What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-16 compared with 2023-02-22 · 400 added, 334 removed, 590 unchanged (55% of the section changed)

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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 structure.

Over the next few years, we expect to experience higher growth

rates than over the last decade.

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 mega trends of electrification, data storage, and wireless communications.

We have identified thirty key product lines for growth and are planning to invest more to expand these key product lines.

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 as part of our growth and margin expansion plan.

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.

To drive growth and optimize stockholder value, we plan to

capitalize on the mega trends of e-mobility, sustainability, and connectivity through initiatives.

We are developing go-to-market strategies and investing in and expanding the key product lines for growth that we have identified.

increased our capacity internally by investing approximately $329 million in 2023 and plan to invest approximately $1.2 billion in total from 2023 - 2025 primarily for capital expansion projects outside of China.

In addition, we are

strategically expanding our outsourced production of commodity products to subcontractors.

At the same time, we are enhancing our channel management while investing in internal resources by adding customer-facing engineers and filling gaps in

technology and market coverage.

Taken together, each of these initiatives supports our Think Customer First organizational culture.

On November 8, 2023, we and Nexperia BV announced that we have entered

into an agreement whereby we will acquire Nexperia’s wafer fabrication facility and operations located in Newport, South Wales, U.K.

for approximately $177 million in cash, subject to customary post-closing adjustments.

The closing of

the transaction is subject to U.K.

government review and customary closing conditions, and is expected to occur in the first quarter of 2024.

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.

Our business and operating results have been, and will continue to be, impacted by worldwide economic conditions.

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, particularly in 2020 .

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.

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

We incurred incremental costs separable from normal operations that are directly related to these 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.

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 statement of operations for the year ended December 31, 2022.

Since 2021, certain costs directly attributable to the pandemic, such as additional costs of cleaning and disinfecting facilities and costs

of additional safety equipment for employees, are no longer incremental and are considered normal operating costs.

These expenses and all indirect financial changes from the

COVID-19 pandemic, such as general macroeconomic effects and higher shipping costs due to reduced shipping capacity, are excluded from the amounts reported as COVID-19 pandemic expenses.

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 believe we have sufficient liquidity to withstand

temporary disruptions in the economic environment.

See additional information regarding our competitive strengths and key challenges as disclosed in Part 1.

On September 12, 2023, we issued $750 million convertible senior notes due 2030.

We used the net proceeds from the issuance of these notes to

repurchase $370.2 million principal amount of convertible senior notes due 2025, $94.2 million to enter into capped call transactions intended to mitigate the dilution risk of convertible senior notes due 2030 by synthetically increasing the

conversion price of the notes to approximately $43.98 per share, to repay amounts outstanding on our amended and restated credit facility, and for other general corporate purposes.

We recognized a loss of $18.9 million due to the early

extinguishment of the repurchased convertible senior notes due 2025.

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 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 customary spread adjustment) and related SOFR-based mechanics.

The maturity date of the 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 credit facility.

The repurchase of $370.2 million principal amount of convertible senior notes due 2025 in September 2023 substantially reduces the risk of

maturity date acceleration.

Other terms and conditions are substantially unchanged.

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

impacted by worldwide economic conditions.

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.

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.

believe we have sufficient liquidity to withstand temporary disruptions in the economic environment.

See additional information regarding our competitive strengths and key challenges as disclosed in Part I.

We utilize several financial metrics, including net revenues, gross profit margin, segment operating income, end-of-period backlog, book-to-bill ratio, inventory

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

The key financial metrics remained strong in the fourth fiscal quarter of 2022, but were slightly negatively impacted by cost inflation, the beginning of a distributor inventory

correction that resulted in lower orders, and foreign currency effects.

Net revenues and margins increased versus the prior year period.

Average selling prices remained stable in the fourth fiscal quarter of 2022 after broad increases in prior

The key financial metrics decreased in the fourth fiscal quarter of 2023 primarily due to the negative impacts of an on-going distributor inventory correction that resulted in lower

Net revenues and margins decreased versus the prior year period primarily due to lower volume.

Net revenues for the year ended December 31, 2023 were

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Impact of COVID-19 pandemic

Restructuring and severance costs

Reconciling items affecting other income (expense):

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Change in tax laws and regulations

Change in deferred taxes due to early extinguishment of debt

Effects of cash repatriation program

Tax effects of pre-tax items above

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Capital expenditures

Our results for 2022 and 2021 represent the continuation of the favorable business conditions that we have been experiencing since the latter part of 2020.

Our percentage of

euro-based sales approximates our percentage of euro-based expenses so the euro 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

Orders are lower due to a distributor inventory correction that began in the fourth fiscal quarter of 2022 and continued throughout 2023.

Our results for 2023 remained strong, although weaker than our 2022

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

transition tax of $27.7 million in 2023

and 2021 and $25.2 million of payments of foreign, withholding, and claw-back cash taxes on foreign earnings in Israel for the $81.2 million (net of taxes) that was repatriated to the U.S.

and $14.8 million in 2022 and 2021, respectively, and $63.6 million and $25.2 million of payments of foreign, withholding, and claw-back cash taxes on foreign earnings for the $276.8 million and $81.2 million (net of taxes) that were repatriated to

in 2023 and 2022, respectively .

Growth and Company Transformation Initiatives

Effective January 1, 2023, a new executive leadership team, promoted from within, embarked on a new era at Vishay.

The new executive management team

laid out a three-year plan to expand capacity to support our highest growth and highest return product lines and to position Vishay to be ready for the next phase of megatrends in e-mobility, sustainability, and connectivity.

The year 2023 is

generally seen as the staging year for this plan, and all elements of the plan are progressing throughout the organization.

In 2024, we expect to advance many of these initiatives and begin to have increased manufacturing capacity available.

