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EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 - VISHAY INTERTECHNOLOGY INCexhibit32-1.htm
EX-31.1 - CERTIFICATION PURSUANT TO RULE 13A-14(A) OR 15D-14(A) - VISHAY INTERTECHNOLOGY INCexhibit31-1.htm
EX-32.2 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 - VISHAY INTERTECHNOLOGY INCexhibit32-2.htm
EX-31.2 - CERTIFICATION PURSUANT TO RULE 13A-14(A) OR 15D-14(A) - VISHAY INTERTECHNOLOGY INCexhibit31-2.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended           October 3, 2015

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

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):

 
Large accelerated filer ý
Accelerated filer
 
Non-accelerated filer (Do not check if smaller reporting company)
Smaller reporting company

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 30, 2015, the registrant had 135,440,811 shares of its common stock and 12,129,227 shares of its Class B common stock outstanding.
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VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
October 3, 2015
CONTENTS

       
Page Number
   
         
     
         
     
         
     
         
     
         
     
         
     
         
     
         
     
         
     
         
   
         
   
         
   
         
   
         
   
         
   
         
   
         
   
         
   
         
   
         
   
         
     
3


PART I  - FINANCIAL INFORMATION

Item 1. Financial Statements

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

   
October 3,
2015
   
December 31,
2014
 
   
(Unaudited)
     
Assets
       
Current assets:
       
Cash and cash equivalents
 
$
390,305
   
$
592,172
 
Short-term investments
   
688,987
     
514,776
 
Accounts receivable, net
   
282,228
     
271,554
 
Inventories:
               
Finished goods
   
113,881
     
113,361
 
Work in process
   
207,940
     
185,769
 
Raw materials
   
124,970
     
125,464
 
Total inventories
   
446,791
     
424,594
 
                 
Deferred income taxes
   
29,160
     
17,815
 
Prepaid expenses and other current assets
   
96,279
     
105,539
 
Total current assets
   
1,933,750
     
1,926,450
 
                 
Property and equipment, at cost:
               
Land
   
90,079
     
91,844
 
Buildings and improvements
   
559,757
     
560,926
 
Machinery and equipment
   
2,381,285
     
2,368,046
 
Construction in progress
   
71,415
     
82,684
 
Allowance for depreciation
   
(2,253,961
)
   
(2,205,405
)
     
848,575
     
898,095
 
                 
Goodwill
   
138,403
     
144,359
 
                 
Other intangible assets, net
   
107,778
     
186,613
 
                 
Other assets
   
143,045
     
143,256
 
Total assets
 
$
3,171,551
   
$
3,298,773
 

Continues on following page.
4


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

   
October 3,
2015
   
December 31,
2014
 
   
(Unaudited)
     
Liabilities and equity
       
Current liabilities:
       
Notes payable to banks
 
$
11
   
$
18
 
Trade accounts payable
   
148,889
     
174,451
 
Payroll and related expenses
   
120,680
     
120,023
 
Other accrued expenses
   
155,829
     
137,576
 
Income taxes
   
25,646
     
24,671
 
Total current liabilities
   
451,055
     
456,739
 
                 
Long-term debt less current portion
   
431,766
     
454,922
 
Deferred income taxes
   
161,546
     
178,900
 
Other liabilities
   
65,510
     
76,811
 
Accrued pension and other postretirement costs
   
277,943
     
300,524
 
Total liabilities
   
1,387,820
     
1,467,896
 
                 
Stockholders' equity:
               
Vishay stockholders' equity
               
Common stock
   
13,544
     
13,532
 
Class B convertible common stock
   
1,213
     
1,213
 
Capital in excess of par value
   
2,057,552
     
2,055,246
 
(Accumulated deficit) retained earnings
   
(172,770
)
   
(175,485
)
Accumulated other comprehensive income (loss)
   
(121,186
)
   
(69,140
)
Total Vishay stockholders' equity
   
1,778,353
     
1,825,366
 
Noncontrolling interests
   
5,378
     
5,511
 
Total equity
   
1,783,731
     
1,830,877
 
Total liabilities and equity
 
$
3,171,551
   
$
3,298,773
 

See accompanying notes.
5



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

   
Fiscal quarters ended
 
   
October 3,
2015
   
September 27,
2014
 
         
Net revenues
 
$
560,654
   
$
638,211
 
Costs of products sold
   
430,510
     
479,819
 
Gross profit
   
130,144
     
158,392
 
                 
Selling, general, and administrative expenses
   
88,995
     
93,837
 
Restructuring and severance costs
   
2,324
     
3,508
 
Impairment of goodwill and long-lived assets
   
62,980
     
-
 
U.S. pension settlement charges
   
-
     
15,588
 
Operating income (loss)
   
(24,155
)
   
45,459
 
                 
Other income (expense):
               
Interest expense
   
(6,677
)
   
(6,167
)
Other
   
3,240
     
(474
)
Loss related to Tianjin explosion
   
(5,350
)
   
