UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q


(Mark One)


☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended           September 30, 2017April 4, 2020


☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from _______to _______


Commission File Number 1-7416001-07416


VISHAY INTERTECHNOLOGY, INC.Vishay Intertechnology, Inc.
(Exact name of registrant as specified in its charter)


Delaware 38-1686453
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification Number)
   
63 Lancaster AvenueLANCASTER AVENUE
Malvern PA, Pennsylvania  19355-2143
 610-644-1300
(Address of Principal Executive Offices) (Registrant'sRegistrant’s Area Code and Telephone Number)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of exchange on which registered
Common stock, par value $0.10 per shareVSHNew York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý☒ Yes☐  ◻ No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)
ý☒Yes☐  ◻ No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging growth company" in Rule 12b-2 of the Exchange Act.  (Check one):


 
Large accelerated filer ýAccelerated Filer ☒
Accelerated filer ☐
◻
 
Non-accelerated filer ☐ (Do not check if smaller reporting company)
◻
Smaller reporting company ☐
 
Emerging growth company ☐
 


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes  ý☒ No


As of October 23, 2017,May 8, 2020 the registrant had 131,874,587132,547,608 shares of its common stock and 12,129,22712,097,409 shares of its Class B common stock outstanding.

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2




VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
September 30, 2017April 4, 2020
CONTENTS


    Page Number
PART I.FINANCIAL INFORMATION  
     
 
Item 1.
Financial Statements
  
     
  
Consolidated Condensed Balance Sheets – September 30, 2017April 4, 2020 (Unaudited) and December 31, 2016
2019		 
4
     
  
Consolidated Condensed Statements of Operations (Unaudited) – Fiscal Quarters Ended SeptemberApril 4, 2020 and March 30, 2017 and October 1, 2016
2019		 
6
     
  
Consolidated Condensed Statements of Comprehensive Income (Unaudited) – Fiscal Quarters Ended SeptemberApril 4, 2020 and March 30, 2017 and October 1, 2016
2019		 
7
     
  
Consolidated Condensed Statements of OperationsCash Flows (Unaudited) – Nine Fiscal MonthsQuarters Ended SeptemberApril 4, 2020 and March 30, 2017 and October 1, 2016
2019		 
8
     
  
Consolidated Condensed Statements of Comprehensive IncomeEquity (Unaudited) – Nine Fiscal Months Ended September 30, 2017 and October 1, 2016
 
9
     
  
Notes to Consolidated Condensed Financial Statements of Cash Flows (Unaudited) – Nine Fiscal Months Ended September 30, 2017 and October 1, 2016
 
10
     
 Item 2.
Consolidated Condensed StatementManagement’s Discussion and Analysis of Equity (Unaudited)
Financial Condition and Results of Operations		 
11
30
     
 Item 3.
Notes to the Consolidated Condensed Financial Statements (Unaudited)
Quantitative and Qualitative Disclosures About Market Risk		 
12
49
     
 
Item 2.
4.
Management's DiscussionControls and Analysis of Financial Condition and Results of Operations
Procedures		 
33
49
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
54
Item 4.
Controls and Procedures
54
PART II.
OTHER INFORMATION
  
     
 
Item 1.
Legal Proceedings
 
55
50
     
 
Item 1A.
Risk Factors
 
55
50
     
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
55
50
     
 
Item 3.
Defaults Upon Senior Securities
 
56
50
     
 
Item 4.
Mine Safety Disclosures
 
56
50
     
 
Item 5.
Other Information
 
56
50
     
 
Item 6.
Exhibits
 
56
51
     
  
SIGNATURES
 
57
52
3





PART I  - FINANCIAL INFORMATION


Item 1.Financial Statements


VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Balance Sheets
(In thousands)


 September 30, 2017  December 31, 2016  April 4, 2020  December 31, 2019 
 (Unaudited)     (Unaudited)    
Assets            
Current assets:            
Cash and cash equivalents $575,385  $471,781  $680,703  $694,133 
Short-term investments  668,185   626,627   140,725   108,822 
Accounts receivable, net  329,422   274,027   325,704   328,187 
Inventories:                
Finished goods  131,367   109,075   122,231   122,466 
Work in process  178,173   162,311   202,318   187,354 
Raw materials  128,036   109,859   128,639   121,860 
Total inventories  437,576   381,245   453,188   431,680 
                
Prepaid expenses and other current assets  112,394   110,792   124,871   141,294 
Total current assets  2,122,962   1,864,472   1,725,191   1,704,116 
                
Property and equipment, at cost:                
Land  91,905   89,753   74,442   75,011 
Buildings and improvements  595,628   570,932   579,161   585,064 
Machinery and equipment  2,399,972   2,283,222   2,591,804   2,606,355 
Construction in progress  63,766   71,777   105,832   110,722 
Allowance for depreciation  (2,298,431)  (2,166,813)  (2,426,757)  (2,425,627)
Property and equipment, net  852,840   848,871   924,482   951,525 
                
Right of use assets  99,506   93,162 
        
Goodwill  142,545   141,407   150,288   150,642 
                
Other intangible assets, net  73,154   84,463   60,468   60,659 
                
Other assets  142,753   138,588   156,569   160,671 
Total assets $3,334,254  $3,077,801  $3,116,504  $3,120,775 


Continues on following page.
4




VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Balance Sheets (continued)
(In thousands)


 September 30, 2017  December 31, 2016  April 4, 2020  December 31, 2019 
 (Unaudited)     (Unaudited)    
Liabilities and equity            
Current liabilities:            
Notes payable to banks $25  $3  $199  $2 
Trade accounts payable  181,988   174,107   153,999   173,915 
Payroll and related expenses  138,616   114,576   116,456   122,100 
Lease liabilities  21,033   20,217 
Other accrued expenses  151,883   149,131   174,556   186,463 
Income taxes  18,085   19,033   24,030   17,731 
Total current liabilities  490,597   456,850   490,273   520,428 
                
Long-term debt less current portion  356,938   357,023   552,096   499,147 
U.S. transition tax payable  140,196   140,196 
Deferred income taxes  289,526   286,797   20,627   22,021 
Long-term lease liabilities  83,440   78,511 
Other liabilities  67,712   59,725   94,762   100,207 
Accrued pension and other postretirement costs  273,851   257,789   265,284   272,402 
Total liabilities  1,478,624   1,418,184   1,646,678   1,632,912 
                
Redeemable convertible debentures  252,889   88,659   -   174 
                
Stockholders' equity:        
Equity:        
Vishay stockholders' equity                
Common stock  13,200   13,385   13,255   13,235 
Class B convertible common stock  1,213   1,213   1,210   1,210 
Capital in excess of par value  1,753,369   1,952,988   1,416,260   1,425,170 
(Accumulated deficit) retained earnings  (177,075)  (307,417)
Retained earnings  84,570   72,180 
Accumulated other comprehensive income (loss)  10,158   (94,652)  (48,174)  (26,646)
Total Vishay stockholders' equity  1,600,865   1,565,517   1,467,121   1,485,149 
Noncontrolling interests  1,876   5,441   2,705   2,540 
Total equity  1,602,741   1,570,958   1,469,826   1,487,689 
Total liabilities, temporary equity, and equity $3,334,254  $3,077,801  $3,116,504  $3,120,775 


See accompanying notes.
5




VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)


 Fiscal quarters ended  Fiscal quarters ended 
 September 30, 2017  October 1, 2016  April 4, 2020  March 30, 2019 
            
Net revenues $677,883  $591,955  $612,841  $745,159 
Costs of products sold  488,610   438,054   465,601   534,000 
Gross profit  189,273   153,901   147,240   211,159 
                
Selling, general, and administrative expenses  93,701   93,916   99,832   103,424 
Restructuring and severance costs  3,244   1,197 
Impairment of intangible assets  -   1,559 
Operating income  92,328   57,229   47,408   107,735 
                
Other income (expense):                
Interest expense  (6,938)  (6,165)  (8,552)  (8,392)
Loss on early extinguishment of debt  (2,920)  (1,307)
Other  798   (380)  198   1,912 
Total other income (expense)  (6,140)  (6,545)  (11,274)  (7,787)
                
Income before taxes  86,188   50,684   36,134   99,948 
                
Income tax expense  21,605   14,088   8,750   24,307 
                
Net earnings  64,583   36,596   27,384   75,641 
                
Less: net earnings attributable to noncontrolling interests  179   156   165   182 
                
Net earnings attributable to Vishay stockholders $64,404  $36,440  $27,219  $75,459 
                
Basic earnings per share attributable to Vishay stockholders $0.44  $0.25  $0.19  $0.52 
                
Diluted earnings per share attributable to Vishay stockholders $0.41  $0.24  $0.19  $0.52 
                
Weighted average shares outstanding - basic  145,728   146,924   144,792   144,554 
                
Weighted average shares outstanding - diluted  156,701   149,894   145,295   145,289 
                
Cash dividends per share $0.0625  $0.0625  $0.0950  $0.0850 


See accompanying notes.
6




VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Comprehensive Income
(Unaudited - In thousands)


 Fiscal quarters ended  Fiscal quarters ended 
 September 30, 2017  October 1, 2016  April 4, 2020  March 30, 2019 
            
Net earnings $64,583  $36,596  $27,384  $75,641 
                
Other comprehensive income, net of tax        
Other comprehensive income (loss), net of tax        
                
Pension and other post-retirement actuarial items  1,292   1,923   1,601   1,457 
                
Foreign currency translation adjustment  28,149   8,585   (23,129)  (9,989)
                
Unrealized gain on available-for-sale securities  220   318 
        
Other comprehensive income  29,661   10,826 
Other comprehensive income (loss)  (21,528)  (8,532)
                
Comprehensive income  94,244   47,422   5,856   67,109 
                
Less: comprehensive income attributable to noncontrolling interests  179   156   165   182 
                
Comprehensive income attributable to Vishay stockholders $94,065  $47,266  $5,691  $66,927 


See accompanying notes.
7




VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)

  Nine fiscal months ended 
  September 30, 2017  October 1, 2016 
       
Net revenues $1,929,033  $1,752,612 
Costs of products sold  1,405,922   1,315,274 
Gross profit  523,111   437,338 
         
Selling, general, and administrative expenses  278,865   276,455 
Restructuring and severance costs  5,194   12,139 
Impairment of intangible assets  -   1,559 
Operating income  239,052   147,185 
         
Other income (expense):        
Interest expense  (20,804)  (18,901)
Other  1,151   2,655 
Loss on disposal of equity affiliate  (7,060)  - 
Gain on early extinguishment of debt  -   4,597 
Total other income (expense)  (26,713)  (11,649)
         
Income before taxes  212,339   135,536 
         
Income taxes  54,398   37,559 
         
Net earnings  157,941   97,977 
         
Less: net earnings attributable to noncontrolling interests  628   437 
         
Net earnings attributable to Vishay stockholders $157,313  $97,540 
         
Basic earnings per share attributable to Vishay stockholders $1.08  $0.66 
         
Diluted earnings per share attributable to Vishay stockholders $1.01  $0.65 
         
Weighted average shares outstanding - basic  146,128   147,470 
         
Weighted average shares outstanding - diluted  155,626   150,125 
         
Cash dividends per share $0.1875  $0.1875 

See accompanying notes.

8

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Comprehensive Income
(Unaudited - In thousands)

  Nine fiscal months ended 
  September 30, 2017  October 1, 2016 
       
Net earnings $157,941  $97,977 
         
Other comprehensive income, net of tax        
         
Pension and other  post-retirement actuarial items  4,843   5,448 
         
Foreign currency translation adjustment  98,965   18,633 
         
Unrealized gain on available-for-sale securities  1,002   1,664 
         
Other comprehensive income  104,810   25,745 
         
Comprehensive income  262,751   123,722 
         
Less: comprehensive income attributable to noncontrolling interests  628   437 
         
Comprehensive income attributable to Vishay stockholders $262,123  $123,285 

See accompanying notes.
9

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)


 Nine fiscal months ended  Three fiscal months ended 
 September 30, 2017  October 1, 2016  April 4, 2020  March 30, 2019 
    (recast - see Note 1)       
Operating activities            
Net earnings $157,941  $97,977  $27,384  $75,641 
Adjustments to reconcile net earnings to net cash provided by operating activities:                
Depreciation and amortization  121,319   119,143   41,520   40,428 
(Gain) loss on disposal of property and equipment  (106)  (1,373)  (45)  (173)
Accretion of interest on convertible debentures  3,703   3,425 
Accretion of interest on convertible debt instruments  3,637   3,490 
Inventory write-offs for obsolescence  12,157   17,085   5,643   6,967 
Impairment of intangible assets  -   1,559 
Loss on disposal of equity affiliate  7,060   - 
Deferred income taxes  9,115   (1,750)  (3,517)  (2,614)
Gain on early extinguishment of debt  -   (4,597)
Loss on extinguishment of debt  2,920   1,307 
Other  6,531   (4,944)  3,524   (1,744)
Net change in operating assets and liabilities, net of effects of businesses acquired  (71,875)  (13,455)  (46,588)  (43,784)
Net cash provided by operating activities  245,845   213,070   34,478   79,518 
                
Investing activities                
Capital expenditures  (84,790)  (81,346)  (24,328)  (36,367)
Proceeds from sale of property and equipment  1,484   1,241   53   395 
Purchase of businesses, net of cash received  -   (11,862)
Purchase of short-term investments  (598,937)  (472,938)  (35,463)  (1,920)
Maturity of short-term investments  610,573   491,867   -   71,455 
Other investing activities  (6,663)  2,886   (1,507)  2,893 
Net cash provided by (used in) investing activities  (78,333)  (58,290)  (61,245)  24,594 
                
Financing activities                
Principal payments on long-term debt and capital leases  -   (34,044)
Repurchase of convertible debentures  (19,849)  (22,695)
Net proceeds (payments) on revolving credit lines  (5,000)  (41,000)  54,000   - 
Common stock repurchases  (37,564)  (16,981)
Net changes in short-term borrowings  22   (626)  85   - 
Dividends paid to common stockholders  (25,054)  (25,329)  (12,592)  (11,249)
Dividends paid to Class B common stockholders  (2,274)  (2,274)  (1,149)  (1,028)
Proceeds from stock options exercised  1,260   - 
Distributions to noncontrolling interests  (1,140)  (707)
Acquisition of noncontrolling interests  (4,100)  - 
Cash withholding taxes paid when shares withheld for vested equity awards  (1,971)  (442)  (1,991)  (2,659)
Other financing activities  (1,255)  - 
Net cash provided by (used in) financing activities  (77,076)  (121,403)  18,504   (37,631)
Effect of exchange rate changes on cash and cash equivalents  13,168   2,703   (5,167)  (3,087)
                
Net increase (decrease) in cash and cash equivalents  103,604   36,080   (13,430)  63,394 
                
Cash and cash equivalents at beginning of period  471,781   475,507   694,133   686,032 
Cash and cash equivalents at end of period $575,385  $511,587  $680,703  $749,426 


See accompanying notes.
10
8




VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed StatementStatements of Equity
(Unaudited - In thousands, except share and per share amounts)


  Common Stock  Class B Convertible Common Stock  Capital in Excess of Par Value  Retained Earnings (Accumulated Deficit)  Accumulated Other Comprehensive Income (Loss)  Total Vishay Stockholders' Equity  Noncontrolling Interests  Total Equity 
Balance at December 31, 2016 $13,385  $1,213  $1,952,988  $(307,417) $(94,652) $1,565,517  $5,441  $1,570,958 
Cumulative effect of accounting change for adoption of ASU 2016-09 (see Note 1)  -   -   -   386   -   386   -   386 
Net earnings  -   -   -   157,313   -   157,313   628   157,941 
Other comprehensive income  -   -   -   -   104,810   104,810   -   104,810 
Distributions to noncontrolling interests  -   -   -   -   -   -   (1,140)  (1,140)
Acquisition of noncontrolling interests  -   -   (1,047)  -   -   (1,047)  (3,053)  (4,100)
Temporary equity reclassification  -   -   (164,230)  -   -   (164,230)  -   (164,230)
Common stock repurchase (2,127,183 shares)  (213)  -   (37,351)  -   -   (37,564)  -   (37,564)
Issuance of stock and related tax withholdings for vested restricted stock units (200,688 shares)  20   -   (1,991)  -   -   (1,971)  -   (1,971)
Dividends declared ($ 0.1875 per share)  -   -   29   (27,357)  -   (27,328)  -   (27,328)
Stock compensation expense  -   -   3,719   -   -   3,719   -   3,719 
Stock options exercised (77,334 shares)  8   -   1,252   -   -   1,260   -   1,260 
Balance at September 30, 2017 $13,200  $1,213  $1,753,369  $(177,075) $10,158  $1,600,865  $1,876  $1,602,741 
  
Common Stock
  
Class B Convertible Common Stock
  
Capital in Excess of Par Value
  
Retained Earnings (Accumulated Deficit)
  
Accumulated Other Comprehensive Income (Loss)
  
Total Vishay Stockholders' Equity
  
Noncontrolling Interests
  
Total Equity
 
Balance at December 31, 2018
 
$
13,212
  
$
1,210
  
$
1,436,011
  
$
(61,258
)
 
$
(6,791
)
 
$
1,382,384
  
$
2,286
  
$
1,384,670
 
Cumulative effect of accounting change for adoption of ASU 2016-02
  
-
   
-
   
-
   
23,013
   
-
   
23,013
   
-
   
23,013
 
Net earnings (loss)
  
-
   
-
   
-
   
75,459
   
-
   
75,459
   
182
   
75,641
 
Other comprehensive income
  
-
   
-
   
-
   
-
   
(8,532
)
  
(8,532
)
  
-
   
(8,532
)
Conversion of Class B shares (18 shares)
  
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Temporary equity reclassification
  
-
   
-
   
3
   
-
   
-
   
3
   
-
   
3
 
Issuance of stock and related tax withholdings for vested restricted stock units (220,718 shares)
  
22
   
-
   
(2,681
)
  
-
   
-
   
(2,659
)
  
-
   
(2,659
)
Dividends declared (0.085 per share)
  
-
   
-
   
15
   
(12,292
)
  
-
   
(12,277
)
  
-
   
(12,277
)
Stock compensation expense
  
-
   
-
   
3,536
   
-
   
-
   
3,536
   
-
   
3,536
 
Repurchase of convertible debentures due 2040 and due 2042
  
-
   
-
   
(11,783
)
  
-
   
-
   
(11,783
)
  
-
   
(11,783
)
Balance at March 30, 2019
 
$
13,234
  
$
1,210
  
$
1,425,101
  
$
24,922
  
$
(15,323
)
 
$
1,449,144
  
$
2,468
  
$
1,451,612
 
                                 
Balance at December 31, 2019
  
13,235
   
1,210
   
1,425,170
   
72,180
   
(26,646
)
  
1,485,149
   
2,540
   
1,487,689
 
Cumulative effect of accounting change for adoption of ASU 2016-13 (see Note 1)
  
-
   
-
   
-
   
(1,070
)
  
-
   
(1,070
)
  
-
   
(1,070
)
Net earnings
  
-
   
-
   
-
   
27,219
   
-
   
27,219
   
165
   
27,384
 
Other comprehensive income (loss)
  
-
   
-
   
-
   
-
   
(21,528
)
  
(21,528
)
  
-
   
(21,528
)
Temporary equity reclassification
  
-
   
-
   
174
   
-
   
-
   
174
   
-
   
174
 
Issuance of stock and related tax withholdings for vested restricted stock units (199,251 shares)
  
20
   
-
   
(2,011
)
  
-
   
-
   
(1,991
)
  
-
   
(1,991
)
Dividends declared (0.095 per share)
  
-
   
-
   
18
   
(13,759
)
  
-
   
(13,741
)
  
-
   
(13,741
)
Stock compensation expense
  
-
   
-
   
2,998
   
-
   
-
   
2,998
   
-
   
2,998
 
Repurchase of convertible senior debentures due 2041
  
-
   
-
   
(10,089
)
  
-
   
-
   
(10,089
)
  
-
   
(10,089
)
Balance at April 4, 2020
 
$
13,255
  
$
1,210
  
$
1,416,260
  
$
84,570
  
$
(48,174
)
 
$
1,467,121
  
$
2,705
  
$
1,469,826
 


See accompanying notes.
11
9

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 1 – Basis of Presentation


The accompanying unaudited consolidated condensed financial statements of Vishay Intertechnology, Inc. ("Vishay"(“Vishay” or the "Company"“Company”) have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States ("GAAP"(“GAAP”) for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented.  The financial statements should be read in conjunction with the consolidated financial statements filed with the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2016.2019.  The results of operations for the fiscal quarter and ninethree fiscal months ended September 30, 2017April 4, 2020 are not necessarily indicative of the results to be expected for the full year.


The Company reports interim financial information for 13-week periods beginning on a Sunday and ending on a Saturday, except for the first fiscal quarter, which always begins on January 1, and the fourth fiscal quarter, which always ends on December 31.  The four fiscal quarters in 2017 end2020 ended on April 1, 2017,4, 2020, July 1, 2017, September 30, 2017,4, 2020, October 3, 2020, and December 31, 2017,2020, respectively.  The four fiscal quarters in 20162019 ended on April 2, 2016, July 2, 2016, October 1, 2016,March 30, 2019, June 29, 2019, September 28, 2019, and December 31, 2016,2019, respectively.


Recently Adopted Accounting Guidance


In MarchJune 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.  The ASU is the result of the FASB's simplification initiative intended to improve GAAP by reducing costs and complexity while maintaining or enhancing the usefulness of related financial statement information.  The ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.  The Company  adopted the ASU on January 1, 2017.  The ASU allowed prospective adoption of certain aspects, while requiring retrospective adoption of other aspects of the guidance.  The Company recognized a cumulative-effect adjustment for previously unrecognized excess tax benefits in January 1, 2017 retained earnings (accumulated deficit) of $386.  The Company reclassified $442 of cash withholding taxes paid when shares were withheld for vested equity awards in the accompanying consolidated condensed statement of cash flows for the nine fiscal months ended October 1, 2016 to financing cash flows.  The Company retrospectively reclassified excess tax benefits as operating cash flows on the consolidated condensed statement of cash flows.  The Company will recognize forfeitures on its stock-based awards as they occur.

