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

FORM 10-Q/A (Amendment No. 1)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           June 29, 2019July 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 001-07416

VISHAY INTERTECHNOLOGY INCVishay 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 Avenue
Malvern, Pennsylvania 19355-2143
 610-644-1300
(Address of Principal Executive Offices) (Registrant’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. ☒ Yes  ◻ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files.)
☒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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 
Large Accelerated Filer ☒
Accelerated filer ◻
 
Non-accelerated filer ◻
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  ☒ No

As of July 26, 2019,31, 2020 the registrant had 132,348,357132,560,749 shares of its common stock and 12,097,409 shares of its Class B common stock outstanding.




EXPLANATORY NOTE

This amendment is being filed to furnish Exhibit 101, Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended June 29, 2019, furnished in iXBRL (Inline eXtensible Business Reporting Language)), which had been inadvertently omitted from the original filing.  For the convenience of the reader, this report on Form 10-Q/A refiles in its entirety our Form 10-Q.  Additionally, this filing includes updated CEO and CFO certifications filed as Exhibits 31.1, 31.2, 32.1, and 32.2.  No other changes have been made to the original filing.


















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2

VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
June 29, 2019July 4, 2020
CONTENTS

   Page Number
PART I.
FINANCIAL INFORMATION
  
     
 
Item 1.
Financial Statements
  
     
  
Consolidated Condensed Balance Sheets (Unaudited) – June 29, 2019July 4, 2020 (Unaudited) and December 31, 20182019
 
4
     
  
Consolidated Condensed Statements of Operations (Unaudited) – Fiscal Quarters Ended July 4, 2020 and June 29, 2019 and June 30, 2018
 
6
     
  
Consolidated Condensed Statements of Comprehensive Income (Unaudited) – Fiscal Quarters Ended July 4, 2020 and June 29, 2019 and June 30, 2018
 
7
     
  
Consolidated Condensed Statements of Operations (Unaudited) – Six Fiscal Months Ended July 4, 2020 and June 29, 2019 and June 30, 2018
 
8
     
  
Consolidated Condensed Statements of Comprehensive Income (Unaudited) – Six Fiscal Months Ended July 4, 2020 and June 29, 2019 and June 30, 2018
 
9
     
  
Consolidated Condensed Statements of Cash Flows (Unaudited) – Six Fiscal Months Ended July 4, 2020 and June 29, 2019 and June 30, 2018
 
10
     
  
Consolidated Condensed Statements of Equity (Unaudited)(Unaudited)
 
11
     
  
Notes to the Consolidated Condensed Financial Statements (Unaudited)
 
12
     
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
3533
     
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
5654
     
 
Item 4.
Controls and Procedures
 
5654
     
PART II.
OTHER INFORMATION
  
     
 
Item 1.
Legal Proceedings
 
5755
     
 
Item 1A.
Risk Factors
 
5755
     
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
5756
     
 
Item 3.
Defaults Upon Senior Securities
 
5756
     
 
Item 4.
Mine Safety Disclosures
 
5756
     
 
Item 5.
Other Information
 
5756
     
 
Item 6.
Exhibits
 
5756
     
  
SIGNATURES
 
5857
3

PART I  - FINANCIAL INFORMATION

Item 1. Financial Statements

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

 June 29, 2019  December 31, 2018  July 4, 2020  December 31, 2019 
 (Unaudited)     (Unaudited)    
Assets            
Current assets:            
Cash and cash equivalents $790,906  $686,032  $599,930  $694,133 
Short-term investments  163   78,286   157,246   108,822 
Accounts receivable, net  365,728   397,020   285,529   328,187 
Inventories:                
Finished goods  132,794   138,112   125,177   122,466 
Work in process  191,552   190,982   196,846   187,354 
Raw materials  139,150   150,566   127,165   121,860 
Total inventories  463,496   479,660   449,188   431,680 
                
Prepaid expenses and other current assets  125,104   142,888   131,125   141,294 
Total current assets  1,745,397   1,783,886   1,623,018   1,704,116 
                
Property and equipment, at cost:                
Land  74,701   87,622   74,985   75,011 
Buildings and improvements  579,304   619,445   596,942   585,064 
Machinery and equipment  2,559,473   2,510,001   2,623,774   2,606,355 
Construction in progress  115,288   125,109   99,932   110,722 
Allowance for depreciation  (2,380,546)  (2,373,176)  (2,474,456)  (2,425,627)
Property and equipment, net  948,220   969,001   921,177   951,525 
                
Right of use assets  96,136   -   103,153   93,162 
                
Goodwill  150,735   147,480   150,641   150,642 
                
Other intangible assets, net  64,883   65,688   58,583   60,659 
                
Other assets  150,759   140,143   168,274   160,671 
Total assets $3,156,130  $3,106,198  $3,024,846  $3,120,775 

Continues on following page.
4

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

 June 29, 2019  December 31, 2018  July 4, 2020  December 31, 2019 
 (Unaudited)     (Unaudited)    
Liabilities and equity      
Liabilities, temporary equity, and equity      
Current liabilities:            
Notes payable to banks $40  $18  $1  $2 
Trade accounts payable  160,222   218,322   148,727   173,915 
Payroll and related expenses  129,095   141,670   126,302   122,100 
Lease liabilities  15,323   -   21,443   20,217 
Other accrued expenses  162,937   229,660   166,261   186,463 
Income taxes  43,979   54,436   40,642   17,731 
Total current liabilities  511,596   644,106   503,376   520,428 
                
Long-term debt less current portion  519,863   494,509   438,494   499,147 
U.S. transition tax payable  140,196   154,953   125,438   140,196 
Deferred income taxes  64,878   85,471   4,231   22,021 
Long-term lease liabilities  86,086   -   85,714   78,511 
Other liabilities  84,628   79,489   98,134   100,207 
Accrued pension and other postretirement costs  256,805   260,984   270,735   272,402 
Total liabilities  1,664,052   1,719,512   1,526,122   1,632,912 
                
Redeemable convertible debentures  -   2,016   -   174 
                
Equity:                
Vishay stockholders' equity                
Common stock  13,235   13,212   13,256   13,235 
Class B convertible common stock  1,210   1,210   1,210   1,210 
Capital in excess of par value  1,426,164   1,436,011   1,412,775   1,425,170 
Retained earnings (accumulated deficit)  55,659   (61,258)
Retained earnings  95,462   72,180 
Accumulated other comprehensive income (loss)  (6,316)  (6,791)  (26,326)  (26,646)
Total Vishay stockholders' equity  1,489,952   1,382,384   1,496,377   1,485,149 
Noncontrolling interests  2,126   2,286   2,347   2,540 
Total equity  1,492,078   1,384,670   1,498,724   1,487,689 
Total liabilities, temporary equity, and equity $3,156,130  $3,106,198  $3,024,846  $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 
 June 29, 2019  June 30, 2018  July 4, 2020  June 29, 2019 
            
Net revenues $685,240  $761,030  $581,717  $685,240 
Costs of products sold  510,639   533,792   451,047   510,639 
Gross profit  174,601   227,238   130,670   174,601 
                
Selling, general, and administrative expenses  95,112   103,945   89,127   95,112 
Restructuring and severance costs  743   - 
Operating income  79,489   123,293   40,800   79,489 
                
Other income (expense):                
Interest expense  (8,204)  (8,372)  (8,430)  (8,204)
Other components of net periodic pension cost  (3,367)  (3,450)
Other  2,970   3,397   (1,484)  (397)
Loss on early extinguishment of debt  -   (17,309)  (1,146)  - 
Total other income (expense)  (8,601)  (25,734)  (11,060)  (8,601)
                
Income before taxes  70,888   97,559   29,740   70,888 
                
Income tax expense (benefit)  26,153   (5,703)
Income tax expense  4,845   26,153 
                
Net earnings  44,735   103,262   24,895   44,735 
                
Less: net earnings attributable to noncontrolling interests  258   165   242   258 
                
Net earnings attributable to Vishay stockholders $44,477  $103,097  $24,653  $44,477 
                
Basic earnings per share attributable to Vishay stockholders $0.31  $0.71  $0.17  $0.31 
                
Diluted earnings per share attributable to Vishay stockholders $0.31  $0.65  $0.17  $0.31 
                
Weighted average shares outstanding - basic  144,621   144,382   144,846   144,621 
                
Weighted average shares outstanding - diluted  145,023   157,657   145,170   145,023 
                
Cash dividends per share $0.0950  $0.0850  $0.095  $0.095 

See accompanying notes.
6

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

 Fiscal quarters ended  Fiscal quarters ended 
 June 29, 2019  June 30, 2018  July 4, 2020  June 29, 2019 
            
Net earnings $44,735  $103,262  $24,895  $44,735 
                
Other comprehensive income (loss), net of tax        
Other comprehensive income, net of tax        
                
Pension and other post-retirement actuarial items  1,623   1,575   1,760   1,623 
                
Foreign currency translation adjustment  7,384   (61,537)  20,088   7,384 
                
Other comprehensive income (loss)  9,007   (59,962)
Other comprehensive income  21,848   9,007 
                
Comprehensive income  53,742   43,300   46,743   53,742 
                
Less: comprehensive income attributable to noncontrolling interests  258   165   242   258 
                
Comprehensive income attributable to Vishay stockholders $53,484  $43,135  $46,501  $53,484 

See accompanying notes.
7

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

 Six fiscal months ended  Six fiscal months ended 
 June 29, 2019  June 30, 2018  July 4, 2020  June 29, 2019 
            
Net revenues $1,430,399  $1,477,825  $1,194,558  $1,430,399 
Costs of products sold  1,044,639   1,045,287   916,648   1,044,639 
Gross profit  385,760   432,538   277,910   385,760 
                
Selling, general, and administrative expenses  198,536   205,183   188,959   198,536 
Restructuring and severance costs  743   - 
Operating income  187,224   227,355   88,208   187,224 
                
Other income (expense):                
Interest expense  (16,596)  (16,049)  (16,982)  (16,596)
Other components of net periodic pension cost  (6,763)  (6,969)
Other  8,278   2,550   (1,286)  1,515 
Loss on early extinguishment of debt  (1,307)  (17,309)  (4,066)  (1,307)
Total other income (expense)  (16,388)  (37,777)  (22,334)  (16,388)
                
Income before taxes  170,836   189,578   65,874   170,836 
                
Income tax expense  50,460   23,771   13,595   50,460 
                
Net earnings  120,376   165,807   52,279   120,376 
                
Less: net earnings attributable to noncontrolling interests  440   344   407   440 
                
Net earnings attributable to Vishay stockholders $119,936  $165,463  $51,872  $119,936 
                
Basic earnings per share attributable to Vishay stockholders $0.83  $1.15  $0.36  $0.83 
                
Diluted earnings per share attributable to Vishay stockholders $0.83  $1.04  $0.36  $0.83 
                
Weighted average shares outstanding - basic  144,589   144,355   144,818   144,589 
                
Weighted average shares outstanding - diluted  145,158   158,580   145,232   145,158 
                
Cash dividends per share $0.1800  $0.1525  $0.19  $0.18 

See accompanying notes.

8

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

 Six fiscal months ended  Six fiscal months ended 
 June 29, 2019  June 30, 2018  July 4, 2020  June 29, 2019 
            
Net earnings $120,376  $165,807  $52,279  $120,376 
                
Other comprehensive income (loss), net of tax                
                
Pension and other post-retirement actuarial items  3,080   3,182   3,361   3,080 
                
Foreign currency translation adjustment  (2,605)  (34,513)  (3,041)  (2,605)
                
Other comprehensive income (loss)  475   (31,331)
Other comprehensive income  320   475 
                
Comprehensive income  120,851   134,476   52,599   120,851 
                
Less: comprehensive income attributable to noncontrolling interests  440   344   407   440 
                
Comprehensive income attributable to Vishay stockholders $120,411  $134,132  $52,192  $120,411 

See accompanying notes.
9

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

 Six fiscal months ended  Six fiscal months ended 
 June 29, 2019  June 30, 2018  July 4, 2020  June 29, 2019 
            
Operating activities            
Net earnings $120,376  $165,807  $52,279  $120,376 
Adjustments to reconcile net earnings to net cash provided by operating activities:                
Depreciation and amortization  81,346   81,174   82,158   81,346 
(Gain) loss on disposal of property and equipment  (162)  (2,242)  (43)  (162)
Accretion of interest on convertible debt instruments  6,985   2,964   7,125   6,985 
Inventory write-offs for obsolescence  12,643   11,799   11,587   12,643 
Deferred income taxes  (5,601)  (25,669)  (4,370)  (5,601)
Loss on extinguishment of debt  1,307   17,309   4,066   1,307 
Other  4,283   4,148   954   4,283 
Change in U.S. transition tax liability  (14,757)  (14,400)  -   (14,757)
Change in repatriation tax liability  (20,479)  (92,093)  (16,258)  (20,479)
Net change in operating assets and liabilities, net of effects of businesses acquired  (50,122)  (110,627)  (12,589)  (50,122)
Net cash provided by operating activities  135,819   38,170   124,909   135,819 
                
Investing activities                
Capital expenditures  (70,148)  (76,646)  (48,832)  (70,148)
Proceeds from sale of property and equipment  464   8,378   230   464 
Purchase of businesses, net of cash received  (11,862)  (14,880)  -   (11,862)
Purchase of short-term investments  (1,970)  (50,193)  (157,086)  (1,970)
Maturity of short-term investments  79,694   447,359   108,044   79,694 
Other investing activities  2,893   (935)  (529)  2,893 
Net cash provided by (used in) investing activities  (929)  313,083 
Net cash used in investing activities  (98,173)  (929)
                
Financing activities                
Proceeds from long-term borrowings  -   600,000 
Issuance costs  (5,394)  (15,621)  -   (5,394)
Repurchase of convertible debentures  (22,695)  (584,991)
Repurchase of convertible debt instruments  (90,525)  (22,695)
Net proceeds (payments) on revolving credit lines  28,000   (54,000)  -   28,000 
Net changes in short-term borrowings  22   119   (113)  22 
Dividends paid to common stockholders  (23,822)  (20,148)  (25,185)  (23,822)
Dividends paid to Class B common stockholders  (2,178)  (1,845)  (2,299)  (2,178)
Distributions to noncontrolling interests  (600)  (525)  (600)  (600)
Cash withholding taxes paid when shares withheld for vested equity awards  (2,708)  (2,297)  (2,016)  (2,708)
Net cash used in financing activities  (29,375)  (79,308)  (120,738)  (29,375)
Effect of exchange rate changes on cash and cash equivalents  (641)  (12,921)  (201)  (641)
                
Net increase in cash and cash equivalents  104,874   259,024 
Net increase (decrease) in cash and cash equivalents  (94,203)  104,874 
                
Cash and cash equivalents at beginning of period  686,032   748,032   694,133   686,032 
Cash and cash equivalents at end of period $790,906  $1,007,056  $599,930  $790,906 

See accompanying notes.
10

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements 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, 2017
 
$
13,188
  
$
1,213
  
$
1,752,506
  
$
(362,254
)
 
$
25,714
  
$
1,430,367
  
$
2,032
  
$
1,432,399
 
Cumulative effect of accounting change for adoption of ASU 2016-01
  
-
   
-
   
-
   
1,801
   
(1,801
)
  
-
   
-
   
-
 
Net earnings
  
-
   
-
   
-
   
62,366
   
-
   
62,366
   
179
   
62,545
 
Other comprehensive income
  
-
   
-
   
-
   
-
   
28,631
   
28,631
   
-
   
28,631
 
Distributions to noncontrolling interests
  
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Conversion of Class B shares (31,800 shares)
  
3
   
(3
)
  
-
   
-
   
-
   
-
   
-
   
-
 
Temporary equity reclassification
  
-
   
-
   
1,080
   
-
   
-
   
1,080
   
-
   
1,080
 
Issuance of stock and related tax withholdings for vested restricted stock units (211,328 shares)
  
21
   
-
   
(2,318
)
  
-
   
-
   
(2,297
)
  
-
   
(2,297
)
Dividends declared ($0.0675 per share)
  
-
   
-
   
11
   
(9,746
)
  
-
   
(9,735
)
  
-
   
(9,735
)
Stock compensation expense
  
-
   
-
   
2,483
   
-
   
-
   
2,483
   
-
   
2,483
 
Balance at March 31, 2018
 
$
13,212
  
$
1,210
  
$
1,753,762
  
$
(307,833
)
 
$
52,544
  
$
1,512,895
  
$
2,211
  
$
1,515,106
 
Net earnings  -   -   -   103,097   -   103,097   165   103,262 
Other comprehensive income
  
-
   
-
   
-
   
-
   
(59,962
)
  
(59,962
)
  
-
   
(59,962
)
Distributions to noncontrolling interests
  
-
   
-
   
-
   
-
   
-
   
-
   
(525
)
  
(525
)
Temporary equity reclassification
  
-
   
-
   
699
   
-
   
-
   
699
   
-
   
699
 
Dividends declared ($0.0850 per share)
  
