Item 1. Financial Statements
Item 1. Financial Statements
VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Balance Sheets
(In thousands)
April 3, 2021
December 31, 2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
643,847
$
619,874
Short-term investments
137,348
158,476
Accounts receivable, net
385,238
338,632
Inventories:
Finished goods
129,310
120,792
Work in process
212,273
201,259
Raw materials
132,373
126,200
Total inventories
473,956
448,251
Prepaid expenses and other current assets
140,536
132,103
Total current assets
1,780,925
1,697,336
Property and equipment, at cost:
Land
75,339
76,231
Buildings and improvements
629,550
641,041
Machinery and equipment
2,705,346
2,732,771
Construction in progress
94,981
86,520
Allowance for depreciation
( 2,587,948
)
( 2,593,398
)
Property and equipment, net
917,268
943,165
Right of use assets
98,001
102,440
Goodwill
157,693
158,183
Other intangible assets, net
64,123
66,795
Other assets
192,552
186,554
Total assets
$
3,210,562
$
3,154,473
Continues on following page.
4
VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Balance Sheets (continued)
(In thousands)
April 3, 2021
December 31, 2020
(Unaudited)
Liabilities, temporary equity, and equity
Current liabilities:
Trade accounts payable
$
206,741
$
196,203
Payroll and related expenses
136,069
141,034
Lease liabilities
21,275
22,074
Other accrued expenses
197,246
182,642
Income taxes
26,715
20,470
Total current liabilities
588,046
562,423
Long-term debt less current portion
453,213
394,886
U.S. transition tax payable
125,438
125,438
Deferred income taxes
1,856
1,852
Long-term lease liabilities
82,260
86,220
Other liabilities
103,881
104,356
Accrued pension and other postretirement costs
287,407
300,113
Total liabilities
1,642,101
1,575,288
Redeemable convertible debentures
-
170
Equity:
Vishay stockholders' equity
Common stock
13,271
13,256
Class B convertible common stock
1,210
1,210
Capital in excess of par value
1,345,284
1,409,200
Retained earnings
217,214
138,990
Accumulated other comprehensive income (loss)
( 11,526
)
13,559
Total Vishay stockholders' equity
1,565,453
1,576,215
Noncontrolling interests
3,008
2,800
Total equity
1,568,461
1,579,015
Total liabilities, temporary equity, and equity
$
3,210,562
$
3,154,473
See accompanying notes.
5
VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
Fiscal quarters ended
April 3, 2021
April 4, 2020
Net revenues
$
764,632
$
612,841
Costs of products sold
561,683
465,601
Gross profit
202,949
147,240
Selling, general, and administrative expenses
105,685
99,832
Operating income
97,264
47,408
Other income (expense):
Interest expense
( 4,376
)
( 8,552
)
Loss on early extinguishment of debt
-
( 2,920
)
Other
( 5,731
)
198
Total other income (expense)
( 10,107
)
( 11,274
)
Income before taxes
87,157
36,134
Income tax expense
15,514
8,750
Net earnings
71,643
27,384
Less: net earnings attributable to noncontrolling interests
208
165
Net earnings attributable to Vishay stockholders
$
71,435
$
27,219
Basic earnings per share attributable to Vishay stockholders
$
0.49
$
0.19
Diluted earnings per share attributable to Vishay stockholders
$
0.49
$
0.19
Weighted average shares outstanding - basic
144,968
144,792
Weighted average shares outstanding - diluted
145,463
145,295
Cash dividends per share
$
0.095
$
0.095
See accompanying notes.
6
VISHAY INTERTECHNOLOGY, INC.
Consolidated Statements of Comprehensive Income
(Unaudited - In thousands)
Fiscal quarters ended
April 3, 2021
April 4, 2020
Net earnings
$
71,643
$
27,384
Other comprehensive income (loss), net of tax
Pension and other post-retirement actuarial items
1,864
1,601
Foreign currency translation adjustment
( 26,949
)
( 23,129
)
Other comprehensive income (loss)
( 25,085
)
( 21,528
)
Comprehensive income
46,558
5,856
Less: comprehensive income attributable to noncontrolling interests
208
165
Comprehensive income attributable to Vishay stockholders
$
46,350
$
5,691
See accompanying notes.