Recently Issued Accounting Guidance

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  The ASU is the result of a convergence project between the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards.  The ASU removes inconsistencies and weaknesses in revenue requirements; provides a more robust framework for addressing revenue issues; improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; provides more useful information to users of financial statements through expanded disclosure requirements; and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer.  The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2018.  The Company intends to retrospectively adopt the ASU effective January 1, 2018.  Based on work performed to date, the adoption of the ASU is not expected to have a material impact on the Company's results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).  The ASU is the result of a project between the FASB and the International Accounting Standards Board to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.  Upon adoption of the ASU, the Company will recognize lease assets and liabilities for its operating leases which are not currently reported on its consolidated balance sheets.  The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2019, with the ability to early adopt.  The Company is currently evaluating the effect of the ASU on its lease contracts.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  The Company adopted the ASU is effective  January 1, 2020.

Payment terms for the Company's sales are generally less than ninety days.  Substantially all of the Company's receivables are collected within twelve months of the transfer of products to the customer and the Company for interimexpects this to continue going forward.  The credit loss allowance is determined through an analysis of the aging of accounts receivable and annual periods beginningassessments of risk that are based on or afterhistorical trends and an evaluation of the impact of current and projected economic conditions.  Receivables from customers with deteriorating financial condition and those over 180 days past due are removed from the pool and evaluated separately.  The adoption of ASU 2016-13 on January 1, 2020 withhad no material impact on the abilityCompany’s allowance for accounts receivable credit losses.

The Company’s cash equivalents, short-term investments, and restricted investments are accounted for as held-to-maturity debt instruments, at amortized cost.  Interest income on these instruments is recorded as “Other income” on the consolidated condensed statements of operations and interest receivable is recognized as a separate asset and recorded in “Prepaid expenses and other current assets” on the consolidated condensed balance sheets.  The Company has not experienced a credit loss on the principal or interest receivable of its cash equivalents, short-term investments, or restricted investments.  The Company pools its cash equivalents, short-term investments, and restricted investments by credit rating of the issuing financial institution and estimates an allowance for credit losses based on the corporate bond default ratios, evaluation of the impact of current and projected economic conditions, and probability of credit loss.  The Company recorded a cumulative-effect adjustment of $810 to early adopt for interim and annual periods beginning on or after January 1, 2019.2020 retained earnings to recognize an allowance for credit losses for these financial instruments upon the adoption of ASU 2016-13.  The Company is currently evaluatingdoes not measure an allowance for credit losses on interest receivable.  Any uncollectible interest receivable will be recognized by reversing interest income within the effectfiscal quarter that the interest becomes uncollectible.

The Company has an immaterial amount of other short-term held-to-maturity debt instruments recorded within “Prepaid expenses and other current assets” on the consolidated condensed balance sheets.  The Company analyzes these assets on a separate asset basis and estimates an allowance for credit losses based on historical credit loss rates and an evaluation of the impact of current and projected economic conditions.  The Company recorded a cumulative-effect adjustment of $260 to January 1, 2020 retained earnings to recognize an allowance for credit losses for these financial instruments upon the adoption of ASU on its financial assets measured at amortized cost.2016-13.


Reclassifications


In addition to the changes due to the retrospective adoption of certain aspects of new accounting guidance described above, certainCertain prior period amounts have been reclassified to conform to the current financial statement presentation.

10
12
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Note 2 – Impact of Coronavirus Outbreak

The Company's operations have been impacted by the coronavirus ("COVID-19") outbreak.  Some manufacturing facilities are or were temporarily closed and some are operating at levels less than full capacity.  The Company has incurred incremental costs separable from normal operations that are directly related to the outbreak and containment efforts, primarily wages paid to manufacturing employees during government-mandated shut-downs, additional wages and hardship allowances for working during lockdown periods, additional costs of cleaning and disinfecting facilities, costs of additional safety equipment for employees, and temporary housing for employees due to travel restrictions, which were partially offset by government subsidies.  The net impact of the costs and subsidies are reported as cost of products sold ($3,130) and selling, general, and administrative expenses ($317) based on employee function on the consolidated condensed statement of operations.

The Company's insurance coverages generally exclude losses incurred due to pandemics.  Any amounts that may be received will not be recognized until all contingencies are settled.

11

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 3 – Leases

The Company leases buildings and machinery and equipment used for manufacturing and/or sales and administrative purposes.  The Company is also party to various service, warehousing, and other agreements that it evaluates for potential embedded leases.

The Company leases assets in each region in which it operates.  No individual lease is considered significant and there are no leases that have not yet commenced that are considered significant.

The net right of use assets and lease liabilities recognized on the consolidated condensed balance sheets for the Company's operating leases were as follows:


 
April 4, 2020
  
December 31, 2019
 
Right of use assets
      
Operating Leases
      
Buildings and improvements
 
$
94,353
  
$
87,689
 
Machinery and equipment
  
5,153
   
5,473
 
Total
 
$
99,506
  
$
93,162
 
Current lease liabilities
        
Operating Leases
        
Buildings and improvements
 
$
18,324
  
$
17,410
 
Machinery and equipment
  
2,709
   
2,807
 
Total
 
$
21,033
  
$
20,217
 
Long-term lease liabilities
        
Operating Leases
        
Buildings and improvements
 
$
81,036
  
$
75,877
 
Machinery and equipment
  
2,404
   
2,634
 
Total
 
$
83,440
  
$
78,511
 
Total lease liabilities
 
$
104,473
  
$
98,728
 
12

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Lease expense is classified on the statement of operations based on asset use.  Total lease cost recognized on the consolidated condensed statements of operations is as follows:


 
Fiscal quarters ended
 
  
April 4, 2020
  
March 30, 2019
 
Lease expense
      
Operating lease expense
 
$
5,652
  
$
5,536
 
Short-term lease expense
  
194
   
833
 
Variable lease expense
  
23
   
12
 
Total lease expense
 
$
5,869
  $6,381 

The Company paid $5,609 and $5,050 for its operating leases in the three fiscal months ended April 4, 2020 and March 30, 2019, respectively, which are included in operating cash flows on the consolidated condensed statements of cash flows.  The weighted-average remaining lease term for the Company's operating leases is 8.8 years and the weighted-average discount rate is 5.9% as of April 4, 2020.

The undiscounted future lease payments for the Company's operating lease liabilities are as follows:


 
April 4, 2020
 
2020 (excluding the three fiscal months ended April 4, 2020)
 
$
16,499
 
2021
  
19,647
 
2022
  
16,044
 
2023
  
13,699
 
2024
  
12,640
 
Thereafter
  
57,162
 

The undiscounted future lease payments presented in the table above include payments through the term of the lease, which may include periods beyond the noncancellable term.  The difference between the total payments above and the lease liability balance is due to the discount rate used to calculate lease liabilities.

13

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 24 – Restructuring and Related Activities


TheIn the third fiscal quarter of 2019, the Company places a strong emphasis on controllingannounced global cost reduction and management rejuvenation programs as part of its costs and combats general price inflation by continuously improving itscontinuous efforts to improve efficiency and operating performance.  When the ongoing cost containment activities are not adequate, the Company takes actions to maintain its cost competitiveness.


The Company incurred significant restructuring costs in its pastprograms are primarily designed to reduce its cost structure.  Historically, the Company's primary cost reduction technique was through the transfer of production from high-labor-cost countries to lower-labor-cost countries.  Since 2013, the Company's cost reduction programs have primarily focused on reducingmanufacturing fixed costs includingand selling, general, and administrative expenses.

In 2013, thecosts company-wide, and provide management rejuvenation.  The Company announced various cost reduction programs.  These programs were substantially implemented by the endexpects to incur charges of the first fiscal quarter of 2016, with some additional costs incurred in the remainder of 2016.  Many of theapproximately $25,000, primarily related to cash severance costs, were recognized ratably over the required stay periods.  In November 2016, theto implement these programs.  The Company announced an extension of one ofexpects these programs.cost reductions to be fully achieved by December 2020.

In 2015, the Company announced additional global cost reduction programs.  These programs include a facility closure in the Netherlands.  The cash costs of these programs, primarily severance, are expected to aggregate to approximately $30,000.  Complete implementation of these programs is expected to occur before the end of 2017.


The following table summarizes restructuringthe activity to date related to this program:

Expense recorded in 2019 $24,139 
Cash paid  (1,330)
Foreign currency translation  35 
Balance at December 31, 2019 $22,844 
Cash paid  (3,742)
Foreign currency translation  (307)
Balance at April 4, 2020 $18,795 

The payment terms vary by country, but generally are paid in a lump sum at cessation of employment.  The current portion of the liability is $15,348 and relatedis included in other accrued expenses which were recognized and reported on a separate line in the accompanying consolidated condensed statements of operations:

  Fiscal quarters ended  Nine fiscal months ended 
  September 30, 2017  October 1, 2016  September 30, 2017  October 1, 2016 
MOSFETs Enhanced Competitiveness Program $2,463  $675  $2,911  $5,700 
Global Cost Reduction Programs  781   986   2,283   6,903 
Modules Production Transfer Program  -   (464)  -   (464)
Total $3,244  $1,197  $5,194  $12,139 

MOSFETs Enhanced Competitiveness Program

Over a period of approximately 2 years and in a series of discrete steps, the manufacture of wafers for a substantial share of products was transferred into a more cost-efficient fab.  As a consequence, certain other manufacturing previously occurring in-house was transferred to third-party foundries.  This transfer of production was substantially completed by the endbalance sheet.  The non-current portion of the first fiscal quarter of 2016.

Employees generally were required to remain withliability is $3,447 and is included in other liabilities on the Company during the production transfer period.  Accordingly, the Company accrued these severance costs ratably over the respective employees' remaining service periods.  The Company has incurred and may continue to incur other exit costs associated with the production transfer, including certain contract termination costs.consolidated condensed balance sheet.

As a result of a review of the financial results and outlook for the Company's MOSFETs segment following the completion of production transfers, in November 2016, the Company determined to implement further cost reductions for the MOSFETs segment.

In November 2016, the Company announced an extension of the MOSFETs Enhanced Competitiveness Program.  The revised program includes various cost reduction initiatives, primarily the transfer of all remaining manufacturing operations at its Santa Clara, California facility to other Vishay facilities or third-party subcontractors.  The Company expects to incur cash charges of approximately $7,000 to $8,000, primarily related to severance, to implement these additional steps.  The total cash charges for the MOSFETs Enhanced Competitiveness Program are expected to be $26,000 to $27,000.  The Company expects to maintain its R&D and management presence in the Silicon Valley area, even after the cessation of manufacturing operations there.
14
13
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

The following table summarizes the activity to date related to this program:

Expense recorded in 2013 $2,328 
Cash paid  (267)
Balance at December 31, 2013 $2,061 
Expense recorded in 2014  6,025 
Cash paid  (856)
Balance at December 31, 2014 $7,230 
Expense recorded in 2015  5,367 
Cash paid  (426)
Foreign currency translation  1 
Balance at December 31, 2015 $12,172 
Expense recorded in 2016  9,744 
Cash paid  (15,686)
Foreign currency translation  2 
Balance at December 31, 2016 $6,232 
Expense recorded in 2017  2,911 
Cash paid  (5,897)
Balance at September 30, 2017 $3,246 

Severance benefits are generally paid in a lump sum at cessation of employment.  Other exit costs of $380 are included in the expenses incurred in 2017 in the table above.  The current portion of the liability is $2,586 and is included in other accrued expenses in the accompanying consolidated condensed balance sheets.  The non-current portion of the liability is included in other liabilities in the accompanying consolidated condensed balance sheets.

Voluntary Separation / Retirement Program


The voluntary separation / early retirement program was offered to employees worldwide who were eligible because they met job classification, age, and years-of-service criteria as of October 31, 2013. The program benefits varied by country and job classification, but generally included a cash loyalty bonus based on years of service. All employees eligible for the program have left the Company.

These employees generally were not aligned with any particular segment. The effective separation / retirement date for most employees who accepted the offer was June 30, 2014 or earlier, with a few exceptions to allow for a transition period. The Company recorded $13,373 of expenses for this program, primarily in 2013 and 2014.  Substantially all amounts related to this program have been paid as of September 30, 2017.
14
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Global Cost Reduction Programs

The global cost reduction programs announced in 2015 include a plan to reduce selling, general, and administrative costs company-wide, and targeted streamlining and consolidation of production for certain product lines within its Capacitors and Resistors & Inductors segments.

The following table summarizes the activity to date related to this program:

Expense recorded in 2015 $13,753 
Cash paid  (986)
Foreign currency translation  (150)
Balance at December 31, 2015 $12,617 
Expense recorded in 2016  9,918 
Cash paid  (16,237)
Foreign currency translation  (34)
Balance at December 31, 2016 $6,264 
Expense recorded in 2017  2,283 
Cash paid  (5,779)
Foreign currency translation  319 
Balance at September 30, 2017 $3,087 

The following table summarizes the expense recognized by segment related to this program:

  Fiscal quarters ended  Nine fiscal months ended 
  September 30, 2017  October 1, 2016  September 30, 2017  October 1, 2016 
Diodes $(13) $210  $-  $788 
Optoelectronic Components  -   -   242   953 
Resistors & Inductors  468   641   1,403   3,163 
Capacitors  88   36   334   459 
Unallocated Selling, General, and Administrative Expenses  238   99   304   1,540 
Total $781  $986  $2,283  $6,903 

Severance benefits are generally paid in a lump sum at cessation of employment.  Other exit costs of $550 are included in the expenses incurred in 2017 in the tables above.  The current portion of the liability is $2,478 and is included in other accrued expenses in the accompanying consolidated condensed balance sheets.  The non-current portion of the liability is included in other liabilities in the accompanying consolidated condensed balance sheets.
15
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 35 – Income Taxes


The provision for income taxes consists of provisions for federal, state, and foreign income taxes.  The effective tax rates for the periods ended SeptemberApril 4, 2020 and March 30, 2017 and October 1, 20162019 reflect the Company'sCompany’s expected tax rate on reported income from continuing operations before income tax and tax adjustments. The Company operates in a global environment with significant operations in various jurisdictions outside the United States.  Accordingly, the consolidated income tax rate is a composite rate reflecting the Company'sCompany’s earnings and the applicable tax rates in the various jurisdictions where the Company operates.


The Company has approximately $100,000 of unremitted foreign earnings that it has deemed not permanently reinvested and thus has accrued foreign withholding and other taxes.   The Company plans to repatriate these foreign earnings in the second fiscal quarter of 2020. 

The Company repurchased a portion of outstanding convertible debentures in the first fiscal quarters of 2020 and 2019 (see Note 6).  The Company recognized tax benefits on the pre-tax loss on early extinguishment of debt.  The Company also recognized tax benefits of $1,346 and $1,312 in the first fiscal quarters of 2020 and 2019, respectively, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the extinguished debentures.

Income tax expense for the first fiscal quarter and nine fiscal months ended September 30, 2017of 2019 includes $892 and $3,100, respectively,tax benefits of $585 for the periodic remeasurement of the deferred tax liability recorded for the foreign taxes associated with the Company's cash repatriation program compared to $1,402 and $3,388 forprogram.

During the fiscal quarter and nine fiscal months ended October 1, 2016, respectively.  The cash repatriation program is expected to occur over several years, and the deferred tax liability is based on the available sources of cash, applicable tax rates, and other factors and circumstances, as of each respective balance sheet date. Changes in the underlying facts and circumstances result in changes in the deferred tax liability balance, which are recorded as tax benefit or expense.  During the second fiscal quarter of 2017, the Company repatriated $38,000 pursuant to this program.

During the nine fiscal months ended September 30, 2017,April 4, 2020, the liabilities for unrecognized tax benefits decreased by $2,463$1,264 on a net basis, primarily due to paymentscurrency translation adjustments and settlements,the expiration of a statute, partially offset by increases for tax positions taken in the current period, interest, and foreign currency effects.interest.

15
16
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Note 46 – Long-Term Debt


Long-term debt consists of the following:


 September 30, 2017  December 31, 2016  April 4, 2020  December 31, 2019 
            
Credit facility $138,000  $143,000  $54,000  $- 
Convertible senior notes, due 2025  512,745   509,128 
Convertible senior debentures, due 2040  109,864   108,120   127   126 
Convertible senior debentures, due 2041  56,372   55,442   1,050   6,677 
Convertible senior debentures, due 2042  62,247   61,341 
Deferred financing costs  (9,545)  (10,880)  (15,826)  (16,784)
  356,938   357,023   552,096   499,147 
Less current portion  -   -   -   - 
 $356,938  $357,023  $552,096  $499,147 

Convertible Senior Debentures

Vishay currently has three issuances of convertible senior debentures outstanding with generally congruent terms.  The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for each issuance of the Company's convertible senior debentures effective as of the ex-dividend date of each cash dividend.


The following table summarizes some key facts and terms regarding the three seriesoutstanding convertible debt instruments as of outstandingApril 4, 2020:


 
Convertible
Senior Notes
Due 2025
  
Convertible
Senior
Debentures
Due 2040
  
Convertible
Senior
Debentures
Due 2041
 
Issuance date June 12, 2018  November 9, 2010  May 13, 2011 
Maturity date June 15, 2025  November 15, 2040  May 15, 2041 
Principal amount as of April 4, 2020 $600,000  $300  $2,640 
Cash coupon rate (per annum)  2.25%  2.25%  2.25%
Nonconvertible debt borrowing rate at issuance (per annum)  5.50%  8.00%  8.375%
Conversion rate effective March 11, 2020 (per $1 principal amount)  31.8278   80.4668   58.7205 
Effective conversion price effective March 11, 2020 (per share) $31.42  $12.43  $17.03 
130% of the conversion price (per share) $40.85  $16.16  $22.14 
Call date  n/a  November 20, 2020  May 20, 2021 

The terms of the convertible senior debentures following the adjustment made to the conversion rate of the debentures on the ex-dividend date of the September 28, 2017 dividend payment:due 2040 and due 2041 are generally congruent.

  Due 2040  Due 2041  Due 2042 
Issuance date November 9, 2010  May 13, 2011  May 31, 2012 
Maturity date November 15, 2040  May 15, 2041  June 1, 2042 
Principal amount $275,000  $150,000  $150,000 
Cash coupon rate (per annum)  2.25%  2.25%  2.25%
Nonconvertible debt borrowing rate at issuance (per annum)  8.00%  8.375%  7.50%
Conversion rate effective September 14, 2017 (per $1 principal amount)  76.9650   56.1650   90.4924 
Effective conversion price effective September 14, 2017 (per share) $12.99  $17.80  $11.05 
130% of the conversion price (per share) $16.89  $23.14  $14.37 
Call date November 20, 2020  May 20, 2021  June 7, 2022 


Prior to three months before the maturity date, the holders may only convert their convertible senior debentures due 2040 and due 2041 only under the following circumstances: (1) during any fiscal quarter after the first full quarter subsequent to issuance, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the debentures falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; (3) Vishay calls any or all of the debentures for redemption, at any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.

The convertible senior debentures due 2042 became2040 and due 2041 are not currently convertible.

Prior to December 15, 2024, the holders of the convertible subsequent tosenior notes due 2025 may convert their notes only under the December 31, 2016 evaluationfollowing circumstances: (1) during any fiscal quarter after the fiscal quarter ending September 29, 2018, if the sale price of Vishay common stock reaches 130% of the conversion criteria, remained convertible subsequent toprice for a specified period; (2) the April 1, 2017 and July 1, 2017 evaluations, and remain convertible subsequent totrading price of the September 30, 2017 evaluation, due tonotes falls below 98% of the product of the sale price of Vishay's common stock exceeding 130%and the conversion rate for a specified period; or (3) upon the occurrence of specified corporate transactions.

The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for the applicable periods in the fourth fiscal quarter of 2016 and first, second, and third fiscal quarters of 2017.  The convertible debentures due 2040 became convertible subsequent to the September 30, 2017 evaluationdebt instruments effective as of the ex-dividend date of each cash dividend.  The conversion criteria, due to the sale price of Vishay's common stock exceeding 130% of therate and effective conversion price for the applicable periods in the third fiscal quarter of 2017.  The debentures due 2040 and due 2042 will remain convertible until December 31, 2017, at which time the conversion criteria will be reevaluated.  At the direction of its Board of Directors, the Company intends, upon future conversion of any of the convertible senior debentures, to repay the principal amounts of the convertible senior debentures innotes due 2025 is adjusted for quarterly cash and settle any additional amounts in shares of Vishay common stock. The excess of the amount that the Company would paydividends to the holders of the debentures due 2040 and due 2042 upon conversion over the carrying value of the liability component of the debentures currently convertible has been reclassified as temporary equity on the consolidated condensed financial statements. The Company intends to finance the principal amount of any converted debentures using borrowings under its credit facility. Accordingly, the debt component of the convertible debentures due 2040 and due 2042 continues to be classified as a non-current liability on the consolidated condensed balance sheets.
17
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, exceptextent such dividends exceed $0.085 per share amounts)
of common stock.


GAAP requires an issuer to separately account for the liability and equity components of the instrument in a manner that reflects the issuer'sissuer’s nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods.  The resulting discount on the debt is amortized as non-cash interest expense in future periods.

16

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

The carrying values of the liability and equity components of the convertible debenturesdebt instruments are reflected in the Company'sCompany’s consolidated condensed balance sheets as follows:


  
Principal amount of
the debentures
  Unamortized discount  Embedded derivative  Carrying value of liability component  Equity component (including temporary equity) - net carrying value 
September 30, 2017
               
Due 2040 $275,000   (165,432)  296  $109,864  $110,094 
Due 2041 $150,000   (93,900)  272  $56,372  $62,246 
Due 2042 $150,000   (87,916)  163  $62,247  $57,874 
Total $575,000  $(347,248) $731  $228,483  $230,214 
                     
December 31, 2016
                    
Due 2040 $275,000   (167,273)  393  $108,120  $110,094 
Due 2041 $150,000   (94,843)  285  $55,442  $62,246 
Due 2042 $150,000   (88,835)  176  $61,341  $57,874 
Total $575,000  $(350,951) $854  $224,903  $230,214 

 
Principal
amount of the
debt
instruments
  
Unamortized
discount
  
Carrying
value of
liability
component
  
Equity
component
(including
temporary
equity) -net
carrying value
 
April 4, 2020            
Convertible senior notes due 2025 $600,000   (87,255) $512,745  $85,262 
Convertible senior debentures due 2040 and due 2041 $2,940   (1,763) $1,177  $1,216 
Total $602,940  $(89,018) $513,922  $86,478 
                 
December 31, 2019                
Convertible senior notes due 2025 $600,000   (90,872) $509,128  $85,262 
Convertible senior debentures due 2040 and due 2041 $17,190   (10,387) $6,803  $7,129 
Total $617,190  $(101,259) $515,931  $92,391 


Interest is payable on the debenturesconvertible debt instruments semi-annually at the cash coupon rate; however, the remaining debt discount is being amortized as additional non-cash interest expense using an effective annual interest rate equal to the Company'sCompany’s estimated nonconvertible debt borrowing rate at the time of issuance.  In addition to ordinary interest, contingent interest will accrue in certain circumstances relating to the trading price of the convertible senior debentures due 2040 and due 2041 and under certain other circumstances, beginning ten years subsequent to issuance.in 2020 and 2021, respectively.  The convertible senior notes due 2025 do not possess contingent interest features.