-
 
     
(8,787
)
   
(6,641
)
                 
Income (loss) before taxes
   
(32,942
)
   
38,818
 
                 
Income tax expense (benefit)
   
(5,392
)
   
11,841
 
                 
Net earnings (loss)
   
(27,550
)
   
26,977
 
                 
Less: net earnings (loss) attributable to noncontrolling interests
   
116
     
6
 
                 
Net earnings (loss) attributable to Vishay stockholders
 
$
(27,666
)
 
$
26,971
 
                 
Basic earnings (loss) per share attributable to Vishay stockholders
 
$
(0.19
)
 
$
0.18
 
                 
Diluted earnings (loss) per share attributable to Vishay stockholders
 
$
(0.19
)
 
$
0.17
 
                 
Weighted average shares outstanding - basic
   
147,701
     
147,569
 
                 
Weighted average shares outstanding - diluted
   
147,701
     
155,546
 
                 
Cash dividends per share
 
$
0.06
   
$
0.06
 

See accompanying notes.
6



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

   
Fiscal quarters ended
 
   
October 3,
2015
   
September 27,
2014
 
         
Net earnings (loss)
 
$
(27,550
)
 
$
26,977
 
                 
Other comprehensive income (loss), net of tax
               
                 
Foreign currency translation adjustment
   
3,662
     
(55,934
)
                 
Pension and other  post-retirement actuarial items
   
2,305
     
10,805
 
                 
Unrealized gain (loss) on available-for-sale securities
   
(253
)
   
(50
)
                 
Other comprehensive income (loss)
   
5,714
     
(45,179
)
                 
Comprehensive income (loss)
   
(21,836
)
   
(18,202
)
                 
Less: comprehensive income attributable to noncontrolling interests
   
116
     
6
 
                 
Comprehensive income (loss) attributable to Vishay stockholders
 
$
(21,952
)
 
$
(18,208
)

See accompanying notes.
7


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

   
Nine fiscal months ended
 
   
October 3,
2015
   
September 27,
2014
 
         
Net revenues
 
$
1,744,560
   
$
1,882,518
 
Costs of products sold
   
1,327,896
     
1,414,750
 
Gross profit
   
416,664
     
467,768
 
                 
Selling, general, and administrative expenses
   
276,717
     
287,300
 
Restructuring and severance costs
   
9,394
     
18,926
 
Impairment of goodwill and long-lived assets
   
62,980
     
-
 
U.S. pension settlment charges
   
-
     
15,588
 
Operating income
   
67,573
     
145,954
 
                 
Other income (expense):
               
Interest expense
   
(19,774
)
   
(17,968
)
Other
   
7,860
     
1,046
 
Loss related to Tianjin explosion
   
(5,350
)
   
-
 
     
(17,264
)
   
(16,922
)
                 
Income before taxes
   
50,309
     
129,032
 
                 
Income taxes
   
20,416
     
40,259
 
                 
Net earnings
   
29,893
     
88,773
 
                 
Less: net earnings attributable to noncontrolling interests
   
592
     
350
 
                 
Net earnings attributable to Vishay stockholders
 
$
29,301
   
$
88,423
 
                 
Basic earnings per share attributable to Vishay stockholders
 
$
0.20
   
$
0.60
 
                 
Diluted earnings per share attributable to Vishay stockholders
 
$
0.19
   
$
0.57
 
                 
Weighted average shares outstanding - basic
   
147,700
     
147,565
 
                 
Weighted average shares outstanding - diluted
   
151,607
     
154,142
 
                 
Cash dividends per share
 
$
0.18
   
$
0.18
 

See accompanying notes.

8


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

   
Nine fiscal months ended
 
   
October 3,
2015
   
September 27,
2014
 
         
Net earnings
 
$
29,893
   
$
88,773
 
                 
Other comprehensive income (loss), net of tax
               
                 
Foreign currency translation adjustment
   
(57,174
)
   
(64,373
)
                 
Pension and other  post-retirement actuarial items
   
6,496
     
13,665
 
                 
Unrealized gain (loss) on available-for-sale securities
   
(1,368
)
   
1,138
 
                 
Other comprehensive loss
   
(52,046
)
   
(49,570
)
                 
Comprehensive income (loss)
   
(22,153
)
   
39,203
 
                 
Less: comprehensive income attributable to noncontrolling interests
   
592
     
350
 
                 
Comprehensive income (loss) attributable to Vishay stockholders
 
$
(22,745
)
 
$
38,853
 

See accompanying notes.
9



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

   
Nine fiscal months ended
 
   
October 3, 2015
   
September 27, 2014
 
Operating activities
       
Net earnings
 
$
29,893
   
$
88,773
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
   
134,281
     
132,344
 
(Gain) loss on disposal of property and equipment
   
(116
)
   
