Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September 30, 2017
☐ |
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, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý
|
Accelerated filer ☐
|
|
Non-accelerated filer ☐ (Do not check if smaller reporting company)
|
Smaller reporting company ☐
|
|
Emerging growth company ☐
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ý No
As of October 23, 2017, the registrant had 131,874,587 shares of its common stock and 12,129,227 shares of its Class B common stock outstanding.
1
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2
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
September 30, 2017
CONTENTS
Page Number
|
||||
PART I.
|
FINANCIAL INFORMATION
|
|||
3
PART I - FINANCIAL INFORMATION
VISHAY INTERTECHNOLOGY, INC.
(In thousands)
September 30, 2017
|
December 31, 2016
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
575,385
|
$
|
471,781
|
||||
Short-term investments
|
668,185
|
626,627
|
||||||
Accounts receivable, net
|
329,422
|
274,027
|
||||||
Inventories:
|
||||||||
Finished goods
|
131,367
|
109,075
|
||||||
Work in process
|
178,173
|
162,311
|
||||||
Raw materials
|
128,036
|
109,859
|
||||||
Total inventories
|
437,576
|
381,245
|
||||||
Prepaid expenses and other current assets
|
112,394
|
110,792
|
||||||
Total current assets
|
2,122,962
|
1,864,472
|
||||||
Property and equipment, at cost:
|
||||||||
Land
|
91,905
|
89,753
|
||||||
Buildings and improvements
|
595,628
|
570,932
|
||||||
Machinery and equipment
|
2,399,972
|
2,283,222
|
||||||
Construction in progress
|
63,766
|
71,777
|
||||||
Allowance for depreciation
|
(2,298,431
|
)
|
(2,166,813
|
)
|
||||
Property and equipment, net
|
852,840
|
848,871
|
||||||
Goodwill
|
142,545
|
141,407
|
||||||
Other intangible assets, net
|
73,154
|
84,463
|
||||||
Other assets
|
142,753
|
138,588
|
||||||
Total assets
|
$
|
3,334,254
|
$
|
3,077,801
|
Continues on following page.
4
VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Balance Sheets (continued)
(In thousands)
September 30, 2017
|
December 31, 2016
|
|||||||
(Unaudited)
|
||||||||
Liabilities and equity
|
||||||||
Current liabilities:
|
||||||||
Notes payable to banks
|
$
|
25
|
$
|
3
|
||||
Trade accounts payable
|
181,988
|
174,107
|
||||||
Payroll and related expenses
|
138,616
|
114,576
|
||||||
Other accrued expenses
|
151,883
|
149,131
|
||||||
Income taxes
|
18,085
|
19,033
|
||||||
Total current liabilities
|
490,597
|
456,850
|
||||||
Long-term debt less current portion
|
356,938
|
357,023
|
||||||
Deferred income taxes
|
289,526
|
286,797
|
||||||
Other liabilities
|
67,712
|
59,725
|
||||||
Accrued pension and other postretirement costs
|
273,851
|
257,789
|
||||||
Total liabilities
|
1,478,624
|
1,418,184
|
||||||
Redeemable convertible debentures
|
252,889
|
88,659
|
||||||
Stockholders' equity:
|
||||||||
Vishay stockholders' equity
|
||||||||
Common stock
|
13,200
|
13,385
|
||||||
Class B convertible common stock
|
1,213
|
1,213
|
||||||
Capital in excess of par value
|
1,753,369
|
1,952,988
|
||||||
(Accumulated deficit) retained earnings
|
(177,075
|
)
|
(307,417
|
)
|
||||
Accumulated other comprehensive income (loss)
|
10,158
|
(94,652
|
)
|
|||||
Total Vishay stockholders' equity
|
1,600,865
|
1,565,517
|
||||||
Noncontrolling interests
|
1,876
|
5,441
|
||||||
Total equity
|
1,602,741
|
1,570,958
|
||||||
Total liabilities, temporary equity, and equity
|
$
|
3,334,254
|
$
|
3,077,801
|
See accompanying notes.
5
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands, except per share amounts)
Fiscal quarters ended
|
||||||||
September 30, 2017
|
October 1, 2016
|
|||||||
Net revenues
|
$
|
677,883
|
$
|
591,955
|
||||
Costs of products sold
|
488,610
|
438,054
|
||||||
Gross profit
|
189,273
|
153,901
|
||||||
Selling, general, and administrative expenses
|
93,701
|
93,916
|
||||||
Restructuring and severance costs
|
3,244
|
1,197
|
||||||
Impairment of intangible assets
|
-
|
1,559
|
||||||
Operating income
|
92,328
|
57,229
|
||||||
Other income (expense):
|
||||||||
Interest expense
|
(6,938
|
)
|
(6,165
|
)
|
||||
Other
|
798
|
(380
|
)
|
|||||
Total other income (expense)
|
(6,140
|
)
|
(6,545
|
)
|
||||
Income before taxes
|
86,188
|
50,684
|
||||||
Income tax expense
|
21,605
|
14,088
|
||||||
Net earnings
|
64,583
|
36,596
|
||||||
Less: net earnings attributable to noncontrolling interests
|
179
|
156
|
||||||
Net earnings attributable to Vishay stockholders
|
$
|
64,404
|
$
|
36,440
|
||||
Basic earnings per share attributable to Vishay stockholders
|
$
|
0.44
|
$
|
0.25
|
||||
Diluted earnings per share attributable to Vishay stockholders
|
$
|
0.41
|
$
|
0.24
|
||||
Weighted average shares outstanding - basic
|
145,728
|
146,924
|
||||||
Weighted average shares outstanding - diluted
|
156,701
|
149,894
|
||||||
Cash dividends per share
|
$
|
0.0625
|
$
|
0.0625
|
See accompanying notes.
6
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands)
Fiscal quarters ended
|
||||||||
September 30, 2017
|
October 1, 2016
|
|||||||
Net earnings
|
$
|
64,583
|
$
|
36,596
|
||||
Other comprehensive income, net of tax
|
||||||||
Pension and other post-retirement actuarial items
|
1,292
|
1,923
|
||||||
Foreign currency translation adjustment
|
28,149
|
8,585
|
||||||
Unrealized gain on available-for-sale securities
|
220
|
318
|
||||||
Other comprehensive income
|
29,661
|
10,826
|
||||||
Comprehensive income
|
94,244
|
47,422
|
||||||
Less: comprehensive income attributable to noncontrolling interests
|
179
|
156
|
||||||
Comprehensive income attributable to Vishay stockholders
|
$
|
94,065
|
$
|
47,266
|
See accompanying notes.
