Vishay Intertechnology, Inc. (VSH)

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Vishay Intertechnology, Inc. (VSH)

Q3 2010 Earnings Call Transcript

November 2, 2010 10:00 am ET

Executives

Lior Yahalomi – EVP & CFO

Dave Tomlinson – SVP & Corporate Controller

Gerald Paul – President & CEO

Felix Zandman – Founder, Executive Chairman, Chief Technical and Business Development Officer

Analysts

Steven Smigie – Raymond James & Associates

Jim Suva – Citigroup

Joe Whitney – Longbow Research

Matt Sheerin – Stifel Nicolaus

Presentation

Operator

Good morning. My name is Patrick, and I will be your conference operator today. At this time, I would like to welcome everyone to Vishay Q3 2010 earnings results 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions)

I would now like to the turn the call over to Vishay’s CFO, Dr. Yahalomi. Dr. Yahalomi, you may begin your conference.

Lior Yahalomi

Good morning, Patrick. Thank you. This is Lior Yahalomi, Vishay’s EVP and Chief Financial Officer. Good morning, ladies and gentlemen, and welcome to Vishay’s third quarter 2010 earnings call.

On the line with me today are Dr. Felix Zandman, Vishay’s Executive Chairman and Chief Technology and Business Development Officer; Dr. Gerald Paul, Vishay’s President and CEO; Lori Lipcaman, Vishay’s EVP and Chief Accounting Officer; and David Tomlinson, Vishay’s Senior VP, Corporate Controller.

Before I start, Dave Tomlinson, will read our customary opening statement. Dave?

Dave Tomlinson

You should be aware that in today’s conference call, we’ll be making certain forward-looking statements to 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.

Lior Yahalomi

Thank you, Dave. I will make summary remarks; Dr. Paul will present detailed analysis of our third quarter of 2010 and finally, Dr. Zandman, will update our R&D and acquisition activities and will make summary remarks.

As you are aware, on July 6, 2010, we completed the spin-off of Vishay Precision Group into an independent publicly traded company trading in the New York Stock exchange under the VPG ticker.

Although VPG is an independent company, due to continuing involvement by having common Board members, limited supply agreements, leases and trademark licenses, we will not restate prior financial statement to present VPG as a discontinued operation for U.S. GAAP purposes.

To assist in the analysis of Vishay, including and excluding VPG, we realigned our U.S. GAAP reportable segments segregating VPG into its own segment beginning last quarter.

Quarterly results; for the third quarter of 2010, Vishay reported revenues of $694.4 million, 1% lower than the second quarter of 2010, and 32.2% higher than the third quarter of 2009.

Excluding VPG, revenues were 7% higher than the second quarter of 2010 and 43.1% higher than the third quarter of 2009 on a comparable basis. Our consolidated gross margin for the quarter was 31.5% compared to 30% for the second quarter of 2010 and 19.9% for the third quarter of 2009.

SG&A expenses for this quarter were $87.5 million or 12.6% of revenues compared to $109.3 million or 15.6% of revenues for the second quarter of 2010, and $89.7 million or 17.1% for last year’s third quarter. VPG accounted for $10.3 million of the third quarter of 2009 SG&A.

Other income and expense for the third quarter of 2010 consists mainly of $2.5 million of interest expense and $5.6 million in foreign currency losses. The effective tax rate for the third quarter of 2010 was approximately 27%.

Capital expenditures for the quarter were $30.9 million compared to $31.1 million in our second quarter of 2010 and $8 million in the third quarter of 2009. Depreciation and amortization for the quarter was $44.5 million compared to $48.8 million in the second quarter of 2010 and $59.2 million in the third quarter of 2009.

As announced in our press release, Vishay reported earnings attributable to Vishay stockholders of $0.47 per diluted share for the third quarter of 2010. There were no unusual items for the third quarter of 2010.

Diluted earnings per share were $0.47 for the quarter represents an improvement as compared to the adjusted net earnings per diluted share of $0.40 for the second quarter of 2010 and adjusted net earnings per diluted share of $0.03 for the third quarter of 2009. Vishay, excluding VPG, generated $0.38 earnings per share in Q2 of 2010.

Year-to-date results; for the nine fiscal months of 2010, Vishay reported revenues of $2 billion. This is 41.9% higher than the same period of 2009. Excluding VPG, which had revenues of $101 million through the spin-off date of July 6, 2010, revenues were 47.7% higher for the nine fiscal months of 2010 relative to the same period of 2009.

Our consolidated gross margin for the nine fiscal months of 2010 was 29.3% compared to 17.5% for the same period of 2009. SG&A and expenses for the nine fiscal months of 2010 were $298.6 million or 14.7% of revenues compared to $260.9 million or 18.2% of revenues for the same period in 2009.

VPG accounted for $35.4 million including $8.4 million of transaction cost for nine fiscal months of 2010 of SG&A expenses, and for $31.4 million in the same period of 2009.

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