Ladies and gentlemen, thank you for standing by and welcome everyone to the Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there would be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn the conference over to Mr. Peter Henrici. Sir, you may begin your conference.

Thank you, Paula. Good morning, and welcome to Vishay Intertechnology's third 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 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 more detail. Finally, we'll reserve time for question-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 third quarter 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 Q3 of $561 million. GAAP EPS for the quarter was a loss of $0.19. Adjusted EPS was $0.17 for the quarter. In light of a sustained decline in market capitalization for Vishay and its peer group companies and other factors. We determined that interim goodwill and indefinite lived impairment test were necessary. Prior to completing the goodwill assessment, we also performed a recoverability test of certain depreciable and amortizable long-lived assets, as required by US GAAP. The Capella business acquired in 2014 has not performed as expected. We still believe that the addition of Capella will in the mid and long-term add considerable value to our entire optoelectronic components business, to the addition of in-house design capabilities. However, we also concluded that the depreciable and amortizable assets of the Capella business primarily customer relationships were not recoverable and recorded the impairment charges of $57.6 million to write-down the related assets to their fair values. We also concluded that the goodwill associated with the capacitors business unit totalling $5.4 million was impaired. No impairment with identified for the other reporting units and asset groups tested for impairment. As previously announced, an explosion occurred in the Port of Tianjin, China on August 12. Vishay owns and operates a diodes manufacturing facility near the port and the shockwave of the explosion caused a temporary shutdown. The Tianjin plant was fully operational again by September 8. We estimate that the temporary shutdown resulted in loss revenue of $20 million during the quarter. Additionally, the results for Q3 include a charge of $5.4 million related to the explosion recorded…

Thank you, Lori, and good morning, everybody. In the third quarter, the overall economy conditions were not favorable in general, as we expected it to be. Additionally, our top line and our financial results suffered from the well-known severe accident in the harbor of Tianjin, which temporarily interrupted the output of one of our large plants. And also, this has been the reason for not reaching our projected midpoint of sales. I believe, that we nevertheless achieved respectable results given the circumstances with a gross margin of 23% of sales and adjusted operating margin of 7% of sales. Adjusted earnings per share of $0.17 and GAAP earnings per share of minus $0.19 due to impairment charges. For the year, we continue to expect the generation of substantially over $100 million free cash. Let me talk about the economic environment, after a reasonably strong first quarter. In signs of weakening in Q2, economic environment in the third quarter did not recover. Asia continued to face headwinds with soft microeconomic conditions in China impacting negatively the entire region. Domestic Chinese consumption has suffered also influence by real estate and stock decline. In the Americas, we continue see a severe weakness in the oil and gas sector and relative stability otherwise. Europe remained stable with automotive and industrial exports continuing strongly. Some concerns exists related to a potential drop of exports to China. Distribution became rather cautious focus on the inventory levels. In the quarter reduction of 2% has been reported. Inventory turns at distribution in the quarter remained at principally reasonable level of 3.3, in particular in the Americas 2.2 turns after 2.3 in the second quarter. In Asia, 4.4 turns after 4.6 and in Europe 3.5 turns after 3.8. The POS of worldwide distribution dropped further by 3% quarter-over-quarter after 2%…

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

[Operator Instructions] your first question comes from the line of Steve Smigie

Dr. Paul, you mentioned potentially for cyclical recovery and I was hoping you could talk a little bit about what gives you some confidence there, what could potentially change that would make that not happen and what does this suggest you about your opportunity for 2016 top line growth?

Well overall, you can say looking back historically unless there is a major change in the macro economy, this is the nature of the piece. This is the nature of our economy that within year, one and half year, the cycle changes. On the other hand, I have more in-depth reasons to believe it, when we look into our order situation in the fourth [ph] quarter, it's quite okay. It's above 1 and we're quite confident that we will not decline substantially. But it could be, the distribution continues to reduce, the inventories we even count on that, which will of course reduce our expectation for a growth tomorrow, for a change tomorrow directly. But for the next year, we do expect a change of the economy of the cycle.

Okay, great and any thoughts on what your calendar 2016, growth could potentially be top line?

Well, we do expect some growth vis-à-vis this year.

Okay, great and just on some and market segments. I think you indicated that military was about flat and I was just wondering, I don't know if it's just rounding but if I just stick in what you guys said as a percentage last quarter versus this quarter looks like it will be down. Is that just rounding errors on that?

I think it's rounding, it's practically rounding, yes I called it flat.

