What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-10 compared with 2022-11-02 · 412 added, 480 removed, 319 unchanged (74% of the section changed)

13 unchanged sentences

We are focused on enhancing stockholder value by growing our business and improving earnings per share.

Since 1985, we have pursued a business strategy of

growth through focused research and development and acquisitions.

We plan to continue to grow our business through intensified internal growth supplemented by opportunistic acquisitions, while at the same time maintaining a prudent capital

To foster intensified internal growth, we have increased our worldwide R&D and engineering technical staff;

we are increasing our technical field sales force in Asia to increase our market access to the industrial segment and increase

the design-in of our products in local markets;

and we are directing increased funding and focus on developing products to capitalize on the connectivity, mobility, and sustainability growth drivers of our business.

We are also investing in

additional capital expenditures to expand key product lines.

Over the next few years, we expect to experience higher growth rates than over the last decade.

This expectation is based upon accelerated electrification, such as factory automation,

electrical vehicles, and 5G infrastructure.

In addition to enhancing stockholder value through growing our business, on February 7, 2022, our Board of Directors adopted a Stockholder Return Policy,

which calls for us to return at least 70% of free cash flow, net of scheduled principal payments of long-term debt, on an annual basis.

Since 1985, we have pursued a business strategy

of growth through focused research and development and acquisitions.

We plan to continue to grow our business through intensified internal growth supplemented by opportunistic acquisitions, while maintaining a prudent capital structure.

growth and optimize stockholder value, we plan to capitalize on the mega trends of electrification, data storage, and wireless communications by developing go-to-market strategies and investing in and expanding the thirty key product lines for

growth that we have identified, increasing our capacity internally by investing approximately $385 million in 2023 and approximately $1.2 billion over the next three years primarily for capital expansion projects outside of China and externally by

outsourcing production of commodity products to subcontractors, enhancing channel management, investing in internal resources by adding customer-facing engineers and filling gaps in technology and market coverage, promoting the full breadth of our

portfolio through solution selling, and instituting a Think Customer First organizational culture.

In addition to enhancing stockholder value through growing our business, in 2022, our Board of Directors adopted a Stockholder Return Policy, which calls

for us to return at least 70% of free cash flow, net of scheduled principal payments of long-term debt, on an annual basis.

See further discussion in “Stockholder Return Policy” below.

On May 8, 2023, we amended and restated our $750 million revolving credit agreement, which replaced our credit agreement that was scheduled to mature

in June 2024.

The amendment and restatement extends the maturity date of the revolving credit agreement until May 8, 2028, replaces the existing total leverage ratio used for financial covenant compliance measurement with a net leverage ratio,

and replaces the LIBOR-based interest rate and related LIBOR-based mechanics applicable to U.S.

dollar borrowings under the revolving credit agreement with an interest rate based on the Secured Overnight Financing Rate ("SOFR") (including a

customary spread adjustment) and related SOFR-based mechanics.

The maturity date of the amended and restated facility will accelerate if within ninety-one days prior to the maturity of our convertible senior notes due 2025, the outstanding

principal amount of such notes exceeds a defined liquidity measure as set forth in the Amended and Restated Credit Facility.

Other terms and conditions are substantially unchanged.

Our business and operating results have been and will continue to be impacted

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Our revenues are dependent on end markets that are impacted by consumer and industrial demand, and our operating results can be adversely affected by reduced demand in those global markets.

The worldwide economy

and, specifically, our business were and continue to be impacted by the COVID-19 pandemic .

While the wide-spread economic impact of the COVID-19 pandemic on Vishay

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

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 statement of operations for the nine fiscal months ended October 1, 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.

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.

We utilize several financial metrics, including net revenues, gross profit margin, operating margin, segment operating margin, end-of-period backlog,

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

Despite ongoing global challenges and further accelerating inflation, net revenues and margins have increased versus the prior fiscal quarter and the prior year

We continue to maximize manufacturing output at all facilities and increase critical manufacturing capacities.

Partially due to the resumption of sales in the third fiscal quarter following government mandated shut-downs, the book-to-bill

ratios and backlogs have decreased.

Average selling prices remain stable after broad increases in prior periods.

Net revenues for the fiscal quarter ended October 1, 2022

The key financial metrics remained strong in the first fiscal quarter of 2023, but were negatively impacted by a distributor inventory correction that resulted in

lower orders.

We have experienced increased input costs.

A portion of these increased costs are absorbed in inventory, which positively impacts gross profit when inventory is built, but will negatively impact gross profit when the inventory is

Average selling prices increased to offset higher costs.

Net revenues for the fiscal quarter ended April 1, 2023

were $871.0 million, compared to $855.3

million and $813.7 million for the fiscal quarters ended July 2, 2022 and October 2, 2021, respectively.

The net earnings attributable

to Vishay stockholders for the fiscal quarter ended October 1, 2022 were $140.1 million, or $0.98 per diluted share, compared to $112.4 million, or $0.78 per diluted

share for the fiscal quarter ended July 2, 2022, and $96.8 million, or $0.67 per diluted share for the fiscal quarter ended October 2, 2021.

Net revenues for the nine fiscal months

ended October 1, 2022 were $2,642.1

million, compared to $2,397.4 million for the nine fiscal months ended October 2, 2021.