-
   
-
   
14
   
(12,272
)
  
-
   
(12,258
)
  
-
   
(12,258
)
Stock compensation expense
  
-
   
-
   
778
   
-
   
-
   
778
   
-
   
778
 
Issuance of convertible notes due 2025
  
-
   
-
   
85,262
   
-
   
-
   
85,262
   
-
   
85,262
 
Repurchase of convertible debentures due 2040 and due 2042
  
-
   
-
   
(246,573
)
  
-
   
-
   
(246,573
)
  
-
   
(246,573
)
Balance at June 30, 2018
 
$
13,212
  
$
1,210
  
$
1,593,942
  
$
(217,008
)
 
$
(7,418
)
 
$
1,383,938
  
$
1,851
  
$
1,385,789
 
                                 
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
  
$
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
   
-
   
-
   
-
   
23,013
   
-
   
23,013
   
-
   
23,013
 
Net earnings
  
-
   
-
   
-
   
75,459
   
-
   
75,459
   
182
   
75,641
   
-
   
-
   
-
   
75,459
   
-
   
75,459
   
182
   
75,641
 
Other comprehensive income
  
-
   
-
   
-
   
-
   
(8,532
)
  
(8,532
)
  
-
   
(8,532
)
  
-
   
-
   
-
   
-
   
(8,532
)
  
(8,532
)
  
-
   
(8,532
)
Conversion of Class B shares (18 shares)
  
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
   
-
 
Temporary equity reclassification
  
-
   
-
   
3
   
-
   
-
   
3
   
-
   
3
   
-
   
-
   
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 ($0.0850 per share)
  
-
   
-
   
15
   
(12,292
)
  
-
   
(12,277
)
  
-
   
(12,277
)
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
   
-
   
-
   
3,536
   
-
   
-
   
3,536
   
-
   
3,536
 
Repurchase of convertible senior debentures
  
-
   
-
   
(11,783
)
  
-
   
-
   
(11,783
)
  
-
   
(11,783
)
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
  $13,234  $1,210  $1,425,101  $24,922  $(15,323) $1,449,144  $2,468  $1,451,612 
Net earnings
  
-
   
-
   
-
   
44,477
   
-
   
44,477
   
258
   
44,735
   -   -   -   44,477   -   44,477   258   44,735 
Other comprehensive income
  
-
   
-
   
-
   
-
   
9,007
   
9,007
   
-
   
9,007
   
-
   
-
   
-
   
-
   
9,007
   
9,007
   
-
   
9,007
 
Distributions to noncontrolling interests
  
-
   
-
   
-
   
-
   
-
   
-
   
(600
)
  
(600
)
  
-
   
-
   
-
   
-
   
-
   
-
   
(600
)
  
(600
)
Temporary equity reclassification
  
-
   
-
   
206
   
-
   
-
   
206
   
-
   
206
   
-
   
-
   
206
   
-
   
-
   
206
   
-
   
206
 
Issuance of stock and related tax withholdings for vested restricted stock units (9,906 shares)
  
1
   
-
   
(50
)
  
-
   
-
   
(49
)
  
-
   
(49
)
  
1
   
-
   
(50
)
  
-
   
-
   
(49
)
  
-
   
(49
)
Dividends declared ($0.0950 per share)
  
-
   
-
   
17
   
(13,740
)
  
-
   
(13,723
)
  
-
   
(13,723
)
Dividends declared ($0.095 per share)
  
-
   
-
   
17
   
(13,740
)
  
-
   
(13,723
)
  
-
   
(13,723
)
Stock compensation expense
  
-
   
-
   
890
   
-
   
-
   
890
   
-
   
890
   
-
   
-
   
890
   
-
   
-
   
890
   
-
   
890
 
Balance at June 29, 2019
 
$
13,235
  
$
1,210
  
$
1,426,164
  
$
55,659
  
$
(6,316
)
 
$
1,489,952
  
$
2,126
  
$
1,492,078
  
$
13,235
  
$
1,210
  
$
1,426,164
  
$
55,659
  
$
(6,316
)
 
$
1,489,952
  
$
2,126
  
$
1,492,078
 
                                
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
  
-
   
-
   
-
   
-
   
(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
 
Net earnings
  
-
   
-
   
-
   
24,653
   
-
   
24,653
   
242
   
24,895
 
Other comprehensive income
  
-
   
-
   
-
   
-
   
21,848
   
21,848
   
-
   
21,848
 
Distributions to noncontrolling interests
  
-
   
-
   
-
   
-
   
-
   
-
   
(600
)
  
(600
)
Issuance of stock and related tax withholdings for vested restricted stock units (13,141 shares)
  
1
   
-
   
(26
)
  
-
   
-
   
(25
)
  
-
   
(25
)
Dividends declared ($0.095 per share)
  
-
   
-
   
18
   
(13,761
)
  
-
   
(13,743
)
  
-
   
(13,743
)
Stock compensation expense
  
-
   
-
   
875
   
-
   
-
   
875
   
-
   
875
 
Repurchase of convertible senior notes due 2025
  
-
   
-
   
(4,352
)
  
-
   
-
   
(4,352
)
  
-
   
(4,352
)
Balance at July 4, 2020
 
$
13,256
  
$
1,210
  
$
1,412,775
  
$
95,462
  
$
(26,326
)
 
$
1,496,377
  
$
2,347
  
$
1,498,724
 

See accompanying notes.
11
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” or the “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”) 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’s Annual Report on Form 10-K for the year ended December 31, 2018.2019.  The results of operations for the fiscal quarter and six fiscal months ended June 29, 2019July 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 2020 end on April 4, 2020, July 4, 2020, October 3, 2020, and December 31, 2020, respectively.  The four fiscal quarters in 2019 endended on March 30, 2019, June 29, 2019, September 28, 2019, and December 31, 2019, respectively.  The four fiscal quarters in 2018 ended on March 31, 2018, June 30, 2018, September 29, 2018, and December 31, 2018, respectively.

Recently Adopted Accounting Guidance

In FebruaryJune 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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.  The guidance in ASU No. 2016-02 and all related ASUs is codified in Accounting Standard Codification (“ASC”) Topic 842, Leases.  The Company adopted ASC Topic 842 effective January 1, 2019.  Upon adoption at January 1, 2019, the Company recognized right of use assets of $91,462 and lease liabilities of $95,784 on the consolidated balance sheet.  The difference between the initial right of use asset and lease liability balances recognized upon adoption of ASC Topic 842 is primarily due to accrued lease incentive balances at December 31, 2018.

On December 20, 2018, the Company received sale proceeds of $45,500 and concurrently leased-back its former manufacturing site in Santa Clara, California, under a short-term arrangement, to raze the buildings.  Upon adoption of ASC Topic 842, the Company was required to reassess the accounting for these transactions.  The transactions did not qualify as a completed sale and leaseback under previous GAAP.  However, pursuant to ASC Topic 842’s sale and leaseback guidance, the transaction would qualify as a completed sale.  The Company recognized a cumulative-effect adjustment to retained earnings (accumulated deficit) of $23,013, to recognize the sale as of the date of adoption, and derecognized the land, building, and related deferred proceeds, which had been recorded in other accrued expenses.

The adoption of the ASU did not have a material impact on the Company's results of operations or cash flows.  See Note 3.

Recently Issued Accounting Guidance

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 0 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

Certain prior period amounts have been reclassified to conform to the current financial statement presentation.

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

Note 2 – Revenue RecognitionImpact of Coronavirus Outbreak

Sales returnsThe Company's operations have been impacted by the coronavirus ("COVID-19") outbreak.  Some manufacturing facilities 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 accrual activity is shown below: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 ($923 and $4,053) and selling, general, and administrative benefits of ($747 and $430) based on employee function on the consolidated condensed statements of operations for the fiscal quarter and six fiscal months ended July 4, 2020, respectively.


 Fiscal quarters ended  Six fiscal months ended 
  June 29, 2019  June 30, 2018  June 29, 2019  June 30, 2018 
Beginning balance $37,577  $32,706  $42,663  $36,680 
Sales allowances  28,903   25,365   57,114   49,553 
Credits issued  (22,270)  (19,348)  (55,332)  (47,798)
Foreign currency  172   (691)  (63)  (403)
Ending balance $44,382  $38,032  $44,382  $38,032 
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.

13
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.  Substantially all of the Company’s leases are structured and classified as operating leases.  As of January 1, 2019, the Company accounts for its leases in accordance with ASC Topic 842.

The Company leases assets in each region in which it operates.  The Company’s leases are generally denominated in the currency of the leased assets' location, which may not be the functional currency of the subsidiary lessee.  Accordingly, the Company remeasures its lease liability and recognizes a transactional gain/loss for leases denominated in currencies other than the functional currency of the subsidiary lessee.

The Company recognizes right of use assets and lease liabilities for leases greater than twelve months in duration based on the contract consideration for lease components through the term of the lease and the applicable discount rate.  Leases with a duration less than or equal to twelve months are considered short-term leases.  The Company does not recognize right of use assets or lease liabilities for short-term leases and classifies the expense as short-term lease expense.  Variable lease payments based on an index or rate are included in the right of use assets and lease liabilities based on the effective rates at lease commencement.  Changes in the rates or indices do not impact the right of use asset or lease liability and are recognized as a component of lease expense in the statement of operations.  Variable lease payments not based on an index or rate are not included in the initial right of use asset and lease liability and are recognized when incurred as a component of lease expense in the statement of operations.

The Company has elected to not separate contract consideration for lease and non-lease components for its building leases.  In addition to the noncancellable period of a lease, the Company includes periods covered by extension options it is reasonably certain to exercise, termination options that it is reasonably certain not to exercise, and extension and termination options controlled by the lessor in its determination of the lease term.  The Company uses the rate implicit in the contract whenever possible when determining the applicable discount rate.  When the implicit rate is not used, the Company employs a portfolio approach based on the duration of the lease.  The portfolio lease rates are calculated monthly.

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 sheetsheets for the Company's operating leases were as of June 29, 2019 and the net right of use assets and lease liabilities recognized upon the adoption of ASC Topic 842 on January 1, 2019 are presented below:follows:


 
June 29, 2019
  
January 1, 2019
  
July 4, 2020
  
December 31, 2019
 
Right of use assets
            
Operating Leases
            
Buildings and improvements
 
$
90,989
  
$
86,058
  
$
98,048
  
$
87,689
 
Machinery and equipment
  
5,147
   
5,404
   
5,105
   
5,473
 
Total
 
$
96,136
  
$
91,462
  
$
103,153
  
$
93,162
 
Current lease liabilities
                
Operating Leases
                
Buildings and improvements
 
$
12,676
  
$
10,644
  
$
18,716
  
$
17,410
 
Machinery and equipment
  
2,647
   
3,317
   
2,727
   
2,807
 
Total
 
$
15,323
  
$
13,961
  
$
21,443
  
$
20,217
 
Long-term lease liabilities
                
Operating Leases
                
Buildings and improvements
 
$
83,604
  
$
79,000
  
$
83,372
  
$
75,877
 
Machinery and equipment
  
2,482
   
2,823
   
2,342
   
2,634
 
Total
 
$
86,086
  
$
81,823
  
$
85,714
  
$
78,511
 
Total lease liabilities
 
$
101,409
  
$
95,784
  
$
107,157
  
$
98,728
 

14
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

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

 
Fiscal quarters ended
  
Six fiscal months ended
 

 
Fiscal quarter
ended
June 29, 2019
  
Six fiscal months
ended
June 29, 2019
  
July 4, 2020
  
June 29, 2019
  
July 4, 2020
  
June 29, 2019
 
Lease expense
                  
Operating lease expense
 
$
5,627
  
$
11,163
  
$
5,760
  
$
5,627
  
$
11,412
  
$
11,163
 
Short-term lease expense
  
819
   
1,652
   
225
   
819
   
419
   
1,652
 
Variable lease expense
  
9
   
21
   
6
   
9
   
29
   
21
 
Total lease expense
 
$
6,455
  
$
12,836
  
$
5,991
  
$
6,455
  $11,860  $12,836 

The Company paid $12,867 and $10,277 for its operating leases in the six fiscal months ended July 4, 2020 and June 29, 2019, respectively, which are included in operating cash flows on the consolidated condensed statementstatements of cash flows.  The weighted-average remaining lease term for the Company's operating leases is 9.2 years and the weighted-average discount rate is 6.1%6.0% as of June 29, 2019.July 4, 2020.

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


 
June 29, 2019
  
July 4, 2020
 
2019 (excluding the six fiscal months ended June 29, 2019)
 
$
11,095
 
2020
  
19,294
 
2020 (excluding the six fiscal months ended July 4, 2020)
 
$
11,165
 
2021
  
16,198
   
20,498
 
2022
  
13,408
   
16,838
 
2023
  
12,387
   
14,370
 
2024
  
13,218
 
Thereafter
  
61,246
   
63,394
 

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.

The Company elected to use the package of practical expedients available in ASC Topic 842; and accordingly, did not reassess existing contracts for leases, the classification of existing leases, or initial direct costs for any existing leases.  The Company also elected to use the practical expedient available in ASC Topic 842 for land easements.

The Company did not elect the practical expedient available in ASC Topic 842 to use hindsight in determining the lease term.  Accordingly, the remaining lease term as of January 1, 2019 was used to calculate the initial right of use asset and lease liability.

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

Note 4 – AcquisitionRestructuring and Related Activities

AsIn the third fiscal quarter of 2019, the Company announced global cost reduction and management rejuvenation programs as part of its growth strategy, the Company seekscontinuous efforts to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets, reputations for product qualityimprove efficiency and reliability,operating performance.

The programs are primarily designed to reduce manufacturing fixed costs and product lines with which theselling, general, and administrative costs company-wide, and provide management rejuvenation.  The Company has substantial marketing and technical expertise.incurred charges totalling $24,882, primarily related to cash severance costs, to implement these programs.  The Company expects these cost reductions to be fully achieved by December 2020.  All participants in the program are now identified.

On January 3, 2019,The following table summarizes the Company acquired substantially all of the assets of Bi-Metallix, Inc. ("Bi-Metallix"), a U.S.-based, privately-held provider of electron beam continuous strip welding services for $11,862.  The Company was a major customer of Bi-Metallix, and the acquired business is being vertically integrated into the Company's Resistors & Inductors segment.  Based on an estimate of their fair values, the Company allocated $2,900 of the purchase priceactivity to definite-lived intangible assets.  After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the Company recorded goodwill of $3,324 related to this acquisition.  program:

Expense recorded in 2019 $24,139 
Cash paid  (1,330)
Foreign currency translation  35 
Balance at December 31, 2019 $22,844 
Expense recorded in 2020  743 
Cash paid  (6,465)
Foreign currency translation  (21)
Balance at July 4, 2020 $17,101 

The resultspayment terms vary by country, but generally are paid in a lump sum at cessation of employment.  The current portion of the liability is $13,401 and operations of this acquisition have been included in the Resistors & Inductors segment since January 3, 2019.  The inclusion of this acquisition did not have a material impact on the Company's consolidated results for the fiscal quarter and six fiscal months ended June 29, 2019.  The goodwill related to this acquisition is included in the Resistors & Inductors reporting unit for goodwill impairment testing.

Had this acquisition occurred as of the beginning of the periods presented in these consolidated condensed financial statements, the pro forma statements of operations would not be materially different thanother accrued expenses on the consolidated condensed statementsbalance sheet.  The non-current portion of operations presented.

The remaining fluctuationthe liability is $3,700 and is included in other liabilities on the goodwill accountconsolidated condensed balance is due to foreign currency translation.sheet.

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


Note 5 – 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 July 4, 2020 and June 29, 2019 and June 30, 2018 reflect the Company’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’s earnings and the applicable tax rates in the various jurisdictions where the Company operates.

During the second fiscal quarter of 2019,2020, the Company repatriated approximately $73,590$104,091 to the United States, and paid withholding and foreign taxes of $20,479.  The Company expects to repatriate an additional approximately $104,000 to the United States in the third fiscal quarter of 2019, net of withholding and foreign taxes of about $15,000.$16,258.  Substantially all of these amounts will bewere used to repay certain intercompany indebtedness, to pay the U.S. transition tax, and to fund capital expansion projects.indebtedness.

After completing these phases of cash repatriation, there will be approximately $100,000 of unremitted foreign earnings remaining that the Company has deemed not permanently reinvested and thus has accrued foreign withholding and other taxes.   The Company continues to evaluate the timingrepurchased a portion of the reparation of these remaining amounts,outstanding convertible notes and may decide to ultimately not repatriate some of these amounts. 