Okay, great and then it does seem like consumer did fairly well. Can you talk a little bit about what's helping there?

Well as I said, the wearables obviously are an area, which grows fast. Whereas I was not too positive on the other areas, they have inventory all across the board. The wearables pull the whole segment at the moment.

Okay and then on Capella, is that more short-term issue related to customers or is there something else going on, that's making a little bit soften your term because it seems like you have self-confidence in intermediate long-term.

In fact, the Capella acquisition obviously did not fulfil our short-term expectations in terms of their business, we've said it. On the other hand, when we look at the development of the business it's going upward, no question 2015 will be better than 2014 and for next year, we expect another substantial, well yes substantial growth it's only smaller number, substantial growth vis-à-vis this year. So I'm looking also over their project and they have an increasing number of projects they pursue, you may know that they have a very dependent, when we acquired them one major Asian telephone maker so to speak, right very dependent and this was also the reason one of the major reasons for the underperformance which we've seen in the first phase. I'm very happy to see that they're now broader, that the efforts are broad and I'm also happy to see that the echo operation with the opto division, this was the deepest reason, why we acquired Capella. It has not only started already see some results. So I'm quite optimistic disregarding of course, the disappointment concerning the impairment.

Okay great and then last with that positive book-to-bill you're seeing so far in October, does that suggest March might be up sequentially from the December quarter and if that happens does that mean, you might see an uptick in gross margin Q1 over Q4.

If it's an uptick in sale than gross margin for sure, we'll be better. Whether or not, this will be better it's too early to judge actually. But it would not be the first time, that the first quarter means recovery for our business. But again, against this speaks clearly the fact that our distributors continue to reduce inventory I believe and nobody knows exactly when they will stop to do that.

Okay, great. Thanks a lot. I appreciate it.

Your next question comes from Harlan Sur

Dr. Paul, I think you said that distribution inventories declined about 2% sequentially in Q3. As you mentioned, your distribution partners are still taking down inventories in Q4. Do you have a rough sense sequentially on how much is the inventories are coming down in Q4 and maybe if you can also help us understand what the POS trends are going to be doing in Q4 as well.

Well, I have to see of course, it's not directly our business. But I do believe, that they continue because if you compare the situation. One quarter earlier, say after the first quarter this year with a situation after the third quarter. Actually, the inventory as we see it was relatively constant and I do believe this gives you enough reason for our partners in distributions to bring down inventory further. I would say, it would not drop more than what we've seen. I don't think it will accelerate, but I think it will continue. Concerning the POS, well this is the same business in the end. We are in, I believe basically they also like us. We'll see a rebound, but the question is when. Maybe they'll see it earlier than we do because of course we're subject to their decisions concerning inventory reductions.

Great, thank you for that and then the team did a great job of reducing SG&A in Q3. Did you get some benefit from accelerating some of the SG&A restructuring program initiatives that you highlighted last quarter.

Very small. In reality, the company reacted like in the past vis-à-vis weaker economy and this went to very smoothly I must say that. So the real impact of our programs will come later.

Okay, great and then my last question. Again as I relates to kind of just the macro trends that you're seeing out there and the potential for more inventory work downs. Do you get a sense that more of bias towards the weakness is still sort of China focused or at this point, are you feeling like it's just broad based globally?

I mean, Asia plays a role in that, of course. The cautiousness started in Asia this time, but we see also some cautiousness in the US as a matter of fact in certain segments and distribution and it's really hard to forecast, what their business decisions are, but again, they will not deplete the inventory completely. I do not believe that anyone at this point believes in the worldwide crisis of the economy. Which automatically will be the reason for continuation of the cycles which we know so well? So in the course of next year hopefully early, they will change the direction and whole business will change direction and then it goes the other way around. They will have want to build inventory again.

Thank you, Dr. Paul and just my last question. On the Capella impairment obviously we all know that, China smartphone segment of the market has been weak. You guys have been making a concerted effort to drive the Capella technology into industrial and automotive applications. When do we start to see those revenues starting to add incrementally to your revenues?

Well, I mean, sensors in general is a good place to be these days. And you see if you look at, this is why I started to report also the sales of this duly created sub-division we have sensors and it goes up and it's quite profitable. I can tell you that, Capella already partially works for this main business, but of course imagine automotive. It takes a time for qualification etc. So it doesn't go overnight. But there are already joint programs and already certain chip designs, which we in the past had to do outside and now made in-house. So we see successes. Despite this write-down, which we had to have. I'm really quite optimistic that this was a good decision to acquire Capella. You see a business you want to be to want to be in sensors and without the ability to design chips, we would not be super successful I fear. So it was right, I think.