Interest expense related to the debenturesconvertible debt instruments is reflected on the consolidated condensed statements of operations for the fiscal quarters ended:


  
Contractual
coupon interest
  Non-cash amortization of debt discount  Non-cash amortization of deferred financing costs  Non-cash change in value of derivative liability  Total interest expense related to the debentures 
September 30, 2017
               
Due 2040 $1,547   626   22   (53) $2,142 
Due 2041 $844   321   11   (21) $1,155 
Due 2042 $844   312   13   (21) $1,148 
Total $3,235  $1,259  $46  $(95) $4,445 
                     
October 1, 2016
                    
Due 2040 $1,547   579   22   (115) $2,033 
Due 2041 $844   296   11   (102) $1,049 
Due 2042 $844   291   13   (71) $1,077 
Total $3,235  $1,166  $46  $(288) $4,159 

 
Contractual
coupon
interest
  
Non-cash
amortization
of debt
discount
  
Other non-cash
interest expense
  
Total interest
expense
related to the
debt
instruments
 
April 4, 2020            
Convertible senior notes due 2025 $3,375   3,617   454  $7,446 
Convertible senior debentures $44   20   -  $64 
Total $3,419  $3,637  $454  $7,510 
                 
March 30, 2019                
Convertible senior notes due 2025 $3,375   3,426   454  $7,255 
Convertible senior debentures $148   64   (16) $196 
Total $3,523  $3,490  $438  $7,451 

Other non-cash interest expense includes amortization of deferred financing costs and changes in the value of embedded derivative liabilities.

The Company used cash to repurchase $14,250 principal amount of convertible senior debentures due 2041 in the first fiscal quarter of 2020.  The net carrying value of the debentures repurchased was $5,645.  In accordance with the authoritative accounting guidance for convertible debentures, the aggregate repurchase payment of $19,926 was allocated between the liability ($9,837) and equity ($10,089) components of the convertible debentures, using the Company's nonconvertible debt borrowing rate at the time of the repurchase.  As a result, the Company recognized a loss on extinguishment of convertible debentures of $2,920, including the write-off of unamortized debt issuance costs.
18
17

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Interest expense related to the debentures is reflected on the consolidated condensed statements of operations for the nine fiscal months ended:

  
Contractual
coupon interest
  Non-cash amortization of debt discount  Non-cash amortization of deferred financing costs  Non-cash change in value of derivative liability  Total interest expense related to the debentures 
September 30, 2017
               
Due 2040 $4,641   1,841   66   (97) $6,451 
Due 2041 $2,532   943   35   (13) $3,497 
Due 2042 $2,532   919   40   (13) $3,478 
Total $9,705  $3,703  $141  $(123) $13,426 
                     
October 1, 2016
                    
Due 2040 $4,641   1,702   66   (150) $6,259 
Due 2041 $2,532   869   35   (136) $3,300 
Due 2042 $2,532   854   40   (102) $3,324 
Total $9,705  $3,425  $141  $(388) $12,883 


Note 7 – Revenue Recognition
19
Sales returns and allowances accrual activity is shown below:


 Fiscal quarters ended 
  April 4, 2020  March 30, 2019 
Beginning balance $40,508  $42,663 
Sales allowances  22,632   28,211 
Credits issued  (27,982)  (33,062)
Foreign currency  (346)  (235)
Ending balance $34,812  $37,577 

See disaggregated revenue information in Note 11.
18

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 5 – Other Income (Expense)

In March 2017, the Company sold its 50% interest in an investment accounted for using the equity method, and recorded a loss of $7,060.  The recorded loss includes Vishay's proportionate share of the investee's accumulated other comprehensive loss of $1,110, recognized upon discontinuation of the equity investment.   The loss on disposal is not deductible for income tax purposes.  There are certain contingencies pending resolution related to the investee, which may require adjustment to the amount of the recognized loss.  The resolution of such additional contingencies is not expected to be material to the financial condition, results of operations, or cash flows of the Company.


20
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 68 – Accumulated Other Comprehensive Income (Loss)


The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each component are as follows:


 Pension and other post-retirement actuarial items  Currency translation adjustment  Unrealized gain (loss) on available-for-sale securities  Total  
Pension and
other post-
retirement
actuarial
items
  
Currency
translation
adjustment
  Total 
Balance at January 1, 2017 $(64,496) $(31,266)  1,110  $(94,652)
Balance at January 1, 2020 $(68,020) $41,374  $(26,646)
Other comprehensive income before reclassifications  -   98,965   1,542  $100,507   -   (23,129) $(23,129)
Tax effect  -   -   (540) $(540)  -   -  $- 
Other comprehensive income before reclassifications, net of tax  -   98,965   1,002  $99,967   -   (23,129) $(23,129)
Amounts reclassified out of AOCI  6,918   -   -  $6,918   2,223   -  $2,223 
Tax effect  (2,075)  -   -  $(2,075)  (622)  -  $(622)
Amounts reclassified out of AOCI, net of tax  4,843   -   -  $4,843   1,601   -  $1,601 
Net other comprehensive income $4,843  $98,965  $1,002  $104,810  $1,601  $(23,129) $(21,528)
Balance at September 30, 2017 $(59,653) $67,699  $2,112  $10,158 
Balance at April 4, 2020 $(66,419) $18,245  $(48,174)


Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost.  (SeeSee Note 79 for further information).information.

Other comprehensive income (loss) includes Vishay's proportionate share of other comprehensive income (loss) of nonconsolidated subsidiaries accounted for under the equity method.
19
21
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Note 79 – Pensions and Other Postretirement Benefits


The Company maintains various retirement benefit plans.  The service cost component of net periodic pension cost is classified in costs of products sold or selling, general, and administrative expenses on the consolidated condensed statements of operations based on the respective employee's function.  The other components of net periodic pension cost are classified as other expense on the consolidated condensed statements of operations.


Defined Benefit Pension Plans


The following table shows the components of the net periodic pension cost for the thirdfirst fiscal quarters of 20172020 and 20162019 for the Company'sCompany’s defined benefit pension plans:


 
Fiscal quarter ended
September 30, 2017
  
Fiscal quarter ended
October 1, 2016
  
Fiscal quarter ended
April 4, 2020
  
Fiscal quarter ended
March 30, 2019
 
 U.S. Plans  Non-U.S. Plans  U.S. Plans  Non-U.S. Plans  U.S. Plans  
Non-U.S.
Plans
  U.S. Plans  
Non-U.S.
Plans
 
                        
Net service cost $-  $948  $-  $790  $-  $1,074  $-  $852 
Interest cost  411   1,247   2,945   1,361   342   924   424   1,291 
Expected return on plan assets  -   (519)  (2,825)  (529)  -   (495)  -   (490)
Amortization of prior service cost  36   19   36   12   36   30   36   51 
Amortization of losses  82   1,595   1,650   1,196   298   1,592   118   1,359 
Curtailment and settlement losses  -   331   -   205   -   229   -   505 
Net periodic benefit cost $529  $3,621  $1,806  $3,035  $676  $3,354  $578  $3,568 


Other Postretirement Benefits

The following table shows the components of the net periodic pensionbenefit cost for the ninefirst fiscal months ended September 30, 2017quarters of 2020 and October 1, 20162019 for the Company's definedCompany’s other postretirement benefit pension plans:


  
Nine fiscal months ended
September 30, 2017
  
Nine fiscal months ended
October 1, 2016
 
  U.S. Plans  Non-U.S. Plans  U.S. Plans  Non-U.S. Plans 
             
Net service cost $-  $2,776  $-  $2,355 
Interest cost  1,232   3,613   8,834   4,097 
Expected return on plan assets  -   (1,543)  (8,476)  (1,605)
Amortization of prior service cost  108   55   108   37 
Amortization of losses  247   4,596   4,951   3,568 
Curtailment and settlement losses  -   983   -   601 
Net periodic benefit cost $1,587  $10,480  $5,417  $9,053 

 
Fiscal quarter ended
April 4, 2020
  
Fiscal quarter ended
March 30, 2019
 
  U.S. Plans  
Non-U.S.
Plans
  U.S. Plans  
Non-U.S.
Plans
 
             
Service cost $28  $69  $35  $72 
Interest cost  59   15   77   30 
Amortization of losses (gains)  7   31   (32)  27 
Net periodic benefit cost $94  $115  $80  $129 


Net periodic benefit cost in 2017 was significantly impacted by the termination and settlement of the Company's qualified U.S. pension plan in December 2016.  The settlement resulted in the immediate recognition of previously unrecognized actuarial items related to the plan in 2016 that were recorded in accumulated other comprehensive income and were being amortized into net periodic pension cost. A final reconciliation of participant data subject to the settlement annuity contract was completed during the second fiscal quarter of 2017.  The final annuity pricing adjustment and related items did not have a material impact on the Company's financial results.

The Company contributed $4,409 to the Company's Taiwanese pension plans to improve the funded status of those plans in 2017.
20
22
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Other Postretirement Benefits

The following table shows the components of the net periodic benefit cost for the third fiscal quarters of 2017 and 2016 for the Company's other postretirement benefit plans:

  
Fiscal quarter ended
September 30, 2017
  
Fiscal quarter ended
October 1, 2016
 
  U.S. Plans  Non-U.S. Plans  U.S. Plans  Non-U.S. Plans 
             
Service cost $33  $71  $31  $67 
Interest cost  77   26   85   36 
Amortization of prior service (credit)  (209)  -   (209)  - 
Amortization of losses (gains)  (24)  16   (8)  17 
Net periodic benefit cost $(123) $113  $(101) $120 

The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 30, 2017 and October 1, 2016 for the Company's other postretirement benefit plans:

  
Nine fiscal months ended
September 30, 2017
  
Nine fiscal months ended
October 1, 2016
 
  U.S. Plans  Non-U.S. Plans  U.S. Plans  Non-U.S. Plans 
             
Service cost $99  $202  $94  $202 
Interest cost  232   76   255   108 
Amortization of prior service (credit)  (627)  -   (627)  - 
Amortization of losses (gains)  (70)  45   (23)  51 
Net periodic benefit cost $(366) $323  $(301) $361 
23
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 810 – Stock-Based Compensation


The Company has various stockholder-approved programs which allow for the grant of stock-based compensation to officers, employees, and non-employee directors of the Company.


The amount of compensation cost related to stock-based payment transactions is measured based on the grant-date fair value of the equity instruments issued.  The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model.  The Company determines compensation cost for restricted stock units ("RSUs"(“RSUs”), and phantom stock units and restricted stock based on the grant-date fair value of the underlying common stock adjusted for expected dividends paid over the required vesting period for non-participating awards.  Compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award.


The following table summarizes stock-based compensation expense recognized:


 Fiscal quarters ended  Nine fiscal months ended  Fiscal quarters ended 
 September 30, 2017  October 1, 2016  September 30, 2017  October 1, 2016  April 4, 2020  March 30, 2019 
                  
Restricted stock units $676  $1,085  $3,556   3,254  $2,783  $3,359 
Phantom stock units  -   -   163   117   215   177 
Stock options  -   -   -   - 
Total $676  $1,085  $3,719   3,371  $2,998  $3,536 


The Company recognizes compensation cost for RSUs that are expected to vest and records cumulative adjustments in the period that the expectation changes.


The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at September 30, 2017 April 4, 2020 (amortization periods in years):


 Unrecognized Compensation Cost  Weighted Average Remaining Amortization Periods  
Unrecognized
Compensation
Cost
  
Weighted
Average
Remaining
Amortization
Periods
 
            
Restricted stock units $3,575   1.2  $5,041   1.0 
Phantom stock units  -   0.0   -   0.0 
Stock options  -   0.0 
Total $3,575      $5,041     


The Company currently expects all performance-based RSUs to vest and all of the associated unrecognized compensation cost for performance-based RSUs presented in the table above to be recognized.

24
21

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


2007 Stock Incentive Plan


The Company'sCompany’s 2007 Stock Incentive Program (the "2007 Program"“2007 Program”), as amended and restated, permits the grant of up to 6,500,000 shares of restricted stock, unrestricted stock, RSUs, stock options, and phantom stock units, to officers, employees, and non-employee directors of the Company.  Such instruments are available for grant until May 20, 2024.


Restricted Stock Units


RSU activity under the 2007 Program as of September 30, 2017April 4, 2020 and changes during the ninethree fiscal months then ended are presented below (number of RSUs in thousands):


 Number of RSUs  Weighted Average Grant-date Fair Value per Unit  
Number of
RSUs
  
Weighted
Average
Grant-date
Fair Value per
Unit
 
Outstanding:            
January 1, 2017  1,004  $12.74 
January 1, 2020  842  $17.93 
Granted  304   15.52   272   18.30 
Vested*  (322)  13.54   (293)  15.52 
Cancelled or forfeited  -   -   -   - 
Outstanding at September 30, 2017  986  $13.34 
Outstanding at April 4, 2020  821  $18.91 
                
Expected to vest at September 30, 2017  986     
Expected to vest at April 4, 2020  808     


* The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy the statutory tax withholding requirements.


The number of performance-based RSUs that are scheduled to vest increases ratably based on the achievement of defined performance criteria between the established target and maximum levels.  RSUs with performance-based vesting criteria are expected to vest as follows (number of RSUs in thousands):


Vesting Date Expected to Vest  Not Expected to Vest  Total 
January 1, 2018  202   -   202 
January 1, 2019  213   -   213 
January 1, 2020  167   -   167 
Vesting Date 
Expected
to Vest
 
Not Expected
to Vest
 Total
January 1, 2021  141  -  141
January 1, 2022  174  -  174
January 1, 2023  152  -  152


Phantom Stock Units


The 2007 Program authorizes the grant of phantom stock units to the extent provided for in the Company'sCompany’s employment agreements with certain executives.  Each phantom stock unit entitles the recipient to receive a share of common stock at the individual'sindividual’s termination of employment or any other future date specified in the applicable employment agreement.  Phantom stock units participate in dividend distribution on the same basis as the Company's common stock and Class B common stock.  Dividend equivalents are issued in the form of additional units of phantom stock.  The phantom stock units are fully vested at all times.


Phantom stock unit activity under the phantom stock plan as of September 30, 2017April 4, 2020 and changes during the ninethree fiscal months then ended are presented below (number of phantom stock units in thousands):


 Number of units  Grant-date Fair Value per Unit  
Number of
units
  
Grant-date
Fair Value per
Unit
 
Outstanding:            
January 1, 2017  145    
January 1, 2020  183    
Granted  10  $16.25   10  $21.49 
Dividend equivalents issued  2       1     
Outstanding at September 30, 2017  157     
Outstanding at April 4, 2020  194     

22
25
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Stock Options

In addition to stock options outstanding pursuant to the 2007 Program, during the periods presented, the Company had stock options outstanding under previous stockholder-approved stock option programs.  These programs are more fully described in Note 12 to the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016.  No additional options may be granted pursuant to these programs.

At December 31, 2016, there were approximately 77,000 options outstanding with a weighted average exercise price of $16.29.  During the nine fiscal months ended September 30, 2017, the remaining approximately 77,000 options were exercised.  The total intrinsic value of options exercised during the nine fiscal months ended September 30, 2017 was $20.
26
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 911 – Segment Information


Vishay is a global manufacturer and supplier of electronic components.  Vishay operates, and its chief operating decision maker makes strategic and operating decisions with regards to assessing performance and allocating resources based on, five6 reporting segments: MOSFETs, Diodes, Optoelectronic Components, Resistors, & Inductors, and Capacitors.  These segments represent groupings of product lines based on their functionality:


● Metal oxide semiconductor field-effect transistors ("MOSFETs") function as solid-state switches to control power.
● Diodes route, regulate, and block radio frequency, analog, and power signals; protect systems from surges or electrostatic discharge damage; or provide electromagnetic interference filtering.
● Optoelectronic components emit light, detect light, or do both.
● Resistors and inductors both impede electric current.  Resistors are basic components used in all forms of electronic circuitry to adjust and regulate levels of voltage and current.
●Inductors use an internal magnetic field to change alternating current phase and resist alternating current.
● Capacitors store energy and discharge it when needed.


The current six segment alignment reflects a change in reporting structure made during the fourth fiscal quarter of 2019.  The fiscal period ended March 30, 2019 has been recast to separately present Resistors and Inductors.

Vishay's reporting segments generate substantially all of their revenue from product sales to the industrial, automotive, telecommunications, computing, consumer products, power supplies, military and aerospace, and medical end markets.  A small portion of revenues is from royalties.


The Company evaluates business segment performance on operating income, exclusive of certain items ("(“segment operating income"income”).  Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income.  The Company'sCompany’s calculation of segment operating income excludes such selling, general, and administrative costs as global operations, sales and marketing, information systems, finance and administration groups, as well as restructuring and severance costs, the impact of the COVID-19 outbreak, goodwill and long-lived asset impairment charges, and other items.  Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the Company.  These items represent reconciling items between segment operating income and consolidated operating income.  Business segment assets are the owned or allocated assets used by each business.


The Company also regularly evaluates gross profit by segment to assist in the analysis of consolidated gross profit.  The Company considers segment operating income to be the more important metric because it more fully captures the business operations of the segments.

27
23

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


The following tables set forth business segment information:


  MOSFETs  Diodes  Optoelectronic Components  Resistors & Inductors  Capacitors  Total 
Fiscal quarter ended September 30, 2017:
                  
Product Sales $126,522  $160,711  $76,740  $217,593  $96,309  $677,875 
Royalty Revenues  -   -   -   8   -  $8 
Total Revenue $126,522  $160,711  $76,740  $217,601  $96,309  $677,883 
                         
Gross Profit $32,307  $42,942  $28,901  $65,541  $19,582  $189,273 
                         
Segment Operating Income $23,391  $37,991  $25,012  $58,267  $14,688  $159,349 
                         
Fiscal quarter ended October 1, 2016:
                        
Product Sales $101,687  $141,127  $72,801  $191,989  $84,299  $591,903 
Royalty Revenues  -   -   -   52   -  $52 
Total Revenue $101,687  $141,127  $72,801  $192,041  $84,299  $591,955 
                         
Gross Profit $16,443  $36,444  $24,250  $58,768  $17,996  $153,901 
                         
Segment Operating Income $7,493  $31,832  $20,340  $51,861  $13,210  $124,736 

 MOSFETs  Diodes  
Optoelectronic
Components
  Resistors  Inductors  Capacitors  Corporate / Other*  Total 
Fiscal quarter ended April 4, 2020:
                      
Net revenues $116,893  $115,343  $54,179  $159,208  $73,785  $93,433  $-  $612,841 
                                 
Gross profit $28,152  $19,518  $14,585  $44,773  $22,987  $20,355  $(3,130) $147,240 
                                 
Segment operating income $18,658  $14,422  $10,686  $38,885  $20,310  $15,070  $(3,130) $114,901 
                                 
Fiscal quarter ended March 30, 2019:
                             
Net revenues $137,341  $167,840  $60,562  $188,831  $71,640  $118,945  $-  $745,159 
                                 
Gross profit $36,059  $43,492  $16,017  $62,589  $23,280  $29,722  $-  $211,159 
                                 
Segment operating income $26,678  $38,128  $11,710  $56,347  $20,640  $24,566  $-  $178,069 
Nine fiscal months ended September 30, 2017:
                
Product Sales $346,086  $461,323  $216,260  $627,116  $278,198  $1,928,983 
Royalty Revenues  -   -   -   50   -  $50 
Total Revenue $346,086  $461,323  $216,260  $627,166  $278,198  $1,929,033 
                         
Gross Profit $78,298  $121,601  $76,668  $188,801  $57,743  $523,111 
                         
Segment Operating Income $51,789  $106,906  $63,401  $166,852  $42,988  $431,936 
                         
Nine fiscal months ended October 1, 2016: 
                    
Product Sales $304,839  $418,629  $203,635  $568,122  $257,175  $1,752,400 
Royalty Revenues  -   -   -   212   -  $212 
Total Revenue $304,839  $418,629  $203,635  $568,334  $257,175  $1,752,612 
                         
Gross Profit $40,914  $106,364  $65,049  $171,808  $53,203  $437,338 
                         
Segment Operating Income $12,671  $90,025  $49,838  $147,315  $37,145  $336,994 



*Amounts reported in Corporate/Other above represent unallocated costs directly related to the COVID-19 outbreak, which are reported as costs of products sold on the consolidated condensed statement of operations.
  Fiscal quarters ended  Nine fiscal months ended 
  September 30, 2017  October 1, 2016  September 30, 2017  October 1, 2016 
Reconciliation:            
Segment Operating Income $159,349  $124,736  $431,936  $336,994 
Restructuring and Severance Costs  (3,244)  (1,197)  (5,194)  (12,139)
Impairment of Intangible Assets  -   (1,559)  -   (1,559)
Unallocated Selling, General, and Administrative Expenses  (63,777)  (64,751)  (187,690)  (176,111)
Consolidated Operating Income $92,328  $57,229  $239,052  $147,185 
Unallocated Other Income (Expense)  (6,140)  (6,545)  (26,713)  (11,649)
Consolidated Income (Loss) Before Taxes $86,188  $50,684  $212,339  $135,536 



