Operator: Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter 2016 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Peter Henrici. Please go ahead, sir.

Peter Henrici: Thank you, Paula. Good morning and welcome to Vishay Intertechnology's second quarter 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 will start today's call with the CFO, who will review our second 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 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 accepting accounting principles. We use non-GAAP measures because we believe that providing full 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 Q2 2016 financial information containing some of the operational metrics that the call will be discussing. Now, I turn the discussion over to Chief Financial Officer Lori Lipcaman.

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 Q2 of 590 million. GAAP EPS for the quarter was $0.22. Adjusted EPS was $0.23 for the quarter. The second quarter includes a gain on early extinguishment of debt of 1 million and restructuring charges totaling 4.5 million. During the second quarter we repurchased approximately 500,000 shares of our common stock for approximately $6.1 million, pursuant to the 100 million share repurchase program announced in May. Since quarter end, we have purchased another approximately 300,000 shares of common stock pursuant to this program. As previously announced, we repurchased the remaining exchangeable notes in a privately negotiated transaction for approximately 11.4 million. The notes repurchased had been exchangeable for approximately 0.8 million shares of common stock and had been reported on our balance sheet and long term debt for the amount of approximately $12.4 million. In quarter two Vishay paid cash dividends to stockholders in the amount of $9.2 million. During the second quarter, we repatriated approximately $46 million of cash to divest as planned. The proceeds were primarily used to pay down our revolving credit facility balance. Revenues in the quarter were 590 million, up by 3.4% from previous quarter and down by 0.1% compared to prior year. Gross margin was 24.8%. Operating margin was 8.4%. Adjusted operating margin was 9.1%. EBITDA was 91 million or 15.4%. Adjusted EBITDA was 94 million or 16.0%. Reconciling versus prior quarter, adjusted operating income quarter two, 2016 compared to adjusted operating income for prior quarter, based on 19 million higher sales or 15 million excluding exchange rate impacts. Adjusted operating income increased by 7 million to 54 million in Q2 2016 from 47 million in Q1 of 2016. The main elements were average selling prices had a negative impact of 4 million, representing a 0.7% ASP decline. Volume increased with a positive impact of 10 million, equivalent to 3.3% increase. Variable cost decreased with a positive impact of 4 million, primarily due to cost reduction efforts and lower metal material prices. Fixed costs decreased with a positive impact of 2 million, primarily coming from our announced cost reduction programs and lower depreciation. Inventory effects had a negative impact of 3 million, due to inventory reductions, primarily at MOSFETs, and exchange rate effects had a negative impact of 1 million. Reconciling versus prior year. Adjusted operating income quarter two, 2016 compared to prior year based on flat sales were 5 million lower excluding the exchange rate impacts. Adjusted operating income increased by 4 million to 54 million in Q2 2016 from 50 million in Q2 2015. The main elements were, average selling prices had a negative impact of 15 million, representing a 2.5% ASP decline. Volume increase was a positive impact of 5 million, improvement to a 1.7% increase. Variable cost decreased with a positive impact of 10 million, primarily due to cost reduction efforts, lower metal and material prices, which more than offset the increase of labor cost. In terms of fixed cost, our announced cost reduction programs offset selling rate increases, and lower amortization of intangibles and lower depreciation had a positive impact of 5 million. Inventory effects had a negative impact of 7 million caused by an inventory reduction in 2016 versus an inventory built in prior year, primarily at MOSFETs. Exchange rates had a positive impact of 7 million. Selling, general and administrative expenses through the quarter were 92 million, slightly higher than expected primarily due to exchange rate effects. For quarter three, 2016, our expectations are approximately 92 million of SG&A expenses at current U.S. dollar to euro exchange rates. For the year 2016, we expect approximately 365 million. I would like to give you an overview of our cost reduction programs. As announced we are implementing global cost reduction