Thank you, Dr. Paul.

Your next question comes from the line of Jim Suva.

I have two questions. The first question is regarding the China plant explosion and then the factory had to be shut down then it's back running again and you recovered very quickly from it. Can you help us understand the impact, if any, does that have to, the December quarter and then maybe post-December? I would imagine you may have work down some inventory during the weeks that was closed and you need to recoup the production from that facility that maybe, would that be helping December sales and gross margins by a certain amount or am I thinking of that incorrectly?

I think Jim, it will not help us much. We have lost in the third quarter $20 million sales as we estimated, I think reasonably and these chances are gone, as a matter of fact. And so we're up and running in a regular form. I think we are in a steady state situation by now. I do not expect anything positive nor negative in the fourth quarter.

Okay, so am I correct - and that factory does not supply any inventory or have inventory that may have been absorbed in September?

To a minor degree I would say, it's not and its few weeks have passed by, since we're fully operational. So a few things already have regulated very quickly.

Great, thank you and then my follow-up question is on the automotive sector. You talked about the European - US strength. Vishay has a very long and great history with the European auto makers especially, with the German OEMs as well as global autos OEMs. Most people are aware of the one German automaker is facing some challenges with its diesel engines. Can you talk us about, have you seen any change of production from that or are you expecting any change to - how should we think about that?

Jim I expected, obviously the question. No, we have not seen anything. It's very true, really nothing at this point in time. Of course, we were also concerned in the beginning that is very true that the company, you talk about, the car companies, the major customer of our customers for sure. On the other had we supply to all kinds of OEMs. That means, if this specific company should lose market share, which is not the case yet right, then others will sell more and I think, as we're supplying to our OEM supply to all the care companies. If this is a specific car maker should sell this, which is not given others will sell more. So I feel relatively certain that this incident which is of course not very nice at all will not hurt, Vishay.

Great, thank you and congratulations to you and your team.

Thank you.

Your next question comes from Matt Sheerin

Just a couple of follow-up questions. Regarding the positive book-to-bill that you're seeing sounds like so far, I mean at least in October is that broad based and does that include distribution or is distribution still negative as the [indiscernible]?

Well actually its distribution driven as a matter of fact, it's true. What we have seen better than expected picture from Asian distribution, I must say that in October. So really, you're right we have seen a better picture and of course this makes me more confident that this rebound which we're expecting will not last until Christmas of 2016, you understand. So it will come relatively fast I hope, but you never know.

But the expectations are that your quarter is more front-end loaded and that become three or four weeks you're going to see your customers particularly in Asia start to bring down inventory levels, right. Yes. It's true.

Yes, it's true.

So the book-to-bill may flip the other way, as you get into January.

You see, but it was nevertheless a nice change, this vis-à-vis the third quarter, which actually was a disappointing one.

Yes on the savings, $23 million in savings from the MOSFET manufacturing shift. When and I know you're looking at margins expanding there. When should we start to see that should have been in Q1 or you got the savings in Q1, so you will carry that into Q2?

Actually nothing has changed from what we said in the past. These savings will kick in beginning of the second quarter of next year, likely we always have said, there is no change.

Okay, so Q2 and then beyond. Okay and then and just lastly and kind of bigger picture question there's been a lots of consolidation going on the component of semiconductor space including some of your competitors and the commodities semiconductor space or at least these rumors about consolidation. What is that you in terms of Vishay's picture as you're seeing more consolidation among your peer group? How does Vishay look in terms of that, when you've got much bigger competitors and competitors now offering more, one stop shop sort of offerings to their customers similar to what Vishay has been trying to do?

Yes, first of all I think we're not very excited about it. I think we can be very confident. Normally, if bigger companies come together this is not what a normal buyer likes as a matter of fact. I believe that, if supplier gets too big, he not necessarily get the tailwind of the buyers, not necessarily. So I believe that Vishay will, we don't count on it directly but I would suspect if I had to choose between opportunity and disadvantage. I would take, call the whole thing more opportunity than a disadvantage for Vishay.

Okay, all right. Thanks a lot. Operator Your next question comes from Shawn Harrison

Couple clarifications as well. POA this quarter, was that down to 5% sequentially for the September quarter?

