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           April 4, 2020

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

For the transition period from _______ to _______

Commission File Number 001-07416

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

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

Securities registered pursuant to Section 12(b) of the Act:
 
     
 
Title of each class
Trading symbol
Name of exchange on which registered
 
 
Common stock, par value $0.10 per share
VSH
New York Stock Exchange LLC
 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)
Yes  No

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

 
Large Accelerated Filer 
Accelerated filer
 
Non-accelerated filer
Smaller reporting company
 
Emerging growth company
 

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

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

As of May 8, 2020 the registrant had 132,547,608 shares of its common stock and 12,097,409 shares of its Class B common stock outstanding.























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2




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

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





PART I  - FINANCIAL INFORMATION

Item 1. Financial Statements

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

   
April 4, 2020
   
December 31, 2019
 
   
(Unaudited)
       
Assets
           
Current assets:
           
Cash and cash equivalents
 
$
680,703
   
$
694,133
 
Short-term investments
   
140,725
     
108,822
 
Accounts receivable, net
   
325,704
     
328,187
 
Inventories:
               
Finished goods
   
122,231
     
122,466
 
Work in process
   
202,318
     
187,354
 
Raw materials
   
128,639
     
121,860
 
Total inventories
   
453,188
     
431,680
 
                 
Prepaid expenses and other current assets
   
124,871
     
141,294
 
Total current assets
   
1,725,191
     
1,704,116
 
                 
Property and equipment, at cost:
               
Land
   
74,442
     
75,011
 
Buildings and improvements
   
579,161
     
585,064
 
Machinery and equipment
   
2,591,804
     
2,606,355
 
Construction in progress
   
105,832
     
110,722
 
Allowance for depreciation
   
(2,426,757
)
   
(2,425,627
)
Property and equipment, net
   
924,482
     
951,525
 
                 
Right of use assets
   
99,506
     
93,162
 
                 
Goodwill
   
150,288
     
150,642
 
                 
Other intangible assets, net
   
60,468
     
60,659
 
                 
Other assets
   
156,569
     
160,671
 
Total assets
 
$
3,116,504
   
$
3,120,775
 

Continues on following page.
4




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

   
April 4, 2020
   
December 31, 2019
 
   
(Unaudited)
       
Liabilities and equity
           
Current liabilities:
           
Notes payable to banks
 
$
199
   
$
2
 
Trade accounts payable
   
153,999
     
173,915
 
Payroll and related expenses
   
116,456
     
122,100
 
Lease liabilities
   
21,033
     
20,217
 
Other accrued expenses
   
174,556
     
186,463
 
Income taxes
   
24,030
     
17,731
 
Total current liabilities
   
490,273
     
520,428
 
                 
Long-term debt less current portion
   
552,096
     
499,147
 
U.S. transition tax payable
   
140,196
     
140,196
 
Deferred income taxes
   
20,627
     
22,021
 
Long-term lease liabilities
   
83,440
     
78,511
 
Other liabilities
   
94,762
     
100,207
 
Accrued pension and other postretirement costs
   
265,284
     
272,402
 
Total liabilities
   
1,646,678
     
1,632,912
 
                 
Redeemable convertible debentures
   
-
     
174
 
                 
Equity:
               
Vishay stockholders' equity
               
Common stock
   
13,255
     
13,235
 
Class B convertible common stock
   
1,210
     
1,210
 
Capital in excess of par value
   
1,416,260
     
1,425,170
 
Retained earnings
   
84,570
     
72,180
 
Accumulated other comprehensive income (loss)
   
(48,174
)
   
(26,646
)
Total Vishay stockholders' equity
   
1,467,121
     
1,485,149
 
Noncontrolling interests
   
2,705
     
2,540
 
Total equity
   
1,469,826
     
1,487,689
 
Total liabilities, temporary equity, and equity
 
$
3,116,504
   
$
3,120,775
 

See accompanying notes.
5




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

   
Fiscal quarters ended
 
   
April 4, 2020
   
March 30, 2019
 
             
Net revenues
 
$
612,841
   
$
745,159
 
Costs of products sold
   
465,601
     
534,000
 
Gross profit
   
147,240
     
211,159
 
                 
Selling, general, and administrative expenses
   
99,832
     
103,424
 
Operating income
   
47,408
     
107,735
 
                 
Other income (expense):
               
