VSH - Earnings call transcript Q2 2019 | Vishay Intertechnology, Inc.

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Operator

Hello. My name is Zatania, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vishay’s Q2 2019 Earnings 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. Instructions] [Operator

would Henrici. turn your Sir, I to call conference. like Peter Mr. you now you. the to over Thank may begin

Peter Henrici

second our Paul, Vishay's Thank to and Officer. Chief With morning, Good and President President today quarter Lori and Officer; Intertechnology's Financial Lipcaman, me Gerald you, Call. Vice XXXX Dr. and are Executive Conference Executive Zatania. Vishay welcome Chief

will today's review results. well we'll more start operational call give Paul our Dr. quarter usual, CFO, discuss will with detail. of As who as overview financial second XXXX Gerald and in our then an the segment business results as performance

we'll Investor for will be Finally, call the Relations This section XX answers. publicly available of this call for at questions time replay reserve approximately our and The from is being days. webcast website for ir.vishay.com.

be be will forward-looking actual events subject You could uncertainties call, in discuss making statements. performance. that certain that to These should conference future from statements the statements to are differ that and and today's we aware risks results forward-looking cause

Exchange For that filings results see please with differ, Form and could Securities XX-K press factors release the and a to today's Vishay's XX-Q cause Form discussion of and Commission.

per investors GAAP that in businesses variables that filed to with this information about diluted the that accepted X-K prepared the operating adjusted by during our may believe are useful also provide be the use we they principles. other call, morning, conjunction outlines addition, considered impact non-GAAP computation. provide. that we We according financial measures we In Form of earnings accounting a and should or we measures generally This refer not to measures because performance share various

Relations you second a Investor of of and financials can the the find metrics. website, section On quarter XXXX presentation our

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

Lori Lipcaman

key the Adjusted a the metrics. on have press you, Peter. and of that for $X.XX revenues QX some will release. Vishay million. I focus everyone. review EPS had Good quarter. I quarter. morning, earnings sure EPS to $X.XX highlights of chance $XXX for was you am most Thank reported our was for

During facility increases million we to with in undrawn rates the amounts. the The interest on at quarter, credit slight facility. a $XXX amounts paid drawn successfully commitment our we new improvement renegotiated capacity on similar

credit financial Additionally, the new for improved that facility covenants has operational allow greater flexibility. and

Also We repatriated million to during cash paid program. United million. and the the $XX States we continued quarter, taxes foreign repatriation our withholding of and $XX

reform enactment of cash taxes transition of We U.S. the also tax reflected million. The on flow made payment as of taxes $XX these of second of the in tax accrued been statement the operating payment the XXXX. upon These have cash an flows. is

I tax-related All a are impacting items in elaborate margins. EPS between reconciling moments. GAAP few of the will items. or and reconciling transactions operating EPS There were items gross these on no adjusted

rate million arrive million income operating XXXX items EBITDA prior $XXX compared quarter income exchange at based reconciling for excluding was There quarter or operating impacts. two to Reconciling EPS $XX no reconciling were Revenues margin in margin. by the prior were quarter $X.XX. at There million, was to no quarter XX.X%. Operating from XX.X%. was Adjusted arrive $XXX year. down and EPS XX.X% was margin were was down Gross items operating pervious $X.XX. adjusted X.X% on quarter, EBITDA. prior sales to versus to compared XX.X%. $XX or million adjusted lower

sales $XX negative decreased QX XXXX representing $X million million or decrease income $XXX $XX two The operating $XX million with lower customers. from in negative million million quarter decline, through QX operating X.X% XXXX decreased in to of QX impacts. impact Operating income excluding had selling XXXX average income equivalent $XXX ASP on U.S. in million year of elements compared in main by X.X% $XX million XXXX prior by to income million which to impact lower passed prices to $XX decreased in Adjusted a includes $XX a XXXX. million volume. XXXX. QX a million were: Volume a tariffs from exchange in rate to $XX Reconciling operating versus based QX

main The impact decline, a decreased selling a again to $XX of X.X% negative decrease. representing tariffs average of were U.S. includes elements a $X representing customers. X.X% prices Volume million impact through ASP had a million with which pass negative

tariffs, and the with cost inflation incentive negative manufacturing increased $X for impact impact million, inefficiencies, year-to-date due positive compensation accruals some due other fixed virtually raw the primarily costs a U.S. $XX decreased was offset to prices costs of June. Variable a million, with period cost of primarily reduction; to variable material of by realignment

the expenses to than and for general administrative accruals expected were period quarter lower year-to-date $XX the compensation adjustments June. for million, to Selling, incentive due

