Good morning and welcome to Vishay Intertechnology Second Quarter 2020 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 will start today's call with the CFO who will review Vishay's second quarter 2020 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 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 an 8-K that outlines the variables that impact the diluted earnings per share computation. On the Investor Relations section of our website, you can find the presentation of the second quarter 2020 financial information, containing some of the operational metrics Dr. Paul will be discussing. Now I turn the call over to Chief Financial Officer, Lori Lipcaman.

Thank you, Peter. Good morning, everyone. I am sure that most of you have had a chance to review our earnings press release. I will focus on some highlights and key metrics. Vishay reported revenues for Q2 of $582 million. EPS was $0.17 for the quarter. Adjusted EPS was $0.18 for the quarter. During the quarter, we completed the cash repatriation program we initiated in response to U.S. tax reform. We repatriated $112 million to the United States and paid withholding and foreign taxes of $16 million. These taxes had been accrued upon enactment of the U.S. tax reform in 2017. The payment of these taxes is reflected as an operating cash flow on the statement of cash flows. During the quarter, we repurchased $75.8 million principal amount of our convertible notes due in 2025, using some of the repatriated cash, and we recognized the U.S. GAAP loss on extinguishment. Similar to Q1, we have identified certain COVID-19-related charges, net of certain subsidies, which are incremental to and separable from normal operations. These items were insignificant to Q2, but are added back when calculating our non-GAAP adjusted EPS for comparability purposes with Q1. I will elaborate on these transactions in a few moments. COVID-19 continues to have an impact on our business. While some of our factories had been temporarily closed and some are operating at levels less than full capacity, substantially all of our manufacturing facilities have been able to continue operating. However, the overall macroeconomic effects of the pandemic have impacted our financial results. As I stated in the introduction, we've identified certain COVID-19-related charges, net of certain subsidies which are incremental to and separable from normal operations. This includes wages paid to manufacturing employees during government-mandated shutdowns, additional wages and hardship allowances for working during lockdown periods, cost of cleaning and disinfecting facilities, cost of additional safety equipment for our employees and temporary help for employees due to travel restrictions. The quantified COVID impacts I just described only include costs directly attributable to the outbreak and exclude indirect impacts, such as general macroeconomic effects of COVID-19 on our business and higher shipping costs due to reduced shipping capacity. Dr. Paul will elaborate further on the impact of COVID-19 on our operations and our expectations for future results in a few moments. Revenues in the quarter were $582 million, down by 5.1% from the previous quarter and down by 15.1% compared to the prior year. Gross margin was 22.5%. Adjusted gross margin excluding COVID costs was 22.6%. Operating margin was 7.0%. Adjusted operating margin excluding COVID costs and restructuring was 7.2%. EPS was $0.17. Adjusted EPS was $0.18. EBITDA was $78 million or 13.4%. Adjusted EBITDA was $80 million or 15.7%. Reconciling versus prior quarter adjusted operating income: quarter two 2020 compared to adjusted operating income for the prior quarter, based on $31 million lower sales or $31 million excluding exchange rate impacts, operating income decreased by $9 million to $42 million in Q2 2020 from $51 million in Q1 2020. The main elements were volume decreased with a negative impact of $17 million, equivalent to a 5.2% decrease in volume. Fixed cost decreased with a positive impact of $15 million, primarily due to lower personnel and travel costs. Inventory impacts had a negative effect of $6 million. Reconciling versus prior year, adjusted operating income quarter 2, 2020 compared to operating income in quarter 2, 2019, based on $104 million lower sales, or $100 million lower excluding exchange rate impacts, adjusted operating income decreased by $38 million to $42 million in Q2 2020 from $79 million in Q2 2019. The main elements were average selling prices had a negative impact of $16 million, representing a 2.7% ASP decline. Volume decreased with a negative impact of $39 million, representing a 12.7% decrease. Variable cost decreased with a positive impact of $9 million. Increases in labor and logistics costs and metal prices were more than offset by cost reductions and lower material prices. Fixed cost decreased with a positive impact of $6 million, primarily due to lower travel costs. Selling, general and administrative expenses for the quarter were $89 million, which includes a net benefit of $0.7 million for subsidies in excess of identified COVID costs. SG&A costs came in lower than our expectations, primarily due to continuing lower travel costs related to the pandemic. For Q3 2020, our expectations are approximately $92 million of SG&A expenses and approximately $375 million for the full year, using the current exchange rate of USD 1 equals EUR 0.87 for the second half of 2020. During the quarter, we completed the cash repatriation program we initiated in response to U.S. tax reform. We repatriated $104 million to the United States, net of withholding and foreign taxes of $16 million. Substantially all of these amounts have been utilized to pay down our