Good morning, ladies and gentlemen, and thank you for standing by. I would like to welcome everyone to the Q1 2015 Earnings Conference Call. I would now like to turn the call over to Peter Henrici. Please go ahead.

Thank you, Terry. Good morning, and welcome to Vishay Intertechnology’s First 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 first 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 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 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 Q1 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 Q1 of $593 million, within the range of our guidance. Exchange rates negatively impacted the top line by $19 million quarter-over-quarter. GAAP EPS for the quarter was $0.20. Adjusted EPS was $0.21 for the quarter. The quarter first quarter includes pretax charges of $1.4 million related to our previously announced cost reduction programs. Revenues in the quarter of $593 down by 2.8% from previous quarter and down by 1.5% compared to prior year. Gross margin was 24.4%. Operating margin was 8.0%. Adjusted operating margin was 8.3%. EBITDA was $95 million or 16.0%. Adjusted EBITDA was $97 million or 16.3%. Reconciling versus prior quarter, adjusted operating income quarter one 2015 compared to adjusted operating income for prior quarter, based on $17 million lower sales or $2 million higher excluding exchange rate impacts. Adjusted operating income increased by $4 million to $49 million in Q1 2015, from $45 million in Q4 2014. The main elements were: average selling prices had a negative impact of $5 million, representing a 0.9% ASP decline; volume increased for the positive impact of $5 million; fixed costs increased with a negative impact of $5 million; and inventory increases had a positive impact of $9 million. Although significant to individual line items exchange rates had no net impact on the adjusted operating income quarter-over-quarter. Versus prior year, adjusted operating income quarter one 2015 compared to prior year based on $9 million lower sales or $29 million higher excluding exchange rate impacts, adjusted operating income remained at the same level of $49 million. The main elements were: average selling prices had a negative…

Thank you, Lori, and good morning, everybody. Despite recent substantial shifts of worldwide exchange rates with the strengthening U.S. dollar and softening euro, Vishay had a promising start into 2015. Naturally, our top line suffered from a weak euro, but profitability was maintained and expectations were met. Vishay in the first quarter achieved a gross margin of 24% of sales and adjusted operating margin of 8% of sales, adjusted earnings per share of $0.21, and GAAP earnings per share of $0.20. We also expect another good year of cash generation maintaining a trend of well over $100 million free cash. Let me talk about the economic environment. The end markets in the first quarter remained generally stable considering normal seasonality and exchange rate effects. POS of distributors in the quarter increased slightly by 2%, and distribution inventory continue to go down by 3%, excluding again exchange rate effects. Inventory turns at distribution remained at 3.4; in the Americas, we are seeing turns of 2.3 after 2.4 in prior quarter; in Asia, 4.4 same as in prior quarter; in Europe 3.9 vis-à-vis 3.4 in prior quarter. Distributors in general are fairly confident for the quarters to come. U.S. markets remained fairly strong with increase in customer confidence thriving in particular automotive and construction-related sectors. Asian markets grow at somewhat reduced pace with some concerns existing for China. The weakened euro has the potential to boost the business of European exporters, mainly in industrial and in automotive. Automotive growth continues in all regions relating to needed production itself, as well as to a growing electronic content. Industrial markets after a euro driven recovery in Europe expect a strong year in general with a somewhat mixed picture in Asia. Computers continue to be soft. Mobile telephones expect a good year with strong overall…

Thank you, Dr. Paul. We’ll open the call for questions. Terry, please take the first question.

Thank you. Your first question comes from the line of Matt Sheerin.

Yes, thanks, good morning, everyone. So, Dr. Paul, it sounds like, looking into Q2 it actually sounds like that you got positive book-to-bill in all your regions and in all your end markets, and particularly distribution. Is your sense that distribution has bottomed in terms of the inventory correction that’s been going on and that point of sale looks good, and then you should see them resume their normal buying patterns or are we still pretty cautious here?