XXXX, QX SG&A the million rates. for million $XXX at are full exchange For and approximately our approximately $XX expectations of expenses constant year

third-tier which and of movement included subsidiaries. about additional to net million, $XX States of During some an received million. taxes In United cash the withholding taxes paid million we the repatriation, foreign began second-tier we $XXX and of We QX, repatriate from of the to second in subsidiaries and foreign $XX million. $XX higher-tier withholding of quarter, process expect

are to foreign state taxes other some subject to to U.S. repatriation U.S. are transition to of tax or withholding of for and federal while to such debt, reform, reform that amounts taxes There amounts Recall subject no additional taxes. all earnings taxes are certain and available capital tax. Substantially, to these $XXX projects tax million settle and income finance have are longer be slated intercompany they to approximately due accrued. with expansion the pay been utilized

end. liquidity quarter credit and larger million comprised capacity $X.X the billion on million. We new and $XXX at unused had was Cash short-term facility $XXX total of investments

did of outstanding we quarter, the instruments. During not any our convertible debt repurchase

and conditions, additional by Board subject factors. or and repurchase open requirements instruments our debt transactions, authorized be to legal repurchases Directors other of continue in market privately market We to negotiated through to convertible business

of totals converts to on the our is outstanding million, expiration in $XXX quarter million the issuance The $XXX Our related credit of of debt No $XXX credit cost $XXX and million convertible debt facility of related of value unamortized at carrying value principal million notes end unamortized million million $XX net face principal of discount. net June instruments debentures. the XXXX. remaining until or revolving $XX due and amount facility to are payments of new

The The on tax XX%. a XX%. rate approximately approximately basis year-to-date effective GAAP was rate normalized was tax year-to-date

for this a quarter mathematically tax approximately For rate yields and the approximately two rate XX%. quarter, of of normalized a XX% GAAP

as gain unusual of previously an the expense foreign adjustments tax remeasure liability negligible of the to tax deemed Our quarterly and GAAP foreign taxes $X effects. from a intercompany The remeasurement of adjustment tax deferred tax million; benefit debentures benefit payable rate $X.X will on resulting occur from quarter net repatriation, permanent payment to currency repatriated. loan upon million convertible QX; foreign tax of basis exchange incremental some such the such A includes: for settlement benefit related year-to-date. until remeasurement amounts of was have similar related and to a The been

the evaluate law, of to continue We and of the tax provisions GILTI the particularly taxes. BEAT U.S. aspects

in jurisdictions. income level based on in rate among could significantly effective result shift different various and of mix assumed A tax results. consolidated is our income taxing an Our

million. million. for share EPS shares for end The XXX were count outstanding quarter purposes third Total quarter the approximately XXXX expected at XXX is

X-K impact calculation, the our filed full explanation please share of the this that and count variables a we to EPS refer For morning.

operations for the $XX for from million. Cash cash million. $XX for quarter were expenditures the quarter was million. Capital $XX was quarter Free the

For $XXX the was trailing million. XX months, cash from operations

of reduction, former for approximately: million, $XXX months $XX expansion, split were million. in cost California. represents Clara, and property the $XX business, were of million; our the for primarily for Santa facility expenditures sales trailing $XX million, from $XXX of manufacturing which equipment sale for maintenance Capital million; the XX Proceeds

under We arrangement buildings. property have raze to a leased the back the short-term

$XXX to: repatriation, The period million the period cash Free taxes related $XX $XXX tax XX-month U.S. million. $XX was reform, generation for XX-month trailing cash and Cash million; paid million. trailing includes

has of $XXX greater XX operations last excess past each years the the XX from Vishay years. cash generated consistently flows of $XXX in and million in million than in

three two quarter or very compared $X.XXX was sales, months of at approximately Backlog billion our end to at of months. X.X the high average historical of still