As part of the Company’s cash repatriation activity, the Company settled an intercompany loan, which previously had been accounted for at the historical foreign exchange rate (akin to an equity contribution) because the debtor entity did not have the intent or ability to repay such intercompany loan.   Currency translation adjustments were recordeddebentures in accumulated other comprehensive income, and were not included in U.S. GAAP pre-tax income.  The Company’s cash repatriation activity resulted in the ability to repay such intercompany loan.  Upon settlement of this intercompany loan, the foreign entity realized a taxable gain.  Income tax expense for the fiscal quarter and six fiscal months ended June 29, 2019 includes tax expense of $7,554 related to this tax-basis foreign exchange gain.

The Company’s repurchase of a portion of the outstanding convertible debentures in the first fiscal quarter of 2019July 4, 2020 (see Note 6) slightly reduced the Company’s expected 2019 tax rate..  The Company recognized a tax benefitbenefits on the pre-tax loss on early extinguishment of debt.  The Company also recognized a tax benefitbenefits of $1,312,$1,346 in the six fiscal months ended July 4, 2020, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the extinguished debentures.

Income tax expense for the fiscal quarter and six fiscal months ended June 29, 2019, includes tax benefit of $48 and $633, respectively, for the periodic remeasurement of the deferred tax liability recorded for the foreign taxes associated with the Company's cash repatriation program.

During the six fiscal months ended June 29, 2019,July 4, 2020, the liabilities for unrecognized tax benefits increaseddecreased by $4,784$3,397 on a net basis, principallyprimarily due to increases for tax positions taken insettlement of an audit and the current and prior periods and interest, offset by expiration of a statute, partially offset by accruals for current year tax positions and payments.interest.

Income tax expense for the fiscal quarter and six fiscal months ended June 30, 2018 includes additional tax expense of $12,000 recognized as a result of additional analysis of the impact of the Tax Cuts and Jobs Act completed in the second fiscal quarter of 2018.
The Company recognized a tax benefit on the pre-tax loss on early extinguishment of debt in the second fiscal quarter of 2018.  The Company also recognized a tax benefit of $33,963, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the extinguished debentures.

Income tax expense for the fiscal quarter and six fiscal months ended June 30, 2018 also included tax benefits of $9,006 and $7,690, respectively for the periodic remeasurement of the deferred tax liability recorded for the Company's cash repatriation program.

17
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 6 – Long-Term Debt

Long-term debt consists of the following:


 June 29, 2019  December 31, 2018 
       
Credit facility $28,000  $- 
Convertible senior notes, due 2025  502,071   495,203 
Convertible senior debentures, due 2040  146   539 
Convertible senior debentures, due 2041  8,132   12,812 
Convertible senior debentures, due 2042  -   923 
Deferred financing costs  (18,486)  (14,968)
   519,863   494,509 
Less current portion  -   - 
  $519,863  $494,509 

Credit Facility

On June 5, 2019, the Company entered into a new credit agreement with a consortium of banks led by JPMorgan Chase Bank, N.A., as administrative agent, and the lenders (the "New Credit Facility"), which provides an aggregate commitment of $750,000 of revolving loans available until June 5, 2024.  The New Credit Facility replaces Vishay’s previous credit agreement that provided for an aggregate commitment of $640,000, and that was scheduled to mature on December 10, 2020.  The New Credit Facility also provides for the ability of Vishay to request up to $300,000 of incremental facilities, subject to the satisfaction of certain conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt.

Borrowings under the New Credit Facility bear interest at LIBOR plus an interest margin.  The applicable interest margin is based on Vishay's leverage ratio.  Based on Vishay's current leverage ratio, borrowings bear interest at LIBOR plus 1.50%, the same as pursuant to the previous credit agreement.  Vishay also pays a commitment fee, also based on its leverage ratio, on undrawn amounts.  The undrawn commitment fee, based on Vishay's current leverage ratio, is 0.25% per annum, an improvement of 5 basis points over the previous credit agreement. 

The New Credit Facility allows an unlimited amount of defined “Investments,” which include certain intercompany transactions and acquisitions, provided the Company's pro forma leverage ratio is equal to or less than 2.75 to 1.00.  If the Company's pro forma leverage ratio is greater than 2.75 to 1.00, such Investments are subject to certain limitations.

The New Credit Facility also allows an unlimited amount of defined "Restricted Payments," which include cash dividends and share repurchases, provided the Company's pro forma leverage ratio is equal to or less than 2.50 to 1.00.  If the Company's pro forma leverage ratio is greater than 2.50 to 1.00, the New Credit Facility allows such payments up to $100,000 per annum (subject to a cap of $300,000 for the term of the facility, with up to $25,000 of any unused amount of the $100,000 per annum base available for use in the next succeeding calendar year).

Similar to the previous credit agreement, the borrowings under the New 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.  

The New Credit Facility continues to limit or restrict the Company and its subsidiaries, from, among other things, incurring indebtedness, incurring liens on its respective assets, making investments and acquisitions (assuming the Company’s 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 the Company's pro forma leverage ratio is greater than 2.50 to 1.00), and requires the Company to comply with other covenants, including the maintenance of specific financial ratios.

Similar to the previous credit agreement, the New Credit Facility also contains customary events of default, including, but not limited to, failure to pay principal or interest, failure to pay or default under other material debt, material misrepresentation or breach of warranty, violation of certain covenants, a change of control, the commencement of  bankruptcy proceedings, the insolvency of Vishay or certain of its significant subsidiaries, and the rendering of a judgment in excess of $50,000 against Vishay or its subsidiaries.  Upon the occurrence of an event of default under the New Credit Facility, Vishay's obligations under the credit facility may be accelerated and the lending commitments under the credit facility may be terminated.

18
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Convertible Debt Instruments
 July 4, 2020  December 31, 2019 
       
Credit facility $-  $- 
Convertible senior notes, due 2025  451,169   509,128 
Convertible senior debentures, due 2040  128   126 
Convertible senior debentures, due 2041  1,058   6,677 
Deferred financing costs  (13,861)  (16,784)
   438,494   499,147 
Less current portion  -   - 
  $438,494  $499,147 

The following table summarizes some key facts and terms regarding the outstanding convertible debt instruments as of June 29, 2019:July 4, 2020:


 
Convertible
Senior Notes
Due 2025
  
Convertible
Senior
Debentures
Due 2040
  
Convertible
Senior
Debentures
Due 2041
  
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  June 12, 2018  November 9, 2010  May 13, 2011 
Maturity date June 15, 2025  November 15, 2040  May 15, 2041  June 15, 2025  November 15, 2040  May 15, 2041 
Principal amount as of June 29, 2019 $600,000  $350  $20,790 
Principal amount as of July 4, 2020 $524,230  $300  $2,640 
Cash coupon rate (per annum)  2.25%  2.25%  2.25%  2.25%  2.25%  2.25%
Nonconvertible debt borrowing rate at issuance (per annum)  5.50%  8.00%  8.375%  5.50%  8.00%  8.375%
Conversion rate effective June 12, 2019 (per $1 principal amount)  31.7738   79.1822   57.7830 
Effective conversion price effective June 12, 2019 (per share) $31.47  $12.63  $17.31 
Conversion rate effective June 11, 2020 (per $1 principal amount)  31.8470   80.9286   59.0575 
Effective conversion price effective June 11, 2020 (per share) $31.40  $12.36  $16.93 
130% of the conversion price (per share) $40.91  $16.42  $22.50  $40.82  $16.07  $22.01 
Call date  n/a  November 20, 2020  May 20, 2021   n/a  November 20, 2020  May 20, 2021 

The terms of the convertible senior debentures due 2040 and due 2041 are generally congruent.  The terms of the fully retired convertible senior debentures due 2042 were also generally congruent to the convertible senior debentures due 2040 and due 2041.

Prior to three months before the maturity date, the holders may 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 2040 and due 2041 are not currently convertible.

Prior to December 15, 2024, the holders of the convertible senior notes due 2025 may convert their notes only under the following 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 price for a specified period (initially $40.94);period; (2) the trading price of the notes falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; or (3) upon the occurrence of specified corporate transactions.

The convertible senior debenturesnotes due 2040 became convertible subsequent to the September 30, 2017 evaluation of the conversion criteria, and remained convertible for each subsequent quarterly evaluation through the June 29, 2019 evaluation, due to the sale price of Vishay's common stock exceeding 130% of the conversion price for the applicable periods.  The convertible senior debentures due 20402025 are not currently convertible.

The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for the convertible debt instruments effective as of the ex-dividend date of each cash dividend.  The conversion rate and effective conversion price for the convertible senior notes due 2025 is adjusted for quarterly cash dividends to the extent such dividends exceed $0.085 per share 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’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.

1918
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 debt instruments are reflected in the Company’s consolidated condensed balance sheets as follows:


 
Principal
amount of the
debt
instruments
  
Unamortized
discount
  
Embedded
derivative
  
Carrying
value of
liability
component
  
Equity
component
(including
temporary
equity) -net
carrying value
  
Principal
amount of the
debt
instruments
  
Unamortized
discount
  
Carrying
value of
liability
component
  
Equity
component
(including
temporary
equity) -net
carrying value
 
June 29, 2019               
July 4, 2020            
Convertible senior notes due 2025 $600,000   (97,929)  -  $502,071  $85,262  $524,230   (73,061) $451,169  $74,495 
Convertible senior debentures due 2040 and due 2041 $21,140   (12,882)  20  $8,278  $8,767  $2,940   (1,754) $1,186  $1,216 
Total $621,140  $(110,811) $20  $510,349  $94,029  $527,170  $(74,815) $452,355  $75,711 
                                    
December 31, 2018                    
December 31, 2019                
Convertible senior notes due 2025 $600,000   (104,797)  -  $495,203  $85,262  $600,000   (90,872) $509,128  $85,262 
Convertible senior debentures due 2040, due 2041, and due 2042 $36,556   (22,352)  70  $14,274  $15,092 
Convertible senior debentures due 2040 and due 2041 $17,190   (10,387) $6,803  $7,129 
Total $636,556  $(127,149) $70  $509,477  $100,354  $617,190  $(101,259) $515,931  $92,391 

Interest is payable on the convertible 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’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 their respective issuance.in 2020 and 2021, respectively.  The convertible senior notes due 2025 do not possess contingent interest features.

Interest expense related to the convertible 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
  
Other non-cash
interest expense
  
Total interest
expense
related to the
debt
instruments
 
July 4, 2020            
Convertible senior notes due 2025 $3,266   3,479   435  $7,180 
Convertible senior debentures $16   9   -  $25 
Total $3,282  $3,488  $435  $7,205 

 
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
debt
instruments
                 
June 29, 2019                               
Convertible senior notes due 2025 $3,375   3,442   454   -  $7,271  $3,375   3,442   454  $7,271 
Convertible senior debentures $119   53   2   (4) $170  $119   53   (2) $170 
Total $3,494  $3,495  $456  $(4) $7,441  $3,494  $3,495  $452  $7,441 
                    
June 30, 2018                    
Convertible senior notes due 2025 $713   556   151   -  $1,420 
Convertible senior debentures $2,692   1,099   39   (156) $3,674 
Total $3,405  $1,655  $190  $(156) $5,094 

2019
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Interest expense related to the convertible debt instruments is reflected on the consolidated condensed statements of operations for the six fiscal months ended:

 
Contractual
coupon
interest
  
Non-cash
amortization
of debt
discount
  
Other non-cash
interest expense
  
Total interest
expense related to the
debt
instruments
 
July 4, 2020            
Convertible senior notes due 2025 $6,641   7,096   889  $14,626 
Convertible senior debentures $60   29   -  $89 
Total $6,701  $7,125  $889  $14,715 

 
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
debt
instruments
                 
June 29, 2019                               
Convertible senior notes due 2025 $6,750   6,868   908   -  $14,526  $6,750   6,868   908  $14,526 
Convertible senior debentures due 2040 and due 2041 $267   117   4   (22) $366 
Convertible senior debentures $267   117   (18) $366 
Total $7,017  $6,985  $912  $(22) $14,892  $7,017  $6,985  $890  $14,892 
                    
June 30, 2018                    
Convertible senior notes due 2025 $713   556   151   -  $1,420 
Convertible senior debentures due 2040 and due 2041 $5,927   2,408   86   5  $8,426 
Total $6,640  $2,964  $237  $5  $9,846 

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 $960, $12,288 and $2,168$75,770 principal amountsamount of convertible senior debenturesnotes due 2040, due 2041, and due 2042, respectively,2025 in the firstsecond fiscal quarter of 2019.2020.  The net carrying value of the debentures repurchased were $396, $4,770, and $924, respectively.was $65,056.  In accordance with the authoritative accounting guidance for convertible debentures,debt, the aggregate repurchase payment of $22,695$70,676 was allocated between the liability ($7,311)65,056) and equity (including temporary($5,620) components of the convertible notes, 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 notes of $1,146, including the write-off of unamortized debt issuance costs in the second fiscal quarter of 2020.

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.  The aggregate repurchase payment of $19,849 was allocated between the liability ($8,452) and equity $15,384)($11,397) 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 $1,307,$2,920, including the write-off of a portion of unamortized debt issuance costs.  The convertible senior debentures due 2042 have been fully repurchased, andcosts in the trustee has confirmed that the Company has satisfied and discharged its obligations under the indenture governing the convertible senior debentures due 2042.first fiscal quarter of 2020.

2120
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 7 – 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
  Total 
Balance at January 1, 2019 $(58,291) $51,500  $(6,791)
Other comprehensive income before reclassifications  -   (2,605) $(2,605)
Tax effect  -   -  $- 
Other comprehensive income before reclassifications, net of tax  -   (2,605) $(2,605)
Amounts reclassified out of AOCI  4,107   -  $4,107 
Tax effect  (1,027)  -  $(1,027)
Amounts reclassified out of AOCI, net of tax  3,080   -  $3,080 
Net other comprehensive income $3,080  $(2,605) $475 
Balance at June 29, 2019 $(55,211) $48,895  $(6,316)

Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost.  See Note 8 for further information.

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

Note 7 – Revenue Recognition

Sales returns and allowances accrual activity is shown below:

 Fiscal quarters ended  Six fiscal months ended 
  July 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
Beginning balance $34,812  $37,577  $40,508  $42,663 
Sales allowances  19,224   28,903   41,856   57,114 
Credits issued  (14,991)  (22,270)  (42,973)  (55,332)
Foreign currency  387   172   41   (63)
Ending balance $39,432  $44,382  $39,432  $44,382 

21
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 8 – 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
  Total 
Balance at January 1, 2020 $(68,020) $41,374  $(26,646)
Other comprehensive income before reclassifications  -   (3,041) $(3,041)
Tax effect  -   -  $- 
Other comprehensive income before reclassifications, net of tax  -   (3,041) $(3,041)
Amounts reclassified out of AOCI  4,442   -  $4,442 
Tax effect  (1,081)  -  $(1,081)
Amounts reclassified out of AOCI, net of tax  3,361   -  $3,361 
Net other comprehensive income $3,361  $(3,041) $320 
Balance at July 4, 2020 $(64,659) $38,333  $(26,326)

Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost.  See Note 9 for further information.
22
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Note 9 – 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 second fiscal quarters of 20192020 and 20182019 for the Company’s defined benefit pension plans:


 
Fiscal quarter ended
June 29, 2019
  
Fiscal quarter ended
June 30, 2018
  
Fiscal quarter ended
July 4, 2020
  
Fiscal quarter ended
June 29, 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 $-  $845  $-  $927  $-  $1,071  $-  $845 
Interest cost  424   1,281   371   1,211   341   919   424   1,281 
Expected return on plan assets  -   (489)  -   (479)  -   (491)  -   (489)
Amortization of prior service cost  36   50   36   54   36   30   36   50 
Amortization of losses  118   1,344   159   1,566   297   1,588   118   1,344 
Curtailment and settlement losses  -   500   -   455   -   231   -   500 
Net periodic benefit cost $578  $3,531  $566  $3,734  $674  $3,348  $578  $3,531 

The following table shows the components of the net periodic pension cost for the six fiscal months ended July 4, 2020 and June 29, 2019 and June 30, 2018 for the Company’s defined benefit pension plans:


 
Six fiscal months ended
June 29, 2019
  
Six fiscal months ended
June 30, 2018
  
Six fiscal months ended
July 4, 2020
  
Six fiscal months ended
June 29, 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 $-  $1,697  $-  $1,875  $-  $2,145  $-  $1,697 
Interest cost  848   2,572   742   2,453   683   1,843   848   2,572 
Expected return on plan assets  -   (979)  -   (967)  -   (986)  -   (979)
Amortization of prior service cost  72   101   72   109   72   60   72   101 
Amortization of losses  236   2,703   318   3,170   595   3,180   236   2,703 
Curtailment and settlement losses  -   1,005   -   917   -   460   -   1,005 
Net periodic benefit cost $1,156  $7,099  $1,132  $7,557  $1,350  $6,702  $1,156  $7,099 

23
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 second fiscal quarters of 20192020 and 20182019 for the Company’s other postretirement benefit plans:


 
Fiscal quarter ended
June 29, 2019
  
Fiscal quarter ended
June 30, 2018
  
Fiscal quarter ended
July 4, 2020
  
Fiscal quarter ended
June 29, 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
 
                        
Service cost $35  $72  $34  $73  $28  $68  $35  $72 
Interest cost  78   30   68   28   59   16   78   30 
Amortization of prior service (credit)  -   -   (37)  - 
Amortization of losses (gains)  (32)  27   (9)  27   6   31   (32)  27 
Net periodic benefit cost $81  $129  $56  $128  $93  $115  $81  $129 

The following table shows the components of the net periodic pension cost for the six fiscal months ended July 4, 2020 and June 29, 2019 and June 30, 2018 for the Company’s other postretirement benefit plans:


 
Six fiscal months ended
June 29, 2019
  
Six fiscal months ended
June 30, 2018
  
Six fiscal months ended
July 4, 2020
  
Six fiscal months ended
June 29, 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
 
                        
Service cost $70  $144  $68  $148  $56  $137  $70  $144 
Interest cost  155   60   136   58   118   31   155   60 
Amortization of prior service (credit)  -   -   (74)  - 
Amortization of losses (gains)  (64)  54   (19)  54   13   62   (64)  54 
Net periodic benefit cost $161  $258  $111  $260  $187  $230  $161  $258 

24
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 9 – 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 Company determines compensation cost for restricted stock units (“RSUs”) and phantom stock units 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  Six fiscal months ended 
  June 29, 2019  June 30, 2018  June 29, 2019  June 30, 2018 
             
Restricted stock units $890  $778  $4,249   3,047 
Phantom stock units  -   -   177   214 
Total $890  $778  $4,426   3,261 

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 June 29, 2019 (amortization periods in years):


 
Unrecognized
Compensation
Cost
  
Weighted
Average
Remaining
Amortization
Periods
 
       
Restricted stock units $4,779   0.9 
Phantom stock units  -   0.0 
Total $4,779     

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.

