What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-10 · 287 added, 292 removed, 439 unchanged (57% of the section changed)

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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.

See further discussion in “Stockholder Value” 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.

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

and replaced 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

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

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

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

in lower orders.

Gross profit was negatively impacted by the recognition of higher input costs that were previously absorbed in inventory.

Net revenues for the fiscal quarter ended July 1, 2023

were $892.1 million, compared to $871.0

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.

million and $863.5 million for the fiscal quarters ended April 1, 2023 and July 2, 2022, respectively.

The net earnings attributable

to Vishay stockholders for the fiscal quarter ended July 1, 2023 were $95.0 million, or $0.68 per diluted share, compared to $111.8 million, or $0.79 per diluted

share for the fiscal quarter ended April 1, 2023, and $112.4 million, or $0.78 per diluted share for the fiscal quarter ended July 2, 2022.

Net revenues for the six fiscal months

ended July 1, 2023 were $1,763.2

million, compared to $1,717.3 million for the six fiscal months ended July 2, 2022.

The net earnings attributable to Vishay

stockholders for the six fiscal months ended July 1, 2023 were $206.8 million, or $1.47 per diluted share, compared to $216.0 million, or $1.49 per diluted share for the six

fiscal months ended July 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

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,

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

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:

Effect of change in indefinite reversal assertion

Effect of changes in valuation allowances

Tax effects of pre-tax items above

Adjusted net earnings

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Adjusted earnings per diluted share

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

The following table

reconciles gross profit by segment to consolidated gross profit ( in thousands ) .

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

Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

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

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

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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

July 1, 2023, April 1, 2023,

and July 2, 2022 represent favorable business conditions.

Our free cash results were significantly impacted by the installment payments of

transition tax of $27.7 million and $14.8 million in the second fiscal quarters of 2023 and 2022, respectively, and $25.2 million of payments of foreign, withholding, and claw-back cash taxes on foreign earnings in Israel for the net $81.2

million that was repatriated to the U.S.

in the second fiscal quarter of 2022 .

Stockholder Value

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

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Fiscal quarters ended

April 1, 2023

April 2, 2022

Six fiscal months ended

Dividends paid to stockholders

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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 first fiscal quarter of 2022 through

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

1st Quarter 2022

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

2nd Quarter 2022

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1st Quarter 2023

2nd Quarter 2023

Gross profit margin (1)

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

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 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.

Revenues increased slightly versus the prior fiscal quarter and the second fiscal quarter of 2023 primarily due to increased volume and positive foreign

currency impacts.

Higher average selling prices also contributed to the increase versus the second fiscal quarter of 2022.

The book-to-bill ratio and backlog were negatively impacted by a distributor inventory correction that continued in the

second fiscal quarter of 2023.

We continue to increase manufacturing capacity for critical product lines.

Average selling prices decreased versus the prior fiscal quarter.

Gross profit margin decreased versus the prior fiscal quarter and the second fiscal quarter of 2022.

The decrease versus the prior fiscal quarter is

primarily due to lower average selling prices, manufacturing inefficiencies, and the recognition upon sale of increased costs previously absorbed in inventory.

The decrease versus the first fiscal quarter of 2022 is primarily due to cost

inflation, manufacturing inefficiencies, and the recognition upon sale of increased costs previously absorbed in inventory, partially offset by higher average selling prices.

The book-to-bill ratio in the second fiscal quarter of 2023 decreased to 0.69 versus 0.84 in the first fiscal quarter of 2023.

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.

that continued in the second fiscal quarter of 2023.

Financial Metrics by Segment

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

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

1st Quarter 2022

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

2nd Quarter 2022

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1st Quarter 2023

2nd Quarter 2023

Book-to-bill ratio

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

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Fiscal quarter ended

April 1, 2023

Change in net revenues

December 31, 2022

Six fiscal months ended

Change in net

April 1, 2023

Changes in net revenues were attributable to the following:

Prior Quarter

Prior Year Quarter

Change attributable to:

Change in volume

Increase in average selling prices

Change in average selling prices

Foreign currency effects

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.

Despite the distributor inventory correction that we are experiencing, the economic

environment remains good and we continue to increase manufacturing capacities.

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

Positive foreign currency impacts also

contributed to the increase versus the prior fiscal quarter and the second fiscal quarter of 2022.