XX of cycle days; of were of sales excluding the quarter XX days quarter quarter-over-quarter impacts. cash the Inventories decreased of were outstanding outstanding conversion were by XXX for for rate outstanding Days a exchange $XX payables million, days days; in XX inventory days. resulting days,

I over will the Paul. to Dr. Now call turn our Executive Gerald Chief Officer,

Gerald Paul

lines. Lori, lower-than-expected demand, high and second impacted financial distribution. morning, you, Despite from overall quarter, relatively a predominantly the environment, in lower course robust performance in a in Thank chain still been good levels has of inventory supply capacities Vishay’s economic Manufacturing by the at everybody. demand, negatively some Well, inefficiencies and product be temporary orders the also adapted manufacturing revenues. burdened the quarter causing had to the to

margin earnings per margin second and earnings the GAAP Vishay, XX.X% of share $X.XX and $X.XX. of in gross adjusted share a of of sales of quarter, sales, XX% per achieved of operating

continued was includes strong taxes It for cash paid million. free show cash. in which of quarter, a repatriation We the $XX million the generation of to $XX

show reduce as economic general principally a Inventories started me for the healthy high chain electronic certain remained to second reached Let in record like environment and we in components the see to talk automotive. during of in the Also the quarter, started but quarter supply about economy it. areas slowdown, have global slowly.

products for enough has of below price drive to continued greater strong, normalize product for most come burn. X. to The lines strong decline POS, times the to down commodity Consequently, ratios despite normal still a not book-to-bill have Lead with been restarted. backlogs also levels. substantially has inventory

quarter differently. markets in to the the continued the second rather Geographically, Coming to regions. develop

as quarters. weakening, We the conditions markets. automotive have as previous industrial Europe in quite and maybe softening strong by seen impacted was good not U.S., economic in

on prior were levels of recovery. signs flat some but Asia year, developed below recently, a substantially there

year Europe and Global quarter X% Let XX%, influenced lower the by second Versus good Asia recover distribution somewhat versus the Asia. first but than continued levels, principally me started mentioned reduced more down prior in U.S. on mainly POS and comment distribution. at I as by quarter, in POS by in to prior quarter the in X%, by before.

have of quarter prior declined high as they they at the inventory very to year. down to the grown – quarter, prior in second turns and compared to X.X to course X.X come distributors historically and further started the slowly. in have to in quarter come have X.X levels Inventories In

in X.X first prior in Europe, X.X after In X.X after turns was In X.X after turns the it X.X in first America, and quarter quarter last In year. QX turns in year. the X.X and Asia, X turns prior in turns details. X.X year. X.X turns Regional and

the forward, currently of industry sales rates reduced growth vehicles are active for to remain our but for view we applications strong going electrification segments a Some be potential. in. progressing comments in on of driver Automotive electronics limit

power of years China develop Medical several in grow continued Military and show tariff the applications. growth, the Things transmission continue to of the strong in United continue several steadily. projects picture. Slowing markets factory in countries, in strongly after metering business business Industrial and bright mixed spots – smart burned but China, markets in definitely States. mainly the Internet to in a to burdened locomotive U.S. markets expansion activities in

XG that product is this seasonal by business The which grow a will become effect. sector expected in phones convinced telecom fixed a I’m recovered, releases, to is Driven pressure. Computers mobile our substantially. be to under slightly the for continues mid-term. partially driver

in present a and scattered see are variables weakened gaming in some and potential new show markets conditioning TV We stable. markets air consumer sets Finally, models. picture.

we Vishay. of million from came versus Let in of quarter and the talk $XXX development off me achieved prior business in In in prior sharply. sales quarter, We below fell as year. the demand $XXX our million $XXX the million distribution second guidance about

quarter $XX down down Excluding exchange rate effects, or quarter year by prior million and second or X%. million prior X% $XX the by were also by versus sales in versus

was the Book-to-bill ratio in X.XX. second quarter

down X.XX high X.X X.XX after level semiconductors, X.XX X.XX, in Americas second for X.XX for QX, continued X.XX, X.XX. continues for X.XX for actives months X.XX after X.XX, for X.XX, X.XX detail: shrink Backlogs for distribution way. X.X after to in months, X.X a of in distribution Some QX, Asia for The Europe months the X.XX months in in from of passives after in after a after at X.XX, still OEMs to the normalization X.X backlogs the broad passives. quarter after

are around has mainly to the versus Price quarter historical prior Just months. semiconductors, you, prior errors X.X% are included. in in X.X% of versus year. remind minus business and our decline backlog restarted, minus Thereby, tariff levels three