 Fiscal quarters ended 
  April 4, 2020  March 30, 2019 
Reconciliation:      
Segment Operating Income $114,901  $178,069 
Impact of COVID-19 Outbreak on Selling, General, and Administrative Expenses  (317)  - 
Unallocated Selling, General, and Administrative Expenses  (67,176)  (70,334)
Consolidated Operating Income $47,408  $107,735 
Unallocated Other Income (Expense)  (11,274)  (7,787)
Consolidated Income Before Taxes $36,134  $99,948 
24
28
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


The Company has a broad line of products that it sells to OEMs, EMS companies, and independent distributors.  The distribution of sales by customer type is shown below:


 Fiscal quarters ended 
  April 4, 2020  March 30, 2019 
Distributors $305,446  $411,560 
OEMs  261,129   282,636 
EMS companies  46,266   50,963 
Total Revenue $612,841  $745,159 

Net revenues were attributable to customers in the following regions:


 Fiscal quarters ended 
  April 4, 2020  March 30, 2019 
Asia $217,084  $259,726 
Europe  233,052   278,899 
Americas  162,705   206,534 
Total Revenue $612,841  $745,159 

The Company generates substantially all of its revenue from product sales to end customers in the industrial, automotive, telecommunications, computing, consumer products, power supplies, military and aerospace, and medical end markets.  Sales by end market are presented below:


 Fiscal quarters ended 
  April 4, 2020  March 30, 2019 
Industrial $215,111  $281,590 
Automotive  201,943   214,786 
Telecommunications  29,692   53,280 
Computing  45,223   47,508 
Consumer Products  20,553   34,049 
Power Supplies  25,194   30,127 
Military and Aerospace  43,935   47,561 
Medical  31,190   36,258 
Total revenue $612,841  $745,159 
25

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 1012 – Earnings Per Share


The following table sets forth the computation of basic and diluted earnings (loss) per share attributable to Vishay stockholders (shares in thousands):


 Fiscal quarters ended  Nine fiscal months ended  Fiscal quarters ended 
 September 30, 2017  October 1, 2016  September 30, 2017  October 1, 2016  April 4, 2020  March 30, 2019 
                  
Numerator:                  
Numerator for basic earnings per share:            
Net earnings attributable to Vishay stockholders $64,404  $36,440  $157,313  $97,540  $27,219  $75,459 
                
Interest savings assuming conversion of dilutive exchangeable notes, net of tax  -   -   -   38 
                
Numerator for diluted earnings per share:                
Net earnings attributable to Vishay stockholders - diluted $64,404  $36,440  $157,313  $97,578 
                        
Denominator:                        
Denominator for basic earnings per share:                        
Weighted average shares  145,572   146,781   145,973   147,327   144,599   144,375 
Outstanding phantom stock units  156   143   155   143   193   179 
Adjusted weighted average shares  145,728   146,924   146,128   147,470 
Adjusted weighted average shares - basic  144,792   144,554 
                        
Effect of dilutive securities:                        
Convertible and exchangeable debt instruments  10,480   2,541   9,160   2,387 
Convertible debt instruments  95   237 
Restricted stock units  493   423   338   266   408   498 
Other  -   6   -   2 
Dilutive potential common shares  10,973   2,970   9,498   2,655   503   735 
                        
Denominator for diluted earnings per share:                        
Adjusted weighted average shares - diluted  156,701   149,894   155,626   150,125   145,295   145,289 
                        
Basic earnings per share attributable to Vishay stockholders $0.44  $0.25  $1.08  $0.66  $0.19  $0.52 
                        
Diluted earnings per share attributable to Vishay stockholders $0.41  $0.24  $1.01  $0.65  $0.19  $0.52 
26
29
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Diluted earnings (loss) per share for the periods presented do not reflect the following weighted average potential common shares that would have an antidilutive effect or have unsatisfied performance conditions (in thousands):


  Fiscal quarters ended  Nine fiscal months ended 
  September 30, 2017  October 1, 2016  September 30, 2017  October 1, 2016 
Convertible notes:            
Convertible Senior Debentures, due 2040  -   -   -   13,750 
Convertible Senior Debentures, due 2041  8,401   8,268   8,371   8,229 
Weighted average employee stock options  -   77   -   96 
Weighted average other  379   415   514   545 


 Fiscal quarters ended 
  April 4, 2020  March 30, 2019 
Convertible debt instruments:      
Convertible senior notes due 2025  19,088   19,052 
Convertible senior debentures due 2041  88   - 
Weighted average other  325   315 
In periods in which they are dilutive, if the potential common shares related to the exchangeable notes are included in the computation, the related interest savings, net of tax, assuming conversion/exchange is added to the net earnings used to compute earnings per share.

The Company'sCompany’s convertible debt instruments are only convertible for specified periods upon the occurrence of certain events.  The Company's convertible debentures due 2042 became convertible subsequent to the December 31, 2016 evaluation of the conversion criteria, remained convertible subsequent to the April 1, 2017 and July 1, 2017 evaluations, and remain convertible subsequent to the September 30, 2017 evaluation.   The convertible debentures due 2040 became convertible subsequent to the September 30, 2017 evaluation of the conversion criteria.  debt instruments are not currently convertible.  In periods that the debenturesconvertible debt instruments are not convertible, the certain conditions which could trigger conversion of the remaining debenturesdebt instruments have been deemed to be non-substantive, and accordingly, the Company assumes the conversion of these instruments in its diluted earnings per share computation during periods in which they are dilutive.


At the direction of its Board of Directors, the Company intends, upon conversion, to repay the principal amounts of any of the convertible senior debentures, due 2040, due 2041, and due 2042,debt instruments in cash and settle any additional amounts in shares of Vishay common stock. Accordingly, the debenturesconvertible instruments are included in the diluted earnings per share computation using the "treasury“treasury stock method"method” (similar to options and warrants) rather than the "if“if converted method"method” otherwise required for convertible debt.  Under the "treasury“treasury stock method,"” Vishay calculates the number of shares issuable under the terms of the debentures based on the average market price of Vishay common stock during the period, and that number is included in the total diluted shares figure for the period.  If the average market price is less than $12.99,$12.43, no shares are included in the diluted earnings per share computation for the convertible senior debentures due 2040, if the average market price is less than $17.80,$17.03, no shares are included in the diluted earnings per share computation for the convertible senior debentures due 2041, and if the average market price is less than $11.05,$31.42, no shares are included in the diluted earnings per share computation for the convertible senior debenturesnotes due 2042.2025.

27
30
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Note 1113 – Fair Value Measurements


The fair value measurement accounting guidance establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:


Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.


Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.


Level 3: Unobservable inputs that reflect the Company'sCompany’s own assumptions.


An asset or liability'sliability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. There have been no changes in the classification of any financial instruments within the fair value hierarchy in the periods presented.


The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis:


  
Total
Fair Value
  Level 1  Level 2  Level 3 
September 30, 2017
            
Assets:            
Assets held in rabbi trusts $44,262  $28,240  $16,022  $- 
Available for sale securities $4,511   4,511   -   - 
  $48,773  $32,751  $16,022  $- 
Liabilities:                
Embedded derivative - convertible debentures due 2040 $(296) $-  $-  $(296)
Embedded derivative - convertible debentures due 2041 $(272)  -   -   (272)
Embedded derivative - convertible debentures due 2042 $(163)  -   -   (163)
  $(731) $-  $-  $(731)
December 31, 2016
                
Assets:                
Assets held in rabbi trusts $41,917  $27,297   14,620  $- 
Available for sale securities $3,969   3,969   -   - 
  $45,886  $31,266  $14,620  $- 
Liabilities:                
Embedded derivative - convertible debentures due 2040 $(393) $-  $-  $(393)
Embedded derivative - convertible debentures due 2041 $(285)  -   -   (285)
Embedded derivative - convertible debentures due 2042 $(176)  -   -   (176)
  $(854) $-  $-  $(854)

 
Total
Fair Value
  Level 1  Level 2  Level 3 
April 4, 2020            
Assets:            
Assets held in rabbi trusts $48,137  $33,687  $14,450  $- 
Available for sale securities $4,073   4,073   -   - 
  $52,210  $37,760  $14,450  $- 
December 31, 2019                
Assets:                
Assets held in rabbi trusts $52,148  $34,280   17,868  $- 
Available for sale securities $4,405   4,405   -   - 
  $56,553  $38,685  $17,868  $- 


As described in Note 6, the Company allocated the aggregate repurchase payment of convertible senior debentures between the associated liability and equity components of the repurchased convertible senior debentures based on a nonrecurring fair value measurement of the convertible senior debentures due 2041 immediately prior to the repurchase.  The nonrecurring fair value measurement is considered a Level 3 measurement.  See Note 6 for further information on the measurement and input.

The Company maintains non-qualified trusts, referred to as "rabbi"“rabbi” trusts, to fund payments under deferred compensation and non-qualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale and company-owned life insurance assets.  The marketable securities held in the rabbi trusts are valued using quoted market prices on the last business day of the period. The company-owned life insurance assets are valued in consultation with the Company'sCompany’s insurance brokers using the value of underlying assets of the insurance contracts.  The fair value measurement of the marketable securities held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy.
28
31
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


The Company holds available for sale investments in debtequity securities that are intended to fund a portion of its pension and other postretirement benefit obligations outside of the United States.  The investments are valued based on quoted market prices on the last business day of the year.period.  The fair value measurement of the investments is considered a Level 1 measurement within the fair value hierarchy.

The convertible senior debentures, due 2040, due 2041, and due 2042, issued by the Company on November 9, 2010, May 13, 2011, and May 31, 2012, respectively, contain embedded derivative features that GAAP requires to be bifurcated and remeasured each reporting period.  Each quarter, the change in the fair value of the embedded derivative features, if any, is recorded in the consolidated condensed statements of operations.  The Company uses a derivative valuation model to derive the value of the embedded derivative features.  Key inputs into this valuation model are the Company's current stock price, risk-free interest rates, the stock dividend yield, the stock volatility, and the debentures' credit spread over LIBOR. The first three aforementioned inputs are based on observable market data and are considered Level 2 inputs while the last two aforementioned inputs are unobservable and thus require management's judgment and are considered Level 3 inputs.  The fair value measurement is considered a Level 3 measurement within the fair value hierarchy.

The Company enters into forward contracts with highly-rated financial institutions to mitigate the foreign currency risk associated with intercompany loans denominated in a currency other than the legal entity's functional currency.  The notional amount of the forward contracts was $300,000 and $100,000 as of September 30, 2017 and December 31, 2016, respectively.  The forward contracts are short-term in nature and are expected to be renewed at the Company's discretion until the intercompany loans are repaid.  We have not designated the forward contracts as hedges for accounting purposes, and as such the change in the fair value of the contracts is recognized in the consolidated condensed statements of operations as a component of other income (expense).  The Company estimates the fair value of the forward contracts based on applicable and commonly used pricing models using current market information and is considered a Level 2 measurement within the fair value hierarchy.  The value of the forward contracts was immaterial as of September 30, 2017.  The Company does not utilize derivatives or other financial instruments for trading or other speculative purposes.


The fair value of the long-term debt, excluding the derivative liabilities and deferred financing costs, at September 30, 2017April 4, 2020 and December 31, 20162019 is approximately $963,100$574,800 and $860,600,$632,200, respectively, compared to its carrying value, excluding the derivative liabilities and deferred financing costs, of $365,752$567,922 and $367,049,$515,931, respectively.  The Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates, which are considered Level 2 inputs.


At September 30, 2017April 4, 2020 and December 31, 2016,2019, the Company'sCompany’s short-term investments were comprised of time deposits with financial institutions that have maturities that exceed 90 days from the date of acquisition; however they all mature within one year from the respective balance sheet dates.  The Company's short-term investments are accounted for as held-to-maturity debt instruments, at amortized cost, which approximates their fair value.  The investments are funded with excess cash not expected to be needed for operations prior to maturity; therefore, the Company believes it has the intent and ability to hold the short-term investments until maturity.  At each reporting date, the Company performs an evaluation to determine if any unrealized losses are other-than-temporary.  No other-than-temporary impairments have been recognized on these securities, and there are no0 unrecognized holding gains or losses for these securities during the periods presented.  There have been no transfers to or from the held-to-maturity classification.  All decreases in the account balance are due to returns of principal at the securities'securities’ maturity dates.  Interest on the securities is recognized as interest income when earned.


At September 30, 2017April 4, 2020 and December 31, 2016,2019, the Company'sCompany’s cash and cash equivalents were comprised of demand deposits, time deposits with maturities of three months or less when purchased, and money market funds.  The Company estimates the fair value of its cash, cash equivalents, and short-term investments using level 2 inputs.  Based on the current interest rates for similar investments with comparable credit risk and time to maturity, the fair value of the Company's cash, cash equivalents, and held-to-maturity short-term investments approximate the carrying amounts reported in the consolidated condensed balance sheets.


The Company'sCompany’s financial instruments also include accounts receivable, short-term notes payable, and accounts payable.  The carrying amounts for these financial instruments reported in the consolidated condensed balance sheets approximate their fair values.

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Item 2.
Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations


This Management's Discussion and Analysis ("MD&A") is intended to provide an understanding of Vishay's financial condition, results of operations and cash flows by focusing on changes in certain key measures from period to period. The MD&A should be read in conjunction with our Consolidated Condensed Financial Statements and accompanying Notes included in Item 1.  This discussion contains forward-looking statements that involve risks and uncertainties.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed in our Annual Report on Form 10-K, particularly in Item 1A. "Risk Factors," filed with the Securities and Exchange Commission on February 14, 2020.

Overview


Vishay Intertechnology, Inc. ("(“Vishay," "we," "us,"” “we,” “us,” or "our"“our”) is a global manufacturer and supplier of discrete semiconductors and passive components, including power MOSFETs, power integrated circuits, transistors, diodes, optoelectronic components, resistors, capacitors, and inductors. Discrete semiconductors and passive components manufactured by Vishay are used in virtually all types of electronic products, including those in the industrial, computing, automotive, consumer electronic products, telecommunications, power supplies, military/aerospace, and medical industries.


We operate in fivesix product segments: MOSFETs; Diodes;MOSFETs, Diodes, Optoelectronic Components;Components, Resistors, & Inductors;Inductors, and Capacitors.  The current six segment alignment reflects a change in reporting structure made during the fourth fiscal quarter of 2019.  The fiscal quarter ended March 30, 2019 results presented herein have been recast to separately present Resistors and Inductors.


We are focused on enhancing stockholder value by growing our business and improving earnings per share.  Since 1985, we have pursued a business strategy of growth through focused research and development and acquisitions.  Through this strategy, we have grown to become one of the world's largest manufacturers of discrete semiconductors and passive components.  We expectplan to continue to grow our strategy ofbusiness through intensified internal growth supplemented by opportunistic acquisitions, while alsoat the same time maintaining a prudent capital structure.

We To foster intensified internal growth, we have increased our worldwide R&D and engineering technical staff; we are focusedexpanding critical manufacturing capacities; we are increasing our technical field sales force in Asia to increase our market access to the industrial segment and increase the design-in of our products in local markets; and we are directing increased funding and focus on enhancing stockholder valuedeveloping products to capitalize on the connectivity, mobility, and improving earnings per share.sustainability growth drivers of our business.  In addition to our growth plan, we also have opportunistically repurchased our stock. stock and, as further described below, reduced dilution risks by repurchasing a portion of our convertible senior debentures.

In 2014, our Board of Directors instituted a quarterly dividend payment program and declared the first cash dividend in the history of Vishay.  In December 2015, we amended our credit facilityWe have paid dividends each quarter since the first fiscal quarter of 2014, and further increased the quarterly cash dividend to increase our ability$0.095 per share in the second fiscal quarter of 2019.

We continued to repurchase shares of stock or pay cash dividends.  On August 2, 2017, our Board of Directors approved a stock repurchase plan, authorizing us to repurchase,convertible senior debentures in open market and privately-negotiated transactions with holders in the aggregate, up to $150 millionfirst fiscal quarter of our outstanding common stock.  The stock repurchase plan will expire on June 1, 2018.  The stock repurchase plan does not obligate us to acquire any particular2020, further reducing the principal amount of common stock, and it may be terminated or suspended at any time at the Company's direction in accordance with the plan.  The Company repurchased 2,127,183 shares of stock for $37.6 million since the inception of this plan.  Additionally, we repurchased 1,752,454 shares of stock for $23.2 million pursuantoutstanding convertible senior debentures to our stock repurchase plan that began in May 2016 and expired on May 2, 2017.$2.9 million.

As part of the amendment and restatement of the revolving credit facility in December 2015, we completed an evaluation of our anticipated domestic cash needs over the next several years and our most efficient use of liquidity, with consideration of the amount of cash that can be repatriated to the U.S. efficiently with lesser withholding taxes in foreign jurisdictions.  As a result of that evaluation, during the fourth quarter of 2015, we recognized income tax expense of $164.0 million, including U.S. federal and state income taxes, incremental foreign income taxes, and withholding taxes payable to foreign jurisdictions, on $300 million of foreign earnings which we expect to repatriate to the U.S. over the next several years. We repatriated $38 million and $46 million to the U.S. pursuant to this plan in 2017 and 2016, respectively.
Our business and operating results have been and will continue to be impacted by worldwide economic conditions.  Our revenues are dependent on end markets that are impacted by consumer and industrial demand, and our operating results can be adversely affected by reduced demand in those global markets.  For several years, we implemented aggressive cost reduction programs.  We continue to monitorThe worldwide economy and, specifically, our business have been impacted by the current economic environment and its potential effects onoutbreak of the coronavirus ("COVID-19").  The outbreak has significantly impacted the global market, including our customers, suppliers, and shipping partners, which has impacted our net revenues.  We have also incurred incremental costs separable from normal operations that are directly attributable to the end markets that we serve.  Additionally,outbreak and containment efforts, primarily salaries and wages for employees impacted by quarantines and additional safety measures, including masks and temperature scanners, which were partially offset by government subsidies.  The net impact of the costs and subsidies are classified as cost of products sold ($3.1 million) and selling, general, and administrative expenses ($0.3 million) based on employee function on the consolidated condensed statement of operations.  We exclude from the amounts reported above indirect financial changes from the outbreak of COVID 19 such as higher shipping costs due to reduced shipping capacity and any missing revenues during the outbreak.

We believe the economic impact of the COVID 19 outbreak on Vishay will be temporary.  We have significant liquidity to withstand the temporary disruptions in the economic environment. However, we continue to closely monitor our fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and resources to meet our future needs.  We will react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess inventory build.  In the firstthird fiscal quarter of 2016,2019, we substantially completed the implementation of targetedannounced global cost reduction and management rejuvenation programs that began in the fourth fiscal quarter of 2013.  The cost reduction programs initiated in 2015 continue as planned.  As a result of a review of the financial results and outlook for our MOSFETs segment following the completion of production transfers, we determined to implement further cost reductions for the MOSFETs segment.  In November 2016, we announced an extension of the MOSFETs Enhanced Competitiveness Program.  Our cost reduction programs are more fully described in Note 2 to the consolidated condensed financial statements included in Item 1, and in "Cost Management" below.  See additional information regarding our competitive strengths and key challenges as disclosed in Part 1part of our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securitiescontinuous efforts to improve efficiency and Exchange Commission (the "SEC") on February 17, 2017.operating performance.


We utilize several financial metrics, including net revenues, gross profit margin, segment operating income, end-of-period backlog, book-to-bill ratio, inventory turnover, change in average selling prices, net cash and short-term investments (debt), and free cash generation to evaluate the performance and assess the future direction of our business.  (SeeSee further discussion in "Financial Metrics"“Financial Metrics” and "Financial“Financial Condition, Liquidity, and Capital Resources.")Resources” below.  The outbreak of COVID-19 has impacted almost all key financial metrics.  We experienced a continued high level of demandsubstantial recovery in virtually all end-marketsorders, particularly from distributors, in the thirdfirst fiscal quarter of 2017.  Net revenues increased versus2020, some of which may have been due to customers preparing for potential disruptions in the prior fiscal quarter and prior year periods.  The continued strong order levels resulted in ansupply chain caused by the COVID-19 outbreak.  This increase in severalorders has positively impacted almost all key financial metrics compared to the prior fiscal quarter and prior year periods.metrics.


Net revenues for the fiscal quarter ended September 30, 2017April 4, 2020 were $677.9$612.8 million, compared to $644.9$609.6 million and $592.0$745.2 million for the fiscal quarters ended July 1, 2017December 31, 2019 and October 1, 2016,March 30, 2019, respectively.  The net earnings attributable to Vishay stockholders for the fiscal quarter ended September 30, 2017April 4, 2020 were $64.4$27.2 million, or $0.41$0.19 per diluted share, compared to $56.2$14.0 million, or $0.36 per share for the fiscal quarter ended July 1, 2017 and  $36.4 million, or $0.24$0.10 per diluted share for the fiscal quarter ended October 1, 2016.
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Net revenues for the nine fiscal months ended September 30, 2017 were $1,929.0 million, compared to $1,752.6 million for the nine fiscal months ended October 1, 2016.  The net earnings attributable to Vishay stockholders for the nine fiscal months ended September 30, 2017 were $157.3December 31, 2019, and $75.5 million, or $1.01 per diluted share, compared to $97.5 million, or $0.65$0.52 per diluted share for the nine fiscal monthsquarter ended October 1, 2016.March 30, 2019.

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We define adjusted net earnings as net earnings determined in accordance with GAAP adjusted for various items that management believes are not indicative of the intrinsic operating performance of our business.  We define free cash as the cash flows generated from continuing operations less capital expenditures plus net proceeds from the sale of property and equipment.  The reconciliations below include certain financial measures which are not recognized in accordance with GAAP, including adjusted net earnings, adjusted earnings per share, and free cash.  These non-GAAP measures should not be viewed as alternatives to GAAP measures of performance or liquidity.  Non-GAAP measures such as adjusted net earnings, adjusted earnings per share, and free cash do not have uniform definitions.  These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies. Management believes that adjusted net earnings and adjusted earnings per share are meaningful because they provide insight with respect to our intrinsic operating results.  Management believes that free cash is a meaningful measure of our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends.