7
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands, except per share amounts)
Nine fiscal months ended
|
||||||||
September 30, 2017
|
October 1, 2016
|
|||||||
Net revenues
|
$
|
1,929,033
|
$
|
1,752,612
|
||||
Costs of products sold
|
1,405,922
|
1,315,274
|
||||||
Gross profit
|
523,111
|
437,338
|
||||||
Selling, general, and administrative expenses
|
278,865
|
276,455
|
||||||
Restructuring and severance costs
|
5,194
|
12,139
|
||||||
Impairment of intangible assets
|
-
|
1,559
|
||||||
Operating income
|
239,052
|
147,185
|
||||||
Other income (expense):
|
||||||||
Interest expense
|
(20,804
|
)
|
(18,901
|
)
|
||||
Other
|
1,151
|
2,655
|
||||||
Loss on disposal of equity affiliate
|
(7,060
|
)
|
-
|
|||||
Gain on early extinguishment of debt
|
-
|
4,597
|
||||||
Total other income (expense)
|
(26,713
|
)
|
(11,649
|
)
|
||||
Income before taxes
|
212,339
|
135,536
|
||||||
Income taxes
|
54,398
|
37,559
|
||||||
Net earnings
|
157,941
|
97,977
|
||||||
Less: net earnings attributable to noncontrolling interests
|
628
|
437
|
||||||
Net earnings attributable to Vishay stockholders
|
$
|
157,313
|
$
|
97,540
|
||||
Basic earnings per share attributable to Vishay stockholders
|
$
|
1.08
|
$
|
0.66
|
||||
Diluted earnings per share attributable to Vishay stockholders
|
$
|
1.01
|
$
|
0.65
|
||||
Weighted average shares outstanding - basic
|
146,128
|
147,470
|
||||||
Weighted average shares outstanding - diluted
|
155,626
|
150,125
|
||||||
Cash dividends per share
|
$
|
0.1875
|
$
|
0.1875
|
See accompanying notes.
8
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands)
Nine fiscal months ended
|
||||||||
September 30, 2017
|
October 1, 2016
|
|||||||
Net earnings
|
$
|
157,941
|
$
|
97,977
|
||||
Other comprehensive income, net of tax
|
||||||||
Pension and other post-retirement actuarial items
|
4,843
|
5,448
|
||||||
Foreign currency translation adjustment
|
98,965
|
18,633
|
||||||
Unrealized gain on available-for-sale securities
|
1,002
|
1,664
|
||||||
Other comprehensive income
|
104,810
|
25,745
|
||||||
Comprehensive income
|
262,751
|
123,722
|
||||||
Less: comprehensive income attributable to noncontrolling interests
|
628
|
437
|
||||||
Comprehensive income attributable to Vishay stockholders
|
$
|
262,123
|
$
|
123,285
|
See accompanying notes.
9
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands)
Nine fiscal months ended
|
||||||||
September 30, 2017
|
October 1, 2016
|
|||||||
(recast - see Note 1)
|
||||||||
Operating activities
|
||||||||
Net earnings
|
$
|
157,941
|
$
|
97,977
|
||||
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
121,319
|
119,143
|
||||||
(Gain) loss on disposal of property and equipment
|
(106
|
)
|
(1,373
|
)
|
||||
Accretion of interest on convertible debentures
|
3,703
|
3,425
|
||||||
Inventory write-offs for obsolescence
|
12,157
|
17,085
|
||||||
Impairment of intangible assets
|
-
|
1,559
|
||||||
Loss on disposal of equity affiliate
|
7,060
|
-
|
||||||
Deferred income taxes
|
9,115
|
(1,750
|
)
|
|||||
Gain on early extinguishment of debt
|
-
|
(4,597
|
)
|
|||||
Other
|
6,531
|
(4,944
|
)
|
|||||
Net change in operating assets and liabilities, net of effects of businesses acquired
|
(71,875
|
)
|
(13,455
|
)
|
||||
Net cash provided by operating activities
|
245,845
|
213,070
|
||||||
Investing activities
|
||||||||
Capital expenditures
|
(84,790
|
)
|
(81,346
|
)
|
||||
Proceeds from sale of property and equipment
|
1,484
|
1,241
|
||||||
Purchase of short-term investments
|
(598,937
|
)
|
(472,938
|
)
|
||||
Maturity of short-term investments
|
610,573
|
491,867
|
||||||
Other investing activities
|
(6,663
|
)
|
2,886
|
|||||
Net cash provided by (used in) investing activities
|
(78,333
|
)
|
(58,290
|
)
|
||||
Financing activities
|
||||||||
Principal payments on long-term debt and capital leases
|
-
|
(34,044
|
)
|
|||||
Net proceeds (payments) on revolving credit lines
|
(5,000
|
)
|
(41,000
|
)
|
||||
Common stock repurchases
|
(37,564
|
)
|
(16,981
|
)
|
||||
Net changes in short-term borrowings
|
22
|
(626
|
)
|
|||||
Dividends paid to common stockholders
|
(25,054
|
)
|
(25,329
|
)
|
||||
Dividends paid to Class B common stockholders
|
(2,274
|
)
|
(2,274
|
)
|
||||
Proceeds from stock options exercised
|
1,260
|
-
|
||||||
Distributions to noncontrolling interests
|
(1,140
|
)
|
(707
|
)
|
||||
Acquisition of noncontrolling interests
|
(4,100
|
)
|
-
|
|||||
Cash withholding taxes paid when shares withheld for vested equity awards
|
(1,971
|
)
|
(442
|
)
|
||||
Other financing activities
|
(1,255
|
)
|
-
|
|||||
Net cash provided by (used in) financing activities
|
(77,076
|
)
|
(121,403
|
)
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
13,168
|
2,703
|
||||||
Net increase (decrease) in cash and cash equivalents
|
103,604
|
36,080
|
||||||
Cash and cash equivalents at beginning of period
|
471,781
|
475,507
|
||||||
Cash and cash equivalents at end of period
|
$
|
575,385
|
$
|
511,587
|
See accompanying notes.