For prior prior prior minus X.X% minus semiconductors, versus plus year; for passives, versus X.X% minus it prior quarter X.X% year. was and quarter X.X% and versus versus

of the principally and were operations. offset the negative Some by again on the we In reduction innovation. second margin – quarter, comments cost able on the impacts to by contributive

impact $XX which fixed SG&A expectations, the manufacturing came better adaptation the adaptation the in However, due of also is at bonuses. primarily there $XXX second capacities. of million, second of in were in expectations. negative quarter our the costs is to the temporary than some quarter below Manufacturing costs our million,

of the output end down by X.X% quarter, to employment at lower second the naturally was Total quarter versus due requirements. production prior XX,XXX,

quarter in in and raw WIP $XX materials Excluding decreased goods. by million, $X exchange million rate inventories in million by the and impacts, by finished $XX

for Inventory turns in at business. for year, million of quarter million million for remained the maintenance versus expansion, $XX a the cost of $X was reduction $XX X.X. million in in spending second level second quarter $XX good $XX prior Capital and million

short-term lower XXXX, market now $XXX CapEx about requirements. reflects which expect For we of million,

in $XX million a year. use million we second of $X the versus In generated of operations from prior cash quarter,

quarter cash repatriation cash by paid $XX million cash cash $XX of the from second cash including this $XX last XX-month repatriation. operations quarter burdened of was million, a million of for taxes year trailing taxes for basis, million. paid $XXX of second The by year Generated on

second the a of free year. prior $XX $XX use in of cash quarter versus in million generated million We

The cash including year XX-month this of We by year on million burdened free was $XX cash of for trailing taxes for basis, by generated paid last paid $XXX a million. second cash of million repatriation. the second million, cash $XX quarter of $XX taxes cash quarter repatriation

good. generation our remains I think of cash

come lines. me various product Let the to

at Vishay’s inductors, very position a strong we resistors profitable all, most segments. and and auto, industrial, business, experiences inductors. high enjoy and impact the and military in inventory market the With since distributors. resistors also traditional of now years, medical First of

The prior Backlog X.XX in were X.X Sales by in exchange is million, down the $XX versus ratio $X down months, which excludes this rate by year. after or or X% in prior million still at $XXX All quarter high. quarter quarter. quarter the book-to-bill impacts. million prior was and X% second second very versus X.XX remained

prior remained to to XX% quarter of versus reduced temporary and Inventory the at vis-à-vis quarter, this in mainly turns product lower to margin manufacturing Gross of the line, minus by prices second prior in caused XX% level year. stability inefficiencies There’s a adaptation X.X. some for stable lower prior quarter in after sales volume outputs. virtually and price due X.X% good

film for the resistor capacities down slowed have manufacturing We expansion of chips. MELFs and thin

We our Coming X.XX in and of fields of broad a to below the but X% prior QX quarter, in of increasing strong the capacitors range business $XXX ratio with quarter. opportunities e-cars. Sales rate was without on with and prior a is in based power effects. second technologies again X.XX capacitors, position American enjoy exchange European market year, transmission in above previous quarter were in Book-to-bill after the million, X% niches.

very and XX% reduced prior a of level still level high capacitors In The a continued margin after to XX% backlog particular, of in chain. X.X normalization months. was at supply Gross the in of satisfactory backlog quarter tantalum a commodity, of inventory sales the in quarter. to further experience phase reduction of

United ongoing Selling strength the China first benefiting in Inventory versus in up, governmental as quarter minus capacitor prior general. Several X.X, the and market prior of held the were turns the prices quarter but major States. from That keep military in at lines plus same year. was versus in programs the X.X% from in X.X% quarter.