Net earnings attributable to Vishay stockholders for the fiscal quarters ended April 4, 2020, December 31, 2019, and March 30, 2019 include items affecting comparability.  The items affecting comparability are (in thousands, except per share amounts):


 Fiscal quarters ended  Nine fiscal months ended  Fiscal quarters ended 
 September 30, 2017  July 1, 2017  October 1, 2016  September 30, 2017  October 1, 2016  April 4, 2020  December 31, 2019  March 30, 2019 
                        
GAAP net earnings attributable to Vishay stockholders $64,404  $56,190  $36,440  $157,313  $97,540  $27,219  $13,962  $75,459 
                                
Reconciling items affecting operating income:
                    
Reconciling items affecting gross income:            
Impact of COVID-19 outbreak $3,130  $-  $- 
            
Other reconciling items affecting operating income:            
Restructuring and severance costs $3,244  $481  $1,197  $5,194  $12,139  $-  $16,884  $- 
Impairment of intangible assets  -   -   1,559   -   1,559 
Impact of COVID-19 outbreak  317   -   - 
                                
Reconciling items affecting other income (expense):
                                
Loss on disposal of equity affiliate $-  $-  $-  $7,060  $- 
Gain on early extinguishment of debt  -   -   -   -   (4,597)
Loss on early extinguishment of debt $2,920  $723  $1,307 
                                
Reconciling items affecting tax expense:
                                
Effects of cash repatriation program $(892) $(1,240) $(1,402) $(3,100) $(3,388)
Change in deferred taxes due to early extinguishment of debt $(1,346) $(289) $(1,312)
Effects of cash repatriation programs  -   (11,554)  (585)
Effects of changes in uncertain tax positions  (804)  -   -   (804)  -   -   2,831   - 
Tax effects of pre-tax items above  (674)  (156)  (441)  (1,271)  (2,436)  (1,482)  (4,277)  (290)
                                
Adjusted net earnings $65,278  $55,275  $37,353  $164,392  $100,817  $30,758  $18,280  $74,579 
                                
Adjusted weighted average diluted shares outstanding  156,701   155,300   149,894   155,626   150,125   145,295   145,202   145,289 
                                
Adjusted earnings per diluted share * $0.42  $0.36  $0.25  $1.06  $0.67 
Adjusted earnings per diluted share $0.21  $0.13  $0.51 

* Includes add-back of interest on exchangeable notes in periods where the notes are dilutive.


Although the term "free cash" is not defined in GAAP, each of the elements used to calculate free cash for the year-to-date period is presented as a line item on the face of our consolidated condensed statement of cash flows prepared in accordance with GAAP and the quarterly amounts are derived from the year-to-date GAAP statements as of the beginning and end of the respective quarter.


 Fiscal quarters ended  Nine fiscal months ended  Fiscal quarters ended 
 September 30, 2017  July 1, 2017  October 1, 2016  September 30, 2017  October 1, 2016**  April 4, 2020  December 31, 2019  March 30, 2019 
Net cash provided by continuing operating activities $117,579  $84,592  $117,657  $245,845  $213,070  $34,478  $84,423  $79,518 
Proceeds from sale of property and equipment  196   345   1,048   1,484   1,241   53   91   395 
Less: Capital expenditures  (35,723)  (32,399)  (30,273)  (84,790)  (81,346)  (24,328)  (56,374)  (36,367)
Free cash $82,052  $52,538  $88,432  $162,539   132,965  $10,203  $28,140  $43,546 


**Results have been recast due toOur results for the adoptionfiscal quarter ended April 4, 2020 represent the beginning of ASU 2016-09.  See Note 1 toan expected recovery, which was negatively impacted by the consolidated condensed financial statements included in Item 1.

COVID-19 outbreak.  Our results for the fiscal quarters ended SeptemberDecember 31, 2019 and March 30, 2017, July 1, 2017, and October 1, 2016 and nine fiscal months ending September 30, 2017 and October 1, 20162019 represent the effects of a strong business environment and order activity, our cost reduction programs, and our organic growth initiatives. We experienced a relatively sharp upturn inthe normalization of demand that we began to experience in the first half of 2017 that continued in the thirdfourth fiscal quarter of 20172018 and further improved results.accelerated through 2019 as supply, in general, caught up with demand, and customers, particularly distributors, significantly reduced their orders as they decreased their inventory.  Our percentage of euro-based sales approximates our percentage of euro-based expenses so the foreign currency impact on revenues was substantially offset by the impact on expenses.  Our pre-tax results were consistent with expectations based on our business model.
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31




Financial Metrics


We utilize several financial metrics to evaluate the performance and assess the future direction of our business.  These key financial measures and metrics include net revenues, gross profit margin, operating margin, segment operating income, end-of-period backlog, and the book-to-bill ratio.  We also monitor changes in inventory turnover and our or publicly available average selling prices ("ASP"(“ASP”).


Gross profit margin is computed as gross profit as a percentage of net revenues.  Gross profit is generally net revenues less costs of products sold, but also deducts certain other period costs, particularly losses on purchase commitments and inventory write-downs.  Losses on purchase commitments and inventory write-downs have the impact of reducing gross profit margin in the period of the charge, but result in improved gross profit margins in subsequent periods by reducing costs of products sold as inventory is used.  Gross profit margin is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed costs.


Operating margin is computed as gross profit less operating expenses as a percentage of net revenues.  We evaluate business segment performance on segment operating margin.  Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income.  Segment operating margin is computed as operating income less items such as restructuring and severance costs, asset write-downs, goodwill and indefinite-lived intangible asset impairments, inventory write-downs, gains or losses on purchase commitments, global operations, sales and marketing, information systems, finance and administrative groups, and other items, expressed as a percentage of net revenues.  We believe that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the segment.  Operating margin is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed costs.


End-of-period backlog is one indicator of future revenues. We include in our backlog only open orders that we expect to ship in the next twelve months.  If demand falls below customers'customers’ forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that are included in our backlog, in many instances without the payment of any penalty.  Therefore, the backlog is not necessarily indicative of the results to be expected for future periods.


An important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the amount of product ordered during a period as compared with the product that we ship during that period. A book-to-bill ratio that is greater than one indicates that our backlog is building and that we are likely to see increasing revenues in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of declining demand and may foretell declining revenues.


We focus on our inventory turnover as a measure of how well we are managing our inventory.  We define inventory turnover for a financial reporting period as our costs of products sold for the four fiscal quarters ending on the last day of the reporting period divided by our average inventory (computed using each fiscal quarter-end balance) for this same period.  A higher level of inventory turnover reflects more efficient use of our capital.


Pricing in our industry can be volatile.  Using our and publicly available data, we analyze trends and changes in average selling prices to evaluate likely future pricing.  The erosion ofWe attempt to offset deterioration in the average selling prices of established products is typical for semiconductor products.  We attempt to offset this deterioration with ongoing cost reduction activities and new product introductions.  Our specialty passive components are more resistant to average selling price erosion.  All pricing is subject to governing market conditions and is independently set by us.
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The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business. The following table shows net revenues, gross profit margin, operating margin, end-of-period backlog, book-to-bill ratio, inventory turnover, and changes in ASP for our business as a whole during the five fiscal quarters beginning with the thirdfirst fiscal quarter of 20162019 through the thirdfirst fiscal quarter of 2017 2020 (dollars in thousands):


 3rd Quarter 2016  4th Quarter 2016  1st Quarter 2017  2nd Quarter 2017  3rd Quarter 2017  1st Quarter 2019  2nd Quarter 2019  3rd Quarter 2019  4th Quarter 2019  1st Quarter 2020 
                              
Net revenues $591,955  $570,819  $606,258  $644,892  $677,883  $745,159  $685,240  $628,329  $609,577  $612,841 
                                        
Gross profit margin(1)  26.0%  23.2%  26.5%  26.8%  27.9%  28.3%  25.5%  23.9%  22.2%  24.0%
                                        
Operating margin (1)(2)
  9.7%  -8.0%  10.7%  12.7%  13.6%  14.5%  11.6%  8.1%  4.0%  7.7%
                                        
End-of-period backlog $608,100  $653,400  $836,500  $1,034,000  $1,122,200  $1,331,800  $1,126,700  $935,400  $911,300  $1,005,200 
                                        
Book-to-bill ratio  1.04   1.11   1.29   1.27   1.11   0.79   0.69   0.72   0.94   1.17 
                                        
Inventory turnover  4.20   4.40   4.50   4.60   4.50   4.3   4.3   4.1   4.3   4.2 
                                        
Change in ASP vs. prior quarter  -0.9%  -1.2%  -1.3%  -0.7%  -0.1%  (0.4)%  (0.9)%  (1.1)%  (0.8)%  (1.1)%


(1) Gross margin for the first fiscal quarter of 2020 includes $3.1 million of expenses directly related to the COVID-19 outbreak (see Note 2 to our consolidated condensed financial statements).
(1)(2) Operating margin for the third and fourth fiscal quarters of 2016 and the first, second, and third fiscal quarters of 20172019 includes $1.2 million, $7.1 million, $1.5 million, $0.5$7.3 million and $3.2$16.9 million, respectively, of restructuring and severance expenses (see Note 24 to our consolidated condensed financial statements).  Operating margin for the thirdfirst fiscal quarter of 20162020 also includes $1.6in total $3.4 million of indefinite-lived intangible assets impairment charges.expenses directly related to the COVID-19 outbreak (see Note 2 to our consolidated condensed financial statements).


See "Financial“Financial Metrics by Segment"Segment” below for net revenues, book-to-bill ratio, and gross profit margin broken out by segment.


Revenues increased versus the prior fiscal quarter, and thirdbut decreased versus the first fiscal quarter of 2016.  The continued strong demand further2019.  After a period of relatively high levels of inventory in the supply chain, inventory levels are now at widely normalized levels.  Strong orders, particularly from global distributor customers, and from Asia in general, increased the backlog while the book-to-bill ratio remains high.  Distributors, particularly in Europe and Asia, continue to drive the high order rate.  We are increasing manufacturing capacities and output of our key product lines, but the high order rates have increased product delivery leadtimes and even caused some shortages of supply, especially in our semiconductor product lines.  Many of our product lines are operating at or near capacity.  Sequentially, averagebacklog.  Average selling prices were virtually stable, reflective ofin total decreased consistent with historical performance, while the strong business environment.decrease for our commodity semiconductor products is accelerating.


Gross profit margin increased versus the prior fiscal quarter, andbut decreased versus the thirdfirst fiscal quarter of 2016.2019.  The increasesfluctuations are primarily due to volume, the effects of our cost reduction programs, and manufacturing efficiencies, partially offset by decreases in average selling prices versus the third fiscal quarter of 2016.volume-driven.


The book-to-bill ratio in the thirdfirst fiscal quarter of 2017 remained strong at 1.112020 increased to 1.17 versus 1.270.94 in the secondfourth fiscal quarter of 2017.2019.  The book-to-bill ratios in the thirdfirst fiscal quarter of 20172020 for distributors and original equipment manufacturers ("OEM") were 1.151.30 and 1.06,1.04, respectively, versus ratios of 1.430.94 and 1.06,0.95, respectively, during the fourth fiscal quarter of 2019.

For the second fiscal quarter of 2017.

For the fourth fiscal quarter of 2017,2020, despite substantial uncertainties, we anticipate revenues between $645$540 million and $685$580 million and gross margins of 26% to 28%21% plus/minus 90 basis points at the exchange rates of the thirdfirst fiscal quarter.quarter of 2020.
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Financial Metrics by Segment


The following table shows net revenues, book-to-bill ratio, gross profit margin, and segment operating margin broken out by segment for the five fiscal quarters beginning with the thirdfirst fiscal quarter of 20162019 through the thirdfirst fiscal quarter of 2017 2020 (dollars in thousands):


 3rd Quarter 2016  4th Quarter 2016  1st Quarter 2017  2nd Quarter 2017  3rd Quarter 2017  1st Quarter 2019  2nd Quarter 2019  3rd Quarter 2019  4th Quarter 2019  1st Quarter 2020 
MOSFETs
                              
Net revenues $101,687  $101,497  $105,529  $114,035  $126,522  $137,341  $128,842  $126,747  $116,215  $116,893 
                                        
Book-to-bill ratio  1.03   1.14   1.37   1.37   1.19   0.84   0.54   0.54   0.94   1.12 
                                        
Gross profit margin  16.2%  17.0%  19.6%  22.2%  25.5%  26.3%  24.8%  24.1%  23.7%  24.1%
                                        
Segment operating margin  7.4%  9.4%  11.1%  14.6%  18.5%  19.4%  17.5%  16.6%  16.1%  16.0%
                                        
Diodes
                                        
Net revenues $141,127  $135,291  $144,895  $155,717  $160,711  $167,840  $142,042  $123,879  $123,382  $115,343 
                                        
Book-to-bill ratio  1.06   1.22   1.44   1.41   1.18   0.63   0.52   0.57   0.88   1.36 
                                        
Gross profit margin  25.8%  21.1%  25.9%  26.4%  26.7%  25.9%  20.3%  17.1%  16.3%  16.9%
                                        
Segment operating margin  22.6%  17.7%  22.6%  23.2%  23.6%  22.7%  16.9%  13.3%  12.6%  12.5%
                                        
Optoelectronic Components
                                        
Net revenues $72,801  $68,491  $65,682  $73,838  $76,740  $60,562  $60,675  $50,702  $51,047  $54,179 
                                        
Book-to-bill ratio  0.98   0.99   1.16   1.11   0.94   0.83   0.70   0.86   1.11   1.40 
                                        
Gross profit margin  33.3%  32.1%  34.0%  34.5%  37.7%  26.4%  26.8%  21.5%  20.2%  26.9%
                                        
Segment operating margin  27.9%  25.9%  25.8%  29.1%  32.6%  19.3%  19.8%  13.7%  12.7%  19.7%
                                        
Resistors & Inductors
                    
Resistors                    
Net revenues $188,831  $165,359  $155,119  $147,883  $159,208 
                    
Book-to-bill ratio  0.89   0.81   0.82   0.95   1.05 
                    
Gross profit margin  33.1%  28.3%  27.4%  23.5%  28.1%
                    
Segment operating margin  29.8%  25.2%  23.8%  19.0%  24.4%
                    
Inductors                    
Net revenues $192,041  $185,503  $200,383  $209,182  $217,601  $71,640  $77,024  $73,458  $76,520  $73,785 
                                        
Book-to-bill ratio  0.99   1.08   1.22   1.23   1.15   0.97   1.01   0.95   1.05   0.98 
                                        
Gross profit margin  30.6%  27.5%  30.5%  29.7%  30.1%  32.5%  31.9%  31.9%  33.5%  31.2%
                                        
Segment operating margin  27.0%  23.7%  26.9%  26.1%  26.8%  28.8%  28.3%  28.3%  30.3%  27.5%
                                        
Capacitors
                                        
Net revenues $84,299  $80,037  $89,769  $92,120  $96,309  $118,945  $111,298  $98,424  $94,530  $93,433 
                                        
Book-to-bill ratio  1.20   1.03   1.25   1.14   0.97   0.67   0.68   0.76   0.84   1.20 
                                        
Gross profit margin  21.3%  17.1%  21.4%  20.6%  20.3%  25.0%  23.5%  22.0%  17.9%  21.8%
                                        
Segment operating margin  15.7%  11.5%  15.8%  15.3%  15.3%  20.7%  19.0%  16.9%  12.3%  16.1%

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Acquisition Activity

As part of our growth strategy, we seek to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets, reputations for product quality and reliability, and product lines with which we have substantial marketing and technical expertise.  This includes exploring opportunities to acquire targets to gain market share, penetrate different geographic markets, enhance new product development, round out our existing product lines, or grow our high margin niche market businesses. Acquisitions of passive components businesses would likely be made to strengthen and broaden our position as a specialty product supplier; acquisitions of discrete semiconductor businesses would be made to increase market share and to generate synergies.  To limit our financial exposure, we have implemented a policy not to pursue acquisitions if our post-acquisition debt would exceed 2.5x our pro forma earnings before interest, taxes, depreciation, and amortization ("EBITDA").  For these purposes, we calculate pro forma EBITDA as the adjusted EBITDA of Vishay and the target for Vishay's four preceding fiscal quarters, with a pro forma adjustment for savings which management estimates would have been achieved had the target been acquired by Vishay at the beginning of the four fiscal quarter period.

Our growth plan targets adding, through acquisitions, an average of approximately $100 million of revenues per year.  Depending on the opportunities available, we might make several smaller acquisitions or a few larger acquisitions. We intend to make such acquisitions using mainly cash, rather than debt or equity, although we do have capacity on our revolving credit facility if necessary. We are not currently targeting acquisitions with a purchase price larger than $500 million.

There is no assurance that we will be able to identify and acquire suitable acquisition candidates at price levels and on terms and conditions we consider acceptable.
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Cost Management


We place a strong emphasis on controlling our costs, and use various measures and metrics to evaluate our cost structure.


We define variable costs as expenses that vary with respect to quantity produced.  Fixed costs do not vary with respect to quantity produced over the relevant time period.  Contributive margin is calculated as net revenue less variable costs.  It may be expressed in dollars or as a percentage of net revenue. Management uses this measure to determine the amount of profit to be expected for any change in revenues.  While these measures are typical cost accounting measures, none of these measures are recognized in accordance with GAAP.  The classification of expenses as either variable or fixed is judgmental and other companies might classify such expenses differently.  These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies.


We closely monitor variable costs and seek to achieve the contributive margin in our business model.  Over a period of many years, we have generally maintained a contributive margin of between 45% - 47% of revenues.  The erosion of average selling prices, particularly of our semiconductor products, that is typical of our industry and inflation negatively impact contributive margin and drive us to continually seek ways to reduce our variable costs.  Our variable cost reduction efforts include increasing the efficiency in our production facilities by expending capital for automation, reducing materials costs, materials substitution, increasing wafer size and shrinking dies to maximize efficiency in our semiconductor production processes, and other yield improvement activities.


Our cost management strategy also includes a focus on controlling fixed costs recorded as costs of products sold or selling, general, and administrative expenses and maintaining our break-even point (adjusted for acquisitions).  We seek to limit increases in selling, general, and administrative expenses to the rate of inflation, excluding foreign currency exchange effects and substantially independent of sales volume changes. At constant fixed costs, we would expect each $1 million increase in revenues to increase our operating income by approximately $450,000 to $470,000.  Sudden changes in the business conditions, however,such as the current COVID-19 situation, may not allow us to quickly adapt our manufacturing capacity and cost structure.


Occasionally, our ongoing cost containment activities are not adequate and we must take actions to maintain our cost competitiveness.  We incurred significant restructuring expenses in our past to reduce our cost structure.  Historically, our primary cost reduction technique was through the transfer of production to the extent possible from high-labor-cost countries to lower-labor-cost countries.  We believe that our manufacturing footprint is suitable to serve our customers and end markets, while maintaining lower manufacturing costs.  Since 2013, our cost reduction programs have primarily focused on reducing fixed costs, including selling, general, and administrative expenses.


We continue to monitor the economic environment and its potential effects on our customers and the end markets that we serve, especially in light of the ongoing COVID-19 situation.

In the fourththird fiscal quarter of 2013,2019, we announced variousglobal cost reduction and management rejuvenation programs as part of our continuous efforts to improve efficiency and operating performance.  We incurred restructuring expense of $24.1 million since the inception of the programs.  We did not incur any restructuring expenses during the three fiscal months ended April 4, 2020.


The programs initiated in 2013are primarily focused on a plandesigned to enhance the competitiveness of our MOSFETs segmentreduce manufacturing fixed costs and a voluntary separation / early retirement offer to certain employees Company-wide. We also implemented two other smaller cost reduction programs concerning the manufacturing of products within our Diodes segment.  The voluntary separation / early retirement and Diodes segment programs were substantially completed in 2014.

We completed the initially planned production transfer as part of the MOSFETs Enhanced Competitiveness Program in the first fiscal quarter of 2016.  The production transfer occurred over a period of approximately two years.  The manufacture of wafers for certain critical products has been transferred into a more cost-efficient fab.  As a consequence, certain other wafer manufacturing previously occurring in-house has been transferred to third-party foundries.  We have incurred and may continue to incur other exit costs associated with the production transfer, including certain contract termination costs.

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The initially-planned production transfer achieved the expected improvement in contributive margin percentage and fixed cost reduction; however, as a result of a decrease in net revenues since the plan was first initiated, gross margin for the MOSFETs segment remained below 20%.

As a result of a review of the financial results and outlook for the MOSFETs segment following the completion of production transfers, in November 2016, we determined to implement further cost reductions for the MOSFETs segment.

In November 2016, we announced an extension of the MOSFETs Enhanced Competitiveness Program.  The extended program includes various cost reduction initiatives, primarily the transfer of all remaining manufacturing operations at our Santa Clara, California facility to other Vishay facilities or third-party subcontractors.

We expect to incur cash charges of approximately $7 million to $8 million, primarily related to severance, to implement these additional steps.  We expect to realize annualized savings of approximately $8 million to $9 million as a result of these additional initiatives.  These savings have been largely achieved by the end of the third fiscal quarter of 2017, with some minor impacts still to be realized.  We expect to maintain our R&D and management presence in the Silicon Valley area, even after the cessation of manufacturing operations there.

The total cash charges for the MOSFETs Enhanced Competitiveness Program are expected to be $26 million to $27 million.

We recorded $2.9 million of restructuring and severance expenses in the first nine fiscal months of 2017 for the expenses that were recognizable under GAAP during the period and $26.4 million of restructuring and severance expenses since the MOSFETs Enhanced Competitiveness Program was implemented.

As a result of our cost reduction activities in our MOSFETs segment, we have established a solid and competitive cost basis for future growth.  Segment gross margin has improved to acceptable levels in the second and third fiscal quarters of 2017 (which also reflects higher revenues).

Programs were also initiated in 2015.  The programs initiated in 2015 include a plan to reduce selling, general, and administrative ("SG&A") costs company-wide, and targeted streamlining and consolidation of production for certain product lines within our Capacitors and Resistors & Inductors segments.provide management rejuvenation.  The programs in total are expected to lower costs by approximately $35$15 million annually (at current volumes) when fully implemented, atof which approximately 50% is expected to be realized as reduced manufacturing fixed costs and 50% is expected to be realized as reduced SG&A expenses.  We expect to incur costs (primarily cash costsseverance expenses) of approximately $30 million.$25 million related to the programs.  The implementation of these programs will not impact planned R&D activities, or our growth initiatives in Asian markets.  We recorded $0.8 million of restructuringresearch and severance expenses in the third fiscal quarter of 2017 for expenses that were recognizable under GAAP during the period and $26.0 million of restructuring and severance expenses since these programs were initiated.  The remaining expenses associated with these programs will be recorded as they become recognizable under GAAP.development activities.