Beginning in late 2024 and into 2025, we expect to be in a better position to capture the next step in the growing demand for electrification in our key end-markets.

To focus this growth, we have identified product lines for growth across each reportable segment Most of these product lines serve multiple end-market

segments, applications, and business channels.

We have developed go-to market strategies for each one of these product lines, concentrating our resources on improving the technical performance of non-commodity and custom products, to better

position Vishay to support the mega trends toward electrification and data communications.

To be ready for this next phase of growth, we intend to invest a total of about $1.2 billion between 2023 and 2025.

These projects include our new

power inductor site in Mexico;

a resistor manufacturing expansion in Mexico;

expanded 8" diode manufacturing in Taiwan and Turin, Italy;

and the new MOSFET 12” fab in Itzehoe, Germany.

Our plan was to invest approximately $385 million in 2023;

however, capital spending for 2023 came in at $329 million due to some delays in delivery and installing equipment.

We intend to carry over the remaining $56 million into 2024.

We have also expanded our external capacity, engaging in developing partnerships with subcontractors to outsource some commodity products and create

incremental capacity for our higher growth and higher return products.

Each reportable segment is evaluating subcontractors, including supporting front-end capacities for our semiconductor segments.

By growing capacity and capabilities, we are also enhancing our ability to support all the business channels of OEM, distribution, and EMS, while

maximizing the profitability of each one through a focus on higher margin customers.

At the same time, we are focusing on increasing our technical resources, adding additional customer-facing engineers, and intensifying our activities in

We have seen and will continue to see an increase in operating expenses over the next couple of years as we add these engineering talents, fill gaps in our technology, and become a preferred supplier to more customers and more broadly

sell our product portfolio.

This includes investments in technology, including enhanced Customer Relationship Management and planning tools, to improve our operational excellence.

The acquisition of MaxPower and its silicon carbide technology in 2022 is an illustration of this increased investment.

During the fourth fiscal

quarter, we released our 1,200-volt silicon carbide ("SiC") planar MOSFETs.

We are planning to have the SiC package types for three different resistance and current capabilities available during the first half of 2024.

In parallel, we continue to

advance the development of the 1,200-volt dual-trench technology, the 1,700-volt planar technology, and the 650-volt planar technology.

We plan to utilize our pending acquisition of the Newport wafer fab as the home for MaxPower to further develop

and scale our SiC capabilities.

Another area of focus is our introduction of solution selling, speaking to customer engineers about applications and the performance improvement that

Vishay components can bring, from the full array of our portfolio.

Customer engineers look for suppliers who can provide solutions to advance their technologies.

Vishay’s semiconductors and passive components can populate greater than 80% of the

components on the circuit board in many applications.

All of this is being done as we implement organizational and structural change at Vishay, focused on a “Think Customer First” philosophy, and becoming a

more responsive company.

We are fostering collaboration internally and externally, particularly in the functions connected to customer programs.

To facilitate that change internally, we re-designed our short- and long-term incentive plans to

align the performance of about 1,000 key employees with Company growth and profitability objectives and stockholder interests.

The equity-based plan was approved by our stockholders at our 2023 annual meeting.

These initiatives are the foundation for our ambitions to unleash the potential at Vishay, realizing the full value of our broad product portfolio and

becoming a customer-first company, and for our goals of driving top line growth, expanding margins and optimizing returns.

Stockholder Return Policy

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):

December 31, 2023

December 31, 2022

Dividends paid to stockholders

Stock repurchases

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

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 the Stockholder Return Policy will remain in effect until such time as the

Board votes to amend or rescind the policy.

Implementation of the Stockholder Return Policy is subject to future declarations of dividends by the Board of Directors, market and business conditions, legal requirements, and other factors.

policy sets forth our intention, but does not obligate us to acquire any shares of common stock or declare any dividends, and the policy may be terminated or suspended at any time at our discretion, in accordance with applicable laws and

Financial Metrics

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These key financial measures and metrics include net

revenues, gross profit margin, operating margin, segment operating income, end-of-period backlog, and the book-to-bill ratio.

We also monitor changes in our inventory turnover and our or publicly available average selling prices (“ASP”).

revenues, gross profit margin, operating margin, segment operating income, segment operating margin, end-of-period backlog, and the book-to-bill ratio.

We also monitor changes in our inventory turnover and our or publicly available average selling

prices (“ASP”).

Gross profit margin is computed as gross profit as a percentage of net revenues.

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Operating margin is computed as gross profit less operating expenses, expressed as a percentage of net revenues.

Operating margin is clearly a function of net revenues, but also reflects our cost management programs and

our ability to contain fixed costs.

Operating margin is clearly a function of net revenues, but also reflects our cost management programs and our ability

to contain fixed costs.

Our chief operating decision maker makes decisions, allocates resources, and evaluates business segment performance based on segment operating income.

Only dedicated, direct selling, general, and administrative

("SG&A") expenses of the segments are included in the calculation of segment operating income.

Only dedicated, direct selling, general, and administrative ("SG&A")

expenses of the segments are included in the calculation of segment operating income.

We do not allocate certain SG&A expenses that are managed at the regional or corporate global level to our segments.

Accordingly, segment

operating income excludes these SG&A expenses that are not directly traceable to the segments.

Segment operating income would also exclude costs not routinely used in the management of the segments in periods when those items are present, such

as restructuring and severance costs, the direct impact of the COVID-19 pandemic, and other items affecting comparability.

Segment operating income is clearly a function of net revenues, but also reflects our cost management programs and our

ability to contain fixed costs.

Accordingly, segment operating income

excludes these SG&A expenses that are not directly traceable to the segments.

Segment operating income would also exclude costs not routinely used in the management of the segments in periods when those items are present, such as restructuring

and severance costs, the direct impact of the COVID-19 pandemic, and other items affecting comparability.

