VISHAY INTERTECHNOLOGY INC 10-Q

Item 1. Financial Statements VISHAY INTERTECHNOLOGY, INC. Consolidated Condensed Balance Sheets (In thousands) July 2, 2022 December 31, 2021 (Unaudited) Assets Current assets: Cash and cash equivalents $ 765,593 $ 774,108 Short-term investments 81,112 146,743 Accounts receivable, net 429,778 396,458 Inventories: Finished goods 172,796 147,293 Work in process 264,123 226,496 Raw materials 196,929 162,711 Total inventories 633,848 536,500 Prepaid expenses and other current assets 160,089 156,689 Total current assets 2,070,420 2,010,498 Property and equipment, at cost: Land 73,047 74,646 Buildings and improvements 629,015 639,879 Machinery and equipment 2,750,175 2,758,262 Construction in progress 147,345 145,828 Allowance for depreciation ( 2,629,014 ) ( 2,639,136 ) Property and equipment, net 970,568 979,479 Right of use assets 111,881 117,635 Deferred income taxes 89,181 95,037 Goodwill 164,295 165,269 Other intangible assets, net 62,698 67,714 Other assets 94,550 107,625 Total assets $ 3,563,593 $ 3,543,257 Continues on following page. 4 VISHAY INTERTECHNOLOGY, INC. Consolidated Condensed Balance Sheets (continued) (In thousands) July 2, 2022 December 31, 2021 (Unaudited) Liabilities and equity Current liabilities: Trade accounts payable $ 243,496 $ 254,049 Payroll and related expenses 160,415 162,694 Lease liabilities 22,734 23,392 Other accrued expenses 214,865 218,089 Income taxes 62,592 35,443 Total current liabilities 704,102 693,667 Long-term debt less current portion 463,302 455,666 U.S. transition tax payable 83,010 110,681 Deferred income taxes 49,542 69,003 Long-term lease liabilities 92,208 99,987 Other liabilities 88,554 95,861 Accrued pension and other postretirement costs 242,464 271,672 Total liabilities 1,723,182 1,796,537 Equity: Vishay stockholders' equity Common stock 13,291 13,271 Class B convertible common stock 1,210 1,210 Capital in excess of par value 1,350,620 1,347,830 Retained earnings 588,803 401,694 Treasury stock (at cost) ( 36,161 ) - Accumulated other comprehensive income (loss) ( 80,344 ) ( 20,252 ) Total Vishay stockholders' equity 1,837,419 1,743,753 Noncontrolling interests 2,992 2,967 Total equity 1,840,411 1,746,720 Total liabilities and equity $ 3,563,593 $ 3,543,257 See accompanying notes. 5 VISHAY INTERTECHNOLOGY, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Fiscal quarters ended July 2, 2022 July 3, 2021 Net revenues $ 863,512 $ 819,120 Costs of products sold 602,289 589,848 Gross profit 261,223 229,272 Selling, general, and administrative expenses 110,400 103,900 Operating income 150,823 125,372 Other income (expense): Interest expense ( 4,307 ) ( 4,443 ) Other 1,380 ( 3,749 ) Total other income (expense) ( 2,927 ) ( 8,192 ) Income before taxes 147,896 117,180 Income tax expense 35,127 23,799 Net earnings 112,769 93,381 Less: net earnings attributable to noncontrolling interests 381 189 Net earnings attributable to Vishay stockholders $ 112,388 $ 93,192 Basic earnings per share attributable to Vishay stockholders $ 0.78 $ 0.64 Diluted earnings per share attributable to Vishay stockholders $ 0.78 $ 0.64 Weighted average shares outstanding - basic 143,996 145,017 Weighted average shares outstanding - diluted 144,397 145,445 Cash dividends per share $ 0.100 $ 0.095 See accompanying notes. 6 VISHAY INTERTECHNOLOGY, INC. Consolidated Statements of Comprehensive Income (Unaudited - In thousands) Fiscal quarters ended July 2, 2022 July 3, 2021 Net earnings $ 112,769 $ 93,381 Other comprehensive income (loss), net of tax Pension and other post-retirement actuarial items 1,365 2,020 Foreign currency translation adjustment ( 49,532 ) 9,285 Other comprehensive income (loss) ( 48,167 ) 11,305 Comprehensive income 64,602 104,686 Less: comprehensive income attributable to noncontrolling interests 381 189 Comprehensive income attributable to Vishay stockholders $ 64,221 $ 104,497 See accompanying notes. 