VISHAY INTERTECHNOLOGY, INC.
ANNUAL REPORT 2020
ANNUAL REPORT 2020
ABOUT VISHAY INTERTECHNOLOGY
For almost six decades we’ve
been building The DNA of tech.™
The Vishay journey began with one man, Dr. Felix Zandman, and a
revolutionary technology. From there we would grow and strengthen over
decades, arriving where we are today: one of the world’s most trusted
manufacturers of electronic components. From discrete semiconductors
to passive components, from the smallest diode to the most powerful
capacitor, Vishay’s breadth of products constitutes the very foundation that
brings modern technology to life, every day, for everyone.
We call it The DNA of tech.™
This DNA is more than infrastructure for today’s most vital electronic
products, it’s a platform to enable growth. Vishay is well-positioned
to propel such timely macroeconomic growth drivers as sustainability,
connectivity, and mobility. Through R&D, manufacturing, engineering,
quality, sales, and marketing, we generate the essential components that
enable inventors and innovators to create new generations of products—
ones that span many sectors: automotive, industrial, consumer, computing,
telecommunications, military & aerospace, and medical.
Together with the manufacturers of today’s and tomorrow’s most
compelling electronic innovations, names you know, we are enabling
next-level automation in factories, the electrification of the automobile,
5G network technology, and the rapid expansion of connectivity across
everything (IoT) to highlight a few areas of strong growth. This diversity of
opportunity is the reason Vishay has thrived, and why we are driven to be
the DNA behind the success of our customers and partners and to be part
of making a future that’s safer, sustainable, and more productive.
Acquisitions
Vishay has made a number of strategic acquisitions over the years.
These include Dale® Electronics, Draloric® Electronic, Sfernice, Sprague®
Electric, Roederstein®, Vitramon®, BCcomponents® (including Beyschlag®),
the Semiconductor Business Group of TEMIC® (Telefunken and Siliconix®),
the infrared component business of Infineon Technologies, General
Semiconductor®, selected product lines from International Rectifier®,
Huntington Electric, HiRel Systems, MCB Industrie, Holy Stone Polytech,
Capella Microsystems, UltraSource®, and Applied Thin-Film Products.
Vishay continues to explore opportunities for targeted acquisitions that
fit its business model.
2 Vishay Intertechnology, Inc.
FROM THE EXECUTIVES
No one expected the challenges and stresses we all have faced in 2020, but the outlook for
2021 is very encouraging for Vishay’s business and even more so for Vishay’s performance in
a strong environment.
I am thankful to report that we have largely been successful at minimizing the COVID-19 impact and
keeping our employees safe. Our front-line workers around the world have ensured continuity of
supply to our customers.
This year we started sharing Vishay’s story in a new way, which reflects feedback from in-depth
customer interviews that revealed how much Vishay is depended upon to be a reliable source of
essential electronic components. The opportunity exists to leverage the breadth and depth of our
product portfolio in solving customers’ design challenges. It is inspiring to be shaping tomorrow’s
innovations by empowering today’s inventors with one of the world’s largest portfolios of high quality,
highly reliable, energy-efficient electronic components. We’re proud to be the go-to manufacturer for
customers, allowing them to innovate with ease and confidence knowing that The DNA of tech™ is
behind them all the way.
Vishay remains firmly committed to driving stockholder value. We regard growth as the basis for doing
so. I am confident that the growth initiatives we are currently implementing will start to show results
mid and long term.
I am grateful to all members of the Vishay family for their hard work and dedication, especially in
these difficult worldwide conditions, and to our customers, vendors, strategic business partners, and
stockholders for their constant and tireless support.
Executive Chairman
of the Board
Marc Zandman
Chief Executive Officer
Dr. Gerald Paul
The year 2020 was for Vishay Intertechnology and its business partners completely
overshadowed by a new experience, the COVID-19 pandemic. From temporary plant
shutdowns in Asia and temporary shortages in the early part of the year, to drastic reactions by
automotive customers in the second quarter and a steep and broad recovery of orders in the
last months of the year, Vishay was able to maintain efficiencies while minimizing fixed costs and
then to quickly ramp back up again.
Once again, Vishay proved to be an excellent generator of “free cash” (the amount of cash
generated from operations in excess of capital expenditures and net proceeds from the sale of
assets)—we generated $192 million in “free cash” during 2020.
We continue to explore avenues to simplify our balance sheet and to benefit our stockholders.
During 2020 and early 2021, we completed our three-year program to retire our convertible
senior debentures due in 2040, 2041, and 2042. These instruments had been convertible
into more than 43 million shares of common stock. Also, during 2020, we opportunistically
repurchased $135 million in principal amount of our convertible senior notes at approximately
95.3% of face value. In addition, we entered into a supplemental indenture related to the
convertible notes due in 2025, which will effectively require Vishay to repay the principal amount
of any converted notes in cash. These actions reduce the potential dilutive impact of these
convertible instruments on our stockholders, and also provide us with the flexibility to better
adjust debt levels if necessary.
Vishay is very well-positioned in the two end markets, automotive and industrial, that are poised
to show strong growth for the foreseeable future. Vishay is also in the process of putting various
initiatives in place to accelerate our growth above and beyond the end market growth we are
currently experiencing. These initiatives range from strengthening our engagement with our
distribution partners to adding more focus on high growth market segments and applications.
I thank all of Vishay’s employees, customers, vendors, strategic business partners, and
stockholders for their continued faith in Vishay.
2020 Annual Report
3
ENABLING
TOMORROW’S INNOVATIONS
In 2020, Vishay adopted a new brand proposition, The DNA of tech,™
that speaks to the Company’s remarkable breadth of products,
continued commitment to customer relationships, and the invaluable
resource for innovation that Vishay has become for almost six decades
in business. In the following sections, we highlight some of the ways in
which Vishay brings innovation to life by enabling designers to create
next-generation products.
4 Vishay Intertechnology, Inc.
Enabling smaller end products
Long before wearable electronics were invented,
it was possible to imagine a communications
device that could be worn in the ear or on the
wrist. Vishay has helped to make the dream a
reality with successive generations of smaller
and smaller components that can do more
in less space. We achieve miniaturization by
various techniques, such as making more
efficient use of silicon and resistive elements,
or by reducing component height, for which
our low profile inductors offer an outstanding
example. Without components such as these
it would be possible to imagine smartphones,
smartwatches, and wireless Bluetooth earbuds,
but impossible to actually create them.
Making more efficient
use of customer
engineering resources
To bring products to market quickly, innovative
companies need to deploy their engineering
resources as efficiently as possible. Vishay
helps our customers reach this goal in several
ways. For example, we provide a wide range
of tools that help customer engineers quickly
perform the calculations they need to choose
or implement components for their designs—
making short work of tasks like proper sizing of
a remote control receiver window, or selecting
the best component for an application based on
a range of design parameters or simulation data.
Vishay also helps speed time to market with
products like our microBUCK® and microBRICK®
DC/DC converters, which give customers a
pre-designed, scalable solution that eliminates
the need to design these essential circuits from
the ground up.
Using energy more efficiently
The need for energy efficiency was once most important in
handheld and portable systems. Today it has become a key
design goal for an ever-wider range of electronics. Driving
this evolution is the growing proportion of the power budget
attributable to electronics in, for example, automotive systems,
as well as the cost of powering electronics in facilities like data
centers, which has become a significant operational expense.
Vishay enables innovation in servers, telecom switches, game
consoles, all types of vehicles, and a huge range of handheld
and portable systems, with products that use as little energy
as possible to perform supporting functions such as power
management, power conversion, energy storage, filtering, and
many more.
Meeting regulatory requirements without
compromising performance
Regulatory goals such as sustainability and care for the
environment form part of the context in which all technological
innovation takes place. Vishay is constantly working to remove
obstacles to innovation by giving customers the performance
they need without using prohibited substances anywhere in our
manufacturing processes or in our final products. To take one
example, in 2020 we transitioned our NTC lug thermistors to a
100% lead (Pb)-free construction. By meeting the “RoHS with no
exemptions” standard, these products can be used by customers
with regulatory confidence in a wide range of applications where
temperature measurement is needed.
2020 Annual Report
5
ENABLING
TOMORROW’S INNOVATIONS
Working reliably in high
temperature, high humidity
environments
When considering high temperature, high
humidity conditions for electronics, the first
environment that may come to mind is under
the hood of an automobile. However, many
other applications meet this criterion — from
down-hole drilling to industrial automation
systems. Vishay has developed its experience
and expertise in high temperature, high humidity
capable components over five decades, helping
to enable innovations in systems destined for
the most extreme environments on earth and
beyond. In 2020, for example, we introduced
new generations of high temperature aluminum
capacitors, inductors, thermistors, and DC-link
film capacitors that are enabling innovation in
automotive designs as well as in such diverse
applications as solar farms, wind energy
generators, industrial power supplies, motor
drives, and welding equipment.
Making electronic systems more
responsive to human inputs
Much of the innovation in electronics is focused
on making consumer, vehicle, and industrial
electronic systems easier to use. A key factor
for ease of use is the real-world user interface,
for which Vishay has made many innovative
contributions with its sensor products.
Examples include tiny sensors in earbuds and
smartphones that turn functions on and off,
and proximity sensors that make touchscreens
respond more accurately to user inputs. Gesture
sensors, which Vishay supplies to Tier-1
automotive customers, not only make vehicle
infotainment systems easier to use, they help
reduce distracted driving.
6 Vishay Intertechnology, Inc.
ENABLING
TOMORROW’S INNOVATIONS
Preventing overheating
Component overheating is not only a constant
design challenge in under the hood automotive
applications, but also in products like smartphones,
where the thermal budget needs to be carefully
managed to ensure a comfortable user experience. In
these environments, the concern is often less about
components with high temperature ratings and more
about preventing heat from being generated in the
first place. Vishay’s expertise in thermally efficient
components is helping our customers find innovative
solutions to problems from hotspots on personal
electronics to efficiently recharging the batteries in
electric vehicles.
Supporting innovation
for sustainability
All of Vishay’s customers are pursuing environmental
sustainability on multiple fronts, from reducing the
carbon footprint of their products to avoiding the
use of harmful chemicals everywhere in their supply
chains. More specifically, Vishay products enable
innovation in the actual systems that are making
alternative sources of energy more reliable and
practical, and conventional sources of energy more
efficient. On the one hand are products tailored for
energy harvesting systems like solar inverters, such
as high voltage silicon carbide diodes that maintain
their efficiency regardless of changes in temperature.
On the other hand are products like a high voltage
MOSFET that helps to make AC power delivery more
efficient for medical and industrial systems. In reality,
Vishay enables innovation throughout the power grid
and in countless systems that are helping to reduce
fossil fuel consumption in particular, and the human
impact on the environment in general.
2020 Annual Report
7
VISHAY’S BLUE CHIP
CUSTOMERS AND
DISTRIBUTORS
Jabil
Lear
RECENT INDUSTRY
AWARDS
Raytheon Supplier Excellence Award 2019
TTI 2019 Supplier Excellence Award
AspenCore 2020 World Electronics
LG Electronics
Achievement Award
Magneti Marelli
Elecfans China Artificial Intelligence
Medtronic
Nexty
Nokia
Plexus
Innovation Excellence Award 2020
Elecfans China IoT Innovation Award 2020
BIS INFOTECH Excellence and Technovation Award 2020
Top 10 Power Product Award 2019
ABB
Apple
Aptiv
Arrow
Asus
Avnet
BAE Systems
Bosch
Boston Scientific
Quanta
BYD
Celestica
Cisco
Continental
Delta
Denso
Digi-Key
Ericsson
Flex
Foxconn
Future
Raytheon
Rutronik
Samsung
Sanmina
Schneider
Seagate
Siemens
Sony
Tesla
TTI
Valeo
General Electric
Weikeng
WPG
ZF Group
…and others
…and others
Gigabyte
Harman
Hella
Hella
Honeywell
Honeywell
Hyundai
Hyundai
Vishay Intertechnology, Inc.
8 Vishay Intertechnology, Inc.
DRIVING
STOCKHOLDER VALUE
Vishay is firmly committed to driving stockholder value.
It accomplishes this through organic growth that is
supplemented by targeted acquisitions, a regular cash
dividend program, and opportunistic stock buybacks, while
at the same time maintaining a prudent capital structure.
Vishay continues to be a reliable generator of “free cash”
(the amount of cash generated from operations in excess
of capital expenditures and net proceeds from the sale of
assets). Vishay has consistently generated in excess of
$200 million in cash from operations in each of the past
nineteen years.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(cid:1409)(cid:1409)(cid:1409)(cid:1409) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
(cid:1407) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-7416
Vishay Intertechnology, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
38-1686453
(IRS employer identification no.)
63 Lancaster Avenue
Malvern, Pennsylvania 19355-2143
(Address of principal executive offices)
(610) 644-1300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.10 per share
Trading symbol
VSH
Name of exchange on which registered
New York Stock Exchange LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1409)(cid:1409)(cid:1409)(cid:1409) No (cid:1386)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1386) No (cid:1409)(cid:1409)(cid:1409)(cid:1409)
Note – Checking the box above will not relieve any registrant required to file reports under Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:1409)(cid:1409)(cid:1409)(cid:1409) No (cid:1386)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes (cid:1409)(cid:1409)(cid:1409)(cid:1409) No (cid:1386)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “ large
accelerated filer,” “ accelerated filer,” “ smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
(cid:1409)(cid:1409)(cid:1409)(cid:1409)
(cid:1386)
Accelerated filer
Smaller reporting company
Emerging growth company
(cid:1386)
(cid:1407)(cid:1407)(cid:1407)(cid:1407)
(cid:1407)(cid:1407)(cid:1407)(cid:1407)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. (cid:1386)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:1409)(cid:1409)(cid:1409)(cid:1409)
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1407)(cid:1407)(cid:1407)(cid:1407) No (cid:1409)(cid:1409)(cid:1409)(cid:1409)
The aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently
completed second fiscal quarter ($14.87 on July 4, 2020), assuming conversion of all of its Class B common stock held by non-affiliates into common stock of the registrant, was $1,977,000,000. There is no
non-voting stock outstanding.
As of February 22, 2021, registrant had 132,633,616 shares of its common stock and 12,097,148 shares of its Class B common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement, which will be filed within 120 days of December 31, 2020, are incorporated by reference into Part III.
This page intentionally left blank.
Vishay Intertechnology, Inc.
Form 10-K for the year ended December 31, 2020
CONTENTS
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Information About Our Executive Officers
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
SIGNATURES
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019, and 2018
Notes to the Consolidated Financial Statements
4
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62
F-2
F-4
F-6
F-7
F-8
F-9
F-10
3
Item 1.
BUSINESS
Our Business
PART I
Vishay Intertechnology, Inc. (“Vishay,” the “Company,” “we,” “us,” or “our”) manufactures one of the world’s largest portfolios of discrete semiconductors and
passive electronic components that support innovative designs in the automotive, industrial, computing, consumer, telecommunications, military, aerospace, and
medical markets. Serving customers worldwide, Vishay brands itself as The DNA of tech.™
Semiconductors include MOSFETs, diodes, and optoelectronic components. Passive components include resistors, inductors, and capacitors. Our semiconductor
components are used for a wide variety of functions, including power control, power conversion, power management, signal switching, signal routing, signal
blocking, signal amplification, two-way data transfer, one-way remote control, and circuit isolation. Our passive components are used to restrict current flow,
suppress voltage increases, store and discharge energy, control alternating current (“AC”) and voltage, filter out unwanted electrical signals, and perform other
functions.
The Vishay Story
For almost six decades we have been building what we call The DNA of tech.TM
The Vishay journey began with one man, the late Dr. Felix Zandman, and a revolutionary technology. In the 1950’s, Dr. Felix Zandman was issued patents for his
PhotoStress® coatings and instruments, used to reveal and measure the distribution of stresses in structures such as airplanes and cars under live load conditions.
His research in this area led him to develop Bulk Metal® foil resistors – ultra-precise, ultra-stable resistors with performance exceeding any other resistor available
to date.
In 1962, Dr. Zandman, with a loan from the late Alfred P. Slaner, founded Vishay to develop and manufacture Bulk Metal foil resistors. Concurrently, J.E. Starr
developed foil resistance strain gages, which also became part of Vishay. Throughout the 1960’s and 1970’s, Vishay established itself as a technical and market
leader in foil resistors, PhotoStress products, and strain gages.
From that beginning, we grew and strengthened our business both organically and through strategic passive component acquisitions beginning in 1985 and
semiconductor acquisitions beginning in the late 1990’s. From discrete semiconductors to passive components; from the smallest diode to the most powerful
capacitor, Vishay manufactures a breadth of products which we call The DNA of tech.™
Through R&D, manufacturing, engineering, quality, sales and marketing, we generate a variety of components that support inventors and innovators creating new
generations of products spanning many sectors: automotive, industrial, computing, consumer, telecommunications, military, aerospace, and medical.
Together with major manufacturers of electronic products worldwide, we are supporting next level automation in multiple areas, including factories, the
electrification of the automobile, 5G network technology, and the rapid expansion of connectivity across everything (IoT).
We continue to implement Dr. Zandman’s vision, strategy, and culture as we work tirelessly to enhance value for our stockholders.
Vishay was incorporated in Delaware in 1962 and maintains its principal executive offices at 63 Lancaster Avenue, Malvern, Pennsylvania 19355-2143. Our
telephone number is (610) 644-1300.
4
Our Competitive Strengths
Global Technology Leader
As industry evolves, The DNA of tech™ evolves. We were founded based on the inventions of Dr. Felix Zandman and we continue to emphasize technological
innovation as a driver of growth. Many of our products and manufacturing techniques, technologies, and packaging methods have been invented, designed, and
developed by Dr. Zandman, our engineers, and our scientists. Our components today are smaller, faster, and more reliable than in the past, helping our customers
to be more inventive and evolve their businesses. Our components are used by virtually all major manufacturers of electronic products worldwide in the
automotive, industrial, computing, consumer, telecommunications, military and aerospace, and medical markets. They are found inside products and systems used
every day, from automobiles to airplanes, power grids, phones, and pacemakers. We are currently a worldwide technology and market leader in wirewound and
other power resistors, leaded film resistors, thin film SMD resistors, power inductors, wet and conformal-coated tantalum capacitors, capacitors for power
electronics, power rectifiers, low-voltage power MOSFETs, and infrared components.
Research and Development Provides Customer-Driven Growth Solutions
We maintain strategically placed application and product support centers where proximity to customers and our manufacturing locations enables us to more easily
gauge and satisfy the needs of local markets. The breadth of our product portfolio along with the proximity of our field application engineers to customers provides
increased opportunities to have our components selected and designed into new end products by customers in all relevant market segments. We also maintain
research and development personnel and promote programs at a number of our production facilities to develop new products and new applications of existing
products, and to improve manufacturing processes and technologies. We plan to grow our business and increase earnings per share, in part, through accelerating
the development of new products and technologies and increasing design-in opportunities by expanding our technical resources for providing solutions to
customers.
Operational Excellence
We are a leading manufacturer in our industry, with a broad product portfolio, access to a wide range of end markets and sales channels, and geographic diversity.
We have solid, well-established relationships with our customers and strong distribution channels. Our senior management team is highly experienced, with deep
industry knowledge. Over the past two decades, our management team has successfully restructured our company and integrated several acquisitions. We can
adapt our operations to changing economic conditions, as demonstrated by our ability to remain profitable and generate cash through the volatile economic cycle of
the recent past.
Broad Market Penetration
We have one of the broadest product lines of discrete semiconductors and passive components among our competitors. Our broad product portfolio allows us to
penetrate markets in all industry segments and all regions, which reduces our exposure to a particular end market or geographic location. We plan to grow our
business and increase earnings per share, in part, through improving market penetration by expanding manufacturing facilities for our most successful products,
increasing technical resources, and developing markets for specialty products in Asia. See Note 15 to our consolidated financial statements for net revenues by
region and end market.
Strong Track Record of Growth through Acquisitions
Since 1985, we have expanded our product line through various strategic acquisitions, growing from a small manufacturer of precision resistors and resistance strain
gages to one of the world’s largest manufacturers and suppliers of a broad line of electronic components. We have successfully integrated the acquired companies
within our existing management and operational structure, reducing selling, general, and administrative expenses through the integration or elimination of redundant
sales and administrative functions, creating manufacturing synergies, while improving customer service. We plan to grow our business and increase earnings per
share, in part, through targeted acquisitions. We have often targeted high margin niche business acquisitions. We also target strategic acquisitions of businesses
with technology and engineering capabilities that we can use to grow our business.
Strong Free Cash Flow Generation
We refer to the amount of cash generated from operations in excess of our capital expenditure needs and net of proceeds from the sale of assets as “free cash” (see
"Overview" included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for "free cash" definition and
reconciliation to generally accepted accounting principles ("GAAP")). Due to our strong operational management, cost control measures, efficient capital
expenditures, broad product portfolio, and strong market position, we have generated positive “free cash” in each of the past 24 years and “free cash” in excess of
$80 million in each of the past 19 years. We expect the benefits of our restructuring and other cost cutting measures (see “Cost Management” included in Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) to contribute to our “free cash” generation going forward.
Financial Strength and Flexibility
As of December 31, 2020, our cash and short-term investment balance exceeded our debt balance by $383.5 million. We also maintain a credit facility, which
provides a revolving commitment of up to $750 million through June 5, 2024, which was substantially all available as of December 31, 2020. Our net cash position
and short-term investment balance, available revolving commitment, and strong “free cash” flow generation provide financial strength and flexibility and reduce our
exposure to future economic uncertainties.
5
Our Key Challenges
Economic Environment
Our business and operating results have been and will continue to be impacted by the global economy and the local economies in which our customers operate.
Our revenues are dependent on end markets that are impacted by fluctuating consumer and industrial demand, and our operating results can be adversely affected
by reduced demand in those markets.
Competition
Our business is highly competitive worldwide, with low transportation costs and few import barriers. Our major competitors, some of which are larger than us, have
significant financial resources and technological capabilities. To continue to grow our business successfully, we need to continually develop, introduce, and market
new and innovative products, modify existing products, respond to technological change, and customize certain products to meet customer requirements.
Continuous Innovation and Protection of Intellectual Property
Our ability to compete effectively with other companies depends, in part, on our ability to maintain the proprietary nature of our technology. Although we have been
awarded, have filed applications for, or have licenses to use, numerous patents in the United States and other countries, there can be no assurance concerning the
degree of protection afforded by these patents or the likelihood that pending patents will be issued.
Continuing to Grow through Acquisitions
Our long-term historical growth in revenues and net earnings has resulted in large part from our strategy of growth through acquisitions. For this strategy to remain
successful, we need to continue to identify attractive and available acquisition candidates, complete acquisitions on favorable terms, and integrate new businesses,
manufacturing processes, employees, and logistical arrangements into our existing management and operating infrastructure.
Recent Events: COVID-19 Pandemic
Our business has been adversely impacted by the widespread global outbreak of COVID-19. Impacts have included disruptions in our ability to manufacture
products and disruptions in the operations of our customers and modes of shipping. To continue to be successful, we will need to continue to adapt our business
and operations for the impacts of the COVID-19 pandemic and potential future coronavirus outbreaks and the mitigation efforts by governments to attempt to
control their spread.
