What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-02 compared with 2022-05-03 · 304 added, 264 removed, 413 unchanged (58% of the section changed)

35 unchanged sentences

was temporary as evidenced by our revenues since the beginning of 2021, similar disruptions have continued to occur on a more limited scale.

In this volatile economic environment, we continue to closely monitor our fixed costs, capital expenditure

plans, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and resources to meet our future needs.

We will react quickly and professionally to changes in demand to minimize

manufacturing inefficiencies and excess inventory build in periods of decline and maximize opportunities in periods of growth.

Our operations in the People's Republic of China, particularly in Shanghai, were impacted by COVID-19 government mandated shut-downs in the second fiscal quarter of 2022.

manufacturing facilities were temporarily closed and some were operating at levels less than full capacity.

We incurred incremental costs separable from normal operations that are directly related to the government mandated shut-downs, primarily wages

paid to manufacturing employees during the shut-downs, additional wages and hardship allowances for working during lockdown periods, 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 ($6.7 million ) and selling, general, and administrative expenses ($0.5 million) based on employee function on the consolidated condensed statements of operations for the fiscal quarter and six fiscal months ended July 2, 2022.

We exclude from the amounts reported above any expenses incurred outside of the People's Republic of China and all indirect financial changes from the COVID-19 pandemic such as

general macroeconomic effects and higher shipping costs due to reduced shipping capacity.

In this volatile economic environment, we continue to closely monitor our fixed costs, capital expenditure plans, inventory, and capital resources

to respond to changing conditions and to ensure we have the management, business processes, and resources to meet our future needs.

We will react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess

inventory build in periods of decline and maximize opportunities in periods of growth.

We have significant liquidity to withstand temporary disruptions in the economic environment.

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“Financial Metrics” and “Financial Condition, Liquidity, and Capital Resources” below.

Despite ongoing pandemic-related issues and accelerating inflation, nearly all key financial metrics have increased versus the prior fiscal quarter and the prior

year quarter.

We continue to maximize manufacturing output at all facilities, increase critical manufacturing capacities, and implement broad price increases.

Order levels continue to be high and backlogs have increased.

Net revenues for the fiscal quarter ended April 2, 2022

Despite ongoing pandemic-related issues and further accelerating inflation, nearly all key financial metrics have increased versus the prior fiscal quarter and

the prior year quarter.

We continue to maximize manufacturing output at all facilities, increase critical manufacturing capacities, and implement broad price increases due to inflationary pressures.

Order levels continue to be high and backlogs

continue to increase.

Net revenues for the fiscal quarter ended July 2, 2022

were $863.5 million, compared to $853.8

million and $764.6 million for the fiscal quarters ended December 31, 2021 and April 3, 2021, respectively.

The net earnings

attributable to Vishay stockholders for the fiscal quarter ended April 2, 2022 were $103.6 million, or $0.71 per diluted share, compared to $36.5 million, or $0.25 per diluted

share for the fiscal quarter ended December 31, 2021, and $71.4 million, or $0.49 per diluted share for the fiscal quarter ended April 3, 2021.

We define adjusted net earnings as net earnings determined in accordance with GAAP adjusted for various items that management believes are not indicative of the intrinsic operating

performance of our business.

We define free cash as the cash flows generated from continuing operations less capital expenditures plus net proceeds from the sale of property and equipment.

The reconciliations below include certain financial

measures which are not recognized in accordance with GAAP, including adjusted net earnings, adjusted earnings per share, and free cash.

These non-GAAP measures should not be viewed as alternatives to GAAP measures of performance or liquidity.

million and $819.1 million for the fiscal quarters ended April 2, 2022 and July 3, 2021, respectively.

The net earnings attributable to Vishay stockholders

for the fiscal quarter ended July 2, 2022 were $112.4 million, or $0.78 per diluted share, compared to $103.6 million, or $0.71 per diluted share for the fiscal

quarter ended April 2, 2022, and $93.2

million, or $0.64 per diluted share for the fiscal quarter ended July 3, 2021.

Net revenues for the six fiscal months

ended July 2, 2022 were $1,717.3

million, compared to $1,583.8 million for the six fiscal months ended July 3, 2021.

The net earnings attributable to Vishay

stockholders for the six fiscal months ended July 2, 2022 were $216.0 million, or $1.49 per diluted share, compared to $164.6 million, or $1.13 per diluted share for the six

fiscal months ended July 3, 2021.

We define adjusted net earnings as net earnings determined in accordance with GAAP adjusted for various items that

management believes are not indicative of the intrinsic operating performance of our business.

We define free cash as the cash flows generated from continuing operations less capital expenditures plus net proceeds from the sale of property and

The reconciliations below include certain financial measures which are not recognized in accordance with GAAP, including adjusted net earnings, adjusted earnings per share, and free cash.

These non-GAAP measures should not be viewed as

alternatives to GAAP measures of performance or liquidity.

Non-GAAP measures such as adjusted net earnings, adjusted earnings per share, and free cash do not have uniform definitions.

These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies.

These measures, as calculated by Vishay, may not be comparable

to similarly titled measures used by other companies.

Management believes that adjusted net earnings and adjusted earnings per share are meaningful because they provide insight with respect to our intrinsic operating results.

Management believes that free cash is a meaningful measure of our ability

to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends.

Management believes

that free cash is a meaningful measure of our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends.

We utilize the free cash metric in defining our Stockholder Return Policy.

Net earnings attributable to Vishay stockholders for the fiscal quarters ended December 31, 2021 and April 3, 2021 include items affecting comparability.

