Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2016 Earnings 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 conference over to Mr. Peter Henrici, Senior Vice President, Investor Relations. Please go ahead, sir.

Thank you, Paula. Good morning and welcome to Vishay Intertechnology's fourth quarter and year 2016 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 fourth quarter and year 2016 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 discussions 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 sections of our website you find a presentation of the fourth quarter and year 2016 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 Q4 of $571 million. GAAP net loss for the quarter was $0.33 per share. Adjusted EPS was $0.18 for the quarter. The fourth quarter includes a non-cash pretax pension settling charge of $79.3 million, a gain on settlement of the Tianjin explosion insurance claim of $8.8 million, restructuring charges totaling $7.1 million and various unusual tax items. During the fourth quarter, we purchased approximately 400,000 shares of our common stock for approximately $6.2 million, pursuant to the $100 million share repurchase program announced in May. This brings the total for the program to date to 1.75 million shares for $23.2 million. Since quarter end, we have not purchased any additional shares of common stock pursuant to this program. We successfully completed the termination and settlement of our qualified U.S. pension plan in December through the purchase of annuity contracts for participants or the payment of lumpsum settlements for eligible participants who selected this option. The settlement required no additional company contributions. As a result of the settlement, we recorded a pretax non-cash charge of $79.3 million to write off all unrecognized actuarial items that had been recorded and accumulated other comprehensive income. The termination settlement will permanently reduce annual pension expense by about $5 million per year and significantly reduce our risk by removing this obligation, which had been over $250 million and had been over $300 million before the partial settlement transaction we completed in 2014. Also during the quarter we reached final agreement on the Tianjin explosion insurance claim and recognized a gain of $8.8 million. Total cash proceeds were about $13…

Thank you, Lori and good morning, everybody. 2016 for Vishay clearly has been a successful year, showing a major improvement of our financial performance. Vishay's key markets during the entire year performed well and strong orders in the fourth quarter, raised confidence also for 2017. Vishay in 2016 achieved a gross margin of 25% of sales versus 24% in 2015 and adjusted operating margin of 9% of sales versus 8% in 2015. GAAP earnings per share of $0.32 vis-à-vis a loss of $0.73 the year before and adjusted earnings per share of $0.85 versus $0.72 in 2015. We generated in 2016 free cash of $167 million, which represents the best performance since five years. The fourth quarter however came in as a disappointment. Results were negatively impacted by a higher than anticipated reduction of inventories by some temporary manufacturing inefficiencies in several divisions and by a less favorable product mix than expected. We achieved a gross margin of 23% of sales, adjusted operating margin of 7% of sales. GAAP earnings per share of -- were a loss of $0.33, adjusted earnings per share $0.18. Let me talk about the economic environment in general first. The economic environment during 2016 generally has been friendly, which in particular is true for our key markets, which are automotive and industrial. A relatively weak euro continues to support European manufacturers. Overall growth in Asia namely in China remained weaker than in previous years, but there are enough opportunities for accelerated growth. In the Americas, despite a reasonably strong general economy, the market for components was relatively weak. The U.S. continues to drive demand creation but outsourcing of production to Asia remains strong and the oil and gas segment was weak throughout the year. Talking about distribution now, in general distributors progressively gained confidence through…

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

Your first question comes from Ruplu Bhattacharya of Bank of America Merrill Lynch.

Hi, thank you for taking my questions. The first question for Lori, could you just give us an idea of the rate at which you plan to repatriate cash into the U.S. especially since the Trump administration, if there is a tax break while doing so. I think in the past you've talked about over a three-year period, but cannot be faster and also can you talk about the rate of buybacks we should expect on a year -- going forward? Thank you.

Okay. So, first of all as you can imagine, we're closely monitoring the discussions with the U.S. Congress and the American President, but of course nothing is really definitive yet. So, we would continue to monitor that and if it became favorable for us, we would certainly take advantage of it. At the moment, what I said in the past is that we're repatriating and it was going to take us three to five years to bring that cash back to America.

So how much cash do you bring back this year and how much was used for share buybacks?

So, this year we brought back approximately $50 million based on the announcement of last year and on the share buybacks, just one moment, $23 million approximately was used for share buyback.

Okay. And Dr. Paul, just asking on the lead times, do you see any lead times extending and given the level of inventory in the channel, do you think there could be any significant inventory restocking in the near term?

As a matter of fact, you're absolutely right. We see supply shortages even in certain places especially in semiconductors. There are many reasons for it I guess, but as a matter of fact we see exactly that. We have seen quite strong orders especially in the first quarter but more so in January. So, it's clear, it's true, I cannot see the pipeline replenishing at this point. There is a lot of request for products.