Interest expense
   
(8,552
)
   
(8,392
)
Loss on early extinguishment of debt
   
(2,920
)
   
(1,307
)
Other
   
198
     
1,912
 
Total other income (expense)
   
(11,274
)
   
(7,787
)
                 
Income before taxes
   
36,134
     
99,948
 
                 
Income tax expense
   
8,750
     
24,307
 
                 
Net earnings
   
27,384
     
75,641
 
                 
Less: net earnings attributable to noncontrolling interests
   
165
     
182
 
                 
Net earnings attributable to Vishay stockholders
 
$
27,219
   
$
75,459
 
                 
Basic earnings per share attributable to Vishay stockholders
 
$
0.19
   
$
0.52
 
                 
Diluted earnings per share attributable to Vishay stockholders
 
$
0.19
   
$
0.52
 
                 
Weighted average shares outstanding - basic
   
144,792
     
144,554
 
                 
Weighted average shares outstanding - diluted
   
145,295
     
145,289
 
                 
Cash dividends per share
 
$
0.0950
   
$
0.0850
 

See accompanying notes.
6




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

   
Fiscal quarters ended
 
   
April 4, 2020
   
March 30, 2019
 
             
Net earnings
 
$
27,384
   
$
75,641
 
                 
Other comprehensive income (loss), net of tax
               
                 
Pension and other  post-retirement actuarial items
   
1,601
     
1,457
 
                 
Foreign currency translation adjustment
   
(23,129
)
   
(9,989
)
                 
Other comprehensive income (loss)
   
(21,528
)
   
(8,532
)
                 
Comprehensive income
   
5,856
     
67,109
 
                 
Less: comprehensive income attributable to noncontrolling interests
   
165
     
182
 
                 
Comprehensive income attributable to Vishay stockholders
 
$
5,691
   
$
66,927
 

See accompanying notes.
7




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

   
Three fiscal months ended
 
   
April 4, 2020
   
March 30, 2019
 
             
Operating activities
           
Net earnings
 
$
27,384
   
$
75,641
 
Adjustments to reconcile net earnings to net cash provided by operating activities:
               
Depreciation and amortization
   
41,520
     
40,428
 
(Gain) loss on disposal of property and equipment
   
(45
)
   
(173
)
Accretion of interest on convertible debt instruments
   
3,637
     
3,490
 
Inventory write-offs for obsolescence
   
5,643
     
6,967
 
Deferred income taxes
   
(3,517
)
   
(2,614
)
Loss on extinguishment of debt
   
2,920
     
1,307
 
Other
   
3,524
     
(1,744
)
Net change in operating assets and liabilities, net of effects of businesses acquired
   
(46,588
)
   
(43,784
)
Net cash provided by operating activities
   
34,478
     
79,518
 
                 
Investing activities
               
Capital expenditures
   
(24,328
)
   
(36,367
)
Proceeds from sale of property and equipment
   
53
     
395
 
Purchase of businesses, net of cash received
   
-
     
(11,862
)
Purchase of short-term investments
   
(35,463
)
   
(1,920
)
Maturity of short-term investments
   
-
     
71,455
 
Other investing activities
   
(1,507
)
   
2,893
 
Net cash provided by (used in) investing activities
   
(61,245
)
   
24,594
 
                 
Financing activities
               
Repurchase of convertible debentures
   
(19,849
)
   
(22,695
)
Net proceeds (payments) on revolving credit lines
   
54,000
     
-
 
Net changes in short-term borrowings
   
85
     
-
 
Dividends paid to common stockholders
   
(12,592
)
   