7 VISHAY INTERTECHNOLOGY, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Six fiscal months ended July 2, 2022 July 3, 2021 Net revenues $ 1,717,305 $ 1,583,752 Costs of products sold 1,196,974 1,151,531 Gross profit 520,331 432,221 Selling, general, and administrative expenses 223,255 209,585 Operating income 297,076 222,636 Other income (expense): Interest expense ( 8,529 ) ( 8,819 ) Other ( 4,371 ) ( 9,480 ) Total other income (expense) ( 12,900 ) ( 18,299 ) Income before taxes 284,176 204,337 Income tax expense 67,457 39,313 Net earnings 216,719 165,024 Less: net earnings attributable to noncontrolling interests 758 397 Net earnings attributable to Vishay stockholders $ 215,961 $ 164,627 Basic earnings per share attributable to Vishay stockholders $ 1.49 $ 1.14 Diluted earnings per share attributable to Vishay stockholders $ 1.49 $ 1.13 Weighted average shares outstanding - basic 144,527 144,992 Weighted average shares outstanding - diluted 144,978 145,453 Cash dividends per share $ 0.20 $ 0.19 See accompanying notes. 8 VISHAY INTERTECHNOLOGY, INC. Consolidated Statements of Comprehensive Income (Unaudited - In thousands) Six fiscal months ended July 2, 2022 July 3, 2021 Net earnings $ 216,719 $ 165,024 Other comprehensive income (loss), net of tax Pension and other post-retirement actuarial items 2,924 3,884 Foreign currency translation adjustment ( 63,016 ) ( 17,664 ) Other comprehensive income (loss) ( 60,092 ) ( 13,780 ) Comprehensive income 156,627 151,244 Less: comprehensive income attributable to noncontrolling interests 758 397 Comprehensive income attributable to Vishay stockholders $ 155,869 $ 150,847 See accompanying notes. 9 VISHAY INTERTECHNOLOGY, INC. Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) Six fiscal months ended July 2, 2022 July 3, 2021 Operating activities Net earnings $ 216,719 $ 165,024 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 80,967 83,879 (Gain) loss on disposal of property and equipment ( 293 ) ( 207 ) Inventory write-offs for obsolescence 10,777 9,550 Deferred income taxes 5,922 519 Other 6,733 5,758 Change in U.S. transition tax liability ( 14,757 ) ( 14,757 ) Change in repatriation tax liability ( 25,201 ) - Net change in operating assets and liabilities ( 172,555 ) ( 74,983 ) Net cash provided by operating activities 108,312 174,783 Investing activities Capital expenditures ( 95,700 ) ( 60,710 ) Proceeds from sale of property and equipment 377 234 Purchase of short-term investments ( 7,769 ) ( 27,488 ) Maturity of short-term investments 66,763 53,679 Other investing activities ( 199 ) 347 Net cash used in investing activities ( 36,528 ) ( 33,938 ) Financing activities Repurchase of convertible debt instruments - ( 300 ) Net proceeds on revolving credit lines 6,000 - Dividends paid to common stockholders ( 26,389 ) ( 25,216 ) Dividends paid to Class B common stockholders ( 2,419 ) ( 2,298 ) Repurchase of common stock held in treasury ( 36,161 ) - Distributions to noncontrolling interests ( 733 ) ( 800 ) Cash withholding taxes paid when shares withheld for vested equity awards ( 2,123 ) ( 1,963 ) Net cash used in financing activities ( 61,825 ) ( 30,577 ) Effect of exchange rate changes on cash and cash equivalents ( 18,474 ) ( 3,383 ) Net increase (decrease) in cash and cash equivalents ( 8,515 ) 106,885 Cash and cash equivalents at beginning of period 774,108 619,874 Cash and cash equivalents at end of period $ 765,593 $ 726,759 See accompanying notes. 