The net earnings attributable to Vishay stockholders for

the nine fiscal months ended October 1, 2022 were $356.0 million, or $2.46 per diluted share, compared to $261.4 million, or $1.80 per diluted share for the nine fiscal months ended October 2, 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.

million and $853.8 million for the fiscal quarters ended December 31, 2022 and April 2, 2022, respectively.

The net earnings

attributable to Vishay stockholders for the fiscal quarter ended April 1, 2023 were $111.8 million, or $0.79 per diluted share, compared to $72.8 million, or $0.51 per diluted

share for the fiscal quarter ended December 31, 2022, and $103.6 million, or $0.71 per diluted share for the fiscal quarter ended April 2, 2022.

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.

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 quarter ended December 31, 2022 includes items affecting comparability.

The items affecting comparability are ( in thousands,

1 unchanged sentence

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

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:

Effects of changes in uncertain tax positions

Effects of changes in valuation allowances

Changes in tax laws and regulations

Tax effects of pre-tax items above

Effect of change in indefinite reversal assertion

Effect of changes in valuation allowances

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 costs 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.

The following table reconciles gross profit by segment to consolidated gross profit ( in thousands ):

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

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

item on the face of our consolidated condensed statement of cash flows prepared in accordance with GAAP and the quarterly amounts are derived from the year-to-date GAAP statements as of the beginning and end of the respective quarter.

results are as follows ( in thousands ) :

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Net cash provided by continuing operating activities

1 unchanged sentence

Capital expenditures

Our results for the fiscal quarters ended October 1, 2022,

July 2, 2022, and October 2, 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 .

Despite the distributor inventory correction that began in the fourth fiscal quarter of 2022 and continued in 2023, our results for the fiscal quarters ended

April 1, 2023, December 31, 2022,

and April 2, 2022 represent the continuation of the favorable business conditions that we have been experiencing.

Stockholder Return Policy

On February 7, 2022, our Board of Directors adopted a Stockholder Return Policy, which calls for us to return at least 70% of free cash flow, net of

scheduled principal payments of long-term debt, on an annual basis.

We are focused on enhancing stockholder value by growing our business and improving earnings per share.

Over the next few years, we expect to

experience higher internal growth rates than over the last decade.

This expectation is based upon accelerated electrification, such as factory automation, electrical vehicles, and 5G infrastructures.

To meet this expected increase in demand and

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

The increased capital expenditures will be primarily used to increase manufacturing capacity for the thirty

key product lines for growth that we identified.

The most significant expansion projects include building a 12-inch wafer fab in Itzehoe, Germany adjacent to our existing 8-inch fab, expanding our Inductors manufacturing, and expanding our GaAs

fab in Heilbronn, Germany.

In 2022, our Board of Directors adopted a Stockholder Return Policy, which calls for us to return at least 70% of free cash flow, net of scheduled

principal payments of long-term debt, on an annual basis.

We intend to return such amounts to stockholders directly, in the form of dividends, or indirectly, in the form of stock repurchases.

The following table summarizes activity pursuant to this policy (in thousands):

Fiscal quarter ended

Nine fiscal months ended

October 1, 2022

Fiscal quarters ended

April 1, 2023

April 2, 2022

Dividends paid to stockholders

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

foreign earnings in Israel are no longer permanently reinvested.

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

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.

However, because most

of our operating cash flow is typically generated by our non-U.S.

subsidiaries, we may in the future need to change our permanent reinvestment assertion on current earnings of certain subsidiaries, which would have the effect of increasing the

During the fourth quarters of 2022 and 2021, we determined that substantially all unremitted foreign earnings in Israel and Germany, respectively,

are no longer indefinitely reinvested.

The changes in these indefinite reinvestment assertions will provide greater access to our worldwide cash balances to fund our growth plan and our Stockholder Return Policy, but also increased our

effective tax rate.

Substantially all of these additional taxes would be withholding and foreign taxes on cash remitted to the U.S., as such dividends are generally not subject to U.S.

federal income tax.

The structure of our newly adopted Stockholder Return Policy enables us to allocate capital responsibly among our business, our lenders, and our

stockholders.

We will continue to invest in growth initiatives including key product line expansions, targeted R&D, and synergistic acquisitions.

The structure of our Stockholder Return Policy enables us to allocate capital responsibly among our business, our lenders, and our stockholders.

will continue to invest in growth initiatives including key product line expansions, targeted R&D, and synergistic acquisitions.

We have paid dividends each quarter since the first quarter of 2014, and t he

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or declare any dividends, and the policy may be terminated or suspended at any time at our discretion, in accordance with applicable laws and regulations.

2023 Long-Term Incentive Plan

To better align our compensation programs with stockholders' interests, our Board has approved, and is

proposing that its stockholders approve, the 2023 Long-Term Incentive Plan (the "2023 Plan") at our 2023 Annual Meeting of Stockholders scheduled to be held May 23, 2023.

If approved by stockholders, the 2023 Plan will replace the Vishay

Intertechnology, Inc.

2007 Stock Incentive Program (the “2007 Program”), which expires on May 20, 2024.

The 2023 Plan allows the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units, other

stock-based awards, phantom stock units, and other cash-based awards to employees, directors, consultants, and other service providers of the Company and its affiliates.

If approved, the 2023 Plan will, among other changes, increase the

total number of shares available for issuance to our employees and other service providers by up to 6,000,000 shares (subject to certain adjustments described in the 2023 Plan).

If approved, we plan to grant an aggregate of approximately

800,000 time-vested restricted stock units to approximately 1,000 employees.

Accordingly, stock compensation expense will increase in future periods.

