Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 27, 2014
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission File Number 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
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38-1686453
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(State or Other Jurisdiction of Incorporation)
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(I.R.S. Employer Identification Number)
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63 Lancaster Avenue
Malvern, PA 19355-2143
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610-644-1300
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(Address of Principal Executive Offices)
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(Registrant's Area Code and Telephone Number)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.
ýYes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer ý
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Accelerated filer ¨
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Non-accelerated filer ¨ (Do not check if smaller reporting company)
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Smaller reporting company ¨
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes ý No
As of October 24, 2014, the registrant had 135,324,313 shares of its common stock and 12,129,227 shares of its Class B common stock outstanding.
This page intentionally left blank.
2
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
September 27, 2014
CONTENTS
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3
VISHAY INTERTECHNOLOGY, INC.
(In thousands)
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September 27,
2014
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December 31,
2013
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||||||
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(Unaudited)
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|||||||
Assets
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||||||||
Current assets:
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||||||||
Cash and cash equivalents
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$
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575,302
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$
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640,348
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Short-term investments
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538,109
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511,231
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||||||
Accounts receivable, net
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303,923
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274,083
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Inventories:
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||||||||
Finished goods
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124,271
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109,617
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Work in process
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195,439
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197,600
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Raw materials
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130,675
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125,491
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Total inventories
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450,385
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432,708
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Deferred income taxes
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21,122
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21,716
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Prepaid expenses and other current assets
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107,267
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100,594
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Total current assets
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1,996,108
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1,980,680
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||||||
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||||||||
Property and equipment, at cost:
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||||||||
Land
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92,980
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93,685
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||||||
Buildings and improvements
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564,514
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560,418
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||||||
Machinery and equipment
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2,368,291
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2,340,778
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Construction in progress
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67,428
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95,278
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||||||
Allowance for depreciation
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(2,207,101
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)
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(2,163,540
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)
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886,112
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926,619
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||||||
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||||||||
Goodwill
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147,436
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43,132
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||||||
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||||||||
Other intangible assets, net
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193,913
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129,951
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||||||
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||||||||
Other assets
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152,953
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156,757
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||||||
Total assets
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$
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3,376,522
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$
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3,237,139
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Continues on following page.
4
VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Balance Sheets (continued)
(In thousands)
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September 27,
2014
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December 31,
2013
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||||||
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(Unaudited)
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|||||||
Liabilities and equity
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||||||||
Current liabilities:
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||||||||
Notes payable to banks
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$
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17
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$
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2
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Trade accounts payable
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158,021
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163,894
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Payroll and related expenses
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138,708
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120,997
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Other accrued expenses
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156,699
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146,670
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Income taxes
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16,536
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17,502
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Total current liabilities
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469,981
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449,065
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Long-term debt less current portion
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440,880
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364,911
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Deferred income taxes
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181,710
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157,640
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Other liabilities
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101,147
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99,426
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||||||
Accrued pension and other postretirement costs
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269,325
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287,901
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||||||
Total liabilities
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1,463,043
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1,358,943
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||||||
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Redeemable convertible debentures
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91,092
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-
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Stockholders' equity:
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Vishay stockholders' equity
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Common stock
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13,532
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13,520
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Class B convertible common stock
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1,213
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1,213
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Capital in excess of par value
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1,964,277
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2,054,087
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(Accumulated deficit) retained earnings
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(195,837
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)
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(257,698
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)
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Accumulated other comprehensive income (loss)
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12,064
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61,634
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||||||
Total Vishay stockholders' equity
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1,795,249
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1,872,756
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Noncontrolling interests
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27,138
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5,440
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||||||
Total equity
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1,822,387
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1,878,196
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Total liabilities, temporary equity, and equity
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$
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3,376,522
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$
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3,237,139
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See accompanying notes.
5
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands, except per share amounts)
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Fiscal quarters ended
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September 27,
2014
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September 28,
2013
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||||||
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||||||||
Net revenues
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$
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638,211
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$
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602,890
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Costs of products sold
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479,819
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459,670
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Gross profit
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158,392
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143,220
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Selling, general, and administrative expenses
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93,837
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90,067
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Restructuring and severance costs
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3,508
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-
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||||||
U.S. pension settlement charges
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15,588
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-
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||||||
Operating income
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45,459
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53,153
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||||||
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||||||||
Other income (expense):
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||||||||
Interest expense
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(6,167
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)
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(5,797
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Other
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(474
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556
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(6,641
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(5,241
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)
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Income before taxes
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38,818
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47,912
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||||||
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||||||||
Income tax expense
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11,841
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15,043
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||||||
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Net earnings
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26,977
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32,869
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||||||
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Less: net earnings attributable to noncontrolling interests
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6
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150
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||||||
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||||||||
Net earnings attributable to Vishay stockholders
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$
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26,971
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$
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32,719
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||||||||
Basic earnings per share attributable to Vishay stockholders
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$
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0.18
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$
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0.23
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Diluted earnings per share attributable to Vishay stockholders
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$
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0.17
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$
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0.22
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Weighted average shares outstanding - basic
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147,569
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145,044
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||||||
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Weighted average shares outstanding - diluted
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155,546
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151,890
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||||||
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||||||||
Cash dividends per share
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$
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0.06
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$
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-
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See accompanying notes.
6
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands)
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Fiscal quarters ended
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|||||||
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September 27,
2014
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September 28,
2013
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||||||
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||||||||
Net earnings
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$
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26,977
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$
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32,869
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||||
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||||||||
Other comprehensive income (loss), net of tax
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||||||||
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||||||||
Foreign currency translation adjustment
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(55,934
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)
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24,975
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|||||
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||||||||
Pension and other post-retirement actuarial items
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10,805
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3,078
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||||||
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||||||||
Unrealized gain (loss) on available-for-sale securities
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(50
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)
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60
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|||||
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||||||||
Other comprehensive income (loss)
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(45,179
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)
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28,113
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|||||
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||||||||
Comprehensive income (loss)
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(18,202
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)
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60,982
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|||||
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||||||||
Less: comprehensive income attributable to noncontrolling interests
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6
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150
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||||||
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||||||||
Comprehensive income (loss) attributable to Vishay stockholders
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$
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(18,208
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)
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$
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60,832
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7
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands, except per share amounts)
|
Nine fiscal months ended
|
|||||||
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September 27,
2014
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September 28,
2013
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||||||
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||||||||
Net revenues
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$
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1,882,518
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$
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1,754,809
|
||||
Costs of products sold
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1,414,750
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1,331,998
|
||||||
Gross profit
|
467,768
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422,811
|
||||||
|
||||||||
Selling, general, and administrative expenses
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287,300
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273,941
|
||||||
Restructuring and severance costs
|
18,926
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-
|
||||||
U.S. pension settlement charges
|
15,588
|
-
|
||||||
Executive compensation credit
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-
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(1,778
|
)
|
|||||
Operating income
|
145,954
|
150,648
|
||||||
|
||||||||
Other income (expense):
|
||||||||
Interest expense
|
(17,968
|
)
|
(17,107
|
)
|
||||
Other
|
1,046
|
1,455
|
||||||
|
(16,922
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)
|
(15,652
|
)
|
||||
|
||||||||
Income before taxes
|
129,032
|
134,996
|
||||||
|
||||||||
Income taxes
|
40,259
|
41,501
|
||||||
|
||||||||
Net earnings
|
88,773
|
93,495
|
||||||
|
||||||||
Less: net earnings attributable to noncontrolling interests
|
350
|
536
|
||||||
|
||||||||
Net earnings attributable to Vishay stockholders
|
$
|
88,423
|
$
|
92,959
|
||||
|
||||||||
Basic earnings per share attributable to Vishay stockholders
|
$
|
0.60
|
$
|
0.65
|
||||
|
||||||||
Diluted earnings per share attributable to Vishay stockholders
|
$
|
0.57
|
$
|
0.61
|
||||
|
||||||||
Weighted average shares outstanding - basic
|
147,565
|
144,119
|
||||||
|
||||||||
Weighted average shares outstanding - diluted
|
154,142
|
151,471
|
||||||
|
||||||||
Cash dividends per share
|
$
|
0.18
|
$
|
-
|
See accompanying notes.