No, but if we have to look it up. No it was less than that, but my colleagues looking up, I come back to that in a minute.

Okay and then going back to Capella. I believe the sales run rate was somewhere around $9 million to $10 million a quarter.

Yes.

So it's growing off that.

Yes and now it's between $10 million and $11 million. But we see a reason to believe, this can grow further. So there are enough projects in the pipeline. But you know project business is project business. You can be lucky or less lucky. But I do believe that there are lots of chances around. So I see a recovery, we already have seen a recovery of the Capella business not to the levels we hope for obviously, but it's going upward and the corporation with opto division goes really well.

And the recovery is not with the Asian handset manufactures, it's with the.

Also, but broader but not only with the handset holders not. Not only.

Okay, the book-to-bill experience for the diodes business coming out of the September quarter, how much of that was tied to the explosion versus underlying demand improving to 1.05 book-to-bill if there is way to kind of parse out.

I think we can calculate it, we have lost $20 million of sales in the quarter. So I think we could calculate the order space on the sale and then take out the potential of $20 million sales obviously.

Okay and then I guess finally, last quarter. I believe the comment was made that you would look to take additional cost down of the business, if kind of a negative environment continue to persists. It doesn't seem like that's going to be case now given a slightly more positive outlook for 2016. Just I guess on whether any additional restructuring needs to be done given the current outlook or whether you think [indiscernible]?

No, I believe, I believe we're set at the moment. But we're always ready as you know, we're always ready to react to further downturns, there's more severe downturns. But I believe what we're doing now make sense, it doesn't harm. It's very important, it reduces the cost but it's kind of organic. It means it doesn't harm what the company can do technically in particular. And also in terms of design in which I want to grow even going forward. I believe we are okay, but again if things turn out worse than I expected or more than I expressed, then we will react stronger than we did up to now.

Okay, were you able to find that POA number?

The POA was 12% down.

In the distribution, well. Okay, thank you, Dr. Paul.

[Operator Instructions] your next question comes from Ruplu Bhattacharya

Couple of questions. First on the MOSFET expected gross margins getting to 20% by 2Q, 2016. I just wanted to clarify, I mean given the computing as we, are you relying any on revenue expanding or is it just based on infrastructure?

No, it's purely cost out.

Okay, all right good. And then, in terms of.

Otherwise, I wouldn't dare to say that, so to speak, but not in our hands.

Right. And then you know it looks like you're able to contain SG&A to $89 million for the next quarter. Can you give us some expectations for SG&A going forward. I mean, what range do you expect that in the next couple of quarters, can you maintain that range?

First of yes, basically this is what we intend to do because of course, we will have to impact of our cost reduction program on the one hand, on the other hand, you have inevitable impacts of inflation named salary increases. So our cost reduction program which is going to be implemented as indicated as promised will offset the wage increase of next year.

Okay, all right. Maybe just to clarify the gross margin impact in the next quarter. It looks like at the midpoint, the revenue is about flat with this quarter. It's about $560 million but then the gross margin guidance seems to be about a 100 basis points lower quarter-on-quarter. So what are some of the dynamics there, is it just I mean, what is impacting that 100 basis points down in gross margin?

We have built inventory in the third quarter still land we're going to reduce inventory in the fourth quarter, so this makes the difference.

Okay and then maybe the last one from me. Just your general thoughts on share buybacks and dividend, do you think you can get to breakeven with the dividend in 2016 in the US?

Well we're on the way to until it gets better, but at the moment, we're still negative on that. We're still cash wise in the US negative. But it's getting better.

And in terms of share buybacks, any thoughts on that?

No thoughts at this point in time. At least nothing, which - we always talk about these things but there is nothing which is really kind of decision at all.

All right, thank you.

Your final question comes from the line of [indiscernible].

I've a follow-up related to the previous question. With the balance sheet, being so overcapitalized and the cash flow generation was steady. I was wondering if the company has considered alternatives to the current plan to create value for shareholder and what valuations does management think of buyback would make sense.

Well we have done buybacks in the past. And this is obviously discussed with the Board by nature and decided by the Board and of course this stays on our agenda principally. But at the moment, we do not feel that this should be re-discussed but I cannot exclude that this will come up again. There are no firm rules, I believe it's an opportunistic thing.

Great. Thank you.

At this time, we have no further questions. I would now like to turn the floor back over to management for any additional or closing remark.

Thank you, Paula. This would conclude our earnings call.