unfavorable Also, business from Coming and to emitters, products mix. Opto the Opto high for the applications. temporarily of line. Vishay's with but as consists of distribution from product a as currently receivers, well Opto suffers couplers business also LEDs inventories, automotive infrared sensors

year, X.XX In below X.X lower of came quarter Opto below in quarter impacts. XX% prior XX% the to months. course, quarter the were quarter. reduced XX% prior still is further sales Book-to-bill backlog The of This which above in second after historical high margin of to in substantially the X% X.X prior after volume. in million, $XX is, levels. the this for all rate was level excludes exchange quarter, in Sales due Gross end, but quarter. a in first the at

turns quarter quarter. X.X compared in X.X the good to We of have inventory first the in seen as

we Price year. minus ongoing The by minus for business and field but couplers. supply of burdened versus historical Opto and X.X% in quarters, the reduction X.X% of to in an of expect quite this also two prior or projects, is supported to come to normal, mainly after more be prior back of the one profitability sensors decline results normalization this line levels will phase, by tangible for quarter chain inventory continue versus

Vishay as we strong but Vishay distributors. substantially largest product has Diodes for and a complete position worldwide. a offers the portfolio. from where automotive broad are commodity suffers the technologies most as represents business industrial inventories currently virtually Coming high to in supplier diodes. at too markets all The well business very

reason. Sales XX% prior in ratio year, effects. to a still a lower in in backlog of of months backlog X.X X.X X.XX sales The X.XX exchange in in below XX% weak much of the the in very from book-to-bill progresses in normalization the A the level the first below reduction from of the quarter some quarter The million, volume very and which were combination in XX% internal at quarter. $XXX explains prior high came rate Gross inventory reduced quarter quarter. months excludes with quarter. quite decline prior and sales, XX% were first margin after the

are again in on good prior The as of X.X% X.X minus the diodes, X.X% included. in versus minus currently the level Inventory pressure selling tariff quarter. see prior versus prices compared quarter, X.X at prior We turns a errors to of year. remained return

have their the the inventories extent been of will We finalized. of full years supply in the after normalization expect the to diodes story to recent chain success continue

the MOSFETs, be book-to-bill inventory in Sales of $XXX starts months MOSFETs, X.XX strong normalization reduced prior of months position in Vishay continues growing excluding Backlog and below leaders now high the prior the to in below rate X.X still market to chain. level million, in The in in has The prior over ratio X% the backlogs of one years, to impact finally a developed a reductions Also, continues. the quarter to see last quarter. automotive. quarter of supply impacts. MOSFET MOSFETs X.X after were year, X% transistors. the first the quarter and in after exchange to second dropped quarter. X.XX Coming

the sales as see at first in quarter Also the compared in in minus were prices as XX% margin prior XX% turns versus selling for quarter we on pressure X.X good MOSFETs, and inventory to prior There the came to versus X.X of gross first quarter compared the minus quarter. for year. the quarter. X.X% The increase, in of X.X%

continue preparing ourselves We internal the substantial of increases particular foundry in and in in capacities, expand for midterm. to automotive, demand,

economic the Let time, for supply levels summarize. increasingly years are doubt moderate course and some that burden growth. high in less and and me will, environment than the quarter. chain inventory second business our booming recent of in our suffered No the for in Automotive has markets the price[ph]

will development. On electronics the the other long hand, supplier, doubt in a well-established as Vishay, there of is broad no line mid growth potential benefit and from reason very this the the in term. to

as done that We are we slowdown managing current before. the have professionally

further. continue We the and presence CapEx, to market will sales our capacities we'll in costs, adapt we'll inventories volume accordance reduce and develop to

the acceleration in third position $XX cost of and $XXX since substantially costs you. Our to time, the Thank the optimizing We quality year an that, million exploit $XXX expanded I cash channel, to to a at guide gross the to and reducing at XX% a organization Peter? inventory restructuring Having of to market XXXX, by burn-off the in are establish our our while, quarter, capabilities range at million next upturn the for expect of to million XX%. between sales emphasize margins same meaningful we, further. of the been program, manufacturing full per we the extent. a year fixed decided personnel a have $XX and