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

2007 Stock Incentive Plan

The Company’s 2007 Stock Incentive Program (the “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 June 29, 2019 and changes during the six fiscal months then ended are presented below (number of RSUs in thousands):


 
Number of
RSUs
  
Weighted
Average
Grant-date
Fair Value per
Unit
 
Outstanding:      
January 1, 2019  904  $14.77 
Granted  314   19.85 
Vested*  (361)  11.70 
Cancelled or forfeited  (15)  17.71 
Outstanding at June 29, 2019  842  $17.93 
         
Expected to vest at June 29, 2019  842     

* 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, 2020  167  -  167
January 1, 2021  141  -  141
January 1, 2022  174  -  174

Phantom Stock Units

The 2007 Program authorizes the grant of phantom stock units to the extent provided for in the Company’s employment agreements with certain executives.  Each phantom stock unit entitles the recipient to receive a share of common stock at the individual’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 June 29, 2019 and changes during the six fiscal months then ended are presented below (number of phantom stock units in thousands):


 
Number of
units
  
Grant-date
Fair Value per
Unit
 
Outstanding:      
January 1, 2019  170    
Granted  10  $17.72 
Dividend equivalents issued  2     
Outstanding at June 29, 2019  182     

26
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 10 – 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 Company determines compensation cost for restricted stock units (“RSUs”) and phantom stock units 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  Six fiscal months ended 
  July 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
             
Restricted stock units $875  $890  $3,658   4,249 
Phantom stock units  -   -   215   177 
Total $875  $890  $3,873   4,426 

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 July 4, 2020 (amortization periods in years):

 
Unrecognized
Compensation
Cost
  
Weighted
Average
Remaining
Amortization
Periods
 
       
Restricted stock units $4,162   0.9 
Phantom stock units  -   n/a 
Total $4,162     

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.

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

2007 Stock Incentive Plan

The Company’s 2007 Stock Incentive Program (the “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 July 4, 2020 and changes during the six fiscal months then ended are presented below (number of RSUs in thousands):

 
Number of
RSUs
  
Weighted
Average
Grant-date
Fair Value per
Unit
 
Outstanding:      
January 1, 2020  842  $17.93 
Granted  272   18.30 
Vested*  (308)  15.70 
Cancelled or forfeited  (13)  19.06 
Outstanding at July 4, 2020  793  $18.90 
         
Expected to vest at July 4, 2020  793     

* 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, 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’s employment agreements with certain executives.  Each phantom stock unit entitles the recipient to receive a share of common stock at the individual’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 July 4, 2020 and changes during the six fiscal months then ended are presented below (number of phantom stock units in thousands):

 
Number of
units
  
Grant-date
Fair Value per
Unit
 
Outstanding:      
January 1, 2020  183    
Granted  10  $21.49 
Dividend equivalents issued  2     
Outstanding at July 4, 2020  195     

26
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Note 11 – 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 periods ended June 29, 2019 have 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”).  Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income.  The Company’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 direct 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
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  MOSFETs  Diodes  
Optoelectronic
Components
  Resistors  Inductors  Capacitors  Corporate / Other*  Total 
Fiscal quarter ended June 29, 2019:                  
Fiscal quarter ended July 4, 2020:
Fiscal quarter ended July 4, 2020:
                      
Net revenues $128,842  $142,042  $60,675  $242,383  $111,298  $685,240  $118,944  $124,187  $49,130  $140,412  $65,185  $83,859  $-  $581,717 
                                                        
Gross profit $31,933  $28,857  $16,231  $71,415  $26,165  $174,601  $26,978  $24,904  $11,728  $32,513  $20,252  $15,218  $(923) $130,670 
                                                        
Segment operating income $22,541  $24,010  $12,022  $63,443  $21,161  $143,177  $17,602  $19,814  $7,948  $27,879  $17,713  $10,524  $(923) $100,557 
                                                        
Fiscal quarter ended June 30, 2018:                        
Fiscal quarter ended June 29, 2019:
Fiscal quarter ended June 29, 2019:
                             
Net revenues $136,559  $182,466  $75,709  $253,947  $112,349  $761,030  $128,842  $142,042  $60,675  $165,359  $77,024  $111,298  $-  $685,240 
                                                        
Gross profit $38,427  $52,408  $26,404  $84,969  $25,030  $227,238  $31,933  $28,857  $16,231  $46,877  $24,538  $26,165  $-  $174,601 
                                                        
Segment operating income $28,517  $47,100  $22,165  $76,248  $19,710  $193,740  $22,541  $24,010  $12,022  $41,667  $21,776  $21,161  $-  $143,177 

Six fiscal months ended July 4, 2020:
                      
Net revenues $235,837  $239,530  $103,309  $299,620  $138,970  $177,292  $-  $1,194,558 
                                 
Gross Profit $55,130  $44,422  $26,313  $77,286  $43,239  $35,573  $(4,053) $277,910 
                                 
Segment Operating Income $36,260  $34,236  $18,634  $66,764  $38,023  $25,594  $(4,053) $215,458 
                                 
Six fiscal months ended June 29, 2019:
                             
Net revenues $266,183  $309,882  $121,237  $354,190  $148,664  $230,243  $-  $1,430,399 
                                 
Gross Profit $67,992  $72,349  $32,248  $109,466  $47,818  $55,887  $-  $385,760 
                                 
Segment Operating Income $49,219  $62,138  $23,732  $98,014  $42,416  $45,727  $-  $321,246 

*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 statements of operations.

Six fiscal months ended June 29, 2019:                  
Net revenues $266,183  $309,882  $121,237  $502,854  $230,243  $1,430,399 
                         
Gross Profit $67,992  $72,349  $32,248  $157,284  $55,887  $385,760 
                         
Segment Operating Income $49,219  $62,138  $23,732  $140,430  $45,727  $321,246 
                         
Six fiscal months ended June 30, 2018:                        
Net revenues $264,065  $349,483  $147,667  $497,993  $218,617  $1,477,825 
                         
Gross Profit $70,449  $95,608  $53,637  $163,499  $49,345  $432,538 
                         
Segment Operating Income $51,075  $85,031  $44,959  $146,250  $38,603  $365,918 
 Fiscal quarters ended  Six fiscal months ended 
  July 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
Reconciliation:            
Segment Operating Income $100,557  $143,177  $215,458  $321,246 
Restructuring and Severance Costs  (743)  -   (743)  - 
Impact of COVID-19 on Selling, General, and Administrative Expenses  747   -   430   - 
Unallocated Selling, General, and Administrative Expenses  (59,761)  (63,688)  (126,937)  (134,022)
Consolidated Operating Income $40,800  $79,489  $88,208  $187,224 
Unallocated Other Income (Expense)  (11,060)  (8,601)  (22,334)  (16,388)
Consolidated Income Before Taxes $29,740  $70,888  $65,874  $170,836 



 Fiscal quarters ended  Six fiscal months ended 
  June 29, 2019  June 30, 2018  June 29, 2019  June 30, 2018 
Reconciliation:            
Segment Operating Income $143,177  $193,740  $321,246  $365,918 
Unallocated Selling, General, and Administrative Expenses  (63,688)  (70,447)  (134,022)  (138,563)
Consolidated Operating Income $79,489  $123,293  $187,224  $227,355 
Unallocated Other Income (Expense)  (8,601)  (25,734)  (16,388)  (37,777)
Consolidated Income Before Taxes $70,888  $97,559  $170,836  $189,578 

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  Six fiscal months ended  Fiscal quarters ended  Six fiscal months ended 
 June 29, 2019  June 30, 2018  June 29, 2019  June 30, 2018  July 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
Distributors $368,420  $446,016  $779,980  $850,076  $349,562  $368,420  $655,008  $779,980 
OEMs  269,026   262,779   551,662   526,829   190,799   269,026   451,928   551,662 
EMS companies  47,794   52,235   98,757   100,920   41,356   47,794   87,622   98,757 
Total Revenue $685,240  $761,030  $1,430,399  $1,477,825  $581,717  $685,240  $1,194,558  $1,430,399 

Net revenues were attributable to customers in the following regions:


 Fiscal quarters ended  Six fiscal months ended  Fiscal quarters ended  Six fiscal months ended 
 June 29, 2019  June 30, 2018  June 29, 2019  June 30, 2018  July 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
Asia $246,193  $302,868  $505,919  $588,346  $260,625  $246,193  $477,709  $505,919 
Europe  254,742   272,601   533,641   539,983   179,928   254,742   412,980   533,641 
Americas  184,305   185,561   390,839   349,496   141,164   184,305   303,869   390,839 
Total Revenue $685,240  $761,030  $1,430,399  $1,477,825  $581,717  $685,240  $1,194,558  $1,430,399 

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  Six fiscal months ended  Fiscal quarters ended  Six fiscal months ended 
 June 29, 2019  June 30, 2018  June 29, 2019  June 30, 2018  July 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
Industrial $250,783  $295,617  $532,373  $575,829  $226,877  $250,783  $441,988  $532,373 
Automotive  200,580   209,858   415,366   418,252   133,834   200,580   335,777   415,366 
Telecommunications  44,562   46,467   97,842   92,391   33,496   44,562   63,188   97,842 
Computing  48,244   53,657   95,752   101,088   55,719   48,244   100,942   95,752 
Consumer Products  30,486   40,939   64,535   78,198   22,571   30,486   43,124   64,535 
Power Supplies  29,474   41,326   59,601   75,569   32,176   29,474   57,370   59,601 
Military and Aerospace  47,848   40,260   95,409   75,474   41,451   47,848   85,386   95,409 
Medical  33,263   32,906   69,521   61,024   35,593   33,263   66,783   69,521 
Total revenue $685,240  $761,030   1,430,399   1,477,825  $581,717  $685,240   1,194,558   1,430,399 

29
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 11 – Earnings Per Share

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


 Fiscal quarters ended  Six fiscal months ended 
  June 29, 2019  June 30, 2018  June 29, 2019  June 30, 2018 
             
Numerator:            
Net earnings attributable to Vishay stockholders $44,477  $103,097  $119,936  $165,463 
                 
Denominator:                
Denominator for basic earnings per share:                
Weighted average shares  144,441   144,215   144,409   144,188 
Outstanding phantom stock units  180   167   180   167 
Adjusted weighted average shares  144,621   144,382   144,589   144,355 
                 
Effect of dilutive securities:                
Convertible and exchangeable debt instruments  24   12,810   131   13,710 
Restricted stock units  378   465   438   515 
Dilutive potential common shares  402   13,275   569   14,225 
                 
Denominator for diluted earnings per share:                
Adjusted weighted average shares - diluted  145,023   157,657   145,158   158,580 
                 
Basic earnings per share attributable to Vishay stockholders $0.31  $0.71  $0.83  $1.15 
                 
Diluted earnings per share attributable to Vishay stockholders $0.31  $0.65  $0.83  $1.04 

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

Diluted earnings 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 Six fiscal months ended
 June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018
Convertible debt instruments:       
Convertible Senior Notes, due 202519,055 3,769 19,053 1,885
Weighted average other315 307 315 307

The Company’s convertible debt instruments are only convertible for specified periods upon the occurrence of certain events.  The convertible debentures due 2040 became convertible subsequent to the September 30, 2017 evaluation of the conversion criteria, and remained convertible for each subsequent quarterly evaluation prior to the June 29, 2019 evaluation.  The Company's convertible debt instruments are not currently convertible.  In periods that the convertible debt instruments are not convertible, the certain conditions which could trigger conversion of the debt 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 debt instruments in cash and settle any additional amounts in shares of Vishay common stock. Accordingly, the convertible instruments are included in the diluted earnings per share computation using the “treasury stock method” (similar to options and warrants) rather than the “if converted method” otherwise required for convertible debt.  Under the “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 $12.63, 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 $17.31, 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 $31.47, no shares are included in the diluted earnings per share computation for the convertible senior notes due 2025.

31
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

Note 12 – Earnings Per Share

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

 Fiscal quarters ended  Six fiscal months ended 
  July 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
             
Numerator:            
Net earnings attributable to Vishay stockholders $24,653  $44,477  $51,872  $119,936 
                 
Denominator:                
Denominator for basic earnings per share:                
Weighted average shares  144,651   144,441   144,624   144,409 
Outstanding phantom stock units  195   180   194   180 
Adjusted weighted average shares  144,846   144,621   144,818   144,589 
                 
Effect of dilutive securities:                
Convertible debt instruments  5   24   50   131 
Restricted stock units  319   378   364   438 
Dilutive potential common shares  324   402   414   569 
                 
Denominator for diluted earnings per share:                
Adjusted weighted average shares - diluted  145,170   145,023   145,232   145,158 
                 
Basic earnings per share attributable to Vishay stockholders $0.17  $0.31  $0.36  $0.83 
                 
Diluted earnings per share attributable to Vishay stockholders $0.17  $0.31  $0.36  $0.83 

Diluted earnings 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  Six fiscal months ended 
  July 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
Convertible debt instruments:            
Convertible Senior Notes, due 2025  18,321   19,055   18,704   19,053 
Convertible Senior Debentures, due 2041  155   -   122   - 
Weighted average other  387   315   356   315 

The Company’s convertible debt instruments are only convertible for specified periods upon the occurrence of certain events.  The Company's convertible debt instruments are not currently convertible.  In periods that the convertible debt instruments are not convertible, the certain conditions which could trigger conversion of the debt 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 debt instruments in cash and settle any additional amounts in shares of Vishay common stock. Accordingly, the convertible instruments are included in the diluted earnings per share computation using the “treasury stock method” (similar to options and warrants) rather than the “if converted method” otherwise required for convertible debt.  Under the “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 $12.36, 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 $16.93, 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 $31.40, no shares are included in the diluted earnings per share computation for the convertible senior notes due 2025.

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


Note 13 – 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’s own assumptions.

An asset or liability’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 
June 29, 2019            
Assets:            
Assets held in rabbi trusts $49,615  $32,786  $16,829  $- 
Available for sale securities $4,431   4,431   -   - 
  $54,046  $37,217  $16,829  $- 
Liabilities:                
Embedded derivative - convertible debentures due 2040 $-  $-  $-  $- 
Embedded derivative - convertible debentures due 2041 $(20)  -   -   (20)
  $(20) $-  $-  $(20)
December 31, 2018                
Assets:                
Assets held in rabbi trusts $41,770  $26,278   15,492  $- 
Available for sale securities $4,309   4,309   -   - 
  $46,079  $30,587  $15,492  $- 
Liabilities:                
Embedded derivative - convertible debentures due 2040 $(1) $-  $-  $(1)
Embedded derivative - convertible debentures due 2041 $(67)  -   -   (67)
Embedded derivative - convertible debentures due 2042 $(2)  -   -   (2)
  $(70) $-  $-  $(70)
 
Total
Fair Value
  Level 1  Level 2  Level 3 
July 4, 2020            
Assets:            
Assets held in rabbi trusts $53,888  $36,822  $17,066  $- 
Available for sale securities $4,401   4,401   -   - 
  $58,289  $41,223  $17,066  $- 
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 debenturesdebt instruments between the associated liability and equity components of the repurchased convertible senior debenturesdebt instruments based on a nonrecurring fair value measurement of the convertible senior debentures due 2040, due 2041, and due 2042debt instruments 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” 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’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.
3231
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)

The Company holds investments in equity 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 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 and due 2041 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 fair value of the long-term debt, excluding the derivative liabilities and deferred financing costs, at June 29, 2019July 4, 2020 and December 31, 20182019 is approximately $610,600$497,600 and $577,200,$632,200, respectively, compared to its carrying value, excluding the derivative liabilities and deferred financing costs, of $538,329$452,355 and $509,407,$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 June 29, 2019July 4, 2020 and December 31, 2018,2019, the Company’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.  NoNaN 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 no0 transfers to or from the held-to-maturity classification.  All decreases in the account balance are due to returns of principal at the securities’ maturity dates.  Interest on the securities is recognized as interest income when earned.

