Good morning and welcome to Vishay Intertechnology Second Quarter 2020 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 Vishay's second quarter for 2020 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 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 Form 8-K that outlines the variables that impacts the diluted earnings per share computation. On the Investor Relations section of our website, you can find the presentation of the second quarter 2020 financial information, containing some of the operational metrics Dr. Paul will be discussing. 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 Q2 of $582 million. EPS was $0.17 for the quarter. Adjusted EPS was $0.18 for the quarter. During the quarter, we completed the cash repatriation program we initiated in response to U.S. tax reform. We repatriated $112 million to the United States and paid withholding and foreign taxes of $16 million. These taxes had been accrued upon enactment of the U.S. tax reform in 2017. The payment of these taxes is reflected as an operating cash flow on the statement of cash flow. During the quarter, we repurchased $75.8 million principal amount of our convertible notes due in 2025, using some of the repatriated cash and recognized the U.S. GAAP loss on extinguishment. Similar to Q1, we have identified certain COVID-19-related charges, net of certain subsidies, which are incremental to and separable from normal operations. These items were insignificant to Q2, but are added back when calculating our non-GAAP adjusted EPS for comparability purposes with Q1. I will elaborate on these transactions in a few moments. COVID-19 continues to have an impact on our business. While some of our factories had been temporarily closed and some are operating at levels less than full capacity, substantially all of our manufacturing facilities have been able to continue operating. However, the overall macroeconomic effects of the pandemic have been our financial results. As I stated in the introduction, we've identified certain COVID-19-related charges, net of certain subsidiaries which are incremental to and separable from normal operations. This includes wages paid to manufacturing employees doing government mandated shutdowns, additional wages and hardship allowances for working during lockdown periods,…

Thank you, Lori, and good morning, everybody. Vishay's worldwide business in the second quarter has been massively influenced by COIVD-19. There were substantial restrictions for the citizens of many countries which burdened the global economy. We successfully adapted to this generally unfriendly environment by cutting production capacities and by substantial belt-tightening in fixed costs. With sales at the high end of our guidance, we managed to beat expectations for the quarter. We achieved gross margin of 22.5% of sales. Gross margin adjusted of 22.6% of sales. Operating margin of 7.0% of sales and adjusted operating margin of 7.2% of sales. Earnings per share were $0.17 and adjusted earnings per share $0.18. By decreasing inventories and by reducing CapEx to the actual requirements quickly, Vishay continued to generate free cash also in this difficult quarter. We achieved 66 million higher than in prior year. A few remarks concerning the economic environment. As indicated global economy in the second quarter has been slowed down by COIVD-19 remarkably, but market sectors suffered to a very different degree. In general automotive has been hurt the most whereas POA remained strong. Asia started to recover whereas Europe and the U.S. were weak. Backlogs and lead times continue to normalize. There is no real shortage of supply. We see low price pressure in general and we expect for the third quarter some weakening of POA, but also a noticeable recovery of the automotive sector. Going through the geographic regions. Americas had a soft second quarter with a significant deterioration of the automotive and commercial avionics sectors distribution build inventory. Europe did exceptionally poorly, also due to COVID related plant shutdowns in automotive. Industrial markets in Europe were giving a mixed impression. The recovery of Asian markets continues despite corona problems, the fact that corona problems still…

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

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

Hi, thank you for taking my questions. Dr Paul, can you talk a little bit more about the inventory and distribution. I mean, book-to-bill was down 2.75 and you said the POS was down. What are you seeing from a regional basis and in the past you've quantified how much excess inventory you think there at distribution any updates to that so, just your thoughts on inventory and distribution would be helpful? Thank you.

Yes, sure. Distribution you remember was a problem a year ago. We identified as a problem and then the distribution worldwide started to reduce inventory. And after quarter one, we were able to classify practically this distribution. There is inventory level at global distribution is more or less normal. So we had to reduce in the first quarter, substantially the inventory and now he built, half of it. What, what they have reduced –in the first quarter. I believe the inventory level is not yet a problem really, I think they are better often then say a year ago. And the inventory built in Asia we have reason in that try to say it. We have reasons to believe at least the part of the inventory build was really aiming at a better future in quarter three and quarter four. So at this point in time, I would not be concerned, it may be a little different from product line to product line. There are some where I would say no problem and others. We have to watch on the other hand, I believe the situation in - concerning inventories is as I said better than it has been.

Got it. Maybe for my next question if, you can touch on what you're hearing from your automotive customers with respect to demand coming back. In the second quarter you obviously had inefficiencies both from COVID-related demand, as well as from automotive shutdowns, but do you anticipate the same level of inefficiency or do you think that gets better now and how do you see demand recovering in the third quarter?

