Good morning. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to Vishay’s Second Quarter Earnings Results 2010 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) I would now like to turn the call over to Vishay’s CFO Loir Yahalomi. You may begin your conference.

Thank you, Kayla. This is Loir Yahalomi, Vishay’s Chief Financial Officer. Ladies and Gentlemen, good morning, and welcome to Vishay’s Second Quarter 2010 Earnings Call. On the line with me today are Dr. Zandman, Chairman and Chief Technical and Business Development Officer; Dr. Paul, Vishay’s President and Chief Executive Officer; Lori Lipcaman, Vishay’s Executive Vice President and Chief Accounting Officer; and David Tomlinson, Vishay’s Senior Vice President and Corporate Controller. Before I start, our Corporate Controller, Dave Tomlinson, will read our customary opening statement. Dave?

You should be aware that in today’s conference call, we’ll be making certain forward-looking statements that discuss future events and performance. These statements are subject to risk 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 10K and Form 10Q filings with the SEC.

Thank you, Dave. After my remarks, Dr. Paul will provide an analysis of our second quarter of 2010 and Dr. Zandman will update our R&D and acquisition activities and will provide summary remarks. As you’re aware, on July 6, 2010, we completed the spinoff of Vishay Precision Group into an independent publically-traded company. Vishay’s financial results for the second quarter of 2010, still includes VPG. VPG is an independent company; however, we will not restate prior financial statements to present VPG as a discontinued operation for U.S. GAAP purposes. The reason is our continuing involvement primarily due to common board members, trademark licenses and certain transitional services. To assist in the analysis of Vishay, including and excluding VPG, we have realigned our U.S. GAAP reportable segment, segregating VPG into its own segment as detailed in our current report on the form 8K filed with the SEC this morning. This form, 8K is available in the SEC-Edgar website, as well as on the Vishay Investor Relations website at ir.vishay.com. I will first discuss quarterly result as reported. In other words, including VPG, and then provide information on Vishay excluding VPG. Quarterly results for Vishay, as reported, including VPG. For the second quarter of 2010, the share reported revenues of 701.7 million, 9.6% higher than the first quarter of 2010, and 52.4% higher than the second quarter of 2009. Our consolidated gross margins for the second quarter was 30%, as compared to 26.1% for the first quarter of 2010, and 17.1% for the second quarter of 2009. The increase from the first quarter of 2010 reflects the continued recovery from the global economic crisis with increased sales and the cost reduction initiatives implemented by the company. Selling, general and administrative expenses for this quarter were 109.3 million or 15.6% of revenue compared…

Thank you, Lior. And good morning, everybody. As you heard from Lior, we are leaving in excellent time. After a phase of steep recovery, Vishay in the second quarter experienced really good business conditions worldwide. Orders were stabilizing above pre-crisis levels. With shipments close to pre-crisis levels and permanently reduced fixed costs, a new level of profitability was reached. As you’ve heard, gross margin of 30% and operating margin of 14%. Without VPG, the numbers are very similar. Gross margin were 29% and operating margins 15%. We reported $0.40 per share adjusted as well as GAAP. The cash generation remains strong. We generated 129 million free cash year to date. A very strong order book gives us confidence for the second half of the year. Let me talk about the economic environment. We believe that global economy is in the phase of a robust recovery. No slowdown is visible in Europe. And although there has been some concerns about it, we cannot see any slowdown. The overall market demand for electronic components has reached historically high levels. There are substantial shortages of supply, capacity, and locations, and long lead times. There is still very low inventory in the supply chain. In particular, for semiconductors, mainly for MOSFETs. There’s a strong POS and very high inventory turns at our distributors. POS is up by 9% and inventory turns worldwide of our distributors at 5.5 after 5.0 in the first quarter. The American distributors show 3.9 turns after 3.4 turns in the first quarter. The European distributors, 5.6 turns after 5.2, and the Asian distributors are at 7.1 turns as compared to 6.7 turns in the first quarter. Distribution inventories went up slightly in the quarter by 6% but there are still at an extremely low level. All market segments and all…