I think we are quite optimistic now. And the whole thing happened according to our expectations. I can recall our conversation about that. It really happened in the way we thought, the correction happened again at the end of last year, and now they seem - having this behind themselves in the ordering in a normal fashion again. So we are quite confident also for distribution.

And we are hearing from companies like Arrow that you’re selectively building some inventory in Europe and there are also some signs that point to some ASP increases from component manufactures. That doesn’t sound like you’re seeing any ASP increases, but are you seeing distribution orders pick up in Europe?

Altogether Europe is doing very well these days. This weaker euro which we have now seems really to support the major countries, at least the countries we are strong in. And altogether distribution and inventory I don’t think comes up at the moment. Increasing prices, honestly speaking, I cannot see at the moment. But price decline as I tried to point out has slowed down quite substantially in practically all the lines.

Yes, and regarding the MOSFET restructuring with the manufacturing shift, do you plan to or will there be a need to build inventory at any point at the end of the year?

Yes, there will be. There will some inventory for the last time, by which we will put encouragingly through the year. This is part of the normal procedure when you want to change location as an automotive supplier [indiscernible].

Okay. Alright, thanks very much.

Thank you.

Thank you. Your next question comes from the line of Jim Suva.

Great. Thank you and congratulations to you and your team at Vishay.

Thank you, Jim.

A follow-up question regarding when you’re looking at changing the manufacturing footprint a little bit, I definitely agree with the inventory bit. Can you help us understand the cost of that we should typically see there? Is there like a buildup of cost also associated with that for a quarter or two and then it comes down, when you sort think about that for margins?

Okay. Concerning costs, effective costs over - integrated over time, we don’t expect any. In fact, as long as for the time we build inventory, it’s a positive impact to the P&L and then we have to reduce it again, and this is what we count on, and we are in agreement with the customer that he takes it afterwards. Then of course, in a context of an inventory reduction it will be a negative impact. But I guess, you would refer to the integral of both phases. No, we do not expect any residual costs.

Okay. And why longer term would not be gross margins or impact be a little bit more profitable than before the change?

Well, it will be, it will be, because we are going through, first of all, we are going from - to a much more effective wafer fab, which we have. And secondly, we are also in this context able to cut substantially fixed costs. So altogether, talking out of memory, this is will be approximately $37 million to the bottom line, to the gross margin line, which will bring us from presently unsatisfactory 13% or so to 20%.

Great. Yes, that’s what I was kind of getting. And I thought we could see that cost to move.

Yes.

And then my follow-up question is given the currency volatility, basically globally around the world, is that changing your M&A pipeline and cadence of which you look at mergers and acquisitions?

No, not really. You understand mergers, acquisitions, this activity is somewhat opportunistic. So you have to analyze the company and exchange rates change as we know. We would be - I think it would be not wise to direct our activities according to these exchange rates, which change anyway going forward. It’s not the case.

Thank you and congratulations again to you and your team.

Thank you.

Your next question comes from the line of Steve Smigie.

Great. Thanks a lot guys. I wanted to ask, and if I’m looking at the book-to-bill data correctly here, but it seems like the OEM book-to-bill is somewhat stronger than the distributor, something you could talk about why you think that is.

Well, first of all, I wanted to emphasize really that it’s more or less the same. So you have 1.04 for distribution, 1.06 for OEMs. You’re absolutely right, it’s stronger, but my message to you was exactly that it’s broad, that as well distribution as OEMs have a positive book-to-bill and I wanted to call it a general broad recovery. I would not find the reason really for that OEMs are somewhat stronger as you said than distribution.

Okay. Maybe I’m splitting hairs on this too, but can you talk about the difference for the semiconductors versus the passive components, 1.02, which is 1.08?

Yes, we are discussing the first quarter and historically the passives are stronger in the first quarter. It’s the nature of the beast. Our passives are exceptionally strong in Europe and we see the consequence of that. Over the year, there is no reason why they should be different from each other obviously.

