Ladies and gentlemen, thank you for standing by and welcome to the Vishay Intertechnology First Quarter 2017 Earnings Conference Call. Today's call is being recorded and will be available for replay. During the presentation, all participants will be in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to hand our program over to Mr. Peter Henrici. Please go ahead.

Thank you, Kirsten. Good morning and welcome to Vishay Intertechnology's first quarter 2017 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 sections of our website, you can find a presentation of the first quarter 2017 financial information containing some of the operational metrics Dr. Paul will be discussing. On June 6th, Johan Vandoorn, Executive Vice President, Chief Technical Officer and Deputy to the CEO will present at the Stifel Technology, Internet & Media Conference in San Francisco and we will be presenting on May 9th at the Jefferies Technology Conference in Miami. 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 $606 million. GAAP net income for the quarter was $0.24 per share. Adjusted EPS was $0.28 for the quarter. The first quarter includes a loss on disposal of equity affiliate of $7.1 million and restructuring charges totaling $1.5 million. During the first quarter, we did not repurchase any additional shares of our common stock pursuant to the 100 million share repurchase program announced last May. The total for the program was 1.75 million shares for $23.2 million. We will continue to evaluate attractive stock repurchase opportunities, so any future purchase remains subject to approval by our Board of Directors. Revenues in the quarter were $606 million, up by 6.2% from previous quarter and up by 6.2% compared to prior year. Gross margin was 26.5%. Operating margin was 10.7%. Adjusted operating margin was 10.9%. EPS was $0.24. Adjusted EPS was $0.28. EBITDA was $96 million or 15.9%. Adjusted EBITDA was $105 million or 17.3%. Reconciling versus prior quarter, adjusted operating income Q1 2017 compared to adjusted operating income for prior quarter based on $35 million higher sales or $39 million higher excluding exchange rate impacts. Adjusted operating income increased by $25 million to $66 million in Q1 2017 from $41 million in Q4 2016. The main elements were average selling prices had a negative impact of $8 million, representing a 1.3% ASP decline. Volume increased with a positive impact of $24 million equivalent to an 8.4% increase. Inventory build had a positive impact of $9 million. Versus prior year, adjusted operating income Q1 2017 compared to prior year based on $36 million higher…

Thank you, Lori and good morning, everybody. The first quarter for Vishay was very successful, actually the best in terms of profitability since five years. We were carried by an unexpected sharp upturn of demand, while maintaining good efficiencies across the Board. Vishay achieved a gross margin of 26.5% of sales. Adjusted operating margin of 11% of sales. Earnings per share GAAP of $0.24 and adjusted earnings per share of $0.28 and we continue to generate free cash on a very satisfactory level. Let me talk about the economic environment. Markets in the first quarter not only remained friendly, but surprised our industry with very substantial orders increases across virtually all product lines. The high order level in Q1was driven by distribution in particular in Asia and Europe. Some tangible shortages of supply and stretching lead time seemed to raise concerns for the mid-term. Semiconductors apparently were more concerned than [indiscernible]. Let me talk about the reasons as we see them -- the regions as we see them, the American market improved versus quarter four with the recovery in the broad industry segment thereby the oil gas sector is stabilize. In Europe, a weak Euro continues to support manufactures in general. Automotive and industrial markets continue to drive growth. Over ordering by quite nervous customers has let to fairly exceptional POS increases. Despite in historically perspective, modest growth rates in Asia and in particular China the business environment for electronic components remains friendly with good opportunities in power transmission and in e-cars. Talking about distribution. Distribution in Asia and Europe, drove the upturn of the orders in the first quarter. At the same time, also POS was strong. In the Americas, it was up 11% versus prior quarter and was virtually on the same level as prior year. In Asia,…

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

Thank you. Our first question comes from Shawn Harrison with Longbow Research.

Hi good morning. This is Gausia Chowdhury on for Shawn Harrison. So, there are some great gross margins this quarter, could you provide some more color on where the upside came from, in particular, was it mainly from the MOSFET and diode line or anything else that I'm missing?

Really virtually all the manufacturing lines went better. The business went better than we anticipated. But of course it's very true the commodity products like diodes really had the lion's share. So, it was -- as you see from the book-to-bill quite a surprise, we didn't expect that. And well it was leading to higher sales and as you will have noticed before, we also expect an even better second quarter.