7
VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
Three fiscal months ended
April 3, 2021
April 4, 2020
Operating activities
Net earnings
$
71,643
$
27,384
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
42,146
41,520
Gain on disposal of property and equipment
( 177
)
( 45
)
Accretion of interest on convertible debt instruments
-
3,637
Inventory write-offs for obsolescence
4,784
5,643
Deferred income taxes
901
( 3,517
)
Loss on extinguishment of debt
-
2,920
Other
5,728
3,524
Net change in operating assets and liabilities
( 67,703
)
( 46,588
)
Net cash provided by operating activities
57,322
34,478
Investing activities
Capital expenditures
( 28,527
)
( 24,328
)
Proceeds from sale of property and equipment
200
53
Purchase of short-term investments
( 12,853
)
( 35,463
)
Maturity of short-term investments
29,519
-
Other investing activities
347
( 1,507
)
Net cash used in investing activities
( 11,314
)
( 61,245
)
Financing activities
Repurchase of convertible debt instruments
( 300
)
( 19,849
)
Net proceeds on revolving credit lines
-
54,000
Net changes in short-term borrowings
-
85
Dividends paid to common stockholders
( 12,608
)
( 12,592
)
Dividends paid to Class B common stockholders
( 1,149
)
( 1,149
)
Cash withholding taxes paid when shares withheld for vested equity awards
( 1,963
)
( 1,991
)
Net cash provided by (used in) financing activities
( 16,020
)
18,504
Effect of exchange rate changes on cash and cash equivalents
( 6,015
)
( 5,167
)
Net increase (decrease) in cash and cash equivalents
23,973
( 13,430
)
Cash and cash equivalents at beginning of period
619,874
694,133
Cash and cash equivalents at end of period
$
643,847
$
680,703
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 Other Comprehensive Income (Loss)
Total Vishay Stockholders' Equity
Noncontrolling Interests
Total Equity
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
-
-
-
( 1,070
)
-
( 1,070
)
-
( 1,070
)
Net earnings (loss)
-
-
-
27,219
-
27,219
165
27,384
Other comprehensive income
-
-
-
-
( 21,528
)
( 21,528
)
-
( 21,528
)
Conversion of Class B shares ( 18 shares)
-
-
-
-
-
-
-
-
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 debentures due 2040 and due 2042
-
-
( 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
Balance at December 31, 2020
13,256
1,210
1,409,200
138,990
13,559
1,576,215
2,800
1,579,015
Cumulative effect of accounting change for adoption of ASU 2020-06 (see Note 1)
-
-
( 66,078
)
20,566
-
( 45,512
)
-
( 45,512
)
Net earnings
-
-
-
71,435
-
71,435
208
71,643
Other comprehensive income (loss)
-
-
-
-
( 25,085
)
( 25,085
)
-
( 25,085
)
Issuance of stock and related tax withholdings for vested restricted stock units ( 149,722 shares)
15
-
( 1,978
)
-
-
( 1,963
)
-
( 1,963
)
Dividends declared ($ 0.095 per share)
-
-
20
( 13,777
)
-
( 13,757
)
-
( 13,757
)
Stock compensation expense
-
-
4,120
-
-
4,120
-
4,120
Balance at April 3, 2021
$
13,271
$
1,210
$
1,345,284
$
217,214
$
( 11,526
)
$
1,565,453
$
3,008
$
1,568,461
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, 2020. The results of operations for the fiscal quarter and three fiscal months ended April 3, 2021 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 2021 end on April 3, 2021, July 3, 2021, October 2, 2021, and December 31, 2021, respectively. The four fiscal quarters in 2020 ended on April 4, 2020, July 4, 2020, October 3, 2020, and December 31, 2020, respectively.