Gross Profit Margins

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.

Gross profit margins for the fiscal quarter ended July 1, 2023 were 28.9%, versus 32.0% and 30.3%, for the comparable prior quarter and prior year period, respectively.

margins for the six fiscal months ended July 1, 2023 were 30.4%, versus 30.3% for the comparable prior year period.

The decrease versus the prior fiscal quarter is primarily due to lower average selling prices, manufacturing inefficiencies, and the recognition upon sale of increased

costs previously absorbed in inventory.

The decrease versus the first fiscal quarter of 2022 is primarily due to cost inflation, manufacturing inefficiencies, and the recognition upon sale of increased costs previously absorbed in inventory,

partially offset by higher average selling prices.

The increase versus the prior year-to-date period is primarily due to higher average selling prices and increased volume, partially offset by increased materials, utilities, and labor costs.

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

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

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

Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

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Fiscal quarter ended

April 1, 2023

Six fiscal months ended

Change in net revenues

December 31, 2022

Change in net revenues

April 1, 2023

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

Prior Quarter

Prior Year Quarter

Change attributable to:

Change in volume

Increase in average selling prices

Increase in volume

Change in average selling prices

Foreign currency effects

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.

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

The increase versus the prior fiscal quarter is primarily due to increased sales to distribution customers and customers in the Europe and Americas regions.

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

distribution customers, automotive and power supply end market customers, and customers in the Europe and Americas regions, partially offset by decreased sales to computing and telecommunications end market customers.

The increase versus

the prior year-to-date period is primarily due to increased sales to distribution customers, automotive, power supply, and industrial end market customers, and customers in the Europe and Americas regions, partially offset by decreased

sales to computing and telecommunications end market customers.

Gross profit margin decreased versus the prior fiscal quarter and the prior year quarter, but increased versus the prior year-to-date period.

decrease versus the prior fiscal quarter is primarily due to decreased average selling prices and increased input costs, partially offset by increased sales volume.

Gross profit increased versus the prior year quarter and gross profit margin

was relatively flat due to increased costs.

Gross profit margin increased versus the prior year-to-date period primarily due to increased sales volume and higher average selling prices, partially offset by higher material, labor, and utility

costs and manufacturing inefficiencies.

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

prior year-to-date period.

The fluctuations are primarily due to gross profit fluctuations.

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

Average selling prices decreased versus the prior fiscal quarter, but increased versus the prior year periods.

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

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 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.

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

1 unchanged sentence

Segment operating margin

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

in thousands) :

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

Fiscal quarter ended

April 1, 2023

Six fiscal months ended

Change in net revenues

December 31, 2022

Change in net revenues

April 1, 2023

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

Prior Quarter

Prior Year Quarter

Change attributable to:

Decrease in volume

Increase in average selling prices

Change in volume

Change in average selling prices

Foreign currency effects

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

The decrease versus the prior fiscal

quarter is primarily due to decreased sales to consumer and power supply end market customers and customers in the Americas region.

The decrease versus the prior year quarter is primarily due to decreased sales to distribution and EMS

customers, power supply end market customers, and customers in the Americas and Asia regions.

The decrease versus the prior year-to-date period is primarily due to decreased sales to distribution and EMS customers and customers in the

Americas and Asia regions.

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 decreased average selling prices, increased material costs, and manufacturing inefficiencies.

The decrease versus the prior year quarter is primarily due to lower sales volume, decreased average selling prices, and

higher material, labor, and utility costs, partially offset by positive foreign currency impacts.

The decrease versus the prior year-to-date period is primarily due to lower sales volume, manufacturing inefficiencies, and higher material

and labor costs, partially offset by increased average selling prices and positive foreign currency impacts.

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

The decreases are

primarily due to decreased gross profit.

Average selling prices decreased versus the prior fiscal quarter and prior year quarter, but increased versus the prior year-to-date period.

Optoelectronic Components

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

Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

1 unchanged sentence

Segment operating margin

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

in thousands) :

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

Fiscal quarter ended

April 1, 2023

Six fiscal months ended

Change in net revenues

December 31, 2022

Change in net revenues

April 1, 2023

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

Prior Quarter

Prior Year Quarter

Change attributable to:

Decrease in volume

Increase in average selling prices

Change in volume

Change in average selling prices

Foreign currency effects

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.