revolving credit facility to zero and to repurchase $75.8 million of convertible notes. Since the enactment of U.S. tax reform, we have repatriated over $1 billion net to the U.S. at a cash tax cost of approximately $211 million. Substantially all amounts have been allocated or utilized to pay down the outstanding balance on our revolving credit facility to zero, repurchase convertible debt instruments, to settle inter-company debts, fund certain capital expansion projects and pay the U.S. transition tax. During the quarter, we were able to repurchase $75.8 million principal amount of our outstanding convertible notes due in 2025. We were able to repurchase the notes at an average of 93% of face value. The U.S. GAAP loss on extinguishment was primarily due to the write-off of unamortized issuance costs. By reducing our fixed-term debt, the repurchase of the convertible notes provides us with future flexibility to better utilize our revolver and to adjust our debt levels as necessary. We continue to be authorized by our Board of Directors to repurchase up to an additional $124 million of convertible notes due 2025, as well as the remaining $3 million of convertible debentures, subject to market and business conditions, legal requirements and other factors. We had total liquidity of $1.4 billion at quarter end, cash and short-term investments comprised $757 million and a usable capacity on the credit facility of approximately $620 million. Our debt at quarter-end is comprised of the convertible notes due in 2025 and the remaining convertible debentures due in 2040 and 2041. The principal amount or face value of the converts totaled $527 million: $524 million related to the notes due in 2025 and $3 million related to the remaining debentures. The carrying value of $438 million is net of unamortized discounts and debt issuance costs. There were no amounts outstanding on our revolving credit facility at the end of quarter two. However, we do expect to utilize the revolver in Q3 and from time-to-time, including for additional repurchase of convertible notes and the payment of the next installment of the U.S. tax reform transition tax in Q3. No principal payments are due until 2025 and the revolving credit facility expires in June 2024. We expect interest for Q3 to be approximately $7.7 million, excluding the impact of any additional convertible note repurchases in Q3. As announced last year, we are implementing a global cost reduction program. A small adjustment to the amounts recorded in Q3 and Q4 of 2019 was recorded in Q2 2020. All participants in the programs are now identified. The programs are intended to provide management rejuvenation and lower costs by approximately $15 million annually when fully implemented by the end of 2020. If you look at the effective tax rate, on a GAAP basis it was approximately 21%. The year-to-date normalized tax rate was approximately 23%. For the quarter, this mathematically yields a GAAP tax rate of approximately 16% and a normalized rate of approximately 18%. Our GAAP tax rate includes the unusual tax benefit related to the settlement of some of the convertible debentures. Our normalized rate excludes the unusual tax items as well as the tax effects of the identified COVID costs, a restructuring charge and a pre-tax loss on the extinguishment of debt. Our consolidated effective tax rate is based on an assumed level and mix of income among our various taxing jurisdictions. A shift in income could result in significantly different results. We now expect our normalized effective tax rate for 2020 to be between 23% and 25%. Our assumed mix of income in lower tax rate jurisdictions versus higher tax rate jurisdictions is proportionally higher than we assumed at the end of Q1. We continue to evaluate the provisions of the U.S. tax laws, particularly aspects of the GILTI and BEAT taxes. Generally at lower levels of pre-tax income, GILTI and BEAT have a larger proportional effect and thus increase our effective tax rate, but higher levels of income in the U.S. reduce the amount of GILTI and BEAT taxes, which was the case in Q2. Total shares outstanding at quarter end were 145 million. The expected share count for EPS purposes for the third quarter 2020 is approximately 145 million. For a full explanation of our EPS share count and variables that impact the calculation, please refer to the 8-K we filed this morning. Cash flow from operations for the quarter was $90 million. Capital expenditures for the quarter were $25 million. Free cash flow for the quarter was $66 million. For the trailing 12 months, cash from operations was $286 million. Capital expenditures were $135 million, split approximately for expansion $90 million; for cost reduction, $7 million; for maintenance of business, $38 million. Free cash generation for the trailing 12-month period was $151 million. The trailing 12-month period includes $35 million cash taxes paid related to cash repatriation. The next installment of the U.S. tax reform transition tax of $15 million was deferred until Q3 as permitted for all companies by the IRS in response to COVID-19. Vishay has consistently generated in excess of $100 million cash flows from operations in each of the past 25 years and greater than $200 million for the last 18 years. Backlog at the end of quarter two was at $914 million or 4.7 months of sales. Inventories decreased quarter-over-quarter by $10 million, excluding exchange rate impacts. Days of inventory outstanding were 91 days. Days of sales outstanding for the quarter were 48 days. Days of payables outstanding for the quarter were 31 days, resulting in a cash conversion cycle of 108 days. Now I will turn the call over to our Chief Executive Officer, Dr. Gerald Paul.