8
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands)
|
Nine fiscal months ended
|
|||||||
|
September 27,
2014
|
September 28,
2013
|
||||||
|
||||||||
Net earnings
|
$
|
88,773
|
$
|
93,495
|
||||
|
||||||||
Other comprehensive income (loss), net of tax
|
||||||||
|
||||||||
Foreign currency translation adjustment
|
(64,373
|
)
|
10,304
|
|||||
|
||||||||
Pension and other post-retirement actuarial items
|
13,665
|
9,250
|
||||||
|
||||||||
Unrealized gain (loss) on available-for-sale securities
|
1,138
|
(154
|
)
|
|||||
|
||||||||
Other comprehensive income (loss)
|
(49,570
|
)
|
19,400
|
|||||
|
||||||||
Comprehensive income
|
39,203
|
112,895
|
||||||
|
||||||||
Less: comprehensive income attributable to noncontrolling interests
|
350
|
536
|
||||||
|
||||||||
Comprehensive income attributable to Vishay stockholders
|
$
|
38,853
|
$
|
112,359
|
See accompanying notes.
9
(Unaudited - In thousands)
|
Nine fiscal months ended
|
|||||||
|
September 27,
2014
|
September 28,
2013
|
||||||
Operating activities
|
||||||||
Net earnings
|
$
|
88,773
|
$
|
93,495
|
||||
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
132,344
|
125,611
|
||||||
(Gain) loss on disposal of property and equipment
|
(65
|
)
|
118
|
|||||
Accretion of interest on convertible debentures
|
2,930
|
2,709
|
||||||
Inventory write-offs for obsolescence
|
15,101
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14,476
|
||||||
U.S. pension settlement charges
|
15,588
|
-
|
||||||
Other
|
4,215
|
(11,986
|
)
|
|||||
Net change in operating assets and liabilities, net of effects of businesses acquired
|
(61,875
|
)
|
(44,862
|
)
|
||||
Net cash provided by operating activities
|
197,011
|
179,561
|
||||||
|
||||||||
Investing activities
|
||||||||
Capital expenditures
|
(90,507
|
)
|
(91,591
|
)
|
||||
Proceeds from sale of property and equipment
|
2,345
|
3,866
|
||||||
Purchase of businesses, net of cash acquired
|
(198,186
|
)
|
(23,034
|
)
|
||||
Purchase of short-term investments
|
(335,341
|
)
|
(424,940
|
)
|
||||
Maturity of short-term investments
|
330,734
|
284,814
|
||||||
Other investing activities
|
1,734
|
1,246
|
||||||
Net cash used in investing activities
|
(289,221
|
)
|
(249,639
|
)
|
||||
|
||||||||
Financing activities
|
||||||||
Debt issuance costs
|
-
|
(4,558
|
)
|
|||||
Principal payments on long-term debt and capital leases
|
(11
|
)
|
(21
|
)
|
||||
Net proceeds on revolving credit lines
|
73,000
|
21,000
|
||||||
Net changes in short-term borrowings
|
14
|
(142
|
)
|
|||||
Dividends paid to common stockholders
|
(24,358
|
)
|
-
|
|||||
Dividends paid to Class B common stockholders
|
(2,183
|
)
|
-
|
|||||
Excess tax benefit from RSUs vested
|
-
|
456
|
||||||
Proceeds from stock options exercised
|
50
|
-
|
||||||
Distributions to noncontrolling interests
|
(547
|
)
|
(240
|
)
|
||||
Other financing activities
|
(1,323
|
)
|
-
|
|||||
Net cash provided by financing activities
|
44,642
|
16,495
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
(17,478
|
)
|
939
|
|||||
|
||||||||
Net decrease in cash and cash equivalents
|
(65,046
|
)
|
(52,644
|
)
|
||||
|
||||||||
Cash and cash equivalents at beginning of period
|
640,348
|
697,595
|
||||||
Cash and cash equivalents at end of period
|
$
|
575,302
|
$
|
644,951
|
See accompanying notes.
10
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands, except 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 January 1, 2014
|
$
|
13,520
|
$
|
1,213
|
$
|
2,054,087
|
$
|
(257,698
|
)
|
$
|
61,634
|
$
|
1,872,756
|
$
|
5,440
|
$
|
1,878,196
|
|||||||||||||||
Net earnings
|
-
|
-
|
-
|
88,423
|
-
|
88,423
|
350
|
88,773
|
||||||||||||||||||||||||
Other comprehensive loss
|
-
|
-
|
-
|
-
|
(49,570
|
)
|
(49,570
|
)
|
-
|
(49,570
|
)
|
|||||||||||||||||||||
Noncontrolling interest in business acquired
|
-
|
-
|
-
|
-
|
-
|
-
|
21,895
|
21,895
|
||||||||||||||||||||||||
Distributions to noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
(547
|
)
|
(547
|
)
|
||||||||||||||||||||||
Temporary equity reclassification
|
-
|
-
|
(91,092
|
)
|
-
|
-
|
(91,092
|
)
|
-
|
(91,092
|
)
|
|||||||||||||||||||||
Restricted stock issuances (117,895 shares)
|
12
|
-
|
(384
|
)
|
-
|
-
|
(372
|
)
|
-
|
(372
|
)
|
|||||||||||||||||||||
Dividends declared ($ 0.18 per share)
|
-
|
-
|
21
|
(26,562
|
)
|
-
|
(26,541
|
)
|
-
|
(26,541
|
)
|
|||||||||||||||||||||
Stock compensation expense
|
-
|
-
|
1,703
|
-
|
-
|
1,703
|
-
|
1,703
|
||||||||||||||||||||||||
Stock options exercised (4,337 shares)
|
-
|
-
|
50
|
-
|
-
|
50
|
-
|
50
|
||||||||||||||||||||||||
Tax effects of stock plan
|
-
|
-
|
(108
|
)
|
-
|
-
|
(108
|
)
|
-
|
(108
|
)
|
|||||||||||||||||||||
Balance at September 27, 2014
|
$
|
13,532
|
$
|
1,213
|
$
|
1,964,277
|
$
|
(195,837
|
)
|
$
|
12,064
|
$
|
1,795,249
|
$
|
27,138
|
$
|
1,822,387
|
See accompanying notes.