Financial Metrics

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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 third fiscal quarter of 2021 through

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

3rd Quarter 2021

4th Quarter 2021

the first fiscal quarter of 2023 (dollars in thousands) :

1st Quarter 2022

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3rd Quarter 2022

4th Quarter 2022

1st Quarter 2023

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 3 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 3 to our consolidated condensed financial statements).

(1) Gross margin for the second fiscal quarter of 2022 includes $6.7 million of expenses directly related to the COVID-19 pandemic.

(2) Operating margin for the second fiscal quarter of 2022 includes $7.2 million of expenses directly related to the COVID-19 pandemic.

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 third 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

The increased volume is partially due to operations and sales resuming following the two-month government mandated COVID-19 shut-down of our manufacturing facilities in Shanghai, People's Republic of China that significantly impacted our

semiconductor segments in the second fiscal quarter of 2022.

The book-to-bill ratio and backlog were negatively impacted by the catch-up in sales during the third fiscal quarter.

We continue to increase manufacturing capacity for critical product

Average selling prices were stable in the third fiscal quarter following broad price increases that we implemented in prior periods across the product portfolio to offset increased materials and transportation costs and accelerating general

Gross profit margin increased versus prior fiscal quarter and the second fiscal quarter of 2021.

Revenues increased slightly versus the prior fiscal quarter primarily due to higher average selling prices and positive foreign currency impacts.

Revenues increased slightly versus the first fiscal quarter of 2022

primarily due to higher average selling prices.

The book-to-bill ratio and backlog were negatively impacted by a distributor inventory correction that continued in the first fiscal quarter of 2023.

We continue to increase manufacturing capacity

for critical product lines.

Average selling prices increased in the first fiscal quarter to offset general inflation.

Gross profit margin increased versus the prior fiscal quarter and the first fiscal quarter of 2022.

The increase versus the prior fiscal quarter is

primarily due to higher volume.

The increase versus the third fiscal quarter of 2021 is primarily due to higher average selling prices and higher volume.

The book-to-bill ratio in the third fiscal quarter of 2022 decreased to 0.88 versus 1.07 in the second fiscal quarter of 2022.

The book-to-bill ratio

was negatively impacted by the catch-up in semiconductor sales during the third fiscal quarter.

The book-to-bill ratios in the third fiscal quarter of 2022 for distributors and original equipment manufacturers ("OEM") were 0.77 and 1.03,

respectively, versus ratios of 1.05 and 1.11, respectively, during the second fiscal quarter of 2022.

For the fourth fiscal quarter of 2022, we anticipate revenues between $860 million and $900 million at a gross margin of 30.0% plus/minus 50 basis points.

primarily due to higher average selling prices, positive foreign currency impacts, and the absorption of a portion of increased costs in inventory, which positively impacted gross profit in the current period, but will negatively impact gross

profit when the inventory is sold.

The increase versus the first fiscal quarter of 2022 is primarily due to higher average selling prices.

The book-to-bill ratio in the first fiscal quarter of 2023 decreased to 0.84 versus 0.94 in the fourth fiscal quarter of 2022.

The book-to-bill ratio was negatively impacted by a distributor inventory correction

that continued in the first fiscal quarter of 2023.

For the second fiscal quarter of 2023, we anticipate revenues between $860 million and $900 million at a gross margin of 29.0% plus/minus 50 basis points.

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 third fiscal quarter of 2021 through the third fiscal quarter of 2022 (dollars in thousands) :

3rd Quarter 2021

4th Quarter 2021

quarters beginning with the first fiscal quarter of 2022 through the first fiscal quarter of 2023 (dollars in thousands) :

1st Quarter 2022

1 unchanged sentence

3rd Quarter 2022

4th Quarter 2022

1st Quarter 2023

Book-to-bill ratio

17 unchanged sentences

Segment operating margin

Acquisition Activity

As part of its growth strategy, the Company seeks to expand through targeted acquisitions of other manufacturers of electronic components.

These acquisition targets include businesses that have

established positions in major markets, reputations for product quality and reliability, and product lines with which the Company has substantial marketing and technical expertise.

It also includes certain businesses that possess technologies which

the Company expects to further develop and commercialize.

To limit our financial exposure, we have implemented a policy not to pursue acquisitions if our post-acquisition debt would exceed 2.5x our pro forma earnings before interest, taxes,

depreciation, and amortization (“EBITDA”).

For these purposes, we calculate pro forma EBITDA as the adjusted EBITDA of Vishay and the target for Vishay’s four preceding fiscal quarters, with a pro forma adjustment for savings which management

estimates would have been achieved had the target been acquired by Vishay at the beginning of the four fiscal quarter period.

Subsequent Event

On October 28, 2022, we acquired MaxPower Semiconductor, Inc.

("MaxPower"), a San Jose, California-based fabless power semiconductor provider dedicated

to delivering innovative and cost-effective technologies that optimize power management solutions.

MaxPower's proprietary device structures and process techniques provide leading edge silicon and silicon carbide ("SiC") MOSFET products.

product development targets automotive and industrial applications.

We paid cash of $50.0 million, net of cash acquired, at closing.

Related to the transaction, we may also be required to make certain contingent payments

of up to $57.5 million, which would be payable upon the achievement of certain technology milestones and the occurrence of certain non-operating events.

The purchase price for U.S.

GAAP purposes will include the fair value, as of the acquisition

date, of certain future contingent payments.