programs intended to lower costs by approximately 35 million annually when fully implemented at a cash cost of approximately 30 million. These programs include a plan to reduce SG&A by 17 million to be implemented by the end of 2016. The final run rate will only be achieved by end of Q4. The annualized run rate of quarter two was 9 million. We also plan to streamline and consolidate production of certain product lines, which we expect to reduce cost of products sold by approximately 18 million annually, split 50-50 between variable and fixed costs. These production transfers will be completed in steps by the end of 2017. The amount of restructuring expense recorded for these programs during Q2 was 3.4 million or 19.7 million for the programs to date. More will follow in 2016. Our other previously announced program in the MOSFET segment has been completed. Going forward we expect annualized cost savings of approximately 23 million per year beginning in Q3. In total, we made approximately 8.8 million of cash restructuring payments during quarter 2. We will continue to monitor the performance of certain divisions for potential cost reduction opportunities. The year to date effective tax rate on a GAAP basis was approximately 28%. The normalized rate was approximately 30%. For the quarter, mathematically yields a GAAP tax rate of approximately 28%, and a normalized rate of approximately 31%. The normalized rate excludes the tax effects of the restructuring charges and the gain on early extinguishment of debt, and also includes the re-measurement of the deferred tax liability recorded with cash repatriation program announced in Q4 2015 of $1.2 million for the quarter and 2.3 million for year to date. We expect our normalized rate for the year to be approximately 30%, the same as our normalized year to date rate. This rate was based on an assumed level and mix of income among various taxing jurisdictions. A shift in income could result in significantly different results. The timing of the completion of the pending risk pension plans settlement, which is contingent upon the suitable favorable IRS determination letter, will result in significant noncash pretax charges, which could in turn result in a significant change in the effective tax rate. Total shares outstanding at quarter end were 147 million. The expected share count for EPS purposes for the third quarter 2016, based on the same average stock price as the second quarter, was approximately 149 million shares, which reflects the reduction in potentially diluted shares after repurchase of exchangeable notes on June 28. Share repurchases during quarter 3 under our stock repurchase program would reduce this estimate. For a full explanation of our EPS share count and variables that impact the calculation, please refer to the 8-K we filed this morning. Cash from operations for the quarter were 75 million. Capital expenditures for the quarter were 31 million. Free cash generation for the quarter was 44 million. For the trailing 12 months, cash from operations was 248 million. Capital expenditures were 149 million, split approximately: for expansion, 81 million, for cost reduction, 14 million, for maintenance and business, 54 million. Proceeds from the sales of property and equipment were 1 million. Free cash generation was 100 million. The first quarter of 2016 included an unusual contribution of 17 million for our Taiwanese pension plans to improve the funded the status of those plans, which actually impacts reported trailing 12 month of cash flow. Vishay has consistently generated an excess of 100 million free cash in each of the past 10 years. Cash flows from operations were greater than 100 million for the last 21 years, and greater than 200 million for the last 14 years. Backlog at the end of quarter two was at 580 million or 2.9 months of sales. Inventories decreased by 8 million quarter over quarter excluding exchange rate impacts. Days of inventory outstanding were 86 days. Days of sales outstanding for the quarter were 45 days. Days payables outstanding for the quarter were 30 days, resulting in a cash conversion cycle 101 days. We had a total liquidity of 1.5 billion at quarter end. Cash and short term investments comprised 1 billion and unused capacity on the credit facility was 509 million. The carrying value of our debt of 335 million is net of unamortized issuance cost of 12 million and includes 124 million outstanding in our credit facilities and 223 million of convertible debentures, net of unamortized discount, issued in three tranches and due in 25, 26, and 27 years, respectively. The principal amount of face value of the converts is 575 million. No principal payments are due until 2020. Now, I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.