Recently Adopted Accounting Guidance
In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-06, Debt – Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . The ASU simplifies the accounting for certain financial instruments with characteristics of liability and equity, including convertible debt instruments. The ASU reduces the number of accounting models available for convertible debt instruments, requires the use of the if-converted method for the calculation of diluted earnings per share for convertible debt instruments, and increases disclosure requirements. The Company adopted the ASU effective January 1, 2021 using a modified retrospective approach. Upon adoption, Company recorded a $ 66,078 decrease in additional paid in capital from the derecognition of the bifurcated equity component of the convertible debt instruments, a $ 59,246 increase in debt from the derecognition of the discount associated with the bifurcated equity component of the convertible debt instruments and a $ 20,566 increase to the opening balance of retained earnings, representing the cumulative interest expense, net of tax effects, recognized related to the amortization of the bifurcated conversion option. The adoption of the ASU did not have a significant impact on the diluted sharecount due to Vishay exercising existing rights to legally amend the indenture governing the convertible senior notes due 2025. See Note 5.
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 – Leases
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 3, 2021
December 31, 2020
Right of use assets
Operating Leases
Buildings and improvements
$
92,951
$
97,429
Machinery and equipment
5,050
5,011
Total
$
98,001
$
102,440
Current lease liabilities
Operating Leases
Buildings and improvements
$
18,622
$
19,370
Machinery and equipment
2,653
2,704
Total
$
21,275
$
22,074
Long-term lease liabilities
Operating Leases
Buildings and improvements
$
79,895
$
83,926
Machinery and equipment
2,365
2,294
Total
$
82,260
$
86,220
Total lease liabilities
$
103,535
$
108,294
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 3, 2021
April 4, 2020
Lease expense
Operating lease expense
$
6,152
$
5,652
Short-term lease expense
325
194
Variable lease expense
127
23
Total lease expense
$
6,604
$
5,869
The Company paid $ 6,161 and $ 5,609 for its operating leases in the three fiscal months ended April 3, 2021 and April 4, 2020, 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 8.7 years and the weighted-average discount rate is 5.9 % as of April 3, 2021.
The undiscounted future lease payments for the Company's operating lease liabilities are as follows:
April 3, 2021
2021 (excluding the three fiscal months ended April 3, 2021)
$
16,736
2022
19,360
2023
16,198
2024
14,165
2025
13,026
Thereafter
54,010
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.
11
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 3 – Restructuring and Related Activities
I n 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 were primarily designed to reduce manufacturing fixed costs and selling, general, and administrative costs company-wide, and provide management rejuvenation. These programs are fully implemented. The Company incurred total charges of $ 24,882 , primarily related to cash severance costs, to implement these programs.
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
Expense recorded in 2020
743
Cash paid
( 10,813
)
Foreign currency translation
683
Balance at December 31, 2020
$
13,457
Cash paid
( 8,447
)
Foreign currency translation
( 96
)
Balance at April 3, 2021
$
4,914
The payment terms vary by country, but generally are paid in a lump sum at cessation of employment. Some payments are made over an extended period. The current portion of the liability is $ 3,479 and is included in other accrued expenses on the consolidated condensed balance sheet. The non-current portion of the liability is $ 1,435 and is included in other liabilities on the consolidated condensed balance sheet.
12
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 4 – Income Taxes
The provision for income taxes consists of provisions for federal, state, and foreign income taxes. The effective tax rates for the periods ended April 3, 2021 and April 4, 2020 reflect the Company’s expected tax rate on reported income 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 adjusted its deferred tax balances by $ 12,127 upon the adoption of ASU No. 2020-06 on January 1, 2021, which was included in the cumulative-effect adjustment recorded to retained earnings. See Note 1.
The Company recognized a tax benefit of $ 4,395 due to a change in tax regulations during the fiscal quarter ended April 3, 2021.
During the fiscal quarter ended April 3, 2021, the liabilities for unrecognized tax benefits decreased by $ 1,485 on a net basis, primarily due to a payment and currency translation adjustments, partially offset by accruals for current year tax positions and interest.