The feedback we get and already seen partially is that the automotive industry is coming back. No question about it, the best way to judge that is to look at the tools from consignment stocks in this case you see it, it's really directly - they have their demand. You can see it like that, and it really dropped this demand. Despite these pools dropped in April and May to 50% of normal 50% of normal Q2 the shutdowns. Already in June it recovered nicely and they promised us so to speak the forecast for the third quarter, the normal level. So in that sense, we get back to normal. Of course, it has to be proven that these cars can be sold afterwards, which on the other hand I think they will.

Okay and me for my last question, Lori you repurchased about $76 million of the convertible notes these were long dated notes. So just I'm trying to understand like why did you do that, what was the reasoning behind the repurchase and do you expect to repurchase more debt going forward? Thanks.

So the last part first. We are still authorized by our Board of Directors to repurchase an additional $124 million of the same debentures, as well as $3 million of the original notes that were out there. Then - the idea was to make it a little bit more flexible in terms of our debt and to pay down our revolver. So, we can make a better use of it in the future and the market conditions where appropriate so that we could repurchase in that 93% of fixed that was.

Okay.

Interest rate for us to do it now.

Thank you. Okay, thanks for all the details, appreciate.

Your next question comes from the line of Karl Ackerman with Cowen.

Hey, good morning. Thanks for taking my question, two if I may. I first want to focus on just manufacturing utilization. I know in the second quarter you say some - several manufacturing challenges from COVID-19 implementations. I may have missed it but are your facility is now fully opened. And then second, one of your peers located in Taiwan, recently indicated that our manufacturing utilization was in the 60% range in Q2? I'm curious whether your manufacturing facilities are above or below that range and if you expect to return to full utilization to the end of the year and I have a follow-up?

Yes, you can see directly from our sales levels at our manufacturing sites cannot be fully utilized and in our case, we have a very heterogeneous programs, not so easy to give a complete number for all Vishay. But of course in the second quarter, they have been plant shutdowns of our customer really and we reacted by short work by having - sort of putting ahead holidays et cetera. So we reacted to it and I was proud to say that except basically minor effects. The plans and we say manage that without major inefficiencies as a matter of fact. Of course, the situation looks better now with automotive preopening their plants. So - as it relates to inefficiencies I'm quite positive that we are going to improve there - and make up for this little negative we hit in the second quarter, but altogether I was very pleased with the reaction of our plants. They did quite nicely and it was a sharp drop, as you know. In Europe we went on short work as I said, which was a good instrument relatively cheap and you could keep your workforce because we do expect and rightly so, the recovery of our debt. So, we have the people that can react. Did I answer your question?

Yes. That's helpful. Yes I know with all the moving parts with COVID-19 it's a bit challenging till you guys forecast the entire automotive market. However, I was hoping you may speak to your content opportunities for electric vehicles over the next 12 to 18 months. I asked because that component market has actually doubled since the start of the year. So, your comments there will be helpful? Thanks.

Yes, it's a small share still, small share but I completely agree that this provides a nice chance for the components industry. So obvious that the electronic content would be very favorable for us in electric cars and it's also true that in Europe at least and I believe also in the U.S. electric cars its funding public funding. So, I do expect a positive impact, but for the next 12 months. I don't think it will change the world. So it will be helpful, but it will not change the world longer term, it helps us no question.

Your next question comes from the line of Shawn Harrison with Loop Capital.

Hi I guess good morning or good afternoon everybody. Dr. Paul I wanted to dig into I guess how you parse through these numbers where you've got extremely weak book-to-bills but backlogs are greater than typical and just kind of the ability to the forecast out three months, maybe even six months. I'm just parsing through the volatility, you're seeing in book-to-bills, but still healthy backlog and what that really tells you about your customers right now?

We also take the shippable backlog of course, not only the total backlog. But of course, we have quite a share of consignment stock which we had to be forecasted. But we watched it very much in detail these days and the pulls from consignment from automotive, which is really for the most part automotive is coming up sharply. So it helps us, but I must agree of course, these are not the times of stable outlooks as a matter of fact. And we have been too pessimistic obviously slightly too pessimistic in quarter two. I believe we are realistic in quarter three, but I completely agree this was a question that of course, forecasting at this point in time, it's not the easiest as the matter of fact, but we were not so far off to not believe.

In the dynamic of I guess we're through July here you see any normalization either or and kind of the POA dynamics, the backlog and the book-to-bill. So you add that far below purity in many of these business lines?

Oh sorry I didn't get you this was POA distribution?

I was either looking at POA distribution for July your book-to-bills for July have you seen some normalization [indiscernible] book-to-bill?

Yes July shows a backlog closer to 1 close to 1 actually. So in that sense, if you want to interpret there is no partner stabilization I can agree. Sure July is more balanced close to 1.

Okay. And then lastly from me Lori, just the repurchase of the debentures, is that kind of the best way you think right now to utilize the cash versus buyback, is that a more efficient way to get the share count down here in the near term?