10
VISHAY INTERTECHNOLOGY, INC.
(Unaudited - In thousands, except share and per share amounts)
Common Stock
|
Class B Convertible Common Stock
|
Capital in Excess of Par Value
|
Retained Earnings (Accumulated Deficit)
|
Accumulated Other Comprehensive Income (Loss)
|
Total Vishay Stockholders' Equity
|
Noncontrolling Interests
|
Total Equity
|
|||||||||||||||||||||||||
Balance at December 31, 2016
|
$
|
13,385
|
$
|
1,213
|
$
|
1,952,988
|
$
|
(307,417
|
)
|
$
|
(94,652
|
)
|
$
|
1,565,517
|
$
|
5,441
|
$
|
1,570,958
|
||||||||||||||
Cumulative effect of accounting change for adoption of ASU 2016-09 (see Note 1)
|
-
|
-
|
-
|
386
|
-
|
386
|
-
|
386
|
||||||||||||||||||||||||
Net earnings
|
-
|
-
|
-
|
157,313
|
-
|
157,313
|
628
|
157,941
|
||||||||||||||||||||||||
Other comprehensive income
|
-
|
-
|
-
|
-
|
104,810
|
104,810
|
-
|
104,810
|
||||||||||||||||||||||||
Distributions to noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,140
|
)
|
(1,140
|
)
|
||||||||||||||||||||||
Acquisition of noncontrolling interests
|
-
|
-
|
(1,047
|
)
|
-
|
-
|
(1,047
|
)
|
(3,053
|
)
|
(4,100
|
)
|
||||||||||||||||||||
Temporary equity reclassification
|
-
|
-
|
(164,230
|
)
|
-
|
-
|
(164,230
|
)
|
-
|
(164,230
|
)
|
|||||||||||||||||||||
Common stock repurchase (2,127,183 shares)
|
(213
|
)
|
-
|
(37,351
|
)
|
-
|
-
|
(37,564
|
)
|
-
|
(37,564
|
)
|
||||||||||||||||||||
Issuance of stock and related tax withholdings for vested restricted stock units (200,688 shares)
|
20
|
-
|
(1,991
|
)
|
-
|
-
|
(1,971
|
)
|
-
|
(1,971
|
)
|
|||||||||||||||||||||
Dividends declared ($ 0.1875 per share)
|
-
|
-
|
29
|
(27,357
|
)
|
-
|
(27,328
|
)
|
-
|
(27,328
|
)
|
|||||||||||||||||||||
Stock compensation expense
|
-
|
-
|
3,719
|
-
|
-
|
3,719
|
-
|
3,719
|
||||||||||||||||||||||||
Stock options exercised (77,334 shares)
|
8
|
-
|
1,252
|
-
|
-
|
1,260
|
-
|
1,260
|
||||||||||||||||||||||||
Balance at September 30, 2017
|
$
|
13,200
|
$
|
1,213
|
$
|
1,753,369
|
$
|
(177,075
|
)
|
$
|
10,158
|
$
|
1,600,865
|
$
|
1,876
|
$
|
1,602,741
|
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, 2016. The results of operations for the fiscal quarter and nine fiscal months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year.
The Company reports interim financial information for 13-week periods beginning on a Sunday and ending on a Saturday, except for the first fiscal quarter, which always begins on January 1, and the fourth fiscal quarter, which always ends on December 31. The four fiscal quarters in 2017 end on April 1, 2017, July 1, 2017, September 30, 2017, and December 31, 2017, respectively. The four fiscal quarters in 2016 ended on April 2, 2016, July 2, 2016, October 1, 2016, and December 31, 2016, respectively.
Recently Adopted Accounting Guidance
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU is the result of the FASB's simplification initiative intended to improve GAAP by reducing costs and complexity while maintaining or enhancing the usefulness of related financial statement information. The ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted the ASU on January 1, 2017. The ASU allowed prospective adoption of certain aspects, while requiring retrospective adoption of other aspects of the guidance. The Company recognized a cumulative-effect adjustment for previously unrecognized excess tax benefits in January 1, 2017 retained earnings (accumulated deficit) of $386. The Company reclassified $442 of cash withholding taxes paid when shares were withheld for vested equity awards in the accompanying consolidated condensed statement of cash flows for the nine fiscal months ended October 1, 2016 to financing cash flows. The Company retrospectively reclassified excess tax benefits as operating cash flows on the consolidated condensed statement of cash flows. The Company will recognize forfeitures on its stock-based awards as they occur.
Recently Issued Accounting Guidance
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is the result of a convergence project between the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The ASU removes inconsistencies and weaknesses in revenue requirements; provides a more robust framework for addressing revenue issues; improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; provides more useful information to users of financial statements through expanded disclosure requirements; and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2018. The Company intends to retrospectively adopt the ASU effective January 1, 2018. Based on work performed to date, the adoption of the ASU is not expected to have a material impact on the Company's results of operations.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU is the result of a project between the FASB and the International Accounting Standards Board to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Upon adoption of the ASU, the Company will recognize lease assets and liabilities for its operating leases which are not currently reported on its consolidated balance sheets. The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2019, with the ability to early adopt. The Company is currently evaluating the effect of the ASU on its lease contracts.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2020, with the ability to early adopt for interim and annual periods beginning on or after January 1, 2019. The Company is currently evaluating the effect of the ASU on its financial assets measured at amortized cost.
Reclassifications
In addition to the changes due to the retrospective adoption of certain aspects of new accounting guidance described above, certain prior period amounts have been reclassified to conform to the current financial statement presentation.
12
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 2 – Restructuring and Related Activities
The Company places a strong emphasis on controlling its costs and combats general price inflation by continuously improving its efficiency and operating performance. When the ongoing cost containment activities are not adequate, the Company takes actions to maintain its cost competitiveness.
The Company incurred significant restructuring costs in its past to reduce its cost structure. Historically, the Company's primary cost reduction technique was through the transfer of production from high-labor-cost countries to lower-labor-cost countries. Since 2013, the Company's cost reduction programs have primarily focused on reducing fixed costs, including selling, general, and administrative expenses.