To the extent contingent payments are deemed compensatory in nature, such payments will be recognized as expense in future periods, and will thus not be included in the U.S.

GAAP purchase price.

There is no assurance that we will be able to identify and acquire additional suitable acquisition candidates at price levels and on terms and conditions we

consider acceptable.

Results of Operations

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Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Cost of products sold

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Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

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

Fiscal quarter ended

October 1, 2022

Nine fiscal months ended

October 1, 2022

Change in net

October 2, 2021

April 1, 2023

Change in net revenues

December 31, 2022

April 2, 2022

Changes in net revenues were attributable to the following:

Prior Quarter

Prior Year Quarter

Change attributable to:

Increase in volume

Change in average selling prices

Change in volume

Increase in average selling prices

Foreign currency effects

We continue to experience good economic conditions while we continue to increase critical manufacturing capacities.

selling prices were stable in the third fiscal quarter following broad price increases implemented across the product portfolio in prior periods.

Net revenues increased significantly versus the prior fiscal quarter and the prior year periods

primarily due to increases in volume and increases in average selling prices versus the prior year periods.

Volume in the third fiscal quarter of 2022 was positively impacted by the resumption of operations and

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

Despite the distributor inventory correction that we are experiencing, the economic environment is good and we continue to increase manufacturing capacities.

We were able to further

increase prices to offset general inflation.

Increased average selling prices contributed to the increase in net revenues versus the prior fiscal quarter and the first fiscal quarter of 2022.

Positive foreign currency impacts also contributed to

the increase versus the prior fiscal quarter.

Gross Profit Margins

Gross profit margins for the fiscal quarter ended October 1, 2022 were 31.3%, versus 30.3% and 27.7%, for the comparable prior quarter and prior year period,

respectively.

Gross profit margins for the nine fiscal months ended October 1, 2022 were 30.7%, versus 27.4% 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, and negative exchange rate impacts.

The gross profit margin increased versus the prior fiscal quarter primarily due to increased volume, partially offset by

inflationary impacts, particularly increased metals and transportation costs and the negative impact of an inventory decrease.

Gross profit margins for the fiscal quarter ended April 1, 2023 were 32.0%, versus 29.1% and 30.3% for the comparable prior fiscal quarter and prior year period, respectively.

Increased average selling prices contributed to the increase in net gross profit margins versus the prior fiscal quarter and the first fiscal quarter of 2022.

We have experienced higher input costs.

A portion of these costs

are absorbed in inventory and will negatively impact gross profit when the inventory is sold.

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

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Gross profit margin

2 unchanged sentences

Fiscal quarter ended

October 1, 2022

Nine fiscal months ended

October 1, 2022

Change in net revenues

April 1, 2023

Change in net revenues

October 2, 2021

December 31, 2022

April 2, 2022

Changes in MOSFETs 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

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

The increases versus the prior

fiscal quarter and prior year quarter are primarily due to increased volume as operations and sales resumed following 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 in the second fiscal quarter of 2022.

Increased average selling prices are the primary factor for the increase versus the prior year-to-date period and also contributed to the increase versus the

prior year quarter.

All regions and sales channels, particularly distribution customers in the Americas region, contributed to the increased revenue.

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

The increase versus the prior fiscal

quarter was primarily due to increased sales volume, partially offset by the negative impact of an inventory decrease following the resumption of operations and sales in Shanghai, People's Republic of China in the third fiscal quarter.

increases versus the prior year periods were primarily due to increased average selling prices, increased sales volume, and 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.

Average selling prices were flat versus the prior fiscal quarter, but increased versus the prior year periods due to the strategic price increases implemented in

prior periods.

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

versus the prior fiscal quarter is primarily due to decreased sales to telecommunications and industrial end market customers and customers in the Americas region, partially offset by increased sales to automotive and consumer products end market

customers and customers in the Asia and Europe regions.

The increase versus the prior year quarter is primarily due to increased sales to automotive, industrial, and consumer product end market customers and customers in the Europe and Americas

regions, partially offset by decreased sales to computing and telecommunications end market customers and customers in the Asia region.

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

The fluctuations are primarily due to sales volume

fluctuations.

Increased average selling prices positively impacted the current year period.

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

The fluctuations

are primarily due to gross profit fluctuations.

Increased segment SG&A expenses as a percentage of sales also impacted both comparison periods.

We continue to implement strategic price increases.

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

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

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.

We 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.

We acquired leading edge silicon and silicon carbide MOSFETs products with our acquisition of MaxPower in the fourth fiscal quarter of 2022.

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

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Gross profit margin

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

October 1, 2022

Nine fiscal months ended

October 1, 2022

Change in net revenues

April 1, 2023

Change in net revenues

October 2, 2021

December 31, 2022

April 2, 2022

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

Prior Quarter

Prior Year Quarter

Change attributable to:

Increase in volume

Change in average selling prices

Decrease in volume

Increase in average selling prices

Foreign currency effects

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

Most end markets and customer

channels contributed to the increases.

The increase versus the prior fiscal quarter is also due to increased volume as operations and sales resumed following extended government mandated COVID-19 shut-downs of our manufacturing facilities in

the People's Republic of China, particularly Shanghai, in the second fiscal quarter.

The increases were negatively impacted by increased inventory at distribution customers in Asia.

