Good morning. At this time, I would like to welcome everyone to the Vishay's fourth quarter 2009 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-session. (Operator Instructions). Thank you. I would now like to turn the call over to Dr. Lior Yahalomi. Sir, you may begin your conference.

Thank you. This is Loir Yahalomi, Vishay's Chief Financial Officer. Good morning, ladies and gentlemen and welcome to Vishay's fourth quarter 2009 earning call. On the line with me today are Dr. Felix Zandman, Vishay's Executive Chairman and Chief Technical and Business Development Officer; Dr. Gerald Paul, Vishay's President and Chief Executive Officer; and Lori Lipcaman, Vishay's Executive Vice President of Finance and Chief Accounting Officer. Before I start, [David Tomlinson], our Senior Vice President, Corporate Controller, will read our customary opening statement. [Dave]?

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 statement. 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 SEC.

Thank you, [Dave]. I will make summary remarks. Dr. Paul, our CEO will add a more detailed analysis of our year and fourth quarter 2009. And finally, Dr. Zandman, our Chairman will update our R&D and acquisition activities and will make summary remarks. Before I start, please note that the press release that we issued this morning includes a schedule which reconciles GAAP EPS and adjusted EPS. Quarterly results. For the fourth quarter of 2009 Vishay reported revenues of $607.0 million, 15.5% higher than the third quarter of 2009 and 5.5% higher than the fourth quarter of 2008. On a GAAP basis, our consolidated gross margin for the quarter was 22.6% as compared to 19.9% for the third quarter of 2009 and 14.8% for the fourth quarter of 2008. The increase from the third quarter of 2009 reflects mainly the recovery from the historical global economic crisis with increased sales and the cost reduction initiative implemented by the company. Selling general and administrative expense for this quarter were $98.3 million or 16.2% of revenues compared to $89.7 million or 17.1% of revenues for the third quarter of 2009 and $97.9 million or 17.0% for last year's fourth quarter. Restructuring and severance costs and related asset write downs in our fourth quarter were $4.1 million. Total cash paid out for restructuring during the fourth quarter of 2009 was $7.2 million. Other income and expense for the fourth quarter of 2009 consist mainly of $1.2 million of interest income. The effective tax rate for the fourth quarter of 2009 was 17.2%. Capital expenditures for the quarter were $24 million as compared to $8 million for the third quarter of 2009 and $52.9 million in the fourth quarter of 2008. Depreciation and amortization for the quarter was $60 million as compared to $59…

Thank you, good morning, everybody. As you could hear from Lior, our CFO, the recovery of Vishay's business in the fourth quarter continued at a robust pace with orders approaching pre-crisis levels. Due to better sales good efficiencies and reduced fixed costs profits improved further Vishay came back to pre-crisis profitability levels at still much lower sales. Gross margin increased to 22.6% of sales. We reported $0.15 per share GAAP or $0.16 per share adjusted. 2009 also became one of our best years in terms of cash. We generated $246 million of free cash $92 million alone in the fourth quarter. Fixed costs were reduced quite dramatically versus 2008 which puts us in a favorable position for reaching new performance levels going forward. Let me talk about the economic environment as we see it. The demand for electronic components in the fourth quarter increased dramatically across all geographies all markets and all sales channels. Low inventory levels in combination with stretching out lead times contributed to exceptional order levels. After a strong turn around in Asia in the third quarter, in Q4 also the U.S. and Europe followed. The main Asian market segments, laptops and mobile phones defined normal seasonality in the fourth quarter. We have seen a major order increase in automotive, which is still driven by small cars, but also supported by very low inventory levels in the pipeline. Industrial segment continues to show a steady recovery worldwide, which I believe is a promising sign for a profound and solid upturn. Military and medical continued strong and stable. [POS] was strong; inventories at distributors were still going down somewhat in the fourth quarter by 2%. I remind you of the reduction of 10%, 12%, and 10% in the prior quarters. Inventory turns at distribution came back to normal.…