(11,249
)
Dividends paid to Class B common stockholders
   
(1,149
)
   
(1,028
)
Cash withholding taxes paid when shares withheld for vested equity awards
   
(1,991
)
   
(2,659
)
Net cash provided by (used in) financing activities
   
18,504
     
(37,631
)
Effect of exchange rate changes on cash and cash equivalents
   
(5,167
)
   
(3,087
)
                 
Net increase (decrease) in cash and cash equivalents
   
(13,430
)
   
63,394
 
                 
Cash and cash equivalents at beginning of period
   
694,133
     
686,032
 
Cash and cash equivalents at end of period
 
$
680,703
   
$
749,426
 

See accompanying notes.
8




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

   
Common Stock
   
Class B Convertible Common Stock
   
Capital in Excess of Par Value
   
Retained Earnings (Accumulated Deficit)
   
Accumulated Other Comprehensive Income (Loss)
   
Total Vishay Stockholders' Equity
   
Noncontrolling Interests
   
Total Equity
 
Balance at December 31, 2018
 
$
13,212
   
$
1,210
   
$
1,436,011
   
$
(61,258
)
 
$
(6,791
)
 
$
1,382,384
   
$
2,286
   
$
1,384,670
 
Cumulative effect of accounting change for adoption of ASU 2016-02
   
-
     
-
     
-
     
23,013
     
-
     
23,013
     
-
     
23,013
 
Net earnings (loss)
   
-
     
-
     
-
     
75,459
     
-
     
75,459
     
182
     
75,641
 
Other comprehensive income
   
-
     
-
     
-
     
-
     
(8,532
)
   
(8,532
)
   
-
     
(8,532
)
Conversion of Class B shares (18 shares)
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Temporary equity reclassification
   
-
     
-
     
3
     
-
     
-
     
3
     
-
     
3
 
Issuance of stock and related tax withholdings for vested restricted stock units (220,718 shares)
   
22
     
-
     
(2,681
)
   
-
     
-
     
(2,659
)
   
-
     
(2,659
)
Dividends declared (0.085 per share)
   
-
     
-
     
15
     
(12,292
)
   
-
     
(12,277
)
   
-
     
(12,277
)
Stock compensation expense
   
-
     
-
     
3,536
     
-
     
-
     
3,536
     
-
     
3,536
 
Repurchase of convertible debentures due 2040 and due 2042
   
-
     
-
     
(11,783
)
   
-
     
-
     
(11,783
)
   
-
     
(11,783
)
Balance at March 30, 2019
 
$
13,234
   
$
1,210
   
$
1,425,101
   
$
24,922
   
$
(15,323
)
 
$
1,449,144
   
$
2,468
   
$
1,451,612
 
                                                                 
Balance at December 31, 2019
   
13,235
     
1,210
     
1,425,170
     
72,180
     
(26,646
)
   
1,485,149
     
2,540
     
1,487,689
 
Cumulative effect of accounting change for adoption of ASU 2016-13 (see Note 1)
   
-
     
-
     
-
     
(1,070
)
   
-
     
(1,070
)
   
-
     
(1,070
)
Net earnings
   
-
     
-
     
-
     
27,219
     
-
     
27,219
     
165
     
27,384
 
Other comprehensive income (loss)
   
-
     
-
     
-
     
-
     
(21,528
)
   
(21,528
)
   
-
     
(21,528
)
Temporary equity reclassification
   
-
     
-
     
174
     
-
     
-
     
174
     
-
     
174
 
Issuance of stock and related tax withholdings for vested restricted stock units (199,251 shares)
   
20
     
-
     
(2,011
)
   
-
     
-
     
(1,991
)
   
-
     
(1,991
)
Dividends declared (0.095 per share)
   
-
     
-
     
18
     
(13,759
)
   
-
     
(13,741
)
   
-
     
(13,741
)
Stock compensation expense
   
-
     
-
     
2,998
     
-
     
-
     
2,998
     
-
     
2,998
 
Repurchase of convertible senior debentures due 2041
   
-
     
-
     
(10,089
)
   
-
     
-
     
(10,089
)
   
-
     
(10,089
)
Balance at April 4, 2020
 
$
13,255
   
$
1,210
   
$
1,416,260
   
$
84,570
   
$
(48,174
)
 
$
1,467,121
   
$
2,705
   
$
1,469,826
 

See accompanying notes.