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

The decrease versus the prior fiscal

quarter is due to the negative impact of an inventory decrease following the resumption of operations and sales in Shanghai, People's Republic of China in the third fiscal quarter and cost inflation, partially offset by increased sales

The increases versus the prior year periods are primarily due to increased average selling prices, our cost reduction measures, and increases in sales volume, partially offset by significant 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 gross profit fluctuations.

The impact of a weaker euro decreased segment SG&A expenses, particularly versus the prior year periods.

Average selling prices decreased versus the prior fiscal quarter, but remain significantly higher than the prior year periods due to the strategic price

increases implemented across the product portfolio in prior periods.

Optoelectronic Components

Net revenues of the Diodes segment decreased versus the prior fiscal quarter and the prior year quarter.

The decreases are primarily due to decreased

sales to customers in the Americas and Asia regions.

The decrease versus the prior fiscal quarter is also due to decreased sales to industrial and power supplies end market customers.

The decrease versus the prior year quarter is also due to

decreased sales to industrial, telecommunications, and computing end market customers.

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

The increases are primarily due to increased average selling

prices, decreased logistics costs, and our cost reduction measures, partially offset by increased materials, utilities, 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.

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

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

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

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Gross profit margin

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

October 1, 2022

Nine fiscal months ended

October 1, 2022

Change in net revenues

April 1, 2023

Change in net revenues

October 2, 2021

December 31, 2022

April 2, 2022

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

Prior Quarter

Prior Year Quarter

Change attributable to:

Change in volume

Change in average selling prices

Decrease in volume

Increase in average selling prices

Foreign currency effects

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

The decrease versus the prior fiscal quarter is primarily due to decreased sales to customers in the Asia and Europe regions, particularly distributor customers, partially offset by increased sales to customers in the Americas region,

particularly distributor customers.

The increases versus the prior year periods were due to a significant increase in sales to customers in the Americas and Europe regions, partially offset by significant decrease in sales to customers in the

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

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

The increase versus the prior fiscal quarter is primarily

due to the positive impact of an inventory increase.

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

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

Average selling prices decreased versus the prior fiscal quarter, but remain higher than the prior year periods due to the strategic price increases

implemented across the product portfolio in prior periods.

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

The decrease versus the prior fiscal quarter is primarily due to decreased sales to power supplies end market customers and decreased sales to customers in the Americas region, partially

offset by increased sales to telecommunications and industrial end market customers.

The decrease versus the prior year quarter is due to decreased sales to all regions and all end market customers, particularly industrial end market customers.

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 average selling prices and the absorption of a portion of increased input costs in inventory, which positively impacted gross profit in the current period, but will negatively impact gross profit when the

inventory is sold.

The decrease versus the prior year quarter is primarily due to lower sales volume and increased materials and labor costs, partially offset by higher average selling prices.

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

The fluctuations are primarily due to gross profit fluctuations.

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

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

1 unchanged sentence

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Gross profit margin

2 unchanged sentences

Fiscal quarter ended

October 1, 2022

Nine fiscal months ended

October 1, 2022

Change in net revenues

April 1, 2023

Change in net revenues

October 2, 2021

December 31, 2022

April 2, 2022

Changes in Resistors 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 Resistors segment decreased slightly versus the prior fiscal quarter, but increased significantly versus the prior year periods.

The decrease versus the prior fiscal quarter is primarily due to decreased sales to customers in all regions, particularly the Europe region, and military and aerospace, industrial, and distributor customers, which was partially offset by

increased sales to EMS customers.

The increase versus the prior year periods is primarily due to increased sales to customers in all regions, particularly the Americas region, distributor and EMS customers, partially offset by decreased sales to

automotive end market customers.

Increased sales to industrial end market customers also contributed to the increase versus the prior year-to-date period.

The acquisition of Barry Industries also contributed to the increase in net revenues

versus the prior year periods.

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

The slight decrease versus the

prior fiscal quarter is primarily due to wage inflation, negative foreign currency exchange rate impacts, and higher fixed costs, mostly offset by increased average selling prices, lower metal prices, and improved efficiencies.

The increases

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

costs, increased labor costs, and negative foreign currency exchange rate impacts.

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

The fluctuations are primarily due to fluctuations in gross profit.

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

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 industrial, military and aerospace, and automotive end market customers and customers in the Europe region.

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

military and aerospace, industrial, and automotive 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 volume, increased average selling prices, manufacturing efficiencies, positive foreign currency impact, and the absorption of a portion of increased costs in inventory, which positively impacted gross profit in the current period, but

will negatively impact gross profit when the inventory is sold.

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

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.

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

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Gross profit margin

2 unchanged sentences

Fiscal quarter ended

October 1, 2022

Nine fiscal months ended

October 1, 2022

Change in net revenues

April 1, 2023

Change in net revenues

October 2, 2021

Changes in net revenues were attributable to the following:

December 31, 2022

April 2, 2022

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

Prior Quarter

2 unchanged sentences

Change in volume

Change in average selling prices

Increase in average selling prices

Foreign currency effects

Net revenues of the Inductors segment decreased versus the prior fiscal quarter and the prior year quarter, but increased versus the prior year-to-date period.

The decrease versus the prior fiscal quarter is

primarily due to decreased sales to customers in all regions, particularly the Europe region, and decreased sales to distributor customers, partially offset by increased sales to EMS customers.