At June 29, 2019July 4, 2020 and December 31, 2018,2019, the Company’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’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.

33
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)


Note 13 – Restructuring and Related Activities

Subsequent Events

On July 29, 2019, the Company announced global cost reduction and management rejuvenation programs as part of its continuous efforts to improve efficiency and operating performance.

The programs are primarily designed to reduce manufacturing fixed costs and selling, general, and administrative costs company-wide, and provide management rejuvenation.  The Company expects to incur charges of approximately $25,000, primarily related to cash severance costs, to implement these programs.  The Company expects these cost reductions to be fully achieved by December 2020.32

34


Item 2.Management’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 15, 2019.14, 2020.

Overview

Vishay Intertechnology, Inc. (“Vishay,” “we,” “us,” or “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.  Results presented herein for the first through third fiscal quarters of 2019 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 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.  We have paid dividends each quarter since the first fiscal quarter of 2014, and further increased the quarterly cash dividend by 12% to $0.095 per share in the second fiscal quarter of 2019.

During 2018 we reacted quicklyOn May 20, 2020, our Board of Directors authorized a program to the opportunities created by the enactmentrepurchase up to $200 million of the U.S. Tax Cuts and Jobs Act (“TCJA”)outstanding convertible senior notes due 2025 in December 2017.  During 2018 we repatriated approximately $724.0 million of cashopen market repurchases or through privately negotiated transactions.  Such transactions provide us more flexibility to the U.S., net of taxes, and further simplifiedadjust our balance sheet by refinancing some of our debt.  In June 2018, we used the net proceeds from issuing $600debt levels if necessary.  We repurchased $75.8 million principal amount of new convertible senior notes to repurchase some of our outstanding convertible senior debentures, which had become less tax-efficient because ofin the TCJA.  During the fourthsecond fiscal quarter of 2018, we utilized repatriated cash to repurchase additional convertible senior debentures in open market and privately-negotiated transactions with holders.  As a result of these transactions, we reduced the principal amount of outstanding convertible senior debentures due 2040, 2041, and 2042 from $575 million to $36.6 million.  2020.  We continuedalso continue to repurchase convertible senior debentures in open market and privately-negotiated transactions with holders,2020, further reducing the principal amount of outstanding convertible senior debentures to $21.1 million in 2019.$2.9 million.

We continued to re-shape our capital structure in 2019.  We replaced our existing credit agreement that was due to expire in December 2020 with a new agreement that will expire June 5, 2024.  The new credit facility increases the aggregate commitment of revolving loans from $640 million to $750 million; provides us with the ability to request up to $300 million of incremental facilities, subject to the satisfaction of certain conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt; reduces the undrawn commitment fee while maintaining the same borrowing rates; and provides greater operating flexibility, including with respect to intercompany funding and other transactions, to enable us to continue to streamline our complex subsidiary structure.

During the second fiscal quarter of 2019, we repatriated approximately $73.6 million to the United States, and paid withholding and foreign taxes of approximately $20.5 million.  We expect to repatriate an additional approximately $104 million to the United States in the third fiscal quarter of 2019, net of withholding and foreign taxes of about $15 million.  Substantially all of these amounts will be used to repay certain intercompany indebtedness, to pay the US transition tax, and to fund capital expansion projects.

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 ($0.9 million and $4.1 million) and selling, general, and administrative expenses (benefits) ($(0.7) million and $(0.4) million) based on employee function on the consolidated condensed statements of operations for the fiscal quarter and six fiscal months ended July 4, 2020, respectively.  We exclude from the amounts reported above indirect financial changes from the outbreak of COVID-19 such as general macroeconomic effects and higher shipping costs due to reduced shipping capacity.

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.
35

  We will react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess inventory build.  In the third fiscal quarter of 2019, we announced global cost reduction and management rejuvenation programs as part of our continuous efforts to improve efficiency and operating performance, which we expect to fully implement by the end of 2020.  All participants in the program are now identified.

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.  See further discussion in “Financial Metrics” and “Financial Condition, Liquidity, and Capital Resources” below.  The outbreak of COVID-19 has impacted almost all key financial metrics.  We believe that supply, in general, caught up with market demand in the first fiscal quarter of 2019.  The second fiscal quarter of 2019 was significantly impacted byexperienced a substantial decrease in orders particularly from distributionin the second fiscal quarter of 2020, due to plant closures of our customers as they reduced their inventory.and the global economic slowdown caused by the COVID-19 outbreak.  This decrease hasin orders negatively impacted almost all key financial metrics, including net revenues.metrics.
33


Net revenues for the fiscal quarter ended June 29, 2019July 4, 2020 were $685.2$581.7 million, compared to $745.2$612.8 million and $761.0$685.2 million for the fiscal quarters ended March 30, 2019April 4, 2020 and June 30, 2018,29, 2019, respectively.  The net earnings attributable to Vishay stockholders for the fiscal quarter ended June 29, 2019July 4, 2020 were $44.5$24.7 million, or $0.31$0.17 per diluted share, compared to $75.5$27.2 million, or $0.52$0.19 per diluted share for the fiscal quarter ended March 30, 2019,April 4, 2020, and $103.1$44.5 million, or $0.65$0.31 per diluted share for the fiscal quarter ended June 30, 2018.29, 2019.

Net revenues for the six fiscal months ended June 29, 2019July 4, 2020 were $1,430.4$1,194.6 million, compared to $1,477.8$1,430.4 million for the six fiscal months ended June 30, 2018.29, 2019.  The net earnings attributable to Vishay stockholders for the six fiscal months ended June 29, 2019July 4, 2020 were $119.9$51.9 million, or $0.83$0.36 per diluted share, compared to $165.5$119.9 million, or $1.04$0.83 per diluted share for the six fiscal months ended June 30, 2018.29, 2019.

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.

The items affecting comparability are (in thousands, except per share amounts):

 Fiscal quarters ended  Six fiscal months ended  Fiscal quarters ended  Six fiscal months ended 
 June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018  July 4, 2020  April 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
                              
GAAP net earnings attributable to Vishay stockholders $44,477  $75,459  $103,097  $119,936  $165,463  $24,653  $27,219  $44,477  $51,872  $119,936 
                    
Reconciling items affecting gross income:                    
Impact of COVID-19 outbreak  923   3,130   -   4,053   - 
                    
Other reconciling items affecting operating income:                    
Restructuring and severance costs  743   -   -   743   - 
Impact of COVID-19 outbreak  (747)  317   -   (430)  - 
                                        
Reconciling items affecting other income (expense):                                        
Loss on early extinguishment of debt  -   1,307   17,309   1,307   17,309   1,146   2,920   -   4,066   1,307 
                                        
Reconciling items affecting tax expense:                                        
Effects of tax-basis foreign exchange gain $7,554  $-  $-  $7,554  $-  $-  $-  $7,554  $-  $7,554 
Enactment of TCJA  -   -   12,000   -   12,000 
Effects of cash repatriation program  (48)  (585)  (9,006)  (633)  (7,690)  (190)  -   (48)  (190)  (633)
Change in deferred taxes due to early extinguishment of debt  -   (1,312)  (33,963)  (1,312)  (33,963)  -   (1,346)  -   (1,346)  (1,312)
Tax effects of pre-tax items above  -   (290)  (3,784)  (290)  (3,784)  (589)  (1,482)  -   (2,071)  (290)
                                        
Adjusted net earnings $51,983  $74,579  $85,653  $126,562  $149,335  $25,939  $30,758  $51,983  $56,697  $126,562 
                                        
Adjusted weighted average diluted shares outstanding  145,023   145,289   157,657   145,158   158,580   145,170   145,295   145,023   145,232   145,158 
                                        
Adjusted earnings per diluted share $0.36  $0.51  $0.54  $0.87  $0.94  $0.18  $0.21  $0.36  $0.39  $0.87 

3634


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  Six fiscal months ended  Fiscal quarters ended  Six fiscal months ended 
 June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018  July 4, 2020  April 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
Net cash provided by (used in) continuing operating activities $56,301  $79,518  $(8,689) $135,819  $38,170 
Net cash provided by continuing operating activities $90,431  $34,478  $56,301  $124,909  $135,819 
Proceeds from sale of property and equipment  69   395   8,194   464   8,378   177   53   69   230   464 
Less: Capital expenditures  (33,781)  (36,367)  (48,373)  (70,148)  (76,646)  (24,504)  (24,328)  (33,781)  (48,832)  (70,148)
Free cash $22,589  $43,546  $(48,868) $66,135  $(30,098) $66,104  $10,203  $22,589  $76,307  $66,135 

Our results for the fiscal quarters ended July 4, 2020 and April 4, 2020 represent the negative impact of the COVID-19 outbreak.  Our results for the fiscal quarter June 29, 2019 March 30, 2019, and June 30, 2018 and six fiscal months ending June 29, 2019 and June 30, 2018 represent the effects of the normalization of demand that we began to experience in the fourth fiscal quarter of 2018 and has accelerated through the first six fiscal months of 2019 as supply, in general, caught up with demand, and customers, particularly distributors, significantly reduced their orders as they decreasedecreased 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.

Our free cash results were significantly impacted by the payment of cash taxes related to the cash repatriated to the U.S. in the second fiscal quarters of 2020 and 2019 of $16.3 million and 2018 of $20.5 million, and $92.1 million in the second fiscal quarters of 2019 and 2018, respectively, and the installment paymentspayment of the U.S. transition tax of $14.8 million and $14.4 million in the second fiscal quartersquarter of 2019 and 2018, respectively.2019.  The 2020 installment payment of the U.S. transition tax was paid in July 2020, as permitted by the special payment relief granted by the Internal Revenue Service to all businesses in response to the COVID-19 outbreak.
3735


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”).

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’ 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.
3836


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 second fiscal quarter of 20182019 through the second fiscal quarter of 20192020 (dollars in thousands):

 2nd Quarter 2018  3rd Quarter 2018  4th Quarter 2018  1st Quarter 2019  2nd Quarter 2019  2nd Quarter 2019  3rd Quarter 2019  4th Quarter 2019  1st Quarter 2020  2nd Quarter 2020 
                              
Net revenues $761,030  $780,972  $775,892  $745,159  $685,240  $685,240  $628,329  $609,577  $612,841  $581,717 
                                        
Gross profit margin(1)  29.9%  30.3%  28.3%  28.3%  25.5%  25.5%  23.9%  22.2%  24.0%  22.5%
                                        
Operating margin(2)  16.2%  17.7%  15.4%  14.5%  11.6%  11.6%  8.1%  4.0%  7.7%  7.0%
                                        
End-of-period backlog $1,595,200  $1,559,700  $1,497,100  $1,331,800  $1,126,700  $1,126,700  $935,400  $911,300  $1,005,200  $914,300 
                                        
Book-to-bill ratio  1.17   0.95   0.94   0.79   0.69   0.69   0.72   0.94   1.17   0.82 
                                        
Inventory turnover  4.6   4.4   4.5   4.3   4.3   4.3   4.1   4.3   4.2   3.9 
                                        
Change in ASP vs. prior quarter  0.7%  0.6%  0.7%  (0.4)%  (0.9)%  (0.9)%  (1.1)%  (0.8)%  (1.1)%  0.1%

(1) Gross margin for the first and second fiscal quarters of 2020 includes $3.1 million and $0.9 million, respectively, of expenses directly related to the COVID-19 outbreak (see Note 2 to our consolidated condensed financial statements).
(2) Operating margin for the third and fourth fiscal quarters of 2019 and second fiscal quarter of 2020 includes $7.3 million, $16.9 million, and $0.7 million, respectively, of restructuring and severance expenses (see Note 4 to our consolidated condensed financial statements).  Operating margin for the first and second fiscal quarters of 2020 also includes in total $3.4 million and $0.2 million, respectively, of expenses directly related to the COVID-19 outbreak (see Note 2 to our consolidated condensed financial statements).

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

Revenues decreased versus the prior fiscal quarter and the second fiscal quarter of 2018.  Distributors, particularly2019.  Revenues and orders were impacted by plant closures of semiconductor products in Asia, began to normalize their backlogs inour customers and the third fiscal quarter of 2018global economic slowdown caused by the COVID-19 outbreak.  The decreased orders decreased the book-to-bill ratio and we experienced a further normalization of demand through the second fiscal quarter of 2019.  Inventory in the supply chain remains at a very high level, which continues to negatively impact orders.  Average selling prices, particularly of commodity products, have begun to decrease consistent withbacklog.  Despite the decrease in demand.revenues and orders, there is low pressure on average selling prices.

Gross profit margin decreased versus the prior fiscal quarter and the second fiscal quarter of 2018.prior year periods.  The decreases are primarily volume-driven, and include temporary manufacturing inefficiencies as we adapt manufacturing capacities.  U.S. tariffs on goods imported from China also impacted the gross profit margin versus the second fiscal quarter of 2018.volume-driven.

The book-to-bill ratio in the second fiscal quarter of 20192020 decreased to 0.690.82 versus 0.791.17 in the first fiscal quarter of 2019.2020.  The book-to-bill ratios in the second fiscal quarter of 20192020 for distributors and original equipment manufacturers ("OEM") were 0.550.75 and 0.86,0.93, respectively, versus ratios of 0.541.30 and 1.10,1.04, respectively, during the first fiscal quarter of 2019.2020.

For the third fiscal quarter of 2019,2020, we anticipate revenues between $600$580 million and $640$620 million andat a gross marginsmargin of 24% to 25% at the22.8% plus/minus 70 basis points, assuming a USD/EUR exchange ratesrate of the second fiscal quarter of 2019.  We anticipate that inventory reductions, particularly by distributors, will have some negative impact on our revenues in the short-term.0.87.
3937


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 second fiscal quarter of 20182019 through the second fiscal quarter of 20192020 (dollars in thousands):

 2nd Quarter 2018  3rd Quarter 2018  4th Quarter 2018  1st Quarter 2019  2nd Quarter 2019  2nd Quarter 2019  3rd Quarter 2019  4th Quarter 2019  1st Quarter 2020  2nd Quarter 2020 
MOSFETs                              
Net revenues $136,559  $144,260  $139,318  $137,341  $128,842  $128,842  $126,747  $116,215  $116,893  $118,944 
                                        
Book-to-bill ratio  0.96   0.88   1.08   0.84   0.54   0.54   0.54   0.94   1.12   0.97 
                                        
Gross profit margin  28.1%  27.0%  26.2%  26.3%  24.8%  24.8%  24.1%  23.7%  24.1%  22.7%
                                        
Segment operating margin  20.9%  20.5%  18.9%  19.4%  17.5%  17.5%  16.6%  16.1%  16.0%  14.8%
                                        
Diodes                                        
Net revenues $182,466  $186,492  $176,961  $167,840  $142,042  $142,042  $123,879  $123,382  $115,343  $124,187 
                                        
Book-to-bill ratio  1.08   0.86   0.83   0.63   0.52   0.52   0.57   0.88   1.36   0.61 
                                        
Gross profit margin  28.7%  29.3%  26.2%  25.9%  20.3%  20.3%  17.1%  16.3%  16.9%  20.1%
                                        
Segment operating margin  25.8%  26.6%  23.3%  22.7%  16.9%  16.9%  13.3%  12.6%  12.5%  16.0%
                                        
Optoelectronic Components                                        
Net revenues $75,709  $76,443  $65,617  $60,562  $60,675  $60,675  $50,702  $51,047  $54,179  $49,130 
                                        
Book-to-bill ratio  1.20   0.88   0.75   0.83   0.70   0.70   0.86   1.11   1.40   0.96 
                                        
Gross profit margin  34.9%  36.2%  28.8%  26.4%  26.8%  26.8%  21.5%  20.2%  26.9%  23.9%
                                        
Segment operating margin  29.3%  30.3%  22.2%  19.3%  19.8%  19.8%  13.7%  12.7%  19.7%  16.2%
                                        
Resistors & Inductors                    
Resistors                    
Net revenues $165,359  $155,119  $147,883  $159,208  $140,412 
                    
Book-to-bill ratio  0.81   0.82   0.95   1.05   0.73 
                    
Gross profit margin  28.3%  27.4%  23.5%  28.1%  23.2%
                    
Segment operating margin  25.2%  23.8%  19.0%  24.4%  19.9%
                    
Inductors                    
Net revenues $253,947  $257,330  $262,963  $260,471  $242,383  $77,024  $73,458  $76,520  $73,785  $65,185 
                                        
Book-to-bill ratio  1.16   1.02   0.94   0.92   0.88   1.01   0.95   1.05   0.98   0.96 
                                        
Gross profit margin  33.5%  34.3%  32.5%  33.0%  29.5%  31.9%  31.9%  33.5%  31.2%  31.1%
                                        
Segment operating margin  30.0%  31.1%  29.4%  29.6%  26.2%  28.3%  28.3%  30.3%  27.5%  27.2%
                                        
Capacitors                                        
Net revenues $112,349  $116,447  $131,033  $118,945  $111,298  $111,298  $98,424  $94,530  $93,433  $83,859 
                                        
Book-to-bill ratio  1.59   1.03   1.02   0.67   0.68   0.68   0.76   0.84   1.20   0.90 
                                        
Gross profit margin  22.3%  23.0%  24.7%  25.0%  23.5%  23.5%  22.0%  17.9%  21.8%  18.1%
                                        
Segment operating margin  17.5%  18.6%  20.4%  20.7%  19.0%  19.0%  16.9%  12.3%  16.1%  12.5%

40


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.