Thank you, Lori, and good morning, everybody. Vishay's worldwide business in the second quarter has been massively influenced by COVID-19. There were substantial restrictions for the citizens of many countries which burdened the global economy. We successfully adapted to this generally unfriendly environment by cutting production capacities and by substantial belt-tightening in fixed costs. With sales at the high end of our guidance, we managed to beat expectations for the quarter. We achieved gross margin of 22.5% of sales. Adjusted gross margin of 22.6% of sales. Operating margin of 7.0% of sales and adjusted operating margin of 7.2% of sales. Earnings per share were $0.17 and adjusted earnings per share $0.18. By decreasing inventories and by reducing CapEx to the actual requirements quickly, Vishay continued to generate free cash also in this difficult quarter. We achieved $66 million, higher than in prior year. A few remarks concerning the economic environment. As indicated, the global economy in the second quarter has been slowed down by COVID-19 remarkably, but market sectors suffered to a very different degree. In general, automotive has been hurt the most whereas POA remained strong. Asia started to recover whereas Europe and the U.S. were weak. Backlogs and lead times continue to normalize. There is no real shortage of supply. We see low price pressure in general and we expect for the third quarter some weakening of POA, but also a noticeable recovery of the automotive sector. Going through the geographic regions. Americas had a soft second quarter with a significant deterioration of the automotive and commercial avionics sectors. Distribution built inventory. Europe did exceptionally poorly, also due to COVID-related plant shutdowns in automotive. Industrial markets in Europe were giving a mixed impression. The recovery of Asian markets continues despite corona problems; the fact that corona problems still exist. There was growth in automotive in China and there's also tailwind for medical and computer equipment. The inventory built at Asian distribution apparently was a preparation for an expected better third quarter. Coming to distribution. Global distribution suffered in the second quarter with POS declining by 12% versus prior quarter and by 13% versus prior year. POS decreased versus prior quarter in the Americas by 25% and in Europe by 19% whereas POS in Asia was flat versus prior quarter. Inventories in distribution in the second quarter increased by $29 million after a reduction of $63 million in the first quarter. In the second quarter, inventory turns at distribution decreased to 2.7 from 2.9 in the first quarter. 2.5 turns were achieved in the prior year. In the Americas, there were 1.4 inventory turns after 1.8 turns in the first quarter and 1.5 turns in the prior year. In Asia 4.1 turns after 3.8 in Q1 and 3.2 in the prior year. In Europe 3.0 turns after 3.7 in Q1 and 3.0 in the prior year. Let me comment on the industry segments. In the second quarter, the automotive industry in general and in particular in the Western Hemisphere due to COVID impacts experienced a historical drop of their business. A bright spot was Asia, namely China, where the business already came back in the course of the second quarter. With most plant closures now behind us, the industry clearly has started to recover. Also the Industrial segment suffered in the second quarter, but the picture is very different in the various sections of this broad business. Industrial equipment as well as oil and gas were weak, whereas power supplies, smart metering and renewable energy performed reasonably well. Pandemic-related equipment provided an upside whereas government spending on power and transportation projects quite often is delayed. Remote learning and work at home continues to push telecom and computer markets. The overall medical market continues strong and also military markets remain positive and steady, but commercial avionics is in a substantial crisis. Let me talk about our business development. Q2 sales excluding exchange rate impacts came in at the high end of our guidance, with POA stronger than expected. We have achieved sales of $582 million versus $613 million in the prior quarter and $685 million in prior year. Excluding exchange rate impact, sales in the second quarter were down by $31 million or 5% versus prior quarter and down versus prior year by $100 million or by 15%. Book-to-bill in the second quarter was 0.82 compared to 1.17 in the first quarter, driven like in the first quarter by distribution. Some detail: 0.75 book-to-bill for distribution after 1.3 in the first quarter; 0.93 for OEMs after 1.04 in the first quarter; 0.81 for semis after 1.27 in the first quarter; 0.83 for passives after 1.08; 0.81 for the Americas after 1.08 in the first quarter; 0.86 for Asia