In 2013, the Company announced various cost reduction programs. These programs were substantially implemented by the end of the first fiscal quarter of 2016, with some additional costs incurred in the remainder of 2016. Many of the severance costs were recognized ratably over the required stay periods. In November 2016, the Company announced an extension of one of these programs.
In 2015, the Company announced additional global cost reduction programs. These programs include a facility closure in the Netherlands. The cash costs of these programs, primarily severance, are expected to aggregate to approximately $30,000. Complete implementation of these programs is expected to occur before the end of 2017.
The following table summarizes restructuring and related expenses which were recognized and reported on a separate line in the accompanying consolidated condensed statements of operations:
Fiscal quarters ended
|
Nine fiscal months ended
|
|||||||||||||||
September 30, 2017
|
October 1, 2016
|
September 30, 2017
|
October 1, 2016
|
|||||||||||||
MOSFETs Enhanced Competitiveness Program
|
$
|
2,463
|
$
|
675
|
$
|
2,911
|
$
|
5,700
|
||||||||
Global Cost Reduction Programs
|
781
|
986
|
2,283
|
6,903
|
||||||||||||
Modules Production Transfer Program
|
-
|
(464
|
)
|
-
|
(464
|
)
|
||||||||||
Total
|
$
|
3,244
|
$
|
1,197
|
$
|
5,194
|
$
|
12,139
|
MOSFETs Enhanced Competitiveness Program
Over a period of approximately 2 years and in a series of discrete steps, the manufacture of wafers for a substantial share of products was transferred into a more cost-efficient fab. As a consequence, certain other manufacturing previously occurring in-house was transferred to third-party foundries. This transfer of production was substantially completed by the end of the first fiscal quarter of 2016.
Employees generally were required to remain with the Company during the production transfer period. Accordingly, the Company accrued these severance costs ratably over the respective employees' remaining service periods. The Company has incurred and may continue to incur other exit costs associated with the production transfer, including certain contract termination costs.
As a result of a review of the financial results and outlook for the Company's MOSFETs segment following the completion of production transfers, in November 2016, the Company determined to implement further cost reductions for the MOSFETs segment.
In November 2016, the Company announced an extension of the MOSFETs Enhanced Competitiveness Program. The revised program includes various cost reduction initiatives, primarily the transfer of all remaining manufacturing operations at its Santa Clara, California facility to other Vishay facilities or third-party subcontractors. The Company expects to incur cash charges of approximately $7,000 to $8,000, primarily related to severance, to implement these additional steps. The total cash charges for the MOSFETs Enhanced Competitiveness Program are expected to be $26,000 to $27,000. The Company expects to maintain its R&D and management presence in the Silicon Valley area, even after the cessation of manufacturing operations there.
13
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The following table summarizes the activity to date related to this program:
Expense recorded in 2013
|
$
|
2,328
|
||
Cash paid
|
(267
|
)
|
||
Balance at December 31, 2013
|
$
|
2,061
|
||
Expense recorded in 2014
|
6,025
|
|||
Cash paid
|
(856
|
)
|
||
Balance at December 31, 2014
|
$
|
7,230
|
||
Expense recorded in 2015
|
5,367
|
|||
Cash paid
|
(426
|
)
|
||
Foreign currency translation
|
1
|
|||
Balance at December 31, 2015
|
$
|
12,172
|
||
Expense recorded in 2016
|
9,744
|
|||
Cash paid
|
(15,686
|
)
|
||
Foreign currency translation
|
2
|
|||
Balance at December 31, 2016
|
$
|
6,232
|
||
Expense recorded in 2017
|
2,911
|
|||
Cash paid
|
(5,897
|
)
|
||
Balance at September 30, 2017
|
$
|
3,246
|
Severance benefits are generally paid in a lump sum at cessation of employment. Other exit costs of $380 are included in the expenses incurred in 2017 in the table above. The current portion of the liability is $2,586 and is included in other accrued expenses in the accompanying consolidated condensed balance sheets. The non-current portion of the liability is included in other liabilities in the accompanying consolidated condensed balance sheets.
Voluntary Separation / Retirement Program
The voluntary separation / early retirement program was offered to employees worldwide who were eligible because they met job classification, age, and years-of-service criteria as of October 31, 2013. The program benefits varied by country and job classification, but generally included a cash loyalty bonus based on years of service. All employees eligible for the program have left the Company.
These employees generally were not aligned with any particular segment. The effective separation / retirement date for most employees who accepted the offer was June 30, 2014 or earlier, with a few exceptions to allow for a transition period. The Company recorded $13,373 of expenses for this program, primarily in 2013 and 2014. Substantially all amounts related to this program have been paid as of September 30, 2017.
14
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Global Cost Reduction Programs
The global cost reduction programs announced in 2015 include a plan to reduce selling, general, and administrative costs company-wide, and targeted streamlining and consolidation of production for certain product lines within its Capacitors and Resistors & Inductors segments.
The following table summarizes the activity to date related to this program:
Expense recorded in 2015
|
$
|
13,753
|
||
Cash paid
|
(986
|
)
|
||
Foreign currency translation
|
(150
|
)
|
||
Balance at December 31, 2015
|
$
|
12,617
|
||
Expense recorded in 2016
|
9,918
|
|||
Cash paid
|
(16,237
|
)
|
||
Foreign currency translation
|
(34
|
)
|
||
Balance at December 31, 2016
|
$
|
6,264
|
||
Expense recorded in 2017
|
2,283
|
|||
Cash paid
|
(5,779
|
)
|
||
Foreign currency translation
|
319
|
|||
Balance at September 30, 2017
|
$
|
3,087
|
The following table summarizes the expense recognized by segment related to this program:
Fiscal quarters ended
|
Nine fiscal months ended
|
|||||||||||||||
September 30, 2017
|
October 1, 2016
|
September 30, 2017
|
October 1, 2016
|
|||||||||||||
Diodes
|
$
|
(13
|
)
|
$
|
210
|
$
|
-
|
$
|
788
|
|||||||
Optoelectronic Components
|
-
|
-
|
242
|
953
|
||||||||||||
Resistors & Inductors
|
468
|
641
|
1,403
|
3,163
|
||||||||||||
Capacitors
|
88
|
36
|
334
|
459
|
||||||||||||
Unallocated Selling, General, and Administrative Expenses
|
238
|
99
|
304
|
1,540
|
||||||||||||
Total
|
$
|
781
|
$
|
986
|
$
|
2,283
|
$
|
6,903
|
Severance benefits are generally paid in a lump sum at cessation of employment. Other exit costs of $550 are included in the expenses incurred in 2017 in the tables above. The current portion of the liability is $2,478 and is included in other accrued expenses in the accompanying consolidated condensed balance sheets. The non-current portion of the liability is included in other liabilities in the accompanying consolidated condensed balance sheets.