Segment operating income is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed

Segment operating margin is segment operating income expressed as a percentage of net revenues.

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A book-to-bill ratio that is greater than one indicates that our backlog is building and that we are likely to see increasing revenues in future periods.

Conversely, a book-to-bill ratio that is less than one

is an indicator of declining demand and may foretell declining revenues.

Conversely, a book-to-bill ratio that is less than one is

an indicator of declining demand and may foretell declining revenues.

We focus on our inventory turnover as a measure of how well we are managing our inventory.

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Pricing in our industry can be volatile.

Using our and publicly available data, we analyze trends and changes in average selling prices to evaluate likely future

Using our and publicly available data, we analyze trends and changes in average selling prices to evaluate likely future pricing.

The erosion of average selling prices of established products is typical for semiconductor products.

We attempt to offset this deterioration with ongoing cost reduction activities and new product introductions.

Our specialty passive

components are more resistant to average selling price erosion.

Our specialty passive components are

more resistant to average selling price erosion.

All pricing is subject to governing market conditions and is independently set by us.

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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 8 to our consolidated 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 8 to our consolidated

financial statements).

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

Revenues increased slightly versus the fourth fiscal quarter of 2021

primarily due to higher average selling prices.

Revenues decreased significantly versus the prior fiscal quarter, primarily due to lower volume.

The decrease versus the prior fiscal quarter is partially due to a sales catch-up experienced in the

third fiscal quarter of 2022 following the government mandated COVID-19 shut-down of our manufacturing facilities in Shanghai, People's Republic of China in the second fiscal quarter and the beginning of a distributor inventory correction in the

fourth fiscal of 2022.

We expect that the distributor inventory correction will continue in the first and second fiscal quarters of 2023.

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

Revenues decreased versus the fourth fiscal quarter of 2022 and versus the prior fiscal quarter primarily due to lower sales volume.

The book-to-bill ratio and backlog

were negatively impacted by the distributor inventory correction that began in 2022 and continued through 2023.

We continue to increase manufacturing capacity for critical product lines.

Average selling prices were stable

in the fourth fiscal quarter following broad price increases that we implemented in prior periods across the product portfolio to offset increased materials and transportation costs and general inflation.

Gross profit margin decreased versus the prior fiscal quarter primarily due to lower volume.

Gross profit margin increased versus the prior year quarter primarily due

to higher average selling prices.

Average selling prices decreased versus the fourth fiscal

quarter of 2022 and prior fiscal quarter.

Gross profit margin decreased versus the prior fiscal quarter and prior year quarter primarily due to lower volume.

The book-to-bill ratio in the fourth fiscal quarter of 2023 increased to 0.75 versus 0.63 in the third fiscal quarter of 2023.

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Segment operating margin

Stockholder Value

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.

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.

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.

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):

December 31, 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 Policy.

We repatriated $81.2 million (net

of taxes) to the United States from Israel during 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 made the determination during the fourth fiscal quarter of 2022 that substantially all unremitted earnings in Germany are no longer indefinitely reinvested and

recorded additional tax expense of $59.6 million.

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.

change in this indefinite reinvestment assertion will provide greater access to our worldwide cash balances to fund our growth plan and our Stockholder Return Policy, but will also increase our effective tax rate.

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 Stockholder Return Policy will remain in effect until such time as the Board votes to amend or rescind the policy.

Implementation of the Stockholder

Return Policy is subject to future declarations of dividends by the Board of Directors, market and business conditions, legal requirements, and other factors.

The policy sets forth our intention, but does not obligate us to acquire any

shares of common stock 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.

Acquisition Activity

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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”).

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.

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.

commercialize, such as MaxPower Semiconductor, Inc.

("MaxPower"), acquired in 2022, and key niche suppliers to vertically integrate our supply chain, such as Centerline Technologies, LLC, acquired in 2023.

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.

On November 8, 2023, we and Nexperia BV announced that we have entered into an agreement whereby we will acquire Nexperia’s wafer fabrication

facility and operations located in Newport, South Wales, U.K.

for approximately $177 million in cash, subject to customary post-closing adjustments.

The closing of the transaction is subject to U.K.

government review and customary closing

conditions, and is expected to occur in the first quarter of 2024.

On October 28, 2022, we acquired 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 SiC MOSFET products.

Its SiC 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, upon favorable resolution of certain technology licensing matters with a third party, and upon the disposition of MaxPower's investment in an equity affiliate.

The transaction also included possible contingent payments of up to $57.5 million, which would be payable upon the achievement of certain technology

milestones, upon favorable resolution of certain technology licensing matters with a third party, and upon the disposition of MaxPower's investment in an equity affiliate.

One of the contingencies was resolved in the fourth fiscal quarter of

2023, which resulted in no additional payments to the former employees and stockholders of MaxPower.

Significant developments occurred in another of the contingencies in January 2024.

Our estimate of the maximum possible contingent payments is

$17.5 million.

MaxPower is included in our MOSFETs segment.

The inclusion of this acquisition did not have a material impact on the Company's consolidated results for the year ended December 31, 2022.

On December 31, 2021, we acquired substantially all of the assets and certain liabilities of Barry Industries, a Massachusetts-based, privately-held manufacturer of

resistive products for $20.8 million.

Barry Industries is included in our Resistors segment.

The inclusion of this acquisition did not have an impact on the Company's consolidated results for the years ended December 31, 2022 and 2021.

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

The inclusion of this acquisition did not have a material impact on the Company's consolidated results for the years ended December 31, 2023 and 2022.

There is no assurance that we will be able to close the transaction for the Nexperia wafer fabrication facility, or identify and acquire additional suitable acquisition

candidates at price levels and on terms and conditions we consider acceptable.