Okay. And if I just look at the book-to-bill ratios over the last three quarters, I mean, it seems the bottom in Q3 improved in Q4, improved here kind of Q1.

Yes.

Is that your sense that we just continue to have sort of improving business conditions out there?

Well, it was like that in the last years that you have the cycle as you see now again. It’s true. In former years, it was more in the second-half that computers pulled us more, but the computers as we all know suffered in recent years. So our cycle has shifted somewhat. So our cycle has shifted in a way the second quarter really often has turned out to be the best of our quarters during in the year. But I don’t think in Vishay you can talk about a major seasonality, but again if you want to go into the next level of approximations, it’s true that the second quarter became somewhat the strongest.

Okay. And then you talked a little bit about some Asian headwinds. It sounds more mixed but what are some of the strengths, what are some of the weaknesses there in Asia that you’re seeing?

Yes, talking really China and I mentioned some general concerns for China. I think we are not alone to have these concerns. On the other hand, it’s my personal conviction that with China, I’m not the expert of about China overnight, but my personal opinion about this Chinese relative slow down, they still go very fast. But this relative slowdown is kind of a correction phase which they have chosen to go through, which I believe after all according to my unimportant judgment is a sound move on their side. Again this for us this is more a philosophical discussion, because our market share in China is regrettably low and what we do at the moment is really to catch up. And seeing the situation whether China for us, we say it’s not so important with China close by 7% or 8% or 9%. For us it’s a major opportunity, which obviously starts to pay off, I’m very happy about that.

Great. If I could sneak one more in, just in terms of Capella opportunity, can you talk a little bit about and I’m pretty used to that kind of sensor being used on a handset, what are some of the applications on the industrial side? And maybe give us a three year outlook on how this market grows? Seems like there’s some decent potential there, I’m just curious how you see this spanning out.

Indeed, there are quite a lot of applications. We’d be very proud to explain them, and we are this application since quite a few years. And you see, you have seen, maybe you remember, we had a growth rate, in my speech I was quoting a growth rate, without Capella of 12% year-over-year. So it’s quite successful overall. And this was for total opto, but sensors in many equipment - pieces of equipment, go faster than that. So altogether, but you know we had this disadvantage that we didn’t have the ability for an own chip construction, chip manufacture and design in-house, which Capella, according to our plans going to fix, it’s very broad, you’ll find a lots of projects in the cars and in industrial equipment, machines.

Okay, great. Thank you.

Thank you. Your next question comes from the line of Harlan Sur.

Hi, good morning. Thanks for taking my question. The team had a very constructive book-to-bill in Q1. Maybe you can just help us understand what your book-to-bill here thus far in the June quarter, and any color you can provide on order trends by end-markets or products quarter-to-date. I just wanted to understand if dimensions are sitting up for more seasonal second-half of the year as you just talked about previously?

I can only say that in April, all these trends of a good book-to-bill continued, in fact in a way they accelerated. So we are quite optimistic for the second quarter, but naturally the visibility for the third quarter already is relatively limited, but we do expect also from today’s perspective, if nothing happens you’d never know. Also the third quarter will be a decent quarter. Concerning the fourth quarter, honestly speaking, there’s zero visibility, so we just don’t know, but altogether the year should be a good one for Vishay.

Great. Thank you for that color, Dr. Paul. Your telecom business was down typically sequentially in Q1, if you can just help us understand some of the particular sub-segments that were weaker than expected and then can you just help us understand directionally here in Q2 how the telecom business is going to be trending.

Telecommunications per se suffered at this point in time. So we have seen a slowdown really in the networking as a matter of fact and we do believe, we fear when we see it like that that this will continue in a way. It will continue to suffer. We do not expect a good year for our telecommunications, as more direct equipment. Well, mobile phones on the hand, it’s good. We see some slowing down of the growth in the fourth generation base station systems, we do. And we think that this is going to last somewhat.