9


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

Note 1 – Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of Vishay Intertechnology, Inc. (“Vishay” 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, 2019.  The results of operations for the fiscal quarter and three fiscal months ended April 4, 2020 are not necessarily indicative of the results to be expected for the full year.

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

Recently Adopted Accounting Guidance

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

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

The Company’s cash equivalents, short-term investments, and restricted investments are accounted for as held-to-maturity debt instruments, at amortized cost.  Interest income on these instruments is recorded as “Other income” on the consolidated condensed statements of operations and interest receivable is recognized as a separate asset and recorded in “Prepaid expenses and other current assets” on the consolidated condensed balance sheets.  The Company has not experienced a credit loss on the principal or interest receivable of its cash equivalents, short-term investments, or restricted investments.  The Company pools its cash equivalents, short-term investments, and restricted investments by credit rating of the issuing financial institution and estimates an allowance for credit losses based on the corporate bond default ratios, evaluation of the impact of current and projected economic conditions, and probability of credit loss.  The Company recorded a cumulative-effect adjustment of $810 to January 1, 2020 retained earnings to recognize an allowance for credit losses for these financial instruments upon the adoption of ASU 2016-13.  The Company does not measure an allowance for credit losses on interest receivable.  Any uncollectible interest receivable will be recognized by reversing interest income within the fiscal quarter that the interest becomes uncollectible.

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

Reclassifications

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

10


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

Note 2 – Impact of Coronavirus Outbreak

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

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

11


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

Note 3 – Leases

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

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

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


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


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

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


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

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

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


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

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

13


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

Note 4 – Restructuring and Related Activities

In the third fiscal quarter of 2019, the Company announced global cost reduction and management rejuvenation programs as part of its continuous efforts to improve efficiency and operating performance.

The programs are primarily designed to reduce manufacturing fixed costs and selling, general, and administrative costs company-wide, and provide management rejuvenation.  The Company expects to incur charges of approximately $25,000, primarily related to cash severance costs, to implement these programs.  The Company expects these cost reductions to be fully achieved by December 2020.

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

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

The payment terms vary by country, but generally are paid in a lump sum at cessation of employment.  The current portion of the liability is $15,348 and is included in other accrued expenses on the consolidated condensed balance sheet.  The non-current portion of the liability is $3,447 and is included in other liabilities on the consolidated condensed balance sheet.
14


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

Note 5 – Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign income taxes.  The effective tax rates for the periods ended April 4, 2020 and March 30, 2019 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.

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

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

Income tax expense for the first fiscal quarter of 2019 includes tax benefits of $585 for the periodic remeasurement of the deferred tax liability recorded for the foreign taxes associated with the Company's cash repatriation program.

During the fiscal quarter ended April 4, 2020, the liabilities for unrecognized tax benefits decreased by $1,264 on a net basis, primarily due to currency translation adjustments and the expiration of a statute, partially offset by interest.

15


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

Note 6 – Long-Term Debt

Long-term debt consists of the following:


 
April 4, 2020
   
December 31, 2019
 
             
Credit facility
 
$
54,000
   
$
-
 
Convertible senior notes, due 2025
   
512,745
     
509,128
 
Convertible senior debentures, due 2040
   
127
     
126
 
Convertible senior debentures, due 2041
   
1,050
     
6,677
 
Deferred financing costs
   
(15,826
)
   
(16,784
)
     
552,096
     
499,147
 
Less current portion
   
-
     
-
 
   
$
552,096
   
$
499,147
 

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


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

The terms of the convertible senior debentures due 2040 and due 2041 are generally congruent.