See Note 2 to our consolidated financial statements.

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maintaining our break-even point (adjusted for acquisitions).

We seek to limit increases in selling, general, and administrative expenses to the rate of inflation, excluding foreign currency exchange effects and substantially independent of sales

volume changes.

We generally seek to limit increases in selling, general, and administrative expenses to the rate of inflation, excluding foreign currency exchange effects and substantially independent

of sales volume changes.

At constant fixed costs, we would expect each $1 million increase in revenues to increase our operating income by approximately $450,000 to $470,000.

Sudden changes in the business conditions, however, may not allow us to quickly

adapt our manufacturing capacity and cost structure.

Sudden changes in the business conditions, however, may not allow us to

quickly adapt our manufacturing capacity and cost structure.

During 2023, we implemented the Vishay Intertechnology, Inc.

2023 Long-Term Incentive Plan (the "2023 Plan") to enable us to recruit and

retain highly qualified employees, directors, consultants and other service providers, provide them with an incentive for productivity, and create an opportunity for them to share in the growth and value of the Company.

The 2023 Plan is the first

broad-based stock compensation program at Vishay in over 20 years.

This program increased operating expenses by $8.8 million in 2023 and is expected to increase operating expenses by between $7 million and $10 million in 2024 versus 2023.

Management believes such additional non-cash costs will enhance the long-term performance of the Company by providing selected participants with an incentive to improve the growth and profitability of the Company.

Also beginning in 2023, we made and are making significant investments in capital expenditures primarily for capital expansion projects outside of China,

which will increase depreciation expense.

At the same time, we are focusing on increasing our technical resources, adding additional customer-facing engineers, and intensifying our activities in R&D.

We have seen and expect to continue to see

an increase in operating expenses over the next couple of years as we add these engineering talents, fill gaps in our technology, and become a preferred supplier to more customers and more broadly sell our product portfolio.

Management believes such

additional costs will enhance our long-term performance by accelerating our growth.

Occasionally, our ongoing cost containment activities are not adequate and we must take actions to maintain our cost competitiveness.

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those foreign currencies.

The dollar was stronger during 2022 versus 2021, but weaker during 2021 versus 2020, with the translation of foreign currency revenues and expenses into U.S.

dollars decreasing reported revenues and expenses in 2022 versus 2021, but increasing reported revenues and

expenses in 2021 versus 2020.

The dollar was weaker during 2023 versus 2022, but stronger during 2022 versus 2021, with the translation of foreign currency revenues and expenses into U.S.

dollars increasing reported revenues and expenses in 2023 versus 2022, but decreasing

reported revenues and expenses in 2022 versus 2021.

Foreign Subsidiaries which use the U.S.

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in the local currency.

The cost of products sold and selling, general, and administrative expense for the year ended December 31, 2022

have been favorably impacted compared to 2021 by local currency transactions of subsidiaries which use the U.S.

dollar as their functional currency, while the cost of products sold and selling, general, and administrative expense for the year ended

December 31, 2021 were unfavorably impacted compared to 2020 by local currency transactions of subsidiaries which use the U.S.

The cost of products sold and selling, general, and administrative expense have been favorably impacted for the year ended December 31, 2023 compared to 2022 and for the year ended December 31, 2022 compared to 2021 by local currency transactions of subsidiaries which use the U.S.

dollar as their functional currency.

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customers during the period, inventory levels at the distributors, current and projected market conditions, and historical experience under the programs.

While we utilize a number of different methodologies to estimate the accruals, all of the

methodologies take into account sales levels to customers during the relevant period, inventory levels at the distributors, current and projected market trends and conditions, recent and historical activity under the relevant programs, changes in

program policies, and open requests for credits.

We utilize a number of different methodologies and consider several factors when estimating the

Some of the factors that we consider are sales levels to customers during the relevant period, inventory levels at the distributors, current and projected market trends and conditions, recent and historical activity under the relevant

programs, changes in program policies, and open requests for credits.

These procedures require the exercise of significant judgments.

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prices at which we believe the inventory can be sold.

Inventories are also adjusted for estimated obsolescence and written down to net realizable value based upon estimates of future demand, technology developments and market conditions.

Inventories are also adjusted for estimated obsolescence and written down to net realizable value based on age of the inventory and upon estimates of future demand, technology developments, and

market conditions.

See Note 1 to our consolidated financial statements for a description of our goodwill impairment tests.

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could increase the effective tax rate and may require the use of cash in the year of resolution.

federal income tax returns are under examination for the years ended December 31, 2017 through 2019.

The IRS may, however, ask for supporting documentation for

net operating losses for the years ended December 31, 2013 through 2016, which were utilized in the year ended December 31, 2017.

During 2022, certain tax examinations were concluded and certain statutes of limitations lapsed.

Our tax provision for those years includes adjustments related to the resolution of

these matters.

certain tax examinations were concluded and certain statutes of limitations lapsed.

Our tax provision for those years includes adjustments related to the resolution of these matters.

We settled an examination of our U.S.

federal income tax

returns for the periods ended December 31, 2017 through 2019.

Our federal income tax returns for subsequent years remain subject to examination.

The tax returns of significant non-U.S.

subsidiaries currently under examination are located in the following jurisdictions:

Germany (2017 through 2021), India (2004 through 2020), and Italy (2017 through 2019).

The Company and its

subsidiaries also file income tax returns in other taxing jurisdictions in the U.S.

and around the world, many of which are still open to examination.

subsidiaries currently under examination are located in the

following jurisdictions:

Israel (2021), Germany (2017 through 2021), India (2004 through 2021), and Philippines (2017 through 2022).

The Company and its subsidiaries also file income tax returns in other taxing jurisdictions in the U.S.

the world, many of which are still open to examination.