after 1.29; 0.78 for Europe after 1.13. Backlog in the second quarter decreased to 4.7 months from 4.9 months; 4.7 in semis and 4.8 in passives. We see low price pressure; there was no price decline versus prior quarter and minus 2.7% versus prior year. We see price declines slowing down for semis: minus 0.2% versus prior quarter and minus 4.5% versus prior year. There was virtually no price decline for capacitors, slightly higher prices 0.3% versus prior quarter and slightly lower prices 0.9% versus prior year. Some comments on operations: in the second quarter we again offset the normal negative impacts on the contributive margin, overcoming also the consequences of capacity cuts and increased logistics costs. With minor exceptions, all Vishay plants currently can operate in a normal fashion. Adjusted SG&A costs in the second quarter came in at $90 million, noticeably better than expectations predominantly due to lower-than-anticipated travel costs. Manufacturing fixed costs in Q2 came in at $124 million, slightly below expectations also. Total employment at the end of the second quarter was 21,555 people, which is 2.4% down from prior year. Excluding exchange rate impact, inventories in the quarter decreased by $10 million, by $3 million in raw materials and by $7 million in WIP and finished goods. Inventory turns in the second quarter were at a satisfactory level of 3.9, down from 4.2 in prior quarter. Our target in terms remains at greater than 4 turns. Capital spending in the second quarter was $25 million versus $34 million in prior year, close to expectations: $19 million for expansion, $1 million for cost reduction, and $5 million for the maintenance of the business. For 2020, we expect CapEx of approximately $110 million in accordance with the requirements of the markets. Concerning cash flow, we generated cash from operations of $286 million on a trailing 12-month basis, including $35 million cash taxes for cash repatriation, and we generated free cash of $151 million on a trailing 12-month basis, including the same $35 million cash taxes for cash repatriation. I think we can say we remain to be a very reliable producer of free cash. Coming to the product lines and I will start with resistors. With resistors, we enjoy a very strong position in the auto, industrial, mill and medical market segments and we do offer virtually all resistor technologies. Vishay's traditionally and historically growing business currently suffers in particular from the weakness of the automotive market sector. Sales in the quarter were $135 million, down by $24 million or by 15% versus prior quarter and down by $28 million or 17% versus prior year, all excluding exchange rate impacts. Book-to-bill in the second quarter was 0.73 after 1.05 in prior quarter, which had been supported by strong orders from distribution. Backlog in the quarter remained flat at 4.4 months. Gross margin in the quarter declined to 23% of sales after 28% in prior quarter, practically due to lower volume. Inventory turns in Q2 were 3.7 after 4.2 in prior quarter; again the expectation also for resistors remains to be above 4 turns. We have seen low to normal price decline, no price decline versus prior quarter-end, minus 2.1% versus prior year. We continue to see significant opportunities to further expand the resistor business in the mid-term. Inductors: the business consists of power inductors and magnetics. Exploiting the growing need for inductors in general, Vishay developed a platform of robust and efficient power inductors and we lead the market technically. With magnetics, we are very well positioned in specialty businesses showing steady growth over the years. Also in inductors, we currently experience a temporary slowdown, mostly driven by the present weakness of the automotive markets. Sales of inductors in the second quarter were $65 million, down by $9 million or 12% versus prior quarter, and down versus prior year by $12 million or by 15%, all excluding exchange rate impacts. Book-to-bill in the second quarter for inductors was 0.96, after 0.98 in prior quarter. Backlog in Q2 has grown to 5.3 months from 4.8 months in prior quarter. Gross margin in the second quarter remained at a very good level of 31% of sales; a better customer mix and some limited inventory build helped. Inventory turns in the quarter reduced to 3.8 after 4.6 in prior quarter; the target also for inductors remains above four turns. We have seen stable selling prices in inductors: an increase of 1.2% versus prior quarter and a slight decrease of 0.5% versus prior year. Inductors continue to carry our highest confidence for growth within the passives portfolio. Capacitors: our business with capacitors is based on a broad range of technologies with a strong position in American and European market niches. We enjoy increasing opportunities