15
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 3 – 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 30, 2017 and October 1, 2016 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.
Income tax expense for the fiscal quarter and nine fiscal months ended September 30, 2017 includes $892 and $3,100, respectively, for the periodic remeasurement of the deferred tax liability recorded for the cash repatriation program compared to $1,402 and $3,388 for the fiscal quarter and nine fiscal months ended October 1, 2016, respectively. The cash repatriation program is expected to occur over several years, and the deferred tax liability is based on the available sources of cash, applicable tax rates, and other factors and circumstances, as of each respective balance sheet date. Changes in the underlying facts and circumstances result in changes in the deferred tax liability balance, which are recorded as tax benefit or expense. During the second fiscal quarter of 2017, the Company repatriated $38,000 pursuant to this program.
During the nine fiscal months ended September 30, 2017, the liabilities for unrecognized tax benefits decreased by $2,463 on a net basis, due to payments and settlements, partially offset by increases for tax positions taken in the current period, interest, and foreign currency effects.
16
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 4 – Long-Term Debt
Long-term debt consists of the following:
September 30, 2017
|
December 31, 2016
|
|||||||
Credit facility
|
$
|
138,000
|
$
|
143,000
|
||||
Convertible senior debentures, due 2040
|
109,864
|
108,120
|
||||||
Convertible senior debentures, due 2041
|
56,372
|
55,442
|
||||||
Convertible senior debentures, due 2042
|
62,247
|
61,341
|
||||||
Deferred financing costs
|
(9,545
|
)
|
(10,880
|
)
|
||||
356,938
|
357,023
|
|||||||
Less current portion
|
-
|
-
|
||||||
$
|
356,938
|
$
|
357,023
|
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 28, 2017 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 September 14, 2017 (per $1 principal amount)
|
76.9650
|
56.1650
|
90.4924
|
|||||||||
Effective conversion price effective September 14, 2017 (per share)
|
$
|
12.99
|
$
|
17.80
|
$
|
11.05
|
||||||
130% of the conversion price (per share)
|
$
|
16.89
|
$
|
23.14
|
$
|
14.37
|
||||||
Call date
|
November 20, 2020
|
May 20, 2021
|
June 7, 2022
|
Prior to three months before the maturity date, the holders may only convert their 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 December 31, 2016 evaluation of the conversion criteria, remained convertible subsequent to the April 1, 2017 and July 1, 2017 evaluations, and remain convertible subsequent to the September 30, 2017 evaluation, due to the sale price of Vishay's common stock exceeding 130% of the conversion price for the applicable periods in the fourth fiscal quarter of 2016 and first, second, and third fiscal quarters of 2017. The convertible debentures due 2040 became convertible subsequent to the September 30, 2017 evaluation of the conversion criteria, due to the sale price of Vishay's common stock exceeding 130% of the conversion price for the applicable periods in the third fiscal quarter of 2017. The debentures due 2040 and due 2042 will remain convertible until December 31, 2017, at which time the conversion criteria will be reevaluated. At the direction of its Board of Directors, the Company intends, upon future conversion of any of the convertible senior debentures, to repay the principal amounts of the convertible senior debentures 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 due 2040 and due 2042 upon conversion over the carrying value of the liability component of the debentures currently convertible has been reclassified as temporary equity on the consolidated condensed financial statements. The Company intends to finance the principal amount of any converted debentures using borrowings under its credit facility. Accordingly, the debt component of the convertible debentures due 2040 and due 2042 continues to be classified as a non-current liability on the consolidated condensed balance sheets.
17
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, 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 (including temporary equity) - net carrying value
|
||||||||||||||||
September 30, 2017
|
||||||||||||||||||||
Due 2040
|
$
|
275,000
|
(165,432
|
)
|
296
|
$
|
109,864
|
$
|
110,094
|
|||||||||||
Due 2041
|
$
|
150,000
|
(93,900
|
)
|
272
|
$
|
56,372
|
$
|
62,246
|
|||||||||||
Due 2042
|
$
|
150,000
|
(87,916
|
)
|
163
|
$
|
62,247
|
$
|
57,874
|
|||||||||||
Total
|
$
|
575,000
|
$
|
(347,248
|
)
|
$
|
731
|
$
|
228,483
|
$
|
230,214
|
|||||||||
December 31, 2016
|
||||||||||||||||||||
Due 2040
|
$
|
275,000
|
(167,273
|
)
|
393
|
$
|
108,120
|
$
|
110,094
|
|||||||||||
Due 2041
|
$
|
150,000
|
(94,843
|
)
|
285
|
$
|
55,442
|
$
|
62,246
|
|||||||||||
Due 2042
|
$
|
150,000
|
(88,835
|
)
|
176
|
$
|
61,341
|
$
|
57,874
|
|||||||||||
Total
|
$
|
575,000
|
$
|
(350,951
|
)
|
$
|
854
|
$
|
224,903
|
$
|
230,214
|
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 30, 2017
|
||||||||||||||||||||
Due 2040
|
$
|
1,547
|
626
|
22
|
(53
|
)
|
$
|
2,142
|
||||||||||||
Due 2041
|
$
|
844
|
321
|
11
|
(21
|
)
|
$
|
1,155
|
||||||||||||
Due 2042
|
$
|
844
|
312
|
13
|
(21
|
)
|
$
|
1,148
|
||||||||||||
Total
|
$
|
3,235
|
$
|
1,259
|
$
|
46
|
$
|
(95
|
)
|
$
|
4,445
|
|||||||||