Gerald Paul: Thank you, Lori, and good morning, everybody. In the second quarter, Vishay operated in overall friendly economic environment. The results continued to improve very much in line with expectations. This year achieved a gross margin of 25% of sales, adjusted operating margin of 9% of sales, adjusted earnings per share of $0.23 per share and GAAP earnings per share of $0.22 per share. Despite substantial cash payments for our own announced restructuring plans, we will continue to generate free cash on a good level. Let me comment on the economic environment. Generally, markets in the second quarter remained fairly friendly, with substantial variations between geographies and market segments. The trends of the first quarter to a large degree remained unchanged. Like in recent quarters, a weak euro supports European manufacturers, driving mainly the industrial and the automotive sectors. Asian markets continue to recover from a weak second half of 2015. The Americas continue to show flat results. The energy sector remains weak, but other sectors, in particular automotive, compensate. Worldwide distribution kept its confidence in Europe improving POS, up by 2.5%; and orders; up by 3%. Some regional detail on the POS of our distributors: the Americas were down by 5% quarter over quarter; Asia up by 7%; and Europe up by 3%, which in fact, if you include currency effects, which led vis a vis prior quarter. Inventory turns of distributors remained at reasonable levels: 3.3 turns, no change vis a vis the first quarter. Some regional details, also for inventory turns. The Americas 2.2 after 2.3 in the first quarter; Asia 4.2 after 4.2; Europe 3.8, unchanged to 3.8 in the prior quarter. Automotive shows continued growth in all regions with fairly strong sales of vehicles and ongoing expansion of electronic content. Electric vehicles technologies is gaining speed, led by China. Industrial continues strong in Europe. It is supported by infrastructure programs in Asia, mainly China, and remains somewhat handicapped by a very weak energy sector in the Americas. Computers show a seasonable improvement, but no real recovery. Mobile phones remained soft. There are pricing battles between mobile phone manufacturers. Fixed telecom remains slow. Future growth is expected from the 4G installation. Gaming wearables and starting, virtual reality, drive the consumer segment. AMS and MIL markets continue flat at the relatively low level, whereas medical markets continue to grow fast. Coming to the development of Vishay's business, sales came in at the midpoint of our guidance. We achieved 590 million sales in the quarter, vis-a-vis 571 million in prior quarter and vis-a-vis 591 million in prior year. Excluding the exchange effect, sales in the second quarter were 15 million, or 3% above prior quarter, but slightly down by 5 million or 1% versus prior year. Book to bill in the quarter was 1.02, 1.03 for distribution after 1.06 in the first quarter; 1.02 for OEMs after 1.12 in the first quarter. 1.2 for actives after 1.09. 1.2 for passives after 1.07. 1.04 for the Americas after 1.05. 1.05 for Asia after 1.1. 0.98 for Europe after 1.09. So all in all, the broad recovery observed in the first quarter continued at a slower pace. The backlog decreased slightly to 2.9 months, 3 months for the actives and 2.9 months for the passives. Order cancellations remain at the normal level. We continue to see lower price pressure; we have lost prices 0.7% versus prior quarter and 2.5% versus prior year. For actives, price decline was 1.1% versus prior quarter and 3.7% versus prior year. For the passives, 0.3% versus minus 0.3% versus prior quarter, and minus 1.1% versus prior year. Some highlights concerning operations. The contributive margin in the second quarter came in slightly above the midpoint of our normal range of between 45% to 47% of sales. SG&A costs in the quarter were 92 million, slightly above expectations, mainly due to exchange rate effects. Manufacturing fixed costs for the quarter were 120 million, according to our expectations. Total employment at the end of the second quarter was 22,150. Below prior quarter it was 22,350 and below prior year when employment was 22,600. Fixed headcount continued to go down by 46 heads in the quarter after the reduction of 96 heads in the first quarter. All of this was a consequence of our restructuring projects. Excluding exchange rate impacts, inventories in the quarter were down by 8 million, raw materials were up by 2 million, but free WIP and finished goods were down by 10 million, mainly in the area of MOSFETs. Inventory turns in the quarter improved from 4.0 in the first quarter to 4.2. Capital spending in the second quarter was 31 million, virtually on the same level as last year. 19 million was spent for an expansion, 3 million for cost reduction, and 9 million for maintenance of business. For the year 2016, we expect CapEx of about 135 million, in line with the midterm requirements of our growth plan. We generated in the second quarter, cash from operations of 75 million versus 79 million in prior year. 248 million generation on a 12 month trailing basis. We generated for the second quarter free cash of 44 million versus 50 million in prior year, 100 million on a trailing 12 month basis. The generation of free cash in 2016, will be impacted by the costs of our restructuring projects of approximately 45 million payouts this year. Nevertheless, we anticipate a respectable performance. Coming to our product lines resistors and inductors, Vishay's traditional and most profitable business continue on a good level. Since a disappointing second half of 2015, there is an ongoing recovery across the-board. In resistors and inductors we enjoy a very strong position in the industrial, AUTO and MIL markets, and HiRel is really well positioned in the medical segment. We continue to grow in the Asian, predominantly Chinese, industrial market. Sales in the quarter were 192 million, up by 4% versus prior quarter, and up by 6% versus prior year, excluding exchange rate impacts. Book to bill in the quarter was 1.02 after 1.1 in prior