Prior to three months before the maturity date, the holders may convert their convertible senior debentures due 2040 and due 2041 only under the following circumstances: (1) during any fiscal quarter after the first full quarter subsequent to issuance, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the debentures falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; (3) Vishay calls any or all of the debentures for redemption, at any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.  The convertible senior debentures due 2040 and due 2041 are not currently convertible.

Prior to December 15, 2024, the holders of the convertible senior notes due 2025 may convert their notes only under the following circumstances: (1) during any fiscal quarter after the fiscal quarter ending September 29, 2018, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the notes falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; or (3) upon the occurrence of specified corporate transactions.

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

GAAP requires an issuer to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods.  The resulting discount on the debt is amortized as non-cash interest expense in future periods.
16


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

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


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

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

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


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

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

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

17


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

Note 7 – Revenue Recognition

Sales returns and allowances accrual activity is shown below:


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

See disaggregated revenue information in Note 11.
18


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

Note 8 – Accumulated Other Comprehensive Income (Loss)

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


 
Pension and
other post-
retirement
actuarial
items
   
Currency
translation
adjustment
   
Total
 
Balance at January 1, 2020
 
$
(68,020
)
 
$
41,374
   
$
(26,646
)
Other comprehensive income before reclassifications
   
-
     
(23,129
)
 
$
(23,129
)
Tax effect
   
-
     
-
   
$
-
 
Other comprehensive income before reclassifications, net of tax
   
-
     
(23,129
)
 
$
(23,129
)
Amounts reclassified out of AOCI
   
2,223
     
-
   
$
2,223
 
Tax effect
   
(622
)
   
-
   
$
(622
)
Amounts reclassified out of AOCI, net of tax
   
1,601
     
-
   
$
1,601
 
Net other comprehensive income
 
$
1,601
   
$
(23,129
)
 
$
(21,528
)
Balance at April 4, 2020
 
$
(66,419
)
 
$
18,245
   
$
(48,174
)

Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost.  See Note 9 for further information.

19


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

Note 9 – Pensions and Other Postretirement Benefits

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

Defined Benefit Pension Plans

The following table shows the components of the net periodic pension cost for the first fiscal quarters of 2020 and 2019 for the Company’s defined benefit pension plans:


 
Fiscal quarter ended
April 4, 2020
   
Fiscal quarter ended
March 30, 2019
 
   
U.S. Plans
   
Non-U.S.
Plans
   
U.S. Plans
   
Non-U.S.
Plans
 
                         
Net service cost
 
$
-
   
$
1,074
   
$
-
   
$
852
 
Interest cost
   
342
     
924
     
424
     
1,291
 
Expected return on plan assets
   
-
     
(495
)
   
-
     
(490
)
Amortization of prior service cost
   
36
     
30
     
36
     
51
 
Amortization of losses
   
298
     
1,592
     
118
     
1,359
 
Curtailment and settlement losses
   
-
     
229
     
-
     
505
 
Net periodic benefit cost
 
$
676
   
$
3,354
   
$
578
   
$
3,568
 

Other Postretirement Benefits

The following table shows the components of the net periodic benefit cost for the first fiscal quarters of 2020 and 2019 for the Company’s other postretirement benefit plans:


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

20


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

Note 10 – Stock-Based Compensation

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

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

The following table summarizes stock-based compensation expense recognized:


 
Fiscal quarters ended
 
   
April 4, 2020
   
March 30, 2019
 
             
Restricted stock units
 
$
2,783
   
$
3,359
 
Phantom stock units
   
215
     
177
 
Total
 
$
2,998
   
$
3,536
 

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

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


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

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

21


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 April 4, 2020 and changes during the three fiscal months then ended are presented below (number of RSUs in thousands):


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

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

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

Vesting Date
 
Expected
to Vest
 
Not Expected
to Vest
 
Total
January 1, 2021
   
141
   
-
   
141
January 1, 2022
   
174