October 1, 2016
|
||||||||||||||||||||
Due 2040
|
$
|
1,547
|
579
|
22
|
(115
|
)
|
$
|
2,033
|
||||||||||||
Due 2041
|
$
|
844
|
296
|
11
|
(102
|
)
|
$
|
1,049
|
||||||||||||
Due 2042
|
$
|
844
|
291
|
13
|
(71
|
)
|
$
|
1,077
|
||||||||||||
Total
|
$
|
3,235
|
$
|
1,166
|
$
|
46
|
$
|
(288
|
)
|
$
|
4,159
|
18
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Interest expense related to the debentures is reflected on the consolidated condensed statements of operations for the nine fiscal months ended:
Contractual
coupon interest
|
Non-cash amortization of debt discount
|
Non-cash amortization of deferred financing costs
|
Non-cash change in value of derivative liability
|
Total interest expense related to the debentures
|
||||||||||||||||
September 30, 2017
|
||||||||||||||||||||
Due 2040
|
$
|
4,641
|
1,841
|
66
|
(97
|
)
|
$
|
6,451
|
||||||||||||
Due 2041
|
$
|
2,532
|
943
|
35
|
(13
|
)
|
$
|
3,497
|
||||||||||||
Due 2042
|
$
|
2,532
|
919
|
40
|
(13
|
)
|
$
|
3,478
|
||||||||||||
Total
|
$
|
9,705
|
$
|
3,703
|
$
|
141
|
$
|
(123
|
)
|
$
|
13,426
|
|||||||||
October 1, 2016
|
||||||||||||||||||||
Due 2040
|
$
|
4,641
|
1,702
|
66
|
(150
|
)
|
$
|
6,259
|
||||||||||||
Due 2041
|
$
|
2,532
|
869
|
35
|
(136
|
)
|
$
|
3,300
|
||||||||||||
Due 2042
|
$
|
2,532
|
854
|
40
|
(102
|
)
|
$
|
3,324
|
||||||||||||
Total
|
$
|
9,705
|
$
|
3,425
|
$
|
141
|
$
|
(388
|
)
|
$
|
12,883
|
19
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5 – Other Income (Expense)
In March 2017, the Company sold its 50% interest in an investment accounted for using the equity method, and recorded a loss of $7,060. The recorded loss includes Vishay's proportionate share of the investee's accumulated other comprehensive loss of $1,110, recognized upon discontinuation of the equity investment. The loss on disposal is not deductible for income tax purposes. There are certain contingencies pending resolution related to the investee, which may require adjustment to the amount of the recognized loss. The resolution of such additional contingencies is not expected to be material to the financial condition, results of operations, or cash flows of the Company.
20
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 6 – 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, 2017
|
$
|
(64,496
|
)
|
$
|
(31,266
|
)
|
1,110
|
$
|
(94,652
|
)
|
||||||
Other comprehensive income before reclassifications
|
-
|
98,965
|
1,542
|
$
|
100,507
|
|||||||||||
Tax effect
|
-
|
-
|
(540
|
)
|
$
|
(540
|
)
|
|||||||||
Other comprehensive income before reclassifications, net of tax
|
-
|
98,965
|
1,002
|
$
|
99,967
|
|||||||||||
Amounts reclassified out of AOCI
|
6,918
|
-
|
-
|
$
|
6,918
|
|||||||||||
Tax effect
|
(2,075
|
)
|
-
|
-
|
$
|
(2,075
|
)
|
|||||||||
Amounts reclassified out of AOCI, net of tax
|
4,843
|
-
|
-
|
$
|
4,843
|
|||||||||||
Net other comprehensive income
|
$
|
4,843
|
$
|
98,965
|
$
|
1,002
|
$
|
104,810
|
||||||||
Balance at September 30, 2017
|
$
|
(59,653
|
)
|
$
|
67,699
|
$
|
2,112
|
$
|
10,158
|
Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost. (See Note 7 for further information).
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 7 – 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 2017 and 2016 for the Company's defined benefit pension plans:
Fiscal quarter ended
September 30, 2017
|
Fiscal quarter ended
October 1, 2016
|
|||||||||||||||
U.S. Plans
|
Non-U.S. Plans
|
U.S. Plans
|
Non-U.S. Plans
|
|||||||||||||
Net service cost
|
$
|
-
|
$
|
948
|
$
|
-
|
$
|
790
|
||||||||
Interest cost
|
411
|
1,247
|
2,945
|
1,361
|
||||||||||||
Expected return on plan assets
|
-
|
(519
|
)
|
(2,825
|
)
|
(529
|
)
|
|||||||||
Amortization of prior service cost
|
36
|
19
|
36
|
12
|
||||||||||||
Amortization of losses
|
82
|
1,595
|
1,650
|
1,196
|
||||||||||||
Curtailment and settlement losses
|
-
|
331
|
-
|
205
|
||||||||||||
Net periodic benefit cost
|
$
|
529
|
$
|
3,621
|
$
|
1,806
|
$
|
3,035
|
The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 30, 2017 and October 1, 2016 for the Company's defined benefit pension plans:
Nine fiscal months ended
September 30, 2017
|
Nine fiscal months ended
October 1, 2016
|
|||||||||||||||
U.S. Plans
|
Non-U.S. Plans
|
U.S. Plans
|
Non-U.S. Plans
|
|||||||||||||
Net service cost
|
$
|
-
|
$
|
2,776
|
$
|
-
|
$
|
2,355
|
||||||||
Interest cost
|
1,232
|
3,613
|
8,834
|
4,097
|
||||||||||||
Expected return on plan assets
|
-
|
(1,543
|
)
|
(8,476
|
)
|
(1,605
|
)
|
|||||||||
Amortization of prior service cost
|
108
|
55
|
108
|
37
|
||||||||||||
Amortization of losses
|
247
|
4,596
|
4,951
|
3,568
|
||||||||||||
Curtailment and settlement losses
|
-
|
983
|
-
|
601
|
||||||||||||
Net periodic benefit cost
|
$
|
1,587
|
$
|
10,480
|
$
|
5,417
|
$
|
9,053
|
Net periodic benefit cost in 2017 was significantly impacted by the termination and settlement of the Company's qualified U.S. pension plan in December 2016. The settlement resulted in the immediate recognition of previously unrecognized actuarial items related to the plan in 2016 that were recorded in accumulated other comprehensive income and were being amortized into net periodic pension cost. A final reconciliation of participant data subject to the settlement annuity contract was completed during the second fiscal quarter of 2017. The final annuity pricing adjustment and related items did not have a material impact on the Company's financial results.
