Vishay Intertechnology Inc. (VSH)

Q1 2012 Earnings Call

May 2, 2012 9:00 am ET

Executives

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

Lori Lipcaman – Executive Vice President and Chief Financial Officer

Gerald Paul – President and Chief Executive Officer

Analysts

Matthew Sheerin – Stifel Nicolaus

J Steven Smigie – Raymond James

Shawn Harrison – Longbow Research

Presentation

Operator

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Good morning and welcome to the Vishay Intertechnology First Quarter 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. 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 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 a Form 8-K that outlines the various variables that impact the diluted earnings per share computation. We expect to file our Form 10-Q for the first quarter this evening. On the Investor Relation section of our website, you can find a presentation of the Q1, 2012 financial information containing some of the operational metrics Dr. Paul will be discussing. Johan Vandoorn, our Executive Vice President and Chief Technical Officer will be presenting on Wednesday May 16, at the J.P. Morgan Global Technology, Media and Telecom Conference in Boston.

Now I turn the discussion over to Chief Financial Officer, Lori Lipcaman.

Lori Lipcaman

Thank you Peter and good morning everyone. I’m sure that most of you have had a chance to review our earnings press release; I’ll focus on some highlights and key metrics. As you’ve seen our adjusted EPS was $0.21 represents a $0.06 quarter-over-quarter increase despite the lower level of revenues. This is primarily due to the temporary cost reduction measures we implemented during the quarter and also to manufacturing efficiencies. This evidenced our ability to act quickly to changing economic environments with our products.

The HiRel acquisition was accretive as expected; we expect HiRel’s sales growth to outperform our corporate average. This is our second acquisition following Huntington Electric, which was acquired in quarter three of last year and also fits well into our strategy of acquiring specialty products businesses. After the quarter ended, we capitalized on our strong financial position to expand the borrowing capacity on our credit facility. These new incremental revolving commitments allows additional flexibility to pursue our growth plan, and we now have borrowing capacity in excess of $500 million.

Looking at the P&L; revenues in the quarter were $539 million, which were down by 2.3% from the previous quarter and down by 22.5% compared to the prior year. Our gross margin was 25.4% and our operating margin was 9.3%. Our quarterly EPS was $0.21. We recorded no unusual items in quarter one.

At this point, I will provide some information on the reconciliations.

Looking at our operating income for the first quarter of 2012, compared to operating income for the prior quarter based on $13 million lower sales or $8 million lower excluding exchange rate impacts, the operating income increased by $16 million from $34 million in quarter four 2011 to $50 million in quarter one 2012. The main elements were average selling prices, which had a negative impact of $5 million, representing a 1% ASP decline. Lower costs both fixed and variable with the positive impact of $15 million primarily due to temporary reduction measures and inventory impacts with the positive impact of $6 million.

Reconciling operating income quarter one 2012 compared to prior year based on $157 million lower sales or $150 million lower excluding exchange rate impacts, the operating income decreased by $72 million from $122 million in quarter one 2011 to $50 million in quarter one 2012. The main elements were a volume decrease with a negative impact of $69 million. Average selling prices had a negative impact of $11 million, representing a 2% ASP decline, which were offset by decreased fixed costs with the positive impact of $9 million.

Turning to SG&A for the quarter, selling general and administrative expenses were $86 million for the quarter. This was in line with our expectation primarily reflecting temporary cost reduction measures as well as the positive impacts in exchange rates. Also the current quarter will benefit from cost reduction measures been at a lower level. Our expectations are slightly above $90 million.

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