(65
)
Accretion of interest on convertible debentures
   
3,167
     
2,930
 
Inventory write-offs for obsolescence
   
15,348
     
15,101
 
Impairment of goodwill and long-lived assets
   
62,980
     
-
 
U.S. pension settlement charges
   
-
     
15,588
 
Deferred income taxes
   
(32,523
)
   
6,869
 
Other
   
(1,939
)
   
(2,654
)
Net change in operating assets and liabilities, net of effects of businesses acquired
   
(57,522
)
   
(61,875
)
Net cash provided by operating activities
   
153,569
     
197,011
 
                 
Investing activities
               
Capital expenditures
   
(86,767
)
   
(90,507
)
Proceeds from sale of property and equipment
   
1,989
     
2,345
 
Purchase of businesses, net of cash acquired
   
-
     
(198,186
)
Purchase of short-term investments
   
(362,595
)
   
(335,341
)
Maturity of short-term investments
   
161,611
     
330,734
 
Sale of other investments
   
400
     
-
 
Other investing activities
   
(3,464
)
   
1,734
 
Net cash used in investing activities
   
(288,826
)
   
(289,221
)
                 
Financing activities
               
Principal payments on long-term debt and capital leases
   
-
     
(11
)
Net proceeds (payments) on revolving credit lines
   
(27,000
)
   
73,000
 
Net changes in short-term borrowings
   
(7
)
   
14
 
Dividends paid to common stockholders
   
(24,378
)
   
(24,358
)
Dividends paid to Class B common stockholders
   
(2,184
)
   
(2,183
)
Excess tax benefit from RSUs vested
   
21
     
-
 
Proceeds from stock options exercised
   
-
     
50
 
Distributions to noncontrolling interests
   
(725
)
   
(547
)
Other financing activities
   
-
     
(1,323
)
Net cash provided by (used in) financing activities
   
(54,273
)
   
44,642
 
Effect of exchange rate changes on cash and cash equivalents
   
(12,337
)
   
(17,478
)
                 
Net increase (decrease) in cash and cash equivalents
   
(201,867
)
   
(65,046
)
                 
Cash and cash equivalents at beginning of period
   
592,172
     
640,348
 
Cash and cash equivalents at end of period
 
$
390,305
   
$
575,302
 

See accompanying notes.
10



VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statement 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 January 1, 2015
 
$
13,532
   
$
1,213
   
$
2,055,246
   
$
(175,485
)
 
$
(69,140
)
 
$
1,825,366
   
$
5,511
   
$
1,830,877
 
Net earnings
   
-
     
-
     
-
     
29,301
     
-
     
29,301
     
592
     
29,893
 
Other comprehensive loss
   
-
     
-
     
-
     
-
     
(52,046
)
   
(52,046
)
   
-
     
(52,046
)
Distributions to noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
-
     
(725
)
   
(725
)
Restricted stock issuances (116,498 shares)
   
12
     
-
     
(651
)
   
-
     
-
     
(639
)
   
-
     
(639
)
Dividends declared ($ 0.18 per share)
   
-
     
-
     
24
     
(26,586
)
   
-
     
(26,562
)
   
-
     
(26,562
)
Stock compensation expense
   
-
     
-
     
2,912
     
-
     
-
     
2,912
     
-
     
2,912
 
Tax effects of stock plan
   
-
     
-
     
21
     
-
     
-
     
21
     
-
     
21
 
Balance at October 3, 2015
 
$
13,544
   
$
1,213
   
$
2,057,552
   
$
(172,770
)
 
$
(121,186
)
 
$
1,778,353
   
$
5,378
   
$
1,783,731
 

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, 2014.  The results of operations for the fiscal quarter and nine fiscal months ended October 3, 2015 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 2015 end on April 4, 2015, July 4, 2015, October 3, 2015, and December 31, 2015, respectively.  The four fiscal quarters in 2014 ended on March 29, 2014, June 28, 2014, September 27, 2014, and December 31, 2014, respectively.

Recently Issued 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 GAAP and International Financial Reporting Standards.  The ASU removes inconsistencies and weaknesses in revenue requirements; provides a more robust framework for addressing revenue issues; improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; provides more useful information to users of financial statements through expanded disclosure requirements; and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer.  The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2018, with the ability to early adopt on January 1, 2017.  Vishay is currently evaluating the effect of the ASU on its revenue contracts and its adoption alternatives.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.  The ASU is the result of the FASB's simplification initiative intended to improve GAAP by reducing costs and complexity while maintaining or enhancing the usefulness of related financial statement information.  The ASU specifies that debt issuance costs related to a note shall be reported in the balance sheet as a direct reduction from the face amount of the note.  The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2016.  The ASU will require the Company to reclassify its capitalized debt issuance costs currently recorded as assets on the consolidated condensed balance sheets.  The ASU will have no effect on the Company's results of operations or liquidity.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.  The ASU is the result of the FASB's simplification initiative intended to improve GAAP by reducing costs and complexity while maintaining or enhancing the usefulness of related financial statement information.  The ASU eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively, and to instead recognize measurement-period adjustments during the period in which the acquirer determines the amount, including the effect on earnings of any amounts which would have been recorded in previous periods if the accounting had been completed at the acquisition date.  The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2016.  The ASU will have no effect on the Company's results of operations or liquidity.