The items affecting comparability are ( in thousands, except per share amounts ):

The items affecting comparability are ( in thousands,

except per share amounts ):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

GAAP net earnings attributable to Vishay stockholders

Reconciling items affecting gross income:

Impact of COVID-19 pandemic

Other reconciling items affecting operating income:

Impact of COVID-19 pandemic

Reconciling items affecting tax expense:

Changes in tax laws and regulations

Tax effects of pre-tax items above

Adjusted net earnings

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Adjusted earnings per diluted share

The following table

reconciles gross profit by segment to consolidated gross profit.

Direct cots of the COVID-19 pandemic are not allocated to the segments as the chief operating decision maker's evaluation of segment performance does not include these costs.

Fiscal quarters ended

Six fiscal months ended

April 2, 2022

Optoelectronic Components

Unallocated gross profit (loss)

Although the term "free cash" is not defined in GAAP, each of the elements used to calculate free cash for the year-to-date period is presented as a line

1 unchanged sentence

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

2 unchanged sentences

Capital expenditures

Despite a slow start to free cash generation in the first fiscal quarter, we expect to generate free cash in line with our history.

Our results for the fiscal quarters ended April 2, 2022,

December 31, 2021, and April 3, 2021

represent the continuation of the favorable business conditions that we have been experiencing.

Our percentage of euro-based sales approximates our percentage of euro-based expenses so the foreign currency impact on revenues was substantially offset

by the impact on expenses.

Our pre-tax results were consistent with expectations based on our business model.

Our results for the fiscal quarters ended July 2, 2022,

July 3, 2021, and July 3, 2021 represent the continuation of the favorable business conditions that we have been experiencing.

percentage of euro-based sales approximates our percentage of euro-based expenses so the foreign currency impact on revenues was substantially offset by the impact on expenses.

Our pre-tax results were consistent with expectations based on our

business model.

Our free cash results were significantly impacted by a temporary inventory build

in 2022, the installment payments of the U.S.

transition tax of $14.8 million in the second fiscal quarters of 2022 and 2021, and $25.2 million of payments of foreign, withholding, and claw-back cash taxes on foreign earnings in Israel for the net

$81.2 million that was repatriated to the U.S.

in the second fiscal quarter of 2022 .

Stockholder Return Policy

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Fiscal quarter ended

April 2, 2022

Six fiscal months ended

Dividends paid to stockholders

Stock repurchases

Despite negative free cash in the first fiscal quarter, for the full year of 2022, we expect to return at least $100 million to stockholders,

consisting of approximately $58 million through our quarterly dividends, and at least $42 million through stock repurchases.

Despite the slow start in free cash in the first six fiscal months of 2022, for the full year of 2022, we expect to return at least $100 million to

stockholders, consisting of approximately $58 million through our quarterly dividends, and at least $42 million through stock repurchases.

As a direct result of a change in tax law in Israel, we made the determination during the fourth quarter of 2021 that substantially all unremitted

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We intend to primarily utilize these earnings, distributed from Israel to the United States, to initially fund our Stockholder Return Program.

However, no amounts were

distributed from Israel to the United States during the first quarter of 2022.

Dividends and stock repurchases during the first quarter of 2022 were funded from cash on-hand.

We repatriated net $81.2 million

to the United States from Israel during the second fiscal quarter of 2022.

The repatriated cash is being used to fund our Stockholder Return Policy.

Over the long-term, we expect to fund the Stockholder Return Policy from our historically strong cash flows from operations.

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The following table

shows net revenues, gross profit margin, operating margin, end-of-period backlog, book-to-bill ratio, inventory turnover, and changes in ASP for our business as a whole during the five fiscal quarters beginning with the first fiscal quarter of 2021 through

the first fiscal quarter of 2022 (dollars in thousands) :

1st Quarter 2021

the second fiscal quarter of 2022 (dollars in thousands) :

2nd Quarter 2021

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1st Quarter 2022

2nd Quarter 2022

Gross profit margin (1)

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_________________________________________

(1) Gross margin for the second fiscal quarter of 2022 includes $6.7 million of expenses directly related to the COVID-19 pandemic (see Note 2 to our consolidated condensed financial statements).

(2) Operating margin for the second fiscal quarter of 2022 includes $7.2 million of expenses directly related to the COVID-19 pandemic (see Note 2 to our consolidated condensed financial statements).

See “Financial Metrics by Segment” below for net revenues, book-to-bill ratio, and gross profit margin broken out by segment.

Revenues increased significantly versus the first fiscal quarter of 2021 primarily due to higher volume and higher average selling prices.

increased slightly versus the prior fiscal quarter primarily due to higher average selling prices.

Revenues increased significantly versus the second fiscal quarter of 2021 primarily due to higher volume and higher average selling prices.

Revenues increased slightly versus the prior fiscal quarter primarily due to

higher average selling prices.

We continue to experience robust demand for our products, with the backlog continuing to grow.

We continue to increase manufacturing capacity, but

sales continue to be limited by our capacity.

Pressure on average selling prices continues to be very low and we are implementing broad price increases across the product portfolio to offset increased materials and transportation costs and general

Gross profit margin increased versus the first fiscal quarter of 2021 and the prior fiscal quarter primarily due to higher average selling prices.

Increased volume also contributed to the increase versus the first fiscal quarter of 2021.

The book-to-bill ratio in the first

fiscal quarter of 2022 increased to 1.14 versus 1.09 in the fourth fiscal quarter of 2021.