Great thanks. And then due to the strong book-to-bills, does that pose a risk that demand might correct later in the year? And during if the book-the-bills are as high through early May as well?

Well, clearly, I don't think -- at the moment, we have a backlog of over four months. This is not our history. Our backlog depending on the business we are in is more like three to three and a half months and it's obvious that sooner or later, this will normalize. But we have to work now on maximizing our sales to exploit the situation.

Okay. Thanks. One more from me if you don't mind. In terms of the long lead times or semi products and in particular for some of our products, are there concerns that they are stuck outs for any components or concern of double ordering occurring in the channel?

You can never exclude that, but at the moment, it's very clear that there is demand there is no inventory build the distribution I would like to emphasize, that means its overall a good sign that the market really demands these products. No question at the moment, I don’t see any inventory increase in the pipeline to the extent I can touch it.

Great. Sounds good. Thank you so much.

Our next question comes from Jim Suva with Citi.

Thank you very much. I have two questions and I'll ask them both at the same time. You mentioned increasing backlog and lead times in demand, but I also believe your inventory went up. Why would the inventory grow up or was it just the shift of the products that you had versus the order? And then my second question is with the increased backlog in demand and book-to-bill is there an opportunity for Vishay to see better average selling prices or less of a normal erosion in pricing as we look ahead? Thank you.

Jim, let me answer the first. First, we did have some very modest inventory built, but you will remember may be that in quarter four we had a substantial inventory reduction of more than what was increased in the first quarter. So if you go up to higher production rates per day, you automatically have to fill the pipeline, as a matter of fact there's no way out and this is what has happened. Overall for the year, we do not expect substantial inventory increases, but you have to fill the pipeline which was relatively empty let's say not empty but at least reduced in the fourth quarter. Concerning the prices, I think we can work for it. We would expect is stabilization. We do not plan for price increases but some stabilization of prices we would like to see and I guess this is not unrealistic.

Thank you so much for the details.

Our next question comes from Ruplu Bhattacharya with Bank of America.

Yes, good morning. Dr. Paul, I was just wondering how much of your auto revenues are tied to the U.S. and what are you baking in terms of auto production growth in the U.S. and how does that impact you?

I know that there are some concerns around automotive in the U.S. But you see we are selling to companies that supply to the automotive industry that export to the whole world. So we are not only dependent or even to a lower degree dependent on the U.S. market. We are more dependent on the car sales with high electronic content which is really more the European and partially the Japanese cars. So as a matter of fact, of course, we watch the situation but on automotive in general worldwide I see a picturize at this point in unchanged form -- completely unchanged.

And then for my follow up, if I can ask on the capital return plan. Can you give us an update on how much cash you have repatriated so far? And any thoughts on a dividend increase and Lori, I think you said you didn't do any buybacks this quarter but any thoughts on buying back stock so? So in general, what do you plan for your cash balance and any M&A thoughts if you can give us guidance?

Okay. So at the end of 2015, we announced repatriation program for $300 million and up to now we have repatriated approximately $50 million -- $46 million something like that. And we would plan to make another repatriation this year and we spread it over several years to optimize the level of tolling taxes from foreign sources. Any new or additional program is too premature for us to establish one because we're waiting to see what will happen in the discussions between Congress and President of America to see what the opportunities might be in the future. So, at the moment, we would not change that program, but of course, it could become interesting to realign even the previously announced repatriation program depending on what comes out of these discussions between Congress and the President in U.S.

Okay, great. And sorry the last one from me just Dr. Paul in terms of growth. So the first half for Vishay is going to be strong in terms of year-on-year growth, do you think given what you know then markets. Is it reasonable to expect the same kind of growth in the second half of ‘17 as well?

As a matter of fact, our second half historically tends to be somewhat lower than the first half and we normally do not guide beyond the second quarter -- the next quarter. As a matter of fact, we started well into the year. I personally think strict extrapolation would not be appropriate but I think we're expecting a good year, no question?

Okay. Thank you very much.

Our next question comes from Matt Sheerin with Stifel.