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 – Goodwill and Other Intangible Assets

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.  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.

In light of a sustained decline in market capitalization for Vishay and its peer group companies, and other factors (including the cost reduction programs announced during the third fiscal quarter as described in Note 3), Vishay determined that interim goodwill and indefinite-lived impairment tests were required as of the end of the third fiscal quarter of 2015.

Prior to completing the interim assessment of goodwill for impairment, the Company performed a recoverability test of certain depreciable and amortizable long-lived assets.  As a result of those assessments, it was determined that the depreciable and amortizable assets associated with the Company's Capella business were not recoverable, and the Company recorded impairment charges totaling $57,600 to write-down the related assets to their fair value.

After completing step one of the goodwill impairment test, it was determined that the estimated fair value of the Capacitors reporting unit was less than the net book value of that reporting unit, requiring the completion of the second step of the impairment evaluation.  The estimated fair value of the Resistors & Inductors and Optoelectronic Components reporting units exceeded the net book value of those reporting units by ratios of 2.0x and 1.3x, respectively, and no second step was required for those reporting units.

Upon completion of the step two analysis for the Capacitors reporting unit, the Company recorded a full goodwill impairment charge of $5,380.

As part of these analyses, the Company determined that its Siliconix tradenames, with a carrying value of $20,359, were not impaired and will continue to be reported as indefinite-lived intangible assets.  The estimated fair value of the Siliconix tradenames exceeded the carrying value by a narrow margin.  They will continue to be closely monitored for impairment.

The fair value of long-lived assets is measured primarily using present value techniques based on projected cash flows from the asset group.  The evaluation of the recoverability of long-lived assets, and the determination of their fair value, requires the Company to make significant estimates and assumptions.  These estimates and assumptions primarily include, but are not limited to: the identification of the asset group at the lowest level of independent cash flows and the principal asset of the group; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures.

The fair value of indefinite-lived trademarks is measured as the discounted cash flow savings realized from owning such tradenames and not having to pay a royalty for their use.  The evaluation of the fair value of indefinite-lived trademarks requires us to make significant estimates and assumptions.  These estimates and assumptions primarily include, but are not limited to: the assumed market-royalty rate; the discount rate; terminal growth rates; and forecasts of revenue.

The fair value of reporting units for goodwill impairment testing purposes is measured primarily using present value techniques based on projected cash flows from the reporting unit.  The calculated results are evaluated for reasonableness using comparable company data.  The determination of the fair value of the reporting units and the allocation of that value to individual assets and liabilities within those reporting units requires the Company to make significant estimates and assumptions.  These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which the Company competes; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures.  The allocation requires several analyses to determine fair value of assets and liabilities including, among others, completed technology, tradenames, customer relationships, and certain property and equipment.

Due to the inherent uncertainty involved in making these estimates, actual financial results could differ from those estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge; could have a significant impact on the conclusion that an asset group's carrying value is recoverable, that an indefinite-lived asset is not impaired, or the determination of any impairment charge if it was determined that the asset values were indeed impaired.

The Company performs its annual goodwill and indefinite-lived impairment test as of the first day of the fiscal fourth quarter. The interim impairment test performed as of October 3, 2015, the last day of the third fiscal quarter, was effectively the annual impairment test for 2015.  If financial conditions deteriorate, an additional interim assessment may be required in the fourth fiscal quarter.

The recorded impairment charges are noncash in nature and do not affect Vishay's liquidity, cash flows from operating activities, or debt covenants, and will not have a material impact on future operations.
13

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


The changes in the carrying amount of goodwill by segment for the nine fiscal months ended October 3, 2015 was as follows:

 
 
Optoelectronic Components
   
Resistors & Inductors
   
Capacitors
   
Total
 
 
 
   
   
   
 
Balance at January 1, 2015
 
$
96,849
   
$
42,146
   
$
5,364
   
$
144,359
 
Goodwill impairment charges
   
-
     
-
     
(5,380
)
   
(5,380
)
Exchange rate effects
   
-
     
(592
)
   
16
     
(576
)
Balance at October 3, 2015
 
$
$96,849
   
$
41,554
   
$
-
   
$
138,403
 
 
                               

Following the impairment charges recorded in the third fiscal quarter of 2015, the other intangible assets are as follows:

   
October 3,
   
December 31,
 
   
2015
   
2014
 
         
Intangible Assets Subject to Amortization
       
  (Definite-lived):
       
   Patents and acquired technology
 
$
93,786
   
$
108,190
 
   Capitalized software
   
53,197
     
53,369
 
   Customer relationships
   
85,526
     
153,853
 
   Tradenames
   
35,758
     
39,612
 
   Non-competition agreements
   
2,267
     
2,283
 
     
270,534
     
357,307
 
Accumulated amortization:
               