Good morning, as presented by Dr. Paul, Q4 is a strong improvement of our Q3. Sales increased by 14% from $575 million to $607 million from Q4 over Q3 and earnings per share increased over 5 fold from $0.03 to $0.60 per share for the same period. Free cash generation was $247 million for the 2009 year, well above our budget. Free cash generation was in number one priority for 2009 and I'm really gratified with our management was able to accomplish that. Free cash will continue to be strong for 2010. Down the reduction of overheads by approximately $180 million will result in a better bottom line for the future. The recession showed us that Vishay is able to respond fast and efficiently even in a case of sudden and very deep recession as we have seen in 2009. Now, a few words about the spin off. We have announced that spin off of our Measurements Group and Foil Resistor Businesses, which will be called Vishay Precision Group or VPR. Now, VPR or Vishay Precision Group is not part of Vishay, the reason for the spin off is a fundamental difference between Vishay Intertechnology and VPG across products, technology and the factoring markets and customers. Vishay Intertechnology has a broad line of discrete electronic components, while VPG is vertically integrated from sensors to weighing modules, to instruments to control systems. The spin off of Vishay makes Vishay a pure play discrete electronic component company. The spin off of VPG will show that VPG performance on a standalone basis not being diluted into Vishay. Also, it will sharpen management focus for both companies. Furthermore, it will enable each company to more effectively execute strategies and allocate resources. And finally, it will enhance the effectiveness of employee compensation structure. It also will provide VPG with its own acquisition currency, I mean if you have shares which could be them put to the market to increase its liquidity if need for acquisitions. Our R&D activities progress as planned and we'll accelerate as the economy improves based on our very strong balance sheet, strong liquidity. And the improved economic environment we're now again actively perusing acquisitions. We are targeting small to mid size companies for the passive components we aim to strengthen and broaden our position as a specialty product supplier. For the discrete semiconductors the intent is to increase market share and exploit synergies, of course the goal of acquisition activities is to further improve our profitability. In the short term future, including next quarter looks very, very promising. Thank you. And we're open to questions.

(Operator Instructions) Your first question comes from Shawn Harrison, Longbow Research.

The first question just has to do with the step up, I guess in SG&A spending and it looks like some of the one-time cost in the fourth quarter. What should we look like or what should we look for in terms of SG&A spending in the March quarter and how much of that will roll off eventually tied to the spin out?

What you have seen in the December quarter is typical for the March quarter, because you have bonuses coming back, some salary increases will be there. So, what you see approximately $98 million per quarter is typical for the March quarter and for the remainder of the year 2010.

So, essentially the cost with the spin out will be replaced with bonus accruals?

Exactly.

The inventory right down that was in cogs will roll off?

Yes, manufacturing fixed, you can expect to go down between quarter four and quarter one.

I would like to just touch again on your commentary about the semiconductor market getting a little bit over heated, with a book-to-bill even above 1.2 in the businesses, but inventory is being very lean at distribution. What do you think I guess the carry through from these high book-to-bill ratios are not into the March quarter, but into the June quarter. Does that imply that we'll see a slowdown in ordering and must been normal seasonality as a result. Just maybe I guess your high level thoughts knowing that, it looks like a recently semi side the March quarters fully booked?

Exactly, just to reconfirm that March quarter looks very solid. I think there is some over heating, but I do not believe that it impact negative or positive judgment of the economic situation, could imagine that the orders may see some decline, but the shipments will continue to grow up when capacity catches up to demand. And then you see in the second quarter normally the better season for the semiconductors anyway, the seasonality always sees to best quarter-in-quarter free also quarter four is not bad for semi in terms of sales, so we are optimistic. Not delaying some over heating at the momentum in terms of orders books.

It's seems like. I guess your statement is more of the situation of capacity versus demand in one step against the normal. Okay, and then just finally, if you can clarify again for actives and passives what the price changes were on both the quarter-over-quarter and year-over- year basis?

Really quarter-over-quarter there was no price decline at all anymore, neither in passives no in actives. On the passives, year-over-year we see an increase of 1.1% basically driven by capacitors in our case, because we have longer term increase pricing projects in place, which now really shows some effect, resistors are practically constant year-over-year. Actives come down year-over-year by 5.4% as I said before, which is low, but I have no question that this price decline foreseeable will slowdown even further on the actives.

Your next question comes from Matt Sheerin - Thomas Weisel Partners.

Could you comment on distribution, obviously there was very strong orders you saw in December and also in March. Do you look at your guidance in March being up sequentially and I know it's normally flat to down, is that mostly distribution orders that you're seeing that is going to drive the higher number in March?

The distribution will be strong no question, but we see a good picture everywhere, but distribution will be strong.

And do you get a sense that those low inventories are going to start to creep up again or do you expect the sell through to be just as strong in the March quarter for distribution?

Matt, I must admit that I was wrong again and again over the quarters; I always expected that the inventories would level off; still they went down slowly in quarter four. I think everybody hopes that we come to stabilization. Personally, I think we will reach it in the first quarter.