Recent Events: Global Trade Disruption
Established global trade agreements and procedures are being challenged, particularly by the U.S. government. Trade disputes have resulted in tariffs and other
trade restrictions including import / export prohibitions. Disruptions to global trade could result in customers seeking different sources of product and reducing our
revenues, or requiring us to seek different sources of supply and increasing our costs. New or revised trade agreements could negatively impact profitability or
require changes in operations in the long-term. We remain cognizant of these challenges and seek to minimize their effects whenever possible.
For a more detailed discussion of the risks and uncertainties inherent in our business, which could materially and adversely affect our business, results of operations
or financial condition, see “Risk Factors” in Item 1A.
6
Key Business Strategies
Since our first acquisition in 1985, we have pursued a business strategy that principally consists of the following elements:
Invest in Innovation to Drive Growth
We plan to continue to use our research and development (“R&D”), engineering, and product marketing resources to continually roll out new and innovative
products. As part of our plan to foster intensified internal growth, we have increased our worldwide R&D and engineering technical staff, and increased our
technical field sales force in Asia to increase opportunities to design-in our products in local markets. Our ability to react to changing customer needs and industry
trends will continue to be key to our success. We intend to leverage our insights into customer demand to continually develop new innovative products within our
existing lines and to modify our existing core products to make them more appealing, addressing changing customer needs and industry trends.
We are directing increased funding and are focusing on developing products to capitalize on the connectivity, mobility, and sustainability growth drivers of our
business.
Cost Management
We place a strong emphasis on controlling our costs. We focus on controlling fixed costs and reducing variable costs. When our ongoing cost management
activities are not adequate, we take actions to maintain our cost competitiveness including restructuring our business to improve efficiency and operating
performance.
Growth through Strategic Acquisitions
We plan to continue to expand within the electronic components industry, through the acquisition of other manufacturers of electronic components that have
established positions in major markets, reputations for product innovation, quality, and reliability, strong customer bases, and product lines with which we have
substantial marketing and technical expertise.
Customer Service Excellence
We maintain significant production facilities in those regions where we market the bulk of our products in order to enhance the service and responsiveness that we
provide to our customers. We aim to further strengthen our relationships with customers and strategic partners by providing broad product lines that allow us to
provide “one-stop shop” service, whereby they can streamline their design and purchasing processes by ordering multiple types of products.
Our growth plan was designed based on the tenets of the key business strategies listed above.
7
Products
We design, manufacture, and market electronic components that cover a wide range of functions and technologies. Our products include both commodity and
non-commodity products in which we believe we enjoy a good reputation and strong brand recognition, including our Siliconix, Dale, Draloric, Beyschlag, Sfernice,
MCB, UltraSource, Applied Thin-Film Products, IHLP®, HiRel Systems, Sprague, Vitramon, Roederstein, ESTA, and BCcomponents brands. We promote our
ability to provide “one-stop shop” service to customers, whereby they can streamline their design and purchasing processes by ordering multiple types of products
from Vishay. Our technical sales force consisting of field application engineers offers customers the complete breadth of the Vishay portfolio for their applications.
We aim to use this broad portfolio to increase opportunities to have our components selected and “designed in” to new end products.
Product Segments
Our products can be divided into two general classes: semiconductors and passive components. Semiconductors are sometimes referred to as “active components”
because they require power to function whereas passive components do not require power to function. Our semiconductor and passive components products are
further categorized based on their functionality for financial reporting purposes.
Semiconductors
Our semiconductor products include metal oxide semiconductor field-effect transistors ("MOSFETs"), diodes, and optoelectronic components. Semiconductors
are typically used to perform functions such as switching, amplifying, rectifying, routing, or transmitting electrical signals, power conversion, and power management.
MOSFETs Segment
MOSFETs function as solid state switches to control power. Our MOSFETs business includes both the commodity and non-commodity markets in which we
believe that we enjoy a good reputation and strong brand recognition (Siliconix). MOSFETs applications include mobile phones, notebook and desktop
computers, tablet computers, digital cameras, televisions, DC/DC and AC/DC switch mode power supplies, solar inverters, automotive and industrial systems. We
are a leader in low-voltage TrenchFET MOSFETs and also offer high-voltage MOSFETs. Our MOSFETs product line includes low- and medium-voltage
TrenchFET MOSFETs, high-voltage planar MOSFETs, high voltage Super Junction MOSFETs, power integrated circuits (power ICs), and integrated function
power devices. We are one of the technology leaders in MOSFETs, with a tradition of innovation in wafer design, packaging, and performance.
Diodes Segment
Diodes route, regulate, and block radio frequency, analog, and power signals; protect systems from surges or electrostatic discharge damage; or provide
electromagnetic interference filtering. Our Diodes business is a solid business with a strong market presence in both the commodity and non-commodity markets.
The products that comprise our Diodes business represent our broadest product line and include rectifiers, small signal diodes, protection diodes, thyristors/SCRs
and power modules. The primary application of rectifiers, found inside the power supplies of virtually all electronic equipment, is to derive DC power from the AC
supply. Vishay is the worldwide leader in rectifiers, having a broad technology base and a good position in automotive, industrial, computing and consumer
markets. Our rectifier innovations include TMBS® using Trench MOS barrier Schottky rectifier technology, which reduces power loss and improves the efficiency
of end systems and eSMP®, the best in class high-current density surface mount packages. Our wide selection of small signal diodes consist of the following
functions: switching, tuning, band-switching, RF attenuation and voltage regulation (Zener). They are available in various glass and plastic packaging options and
generally are used in electronic circuits, where small currents and high frequencies are involved. Vishay is also one of the market leaders for TVS (transient voltage
suppressor) diodes. The portfolio of protection diodes includes ESD protection and EMI filter. Our thyristors or SCR (silicon-controlled rectifiers) are very
popular in the industrial high-voltage AC power control applications. The fast growing markets of solar inverter and HEV/EV are the focus of our power modules
business (IGBT or MOSFET modules). These modules can be customized to fit in different customer design requirements.
Optoelectronic Components Segment
Optoelectronic components emit light, detect light, or do both. Our Optoelectronic Components business has a strong market presence in both the commodity and
non-commodity markets. Our broad range of standard and customer specific optoelectronic components includes infrared (“IR”) emitters and detectors, IR
remote control receivers, optocouplers, solid-state relays, optical sensors, light-emitting diodes (“LEDs”), 7-segment displays, and IR data transceiver modules
(IrDA®). Our IR remote control receivers are designed for use in infrared remote control, data transmission, and light barrier applications in end products including
televisions, set-top boxes, notebook computers, and audio systems. We are the leading manufacturer of IR remote control receivers. Our optocouplers electrically
isolate input and output signals. Uses include switch-mode power supplies, consumer electronics, telecommunications equipment, solar inverters, and industrial
systems. Our IR data transceiver modules are used for short range, two-way, high-speed, and secure wireless data transfer between electronic devices such as
home medical appliances, mobile phones, industrial data loggers, and metering. Our optical sensors product line was considerably strengthened by our acquisition
of Capella in 2014. Our optical sensors products include ambient light sensors, optical encoders, integrated photodiode and I/V amplifiers, proximity sensors,
color sensors, and UV sensors. Applications include telecommunications, mobile phones, smartphone, handheld devices, digital cameras, laptops, desktop
computers, LED backlighting, office automation equipment, household electrical appliance and automotive electronics. Our LEDs are designed for backlighting and
illumination in automotive and other applications. Our LEDs include ultra-bright as well as small surface-mount packages, with products available in all standard
colors including white.
8
Passive Components
Our passive components include resistors, inductors, and capacitors. Passive components are used to store electrical charges, to limit or resist electrical current,
and to help in filtering, surge suppression, measurement, timing, and tuning applications.
Resistors Segment
Resistors impede electric current. Resistors are basic components used in all forms of electronic circuitry to adjust and regulate levels of voltage and current. Our
Resistors business is our original business. We maintain the broadest portfolio of resistor products worldwide. Under current market conditions, the business is
solid, predictable, and growing at relatively stable selling prices. We are a market leader with a strong technology base, many specialty products, and strong brand
recognition (such as our Dale, Draloric, Beyschlag, and Sfernice brands). We focus on higher value markets in specialized industries, while maintaining a complete
portfolio of commodity products. We do not aim to be the volume leader in commodity markets.
Resistors vary widely in precision and cost, and are manufactured from numerous materials and in many forms. Linear resistive components are classified as
variable or fixed, depending on whether or not their resistance is adjustable. Non-linear resistors function by varying in resistance under influence of temperature
(thermistors) or voltage (varistors). They can be used in temperature-measuring applications or as current or voltage-limiting devices. We manufacture virtually all
types of fixed resistors, both in discrete and network forms, as well as many variable types.
Vishay resistor innovations include Power Metal Strip® technology. These resistors feature very low resistance and are used to measure changes in current flow
(current sensing) or divert current flow (shunting).
Inductors Segment
Inductors also impede electric current. Inductors use an internal magnetic field to change alternating current phase and resist alternating current. While part of our
traditional business, the inductors product line has grown significantly in recent years. We are a market leader with a strong technology base, many specialty
products, and strong name recognition (such as our IHLP® and HiRel Systems brands). We focus on higher value markets in specialized industries, such as the
industrial, automotive, military, and medical end markets.
Inductor applications include controlling AC current and voltage, filtering out unwanted electrical signals, and energy storage. Vishay inductor innovations include
our patented IHLP low-profile, high-current inductor technology with industry-leading specifications. Our low-profile, high-current inductors save circuit board
space and power in voltage regulator module (“VRM”) and DC to DC converter applications. In addition, we are a worldwide leader in custom magnetic solutions
focusing on high performance and high reliability.
Capacitors Segment
Capacitors store energy and discharge it when needed. Our Capacitors business consists of a broad range of reliable, high-quality products. We have a strong
presence worldwide in specialty markets based on our product performance and reliability and strong brand recognition (including our Sprague, Vitramon,
Roederstein, BCcomponents, and ESTA brands). We focus on higher value markets in specialized industries, while maintaining a complete portfolio of commodity
products. We do not aim to be the volume leader in commodity markets. Capacitors are used in almost all electronic circuits. They store energy and discharge it
when needed. Important applications for capacitors include electronic filtering for linear and switching power supplies; decoupling and bypass of electronic signals
for integrated circuits and circuit boards; and frequency control, timing and conditioning of electronic signals for a broad range of applications.
We manufacture products based on all major capacitor technologies: tantalum (molded chip tantalum, coated chip tantalum, solid through-hole tantalum, wet
tantalum, and polymer), ceramic (multilayer chip and ceramic disc), film, power, heavy-current, and aluminum electrolytic. Our capacitors range from tiny surface-
mount devices for hearing aids and mobile devices to large power correction capacitors used in renewable energy, heavy industry, and electrical power grids. We
are a recognized technology leader in many product ranges, securing our strong position in military and medical markets, and in a wide range of industrial and
automotive applications. Our wet tantalum and MicroTan™ technologies are market leaders.
9
Military Qualifications
We have qualified certain of our products under various military specifications approved and monitored by United States government agencies, and under certain
European military specifications. Qualification levels are based in part upon the rate of failure of products. In order to maintain the classification level of a product,
we must continuously perform tests on the product and the results of these tests must be reported to the government agencies. If the product fails to meet the
requirements for the applicable classification level, the product’s classification may be reduced to a lower level. During the time that the classification level is
reduced for a product with military application, net revenues and earnings attributable to that product may be adversely affected.
Manufacturing Operations
In order to better serve our customers, we maintain production facilities in locations where we market the bulk of our products, such as the United States,
Germany, and Asia. To optimize production efficiencies, we have whenever practicable established manufacturing facilities in countries, such as India, Israel,
Malaysia, Mexico, the People’s Republic of China, and the Philippines, where we can benefit from lower labor costs and also benefit from various government
incentives, including tax relief.
One of our most sophisticated manufacturing operations is the production of power semiconductor components. This manufacturing process involves two phases of
production: wafer fabrication and assembly (or packaging). Wafer fabrication subjects silicon wafers to various thermal, metallurgical, and chemical process steps
that change their electrical and physical properties. These process steps define cells or circuits within numerous individual devices (termed “dies” or “chips”) on
each wafer. Assembly is the sequence of production steps that divides the wafer into individual chips and encloses the chips in structures (termed “packages”) that
make them usable in a circuit. Both wafer fabrication and assembly phases incorporate wafer level and device level electrical testing to ensure that device design
integrity has been achieved.
In the United States, our manufacturing facilities are located in California, Connecticut, Minnesota, Nebraska, New Hampshire, New York, Rhode Island, South
Dakota, Vermont, and Wisconsin. In Asia, our main manufacturing facilities are located in the People’s Republic of China, the Republic of China (Taiwan), India,
and Malaysia. In Europe, our main manufacturing facilities are located in Germany, France, and the Czech Republic. We have substantial manufacturing facilities in
Israel. We also have manufacturing facilities in Austria, Dominican Republic, Japan, Hungary, Italy, Mexico, Portugal, and the Philippines. Over the past several
years, we have invested substantial resources to increase the efficiency of our plants, which we believe will further reduce production costs.
All of our manufacturing operations have received ISO 9001 certification. ISO 9001 is a comprehensive set of quality program standards developed by the
International Standards Organization.
Sources of Supplies
Although most materials incorporated in our products are available from a number of sources, certain materials, including plastics and metals, are available only
from a relatively limited number of suppliers or are subject to significant price volatility.
Silicon wafers are the most important raw material for the manufacturing of our semiconductor products. Silicon wafers are manufactured from high-purity silicon, a
metalloid. There have at times been industry-wide shortages of high-purity silicon resulting primarily from growing demand of the electronic component and solar
power industries, and limited growth in high-purity silicon manufacturing capacities. Shifts in demand for high-purity silicon and in turn, silicon wafers, have resulted
in significant fluctuation in prices of silicon wafers.
We are a major consumer of the world’s annual production of tantalum, a metal used in the manufacturing of tantalum capacitors. There are few suppliers that
process tantalum ore into capacitor grade tantalum powder.
Certain materials, in addition to tantalum and including tin, tungsten, and gold are available only from a relatively limited number of suppliers, the source for which
may be in the Democratic Republic of the Congo ("DRC") or an adjoining country. We are working to have a supply chain that is 100% certified conflict-free.
Palladium, a metal used to produce multi-layer ceramic capacitors, is currently found primarily in South Africa and Russia. Palladium is a commodity metal that is
subject to price volatility. We periodically enter into short-term commitments to purchase palladium.
Certain metals used in the manufacture of our products, such as copper, are traded on active markets, and can be subject to significant price volatility. Our policy
is to enter into short-term commitments to purchase defined portions of annual consumption of these metals if market prices decline below budget.
10
Inventory and Backlog
We manufacture both standardized products and those designed and produced to meet customer specifications. We maintain an inventory of standardized
components and monitor the backlog of outstanding orders for our products.
We include in our backlog only open orders that we expect to ship in the next twelve months. Many of our customers encounter uncertain and changing demand for
their products. They typically order products from us based on their forecasts. If demand falls below customers’ forecasts, or if customers do not control their
inventory effectively, they may cancel or reschedule the shipments included in our backlog, in many instances without the payment of any penalty. Therefore, our
backlog at any point in time is not necessarily indicative of the results to be expected for future periods.
Customers and Marketing
We sell our products to original equipment manufacturers (“OEMs”), electronic manufacturing services (“EMS”) companies, which manufacture for OEMs on an
outsourcing basis, and independent distributors that maintain large inventories of electronic components for resale to OEMs and EMS companies. See Note 15 to
our consolidated financial statements for net revenues by customer type.
Our sales organizations are regionally based. While our sales and support procedures are typically similar across all regions, we remain flexible in our ability to offer
programs tailored to our customers’ specific support requirements in each local area. The aim of our sales organizations is supporting our customers across all
product lines, developing new design wins, negotiating contracts, and providing general commercial support as would normally be expected of a large multi-national
sales force.
We have an established Strategic Global Account program, which provides each of our top customers with a dedicated Strategic Global Account Manager. Our
Strategic Global Account Managers are typically highly experienced salesmen or saleswomen who are capable of providing key customers with the coordination
and management visibility required in a complex multi-product business relationship. They typically coordinate the sales, pricing, contract, logistic, quality, and other
aspects of the customer’s business requirements. The Strategic Global Account Manager normally is the focal point of communication between Vishay and our
main customers. We maintain a similar program for our strategic distributors as well.
We work with our customers so that our products are incorporated into the design of electronic equipment at the earliest stages of development and to provide
technical and applications support. In addition to our staff of direct field sales personnel, independent manufacturers’ representatives, and distributors, our Business
Development group maintains teams of dedicated Field Application Engineers (“FAEs”) to assist our customers in solving technical problems and in developing
products to meet specific customer application needs using our entire product portfolio to provide support for our customers’ engineering needs. Organized by
market segment, our Business Development FAEs bring specific knowledge of component applications in their areas of expertise in the automotive,
telecommunications, computer, consumer/entertainment, industrial, peripherals, digital consumer, and other market segments. With the ultimate goal of a Vishay
“design-in” – the process by which our customers specify a Vishay component in their products – this program offers our customers enhanced access to all Vishay
technologies while at the same time increasing design wins, and ultimately sales, for us. Most importantly, the process is closely monitored via a proprietary
database developed by our Business Development group. Our database captures specific design activities and allows for real-time measurement of new business
potential for our management team.
Our top 30 customers have been relatively stable despite not having long-term commitments to purchase our products. With selected customers, we have signed
longer term (greater than one year) contracts for specific products. Net revenues from our top 30 customers represent approximately 70% of our total net
revenues. No single customer comprised more than 10% of our total net revenues for 2020.
In certain areas we also work with sales representatives. The commission expense for these sales representatives is not material.
Research and Development
Many of our products and manufacturing techniques, technologies, and packaging methods have been invented, designed, and developed by Dr. Felix Zandman,
our engineers, and our scientists. We maintain strategically placed design centers where proximity to customers enables us to more easily gauge and satisfy the
needs of local markets. These design centers are located predominantly in the United States, Germany, Italy, Israel, the People’s Republic of China, France, and
the Republic of China (Taiwan).
We also employ research and development personnel and promote programs at a number of our production facilities to develop new products and new
applications of existing products and to improve manufacturing processes and technologies. This decentralized system encourages product development at
individual manufacturing facilities, closer to our customers.
11
Competition
We face strong competition in various product lines from both domestic and foreign manufacturers. Our primary competitors by product type include:
• MOSFETs: Infineon, ON Semiconductor, Renesas, STMicroelectronics, Toshiba.
• Diodes: Diodes Inc., Nexperia, ON Semiconductor, Rohm, STMicroelectronics.
• Optoelectronic Components: Broadcom, ON Semiconductor, Renesas, Toshiba.
• Resistors: Bourns, KOA, Murata, Panasonic, Rohm, TDK-EPCOS, Yageo.
•
Inductors: Bourns, Cyntec, Murata, Panasonic, Taiyo Yuden, TDK-EPCOS, Yageo.
• Capacitors: Kyocera, Murata, Nichicon, Panasonic, Taiyo Yuden, TDK-EPCOS, Yageo.
There are many other companies that produce products in the markets in which we compete.
Our competitive position depends on our ability to maintain a competitive advantage on the basis of product quality, know-how, proprietary data, market
knowledge, service capability, technological innovation, business reputation, and price competitiveness. Our sales and marketing programs aim to compete by
offering our customers a broad range of world-class technologies and products, superior global sales and distribution support, and a secure and multi-location
source of product supply.
Recently there has been a considerable amount of consolidation activity in the electronic component industry, some of which involved our primary competitors. We
view the industry consolidation as an opportunity for us to gain business as an independent second-source supplier.
Patents and Licenses
We have made a significant investment in securing intellectual property protection for our technology and products. We seek to protect our technology by, among
other things, filing patent applications for technology considered important to the development of our business. We also rely upon trade secrets, unpatented know-
how, continuing technological innovation, and the aggressive pursuit of licensing opportunities to help develop and maintain our competitive position.
Our ability to compete effectively with other companies depends, in part, on our ability to maintain the proprietary nature of our technology. Although we have been
awarded, have filed applications for, or have been licensed under, numerous patents in the United States and other countries, there can be no assurance concerning
the degree of protection afforded by these patents or the likelihood that pending patents will be issued.
We require all of our technical, research and development, sales and marketing, and management employees and most consultants and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information
developed or made known to the entity or individual during the course of the entity’s or individual’s relationship with us is to be kept confidential and not disclosed
to third parties except in specific circumstances. Substantially all of our technical, research and development, sales and marketing, and management employees have
entered into agreements providing for the assignment to us of rights to inventions made by them while employed by us.
When we believe other companies are misappropriating our intellectual property rights, we vigorously enforce those rights through legal action, and we intend to
continue to do so. See Item 3, “Legal Proceedings.”
Although we have numerous United States and foreign patents covering certain of our products and manufacturing processes, no particular patent is considered
individually material to our business.
Human Capital
As a global company, we collaborate internationally and celebrate the diversity of our local cultures.(cid:3031)(cid:3031)Employees are encouraged to bring their unique perspectives,
help identify opportunities to collaborate, and open themselves to the career development that comes from learning from others.
As of December 31, 2020, we employed approximately 21,600 full time employees worldwide. Reflecting our global business, our executive management team
and many leadership positions are dispersed throughout the world.
12
Employees by location are summarized as follows:
United States
People’s Republic of China
Germany
Israel
Taiwan
Czech Republic
India
Other Europe
Other Americas
Other Asia
Total
2,200
6,500
2,100
2,100
1,800
1,200
1,100
1,500
1,300
1,800
21,600
Many of our employees outside the United States are members of workers councils or unions, or otherwise subject to collective bargaining agreements. Employees
at one small U.S. facility, representing less than 1% of our U.S. workforce, are represented by a trade union. We consider our relations with our employees to be
good.
Our future success is substantially dependent on our ability to attract and retain highly qualified technical and administrative personnel.
In order to prepare for the future Vishay introduced a Young Talent Program. Every year a diverse cross-cultural, cross-regional and cross-functional group of
young individuals is being identified to prepare for higher leadership roles.
To identify and develop future leaders Vishay established a global Vishay Academy. Employee development programs focus on offering individual and group
learning to maintain profitable business growth while also increasing speed and agility to meet customer demand. Global training and development programs include
courses in leadership development, P&L management, business finance for non-finance leaders, distance leadership / global matrix management. A robust
succession plan for the top 200 positions in the organization and levels below has been created recently. A specialist career model also provides development
opportunities for technical roles in parallel to management careers.
Vishay has accelerated a global continuous improvement program to ensure increase of efficiencies and product quality through employee participation.
During the COVID-19 pandemic in 2020, Vishay continued to deliver training and development courses. To protect our employees, courses were delivered online,
including live events for all employees. Communication from executive management has played an important role to regularly inform employees and keep them
engaged.
Regulatory Compliance
We are required to comply with numerous regulations that are normal and customary to businesses in our industry and the jurisdictions in which we operate. These
regulations relate to, among other things, environmental health and safety, procurement integrity, export control, government security regulations, employment
practices, accuracy of records and the recording of costs, anti-corruption, and privacy. See Item 1A, “Risk Factors,” for additional discussion of such regulations
and the potential consequences for non-compliance.
Environmental Health and Safety
We have adopted an Environmental Health and Safety Corporate Policy that commits us to achieve and maintain compliance with applicable environmental laws, to
promote proper management of hazardous materials for the safety of our employees and the protection of the environment, and to minimize the hazardous materials
generated in the course of our operations. This policy is implemented with accountability directly to the Board of Directors. In addition, our manufacturing
operations are subject to various federal, state, and local laws restricting discharge of materials into the environment.
