Vishay Intertechnology's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Vishay Intertechnology, Inc. (VSH)

Q2 2012 Earnings Call

July 31, 2012 09:00 am ET

Executives

Peter Henrici - SVP, Corporate Communications & Corporate Secretary

Gerald Paul - President & CEO

Lori Lipcaman - EVP & CFO

Analysts

Matt Sheerin - Stifel Nicolaus

Jim Suva - Citigroup

Joe Wittine - Longbow Research

Steve Smigie - Raymond James

Presentation

Operator

Good morning and welcome to the Vishay Intertechnology second quarter 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. 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 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 discussion of factors that could cause the 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 that provides 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. We expect to file our Form 10-Q for the second quarter this evening.

On the Investor Relations section of our website, you can find the presentation of the Q2 financial information containing some of the operational metrics Dr. Paul will be discussing as well as a presentation on Vishay’s growth plan.

Dr. Gerald Paul, will be presenting on Wednesday, September 5th, at the Citi’s Annual Technology Conference in New York.

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

Lori Lipcaman

Thank you, Peter. Good morning. I am sure that most of you have had a chance to view our earnings press release. I will focus on some highlights and key metrics.

Adjusted EPS of $0.24 increased $0.03 quarter-over-quarter. We successfully sold a property vacated due to our restructuring activities recognizing a gain of $12 million.

In the second quarter, we completed the repurchase of 13.9 million shares of our common stock. Including this most recent repurchase, we have spent $575 million to repurchase 44.3 million shares of our common stock since the fourth quarter of 2010. This represents 24% of our shares outstanding before we began the initiative.

We pay a fixed cash interest of 2.25% on the face value during the lifetime of the convertible debentures. We chose converts as the more efficient way to finance and to execute substantial share repurchases rather than repay trading cash or using other forms of debt.

Looking at the P&L; revenues in the quarter were $588 million, up by 9.2% from previous quarter, and down by 17.1% compared to prior year. Gross margin was 25.1%. Operating margin was 12.4%. Adjusted operating margin was 10.3%. EPS was $0.29. Adjusted EPS was $0.24.

Our adjusted operating margin excludes a gain of $12.2 million recorded on the sale of a manufacturing facility in Belgium previously vacated as part of our restructuring activities. Our adjusted EPS excludes the after-tax effective this gain. In our press release, we have included a table which reconciles GAAP EPS to adjusted EPS.

Reconciling adjusted operating income quarter two 2012 compared to operating income for prior quarter based on $50 million higher sales or $53 million higher excluding exchange rate impact, the adjusted operating income increased by $11 million from $50 million in Q1 2012 to $61 million in Q2 2012.

The main elements were, average selling prices which had a negative impact of $8 million representing a 1.4% ASP decline; volume increased with the positive impact of $27 million; we had higher fixed costs with a negative impact of $4 million due to the non-repetition of temporary reduction measures in Q1 and inventory had a negative impact of $4 million due to non-repetition of the Q1 inventory build.

Reconciling adjusted operating income in quarter two 2012 compared to prior year based on $122 million lower sales or $101 million lower excluding exchange rate impacts, the adjusted operating income decreased by $58 million from $119 million in Q2 2011 to $61 million in Q2 of 2012. The main elements were, average selling prices which had a negative impact of $18 million, representing a 3.1% ASP decline and volume decreased with negative impact of $38 million.

Selling, general and administrative expenses for the quarter were $87 million. This was lower than our original expectations reflecting primarily the realignment of bonus accruals to current expectations for the year, as well as a positive impact from exchange rates of approximately $1 million. For the current quarter, our expectations are approximately $90 million.

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