The book-to-bill ratios in the first

fiscal quarter of 2022 for distributors and original equipment manufacturers ("OEM") were 1.16 and 1.13, respectively, versus ratios

of 1.06 and 1.15, respectively, during the fourth fiscal quarter of 2021.

For the second fiscal quarter of 2022, considering pandemic-related disturbances in China, we anticipate revenues between $830 million and $870 million at

a gross margin of 28.1% plus/minus 50 basis points at the exchange rates of Q1 2022.

We continue to increase manufacturing capacity, but sales continue to be limited by our capacity.

Pressure on average

selling prices continues to be very low and we are implementing broad price increases across the product portfolio to offset increased materials and transportation costs and accelerating general inflation.

Sequentially, gross profit margin was flat, with higher average selling prices offset by directly related COVID-19 pandemic costs.

Gross profit margin

increased versus the second fiscal quarter of 2021 primarily due to higher average selling prices and higher volume.

The book-to-bill ratio in the second fiscal quarter of 2022 remained strong at 1.07 versus 1.14 in the first fiscal quarter of 2022.

The book-to-bill

ratios in the second fiscal quarter of 2022 for distributors and original equipment manufacturers ("OEM") were 1.05 and 1.11, respectively, versus ratios of 1.16 and 1.13, respectively, during the first fiscal quarter of 2022.

For the third fiscal quarter of 2022, we anticipate revenues between $860 million and $900 million at a gross margin of 29.0% plus/minus 50 basis points at an exchange rate USD/EUR of 0.98.

Financial Metrics by Segment

The following table shows net revenues, book-to-bill ratio, gross profit margin, and segment operating margin broken out by segment for the five fiscal

quarters beginning with the first fiscal quarter of 2021 through the first fiscal quarter of 2022 (dollars in thousands) :

1st Quarter 2021

quarters beginning with the second fiscal quarter of 2021 through the second fiscal quarter of 2022 (dollars in thousands) :

2nd Quarter 2021

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1st Quarter 2022

2nd Quarter 2022

Book-to-bill ratio

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Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

7 unchanged sentences

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

1 unchanged sentence

Fiscal quarter ended

April 2, 2022

Change in net revenues

December 31, 2021

Six fiscal months ended

Change in net

April 2, 2022

Changes in net revenues were attributable to the following:

Prior Quarter

Prior Year Quarter

Change attributable to:

2 unchanged sentences

Foreign currency effects

We continue to experience an excellent economic environment with strong customer demand while we continue to increase manufacturing capacities.

Due to the high demand, we were able to

implement broad price increases across the product portfolio.

Net revenues increased significantly versus the first fiscal quarter of 2021 and slightly versus the prior fiscal quarter due to increases in average selling prices.

Increased volume

also contributed to the increase versus the first fiscal quarter of 2021.

We continue to experience an excellent economic environment with strong customer demand while we continue to increase

manufacturing capacities.

Due to the high demand, we were able to implement broad price increases across the product portfolio.

Net revenues increased significantly versus the fiscal quarter and six fiscal months ended July 3, 2021 and slightly

versus the prior fiscal quarter primarily due to increases in average selling prices.

Increased volume also contributed to the increase versus the fiscal quarter and six fiscal months ended July 3, 2021.

the second fiscal quarter of 2022 was impacted by a two-month government mandated shut-down of two facilities in Shanghai, People's Republic of China, in response to the COVID-19 pandemic.

Gross Profit Margins

Gross profit margins for the fiscal quarter ended April 2, 2022 were 30.3%, versus 27.3% and 26.5% for the comparable prior fiscal quarter and prior year period,

Gross profit margins for the fiscal quarter ended July 2, 2022 were 30.3%, versus 30.3% and 28.0%, for the comparable prior quarter and prior year period,

respectively.

The increases versus the first fiscal quarter of 2021 and prior fiscal quarter are primarily due to increases in average selling prices.

Increased volume also contributed to the increase versus the first

fiscal quarter of 2021.

Gross profit margins for the six fiscal months ended July 2, 2022 were 30.3%, versus 27.3% for the comparable prior year period.

The increases versus the prior year periods are primarily due to higher average selling prices and increased volume, partially

offset by inflationary impacts, particularly increased metals and transportation costs.

The gross profit margin was flat versus the prior fiscal quarter as higher average selling prices were offset by inflationary impacts, particularly increased

metals and transportation costs and direct costs of the COVID-19 pandemic.

Analysis of revenues and margins for our segments is provided below.

Direct costs of the COVID-19 pandemic are not allocated to the segments.

Net revenues, gross profit margins, and segment operating margins of the MOSFETs segment were as follows (dollars in thousands):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

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Fiscal quarter ended

April 2, 2022

Six fiscal months ended

Change in net revenues

December 31, 2021

Change in net revenues

April 2, 2022

Changes in MOSFETs segment net revenues were attributable to the following:

Prior Quarter

Prior Year Quarter

Change attributable to:

Change in volume

Decrease in volume

Increase in average selling prices

Foreign currency effects

The MOSFET segment net revenues increased slightly versus the prior fiscal quarter and significantly versus the prior year quarter.

Our results for the

first fiscal quarter were negatively impacted by the temporary closure of our main manufacturing facility in Shanghai due to a COVID-19 lockdown.

The increase versus the prior fiscal quarter was primarily due to significant growth from our IC

products, which was offset by decreases from our remaining products, which were impacted by the lockdown.

All end market customers and all customer channels contributed to the growth versus the prior year quarter.