All right. And the last one for me, can you just quantify how much of your revenue is from the U.S.?

All together the share of the U.S is we don’t know by heart exactly, 25% roughly, you can have the number better obviously. Peter is looking.

All right. Thank you so much.

.:

23%, now [you have three-year] number.

Thank you.

Your next question comes from Shawn Harrison of Longbow Research,

Hi, good morning. This is Gausia Chowdhury on behalf of Shawn. My first question for you is with regards to the gross margin miss from the midpoint of guidance, was that all de-stocking within auto and MOSFET and what areas drive the margin rebound in the first quarter here?

First of all, the biggest effect vis-à-vis our expectations came from two points. It was the variable margin that was disappointing and this comes from quite a few, but adding up inefficiencies in quite a few divisions, which have to do with lower volume. You have seen our inventory decrease in the fourth quarter, which is mainly in MOSFET, but also happened in a few other segments of the business. And then of course also we had less favorable product mix. We saw it in a way coming and I commented on it in the last telephone conference, but it turned out to be more severe this change to a more normal mix. You remember in Q3, we had an excellent mix and it normalized more than we thought. This was the main reason. Then of course we have inventory decline, inventory reduction, which was not planned. We had supply problems from really one of our suppliers didn’t help us very much. And then of course, we had the sales came in slightly below the consensus you have seen, which was our expectation also. These were the three major reasons.

Okay. And do you see those normalizing in the first quarter because you are…

Yes.

Okay. And then second, how much of the book-to-bill strength that you saw, it seems like they were almost at record highs. How much of that was the earlier Chinese New Year?

We have about 1.3 in January, 1.3.

Okay. All right. And that was because of the Chinese New Year, a lot of the impact was because of the earlier?

Chinese is every year. It was really strong -- really strong and there are some shortages of supply in the market mainly at semiconductors.

Okay. Great. And the last question is just going back to buyback question, correct me if I am wrong, but I think the current buyback is set to expire in the summer of 2017. It seems like the pace of buyback has been pretty light so far. So what can we expect for the remainder of the year?

So, the currently approved program by our Board of Directors run until May of 2017 and of course they would have to evaluate the situation and determine if they would like to prolong that.

Thank you.

You're welcome.

Your next question comes from Harlan Sur of JPMorgan.

Good morning and thank you for taking my question. Book-to-bill in Asia even normalizing for the lower 4Q revenues was very strong, which was for two consecutive quarters. I am wondering if you can help us understand what end markets are strong? I assume one of them is automotive and transportation, maybe what about the industrial sector and how much of this is broad demand versus the momentum that you've captured to your Asia growth plan?

I think it's both. It’s really across the Board for Vishay. Indeed, we had successes finally, I may say after trying for quite a few years measurable successes in the passives, which is mainly industrial, some automotive, but mainly both, industrial and automotive. Otherwise this broad demand for semiconductors, which we just have seen in the recent weeks, really weeks has to do with certain shortages, which I don't want to comment on. This came as a surprise to us and I would call this a very temporary situation as I see it.

Great. Thank you, Dr. Paul. And then you indicated your views on growth this year in your capacitor and Opto businesses after declines in 2016. What's driving the confidence there and I apologize if I missed this, but do you expect your MOSFET business to grow this year as well?

Yes. We do, but we're handicapped a little by supply problems at the moment. But this improves continuously and we believe the MOSFETs will grow vis-à-vis prior year this year. Concerning the capacitors, I think it's tangible. We already have orders especially in power caps received quite substantial orders in the third quarter of last year and they are shippable in the course of the year. It's a program a governmental program and it's quite sizable. Altogether it's around $30 million, which will be shipped this year, which we didn’t have in last year's shipment. So, I'm confident there. We also see film capacitors being quite strong across the Board in the context of the electro cars and then we are entering and hope to grow our places in the tantalum polymer market. So, I'm quite positive that 2017 we will see an increase also in capacitors. In Opto, I don't have to comment much. Opto has been growing since many years and last year, we had at the end an unexpected end of a few programs in the first quarter, you may remember. Since then, we are growing nicely, but the first quarter was not good and if you take the year then it comes out as a negative, but we already back on a growth track. So, I am quite optimistic on especially sensors.

Great. Thank you very much.

Your next question comes Jim Suva of Citi.