See Notes 1 and 5 to consolidated financial statements for additional information.

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Change attributable to:

Increase in volume

Change in volume

Increase in average selling prices

Foreign currency effects

Net revenues increased significantly in 2022 and 2021 versus the prior years.

We experienced good economic conditions while we increased critical manufacturing capacities through 2022.

We implemented broad price increases across

the product portfolio.

Net revenues increased versus 2021 primarily due to increases in volume and average selling prices.

Despite the inventory correction that we are experiencing, the long-term prospects for our business remain favorable, and we

continue to increase manufacturing capacities for critical product lines.

The decrease in net revenues in 2023 is primarily sales volume-driven, partially offset by increased average selling prices.

The increase in net revenues in 2022 was

primarily due to increased sales volume and average selling prices.

Gross Profit and Margins

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for the year ended December 31, 2022.

The increase in gross profit margin is primarily due to increased average selling prices and

increased sales volume.

Higher transportation and metals and materials costs negatively impacted the contributive margin.

The decrease in gross profit margin is primarily due to decreased sales volume.

Higher labor,

materials, and utilities costs also negatively impacted the gross profit margin.

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

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Change attributable to:

Increase in volume

Change in average selling prices

Change in volume

Increase in average selling prices

Foreign currency effects

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Segment operating margin

The MOSFETs segment net revenues increased significantly in 2022 versus the prior year.

The increase is primarily due to increased average selling prices and sales

The increase in net revenues was achieved despite 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, while we had no significant closures in 2021.

All regions and customer channels, particularly distribution customers in the Americas region, contributed to the increase.

The gross profit margin in 2022 increased versus the

prior year primarily due to increased average selling prices and sales volume, partially offset by significant cost inflation.

The segment operating margin increased versus the prior year primarily due to increased gross profit.

Net revenues of the MOSFETs segment increased slightly in 2023 versus the prior year.

The increase is primarily due to increased sales to automotive, power supply, and

industrial end market customers in the Europe region, partially offset decreased sales to customers in the Americas and Asia regions.

The gross profit margin in 2023 decreased versus the

prior year primarily due to higher utilities, labor, and repair and maintenance costs.

The segment operating margin decreased versus the prior year primarily due to decreased gross profit.

Increased segment SG&A expenses

primarily due to increased R&D activity, including those of recently acquired MaxPower, limited the increase.

Average selling prices increased versus the prior year due to the strategic price increases implemented beginning in the second half of 2021.

primarily due to acquisition-related expenses also contributed to the decrease.

Average selling prices increased versus the prior year.

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

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acquisition of MaxPower in the fourth fiscal quarter of 2022.

Our pending acquisition of Nexperia's Newport fab is expected to enhance the manufacturing capacity and capabilities of our MOSFETs segment.

Net revenues of the Diodes segment were as follows (dollars in thousands):

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Change attributable to:

Increase in volume

Change in volume

Increase in average selling prices

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Segment operating margin

Net revenues of the Diodes segment increased significantly in 2022.

The increase in net revenues was achieved despite various government mandated COVID-19 shut-downs in the People's Republic of China that impacted our operations in Tianjin, Shanghai, and Xi'an, while we had no significant closures in 2021.

increase is primarily due to increased average selling prices and sales volume, partially offset by negative foreign currency impacts.

End market customers in all regions and distribution customers in the Americas region contributed to the growth.

Gross profit margin increased versus the prior year primarily due to increased average selling prices, our cost reduction measures, and increases in sales volume,

partially offset by cost inflation.

Segment operating margin increased versus the prior year primarily due to increased gross profit.

The impact of a weaker euro decreased segment SG&A

The decrease in segment SG&A expenses was partially offset by cost inflation and increased R&D activities.

Net revenues of the Diodes segment decreased significantly in 2023.

The decrease is primarily due to decreased sales to distribution and EMS customers, power supply end market customers, and customers in the Americas and Asia regions, partially offset by increased sales to automotive end market customers.

Gross profit margin decreased versus the prior year primarily due to lower sales volume and higher materials, labor, and fixed costs, partially offset by higher

average selling prices.

Segment operating margin decreased versus the prior year primarily due to decreased gross profit.

Average selling prices increased versus the prior year.

Ongoing strong demand allowed us to continue with strategic price increases.

Positive customer and product mix

also contributed to the increased prices.

O ptoelectronic Components

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Change attributable to:

Change in volume

Decrease in volume

Increase in average selling prices

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Segment operating margin

The Optoelectronic Components segment net revenues decreased slightly versus the prior year.

The decrease was primarily due to the negative impact of a weaker euro and

decreased sales volume, partially offset by increased average selling prices.

Sales to customers in the Asia region, particularly consumer and telecommunications end market customers, decreased, partially offset by increased sales to customers in

the Americas region.

The gross profit margin increased versus the prior year.

The increase is primarily due to increased average selling prices, a more profitable product mix, and our cost

reduction measures, partially offset by cost inflation and lower sales volume.

The segment operating margin increased primarily due to the increase in gross profit.

Decreased segment SG&A expenses, primarily due to the weaker

euro, positively impacted the segment operating margin.

Net revenues of the Optoelectronic Components segment decreased significantly versus the prior year.

The decrease was primarily due to general consumer weakness that

impacted many of the products we sell.

The result was decreased sales to distribution customers and customers in all regions.

We expect long-term growth for this segment.

The gross profit margin decreased versus the prior year.

The decrease is primarily due to lower sales volume, higher materials, services, labor, and utilities costs,

and inventory and higher depreciation expense.

The segment operating margin decreased primarily due to the decrease in gross profit.

Average selling prices increased versus the prior year.

The high level of demand and cost inflation allowed us to continue to increase average selling prices for certain customers.