Gross profit margin increased versus the prior fiscal quarter and the prior year quarter.

The increases were primarily due to increased average selling

prices, a positive change in the sales mix toward more profitable products such as ICs, and the positive impact of an inventory increase, partially offset by significant cost inflation.

Increased sales volume also contributed to the increase

versus the prior year quarter.

The segment operating margin increased versus the prior fiscal quarter and prior year quarter.

The increases are primarily due to

increased gross profit.

Decreased segment SG&A expenses as a percentage of sales also contributed to the increase versus the prior fiscal quarter.

The MOSFET segment net revenues decreased significantly versus the prior fiscal quarter and prior year quarter, but increased moderately versus the

prior year-to-date period.

Our results for the second fiscal quarter were significantly impacted by the two-month government mandated COVID-19 shut-down in Shanghai, People's Republic of China that required an almost complete closure of our

main manufacturing facility.

Increased sales of our products that are not assembled in Shanghai, particularly our IC products, partially offset the impact of the shut-down.

The increase versus the prior year-to-date period was primarily due

to our IC products.

Gross profit margin increased versus the prior fiscal quarter and especially versus the prior year periods.

The increases were primarily due to

increased average selling prices, the positive impact of an inventory increase, and our cost reduction measures, partially offset by significant cost inflation and a decrease in volume.

The increases versus the prior year periods were also

supported by a positive change in the sales mix toward more profitable products such as ICs.

The segment operating margin increased versus the prior fiscal quarter and prior year periods.

The increases are

primarily due to increased gross profit.

Increased segment SG&A expenses primarily due to increased R&D activity limited the increases.

We continue to implement strategic price increases.

Average selling prices increased versus the prior fiscal quarter and the prior year quarter.

Average selling prices increased versus the prior fiscal quarter and the prior year periods.

We continue to invest to expand mid- and long-term manufacturing capacity for strategic product lines.

building a 12-inch wafer fab in Itzehoe, Germany adjacent to our existing 8-inch wafer fab, which we expect will increase our in-house wafer capacity by approximately 70% within 3-4 years and allow us to balance our in-house and foundry wafer

have begun building a 12-inch wafer fab in Itzehoe, Germany adjacent to our existing 8-inch wafer fab, which we expect will increase our in-house wafer capacity by approximately 70% within 3-4 years and allow us to balance our in-house and

foundry wafer supply.

Net revenues, gross profit margins, and segment operating margins of the Diodes segment were as follows (dollars in thousands):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

1 unchanged sentence

Segment operating margin

The change in net revenues versus the comparable prior periods was as follows (dollars

in thousands) :

The change in net revenues versus the comparable prior periods was as follows (dollars in thousands) :

Fiscal quarter ended

April 2, 2022

Six fiscal months ended

Change in net revenues

December 31, 2021

Change in net revenues

April 2, 2022

Changes in Diodes segment net revenues were attributable to the following:

Prior Quarter

Prior Year Quarter

Change attributable to:

Change in volume

Increase in volume

Increase in average selling prices

Foreign currency effects

Net revenues of the Diodes segment increased significantly versus the prior year quarter, but decreased significantly versus the prior fiscal quarter.

All end markets and all customer channels, particularly distributor customers, contributed to the increase versus the prior year quarter.

The decrease versus the prior quarter is primarily due to temporary closures of our manufacturing

facilities in China due to COVID-19 lockdowns.

Gross profit margin increased versus the prior fiscal quarter and the prior year quarter.

The increase versus the prior fiscal quarter is primarily due

to increased average selling prices and the positive impact of an inventory increase, partially offset by cost inflation and a decrease in sales volume.

The increase versus the prior year quarter is primarily due to increased average selling

prices, increased sales volume, and our cost reduction measures, partially offset by cost inflation and negative foreign currency impacts primarily from the weaker euro.

The segment operating margin increased versus the prior fiscal quarter and prior year quarter.

The increases are primarily

due to increased gross profit.

Decreased segment SG&A expenses also contributed to the increase versus the prior fiscal quarter.

Net revenues of the Diodes segment increased moderately versus the prior fiscal quarter and significantly versus the prior year periods.

markets and all customer channels, particularly distributor customers, contributed to the increases.

The increases were limited by extended government mandated COVID-19 shut-downs of our manufacturing facilities in the People's Republic of

China, particularly Shanghai.

Gross profit margin increased versus the prior fiscal quarter and the prior year periods.

The increases are primarily due to increased average

selling prices, our cost reduction measures, and increases in sales volume, partially offset by significant cost inflation.

Foreign currency exchange impacts, particularly the weaker euro, negatively impacted the gross profit margin versus

the prior fiscal quarter and the prior year-to-date period.

The segment operating margin increased versus the prior fiscal quarter and the prior year periods.

The increases are primarily due to increased

gross profit.

Decreased segment SG&A expenses versus the prior year periods contributed to the increases.

We continue to implement strategic price increases across the product portfolio.

Average selling prices increased versus the prior fiscal quarter and

prior year quarter.

O ptoelectronic Components

prior year periods.

Optoelectronic Components

Net revenues, gross profit margins, and segment operating margins of the Optoelectronic Components segment were as follows (dollars in thousands):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

1 unchanged sentence

Segment operating margin

The change in net revenues versus the comparable prior periods was as follows (dollars

in thousands) :

The change in net revenues versus the comparable prior periods was as follows (dollars in thousands) :

Fiscal quarter ended

April 2, 2022

Six fiscal months ended

Change in net revenues

December 31, 2021

Change in net revenues

April 2, 2022

Changes in Optoelectronic Components segment net revenues were attributable to the following:

Prior Quarter

Prior Year Quarter

Change attributable to:

Increase in volume

Change in volume

Increase in average selling prices

Foreign currency effects

Net revenues of our Optoelectronic Components segment increased moderately versus the prior fiscal quarter and prior year quarter.