quarter. The backlog remained at a good level of 2.9. Gross margin for resistors and inductors was at 30% of sales in the quarter after 31% in prior quarter. There have been some limited temporary inefficiencies caused by inventory reduction. Inventory turns in the quarter were at 4.6, up from 4.4 in Q1. Price decline was low, minus 0.5% in prior quarter and minus 1.6% versus prior year. We continue to invest for expanding manufacturing capacities in power inductors and in thin film resistors. Coming to capacitors, our business with capacitors is based on a broad range of technologies, with a strong position in American and European market niches. Capacitors continue to suffer from the decline of the oil and gas sector and from the weakness in computers. Sales in the second quarter were at 85 million, down by 5% versus prior quarter and by 9% versus prior year, again without exchange rate effects. The book to bill ratio in the quarter was 1.03 after 1.01 in the previous quarter. The backlog increased slightly to three months. Gross margin for capacitors came in at 21% of sales after 19% in prior quarter, also supported by lower material costs. Inventory turns in the quarter were 3.6 after 3.8 in prior quarters. We've seen no price decline this quarter, neither vis a vis prior quarter nor vis-a-vis prior year. We remain confident for capacitors in view of our opportunities in Asia in film and power capacitors, as well as for polymer tantalum capacitors in MAP technology. Coming to our Opto line. Vishay's business with Opto products consists of infrared emitters, receivers, sensors, and couplers, as well as LEDs for automotive applications. The business with infrared Opto products represent one of Vishay's opportunities for growth, especially the segment of sensors, where we will be even more competitive going forward by having an own competence in chip design. Sales in the quarter were 68 million, 8% above prior quarter, but still 7% below prior year, which excludes exchange rate impacts. We've seen a substantial recovery versus prior quarter, which was soft, but we are still not on the expected levels. We think this will happen in the third quarter. Book to bill in the quarter was 1.15 after 1.09 in prior quarter. This was encouraging. The backlog increased from 3.2 months to 3.4 months due to higher sales. Gross margin improved to 32% of sales from 31% in prior quarter. We applied excellent inventory turns of 6.4 in the quarter after 5.7 in the first quarter. Price decline was low, in fact, vis a vis prior quarter. There was a price increase of 0.2%, and vis a vis prior year we had a decrease of 3.3%. And as I indicated we expect continued recovery of the sales in the third quarter. Coming to diodes. Diodes represent a broad and growing commodity business, where we are largest supplier worldwide. Vishay offers virtually all technologies, as well as the most complete product portfolio, and we in particular are leading in power applications. The business has recovered from a soft second half of 2015. We reached in the quarter 142 million of sales, 4% above prior quarter and 2% above prior year, when excluding exchange rate effects. The book to bill ratio in the quarter was 1.02 after 1.05 in the prior quarter. The backlog was at 2.8 months, slightly down from prior quarter. Gross margin in the quarter improved further to 26% of sales after 24% in the prior quarter, mostly due to higher volume. Inventory turns continue on a very satisfactory level of 4.6 in the quarter, which is slightly up from 4.5 in prior quarter. The price decline is decreasing. We are seeing a price decline of 0.5% versus prior quarter and up 3.2% versus prior year. Diodes have developed into a very relevant and stable contributor to our P&L and to our cash generation. Coming to the MOSFET area. Vishay continues to be one of the market leaders in MOSFET transistors. MOSFET since a few years suffer from the weakness of the computer segment and recently from a slowdown also in mobile phones. Over the last years we, on the other hand, developed a good and growing position in automotive, which helps to stabilize the business. Sales in the quarter were 102 million, 1% above prior quarter but 4% below prior year, excluding exchange rate impacts. The sales volume in MOSFET continues to be disappointing. The book to bill ratio in the quarter was 0.94 after 1.14 in prior quarter. The backlog decreased to 2.9 months from 3.1 months in prior quarter. The gross margin in the quarter was at 12% of sales. Results were negatively impacted by the expected reductions of finished goods inventory and by the remaining cleanup activities in the closed FAB in Santa Clara. Just to give you a picture, if there had been no inventory reduction, gross margin would already have been at 15% in the quarter. Inventory turns were 3.2 in the quarter after 3.0 in prior quarter. Price decline was normal for the MOSFETs, 2.7% down versus prior quarter, 4.6% down versus prior year. We have finalized our major cost reduction project according to plan and stopped wafer production in the Santa Clara plant. We transferred manufacturing to our modern FAB in Germany. We will enjoy substantial cost reduction of 6 million per quarter as projected. Can I summarize? Vishay enjoyed a solid second quarter in a generally friendly economic climate. Financial expectations for the second quarter were met and we foresee some further improvements for the coming quarter, mainly based on the cost reduction benefits of our restructuring programs. We continue to control our fixed costs tightly, implementing the announced restructuring plans on time. We see opportunities for accelerated organic growth by penetrating the Asian market in the automotive segment worldwide even more intensively. And based on our new products like in sensors and capacitors. Vishay continues to focus on shareholder value by implementing stock buyback programs and paying cash dividends while further pursuing acquisitions. For the third quarter, we guide to a sales range between 570 million and 610 million at gross margins between 24% and 26% of sales. Thank you.

