everything at the end.

Okay, okay. Thank you.

Your next question will come from Shawn Harrison of Longbow Research.

Good morning. This is Gausia Chowdhury on behalf of Shawn.

Good morning.

Just you’re backing off the last question, can you give us a little bit more color on why the additional MOSFET restructuring? And is any other restructuring being considered?

MOSFET is a commodity product and we have seen that our traditional markets like the telephones and the computers relatively are suffering in the last years and they do not really recover. So, in order to beef up profitability, we decided to take this next step in manufacturing, which in fact you can do without adding risk, which was a matter of sequence. So, in the back of minds we may have had it before, but now we feel it's the right time to implement.

Okay. Great. Are any other restructuring programs being considered right now?

At the MOSFETs manufacturing, this is what we intend to do. This does really conclude any manufacturing in Santa Clara and move it to more beneficial places, financially more beneficial places.

Okay. Great. And then with regard to the gross margin for this quarter, any specific factors behind that strong gross margin?

Well, as I said, we had good efficiencies and also good volume. And, of course, the MOSFETs program helps. The MOSFETs programs in quarter three kicked in already to the full extent really and I believe that this will help together to have 26%. So, that's it.

All right, great. Thank you.

Your next question comes from Jim Suva of Citi.

Thank you very much. On the restructuring and the impairment, are they completely unique items or are they related? And is there an impact to forward-looking gross and operating margins?

Hello, Jim. Sorry. So, of course, when reviewing our financial situation at the end of the quarter and the results and the outlook of the MOSFETs business, we determined that we wanted to undertake some additional or extend the restructuring program as Dr. Paul explained. And - but the impairment was due to the outlook for lower volume than originally anticipated.

Okay. And is there a future impact on gross and operating margins?

Yes, an improvement.

As I tried to say before, at the moment we are running - normalizing for inventory reduction, say, at 18.5% gross and we have in mind and we can calculate that and we did so. After the completion of this new program, we will be noticeably over 20% gross margin and the timings is next year. That means in the first quarter 2018 we believe when everything is implemented and we did not put in a lot of hope for the sales, it can come hopefully if things don’t reap [ph] we were on the conservative side. So, I think it's the right thing. Just to say, though, so cost reduction opportunities, we always exploited whenever we think they exist. So, we would have done that anyway this cost reduction as a matter of fact. Now is the time, and now we do it.

Great and another quick follow-up, in a slower growth environment economically, which we're seeing, does this change your capital allocation priorities like as M&A become more interesting or internal focused improving, profitability become more interesting or how should we think about your priorities for your capital allocation and management use of time? Thank you.

Well, okay, well, first of all I never saw this entire context. We always look for good acquisitions for and this is an opportunistic approach as it always has been. And to keep Vishay afloat so to speak even in bad times was always our strength. So, we always look at these opportunities independently of the economic situation. But I must admit when we acquire a company, there is a cash payback calculation and it could be that in those times enterprises are more cheaply to pick.

Thank you very much for the details.

Your next question comes from Matt Sheerin of Stifel.

Thanks. Good morning everyone. Just a couple of questions from me Dr. Paul, regarding the strength that you saw in Asia, I think you said that was up 7% sequentially. It sounds like end markets there, particularly China, but how much of that you think is a function of restocking or inventory replenishment and are there concerns at all that you may see that decline in the next couple of quarters as customers bring inventory down?

I would say a part of it is seasonal clearly in the same way as Europe in the third quarter is always suffering seasonally. The same you always tend to hear for stronger third quarter in Asia. In that sense I completely agree with you. There will be a normalization. It would not go through the roof.

Okay. And then your overall cash position was up again, but could you remind us how much of that is offshore? And I know on the cash repatriation program that you've talked about, where are you in terms of, I think, the target was 300 million, where are we on that program?

So, Jim, substantially all of our cash was offshore. I think it's - [Indiscernible] excuse me, all of our cash is offshore. And on the cash repatriation program that we announced in January, we brought back approximately 50 million this year and we plan to continue the process for next three years or so with 300 million.

Okay, 50 million so far. Okay. And then on the MOSFET business you talked about that margin expansion program through cost cutting, but that business also continues to be weak. I know some of the end markets that you sell into there are weak. Are there decisions to make, Dr. Paul, at some point about further restructuring or perhaps walking away from certain end markets that are just not growing, because if you look at your margins relative to other commodity assuming that your lines are still pretty, pretty weak even with the 20% plus target that you have?

Well, on the other hand, the MOSFETs is an important part. We had a broad lineup by design. And the MOSFETs business is an important addition to our portfolio, Matt. And when I am - the commodity business, if you really reached to lower 20s, but substantially above the 20, then this is where diodes have been for a long time. Only now diodes, they’re slow and come up to 25%, 26%, but 20%, say, 22% or something like that is already something, which brings value to Vishay, no question about it. And from a growth standpoint, I share your concern about the return growth of telephones and computers. But this is why we want to be stronger in automotive. And in automotive, historically we have never been and now we are there and we already have some 25% in automotive if we can grow that I believe.

Okay. And just lastly if you look at the semi-electro landscape you’re seeing as you know mass of consolidation and even including many of your competitors that play in the automotive space, companies like IRF and others, Fairchild, so is that - is that trend or you’re seeing? Does that create competitive concerns or more competitive positions for Vishay or perhaps benefits, because you continue to be focused with your product areas? What do you think about the consolidation and what does that mean to Vishay?

Honestly I am not so super concerned. I believe this concentration may even help to a degree an independent source like we are. I don't want to say too much more. But I would call it more an opportunity for us in particular than a threat. I don't want to comment too much more, but I think it's obvious.

Okay, all right. Thanks a lot.

This concludes the question-and-answer session for today’s conference. I will now turn the floor back over to management for any additional or closing remarks.

Thank you for your interest in Vishay Intertechnology. That concludes our third quarter conference call.