All end markets and all customer channels, particularly OEM customers, contributed to the increase versus the prior fiscal quarter.

The end of the COVID-19-related restrictions on

our manufacturing facility in Malaysia that impacted the prior fiscal quarter business also contributed to the increase.

The increase versus the prior year quarter was primarily due to increased average selling prices, partially offset by

decreased volume and negative foreign currency impacts.

A significant increase of sales to American distributors was offset by a significant decrease of sales to Asian distributors.

Gross profit margin increased versus the prior fiscal quarter and the prior year quarter.

The increase versus the prior fiscal quarter is primarily

due to higher average selling prices, higher sales volume, cost reduction measures, and the positive impact of an inventory increase.

The increases versus the prior year quarter are primarily due to higher average selling prices, a more

profitable product mix, and the positive impact of an inventory increase, partially offset by cost inflation and a lower sales volume.

The segment operating margin increased versus the prior fiscal quarter and prior year quarter.

The increases are primarily due to increased gross profit.

Decreased segment SG&A expenses also contributed to

the increase versus the prior fiscal quarter.

Net revenues of our Optoelectronic Components segment decreased moderately versus the prior fiscal quarter but increased slightly versus the prior

year quarter and moderately versus the prior year-to-date period.

All end markets and all customer channels contributed to the decrease versus the prior fiscal quarter, particularly customers in the Asia region.

The increases versus the prior

year periods were due to a significant increase in sales to customers in the Americas region and a moderate increase in sales to customers in the Europe region, partially offset by significant decrease in sales to customers in the Asia region.

The increases versus the prior year periods were primarily due to increased average selling prices, partially offset by negative foreign currency impacts.

Gross profit margin decreased versus the prior fiscal quarter but increased versus the prior year periods.

The decrease versus the prior fiscal

quarter is primarily due to cost inflation and the negative impact of an inventory decrease, partially offset by higher average selling prices.

The increases versus the prior year periods are primarily due to higher average selling prices, a

more profitable product mix, and our cost reduction measures, partially offset by cost inflation.

The segment operating margin decreased versus the prior fiscal quarter, but increased versus the prior year periods.

The fluctuations are primarily due

to fluctuations in gross profit margin.

Decreased segment SG&A expenses, primarily due to the weaker euro, positively impacted the segment operating margin.

The strategic price increases that were implemented throughout the prior year across the product portfolio are significant when comparing to the prior

year quarter.

Average selling prices increased slightly versus the prior fiscal quarter and significantly versus the prior year quarter.

We have modernized and expanded our Heilbronn wafer fab and plan to increase production in the facility during 2022.

Average selling prices increased slightly versus the prior fiscal quarter and significantly versus the prior year periods

We are now using our recently modernized and expanded wafer fab in Heilbronn, Germany.

Net revenues, gross profit margins, and segment operating margins of the Resistors segment were as follows (dollars in thousands):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

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Fiscal quarter ended

April 2, 2022

Six fiscal months ended

Change in net revenues

December 31, 2021

Change in net revenues

April 2, 2022

Changes in Resistors segment net revenues were attributable to the following:

Prior Quarter

Prior Year Quarter

Change attributable to:

2 unchanged sentences

Foreign currency effects

Net revenues of the Resistors segment increased significantly versus the prior fiscal quarter and prior year quarter.

The increase versus the prior

fiscal quarter is primarily due to increased sales to Europe and Americas region customers and industrial end market customers.

The increase versus the prior year quarter is primarily due to increased sales to customers in all regions, distributor

customers, and industrial end market customers.

The gross profit margin increased versus the prior fiscal quarter and prior year quarter.

The increases are primarily due to increased sales volume, higher

average selling prices, and greater efficiencies, partially offset by higher metals and labor costs and negative exchange rate impacts.

The segment operating margin increased versus the prior fiscal quarter and prior year quarter.

Net revenues of the Resistors segment increased slightly versus the prior fiscal quarter and significantly versus the prior year periods.

versus the prior fiscal quarter is primarily due to increased sales to Americas and Asia region customers and distributor customers, which was partially offset by decreased sales to Europe region customers and automotive and industrial end market

The increase versus the prior year periods is primarily due to increased sales to customers in all regions, particularly the Americas region, distributor customers, and industrial end market customers.

The acquisition of Barry

Industries also contributed to the increase in net revenues versus the prior year periods.

The gross profit margin increased versus the prior fiscal quarter and prior year periods.

The increase versus the prior fiscal quarter is primarily due to

increased average selling prices, higher sales volume, improved efficiencies, and fixed costs control measures, partially offset by significant metal price increases, increased material procurement costs, and negative foreign currency exchange rate

The increases versus the prior year periods are primarily due to increased sales volume, higher average selling prices, and greater efficiencies, partially offset by metal price increases, increased material procurement costs, increased

labor costs, and negative foreign currency exchange rate impacts.

The segment operating margin increased versus the prior fiscal quarter and prior year periods.

The increases are primarily due to increased gross profit.

Average selling prices increased versus the prior fiscal quarter and prior year quarter.

Average selling prices increased versus the prior fiscal quarter and prior year periods.

We are increasing critical manufacturing capacities for certain product lines.