The Company contributed $4,409 to the Company's Taiwanese pension plans to improve the funded status of those plans in 2017.
22
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Other Postretirement Benefits
The following table shows the components of the net periodic benefit cost for the third fiscal quarters of 2017 and 2016 for the Company's other postretirement benefit plans:
Fiscal quarter ended
September 30, 2017
|
Fiscal quarter ended
October 1, 2016
|
|||||||||||||||
U.S. Plans
|
Non-U.S. Plans
|
U.S. Plans
|
Non-U.S. Plans
|
|||||||||||||
Service cost
|
$
|
33
|
$
|
71
|
$
|
31
|
$
|
67
|
||||||||
Interest cost
|
77
|
26
|
85
|
36
|
||||||||||||
Amortization of prior service (credit)
|
(209
|
)
|
-
|
(209
|
)
|
-
|
||||||||||
Amortization of losses (gains)
|
(24
|
)
|
16
|
(8
|
)
|
17
|
||||||||||
Net periodic benefit cost
|
$
|
(123
|
)
|
$
|
113
|
$
|
(101
|
)
|
$
|
120
|
The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 30, 2017 and October 1, 2016 for the Company's other postretirement benefit plans:
Nine fiscal months ended
September 30, 2017
|
Nine fiscal months ended
October 1, 2016
|
|||||||||||||||
U.S. Plans
|
Non-U.S. Plans
|
U.S. Plans
|
Non-U.S. Plans
|
|||||||||||||
Service cost
|
$
|
99
|
$
|
202
|
$
|
94
|
$
|
202
|
||||||||
Interest cost
|
232
|
76
|
255
|
108
|
||||||||||||
Amortization of prior service (credit)
|
(627
|
)
|
-
|
(627
|
)
|
-
|
||||||||||
Amortization of losses (gains)
|
(70
|
)
|
45
|
(23
|
)
|
51
|
||||||||||
Net periodic benefit cost
|
$
|
(366
|
)
|
$
|
323
|
$
|
(301
|
)
|
$
|
361
|
23
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 8 – 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 30, 2017
|
October 1, 2016
|
September 30, 2017
|
October 1, 2016
|
|||||||||||||
Restricted stock units
|
$
|
676
|
$
|
1,085
|
$
|
3,556
|
3,254
|
|||||||||
Phantom stock units
|
-
|
-
|
163
|
117
|
||||||||||||
Stock options
|
-
|
-
|
-
|
-
|
||||||||||||
Total
|
$
|
676
|
$
|
1,085
|
$
|
3,719
|
3,371
|
The Company recognizes compensation cost for RSUs that are expected to vest and records cumulative adjustments in the period that the expectation changes.
The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at September 30, 2017 (amortization periods in years):
Unrecognized Compensation Cost
|
Weighted Average Remaining Amortization Periods
|
|||||||
Restricted stock units
|
$
|
3,575
|
1.2
|
|||||
Phantom stock units
|
-
|
0.0
|
||||||
Stock options
|
-
|
0.0
|
||||||
Total
|
$
|
3,575
|
The Company currently expects all performance-based RSUs to vest and all of the associated unrecognized compensation cost for performance-based RSUs presented in the table above to be recognized.
24
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 September 30, 2017 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, 2017
|
1,004
|
$
|
12.74
|
|||||
Granted
|
304
|
15.52
|
||||||
Vested*
|
(322
|
)
|
13.54
|
|||||
Cancelled or forfeited
|
-
|
-
|
||||||
Outstanding at September 30, 2017
|
986
|
$
|
13.34
|
|||||
Expected to vest at September 30, 2017
|
986
|
* The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy the statutory tax withholding requirements.
The number of performance-based RSUs that are scheduled to vest increases ratably based on the achievement of defined performance criteria between the established target and maximum levels. RSUs with performance-based vesting criteria are expected to vest as follows (number of RSUs in thousands):
Vesting Date
|
Expected to Vest
|
Not Expected to Vest
|
Total
|
|||||||||
January 1, 2018
|
202
|
-
|
202
|
|||||||||
January 1, 2019
|
213
|
-
|
213
|
|||||||||
January 1, 2020
|
167
|
-
|
167
|
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 September 30, 2017 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, 2017
|
145
|
|||||||
Granted
|
10
|
$
|
16.25
|
|||||
Dividend equivalents issued
|
2
|
|||||||
Outstanding at September 30, 2017
|
157
|
25
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Stock Options
In addition to stock options outstanding pursuant to the 2007 Program, during the periods presented, the Company had stock options outstanding under previous stockholder-approved stock option programs. These programs are more fully described in Note 12 to the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2016. No additional options may be granted pursuant to these programs.
At December 31, 2016, there were approximately 77,000 options outstanding with a weighted average exercise price of $16.29. During the nine fiscal months ended September 30, 2017, the remaining approximately 77,000 options were exercised. The total intrinsic value of options exercised during the nine fiscal months ended September 30, 2017 was $20.
26
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 9 – Segment Information
Vishay is a global manufacturer and supplier of electronic components. Vishay operates, and its chief operating decision maker makes strategic and operating decisions with regards to assessing performance and allocating resources based on, five reporting segments: MOSFETs, Diodes, Optoelectronic Components, Resistors & Inductors, and Capacitors. These segments represent groupings of product lines based on their functionality:
●
|
Metal oxide semiconductor field-effect transistors ("MOSFETs") function as solid-state switches to control power.
|
|
●
|
Diodes route, regulate, and block radio frequency, analog, and power signals; protect systems from surges or electrostatic discharge damage; or provide electromagnetic interference filtering.
|
|
●
|
Optoelectronic components emit light, detect light, or do both.
|
|
●
|
Resistors and inductors both impede electric current. Resistors are basic components used in all forms of electronic circuitry to adjust and regulate levels of voltage and current. Inductors use an internal magnetic field to change alternating current phase and resist alternating current.
|
|
●
|
Capacitors store energy and discharge it when needed.
|
Vishay's reporting segments generate substantially all of their revenue from product sales to the industrial, automotive, telecommunications, computing, consumer products, power supplies, military and aerospace, and medical end markets. A small portion of revenues is from royalties.