Thank you very much and for the details thus far. I have two questions now and I'll ask them at the same time. First, you mentioned the backlog and the bookings have improved and were quite strong. When we look at the ASP's, is it fair to assume that those bookings and backlogs could and should result in better or improving ASP's or is it like mix shift that really impacts that because if you're talking about some shortage and backlogs longer, I guess I would think that it would lead to stronger average selling price and then I'll ask my follow-up actually after that.

Jim, I would hope. So, but on the other hand, it's as I said, we got displacement shortage as a temporary effect, plus most of the OEM contracts have been negotiated and we keep contracts obviously. As a matter of fact, of course if such a supply shortage would remain in place for say half a year or so, then inevitably the whole market will see less steep price decline, less of a price decline for sure. It always has been the case, but it takes some consistency in that before we see it.

Okay. That makes sense. Thanks for the details. Then my follow-up question is you mentioned that you have been seeing success in the sensor market, can you help us understand what end markets or type of products -- there's lots of sensors out there all the way from drive trains to optical to photo, to camera sensing, lots of them. Where is your strength and is this an area you continue to focus on and if so, would it be organically or do you think that do you need to make some acquisitions to go on into maybe some other technical areas that you may not be in today?

Jim, we historically grew and we've been talking many years. We grew in the automotive industry and in industrial industry quite well over years. I do not believe that we need a further acquisition, but I don't want to exclude it either. It depends -- it's an opportunistic business. So, if something came about census, but for sure would be an area where we would look to if there was a reasonable acquisition attempt, but I'm talking without acquisition, I believe in organic growth, which we will show again already this year. And it goes always to the same areas. It goes to automotive and it goes to industrial, which are our good markets, our traditional markets anyway and we do have a good position there.

Thank you so much for the details and clarifications. It's greatly appreciated. Thank you.

Your next question comes from Matthew Sheerin of Stifel Nicolaus.

Yes thanks. Hi, everyone. Just a couple of questions here. On the SG&A, I think you're guiding to $95 million this quarter, which is up year over year and guiding up slightly for the year, but you've also got continuing cost-cutting restructuring program going on. So, trying to figure out whether those programs will be more of a benefit of your gross margin versus the OpEx and why OpEx is trending higher?

Okay. So maybe I'll start first with the SG&A, so you're correctly guided to $95 million, which is slightly up compared to quarter four, because we had a gain on the disposal of some of the remaining fixed assets when we closed down our wafer fab in California. It does not repeat in Q1 nor in 2016 by nature. So, the estimate for the full year is only $370 million. It's not a supreme piece in essence and quarter one is the highest SG&A of the four quarters for 2017.

Okay. So exactly that's a trend down then through the year?

Yes, correct.

Okay. And then on the MOSFET business, Dr. Paul you talked about some shortage of wafers, is that -- has that been alleviated now? My understanding why that's led to your big increase in bookings particularly from distribution, but do you expect…

Gross margin. Sorry for that. It didn’t have the gross margin either obviously. So, I am sorry for that I interrupt.

No, sure, I'm just trying to figure out whether or not you can meet that demand this quarter and what that does to pricing and if you've got a big quarter here, is that going to drop down if demand or supply is more in line with demand and what does that do to your next quarter because obviously you're guiding a little bit better than seasonal for your overall revenue this quarter than you have last few years and I know that we've seen some change in seasonality due to the mix of your business and just the cycles in general, but just trying to figure out how you envision that playing out going into Q2?

Realistically speaking, we will still be handicapped to a degree in the first quarter especially in MOSFET only, just in MOSFETs we are talking. The supply improves steadily, but you remember part of the sales, which we made in the fourth quarter was based on stock reduction, inventory deduction and this inventory is gone. So as a matter of fact, despite the fact that the supply is better now and hopefully is back to normal foreseeably, it will take a little time until these constraints will over and will lead to higher sales. So, I still see as was unexpected I must say that, this delivery problems, they were unexpected, but for the moment they are improving but in quarter one, we still are handicapped.

And in the products in question, is that specific to one end market or application or is that pretty much across because you talked about obviously you sell into PCs and consumer in the MOSFET business, but also you talked about growing the order, is that across the Board or just specific to one market?

It's not across the Board. It's not in automotive, but it's in order more consumer oriented product. At the moment, the backlog increases much.

Okay. So, for automotive you produce your own wafers?

Yes. We do.

That's the new German facility, right?

Yes, exactly.

Yes. Okay. That's it for me. Thanks a lot.

Thank you.

At this time, there are no further questions. I will now turn the floor back over to Management for any additional or closing remarks.

Thank you for your interest in Vishay Intertechnology. This concludes our Q4 call.