Peter Henrici

Thank you, first question. to Zaytinya, the Dr. We'll the Paul. questions. call now take open please

Operator

line Shawn Research. the Your with of comes first Longbow Harrison from question

Shawn Harrison

the you excess a inventory think there. inventory Hi everybody. you million Dr. now? excess maybe, know I of that, that I'm How was this guess, think guessing a Paul, channel spoke bit is it's last about quarter, weaker sales I larger out given much $XXX outlook? sitting channel do

Gerald Paul

say I would must between and I somewhere. agree. it's million $XXX $XXX

million exactly. $XXX But is know it's between $XXX it million. I never – You think to

Shawn Harrison

long calendar to off? And guess that take burn does the could you how early year would something that would Is or by bleed into happen XXXX? the that that of end

Gerald Paul

It all on few assumptions, much a depends course. of very

distributors all, as – turns a target. you which assume what First inventory must have our of

some Secondly, you on development POS. the have assumptions to take of

assumptions. from it's Of say, this that. our now, did would course, we three contains now, guess. three quarters But beginning is about a And quarters I best again, few

Shawn Harrison

mentioned was POS. you point for then distribution your you for this of quarter? And What partners purchase

Gerald Paul

mean POA? You

Shawn Harrison

POA, yes. Yes.

Gerald Paul

down, We POA. that. POA was want the percentage you know down. substantially

a me we well, right? reality, give see, minute. sold me know the POA, Let three in distribution to to sales want –you

Shawn Harrison

please. Yes,

Gerald Paul

million. $XXX Yes, $XXX million.

Shawn Harrison

Okay. And then lastly, may. if I

any products guessing You more said you normal. lead may something I'm have applications almost be Do back times times right lead now? or are extended all it with specific. to niche product

Gerald Paul

Precisely. I point. lead wouldn't which name times Absolutely. at product has this commodity longer any

normal Otherwise, are in some normalized has form. niches do the to productivity. normal with phase we have on normalization for and This down is to we quite but depends sure, the in. nothing the broad this We are

Shawn Harrison

you. Okay. Thank

Gerald Paul

you. Thank

Operator

from line next the Cowen. of Your question Karl Ackerman comes with

Karl Ackerman

perhaps prices Paul, price partners. quarter, Hey, think, to lead normalize some today And have vis-a-vis just effort for to And follow-up, good the declines. as of inventory book-to-bill like X inventory also to the or time as normalize as an as distribution your that about – I by alluded and much is to is you at component and announced MOSFETs, X.XX think typical an that begun expect spoken everyone. extended distribution electronic lead this with the times by will think, the diodes cycle? you've you evidenced the Shawn overhang weeks Lori XX. lead XX as, end coincide and X% morning I Dr. inventories indication of have distributor peers year versus I annual a this normalize as products times at restructuring Do earlier, digestion

Gerald Paul

all, I talking first broad is normalized. of in reduction Well, the again, And form said inventory, commodity can't what for in things. a times said before, but that that. must I our general on say the of I repeat before, already believe, lead are what – have this again as product the I we I assumes few I

that on Of course, estimate my calculated. best personal a my these in to it will on guess level take reasonable down few bring assumptions is based distribution is three the inventories quarters a to like assumptions based something

successfully reduction an the restructuring do, to also cost-reduction Concerning manufacturing past We variable in to always have did cost, margin measures against our that these you decline program, realized. answered, that variable will the which as the in by not doubt the and have just future. against we is we cost quite defend goes because decline by process. price no adaptation in price be as This fixed is will not able the answer

Our two the volume has point. Target time, more inflation at just fixed down, manufacturing course, comes cost of a us a is, slow for little some time the to back to targets cost, really. number on give fixed the one that program

rejuvenate to organization. hand, our use we other also want the on opportunity further And the to

but not price it's a that I answer before few vis-a-vis preplanning for an repeat done We that, have was are good Vishay, think quite and it successfully, and to decline. we years

Karl Ackerman

another question. I may If Understood. ask

grow larger to and investor a as – your to has today being One ability restructuring over above been end-market opposed a perhaps questions story. the of demand

or the So think R&D you these products to versus contemplate months. a as into going the uplift help about a back come savings demand portion of end-market mix how it opportunity you. XX of you will forward, whether growth? value-added think next your richer as of us And Thank will growth about from all be margin in restructuring much funneled operating XX