The programs announced in 2015 are expected to reduce selling, general, and administrative costs by approximately $17 million annually.  These selling, general, and administrative cost reductions were substantially implemented by the end of 2016.  We first solicited volunteers to accept a voluntary separation / early retirement offer.offer, which was generally successful.  The voluntary separation benefits vary by country and job classification, but generally offer a cash loyalty bonus.  AdditionalA limited number of involuntary terminations wereare necessary to achieve the cost reduction targets. We beganexpect these cost reductions to realize cost savings as a result of these programs in 2016.be fully achieved by December 2020.


The targeted plans to streamline and consolidate production of certain product lines are expected to decrease costs of products sold by approximately $18 million annually (at current volumes).  These plans include the Zwolle, Netherlands aluminum capacitors facility closure announced on June 30, 2015.

Except for the Zwolle and Santa Clara facilities described above, no otherNo manufacturing facility closures are currently expected pursuant to these programs.

Except for the distinct and targetedthese programs, noted above, we do not anticipate any other material restructuring activities in 2017.  We believe that we can substantially maintain our trained workforce, even at lower manufacturing activity levels, by reducing hours and limiting the use of subcontractors and foundries.2020.  However, a continued sluggish business environment for the electronics industry, ora prolonged impact of the recurrence ofCOVID-19 outbreak, or a significant economic downturn may require us to implement additional restructuring initiatives.


In uncertain times, we focus on managing our production capacities in accordance with customer requirements, and maintain discipline in terms of our fixed costs and capital expenditures. Even as we seek to manage our costs, we remain cognizant of the future requirements of our demanding markets. We continue to pursue our growth plans through investing in capacities for strategic product lines, and through increasing our resources for R&D, technical marketing, and field application engineering; supplemented by opportunistic acquisitions of specialty businesses.

Our long-term strategy includes growth through the integration of acquired businesses, and GAAP requires plant closure and employee termination costs that we incur in connection with our acquisition activities to be recorded as expenses in our consolidated statement of operations, as such expenses are incurred.  We have not incurred any material plant closure or employee termination costs related to any of the businesses acquired since 2011, but we expect to have some level of future restructuring expenses due to acquisitions.

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Even as we seek to manage our costs, we continue to pursue our growth plans through investing in capacities for strategic product lines, and through increasing our resources for R&D, technical marketing, and field application engineering; supplemented by opportunistic acquisitions of specialty businesses.
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Foreign Currency Translation


We are exposed to foreign currency exchange rate risks, particularly due to transactions in currencies other than the functional currencies of certain subsidiaries.  We occasionally use forward exchange contracts to economically hedge a portion of these exposures.


GAAP requires that we identify the "functional currency"“functional currency” of each of our subsidiaries and measure all elements of the financial statements in that functional currency.  A subsidiary'ssubsidiary’s functional currency is the currency of the primary economic environment in which it operates.  In cases where a subsidiary is relatively self-contained within a particular country, the local currency is generally deemed to be the functional currency.  However, a foreign subsidiary that is a direct and integral component or extension of the parent company'scompany’s operations generally would have the parent company'scompany’s currency as its functional currency.  We have both situations among our subsidiaries.


Foreign Subsidiaries which use the Local Currency as the Functional Currency


We finance our operations in Europe and certain locations in Asia in local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency.  For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated condensed balance sheets have been translated at the rate of exchange as of the balance sheet date. Translation adjustments do not impact the results of operations and are reported as a separate component of stockholders'stockholders’ equity.


For those subsidiaries where the local currency is the functional currency, revenues and expenses incurred in the local currency are translated at the average exchange rate for the year.  While the translation of revenues and expenses incurred in the local currency into U.S. dollars does not directly impact the statements of operations, the translation effectively increases or decreases the U.S. dollar equivalent of revenues generated and expenses incurred in those foreign currencies.  The dollar generally was weakerstronger during the thirdfirst fiscal quarter of 20172020 compared to the prior fiscal quarter and prior year quarter,period, with the translation of foreign currency revenues and expenses into U.S. dollars increasingdecreasing reported revenues and expenses versus the prior fiscal quarter and prior year quarter.period.


Foreign Subsidiaries which use the U.S. Dollar as the Functional Currency


Our operations in Israel and most significant locations in Asia are largely financed in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency.  For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results of operations.  While these subsidiaries transact most business in U.S. dollars, they may have significant costs, particularly payroll-related, which are incurred in the local currency. The cost of products sold and selling, general, and administrative expense for the thirdfirst fiscal quarter of 20172020 have been unfavorablyslightly favorably impacted (comparedcompared to the prior quarter)fiscal quarter and prior year period by local currency transactions of subsidiaries which use the U.S. dollar as their functional currency and favorably impacted (compared to the prior year quarter) by local currency transactions of subsidiaries which use the U.S. dollar as their functional currency.

We enter into forward contracts with highly-rated financial institutions to mitigate the foreign currency risk associated with intercompany loans denominated in a currency other than the legal entity's functional currency.  The notional amount of the forward contracts was $300.0 million as of September 30, 2017.  The forward contracts are short-term in nature and are expected to be renewed at our discretion until the intercompany loans are repaid.  The forward contracts are carried at fair value in our consolidated condensed balance sheets.  We have not designated the forward contracts as hedges for accounting purposes, and as such the change in the fair value of the contracts is recognized in our consolidated condensed statements of operations as a component of other income (expense).  We do not utilize derivatives or other financial instruments for trading or other speculative purposes.

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Results of Operations


Statements of operations'operations’ captions as a percentage of net revenues and the effective tax rates were as follows:


 Fiscal quarters ended  Nine fiscal months ended  Fiscal quarters ended 
 September 30, 2017  July 1, 2017  October 1, 2016  September 30, 2017  October 1, 2016  April 4, 2020  December 31, 2019  March 30, 2019 
Cost of products sold  72.1%  73.2%  74.0%  72.9%  75.0%  76.0%  77.8%  71.7%
Gross profit  27.9%  26.8%  26.0%  27.1%  25.0%  24.0%  22.2%  28.3%
Selling, general & administrative expenses  13.8%  14.0%  15.9%  14.5%  15.8%  16.3%  15.5%  13.9%
Operating income  13.6%  12.7%  9.7%  12.4%  8.4%
Income before taxes and noncontrolling interest  12.7%  11.7%  8.6%  11.0%  7.7%
Net earnings attributable to Vishay stockholders  9.5%  8.7%  6.2%  8.2%  5.6%
Operating income (loss)  7.7%  4.0%  14.5%
Income (loss) before taxes and noncontrolling interest  5.9%  1.9%  13.4%
Net earnings (loss) attributable to Vishay stockholders  4.4%  2.3%  10.1%
________                                
Effective tax rate  25.1%  25.5%  27.8%  25.6%  27.7%  24.2%  -25.4%  24.3%


Net Revenues


Net revenues were as follows (dollars in thousands):


 Fiscal quarters ended Nine fiscal months ended 
 September 30, 2017 July 1, 2017 October 1, 2016 September 30, 2017 October 1, 2016 
Net revenues $677,883  $644,892  $591,955  $1,929,033  $1,752,612 
 Fiscal quarters ended 
 April 4, 2020 December 31, 2019 March 30, 2019 
Net revenues $612,841  $609,577  $745,159 


The change in net revenues versus the comparable prior periods was as follows (dollars in thousands):


 Fiscal quarter ended September 30, 2017 Nine fiscal months ended September 30, 2017 
 Change in net revenues  % change Change in net revenues  % change 
July 1, 2017 $32,991   5.1%      
October 1, 2016 $85,928   14.5% $176,421   10.1%
 Fiscal quarter ended April 4, 2020 
 Change in net revenues % change 
December 31, 2019 $3,264   0.5%
March 30, 2019 $(132,318)  -17.8%


Changes in net revenues were attributable to the following:


 vs. Prior Quarter  vs. Prior Year Quarter  vs. Prior Year-to-Date  vs. Prior Quarter  vs. Prior Year Quarter 
Change attributable to:               
Change in volume  3.1%  15.9%  13.8%  1.6%  -15.0%
Decrease in average selling prices  -0.1%  -2.4%  -2.7%  -1.1%  -2.9%
Foreign currency effects  2.1%  1.6%  -0.1%  -0.1%  -0.8%
Other  0.0%  -0.6%  -0.9%  0.1%  0.9%
Net change  5.1%  14.5%  10.1%  0.5%  -17.8%


We experienced a substantial, broad-based increase in demand for our products beginning in the first half of 2017 whichthat continued inthrough the third fiscal quarter of 20172018.  Demand started to decrease in the fourth fiscal quarter of 2018 and the decrease accelerated through 2019 as customers, particularly distributors, reduced orders as they decreased their inventory.  The decrease in demand resulted in increaseddecreased net revenues compared to the prior fiscal quarter and prior year periods.

We deduct, from the sales that we recordended March 30, 2019.  Net revenues began to distributors, allowances for future credits that we expect to provide for returns, scrapped product, and price adjustments under various programs made available to the distributors.  We make deductions corresponding to particular salesincrease in the period in whichfirst fiscal quarter of 2020, but have been impacted by the sales are made, although the corresponding credits may not be issued until future periods.  We estimate the deductions based on sales levels to distributors, inventory levels at the distributors, current and projected market trends and conditions, recent and historical activity under the relevant programs, changes in program policies, and open requests for credits.  We recorded deductions from gross revenues under our distributor incentive programs of $22.4 million, $23.3 million, and $23.5 million for the fiscal quarters ended September 30, 2017, July 1, 2017, and October 1, 2016, respectively, or 3.2%, 3.5%, and 3.8% of gross revenues, respectively.  Actual credits issued under the programs during the fiscal quarters ended September 30, 2017, July 1, 2017 and October 1, 2016 were $28.1 million, $20.1 million, and $25.6 million, respectively.  We recorded deductions from gross revenues under our distributor incentive programs of $67.2 million and $65.4 million for the nine fiscal months ended September 30, 2017 and October 1, 2016, respectively, or 3.4% and 3.6% of gross revenues, respectively.  Actual credits issued under the programs during the nine fiscal months ended September 30, 2017 and October 1, 2016 were $71.6 million and $66.8 million, respectively.  Increases and decreases in these incentives are largely attributable to the then-current business climate.COVID-19 outbreak.


Gross Profit and Margins


Gross profit margins for the fiscal quarter ended September 30, 2017April 4, 2020 were 27.9%24.0%, versus 26.8%22.2% and 26.0%,28.3% for the comparable prior fiscal quarter and prior year period, respectively.  Gross profit margins forThe increase versus the nineprior fiscal months ended September 30, 2017 were 27.1%,quarter is primarily due to increased volume, manufacturing efficiencies, and changes in tariffs.  The decrease versus 25.0% for the comparable prior year period.  The increasequarter is primarily due primarily to increaseddecreased sales volume.volume and average selling prices.  We were able to offset the negative impacts of inflation and average selling price decline by cost reductions and innovation, and maintain our contributive margin.
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Segments


Analysis of revenues and gross profit margins for our segments is provided below.


MOSFETs


Net revenues and gross profit margin of the MOSFETs segment were as follows (dollars in thousands):


Fiscal quarters ended Nine fiscal months ended Fiscal quarters ended 
September 30, 2017 July 1, 2017 October 1, 2016 September 30, 2017 October 1, 2016 April 4, 2020 December 31, 2019 March 30, 2019 
Net revenues $126,522  $114,035  $101,687  $346,086  $304,839  $116,893  $116,215  $137,341 
Gross profit margin  25.5%  22.2%  16.2%  22.6%  13.4%  24.1%  23.7%  26.3%


The change in net revenues versus the comparable prior periods was as follows (dollars in thousands):


 Fiscal quarter ended September 30, 2017 Nine fiscal months ended September 30, 2017 
 Change in net revenues  % change Change in net revenues  % change 
July 1, 2017 $12,487   11.0%      
October 1, 2016 $24,835   24.4% $41,247   13.5%
 
Fiscal quarter ended
April 4, 2020
 
 Change in net revenues % change 
December 31, 2019 $678   0.6%
March 30, 2019 $(20,448)  -14.9%


Changes in MOSFETs segment net revenues were attributable to the following:


 vs. Prior Quarter  vs. Prior Year Quarter  vs. Prior Year-to-Date  vs. Prior Quarter  vs. Prior Year Quarter 
Change attributable to:               
Change in volume  9.9%  27.1%  18.3%  0.9%  -9.8%
Decrease in average selling prices  -0.1%  -2.3%  -3.4%  -0.2%  -5.8%
Foreign currency effects  1.0%  0.7%  -0.1%  -0.1%  -0.4%
Other  0.2%  -1.1%  -1.3%  0.0%  1.1%
Net change  11.0%  24.4%  13.5%  0.6%  -14.9%


In the fiscal quarter and nine fiscal months ended September 30, 2017, theThe MOSFETs segment significantlynet revenues increased its net revenueslightly versus prior year periods and the already improved results of the prior fiscal quarter. The growth was achieved by significant volume increases in all regions and sales channels and particularly in Asia, the segment's biggest market. Declining average selling prices and other negative factors had only small offsetting effects on the growth.  Our IC products business contributed strongly to the growth.

The gross profit margin for the third fiscal quarter, and first nine fiscal months of 2017 wasbut decreased significantly higher thanversus the prior year periods.quarter.  The increases are primarily attributable to the revenue growth and the implemented cost reduction program (see below), which exceeded the impact from lower average selling prices and cost inflation. The prior year periods were also burdened by the recognition of fixed costs in inventory produced in 2015 due to the restructuring program and sold beginning in the second fiscal quarter of 2016. Theslight increase of the gross profit margin versus the prior fiscal quarter was the net result from significant increases in the Asia and Americas regions, partially offset by a significant decrease in the Europe region primarily due to higher volume.a singularity of a last-time-buy in the prior fiscal quarter.  The decrease versus the prior year quarter was primarily due to distributor inventory reductions and the temporary closure of our main manufacturing facility in China due to the COVID-19 outbreak.  The decrease was partially offset by significant growth in revenues from automotive customers as well as with our IC product business particularly in Europe and Asia.


Gross profit margin increased versus the prior fiscal quarter, but decreased versus the prior year quarter.  The positive business climate ledincrease versus the prior fiscal quarter is due to cost reduction measures.  The decrease versus the prior year quarter is primarily due to lower pricing pressure in the third fiscal quarter of 2017 for our established MOSFETs products. average selling prices and significantly lower volume, partially offset by cost reduction measures.

We have experienced a minimal declineslight decrease in average selling prices versus the prior fiscal quarter and only moderate declinesquarter.  The reduced customer demand versus the prior year periods.quarter significantly increased pricing pressure and resulted in a significant decrease in average selling prices. 

In 2013, we announced a cost reduction program to enhance the competitiveness of our MOSFETs segment. The planned production transfers were substantially implemented by the end of the first fiscal quarter of 2016 and began to provide improvement in the third fiscal quarter of 2016.

As a result of a review of the financial results and outlook for the MOSFETs segment following the completion of production transfers, we determined to implement further cost reductions. In November 2016, we announced an extension of the MOSFETs Enhanced Competitiveness Program. The revised program includes various cost reduction initiatives, primarily the transfer of all remaining manufacturing operations at our Santa Clara, California facility to other Vishay facilities or third-party subcontractors. We expect to maintain our R&D and management presence in the Silicon Valley area, even after the cessation of manufacturing operations there.

We expect to incur cash charges of approximately $7 to $8 million, primarily related to severance, to implement these additional steps, and expect to realize annualized cost savings of approximately $8 to $9 million as a result of these additional initiatives. See "Cost Management" above and Note 2 to our consolidated condensed financial statements.


We continue to make capitalinvest to expand mid- and R&D investments in this business.  We are in the process of increasinglong-term manufacturing volume at third-party foundries and maximizing the output of our internal fab to meet the increased demand.capacity for strategic product lines.
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38



Diodes


Net revenues and gross profit marginmargins of the Diodes segment were as follows (dollars in thousands):


Fiscal quarters ended Nine fiscal months ended Fiscal quarters ended 
September 30, 2017 July 1, 2017 October 1, 2016 September 30, 2017 October 1, 2016 April 4, 2020 December 31, 2019 March 30, 2019 
Net revenues $160,711  $155,717  $141,127  $461,323  $418,629  $115,343  $123,382  $167,840 
Gross profit margin  26.7%  26.4%  25.8%  26.4%  25.4%  16.9%  16.3%  25.9%


The change in net revenues versus the comparable prior periods was as follows (dollars in thousands):


 Fiscal quarter ended September 30, 2017 Nine fiscal months ended September 30, 2017 
 Change in net revenues  % change Change in net revenues  % change 
July 1, 2017 $4,994   3.2%      
October 1, 2016 $19,584   13.9% $42,694   10.2%
 
Fiscal quarter ended
April 4, 2020
 
 Change in net revenues % change 
December 31, 2019 $(8,039)  -6.5%
March 30, 2019 $(52,497)  -31.3%


Changes in Diodes segment net revenues were attributable to the following:


 vs. Prior Quarter  vs. Prior Year Quarter  vs. Prior Year-to-Date  vs. Prior Quarter  vs. Prior Year Quarter 
Change attributable to:               
Change in volume  2.1%  16.9%  14.8%
Decrease in volume  -4.2%  -28.1%
Decrease in average selling prices  -0.6%  -3.3%  -3.4%  -2.5%  -5.6%
Foreign currency effects  1.7%  1.3%  -0.1%  -0.1%  -0.5%
Other  0.0%  -1.0%  -1.1%  0.3%  2.9%
Net change  3.2%  13.9%  10.2%  -6.5%  -31.3%


TheNet revenues of the Diodes segment achieved significant growth in net revenues in the fiscal quarter and the nine fiscal months ended September 30, 2017 versus the corresponding prior year periods. Significant volume increases, especially in Asia and Europe, were partially offset by declining average selling prices and other negative factors.  Moderate revenue growth was achieved versus the already strong prior fiscal quarter primarily due to volume growth, especially in Europe, and positive foreign currency effects of a stronger euro.

The gross profit margin increased slightlydecreased significantly versus the prior fiscal quarter and the prior year periodsquarter.  Inventory reductions by distributors continue to burden our business.  The first fiscal quarter of 2020 was also impacted by the temporary closure of our main manufacturing facility in China due to the COVID-19 outbreak.  The decrease versus the prior fiscal quarter was primarily due to volume growth and cost reduction activities, which weredecreased revenue from distribution customers, partially offset by decliningsignificant growth with end customers in the Americas and Europe regions.  The decrease versus the prior year quarter was in all regions and sales channels, particularly distributor customers.

Gross profit margin increased versus the prior fiscal quarter, but decreased versus the prior year quarter.  The increase versus the prior fiscal quarter was primarily due to a change in the impact of U.S. tariffs on goods imported from China.  Gross profit margin decreased versus the prior year quarter due to decreased sales volume and lower average selling prices.

Average selling prices and cost inflation.
Typical pricing pressure for our established Diodes products continues. We have experienced a slight declinedecreased moderately versus the prior fiscal quarter and moderate price declinessignificantly versus the prior year periods.quarter.  Unfavorable product mix contributed to the decreases in average selling prices.

We are increasing manufacturing capacity in all critical lines to meet the increased demand.


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39



OptoelectronicOptoelectronic Components


Net revenues and gross profit marginmargins of the Optoelectronic Components segment were as follows (dollars in thousands):


Fiscal quarters ended Nine fiscal months ended Fiscal quarters ended 
September 30, 2017 July 1, 2017 October 1, 2016 September 30, 2017 October 1, 2016 April 4, 2020 December 31, 2019 March 30, 2019 
Net revenues $76,740  $73,838  $72,801  $216,260  $203,635  $54,179  $51,047  $60,562 
Gross profit margin  37.7%  34.5%  33.3%  35.5%  31.9%  26.9%  20.2%  26.4%


The change in net revenues versus the comparable prior periods was as follows (dollars in thousands):


 Fiscal quarter ended September 30, 2017 Nine fiscal months ended September 30, 2017 
 Change in net revenues  % change Change in net revenues  % change 
July 1, 2017 $2,902   3.9%      
October 1, 2016 $3,939   5.4% $12,625   6.2%
 
Fiscal quarter ended
April 4, 2020
 
 Change in net revenues % change 
December 31, 2019 $3,132   6.1%
March 30, 2019 $(6,383)  -10.5%


Changes in Optoelectronic Components segment net revenues were attributable to the following:


 vs. Prior Quarter  vs. Prior Year Quarter  vs. Prior Year-to-Date  vs. Prior Quarter  vs. Prior Year Quarter 
Change attributable to:               
Change in volume  1.7%  6.0%  9.8%  5.6%  -7.9%
Decrease in average selling prices  0.0%  -2.1%  -3.0%  -0.8%  -2.2%
Foreign currency effects  2.2%  1.6%  0.0%  -0.2%  -1.2%
Other  0.0%  -0.1%  -0.6%  1.5%  0.8%
Net change  3.9%  5.4%  6.2%  6.1%  -10.5%


In the fiscal quarter and the nine fiscal months ended September 30, 2017, theNet revenues of our Optoelectronic Components segment  achieved significant growth in net revenues versus the corresponding prior year periods. The volume increases, especially with distributors in all regions and European end customers, were only partially offset by a decrease in sales of our mobile sensor products in Asia, declining average selling prices, and other negative factors.  The moderate growthincreased significantly versus the prior fiscal quarter, wasbut decreased significantly versus the prior year quarter.  The increase versus the prior fiscal quarter is primarily achieved by an increasedue to significant growth in the Americas and Europe regions, particularly with distributor customers.  The increase was partially offset by significant decrease in revenues from the Asia region.  The decrease versus the prior year quarter was in all regions and sales volume of our mobile sensor products to Asian end customerschannels, particularly in the Americas and positive currency effects of a stronger euro.Asia regions.