   Patents and acquired technology
   
(74,959
)
   
(71,700
)
   Capitalized software
   
(46,976
)
   
(45,979
)
   Customer relationships
   
(36,359
)
   
(50,630
)
   Tradenames
   
(23,052
)
   
(21,384
)
   Non-competition agreements
   
(1,769
)
   
(1,360
)
     
(183,115
)
   
(191,053
)
Net Intangible Assets Subject to Amortization
   
87,419
     
166,254
 
                 
Intangible Assets Not Subject to Amortization
               
  (Indefinite-lived):
               
    Tradenames
   
20,359
     
20,359
 
   
$
107,778
     
186,613
 

Estimated annual amortization expense of intangible assets on the balance sheet at October 3, 2015 for the fourth fiscal quarter of 2015 and the next four years is as follows:

2015
 
$
4,135
 
2016
   
15,314
 
2017
   
13,162
 
2018
   
9,180
 
2019
   
5,343
 
14

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
 
Note 3 – 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 were 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 $32,000.  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.

On August 3, 2015, the Company announced additional global cost reduction programs as part of its continuous efforts to improve efficiency and operating performance. These programs include a facility closure in the Netherlands that was previously announced in the second fiscal quarter of 2015.  The cash costs of these programs, primarily severance, are expected to aggregate to approximately $30,000.  Complete implementation of these programs is expected to occur before the end of 2017.

The following table summarizes restructuring and related expenses which were recognized and reported on a separate line in the accompanying consolidated statements of operations:

   
Fiscal quarters ended
   
Nine fiscal months ended
 
   
October 3, 2015
   
September 27, 2014
   
October 3, 2015
   
September 27, 2014
 
MOSFETs Enhanced Competitiveness Program
 
$
1,445
   
$
1,522
   
$
3,737
   
$
4,741
 
Voluntary Separation / Retirement Program
   
-
     
(94
)
   
77
     
12,105
 
Modules Production Transfer Program
   
-
     
2,080
     
-
     
2,080
 
Global Cost Reduction Programs
   
879
     
-
     
5,580
     
-
 
Total
 
$
2,324
   
$
3,508
   
$
9,394
   
$
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 2013
 
$
2,328
 
Cash paid
   
(267
)
Balance at December 31, 2013
 
$
2,061
 
Expense recorded in 2014
   
6,025
 
Cash paid
   
(856
)
Balance at December 31, 2014
 
$
7,230
 
Expense recorded in 2015
   
3,737
 
Cash paid
   
(400
)
Balance at October 3, 2015
 
$
10,567
 

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.
15

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 2013
 
$
486
 
Cash paid
   
(98
)
Foreign currency translation
   
3
 
Balance at December 31, 2013
 
$
391
 
Expense recorded in 2014
   
12,792
 
Cash paid
   
(8,054
)
Foreign currency translation
   
(455
)
Balance at December 31, 2014
 
$
4,674
 
Expense recorded in 2015
   
77
 
Cash paid
   
(2,761
)
Foreign currency translation
   
(234
)
Balance at October 3, 2015
 
$
1,756
 

The payment terms vary by country, but generally are paid in a lump sum at cessation of employment. Certain participants are being paid in installments.  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 following table summarizes the activity to date related to this program:

Expense recorded in 2014
 
$
2,080
 
Cash paid
   
(464
)
Foreign currency translation
   
(121
)
Balance at December 31, 2014
 
$
1,495
 
Cash paid
   
(567
)
Foreign currency translation
   
(105
)
Balance at October 3, 2015
 
$
823
 

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.

16

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

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

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

Expense recorded in 2015
 
$
5,580
 
Cash paid
   
(410
)
Foreign currency translation
   
(19
)
Balance at October 3, 2015
 
$
5,151
 

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

Diodes
 
$
48
 
Resistors & Inductors
   
480
 
Capacitors
   
4,719
 
Unallocated Selling, General, and Administrative Expenses
   
333
 
Total
 
$
5,580
 

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 4 – 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 October 3, 2015 and September 27, 2014 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 nine fiscal months ended October 3, 2015, the liabilities for unrecognized tax benefits increased by $130 on a net basis, principally due to increases for tax positions taken in prior periods and interest, offset by a decrease due to foreign currency effects.