Gerald Paul

inventory, I've all, Well, realize, in first have to was which now years. think of we really I said grown last that, before. of build And part as substantially the we

hand, On nicely anyway. the other Vishay quite grows

cetera. which share have We products. always three new watch years, of products the that we carefully. with et continuously We sales We five than younger make years, watch

related So do we program more look not never or R&D. in the volume. We at it and going money on saving is cost to we savings will forward, less disregarding carefully. not were expenditures so R&D, These

course, inflation. the do So beginning. costs. permanent we of by continue save impact by we at And just your of time, costs what the same the first can fixed pressure two there to at cost I before, is to as look some you younger and just things, of the a while of people fixed least are do. forward on idea But fixed less going optimizing of said expensive, certain means to at slow the that to down results this for reducing by slow these inflation down personnel It replacing all, in part also

but again, money and R&D did, yourself cutting improved I or programs. technical will never not time some save emphasize, at we in margins, give you down So

Karl Ackerman

Thank you.

Gerald Paul

It's unrelated.

Operator

line Your with next Ruplu question comes of Bank from Bhattacharya of the America.

Ruplu Bhattacharya

what you Manufacturing more? my the think Paul, leverage contribution about was that fixed to morning, cost questions. Dr. just you of How for Good do on you manufacturing in defend thank XX%, have that going reduce think terms of in you taking Hi. should were costs follow-up we trying talking margin this capacity, forward? about quarter to $XXX to million.

Gerald Paul

Well, remind I history. you our maybe of

seen constant That And to and good were price inflation, not course, able the and have since the in past. we history a decline freely price of market. always have which phase XXXX impacted they we against ourselves do means all programs right? and of in decline we by margins, defend this at have variable were – that We of

its defend be time. So did to I will have just do what by that in we forward always we able absolutely point this no at doubt margin variable going and continuing

decline for price that's see will, back, We sure, coming true.

going see, forward. going are On material other also, to moderate more being hand, the we costs

– our I to going are variable defend again, question. summarize, to So no we margin,

Ruplu Bhattacharya

Okay. That's how currently total down of helpful. capacity, And then in offline? it terms or of much is your

Gerald Paul

say many how to lines. have very we is This

in the point of will us, hand, that you as On the are at you capacity, on the of gives hand, say this time, course, the all max other normalization can other time products, substantially which on commodity appreciate.

historically, sooner are of has times you definitely, replaced later So and steep also always growth of it times remember by or normalization that. the been case,

is because quite something, check equipped, the would increasing have by substantially. really line are machines is number have number course place. underutilized for to a utilized this – but of a To facing We or on give pick diodes in line, is a this an MOSFETs I depends Can XX% the of demand line. I we vague you well challenge number.

Ruplu Bhattacharya

helpful. Okay. think Asia, what you recovery saw No, your you recently in that And I drove that? some on then prepared remarks, said that's

Gerald Paul

the POS seen to of X% and that there. number quarter the the lower be, to on Well, Asia course, over four, on we used of some one between seen, to lead level commented can you our turnaround quarter distributors – two quarter than hope it relatively a follow We've and we quarter maybe that one, but is this and which see POS in that have worse we down. have was of the we

Ruplu Bhattacharya

Got it.

for the Okay, details. thank you so much. Thanks

Operator

Sheerin Your the with comes Stifel. line from next question of Matt

Matt Sheerin

build for you your inventory quarters, correction. to about and as you to Or Good you well I sense take there sign base? so? weakness get the looking or you. a a first a which are of three going think demand within some Have is is Dr. about I that they long work come that is your customer also distribution in you're are demand. that morning. that X And OEM, just the book-to-bill getting that time several distribution, thank off as lot for quarters a weak sense has below noticed Yes, talking weaker? inventory obviously talked Paul, in which the