We continue to broaden our business with

targeted acquisitions of specialty resistors businesses, such as Barry Industries.

We continue to broaden our business with targeted acquisitions of specialty

resistors businesses, such as Barry Industries.

Net revenues, gross profit margins, and segment operating margins of the Inductors segment were as follows (dollars in thousands):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

Segment operating margin

Gross profit margin

Segment operating margin

The change in net revenues versus the comparable prior periods was as follows (dollars in thousands) :

Fiscal quarter ended

April 2, 2022

Six fiscal months ended

Change in net revenues

December 31, 2021

Change in net revenues

April 2, 2022

Changes in Inductors segment net revenues were attributable to the following:

Changes in net revenues were attributable to the following:

Prior Quarter

1 unchanged sentence

Change attributable to:

Change in volume

Change in average selling prices

Increase in volume

Increase in average selling prices

Foreign currency effects

Net revenues of the Inductors segment increased slightly versus the prior fiscal quarter, but decreased slightly versus the prior year quarter.

increase versus the prior fiscal quarter is primarily due to increased sales to automotive and military & aerospace end market customers and customers in the Europe region.

The decrease versus the prior year quarter is primarily due to

decreased sales to automotive and medical end market customers and customers in the Europe and Asia regions.

The gross profit margin increased versus the prior fiscal quarter, but decreased versus the prior year quarter.

The increase versus the prior fiscal

quarter is primarily due to higher sales volume and the positive impact of increased inventory.

The decrease versus the prior year quarter is primarily due to lower sales volume, increased labor and logistics costs, and negative foreign currency

impacts, partially offset by increased average selling prices.

The segment operating margin increased versus the prior fiscal quarter, but decreased versus the prior year quarter.

Net revenues of the Inductors segment increased significantly versus the prior fiscal quarter, moderately versus the prior year quarter, and slightly versus the prior year-to-date period.

The increase versus the

prior fiscal quarter is primarily due to increased sales to customers in all regions, particularly the Americas region, and increased sales to distribution and EMS customers, and automotive end market customers.

The increase versus the prior year

periods is primarily due to increased sales to customers in the Europe and Americas regions, partially offset by decreased sales to customers in the Asia region.

The increase versus the prior year quarter is also due to increased sales to EMS

customers and military and aerospace and automotive end market customers.

The increase versus the prior year-to-date period is also due to increased sales to distribution and EMS customers and military and aerospace end market customers.

The gross profit margin increased versus the prior fiscal quarter, but decreased versus the prior year periods.

The increase versus the prior fiscal quarter is primarily due to higher sales volume, increased

average selling prices, improved efficiencies, and lower logistics costs, partially offset by increased materials costs.

The decreases versus the prior year periods are primarily due to the impact from higher logistics, labor, and material costs

as well as negative foreign currency exchange rate impacts, partially offset by higher volume, increased average selling prices, and other cost reduction measures.

The segment operating margin increased versus the prior fiscal quarter, but decreased versus the prior year periods.

The fluctuations are primarily due to gross profit fluctuations.

Average selling prices were unchanged versus the prior fiscal quarter and increased slightly versus the prior year quarter.

We expect long-term growth in this segment, and are continuously expanding manufacturing capacity for certain product lines and evaluating acquisition

opportunities, particularly of specialty businesses.

Average selling prices increased versus the prior fiscal quarter and the prior year periods.

We expect long-term growth in this segment, and are continuously expanding manufacturing capacity for certain product lines and evaluating acquisition opportunities, particularly of specialty businesses.

Net revenues, gross profit margins, and segment operating margins of the Capacitors segment were as follows (dollars in thousands):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

Segment operating margin

Gross profit margin

Segment operating margin

The change in net revenues versus the comparable prior periods was as follows (dollars in thousands) :

Fiscal quarter ended

April 2, 2022

Six fiscal months ended

Change in net revenues

December 31, 2021

Change in net revenues

April 2, 2022

Changes in Capacitors segment net revenues were attributable to the following:

Prior Year Quarter

Change attributable to:

Change in volume

Increase in volume

Increase in average selling prices

Foreign currency effects

Net revenues of the Capacitors segment decreased slightly versus the prior fiscal quarter, but increased significantly versus the prior year quarter.

The decrease versus the prior fiscal quarter is primarily due to decreased sales to industrial end market customers and customers in the Asia region.

The increase versus the prior year quarter is primarily due to increased sales to distributor and

EMS customers, industrial end market customers, and customers in all regions.

The gross profit margin increased versus the prior fiscal quarter and the prior year quarter.

The increase versus the prior fiscal quarter is primarily due to

increased average selling prices, favorable product mix, and positive impact from increased inventory.

The increase versus the prior year quarter is primarily due to higher sales volume and increased average selling prices, partially

offset by increased materials and labor costs.

The segment operating margin increased versus the prior fiscal quarter and prior year quarter.

The increases are primarily due to increased gross profit.

Average selling prices increased versus the prior fiscal quarter and the prior year quarter.

Net revenues of the Capacitors segment increased moderately versus the prior fiscal quarter and significantly versus the prior year periods.

increase versus the prior fiscal quarter is primarily due to increased sales to customers in the Europe and Americas regions and industrial end market customers.

The increase versus the prior year quarter is primarily due to increased sales to

customers in the Americas and Asia regions, EMS customers, and industrial end market customers.

The increase versus the prior year-to-date period is primarily due to increased sales to customers in all regions, particularly the Americas region,

distributor and EMS customers, and industrial end market customers.