The gross profit margin increased moderately versus the prior fiscal quarter and the prior year periods.quarter.  The increasesincrease versus the prior year periods werefiscal quarter is primarily attributabledue to the significantincreased sales volume, increaseswhich led to manufacturing efficiencies, and a more profitable sales mix, which werean increase in inventory, partially offset by lower average selling prices and cost inflation.  The positive net impact of foreign currency effects from a stronger euro, a slight volume increase, and a favorable liability settlement were primarily attributable for the increase versus the prior fiscal quarter.

The overall positive business environment resulted in reduced pricing pressure for our established Optoelectronic Components products. We have experienced a slight decline versus the prior year fiscal quarter and a moderate price decline versus the prior year-to-date period.  There was no decrease in theis primarily due to cost reductions, partially offset by lower average selling prices and cost inflation.

Average selling prices decreased slightly versus the prior fiscal quarter and prior year quarter.

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45


Resistors & Inductors


Net revenues and gross profit marginmargins of the Resistors & Inductors segment were as follows (dollars in thousands):


Fiscal quarters ended Nine fiscal months ended Fiscal quarters ended 
September 30, 2017 July 1, 2017 October 1, 2016 September 30, 2017 October 1, 2016 April 4, 2020 December 31, 2019 March 30, 2019 
Net revenues $217,601  $209,182  $192,041  $627,166  $568,334  $159,208  $147,883  $188,831 
Gross profit margin  30.1%  29.7%  30.6%  30.1%  30.2%  28.1%  23.5%  33.1%


The change in net revenues versus the comparable prior periods was as follows (dollars in thousands):


 Fiscal quarter ended September 30, 2017 Nine fiscal months ended September 30, 2017 
 Change in net revenues  % change Change in net revenues  % change 
July 1, 2017 $8,419   4.0%      
October 1, 2016 $25,560   13.3% $58,832   10.4%
 
Fiscal quarter ended
April 4, 2020
 
 Change in net revenues % change 
December 31, 2019 $11,325   7.7%
March 30, 2019 $(29,623)  -15.7%


Changes in Resistors & Inductors segment net revenues were attributable to the following:


 vs. Prior Quarter  vs. Prior Year Quarter  vs. Prior Year-to-Date  vs. Prior Quarter  vs. Prior Year Quarter 
Change attributable to:               
Change in volume  1.3%  13.5%  13.5%  8.9%  -12.0%
Decrease in average selling prices  -0.3%  -2.1%  -2.3%  -0.6%  -1.0%
Foreign currency effects  2.7%  2.2%  -0.2%  -0.3%  -1.2%
Other  0.3%  -0.3%  -0.6%  -0.3%  -1.5%
Net change  4.0%  13.3%  10.4%  7.7%  -15.7%


Net revenues of the Resistors & Inductors segment increased moderatelysignificantly versus the prior fiscal quarter, andbut decreased significantly versus the prior year periods.period.  The increase versus the prior fiscal quarter is primarily attributable to the Europe and Americas regions experienced the most significant growth in net revenuesand distributor, industrial, and automotive customers.  The decrease versus the prior year quarter is due to all regions and prior year periods.  Almost all end-markets contributed to the growth.  Distributionprimarily distributor and the industrial and automotive end-markets contributed the most to the revenue increases.customers.


The gross profit margin increased slightly versus the prior fiscal quarter.  Better efficiencies due to higher sales volume and favorable foreign currency effects contributed to the better performance.  The gross profit margin declined slightlyquarter, but decreased versus the prior year periods.period.  The slight decrease wasincrease versus the prior fiscal quarter is primarily due to increased sales volume and manufacturing efficiencies, partially offset by lower average selling prices.  The decrease versus the prior year quarter is due to decreased sales volume, decreased average selling prices, labor and inflationary effects, which were partially offset by the impactsmaterials cost increases, and negative impact of higher sales volume.exchange rates.


Average selling prices declineddecreased slightly versus the prior fiscal quarter and prior year periods, consistent with historical performance.quarter.

Capital spending projects are underway in response to the increased market demand for certain product lines.

In 2015, we announced global cost reduction programs which include targeted plans to streamline and consolidate certain product lines, including within our Resistors & Inductors segment. See "Cost Management" above and Note 2 to our consolidated condensed financial statements.


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41



CapacitorsInductors


Net revenues and gross profit marginmargins of the CapacitorsInductors segment were as follows (dollars in thousands):


Fiscal quarters ended Nine fiscal months ended Fiscal quarters ended 
September 30, 2017 July 1, 2017 October 1, 2016 September 30, 2017 October 1, 2016 April 4, 2020 December 31, 2019 March 30, 2019 
Net revenues $96,309  $92,120  $84,299  $278,198  $257,175  $73,785  $76,520  $71,640 
Gross profit margin  20.3%  20.6%  21.3%  20.8%  20.7%  31.2%  33.5%  32.5%


The change in net revenues versus the comparable prior periods was as follows (dollars in thousands):


 Fiscal quarter ended September 30, 2017 Nine fiscal months ended September 30, 2017 
 Change in net revenues  % change Change in net revenues  % change 
July 1, 2017 $4,189   4.5%      
October 1, 2016 $12,010   14.2% $21,023   8.2%
 Fiscal quarter ended April 4, 2020 
 Change in net revenues % change 
December 31, 2019 $(2,735)  -3.6%
March 30, 2019 $2,145   3.0%


Changes in Inductors segment net revenues were attributable to the following:

 vs. Prior Quarter  vs. Prior Year Quarter 
Change attributable to:      
Change in volume  -0.9%  6.5%
Decrease in average selling prices  -2.6%  -2.7%
Foreign currency effects  0.0%  -0.6%
Other  -0.1%  -0.2%
Net change  -3.6%  3.0%

Net revenues of the Inductors segment decreased versus the prior fiscal quarter, but increased versus the prior year quarter.  The decrease versus the prior fiscal quarter is primarily due to the Asia region and distributor and automotive customers.  The increase versus the prior year quarter is primarily due to the Americas and Asia regions and medical and military and aerospace customers.

The gross profit margin decreased versus the prior fiscal quarter and the prior year quarter.  The decrease versus the prior fiscal quarter is primarily due to decreased volume and average selling prices.  The decrease versus the prior year quarter is primarily due to decreased average selling prices and inventory obsolescence.

Average selling prices decreased slightly versus the prior fiscal quarter and prior year quarter.

We expect long-term growth in this segment, and are positioned to capitalize on future market upturns.
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Capacitors

Net revenues and gross profit margins of the Capacitors segment were as follows (dollars in thousands):

 Fiscal quarters ended 
 April 4, 2020 December 31, 2019 March 30, 2019 
Net revenues $93,433  $94,530  $118,945 
Gross profit margin  21.8%  17.9%  25.0%

The change in net revenues versus the comparable prior periods was as follows (dollars in thousands):

 Fiscal quarter ended April 4, 2020 
 Change in net revenues % change 
December 31, 2019 $(1,097)  -1.2%
March 30, 2019 $(25,512)  -21.4%

Changes in Capacitors segment net revenues were attributable to the following:


 vs. Prior Quarter  vs. Prior Year Quarter  vs. Prior Year-to-Date  
vs. Prior
Quarter
  vs. Prior Year Quarter 
Change attributable to:               
Change in volume  0.8%  14.5%  10.5%
Decrease in volume  -0.5%  -21.1%
Change in average selling prices  1.1%  -2.0%  -1.7%  -0.6%  0.8%
Foreign currency effects  2.6%  2.1%  -0.3%  -0.2%  -1.1%
Other  0.0%  -0.4%  -0.3%  0.1%  0.0%
Net change  4.5%  14.2%  8.2%  -1.2%  -21.4%


Net revenues of the Capacitors segment for the fiscal quarter and nine fiscal months ended September 30, 2017 have increased moderatelydecreased slightly versus the prior fiscal quarter and significantly versus the prior year periods.  Regionquarter.  Net revenues decreased versus the prior fiscal quarter primarily in the Asia contributed the most to the revenue increase, whileregion, which was partially offset by increases in the Americas and Europe regions also reported strong revenues.and increased revenues from automotive customers.  The decrease in net revenues versus the prior year quarter is due to all regions and primarily distributor and industrial end-market reported strong revenues, while distribution reported the largest increase.  The automotive end-market remained stable.customers.


The gross profit margin decreased slightlyincreased versus the prior fiscal quarter, and prior year fiscal quarter primarily due to unfavorable product mix and inflationary effects.  Decreased average selling prices also negatively impacted the gross profit marginbut decreased versus the prior year fiscal quarter.  The negative impacts were partially offset by the positive impacts of better efficiencies and the cost reduction program.  The gross profit margin increased slightlyincrease versus the prior year-to-date period,fiscal quarter is primarily due to better efficiencies from increaseda more profitable product mix and manufacturing efficiencies.  The decrease versus the prior year quarter is primarily due to lower sales volume.


AverageDespite the significantly lower sales volume, average selling prices increased slightly versus the prior fiscalyear quarter which is unusual inprimarily due to increased prices for certain materials that were passed through to our industry and reflective of a positive business environment.customers.  Average selling prices have decreased slightly versus the prior year periods.

Capital spending projects are underway in response to the increased market demand for certain product lines.

In 2015, we announced global cost reduction programs which include targeted plans to streamline and consolidate certain product lines, including within our Capacitors segment. See "Cost Management" above and Note 2 to our consolidated condensed financial statements.

fiscal quarter.
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Selling, General, and Administrative Expenses


Selling, general, and administrative ("(“SG&A"&A”) expenses are summarized as follows (dollars in thousands):


Fiscal quarters ended Nine fiscal months ended Fiscal quarters ended 
September 30, 2017 July 1, 2017 October 1, 2016 September 30, 2017 October 1, 2016 April 4, 2020 December 31, 2019 March 30, 2019 
Total SG&A expenses $93,701  $90,446  $93,916  $278,865  $276,455  $99,832  $94,299  $103,424 
as a percentage of revenues  13.8%  14.0%  15.9%  14.5%  15.8%  16.3%  15.5%  13.9%


SG&A expenses are virtually stable versus the prior year quarter and prior year-to-date periods.  The effects of our cost reduction programs have generally offset general salary and cost inflation and negative foreign currency effects.  SG&A expenses for the fiscal quarter ended April 4, 2020 include $0.3 million of incremental costs separable from normal operations directly attributable to the COVID-19 outbreak.  SG&A expenses increased slightly versus the prior fiscal quarter in line withprimarily due to incentive compensation, but were below expectations when adjusting fordue to reduced travel and other discretionary spending due to the impact of foreign currency effects.COVID-19 outbreak.

Certain items included in SG&A expenses impact the comparability of these amounts, as summarized below (in thousands):

 Fiscal quarters ended Nine fiscal months ended 
 September 30, 2017 July 1, 2017 October 1, 2016 September 30, 2017 October 1, 2016 
Amortization of intangible assets $3,432  $3,430  $3,594  $10,830  $10,834 

Certain intangible assets became fully amortized in the second fiscal quarter of 2017.  In September 2016, we began to amortize our Siliconix tradenames, which were previously considered indefinite-lived, over their estimated remaining useful life of 10 years.

In 2013 and 2015, we announced restructuring programs targeting SG&A expenses.  See "Cost Management" above.


Other Income (Expense)


Interest expense for the fiscal quarter ended September 30, 2017 decreased $0.1 millionApril 4, 2020 was unchanged versus the fiscal quarter ended December 31, 2019 and increased $0.8by $0.2 million versus the fiscal quartersquarter ended July 1, 2017 and October 1, 2016, respectively.  Interest expense forMarch 30, 2019.  The increase is primarily due to borrowings on the nine fiscal months ended September 30, 2017 increased by $1.9 million versus the nine fiscal months ended October 1, 2016.  The increases are primarily attributable to higher average outstanding balances and slightly higher interest rates on our revolving credit facility, partially offset by reduced interest expense on the convertible senior debentures as a result of  repurchases in 2019 and 2020.

We repurchased $14.3 million principal amount of convertible senior debentures in 2020.  We recognized a $2.9 million loss on early extinguishment of the fiscal quarter and nine fiscal months ended September 30, 2017.repurchased convertible debentures.


The following tables analyze the components of the line "Other"“Other” on the consolidated condensed statements of operations (in thousands):


 Fiscal quarters ended     Fiscal quarters ended    
 September 30, 2017  July 1, 2017  Change  April 4, 2020  December 31, 2019  Change 
Foreign exchange gain (loss) $(904) $(760) $(144) $1,864  $(1,576) $3,440 
Interest income  1,802   1,534   268   1,854   1,734   120 
Other components of other periodic pension cost  (3,068)  (3,848)  780 
Investment income (expense)  (437)  (97)  (340)
Other  (100)  (25)  (75)  (15)  135   (150)
 $798  $749  $49  $198  $(3,652) $3,850 


 Fiscal quarters ended     Fiscal quarters ended    
 September 30, 2017  October 1, 2016  Change  April 4, 2020  March 30, 2019  Change 
Foreign exchange gain (loss) $(904) $(1,516) $612  $1,864  $(470) $2,334 
Interest income  1,802   1,033   769   1,854   2,199   (345)
Other components of other periodic pension cost  (3,068)  (3,396)  328 
Investment income (expense)  (437)  3,590   (4,027)
Other  (100)  103   (203)  (15)  (11)  (4)
 $798  $(380) $1,178  $198  $1,912  $(1,714)


  Nine fiscal months ended    
  September 30, 2017  October 1, 2016  Change 
Foreign exchange gain (loss) $(3,325) $(597) $(2,728)
Interest income  4,599   3,200   1,399 
Other  (123)  52   (175)
  $1,151  $2,655  $(1,504)
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44




Income Taxes


For the fiscal quarter ended September 30, 2017,April 4, 2020, our effective tax rate was 25.1%24.2%, as compared to 25.5%-25.4% and 27.8%24.3% for the fiscal quarters ended JulyDecember 31, 2019 and March 30, 2019, respectively.  With the reduction in the U.S. statutory rate to 21% beginning January 1, 2017 and October 1, 2016, respectively.  For the nine fiscal months ended September 30, 2017,2018, we expect that our effective tax rate was 25.6%, as compared to 27.7% forwill now be higher than the nine fiscal months ended October 1, 2016.  TheU.S. statutory rate, excluding unusual transactions.  Historically, the effective tax rate isrates were generally less than the U.S. statutory rate primarily because of earnings in foreign jurisdictions.

Income  Discrete tax expenseitems impacted our effective tax rate for theeach fiscal quarter and ninepresented.   
We recorded additional tax benefits of $0.6 million in the first fiscal months ended September 30, 2017 includes $0.9 million and $3.1 million, respectively, forquarter 2019 due to the remeasurement of the deferred tax liability recorded for therelated to our cash repatriation program, announcedprimarily due to foreign currency effects.  These types of remeasurement adjustments will continue until the amounts are repatriated.

The effective tax rates for the fiscal quarters ended April 4, 2020, December 31, 2019, and March 30, 2019 were also impacted by the effect of the repurchase of convertible senior debentures.  We recognized tax benefits of $1.3 million, $0.3 million, and $1.3 million in the fourth fiscal quarterquarters ended April 4, 2020, December 31, 2019, and March 30, 2019, respectively, resulting from the extinguishments, reflecting the reduction in deferred tax liabilities related to the special tax attributes of 2015. The cash repatriation program is expectedthe debentures. 

During the three fiscal months ended April 4, 2020, the liabilities for unrecognized tax benefits decreased by $1.3 million on a net basis, primarily due to occur over several years,currency translation adjustments and the deferred tax liability is based on the available sourcesexpiration of cash, applicable tax rates, and other factors and circumstances, as of each respective balance sheet date. Changes in the underlying facts and circumstances result in changes in the deferred tax liability balance, which are recorded as tax benefit or expense.  During the second fiscal quarter of 2017, we repatriated $38.0 million pursuant to this program.a statute, partially offset by interest.


We operate in a global environment with significant operations in various jurisdictionslocations outside the United States. Accordingly, ourthe consolidated income tax rate is a composite rate reflecting our earnings and the applicable tax rates in the various jurisdictionslocations where we operate. Part of our historical strategy ishas been to achieve cost savings by operating inthrough the transfer and expansion of manufacturing operations to countries where we can take advantage of lower labor costs and available tax and other government-sponsored incentives.  Accordingly, our effective tax rate is generallyhas historically been less than the U.S. statutory tax rate.  Changesrate, except in years where there are material discrete items.

Additional information about income taxes is included in Note 5 to our effective tax rate are largely attributable to changes in the mix of pretax income among our various taxing jurisdictions.consolidated condensed financial statements.

During the nine fiscal months ended September 30, 2017, the liabilities for unrecognized tax benefits decreased by $2.5 million on a net basis, principally due to payments and settlements, partially offset by increases for tax positions taken in prior periods, interest, and foreign currency effects.


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45




Financial Condition, Liquidity, and Capital Resources


We focus on our ability to generate cash flows from operations. The cash generated from operations is used to fund our capital expenditure plans, and cash in excess of our capital expenditure needs is available to fund our acquisition strategy, to reduce debt levels, and to pay dividends and repurchase stock.  We have generated cash flows from operations in excess of $200 million in each of the past 15last 18 years, and cash flows from operations in excess of $100 million in each of the past 22last 25 years.


Management uses a non-GAAP measure, "free cash," to evaluate our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends.  See "Overview" above for "free cash" definition and reconciliation to GAAP.  Vishay has generated positive "free cash" in each of the past 2023 years, and "free cash" in excess of $80 million in each of the past 15last 18 years. In this volatile economic environment, we continue to focus on the generation of free cash, including an emphasis on cost controls.


We continuedDuring 2019, we repatriated $188.7 million to generate positivethe United States, and paid cash taxes of $38.8 million related to the repatriations.  The payment of these cash taxes was recorded as an operating cash flow and any future cash taxes associated with the TCJA transition tax and related foreign taxes on repatriated cash will generally be recorded as operating cash flows.  The payment of these cash taxes significantly impacted cash flows from operations and free cash duringfor the fiscal quarteryear ended September 30, 2017.December 31, 2019.  We expect our business to generatecontinue to be a reliable generator of free cash, in 2017 in line with our history.partially offset by such tax payments.  There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash at the same levels, or at all, going forward if the current economic environment worsens.


Beginning in the fourth fiscal quarter of 2010, we have reacted to favorable market conditions to significantly reshape the company's capital structure. We have completed three issuances of low-coupon convertible debentures since the fourth fiscal quarter of 2010, each of which matures thirty years from the date of issuance. We utilized the proceeds of those debenture offerings to repurchase approximately 24% of our outstanding stock prior to implementing these initiatives.

On May 2, 2016, our Board of Directors approved a stock repurchase plan, authorizing us to repurchase, in the aggregate, up to $100 million of our outstanding common stock.  The stock repurchase plan expired on May 2, 2017.  We repurchased 1,752,454 shares of stock for $23.2 million pursuant to the plan, all of which occurred in 2016.

On August 2, 2017, our Board of Directors approved a stock repurchase plan, authorizing us to repurchase, in the aggregate, up to $150 million of our outstanding common stock.  The stock repurchase plan will expire on June 1, 2018.  The stock repurchase plan does not obligate us to acquire any particular amount of common stock, and it may be terminated or suspended at any time at the Company's direction in accordance with the plan.  We repurchased 2,127,183 shares of stock for $37.6 million since the inception of this plan.

In 2016, we acquired, in two privately negotiated transactions, all of the outstanding exchangeable notes due 2102.  The total purchase price for the two transactions was $34.0 million.  The exchangeable unsecured notes were issued in 2002 in connection with an acquisition, and were subject to a put and call agreement dated December 13, 2002.  The repurchased notes had been exchangeable for approximately 2.5 million shares of our common stock.

We also entered intomaintain a new, larger, revolving credit facility, in 2010, which was amended and restated on August 8, 2013, and further amended and restated on December 10, 2015. The amended and restated credit facility provides an aggregate commitment of $640$750 million of revolving loans available until December 10, 2020, and we haveJune 5, 2024.  The maximum amount available on the revolving credit facility is restricted by the financial covenants described below.  The credit facility also provides us the ability to request up to $50$300 million of incremental revolving commitments,facilities, subject to the satisfaction of certain conditions.  The previousconditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt. 

At April 4, 2020, we had $54 million outstanding on our revolving credit agreement was scheduled to mature on August 8, 2018.  At September 30, 2017 andfacility.  We had no amounts outstanding at December 31, 2016, $1382019. We borrowed $57 million and $143repaid $3 million respectively, wereon the revolving credit facility during the three fiscal months ended April 4, 2020.  The average outstanding underbalance on our revolving credit facility.facility calculated at fiscal month-ends was $34.3 million and the highest amount outstanding on our revolving credit facility at a fiscal month end was $54 million during the three fiscal months ended April 4, 2020.


The amended and restatedrevolving credit facility allows an unlimited amount of defined "Restricted Payments," which include cash dividends to stockholders and share repurchases, provided our pro forma leverage ratio is less than 2.25 to 1.  If our leverage ratio is greater than 2.25 to 1, the credit facility allows such payments up to $75 million per annum (subject to a cap of $225 million for the term of the facility).  The amended and restated credit facility provides us with significantly more flexibility to execute these transactions, and our ability to utilize some of our foreign-source income for these types of transactions provides even further financial flexibility.

Borrowings under the credit facility bear interest at LIBOR plus an interest margin. The applicable interest margin is based on our leverage ratio. Based on our current leverage ratio, borrowings bear interest at LIBOR plus 1.75%. The interest rate on our borrowings will increase to LIBOR plus 2.00% if our leverage ratio equals or exceeds 2.50 to 1 and will decrease to LIBOR plus 1.50% if our leverage ratio decreases below 1.50 to 1.

We also pay a fee, also based on our leverage ratio, on undrawn amounts.  The undrawn commitment fee, based on our current leverage ratio, is 0.35% per annum.  Such undrawn commitment fee will increase to 0.50% per annum if our leverage ratio equals or exceeds 2.50 to 1 and will decrease to 0.30% per annum if our leverage ratio decreases below 1.50 to 1.  Prior to the December 10, 2015 amendment and restatement, the credit agreement required Vishay to pay facility fees on the entire commitment amount.

The borrowings under the credit facility are secured by a lien on substantially all assets, including accounts receivable, inventory, machinery and equipment, and general intangibles (but excluding real estate, intellectual property registered or licensed for use in, or arising under the laws of, any country other than the United States, assets located outside of the United States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the United States, and pledges of stock in certain significant domestic and foreign subsidiaries; and are guaranteed by certain significant subsidiaries. Certain of our subsidiaries are permitted to borrow under the credit facility, subject to the satisfaction of specified conditions. Any borrowings by these subsidiaries under the credit facility will be guaranteed by Vishay and certain subsidiaries.