Gerald Paul

out customers, these be I customers, no automotive in must, course, inventory definitely also no it at more it that, really I – know definitely case. can moment. But a weakness, believe point in larger our to customers that also we the My moment, true be certain that. admit repeat, the we the you're rule of And certain inventory from report. at big a that. large customers. it part automotive, the be in the definitely to is smaller weakness automotive this at not can the OEMs But I inventory, that this do time. will this is terms that unusual the But you think see estimate, severe at prove say that. I and saying. under to of I see very But at there's the something in reconfirm more is We unfortunately, of case number distribution so, I what in so in industrial was automotive, It's even customers, an cannot three firm will at issue have it longer. quarters, assumptions. like customers,

Matt Sheerin

the And ago? Okay. are remind in capacity for now plans talked some know or year two But regarding you CapEx CapEx, resistors. expansions what could back was to you earlier rest it the your pulling of about what I us a the relative quarter

Gerald Paul

to optimize that emphasize million. been we we later. wanted had We the came of us still canceled. and EBITDA we Again, $XXX may beginning timing, out. the have I that – to this outlook down brought to the million. the will now we has went only believe only million, of $XXX do we plan then, mind the pushed to and to do conclusion We so should have were the into whatever We We really $XXX at programs none the in year of reduced X-X-X, our

Matt Sheerin

Okay.

Gerald Paul

want No limitations. secret a little that to course, of there more, but since certain I squeeze are,

Matt Sheerin

Backing December primarily that the that looks cost or this is program, million with like gave goods? flat in it Fair so, the for will lower? going SG&A of impact $XX Yes. around know, it's I SG&A in with And of enough. the year. restructuring number, Or kind be guide Lori the September,

Gerald Paul

year. Matt, me follows. it's that excuse impact I will next It as Matt, answer.

We are it will going – in manufacturing to in fixed as start will really be in approximately, the well as – be SG&A, about quarter well okay. in XX-XX as And year. one next impact quarter

Matt Sheerin

thanks you, much. Thank okay. XX-XX, very

Operator

next with Your the Harlan question of Sur comes JP from line Morgan.

Harlan Sur

Paul Good Lori. morning, Dr. and

relatively are in, to you stable? come the have starting cancellations backlog? of times lead in guys existing see of that holding some now Or backlog is that the On

Gerald Paul

up. quite a the was I normal as appear also in inventory, cancellations to And commented backlog happen us, they have I high. that this we come never time, No, really so matter reduce to course, the and backlog a for actions problem a this supply But do What overwhelmingly these see chain some thing just that was there expected because of on that was fact. inventories was the But since cancellations, now for high think, concrete this sense it. to is of new but the in be just are not cancellations.

Harlan Sur

it. got Yes,

you very any market a just signs you seeing customer on And of is end by there inventory demand saw on And pull? in replenishment here China do conservative? demand this better POS Okay. had potentially QX, segments you And are real QX? the in in that sense Or showing still more trends? pickup, China that that been are sense which get then is

Gerald Paul

let’s our a industrial don’t the of that that Well, consequence really But of precisely. this only trade But war, we report as I recover have that was segment we we don't who change, that this continue. that the – seems precisely. I little. again, I hope am pretend we predict picture We know course, of think will a name really want is partially it, and really to to course, and picture don’t have China one We some the know. a – to down in

Harlan Sur

region. what some the and it's From looks a weakest the quarter-over-quarter Americas more on you're help us was you maybe region in just but I'm seeing a understand geographical the perspective, the of sales-wise region? talking numbers, rough looks it basis, like like dynamics Americas Can

Gerald Paul

and number, in and also, back not still I sales for the us. Europe. would've especially America good the is Well, for between you was named business, strong most but important had Europe. good never the I which highest And military, which us, second first question. would It's the the asked no quarter, Maybe strength it's business. a suffered Asia have if named came area

spot So weak quarter Europe. between and is I one two think the

Harlan Sur

And Europe? primarily automotive in

Gerald Paul

Yes.

Harlan Sur

you. Thank Great.

Gerald Paul

Thank you.

Operator

this questions further at no time. are There

Peter Henrici

your call. for quarter Thank you second our concludes This interest in Vishay Intertechnology.

Operator

disconnect. Ladies and gentlemen, you may now

Vishay Intertechnology (VSH) 30 Jul 192019 Q2 Earnings call transcript