On January 3, 2019, we acquired substantially all of the assets and liabilities of Bi-Metallix, Inc. ("Bi-Metallix"), a U.S.-based, privately-held provider of electron beam continuous strip welding services for $11.9 million.  We were a major customer of Bi-Metallix, and the acquired business will be vertically integrated into our Resistors & Inductors segment.  The results and operations of this acquisition have been included in the Resistors & Inductors segment since January 3, 2019.  Bi-Metallix did not have a material impact on the Company's consolidated results for the fiscal quarter and six fiscal months ended June 29, 2019.

There is no assurance that we will be able to identify and acquire additional suitable acquisition candidates at price levels and on terms and conditions we consider acceptable.
4138


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.serve, especially in light of the ongoing COVID-19 situation.

On July 29,In the third fiscal quarter of 2019, we announced global cost reduction and management rejuvenation programs as part of our continuous efforts to improve efficiency and operating performance.  We incurred restructuring expense of $24.9 million since the inception of the programs.  We incurred $0.7 million of restructuring expenses during the six fiscal months ended July 4, 2020.

The programs are primarily designed to reduce manufacturing fixed costs and selling, general, and administrative ("SG&A") costs company-wide, and provide management rejuvenation.  The programs in total are expected to lower costs by approximately $15 million annually when fully implemented, of 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 severance expenses) of approximately $25 million related to the programs.  The implementation of these programs will not impact planned research and development activities.  All individuals have been identified and such expected costs have been accrued.

We will first solicitsolicited 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 will likely bewere necessary to achieve the cost reduction targets. All participants in the program are now identified.  We expect these cost reductions to be fully achieved by December 2020.

No manufacturing facility closures are currently expected pursuant to these programs. Except for these programs, we do not anticipate any other material restructuring activities during the remainder of 2019 orin 2020.  However, a continued sluggish business environment for the electronics industry, a prolonged impact of the COVID-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.
4239


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” of each of our subsidiaries and measure all elements of the financial statements in that functional currency.  A subsidiary’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’s operations generally would have the parent company’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’ 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 slightly stronger during the second fiscal quarter and first six fiscal months of 20192020 compared to the prior fiscal quarter and prior year periods, with the translation of foreign currency revenues and expenses into U.S. dollars slightly decreasing reported revenues and expenses versus the prior fiscal quarter and prior year periods.

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 for the second fiscal quarter and first six fiscal months of 20192020 have been slightly favorably impacted compared to the prior fiscal quarter and prior year periods by local currency transactions of subsidiaries which use the U.S. dollar as their functional currency.

4340


Results of Operations

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

Fiscal quarters ended Six fiscal months ended Fiscal quarters ended  Six fiscal months ended 
June 29, 2019 March 30, 2019 June 30, 2018 June 29, 2019 June 30, 2018 July 4, 2020  April 4, 2020  June 29, 2019  July 4, 2020  June 29, 2019 
Cost of products sold74.5% 71.7% 70.1% 73.0% 70.7%  77.5%  76.0%  74.5%  76.7%  73.0%
Gross profit25.5% 28.3% 29.9% 27.0% 29.3%  22.5%  24.0%  25.5%  23.3%  27.0%
Selling, general & administrative expenses13.9% 13.9% 13.7% 13.9% 13.9%  15.3%  16.3%  13.9%  15.8%  13.9%
Operating income11.6% 14.5% 16.2% 13.1% 15.4%  7.0%  7.7%  11.6%  7.4%  13.1%
Income before taxes and noncontrolling interest10.3% 13.4% 12.8% 11.9% 12.8%  5.1%  5.9%  10.3%  5.5%  11.9%
Net earnings attributable to Vishay stockholders6.5% 10.1% 13.5% 8.4% 11.2%  4.2%  4.4%  6.5%  4.3%  8.4%
________                             
Effective tax rate36.9% 24.3% -5.8% 29.5% 12.5%  16.3%  24.2%  36.9%  20.6%  29.5%

Net Revenues

Net revenues were as follows (dollars in thousands):

  Fiscal quarters ended  Six fiscal months ended 
  June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018 
Net revenues $685,240  $745,159  $761,030  $1,430,399  $1,477,825 
 Fiscal quarters ended Six fiscal months ended 
 July 4, 2020 April 4, 2020 June 29, 2019 July 4, 2020 June 29, 2019 
Net revenues $581,717  $612,841  $685,240  $1,194,558  $1,430,399 

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

  
Fiscal quarter ended
June 29, 2019
  
Six fiscal months ended
June 29, 2019
 
  
Change in net
revenues
  % change  
Change in net
revenues
  % change 
March 30, 2019 $(59,919)  -8.0%      
June 30, 2018 $(75,790)  -10.0% $(47,426)  -3.2%
 
Fiscal quarter ended
July 4, 2020
 
Six fiscal months ended
July 4, 2020
 
 
Change in net
revenues
  % change 
Change in net
revenues
  % change 
April 4, 2020 $(31,124)  -5.1%      
June 29, 2019 $(103,523)  -15.1% $(235,841)  -16.5%

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
  
vs. Prior
Year-to-Date
 
Change attributable to:              
Decrease in volume-7.0% -7.7% -1.3%  -5.2%  -12.7%  -13.9%
Change in average selling prices-0.9% -0.6% 0.1%  0.1%  -2.7%  -2.8%
Foreign currency effects-0.3% -1.9% -2.3%  0.0%  -0.5%  -0.7%
Acquisitions0.0% 0.1% 0.3%
Other0.2% 0.1% 0.0%  0.0%  0.8%  0.9%
Net change-8.0% -10.0% -3.2%  -5.1%  -15.1%  -16.5%

We experienced a substantial, broad-based increase in demandNet revenues for our products beginning in the first fiscal quarter and six fiscal months ended July 4, 2020 have been negatively impacted by the COVID-19 outbreak.  The impact of 2017 that continued through the third fiscal quarter of 2018.  Demand started to decreaseCOVID-19 in the fourth fiscal quarter of 20182020 and the decrease has accelerateddeclining order rates experienced through the second fiscal quarter of 2019 as distributors have significantly reduced orders as they decrease their inventory.  The decrease in demand resultedresult in decreased net revenues compared to the prior fiscal quarter and prior year periods.six fiscal months ended June 29, 2019.

Gross Profit and Margins

Gross profit margins for the fiscal quarter ended June 29, 2019July 4, 2020 were 25.5%22.5%, versus 28.3%24.0% and 29.9%25.5%, for the comparable prior quarter and prior year period, respectively.  Gross profit margins for the six fiscal months ended June 29, 2019July 4, 2020 were 27.0%23.3%, versus 29.3%27.0% for the comparable prior year period.  The decreases aredecrease versus the prior fiscal quarter and prior year periods is primarily due to the decreases indecreased sales volume and the impacts of U.S. tariffs on goods imported from China.volume.  We were able to offset the negative impacts of inflation and average selling price decline by cost reductions and innovation.  Contributive margin was negatively impacted by the adaptation of manufacturing capacities in the second fiscal quarter of 2019.maintain our contributive margin.
4441


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  Six fiscal months ended Fiscal quarters ended Six fiscal months ended 
 June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018 July 4, 2020 April 4, 2020 June 29, 2019 July 4, 2020 June 29, 2019 
Net revenues $128,842  $137,341  $136,559  $266,183  $264,065  $118,944  $116,893  $128,842  $235,837  $266,183 
Gross profit margin  24.8%  26.3%  28.1%  25.5%  26.7%  22.7%  24.1%  24.8%  23.4%  25.5%

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

  
Fiscal quarter ended
June 29, 2019
  
Six fiscal months ended
June 29, 2019
 
  
Change in net
revenues
  % change  
Change in net
revenues
  % change 
March 30, 2019 $(8,499)  -6.2%      
June 30, 2018 $(7,717)  -5.7% $2,118   0.8%
 
Fiscal quarter ended
July 4, 2020
 
Six fiscal months ended
July 4, 2020
 
 
Change in net
revenues
  % change 
Change in net
revenues
  % change 
April 4, 2020 $2,051   1.8%      
June 29, 2019 $(9,898)  -7.7% $(30,346)  -11.4%

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
  
vs. Prior
Year-to-Date
 
Change attributable to:              
Change in volume-5.3% -2.0% 3.5%  3.0%  -1.6%  -5.8%
Decrease in average selling prices-0.8% -2.8% -1.6%  -1.3%  -6.0%  -5.9%
Foreign currency effects-0.2% -1.0% -1.2%  0.0%  -0.3%  -0.4%
Other0.1% 0.1% 0.1%  0.1%  0.2%  0.7%
Net change-6.2% -5.7% 0.8%  1.8%  -7.7%  -11.4%

NetThe MOSFETs segment net revenues ofincreased slightly versus the MOSFETs segmentprior fiscal quarter, but decreased significantly versus the prior fiscal quarter and prior year quarter, but increased slightly versus the prior year-to-date period.periods.  The slight increase versus the prior year-to-date periodfiscal quarter was the net result from a significant increase in revenues from distribution customers, which was almost fully offset by a significant decrease in revenues from automotive customers in the Europe and Americas regions.  The increased revenue from distribution customers is partially attributable to the re-opening of our main manufacturing facility in China after its temporary closure in the prior fiscal quarter due to the significant increase in the first fiscal quarter versus the prior year.COVID-19 outbreak.  The increase in net revenuesdecrease versus the prior year periods from European and American end customers were offset by the significant decrease from distributorswas experienced in the Americas. Significant increases in our biggest market, Asian distributors, versus the prior fiscal quarter were offset by decreases in the Americas and Europeall regions and Asian end customers.sales channels with the exception of customers of our IC products in Asia, which increased significantly.

Gross profit margin decreased versus the prior fiscal quarter and the prior year periods.  The decrease versus the prior fiscal quarter is primarily due to lower volumeaverage selling prices, cost inflation, and increased costs associated with lower volume.production levels, partially offset by cost reduction measures.  The decrease versus the prior year periods is primarily due to the declininglower volume and lower average selling prices, and the impact of U.S. tariffs on goods imported from China.partially offset by cost reduction measures.

The reduced demand from some end markets has had a limited impact on pricing.  We experienced a slight decrease in average selling prices versus the prior fiscal quarter andquarter.  The reduced customer demand versus the prior year periods.periods increased pricing pressure and resulted in significant decreases in average selling prices.

We continue to invest to expand mid- and long-term manufacturing capacity for strategic product lines at our internal fab and at third-party foundries.lines.
4542


Diodes

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

 Fiscal quarters ended  Six fiscal months ended Fiscal quarters ended Six fiscal months ended 
 June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018 July 4, 2020 April 4, 2020 June 29, 2019 July 4, 2020 June 29, 2019 
Net revenues $142,042  $167,840  $182,466  $309,882  $349,483  $124,187  $115,343  $142,042  $239,530  $309,882 
Gross profit margin  20.3%  25.9%  28.7%  23.3%  27.4%  20.1%  16.9%  20.3%  18.5%  23.3%

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

  
Fiscal quarter ended
June 29, 2019
  
Six fiscal months ended
June 29, 2019
 
  
Change in net
revenues
  % change  
Change in net
revenues
  % change 
March 30, 2019 $(25,798)  -15.4%      
June 30, 2018 $(40,424)  -22.2% $(39,601)  -11.3%
 
Fiscal quarter ended
July 4, 2020
 
Six fiscal months ended
July 4, 2020
 
 
Change in net
revenues
  % change 
Change in net
revenues
  % change 
April 4, 2020 $8,844   7.7%      
June 29, 2019 $(17,855)  -12.6% $(70,352)  -22.7%

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
  
vs. Prior
Year-to-Date
 
Change attributable to:              
Decrease in volume-13.6% -20.8% -10.7%
Change in volume  6.5%  -8.9%  -19.3%
Change in average selling prices-2.4% -0.8% 1.1%  0.9%  -3.9%  -4.7%
Foreign currency effects-0.2% -1.2% -1.6%  -0.1%  -0.4%  -0.5%
Other0.8% 0.6% -0.1%  0.4%  0.6%  1.8%
Net change-15.4% -22.2% -11.3%  7.7%  -12.6%  -22.7%

Net revenues of ourthe Diodes segment declinedincreased significantly versus the prior fiscal quarter, and prior year periods.  Net revenuesbut decreased significantly in all regions and sales channels, except Asia end customers that decreased moderately, versus the prior fiscal quarter.  Net revenues decreased significantly in all regions and sales channels versus the prior year periods.

Gross profit margin decreased  The increase versus the prior fiscal quarter was the net result from a significant increase in revenue from distribution customers, partially offset by a significant decrease in revenue from the Europe and prior year periods.Americas regions.  The decrease versusincreased revenue from distribution customers is partially attributable to the re-opening of our main manufacturing facility in China after its temporary closure in the prior fiscal quarter is primarily due to the decreased volume, lower average selling prices, and a reduction in inventory.  COVID-19 outbreak.  The decrease versus the prior year periods isquarter was the net result from a significant decrease in  revenues from all end customers except distribution customers in the Asia and Europe regions, which increased significantly.  The more significant decrease versus the prior year-to-date period was experienced in all regions and sales channels.

Gross profit margin increased versus the prior fiscal quarter, but decreased versus the prior year periods.  The increase versus the prior fiscal quarter was primarily due to the significant decreaseincreased sales volume, higher average selling prices, and a change in volume and the impact of U.S. tariffs on goods imported from China.  The decrease versus the prior year quarter was the net result from lower average selling prices, decreased sales volume, and cost inflation, almost fully offset by lower U.S. tariffs duties and cost reduction measures.  The decrease versus the prior year-to-date period was the net result from decreased sales volume, lower average selling prices, and cost inflation, partially offset by lower U.S. tariffs duties and cost reduction measures.

Average selling prices decreasedincreased slightly versus the prior fiscal quarter and prior year quarter, but increaseddecreased moderately versus the prior year-to-date period.  The decreaseyear periods.  A more favorable product mix versus the unfavorable product mix in the prior fiscal quarter partially due to the COVID-19 supply situation contributed to the increase in average selling prices versus the prior fiscal quarter and prior year quarter is primarily due to increased pricing pressure resulting from decreased demand.  The slight increase versus the prior year-to-date period is primarily due to a more favorable customer mix and the impact of U.S. tariffs passed through to customers.quarter.

4643


Optoelectronic Components

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

 Fiscal quarters ended  Six fiscal months ended Fiscal quarters ended Six fiscal months ended 
 June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018 July 4, 2020 April 4, 2020 June 29, 2019 July 4, 2020 June 29, 2019 
Net revenues $60,675  $60,562  $75,709  $121,237  $147,667  $49,130  $54,179  $60,675  $103,309  $121,237 
Gross profit margin  26.8%  26.4%  34.9%  26.6%  36.3%  23.9%  26.9%  26.8%  25.5%  26.6%

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

  
Fiscal quarter ended
June 29, 2019
  
Six fiscal months ended
June 29, 2019
 
  
Change in net
revenues
  % change  
Change in net
revenues
  % change 
March 30, 2019 $113   0.2%      
June 30, 2018 $(15,034)  -19.9% $(26,430)  -17.9%
 
Fiscal quarter ended
July 4, 2020
 
Six fiscal months ended
July 4, 2020
 
 
Change in net
revenues
  % change 
Change in net
revenues
  % change 
April 4, 2020 $(5,049)  -9.3%      
June 29, 2019 $(11,545)  -19.0% $(17,928)  -14.8%

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
  
vs. Prior
Year-to-Date
 
Change attributable to:              
Change in volume0.6% -16.8% -14.3%
Decrease in volume  -9.2%  -17.3%  -12.6%
Decrease in average selling prices-0.1% -2.5% -2.4%  -0.3%  -2.1%  -2.2%
Foreign currency effects-0.5% -1.8% -2.2%  0.2%  -0.3%  -0.7%
Other0.2% 1.2% 1.0%  0.0%  0.7%  0.7%
Net change0.2% -19.9% -17.9%  -9.3%  -19.0%  -14.8%

Net revenues of our Optoelectronic Components segment decreased significantly versus the prior fiscal quarter and the prior year periods.  The second fiscal quarter of 2020 was significantly impacted by government regulations in the Philippines and Malaysia due to the COVID-19 outbreak, which temporarily caused significant capacity loss of our main manufacturing facilities in these countries.  This resulted in significant revenue decreases in all regions and sales channels with the exception of Asian distributors, which increased significantly.