We are involved in environmental remediation programs at various sites currently or formerly owned by us and our subsidiaries both within and outside of the U.S.,
in addition to involvement as a potentially responsible party (“PRP”) at Superfund sites. Certain obligations as a PRP have arisen in connection with business
acquisitions. The remediation programs are on-going and the ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations and alternative cleanup methods. See Item 3, “Legal Proceedings.”
We are not involved in any pending or threatened proceedings that would require curtailment of our operations. We continually expend funds to ensure that our
facilities comply with applicable environmental regulations. While we believe that we are in material compliance with applicable environmental laws, we cannot
accurately predict future developments and do not necessarily have knowledge of all past occurrences on sites that we currently occupy. More stringent
environmental regulations may be enacted in the future, and we cannot determine the modifications, if any, in our operations that any such future regulations might
require, or the cost of compliance with such regulations. Moreover, the risk of environmental liability and remediation costs is inherent in the nature of our business
and, therefore, there can be no assurance that material environmental costs, including remediation costs, will not arise in the future.
13
With each acquisition, we attempt to identify potential environmental concerns and to minimize, or obtain indemnification for, the environmental matters we may be
required to address. In addition, we establish reserves for specifically identified potential environmental liabilities. We believe that the reserves we have established
are adequate. Nevertheless, we have in the past and may in the future inherit certain pre-existing environmental liabilities, generally based on successor liability
doctrines. Although we have never been involved in any environmental matter that has had a material adverse impact on our overall operations, there can be no
assurance that in connection with any past or future acquisition we will not be obligated to address environmental matters that could have a material adverse impact
on our operations.
Company Information and Website
We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission (“SEC”) under the Securities
Exchange Act of 1934. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers,
including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.
In addition, our company website can be found on the Internet at www.vishay.com. The website contains information about us and our operations. Copies of each
of our filings with the SEC on Form 10-K, Form 10-Q, and Form 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as
soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC. To view the reports, access ir.vishay.com
and click on “SEC Filings.”
The following corporate governance related documents are also available on our website:
• Corporate Governance Principles
• Code of Business Conduct and Ethics
• Code of Ethics for Financial Officers
• Audit Committee Charter
• Nominating and Corporate Governance Committee Charter
• Compensation Committee Charter
• Clawback Policy
• Hedging-Pledging Policy
• Nominating and Corporate Governance Committee Policy Regarding Qualification of Directors
•
• Related Party Transactions Policy
•
Procedures for Securityholders’ Submissions of Nominating Recommendations
Ethics Helpline
To view these documents, access ir.vishay.com and click on “Corporate Governance.”
Any of the above documents can also be obtained in print by any stockholder upon request to our Investor Relations Department at the following address:
Corporate Investor Relations
Vishay Intertechnology, Inc.
63 Lancaster Avenue
Malvern, PA 19355-2143
14
Item 1A.
RISK FACTORS
From time to time, information provided by us, including but not limited to statements in this report, or other statements made by or on our behalf, may contain
“forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks, uncertainties,
and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those anticipated.
Set forth below are important factors that could cause our results, performance, or achievements to differ materially from those in any forward-looking statements
made by us or on our behalf. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the
following to be a complete discussion of all potential risks or uncertainties.
Risks relating to our business
Our business may be adversely affected by the widespread outbreak of diseases, including the COVID-19 pandemic and the mitigation efforts by
governments worldwide to control its spread.
The widespread global outbreak of COVID-19 has adversely affected our business. Impacts have included disruptions in our ability to manufacture products and
disruptions in the operations of our customers and modes of shipping. While we are unable to accurately predict the full extent to which the COVID-19 pandemic
and the mitigation efforts by governments to attempt to control its spread will have on our business due to numerous uncertainties, thus far the impacts have resulted
in increased costs and a reduction in sales to certain regions and end-markets. We cannot predict when the impact of the COVID-19 pandemic will end or when
future coronavirus outbreaks or pandemics will occur.
The potential risks and effects of the COVID-19 pandemic and the related economic crisis that could have an adverse effect on our business include, but are not
limited to:
•
•
•
•
•
•
•
•
Adverse impact on our customers and supply channels;
Decrease in sales, product demand and pricing and unfavorable economic and market conditions;
Increased costs, including higher shipping costs due to reduced shipping capacity;
Restrictions on our manufacturing, support operations or workforce, or similar limitations for our customers, vendors, and suppliers, that could limit our
ability to meet customer demand;
Potential increased credit risk if customers, distributors, and resellers are unable to pay us, or must delay paying their obligations to us;
Restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures could
result in delays;
Impact on our workforce/employees due to the ease with which the virus spreads and the current shelter-in-place orders; and
Cybersecurity risks as a result of extended periods of remote work arrangements.
Such effects could result in us being required to record impairment charges related to our property and equipment, intangible assets, or goodwill.
Our business is cyclical and future periods of decline and increased demand are not predictable.
The electronic component industry is highly cyclical and experiences periods of decline from time to time. We and others in the electronic component industry have
experienced these conditions in the recent past and cannot predict when we may experience downturns in the future. Market conditions, such as during a decline in
product demand on a global basis, could result in order cancellations and deferrals, lower average selling prices, and a material and adverse impact on our results of
operations. These declines in demand are usually driven by market conditions in the end markets for our products, but may also result from distributors not
appropriately managing their inventory levels.
We may also experience intense demand for our products in periods of a rising economy and we may have difficulty expanding our manufacturing capacity to
satisfy demand during such periods. Factors which could limit such expansion include delays in procurement of manufacturing equipment, shortages of skilled
personnel, and physical constraints on expansion of our facilities.
Changes in the demand mix, needed technologies, and these end markets may adversely affect our ability to match our products, inventory, and capacity to meet
customer demand and could adversely affect our operating results and financial condition. A slowdown in demand or recessionary trends in the global economy
makes it more difficult for us to predict our future sales and manage our operations, and could adversely impact our results of operations. Capacity that we add
during upturns in the business cycle may result in excess capacity during periods when demand for our products recede, resulting in inefficient use of capital which
could also adversely affect us.
15
We have incurred, and may in the future incur, restructuring costs and associated asset write-downs.
To remain competitive, particularly when business conditions are difficult, we sometimes attempt to reduce our cost structure by restructuring our existing
businesses, where we seek to achieve synergies, eliminate redundant facilities and staff positions, and move operations, where possible, to jurisdictions with lower
labor costs. We incurred restructuring costs in 2020 and 2019 to implement global cost reduction and management rejuvenation programs as part of our
continuous efforts to improve efficiency and operating performance. We also incurred significant restructuring expenses from 2014 to 2017, including accelerated
depreciation expenses related to assets that were no longer used after the implementation of the associated restructuring programs.
Additionally, our long-term strategy includes growing through the integration of acquired businesses, and GAAP requires plant closure and employee termination
costs that we incur in connection with our acquisition activities to be recorded as expenses in our consolidated statement of operations, as such expenses are
incurred. For this reason, we expect to have some level of future restructuring expenses due to acquisitions.
In the past we have grown through successful integration of acquired businesses, but this may not continue.
Our long-term historical growth in revenues and net earnings has resulted in large part from our strategy of expansion through acquisitions. Despite our plan to
continue to grow, in part, through targeted acquisitions, we may be unable to continue to identify, have the financial capabilities to acquire, or successfully complete
transactions with suitable acquisition candidates. We are subject to various U.S. and foreign competition laws and regulations that may affect our ability to complete
certain acquisitions. Also, if an acquired business fails to operate as anticipated, cannot be successfully integrated with our other businesses, or we cannot
effectively mitigate the assumed, contingent, and unknown liabilities acquired, our results of operations, financial condition, enterprise value, market value, and
prospects could all be materially adversely affected.
To remain successful, we must continue to innovate, and our investments in new technologies may not prove successful.
Our future operating results are dependent on our ability to continually develop, introduce, and market new and innovative products, to modify existing products, to
respond to technological change, and to customize certain products to meet customer requirements. There are numerous risks inherent in this process, including the
risks that we will be unable to anticipate the direction of technological change or that we will be unable to develop and market new products and applications in a
timely fashion to satisfy customer demands. If this occurs, we could lose customers and experience adverse effects on our financial condition and results of
operations.
In addition to our own research and development initiatives, we periodically invest in technology start-up enterprises, in which we may acquire a controlling or
noncontrolling interest but whose technology would be available to be commercialized by us. There are numerous risks in investments of this nature including the
limited operating history of such start-up entities, their need for capital, and their limited or absence of production experience, as well as the risk that their
technologies may prove ineffective or fail to gain acceptance in the marketplace. Certain of our historical investments in start-up companies have not succeeded,
and there can be no assurance that our current and future investments in start-up enterprises will prove successful.
Our results are sensitive to raw material availability, quality, and cost.
Many of our products require the use of raw materials that are produced in only a limited number of regions around the world or are available from only a limited
number of suppliers. Our results of operations may be materially adversely affected if we have difficulty obtaining these raw materials, the quality of available raw
materials deteriorates, or there are significant price increases for these raw materials. The determination that any of the raw materials used in our products are so
called "conflict minerals" originating from the Democratic Republic of the Congo or adjoining countries could increase the probability that we will encounter the
challenges noted above, incur additional expenses to comply with government regulations, and face public scrutiny. For periods in which the prices of these raw
materials are rising, we may be unable to pass on the increased cost to our customers, which would result in decreased margins for the products in which they are
used. For periods in which the prices are declining, we may be required to write down our inventory carrying cost of these raw materials, because we record our
inventory at the lower of cost or market. Depending on the extent of the difference between market price and our carrying cost, this write-down could have a
material adverse effect on our results of operations.
From time to time there have been short-term market shortages of certain raw materials used in our products. While these shortages have not historically adversely
affected our ability to increase production of products containing these materials, they have historically resulted in higher raw material costs for us. We cannot make
any assurances that any of these market shortages in the future would not adversely affect our ability to increase production, particularly during periods of growing
demand for our products. To assure availability of raw materials in times of shortage, we may enter into long-term supply contracts for these materials, which may
prove costly, unnecessary, and burdensome when the shortage abates.
16
Our ability to compete effectively with other companies depends, in part, on our ability to maintain the proprietary nature of our technology and to
operate our business without infringing or violating the intellectual property rights of others.
Protection of intellectual property often involves complex legal and factual issues. We will be able to protect our proprietary rights from unauthorized use by third
parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. We have
applied, and will continue to apply, for patents covering our technologies and products, as we deem appropriate. However, our applications may not result in
issued patents. Also, our existing patents and any future patents may not be sufficiently broad to prevent others from practicing our technologies or from developing
competing products. Others may independently develop similar or alternative technologies, design around our patented technologies, or may challenge or seek to
invalidate our patents. Also, the legal system in certain countries in which we operate may not provide or may not continue to provide sufficient, intellectual property
legal protections and remedies.
Litigation regarding patent and other intellectual property rights is prevalent in the electronic components industry, particularly the discrete semiconductor sector.
We have on occasion been notified that we may be infringing on patent and other intellectual property rights of others. In addition, customers purchasing
components from us have rights to indemnification under certain circumstances if such components violate the intellectual property rights of others. Further, we have
observed that in the current business environment, electronic component and semiconductor companies have become more aggressive in asserting and defending
patent claims against competitors. We will continue to vigorously defend our intellectual property rights, and may become party to disputes regarding patent
licensing and cross patent licensing. Although licenses are generally offered in such situations and we have successfully resolved these situations in the past, there
can be no assurance that we will not be subject to future litigation alleging intellectual property rights infringement, or that we will be able to obtain licenses on
acceptable terms. An unfavorable outcome regarding one of these matters could have a material adverse effect on our business and results of operations.
We face intense competition in our business, and we market our products to an increasingly concentrated group of customers.
Our business is highly competitive worldwide, with low transportation costs and few import barriers. We compete principally on the bases of product quality and
reliability, availability, customer service, technological innovation, timely delivery, and price. The electronic component industry has become increasingly
concentrated and globalized in recent years as many of our primary competitors have been acquired. The acquiring companies, most of which are larger than us,
have significant financial resources and technological capabilities.
Our customers have also become increasingly concentrated in recent years, and as a result, their buying power has increased and they have had greater ability to
negotiate favorable pricing and terms. This trend has adversely affected our average selling prices, particularly for commodity components.
Our backlog is subject to customer cancellation.
Many of the orders that comprise our backlog may be canceled by our customers without penalty. Our customers may on occasion double and triple order
components from multiple sources to ensure timely delivery when demand exceeds global supply. They often cancel orders when business is weak and inventories
are excessive. Therefore, we cannot be certain that the amount of our backlog accurately reflects the level of orders that we will ultimately deliver. Our results of
operations could be adversely impacted if customers cancel a material portion of orders in our backlog.
Our future success is substantially dependent on our ability to attract and retain highly qualified technical, managerial, marketing, finance, and
administrative personnel.
Rapid changes in technologies, frequent new product introductions, and declining average selling prices over product life cycles require us to attract and retain
highly qualified personnel to develop and manufacture products that feature technological innovations and bring them to market on a timely basis. Our complex
operations also require us to attract and retain highly qualified administrative personnel in functions such as legal, tax, accounting, financial reporting, auditing, and
treasury. The market for personnel with such qualifications is highly competitive. While we have employment agreements with certain of our executives, we have
not entered into employment agreements with all of our key personnel.
The loss of the services of or the failure to effectively recruit qualified personnel could have a material adverse effect on our business.
17
Interruptions in our information technology systems could adversely affect our business.
We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business. Any significant system or
network disruption, including, but not limited to, new system implementations, computer viruses, security breaches, phishing, spoofing, cyberattacks, facility issues
or energy blackouts could have a material adverse impact on our operations and results of operations. These incidents, which might be related to industrial or other
espionage, include covertly introducing malware and spyware to our computers and networks (or to an electronic system operated by a third party for our benefit)
and impersonating authorized users, among others. Such a network disruption could result in a loss of the confidentiality of our intellectual property or the release
of sensitive competitive information or customer, supplier or employee personal data. Any loss of such information could harm our competitive position, result in a
loss of customer confidence, and cause us to incur significant costs to remedy the damages caused by the disruptions or security breaches. We have implemented
protective measures to prevent against and limit the effects of system or network disruptions, but there can be no assurance that such measures will be sufficient to
prevent or limit the damage from any disruptions and any such disruption could have a material adverse impact on our business and results of operations.
Third-party service providers, such as foundries, subcontractors, distributors, and vendors have access to certain portions of our sensitive data. In the event that
these service providers do not properly safeguard our data that they hold, security breaches and loss of our data could result. Any such loss of data by our third-
party service providers could have a material adverse impact on our business and results of operations.
Significant fluctuations in interest rates could adversely affect our results of operations and financial position.
We are exposed to changes in interest rates as a result of our borrowing activities and our cash balances. Our credit facility bears interest at variable rates based on
LIBOR. A significant increase in LIBOR would significantly increase our interest expense. A general increase in interest rates would be largely offset by an increase
in interest income earned on our cash and short-term investment balances, which are currently greater than our debt balances. However, there can be no assurance
that the interest rate earned on cash and short-term investments will move in tandem with the interest rate paid on our variable rate debt.
Future acquisitions could require us to issue additional indebtedness or equity.
If we were to undertake a substantial acquisition for cash, the acquisition would likely need to be financed in part through bank borrowings or the issuance of public
or private debt. This acquisition financing would likely decrease our ratio of earnings to fixed charges and adversely affect other leverage criteria. Under our credit
facility, we are required to obtain the lenders’ consent for certain additional debt financing and to comply with other covenants including the application of specific
financial ratios. We cannot make any assurances that the necessary acquisition financing would be available to us on acceptable terms if and when required. If we
were to undertake an acquisition for equity, the acquisition may have a dilutive effect on the interests of the holders of our common stock.
Regulatory and compliance related risks
Future changes in our environmental liability and compliance obligations may harm our ability to operate or increase our costs.
Our operations, products and/or product packaging are subject to, among other matters, environmental laws and regulations governing, among other matters, air
emissions, wastewater discharges, the handling, disposal and remediation of hazardous substances, wastes and certain chemicals used or generated in our
manufacturing processes, employee health and safety labeling or other notifications with respect to the content or other aspects of our processes, products or
packaging, restrictions on the use of certain materials in or on design aspects of our products or product packaging, and responsibility for disposal of products or
product packaging. We establish reserves for specifically identified potential environmental liabilities. Nevertheless, we have in the past and may in the future inherit
certain pre-existing environmental liabilities, generally based on successor liability doctrines, or otherwise incur environmental liabilities. We are involved in
remediation programs and related litigation at various current and former properties and at third-party disposal sites both within and outside of the United States,
including involvement as a potentially responsible party at Superfund sites. Although we have never been involved in any environmental matter that has had a
material adverse impact on our overall operations, there can be no assurance that in connection with any past or future acquisition, future developments, including
related to our remediation programs, or otherwise, we will not be obligated to address environmental matters that could have a material adverse impact on our
results of operations. In addition, more stringent environmental laws and regulations may be enacted in the future, and we cannot presently determine the
modifications, if any, in our operations that any such future regulations might require, or the cost of compliance with current and future laws and regulations. In order
to resolve liabilities at various sites, we have entered into various administrative orders and consent decrees, some of which may be, under certain conditions,
reopened or subject to renegotiation.
Our products are sold to or used in goods sold to the U.S. government and other governments. By virtue of such sales, we are subject to various
regulatory requirements and risks in the event of non-compliance.
We sell products under prime and subprime contracts with the U.S. government and other governments. Many of these products are used in military applications.
Government contractors must comply with specific procurement regulations and other requirements. These requirements, although customary in government
contracts, impact our performance and compliance costs. Failure to comply with these regulations and requirements could result in contract modifications or
termination, and the assessment of penalties and fines, which could negatively impact our results of operations and financial condition. Our failure to comply with
these regulations and requirements could also lead to suspension or debarment, for cause, from government contracting or subcontracting for a period of time.
Among the causes for debarment are violations of various statutes, including those related to procurement integrity, export control, government security regulations,
employment practices, protection of the environment, accuracy of records and the recording of costs, and foreign corruption. The termination of a government
contract as a result of any of these acts could have a negative impact on our results of operations and financial condition and could have a negative impact on our
reputation and ability to procure other government contracts in the future.
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We have qualified certain of our products under various military specifications approved and monitored by the United States Defense Electronic Supply Center and
under certain European military specifications. These products are assigned certain classification levels. In order to maintain the classification level of a product, we
must continuously perform tests on the products and the results of these tests must be reported to governmental agencies. If a product fails to meet the requirements
of the applicable classification level, its classification may be reduced to a lower level. A decrease in the classification level for a product with a military application
could have an adverse impact on the net revenues and earnings attributable to that product.
Our credit facility restricts our current and future operations and requires compliance with certain financial covenants.
Our credit facility includes restrictions on, among other things, incurring indebtedness, incurring liens on assets, making investments and acquisitions, making asset
sales, and paying cash dividends and making other restricted payments. Our credit facility also requires us to comply with other covenants, including the
maintenance of specific financial ratios. If we are not in compliance with all of such covenants, the credit facility could be terminated by the lenders, and all amounts
outstanding pursuant to the credit facility could become immediately payable. Additionally, our convertible debt instruments have cross-default provisions that could
accelerate repayment in the event the indebtedness under the credit facility is accelerated.
Risks associated with our operations outside the United States
We are subject to the risks of political, economic, and military instability in countries outside the United States in which we operate.
We have substantial operations outside the United States, and approximately 75% of our revenues during 2020 were derived from sales to customers outside the
United States. Certain of our assets are located, and certain of our products are produced, in countries which are subject to risks of social, political, economic,
and military instability. This instability could result in wars, riots, nationalization of industry, currency fluctuation, and labor unrest. These conditions could have an
adverse impact on our ability to operate in these regions and, depending on the extent and severity of these conditions, could materially and adversely affect our
overall financial condition, results of operations, and our ability to access our liquidity.
Our business has been in operation in Israel for 50 years, where we have substantial manufacturing operations. Although we have never experienced any material
interruption in our operations attributable to these factors, in spite of several Middle East crises, including wars, our financial condition and results of operations
might be adversely affected if events were to occur in the Middle East that interfered with our operations in Israel.
Our global operations are subject to extensive anti-corruption laws and other regulations.
The U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper
payments or providing anything of value to improperly influence foreign government officials for the purpose of obtaining or retaining business, or obtaining an unfair
advantage. Recent years have seen a substantial increase in the global enforcement of anti-corruption laws. Our continued operation and expansion outside the
United States, including in developing countries, could increase the risk of such violations or violations under other regulations relating to limitations on or licenses
required for sales made to customers located in certain countries. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business,
and result in a material adverse effect on our reputation, business and results of operations or financial condition.
We attempt to improve profitability by controlling labor costs, but these activities could result in labor unrest or considerable expense.
Historically, our primary labor cost controlling strategy was to transfer manufacturing operations to countries with lower production costs, such as the Dominican
Republic, India, Malaysia, Mexico, the People’s Republic of China, and the Philippines. We believe that our manufacturing footprint is suitable to serve our
customers and end markets, while maintaining lower manufacturing costs. We do not anticipate further transferring any significant existing operations to lower-
labor-cost countries; however, acquired operations may be transferred to lower-labor-cost countries when integrated into Vishay. Currently, our primary labor cost
controlling strategy involves reducing hours and limiting the use of subcontractors and foundries when demand for our products decreases. Shifting operations to
lower-labor-cost countries, reducing hours, or limiting the use of subcontractors and foundries could result in production inefficiencies, higher costs, and/or strikes
or other types of labor unrest.
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We are subject to foreign currency exchange rate risks which may impact our results of operations.
We are exposed to foreign currency exchange rate risks, particularly due to market values of transactions in currencies other than the functional currencies of
certain subsidiaries. From time to time, we utilize forward contracts to hedge a portion of projected cash flows from these exposures.
Our significant foreign subsidiaries are located in Germany, Israel, and Asia. We finance our operations in Europe and certain locations in Asia in local currencies.
Our operations in Israel and most significant locations in Asia are largely financed in U.S. dollars, but these subsidiaries also have significant transactions in local
currencies. Our exposure to foreign currency risk is mitigated to the extent that the costs incurred and the revenues earned in a particular currency offset one
another. Our exposure to foreign currency risk is more pronounced in situations where, for example, production labor costs are predominantly paid in local
currencies while the sales revenue for those products is denominated in U.S. dollars. This is particularly the case for products produced in Israel, the Czech
Republic, and China.
A change in the mix of the currencies in which we transact our business could have a material effect on results of operations. Furthermore, the timing of cash
receipts and disbursements could have a material effect on our results of operations, particularly if there are significant changes in exchange rates in a short period of
time.
Most of our operating cash is generated by our non-U.S. subsidiaries, and our U.S. parent company and U.S. subsidiaries have significant
payment obligations.
We generate a significant amount of cash and profits from our non-U.S. subsidiaries. We used substantially all of the amounts repatriated in 2018, 2019, and 2020
to significantly re-shape the capital structure of the Company. As of December 31, 2020, substantially all of our cash and cash equivalents and short-term
investments were held by subsidiaries outside of the United States. Our unused revolving credit facility provides us with additional U.S. liquidity.