The decrease versus the prior year quarter is

primarily due to decreased sales to customers in the Asia region and distribution customers, partially offset by increased sales to customers in the Americas and Europe regions and increased sales to EMS customers and industrial end market

The increase versus the prior year-to-date period is primarily due to increased sales to customers in the Americas and Europe regions, 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 distributor and EMS customers, and military and aerospace end market customers, partially offset by decreased sales to customers in the Asia region, decreased sales to distributor

customers, and decreased sales to automotive and industrial end market customers.

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

The decrease versus the prior fiscal quarter is primarily due to lower sales volume, inefficiencies, and increased

material prices, partially offset by lower logistics costs and other cost savings measures.

The decrease versus the prior year quarter is primarily due to increased labor and material costs, inefficiencies, and negative foreign currency exchange

rate impacts, partially offset by increased average selling prices.

The decrease versus the prior year-to-date period is primarily due to increased logistics, labor, and material costs, inefficiencies, and negative foreign currency exchange rate

impacts, partially offset by higher sales volume, increased average selling prices.

and other cost reduction measures.

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

The decreases are primarily due to gross profit decreases.

Average selling prices decreased versus the prior fiscal quarter, but increased versus 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 of the Inductors segment increased significantly 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 end market customers and customers in the Europe and Americas regions, partially offset by decreased sales to customers in the Asia region.

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

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

The decrease versus the prior fiscal quarter is primarily

due to increased labor costs and fixed cost inflation, partially offset by higher sales volume and increased average selling prices.

The decrease versus the prior year quarter is primarily due to lower sales volume, manufacturing inefficiencies, and

increased labor costs, partially offset by increased average selling prices and decreased logistics costs.

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

The decreases are primarily due to decreases in gross profit.

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

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

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Gross profit margin

2 unchanged sentences

Fiscal quarter ended

October 1, 2022

Nine fiscal months ended

October 1, 2022

Change in net revenues

April 1, 2023

Change in net revenues

October 2, 2021

December 31, 2022

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

Change in average selling prices

Foreign currency effects

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

decrease versus the prior fiscal quarter is primarily due to decreased sales to customers in all regions, distributor customers, and industrial end market customers, partially offset by increased sales to automotive end market customers.

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, partially offset by decreased sales to customers in the Europe region.

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, partially offset by decreased

sales to automotive 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 lower sales volume, decreased average selling prices, and increased materials and utilities costs, partially offset by favorable product mix and decreased metals costs.

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, higher fixed 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 decreased versus the prior fiscal quarter, but increased versus the prior year periods.

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

The increase versus the prior fiscal quarter

is primarily due to increased sales to industrial end market customers and customers in the Europe and Asia regions.

The increase versus the prior year quarter is primarily due to increased sales to industrial and aerospace and military end market

customers and customers in the Americas and Europe 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

volume, manufacturing efficiencies, 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 manufacturing

inefficiencies and 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 decreased versus the prior fiscal quarter, but increased versus the prior year quarter.

Selling, General, and Administrative Expenses

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

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

Fiscal quarters ended

Nine fiscal months ended

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

April 1, 2023

December 31, 2022

April 2, 2022

Total SG&A expenses

as a percentage of revenues

The sequential decrease in SG&A expenses is primarily attributable to foreign currency exchange impacts.

SG&A expenses increased versus the prior

year periods due to cost inflation.

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.

Other Income (Expense)

Interest expense for the fiscal quarter ended October 1, 2022 decreased $0.2 million versus the fiscal quarter ended July 2, 2022 and decreased $0.3 million versus the fiscal quarter ended October 2, 2021.

Interest expense for the nine

fiscal months ended October 1, 2022 decreased by $0.6 million versus the nine fiscal months ended October 2, 2021.

Interest expense for the fiscal quarter ended April 1, 2023

increased $0.6 million versus the fiscal quarter ended December 31, 2022 and increased by $0.9 million versus the fiscal quarter ended

April 2, 2022.

The increases are due to higher interest rates and higher average balances outstanding on the revolving credit facility.

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

Fiscal quarters ended

October 1, 2022

October 2, 2021

Foreign exchange gain (loss)

Interest income

Other components of net periodic pension expense

Investment income

Fiscal quarters ended

October 1, 2022

April 1, 2023

December 31, 2022

Foreign exchange gain (loss)

Interest income

Other components of net periodic pension expense

Other components of other periodic pension cost

Investment income (expense)

Nine fiscal months ended

October 1, 2022

October 2, 2021

Fiscal quarters ended

April 1, 2023

April 2, 2022

Foreign exchange gain (loss)

Interest income

Other components of net periodic pension expense

Other components of other periodic pension cost

Investment income (expense)

For the fiscal quarter ended October 1, 2022, our effective tax rate was 22.4%, as

compared to 23.8% and 16.6%

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

For the nine fiscal months ended October 1, 2022, our effective tax rate was 23.2%,

as compared to 18.3% for the nine

fiscal months ended October 2, 2021.

reduction in the U.S.

statutory rate to 21% beginning January 1, 2018, we expect that our effective tax rate will be higher than the U.S.

For the fiscal quarter ended April 1, 2023,

our effective tax rate was 28.4%, as compared to 42.9% and 23.7% for the fiscal quarters ended December 31, 2022 and April 2, 2022,

respectively.

We expect that our effective tax rate will be higher than the U.S.

statutory rate, excluding unusual transactions.

Discrete tax items of $(5.9) million (tax benefits) and

$(5.7) million (tax benefits) impacted our effective tax rate for the fiscal quarters ended October 1, 2022 and October 2, 2021, respectively.