Gross profit margin decreased versus the prior fiscal quarter and the prior year periods.  The decreases were the net result from decreased sales volume, lower average selling prices, and cost inflation, partially offset by cost reduction measures and an increase in inventory.

Average selling prices decreased slightly versus the prior fiscal quarter but decreased significantly versus theand prior year periods.  Increased revenue versus the prior fiscal quarter from Asian and European distributors and American end customers was offset by decreased revenue from American distributors and Asian and European end customers.   The decrease versus the prior year periods is due to all regions and sales channels, particularly Asian and American distributors.  Lower average selling prices and negative foreign currency impacts also contributed to the decreases.

The gross profit margin increased slightly versus the prior fiscal quarter, but decreased versus the prior year periods.  The decreases versus the prior year periods are primarily due to decreased volume, lower average selling prices, and a less profitable product mix.

The pricing pressure for our established Optoelectronic Components products increases as demand decreases.  The significant decrease in demand versus the prior year periods results in decreased average selling prices.
4744


Resistors & Inductors

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

 Fiscal quarters ended  Six fiscal months ended Fiscal quarters ended Six fiscal months ended 
 June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018 July 4, 2020 April 4, 2020 June 29, 2019 July 4, 2020 June 29, 2019 
Net revenues $242,383  $260,471  $253,947  $502,854  $497,993  $140,412  $159,208  $165,359  $299,620  $354,190 
Gross profit margin  29.5%  33.0%  33.5%  31.3%  32.8%  23.2%  28.1%  28.3%  25.8%  30.9%

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

  
Fiscal quarter ended
June 29, 2019
  
Six fiscal months ended
June 29, 2019
 
  
Change in net
revenues
  % change  
Change in net
revenues
  % change 
March 30, 2019 $(18,088)  -6.9%      
June 30, 2018 $(11,564)  -4.6% $4,861   1.0%
 
Fiscal quarter ended
July 4, 2020
 
Six fiscal months ended
July 4, 2020
 
 Change in net revenues % change Change in net revenues % change 
April 4, 2020 $(18,796)  -11.8%      
June 29, 2019 $(24,947)  -15.1% $(54,570)  -15.4%

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  vs. Prior Year-to-Date 
Change attributable to:              
Change in volume-4.8% -2.0% 2.0%  -14.8%  -15.9%  -13.8%
Change in average selling prices-0.4% 0.0% 0.1%
Decrease in average selling prices  0.0%  -2.1%  -1.5%
Foreign currency effects-0.4% -2.3% -2.8%  0.0%  -0.7%  -1.0%
Acquisitions0.0% 0.3% 0.9%
Other-1.3% -0.6% 0.8%  3.0%  3.6%  0.9%
Net change-6.9% -4.6% 1.0%  -11.8%  -15.1%  -15.4%

Net revenues of the Resistors & Inductors segment decreased significantly versus the prior fiscal quarter moderately versus theand prior year quarter, but increased slightly versus the prior year-to-date period.periods.  The increase versus the prior year-to-date period is due to the significant increase in net revenues in the first fiscal quarter of 2019 versus the prior year.  Net revenues decreased for all regionsdecrease versus the prior fiscal quarter and prior year quarter, except forperiods is primarily attributable to the Europe and Americas region, which increasedregions and industrial and automotive customers.  Distributor customers also contributed to the decrease versus the prior year quarter.  The decrease in net revenues versus the prior fiscal quarter is primarily due to distribution customers and the industrial and automotive end markets.  The decrease in net revenues versus the prior year quarter is primarily due to distribution customers.periods.

The gross profit margin decreased versus the prior fiscal quarter and the prior year periods.  The decrease versus the prior fiscal quarter is primarily due to lowerdecreased sales volume, inefficiencies caused by lower volume,higher shipping costs, and a less profitable product mix.inventory reductions.  The decrease versus the prior year periods is primarily due to lowerdecreased sales volume, inefficiencies caused by lower volume, increased labor costs, and a reduction in inventory.

Due to the strong business environment throughout 2018,decreased average selling prices, increased throughlabor and materials cost increases, and negative impact of exchange rates.  Fixed cost reductions partially offset the first nine fiscal months of 2018 before starting to decrease consistent with our historical experience in the fourth fiscal quarter of 2018.  This resulted in average selling prices that were slightly lowerdecreases versus the prior fiscal quarter and unchanged orprior year periods.

Average selling prices decreased slightly higher versus the prior year periods.

Capital spending projects continue for strategic product lines.
45


Inductors

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

 Fiscal quarters ended Six fiscal months ended 
 July 4, 2020 April 4, 2020 June 29, 2019 July 4, 2020 June 29, 2019 
Net revenues $65,185  $73,785  $77,024  $138,970  $148,664 
Gross profit margin  31.1%  31.2%  31.9%  31.1%  32.2%

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

 
Fiscal quarters ended
July 4, 2020
 
Six fiscal months ended
July 4, 2020
 
 Change in net revenues % change Change in net revenues % change 
April 4, 2020 $(8,600)  -11.7%      
June 29, 2019 $(11,839)  -15.4% $(9,694)  -6.5%

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

 vs. Prior Quarter  vs. Prior Year Quarter  vs. Prior Year-to-Date 
Change attributable to:         
Decrease in volume  -12.5%  -14.9%  -4.7%
Change in average selling prices  1.2%  -0.5%  -1.7%
Foreign currency effects  0.0%  -0.1%  -0.3%
Other  -0.4%  0.1%  0.2%
Net change  -11.7%  -15.4%  -6.5%

Net revenues of the Inductors segment decreased significantly versus the prior fiscal quarter and prior year periods.  The decrease versus the prior fiscal quarter and prior year periods is primarily due to the Europe and Americas regions and automotive and medical customers.

The gross profit margin decreased versus the prior fiscal quarter and the prior year periods.  The decreases are primarily due to lower sales volume, partially offset by cost savings.

Average selling prices increased versus the prior fiscal quarter, but decreased versus the prior year periods.

We expect long-term growth in this segment, and are positioned to capitalize on future market upturns.
4846


Capacitors

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

 Fiscal quarters ended  Six fiscal months ended Fiscal quarters ended Six fiscal months ended 
 June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018 July 4, 2020 April 4, 2020 June 29, 2019 July 4, 2020 June 29, 2019 
Net revenues $111,298  $118,945  $112,349  $230,243  $218,617  $83,859  $93,433  $111,298  $177,292  $230,243 
Gross profit margin  23.5%  25.0%  22.3%  24.3%  22.6%  18.1%  21.8%  23.5%  20.1%  24.3%

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

  
Fiscal quarter ended
June 29, 2019
  
Six fiscal months ended
June 29, 2019
 
  
Change in net
revenues
  % change  
Change in net
revenues
  % change 
March 30, 2019 $(7,647)  -6.4%      
June 30, 2018 $(1,051)  -0.9% $11,626   5.3%
 
Fiscal quarter ended
July 4, 2020
 
Six fiscal months ended
July 4, 2020
 
 
Change in net
revenues
  % change 
Change in net
revenues
  % change 
April 4, 2020 $(9,574)  -10.2%      
June 29, 2019 $(27,439)  -24.7% $(52,951)  -23.0%

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
  
vs. Prior
Year-to-Date
 
Change attributable to:              
Change in volume-5.4% 0.6% 7.0%
Change in average selling prices-0.4% 1.9% 2.1%
Decrease in volume  -10.6%  -24.8%  -22.9%
Increase in average selling prices  0.1%  0.8%  1.0%
Foreign currency effects-0.4% -3.0% -3.5%  -0.2%  -0.6%  -0.9%
Other-0.2% -0.4% -0.3%  0.5%  -0.1%  -0.2%
Net change-6.4% -0.9% 5.3%  -10.2%  -24.7%  -23.0%

Net revenues of the Capacitors segment decreased significantly versus the prior fiscal quarter and prior year periods.  Net revenues decreased slightly versus the prior yearfiscal quarter but increased significantly versusprimarily in the prior year-to-date period.Europe and Americas regions and industrial and automotive customers.  The decrease in net revenues versus the prior fiscal quarteryear periods is primarily due to decreases in the Americas and Europe regions, distribution customers, and the industrial and automotive end markets.  The decrease versus the prior year quarter is primarily due to decreases in the Asia and Europeall regions and theprimarily distributor, automotive, end market.  The increase versus the prior year-to-date period is primarily due to increases in the Americas and Europe regions and distributionindustrial customers.

The gross profit margin decreased versus the prior fiscal quarter but increased versus theand prior year periods.  The decrease versus the prior fiscal quarter isdecreases are primarily due to lower sales volume, and increased metal and labor costs, partially offset by fixed cost reductions.  The increasesavings and increased selling prices.  Higher shipping costs also contributed to the decrease versus the prior year periods is primarily due to increasedperiods.

Despite the significantly lower sales volume, higher average selling prices and more profitable product mix.

Average selling prices decreasedincreased slightly versus the prior fiscal quarter but increased slightly versus theand prior year periods consistent with fluctuations in demand.primarily due to increased prices for certain materials that were passed through to our customers.

4947


Selling, General, and Administrative Expenses

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

 Fiscal quarters ended  Six fiscal months ended Fiscal quarters ended Six fiscal months ended 
 June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018 July 4, 2020 April 4, 2020 June 29, 2019 July 4, 2020 June 29, 2019 
Total SG&A expenses $95,112  $103,424  $103,945  $198,536  $205,183  $89,127  $99,832  $95,112  $188,959  $198,536 
as a percentage of revenues  13.9%  13.9%  13.7%  13.9%  13.9%  15.3%  16.3%  13.9%  15.8%  13.9%

The overall decrease in SG&A expenses is primarilyfor the fiscal quarters ended July 4, 2020 and April 4, 2020 include $(0.7) million and $0.3 million, respectively of incremental net costs (benefits) separable from normal operations directly attributable to reductionsthe COVID-19 outbreak.  SG&A expenses decreased versus the prior fiscal quarter primarily due to reduced incentive compensation, COVID-19 subsidies received, and favorable foreign currency exchange impacts.

Certain items included in SG&A expenses impactreduced travel and other discretionary spending due to the comparability of these amounts, as summarized below (in thousands):

  Fiscal quarters ended  Six fiscal months ended 
  June 29, 2019  March 30, 2019  June 30, 2018  June 29, 2019  June 30, 2018 
Amortization of intangible assets $2,115  $2,139  $3,224  $4,254  $6,425 
Net loss (gain) on sales of assets  11   (173)  (2,066)  (162)  (2,242)

Certain intangible assets became fully amortized in the third fiscal quarter of 2018.

On July 29, 2019, we announced a restructuring program targeting SG&A expenses.  See "Cost Management" above.
50

COVID-19 outbreak.

Other Income (Expense)

Interest expense for the fiscal quarter ended June 29, 2019July 4, 2020 decreased $0.1 million versus the fiscal quarter ended April 4, 2020, but increased $0.2 million versus boththe fiscal quartersquarter ended March 30, 2019 and June 30, 2018.29, 2019.  Interest expense for the six fiscal months ended June 29, 2019July 4, 2020 increased by $0.5$0.4 million versus the six fiscal months ended June 30, 2018.29, 2019.  The decrease versus the prior fiscal quarter ended April 4, 2020 is primarily due to the lower interest rate environment due to the COVID-19 outbreak and repurchases of convertible senior notes.  The increase versus the prior year periods are primarily due to borrowings on the revolving credit facility, partially offset by reduced interest expense on the convertible senior debentures as a result of  the convertible senior debentures repurchasedrepurchases in the first fiscal quarter of 2019.  The decrease versus the prior year quarter is primarily due to reduced interest expense on the revolving credit facility2019 and the convertible senior debentures as a result of using cash repatriated in 2018 to reduce the outstanding balance of the revolving credit facility and to repurchase convertible senior debentures.  The increase versus the prior year-to-date period is primarily attributable to the issuance of convertible senior notes due 2025 in the second fiscal quarter of 2018, partially offset by the effects of convertible senior debenture repurchases and the reduced outstanding balance on the revolving credit facility .2020.

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

 Fiscal quarters ended     Fiscal quarters ended    
 June 29, 2019  June 30, 2018  Change  July 4, 2020  June 29, 2019  Change 
Foreign exchange gain (loss) $(481) $1,182  $(1,663) $(1,183) $(481) $(702)
Interest income  2,147   2,762   (615)  956   2,147   (1,191)
Other components of net periodic pension expense  (3,063)  (3,367)  304 
Investment income (expense)  1,399   (550)  1,949   1,806   1,399   407 
Other  (95)  3   (98)  -   (95)  95 
 $2,970  $3,397  $(427) $(1,484) $(397) $(1,087)

 Fiscal quarters ended     Fiscal quarters ended    
 June 29, 2019  March 30, 2019  Change  July 4, 2020  April 4, 2020  Change 
Foreign exchange gain (loss) $(481) $(470) $(11) $(1,183) $1,864  $(3,047)
Interest income  2,147   2,199   (52)  956   1,854   (898)
Other components of net periodic pension expense  (3,063)  (3,068)  5 
Investment income (expense)  1,399   3,590   (2,191)  1,806   (437)  2,243 
Other  (95)  (11)  (84)  -   (15)  15 
 $2,970  $5,308  $(2,338) $(1,484) $198  $(1,682)

 Six fiscal months ended     Six fiscal months ended    
 June 29, 2019  June 30, 2018  Change  July 4, 2020  June 29, 2019  Change 
Foreign exchange gain (loss) $(951) $(743) $(208) $681  $(951) $1,632 
Interest income  4,346   4,798   (452)  2,810   4,346   (1,536)
Other components of net periodic pension expense  (6,131)  (6,763)  632 
Investment income (expense)  4,989   (1,454)  6,443   1,369   4,989   (3,620)
Other  (106)  (51)  (55)  (15)  (106)  91 
 $8,278  $2,550  $5,728  $(1,286) $1,515  $(2,801)

5148


Income Taxes

For the fiscal quarter ended June 29, 2019,July 4, 2020, our effective tax rate was 36.9%16.3%, as compared to 24.3%24.2% and (5.8)%36.9% for the fiscal quarters ended March 30, 2019April 4, 2020 and June 30, 2018,29, 2019, respectively.  For the six fiscal months ended June 29, 2019,July 4, 2020, our effective tax rate was 29.5%20.6%, as compared to 12.5%29.5% for the six fiscal months ended June 30, 2018.29, 2019.  With the reduction in the U.S. statutory rate to 21% beginning January 1, 2018, we expect that our effective tax rate will now be higher than the U.S. statutory rate, excluding unusual transactions.  Historically, the effective tax rates were generally less than the U.S. statutory rate primarily because of earnings in foreign jurisdictions.  Discrete tax items impacted our effective tax rate for each periodfiscal quarter presented.

We recorded tax benefits of $0.6 million during the six fiscal months ended June 29, 2019, due to the remeasurement of the deferred tax liability related to our cash repatriation program.  These types of remeasurement adjustments will continue until the amounts are repatriated.  During the second fiscal quarter of 2019,2020, we repatriated approximately $73.6$104.1 million to the United States, and paid withholding and foreign taxes of approximately $20.5$16.3 million.  We expect to repatriate an additional approximately $104 million to the United States in the third fiscal quarter of 2019, net of withholding and foreign taxes of about $15 million.

As part of our cash repatriation activity, we settled an intercompany loan, which previously had been accounted for at the historical foreign exchange rate (akin to an equity contribution) because the debtor entity did not have the intent or ability to repay such intercompany loan.   Currency translation adjustments were recorded in accumulated other comprehensive income, and were not included in U.S. GAAP pre-tax income.  Our cash repatriation activity resulted in the ability to repay such intercompany loan.  Upon settlement of this intercompany loan, the foreign entity realized a taxable gain.  Income tax expense for the fiscal quarter and six fiscal months ended June 29, 2019 includes tax expense of $7.6 million related to this tax-basis foreign exchange gain.

The effective tax rates for the fiscal quarter ended March 30, 2019 and six fiscal months ended July 4, 2020 and June 29, 2019 were impacted by the effect of the repurchase of convertible senior debentures in the first fiscal quarter of 2019.debentures.  We recognized a tax benefitbenefits of $1.3 million in both the six fiscal quartermonths ended March 30,July 4, 2020 and June 29, 2019, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the extinguishedconvertible debentures. 