The Company evaluates business segment performance on operating income, exclusive of certain items ("segment operating income"). Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income. The Company's calculation of segment operating income excludes such selling, general, and administrative costs as global operations, sales and marketing, information systems, finance and administration groups, as well as restructuring and severance costs, goodwill and long-lived asset impairment charges, and other items. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the Company. These items represent reconciling items between segment operating income and consolidated operating income. Business segment assets are the owned or allocated assets used by each business.
The Company also regularly evaluates gross profit by segment to assist in the analysis of consolidated gross profit. The Company considers segment operating income to be the more important metric because it more fully captures the business operations of the segments.
27
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The following tables set forth business segment information:
MOSFETs
|
Diodes
|
Optoelectronic Components
|
Resistors & Inductors
|
Capacitors
|
Total
|
|||||||||||||||||||
Fiscal quarter ended September 30, 2017:
|
||||||||||||||||||||||||
Product Sales
|
$
|
126,522
|
$
|
160,711
|
$
|
76,740
|
$
|
217,593
|
$
|
96,309
|
$
|
677,875
|
||||||||||||
Royalty Revenues
|
-
|
-
|
-
|
8
|
-
|
$
|
8
|
|||||||||||||||||
Total Revenue
|
$
|
126,522
|
$
|
160,711
|
$
|
76,740
|
$
|
217,601
|
$
|
96,309
|
$
|
677,883
|
||||||||||||
Gross Profit
|
$
|
32,307
|
$
|
42,942
|
$
|
28,901
|
$
|
65,541
|
$
|
19,582
|
$
|
189,273
|
||||||||||||
Segment Operating Income
|
$
|
23,391
|
$
|
37,991
|
$
|
25,012
|
$
|
58,267
|
$
|
14,688
|
$
|
159,349
|
||||||||||||
Fiscal quarter ended October 1, 2016:
|
||||||||||||||||||||||||
Product Sales
|
$
|
101,687
|
$
|
141,127
|
$
|
72,801
|
$
|
191,989
|
$
|
84,299
|
$
|
591,903
|
||||||||||||
Royalty Revenues
|
-
|
-
|
-
|
52
|
-
|
$
|
52
|
|||||||||||||||||
Total Revenue
|
$
|
101,687
|
$
|
141,127
|
$
|
72,801
|
$
|
192,041
|
$
|
84,299
|
$
|
591,955
|
||||||||||||
Gross Profit
|
$
|
16,443
|
$
|
36,444
|
$
|
24,250
|
$
|
58,768
|
$
|
17,996
|
$
|
153,901
|
||||||||||||
Segment Operating Income
|
$
|
7,493
|
$
|
31,832
|
$
|
20,340
|
$
|
51,861
|
$
|
13,210
|
$
|
124,736
|
Nine fiscal months ended September 30, 2017:
|
||||||||||||||||||||||||
Product Sales
|
$
|
346,086
|
$
|
461,323
|
$
|
216,260
|
$
|
627,116
|
$
|
278,198
|
$
|
1,928,983
|
||||||||||||
Royalty Revenues
|
-
|
-
|
-
|
50
|
-
|
$
|
50
|
|||||||||||||||||
Total Revenue
|
$
|
346,086
|
$
|
461,323
|
$
|
216,260
|
$
|
627,166
|
$
|
278,198
|
$
|
1,929,033
|
||||||||||||
Gross Profit
|
$
|
78,298
|
$
|
121,601
|
$
|
76,668
|
$
|
188,801
|
$
|
57,743
|
$
|
523,111
|
||||||||||||
Segment Operating Income
|
$
|
51,789
|
$
|
106,906
|
$
|
63,401
|
$
|
166,852
|
$
|
42,988
|
$
|
431,936
|
||||||||||||
Nine fiscal months ended October 1, 2016:
|
||||||||||||||||||||||||
Product Sales
|
$
|
304,839
|
$
|
418,629
|
$
|
203,635
|
$
|
568,122
|
$
|
257,175
|
$
|
1,752,400
|
||||||||||||
Royalty Revenues
|
-
|
-
|
-
|
212
|
-
|
$
|
212
|
|||||||||||||||||
Total Revenue
|
$
|
304,839
|
$
|
418,629
|
$
|
203,635
|
$
|
568,334
|
$
|
257,175
|
$
|
1,752,612
|
||||||||||||
Gross Profit
|
$
|
40,914
|
$
|
106,364
|
$
|
65,049
|
$
|
171,808
|
$
|
53,203
|
$
|
437,338
|
||||||||||||
Segment Operating Income
|
$
|
12,671
|
$
|
90,025
|
$
|
49,838
|
$
|
147,315
|
$
|
37,145
|
$
|
336,994
|
Fiscal quarters ended
|
Nine fiscal months ended
|
|||||||||||||||
September 30, 2017
|
October 1, 2016
|
September 30, 2017
|
October 1, 2016
|
|||||||||||||
Reconciliation:
|
||||||||||||||||
Segment Operating Income
|
$
|
159,349
|
$
|
124,736
|
$
|
431,936
|
$
|
336,994
|
||||||||
Restructuring and Severance Costs
|
(3,244
|
)
|
(1,197
|
)
|
(5,194
|
)
|
(12,139
|
)
|
||||||||
Impairment of Intangible Assets
|
-
|
(1,559
|
)
|
-
|
(1,559
|
)
|
||||||||||
Unallocated Selling, General, and Administrative Expenses
|
(63,777
|
)
|
(64,751
|
)
|
(187,690
|
)
|
(176,111
|
)
|
||||||||
Consolidated Operating Income
|
$
|
92,328
|
$
|
57,229
|
$
|
239,052
|
$
|
147,185
|
||||||||
Unallocated Other Income (Expense)
|
(6,140
|
)
|
(6,545
|
)
|
(26,713
|
)
|
(11,649
|
)
|
||||||||
Consolidated Income (Loss) Before Taxes
|
$
|
86,188
|
$
|
50,684
|
$
|
212,339
|
$
|
135,536
|
28
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 10 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings (loss) per share attributable to Vishay stockholders (shares in thousands):
Fiscal quarters ended
|
Nine fiscal months ended
|
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September 30, 2017
|
October 1, 2016
|
September 30, 2017
|
October 1, 2016
|
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