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

The increase versus the prior fiscal quarter is primarily due to increased sales to distribution customers and customers in the Asia region, partially

offset by decreased sales to customers in the Americas and Europe regions.

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

Americas region.

The decrease versus the prior year-to-date period is primarily due to distribution customers and customers in all regions.

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 unfavorable product mix, manufacturing inefficiencies, higher input costs, and the recognition upon sale of increased costs previously absorbed in inventory.

The decrease versus the prior year quarter is primarily due to lower sales volume, manufacturing inefficiencies, and higher material, subcontractor service, and utility costs.

The decrease versus the prior year-to-date period is

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

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

The fluctuations are primarily due to gross profit fluctuations.

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

Average selling prices decreased versus the prior fiscal quarter, but increased versus the prior year periods.

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

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

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Fiscal quarter ended

April 1, 2023

Six fiscal months ended

Change in net revenues

December 31, 2022

Change in net revenues

April 1, 2023

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

Prior Quarter

Prior Year Quarter

Change attributable to:

Increase in volume

Increase in average selling prices

Change in volume

Change in average selling prices

Foreign currency effects

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

The increase versus the prior

fiscal quarter is primarily due to increased sales to industrial, military and aerospace, and automotive end market customers and customers in the Europe region.

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

The decrease versus

the prior fiscal quarter is primarily due to decreased sales to military and aerospace and industrial 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.

EMS customers, military and aerospace and industrial end market customers, and customers in all regions, particularly Europe.

The increase versus the prior year-to-date period is primarily due to increased sales to distribution and EMS

customers, military and aerospace and industrial end market customers, and customers in all regions, particularly Europe.

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 decreased

volume, manufacturing inefficiencies, and the recognition upon sale of increased costs previously absorbed in inventory.

The decrease versus the prior year quarter is primarily due to increased labor and material costs and

manufacturing inefficiencies, partially offset by higher sales volume and increased average selling prices.

The decrease versus the prior year-to-date period is primarily due to increased labor and material costs, partially offset by higher

sales volume and increased average selling prices.

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

The decreases are primarily due to decreased gross profit.

Average selling prices decreased versus the prior fiscal quarter, but increased versus the prior year periods.

We are increasing critical manufacturing capacities for certain product lines.

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

3 unchanged sentences

Fiscal quarter ended

April 1, 2023

Six fiscal months ended

Change in net revenues

December 31, 2022

Change in net revenues

April 1, 2023

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

Changes in net revenues were attributable to the following:

Prior Quarter

4 unchanged sentences

Foreign currency effects

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.

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

The increase versus the prior fiscal quarter is primarily due to increased sales to EMS customers, automotive and aerospace and military end market customers, and customers in the Americas region, partially offset by decreased sales to customers

in the Europe region.

The decrease versus the prior year quarter is primarily due to decreased sales to distribution customers and customers in the Asia and Europe regions, partially offset by increased sales to medical, industrial, and

aerospace and military end market customers and customers in the Americas region.

The decrease versus the prior year-to-date period is primarily due to decreased sales to distribution customers and customers in the Asia region, partially offset

by increased sales to EMS customers and medical, automotive, and aerospace and military end market customers and customers in the Americas region.

The 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 increased sales volume, higher average selling prices, and manufacturing efficiencies.

The increases versus the prior year periods are primarily due to increased average selling prices and positive foreign currency impacts,

partially offset by decreased sales volume.

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

The increases are primarily due to increases in gross profit.

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

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

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

3 unchanged sentences

Fiscal quarter ended

April 1, 2023

Six fiscal months ended

Change in net revenues

December 31, 2022

Change in net revenues

April 1, 2023

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

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

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.

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

The increase versus the prior

fiscal quarter is primarily due to increased sales to distribution end market customers and customers in the Asia region.

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

customers in the Asia and Europe regions, partially offset by decreased sales to distribution customers.

The increase versus the prior year-to-date period is primarily due to increased sales to industrial end market customers and customers in

the Asia and Europe regions, partially offset by decreased sales to distribution 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 manufacturing inefficiencies, higher labor costs, and negative impact from decreased inventory.

The increase versus the prior year quarter is primarily due to increased average selling prices, favorable product mix, and positive

foreign currency impact, partially offset by manufacturing inefficiencies, increased labor costs, and negative impact from decreased inventory.