During 2014, the Company borrowed $53,000 on its revolving credit facility to achieve future flexibility given the legal entity and the financial structure utilized for the Capella Microsystems Inc. ("Capella") acquisition.  Subsequent to the acquisition of the noncontrolling interests in Capella on December 31, 2014, the Company planned to repatriate cash from the 2014 earnings of non-U.S. subsidiaries to the United States primarily to repay those borrowings on the revolving credit facility, and also to realign the acquired entity structure to have Capella's U.S. subsidiary directly owned by Vishay Intertechnology, Inc. The tax provision for the year ended December 31, 2014 included all U.S. federal and state income taxes, incremental foreign income taxes, and withholding taxes payable related to that anticipated repatriation transaction.  During the second fiscal quarter of 2015, we reduced the balance of the revolving credit facility by approximately $45,000 using cash that was repatriated.  The final $11,000 from this repatriation transaction was repatriated in the third fiscal quarter of 2015 and used to further reduce the balance of the revolving credit facility, although some amounts were redrawn from the credit facility for other corporate purposes.
18

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

Note 5 – Long-Term Debt

Long-term debt consists of the following:

   
October 3, 2015
   
December 31, 2014
 
         
Credit facility
 
$
173,000
   
$
200,000
 
Exchangeable unsecured notes, due 2102
   
38,642
     
38,642
 
Convertible senior debentures, due 2040
   
105,719
     
103,841
 
Convertible senior debentures, due 2041
   
54,278
     
53,249
 
Convertible senior debentures, due 2042
   
60,127
     
59,190
 
     
431,766
     
454,922
 
Less current portion
   
-
     
-
 
   
$
431,766
   
$
454,922
 

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 August 31, 2015 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 31, 2015 (per $1 principal amount)
   
74.3326
     
54.2441
     
87.3974
 
Effective conversion price effective August 31, 2015 (per share)
 
$
13.45
   
$
18.44
   
$
11.44
 
130% of the conversion price (per share)
 
$
17.49
   
$
23.97
   
$
14.87
 
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.

Based on an evaluation of the conversion criteria at October 3, 2015 and December 31, 2014, none of the convertible senior debentures due 2040, due 2041, or due 2042 were convertible.  The conversion criteria of the debentures will continue to be evaluated and the debentures may become convertible in the future.  At the direction of the Company's Board of Directors, the Company intends, upon conversion, to repay the principal amount of the convertible debentures in cash and settle any additional amounts in shares of the Company's common stock.  The Company intends to finance the principal amount of any converted debentures using borrowings under its credit facility.
19

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

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 - net carrying value
 
October 3, 2015
                   
Due 2040
 
$
275,000
     
(170,111
)
   
830
   
$
105,719
   
$
110,094
 
Due 2041
 
$
150,000
     
(96,292
)
   
570
   
$
54,278
   
$
62,246
 
Due 2042
 
$
150,000
     
(90,255
)
   
382
   
$
60,127
   
$
57,874
 
Total
 
$
575,000
   
$
(356,658
)
 
$
1,782
   
$
220,124
   
$
230,214
 
                                         
December 31, 2014
                                       
Due 2040
 
$
275,000
     
(171,685
)
   
526
   
$
103,841
   
$
110,094
 
Due 2041
 
$
150,000
     
(97,092
)
   
341
   
$
53,249
   
$
62,246
 
Due 2042
 
$
150,000
     
(91,048
)
   
238
   
$
59,190
   
$
57,874
 
Total
 
$
575,000
   
$
(359,825
)
 
$
1,105
   
$
216,280
   
$
230,214
 

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
 
October 3, 2015
                   
Due 2040
 
$
1,547
     
535
     
22
     
198
   
$
2,302
 
Due 2041
 
$
844
     
272
     
12
     
92
   
$
1,220
 
Due 2042
 
$
844
     
270
     
13
     
105
   
$
1,232
 
Total
 
$
3,235
   
$
1,077
   
$
47
   
$
395
   
$
4,754
 
                                         
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
 
20

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

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

   
Contractual
coupon interest
   
Non-cash amortization of debt discount
   
Non-cash amortization of deferred financing costs
   
Non-cash change in value of derivative liability
   
Total interest expense related to the debentures
 
October 3, 2015
                   
Due 2040
 
$
4,641
     
1,574
     
66
     
304
   
$
6,585
 
Due 2041
 
$
2,532
     
800
     
36
     
229
   
$
3,597
 
Due 2042
 
$
2,532
     
793
     
40
     
144
   
$
3,509
 
Total
 
$
9,705
   
$
3,167
   
$
142
   
$
677
   
$
13,691
 
                                         
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
 
21

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

Note 6 – Other Income (Expense)

On August 12, 2015, a major explosion occurred in the port of Tianjin, China.  Vishay owns and operates a diodes manufacturing facility in Tianjin near the port.  The shockwave of the explosion resulted in some damage to the facility and caused a temporary shutdown.  Full production resumed on September 8, 2015.  

As a result of this incident, through the end of the third fiscal quarter, the Company estimates that it has incurred $9,645 for inventory, property, and equipment damage (at net book value) and related repair and clean-up costs.  As of October 3, 2015, the Company has recorded a receivable of $4,295 for amounts which are probable of recovery under its insurance policies.  The accompanying condensed consolidated statements of operations for the fiscal quarter and nine fiscal months ended October 3, 2015 include, as a separate line item, a loss of $5,350 related to these items, which represents the insurance deductible and certain costs which are potentially not recoverable.