The credit facility also limits or restricts us from, among other things, incurring indebtedness, incurring liens on its respective assets, making investments and acquisitions and(assuming our pro forma leverage ratio is greater than 2.75 to 1.00), making asset sales, and paying cash dividends and making other restricted payments (assuming our pro forma leverage ratio is greater than 2.252.50 to 1)1.00), and requires us to comply with other covenants, including the maintenance of specific financial ratios.

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The financial maintenance covenants include (a) an interest expense coverage ratio of not less than 2.00 to 1; and (b) a leverage ratio of not more than 3.25 to 1 (and a pro forma ratio of 2.753.00 to 1 on the date of incurrence of additional debt). The computation of these ratios is prescribed in Article VI of the Credit Agreement between Vishay Intertechnology, Inc. and JPMorgan Chase Bank, N.A., which has been filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed December 10, 2015.June 5, 2019.


We were in compliance with all financial covenants under the credit facility at September 30, 2017.April 4, 2020.  Our interest expense coverage ratio and leverage ratio were 15.0615.44 to 1 and  1.611.67 to 1, respectively.  We expect to continue to be in compliance with these covenants based on current projections.  Based on our current EBITDA and outstanding revolver balance, the usable capacity on the revolving credit facility is approximately $619 million.


If we are not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and allany amounts then outstanding pursuant to the credit facility could become immediately payable. Additionally, our convertible senior debentures due 2040 and due 2041 and our convertible senior notes due 20422025 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated.

46



The balancecredit facility allows an unlimited amount of defined “Investments,” which include certain intercompany transactions and acquisitions, provided our pro forma leverage ratio is equal to or less than 2.75 to 1.00.  If our pro forma leverage ratio is greater than 2.75 to 1.00, such Investments are subject to certain limitations.

The credit facility also allows an unlimited amount of defined "Restricted Payments," which include cash dividends and share repurchases, provided our pro forma leverage ratio is equal to or less than 2.50 to 1.00.  If our pro forma leverage ratio is greater than 2.50 to 1.00, the credit facility allows such payments up to $100 million per annum (subject to a cap of $300 million for the term of the facility, with up to $25 million of any unused amount of the $100 million per annum base available for use in the next succeeding calendar year).

Borrowings under the credit facility bear interest at LIBOR plus an interest margin.  The applicable interest margin is based on our leverage ratio.  Based on our current leverage ratio, any new borrowings will bear interest at LIBOR plus 1.75%.  The interest rate on any borrowings decreases to LIBOR plus 1.50% if our leverage ratio is below 1.50 to 1 and increases to 2.00% if our leverage ratio equals or exceeds 2.50 to 1.

We also pay a commitment fee, also based on its leverage ratio, on undrawn amounts.   The undrawn commitment fee, based on Vishay's current leverage ratio, is 0.30% per annum.  Such undrawn commitment fee decreases to 0.25% per annum if our leverage ratio is below 1.50 to 1 and increases to 0.35% per annum if our leverage ratio equals or exceeds 2.50 to 1. 

The borrowings under the credit facility are secured by a lien on substantially all assets, including  accounts receivable, inventory, machinery and equipment, and general intangibles (but excluding real estate, intellectual property registered or licensed solely for use in, or arising solely under the laws of, any country other than the United States, assets located solely outside of the United States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the United States, and pledges of stock in certain significant domestic and foreign subsidiaries; and are guaranteed by certain significant subsidiaries.  

During the first fiscal quarter of 2020, we repurchased $14.3 million principal amount of convertible senior debentures due 2041 for $19.9 million.  We borrowed from our revolving credit facility was $143to fund the repurchases.

We have approximately $100 million at December 31, 2016.of unremitted foreign earnings that we have deemed not permanently reinvested and thus have accrued foreign withholding and other taxes.  We borrowed $418 million and repaid $423 million on our credit facility duringplan to repatriate the nine fiscal months ended September 30, 2017.  The average outstanding balance on our credit facility calculated at fiscal month-ends was $213.4 million and the highest amount outstanding on our credit facility at a month end was $273 million during the nine fiscal months ended September 30, 2017.

Prior to three months before the maturity date, our convertible senior debentures are convertible by the holders under certain circumstances.  The convertible debentures due 2042 became convertible subsequent to the December 31, 2016 evaluation of the conversion criteria, remained convertible subsequent to the April 1, 2017 and July 1, 2017 evaluations, and remain convertible subsequent to the September 30, 2017 evaluation, due to the sale price of our common stock exceeding 130% of the conversion price for the applicable periodsremaining amounts in the fourthsecond fiscal quarter of 20162020, but the current COVID-19 outbreak could cause us to defer these plans.  We also continue to evaluate the TCJA's provisions and may further adjust our financial and capital structure and business practices accordingly.

As of April 4, 2020, substantially all of our cash and cash equivalents and short-term investment were held in countries outside of the first, second, and third fiscal quartersUnited States.  Our substantially undrawn credit facility provides us with significant operating liquidity in the United States.  We expect to fund any future repurchases of 2017.  The convertible debentures, due 2040 became convertible subsequentas well as other obligations required to be paid by the September 30, 2017 evaluation of the conversion criteria, dueU.S. parent company, Vishay Intertechnology, Inc., including cash dividends to the sale price ofstockholders, share repurchases, and principal and interest payments on our common stock exceeding 130% of the conversion price for the applicable period in the third fiscal quarter of 2017.  Such debentures will remain convertible until December 31, 2017, at which time the conversion criteria will be reevaluated.  At the direction of our Board of Directors, we intend, upon conversion, to repay the principal amount of the convertible debentures in cash and settle any additional amounts in shares of our common stock. We intend to finance the principal amount of any converted debentures using borrowingsdebt instruments by borrowing under our revolving credit facility.  Accordingly, the debt component of the convertible debentures due 2040 and due 2042 continues to be classified as a noncurrent liability on the consolidated condensed balance sheets.  No conversionsOur U.S. subsidiaries also have occurred to date.  The convertible debentures due 2041 are not currently convertible.operating cash needs.


Management expects to periodically pay down the balance of our revolving credit facility with available cash or use the credit facility from time-to-time to meet certain short-term financing needs.  We expect that cash on-hand and cash flows from operations will be sufficient to meet our longer-term financing needs related to normal operating requirements, regular dividend payments, and our research and development and capital expenditure plans.  Additional acquisition activity, share repurchases, convertible debt repurchases, or conversion of our convertible debentures may require additional borrowing under our credit facility or may otherwise require us to incur additional debt.  No principal payments on our outstanding debt are due before the maturity of our revolving credit facility in December 2020.June 2024.


As of September 30, 2017, substantially allPrior to three months before the maturity date, our convertible senior debentures are convertible by the holders under certain circumstances.  The convertible senior debentures due 2040 and due 2041 and the convertible senior notes due 2025 are not currently convertible.  At the direction of our Board of Directors, we intend, upon conversion, to repay the principal amount of the any convertible debt instruments in cash and cash equivalents and short-term investments were heldsettle any additional amounts in countries outside of the United States.  Certain payments, such as cash dividends to stockholders, share repurchases, and interest payments on our debt instruments need to be paid by the U.S. parent company, Vishay Intertechnology, Inc.  Our U.S. subsidiaries also have operating cash needs.

Our substantially undrawn credit facility provides us with significant liquidity in the United States.

As part of the amendment and restatement of the revolving credit facility in December 2015, we completed an evaluationshares of our anticipated domestic cash needs overcommon stock.  We intend to finance the next several years and our most efficient use of liquidity, with consideration of theprincipal amount of cash that can be repatriatedany converted debentures using borrowings under our credit facility.  No conversions have occurred to the U.S. efficiently with lesser withholding taxes in foreign jurisdictions.  As a result of that evaluation, during the fourth quarter of 2015, we recognized income tax expense, including U.S. federal and state income taxes, incremental foreign income taxes, and withholding taxes payable to foreign jurisdictions, on $300 million of foreign earnings which we expect to repatriate to the U.S. over the next several years.  We repatriated $38.0 million and $46.0 million pursuant to this program in 2017 and 2016, respectively.  We continuously monitor legislative developments in the U.S. and other jurisdictions where we operate, and can adapt our repatriation strategy to the extent necessary or prudent, based on changes in law, tax rates, or other regulations.date. 

47
Except as described above, earnings generated by foreign subsidiaries are expected to be reinvested outside of the United States indefinitely.  If additional cash is needed to be repatriated to the United States, in addition to various foreign country laws regulating the exportation of the cash and profits, we would be subject to U.S. income taxes (subject to an adjustment for foreign tax credits), state income taxes, incremental foreign income taxes, and withholding taxes payable to various foreign jurisdictions.




We invest a portion of our excess cash in highly liquid, high-quality instruments with maturities greater than 90 days, but less than 1 year, which we classify as short-term investments on our consolidated balance sheets.  As these investments were funded using a portion of excess cash and represent a significant aspect of our cash management strategy, we include the investments in the calculation of net cash and short-term investments (debt).


The interest rates on our short-term investments vary by location, but can be up to 150 bps higher than the interest rates on our cash accounts.  The average interest rate on our short-term investments was 0.52%0.65% due to the low interest rate environment in Europe.  Transactions related to these investments are classified as investing activities on our consolidated condensed statements of cash flows.


51The amount of short-term investments at April 4, 2020 is lower than normal due to 2018 and 2019 completed cash repatriation activity.


The following table summarizes the components of net cash and short-term investments (debt) at September 30, 2017April 4, 2020 and December 31, 2016 2019 (in thousands):


 September 30, 2017  December 31, 2016  April 4, 2020  December 31, 2019 
            
Credit facility $138,000  $143,000  $54,000  $- 
Convertible senior notes, due 2025*  512,745   509,128 
Convertible senior debentures, due 2040*  109,864   108,120   127   126 
Convertible senior debentures, due 2041*  56,372   55,442   1,050   6,677 
Convertible senior debentures, due 2042*  62,247   61,341 
Deferred financing costs  (9,545)  (10,880)  (15,826)  (16,784)
Total debt  356,938   357,023   552,096   499,147 
                
Cash and cash equivalents  575,385   471,781   680,703   694,133 
Short-term investments  668,185   626,627   140,725   108,822 
                
Net cash and short-term investments (debt) $886,632  $741,385  $269,332  $303,808 


*Represents the carrying amount of the convertible debentures,instruments, which is comprised of the principal amount of the debentures,instruments, net of the unamortized discount and the associated embedded derivative liability.liability, when applicable.


"Net cash and short-term investments (debt)" does not have a uniform definition and is not recognized in accordance with GAAP. This measure should not be viewed as an alternative to GAAP measures of performance or liquidity. However, management believes that an analysis of "net cash and short-term investments (debt)" assists investors in understanding aspects of our cash and debt management. The measure, as calculated by us, may not be comparable to similarly titled measures used by other companies.


Our financial condition as of September 30, 2017April 4, 2020 continued to be strong, with a current ratio (current assets to current liabilities) of 4.33.5 to 1, as compared to 4.13.3 to 1 as of December 31, 2016.2019.  The increase in the ratio is primarily due to increasesthe decrease in accounts receivable, inventory, cashpayable and cash equivalents, and short-term investments.other accrued expenses.  Our ratio of total debt to Vishay stockholders' equity was 0.220.38 to 1 at September 30, 2017,April 4, 2020, as compared to 0.230.34 to 1 at December 31, 2016.2019.  The decreaseincrease in the ratio is primarily due to increases in retained earnings (accumulated deficit) and accumulated other comprehensive income (loss).borrowings on the revolving credit facility.


Cash flows provided by operating activities were $245.8$34.5 million for the ninethree fiscal months ended September 30, 2017,April 4, 2020, as compared to cash flows provided by operations of $213.1$79.5 million for the ninethree fiscal months ended October 1, 2016.  The improvement in operating cash flows reflects an increase in net earnings.  Cash flows provided by operating activities for the nine fiscal months ended SeptemberMarch 30, 2017 and October 1, 2016 were negatively impacted by $4.4 million and $17.0 million, respectively, of cash contributions to our Taiwanese pension plans.2019.


Cash paid for property and equipment for the ninethree fiscal months ended September 30, 2017April 4, 2020 was $84.8$24.3 million, as compared to $81.3$36.4 million for the ninethree fiscal months ended October 1, 2016.March 30, 2019. We expect capital spending of approximately $165$110 million in 2017.  The increase from the beginning2020, in accordance with requirements of the year is due to advancing expansion projects to satisfy demand in certain product lines.our markets.


Cash paid for dividends to our common and Class B common stockholders totalled $27.3$13.7 million and $27.6$12.3 million for the ninethree fiscal months ended SeptemberApril 4, 2020 and March 30, 2017 and October 1, 2016,2019, respectively.  We expect dividend payments in 20172020 to total approximately $36.4$55.0 million.  However, any future dividend declaration and payment remains subject to authorization by our Board of Directors.

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52



Contractual Commitments and Off-Balance Sheet Arrangements


Our Annual Report on Form 10-K for the year ended December 31, 20162019 filed on February 17, 2017,14, 2020, includes a table of contractual commitments.  There were no material changes to these commitments sinceduring the filing of our Annual Report on Form 10-K.three fiscal months ended April 4, 2020.

We do not participate in nor have we created any off-balance sheet variable interest entities or other off-balance sheet financing, other than the operating leases described in our Annual Report on Form 10-K for the year ended December 31, 2016.


Dividends


In 2014, our Board of Directors approved the initiation of a quarterly cash dividend program.  CashQuarterly cash dividends of $0.06 per share of common stock and Class B common stock werehave been paid in each quarter since the first fiscal quarter of 2014 and 2015.  On February 16, 2016, our Board of Directors increased the quarterly cash dividend to $0.0625 per share of common stock and Class B common stock.2014.  We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors.


The following table summarizes the quarterly cash dividends declared (in thousands):


Fiscal Period
 
Amount
 
Month of Payment
Three fiscal months ended April 1, 2017 $9,136 March
Three fiscal months ended July 1, 2017  9,141 June
Three fiscal months ended September 30, 2017  9,050 September
Fiscal PeriodAmount Month of Payment
Three fiscal months ended April 4, 2020 $13,741 March


Safe Harbor Statement


From time to time, information provided by us, including but not limited to statements in this report, or other statements made by or on our behalf, may contain "forward-looking"“forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as "believe," "estimate," "will“believe,” “estimate,” “will be," "will," "would," "expect," "anticipate," "plan," "project," "intend," "could," "should,"” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should,” or other similar words or expressions often identify forward-looking statements.


Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance, or achievements may vary materially from those anticipated, estimated, or projected.  Among the factors that could cause actual results to materially differ include: general business and economic conditions; delays or difficulties in implementing our cost reduction strategies; delays or difficulties in expanding our manufacturing capacities; manufacturing or supply chain interruptions or changes in customer demand because of COVID-19 or similar diseases; an inability to attract and retain highly qualified personnel; changes in foreign currency exchange rates; uncertainty related to the effects of changes in foreign currency exchange rates; competition and technological changes in our industries; difficulties in new product development; difficulties in identifying suitable acquisition candidates, consummating a transaction on terms which we consider acceptable, and integration and performance of acquired businesses; difficulties in new product development; changes in competitionapplicable domestic and technology inforeign tax regulations and uncertainty regarding the markets that we serve and the mix of our products required to address these changes; an inability to attract and retain highly qualified personnel, particularly in respect of our acquired businesses; uncertainty related to the effects ofsame; changes in U.S. and foreign currency exchange rates; delays or difficultiestrade regulations and tariffs and uncertainty regarding the same; changes in implementing our cost management strategies;applicable accounting standards and other factors affecting our operations, markets, capacity to meet demand, products, services, and prices that are set forth in our filings with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q.  We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


Our 20162019 Annual Report on Form 10-K listed various important factors that could cause actual results to differ materially from projected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995.  Readers can find them in Part I, Item 1A, of that filing under the heading "Risk“Risk Factors."” You should understand that it is not possible to predict or identify all such factors.  Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
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Item 3.
Quantitative and Qualitative Disclosures About Market Risk


Part II, Item 7A, "Quantitative“Quantitative and Qualitative Disclosures About Market Risk,"” of our Annual Report on Form 10-K for the year ended December 31, 2016,2019, filed with the SEC on February 17, 2017,14, 2020, describes our exposure to market risks.  There have been no material changes to our market risks since December 31, 2016.2019.


Item 4.
Controls and Procedures


Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures


An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer ("CEO"(“CEO”) and Chief Financial Officer ("CFO"(“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”).  Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are: (1) recorded, processed, summarized, and reported within the time periods specified in the SEC'sSEC’s rules and forms; and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.


Changes in Internal Control Over Financial Reporting


There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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49




PART II - OTHER INFORMATION


Item 1.
Legal Proceedings


Item 3 of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016,2019, filed with the SEC on February 17, 2017, describe14, 2020 describes certain of our legal proceedings.  ThereExcept as disclosed below, there have been no material developments to the legal proceedings previously disclosed.


Effective February 26, 2020 Holy Stone Enterprise Co., Ltd. (“Holy Stone”) entered into a settlement agreement on behalf of itself, Milestone Global Technology, Inc. and Vishay Polytech Co., Ltd. ("VPC"), formerly known as Holy Stone Polytech Co., Ltd. (the “Settlement Agreement”).  VPC was acquired from Holy Stone by a Vishay subsidiary in June 2014.  Under the Settlement Agreement, Holy Stone agreed to pay $28,000,000 as full settlement of the In Re Capacitors Antitrust Litigation Civil Action No. 3:14-cv-03264-JD filed in the United States District Court, Northern District of California (the “Complaint”).  According to the Settlement Agreement, VPC will be dismissed from the Complaint, and along with Vishay, Vishay Israel Ltd. and others, will be released from all future claims relating to the conduct alleged in the Complaint to the extent the conduct relates to the sale or manufacturing of aluminum, tantalum or film capacitors in the United States.  The purported wrongdoing attributable to VPC as described in the Complaint occurred prior to its acquisition by Vishay.  VPC expressly denies any allegations included in the Complaint.  The Settlement Agreement is subject to court approval and notice to the members of the plaintiff class.

Pursuant to the terms and conditions of the indemnification agreement between Vishay and Holy Stone related to Vishay’s acquisition of VPC in 2014, neither Vishay nor VPC will contribute any amount toward the settlement.

Item 1A.
Risk Factors


ThereExcept as described below, there have been no material changes to the risk factors we previously disclosed under Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016,2019, filed with the SEC on February 17, 2017.14, 2020.


Our business may be adversely affected by the widespread outbreak of diseases, including the recent COVID-19 outbreak and the mitigation efforts by governments worldwide to control its spread.

The widespread global outbreak of COVID-19 has adversely affected our business.  Impacts have included disruptions in our ability to manufacture products and disruptions in the operations of our customers and modes of shipping.While we are unable to accurately predict the full extent to which the COVID-19 outbreak and the mitigation efforts by governments to attempt to control its spread will have on our business due to numerous uncertainties, thus far the impacts have resulted in increased costs and a reduction in sales to certain regions and end-markets. We cannot predict when the impact of the COVID-19 outbreak will end or when future coronavirus outbreaks will occur.

The potential risks and effects of the COVID-19 outbreak and economic crisis, including potential global or regional recessions or depressions, that could have an adverse effect on our business include, but are not limited to:

•Adverse impact on our customers and supply channels;
•Decrease in sales, product demand and pricing and unfavorable economic and market conditions;
•Increased costs, including higher shipping costs due to reduced shipping capacity;
•Restrictions on our manufacturing, support operations or workforce, or similar limitations for our customers, vendors, and suppliers, that could limit our ability to meet customer demand;
•Potential increased credit risk if customers, distributors, and resellers are unable to pay us, or must delay paying their obligations to us;
•Restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures could result in delays; and
•Impact on our workforce/employees due to the ease with which the virus spreads and the current shelter-in-place orders.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds


On August 2, 2017, our Board of Directors approved a stock repurchase plan, authorizing us to repurchase, in the aggregate, up to $150 million of our outstanding common stock.  The stock repurchase plan will expire on June 1, 2018.  The stock repurchase plan does not obligate us to acquire any particular amount of common stock, and it may be terminated or suspended at any time at the Company's direction in accordance with the plan.  The following table provides information about repurchases of the Company's common stock during the three-month period ended September 30, 2017:Not applicable.

Period Total Number of Shares Purchased  Average Price Paid per Share (including commission)  Total Number of Shares Purchased as Part of Publicly Announced Program  Total Dollar Amount Purchased Under the Program  Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program 
                
July 2 - July 29  -  $-   -  $-  $- 
July 30 - August 26  898,499  $17.23   898,499  $15,484,861  $134,515,139 
August 27 - September 30  1,228,684  $17.97   1,228,684  $22,078,938  $112,436,201 
Total  2,127,183  $17.66   2,127,183  $37,563,799  $112,436,201 


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Item 3.
Defaults Upon Senior Securities


Not applicable.


Item 4.
Mine Safety Disclosures


Not applicable.


Item 5.
Other Information


Not applicable.


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Item 6.
Exhibits


10.1
First Amendment to Employment Agreement, dated February 28, 2020, between Vishay Europe GmbH (an indirect wholly owned subsidiary of Vishay Intertechnology, Inc.), Vishay Intertechnology, Inc., and Lori Lipcaman.  Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed February 28, 2020.
31.1
Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Dr. Gerald Paul, Chief Executive Officer.
31.2
Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Lori Lipcaman, Chief Financial Officer.
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Dr. Gerald Paul, Chief Executive Officer.
32.2
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Lori Lipcaman, Chief Financial Officer.
101Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended September 30, 2017,April 4, 2020, furnished in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language)).
104Cover Page Interactive Data File (formatted as Inline eXtensible Business Reporting Language and contained in Exhibit 101)
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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


VISHAY INTERTECHNOLOGY, INC.
   
 
/s/ Lori Lipcaman
 
 Lori Lipcaman 
 Executive Vice President and Chief Financial Officer
 (as a duly authorized officer and principal financial and
 accounting officer)


Date:  October 26, 2017May 12, 2020


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