The increase versus the prior year-to-date period is primarily due to higher sales volume, increased

average selling prices, favorable product mix, and positive foreign currency impact, partially offset by manufacturing inefficiencies, increased labor and material costs, and negative impact from decreased inventory.

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

The fluctuations are primarily due to gross profit fluctuations.

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

Selling, General, and Administrative Expenses

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

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

Fiscal quarters ended

April 1, 2023

December 31, 2022

Six fiscal months ended

April 1, 2023

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as a percentage of revenues

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

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

SG&A expenses increased versus the prior fiscal quarter and the prior year periods as expected.

The increases are due to general inflation and higher

compensation costs, including the implementation of the 2023 Long-Term Incentive Plan in the second fiscal quarter.

Other Income (Expense)

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.

Interest expense for the fiscal quarter ended July 1, 2023

increased $1.3 million versus the fiscal quarter ended April 1, 2023 and increased $2.1 million versus the fiscal quarter ended July 2, 2022.

Interest expense for the six

fiscal months ended July 1, 2023 increased by $3.0 million versus the six fiscal months ended July 2, 2022.

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

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Fiscal quarters ended

April 1, 2023

December 31, 2022

Foreign exchange gain (loss)

Interest income

Other components of other periodic pension cost

Other components of net periodic pension expense

Investment income (expense)

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April 1, 2023

April 2, 2022

Foreign exchange gain (loss)

Interest income

Other components of other periodic pension cost

Other components of net periodic pension expense

Investment income (expense)

For the fiscal quarter ended April 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.

Six fiscal months ended

Foreign exchange gain (loss)

Interest income

Other components of net periodic pension expense

Investment income (expense)

For the fiscal quarter ended July 1, 2023, our effective tax rate was 28.5%, as compared

to 28.4% and 23.8%

for the fiscal quarters ended April 1, 2023 and July 2, 2022, respectively.

For the six fiscal months ended July 1, 2023, our effective tax rate was 28.5%,

as compared to 23.7% for the six

fiscal months ended July 2, 2022.

We expect that

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

statutory rate, excluding unusual transactions.

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.

During the six fiscal months ended July 1, 2023, the liabilities for unrecognized tax benefits increased by $0.6 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.

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Financial Condition, Liquidity, and Capital Resources

Our financial condition as of April 1, 2023 continued to be strong.

Our financial condition as of July 1, 2023 continued to be strong.

Cash and short-term investments exceed

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

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.

Cash flows provided by operating activities were $237.1 million

for the six fiscal months ended July 1, 2023, as compared to cash flows provided by operations of $108.3 million for the six fiscal months ended July 2, 2022.

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

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April 1, 2023

December 31, 2022

April 2, 2022

Days sales outstanding ("DSO") (a)

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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.

Cash paid for property and equipment for the six

fiscal months ended July 1, 2023 was $117.3

million, as compared to $95.7 million for the six fiscal months ended July 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.

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.

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

July 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.

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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

“Stockholder Value” above for additional information.

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

December 31, 2022

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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.

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consolidated condensed statements of cash flows.

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

We are aligning the maturity dates of our cash equivalents and short-terms investments in preparation of a planned repatriation in the third fiscal quarter of 2023.

This has resulted in a decrease in

our short-term investment balance.

As of July 1, 2023, substantially all of

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

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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.

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.

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 amendment and restatement extended 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.

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 $185 million outstanding at July 1, 2023.

We borrowed $426

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

million and repaid $283 million on the revolving credit facility during the six fiscal months ended July 1, 2023.

The average outstanding balance on our revolving credit facility calculated at fiscal month-ends was $129.2 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

amount outstanding on our revolving credit facility at a fiscal month end was $185 million during the six fiscal months ended July 1, 2023.

The amendment and restatement of the facility replaced 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.

Measurements prior to the amendment and restatement were 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

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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.

and JPMorgan Chase Bank, N.A., which was 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 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

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

2.50 to 1.00).

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

Our interest coverage ratio and net leverage ratio were

26.70 to 1 and 0.50 to 1, respectively.

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outstanding pursuant to the credit facility could become immediately payable.

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

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.

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 accelerated.

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.

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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

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

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

mechanics applicable to U.S.

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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.

Based on our current total leverage ratio of 0.82 to 1, 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

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 subsidiaries;

United 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.

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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.

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.

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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