The Company's insurance coverage generally provides for replacement cost of damaged items.  Any amount expected to be received in excess of the book value of the damaged item will be treated as a gain, but will not be recorded until contingencies are resolved.  The Company also believes that it has valid claims under its business interruption insurance policies, but those claims cannot be quantified at this time.  The Company will not record a receivable for business interruption claims until all contingencies have been resolved.
22

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, 2015
 
$
(155,760
)
 
$
84,703
     
1,917
   
$
(69,140
)
Other comprehensive income (loss) before reclassifications
   
-
     
(57,174
)
   
(1,424
)
 
$
(58,598
)
Tax effect
   
-
     
-
     
498
   
$
498
 
Other comprehensive income (loss) before reclassifications, net of tax
   
-
     
(57,174
)
   
(926
)
 
$
(58,100
)
Amounts reclassified out of AOCI
   
9,548
     
-
     
(680
)
 
$
8,868
 
Tax effect
   
(3,052
)
   
-
     
238
   
$
(2,814
)
Amounts reclassified out of AOCI, net of tax
   
6,496
     
-
     
(442
)
 
$
6,054
 
Net other comprehensive income (loss)
 
$
6,496
   
$
(57,174
)
 
$
(1,368
)
 
$
(52,046
)
Balance at October 3, 2015
 
$
(149,264
)
 
$
27,529
   
$
549
   
$
(121,186
)

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).  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 $680 for the nine fiscal months ended October 3, 2015. 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.
23

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.

Defined Benefit Pension Plans

The following table shows the components of the net periodic pension cost for the third fiscal quarters of 2015 and 2014 for the Company's defined benefit pension plans:

   
Fiscal quarter ended
October 3, 2015
   
Fiscal quarter ended
September 27, 2014
 
   
U.S. Plans
   
Non-U.S. Plans
   
U.S. Plans
   
Non-U.S. Plans
 
                 
Net service cost
 
$
-
   
$
812
   
$
-
   
$
826
 
Interest cost
   
2,915
     
1,412
     
3,313
     
2,149
 
Expected return on plan assets
   
(3,391
)
   
(448
)
   
(3,578
)
   
(534
)
Amortization of prior service cost (credit)
   
16
     
-
     
(23
)
   
1
 
Amortization of losses
   
2,048
     
1,278
     
1,507
     
677
 
Curtailment and settlement losses
   
-
     
-
     
15,588
     
-
 
Net periodic benefit cost
 
$
1,588
   
$
3,054
   
$
16,807
   
$
3,119
 

The following table shows the components of the net periodic pension cost for the nine fiscal months ended October 3, 2015 and September 27, 2014 for the Company's defined benefit pension plans:

   
Nine fiscal months ended
October 3, 2015
   
Nine fiscal months ended
September 27, 2014
 
   
U.S. Plans
   
Non-U.S. Plans
   
U.S. Plans
   
Non-U.S. Plans
 
                 
Net service cost
 
$
-
   
$
2,467
   
$
-
   
$
2,481
 
Interest cost
   
8,743
     
4,263
     
10,981
     
6,525
 
Expected return on plan assets
   
(10,174
)
   
(1,358
)
   
(11,694
)
   
(1,591
)
Amortization of prior service cost (credit)
   
48
     
-
     
(69
)
   
3
 
Amortization of losses
   
6,144
     
3,859
     
5,127
     
2,055
 
Curtailment and settlement losses
   
-
     
-
     
15,588
     
-
 
Net periodic benefit cost
 
$
4,761
   
$
9,231
   
$
19,933
   
$
9,473
 

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.

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.
24

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

In the second fiscal quarter of 2015, the Company began the process of terminating the Vishay Retirement Plan, the Company's U.S. qualified pension plan.  Plan participants will not be adversely affected by the plan termination, but rather will have their benefits either converted into a lump sum cash payment or an annuity contract placed with an insurance carrier.

The completion of this proposed termination and settlement is contingent upon the receipt of a favorable determination letter from the Internal Revenue Service ("IRS") and meeting certain IRS and Pension Benefit Guarantee Corporation ("PBGC") requirements, which is expected to take at least one year.
 
As of the last fiscal year-end measurement date (December 31, 2014), the Vishay Retirement Plan was fully-funded on a GAAP basis.  In order to terminate the plan in accordance with IRS and PBGC requirements, the Company is required to fully fund the plan on a termination basis and will commit to contribute the additional assets necessary to do so.  The amount necessary to do so is not yet known, but is currently estimated to be between zero and $35,000.