13
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5 – Long-Term Debt
Long-term debt consists of the following:
April 3, 2021
December 31, 2020
Credit facility
$
-
$
-
Convertible senior notes, due 2025
465,344
406,268
Convertible senior debentures, due 2040
-
130
Deferred financing costs
( 12,131
)
( 11,512
)
453,213
394,886
Less current portion
-
-
$
453,213
$
394,886
The following table summarizes some key facts and terms regarding the outstanding convertible senior notes due 2025 as of April 3, 2021:
Convertible
Senior Notes
Due 2025
Issuance date
June 12, 2018
Maturity date
June 15, 2025
Principal amount as of April 3, 2021
$
465,344
Cash coupon rate (per annum)
2.25
%
Nonconvertible debt borrowing rate at issuance (per annum)
5.50
%
Conversion rate effective March 16, 2021 (per $1 principal amount)
31.8965
Effective conversion price effective March 16, 2021 (per share)
$
31.35
% of the conversion price (per share)
$
40.76
Call date
n/a
Effective January 1, 2021, Vishay adopted ASU No. 2020-06. Upon adoption, Vishay derecognized the bifurcated equity component, debt discount, and deferred taxes and remeasured the deferred financing costs associated with its convertible debt instruments. See Note 1. The carrying value of Vishay's convertible debt instruments is now equal to the outstanding principal amount and interest expense is now equal to the cash interest paid. The remeasured deferred financing costs continue to be recognized as non-cash interest expense.
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 convertible senior notes due 2025 are not currently convertible.
Upon conversion of the convertible senior notes due 2025, Vishay will satisfy its conversion obligations by paying $1 cash per $1 principal amount of converted notes and settle any additional amounts due in common stock.
The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for the convertible senior notes due 2025 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.
As of December 31, 2020, there were $300 of convertible senior debentures due 2040 outstanding. On January 5, 2021, Vishay gave notice to the holders of its convertible senior debentures due 2040 that Vishay would redeem the debentures on February 4, 2021. The redemption price was paid in cash and was equal to 100% of the principal amount plus accrued but unpaid interest to, but excluding February 4, 2021.
14
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The carrying value of the convertible senior notes due 2025 was $465,344 as of April 3, 2021. The carrying value of the liability and equity components of the convertible debt instruments prior to the adoption of ASU No. 2020-06 are reflected in the Company’s consolidated condensed balance sheet as follows:
Principal
amount of the
debt
instruments
Unamortized
discount
Carrying
value of
liability
component
Equity
component
(including
temporary
equity) -net
carrying value
December 31, 2020
Convertible senior notes due 2025
$
465,344
( 59,076
)
$
406,268
$
66,127
Convertible senior debentures due 2040
$
300
( 170
)
$
130
$
121
Total
$
465,644
$
( 59,246
)
$
406,398
$
66,248
Interest is payable on the convertible debt instruments semi-annually at the cash coupon rate. Prior to the adoption of ASU 2020-06 on January 1, 2021, the debt discount associated with the convertible debt instruments was 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.
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 3, 2021
Convertible senior notes due 2025
$
2,618
-
433
$
3,051
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
Other non-cash interest expense includes amortization of deferred financing costs. Interest expense related to the convertible senior debentures was immaterial in 2021.
15
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 6 – Revenue Recognition
Sales returns and allowances accrual activity is shown below:
Fiscal quarters ended
April 3, 2021
April 4, 2020
Beginning balance
$
39,629
$
40,508
Sales allowances
23,796
22,632
Credits issued
( 28,446
)
( 27,982
)
Foreign currency
( 530
)
( 346
)
Ending balance
$
34,449
$
34,812
See disaggregated revenue information in Note 10.