During the six fiscal months ended June 29, 2019,July 4, 2020, the liabilities for unrecognized tax benefits increaseddecreased by $4.8$3.4 million on a net basis, principallyprimarily due to increases for tax positions taken insettlement of an audit and the current period and interest, offset by expiration of a statute, partially offset by accruals for current year tax positions and payments.

Income tax expense for the fiscal quarter and six fiscal months ended June 30, 2018 includes additional tax expense of $12.0 million recognized as a result of additional analysis of the impact of the Tax Cuts and Jobs Act completed in the second fiscal quarter of 2018.
The Company recognized a tax benefit on the pre-tax loss on early extinguishment of debt in the second fiscal quarter of 2018.  The Company also recognized a tax benefit of $34.0 million, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the extinguished debentures.

We also recorded additional tax benefits of $9.0 million and $7.7 million during the second fiscal quarter and six fiscal months ended June 30, 2018, respectively, due to the remeasurement of the deferred tax liability related to our cash repatriation program.  We repatriated $274 million to the U.S. pursuant to this program in the second fiscal quarter of 2018.  As a result of this repatriation, we paid cash taxes of $92.1 million in the second fiscal quarter of 2018.
interest.

We operate in a global environment with significant operations in various locations outside the United States. Accordingly, the consolidated income tax rate is a composite rate reflecting our earnings and the applicable tax rates in the various locations where we operate. Part of our historical strategy has been to achieve cost savings through 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 has historically been less than the U.S. statutory rate, except in years where there are material discrete items.

Additional information about income taxes is included in Note 5 to our consolidated condensed financial statements included in Item 1.statements.

5249


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 last 1718 years, and cash flows from operations in excess of $100 million in each of the last 2425 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 2223 years, and "free cash" in excess of $80 million in each of the last 1718 years. In this volatile economic environment, we continue to focus on the generation of free cash, including an emphasis on cost controls.

During 2018,the second fiscal quarter of 2020, we repatriated approximately $724$104.1 million to the United States, and paid cash taxes of $156.8$16.3 million related to the repatriations.  WeDuring 2019, we repatriated approximately $73.6$188.7 million to the United States, and paid cash taxes of $20.5$38.8 million related to the repatriations in 2019.repatriations.  The paymentpayments of these cash taxes waswere recorded as an operating cash flowflows 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 for the year ended December 31, 2018 and six fiscal months ended June 29,July 4, 2020 and the year ended December 31, 2019.  We expect our business to continue to be a reliable generator of free cash, 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.

On June 5, 2019,The $104.1 million repatriation in the second fiscal quarter of 2020 completes our cash repatriation program that we entered intoinitiated in response to the TCJA.  We continue to evaluate the TCJA's provisions and may further adjust our financial and capital structure and business practices accordingly.

We maintain a newrevolving credit facility, which provides an aggregate commitment of $750 million of revolving loans available until June 5, 2024.  The newmaximum amount available on the revolving credit facility replaces our previous credit agreement that provided for an aggregate commitment of $640 million, and that was scheduled to mature on December 10, 2020.is restricted by the financial covenants described below.  The new credit facility also provides us the ability to request up to $300 million of incremental facilities, subject to the satisfaction of certain conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt. 

At June 29, 2019, $28 million isJuly 4, 2020, we had no amounts outstanding underon our revolving credit facility.  We had no amounts outstanding at December 31, 2019.  We borrowed and repaid $182 million on the revolving credit facility during the six fiscal months ended July 4, 2020.  The average outstanding balance on our revolving credit facility calculated at fiscal month-ends was $35.5 million and the highest amount outstanding on our revolving credit facility at a fiscal month end was $61 million during the six fiscal months ended July 4, 2020.

The revolving credit 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, borrowings bear interest at LIBOR plus 1.50%, the same as pursuant to the previous credit agreement.  The interest rate on any borrowings increases to LIBOR plus 1.75% if our leverage ratio is between 1.50 to 1 and 2.50 to 1 and further 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 0.25% per annum, an improvement of 5 basis points over the previous credit agreement.  Such undrawn commitment fee increases to 0.30% per annum if our leverage ratio is between 1.50 to 1 and 2.50 to 1 and further 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.  

The credit facility also limits or restricts us from, among other things, incurring indebtedness, incurring liens on its respective assets, making investments and acquisitions (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 2.50 to 1.00), and requires us to comply with other covenants, including the maintenance of specific financial ratios.

The financial maintenance covenants include (a) an interest 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 3.00 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 June 5, 2019.
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We were in compliance with all financial covenants under the credit facility at June 29, 2019.July 4, 2020.  Our interest coverage ratio and leverage ratio were 20.5113.37 to 1 and 1.061.49 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 $622 million.

If we are not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and any 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 2025 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated.
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The credit 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 1.50%.  The interest rate on any borrowings increases to LIBOR plus 1.75% if our leverage ratio is between 1.50 to 1 and 2.50 to 1 and further increases to 2.00% if our leverage ratio equals or exceeds 2.50 to 1.

We had no amounts outstandingalso 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 0.25% per annum.  Such undrawn commitment fee increases to 0.30% per annum if our revolvingleverage ratio is between 1.50 to 1 and 2.50 to 1 and further increases to 0.35% per annum if our leverage ratio equals or exceeds 2.50 to 1. 

The borrowings under the credit facility at December 31, 2018. We borrowed $30 millionare secured by a lien on substantially all assets, including  accounts receivable, inventory, machinery and repaid $2 million onequipment, and general intangibles (but excluding real estate, intellectual property registered or licensed solely for use in, or arising solely under the new credit facility duringlaws of, any country other than the six fiscal months ended June 29, 2019.  The average outstanding balance on our credit facility calculated at fiscal month-ends was $4.7 millionUnited States, assets located solely outside of the United States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the highest amount outstanding on our revolving credit facility at a fiscal month end was $28 million during the six fiscal months ended June 29, 2019.United States, and pledges of stock in certain significant domestic and foreign subsidiaries; and are guaranteed by certain significant subsidiaries.  

During 2018,the second fiscal quarter of 2020, we issued $600repurchased $75.8 million principal amount of 2.25% convertible senior notes due 2025 to qualified institutional investors and repatriated approximately $724 million to the United States.  We used substantially all of the proceeds from the issuance and the repatriated amounts to reduce the outstanding balance of the credit facility to zero, to repay certain intercompany indebtedness, and to fund our 2018 repurchases of convertible senior debentures.

for $70.7 million.  During the first fiscal quarter of 2019,2020, we repurchased $1.0 million, $12.3 million, and the remaining $2.2$14.3 million principal amount of convertible senior debentures due 2040, due 2041 and due 2042, respectively, for $22.7$19.8 million.  We used cash on hand, primarily repatriated cash,initially borrowed from our revolving credit facility to fund the repurchases.

Duringrepurchases, and then repaid all such amounts upon the second fiscal quartercompletion of 2019, we repatriated approximately $73.6 million to the United States, and paid withholding and foreign taxes of approximately $20.5 million.  We expect to repatriate an additional approximately $104 million to the United States in the third fiscal quarter of 2019, net of withholding and foreign taxes of about $15 million.  Substantially all of these amounts will be used to repay certain intercompany indebtedness, to pay the US transition tax, and to fund capital expansion projects.

After completing these phases of cash repatriation there will be approximately $100 million of unremitted foreign earnings that we have deemed not permanently reinvested and thus has accrued foreign withholding and other taxes.   We continueplan.  Such transactions provide us more flexibility to evaluate the timing of the reparation of these remaining amounts, and may decide to ultimately not repatriate some of these amounts. 

We also continue to evaluate the TCJA's provisions and may further adjust our financial and capital structure and business practices accordingly.debt levels if necessary.

As of June 29, 2019,July 4, 2020, substantially all of our cash and cash equivalents and short-term investment were held in countries outside of the United States.  Our substantially undrawn credit facility provides us with significant operating liquidity in the United States.  We expect to fund any future repurchases of convertible debentures,debt instruments, as well as other obligations required to be paid by the U.S. parent company, Vishay Intertechnology, Inc., including cash dividends to stockholders, share repurchases, and principal and interest payments on our debt instruments by borrowing under our revolving credit facility.  Our U.S. subsidiaries also have operating cash needs.

Management expects to 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 debt are due before the maturity of2025 and our new revolving credit facility expires in June 2024.

Prior to three months before the maturity date, our convertible senior debentures are convertible by the holders under certain circumstances.  The convertible debentures due 2040 became convertible subsequent to the September 30, 2017 evaluation of the conversion criteria, and remained convertible for each subsequent quarterly evaluation prior to the June 29, 2019 evaluation, due to the sale price of our common stock exceeding 130% of the conversion price for the applicable periods.  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 settle any additional amounts in shares of our common stock.  We intend to finance the principal amount of any converted debentures using borrowings under our credit facility.  No conversions have occurred to date. 
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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 0.8%0.26% due to the low interest rate environment in Europe.Europe and the U.S.  Transactions related to these investments are classified as investing activities on our consolidated condensed statements of cash flows.

The amount of short-term investments at June 29, 2019July 4, 2020 is lower than normal due to the recently completed and planned cash repatriation activity.

The following table summarizes the components of net cash and short-term investments (debt) at June 29, 2019July 4, 2020 and December 31, 20182019 (in thousands):

 June 29, 2019  December 31, 2018  July 4, 2020  December 31, 2019 
            
Credit facility $28,000  $-  $-  $- 
Convertible senior notes, due 2025*  502,071   495,203   451,169   509,128 
Convertible senior debentures, due 2040*  146   539   128   126 
Convertible senior debentures, due 2041*  8,132   12,812   1,058   6,677 
Convertible senior debentures, due 2042*  -   923 
Deferred financing costs  (18,486)  (14,968)  (13,861)  (16,784)
Total debt  519,863   494,509   438,494   499,147 
                
Cash and cash equivalents  790,906   686,032   599,930   694,133 
Short-term investments  163   78,286   157,246   108,822 
                
Net cash and short-term investments (debt) $271,206  $269,809  $318,682  $303,808 

*Represents the carrying amount of the convertible instruments, which is comprised of the principal amount of the instruments, net of the unamortized discount and the associated embedded derivative 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 June 29, 2019July 4, 2020 continued to be strong, with a current ratio (current assets to current liabilities) of 3.43.2 to 1, as compared to 2.83.3 to 1 as of December 31, 2018.2019.  The increasedecrease is primarily due to the decrease in cash and accounts payable and other accrued expenses.receivable.  Our ratio of total debt to Vishay stockholders' equity was 0.350.29 to 1 at June 29, 2019,July 4, 2020, as compared to 0.360.34 to 1 at December 31, 2018.2019.  The slight decrease in the ratio is primarily due to increased retained earnings.repurchases of convertible debt instruments.

Cash flows provided by operating activities were $124.9 million for the six fiscal months ended July 4, 2020, as compared to cash flows provided by operations of $135.8 million for the six fiscal months ended June 29, 2019, as compared to cash flows provided by operations of $38.2 million for the six fiscal months ended June 30, 2018.2019.

Cash paid for property and equipment for the six fiscal months ended June 29, 2019July 4, 2020 was $70.1$48.8 million, as compared to $76.6$70.1 million for the six fiscal months ended June 30, 2018.29, 2019. We expect capital spending of approximately $150$110 million in 2019, which reflects lower short-term market requirements.2020, in accordance with requirements of our markets.

Cash paid for dividends to our common and Class B common stockholders totalled $26.0$27.5 million and $22.0$26.0 million for the six fiscal months ended July 4, 2020 and June 29, 2019, and June 30, 2018, respectively.  On May 7, 2018, our Board of Directors increased the quarterly dividend to $0.085 per share, representing a 26% increase over the previous quarterly dividend.  On May 8, 2019, our Board of Directors increased the quarterly dividend to $0.095 per share, representing a 12% increase over the previous quarterly dividend.  We expect dividend payments in 20192020 to total approximately $53.4$55.0 million.  However, any future dividend declaration and payment remains subject to authorization by our Board of Directors.
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Contractual Commitments and Off-Balance Sheet Arrangements

Our Annual Report on Form 10-K for the year ended December 31, 20182019 filed on February 15, 2019,14, 2020, includes a table of contractual commitments.  ThereExcept as described below, there were no material changes to these commitments during the six fiscal months ended June 29, 2019.July 4, 2020.

The following tables disclose material changes in contractual commitments during the six fiscal months ended July 4, 2020.  The tables represent our long-term debt obligations and expected cash requirements for interest as of July 4, 2020 and December 31, 2019, reflecting the repurchase of convertible senior notes due 2025 and convertible senior debentures due 2041.

As of July 4, 2020 (in thousands):

 
    
Payments due by period
 
 
 
Total
  
2020
   
2021 - 2022
   
2023 - 2024
  
2025 and beyond
 
 
                 
Long-term debt (1)
  
527,170
   
-
   
-
   
-
   
527,170
 
Interest payments on long-term debt (2)
  
67,232
   
6,868
   
27,473
   
26,405
   
6,486
 
 
                    
(1) Excludes unamortized debt discount associated with our convertible senior notes due 2025 and our convertible senior debentures due 2040 and due 2041.
 
(2) Excludes the non-cash interest expense related to the amortization of the discount associated with our convertible senior notes due 2025 and our convertible senior debentures due 2040 and due 2041.
 

As of December 31, 2019 (in thousands):

 
    
Payments due by period
 
 
 
Total
  
2020
   
2021 - 2022
   
2023 - 2024
  
2025 and beyond
 
 
                 
Long-term debt (1)
  
617,190
   
-
   
-
   
-
   
617,190
 
Interest payments on long-term debt (2)
  
90,260
   
15,762
   
31,524
   
30,456
   
12,518
 
 
                    
(1) Excludes unamortized debt discount associated with our convertible senior notes due 2025 and our convertible senior debentures due 2040 and due 2041.
 
(2) Excludes the non-cash interest expense related to the amortization of the discount associated with our convertible senior notes due 2025 and our convertible senior debentures due 2040 and due 2041.
 

We do not participate in nor have we created any off-balance sheet variable interest entities or other off-balance sheet financing.

Dividends

In 2014, our Board of Directors approved the initiation of a quarterly cash dividend program.  Quarterly cash dividends have been paid in each quarter since the first fiscal quarter of 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 March 30, 2019 $12,277 March
Three fiscal months ended June 29, 2019  13,723 June
Fiscal Period Amount Month of Payment
Three fiscal months ended April 4, 2020 $13,741 March
Three fiscal months ended July 4, 2020  13,743 June
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On May 8, 2019, we announced that the quarterly cash dividend was further increased by 12% to $0.095 per share.

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” information within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as “believe,” “estimate,” “will be,” “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; 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; changes in applicable domestic and foreign tax regulations and uncertainty regarding the same; changes in U.S. and foreign trade regulations and tariffs and uncertainty regarding the same; changes in 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 20182019 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 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.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2018,2019, filed with the SEC on February 15, 2019,14, 2020, describes our exposure to market risks.  There have been no material changes to our market risks since December 31, 2018.2019.

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”) and Chief Financial Officer (“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”).  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’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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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, 2018,2019, filed with the SEC on February 15, 201914, 2020 and Item 1 of Part II of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2019,April 4, 2020, filed with the SEC on May 9, 201912, 2020 describe certain of our legal proceedings.  There have been no material developments to the legal proceedings previously disclosed.

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, 2018,2019, filed with the SEC on February 15, 2019.14, 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;
•Impact on our workforce/employees due to the ease with which the virus spreads and the current shelter-in-place orders; and
•Cybersecurity risks as a result of extended periods of remote work arrangements.

Such effects could result in us being required to record impairment charges related to our property and equipment, intangible assets, or goodwill.
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Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.
Defaults Upon Senior Securities

Not applicable.

Item 4.
Mine Safety Disclosures

Not applicable.

Item 5.
Other Information

Not applicable.

Item 6.
Exhibits

10.1
CreditAmendment to Employment Agreement dated asbetween Vishay Dale Electronics, LLC (a wholly owned subsidiary of June 5, 2019 among Vishay Intertechnology, Inc.), Vishay Intertechnology, Inc., and JPMorgan Chase Bank, N.A.Joel Smejkal dated May 20, 2020.
10.2
Employment Agreement between Vishay Israel Ltd. (a wholly owned subsidiary of Vishay Intertechnology, Inc.), as administrative agent,Vishay Intertechnology, Inc., and the lendersJeffrey Webster dated May 20, 2020.
10.3
Employment Agreement between Vishay Electronic GmbH (an indirect wholly owned subsidiary of Vishay Intertechnology, Inc.), Vishay Intertechnology, Inc., and other parties thereto.  Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed June 5, 2019.Andreas Randebrock dated May 20, 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 June 29, 2019,July 4, 2020, furnished in iXBRL (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:  July 31, 2019August 4, 2020

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