Discrete tax items of $(5.9) million (tax benefits) and $(14.0) million (tax benefits) impacted our effective tax rate for the nine fiscal months ended October 1, 2022 and

October 2, 2021, respectively.

We recognized tax benefits of $5.9 million in the third fiscal quarter of 2022 for changes in uncertain tax positions following the resolution of a tax

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 nine fiscal months ended October 1, 2022, the liabilities for unrecognized tax benefits decreased by $11.5 million on a net basis, primarily

due to payments, settlements, and currency translation adjustments, partially offset by accruals for current year tax positions and interest.

Unusual transactions impacted our effective tax rate for the prior fiscal quarter.

These items totaled $26.0 million

of tax expense in the fiscal quarter ended December 31, 2022.

During the three fiscal months ended April 1, 2023, the liabilities for unrecognized

tax benefits increased by $0.5 million on a net basis, primarily due to currency translation adjustments, accruals for current year tax positions, and interest.

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

5 unchanged sentences

Financial Condition, Liquidity, and Capital Resources

Our financial condition as of October 1, 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.

Our financial condition as of April 1, 2023 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.

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

See "Overview" above for "free cash" definition and reconciliation to GAAP.

Vishay has generated positive "free cash" in each of the past 25 years, and "free cash" in excess of $80 million in each of the last 20 years.

In this volatile

economic environment, we continue to focus on the generation of free cash, including an emphasis on cost controls.

Cash flows provided by operating activities were $317.8 million

for the nine fiscal months ended October 1, 2022, as compared to cash flows provided by operations of $310.5 million for the nine fiscal months ended October 2, 2021.

Cash paid for property and equipment for the nine fiscal months

ended October 1, 2022 was $172.2

million, as compared to $118.2 million for the nine fiscal months ended October 2, 2021.

Cash flows provided by operating activities were $129.9 million for

the three fiscal months ended April 1, 2023, as compared to cash flows provided by operations of $33.6 million for the three fiscal months ended April 2, 2022.

In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle.

The following table presents the components of our

cash conversion cycle:

Fiscal quarters ended

April 1, 2023

December 31, 2022

April 2, 2022

Days sales outstanding ("DSO") (a)

Days inventory outstanding ("DIO") (b)

Days payable outstanding ("DPO") (c)

Cash conversion cycle

a) DSO measures the average collection period of our receivables.

DSO is calculated by dividing the average

accounts receivable by the average net revenue per day for the respective fiscal quarter.

b) DIO measures the average number of days from procurement to sale of our product.

DIO is calculated by

dividing the average inventory by average cost of goods sold per day for the respective fiscal quarter.

c) DPO measures the average number of days our payables remain outstanding before payment.

DPO is calculated

by dividing the average accounts payable by the average cost of goods sold per day for the respective fiscal quarter.

The increase in inventory is partly due to an increase in input costs.

The recognition of higher input costs in inventory will negatively impact gross

profit when the inventory is sold.

Cash paid for property and equipment for the three

fiscal months ended April 1, 2023 was $45.6

million, as compared to $35.9 million for the three fiscal months ended April 2, 2022.

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 for the nine fiscal months ended October 1, 2022 was negatively impacted by working capital changes, higher than usual capital expenditures, and cash taxes paid for repatriation.

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.

On February 7, 2022, our 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.

“Stockholder Return Policy” above for additional information.

The following table summarizes the components of net cash and short-term investments (debt) at October 1, 2022 and December 31, 2021 (in thousands) :

October 1, 2022

We expect to invest approximately $385 million in 2023 and approximately $1.2 billion over the next three years primarily for capital

expansion projects outside of China.

Free cash flow for the three fiscal months ended April 1, 2023 was negatively impacted by higher than usual capital expenditures, but still increased significantly versus the three fiscal months ended

April 2, 2022 primarily due to a smaller increase in working capital.

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.

In 2022, our 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.

See “Stockholder

Return Policy” above for additional information.

The following table summarizes the components of net cash and short-term investments (debt) at April 1, 2023 and December 31, 2022 (in thousands) :

April 1, 2023

December 31, 2022

12 unchanged sentences

classify as short-term investments on our consolidated balance sheets.

As these investments were funded using a portion of excess cash and represent a significant aspect of our cash management strategy, we include the investments in the calculation

of net cash and short-term investments (debt).

As these investments were funded using a portion of excess cash and represent a significant aspect of our cash management strategy, we include the investments in the calculation of

net cash and short-term investments (debt).

The interest rates on our short-term investments vary by location.

1 unchanged sentence

consolidated condensed statements of cash flows.

As of October 1, 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

We are aligning the maturity dates of our cash equivalents and short-terms investments in preparation of a planned repatriation late in the second fiscal quarter or early in the third fiscal quarter of

This has resulted in a decrease in our short-term investment balance.

As of April 1, 2023, substantially all of

our cash and cash equivalents and short-term investments 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.

parent company, Vishay Intertechnology, Inc.

subsidiaries also have cash operating needs.

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.

The distribution of earnings from Israel and Germany to the United States will be used, in part, 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.

The maximum amount

available on the revolving credit facility is restricted by the financial covenants described below.

The credit facility also provides us the ability to request up to $300 million of incremental facilities, subject to the satisfaction of certain

conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt.

We had no amounts outstanding on our revolving credit facility at December 31, 2021 and October 1, 2022.