10 VISHAY INTERTECHNOLOGY, INC. Consolidated Condensed Statements of Equity (Unaudited - In thousands, except share and per share amounts) Common Stock Class B Convertible Common Stock Capital in Excess of Par Value Retained Earnings (Accumulated Deficit) Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Vishay Stockholders' Equity Noncontrolling Interests Total Equity 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 - - ( 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 Net earnings - - - 93,192 - - 93,192 189 93,381 Other comprehensive income - - - - - 11,305 11,305 - 11,305 Distributions to noncontrolling interests - - - - - - - ( 800 ) ( 800 ) Dividends declared ($ 0.095 per share) - - 20 ( 13,777 ) - - ( 13,757 ) - ( 13,757 ) Stock compensation expense - - 828 - - - 828 - 828 Balance at July 3, 2021 $ 13,271 $ 1,210 $ 1,346,132 $ 296,629 $ - $ ( 221 ) $ 1,657,021 $ 2,397 $ 1,659,418 Balance at December 31, 2021 $ 13,271 $ 1,210 $ 1,347,830 $ 401,694 $ - $ ( 20,252 ) $ 1,743,753 $ 2,967 $ 1,746,720 Net earnings - - - 103,573 - - 103,573 377 103,950 Other comprehensive income (loss) - - - - - ( 11,925 ) ( 11,925 ) - ( 11,925 ) Issuance of stock and related tax withholdings for vested restricted stock units ( 189,731 shares) 19 - ( 2,142 ) - - - ( 2,123 ) - ( 2,123 ) Dividends declared ($ 0.10 per share) - - 22 ( 14,491 ) - - ( 14,469 ) - ( 14,469 ) Stock compensation expense - - 3,842 - - - 3,842 - 3,842 Repurchase of common stock held in treasury ( 513,227 shares) - - - - ( 9,873 ) - ( 9,873 ) - ( 9,873 ) Balance at April 2, 2022 $ 13,290 $ 1,210 $ 1,349,552 $ 490,776 $ ( 9,873 ) $ ( 32,177 ) $ 1,812,778 $ 3,344 $ 1,816,122 Net earnings - - - 112,388 - - 112,388 381 112,769 Other comprehensive income - - - - - ( 48,167 ) ( 48,167 ) - ( 48,167 ) Distributions to noncontrolling interests - - - - - - - ( 733 ) ( 733 ) Issuance of stock and related tax withholdings for vested restricted stock units ( 11,308 shares) 1 - ( 1 ) - - - - - - Dividends declared ($ 0.10 per share) - - 22 ( 14,361 ) - - ( 14,339 ) - ( 14,339 ) Stock compensation expense - - 1,047 - - - 1,047 - 1,047 Repurchase of common stock held in treasury ( 1,400,039 shares) - - - - ( 26,288 ) - ( 26,288 ) - ( 26,288 ) Balance at July 2, 2022 $ 13,291 $ 1,210 $ 1,350,620 $ 588,803 $ ( 36,161 ) $ ( 80,344 ) $ 1,837,419 $ 2,992 $ 1,840,411 See accompanying notes. 11 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 1 – Basis of Presentation The accompanying unaudited consolidated condensed financial statements of Vishay Intertechnology, Inc. (“Vishay” or the “Company”) have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented. The financial statements should be read in conjunction with the consolidated financial statements filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for the fiscal quarter and six fiscal months ended July 2, 2022 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 2022 end on April 2, 2022, July 2, 2022, October 1, 2022, and December 31, 2022, respectively. The four fiscal quarters in 2021 ended on April 3, 2021, July 3, 2021, October 2, 2021, and December 31, 2021, respectively. Reclassifications Certain prior period amounts have been reclassified to conform to the current financial statement presentation. Note 2 – Impact of COVID-19 Pandemic The Company's operations in the People's Republic of China , particularly in Shanghai, were impacted by COVID-19 government mandated shut-downs of our facilities in the second fiscal quarter of 2022. The Company incurred incremental costs separable from normal operations that are directly related to the 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 ($ 6,661 ) and selling, general, and administrative expenses of ($ 546 ) based on employee function on the consolidated condensed statements of operations for the fiscal quarter and six fiscal months ended July 2, 2022. 12 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 3 – 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: July 2, 2022 December 31, 2021 Right of use assets Operating Leases Buildings and improvements $ 107,605 $ 112,951 Machinery and equipment 4,276 4,684 Total $ 111,881 $ 117,635 Current lease liabilities Operating Leases Buildings and improvements $ 20,344 $ 20,851 Machinery and equipment 2,390 2,541 Total $ 22,734 $ 23,392 Long-term lease liabilities Operating Leases Buildings and improvements $ 90,379 $ 97,890 Machinery and equipment 1,829 2,097 Total $ 92,208 $ 99,987 Total lease liabilities $ 114,942 $ 123,379 Lease expense is classified in the statements of operations based on