Good morning. This is Felix Zandman, Executive Chairman of the Board, Chief Technical Officer and Chief Business Development Officer. Vishay had a good second quarter, as you heard, retuning earnings per share of $0.40 a share. It is the fourth consecutive increase of GAAP earnings per share since the crisis. Let’s look at the last four quarters. [Inaudible] EPS for third quarter of 2009 from a loss of $0.16 from the prior quarter; $0.15 per share for the fourth quarter of 2009; $0.24 for Q1 of 2010; and finally $0.40 for the second quarter of 2010. The present quarter, the third quarter of 2010 looks also quite promising. All operational results have improved substantially as you heard when compared to pre-crisis level. Free cash year to date was 129 million, an exceptionally good result, and we are focusing on that continuing. We continue to focus on free cash and this is one of our basis of operations. The separation for Vishay, of Vishay’s Precision Group, called VPG, under the leadership of Ziv Shoshani it’s president and CEO, was seamless and very well educated. The sales of Vishay have almost reached the pre-crisis levels, although the sales of VPG are still somewhat lagging in the product areas of [inaudible] assistance. But sales in core products are at record levels. I expect that the combined market capital of Vishay and VPG together is higher by 10% to 20% range when compared to the market prior to separation of VPG from Vishay. Both companies are now focusing on their separate prices. Vishay continues to look for acquisitions, small and large. However, with the intent not to exceed the ratio of 2 ½ times debt to EBITDA ratio for Vishay and the potential acquired company, as you heard from our CFO, more details about…

(Operator Instructions) Your first question comes from Jim Suva. Jim Suva [Ostia Merchant] – Citigroup : Hi. Congratulations, gentlemen. This is Ostia Merchant on behalf of Jim Suva.

Thank you. Jim Suva [Ostia Merchant] – Citigroup : Just now with the VPG spinoff, I guess we – if you can provide further clarity on how we should look at your outlook for growth margin, operating expenses and sort of the effective tax rate now that you’ve spun off VPG? Can you please provide some guidance on that? Thank you.

I can say something. First of all, the gross margin we have guided to slightly further – further slight improvements, as you remember. And we are at 29% in the second quarter without VPG. On the SG&A, I think we can say 19 million per quarter is the appropriate number for Vishay without VPG. Jim Suva [Ostia Merchant] – Citigroup : And then your effective tax rate?

It would be no big change from what we have now, around 27%. Jim Suva [Ostia Merchant] – Citigroup : Okay. And the gross margin improvements that you were citing, is that a function of both ASB increases –

It is mostly volume. The further improvement we expect to come from volume for the most part. Jim Suva [Ostia Merchant] – Citigroup : Okay. That’s all I have right now. Thank you.

Thank you.

Your next questions if from Matt Sheerin. Matt Sheerin – Thomas Weisel Partners: Yes. Thanks. Good morning. So Dr. Paul, I didn’t get the book-to-bill for Siliconix. You may have given it, but I missed that. Could you give us that?

No, I haven’t. Siliconix was at 0.8 in the 79 in the quarter. But this is somehow also distorted by the fact that we do not recognize orders that are beyond one year. You understand? This is our policy, we do not recognize them. If you counted all the orders, also the ones beyond one year confirmation time, it would have been about 4.2. Matt Sheerin – Thomas Weisel Partners: Okay. So it was 0.8?

Approximately, 79. Matt Sheerin – Thomas Weisel Partners: Okay. And that was – okay, so that’s up what, six-month bookings? Why was it down so much?

As I said, if you had counted all the orders, also the ones with confirmation dates beyond a year, we have very full capacities, then the order book-to-bill ratio would have been above 1.2, around 1.2. Matt Sheerin – Thomas Weisel Partners: Okay. And your guidance for September implies up at the midpoint around 4% or so sequentially. Is that – do you expect all of your segments to be up sequentially, or would Siliconix be down based on that –

Siliconix really would be up in particular. Matt Sheerin – Thomas Weisel Partners: So it would be up.

I think I didn’t get across – so our order book in Siliconix is extremely full. Matt Sheerin – Thomas Weisel Partners: Okay. And on the gross margin, it looks like you’re at, you know, basically record gross margins if you take out the bubble years of 2000, 2001, same thing on operating margin. Do you think that’s sustainable, or are you getting help from ASPs in the fact that as you said, you used the term overheated. Do you think, you know, Vishay can sort of sustain that? You’re at $1.40-plus EPS run rate right now, do you think that’s sustainable for the new Vishay if you will? Or is that a little bit too optimistic?

Well, as a matter of fact, as I said since quite a few quarters, based on all the fixed cost reductions we had during the crisis, our break-even point has come down by 400 to 500 million. And this is sustainable. It means, at the same sales level, we are going to generate substantially more profits than before the crisis. The remainder is function of volume. And as it looks for the third quarter, we are very optimistic the volume remains. But principally speaking, at each sales we are going to be at, our results will be substantially better than before the crisis. Matt Sheerin – Thomas Weisel Partners: Okay. And your book-to-bill did come down pretty significantly in the quarter. Do you think part of it is, as you said, you acknowledged last quarter that there was some so-called double ordering. Do you think that’s starting to go away and the true book-to-bill is more reflective of what the real demand looks like going forward?

I try to make the same argument. If it counted all the orders, regardless when the confirmation date was, even beyond a year, if you had done the book-to-bill would have been very similar to the first quarter, very similar. Matt Sheerin – Thomas Weisel Partners: Okay.