Yes, thanks and good morning. Yes, I mean in terms of just following up some of the questions on the high bookings level and in your backlog, we haven't seen that in a few years, Dr. Paul are you in terms of lead times and able to keep up with that. It sounds like the MOSFET situation is probably the most dire in terms of not being able to keep up with demand. So could you talk about lead times in MOSFETs now and then in the other areas where there are extended?

Well you're absolutely right, Matt. We have long lead times not only in MOSFET, but also in MOSFET’s. At the moment, it depends a little bit on the pipe but overall 20 weeks is not uncommon at this point in time for a commodity product in general. The difference to MOSFET as in this case we have to rely also on outside suppliers on foundries and we work on these foundries, we qualified one additional ones on the way but we need more than that. So otherwise, we are adding capacity as fast as we can possibly. And this is not only hiring people sometimes, it's even equipment and this is also you may have seen it we are going to increase to a degree advancing actually certain capital programs which we have in mind anyway, but we do need now faster this comes to this higher CapEx rate this year. Altogether, we do our maximum but I know that the market at the moment is cannot be totally satisfied with many of our lead times, but this is basically, we do what we can so to speak.

And then in the outside of the actives area in the passive components, are you seeing extended lead times on capacitors and resistors as well?

Yes, we see it on resistor chips, even traditionally nearly on power inductors and basically we see it in capacitors or some tantalum capacitors, yes also.

Okay. And then just a little…go ahead.

I just wanted to say we are somewhat overwhelmed with orders in quarter one really as a matter of fact.

Yes well that certainly sounds like a good problem. And then just for Lori on just OpEx, it looks like you were generally in line with your guidance given the higher your gross profit projections in higher sales activity, are you expecting sort of to maintain that range or will that be higher?

No, actually, we're expecting $94 million for Q2 and for 2017 approximately $373 million at today's exchange rates.

Okay, I missed that. Okay. Thanks very much.

Okay.

Our next question comes from Harlan Sur with JPMorgan.

Good morning and thank you for taking my question. Good to see the strong results of the business. Given the strong book-to-bill in distribution and just the overall strong dynamics in your backlog, just wondering, if you could give us a little bit more color in terms of end market demand? I know that I think your industrial business was up about 15% sequentially, looks like auto was up about 10% sequentially. Any color you can give us in terms of within those two segments some of the sub-segment demand trends which area is stronger and which area is a bit weaker?

Now it's obvious that automotive for us is strong across the Board. Our customers mainly the four big ones to do very well at this point in time and their projection is I try to say is a continued up for the foreseeable future. So, no changes to trend maybe even some acceleration in, but I cannot qualify it -- it’s all okay in all segments. Despite some concerns for the auto market in the U.S. which I appreciate but we don't see that -- we don't see that. Then on industrial also it has been quite good and increasingly good last year if you remember. What has -- but this is not a dramatic change, obviously the situation in the United States has improved from the quarter four to quarter one and in particular the oil gas segment of that has stabilized at least, maybe you can even see certain improvement there. But we are not talking major drastic changes between quarter four and quarter one as it relates to the economic environment. Computers on the other hand, they continue to shrink I mean, so I see principally speaking, obviously, there was a lot of caution in the end of the year and there's some catch-up incurred in combination I believe with some shortages of supply in certain segments which came up, which obviously do the same thing, did times go out which increases the interest for ordering more etcetera, etcetera. So if it happens -- it happened what -- how it always was the case.

Thanks for the insights, Dr. Paul. And then, on the supply shortages obviously it seems like the demand profile has caught the team a little bit by surprise here. But I'm just wondering in your view is this is much of this more Vishay specific or do you think that the supply shortages are pretty much industry wide and primarily across and I'm talking about primarily across to market and dire product lines?

I cannot comment on the competition but I know we know for sure I think most of us knew for sure they have been distinct shortages of supply in quarter, which really got to be temporary by the away and of course, this has for sure accelerated our order intake. no question about it.

Thank you.

And that would include our Q&A session for this morning’s call and I’ll hand the program back over to Peter Henrici for any additional remark.

Thank you. This concludes our First Quarter Conference Call. Thank you for your interest in Vishay Intertechnology.