asset use. Total lease cost recognized on the consolidated condensed statements of operations is as follows: Fiscal quarters ended Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Lease expense Operating lease expense $ 6,304 $ 6,248 $ 12,756 $ 12,400 Short-term lease expense 236 428 540 753 Variable lease expense - 66 100 193 Total lease expense $ 6,540 $ 6,742 $ 13,396 $ 13,346 The Company paid $ 12,241 and $ 12,176 for its operating leases in the six fiscal months ended July 2, 2022 and July 3, 2021, 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 8.6 years and the weighted-average discount rate is 5.3 % as of July 2, 2022. The undiscounted future lease payments for the Company's operating lease liabilities are as follows: July 2, 2022 2022 (excluding the six fiscal months ended July 2, 2022) $ 11,879 2023 22,412 2024 20,002 2025 17,247 2026 15,522 Thereafter 57,740 The undiscounted future lease payments presented in the table above include payments through the term of the lease, which may include periods beyond the noncancellable term. The difference between the total payments above and the lease liability balance is due to the discount rate used to calculate lease liabilities. 13 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 4 – 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 July 2, 2022 and July 3, 2021 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 repatriated $ 81,243 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. The Company paid withholding taxes, foreign taxes, and Israeli clawback taxes of $ 25,201 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 $ 5,102 on a net basis, primarily due to payments and currency translation adjustments, partially offset by accruals for current year tax positions and interest. Note 5 – Long-Term Debt Long-term debt consists of the following: July 2, 2022 December 31, 2021 Credit facility $ 6,000 $ - Convertible senior notes, due 2025 465,344 465,344 Deferred financing costs ( 8,042 ) ( 9,678 ) 463,302 455,666 Less current portion - - $ 463,302 $ 455,666 The following table summarizes some key facts and terms regarding the outstanding convertible senior notes due 2025 as of July 2, 2022: Convertible Senior Notes Due 2025 Issuance date June 12, 2018 Maturity date June 15, 2025 Principal amount as of July 2, 2022 $ 465,344 Cash coupon rate (per annum) 2.25 % Nonconvertible debt borrowing rate at issuance (per annum) 5.50 % Conversion rate effective June 16, 2022 (per $1 principal amount) 32.0005 Effective conversion price effective June 16, 2022 (per share) $ 31.25 130% of the current effective conversion price (per share) $ 40.63 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. 14 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 6 - Stockholders' Equity On February 7, 2022, the Company's Board of Directors adopted a Stockholder Return Policy that will remain in effect until such time as the Board votes to amend or rescind the policy. The Stockholder Return Policy calls for the Company to return a prescribed amount of cash flows on an annual basis. The Company intends to return such amounts directly, in the form of dividends, or indirectly, in the form of stock repurchases. The following table summarizes activity pursuant to this policy: Fiscal quarter ended Six fiscal months ended July 2, 2022 July 2, 2022 Dividends paid to stockholders $ 14,339 $ 28,808 Stock repurchases 26,288 36,161 Total $ 40,627 $ 64,969 The repurchased shares are being held as treasury stock. The Company records treasury stock at cost, inclusive of fees, commissions and other expenses, when outstanding common shares are repurchased. As of December 31, 2021, no shares of common stock were held as treasury stock. As of July 2, 2022, 1,913,266 shares of common stock are being held as treasury stock. Note 7 – Revenue Recognition Sales returns and allowances accrual activity is shown below: Fiscal quarters ended Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Beginning