U.S. tax obligations, cash dividends to stockholders, share repurchases, additional convertible debt repurchases, and principal and interest payments on our debt
instruments need to be paid by our U.S. parent company, Vishay Intertechnology, Inc. Our U.S. subsidiaries have other operating cash needs.
If our U.S. cash and cash equivalents and short-term investment and other liquidity sources are inadequate to satisfy these obligations, we may be required to
repatriate additional cash to the United States. If we are unable to repatriate adequate cash to the United States to satisfy these obligations, it could materially and
adversely affect our overall financial condition, results of operations and our liquidity.
Changes in U.S. trade policies, and related factors beyond our control, may adversely impact our business, financial condition, and results of operations.
Our business is subject to risks associated with U.S. and foreign legislation and regulations relating to imports, including quotas, duties, tariffs or taxes, and other
import charges or restrictions, which could adversely affect our operations and our ability to import products. The U.S. has taken actions that impact U.S. trade
with China, including imposing tariffs on certain goods manufactured in China and imported into the U.S., including certain of our products. Such actions may
impact our competitiveness and adversely affect the demand for these products, or if those costs cannot be passed on to our customers, could adversely impact our
results of operations for affected segments and the Company as a whole.
Further changes in U.S. trade policy could trigger additional retaliatory actions by affected countries. If these consequences are realized, it could result in a general
economic downturn or otherwise have a material adverse effect on our business.
20
Risks related to our capital structure
The holders of our Class B common stock have effective voting control of our company, giving them the effective ability to prevent a change in control
transaction.
We have two classes of common stock: common stock and Class B common stock. The holders of common stock are entitled to one vote for each share held,
while the holders of Class B common stock are entitled to 10 votes for each share held. At December 31, 2020, the holders of Class B common stock held
approximately 47.7% of the voting power of the Company. The ownership of Class B common stock is highly concentrated, and holders of Class B common stock
effectively can cause the election of directors and approve other actions as stockholders. Mrs. Ruta Zandman (a member of our Board of Directors) controls the
voting of, solely or on a shared basis with Marc Zandman (our Executive Chairman) and Ziv Shoshani (a member of our Board of Directors), approximately 89.7%
of our Class B common stock and 42.9% of the total voting power of our capital stock as of December 31, 2020. Holders of our Class B common stock may act
in ways that are contrary to, or not in the best interests of, holders of our common stock. The voting rights of the holders of our Class B common stock effectively
give such holders the ability to prevent transactions that would result in a change in control of us, including transactions in which holders of our common stock might
otherwise receive a premium for their shares over the then-current market price.
Our acquisition strategy could be impeded if our Board of Directors were reluctant to authorize the issuance of substantial additional shares.
Our overall long-term business strategy has historically included a strong focus on acquisitions financed alternatively through cash on hand or the incurrence of
indebtedness. We may in the future be presented with attractive investment or strategic opportunities that, because of their size and our financial condition at the
time, would require the issuance of substantial additional amounts of our common stock. If such opportunities were to arise, our Board of Directors may consider
the potentially dilutive effect on the interests and voting power of our existing stockholders, including our Class B stockholders, and may therefore be reluctant to
authorize the issuance of additional shares. Any such reluctance could impede our ability to complete certain transactions.
Our outstanding convertible debt instruments may impact the trading price of our common stock.
We believe that many investors in, and potential purchasers of, convertible debt instruments employ, or seek to employ, a convertible arbitrage strategy with
respect to these instruments. Investors that employ a convertible arbitrage strategy with respect to convertible debt instruments typically implement that strategy by
selling short the common stock underlying the convertible instrument and dynamically adjusting their short position while they hold the instrument. The
implementation of this strategy by investors in our convertible debentures, as well as related market regulatory actions, could have a significant impact on the trading
prices of our common stock, and the trading prices and liquidity of our convertible debentures. The price of our common stock and our convertible debentures
could also be affected by possible sales of our common stock by investors who view our convertible debentures as more attractive means of equity participation in
us.
Anti-takeover defenses in our amended and restated certificate of incorporation, our amended and restated bylaws and under Delaware law may impede
or discourage a merger, a takeover attempt or other business combinations, which could also reduce the market price of our common stock.
We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of
us, even if a change in control would be beneficial to our existing stockholders. Our amended and restated certificate of incorporation and amended and restated
bylaws also contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to
elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our
management. These provisions include:
•
•
•
•
•
•
the provision that our Class B common stock is generally entitled to ten votes per share, while our common stock is entitled to one vote per share, enabling
the holders of our Class B common stock to effectively control the outcome of substantially all matters submitted to a vote of our stockholders, including the
election of directors and change of control transactions;
the provision establishing a classified board of directors with three-year staggered terms and the provision that a director may be removed only for cause,
each of which could delay the ability of stockholders to change the membership of a majority of our board of directors;
the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and
voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
the right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal
of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
the requirement that a special meeting of stockholders may be called only by the directors or by any officer instructed by the directors to call the meeting,
which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
the ability of our board of directors, by majority vote, to amend the bylaws, which may allow our board of directors to take additional actions to prevent an
unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt.
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In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. This statute prohibits a Delaware corporation
listed on a national securities exchange from engaging in a business combination with an interested stockholder (generally a person who, together with its affiliates,
owns or within the last three years has owned 15% or more of our voting stock subject to certain exceptions) for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The application of
Section 203 also could have the effect of delaying or preventing a change in control of us. Any of these provisions could, under certain circumstances, depress the
market price of our common stock.
The ability of our board of directors or a committee thereof to create and issue a new series of preferred stock and certain provisions of Delaware law and our
certificate of incorporation and bylaws could impede a merger, takeover attempt or other business combination involving us or discourage a potential acquirer from
making a tender offer for our common stock, which, under certain circumstances, could reduce the market price of our common stock.
Risks related to the spin-off of the Vishay Precision Group
Vishay Precision Group is using the Vishay name under license from us, which could result in product and market confusion or the loss of certain of our
rights to the Vishay name.
VPG has a worldwide, perpetual and royalty-free license from us to use the “Vishay” mark as part of its corporate name and in connection with the manufacture,
sale, and marketing of the products and services that comprise its measurements and foil resistors businesses. The license of the Vishay name to VPG is important
to VPG because the success of VPG depends on the reputation of the Vishay brand for these products and services built over many years. Nonetheless, there
exists the risk that the use by VPG could cause confusion in the marketplace over the products of the two companies, that any negative publicity associated with a
product or service of VPG following the spin-off could be mistakenly attributed to our company or that we could lose our own rights to the “Vishay” mark if we fail
to impose sufficient controls on VPG’s use of the mark.
General Risk Factors
In addition to the risks relating specifically to our business, a variety of other factors relating to general conditions could cause actual results, performance, or
achievements to differ materially from those expressed in any of our forward-looking statements. These factors include:
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•
•
•
•
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overall economic and business conditions;
competitive factors in the industries in which we conduct our business;
changes in governmental regulation;
changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations;
changes in GAAP or interpretations of GAAP by governmental agencies and self-regulatory groups;
interest rate fluctuations, foreign currency rate fluctuations, and other capital market conditions; and
economic and political conditions in international markets, including governmental changes and restrictions on the ability to transfer capital across borders.
Our common stock, traded on the New York Stock Exchange, has in the past experienced, and may continue to experience, significant fluctuations in price and
volume. We believe that the financial performance and activities of other publicly traded companies in the electronic component industry could cause the price of
our common stock to fluctuate substantially without regard to our operating performance.
We operate in a continually changing business environment, and new factors emerge from time to time. Other unknown and unpredictable factors also could have a
material adverse effect on our future financial condition and results of operations.
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Item 1B.
UNRESOLVED STAFF COMMENTS
None.
Item 2.
PROPERTIES
At December 31, 2020, our business had 54 manufacturing locations. Our manufacturing facilities include owned and leased locations. Some locations include both
owned and leased facilities in the same location. The list of manufacturing facilities below excludes former manufacturing facilities that are not presently used for
manufacturing activities due to our restructuring activities. See Note 4 to our consolidated financial statements for further information related to our restructuring
efforts, as well as additional information in “Cost Management” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”
In the opinion of management, our properties and equipment generally are in good operating condition and are adequate for our present needs. Owning many of
our manufacturing facilities provides us meaningful financial and operating benefits, including long-term stability and a necessary buffer for economic downturns. We
do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.
The principal locations of our owned manufacturing facilities, along with available space including administrative offices, are as follows:
Owned Locations
Business Segment
Approx. Available Space
(Square Feet)
Columbus, NE
Bennington, VT
Yankton, SD
Warwick, RI
Niagara Falls, NY
Marshall, MN
United States
Non-U.S.
Vocklabruck, Austria
People's Republic of China
Tianjin
Shanghai
Xi'an
Czech Republic
Blatna
Dolni Rychnov
Prachatice
Volary
France
Nice
Chateau Gontier
Hyeres
Germany
Selb
Heide
Landshut
Fichtelberg
Budapest, Hungary
Loni, India
Israel
Dimona
Migdal Ha'Emek
Be'er Sheva
Turin, Italy
Miharu, Japan
Melaka, Malaysia
Juarez, Mexico
Famalicao, Portugal
Republic of China (Taiwan)
Taipei
Kaohsiung
Resistors
Capacitors
Inductors
Resistors
Resistors
Inductors
Diodes
Diodes
Diodes
MOSFETs and Diodes
Resistors and Capacitors
Resistors and Capacitors
Capacitors
Resistors
Resistors
Resistors
Resistors
Resistors and Capacitors
Resistors
Capacitors
Resistors
Diodes
Resistors and Capacitors
Resistors and Capacitors
Capacitors
Resistors, Inductors and Capacitors
Diodes
Capacitors
Optoelectronic Components
Resistors
Capacitors
Diodes
MOSFETs
23
201,000
64,000
60,000
56,000
34,000
22,000
100,000
370,000
195,000
121,000
276,000
183,000
92,000
35,000
221,000
82,000
59,000
472,000
264,000
75,000
36,000
101,000
395,000
404,000
288,000
276,000
102,000
165,000
156,000
60,000
222,000
366,000
63,000
The principal locations of our leased manufacturing facilities, along with available space including administrative offices, are as follows:
Leased Locations
Business Segment
United States
Columbus, NE
Milwaukee, WI
Ontario, CA
Dover, NH
Hollis, NH
Fremont, CA
East Windsor, CT
Duluth, MN
Non-U.S.
Klagenfurt, Austria
People’s Republic of China
Danshui
Shanghai
Shatian
Zhuhai
Long Xi
Prestice, Czech Republic
Santo Domingo, Dominican Republic
Germany
Itzehoe
Heilbronn
Selb
Mumbai, India
Mexico
Juarez
Mexicali
Manila, Philippines
Kaohsiung, Republic of China (Taiwan)
Resistors
Resistors
Resistors
Inductors
Resistors
Resistors
Resistors
Inductors
Capacitors
Capacitors, Inductors, and Resistors
MOSFETs
Capacitors and Resistors
Inductors
Resistors
Capacitors
Inductors
MOSFETs
Diodes and Optoelectronic Components
Capacitors
Diodes
Resistors
Resistors
Optoelectronic Components
Diodes
Approx. Available
Space (Square Feet)
87,000
42,000
38,000
35,000
25,000
18,000
17,000
10,000
150,000
446,000
300,000
218,000
179,000
36,000
15,000
44,000
217,000
139,000
47,000
34,000
102,000
15,000
149,000
130,000
24
Item 3. LEGAL PROCEEDINGS
From time to time we are involved in routine litigation incidental to our business. Management believes that such matters, either individually or in the aggregate,
should not have a material adverse effect on our business or financial condition.
Intellectual Property Matters
We are engaged in discussions with various parties regarding patent licensing and cross patent licensing issues. In addition, we have observed that in the current
business environment, electronic component and semiconductor companies have become more aggressive in asserting and defending patent claims against
competitors. We are a party to disputes alleging infringement of third-party patents. When we believe other companies are misappropriating our intellectual
property rights, we vigorously enforce those rights through legal action, and we intend to continue to do so.
Environmental Matters
Vishay is involved in environmental remediation programs at various sites currently or formerly owned by Vishay and its subsidiaries both within and outside of the
U.S., in addition to involvement as a potentially responsible party (“PRP”) at Superfund sites. Certain obligations as a PRP have arisen in connection with business
acquisitions. The remediation programs are on-going and the ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. See also Note 13 to our consolidated financial statements.
Vishay GSI, Inc. (“VGSI”), a wholly owned subsidiary of the Company, is a direct defendant in two separate, but related, litigation matters: (1) 101 Frost Street
Associates, L.P. v. United States Department of Energy et al.; and (2) Hicksville Water District v. United States Department of Energy, et al. VGSI is
also a third-party defendant in a third related matter, United States v Island Transportation Corp. et al. All three cases are pending in the United State District
Court for the Eastern District of New York.
The three cases contain claims for recovery of response costs under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”),
and allege that a predecessor’s manufacturing operations in Hicksville, New York (the “Site”), between 1960 and 1993, impacted groundwater beneath and
downgradient of the Site. The groundwater beneath and downgradient of the Site is part of the New Cassel/Hicksville Groundwater Contamination Site, which
was added to the National Priorities List pursuant to CERCLA on September 15, 2011. The Company is vigorously contesting plaintiff’s claims and will
aggressively prosecute its affirmative claims.
Item 4.
MINE SAFETY DISCLOSURES
None.
25
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table sets forth certain information regarding our executive officers as of February 24, 2021:
Name
Marc Zandman*
Dr. Gerald Paul*
Lori Lipcaman
Johan Vandoorn
David Valletta
Joel Smejkal
Clarence Tse
Jeff Webster
Andreas Randebrock
* Member of the Executive Committee of the Board of Directors.
Age
59
71
63
64
60
54
62
50
56
Positions Held
Executive Chairman of the Board, Chief Business Development Officer,
and President, Vishay Israel Ltd.
Chief Executive Officer, President, and Director
Executive Vice President and Chief Financial Officer
Executive Vice President and Chief Technical Officer
Executive Vice President Worldwide Sales
Executive Vice President Corporate Business Development
Executive Vice President and Business Head Semiconductors
Executive Vice President and Business Head Passive Components
Executive Vice President Global Human Resources
Marc Zandman was appointed Executive Chairman of the Board and Chief Business Development Officer effective June 5, 2011. Mr. Zandman has served as a
Director of Vishay since 2001 and President of Vishay Israel Ltd. since 1998. Mr. Zandman previously was Vice Chairman of the Board from 2003 to June 2011,
and Chief Administration Officer from 2007 to June 2011. Mr. Zandman was Group Vice President of Vishay Measurements Group from 2002 to 2004. Mr.
Zandman has served in various other capacities with Vishay since 1984. He is the son of the late Dr. Felix Zandman, Vishay’s Founder. Mr. Zandman controls, on
a shared basis with Ruta Zandman and Ziv Shoshani, approximately 34.0% of the total voting power of our capital stock as of December 31, 2019. He also is
non-executive Chairman of Vishay Precision Group, Inc., an independent, publicly-traded company spun-off from Vishay Intertechnology in 2010.
Dr. Gerald Paul was appointed Chief Executive Officer effective January 1, 2005. Dr. Paul has served as a Director of the Company since 1993, and has been
President of the Company since March 1998. Dr. Paul also was Chief Operating Officer from 1996 to 2006. Dr. Paul previously was an Executive Vice President
of the Company from 1996 to 1998, and President of Vishay Electronic Components, Europe from 1994 to 1996. Dr. Paul has been Managing Director of Vishay
Electronic GmbH, a subsidiary of the Company, since 1991. Dr. Paul has been employed by Vishay and a predecessor company since 1978.
Lori Lipcaman was appointed Executive Vice President and Chief Financial Officer of the Company effective September 1, 2011. Ms. Lipcaman had been
appointed Executive Vice President Finance and Chief Accounting Officer in September 2008. Previously, she served as Vishay’s Corporate Senior Vice
President, Operations Controller, from March 1998 to September 2008. Prior to that, she served in various positions of increasing responsibility in finance and
controlling since joining the Company in May 1989.
Johan Vandoorn was appointed Executive Vice President and Chief Technical Officer effective August 1, 2011. Mr. Vandoorn is responsible for Vishay’s
technical development and internal growth programs. Mr. Vandoorn has held various positions of increasing responsibility since Vishay’s acquisition of
BCcomponents Holdings BV (“BCcomponents”) in 2002, including Executive Vice President – Passive Components (2006 – 2012). Mr. Vandoorn had been
Vice President – Global Operations of BCcomponents from 2000 until its acquisition by Vishay, and previously worked for Philips Components (“Philips”) from
1980 until Philips sold the BCcomponents business to a private equity firm in 1998.
David Valletta serves as Vishay’s Executive Vice President – Worldwide Sales, a position he has held since 2007. Mr. Valletta has held various positions of
increasing responsibility since Vishay’s acquisition of Vitramon in 1994. Prior to joining Vitramon, Mr. Valletta also worked for AVX Corporation. His
experience with Vishay includes various positions within the Americas region in direct and distribution sales management and global sales responsibility for the
Company’s key strategic customers.
Joel Smejkal was appointed Executive Vice President Corporate Business Development effective July 1, 2020. Mr. Smejkal previously was Executive Vice
President and Business Head Passive Components from 2017. Mr. Smejkal has held various positions of increasing responsibility since joining Vishay in 1990
including Senior Vice President Global Distribution Sales (2012 - 2016). Mr. Smejkal's experience with Vishay includes worldwide and divisional leadership roles
in engineering, marketing, operations and sales. He was a product developer of 18 U.S. Patents for the Power Metal Strip® resistor technology and brings
significant business development, marketing and sales experience.
Clarence Tse was appointed Executive Vice President and Business Head Semiconductors effective January 1, 2017. Mr. Tse has held various positions of
increasing responsibility since Vishay's acquisition of Siliconix/Telefunken in 1998, including Senior Vice President, Diodes Division (2008 - 2016), Senior Vice
President, Power Diodes Division (2002 - 2008) and Vice President, Finance and Administration Asia (1998 - 2001). Mr. Tse was first hired by Siliconix in
1985.
Jeff Webster was appointed Executive Vice President and Business Head Passive Components effective July 1, 2020. Mr. Webster has held various positions of
increasing responsibility since joining Vishay in 2000 including Senior Vice President Global Quality (2014 - 2019) and Vice President Global Quality - Actives
(2000 - 2014). Prior to joining Vishay, Mr. Webster worked for Intersil. Mr. Webster's experience includes roles in Quality, Operations, and R&D.
Andreas Randebrock was appointed Executive Vice President Global Human Resources effective July 1, 2020. Mr. Randebrock has been working for Vishay
since 2015 as Senior Vice President Employee Development. Before Mr. Randebrock joined Vishay he worked as a management consultant in the field of
leadership, human resources, and organizational consulting for more than 20 years. From 1998 until 2015, Mr. Randebrock was employed by the global human
resources consultancy Hay Group (acquired in 2015 by Korn Ferry) where he held various positions of increasing responsibility and was a partner.
26
PART II
Item 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange under the symbol VSH. The following table sets forth the high and low sales prices for our common
stock as reported on the New York Stock Exchange composite tape for the indicated fiscal quarters. Holders of record of our common stock totaled
approximately 1,000 at February 22, 2021. Because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders,
we are unable to estimate the total number of beneficial owners represented by these stockholders of record.
In 2014, the Company's Board of Directors instituted a quarterly cash dividend program and declared the first cash dividend in the history of Vishay. Quarterly
cash dividends have been paid in each quarter since the first fiscal quarter of 2014. We expect to continue to pay quarterly dividends, although the amount and
timing of any future dividends remains subject to authorization of our Board of Directors.
The following table sets forth, for the indicated periods, the high and low sales prices of our common stock and the quarterly cash dividends declared.
Common stock price range
2020
2019
Dividends declared
per share
High
Low
High
Low
2020
2019
Fourth quarter
Third quarter
Second quarter
First quarter
$
$
$
$
20.99
17.59
18.41
23.25
$
$
$
$
15.74
14.50
13.40
11.23
$
$
$
$
21.61
18.23
20.85
22.94
$
$
$
$
16.29
14.36
15.06
16.63
$
$
$
$
0.0950
0.0950
0.0950
0.0950
$
$
$
$
0.0950
0.0950
0.0950
0.0850
At February 22, 2021, we had outstanding 12,097,148 shares of Class B common stock, par value $.10 per share, each of which entitles the holder to ten votes.
The Class B common stock generally is not transferable except in certain very limited instances, and there is no market for those shares. The Class B common
stock is convertible, at the option of the holder, into common stock on a share for share basis. As a result of the passing of our founder and former Executive
Chairman, Dr. Felix Zandman, Mrs. Ruta Zandman (a member of our Board of Directors) controls the voting of, solely or on a shared basis with Marc Zandman
(our Executive Chairman) and Ziv Shoshani (a member of our Board of Directors) approximately 89.7% of our Class B common stock and 42.9% of the total
voting power of our capital stock as of December 31, 2020.
Certain of our debt obligations contain restrictions as to the payment of cash dividends. See "Financial Condition, Liquidity, and Capital Resources" included in
Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
On November 17, 2020, the Company’s Board of Directors extended the authorization of the Executive Committee of the Board to execute a program to
repurchase up to $150 million of common stock on the open market. Such transactions are subject to market and business conditions, legal requirements, and other
factors. The program implementing such authorization does not obligate us to acquire any shares of common stock, and it may be terminated or suspended at any
time at our discretion, in accordance with applicable laws and regulations. No shares have been repurchased pursuant to this program.
In the fourth fiscal quarter of 2020, the Company repurchased $2.6 million of the Company's convertible senior debentures due 2041. The aggregate purchase
price for the repurchases was $3.5 million. The convertible senior debentures the Company repurchased in the fourth fiscal quarter had been convertible into
approximately 0.2 million shares of Vishay common stock, assuming physical settlement.
27
Stock Performance Graph
The line graph below compares the cumulative total stockholder return on Vishay’s common stock over a 5-year period with the returns on the Standard & Poor’s
MidCap 400 Stock Index (of which Vishay is a component), the Standard & Poor’s 500 Stock Index, and the Philadelphia Semiconductor Index. The line graph
assumes that $100 had been invested at December 31, 2015 and assumes that all dividends were reinvested.
Company Name / Index
Vishay Intertechnology, Inc.
S&P 500 Index
S&P MidCap 400 Index
Philadelphia Semiconductor Index
Base
Period
2015
100
100
100
100
Years Ending December 31,
2016
2017
2018
2019
136.97
111.96
120.74
139.32
177.96
136.40
140.35
195.80
156.81
130.42
124.80
183.97
189.20
171.49
157.49
300.35
2020
188.21
203.04
179.00
461.53
Item 6.
SELECTED FINANCIAL DATA
Not applicable.
28
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis (“MD&A”) is intended to provide an understanding of Vishay's financial condition, results of operations
and cash flows by focusing on changes in certain key measures from year to year. The MD&A should be read in conjunction with our Consolidated
Financial Statements and accompanying Notes filed herewith, commencing on page F-1 of this report. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as
a result of various factors, including those discussed elsewhere in this Annual Report on Form 10-K, particularly in Item 1A. “Risk Factors.”