in the field of power transmission and of electric cars, namely in Asia, specifically in China. Also capacitors experienced the present general market weaker sales in the second quarter: sales were $84 million, 10% below prior quarter and 24% below prior year without exchange rate effects. Book-to-bill in the second quarter was 0.90 after 1.2 in prior quarter. Backlogs increased to 5 months from 4.6 in the first quarter, mostly due to lower volume and no more inventory build. Gross margin in the second quarter decreased to 18% of sales after 22% in prior quarter. Inventory turns in the quarter dropped to 3.3, below acceptable levels. We have seen stable and slightly increasing selling prices: plus 0.1% versus prior quarter, plus 0.8% versus prior year. We will continue to benefit for capacitors from strong mill markets and the ongoing need for grid expansions, mainly in China. Opto: Vishay’s business with Opto products consists of sensors, infrared emitters, receivers, couplers and LEDs for automotive applications. Sales in the quarter were $49 million, 9% below prior quarter and 19% below prior year, without exchange rate impacts. Book-to-bill in the quarter was 0.96 after 1.4 in prior quarter. The backlog was at a very high level of 6.1 months after 5.6 in the first quarter. Gross margin in the quarter was at 24% of sales after 27% in the first quarter. Lower volume and temporarily increased inefficiencies in the context of COVID-driven plant closings were the reasons. In fact the Opto business in Q2 in terms of manufacturing suffered the most where finishing plants had been closed for weeks. The acute inventory turns of the Opto business were 4.9 in the second quarter compared to 5.7 in quarter one. Price decline for Opto is normal; we have seen minus 0.3% versus prior quarter and minus 2.1% versus prior year. We are confident that Opto products going forward will contribute noticeably to our growth and we are in process to modernize and to expand our Heilbronn fab in Germany. Diodes: Diodes for Vishay represent a broad commodity business, where we are one of the largest suppliers worldwide. Vishay offers virtually all technologies, as well as a very complete product portfolio. The business has a very strong position in the automotive and industrial market segments and kept growing steadily and profitably over the years. Presently diodes suffer from the weakness of its main market and relatively high inventory level in the supply chain. Sales in the quarter were $124 million, up by 8% versus prior quarter, but 12% below prior year without exchange impacts. Book-to-bill was low in the quarter, 0.61 after 1.36 in Q1, all driven by distribution. Backlog decreased to 4.5 months from six months in prior quarters, but this is still high. Gross margin in the quarter improved to 20% of sales as compared to 17% in Q1 due to higher volume. Inventory turns remained at a good level of 4.2 after 4.1 in the first quarter. Price decline has normalized for diodes; we have seen higher prices of 0.9% versus prior quarter and a decline of 3.9% versus prior year. Last but not least the MOSFETs: Vishay is one of the market leaders in MOSFET transistors. In MOSFETs, we enjoy a strong and a growing market position in automotive, which in view of an increase in use of MOSFETs in automotive will provide a successful future. Sales in the quarter were $119 million, 2% above prior quarter and 7% below prior year excluding exchange rate effects. Book-to-bill ratio was 0.97 in the quarter after 1.12 in the first quarter. Backlog remains at 4.4 months as compared to 4.5 months in Q1. Gross margin in the quarter was at 23% of sales, slightly below Q1 at 24%. Inventory turns in the quarter were 3.7 as compared to 3.6 in the first quarter. There is a relatively normal price decline for MOSFETs: minus 1.3% versus prior quarter and minus 6.0% versus prior year. MOSFETs without any doubt remain key for Vishay’s growth going forward. Let me summarize. No doubt this unprecedented pandemic currently impacts many segments of the world economy including electronics. However, there are clear reasons for confidence. First of all we seemingly have reached the bottom in the fundamentals; electronic growth remains completely intact. Vishay has proven its ability in dealing with temporary economic downs numerous times and we'll master the challenges of this crisis as well, as the first half of 2020 has already shown us. We will continue to focus on profitability and cash generation while neither neglecting our essential long-term strategy nor safeguarding the health and well-being of our employees. For the third quarter, we are assuming an exchange rate of $1.15 to the euro and guide to a sales range of between $580 million to $620 million at a gross margin of 22.8% plus/minus 70 basis points. Thank you very much, Peter.