Other Postretirement Benefits

The following table shows the components of the net periodic benefit cost for the third fiscal quarters of 2015 and 2014 for the Company's other postretirement benefit plans:

   
Fiscal quarter ended
October 3, 2015
   
Fiscal quarter ended
September 27, 2014
 
   
U.S. Plans
   
Non-U.S. Plans
   
U.S. Plans
   
Non-U.S. Plans
 
                 
Service cost
 
$
31
   
$
69
   
$
29
   
$
77
 
Interest cost
   
83
     
37
     
88
     
61
 
Amortization of prior service (credit)
   
(209
)
   
-
     
(206
)
   
-
 
Amortization of losses (gains)
   
22
     
19
     
(35
)
   
9
 
Net periodic benefit cost
 
$
(73
)
 
$
125
   
$
(124
)
 
$
147
 

The following table shows the components of the net periodic pension cost for the nine fiscal months ended October 3, 2015 and September 27, 2014 for the Company's other postretirement benefit plans:

   
Nine fiscal months ended
October 3, 2015
   
Nine fiscal months ended
September 27, 2014
 
   
U.S. Plans
   
Non-U.S. Plans
   
U.S. Plans
   
Non-U.S. Plans
 
                 
Service cost
 
$
91
   
$
206
   
$
87
   
$
235
 
Interest cost
   
250
     
110
     
264
     
187
 
Amortization of prior service (credit)
   
(627
)
   
-
     
(618
)
   
-
 
Amortization of losses (gains)
   
67
     
57
     
(105
)
   
29
 
Net periodic benefit cost
 
$
(219
)
 
$
373
   
$
(372
)
 
$
451
 
25

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
 
   
October 3, 2015
   
September 27, 2014
   
October 3, 2015
   
September 27, 2014
 
                 
Stock options
 
$
-
   
$
-
   
$
-
     
-
 
Restricted stock units
   
933
     
(42
)
   
2,771
     
1,572
 
Phantom stock units
   
-
     
-
     
141
     
131
 
Total
 
$
933
   
$
(42
)
 
$
2,912
     
1,703
 

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 October 3, 2015 (amortization periods in years):

   
Unrecognized Compensation Cost
   
Weighted Average Remaining Amortization Periods
 
         
Stock options
 
$
-
     
0.0
 
Restricted stock units
   
8,547
     
1.2
 
Phantom stock units
   
-
     
0.0
 
Total
 
$
8,547
         

Unrecognized compensation cost presented in the table above includes $2,935 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.
26

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 October 3, 2015 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, 2015
   
1,147
   
$
12.75
 
Granted
   
349
     
13.60
 
Vested*
   
(162
)
   
11.34
 
Cancelled or forfeited
   
(276
)
   
12.88
 
Outstanding at October 3, 2015
   
1,058
   
$
13.21
 
                 
Expected to vest at October 3, 2015
   
836
         

* 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, 2016
   
-
     
222
     
222
 
January 1, 2017
   
192
     
-
     
192
 
January 1, 2018
   
202
     
-
     
202
 

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 October 3, 2015 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, 2015
   
119
     
Granted
   
10
   
$
14.09
 
Dividend equivalents issued
   
2
         
Redeemed for common stock
   
-
         
Outstanding at October 3, 2015
   
131
         
27

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

Stock Options

In addition to stock options outstanding pursuant to the 2007 Program, during the periods presented, the Company had stock options outstanding under previous stockholder-approved stock option programs.  These programs are more fully described in Note 12 to the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2014.  No additional options may be granted pursuant to these programs.

At December 31, 2014 and October 3, 2015, there were 105,000 options outstanding with a weighted average exercise price of $15.38.  At October 3, 2015, the weighted average remaining contractual life of all outstanding options was 1.57 years.

At October 3, 2015, 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 2015 of $9.81 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 October 3, 2015 was zero because all outstanding options have exercise prices in excess of market value.  This amount changes based on changes in the market value of the Company's common stock.  During the nine fiscal months ended October 3, 2015, no options were exercised.
28

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, 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 following tables set forth business segment information:

   
MOSFETs
   
Diodes
   
Optoelectronic Components
   
Resistors & Inductors
   
Capacitors
   
Total
 
Fiscal quarter ended October 3, 2015:
                       
Product Sales
 
$
109,446
   
$
123,922
   
$
70,008
   
$
172,995
   
$
83,547
   
$
559,918
 
Royalty Revenues
   
-
     
-
     
-
     
736
     
-
   
$
736
 
Total Revenue
 
$
109,446
   
$
123,922
   
$
70,008
   
$
173,731
   
$
83,547
   
$
560,654
 
                                                 
Gross Margin
 
$
16,795
   
$
27,508
   
$
22,969
   
$
49,843
   
$
13,029
   
$
130,144
 
                                                 
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
 
                                                 


Nine fiscal months ended October 3, 2015:
                       
Product Sales
 
$
322,553
   
$
399,155
   
$
211,610
   
$
538,173
   
$
270,474
   
$
1,741,965
 
Royalty Revenues
   
11
     
-
     
-
     
2,584
     
-
   
$
2,595
 
Total Revenue
 
$
322,564
   
$
399,155
   
$
211,610
   
$
540,757
   
$
270,474
   
$
1,744,560
 
                                                 
Gross Margin
 
$
45,261
   
$
88,998
   
$
69,483
   
$
162,034
   
$
50,888
   
$
416,664
 
                                                 
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