Overview
Vishay Intertechnology, Inc. ("Vishay," "we," "us," or "our") manufactures one of the world’s largest portfolios of discrete semiconductors and passive electronic
components that are essential to innovative designs in the automotive, industrial, computing, consumer, telecommunications, military, aerospace, and medical
markets.
We operate in six segments based on product functionality: MOSFETs, Diodes, Optoelectronic Components, Resistors, Inductors, and Capacitors.
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. To foster intensified internal growth, we have increased our worldwide
R&D and engineering technical staff; we are expanding critical manufacturing capacities; we are increasing our technical field sales force in Asia to increase our
market access to the industrial segment and increase the design-in of our products in local markets; and we are directing increased funding and focus on developing
products to capitalize on the connectivity, mobility, and sustainability growth drivers of our business. In addition to our growth plan, we also have opportunistically
repurchased our stock and, as further described below, reduced dilution risks by repurchasing substantially all of our convertible senior debentures.
In 2014, our Board of Directors instituted a quarterly dividend payment program and declared the first cash dividend in the history of Vishay. We have paid
dividends each quarter since the first fiscal quarter of 2014, and further increased the quarterly cash dividend by 12% to $0.095 per share in the second fiscal
quarter of 2019.
We have been re-shaping our capital structure since the enactment of the U.S. Tax Cuts and Jobs Act (“TCJA”) in December 2017. We repatriated over $1
billion (net of withholding taxes) of cash to the United States since the enactment of the TCJA. In 2019, we replaced our existing credit agreement that was due to
expire in December 2020 with a new agreement that will expire in June 2024. Among other benefits of the new credit facility, the aggregate commitment of
revolving loans increased to $750 million with the ability to request up to $300 million of incremental facilities, subject to the satisfaction of certain conditions. We
used the net proceeds from the 2018 issuance of $600 million principal amount of new convertible senior notes due 2025 and repatriated cash to reduce the
amount of our outstanding convertible senior debentures, which had become less tax-efficient because of the TCJA, from $575 million to $0.3 million as of
December 31, 2020. On February 4, 2021, we redeemed the remaining convertible senior debentures. On May 20, 2020, our Board of Directors authorized a
program to repurchase up to $200 million of the outstanding convertible senior notes due 2025 in open market repurchases or through privately negotiated
transactions. Such transactions provide us more flexibility to adjust our debt levels if necessary. We repurchased $134.7 million principal amount of convertible
senior notes in the year ended December 31, 2020. Our debt instruments and transactions are more fully described in Note 6 to the consolidated financial
statements.
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 have been impacted by the outbreak of the coronavirus ("COVID-19"). The pandemic has significantly
impacted the global market, including our customers, suppliers, and shipping partners, which has impacted our net revenues. We have also incurred incremental
costs separable from normal operations that are directly attributable to the pandemic and containment efforts, primarily salaries and wages for employees impacted
by quarantines and additional safety measures, including masks and temperature scanners, which were partially offset by government subsidies. The net impact of
the costs and subsidies are classified as cost of products sold of $4.6 million and selling, general, and administrative benefits of $1.5 million based on employee
function on the consolidated statement of operations for the year ended December 31, 2020. We exclude from the amounts reported above indirect financial
changes from the COVID-19 pandemic such as general macroeconomic effects and higher shipping costs due to reduced shipping capacity. See additional
information regarding our competitive strengths and key challenges as disclosed in Part 1.
We believe the economic impact of the COVID-19 pandemic on Vishay will be temporary. We have significant liquidity to withstand the temporary disruptions in
the economic environment. However, 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 the third fiscal quarter of 2019, we announced global cost reduction
and management rejuvenation programs as part of our continuous efforts to improve efficiency and operating performance, which were fully implemented by the
end of 2020. Our cost reduction program is more fully described in Note 4 to the consolidated financial statements and in "Cost Management" below.
We utilize several financial metrics, including net revenues, gross profit margin, segment operating income, end-of-period backlog, book-to-bill ratio, inventory
turnover, change in average selling prices, net cash and short-term investments (debt), and free cash generation to evaluate the performance and assess the future
direction of our business. See further discussion in “Financial Metrics” and “Financial Condition, Liquidity, and Capital Resources” below. The COVID-19
pandemic has impacted almost all key financial metrics throughout 2020. We experienced a broad recovery in orders and sales beginning in the third fiscal quarter
of 2020 that accelerated in the fourth fiscal quarter, primarily due to increased demand from distributors. The increases in orders and sales positively impacted
almost all key financial metrics.
29
Net revenues for the year ended December 31, 2020 were $2.502 billion, compared to net revenues of $2.668 billion and $3.035 billion for the years ended
December 31, 2019 and 2018, respectively. Net earnings attributable to Vishay stockholders for the year ended December 31, 2020 were $122.9 million, or
$0.85 per diluted share, compared to $163.9 million, or $1.13 per diluted share, and $345.8 million, or $2.24 per share, for the years ended December 31, 2019
and 2018, respectively.
We define adjusted net earnings as net earnings determined in accordance with GAAP adjusted for various items that management believes are not indicative of the
intrinsic operating performance of our business. We define free cash as the cash flows generated from continuing operations less capital expenditures plus net
proceeds from the sale of property and equipment. The reconciliations below include certain financial measures which are not recognized in accordance with
GAAP, including adjusted net earnings, adjusted earnings per share, and free cash. These non-GAAP measures should not be viewed as alternatives to GAAP
measures of performance or liquidity. Non-GAAP measures such as adjusted net earnings, adjusted earnings per share, and free cash do not have uniform
definitions. These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies. 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.
Net earnings attributable to Vishay stockholders for the years ended December 31, 2020, 2019, and 2018 include items affecting comparability. The items
affecting comparability are (in thousands, except per share amounts):
Years ended December 31,
2019
2020
2018
GAAP net earnings attributable to Vishay stockholders
$
122,923
$
163,936
$
345,758
Reconciling items affecting gross income:
Impact of COVID-19 pandemic
Other reconciling items affecting operating income:
Impact of COVID-19 pandemic
Restructuring and severance costs
Reconciling items affecting other income (expense):
Loss on early extinguishment of debt
Reconciling items affecting tax expense (benefit):
Change in deferred taxes due to early extinguishment of debt
Effects of cash repatriation program
Effects of changes in uncertain tax positions
Effects of tax-basis foreign exchange gain
Enactment of TCJA
Tax effects of pre-tax items above
Adjusted net earnings
Adjusted weighted average diluted shares outstanding
Adjusted earnings per diluted share
4,563
-
(1,451)
743
-
24,139
-
-
-
8,073
2,030
26,583
$
$
$
(1,563) $
(190)
3,751
-
-
(2,799)
134,050 $
(1,601) $
(9,583)
2,831
7,554
-
(6,211)
183,095 $
(54,877)
(10,047)
-
-
25,496
(5,812)
327,101
145,228
145,136
154,622
0.92 $
1.26 $
2.12
Although the term "free cash" is not defined in GAAP, each of the elements used to calculate free cash is presented as a line item on the face of our consolidated
statements of cash flows prepared in accordance with GAAP.
Net cash provided by continuing operating activities
Proceeds from sale of property and equipment
Less: Capital expenditures
Free cash
Years ended December 31,
2019
2020
2018
$
$
314,938
403
(123,599)
191,742
$
$
296,444
577
(156,641)
140,380
$
$
258,506
55,561
(229,899)
84,168
Our results for 2020 represent the impacts of the COVID-19 pandemic on our business that resulted in a sharp decrease in demand in first half of the year followed
by a sharp and broad recovery in the latter part of the year. Our results for 2019 represent the effects of the normalization of demand that we began to experience
in the fourth fiscal quarter of 2018 and accelerated through 2019. 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 model.
Our free cash results were significantly impacted by the payment of cash taxes related to the cash repatriated to the U.S. of $16.3 million, $38.8 million and $156.8
million in 2020, 2019, and 2018, respectively, and the installment payments of the U.S. transition tax of $14.8 million in each year in the reporting period.
30
Financial Metrics
We utilize several financial metrics to evaluate the performance and assess the future direction of our business. 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”).
Gross profit margin is computed as gross profit as a percentage of net revenues. Gross profit is generally net revenues less costs of products sold, but also deducts
certain other period costs, particularly losses on purchase commitments and inventory write-downs. Losses on purchase commitments and inventory write-downs
have the impact of reducing gross profit margin in the period of the charge, but result in improved gross profit margins in subsequent periods by reducing costs of
products sold as inventory is used. Gross profit 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 computed as gross profit less operating expenses as a percentage of net revenues. We evaluate business segment performance on segment
operating margin. Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income.
Segment operating margin is computed as operating income less items such as restructuring and severance costs, asset write-downs, goodwill and indefinite-lived
intangible asset impairments, inventory write-downs, gain or losses on purchase commitments, global operations, sales and marketing, information systems, finance
and administrative groups, and other items, expressed as a percentage of net revenues. We believe that evaluating segment performance excluding such items is
meaningful because it provides insight with respect to intrinsic operating results of the segment. Operating margin is clearly a function of net revenues, but also
reflects our cost management programs and our ability to contain fixed costs.
End-of-period backlog is one indicator of future revenues. We include in our backlog only open orders that we expect to ship in the next twelve months. If demand
falls below customers’ forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that are included in our
backlog, in many instances without the payment of any penalty. Therefore, the backlog is not necessarily indicative of the results to be expected for future periods.
An important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the amount of product ordered during a period as compared with the
product that we ship during that period. 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.
We focus on our inventory turnover as a measure of how well we are managing our inventory. We define inventory turnover for a financial reporting period as our
costs of products sold for the four fiscal quarters ending on the last day of the reporting period divided by our average inventory (computed using each fiscal
quarter-end balance) for this same period. A higher level of inventory turnover reflects more efficient use of our capital.
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 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. All pricing is subject to
governing market conditions and is independently set by us.
31
The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business. 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 fourth fiscal quarter of 2019 through the fourth fiscal quarter of 2020 (dollars in thousands):
Net revenues
Gross profit margin (1)
Operating margin (2)
End-of-period backlog
Book-to-bill ratio
Inventory turnover
4th Quarter
2019
1st Quarter
2020
2nd Quarter
2020
3rd Quarter
2020
4th Quarter
2020
$
609,577
$
612,841
$
581,717
$
640,160
$
667,180
22.2%
4.0%
24.0%
7.7%
22.5%
7.0%
23.7%
9.6%
22.8%
9.0%
$
911,300
$
1,005,200
$
914,300
$
927,900
$
1,239,800
0.94
4.3
1.17
4.2
0.82
3.9
0.99
4.4
1.44
4.6
Change in ASP vs. prior quarter
_______________
(1) Gross margin for the first, second, third, and fourth fiscal quarters of 2020 includes $3.1 million, $0.9 million, $0.2 million, and $0.3 million, respectively, of expenses directly related to
the COVID-19 outbreak (see Note 8 to our consolidated financial statements).
(2) Operating margin for the fourth fiscal quarter of 2019 and second fiscal quarter of 2020 includes $16.9 million, and $0.7 million, respectively, of restructuring and severance expenses
(see Note 4 to our consolidated financial statements). Operating margin for the first, second, third, and fourth fiscal quarters of 2020 also includes in total $3.4 million, $0.2 million, $(0.2)
million, and $(0.3) million, respectively, of expenses (benefits) directly related to the COVID-19 outbreak (see Note 8 to our consolidated financial statements).
-1.1%
-0.8%
-0.3%
-1.1%
0.1%
See “Financial Metrics by Segment” below for net revenues, book-to-bill ratio, and gross profit margin broken out by segment.
Revenues increased versus the prior fiscal quarter and the fourth fiscal quarter of 2019. The recovery in demand that began in the third fiscal quarter of 2020
accelerated significantly in the fourth fiscal quarter primarily due to distribution customers and perceived future supply shortages. Distributor inventory levels
continued to decrease in the fourth fiscal quarter. The increased orders increased the book-to-bill ratio and backlog and reduced pressure on average selling
prices.
Gross profit margin decreased versus the prior fiscal quarter, but increased versus the prior year quarter. Gross profit margin in the fourth fiscal quarter of 2020
was burdened by higher freight and metal prices as well as the impact of a weaker U.S. dollar versus currencies in which we incur costs, but no sales.
The book-to-bill ratio in the fourth fiscal quarter of 2020 increased to 1.44 versus 0.99 in the third fiscal quarter of 2020. The book-to-bill ratios in the fourth fiscal
quarter of 2020 for distributors and original equipment manufacturers ("OEM") were 1.89 and 0.96, respectively, versus ratios of 0.99 and 1.01, respectively,
during the third fiscal quarter of 2020.
32
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 fourth fiscal quarter of 2019 through the fourth fiscal quarter of 2020 (dollars in thousands):
MOSFETs
Net revenues
Book-to-bill ratio
Gross profit margin
Segment operating margin
Diodes
Net revenues
Book-to-bill ratio
Gross profit margin
Segment operating margin
Optoelectronic Components
Net revenues
Book-to-bill ratio
Gross profit margin
Segment operating margin
Resistors
Net revenues
Book-to-bill ratio
Gross profit margin
Segment operating margin
Inductors
Net revenues
Book-to-bill ratio
Gross profit margin
Segment operating margin
Capacitors
Net revenues
Book-to-bill ratio
Gross profit margin
Segment operating margin
_________
4th Quarter
2019
1st Quarter
2020
2nd Quarter
2020
3rd Quarter
2020
4th Quarter
2020
$
116,215
$
116,893
$
118,944
$
133,976
$
131,567
0.94
23.7%
16.1%
1.12
24.1%
16.0%
0.97
22.7%
14.8%
0.93
22.1%
15.0%
1.64
22.4%
15.3%
$
123,382
$
115,343
$
124,187
$
123,744
$
139,274
0.88
16.3%
12.6%
1.36
16.9%
12.5%
0.61
20.1%
16.0%
1.05
16.8%
12.8%
1.65
17.8%
14.1%
$
51,047
$
54,179
$
49,130
$
64,955
$
68,352
1.11
20.2%
12.7%
1.40
26.9%
19.7%
0.96
23.9%
16.2%
0.97
32.8%
26.5%
1.46
27.7%
21.3%
$
147,883
$
159,208
$
140,412
$
145,362
$
161,201
0.95
23.5%
19.0%
1.05
28.1%
24.4%
0.73
23.2%
19.9%
1.06
24.2%
20.7%
1.24
25.3%
21.0%
$
76,520
$
73,785
$
65,185
$
79,399
$
75,260
1.05
33.5%
30.3%
0.98
31.2%
27.5%
0.96
31.1%
27.2%
0.96
33.5%
30.4%
1.03
30.1%
27.0%
$
94,530
$
93,433
$
83,859
$
92,724
$
91,526
1.20
21.8%
16.1%
0.90
18.1%
12.5%
0.95
19.8%
14.8%
1.54
17.5%
12.5%
0.84
17.9%
12.3%
33
Acquisition Activity
As part of our growth strategy, we seek to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in
major markets, reputations for product quality and reliability, and product lines with which we have substantial marketing and technical expertise. This includes
exploring opportunities to acquire targets to gain market share, penetrate different geographic markets, enhance new product development, round out our existing
product lines, or grow our high margin niche market businesses. Acquisitions of passive components businesses would likely be made to strengthen and broaden
our position as a specialty product supplier; acquisitions of discrete semiconductor businesses would be made to increase market share and to generate synergies.
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 October 1, 2020, we acquired the worldwide business and substantially all of the U.S. assets of Applied Thin-Film Products ("ATP"), a California-based,
privately-held manufacturer of custom, build-to-print thin film substrates for the microwave, fiber optic, and life science industries. Concurrently, a Chinese
subsidiary of Applied Thin-Film Products entered into an agreement to sell certain inventory and equipment to a subsidiary of Vishay for approximately $0.4 million
at a later date. The total acquisition price was $25.9 million. The results and operations of this acquisition have been included in the Resistors segment since
October 1, 2020. ATP did not have a material impact on our consolidated results for the year ended December 31, 2020.
On January 3, 2019, we acquired substantially all of the assets and liabilities of Bi-Metallix, Inc. ("Bi-Metallix"), a U.S.-based, privately-held provider of electron
beam continuous strip welding services for $11.9 million. We were a major customer of Bi-Metallix, and the acquired business has been vertically integrated into
our Resistors segment. The results and operations of this acquisition have been included in the Resistors segment since January 3, 2019. Bi-Metallix did not have a
material impact on our consolidated results for the years ended December 31, 2020 and 2019.
There is no assurance that we will be able to identify and acquire additional suitable acquisition candidates at price levels and on terms and conditions we consider
acceptable.
34
Cost Management
We place a strong emphasis on controlling our costs, and use various measures and metrics to evaluate our cost structure.
We define variable costs as expenses that vary with respect to quantity produced. Fixed costs do not vary with respect to quantity produced over the relevant time
period. Contributive margin is calculated as net revenue less variable costs. It may be expressed in dollars or as a percentage of net revenue. Management uses
this measure to determine the amount of profit to be expected for any change in revenues. While these measures are typical cost accounting measures, none of
these measures are recognized in accordance with GAAP. The classification of expenses as either variable or fixed is judgmental and other companies might
classify such expenses differently. These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies.
We closely monitor variable costs and seek to achieve the contributive margin in our business model. Over a period of many years, we have generally maintained a
contributive margin of between 45% - 47% of revenues. The erosion of average selling prices, particularly of our semiconductor products, that is typical of our
industry, and inflation negatively impact contributive margin and drive us to continually seek ways to reduce our variable costs. Our variable cost reduction efforts
include increasing the efficiency in our production facilities by expending capital for automation, reducing materials costs, materials substitution, increasing wafer size
and shrinking dies to maximize efficiency in our semiconductor production processes, and other yield improvement activities.
Our cost management strategy also includes a focus on controlling fixed costs recorded as costs of products sold or selling, general, and administrative expenses
and 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. 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.
Occasionally, our ongoing cost containment activities are not adequate and we must take actions to maintain our cost competitiveness. We incurred significant
restructuring expenses in our past to reduce our cost structure. Historically, our primary cost reduction technique was through the transfer of production to the
extent possible from high-labor-cost countries to lower-labor-cost countries. We believe that our manufacturing footprint is suitable to serve our customers and
end markets, while maintaining lower manufacturing costs. Since 2013, our cost reduction programs have primarily focused on reducing fixed costs, including
selling, general, and administrative expenses.
We continue to monitor the economic environment and its potential effects on our customers and the end markets that we serve.
In the third fiscal quarter of 2019, we announced global cost reduction and management rejuvenation programs as part of our continuous efforts to improve
efficiency and operating performance. The programs were primarily designed to reduce manufacturing fixed costs and selling, general, and administrative
("SG&A") costs company-wide, and provide management rejuvenation. The programs in total are expected to lower costs by approximately $15 million annually
beginning in 2021, of which approximately 50% is expected to be realized as reduced manufacturing fixed costs and 50% is expected to be realized as reduced
SG&A expenses. The implementation of these programs did not impact planned research and development activities.
We first solicited volunteers to accept a voluntary separation / early retirement offer, which was generally successful. The voluntary separation benefits varied by
country and job classification, but generally offered a cash loyalty bonus. A limited number of involuntary terminations were necessary to achieve the cost reduction
targets.
No manufacturing facility closures occurred pursuant to these programs.
The programs are now substantially implemented. We incurred restructuring expense of $24.9 million, including $0.7 million in 2020, to implement these programs.
We do not anticipate any material restructuring activities in 2021. However, a worsening business environment for the electronics industry, a prolonged impact of
the COVID-19 pandemic, or a significant economic downturn may require us to implement additional restructuring initiatives.
See Note 4 to our consolidated financial statements for additional information.
In uncertain times, we focus on managing our production capacities in accordance with customer requirements, and maintain discipline in terms of our fixed costs
and capital expenditures. Even as we seek to manage our costs, we remain cognizant of the future requirements of our demanding markets. We continue to pursue
our growth plans through investing in capacities for strategic product lines, and through increasing our resources for R&D, technical marketing, and field application
engineering; supplemented by opportunistic acquisitions of specialty businesses.
Our long-term strategy includes growth through the integration of acquired businesses, and GAAP requires plant closure and employee termination costs that we
incur in connection with our acquisition activities to be recorded as expenses in our consolidated statement of operations, as such expenses are incurred. We have
not incurred any material plant closure or employee termination costs related to any of the businesses acquired since 2011, but we expect to have some level of
future restructuring expenses due to acquisitions.
35
Foreign Currency Translation
We are exposed to foreign currency exchange rate risks, particularly due to transactions in currencies other than the functional currencies of certain subsidiaries.
We occasionally use forward exchange contracts to economically hedge a portion of our projected cash flows from these exposures.
GAAP requires that entities identify the “functional currency” of each of their subsidiaries and measure all elements of the financial statements in that functional
currency. A subsidiary’s functional currency is the currency of the primary economic environment in which it operates. In cases where a subsidiary is relatively self-
contained within a particular country, the local currency is generally deemed to be the functional currency. However, a foreign subsidiary that is a direct and integral
component or extension of the parent company’s operations generally would have the parent company’s currency as its functional currency. We have both
situations among our subsidiaries.
Foreign Subsidiaries which use the Local Currency as the Functional Currency
We finance our operations in Europe and certain locations in Asia in local currencies, and accordingly, these subsidiaries utilize the local currency as their functional
currency. For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated balance sheets have been translated at
the rate of exchange as of the balance sheet date. Translation adjustments do not impact the results of operations and are reported as a separate component of
stockholders’ equity.
For those subsidiaries where the local currency is the functional currency, revenues and expenses are translated at the average exchange rate for the year. While the
translation of revenues and expenses into U.S. dollars does not directly impact the consolidated statement of operations, the translation effectively increases or
decreases the U.S. dollar equivalent of revenues generated and expenses incurred in those foreign currencies. The dollar was weaker during 2020 versus 2019,
with the translation of foreign currency revenues and expenses into U.S. dollars increasing reported revenues and expenses versus 2019, but stronger during 2019
versus 2018, with the translation of foreign currency revenues and expenses into U.S. dollars decreasing reported revenues and expenses versus 2018.
Foreign Subsidiaries which use the U.S. Dollar as the Functional Currency
Our operations in Israel and most significant locations in Asia are largely financed in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their
functional currency. For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured
into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results
of operations. While these subsidiaries transact most business in U.S. dollars, they may have significant costs, particularly payroll-related, which are incurred in the
local currency. The cost of products sold and selling, general, and administrative expense for the year ended December 31, 2020 have been slightly unfavorably
impacted (compared to the prior year) and more significantly unfavorably impacted in the fourth fiscal quarter of 2020 (compared to the prior year quarter) by local
currency transactions of subsidiaries which use the U.S. dollar as their functional currency.
See Item 7A for additional discussion of foreign currency exchange risk.
36
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 1 to our consolidated financial statements. We identify here a number of policies that entail significant
judgments or estimates.
Revenue Recognition
Revenue is measured based on the consideration specified in contracts with customers, and excludes any sales incentives and amounts collected on behalf of third
parties. We recognize revenue when we satisfy our performance obligations.
We have a broad line of products that we sell to original equipment manufacturers ("OEMs"), electronic manufacturing services ("EMS") companies, which
manufacture for OEMs on an outsourcing basis, and independent distributors that maintain large inventories of electronic components for resale to OEMs and EMS
companies.