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

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Change attributable to:

Increase in volume

Change in volume

Increase in average selling prices

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Segment operating margin

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

All regions, particularly the Americas, contributed to the increase.

distributor and EMS customers and industrial end market customers increased significantly, partially offset by decreased sales to automotive end market customers.

The acquisition of Barry Industries in the fourth fiscal quarter of 2021 also

contributed to the increase in net revenues.

The gross profit margin increased versus the prior year.

The increase is due to increased sales volume, increased average selling prices, manufacturing efficiencies,

and cost reduction measures, partially offset by increased labor, materials, metals, and logistics costs.

Segment operating margin increased versus the prior year.

The increase is primarily due to increased gross profit.

Net revenues of the Resistors segment increased slightly versus the prior year.

The increase was primarily due to increased sales to military and aerospace, automotive,

and industrial end market customers and customers in the Europe region, partially offset by decreased sales to distribution customers.

The gross profit margin decreased versus the prior year.

The decrease is due to lower sales volume, higher labor and materials costs, and other inflationary impacts,

partially offset by increased average selling prices, lower metals and logistics costs, and favorable exchange rate impacts.

Segment operating margin decreased versus the prior year.

The decrease is primarily due to decreased gross profit.

Average selling prices increased versus the prior year.

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Change in volume

Change in average selling prices

Increase in average selling prices

Foreign currency effects

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Segment operating margin

Net revenues of the Inductors segment decreased slightly versus the prior year.

The Asia and Europe regions contributed to the decrease, while the Americas region

Sales to distributor customers and automotive and industrial end markets decreased, partially offset by increases to EMS customers and military and aerospace end market customers.

The gross profit margin decreased versus the prior year.

The decrease is primarily due to increased logistics, labor, and materials costs, manufacturing inefficiencies,

lower sales volume, and negative foreign currency impacts, partially offset by increased average selling prices and cost reductions.

Segment operating margin decreased versus the prior year.

The decrease is primarily due to decreased gross profit.

Average selling prices increased slightly versus the prior year.

Net revenues of the Inductors segment increased moderately versus the prior year.

The increase is primarily due to increased sales to EMS customers, medical,

automotive, and military and aerospace end market customers, and customers in the Americas and Europe regions, partially offset by decreased sales to distribution customers, industrial and telecommunications end market customers, and customers in the

The gross profit margin increased versus the prior year.

The increase is primarily due to increased average selling prices, higher sales volume, lower logistics and

metals prices, and positive foreign currency impacts, partially offset by higher labor and materials costs, other inflationary impacts, and start-up costs of a new manufacturing facility.

Segment operating margin increased versus the prior year.

The increase is primarily due to increased gross profit.

Average selling prices increased versus the prior year.

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.

We have greatly increased our manufacturing capacity for power inductors in

the past year.

Net revenues of the Capacitors segment were as follows (dollars in thousands):

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Change attributable to:

Increase in volume

Change in volume

Increase in average selling prices

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Segment operating margin

Net revenues of the Capacitors segment increased significantly versus the prior year.

Sales to the Americas and Asia regions increased, while sales to the Europe region

decreased slightly.

The increase is primarily due to increased sales to EMS customers and the industrial end market, partially offset by decreased sales to the automotive end market.

Net revenues of the Capacitors segment decreased slightly versus the prior year.

The decrease is primarily due to decreased sales to distribution and EMS customers and

customers in the Americas and Asia regions, partially offset by increased sales to industrial end market customers.

The gross profit margin increased versus the prior year.

The increase is due to increased sales volume, increased average selling prices, and positive impact of product

mix, partially offset by increased materials, metals, and labor costs and manufacturing inefficiencies.

The increase is due to increased average selling prices, positive impact of product mix, positive foreign

currency impacts, and lower metals, freight, and utility costs, partially offset by lower sales volume and higher labor and tantalum costs.

Segment operating margin increased versus the prior year.

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SG&A expenses for the year ended December 31, 2023

increased versus the year ended December 31, 2021 due to cost inflation.

SG&A expenses for the year ended December 31, 2022

includes $0.5 million of incremental net costs separable from normal operations directly attributable to the COVID-19 pandemic.

increased versus the year ended December 31, 2022 due to general inflation and higher compensation costs, including the implementation

of the 2023 Long-Term Incentive Plan in 2023.

Other Income (Expense)

2023 Compared to 2022

Interest expense for the year ended December 31, 2022 decreased by $0.4 million versus the year ended December

Interest expense for the year ended December 31, 2023 increased by $8.0 million versus the year ended December

The increase is primarily due to higher interest rates and higher average balances outstanding on the revolving credit

facility in 2023 prior to September 2023 when it was paid down to $0.

The following table analyzes the components of the line “Other” on the consolidated statements of operations (in thousands):

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Interest expense for the year ended December 31, 2022 decreased by $ 0.4 million versus the year ended December 31, 2021.

The decrease is primarily due to the elimination

of non-cash debt discount amortization upon the adoption of ASU No.

2020-06 effective January 1, 2021 and repurchases of convertible notes in the second and third fiscal quarters of 2020.

The following table analyzes the components of the line “Other” on the consolidated statements of operations (in thousands):

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items impacted our effective tax rate for each period presented.

These items were $20.0 million in 2022, $39.3 million in 2021, and $2.0 million in 2020.

These items were $20.0 million in 2022 and $39.3 million in 2021.

There were no unusual tax transactions that impacted the effective tax rate for the year ended December 31, 2023.

The effective tax rate for the year ended December 31, 2022 was impacted by $5.9 million of tax benefits recognized for changes in uncertain tax positions following the resolution of a tax audit, $59.6 million of tax

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million of tax benefits recognized due to changes in tax regulations.