The gross profit margin decreased versus the prior fiscal quarter, but increased versus the prior year periods.

The decrease versus the prior fiscal quarter is

primarily due to increased metals prices and negative impact from decreased inventory, partially offset by increased volume, increased average selling prices, and favorable product mix.

The increases versus the prior year periods are

primarily due to higher sales volume, increased average selling prices, and favorable product mix, partially offset by increased materials and labor costs and manufacturing inefficiencies.

The segment operating margin decreased versus the prior fiscal quarter, but increased versus the prior year periods.

The fluctuations are primarily due to

gross profit fluctuations.

Average selling prices increased versus the prior fiscal quarter and the prior year periods.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses are summarized as follows (dollars in thousands):

Selling, general, and administrative (“SG&A”) expenses are summarized as follows (dollars in thousands):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Six fiscal months ended

April 2, 2022

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as a percentage of revenues

The sequential increase in SG&A expenses is primarily attributable to uneven attribution of stock compensation expense and cost inflation.

expenses increased versus the prior year quarter due to cost inflation.

The sequential decrease in SG&A expenses is primarily attributable to uneven attribution of stock compensation expense in the first fiscal quarter of

the year and foreign currency exchange impacts.

SG&A expenses increased versus the prior year quarter due to cost inflation.

SG&A expenses for the fiscal quarter and six fiscal months ended July 2, 2022 include $0.5 million of incremental

costs separable from normal operations directly attributable to COVID-19 government mandated shut-downs incurred in our People's Republic of China facilities.

Other Income (Expense)

Interest expense for the fiscal quarter ended April 2, 2022

decreased $0.1 million versus the fiscal quarter ended December 31, 2021 and decreased by $0.2 million versus the fiscal quarter ended April 3, 2021.

Interest expense for the fiscal quarter ended July 2, 2022

increased $0.1 million versus the fiscal quarter ended April 2, 2022 and decreased $0.1 million versus the fiscal quarter ended July 3, 2021.

Interest expense for the six fiscal months ended July 2, 2022 decreased by $0.3 million versus the six fiscal months ended July 3, 2021.

The following tables analyze the components of the line “Other” on the consolidated condensed statements of operations (in thousands):

Fiscal quarters ended

April 2, 2022

December 31, 2021

Foreign exchange gain (loss)

Interest income

Other components of other periodic pension cost

Investment income (expense)

Other components of net periodic pension expense

Investment income

Fiscal quarters ended

April 2, 2022

April 3, 2021

Foreign exchange gain (loss)

Interest income

Other components of other periodic pension cost

Other components of net periodic pension expense

Investment income (expense)

For the fiscal quarter ended April 2, 2022,

our effective tax rate was 23.7%, as compared to 67.7% and 17.8% for the fiscal quarters ended December 31, 2021 and April 3, 2021, respectively.

Six fiscal months ended

Foreign exchange gain (loss)

Interest income

Other components of net periodic pension expense

Investment income (expense)

For the fiscal quarter ended July 2, 2022, our effective tax rate was 23.8%, as compared

to 23.7% and 20.3%

for the fiscal quarters ended April 2, 2022 and July 3, 2021, respectively.

For the six fiscal months ended July 2, 2022, our effective tax rate was 23.7%,

as compared to 19.2% for the six

fiscal months ended July 3, 2021.

reduction in the U.S.

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Discrete tax items impacted our effective tax rate for the

prior quarters presented.

These items were $53.3 million in the fiscal quarter ended December 31, 2021 and $(4.4) million (tax benefit)

in the fiscal quarter ended April 3, 2021.

During the three fiscal months ended April 2, 2022, the liabilities for

unrecognized tax benefits decreased by $3.0 million on a net basis, primarily due to a payment and currency translation adjustments, partially offset by accruals for current year tax positions and interest.

2021 periods presented.

These items were $(3.9) million and $(8.3) million (tax benefits) in the fiscal quarter and six fiscal months ended July 3, 2021.

We repatriated $81.2 million to the United States in the second fiscal quarter of 2022 pursuant to the repatriation program initiated in response to a

change in Israeli tax law.

We paid withholding taxes, foreign taxes, and Israeli clawback taxes of $25.2 million due to the repatriation.

Tax expense for the repatriation was recorded in 2021 when the tax law was enacted.

During the six fiscal months ended July 2, 2022, the liabilities for unrecognized tax benefits decreased by $5.1 million on a net basis, primarily due to

payments, statute expiration, and currency translation adjustments, partially offset by accruals for current year tax positions and interest.

We operate in a global environment with significant operations in various locations outside the United States.

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Financial Condition, Liquidity, and Capital Resources

Our financial condition as of April 2, 2022 continued to be strong.

Cash and short-term investments exceed our long-term debt balances, and we have historically been a strong generator of operating cash flows.

generated from operations is used to fund our capital expenditure plans, and cash in excess of our capital expenditure needs is available to fund our acquisition strategy, to reduce debt levels, and to pay dividends and repurchase stock.

generated cash flows from operations in excess of $200 million in each of the last 20 years, and cash flows from operations in excess of $100 million in each of the last 27 years.

Our financial condition as of July 2, 2022 continued to be strong.

Cash and short-term investments exceed

our long-term debt balances, and we have historically been a strong generator of operating cash flows.

The cash generated from operations is used to fund our capital expenditure plans, and cash in excess of our capital expenditure needs is available

to fund our acquisition strategy, to reduce debt levels, and to pay dividends and repurchase stock.