You gave revenue guidance, but you didn't give gross margin or EPS guidance and then I appreciate that, but what kind of incremental margin contribution should we expect going forward given that you still have some costs coming out, should it be in the 40% or more range?

Yes. We always say between 40% or 45.

As the year goes on, do you see that coming down at all as you invest back in capacity and people?

No, as a matter of fact, we are going to keep the fixed cost fixed and this is our typical variable margin, contributed margin what you're talking about. So, it's just a function of sales.

Just lastly, Dr. Paul obviously things are very good, you used the term overheated a couple of times and we have seen that from some other suppliers back in '03 and '04 we saw very strong growth and then there was an inventory correction because there were order cancellations, customers got ahead of themselves in terms of ordering. What you're doing in terms of looking for signs that may happen this year and in terms of running your own business. What sort of plan B do you have in place to keep cost down, so that if you do have a down quarter the negative impact won't be that big?

First of all, as I've said fixed cost are fixed. We have achieved quite a reduction vis-à-vis in 2008, a portion will come back, but you have seen that already in the fourth quarter. So we will keep the fixed cost at this level regardless of what. Secondly, we're not going to jump back into high levels of capital spending, but we do really is we concentrate on specialty products or new products, which I believe would be absolutely detrimental if we didn't do it, but we are not investing based on this high order levels which we see, which absolutely contain some overheating. As a matter of fact, which we don't believe to emphasize that, the economy slows down really again, our shipment slow down really then we go back to our saving modes, cost saving mode of the year 2009. We have trained so to speak, we had to train it and this is absolutely possible to reintroduce that in a short time.

Your next question comes from Steve Smigie - Raymond James.

Is there something you could talk a little bit about what the revenue looks like now for the business that will be spun out? I think we have a clear picture of the measurement stuff, but I think the part of the resistors, what will the dollar amount be at this point and it's Q2 that's likely to get spun out, correct?

Out of memory, Steve in 2009, the sales of VPG altogether was about $175 million.

I was just wondering because it's a big jump up here in the guidance that changed dramatically?

The jump up doesn't come from this portion of the business.

And just I was curious are you thinking that's spin off of Q2 and you answered a question earlier about what OpEx did look like in March to take into account some of the cost coming out, so I guess there is little confused just to how the cost to come out spin off until June or that the June Quarter?

We expect, maybe I misunderstood your question but we expect to spin off to take place mid of the year. And then when I say the fixed cost constant, I always talk still about the entire company of course.

So, I guess if I'm looking at overall operating expenses for the March quarter, you are saying that's going to be and going forward everything included, it is going to be roughly around that $98 million level?

Yes, and on the manufacturing fixed cost side, you could see it though.

And then on the book-to-bill on the distribution business as others have mentioned, obviously very strong. So, I have to assume that part of that is just their desire to really fill a channel that is comedown meaningfully. So, how much of that increase in orders do you think you will actually service in the quarter. I mean is it, you think you will get through all of that or is that you just sort of working your way through and you're going to have to keep some of that you're not going to be able get so much capacity into them, sort of something to look into?

Let me answer, if we ship what we can ship obviously and there is a limitation for Vishay to bring back capacity super, super quickly and there is a limitation, obviously not only for Vishay. So, I think there is kind of fuse in the whole thing, I don't think that the inventories will shoot up so dramatically, it is just not there, the potentially is not there in my judgment. So, I do believe that the low inventory level at distribution will survive for sometime.

Last question, I will let somebody else jump in here, just on the capacity, it sounds you're adding some other people are, but even given that, it seems like people, most companies are generally remaining fairly constrained in terms of what their commitments are to future and capital spending and you are taking it back off, no doubt but a lot of guys seem to be still on a very conservative mood and I was just, at least for yourselves or whatever you are willing to comment what you see from your competitors, does that seem reasonable?

I think I can only a reconfirm what you said. And this is also through for Vishay. So, what we are spending at the moment in terms of expansion as I tried to say before is really not consequence of this high order level, which we see. In reality, this is something we would have done anyway for new products in particular and for specialty applications. So, I don't think we jump blindly as maybe the industry and Vishay has jumped into such situations in the past.

And there are no further questions. Dr. Yahalomi, do you have any closing remarks?

Thank you. I would like to thank you for participating in our call. We appreciate your interest in Vishay, and we look forward to your continued interest in the future. Thank you.

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