We repatriated $104.1 million to the United States, and paid withholding and foreign taxes of $16.3 million in the year ended December 31, 2020, which completed the cash repatriation program that we initiated in 2017 in response to the TCJA enacted in the United States.

We recorded tax

benefits of $0.2 million during the year ended December 31, 2020 due to adjustments to remeasure the deferred taxes related to our cash

repatriation program, such as foreign currency effects, and to consider certain corporate reorganizational activities that impact repatriation.

The effective tax rate for the year ended December 31, 2020

was also impacted by a $1.6 million tax benefit recognized upon the repurchase of convertible debentures reflecting the reduction in deferred tax liabilities related to the special tax attributes of the convertible debentures and $3.8 million of net

tax expense recognized for changes in uncertain tax positions.

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

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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 21 years, and cash flows from operations in

excess of $100 million in each of the last 28 years.

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

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

Vishay has generated positive "free cash" in each of the past 26 years, and "free cash" in excess of $80 million in each of the last 21 years.

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 $484.3 million for the year ended December 31, 2022, as compared to

cash flows provided by operations of $457.1 million for the year ended December 31, 2021.

Cash flows provided by operating activities were $365.7 million for the year ended December 31, 2023, as compared to cash

flows provided by operations of $484.3 million for the year ended December 31, 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 during the five fiscal quarters beginning with

the fourth fiscal quarter of 2022 through the fourth fiscal quarter of 2023:

4th Quarter 2022

1st Quarter 2023

2nd Quarter 2023

3rd Quarter 2023

4th Quarter 2023

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

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.

Cash paid for property and equipment for the year ended December 31, 2023 was $329.4 million, as compared to $325.3 million for the year ended December 31, 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 year ended December 31, 2022 was negatively impacted by working capital changes, higher than usual capital expenditures, and cash taxes paid for repatriation.

We expect our business to continue to be a

reliable generator of free cash.

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

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.

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

in Israel are no longer indefinitely reinvested.

We recorded the additional tax expense during the fourth fiscal quarter of 2021 to accrue the claw-back tax on applicable earnings and withholding taxes necessary to distribute these approximately

$385.0 million of accumulated earnings to the United States.

We repatriated $81.2 million (net of taxes) to the United States in 2022 pursuant to this repatriation

We made the determination during the fourth fiscal quarter of 2022 that substantially all unremitted earnings in Germany are no longer indefinitely

We recorded additional tax expense during the fourth fiscal quarter of 2022 to accrue the $59.6 million of withholding taxes necessary to distribute these approximately $360.0 million of accumulated earnings to the United States.

These changes in this indefinite reinvestment assertion provide greater access to our worldwide cash balances to fund our growth plan and our Stockholder

Return Policy.

While the change in assertion provides access to these balances, these amounts will be repatriated only as needed.

The withholding taxes associated with any distribution to the United States is payable upon distribution.

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.

See “Stockholder Value” above for additional

To be well positioned to service our customers and to fully participate in growing markets, we have

increased and expect to maintain a relatively high level of capital expenditures for expansion in the mid-term.

We expect to invest approximately $450 million in 2024 and approximately $1.2 billion from 2023 to 2025 primarily for capital expansion

projects outside of China.

Free cash flow for the year ended December 31, 2023 decreased versus the year ended December 31, 2022 primarily due to decreased net earnings, increased transition and repatriation taxes paid, and a working capital increase.

expect that free cash flow will be negatively impacted by the expected high level of capital expenditures for expansion in 2023 - 2025 after which we expect to generate increasingly higher levels 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

The following table summarizes the components of net cash and short-term investments (debt) (in thousands) :

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Convertible senior notes, due 2025

Convertible senior notes, due 2030

Deferred financing costs

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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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statements of cash flows.

As of December 31, 2022, substantially all of our cash

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

We aligned the maturity dates of our cash equivalents and short-term investments in preparation of the planned cash repatriation that was completed in the fourth fiscal quarter of 2023, which resulted in a decrease in our

short-term investment balance.

As of December 31, 2023, 65.5% 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.

company, Vishay Intertechnology, Inc.

parent company,

Vishay Intertechnology, Inc.

A U.S.-domiciled subsidiary is expected to be the acquiring entity of Nexperia's wafer fabrication facility and operations in Newport, South Wales, U.K.

subsidiaries also have cash operating needs.

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

We expect that cash on-hand

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

development and capital expenditure plans.

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

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

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 $42 million outstanding at December 31, 2022.

We borrowed $759 million and repaid $717 million on the revolving credit facility during the

year ended December 31, 2022.

distribution of earnings from Israel and Germany to the United States will be used to fund our Stockholder Return Policy and the Nexperia transaction.

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.

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 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 no amounts outstanding at December 31, 2023.

We borrowed $501 million and repaid $543 million on the revolving credit facility during the year

ended December 31, 2023.

The average outstanding balance on our revolving credit facility calculated at fiscal month-ends was $93.3

million and the highest amount outstanding on our revolving credit facility at a fiscal month end was $185 million during the year ended December 31, 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

We used $185 million of the net proceeds from the convertible senior notes due 2030 to repay amounts outstanding on the revolving credit facility in the third fiscal quarter of 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 were based on a total leverage ratio.

Pursuant to the credit facility, the financial maintenance covenants include (a) an interest coverage ratio of not less than 2.00 to 1;

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

June 5, 2019.

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.

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 to 1.00).

We were in compliance with all financial covenants under the credit facility at December 31, 2023.

coverage ratio and leverage ratio were 32.78 to 1 and 0.65 to 1, respectively.

coverage ratio and net leverage ratio were 17.83 to 1 and 0.84 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 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 accelerated.

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

The applicable interest margin is based on our leverage ratio.

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

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 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;

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

outstanding pursuant to the credit facility could become immediately payable.