We have generated cash flows from operations in excess of $200 million in each of the last 20 years, and cash flows from operations in excess of $100

million in each of the last 27 years.

Management uses a non-GAAP measure, "free cash," to evaluate our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or

4 unchanged sentences

Cash flows provided by operating activities were $108.3 million

for the three fiscal months ended April 2, 2022, as compared to cash flows provided by operations of $57.3 million for the three fiscal

months ended April 3, 2021.

Cash paid for property and equipment for the three fiscal months ended April 2, 2022 was $35.9 million, as compared to $28.5 million for the three fiscal months ended April 3, 2021.

well positioned to service our customers and to fully participate in growing markets, we intend to increase our capital expenditures for expansion in the mid-term.

For the year 2022, we expect to invest approximately $325 million in capital

expenditures.

Free cash flow was negative for the three fiscal months ended April 2, 2022 due to working capital changes and higher than usual capital expenditures.

We expect our business to

continue to be a reliable generator of free cash.

There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash at our historical levels, or at all, going forward if the economic environment

for the six fiscal months ended July 2, 2022, as compared to cash flows provided by operations of $174.8 million for the six fiscal months ended July 3, 2021.

Cash paid for property and equipment for the six fiscal months

ended July 2, 2022 was $95.7

million, as compared to $60.7 million for the six fiscal months ended July 3, 2021.

To be well positioned to service our customers and to fully

participate in growing markets, we intend to increase our capital expenditures for expansion in the mid-term.

For the year 2022, we expect to invest approximately $325 million in capital expenditures.

Free cash flow was lower than historical levels in the six

fiscal months ended July 2, 2022 due to working capital changes, higher than usual capital expenditures, and cash taxes paid for

repatriation.

We expect our business to continue to be a reliable generator of free cash.

There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash at our historical levels, or at all,

going forward if the economic environment worsens.

The COVID-19 pandemic and the mitigation efforts by governments to control its spread have not had a significant impact on our financial condition, liquidity, or capital resources.

1 unchanged sentence

“Stockholder Return Policy” above for additional information.

The following table summarizes the components of net cash and short-term investments (debt) at April 2, 2022 and December 31, 2021 (in thousands) :

April 2, 2022

The following table summarizes the components of net cash and short-term investments (debt) at July 2, 2022 and December 31, 2021 (in thousands) :

December 31, 2021

17 unchanged sentences

consolidated condensed statements of cash flows.

As of April 2, 2022, substantially all of our cash and cash equivalents and short-term investment were held in countries outside of the United States.

As of July 2, 2022, substantially all of

our cash and cash equivalents and short-term investment were held in countries outside of the United States.

Cash dividends to stockholders, share repurchases, and principal and interest payments on our debt instruments need to be paid by the U.S.

1 unchanged sentence

subsidiaries also have cash operating needs.

distribution of earnings from Israel to the United States will initially be used to fund our Stockholder Return Policy.

We expect that cash on-hand and cash flows from operations will be sufficient to meet our longer-term financing needs related to

normal operating requirements, regular dividend payments, share repurchases pursuant to our Stockholder Return Policy, and our research and development and capital expenditure plans.

Our substantially undrawn credit facility provides us with

significant operating liquidity in the United States.

The distribution of earnings from Israel to the United States will initially be used to fund our Stockholder Return Policy.

We expect that cash

on-hand and cash flows from operations will be sufficient to meet our longer-term financing needs related to normal operating requirements, regular dividend payments, share repurchases pursuant to our Stockholder Return Policy, and our research and

development and capital expenditure plans.

Our substantially undrawn credit facility provides us with significant operating liquidity in the United States.

Our revolving credit facility provides an aggregate commitment of $750 million of revolving loans available until June 5, 2024.

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At December 31, 2021, we had no amounts outstanding on our revolving credit facility.

We had no amounts outstanding at April 2, 2022.

We borrowed $282

million and repaid $282 million on the revolving credit facility during the three fiscal months ended April 2, 2022.

The average outstanding balance on our revolving credit facility calculated at fiscal month-ends was $58.7 million and the highest

amount outstanding on our revolving credit facility at a fiscal month end was $124 million during the three fiscal months ended April 2, 2022.

We had $6 million outstanding at July 2, 2022.

We borrowed $504 million and repaid $498 million on the revolving credit facility during the six fiscal months ended July 2, 2022.

The average outstanding

balance on our revolving credit facility calculated at fiscal month-ends was $62.5 million and the highest amount outstanding on our revolving credit facility at a fiscal month end was $124 million during the six fiscal months ended July 2, 2022.

The revolving credit facility limits or restricts us from, among other things, incurring indebtedness, incurring liens on its respective assets, making

7 unchanged sentences

filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed June 5, 2019.

We were in compliance with all financial covenants under the credit facility at April 2, 2022.

Our interest coverage ratio and leverage ratio were 31.61

to 1 and 0.69 to 1, respectively.

We expect to continue to be in compliance with these covenants based on current projections.

We were in compliance with all financial covenants under the credit facility at July 2, 2022.

Our interest coverage ratio and leverage ratio were 32.03 to 1 and 0.67 to 1, respectively.

We expect to continue to be in compliance with these covenants based

on current projections.

If we are not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and any amounts then

15 unchanged sentences

require additional borrowing under our credit facility or may otherwise require us to incur additional debt.

No principal payments on our debt are due before 2025 and our revolving credit facility expires in June 2024.

No principal payments on our debt are due before our revolving credit facility expires in June 2024.

The convertible senior notes due 2025 are not currently convertible.

37 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis