Vishay Intertechnology, Inc. (VSH)

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Vishay Intertechnology, Inc. (VSH)

Q4 2012 Earnings Call

February 5, 2013 9:00 AM ET

Executives

Peter Henrici - Senior Vice President, Corporate Communications and Corporate Secretary

Gerald Paul - President and Chief Executive Officer

Lori Lipcaman - Executive Vice President and Chief Financial Officer

Analyst

Steve Smigie - Raymond James

Sameer Kalucha - JPMorgan

Shawn Harrison - Longbow Research

Jim Suva - Citigroup

Matt Sheerin - Stifel Nicolaus

Presentation

Operator

At this time, I would like to welcome everyone to the Vishay Q4 2012 earnings call. (Operator Instructions)

Mr. Henrici, you may begin your conference.

Peter Henrici

Good morning, and welcome to Vishay Intertechnology's fourth quarter 2012 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 2012 financial results. Dr. 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 Relation 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 Form 8-K that outlines the various variables that impact the diluted earnings per share computation. On the Investor Relation section of our website, you can find a presentation of the Q4 2012 financial information containing some of the operational metrics Dr. Paul will be discussing, as well as a presentation on Vishay's growth plan.

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 Q4 of $531 million, slightly above the midpoint of our guidance. Revenues for the year were $2.2 billion with an operating margin of 8.5% and an adjusted operating margin of 7.9%, excluding the gain on the sale of our property in Belgium, vacated as part of our past restructuring activities. Our operating income was as we would expect at these low revenue levels according to our business model.

EPS for quarter four of $0.14 included a one-time tax benefit of $4 million. Adjusted EPS for quarter four was $0.11. EPS for the year was $0.79 and adjusted EPS was $0.71. Vishay generated free cash of $40 million in the quarter and $147 million in the year. Revenues in the quarter were $531 million, down by 7.4% from pervious quarter and down by 3.8% compared to prior year. Gross margin was 20.5%. Operating margin was 4.1%. EPS was $0.14. Adjusted EPS was $0.11.

In quarter four we recorded a one-time tax benefit of $4 million, related to the release of a valuation allowance on a deferred tax asset in Israel. A merger of several of our wholly owned subsidiaries in Israel will allow us for the realization of these tax benefits that likely otherwise would have been foregone.

Reconciling versus prior quarter, operating income quarter four 2012 compared to operating income for prior quarter, based on $42 million lower sales, or $48 million lower excluding the exchange rate impact, operating income decreased by $23 million from $45 million in quarter three 2012 to $22 million in quarter four 2012. The main elements were: average selling prices, which had a negative impact of $9 million, representing a 1.6% ASP decline; volume decreased with a negative impact of $17 million; and lower fixed cost had a positive impact of $2 million.

Versus prior year, operating income quarter four 2012 compared to prior year adjusted, based on $21 million lower sales, or $14 million lower excluding exchange rate impacts, operating income decreased by $12 million from $34 million in quarter four 2011 to $22 million in quarter four 2012. The main elements were: average selling prices, which had a negative impact of $29 million, representing a 5.4% ASP decline; volume increased with a positive impact of $14 million, $7 million coming from our HiRel acquisition; variable cost decreased with a positive impact of $4 million, $3 million coming from lower metal prices; the fixed cost reduction of $6 million was offset by the acquisition related fixed cost.

Comparing 2012 versus 2011, adjusted operating income for the year 2012, based on $364 million lower sales, or $309 million lower excluding exchange rate impacts, operating income decreased by $175 million from $352 million in 2011, to $177 million in 2012. The main elements were: average selling prices, which had a negative impact of $82 million, representing a 3.7% ASP decline; volume decreased with a negative impact of $99 million, $129 million excluding acquisitions; and fixed cost reductions of $23 million was offset by the acquisition related fixed cost; and exchange rates had a positive impact of $9 million.

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