But understand, if you’re at full capacities, then you confirmed the orders sometimes after one year, then we don’t count it anymore. This is our policy. Matt Sheerin – Thomas Weisel Partners: Okay. And just for my last question, Dr. Paul. What is your company’s total capacity revenue right now at in terms of if you were full, what could you produce?

It depends very much, of course, on the mix of products. You know, we have very many lines and – but I think, I expected the questions, so I think a fair number without VPG could be around 750. Matt Sheerin – Thomas Weisel Partners: Seven-fifty, okay.

But Matt, this is a – it depends really on the mix. It’s a good guess, I think. Matt Sheerin – Thomas Weisel Partners: Got you. And just lastly on pricing, I mean, obviously you’re in a business, are you expecting, or are you expecting to sort of run your business in an environment where there’s more normal price erosion?

Well, we expect fees, just level of prices for our foreseeable future. Matt Sheerin – Thomas Weisel Partners: Okay.

Okay. So we do not expect price decline for the time being. Matt Sheerin – Thomas Weisel Partners: Okay. Thanks very much.

Thank you. Your next question is from Joe. Shawn Harrison [Joe] – Longbow Research : Hi. Good morning. This is Joe calling in for Shawn Harrison. First off, congratulations on the quarter. I wanted to jump on the gross margin question from the first caller as well. The incremental margins, I guess, have been robust for three straight quarters now with 70 to 90%. So it doesn’t seem like from your comments there’s any reasons to expect a slowing. And you said it will increase further. Is it safest just to model your typical –

Very much so. Very much so. Shawn Harrison [Joe] – Longbow Research : Is there an benefit that you expect to change to the downside or anything to that extent?

No. I think if you go with this variable margin of 50% of consecutive margin, you’re right. Shawn Harrison [Joe] – Longbow Research : Okay. Secondly, lead times. Have lead times come in at all as you look out at any aspect of your business?

No. They are very, very long. In fact, quite often longer than a year, as I tried to say. Shawn Harrison [Joe] – Longbow Research : Okay. What about an update on the new capacity? You mentioned that the internal efforts have been going pretty well. I didn’t hear you speak about the external wafer sourcing.

All together, as I said, all together Siliconix, already in the third quarter, will be from a manufacturing standpoint and of course, also from a sales standpoint, at peak prices levels. This is one quarter earlier than we anticipated. And this includes, of course, also our external sources. Shawn Harrison [Joe] – Longbow Research : And just one more thing. Inventory distribution, you said it picked up a little bit. We also saw that at Aero. I mean, the question – how do you see that trending in the second half of the year inventory?

I don’t have anything new since then, to be honest. But you must see, we are not the only ones who had some price increases in the quarter. It could also be the matter of an inventory evaluation. So we still see that inventories in distribution at extremely low levels given the activity, extremely low levels. I can hardly remember inventories down for distribution worldwide at 5.5. Shawn Harrison [Joe] – Longbow Research : Got you. Hey, one last clarification thing, you had mentioned to Matt, I think, what the Siliconix book-to-bill would have been excluding the –

Above 1.2, around 1.2. Shawn Harrison [Joe] – Longbow Research : Do you by chance have a comparable number what the March quarter would have been along those same lines? Or where there orders more than a year at that point?

Not by half, but it would have been high, I would say. More than 1.2. But book-to-bill above 1 is not sustainable by definition. Shawn Harrison [Joe] – Longbow Research : Terrific. Thanks and congratulations again.

Thank you.

Thank you. (Operator Instructions) Your next question is from Steve Smigie. Steve Smigle [Andrew] – Raymond James: Hi guys. This is Andrew calling in for Steve. Congratulations on the nice numbers here. Just to start out, I think you mentioned, you know, adjusted EPS for standalone Vishay at $0.38 there. You also mentioned about 6 million transaction costs, you know, related to VPG. Is that still in included in your –

Yes. In the $0.38, it’s included. Steve Smigle [Andrew] – Raymond James: It is included. Okay, great. Great. And then, I think you mentioned, you know, you gave a little color on the increase in gross profit there for the quarter of 30 million – 34 million related to you know, higher volumes, approximately 10 million on negative impact of fixed costs. Was there a third or fourth component there?

Quarter over quarter, these were really the three important items. ASP is 13 million positive volume, 34 million positive and some mostly similarities increased fixed cost of 10. These were really the three elements. Steve Smigle [Andrew] – Raymond James: Okay. And I think you said for the next quarter you’re expecting pretty broad-based growth across each segment there. Could you talk a little bit about if gross margin expectations have changed for any of the lines based on some of the additional capacity you’re bringing online, but also the debottlenecking as well? Have those changed at all?