We recognize revenue on sales to distributors when the distributor takes control of the products ("sold-to" model). We have agreements with distributors that
allow distributors a limited credit for unsaleable products, which we refer to as a "scrap allowance." Consistent with industry practice, we also have a "stock, ship
and debit" program whereby we consider requests by distributors for credits on previously purchased products that remain in distributors' inventory, to enable the
distributors to offer more competitive pricing. In addition, we have contractual arrangements whereby we provide distributors with protection against price
reductions initiated by us after product is sold by us to the distributor and prior to resale by the distributor.
We recognize the estimated variable consideration to be received as revenue and record a related accrued expense for the consideration not expected to be
received, based upon an estimate of product returns, scrap allowances, "stock, ship and debit" credits, and price protection credits that will be attributable to sales
recorded through the end of the period. We make these estimates based upon sales levels to our 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. These
procedures require the exercise of significant judgments. We believe that we have a reasonable basis to estimate future credits under the programs.
See Notes 1 and 9 to our consolidated financial statements for further information.
Convertible Debt Instruments
As of December 31, 2020, we had two issuances of convertible debt instruments outstanding. On February 4, 2021, we redeemed the remaining convertible
senior debentures. Current GAAP requires us to separately account for the liability and equity components of convertible debt instruments in a manner that reflects
our nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The resulting discount on the debt is amortized as non-cash
interest expense in future periods. Additionally, upon extinguishment of convertible debt instruments, GAAP requires the aggregate repurchase payment to be
allocated between the liability and equity (including temporary equity) components of the convertible debt instruments, using our nonconvertible debt borrowing
rate at the time of extinguishment. The estimated nonconvertible debt borrowing rate can significantly impact the accounting for convertible debt instruments. The
estimation of our nonconvertible debt borrowing rate requires significant judgment. We employ a market approach and base our estimate on observed data from
companies with similar capital structures and debt instruments as well as data obtained from third-party financial institutions. We believe we have a reasonable
basis to estimate our nonconvertible debt borrowing rate.
This accounting will change upon the adoption of ASU No. 2020-06 on January 1, 2021.
See Notes 1 and 6 to our consolidated financial statements for further information.
Inventories
We value our inventories at the lower of cost or net realizable value, with cost determined under the first-in, first-out method. The valuation of our inventories
requires our management to make market estimates. For work in process goods, we are required to estimate the cost to completion of the products and the prices
at which we will be able to sell the products. For finished goods, we must assess the 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.
Goodwill
See Note 1 to our consolidated financial statements for a description of our goodwill impairment tests.
The fair value of reporting units for goodwill impairment testing purposes is measured primarily using present value techniques based on projected cash flows from
the reporting unit. The calculated results are evaluated for reasonableness using comparable company data. The determination of the fair value of the reporting
units requires us to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of
appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which we compete; the discount rate; terminal growth rates;
and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures.
37
Due to the inherent uncertainty involved in making these estimates, actual financial results could differ from those estimates. In addition, changes in assumptions
concerning future financial results or other underlying assumptions could have a significant impact on the fair value of the reporting unit and the amount of the
goodwill impairment charge.
Pension and Other Postretirement Benefits
Our defined benefit plans are concentrated in the United States, Germany, and the Republic of China (Taiwan). At December 31, 2020, our U.S. plans include
various non-qualified plans. The table below summarizes information about our pension and other postretirement benefit plans. This information should be read in
conjunction with Note 11 to our consolidated financial statements (amounts in thousands):
Benefit
obligation
Plan assets
Funded
position
Informally
funded assets
Net position
Unrecognized
actuarial
items
U.S. non-qualified pension plans
German pension plans
Taiwanese pension plans
Other pension plans
OPEB plans
Other retirement obligations
$
$
45,564
199,576
60,753
47,480
16,233
14,282
383,888
$
$
-
-
45,189
29,145
-
-
74,334
$
$
(45,564) $
(199,576)
(15,564)
(18,335)
(16,233)
(14,282)
(309,554) $
$
30,400
4,917
-
-
-
-
35,317
$
(15,164) $
(194,659)
(15,564)
(18,335)
(16,233)
(14,282)
(274,237) $
10,709
69,682
12,568
12,230
2,463
-
107,652
Accounting for defined benefit pension and other postretirement plans involves numerous assumptions and estimates. The discount rate at which obligations could
effectively be settled and the expected long-term rate of return on plan assets are two critical assumptions in measuring the cost and benefit obligations of our
pension and other postretirement benefit plans. Other important assumptions include the anticipated rate of future increases in compensation levels, estimated
mortality, and for certain postretirement medical plans, increases or trends in health care costs. Management reviews these assumptions at least annually. We use
independent actuaries and investment advisers to assist us in formulating assumptions and making estimates. These assumptions are updated periodically to reflect
the actual experience and expectations on a plan specific basis as appropriate.
In the U.S., we utilize published long-term high quality bonds to determine the discount rate at the measurement date. In Germany and the Republic of China
(Taiwan), we utilize published long-term government bond rates to determine the discount rate at the measurement date. We utilize bond yields at various maturity
dates that reflect the timing of expected future benefit payments. We believe the discount rates selected are the rates at which these obligations could effectively be
settled.
Non-qualified plans in the U.S. are considered by law to be unfunded. However, the Company maintains assets in a rabbi trust to fund benefit payments under
certain of these plans. Such assets would be subject to creditor claims under certain conditions. (See also Notes 11 and 18 to our consolidated financial
statements.)
Many of our non-U.S. plans are unfunded based on local laws and customs. For those non-U.S. plans that do maintain investments, their asset holdings are
primarily cash and fixed income securities, based on local laws and customs. Some non-U.S. plans also informally fund their plans by holding certain available-for-
sale investments. Such assets would be subject to creditor claims under certain conditions. (See also Note 18 to our consolidated financial statements.)
We set the expected long-term rate of return based on the expected long-term average rates of return to be achieved by the underlying investment portfolios. In
establishing this rate, we consider historical and expected returns for the asset classes in which the plans are invested, advice from pension consultants and
investment advisors, and current economic and capital market conditions. The expected return on plan assets is incorporated into the computation of pension
expense. The difference between this expected return and the actual return on plan assets is deferred. The net deferral of past asset losses (gains) affects the
calculated value of plan assets and, ultimately, future pension expense (income).
We continue to seek to de-risk our global pension exposures. Such actions could result in increased net periodic pension cost due to lower expected rates of
return on plan assets and/or possible additional charges to recognize unamortized actuarial items if all or a portion of the obligations were to be settled.
We believe that the current assumptions used to estimate plan obligations and annual expenses are appropriate. However, if economic conditions change or if our
investment strategy changes, we may be inclined to change some of our assumptions, and the resulting change could have a material impact on the consolidated
statements of operations and on the consolidated balance sheet.
38
Income Taxes
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our
provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is
uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves
are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these
reserves in light of changing facts and circumstances and the provision for income taxes includes the impact of reserve provisions and changes to reserves that are
considered appropriate.
These accruals for tax-related uncertainties are based on our best estimate of potential tax exposures. When particular matters arise, a number of years may elapse
before such matters are audited by tax authorities and finally resolved. Favorable resolution of such matters could be recognized as a reduction to our effective tax
rate in the year of resolution. Unfavorable resolution of any particular issue could increase the effective tax rate and may require the use of cash in the year of
resolution.
Our U.S. federal income tax returns are under examination for the years ended December 31, 2017 and 2018. The IRS may, however, ask for supporting
documentation for net operating losses for the years ended December 31, 2013 - 2016, which were utilized in the year ended December 31, 2017. During 2020,
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. The tax returns of significant non-U.S. subsidiaries currently under examination are located in the following jurisdictions: Germany (2013 through
2016), India (2004 through 2017), and Singapore (2015 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.
See Notes 1 and 5 to consolidated financial statements for additional information.
39
Results of Operations
Statement of operations’ captions as a percentage of net revenues and the effective tax rates were as follows:
Costs of products sold
Gross profit
Selling, general, and administrative expenses
Operating income
Income before taxes and noncontrolling interest
Net earnings (loss) attributable to Vishay stockholders
________
Effective tax rate
Net Revenues
Net revenues were as follows (dollars in thousands):
Net revenues
Change versus prior year
Percentage change versus prior year
Changes in net revenues were attributable to the following:
Change attributable to:
Decrease in volume
Decrease in average selling prices
Foreign currency effects
Acquisitions
Other
Net change
Years ended December 31,
2019
2018
2020
76.7%
23.3%
14.8%
8.4%
6.3%
4.9%
74.8%
25.2%
14.4%
9.8%
8.5%
6.1%
21.8%
27.2%
70.7%
29.3%
13.3%
16.0%
13.7%
11.4%
16.9%
2020
2019
2018
$
$
2,501,898
(166,407)
$
$
-6.2%
2,668,305 $
(366,384)
-12.1%
3,034,689
2020 vs. 2019
2019 vs. 2018
-4.4%
-2.8%
0.5%
0.2%
0.3%
-6.2%
-9.8%
-1.1%
-1.6%
0.1%
0.3%
-12.1%
Demand for our products in 2020 was significantly impacted by the COVID-19 pandemic, in which we experienced significant decreases, particularly in the second
fiscal quarter, due primarily to closures of customer facilities followed by a broad recovery beginning in the third fiscal and accelerating in the fourth fiscal quarter.
We experienced a decrease in demand beginning in the fourth fiscal quarter of 2018 that accelerated through 2019 as customers, particularly distributors, reduced
orders as they decreased their inventory. The negative impact of the COVID-19 pandemic in 2020, particularly through the first half of 2020, and the declining
order rates experienced through 2019 result in decreased net revenues compared to the prior year periods.
Gross Profit and Margins
Gross profit margins for the year ended December 31, 2020 were 23.3%, as compared to 25.2% for the year ended December 31, 2019. The decrease in gross
profit margin is primarily due to decreased sales volume, and also includes the negative impacts of higher freight and metals costs. Higher freight and metals costs
contributed to the decrease in our contributive margin in 2020, despite manufacturing efficiencies.
Gross profit margins for the year ended December 31, 2019 were 25.2%, as compared to 29.3% for the year ended December 31, 2018. The decrease is
primarily due to decreased sales volume, temporary manufacturing inefficiencies, and the impact of tariffs on products imported from China. We were not able to
completely offset the normal negative impacts of inflation and average selling price decline by cost reductions and innovation due to the negative impact of
manufacturing inefficiencies caused by capacity adaptations. As a result, our contributive margin decreased in 2019.
40
Segments
Analysis of revenues and gross profit margins for our segments is provided below.
MOSFETs
Net revenues of the MOSFETs segment were as follows (dollars in thousands):
Net revenues
Change versus comparable prior year period
Percentage change versus comparable prior year period
Changes in MOSFETs segment net revenues were attributable to the following:
Change attributable to:
Change in volume
Decrease in average selling prices
Foreign currency effects
Other
Net change
Gross profit margins for the MOSFETs segment were as follows:
Years ended December 31,
2019
2018
2020
$
$
501,380
(7,765)
$
$
-1.5%
509,145 $
(38,498)
-7.0%
547,643
2020 vs. 2019
2019 vs. 2018
4.1%
-5.6%
0.3%
-0.3%
-1.5%
-3.3%
-3.2%
-0.9%
0.4%
-7.0%
Years ended December 31,
2019
2018
2020
Gross profit margins
22.8%
24.8%
26.6%
The MOSFETs segment net revenues decreased slightly in 2020 versus the prior year. Net revenues were negatively impacted by the temporary closure of our
main manufacturing facility in China in the first fiscal quarter of 2020 and a significant decrease in revenues from automotive customers in the second fiscal quarter of
2020 due to the COVID-19 pandemic and mitigation efforts. Sales volume increased in the second half of 2020. The increased sales volume was fully offset the
impact of declining selling prices. We experienced a significant increase in Asia, supported by our IC products, but significant decreases in the Europe and the
Americas regions.
The gross profit margin in 2020 decreased versus the prior year primarily due to lower average selling prices, higher metals prices, and the negative impact of
inventory reduction, partially offset by higher sales volume and cost reduction measures.
We experienced a significant decrease in average selling prices versus 2019. The decrease is partly due to negative customer and product mix. Due to increased
demand, we anticipate prices will stabilize in 2021.
We continue to invest to expand mid- and long-term manufacturing capacity for strategic product lines.
41
Diodes
Net revenues of the Diodes segment were as follows (dollars in thousands):
Net revenues
Change versus comparable prior year period
Percentage change versus comparable prior year period
Changes in Diodes segment net revenues were attributable to the following:
Change attributable to:
Decrease in volume
Decrease in average selling prices
Foreign currency effects
Other
Net change
Gross profit margins for the Diodes segment were as follows:
Years ended December 31,
2019
2018
2020
$
$
502,548
(54,595)
$
$
-9.8%
557,143 $
(155,793)
-21.9%
712,936
2020 vs. 2019
2019 vs. 2018
-6.2%
-4.4%
0.4%
0.4%
-9.8%
-19.6%
-2.0%
-1.1%
0.8%
-21.9%
Years ended December 31,
2019
2018
2020
Gross profit margins
17.9%
20.4%
27.6%
After record net revenues in 2018, net revenues of our Diodes segment significantly decreased in 2019 and 2020. Net revenues have been negatively impacted by
excess supply in the supply chain. The decrease versus 2019 is due to significant decreases in the Americas and Europe regions, partially offset by increases in the
Asia region. Decreased average selling prices also contributed to the decrease in net revenues.
Gross profit margin decreased versus the prior year primarily due to decreases in volume and average selling prices, partially offset by cost reduction measures.
Continued low customer demand in 2020 further increased the pressure on selling prices. Negative customer and product mix also contributed to the lower prices.
As a result, we experienced a moderate decrease in average selling prices versus the prior year.
42
Optoelectronic Components
Net revenues of the Optoelectronic Components segment were as follows (dollars in thousands):
Net revenues
Change versus comparable prior year period
Percentage change versus comparable prior year period
Changes in Optoelectronic Components segment net revenues were attributable to the following:
Change attributable to:
Change in volume
Decrease in average selling prices
Foreign currency effects
Other
Net change
Gross profit margins for the Optoelectronic Components segment were as follows:
Years ended December 31,
2019
2018
2020
$
$
236,616
13,630
$
$
6.1%
222,986 $
(66,741)
-23.0%
289,727
2020 vs. 2019
2019 vs. 2018
6.4%
-1.4%
0.9%
0.2%
6.1%
-19.3%
-3.1%
-1.7%
1.1%
-23.0%
Years ended December 31,
2019
2018
2020
Gross profit margin
28.1%
24.0%
34.6%
The Optoelectronic Components segment net revenues increased significantly in 2020 versus the prior year. The increase is primarily due to significant increases in
the second half of 2020. The increase was primarily due to distribution customers especially in Asia.
The gross profit margin increased significantly versus the prior year. The increase is primarily due to the significant increases in volume, our cost reduction measures,
the positive impact of an inventory increase and lower inventory obsolescence, partially offset by lower average selling prices and cost inflation.
The pricing pressure for our established Optoelectronic Components products decreased in parallel with the increase in demand. Average selling prices also
benefited from some customers that prioritized securing supply over price reductions due to the COVID-19 pandemic. Therefore, average selling prices decreased
slightly versus the prior year.
43
Resistors
Net revenues of the Resistors segment were as follows (dollars in thousands):
Net revenues
Change versus comparable prior year period
Percentage change versus comparable prior year period
Changes in Resistors segment net revenues were attributable to the following:
Change attributable to:
Decrease in volume
Change in average selling prices
Foreign currency effects
Acquisitions
Other
Net change
Gross profit margins for the Resistors segment were as follows:
Years ended December 31,
2019
2018
2020
$
$
606,183
(51,009)
$
$
(7.8)%
657,192
(59,202)
$
716,394
(8.3)%
2020 vs. 2019
2019 vs. 2018
-7.4%
-1.9%
0.7%
0.8%
0.0%
-7.8%
-7.0%
0.2%
-2.5%
0.5%
0.5%
-8.3%
Years ended December 31,
2019
2018
2020
Gross profit margin
25.3%
28.4%
33.3%
Net revenues of the Resistors segment decreased significantly versus the prior year. We experienced a significant decrease in net revenues in the Europe region, a
slight decrease in the Americas region, and a significant increase in the Asia region. Sales to distributor and industrial customers decreased significantly.
The gross profit margin decreased versus the prior year. The decrease is due to lower sales volume, reduced average selling prices, labor cost increases, and
increased shipping and metal prices, partially offset by fixed cost reductions and the positive impact of an inventory increase.
Average selling prices decreased slightly versus the prior year.
44
Inductors
Net revenues of the Inductors segment were as follows (dollars in thousands):
Net revenues
Change versus comparable prior year period
Percentage change versus comparable prior year period
Changes in Inductors segment net revenues were attributable to the following:
Change attributable to:
Increase in volume
Decrease in average selling prices
Foreign currency effects
Other
Net change
Gross profit margins for the Inductors segment were as follows:
Years ended December 31,
2019
2018
2020
$
$
293,629
(5,013)
$
$
(1.7)%
298,642
(3,250)
$
301,892
(1.1)%
2020 vs. 2019
2019 vs. 2018
0.4%
-2.4%
0.3%
0.0%
-1.7%
1.4%
-1.6%
-0.8%
-0.1%
-1.1%
Years ended December 31,
2019
2018
2020
Gross profit margin
31.5%
32.4%
32.8%
Net revenues of the Inductors segment decreased slightly versus the prior year. Decreases in the Europe and Americas regions were partially offset by a significant
increase in the Asia region. Reduced sales to automotive and medical customers were partially offset by increased sales to military and aerospace,
telecommunications, and industrial customers.
The gross profit margin decreased versus the prior year. The decrease is primarily due to lower average selling prices, labor costs increases, and increased
shipping costs, partially offset by manufacturing efficiencies, lower materials prices, and variable cost reductions.
Average selling prices decreased slightly versus the prior year.
We expect long-term growth in this segment, and are positioned to capitalize on future market upturns.
45
Capacitors
Net revenues of the Capacitors segment were as follows (dollars in thousands):
Net revenues
Change versus comparable prior year period
Percentage change versus comparable prior year period
Changes in Capacitors segment net revenues were attributable to the following:
Change attributable to:
Decrease in volume
Increase in average selling prices
Foreign currency effects
Other
Net change
Gross profit margins for the Capacitors segment were as follows:
Years ended December 31,
2019
2018
2020
$
$
361,542
(61,655)
$
$
-14.6%
423,197 $
(42,900)
-9.2%
466,097
2020 vs. 2019
2019 vs. 2018
-15.7%
1.1%
0.4%
-0.4%
-14.6%
-8.8%
2.3%
-2.3%
-0.4%
-9.2%
Years ended December 31,
2019
2018
2020
Gross profit margin
19.4%
22.3%
23.3%
Net revenues of the Capacitors segment decreased significantly versus the prior year. All regions decreased. The decrease is primarily due to lower sales to
distributor, industrial, and automotive customers. Delays of government-sponsored projects significantly impacted the segment.
The gross profit margin decreased versus the prior year. The decrease is due to lower sales volume, negative product mix, and increased shipping costs, partially
offset by higher average selling prices, manufacturing efficiencies, fixed cost reductions, and lower labor costs.
Despite the lower sales volume, average selling prices have increased slightly versus the prior year. The increase is primarily due to increased prices for certain
materials that were passed through to our customers.
46
Selling, General, and Administrative Expenses
Selling, general, and administrative (“SG&A”) expenses are summarized as follows (dollars in thousands):
Total SG&A expenses
as a percentage of sales
Years ended December 31,
2019
2018
2020
$
371,450 $
14.8%
384,631
$
14.4%
403,404
13.3%
SG&A expenses for the year ended December 31, 2020 includes $(1.5) million of incremental net costs (benefits) separable from normal operations directly
attributable to the COVID-19 outbreak. SG&A expenses decreased due to reduced travel and other discretionary spending due to the COVID-19 pandemic.
Certain items included in SG&A expenses impact the comparability of these amounts, as summarized below (in thousands):
Years ended December 31,
2019
2020
2018
Amortization of intangible assets
$
8,113 $
8,476 $
11,807
Certain intangible assets became fully amortized in the third fiscal quarter of 2018 and the second and third fiscal quarters of 2020.
47
Other Income (Expense)
2020 Compared to 2019
Interest expense for the year ended December 31, 2020 decreased by $2.1 million versus the year ended December 31, 2019. The decrease is primarily
attributable to repurchases of convertible debt instruments and the lower interest rate environment due to the COVID-19 pandemic.
We repurchased $151.5 million principal amount of convertible debt instruments in 2020. We recognized a $8.1 million loss on early extinguishment of the
repurchased convertible debt instruments in 2020.
The following table analyzes the components of the line “Other” on the consolidated statements of operations (in thousands):
Foreign exchange gain (loss)
Interest income
Other components of net periodic pension expense
Investment income
Other
2019 Compared to 2018
Years ended December 31,
2020
2019
Change
$
$
(4,095) $
3,709
(13,613)
2,271
(26)
(11,754) $
(1,414) $
8,445
(13,959)
6,448
61
(419) $
(2,681)
(4,736)
346
(4,177)
(87)
(11,335)
Interest expense for the year ended December 31, 2019 decreased by $3.0 million versus the year ended December 31, 2018. The decrease is primarily
attributable to reduced interest expense on the revolving credit facility and the convertible senior debentures as a result of using cash repatriated in 2018 to repay
the balance of the credit facility in the third fiscal quarter of 2018 and to repurchase convertible senior debentures, partially offset by the issuance of convertible
senior notes due 2025 in the second fiscal quarter of 2018.
We repurchased $19.4 million principal amount of convertible senior debentures in 2019. We recognized a $2.0 million loss on early extinguishment of the
repurchased convertible debentures in 2019.
The following table analyzes the components of the line “Other” on the consolidated statements of operations (in thousands):
Foreign exchange gain (loss)
Interest income
Other components of net periodic pension expense
Investment income (loss)
Other
Years ended December 31,
2019
2018
Change
$
$
(1,414) $
8,445
(13,959)
6,448
61
(419) $
(1,991) $
11,940
(13,118)
(1,646)
(266)
(5,081) $
577
(3,495)
(841)
8,094
327
4,662
48
Income Taxes
For the years ended December 31, 2020, 2019, and 2018, the effective tax rates were 21.8%, 27.2%, and 16.9%, respectively. With the reduction in the U.S.
statutory rate to 21% beginning January 1, 2018, we expect that our effective tax rate will now be higher than the U.S. statutory rate, excluding unusual
transactions. Historically, the effective tax rates were generally less than the U.S. statutory rate primarily because of earnings in foreign jurisdictions. Discrete tax
items impacted our effective tax rate for each period presented. These items were $2.0 million in 2020, $0.8 million (tax benefit) in 2019, and $39.4 million (tax
benefit) in 2018.
We repatriated $104.1 million, $188.7 million, and $724 million to the United States, and paid withholding and foreign taxes of $16.3 million, $38.8 million, and
$156.8 million in the years ended December 31, 2020, 2019, and 2018, respectively. The cash repatriation program that we initiated in 2017 in response to the
Tax Cuts and Jobs Act ("TCJA") enacted in the United States is now completed.
The effective tax rates for the years ended December 31, 2020, 2019, and 2018 were impacted by the effect of the repurchase of convertible debentures. We
recognized tax benefits of $1.6 million, $1.6 million, and $54.9 million in 2020, 2019, and 2018, respectively, reflecting the reduction in deferred tax liabilities
related to the special tax attributes of the convertible debentures. See Note 6 to our consolidated financial statements.