11
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
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, 2013. The results of operations for the fiscal quarter and nine fiscal months ended September 27, 2014 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 2014 end on March 29, 2014, June 28, 2014, September 27, 2014, and December 31, 2014, respectively. The four fiscal quarters in 2013 ended on March 30, 2013, June 29, 2013, September 28, 2013, and December 31, 2013, respectively.
Recently Adopted Accounting Guidance
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is the result of a convergence project between the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The ASU removes inconsistencies and weaknesses in revenue requirements; provides a more robust framework for addressing revenue issues; improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; provides more useful information to users of financial statements through expanded disclosure requirements; and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The ASU is effective for the Company for interim and annual periods beginning after January 1, 2017. Vishay is currently evaluating the effect of the ASU on its revenue contracts.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current financial statements presentation.
12
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 2 – Acquisition Activities
As part of its growth strategy, the Company seeks 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 the Company has substantial marketing and technical expertise.
Holy Stone Polytech Co., Ltd.
On June 11, 2014, Vishay acquired Holy Stone Polytech Co., Ltd. ("Holy Stone Polytech"), a Japanese manufacturer of tantalum capacitors and formerly a subsidiary of Holy Stone Enterprise Co. Ltd., for $20,776, net of cash acquired. The acquisition is expected to strengthen the Company's position in tantalum capacitors, especially in Asia. For financial reporting purposes, the results of operations of Holy Stone Polytech have been included in the Capacitors segment since June 11, 2014. The inclusion of this business did not have a material impact on the Company's consolidated results for the fiscal quarter or nine fiscal months ended September 27, 2014. Based on an estimate of their fair values, the Company allocated $3,736 of the purchase price 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 $7,736 related to this acquisition. The goodwill associated with this transaction is not deductible for income tax purposes. The Company will test the goodwill for impairment at least annually in accordance with GAAP. The preliminary allocation is pending finalization of appraisals for property and equipment and intangible assets, finalization of a working capital adjustment, environmental assessments, and completion of other customary post-closing review activities. There can be no assurance that the estimated amounts recorded represent the final purchase allocation.
Capella Microsystems Inc.
On July 11, 2014, Vishay entered into an agreement to acquire Capella Microsystems (Taiwan) Inc. ("Capella") for approximately $205,000. Capella is a fabless IC design company specializing in optoelectronic products. As a first step in the acquisition, Vishay launched a tender offer for Capella's outstanding shares. A total of 38,703,705 shares of Capella, or 88.95% of outstanding shares, were tendered and accepted by Vishay. The offer period expired on September 1, 2014. Pursuant to the terms of the tender offer, Vishay paid NT$139 for each share tendered. The aggregate purchase price was $180,167. Capella had cash and short-term investments on hand of $50,195 at the date of acquisition. Vishay funded the acquisition with cash on hand and $53,000 of borrowings under its credit facility. The acquisition is expected to strengthen the Company's position in optoelectronic sensors.
Upon the close of the tender offer, Vishay controlled Capella and began consolidating it in its financial statements. For financial reporting purposes, the results and operations and net assets of Capella have been included in the Optoelectronic Components segment. The interest represented by the shares not tendered are presented as noncontrolling interests in the consolidated condensed financial statements. The fair value of the noncontrolling interest was determined based on the observable quoted share price as of the acquisition date. Due to the timing of the close of the tender offer, Capella's results were not material to the Company's consolidated results for the fiscal quarter or nine fiscal months ended September 27, 2014.
Vishay expects to acquire the remaining outstanding shares of Capella pursuant to the merger agreement. In connection with the closing of the merger, all remaining holders of Capella common stock other than Vishay and its subsidiaries will receive the same consideration for their shares as the holders who tendered their shares in the tender offer, or approximately $22,000 in the aggregate. The merger is expected to be completed by the end of January 2015. The closing of the merger is subject to customary closing conditions, including obtaining all necessary governmental approvals and clearances.
Based on an estimate of their fair values, the Company allocated the purchase price of the acquisition as follows:
Short-term investments
|
$
|
47,438
|
||
Working capital (excluding cash and short-term investments)
|
(6,374
|
)
|
||
Property and equipment
|
4,134
|
|||
Intangible assets:
|
||||
Patents and acquired technology
|
14,870
|
|||
Capitalized software
|
101
|
|||
Customer relationships
|
54,400
|
|||
Tradenames
|
5,110
|
|||
Total intangible assets
|
74,481
|
|||
Other, net
|
(454
|
)
|
||
Deferred taxes, net
|
(17,626
|
)
|
||
Total identifiable assets and liabilities
|
101,599
|
|||
|
||||
Cash paid to Capella stockholders, net of cash aquired
|
177,410
|
|||
Fair value of noncontrolling interest
|
21,895
|
|||
|
||||
Goodwill
|
$
|
97,706
|
The weighted average useful lives for patents and acquired technology, customer relationships, and tradenames are 10, 7, and 7 years, respectively. The Company will test the goodwill for impairment at least annually in accordance with GAAP. The goodwill associated with this transaction is not deductible for income tax purposes. The preliminary allocation is pending finalization of appraisals for property and equipment and intangible assets. There can be no assurance that the estimated amounts recorded represent the final purchase price allocation.
13
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
In evaluating the acquisition of Capella, the Company focused primarily on the ability to synergize its optoelectronics design capabilities with Vishay's existing optoelectronics product lines and customers. As a result, the fair value of the acquired assets, including identified intangible assets, corresponds to a relatively smaller portion of the acquisition price, with the Company recording a substantial amount of goodwill associated with the acquisition.
The Company recognized $613 of acquisition costs classified as a component of selling, general, and administrative expenses in its consolidated condensed statements of operations.