16
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 7 – Accumulated Other Comprehensive Income (Loss)
The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each component are as follows:
Pension and
other post-
retirement
actuarial
items
Currency
translation
adjustment
Total
Balance at January 1, 2021
$
( 77,075
)
$
90,634
$
13,559
Other comprehensive income before reclassifications
-
( 26,949
)
$
( 26,949
)
Tax effect
-
-
$
-
Other comprehensive income before reclassifications, net of tax
-
( 26,949
)
$
( 26,949
)
Amounts reclassified out of AOCI
2,659
-
$
2,659
Tax effect
( 795
)
-
$
( 795
)
Amounts reclassified out of AOCI, net of tax
1,864
-
$
1,864
Net other comprehensive income
$
1,864
$
( 26,949
)
$
( 25,085
)
Balance at April 3, 2021
$
( 75,211
)
$
63,685
$
( 11,526
)
Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost. See Note 8 for further information.
17
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 8 – Pensions and Other Postretirement Benefits
The Company maintains various retirement benefit plans. The 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 2021 and 2020 for the Company’s defined benefit pension plans:
Fiscal quarter ended
April 3, 2021
Fiscal quarter ended
April 4, 2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
Net service cost
$
-
$
1,190
$
-
$
1,074
Interest cost
254
754
342
924
Expected return on plan assets
-
( 417
)
-
( 495
)
Amortization of prior service cost
36
51
36
30
Amortization of losses
447
1,884
298
1,592
Curtailment and settlement losses
-
199
-
229
Net periodic benefit cost
$
737
$
3,661
$
676
$
3,354
Other Postretirement Benefits
The following table shows the components of the net periodic benefit cost for the first fiscal quarters of 2021 and 2020 for the Company’s other postretirement benefit plans:
Fiscal quarter ended
April 3, 2021
Fiscal quarter ended
April 4, 2020
U.S. Plans
Non-U.S.
Plans
U.S. Plans
Non-U.S.
Plans
Service cost
$
25
$
71
$
28
$
69
Interest cost
41
11
59
15
Amortization of losses (gains)
13
29
7
31
Net periodic benefit cost
$
79
$
111
$
94
$
115
18
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 9 – Stock-Based Compensation
The Company has various stockholder-approved programs which allow for the grant of stock-based compensation to officers, employees, and non-employee directors of the Company.
The amount of compensation cost related to stock-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. The Company determines compensation cost for restricted stock units (“RSUs”) and phantom stock units based on the grant-date fair value of the underlying common stock adjusted for expected dividends paid over the required vesting period for non-participating awards. Compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award.
The following table summarizes stock-based compensation expense recognized:
Fiscal quarters ended
April 3, 2021
April 4, 2020
Restricted stock units
$
3,911
$
2,783
Phantom stock units
209
215
Total
$
4,120
$
2,998
The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at April 3, 2021 (amortization periods in years) :
Unrecognized
Compensation
Cost
Weighted
Average
Remaining
Amortization
Periods
Restricted stock units
$
5,885
1.1
Phantom stock units
-
n/a
Total
$
5,885
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.
19
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Restricted Stock Units
RSU activity under the 2007 Program as of April 3, 2021 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, 2021
793
$
18.90
Granted
319
22.07
Vested*
( 235
)
18.79
Cancelled or forfeited
-
-
Outstanding at April 3, 2021
877
$
20.08
Expected to vest at April 3, 2021
877
* 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, 2022
174
-
174
January 1, 2023
152
-
152
January 1, 2024
165
-
165
Phantom Stock Units
Phantom stock unit activity under the phantom stock plan as of April 3, 2021 and changes during the three 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, 2021
198
Granted
10
$
20.89
Dividend equivalents issued
1
Outstanding at April 3, 2021
209
20
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 10 – Segment Information
The following tables set forth business segment information:
MOSFETs
Diodes
Optoelectronic
Components
Resistors
Inductors
Capacitors
Corporate / Other*
Total
Fiscal quarter ended April 3, 2021 :
Net revenues
$
153,223
$
157,178
$
77,771
$
186,602
$
83,458
$
106,400
$
-
$
764,632
Gross profit
$
37,108
$
34,416
$
25,626
$
53,973
$
27,751
$
24,075
$
-
$
202,949
Segment operating income
$
27,207
$
28,821
$
21,210
$
47,376
$
25,290
$
18,863
$
-
$
168,767
Fiscal quarter ended April 4, 2020 :
Net revenues
$
116,893
$
115,343
$
54,179
$
159,208
$
73,785
$
93,433
$
-
$
612,841
Gross profit
$
28,152
$
19,518
$
14,585
$
44,773
$
22,987
$
20,355
$
( 3,130
)
$
147,240
Segment operating income
$
18,658
$
14,422
$
10,686
$
38,885
$
20,310
$
15,070
$
( 3,130
)
$
114,901
* Amounts reported in Corporate/Other above represent unallocated costs directly related to the COVID-19 pandemic, which are reported as costs of products sold on the consolidated condensed statement of operations.