Thank you, Dr. Paul. We will now open the call to questions. Dorothy, please take the first question.

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

Hi, thank you for taking my questions. Dr. Paul, can you talk a little bit more about the inventory and distribution. I mean, book-to-bill was down to 0.82 and you said the POS was down. What are you seeing from a regional basis and in the past you've quantified how much excess inventory you think there is at distribution — any updates to that? So, just your thoughts on inventory and distribution would be helpful. Thank you.

Yes, sure. Distribution you remember was a problem a year ago. We identified it as a problem and then distribution worldwide started to reduce inventory. After quarter one, we were able to classify practically this distribution. The inventory level at global distribution is more or less normal. So we had to reduce in the first quarter substantially the inventory and now they built half of it back that they had reduced in the first quarter. I believe the inventory level is not yet a problem really; I think they are better off than a year ago. The inventory build in Asia we have reasons to believe at least part of the inventory build was really aiming at a better future in quarter three and quarter four. So at this point in time, I would not be concerned; it may be a little different from product line to product line. There are some where I would say no problem and others we have to watch. On the other hand, I believe the situation concerning inventories is, as I said, better than it has been.

Got it. Maybe for my next question, can you touch on what you're hearing from your automotive customers with respect to demand coming back? In the second quarter you obviously had inefficiencies both from COVID-related issues, as well as from automotive shutdowns, but do you anticipate the same level of inefficiency or do you think that gets better now and how do you see demand recovering in the third quarter?

The feedback we get and that we've already seen partially is that the automotive industry is coming back. No question about it. The best way to judge that is to look at the consignment stocks and the pulls from consignment — in this case you see it, it's really directly — they have their demand. You can see it like that, and it really dropped in April and May to 50% of normal due to shutdowns. Already in June it recovered nicely and the customers are forecasting for the third quarter near normal levels. So in that sense, we get back to normal. Of course, it has to be proven that these cars can be sold afterwards, which on the other hand I think they will.

Okay, and my last question: Lori, you repurchased about $76 million of the convertible notes — these were long-dated notes. I'm trying to understand why did you do that, what was the reasoning behind the repurchase and do you expect to repurchase more debt going forward? Thanks.