Pro Forma Results
The unaudited pro forma results would have been as follows, assuming the acquisitions had occurred as of January 1, 2013:
|
Fiscal quarters ended
|
Nine fiscal months ended
|
||||||||||||||
|
September 27, 2014
|
September 28, 2013
|
September 27, 2014
|
September 28, 2013
|
||||||||||||
|
||||||||||||||||
Pro forma net revenues
|
$
|
643,917
|
$
|
619,580
|
$
|
1,911,246
|
$
|
1,817,633
|
||||||||
Pro forma net earnings attributable to Vishay stockholders
|
26,688
|
33,182
|
85,713
|
98,200
|
||||||||||||
Pro forma basic earnings per share attributable to Vishay stockholders
|
$
|
0.18
|
$
|
0.23
|
$
|
0.58
|
$
|
0.68
|
||||||||
Pro forma diluted earnings per share attributable to Vishay stockholders
|
$
|
0.17
|
$
|
0.22
|
$
|
0.56
|
$
|
0.65
|
The pro forma information presented for the fiscal quarter and nine fiscal months ended September 27, 2014 was adjusted to exclude acquisition-related costs incurred in 2014. The pro forma information also includes adjustments for interest expense that would have been incurred to finance the acquisition, amortization of acquired intangible assets, depreciation of acquired property and equipment, allocation of a portion of Capella results to noncontrolling interests, and tax related effects.
The unaudited pro forma results are not necessarily indicative of the results that would have been attained had the acquisition occurred on January 1, 2013.
14
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 3 – Goodwill
Goodwill represents the excess of the cost of a business acquired over the fair value of the related net assets at the date of acquisition. Goodwill is not amortized but rather tested for impairment at least annually. The required annual impairment test of goodwill is completed as of the first day of the fourth fiscal quarter of each year. These impairment tests must be performed more frequently whenever events or changes in circumstances indicate that the asset might be impaired. The Company's business segments (see Note 10) represent its reporting units for goodwill impairment testing purposes.
The changes in the carrying amount of goodwill by segment for the nine fiscal months ended September 27, 2014 was as follows:
|
Optoelectronic Components
|
Resistors & Inductors
|
Capacitors
|
Total
|
||||||||||||
|
||||||||||||||||
Balance at January 1, 2014
|
$
|
-
|
$
|
43,132
|
$
|
-
|
$
|
43,132
|
||||||||
Holy Stone acquisition
|
-
|
-
|
7,736
|
7,736
|
||||||||||||
Capella acquisition
|
97,706
|
-
|
-
|
97,706
|
||||||||||||
Exchange rate effects
|
-
|
(643
|
)
|
(495
|
)
|
(1,138
|
)
|
|||||||||
Balance at September 27, 2014
|
$
|
97,706
|
$
|
42,489
|
$
|
7,241
|
$
|
147,436
|
||||||||
|
15
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 4 – Restructuring and Related Activities
The Company places a strong emphasis on controlling its costs.
Historically, the Company's primary cost reduction technique was through the transfer of production to the extent possible from high-labor-cost countries, such as the United States and Western Europe, to lower-labor-cost countries, such as the Czech Republic, Hungary, Israel, India, Malaysia, Mexico, the People's Republic of China, and the Philippines. Between 2001 and 2009, the Company recorded, in the consolidated statements of operations, restructuring and severance costs and related asset write-downs in order to reduce its cost structure going forward.
The Company also incurred significant costs to restructure and integrate acquired businesses, which was included in the cost of the acquisitions under then-applicable GAAP.
The Company did not initiate any new restructuring projects in the years ended December 31, 2012, 2011, or 2010.
On October 28, 2013, the Company announced various cost reduction programs as part of its continuous efforts to improve efficiency and operating performance. The cash costs of these programs, primarily severance, are expected to be approximately $31,700. Complete implementation of all of the programs is expected to occur before the end of the first fiscal quarter of 2016. Many of the severance costs will be recognized ratably over the required stay periods.
The following table summarizes restructuring and related expenses which were recognized and reported on a separate line in the accompanying consolidated statements of operations:
|
Fiscal quarter ended
|
Nine fiscal months ended
|
||||||
|
September 27, 2014
|
September 27, 2014
|
||||||
MOSFETs Enhanced Competitiveness Program
|
$
|
1,522
|
$
|
4,741
|
||||
Voluntary Separation / Retirement Program
|
(94
|
)
|
12,105
|
|||||
Modules Production Transfer Program
|
2,080
|
2,080
|
||||||
Total
|
$
|
3,508
|
$
|
18,926
|
MOSFETs Enhanced Competitiveness Program
Over a period of approximately 2 years and in a series of discrete steps, the manufacture of wafers for a substantial share of products will be transferred into a more cost-efficient fab. As a consequence, certain other manufacturing currently occurring in-house will be transferred to third-party foundries.
The total severance costs associated with these initiatives are expected to be approximately $16,000. Employees generally must remain with the Company during the production transfer period. Accordingly, the Company will accrue these severance costs ratably over the respective employees' remaining service periods.
The following table summarizes the activity to date related to this program:
Expense recorded in the fourth fiscal quarter of 2013
|
$
|
2,328
|
||
Cash paid
|
(267
|
)
|
||
Balance at December 31, 2013
|
$
|
2,061
|
||
Expense
|
4,741
|
|||
Cash paid
|
(682
|
)
|
||
Balance at September 27, 2014
|
$
|
6,120
|
Severance benefits are generally paid in a lump sum at cessation of employment. The current portion of the liability is $840 and is included in other accrued expenses in the accompanying consolidated condensed balance sheets. The non-current portion of the liability is included in other liabilities in the accompanying consolidated condensed balance sheets.
16
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Voluntary Separation / Retirement Program
The voluntary separation / early retirement program was offered to employees worldwide who were eligible because they met job classification, age, and years-of-service criteria as of October 31, 2013. The program benefits vary by country and job classification, but generally include a cash loyalty bonus based on years of service. All employees eligible for the program have been identified, and have left or will leave the Company after the expiration of their respective transition periods.
These employees generally were not aligned with any particular segment. The effective separation / retirement date for most employees who accepted the offer was June 30, 2014 or earlier, with a few exceptions to allow for a transition period.
The following table summarizes the activity to date related to this program:
Expense recorded in the fourth fiscal quarter of 2013
|
$
|
486
|
||
Cash paid
|
(98
|
)
|
||
Foreign currency translation
|
3
|
|||
Balance at December 31, 2013
|
$
|
391
|
||
Expense
|
12,105
|
|||
Cash paid
|
(6,654
|
)
|
||
Foreign currency translation
|
(291
|
)
|
||
Balance at September 27, 2014
|
$
|
5,551
|
The payment terms vary by country, but generally are paid in a lump sum at cessation of employment. The entire amount of the liability is considered current and is included in other accrued expenses in the accompanying consolidated balance sheets.
Modules Production Transfer
In an effort to reduce costs and streamline production of its module products within its Diodes segment, the Company committed to two smaller cost reduction programs related to the transferring of production of certain of its products. The production transfers will take approximately twelve months to execute.