We recorded tax benefits of $0.2 million, $9.6 million, and $10.0 million during the years ended December 31, 2020, 2019, and 2018, respectively, 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 rates for the years ended December 31, 2020 and 2019 were also impacted by $3.8 million and $2.8 million, respectively, of net tax expense for
changes in uncertain tax positions.
As part of our cash repatriation activity, we settled an intercompany loan, which previously had been accounted for at the historical foreign exchange rate (akin to
an equity contribution) because the debtor entity did not have the intent or ability to repay such intercompany loan. Currency translation adjustments were
recorded in accumulated other comprehensive income, and were not included in U.S. GAAP pre-tax income. Our cash repatriation activity resulted in the ability to
repay such intercompany loan. Upon settlement of this intercompany loan, the foreign entity realized a taxable gain. Income tax expense for the year ended
December 31, 2019 includes tax expense of $7.6 million related to this tax-basis foreign exchange gain.
The effective tax rate for the year ended December 31, 2018 was significantly impacted by $25.5 million of TCJA measurement period adjustments.
We operate in a global environment with significant operations in various locations outside the United States. Accordingly, the consolidated income tax rate is a
composite rate reflecting our earnings and the applicable tax rates in the various locations where we operate. Part of our historical strategy has been to achieve cost
savings through the transfer and expansion of manufacturing operations to countries where we can take advantage of lower labor costs and available tax and other
government-sponsored incentives.
Additional information about income taxes is included in Note 5 to our consolidated financial statements.
49
Financial Condition, Liquidity, and Capital Resources
We focus on our ability to generate cash flows from operations. The cash generated from operations is used to fund our capital expenditure plans, and cash in
excess of our capital expenditure needs is available to fund our acquisition strategy, to reduce debt levels, and to pay dividends and repurchase stock. We have
generated cash flows from operations in excess of $200 million in each of the last 19 years, and cash flows from operations in excess of $100 million in each of the
last 26 years.
Management uses a non-GAAP measure, "free cash," to evaluate our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through
stock repurchases or dividends. See "Overview" above for "free cash" definition and reconciliation to GAAP. Vishay has generated positive "free cash" in each of
the past 24 years, and "free cash" in excess of $80 million in each of the last 19 years. In this volatile economic environment, we continue to focus on the generation
of free cash, including an emphasis on cost controls.
The COVID-19 pandemic and the mitigation efforts by governments to control its spread has not had significant impact on our financial condition, liquidity, or
capital resources.
We repatriated $104.1 million and $188.7 million to the United States, and paid cash taxes of $16.3 million and $38.8 million related to the repatriations in 2020
and 2019, respectively. The payments of these cash taxes were recorded as operating cash flows and any future cash taxes associated with the TCJA transition
tax and related foreign taxes on repatriated cash will generally be recorded as operating cash flows. The payment of these cash taxes significantly impacted cash
flows from operations and free cash for the years ended December 31, 2020 and 2019. We expect our business to continue to be a reliable generator of free
cash, partially offset by such tax payments. There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash
at the same levels, or at all, going forward if the current economic environment worsens.
The $104.1 million repatriation in the second fiscal quarter of 2020 completed our cash repatriation program that we initiated in response to the TCJA. We
continue to evaluate the TCJA's provisions and may further adjust our financial and capital structure and business practices accordingly.
We maintain a revolving credit facility, which 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.
At December 31, 2020, we had no amounts outstanding on our revolving credit facility. We had no amounts outstanding at December 31, 2019. We borrowed
$479 million and repaid $479 million on the revolving credit facility during the year ended December 31, 2020. The average outstanding balance on our revolving
credit facility calculated at fiscal month-ends was $40.8 million and the highest amount outstanding on our revolving credit facility at a fiscal month end was $115
million during the year ended December 31, 2020.
The revolving credit facility limits or restricts us from, among other things, incurring indebtedness, incurring liens on its respective assets, making investments and
acquisitions (assuming our pro forma leverage ratio is greater than 2.75 to 1.00), making asset sales, and paying cash dividends and making other restricted
payments (assuming our pro forma leverage ratio is greater than 2.50 to 1.00), and requires us to comply with other covenants, including the maintenance of
specific financial ratios.
The financial maintenance covenants include (a) an interest coverage ratio of not less than 2.00 to 1; and (b) a leverage ratio of not more than 3.25 to 1 (and a pro
forma ratio of 3.00 to 1 on the date of incurrence of additional debt). The computation of these ratios is prescribed in Article VI of the Credit Agreement between
Vishay Intertechnology, Inc. and JPMorgan Chase Bank, N.A., which has been filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed June 5,
2019.
We were in compliance with all financial covenants under the credit facility at December 31, 2020. Our interest coverage ratio and leverage ratio were 16.14 to 1
and 1.26 to 1, respectively. We expect to continue to be in compliance with these covenants based on current projections. Based on our current EBITDA and
outstanding revolver balance, the usable capacity on the revolving credit facility is approximately $730 million.
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.
50
The credit facility allows an unlimited amount of defined “Investments,” which include certain intercompany transactions and acquisitions, provided our pro forma
leverage ratio is equal to or less than 2.75 to 1.00. If our pro forma leverage ratio is greater than 2.75 to 1.00, such Investments are subject to certain limitations.
The credit facility also allows an unlimited amount of defined "Restricted Payments," which include cash dividends and share repurchases, provided our pro forma
leverage ratio is equal to or less than 2.50 to 1.00. If our pro forma leverage ratio is greater than 2.50 to 1.00, the credit facility allows such payments up to $100
million per annum (subject to a cap of $300 million for the term of the facility, with up to $25 million of any unused amount of the $100 million per annum base
available for use in the next succeeding calendar year).
Borrowings under the credit facility bear interest at LIBOR plus an interest margin. The applicable interest margin is based on our leverage ratio. Based on our
current leverage ratio, any new borrowings will bear interest at LIBOR plus 1.50%. The interest rate on any borrowings increases to LIBOR plus 1.75% if our
leverage ratio is between 1.50 to 1 and 2.50 to 1 and further increases to 2.00% if our leverage ratio equals or exceeds 2.50 to 1.
We also pay a commitment fee, also based on its leverage ratio, on undrawn amounts. The undrawn commitment fee, based on Vishay's current leverage ratio, is
0.25% per annum. Such undrawn commitment fee increases to 0.30% per annum if our leverage ratio is between 1.50 to 1 and 2.50 to 1 and further increases
to 0.35% per annum if our leverage ratio equals or exceeds 2.50 to 1.
The borrowings under the credit facility are secured by a lien on substantially all assets, including accounts receivable, inventory, machinery and equipment, and
general intangibles (but excluding real estate, intellectual property registered or licensed solely for use in, or arising solely under the laws of, any country other than
the United States, assets located solely outside of the United States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the
United States, and pledges of stock in certain significant domestic and foreign subsidiaries; and are guaranteed by certain significant subsidiaries.
During 2020, we repurchased $134.7 million principal amount of convertible senior notes due 2025 for $128.3 million and $16.9 million principal amount of
convertible senior debentures due 2041 for $23.3 million. We borrowed from our revolving credit facility to fund the repurchases, a portion of which was repaid
upon the completion of the cash repatriation plan in the second fiscal quarter. Such transactions provide us more flexibility to adjust our debt levels if necessary.
As of December 31, 2020, substantially all of our cash and cash equivalents and short-term investment were held in countries outside of the United States. Our
substantially undrawn credit facility provides us with significant operating liquidity in the United States. We expect, at least initially, to fund any future repurchases of
convertible debt instruments, as well as other obligations required to be paid by the U.S. parent company, Vishay Intertechnology, Inc., including cash dividends to
stockholders, share repurchases, and principal and interest payments on our debt instruments by borrowing under our revolving credit facility. Our U.S.
subsidiaries also have cash operating needs.
Management expects to use the credit facility from time-to-time to meet certain short-term financing needs. 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, and our research and
development and capital expenditure plans. Additional acquisition activity, share repurchases, convertible debt repurchases, or conversion of our convertible debt
instruments may require additional borrowing under our credit facility or may otherwise require us to incur additional debt. No principal payments on our debt are
due before 2025 and our revolving credit facility expires in June 2024.
Our contractual commitments are detailed in the Contractual Commitments table below.
Prior to three months before the maturity date, our convertible senior debentures are convertible by the holders under certain circumstances. The convertible senior
debentures due 2040 were convertible at December 31, 2020. The Company redeemed the remaining $0.3 million principal amount of convertible senior
debentures due 2040 on February 4, 2021. The convertible senior notes due 2025 are not currently convertible. Pursuant to the indenture governing 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 debt instruments
using borrowings under our credit facility. No conversions have occurred to date.
51
We invest a portion of our excess cash in highly liquid, high-quality instruments with maturities greater than 90 days, but less than 1 year, which we 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).
The interest rates on our short-term investments vary by location, but can be up to 150 bps higher than the interest rates on our cash accounts. The average
interest rate on our short-term investments was approximately 0.0% due to the negative interest rate environment in Europe and the very low interest rate
environment in the United States. Transactions related to these investments are classified as investing activities on our consolidated statements of cash flows.
The amount of short-term investments at December 31, 2020 is lower than normal due to the recently completed cash repatriation activity.
The following table summarizes the components of net cash and short-term investments (debt) (in thousands):
Credit Facility
Convertible senior notes, due 2025*
Convertible senior debentures, due 2040*
Convertible senior debentures, due 2041*
Deferred financing costs
Total debt
Cash and cash equivalents
Short-term investments
Net cash and short-term investments (debt)
December 31,
2020
December 31,
2019
$
- $
406,268
130
-
(11,512)
394,886
619,874
158,476
-
509,128
126
6,677
(16,784)
499,147
694,133
108,822
$
383,464 $
303,808
*Represents the carrying amount of the convertible debt instruments, which is comprised of the principal amount of the instruments, net of the unamortized discount.
"Net cash and short-term investments (debt)" does not have a uniform definition and is not recognized in accordance with GAAP. This measure should not be
viewed as an alternative to GAAP measures of performance or liquidity. However, management believes that an analysis of "net cash and short-term investments
(debt)" assists investors in understanding aspects of our cash and debt management. The measure, as calculated by us, may not be comparable to similarly titled
measures used by other companies.
Our financial condition as of December 31, 2020 continued to be strong, with the current ratio (current assets to current liabilities) of 3.0 to 1, as compared to 3.3
to 1 as of December 31, 2019. The decrease is primarily due to the increase in trade accounts payable and accrued payroll and related expenses. Our ratio of
total debt to Vishay stockholders' equity was 0.25 to 1 at December 31, 2020 as compared to a ratio of 0.34 to 1 at December 31, 2019. The decrease in the
ratio is primarily due to repurchases of convertible debt instruments.
Cash flows provided by operating activities were $314.9 million for the year ended December 31, 2020, as compared to cash flows provided by operations of
$296.4 million for the year ended December 31, 2019. The increase in operating cash flows is partially due to less repatriation cash taxes paid in 2020 versus
2019.
Cash paid for property and equipment for the year ended December 31, 2020 was $123.6 million, as compared to $156.6 million for the year ended December
31, 2019. We expect capital spending of approximately $175 million in 2021, as required to fulfill increased demand.
Cash paid for dividends to our common and Class B common stockholders totalled $55.0 million and $53.4 million for the years ended December 31, 2020 and
2019, respectively. We expect dividend payments in 2021 to total approximately $55.0 million. However, any future dividend declaration and payment remains
subject to authorization by our Board of Directors.
52
In evaluating our liquidity and capital resources, we consider our outstanding contractual commitments. As of December 31, 2020 we had contractual obligations
as follows (in thousands):
Total
2021
2022
Payments due by period
2024
2023
2025
Thereafter
$
465,644 $
300 $
- $
-
$
- $
465,344 $
-
53,113
140,044
1,310
12,346
22,671
-
12,345
19,128
-
12,345
15,628
-
11,278
14,172
1,310
4,799
13,227
-
-
55,218
-
220,538
19,901
22,538
26,593
21,028
28,646
101,832
51,600
140,195
41,458
48,032
67,694
51,600
14,757
4,796
30,461
-
-
14,757
-
16,011
-
-
27,669
-
1,560
-
-
36,893
-
-
-
-
46,119
-
-
-
-
-
36,662
-
67,694
Long-term debt
Interest payments on
long-term debt
Operating leases
Letters of credit
Expected pension and
postretirement plan
funding
Estimated costs to
complete construction in
progress
TCJA transition tax
Uncertain tax positions
Purchase commitments
Other long-term liabilities
Total contractual cash
obligations
$
1,229,628 $
156,832 $
84,779 $
83,795
$
84,681 $
558,135 $
261,406
Commitments for long-term debt are based on the amount required to settle the obligation. Accordingly, the discounts and capitalized deferred financing costs
associated with our convertible debt instruments are excluded from the calculation of long-term debt commitments in the table above.
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. Commitments for interest payments on long-term debt exclude non-cash interest expense related to the
amortization of the discount associated with our convertible debt instruments.
Various factors could have a material effect on the amount of future principal and interest payments. Principal and interest commitments associated with our
convertible debt instruments are based on the amounts outstanding as of December 31, 2020 as adjusted for the redemption of the convertible senior debentures
due 2040 on February 4, 2021. No further repurchases are considered. Additionally, interest commitments for our revolving credit facility are based on the rate
prevailing at December 31, 2020, but actual rates are variable and are certain to change over time.
The TCJA imposed a one-time transition tax on deferred foreign earnings of 15.5% for liquid assets and 8% for illiquid assets, 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, 2020, $44.3 million has been paid.
Our consolidated balance sheet at December 31, 2020 includes liabilities associated with uncertain tax positions in multiple taxing jurisdictions where we conduct
business. Due to the uncertain and complex application of tax regulations, combined with the difficulty in predicting when tax audits 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.
There are certain guarantees and indemnifications extended among Vishay and VPG in accordance with the terms of the Master Separation and Distribution
Agreement and the Tax Matters Agreement. The guarantees primarily relate to certain contingent tax liabilities included in the Tax Matters Agreement. See Note 19
to our consolidated financial statements for further discussion of the Tax Matters Agreement. These obligations are included in the uncertain tax positions disclosed
above, but were not material to us as of December 31, 2020.
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. Our actual purchases in future periods
are expected to be greater than these minimum commitments.
Other long-term liabilities in the table above include obligations that are reflected on our consolidated balance sheets as of December 31, 2020. We include the
current portion of the long-term liabilities in the table above. Other long-term liabilities for which we are unable to reasonably estimate the timing of the settlement
are classified as payments due thereafter in the table above, although actual timing of payments may be sooner.
For a further discussion of our long-term debt, pensions and other postretirement benefits, leases, uncertain tax positions, and purchase commitments, see Notes 3,
5, 6, 11, and 13 to our consolidated financial statements.
53
Inflation
Normally, inflation does not have a significant impact on our operations as our products are not generally sold on long-term contracts. Consequently, we can adjust
our selling prices, to the extent permitted by competition and other market conditions, to reflect cost increases caused by inflation.
See also “Commodity Price Risk” included in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” for additional related information.
Recent Accounting Pronouncements
See Note 1 to our consolidated financial statements for information about recent accounting pronouncements.
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Disclosure
We are exposed to certain financial risks, including fluctuations in foreign currency exchange rates, interest rates, and commodity prices. We manage our exposure
to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Our
policies do not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures. We
do not use financial instruments for trading purposes and we are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an
ongoing basis and believe that we can modify or adapt our hedging strategies as needed.
Interest Rate Risk
We are exposed to changes in interest rates as a result of our borrowing activities and our cash balances. On a selective basis, we have in the past entered into
interest rate swap or cap agreements to reduce the potential negative impact that increases in interest rates could have on our outstanding variable rate debt. As of
December 31, 2020, 2019, and 2018 we did not have any outstanding interest rate swap or cap agreements.
The interest paid on our credit facility is based on a LIBOR spread. At December 31, 2020, we had no amounts outstanding under the revolving credit facility.
Future borrowings under the revolving credit commitment will bear interest at LIBOR plus 1.50%.
Our convertible debt instruments bear interest at a fixed rate, and accordingly are not subject to interest rate fluctuation risks.
At December 31, 2020, we had $619.9 million of cash and cash equivalents and $158.5 million of short-term investments, which earn interest at various variable
rates.
Based on the debt and cash positions at December 31, 2020, we would expect a 50 basis point increase or decrease in interest rates to increase or decrease our
annualized net earnings by approximately $3.1 million.
See Note 6 to our consolidated financial statements for additional information about our long-term debt. Also see “Economic Outlook and Impact on Operations
and Future Financial Results” included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional
discussion of market risks.
Foreign Exchange Risk
We are exposed to foreign currency exchange rate risks, particularly due to market values of transactions in currencies other than the functional currencies of
certain subsidiaries. We use forward exchange contracts to economically hedge a portion of these exposures. We entered into forward contracts with highly-rated
financial institutions to mitigate the foreign currency risk associated with intercompany loans denominated in a currency other than the legal entity's functional
currency. The notional amount of the forward contracts was $100 million as of December 31, 2020. The forward contracts are short-term in nature and are
expected to be renewed at our discretion until the intercompany loans are repaid. We have not designated the forward contracts as hedges for accounting
purposes, and as such the change in the fair value of contracts is recognized in our consolidated statements of operations as a component of other income
(expense). We do not utilize derivatives or other financial instruments for trading or other speculative purposes.
Our significant foreign subsidiaries are located in Germany, Israel, and Asia. We finance our operations in Europe and certain locations in Asia in local currencies.
Our operations in Israel and most significant locations in Asia are largely financed in U.S. dollars, but these subsidiaries also have significant transactions in local
currencies. Our exposure to foreign currency risk is mitigated to the extent that the costs incurred and the revenues earned in a particular currency offset one
another. Our exposure to foreign currency risk is more pronounced in Israel, the Czech Republic, and China because the percentage of expenses denominated in
Israeli shekels, Czech koruna, and Chinese renminbi to total expenses is much greater than the percentage of sales denominated in Israeli shekels, Czech koruna,
and Chinese renminbi to total sales. Therefore, if the Israeli shekel, Czech koruna, and Chinese renminbi strengthen against all or most of our other major
currencies, our operating profit is reduced. Where possible, we maintain local currency denominated cash balances in these countries approximately equal to the
local currency liabilities to naturally hedge our exposures. We also have a slightly higher percentage of euro-denominated sales than expenses. Therefore, when the
euro strengthens against all or most of our other major currencies, our operating profit is slightly increased. Accordingly, we monitor several important cross-rates.
54
We have performed sensitivity analyses of our consolidated foreign exchange risk as of December 31, 2020 and 2019, using a model that measures the change in
the values arising from a hypothetical 10% adverse movement in foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
The foreign currency exchange rates we used were based on market rates in effect at December 31, 2020 and 2019. The sensitivity analyses indicated that a
hypothetical 10% adverse movement in foreign currency exchange rates would impact our net earnings by approximately $2.6 million and $3.1 million at December
31, 2020 and December 31, 2019, respectively, although individual line items in our consolidated statement of operations would be materially affected. For
example, a 10% weakening in all foreign currencies would decrease the U.S. dollar equivalent of operating income generated in foreign currencies, which would be
offset by foreign exchange gains of our foreign subsidiaries that have significant transactions in U.S. dollars or have the U.S. dollar as their functional currency.
A change in the mix of the currencies in which we transact our business could have a material effect on the estimated impact of the hypothetical 10% movement in
the value of the U.S. dollar. Furthermore, the timing of cash receipts and disbursements could result in materially different actual results versus the hypothetical 10%
movement in the value of the U.S. dollar, particularly if there are significant changes in exchange rates in a short period of time.
Commodity Price Risk
Although most materials incorporated in our products are available from a number of sources, certain materials are available only from a relatively limited number of
suppliers or are subject to significant price volatility. Our results of operations may be materially and adversely affected if we have difficulty obtaining these raw
materials, the quality of available raw materials deteriorates, or there are significant price changes for these raw materials. The determination that any of the raw
materials used in our products are conflict minerals originating from the Democratic Republic of the Congo and adjoining countries could increase the probability
that we will encounter the challenges noted above, incur additional expenses to comply with government regulations, and face public scrutiny. For periods in which
the prices of these raw materials are rising, we may be unable to pass on the increased cost to our customers which would result in decreased margins for the
products in which they are used. For periods in which the prices are declining, we may be required to write down our inventory carrying cost of these raw
materials, since we record our inventory at the lower of cost or market. Depending on the extent of the difference between market price and our carrying cost, this
write-down could have a material adverse effect on our net earnings. We also may need to record losses for adverse purchase commitments for these materials in
periods of declining prices.
Silicon wafers are the most important raw material for the manufacturing of our semiconductor products. Silicon wafers are manufactured from high-purity silicon, a
metalloid. There have at times been industry-wide shortages of high-purity silicon resulting primarily from growing demand of the electronic component and solar
power industries, and limited growth in high-purity silicon manufacturing capacities. Shifts in demand for high-purity silicon and in turn, silicon wafers, have resulted
in significant fluctuation in prices of silicon wafers.
We are a major consumer of the world’s annual production of tantalum, a metal used in the manufacturing of tantalum capacitors. There are few suppliers that
process tantalum ore into capacitor grade tantalum powder.
Palladium, a metal used to produce multi-layer ceramic capacitors, is currently found primarily in South Africa and Russia. Palladium is a commodity metal that is
subject to price volatility. We periodically enter into short-term commitments to purchase palladium.
Certain metals used in the manufacture of our products, such as copper, are traded on active markets, and can be subject to significant price volatility. Our policy
is to enter into short-term commitments to purchase defined portions of annual consumption of these metals if market prices decline below budget.
We estimate that a 10% increase or decrease in the costs of raw materials subject to commodity price risk would decrease or increase our net earnings by $7.4
million, assuming that such changes in our costs have no impact on the selling prices of our products and that we have no pending commitments to purchase metals
at fixed prices.
55
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are filed herewith, commencing on page F-1 of this report.
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A.
CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e)
and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on that evaluation, our CEO and CFO concluded that our
disclosure controls and procedures were effective as of the end of the period covered by this annual report to ensure that information required to be disclosed in
reports that we file or submit under the Exchange Act is: (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules
and forms; and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required
disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Certifications
The certifications of our CEO and CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibits 31.1 and 31.2 to this Annual Report on
Form 10-K. We have also filed with the New York Stock Exchange the most recent Annual Certification as required by Section 303A.12(a) of the New York
Stock Exchange Listed Company Manual.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2020 based on the 2013 framework set forth in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our
internal control over financial reporting was effective as of December 31, 2020.
Ernst & Young LLP has issued an attestation report on the effectiveness of our internal control over financial reporting. Their report is set forth below.
56
To the Stockholders and the Board of Directors of Vishay Intertechnology, Inc.
Report of Independent Registered Public Accounting Firm
Opinion on Internal Control over Financial Reporting
We have audited Vishay Intertechnology, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In
our opinion, Vishay Intertechnology, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31,
2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance
sheets of the Company as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income, stockholders’ equity,
and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 24, 2021 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect material misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 24, 2021
57
Item 9B.
OTHER INFORMATION
None.