Thank you. And then my final question. And I appreciate you breaking out the opto sensor subdivision. I think you mentioned on the last call, if you had included Capella this division would have done about $120 million last year. I think you said, you did about $32 million in this sub-segment in Q1. I’m assuming that Capella still has strong traction at some of the smartphone players like Samsung, and some of the other smartphone suppliers as well. And maybe potentially some growing traction in robots. The question for you is, are you still expecting strong growth in this sub-segment this year? And is it primarily going to be driven by mobile devices?

We do expect Capella is relatively new to us, and I think, I said already that this is a project driven business, which contains by nature surprises in both directions. At the moment, Capella runs approximately somewhat above the level of the second-half of last year. But this is really not the target. So we foresee at the moment approximately this year, as I said between $40 million and $50 million sales of Capella, which is above last year. But I must admit below our original expectations. But we work on it, we work on it. Most important for me is the following, let me reemphasize that Capella, the reason for acquiring Capella was not only to be part of their traditional business, really not, it’s okay, but it was not a real target. The real target was to support our sensor business in industrial automotive, by an own chip design capability. And I believe this has been achieved. We still have to prove it, but it’s on the way, we already work on common projects.

Great. Thanks, Dr. Paul.

Your next question comes from the line of Gausia Chowdhury.

Gausia calling on behalf of Shawn Harrison. I was wondering in PCs, given the euro weakness and some end market softness and if you see, for example…

Sorry, excuse me, I could not hear you. I’m sorry.

I’m sorry. Could you hear me now?

Yes, yes.

Okay, I’m sorry. I was wondering given the euro weakness and some of the weakness you’re seeing in end markets such as maybe PCs, and that offsetting some of the restructuring phase do you see the need for more fixed cost cuts in the future?

Well, it was not the first. This program of last year was definitely not our first program to cut fixed costs. And of costs, there can be the necessity. We always think about efficiency improvements. There can be the necessity going forward for another program, which is not changing our direction whatsoever. So we will continue to improve our market presence, our technical presence, but there is always some efficiencies to be gained in the administrative side. So we are going - I don’t want to announce it like that, but answering your question, indeed, that can be a follow program or a programming program.

Okay, great. Thank you. And then, my second question was just the lighter cash flow, could you just explain the dynamics behind the lighter free cash flow in the first quarter?

In the cash flow, since many years we have a cycle that years I can say it in, at least we are from, the starts always slow historically, you can go to our history, and then we come out with free cash flow of about 150, and this is also going to happen this year. There are some dynamics, some cash expenditures heavy in the first quarter and less heavy in the second-half. But there are many items, but they add up to such a cycling and it’s always the same.

Okay. Thank you.

[Operator Instructions] Your next question comes from the line of Ruplu Bhattacharya.

Question, Dr. Paul, I wanted to ask you about the market for high power capacitors. I think in the past you said that your expectations haven’t yet been fully realized. So maybe if you can just talk about how Vishay has positioned in that? What is the size of the market? And what revenues can you expect longer-term as a percent of your capacitor sales?

The worldwide power capacitor market is not an easy number to get. But let me say the following. Concerning the size, indeed, we have successes there. On the other hand, unfortunately for us, there is an offsetting momentum in Europe, our traditional market. In Europe, there is a slowdown of projects clearly, and also there is a - yes, practically that it’s an economic driven reduction. So altogether, if you add Asia and Europe together to get the whole picture, it’s okay, but somewhat not quite the way we wanted it to be. But if you talk Asia alone, starting from little only, for us, it’s a nice development. Again, we have to go for projects and not all the projects you try to get you really get, obviously, but we see a broadening of the business in China and in India also both cases. But this is not - it’s not achieved overnight, because this is a process. And I’m very happy on the other hand that we started it few years ago really, because again Europe is going to be soft foreseeably for some time, this is what we feel.