The following table summarizes the activity to date related to this program:
Expense
|
$
|
2,080
|
||
Cash paid
|
(94
|
)
|
||
Foreign currency translation
|
(44
|
)
|
||
Balance at September 27, 2014
|
$
|
1,942
|
Severance benefits are generally paid in a lump sum at cessation of employment. The entire amount of the liability is considered current and is included in other accrued expenses in the accompanying consolidated condensed balance sheets.
17
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 September 27, 2014 and September 28, 2013 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.
In July 2013, a new tax law was enacted in Israel which effectively increases the corporate income tax rate on certain types of income earned after January 1, 2014. Accordingly, the Company's deferred tax assets in Israel were increased to reflect the higher rate and a one-time tax benefit of $2,867 was recorded in the consolidated condensed statement of operations during the fiscal quarter and nine fiscal months ended September 28, 2013. As a result of the retroactive enactment of the American Taxpayer Act of 2012, which was signed into law on January 2, 2013, the Company recorded one-time tax benefits of $1,330 in the consolidated condensed statement of operations during the nine fiscal months ended September 28, 2013.
During the nine fiscal months ended September 27, 2014, the liabilities for unrecognized tax benefits decreased by $1,432 on a net basis, principally due to payments and currency effects offset by increases for interest and positions taken in prior periods.
18
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:
|
September 27,
2014
|
December 31,
2013
|
||||||
|
||||||||
Credit facility
|
$
|
187,000
|
$
|
114,000
|
||||
Exchangeable unsecured notes, due 2102
|
38,642
|
38,642
|
||||||
Convertible senior debentures, due 2040
|
103,364
|
101,846
|
||||||
Convertible senior debentures, due 2041
|
52,966
|
52,264
|
||||||
Convertible senior debentures, due 2042
|
58,908
|
58,159
|
||||||
|
440,880
|
364,911
|
||||||
Less current portion
|
-
|
-
|
||||||
|
$
|
440,880
|
$
|
364,911
|
Convertible Senior Debentures
Vishay currently has three issuances of convertible senior debentures outstanding with generally congruent terms. The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for each issuance of the Company's convertible senior debentures effective as of the ex-dividend date of each cash dividend.
The following table summarizes some key facts and terms regarding the three series of outstanding convertible senior debentures following the adjustment made to the conversion rate of the debentures on the ex-dividend date of the September 18, 2014 dividend payment:
|
Due 2040
|
Due 2041
|
Due 2042
|
|||||||||
Issuance date
|
November 9, 2010
|
May 13, 2011
|
May 31, 2012
|
|||||||||
Maturity date
|
November 15, 2040
|
May 15, 2041
|
June 1, 2042
|
|||||||||
Principal amount
|
$
|
275,000
|
$
|
150,000
|
$
|
150,000
|
||||||
Cash coupon rate (per annum)
|
2.25
|
%
|
2.25
|
%
|
2.25
|
%
|
||||||
Nonconvertible debt borrowing rate at issuance (per annum)
|
8.00
|
%
|
8.375
|
%
|
7.50
|
%
|
||||||
Conversion rate effective August 26, 2014 (per $1 principal amount)
|
72.8961
|
53.1957
|
85.7084
|
|||||||||
Effective conversion price effective August 26, 2014 (per share)
|
$
|
13.72
|
$
|
18.80
|
$
|
11.67
|
||||||
130% of the conversion price (per share)
|
$
|
17.84
|
$
|
24.44
|
$
|
15.17
|
||||||
Call date
|
November 20, 2020
|
May 20, 2021
|
June 7, 2022
|
Prior to three months before the maturity date, the holders may only convert their debentures 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 debentures due 2042 became convertible subsequent to the September 27, 2014 evaluation of the conversion criteria, due to the sale price of Vishay's common stock exceeding 130% of the conversion price for the applicable period in the third fiscal quarter of 2014. The debentures due 2042 will remain convertible until December 31, 2014, at which time the conversion criteria will be reevaluated. At the direction of its Board of Directors, the Company intends, upon conversion, to repay the principal amounts of the convertible senior debentures due 2042 in cash and settle any additional amounts in shares of Vishay common stock. The excess of the amount that the Company would pay to the holders of the debentures upon conversion over the carrying value of the liability component of the debentures currently convertible has been reclassifed as temporary equity in the condensed consolidated financial statements. The Company intends to finance the principal amount of any converted debentures using borrowings under its credit facility. Accordingly, the debt component of the convertible debentures due 2042 continues to be classified as a non-current liability in the consolidated condensed balance sheets.
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.
The carrying values of the liability and equity components of the convertible debentures are reflected in the Company's consolidated condensed balance sheets as follows:
|
Principal amount of
the debentures
|
Unamortized discount
|
Embedded derivative
|
Carrying value of liability component
|
Equity component (including temporary equity) - net carrying value
|
|||||||||||||||
September 27, 2014
|
||||||||||||||||||||
Due 2040
|
$
|
275,000
|
(172,189
|
)
|
553
|
$
|
103,364
|
$
|
110,094
|
|||||||||||
Due 2041
|
$
|
150,000
|
(97,348
|
)
|
314
|
$
|
52,966
|
$
|
62,246
|
|||||||||||
Due 2042
|
$
|
150,000
|
(91,301
|
)
|
209
|
$
|
58,908
|
$
|
57,874
|
|||||||||||
Total
|
$
|
575,000
|
$
|
(360,838
|
)
|
$
|
1,076
|
$
|
215,238
|
$
|
230,214
|
|||||||||
|
||||||||||||||||||||
December 31, 2013
|
||||||||||||||||||||
Due 2040
|
$
|
275,000
|
(173,645
|
)
|
491
|
$
|
101,846
|
$
|
110,094
|
|||||||||||
Due 2041
|
$
|
150,000
|
(98,085
|
)
|
349
|
$
|
52,264
|
$
|
62,246
|
|||||||||||
Due 2042
|
$
|
150,000
|
(92,038
|
)
|
197
|
$
|
58,159
|
$
|
57,874
|
|||||||||||
Total
|
$
|
575,000
|
$
|
(363,768
|
)
|
$
|
1,037
|
$
|
212,269
|
$
|
230,214
|
19
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Interest is payable on the debentures 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 debentures and under certain other circumstances beginning ten years subsequent to issuance.