So the last part first: we are still authorized by our Board of Directors to repurchase an additional $124 million of the same debentures, as well as $3 million of the original notes that were out there. The idea was to make it a little bit more flexible in terms of our debt and to pay down our revolver so we can make a better use of it in the future. When market conditions are appropriate, we could repurchase the debentures at discounts — in this case we were able to repurchase at 93% of face value. That made it an attractive use of cash and improved our flexibility in terms of interest and revolver usage going forward.

Okay. Thank you. Appreciate it.

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

Hey, good morning. Thanks for taking my question, two if I may. First I want to focus on just manufacturing utilization. I know in the second quarter you had some manufacturing challenges from COVID-19 implementations. I may have missed it but are your facilities now fully opened? And then second, one of your peers located in Taiwan recently indicated that their manufacturing utilization was in the 60% range in Q2. I'm curious whether your manufacturing facilities are above or below that range and if you expect to return to full utilization by the end of the year? I have a follow-up after that.

Yes, you can see directly from our sales levels that our manufacturing sites cannot be fully utilized when sales drop, and in our case, we have a very heterogeneous program, so it's not so easy to give a single number for all of Vishay. But of course in the second quarter there were plant shutdowns by our customers and we reacted by short work, giving holidays, etc. So we reacted to it and I was proud to say that except for basically minor effects, the plants — and we say manage that without major inefficiencies as a matter of fact. Of course, the situation looks better now with automotive plants reopening. As it relates to inefficiencies, I'm quite positive that we are going to improve there and make up for the small negative we hit in the second quarter. Altogether I was very pleased with the reaction of our plants. They did quite nicely despite the sharp drop. In Europe we used short work, which was a good instrument, relatively inexpensive, and you could keep your workforce because we do expect the recovery. So we have the people that can react. Did I answer your question?

Yes, that's helpful. I know with all the moving parts with COVID-19 it's a bit challenging to forecast the entire automotive market. However, I was hoping you might speak to your content opportunities for electric vehicles over the next 12 to 18 months. I asked because that component market has actually doubled since the start of the year. So your comments there will be helpful. Thanks.

Yes, it's a small share still, but I completely agree that this provides a nice chance for the components industry. It's obvious that the electronic content would be very favorable for us in electric cars and it's also true that in Europe at least — and I believe also in the U.S. — electric cars receive public funding. So, I do expect a positive impact, but for the next 12 months I don't think it will change the world. So it will be helpful, but it will not change the world in the near term.

Your next question comes from the line of Shawn Harrison with Loop Capital.

Hi — good morning or good afternoon everybody. Dr. Paul I wanted to dig into how you parse through these numbers where you've got extremely weak book-to-bills but backlogs are greater than typical, and just kind of the ability to forecast out three months, maybe even six months. I'm parsing through the volatility you're seeing in book-to-bills, but still healthy backlog — what does that really tell you about your customers right now?

We also track the shippable backlog of course, not only the total backlog. But of course, we have quite a share of consignment stock which is forecasted. We watch it in very detailed fashion these days and the pulls from consignment from automotive, which is for the most part automotive, are coming up sharply. So it helps us, but I must agree of course, these are not the times of a stable outlook. We were slightly too pessimistic obviously in quarter two. I believe we are realistic for quarter three, but I completely agree forecasting at this point in time is not the easiest. That said, we were not so far off as to be wrong in our view.

In the dynamics through July, do you see any normalization in POA distribution — the backlog and the book-to-bill? Are those moving back toward parity for July?

Yes, July shows book-to-bill closer to 1, close to parity actually. So in that sense, if you want to interpret that there is some stabilization. July is more balanced and closer to 1.

Okay. And then lastly from me Lori, just the repurchase of the debentures — is that kind of the best way you think right now to utilize the cash versus buybacks? Is that a more efficient way to reduce share count or to use cash in the near term?

Yes, the repurchase provided flexibility in the usage of our revolver. So yes, we do think that was effective and appropriate given market conditions and our capital priorities.