Fiscal quarters ended
April 3, 2021
April 4, 2020
Reconciliation:
Segment Operating Income
$
168,767
$
114,901
Impact of COVID-19 Pandemic on Selling, General, and Administrative Expenses
-
( 317
)
Unallocated Selling, General, and Administrative Expenses
( 71,503
)
( 67,176
)
Consolidated Operating Income
$
97,264
$
47,408
Unallocated Other Income (Expense)
( 10,107
)
( 11,274
)
Consolidated Income Before Taxes
$
87,157
$
36,134
21
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The Company has a broad line of products that it sells to OEMs, EMS companies, and independent distributors. The distribution of sales by customer type is shown below:
Fiscal quarters ended
April 3, 2021
April 4, 2020
Distributors
$
424,125
$
305,446
OEMs
294,637
261,129
EMS companies
45,870
46,266
Total Revenue
$
764,632
$
612,841
Net revenues were attributable to customers in the following regions:
Fiscal quarters ended
April 3, 2021
April 4, 2020
Asia
$
322,460
$
217,084
Europe
268,323
233,052
Americas
173,849
162,705
Total Revenue
$
764,632
$
612,841
The Company generates substantially all of its revenue from product sales to end customers in the industrial, automotive, telecommunications, computing, consumer products, power supplies, military and aerospace, and medical end markets. Sales by end market are presented below:
Fiscal quarters ended
April 3, 2021
April 4, 2020
Industrial
$
270,801
$
215,111
Automotive
255,973
201,943
Telecommunications
24,902
29,692
Computing
59,899
45,223
Consumer Products
40,795
20,553
Power Supplies
35,246
25,194
Military and Aerospace
41,538
43,935
Medical
35,478
31,190
Total revenue
$
764,632
$
612,841
22
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share attributable to Vishay stockholders (shares in thousands) :
Fiscal quarters ended
April 3, 2021
April 4, 2020
Numerator:
Net earnings attributable to Vishay stockholders
$
71,435
$
27,219
Denominator:
Denominator for basic earnings per share:
Weighted average shares
144,760
144,599
Outstanding phantom stock units
208
193
Adjusted weighted average shares - basic
144,968
144,792
Effect of dilutive securities:
Convertible debt instruments
9
95
Restricted stock units
486
408
Dilutive potential common shares
495
503
Denominator for diluted earnings per share:
Adjusted weighted average shares - diluted
145,463
145,295
Basic earnings per share attributable to Vishay stockholders
$
0.49
$
0.19
Diluted earnings per share attributable to Vishay stockholders
$
0.49
$
0.19
Diluted earnings per share for the periods presented do not reflect the following weighted average potential common shares that would have an antidilutive effect or have unsatisfied performance conditions (in thousands) :
Fiscal quarters ended
April 3, 2021
April 4, 2020
Convertible debt instruments:
Convertible senior notes due 2025
-
19,088
Convertible senior debentures due 2041
-
88
Weighted average other
317
325
If the average market price of Vishay common stock is less than the effective conversion price of the convertible senior notes due 2025, no shares are included in the diluted earnings per share computation for the convertible senior notes due 2025. Upon Vishay exercising its existing right to legally amend the indenture governing the convertible senior notes due 2025, Vishay will satisfy its conversion obligations by paying $1 cash per $1 principal amount of converted notes and settle any additional amounts due in common stock. Accordingly, the notes are not anti-dilutive when t he average market price of Vishay common stock is less than the effective conversion price of the convertible senior notes due 2025.