Okay. Thanks for the color on that. And then, with respect to Holy Stone, is the integration complete, or is there anything still to be done in that respect?

No, Holy Stone is integrated to the extent we wanted it to integrate. We want to keep them also in - to a degree they are good technologically and we bought this company as you may remember mainly out of technological reasons. They have the polymer capacitor capability, which we Vishay did not have yet. They have it, they work together with our traditional plan, and they’re on the way to design new products together based on the polymer technology. But asking integration, we have done what we have to do I think.

Okay. And the last one for me, just a follow-up on one of the prior questions, the new opto sensor subdivision, I think in the past you’ve and even today you’ve talked about that division having strong growth in sensors. You also mentioned the 12% rate, I couldn’t exactly follow, I think that was for the whole opto division?

This was, indeed, for whole opto, but the sensors as a part of it, I don’t have the number at hand, it’s faster growing than the total. So, indeed, it’s a very nice business to be in, and we do believe that competitor’s capability will even enhance that.

Okay. Sorry, the last one for me, in terms of the areas of CapEx spend, can you just, I think you mentioned $160 million. So what are some of the areas that you’re spending CapEx on?

It’s broad, but very much goes into diodes. Diodes is a very important part of our activities. They have packages, quite innovative packages, and we have to create capacity for that. But that’s very strong in the whole thing. Naturally MOSFETs partially as a part of the move but also generically - it’s broad, but I think if I should highlight one area of capital spending, it’s the diodes.

Okay. Thank you so much.

Your next question comes from the line of Shawn Harrison.

Hi, Dr. Paul. Sorry, if you had some good portion, I just got on the call about five minutes ago, but two questions. One, just, if you covered this, I apologize, but it’s on pricing, pricing in Europe, have you - are you looking to adjust pricing higher even in the marketplace, are you seeing competitors do anything with pricing within Europe?

I have to admit that I expected this question and ask people for that, we don’t see it at this point in time. It should not be logical what you said, but we don’t see it.

I guess, why aren’t you seeing it? Do you have any idea why pricing hasn’t changed?

Don’t want to call for it, so to speak. But anyway, as a matter of fact, we do have longer-term contracts with the OEMs, so this is not the area where it should happen. It’s good there to be with distribution obviously, but in this case, we, as I said, there is nothing at the moment.

Okay. And just exports out of Europe, one thing if you touched on this I’m sorry. But have you seen an increase in demand for products or end products that would be exported out of Europe given the weaker euro?

I think the consequence of the weaker euro is if it stays that way not fear to the full extent yet. So it’s a little early to speculate on the mechanics and when it starts. All what you mention is clearly logical, but we don’t see it yet. I can - have to - unfortunately, I cannot contribute much more than that. It’s not fair.

And then I came on…

[indiscernible] our judgment.

Okay. I heard right at the end of your response from the colleague’s question on restructuring, I guess what I was looking at or considering was the fact that with the euro being done, you do have quite a naturally hedge, you do have translational head winds that, if I’m looking at 2016, a decent chunk of the benefits you should see from restructuring Siliconix is going away. And so that’s essentially if I was contributing, are you looking at other fixed costs reductions here in very near term and over multiple years, because you have to mitigate the translational headwind?

Yes. First of all, I think the weaker euro we should even see a better situation, because we changed dollar costs in Silicon Valley basically to euro costs in the Northern part of Germany. So a weaken euro should even increase the impact of our cost reduction program. But this - having said that, it’s absolutely true what you say, this is not our last cost reduction project in Vishay. In fact, we are thinking continuously about ways to be efficient or more efficient not only in the variable side if yield and the productivity, but also in the fixed side. And it’s very true, it’s very likely that there will be another fixed cost reduction program ahead of us. But I don’t want to announce it now. It’s - we are thinking about a couple of things.

Sounds very helpful. Thanks as always, Dr. Paul.

Okay.

And there are no further audio questions.

Thank you, Terry. That finalizes our Q1 call.

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