balance $ 39,161 $ 34,449 $ 39,759 $ 39,629 Sales allowances 19,040 22,043 46,417 45,839 Credits issued ( 16,569 ) ( 15,350 ) ( 44,295 ) ( 43,796 ) Foreign currency ( 857 ) 120 ( 1,106 ) ( 410 ) Ending balance $ 40,775 $ 41,262 $ 40,775 $ 41,262 Note 8 – Accumulated Other Comprehensive Income (Loss) The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each component are as follows: Pension and other post- retirement actuarial items Currency translation adjustment Total Balance at January 1, 2022 $ ( 58,908 ) $ 38,656 $ ( 20,252 ) Other comprehensive income (loss) before reclassifications - ( 63,016 ) $ ( 63,016 ) Tax effect - - $ - Other comprehensive income before reclassifications, net of tax - ( 63,016 ) $ ( 63,016 ) Amounts reclassified out of AOCI 4,269 - $ 4,269 Tax effect ( 1,345 ) - $ ( 1,345 ) Amounts reclassified out of AOCI, net of tax 2,924 - $ 2,924 Net other comprehensive income (loss) $ 2,924 $ ( 63,016 ) $ ( 60,092 ) Balance at July 2, 2022 $ ( 55,984 ) $ ( 24,360 ) $ ( 80,344 ) Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost. See Note 9 for further information. 15 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 9 – Pensions and Other Postretirement Benefits The Company maintains various retirement benefit plans. The service cost component of net periodic pension cost is classified in costs of products sold or selling, general, and administrative expenses on the consolidated condensed statements of operations based on the respective employee's function. The other components of net periodic pension cost are classified as other expense on the consolidated condensed statements of operations. Defined Benefit Pension Plans The following table shows the components of the net periodic pension cost for the second fiscal quarters of 2022 and 2021 for the Company’s defined benefit pension plans: Fiscal quarter ended July 2, 2022 Fiscal quarter ended July 3, 2021 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans Net service cost $ - $ 1,068 $ - $ 1,191 Interest cost 281 813 254 754 Expected return on plan assets - ( 440 ) - ( 419 ) Amortization of prior service cost 36 53 36 50 Amortization of losses 426 1,205 446 1,887 Curtailment and settlement losses - 265 - 202 Net periodic benefit cost $ 743 $ 2,964 $ 736 $ 3,665 The following table shows the components of the net periodic pension cost for the six fiscal months ended July 2, 2022 and July 3, 2021 for the Company’s defined benefit pension plans: Six fiscal months ended July 2, 2022 Six fiscal months ended July 3, 2021 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans Net service cost $ - $ 2,185 $ - $ 2,381 Interest cost 561 1,665 508 1,508 Expected return on plan assets - ( 900 ) - ( 836 ) Amortization of prior service cost 72 109 72 101 Amortization of losses 853 2,476 893 3,771 Curtailment and settlement losses - 544 - 401 Net periodic benefit cost $ 1,486 $ 6,079 $ 1,473 $ 7,326 16 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Other Postretirement Benefits The following table shows the components of the net periodic benefit cost for the second fiscal quarters of 2022 and 2021 for the Company’s other postretirement benefit plans: Fiscal quarter ended July 2, 2022 Fiscal quarter ended July 3, 2021 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans Service cost $ 9 $ 60 $ 26 $ 70 Interest cost 44 14 41 11 Amortization of losses 85 21 13 30 Net periodic benefit cost $ 138 $ 95 $ 80 $ 111 The following table shows the components of the net periodic pension cost for the six fiscal months ended July 2, 2022 and July 3, 2021 for the Company’s other postretirement benefit plans: Six fiscal months ended July 2, 2022 Six fiscal months ended July 3, 2021 U.S. Plans Non-U.S. Plans U.S. Plans Non-U.S. Plans Service cost $ 19 $ 123 $ 51 $ 141 Interest cost 89 29 82 22 Amortization of losses 171 44 26 59 Net periodic benefit cost $ 279 $ 196 $ 159 $ 222 17 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 10 – Stock-Based Compensation The following table summarizes stock-based compensation expense recognized: Fiscal quarters ended Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Restricted stock units $ 1,047 $ 828 $ 4,667 4,739 Phantom stock units - - 222 209 Total $ 1,047 $ 828 $ 4,889 4,948 The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at July 2, 2022 (amortization periods in years) : Unrecognized Compensation Cost Weighted Average Remaining Amortization Periods Restricted stock units $ 4,896 0.9 Phantom stock units - n/a Total $ 4,896 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. 