Peter Henrici: Thank you, Dr. Paul. We will now open the call to questions. Paula, please take the first question.

Operator: Your first question comes from Harlan Sur of JPMorgan.

Harlan Sur:

Gerald Paul:

Harlan Sur:

Gerald Paul:

Harlan Sur:

Gerald Paul:

Harlan Sur:

Operator: Your next question comes from Ruplu Bhattacharya of Bank of America Merrill Lynch.

Ruplu Bhattacharya:

Gerald Paul:

Ruplu Bhattacharya:

Gerald Paul:

Ruplu Bhattacharya:

Gerald Paul:

Ruplu Bhattacharya:

Gerald Paul:

Lori Lipcaman:

Ruplu Bhattacharya:

Lori Lipcaman:

Ruplu Bhattacharya:

Lori Lipcaman:

Operator: Your next question comes from Jim Suva of Citi.

Jim Suva:

Lori Lipcaman:

Jim Suva:

Lori Lipcaman:

Gerald Paul:

Jim Suva:

Operator: Your next question comes from Matt Sheerin of Stifel.

Matt Sheerin:

Gerald Paul:

Matt Sheerin:

Gerald Paul:

Matt Sheerin:

Gerald Paul:

Matt Sheerin:

Gerald Paul:

Operator: Your next question will come from Shawn Harrison of Longbow Research.

Shawn Harrison:

Gerald Paul:

Shawn Harrison:

Gerald Paul:

Shawn Harrison:

Gerald Paul:

Shawn Harrison:

Gerald Paul:

Shawn Harrison:

Gerald Paul:

Shawn Harrison:

Gerald Paul:

Shawn Harrison:

Gerald Paul:

Operator: This concludes the question and answer session of today's conference. I will now turn the floor back over to management for any additional or closing remarks.

Peter Henrici: Thank you, Paula. Thank you for your interest in Vishay Intertechnology. I will turn the call back to you Paula.