As soon as growth goes up you can count on everything being the same. Not everything aligned, but on something like 50% contributed margins. So this is really the answer for constant prices, right? From a pricing standpoint, I’d say it’s firm, as I said before. And there are no surprises on the fixed-cost side. So I think it’s easy to model. Steve Smigle [Andrew] – Raymond James: Okay. And then finally, you know, you mentioned the automotive recovery’s pretty nice here. Any regions in specific that may have outperformed?

I think in Germany in particular, so Europe, but for the most part in Germany, at last cut, that I exported very much to Asia. There is an enormous boom there at the moment. Steve Smigle [Andrew] – Raymond James: Okay, great. Well, thank you very much.

Thank you.

Thank you. Your next question is a follow up from Joe Whitney. Shawn Harrison [Joe] – Longbow Research : Hi. Thanks. Just two quick follow ups. Tantalum powder, can you comment on the current environment for availability and pricing, and how it’s impacting you?

You can work from the assumption that you have secured for this year. Shawn Harrison [Joe] – Longbow Research : Okay. And then last thing, in the press release that the working mentioned that orders have stabilized, I guess at this point, granted they’re well above pre-crisis levels. In any of your businesses, I guess, is that more so than others I guess? You know, orders –

At the moment, we have book-to-bill, if you count all the orders as I said, regardless of confirmation date, you have all the lines of above one. Shawn Harrison [Joe] – Longbow Research : It’s helpful to say when the book-to-bills peaked within the June quarter. I guess, was it early or late?

They cannot be book-to-bill for ever substantially above one. The lead times get too long. That means even if there’s absolutely wonderful times for the next years, sooner or later book-to-bill will approach one by nature of things, I would say. So it’s not an indication for a slow down. If book to bill is not 1.5 anymore, but just 1.2, I think. Shawn Harrison [Joe] – Longbow Research : Absolutely. I think some may welcome a little bit of a decline in the ratio. Okay. Thanks again.

Thank you. Your next question is follow up from Matt Sheerin. Matt Sheerin – Thomas Weisel Partners: Yes, just a couple of questions. One on the acquisition strategy and the debt to EBITDA ratio, is that a next debt ratio?

No. That’s not a net debt, however considering our, you know, 600-plus million of cash, which we continued to generate and will continue to focus on, you could expect that we’ll maintain a very strong cash position in any acquisition forward. Matt Sheerin – Thomas Weisel Partners: So in other words, you would use cash, or some of that cash for an acquisition?

You know, possible, possible. However, we would maintain some of it for restructuring and will maintain some of it to manage any potential downturn in the market as we always do. Matt Sheerin – Thomas Weisel Partners: Okay because if you look at the numbers and even if you normalize the EBITDA run rates of ’07 and ’08, you’re still talking about the capacity to spend a billion dollars or more on acquisitions. Correct?

Agree. Matt Sheerin – Thomas Weisel Partners: Okay. And then just back to the, Dr. Paul –

This is really the, you know, we have no large targets, and I would say that the 2.5 really represents the maximum the Board directed us to reach. So it’s not like this is what we’re looking for. We’re looking for smaller medium-sized acquisitions as Dr. Paul indicated over the last couple of quarters, and we will be obviously – we will only reach to that 2.5 if we know for sure that immediately thereafter we will be able to generate free cash to start paying down the debt so that we could go back to a more normalized 1 or below 1 as we are today in terms of our debt to EBITDA. Matt Sheerin – Thomas Weisel Partners: Understood. Okay. Thanks on that. And then, Dr. Paul, just back to the question of lead times you mentioned for Siliconix out a year, which seems like we haven’t heard that number maybe ever. So what are you realistically quoting customers? When do you sort of stop at the six months and after that then the orders you get are sort of, you know, don’t make any sense and they’re phantom orders?

It’s our policy, and I think it’s very broad, this policy to only recognize orders when lead times are below a year. This is normal. At the moment, there is, of course, a location and by nature of things, people order very much long term, which doesn’t mean too much. But on the other hand, it’s also not a sign of any downturn if this show go down at a point. It’s just the concern people have not to get the product. Matt Sheerin – Thomas Weisel Partners: Okay. And how are you allocating product, whether it be on the passive side, or the active side to customers? How do you make those decisions?

Well, as a matter of fact, it’s basically in Siliconix, by the way, basically in Siliconix. On the other side, it’s not really from a location. Well, we look at the history with the customer and basically – well, how good we are together, as a matter of fact. And really, we have to take into account contextual conditions also. Matt Sheerin – Thomas Weisel Partners: Okay. Thanks a lot.

Thank you.

Thank you. At this time there are no further questions. Dr. Yahalomi, do you have any closing remarks?

Thank you for your participation in our call. We do appreciate your interest and we look forward for your continued participation. Thank you.

Thank you. This concludes today’s call. You may disconnect.