18 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Restricted Stock Units RSU activity under the Company's 2007 Stock Incentive Program (the "2007 Program") as of July 2, 2022 and changes during the six 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, 2022 877 $ 20.08 Granted 336 19.13 Vested* ( 306 ) 20.04 Cancelled or forfeited ( 13 ) 20.50 Outstanding at July 2, 2022 894 $ 19.73 Expected to vest at July 2, 2022 894 * 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, 2023 152 - 152 January 1, 2024 165 - 165 January 1, 2025 168 - 168 Phantom Stock Units Phantom stock unit activity under the 2007 Program as of July 2, 2022 and changes during the six 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, 2022 212 Granted 10 $ 22.20 Dividend equivalents issued 2 Outstanding at July 2, 2022 224 19 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 11 – Segment Information The following tables set forth business segment information: MOSFETs Diodes Optoelectronic Components Resistors Inductors Capacitors Corporate / Other* Total Fiscal quarter ended July 2, 2022 : Net revenues $ 158,395 $ 192,083 $ 77,936 $ 213,176 $ 89,608 $ 132,314 $ - $ 863,512 Segment Operating Income $ 44,602 $ 48,513 $ 22,395 $ 63,650 $ 26,914 $ 27,620 $ ( 6,661 ) $ 227,033 Fiscal quarter ended July 3, 2021 : Net revenues $ 167,937 $ 174,815 $ 75,795 $ 194,722 $ 85,539 $ 120,312 $ - $ 819,120 Segment Operating Income $ 37,510 $ 36,120 $ 20,152 $ 51,365 $ 26,244 $ 23,686 $ - $ 195,077 Six fiscal months ended July 2, 2022 : Net revenues $ 331,069 $ 374,417 $ 158,952 $ 420,208 $ 172,385 $ 260,274 $ - $ 1,717,305 Segment Operating Income $ 93,126 $ 88,939 $ 50,554 $ 121,793 $ 49,113 $ 55,020 $ ( 6,661 ) $ 451,884 Six fiscal months ended July 3, 2021 : Net revenues $ 321,160 $ 331,993 $ 153,566 $ 381,324 $ 168,997 $ 226,712 $ - $ 1,583,752 Segment Operating Income $ 64,717 $ 64,941 $ 41,362 $ 98,741 $ 51,534 $ 42,549 $ - $ 363,844 * 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 statements of operations. Fiscal quarters ended Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Reconciliation: Segment Operating Income $ 227,033 $ 195,077 $ 451,884 $ 363,844 Impact of the COVID-19 Pandemic on Selling, General, and Administrative Expenses ( 546 ) - ( 546 ) - Unallocated Selling, General, and Administrative Expenses ( 75,664 ) ( 69,705 ) ( 154,262 ) ( 141,208 ) Consolidated Operating Income $ 150,823 $ 125,372 $ 297,076 $ 222,636 Unallocated Other Income (Expense) ( 2,927 ) ( 8,192 ) ( 12,900 ) ( 18,299 ) Consolidated Income Before Taxes $ 147,896 $ 117,180 $ 284,176 $ 204,337 20 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 Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Distributors $ 515,714 $ 492,809 $ 1,013,583 $ 916,934 OEMs 288,695 277,418 586,124 572,055 EMS companies 59,103 48,893 117,598 94,763 Total Revenue $ 863,512 $ 819,120 $ 1,717,305 $ 1,583,752 Net revenues were attributable to customers in the following regions: Fiscal quarters ended Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Asia $ 344,770 $ 347,343 $ 688,782 $ 669,803 Europe 275,965 268,828 565,949 537,151 Americas 242,777 202,949 462,574 376,798 Total Revenue $ 863,512 $ 819,120 $ 1,717,305 $ 1,583,752 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 Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Industrial $ 350,955 $ 322,133 $ 688,324 $ 592,934 Automotive 253,672 247,029 513,173 