Vishay Intertechnology, Inc. (VSH)

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Vishay Intertechnology, Inc. (VSH)

Q4 2011 Earnings Call

February 7, 2012 09:00 am ET

Executives

Peter Henrici – Senior Vice President, Corporate Communications

Lori Lipcaman – Executive Vice President and Chief Financial Officer

Gerald Paul – President and Chief Executive Officer

Analysts

Jim Suva – Citigroup

Matthew Sheerin – Stifel Nicolaus

Steven J. O’Brien – J.P.Morgan

Shawn Harrison – Longbow Research

Steve Smigie – Raymond James

Presentation

Operator

Good morning and welcome to the Vishay Intertechnology Fourth Quarter and Year 2012 Earnings Call. My name is Melissa and I will be your conference moderator today. (Operator Instructions) After the speakers’ remarks, there will be a question and answer session.

I will now turn the call over to Peter Henrici, Senior Vice President, Corporate Communications. You may begin.

Peter Henrici

Thank you, Melissa. Good morning and welcome to Vishay Intertechnology’s Fourth Quarter 2011 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-end 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 from 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 business 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 section of our website, you can find a presentation of the Q4, 2011 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’m sure that most of you have had the chance to review our earnings press release. I will focus on some highlights and key metrics. As you have seen, revenues were down significantly quarter over quarter, but within the lower range of our guidance excluding exchange rate effects. The weaker Euro impacted revenues by approximately $8 million. Margins for the quarter reflected the lower volumes. Revenues for the year were $2.6 million, and for quarter four, $551 million.

EPS for 2011 was $1.42 and for quarter four, $0.19. Adjusted EPS for 2011 was $1.46, and for quarter four, $0.15. Cash from operations from 2011 was $376 million.

On January 13, we acquired HiRel Systems, a leading supplier of high reliability magnetics products. The purchase price was approximately $85 million, including repayment of HiRel debt, and subject to customary post-closing adjustments. It will be reported in our resistors and inductive segment. This recent acquisition sits well into our recently announced growth plan. We expect it to be accretive immediately. We expect a payback of less than eight years. You will hear more about HiRel later.

Looking at the P&M, revenues in the quarter were $551 million, down by 13.5% from previous quarter and down by 19.9% compared to prior year. Gross margin was 22.8%. Operating margin was 6.1%. EPS was $0.19. Our adjusted EPS was $0.15. Adjusted EPS excludes one-time tax benefits totaling $6.5 million, primarily related to the release of deferred tax valuation allowances in various jurisdictions.

Revenues for the year 2011 were $2,594,000,000, down by 1.1% from previous year, excluding a spinoff of Vishay Precision Group. Gross margin was 27.8%. Operating margin was 13.4%. Adjusted operating margin was 13.6%. EPS was $1.42. Our adjusted EPS was $1.46. Our adjusted operating margin for the year excludes pretax charges totaling $5.8 million related to costs recognized upon the passing of our founder and former chairman, Dr. Felix Zandman and the resignation of our former chief financial officer, Dr. Lior Yahalomi.

Our adjusted EPS excludes the after-tax effect of these charges, as well as a one-time tax expense of $10 million recorded in Q1 and one-time tax benefit of $6.5 million recorded in Q4. In our press release, we’ve included a table which reconciles GAAP EPS into adjusted EPS.

Let me reconcile operating income for Q4 2011 compared to adjusted operating income for prior quarter. Based on $86 million lower sales, or $78 million lower excluding exchange rate impacts, the adjusted operating income decreased by $44 million from $77 million in Q3 2011 and $34 million in Q4 2011. The main elements were average selling prices, which had a negative impact of $3 million, representing 0.5% ASP decline and volume decreased with a negative impact of $37 million.

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