Interest expense related to the debentures is reflected on the consolidated condensed statements of operations for the fiscal quarters ended:
|
Contractual
coupon interest
|
Non-cash amortization of debt discount
|
Non-cash amortization of deferred financing costs
|
Non-cash change in value of derivative liability
|
Total interest expense related to the debentures
|
|||||||||||||||
September 27, 2014
|
||||||||||||||||||||
Due 2040
|
$
|
1,547
|
495
|
22
|
93
|
$
|
2,157
|
|||||||||||||
Due 2041
|
$
|
844
|
251
|
11
|
(29
|
)
|
$
|
1,077
|
||||||||||||
Due 2042
|
$
|
844
|
251
|
13
|
13
|
$
|
1,121
|
|||||||||||||
Total
|
$
|
3,235
|
$
|
997
|
$
|
46
|
$
|
77
|
$
|
4,355
|
||||||||||
|
||||||||||||||||||||
September 28, 2013
|
||||||||||||||||||||
Due 2040
|
$
|
1,547
|
458
|
22
|
(30
|
)
|
$
|
1,997
|
||||||||||||
Due 2041
|
$
|
844
|
231
|
11
|
(13
|
)
|
$
|
1,073
|
||||||||||||
Due 2042
|
$
|
844
|
233
|
13
|
3
|
$
|
1,093
|
|||||||||||||
Total
|
$
|
3,235
|
$
|
922
|
$
|
46
|
$
|
(40
|
)
|
$
|
4,163
|
Interest expense related to the debentures is reflected on the consolidated condensed statements of operations for the nine fiscal months ended:
|
Contractual
coupon interest
|
Non-cash amortization of debt discount
|
Non-cash amortization of deferred financing costs
|
Non-cash change in value of derivative liability
|
Total interest expense related to the debentures
|
|||||||||||||||
September 27, 2014
|
||||||||||||||||||||
Due 2040
|
$
|
4,641
|
1,456
|
66
|
62
|
$
|
6,225
|
|||||||||||||
Due 2041
|
$
|
2,532
|
737
|
35
|
(35
|
)
|
$
|
3,269
|
||||||||||||
Due 2042
|
$
|
2,532
|
737
|
40
|
12
|
$
|
3,321
|
|||||||||||||
Total
|
$
|
9,705
|
$
|
2,930
|
$
|
141
|
$
|
39
|
$
|
12,815
|
||||||||||
|
||||||||||||||||||||
September 28, 2013
|
||||||||||||||||||||
Due 2040
|
$
|
4,641
|
1,346
|
66
|
(193
|
)
|
$
|
5,860
|
||||||||||||
Due 2041
|
$
|
2,532
|
679
|
35
|
(100
|
)
|
$
|
3,146
|
||||||||||||
Due 2042
|
$
|
2,532
|
684
|
40
|
(73
|
)
|
$
|
3,183
|
||||||||||||
Total
|
$
|
9,705
|
$
|
2,709
|
$
|
141
|
$
|
(366
|
)
|
$
|
12,189
|
Exchangeable Unsecured Notes, due 2102
Quarterly cash dividends do not result in an adjustment to the put/call rate of the Company's exchangeable unsecured notes due 2102; therefore, the cash dividend payments in the first, second, and third fiscal quarters of 2014 had no effect on the exchangeable notes due 2102.
20
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
|
Unrealized gain (loss) on available-for-sale securities
|
Total
|
||||||||||||
Balance at January 1, 2014
|
$
|
(129,918
|
)
|
$
|
190,998
|
554
|
$
|
61,634
|
||||||||
Other comprehensive income (loss) before reclassifications
|
(1,177
|
)
|
(64,373
|
)
|
1,775
|
$
|
(63,775
|
)
|
||||||||
Tax effect
|
412
|
-
|
(621
|
)
|
$
|
(209
|
)
|
|||||||||
Other comprehensive income (loss) before reclassifications, net of tax
|
(765
|
)
|
(64,373
|
)
|
1,154
|
$
|
(63,984
|
)
|
||||||||
Amounts reclassified out of AOCI
|
22,010
|
-
|
(24
|
)
|
$
|
21,986
|
||||||||||
Tax effect
|
(7,580
|
)
|
-
|
8
|
$
|
(7,572
|
)
|
|||||||||
Amounts reclassified out of AOCI, net of tax
|
14,430
|
-
|
(16
|
)
|
$
|
14,414
|
||||||||||
Net other comprehensive income (loss)
|
$
|
13,665
|
$
|
(64,373
|
)
|
$
|
1,138
|
$
|
(49,570
|
)
|
||||||
Balance at September 27, 2014
|
$
|
(116,253
|
)
|
$
|
126,625
|
$
|
1,692
|
$
|
12,064
|
Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost, and include the U.S. pension settlement charges. (See Note 8 for further information). The amount of unrealized gains (losses) on available-for-sale securities reclassified out of AOCI as a result of sales of securities held by the Company's rabbi trust used to fund a deferred compensation plan was $24 for the fiscal quarter and nine fiscal months ended September 27, 2014. These reclassifications are recorded as a component of compensation expense within Selling, General, and Administrative expenses on our consolidated condensed statements of operations.
Other comprehensive income (loss) includes Vishay's proportionate share of other comprehensive income (loss) of nonconsolidated subsidiaries accounted for under the equity method.
21
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 8 – Pensions and Other Postretirement Benefits
The Company maintains various retirement benefit plans.
The following table shows the components of the net periodic pension cost for the third fiscal quarters of 2014 and 2013 for the Company's defined benefit pension plans:
|
Fiscal quarter ended
September 27, 2014
|
Fiscal quarter ended
September 28, 2013
|
||||||||||||||
|
U.S. Plans
|
Non-U.S. Plans
|
U.S. Plans
|
Non-U.S. Plans
|
||||||||||||
|
||||||||||||||||
Net service cost
|
$
|
-
|
$
|
826
|
$
|
-
|
$
|
864
|
||||||||
Interest cost
|
3,313
|
2,149
|
3,471
|
2,022
|
||||||||||||
Expected return on plan assets
|
(3,578
|
)
|
(534
|
)
|
(4,781
|
)
|
(510
|
)
|
||||||||
Amortization of prior service cost (credit)
|
(23
|
)
|
1
|
244
|
(9
|
)
|
||||||||||
Amortization of losses
|
1,507
|
677
|
3,733
|
832
|
||||||||||||
Curtailment and settlement losses
|
15,588
|
-
|
-
|
-
|
||||||||||||
Net periodic benefit cost
|
$
|
16,807
|
$
|
3,119
|
$
|
2,667
|
$
|
3,199
|
The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 27, 2014 and September 28, 2013 for the Company's defined benefit pension plans:
|
Nine fiscal months ended
September 27, 2014
|
Nine fiscal months ended
September 28, 2013
|
||||||||||||||
|
U.S. Plans
|
Non-U.S. Plans
|
U.S. Plans
|
Non-U.S. Plans
|
||||||||||||
|
||||||||||||||||
Net service cost
|
$
|
-
|
$
|
2,481
|
$
|
-
|
$
|
2,621
|
||||||||
Interest cost
|
10,981
|
6,525
|
10,412
|
6,076
|
||||||||||||
Expected return on plan assets
|
(11,694
|
)
|
(1,591
|
)
|
(14,343
|
)
|
(1,559
|
)
|
||||||||
Amortization of prior service cost (credit)
|
(69
|
)
|
3
|
733
|
(26
|
)
|
||||||||||
Amortization of losses
|
5,127
|
2,055
|
11,198
|
2,499
|
||||||||||||
Curtailment and settlement losses
|
15,588
|
-
|
-
|
-
|
||||||||||||
Net periodic benefit cost
|
$
|
19,933
|
$
|
9,473
|
$
|
8,000
|
$
|
9,611
|
During the third fiscal quarter of 2014, the Company executed two partial-settlement transactions to reduce the risk associated with its U.S. qualified pension obligations. These transactions included the purchase of annuity contracts for approximately 700 participants pursuant to an arrangement inherited in a past acquisition and a special limited-time voluntary lump-sum payment offer to certain former employees who were deferred vested participants of the plan not currently receiving periodic payments of their pension benefit. A total of 800 participants accepted the voluntary lump-sum offer. The plan is no longer obligated to pay any benefits to the 1,500 participants covered by these two settlement transactions. These former participants represented approximately 23% of the total participants prior to executing these transactions.