503,002 Telecommunications 28,883 22,956 59,896 47,858 Computing 57,035 64,632 124,966 124,531 Consumer Products 43,147 43,609 81,855 84,404 Power Supplies 41,144 42,045 81,426 77,291 Military and Aerospace 55,703 43,173 102,201 84,711 Medical 32,973 33,543 65,464 69,021 Total revenue $ 863,512 $ 819,120 $ 1,717,305 $ 1,583,752 21 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 12 – 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 Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Numerator: Net earnings attributable to Vishay stockholders $ 112,388 $ 93,192 $ 215,961 $ 164,627 Denominator: Denominator for basic earnings per share: Weighted average shares 143,773 144,808 144,305 144,784 Outstanding phantom stock units 223 209 222 208 Adjusted weighted average shares 143,996 145,017 144,527 144,992 Effect of dilutive securities: Convertible debt instruments - - - 5 Restricted stock units 401 428 451 456 Dilutive potential common shares 401 428 451 461 Denominator for diluted earnings per share: Adjusted weighted average shares - diluted 144,397 145,445 144,978 145,453 Basic earnings per share attributable to Vishay stockholders $ 0.78 $ 0.64 $ 1.49 $ 1.14 Diluted earnings per share attributable to Vishay stockholders $ 0.78 $ 0.64 $ 1.49 $ 1.13 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 Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 Restricted stock units 333 317 333 317 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. 22 NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 13 – Fair Value Measurements 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 July 2, 2022 Assets: Assets held in rabbi trusts $ 48,144 $ 25,369 $ 22,775 $ - Available for sale securities $ 3,673 3,673 - - Precious metals $ 4,421 4,421 - - $ 56,238 $ 33,463 $ 22,775 $ - December 31, 2021 Assets: Assets held in rabbi trusts $ 59,687 $ 32,713 26,974 $ - Available for sale securities $ 4,455 4,455 - - $ 64,142 $ 37,168 $ 26,974 $ - There have been no changes in the classification of any financial instruments within the fair value hierarchy in the periods presented. 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. 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. From time to time, the Company purchases precious metals bullion in excess of its immediate manufacturing needs to mitigate the risk of supply shortages or volatile price fluctuations. The metals are valued based on quoted market prices on the last business day of the period. The fair value measurement of the metals are considered a Level 1 measurement within the fair value hierarchy. The Company has entered 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 Company had no outstanding forward contracts as of July 2, 2022. The notional amount of the forward contracts was $ 100,000 as of December 31, 2021. The forward contracts were short-term in nature and were renewed at the Company's discretion until the intercompany loans were repaid. We did not designate the forward contracts as hedges for accounting purposes, and as such the change in the fair value of the contracts would be recognized in the consolidated condensed statements 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 was considered a Level 2 measurement within the fair value hierarchy. The value of the forward contracts was immaterial as of December 31, 2021. 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 July 2, 2022 and December 31, 2021 is approximately $ 446,100 and $ 485,500 , respectively, compared to its carrying value, excluding the deferred financing costs, of $ 471,344 and $ 465,344 , 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 July 2, 2022 and December 31, 2021, 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 July 2, 2022 and December 31, 2021, 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 and accounts payable. The carrying amounts for these financial instruments reported in the consolidated condensed balance sheets approximate their fair values. 23