Yes, but the room product was the flexibility in the usage of our revolver. So yes, we do think that was most effective.

Okay, thank you very much.

Your next question comes from the line of Matt Sheerin with Stifel.

Yes, thank you and good morning. Dr. Paul I wanted to just follow up on your commentary regarding the automotive recovery. Could you talk about what you're seeing by region, your peers are talking about relative strength in Asia and China continued weakness in U.S. and then Europe holiday shutdown. So could you tell us what you're seeing there?

I can follow my competitors as a matter of the fact my colleagues. Asia has never dropped off. Asia was strong also in quarter 2 and automotive was quite strong. Europe's closed a lot of plants and Europe may I say that dropped like a stone in automotive in quarter 2. And here it's clear completely clear to be seen that the plants have opened the Paulson consignment stock are back to normal nearly so some matter really of July. America remains relatively weak at this point that is very true.

And are you expecting December then to be an up quarter in all your regions from what you can tell now in automotive?

Don't know how it will go in the U.S. somewhat as a matter of fact, I believe that Asia will continue to be strong. I believe Europe is back to halfway normal with the restriction they discussed and have to be sold at the end, of course, but we’ll have I believe. And the U.S. I have scattered picture, so indeed it would be in automotive with the third quarter be better than the second it’s obvious.

Okay. And I wanted to ask about the relative strength you're seeing in your MOSFET business we’re seeing less worse if you will than your other markets. Is that a function of content gains or share gains [indiscernible]?

No you are absolutely right. We believe in content gains we have quite success with MOSFETs in quite a few automotive customers, which we didn't have before these automotive customers. So we are gaining content no question.

Okay and lastly, regarding your CapEx and capacity expansion. I know the company's strategy has been to add capacity even in tough times, because you want to get ready for the next up cycle, could you tell us where things stand there?

Okay. Well we’re at a run rate of 3.2 billion in 2018 has been part of the year. I believe for next year we at least will have this capacity in terms of sales back because we invested. And in the meantime, I do not believe there will be a shortage of capacity. I don't think so for next year, but we expect next year up of course, but there is enough room.

Okay, thank you.

Thank you.

Your next question comes from the line of David O'Connor with Exane BNP Paribas.

Great thanks for taking my question. A couple on my side maybe firstly and Dr. Paul, you talked about on your prepared remarks and capacitors and returns 3.3 times below the acceptable levels, just wondering what kind of actions are you taking there and to get that back on track compared to the so the segments that’s my first question?

No revolutionary actions we want to be above 3.5 also in capacitors. There are certain reasons like capacitors will never be the product line we take inventory returns - technical reasons, but 3.3 was to know and we are bringing down certain raw materials. We watch once more the way and process. So look we had a massive decline of the business and the plans we are not able yet, and I emphasize yet to follow completely in terms of inventories. So we don't need the revolution we will connect and I'm sure we'll get back to the 3.7 or whatever we had.

Okay, got it thanks for that. And then maybe as for my next question, can you talk slightly about bookings in Europe. You said in July. And I think on the previous questions that and they're approaching parse and was that across the industrial segment as well in Europe or is that still quite mix?

Cannot answer for July Peter, have you looked at, the reach those split of the orders.

We only gave out the book-to-bill for the total company and close to parity, not by region and not by segment.

But the major recovery in Europe will come from automotive in quarter three there is no question. The problem is that you won't see that so easily in book-to-bill, it's mostly from consignment stock which by nature won’t leave a big trace book-to-bill market its sales orders and sales at the same time, right, this is the definition of consignment. So it would not be too helpful to look at the book-to-bill, I believe in Europe alone, because it is automotive this concerned, this is getting better vis-à-vis in June.

Okay, understood. And maybe my last question just on the backlog. Did you do any specific cleaning of the backlog in Q2 and could you just elaborate more on the previous comment that you're tracking shippable backlog was what you're seeing or what exactly you mean by that? Thanks.

Well, normally, I'm quoting only to total backlog, but of course you know when these parts of the backlog due to be shipped and for that for instance, if you can see the next four weeks next 13 weeks we watch normally the ship with the Petrobras the next 13 weeks. Additionally to the total backlog so it's quite normal. I think everybody does that. And as a matter of fact this only does not have the pools from consignment stocks completely included. And so I don't see the complete picture at the moment we expect the improvement from consignment stock through automotive. Sorry, I missed your question. May be could you?

Yes that's helpful. And maybe just on the backlog. Did you do any specific cleaning of the backlog as we know?

No, cleaning no cleaning no.

Okay, thanks so much.

Thank you.

And there are no further questions at this time, I will turn it back over to you for closing remarks.

Thank you, Dorothy. This concludes our second quarter conference call. Thank you for your interest in Vishay Intertechnology.

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