As a result of these transactions, the projected benefit obligation, plan assets, and funded status were remeasured on the dates of the respective settlements. The plan assets consisted of equity securities, fixed income securities, and real estate investments.
Equity securities held by the U.S. defined benefit retirement plan consist of various mutual funds and exchange traded funds that are valued based on quoted market prices on the last business day of the year. The fair value measurement of the mutual funds and exchange traded funds securities is considered a Level 1 measurement within the fair value hierarchy.
Fixed income securities held by the U.S. defined benefit retirement plans consist of exchange traded funds and a short-term investment fund. The exchange traded funds are valued based on quoted market prices on the last business day of the year. The fair value measurement of the exchange traded funds securities is considered a Level 1 measurement within the fair value hierarchy. The short-term investment fund strictly invests in short-term investments, including commercial paper, certificates of deposit, U.S. government agency and instrumentality obligations, U.S. government obligations, corporate notes, and funding agreements. The maturity date of all investments held by the short-term investment fund is within one year from the financial statement date. There are no redemption restrictions on the plan's investment. The fair value of the short-term investment fund has been estimated using the net asset value per share of the investment. The fair value measurement of the short-term investment fund is considered a Level 2 measurement within the fair value hierarchy.
Real estate investments held by the U.S. defined benefit retirement plans consist of real estate investment trust securities that are valued at quoted market prices on the last business day of the year. The fair value measurement of the real estate investments is considered a Level 1 measurement within the fair value hierarchy.
These transactions reduced the U.S. projected benefit obligation by approximately $59,400, and were funded entirely with plan assets. These transactions also resulted in the recognition of non-cash settlement charges aggregating $15,588, representing previously unrecognized actuarial items. These non-cash charges are presented on a separate line in the consolidated condensed statements of operations.
The Company continues to evaluate options to further reduce the risk associated with its pension obligations.
22
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The following table shows the components of the net periodic benefit cost for the third fiscal quarters of 2014 and 2013 for the Company's other postretirement benefit plans:
|
Fiscal quarter ended
September 27, 2014
|
Fiscal quarter ended
September 28, 2013
|
||||||||||||||
|
U.S. Plans
|
Non-U.S. Plans
|
U.S. Plans
|
Non-U.S. Plans
|
||||||||||||
|
||||||||||||||||
Service cost
|
$
|
29
|
$
|
77
|
$
|
28
|
$
|
74
|
||||||||
Interest cost
|
88
|
61
|
78
|
64
|
||||||||||||
Amortization of prior service (credit)
|
(206
|
)
|
-
|
(200
|
)
|
-
|
||||||||||
Amortization of losses (gains)
|
(35
|
)
|
9
|
1
|
-
|
|||||||||||
Net periodic benefit cost
|
$
|
(124
|
)
|
$
|
147
|
$
|
(93
|
)
|
$
|
138
|
The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 27, 2014 and September 28, 2013 for the Company's other postretirement benefit plans:
|
Nine fiscal months ended
September 27, 2014
|
Nine fiscal months ended
September 28, 2013
|
||||||||||||||
|
U.S. Plans
|
Non-U.S. Plans
|
U.S. Plans
|
Non-U.S. Plans
|
||||||||||||
|
||||||||||||||||
Service cost
|
$
|
87
|
$
|
235
|
$
|
83
|
$
|
222
|
||||||||
Interest cost
|
264
|
187
|
235
|
191
|
||||||||||||
Amortization of prior service (credit)
|
(618
|
)
|
-
|
(599
|
)
|
-
|
||||||||||
Amortization of losses (gains)
|
(105
|
)
|
29
|
3
|
-
|
|||||||||||
Net periodic benefit cost
|
$
|
(372
|
)
|
$
|
451
|
$
|
(278
|
)
|
$
|
413
|
23
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 fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Company determines compensation cost for restricted stock units ("RSUs"), phantom stock units, and restricted stock based on the grant-date fair value of the underlying common stock adjusted for expected dividends paid over the required vesting period for non-participating awards. Compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award.
The following table summarizes stock-based compensation expense recognized:
|
Fiscal quarters ended
|
Nine fiscal months ended
|
||||||||||||||
|
September 27, 2014
|
September 28, 2013
|
September 27, 2014
|
September 28, 2013
|
||||||||||||
|
||||||||||||||||
Stock options
|
$
|
-
|
$
|
-
|
$
|
-
|
18
|
|||||||||
Restricted stock units
|
(42
|
)
|
382
|
1,572
|
(1,336
|
)
|
||||||||||
Phantom stock units
|
-
|
-
|
131
|
108
|
||||||||||||
Total
|
$
|
(42
|
)
|
$
|
382
|
$
|
1,703
|
(1,210
|
)
|
The Company recognizes compensation cost for RSUs that are expected to vest and records cumulative adjustments in the period that the expectation changes. Stock-based compensation for the nine fiscal months ended September 28, 2013, as presented in the table above, includes the material reversal of stock-based compensation expense recognized for the performance-based RSUs scheduled to vest on January 1, 2014 recorded in the second fiscal quarter of 2013. $1,778 of these reversed costs had been originally reported as a separate line item upon cessation of employment of certain former executives in 2011, and accordingly, this adjustment is also reported as a separate line item in the accompanying consolidated condensed statements of operations. A portion of the stock-based compensation expense related to certain current executives that was reversed in the second fiscal quarter of 2013 was recognized in the fourth fiscal quarter of 2013 due to certain amendments to the performance-based RSUs granted to certain current executives in 2011 approved by the Compensation Committee of the Board of Director's in the fourth fiscal quarter of 2013. Pursuant to their original terms, the performance-based RSUs would have vested on January 1, 2014 only if all of the associated performance criteria were met for the three-year period ending December 31, 2013. Pursuant to the amended terms, 75% of the performance-based RSUs of each of such executives vested effective December 5, 2013 in light of the Compensation Committee of the Board of Director's assessment that the performance criteria would be achieved in substantial part by December 31, 2013.