23
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 12 – Fair Value Measurements
The fair value measurement accounting guidance establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the Company’s own assumptions.
An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. There have been no changes in the classification of any financial instruments within the fair value hierarchy in the periods presented.
The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis:
Total
Fair Value
Level 1
Level 2
Level 3
April 3, 2021
Assets:
Assets held in rabbi trusts
$
56,143
$
31,352
$
24,791
$
-
Available for sale securities
$
4,641
4,641
-
-
$
60,784
$
35,993
$
24,791
$
-
December 31, 2020
Assets:
Assets held in rabbi trusts
$
57,892
$
34,145
23,747
$
-
Available for sale securities
$
4,917
4,917
-
-
$
62,809
$
39,062
$
23,747
$
-
The Company maintains non-qualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and non-qualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale and company-owned life insurance assets. The marketable securities held in the rabbi trusts are valued using quoted market prices on the last business day of the period. The company-owned life insurance assets are valued in consultation with the Company’s insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of the marketable securities held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy.
24
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The Company holds investments in debt securities that are intended to fund a portion of its pension and other postretirement benefit obligations outside of the United States. The investments are valued based on quoted market prices on the last business day of the period. The fair value measurement of the investments is considered a Level 1 measurement within the fair value hierarchy.
The Company enters into forward contracts with highly-rated financial institutions to mitigate the foreign currency risk associated with intercompany loans denominated in a currency other than the legal entity's functional currency. The notional amount of the forward contracts was $ 100,000 as of April 3, 2021 and December 31, 2020. The forward contracts are short-term in nature and are expected to be renewed at the Company's discretion until the intercompany loans are repaid. We have not designated the forward contracts as hedges for accounting purposes, and as such the change in the fair value of the contracts is recognized in the consolidated condensed statement of operations as a component of other income (expense). The Company estimates the fair value of the forward contracts based on applicable and commonly used pricing models using current market information and is considered a Level 2 measurement within the fair value hierarchy. The value of the forward contracts was immaterial as of April 3, 2021 and December 31, 2020. The Company does not utilize derivatives or other financial instruments for trading or other speculative purposes.
The fair value of the long-term debt, excluding the derivative liabilities and deferred financing costs, at April 3, 2021 and December 31, 2020 is approximately $ 517,700 and $ 491,400 , respectively, compared to its carrying value, excluding the deferred financing costs, of $ 465,344 and $ 406,398 , respectively. The Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates, which are considered Level 2 inputs.
At April 3, 2021 and December 31, 2020, the Company’s short-term investments were comprised of time deposits with financial institutions that have maturities that exceed 90 days from the date of acquisition; however they all mature within one year from the respective balance sheet dates. The Company's short-term investments are accounted for as held-to-maturity debt instruments, at amortized cost, which approximates their fair value. The investments are funded with excess cash not expected to be needed for operations prior to maturity; therefore, the Company believes it has the intent and ability to hold the short-term investments until maturity. At each reporting date, the Company performs an evaluation to determine if any unrealized losses are other-than-temporary. No other-than-temporary impairments have been recognized on these securities, and there are no unrecognized holding gains or losses for these securities during the periods presented. There have been no transfers to or from the held-to-maturity classification. All decreases in the account balance are due to returns of principal at the securities’ maturity dates. Interest on the securities is recognized as interest income when earned.
At April 3, 2021 and December 31, 2020, the Company’s cash and cash equivalents were comprised of demand deposits, time deposits with maturities of three months or less when purchased, and money market funds. The Company estimates the fair value of its cash, cash equivalents, and short-term investments using level 2 inputs. Based on the current interest rates for similar investments with comparable credit risk and time to maturity, the fair value of the Company's cash, cash equivalents, and held-to-maturity short-term investments approximate the carrying amounts reported in the consolidated condensed balance sheets.
The Company’s financial instruments also include accounts receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the consolidated condensed balance sheets approximate their fair values.
25