We borrowed $558 million and repaid $558 million on the revolving credit facility during the nine fiscal months ended October 1, 2022.

outstanding balance on our revolving credit facility calculated at fiscal month-ends was $47.9 million and the highest amount outstanding on our revolving credit facility at a fiscal month end was $124 million during the nine fiscal months ended October 1, 2022.

On May 8, 2023, we amended and restated our $750 million revolving credit agreement, which replaced our credit agreement that was scheduled to mature in

The amendment and restatement extends the maturity date of the revolving credit agreement until May 8, 2028.

The maximum amount available on the revolving credit facility is restricted by the financial covenants described below.

The credit facility also provides

us the ability to request up to $300 million of incremental facilities, subject to the satisfaction of certain conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or

incremental equivalent debt.

We had $42 million outstanding on our revolving credit facility at December 31, 2022 and $107 million outstanding at April 1, 2023.

We borrowed $87

million and repaid $22 million on the revolving credit facility during the three fiscal months ended April 1, 2023.

The average outstanding balance on our revolving credit facility calculated at fiscal month-ends was $91.7 million and the highest

amount outstanding on our revolving credit facility at a fiscal month end was $107 million during the three fiscal months ended April 1, 2023.

The amendment and restatement of the facility replaces the leverage ratio used for compliance measurement with a net leverage ratio, reducing the measure

of outstanding debt by up to $250 million of unrestricted cash.

Measurements prior to the amendment and restatement are based on a total leverage ratio.

Pursuant to the amended and restated credit facility, the financial maintenance covenants include (a) an interest coverage ratio of not less than 2.00 to

and (b) a net leverage ratio of not more than 3.25 to 1 (and a pro forma ratio of 3.00 to 1 on the date of incurrence of additional debt).

The computation of these ratios is prescribed in Article VI of the Credit Agreement between Vishay

Intertechnology, Inc.

and JPMorgan Chase Bank, N.A., which has been filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed May 8, 2023.

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

investments and acquisitions (assuming our pro forma leverage ratio is greater than 2.75 to 1.00), making asset sales, and paying cash dividends and making other restricted payments (assuming our pro forma leverage ratio is greater than 2.50 to

1.00), and requires us to comply with other covenants, including the maintenance of specific financial ratios.

The financial maintenance covenants include (a) an interest coverage ratio of not less than 2.00 to 1;

and (b) a leverage ratio of not more than 3.25 to 1

(and a pro forma ratio of 3.00 to 1 on the date of incurrence of additional debt).

The computation of these ratios is prescribed in Article VI of the Credit Agreement between Vishay Intertechnology, Inc.

and JPMorgan Chase Bank, N.A., which has been

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 October 1, 2022.

Our interest coverage ratio and leverage ratio were 36.01 to 1 and 0.61 to 1, respectively.

We expect to continue to be in compliance with these covenants

based on current projections.

investments and acquisitions (assuming our pro forma net leverage ratio is greater than 2.75 to 1.00), making asset sales, and paying cash dividends and making other restricted payments (assuming our pro forma net leverage ratio is greater than 2.50

We were in compliance with all financial covenants under the credit facility at April 1, 2023.

Our interest coverage ratio and (total) leverage ratio were

31.69 to 1 and 0.71 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

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Additionally, our convertible senior notes due 2025 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is

Borrowings under the credit facility bear interest at LIBOR plus an interest margin.

The applicable interest margin is based on our leverage ratio.

also pay a commitment fee, also based on our leverage ratio, on undrawn amounts.

Based on our current leverage ratio, any new borrowings will bear interest at LIBOR plus 1.50%, and the undrawn commitment fee is 0.25% per annum.

The maturity date of the amended and restated credit facility will accelerate if within ninety-one days prior to the maturity of our convertible senior notes due 2025, the outstanding principal amount of such notes exceeds a defined

liquidity measure as set forth in the Amended and Restated Credit Facility.

Prior to the amendment and restatement, borrowings under the credit facility bore interest at LIBOR plus an interest margin.

The applicable interest

margin is based on our total leverage ratio.

We also paid a commitment fee, also based on our total leverage ratio, on undrawn amounts.

The amended and restated credit facility replaces the LIBOR-based interest rate and related LIBOR-based

mechanics applicable to U.S.

dollar borrowings under the revolving credit agreement with an interest rate based on SOFR (including a customary spread adjustment) and related SOFR-based mechanics.

Borrowings in foreign currency bear interest at a

local reference rate plus an interest margin.

Based on our current total leverage ratio, any new borrowings will bear interest at SOFR plus 1.60% (including the applicable credit spread), and the undrawn commitment fee is 0.25% per annum.

The borrowings under the credit facility are secured by a lien on substantially all assets, including accounts receivable, inventory, machinery and

equipment, and general intangibles (but excluding real estate, intellectual property registered or licensed solely for use in, or arising solely under the laws of, any country other than the United States, assets located solely outside of the United

States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the United States, and pledges of stock in certain significant domestic and foreign subsidiaries;

and are guaranteed by certain significant

subsidiaries.

States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the United States, and pledges of stock in certain subsidiaries;

and are guaranteed by certain significant subsidiaries.

We expect, at least initially, to fund certain future obligations required to be paid by the U.S.

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We also expect to continue to use the credit facility from time-to-time to meet certain short-term financing needs.

Additional acquisition activity, convertible debt repurchases, or conversion of our convertible debt instruments may

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.

Additional acquisition activity, convertible debt repurchases, or conversion of our convertible debt instruments may 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.

The convertible senior notes due 2025 are not currently convertible.

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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