The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at September 27, 2014 (amortization periods in years):
|
Unrecognized Compensation Cost
|
Weighted Average Remaining Amortization Periods
|
||||||
|
||||||||
Stock options
|
$
|
-
|
0.0
|
|||||
Restricted stock units
|
10,808
|
1.2
|
||||||
Phantom stock units
|
-
|
0.0
|
||||||
Total
|
$
|
10,808
|
Unrecognized compensation cost presented in the table above includes $6,485 of unrecognized compensation cost for performance-based RSUs that are not currently expected to vest and for which no compensation cost is currently being recognized.
24
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") was amended and restated and approved by Vishay's stockholders at Vishay's Annual Meeting of Stockholders on May 20, 2014. The 2007 Program 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.
Stock Options
In addition to stock options outstanding pursuant to the 2007 Program, during the periods presented, the Company had stock options outstanding under previous stockholder-approved stock option programs. These programs are more fully described in Note 12 to the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2013. No additional options may be granted pursuant to these programs.
Stock option activity under the 2007 Program as of September 27, 2014 and changes during the nine fiscal months then ended are presented below (number of options in thousands):
|
Number of Options
|
Weighted Average Exercise Price
|
||||||
Outstanding:
|
||||||||
January 1, 2014
|
109
|
$
|
15.24
|
|||||
Granted
|
-
|
-
|
||||||
Exercised
|
(4
|
)
|
11.62
|
|||||
Cancelled or forfeited
|
-
|
-
|
||||||
Outstanding at September 27, 2014
|
105
|
$
|
15.38
|
|||||
|
||||||||
Vested
|
105
|
|||||||
|
||||||||
Exercisable
|
105
|
At September 27, 2014, there were no unvested options outstanding.
The pretax aggregate intrinsic value (the difference between the closing stock price on the last trading day of the third fiscal quarter of 2014 of $14.42 per share and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 27, 2014 is $42. This amount changes based on changes in the market value of the Company's common stock. During the nine fiscal months ended September 27, 2014, 4,337 options were exercised. The total instrinsic value of options exercised during the nine fiscal months ended September 27, 2014 was $18.
25
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Restricted Stock Units
RSU activity under the 2007 Program as of September 27, 2014 and changes during the nine 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, 2014
|
1,059
|
$
|
13.40
|
|||||
Granted
|
336
|
13.48
|
||||||
Vested*
|
(146
|
)
|
15.87
|
|||||
Cancelled or forfeited
|
(102
|
)
|
17.45
|
|||||
Outstanding at September 27, 2014
|
1,147
|
$
|
12.75
|
|||||
|
||||||||
Expected to vest at September 27, 2014
|
649
|
* 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 on January 1, 2015 is evaluated based on the full achievement of the defined target performance criteria. The number of performance-based RSUs that are scheduled to vest on January 1, 2016 and January 1, 2017 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, 2015
|
-
|
276
|
276
|
|||||||||
January 1, 2016
|
-
|
222
|
222
|
|||||||||
January 1, 2017
|
192
|
-
|
192
|
Phantom Stock Plan
The 2007 Program authorizes the grant of phantom stock units to the extent provided for in the Company's employment agreements with such senior 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 September 27, 2014 and changes during the nine 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, 2014
|
107
|
|||||||
Granted
|
10
|
$
|
13.12
|
|||||
Dividend equivalents issued
|
2
|
|||||||
Redeemed for common stock
|
-
|
|||||||
Outstanding at September 27, 2014
|
119
|
26
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 10 – Segment Information
Vishay operates, and its chief operating decision maker makes strategic and operating decisions with regards to assessing performance and allocating resources based on, five reporting segments: MOSFETs, Diodes, Optoelectronic Components, Resistors & Inductors, and Capacitors.
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, executive compensation charges (credits), material gains and losses on sales of property, 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 following tables set forth business segment information:
|
MOSFETs
|
Diodes
|
Optoelectronic Components
|
Resistors & Inductors
|
Capacitors
|
Total
|
||||||||||||||||||
Fiscal quarter ended September 27, 2014:
|
||||||||||||||||||||||||
Product Sales
|
$
|
121,631
|
$
|
151,444
|
$
|
67,549
|
$
|
189,419
|
$
|
107,105
|
$
|
637,148
|
||||||||||||
Royalty Revenues
|
28
|
-
|
-
|
1,035
|
-
|
$
|
1,063
|
|||||||||||||||||
Total Revenue
|
$
|
121,659
|
$
|
151,444
|
$
|
67,549
|
$
|
190,454
|
$
|
107,105
|
$
|
638,211
|
||||||||||||
|
||||||||||||||||||||||||
Gross Margin
|
$
|
17,384
|
$
|
36,135
|
$
|
24,585
|
$
|
59,581
|
$
|
20,707
|
$
|
158,392
|
||||||||||||
|
||||||||||||||||||||||||
Fiscal quarter ended September 28, 2013:
|
||||||||||||||||||||||||
Product Sales
|
$
|
115,143
|
$
|
140,790
|
$
|
56,796
|
$
|
176,885
|
$
|
111,910
|
$
|
601,524
|
||||||||||||
Royalty Revenues
|
25
|
-
|
51
|
1,290
|
-
|
$
|
1,366
|
|||||||||||||||||
Total Revenue
|
$
|
115,168
|
$
|
140,790
|
$
|
56,847
|
$
|
178,175
|
$
|
111,910
|
$
|
602,890
|
||||||||||||
|
||||||||||||||||||||||||
Gross Margin
|
$
|
15,735
|
$
|
32,405
|
$
|
20,163
|
$
|
54,093
|
$
|
20,824
|
$
|
143,220
|
||||||||||||
|
Nine fiscal months ended September 27, 2014:
|
||||||||||||||||||||||||
Product Sales
|
$
|
358,715
|
$
|
437,944
|
$
|
188,305
|
$
|
569,944
|
$
|
324,360
|
$
|
1,879,268
|
||||||||||||
Royalty Revenues
|
127
|
-
|
-
|
3,123
|
-
|
$
|
3,250
|
|||||||||||||||||
Total Revenue
|
$
|
358,842
|
$
|
437,944
|
$
|
188,305
|
$
|
573,067
|
$
|
324,360
|
$
|
1,882,518
|
||||||||||||
|
||||||||||||||||||||||||
Gross Margin
|
$
|
48,872
|
$
|
100,606
|
$
|
68,610
|
$
|
181,096
|
$
|
68,584
|
$
|
467,768
|
||||||||||||
|
||||||||||||||||||||||||
Nine fiscal months ended September 28, 2013:
|
||||||||||||||||||||||||
Product Sales
|
$
|
331,473
|
$
|
406,525
|
$
|
171,419
|
$
|
510,630
|
$
|
329,821
|
$
|
1,749,868
|
||||||||||||
Royalty Revenues
|
146
|