Additionally, our convertible senior notes due 2025 and due 2030 have cross-default provisions that could accelerate repayment in the event the indebtedness under the

credit facility is accelerated.

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 credit facility.

The repurchase of $370.2 million principal amount of convertible senior notes due 2025 in the third fiscal quarter of 2023 reduces the risk that the maturity date of

the credit facility will accelerate.

Borrowings under the credit facility bear interest at variable reference rates plus an interest margin.

The applicable interest margin is based on our

total leverage ratio.

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

dollar borrowings under the revolving credit agreement are based on SOFR (including a customary spread adjustment).

in foreign currencies bear interest at currency-specific reference rates plus an interest margin.

Based on our current total leverage ratio of 1.19

to 1, any new U.S.

dollar 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 subsidiaries;

and are guaranteed by certain significant subsidiaries.

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require us to incur additional debt.

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

The convertible senior notes due 2025 are not currently convertible.

Pursuant to the indenture governing the convertible senior notes due 2025 and the amendments thereto incorporated in the Supplemental Indenture dated December

23, 2020, we will cash-settle the principal amount of $1,000 per note and settle any additional amounts in shares of our common stock.

We intend to finance the principal amount of any converted notes using borrowings under our credit facility.

conversions have occurred to date.

No principal payments on our debt are due before 2025.

On September 12, 2023, we issued $750 million convertible senior notes due 2030.

We used the net proceeds from the issuance of these notes to repurchase

$370.2 million principal amount of convertible senior notes due 2025, to pay $94.2 million to enter into capped call transactions intended to mitigate the dilution risk of convertible senior notes due 2030 by synthetically increasing the conversion

price of the notes to approximately $43.98 per share, to repay amounts outstanding on our amended and restated credit facility, and for other general corporate purposes.

Prior to six months before the maturity date, our convertible senior notes due 2030 are convertible by the holders under certain circumstances.

convertible senior notes due 2030 are not convertible as of September 30, 2023 and will not be contingently convertible before the first fiscal quarter of 2024.

Pursuant to the indenture governing the convertible senior notes due 2030, we will

cash-settle the principal amount of $1,000 per note and settle any additional amounts in cash or shares of our common stock.

We intend to finance the principal amount of any converted senior notes due 2030 using borrowings under our credit

The transactions effectively refinanced the majority of the convertible senior notes due 2025 for five additional years at the same coupon interest rate,

reduced future interest expense due to the paydown of the revolving credit facility, and enhanced our U.S.

liquidity position to execute our growth initiatives.

The remaining convertible senior notes due 2025 are not currently convertible.

Pursuant to the indenture governing the convertible senior notes due 2025 and the amendments thereto incorporated in the Supplemental Indenture dated

December 23, 2020, we will cash-settle the principal amount of $1,000 per note and settle any additional amounts in shares of our common stock.

We intend to finance the principal amount of any converted notes using borrowings under our credit

No conversions have occurred to date.

In evaluating our liquidity and capital resources, we consider our outstanding commitments.

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Estimated costs to complete MOSFETs wafer fab

Remaining cost to acquire Newport wafer fab

TCJA transition tax

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Commitments for interest payments on long-term debt are cash commitments based on the stated maturity dates of each agreement and include fees under our revolving credit

facility, which expires on June 4, 2024.

facility, which expires on May 8, 2028.

Commitments for interest payments on long-term debt exclude non-cash interest expense related to the amortization of deferred financing costs.

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notes are based on the amounts outstanding as of December 31, 2023.

Additionally, interest commitments for our revolving credit

facility are based on the rate prevailing at December 31, 2022, but actual rates are variable and are certain to change over time.

The TCJA imposed a one-time transition tax on deferred foreign earnings, payable in defined increments over eight years.

As a result of this requirement, we expect to

pay $184.5 million, net of estimated applicable foreign tax credits, and after utilization of net operating loss and R&D and FTC Credit carryforwards.

As of December 31, 2022, $73.8 million has been paid.

Additionally, interest commitments for our revolving credit facility

are based on the rate prevailing at December 31, 2023, but actual rates are variable and are certain to change over time.

The TCJA imposed a one-time transition tax on deferred foreign earnings, payable in defined increments over eight years through 2025.

Estimated costs to complete the MOSFETs wafer fab include amounts that we are not contractually required to complete.

On November 8, 2023, Vishay and Nexperia BV announced that we have entered into an agreement whereby we will acquire Nexperia’s wafer fabrication facility

and operations located in Newport, South Wales, U.K.

for approximately $177.0 million in cash.

On November 8, 2023, we remitted $8.75 million to an escrow account as a deposit for this agreement.

The closing of the transaction is subject to U.K.

government review and customary closing conditions, and is expected to occur in the first quarter of 2024.

Our consolidated balance sheet at December 31, 2023

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throughout the world may be concluded, we cannot make reliable estimates of the timing of the remaining cash outflows relating to these liabilities.

Accordingly, we have classified the amount recorded as a current liability as payable within one

year, and the remaining uncertain tax positions are classified as payments due thereafter, although actual timing of payments may be sooner.

Accordingly, we have classified all non-current uncertain tax positions as payments due thereafter,

although actual timing of payments may be sooner.

Expected pension and postretirement plan funding is based on a projected schedule of benefit payments under the plans.

We maintain long-term foundry arrangements with subcontractors to ensure access to external front-end capacity for our semiconductor products.

The purchase commitments

in the table above represent the estimated minimum commitments for silicon wafers under these arrangements.

We maintain long-term arrangements with subcontractors, suppliers, and other business partners to ensure access to external capacity and supplies for certain products.

purchase commitments in the table above represent the estimated minimum commitments under these arrangements.

Our actual purchases in future periods are expected to be greater than these minimum commitments.

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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-K

Item 7. Management’s Discussion and Analysis