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

Yes, thank you and good morning. Dr. Paul I wanted to just follow up on your commentary regarding the automotive recovery. Could you talk about what you're seeing by region? Your peers are talking about relative strength in Asia and China and continued weakness in the U.S. and then Europe had plant shutdowns. So could you tell us what you're seeing there?

I can follow my competitors in general. Asia never dropped off; Asia was relatively strong also in quarter 2 and automotive was quite strong there. Europe closed a lot of plants and Europe dropped sharply in automotive in quarter 2. It is clear that the plants have reopened and consignment stocks are back to nearly normal, some matter really in July. America remains relatively weak at this point — that is very true.

And are you expecting December then to be an up quarter in all your regions from what you can tell now in automotive?

I don't know how it will go in the U.S.; it's somewhat uncertain. I believe that Asia will continue to be strong. I believe Europe is back to about halfway normal with the restrictions they discussed and the reopening, but the U.S. is a more scattered picture. So indeed it would be reasonable to expect the third quarter in automotive to be better than the second quarter.

Okay. I wanted to ask about the relative strength you're seeing in your MOSFET business — we're seeing it fare less poorly than your other markets. Is that a function of content gains or share gains?

No, you are absolutely right. We believe in content gains. We have had success with MOSFETs in quite a few automotive customers which we didn't have before; these automotive customers give us additional content. So we are gaining content, no question.

Okay, and lastly regarding your CapEx and capacity expansion. I know the company's strategy has been to add capacity even in tough times because you want to get ready for the next up cycle. Could you tell us where things stand there?

We’re at a run rate of about $3.2 billion in revenue historically. I believe for next year we at least will have sales recover because we invested. In the meantime, I do not believe there will be a shortage of capacity for next year. I expect next year to be up of course, but there is enough room given current investments.

Your next question comes from the line of David O'Connor with Exane BNP Paribas.

Great, thanks for taking my question. A couple on my side. First, Dr. Paul, you talked about in your prepared remarks that capacitors returned 3.3 times, below acceptable levels. Just wondering what kind of actions are you taking there to get that back on track compared to the other segments?

No revolutionary actions. We want to be above 3.5 turns also in capacitors. There are certain reasons — capacitors will never be the product line with the highest inventory turns for technical reasons, but 3.3 was too low and we are reducing certain raw material inventories and watching production and processes more closely. We had a massive decline of the business and our plants were not yet fully able to follow completely in terms of inventories. So we don't need a revolution; we will correct and I'm sure we'll get back to better turns such as 3.7 or whatever we had previously.

Okay, got it thanks for that. And then maybe as for my next question, can you talk slightly about bookings in Europe? You said in July book-to-bill was approaching parity. Was that across the industrial segment as well in Europe or is that still quite mixed?

I cannot answer for July by region in detail here — Peter, have you looked at the split of the orders?

We only gave out the book-to-bill for the total company and close to parity, not by region and not by segment.

But the major recovery in Europe will come from automotive in quarter three, there is no question. The problem is that you won't see that so easily in book-to-bill because it is mostly from consignment stock which by nature won’t leave a big trace in book-to-bill. So it would not be too helpful to look at book-to-bill for Europe alone when it's driven by consignment and automotive. We expect the improvement from consignment stock through automotive beginning in June and into July.

Okay, understood. And maybe my last question just on the backlog: did you do any specific cleaning of the backlog in Q2? Could you elaborate more on the previous comment that you're tracking shippable backlog and what exactly you mean by that? Thanks.

Normally, we quote total backlog, but of course we look at the shippable backlog — that is, what is due to be shipped in the next four or thirteen weeks. We watch normally the shipable backlog for the next 13 weeks in addition to the total backlog, so that's quite normal. This does not include consignment pulls entirely — and so you don't see the complete picture if you only look at total backlog. We expect improvement from consignment stock in automotive. Regarding cleaning the backlog: no, we did not do any special cleaning.

Okay, thanks so much.

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

Thank you, ladies and gentlemen, that does conclude today's conference call. You may now disconnect.