Item 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
PART III
We have a code of ethics applicable to our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer or Controller, and financial managers. The
text of this code has been posted on our website. To view the code, go to our website at ir.vishay.com and click on Corporate Governance. You can obtain a
printed copy of this code, free of charge, by contacting us at the following address:
Corporate Investor Relations
Vishay Intertechnology, Inc.
63 Lancaster Avenue
Malvern, PA 19355-2143
It is our intention to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or any waiver from, a provision of this code by
posting such information on our website, at the aforementioned address and location.
Certain information required under this Item with respect to our Executive Officers is set forth in Part I hereof under the caption “Executive Officers of the
Registrant.”
Other information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2020, our most
recent fiscal year end, and is incorporated herein by reference.
Item 11.
EXECUTIVE COMPENSATION
Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2020, our most recent
fiscal year end, and is incorporated herein by reference.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2020, our most recent
fiscal year end, and is incorporated herein by reference.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2020, our most recent
fiscal year end, and is incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2020, our most recent
fiscal year end, and is incorporated herein by reference.
58
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
(a) Documents Filed as Part of Form 10-K
1.
Financial Statements
The Consolidated Financial Statements for the year ended December 31, 2020 are filed herewith. See Index to the Consolidated Financial Statements on
page F-1 of this report.
2.
Financial Statement Schedules
All financial statement schedules have been omitted because they are not applicable, not material, or the required information is shown in the consolidated
financial statements or the notes thereto.
3.
Exhibits
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
10.1†
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
Corrected Amended and Restated Certificate of Incorporation of Vishay Intertechnology, Inc. dated June 5, 2012. Incorporated by
reference to Exhibit 3.1 to our current report on Form 8-K filed June 5, 2012.
Amended and Restated Bylaws dated June 1, 2011. Incorporated by reference to Exhibit 3.2 to our current report on Form 8-K filed
June 2, 2011.
First Amendment to Amended and Restated Bylaws. Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K,
filed on August 11, 2015.
Indenture, dated as of November 9, 2010, by and between Vishay Intertechnology, Inc. and Wilmington Trust Company, as Trustee.
Incorporated by reference to Exhibit 4.1 to our current report on Form 8-K filed November 9, 2010.
Indenture, dated as of May 13, 2011, by and between Vishay Intertechnology, Inc. and Wilmington Trust Company, as Trustee.
Incorporated by reference to Exhibit 4.1 to our current report on Form 8-K filed May 13, 2011.
Indenture, dated as of June 12, 2018, by and between Vishay Intertechnology, Inc. and HSBC Bank USA, N.A., as Trustee.
Incorporated by reference to Exhibit 4.1 to our current report on Form 8-K filed June 13, 2018.
Form of Global Note, representing Vishay Intertechnology, Inc.'s 2.25% Senior Convertible Notes due 2025 (included as Exhibit A to
the Indenture filed as Exhibit 4.5). Incorporated by reference to Exhibit 4.2 to our current report on Form 8-K, filed on June 13, 2018.
Description of Capital Stock. Incorporated by reference to Exhibit 4.6 to our 2019 annual report on Form 10-K.
First Supplemental Indenture, dated as of December 23, 2020, by and between Vishay Intertechnology, Inc. and HSBC Bank USA,
N.A., as Trustee. Incorporated by reference to Exhibit 4.1 to our current report on Form 8-K filed January 5, 2021.
Amended and restated Vishay Intertechnology 162(m) Cash Bonus Plan. Incorporated by reference to Annex A to our Proxy
Statement, dated March 31, 2017, for our 2017 Annual Meeting of Stockholders.
Amended and Restated Vishay Intertechnology, Inc. 2007 Stock Incentive Program. Incorporated by reference to Annex A to our
definitive proxy statement, dated April 4, 2014, for our 2014 Annual Meeting of Stockholders.
Employment agreement, between Vishay Europe GmbH (an indirect wholly owned subsidiary of Vishay Intertechnology, Inc.) and Dr.
Gerald Paul. Incorporated by reference to Exhibit 10.3 to our quarterly report on Form 10-Q for the fiscal quarter ended October 2,
2004.
Amendment to Employment Agreement, dated August 8, 2010, between Vishay Europe GmbH (an indirect wholly owned subsidiary of
Vishay Intertechnology, Inc.) and Dr. Gerald Paul. Incorporated by reference to Exhibit 10.5 to our quarterly report on Form 10-Q for
the fiscal quarter ended July 3, 2010.
Amendment to Employment Agreement, dated August 28, 2011, between Vishay Europe GmbH (an indirect wholly owned subsidiary of
Vishay Intertechnology, Inc.) and Dr. Gerald Paul. Incorporated by reference to Exhibit 10.3 to our quarterly report on Form 10-Q for
the fiscal quarter ended October 1, 2011.
Employment Agreement between Vishay Israel Ltd. (a wholly owned subsidiary of Vishay Intertechnology, Inc.) and Marc Zandman.
Incorporated by reference to Exhibit 10.2 to our quarterly report on Form 10-Q for the fiscal quarter ended October 2, 2004.
Amendment to Employment Agreement, dated August 8, 2010, between Vishay Israel Ltd. (a wholly owned subsidiary of Vishay
Intertechnology, Inc.) and Marc Zandman. Incorporated by reference to Exhibit 10.6 to our quarterly report on Form 10-Q for the fiscal
quarter ended July 3, 2010.
Amendment to Employment Agreement, dated August 30, 2011, between Vishay Israel Ltd. (a wholly owned subsidiary of Vishay
Intertechnology, Inc.) and Marc Zandman. Incorporated by reference to Exhibit 10.2 to our quarterly report on Form 10-Q for the fiscal
quarter ended October 1, 2011.
59
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
10.16†
10.17†
10.18†
10.19†
10.20†
10.21†
10.22†
10.23†
10.24
10.25
10.26
10.27
10.28*
Employment Agreement, dated February 15, 2018, between Vishay Europe GmbH (an indirect wholly owned subsidiary of Vishay
Intertechnology, Inc.), Vishay Intertechnology, Inc., and Lori Lipcaman. Incorporated by reference to Exhibit 10.1 to our current report
on Form 8-K, filed on February 16, 2018.
First Amendment to Employment Agreement, dated February 28, 2020, between Vishay Europe GmbH (an indirect wholly owned
subsidiary of Vishay Intertechnology, Inc.), Vishay Intertechnology, Inc., and Lori Lipcaman. Incorporated by reference to Exhibit 10.1
to our current report on Form 8-K, filed February 28, 2020.
Terms and Conditions of Johan Vandoorn Employment Agreement, dated January 16, 2012. Incorporated by reference to Exhibit 10.31
to our 2011 annual report on Form 10-K.
Amendment to Terms and Conditions of Johan Vandoorn Employment Agreement, dated March 4, 2014. Incorporated by reference to
Exhibit 10.3 to our quarterly report on Form 10-Q for the fiscal quarter ended March 29, 2014.
Second Amendment to Terms and Conditions of Johan Vandoorn Employment Agreement, dated March 3, 2015. Incorporated by
reference to Exhibit 10.4 to our quarterly report on Form 10-Q for the fiscal quarter ended April 4, 2015.
Third Amendment to Terms and Conditions of Johan Vandoorn Employment Agreement, dated February 15, 2018. Incorporated by
reference to Exhibit 10.2 to our current report on Form 8-K, filed on February 16, 2018.
Employment Agreement, dated February 15, 2018, between Vishay Americas, Inc. (a wholly owned subsidiary of Vishay
Intertechnology, Inc.), Vishay Intertechnology, Inc., and David Valletta. Incorporated by reference to Exhibit 10.3 to our current report
on Form 8-K, filed on February 16, 2018.
Employment Agreement, dated February 15, 2018, between Vishay Singapore Pte. Ltd. (an indirect wholly owned subsidiary of Vishay
Intertechnology, Inc.), Vishay Intertechnology, Inc., and Clarence Tse. Incorporated by reference to Exhibit 10.4 to our current report
on Form 8-K, filed on February 16, 2018.
Employment Agreement, dated February 15, 2018, between Vishay Americas, Inc. (a wholly owned subsidiary of Vishay
Intertechnology, Inc.), Vishay Intertechnology, Inc., and Joel Smejkal. Incorporated by reference to Exhibit 10.5 to our current report
on Form 8-K, filed on February 16, 2018.
Amendment to Employment Agreement between Vishay Dale Electronics, LLC (a wholly owned subsidiary of Vishay Intertechnology,
Inc.), Vishay Intertechnology, Inc., and Joel Smejkal dated May 20, 2020. Incorporated by reference to Exhibit 10.1 to our quarterly
report on Form 10-Q for the fiscal quarter ended July 4, 2020.
Employment Agreement, dated February 15, 2018, between Vishay Electronic GmbH (an indirect wholly owned subsidiary of Vishay
Intertechnology, Inc.), Vishay Intertechnology, Inc., and Werner Gebhardt. Incorporated by reference to Exhibit 10.6 to our current
report on Form 8-K, filed on February 16, 2018.
Amendment to Employment Agreement between Vishay Electronic GmbH (an indirect wholly owned subsidiary of Vishay
Intertechnology, Inc.), Vishay Intertechnology, Inc., and Werner Gebhardt, dated February 22, 2019. Incorporated by reference to
Exhibit 10.1 to our quarterly report on Form 10-Q for the fiscal quarter ended March 30, 2019.
Employment Agreement between Vishay Israel Ltd. (a wholly owned subsidiary of Vishay Intertechnology, Inc.), Vishay Intertechnology,
Inc., and Jeffrey Webster dated May 20, 2020. Incorporated by reference to Exhibit 10.2 to our quarterly report on Form 10-Q for the
fiscal quarter ended July 4, 2020.
Employment Agreement between Vishay Electronic GmbH (an indirect wholly owned subsidiary of Vishay Intertechnology, Inc.), Vishay
Intertechnology, Inc., and Andreas Randebrock dated May 20, 2020. Incorporated by reference to Exhibit 10.3 to our quarterly report
on Form 10-Q for the fiscal quarter ended July 4, 2020.
Vishay Intertechnology, Inc. Key Employee Wealth Accumulation Plan (as amended and restated, effective January 1, 2017).
Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed December 23, 2016.
Master Separation and Distribution Agreement, dated June 22, 2010, by and among Vishay Intertechnology, Inc. and Vishay Precision
Group, Inc. Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed June 23, 2010.
Employee Matters Agreement, dated June 22, 2010, by and among Vishay Intertechnology, Inc. and Vishay Precision Group, Inc.
Incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed June 23, 2010.
Tax Matters Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. Incorporated by
reference to Exhibit 10.1 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Trademark License Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc.
Incorporated by reference to Exhibit 10.2 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Supply Agreement, dated July 6, 2010, between Vishay Advanced Technology, Ltd. And Vishay Dale Electronics, Inc. Incorporated by
reference to Exhibit 10.4 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
60
10.29*
10.30*
10.31*
10.32*
10.33
10.34*
10.35*
10.36
10.37
10.38†
10.39†
10.40†
10.41†
10.42†
10.43†
10.44**†
21**
23.1**
31.1**
31.2**
32.1**
32.2**
101**
Patent License Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Dale Electronics, Inc. Incorporated
by reference to Exhibit 10.6 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Supply Agreement, dated July 6, 2010, between Vishay Dale Electronics, Inc. and Vishay Advanced Technology, Ltd. Incorporated
by reference to Exhibit 10.8 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Supply Agreement, dated July 6, 2010, between Vishay Measurements Group, Inc. and Vishay S.A. Incorporated by reference to
Exhibit 10.9 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Manufacturing Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Precision Foil GmbH. Incorporated by reference to
Exhibit 10.10 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Intellectual Property License Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Precision Foil GmbH. Incorporated by
reference to Exhibit 10.11 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Supply Agreement, dated July 6, 2010, between Vishay Precision Foil GmbH and Vishay S.A. Incorporated by reference to Exhibit
10.12 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Intellectual Property License Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Measurements Group, Inc.
Incorporated by reference to Exhibit 10.13 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.
Credit Agreement, dated as of June 5, 2019, among Vishay Intertechnology, Inc. and JPMorgan Chase Bank, N.A., as administrative
agent and the lenders and other parties thereto. Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed June
5, 2019.
Amendment No. 1 to Credit Agreement, dated as of September 20, 2019, among Vishay Intertechnology, Inc. and JPMorgan Chase
Bank, N.A., as administrative agent and the lenders and other parties thereto. Incorporated by reference to Exhibit 10.1 to our
quarterly report on Form 10-Q for the fiscal quarter ended September 28, 2019.
Vishay Intertechnology, Inc. Form of Executive Officer Restricted Stock Unit Agreement. Incorporated by reference to Exhibit 10.1 to
our current report on Form 8-K, filed on March 6, 2018.
Vishay Intertechnology, Inc. Form of Executive Officer Restricted Stock Unit Agreement. Incorporated by reference to Exhibit 10.45
to our 2019 annual report on Form 10-K.
Vishay Intertechnology, Inc. Form of Non-Employee Director Restricted Stock Unit Agreement. Incorporated by reference to Exhibit
10.3 to our current report on Form 8-K, filed on May 21, 2014.
Vishay Intertechnology, Inc. Form of Non-Employee Director Restricted Stock Unit Agreement. Incorporated by reference to Exhibit
10.2 to our current report on Form 8-K, filed on March 6, 2018.
Vishay Intertechnology, Inc. Form of Non-Employee Director Restricted Stock Unit Agreement. Incorporated by reference to Exhibit
10.48 to our 2019 annual report on Form 10-K.
Vishay Intertechnology, Inc. Form of Executive Officer Phantom Stock Unit Agreement. Incorporated by reference to Exhibit 10.50 to
our 2019 annual report on Form 10-K.
Vishay Intertechnology, Inc. Non-Employee Director Compensation Plan.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Certification pursuant to Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 – Chief Executive Officer.
Certification pursuant to Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 – Chief Financial Officer.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief
Executive Officer.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief
Financial Officer.
Interactive Data File (Annual Report on Form 10-K, for the year ended December 31, 2020, furnished in iXBRL (Inline eXtensible
Business Reporting Language)).
Cover Page Interactive Data File (formatted as Inline eXtensible Business Reporting Language and contained in Exhibit 101)
104**
__________________
* Confidential treatment has been requested by, and accorded to, VPG with respect to certain portions of this Exhibit. Omitted portions have been filed separately by VPG with the
Securities and Exchange Commission.
** Filed herewith.
† Denotes a management contract or compensatory plan, contract, or arrangement.
Item 16.
FORM 10-K SUMMARY
Not applicable.
61
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SIGNATURES
VISHAY INTERTECHNOLOGY, INC.
By:/s/ Gerald Paul
Dr. Gerald Paul
President and Chief Executive Officer
February 24, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated below.
Signature
Principal Executive Officer:
/s/ Gerald Paul
Dr. Gerald Paul
Principal Financial and Accounting Officer:
/s/ Lori Lipcaman
Lori Lipcaman
Board of Directors:
/s/ Marc Zandman
Marc Zandman
/s/ Michael Cody
Michael Cody
/s/ Abraham Ludomirski
Dr. Abraham Ludomirski
/s/ Ziv Shoshani
Ziv Shoshani
/s/ Timothy V. Talbert
Timothy V. Talbert
/s/ Jeffrey H. Vanneste
Jeffrey H. Vanneste
/s/ Thomas C. Wertheimer
Thomas C. Wertheimer
/s/ Ruta Zandman
Ruta Zandman
/s/ Raanan Zilberman
Raanan Zilberman
Title
Date
President, Chief Executive Officer,
and Director
February 24, 2021
Executive Vice President and Chief
Financial Officer
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
Executive Chairman of
the Board of Directors
Director
Director
Director
Director
Director
Director
Director
Director
62
Vishay Intertechnology, Inc.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Audited Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to the Consolidated Financial Statements
F-2
F-4
F-6
F-7
F-8
F-9
F-10
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Vishay Intertechnology, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Vishay Intertechnology, Inc. (the Company) as of December 31, 2020 and 2019, and the
related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended
December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal
control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
account or disclosure to which it relates.
F-2
Description of
Matter
the
Sales Returns and Allowances Accruals
At December 31, 2020, the Company’s liability for sales returns and allowances was $39.6 million. As discussed in Note 1 of the
consolidated financial statements, the Company recognizes the estimated variable consideration to be received as revenue from
contracts with customers and recognizes a related accrued liability for estimated future credits that will be issued to its customers,
primarily distributors, for product returns, scrap allowance, “stock, ship and debit” and price protection programs with those
customers.
Auditing management’s sales returns and allowances accruals involved a high degree of subjectivity due to the significant judgment
required in evaluating management’s estimates of future credits that will be issued to customers for sales that were recognized during
the period. In particular, the estimates were sensitive to significant assumptions such as projected market trends and conditions that
drive expected demand and pricing of the Company’s products to be sold from distributor inventories in the future, inventory levels at
customer locations subject to future credits, and the amount of future credits that are expected to be provided to the customers.
How We Addressed
in Our
the Matter
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s sales
returns and allowances review process. For example, we tested controls over management’s review of the significant assumptions
described above.
To test the estimated sales returns and allowances accruals, we performed audit procedures that included, among others, assessing
methodologies and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used
by the Company in its analyses. We inspected contracts with customers in evaluating whether the assumptions used by management
agreed with the terms and conditions of the contracts. In addition, we compared the significant assumptions used by management to
current industry and economic trends that affect demand for the Company’s products, pricing trends and actual historical credit
experience. We also assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant
assumptions to evaluate the changes in the sales returns and allowances accruals that would result from changes in the significant
assumptions.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 1968.
Philadelphia, Pennsylvania
February 24, 2021
F-3
VISHAY INTERTECHNOLOGY, INC.
Consolidated Balance Sheets
(In thousands, except share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowances for credit losses of $1,697 and $1,095, respectively
Inventories:
Finished goods
Work in process
Raw materials
Total inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, at cost:
Land
Buildings and improvements
Machinery and equipment
Construction in progress
Allowance for depreciation
Property and equipment, net
Right of use assets
Goodwill
Other intangible assets, net
Other assets
Total assets
Continues on following page.
December 31,
2020
December 31,
2019
$
619,874 $
694,133
158,476
108,822
338,632
328,187
120,792
201,259
126,200
448,251
122,466
187,354
121,860
431,680
132,103
1,697,336
141,294
1,704,116
76,231
641,041
2,732,771
86,520
(2,593,398)
943,165
75,011
585,064
2,606,355
110,722
(2,425,627)
951,525
102,440
93,162
158,183
150,642
66,795
60,659
186,554
3,154,473 $
160,671
3,120,775
$
F-4
VISHAY INTERTECHNOLOGY, INC.
Consolidated Balance Sheets (continued)
(In thousands, except share amounts)
Liabilities, temporary equity, and equity
Current liabilities:
Notes payable to banks
Trade accounts payable
Payroll and related expenses
Lease liabilities
Other accrued expenses
Income taxes
Total current liabilities
Long-term debt, less current portion
U.S. transition tax payable
Deferred income taxes
Long-term lease liabilities
Other liabilities
Accrued pension and other postretirement costs
Total liabilities
Commitments and contingencies
Redeemable convertible debentures
Stockholders' equity:
Preferred stock, par value $1.00 per share: authorized - 1,000,000 shares; none issued
Common stock, par value $0.10 per share: authorized - 300,000,000 shares; 132,561,010 and 132,348,357 shares
outstanding
Class B convertible common stock, par value $0.10 per share: authorized - 40,000,000 shares; 12,097,148 and
12,097,409 shares outstanding
Capital in excess of par value
Retained earnings
Accumulated other comprehensive income (loss)
Total Vishay stockholders' equity
Noncontrolling interests
Total equity
Total liabilities, temporary equity, and equity
See accompanying notes.
December 31,
2020
December 31,
2019
$
$
- $
196,203
141,034
22,074
182,642
20,470
562,423
394,886
125,438
1,852
86,220
104,356
300,113
1,575,288
2
173,915
122,100
20,217
186,463
17,731
520,428
499,147
140,196
22,021
78,511
100,207
272,402
1,632,912
170
174
-
-
13,256
13,235
1,210
1,409,200
138,990
13,559
1,576,215
2,800
1,579,015
3,154,473 $
1,210
1,425,170
72,180
(26,646)
1,485,149
2,540
1,487,689
3,120,775
F-5
VISHAY INTERTECHNOLOGY, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Net revenues
Costs of products sold
Gross profit
Selling, general, and administrative expenses
Restructuring and severance costs
Operating income
Other income (expense):
Interest expense
Other
Loss on early extinguishment of debt
Total other income (expense)
Income before taxes
Income tax expense
Net earnings
Years ended December 31,
2019
2020
2018
$
2,501,898 $
1,919,995
581,903
2,668,305 $
1,997,105
671,200
3,034,689
2,146,165
888,524
371,450
743
209,710
(31,555)
(11,754)
(8,073)
(51,382)
384,631
24,139
262,430
403,404
-
485,120
(33,683)
(419)
(2,030)
(36,132)
(36,680)
(5,081)
(26,583)
(68,344)
158,328
226,298
416,776
34,545
61,508
70,239
123,783
164,790
346,537
Less: net earnings attributable to noncontrolling interests
860
854
779
Net earnings attributable to Vishay stockholders
Basic earnings per share attributable to Vishay stockholders:
Diluted earnings per share attributable to Vishay stockholders:
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted
Cash dividends per share
See accompanying notes.
$
$
$
122,923 $
163,936 $
345,758
0.85
0.85
$
$
1.13 $
1.13 $
2.39
2.24
144,836
144,608
144,370
145,228
145,136
154,622
$
0.3800 $
0.3700 $
0.3225
F-6
VISHAY INTERTECHNOLOGY, INC.
Consolidated Statements of Comprehensive Income
(In thousands)
Years ended December 31,
2019
2020
2018
Net earnings
$
123,783 $
164,790 $
346,537
Other comprehensive income (loss), net of tax
Pension and other post-retirement actuarial items
(9,055)
(9,729)
10,750
Foreign currency translation adjustment
Other comprehensive income (loss)
Comprehensive income
49,260
(10,126)
(41,454)
40,205
(19,855)
(30,704)
163,988
144,935
315,833
Less: comprehensive income attributable to noncontrolling interests
860
854
779
Comprehensive income attributable to Vishay stockholders
$
163,128 $
144,081 $
315,054
See accompanying notes.
F-7
VISHAY INTERTECHNOLOGY, INC.
Consolidated Statements of Cash Flows
(In thousands)
Operating activities
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
(Gain) loss on disposal of property and equipment
Accretion of interest on convertible debt instruments
Inventory write-offs for obsolescence
Pensions and other postretirement benefits, net of contributions
Loss on early extinguishment of debt
Deferred income taxes
Other
Change in U.S. transition tax liability
Change in repatriation tax liability
Net change in operating assets and liabilities, net of effects of businesses acquired
Net cash provided by operating activities
Investing activities
Capital expenditures
Proceeds from sale of property and equipment
Purchase of businesses, net of cash acquired
Purchase of short-term investments
Maturity of short-term investments
Other investing activities
Net cash provided by (used in) investing activities
Financing activities
Proceeds from long-term borrowings
Issuance costs
Repurchase of convertible debt instruments
Net proceeds (payments) on revolving credit lines
Dividends paid to common stockholders
Dividends paid to Class B common stockholders
Net changes in short-term borrowings
Distributions to noncontrolling interests
Cash withholding taxes paid when shares withheld for vested equity awards
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Years ended December 31,
2019
2020
2018
$
123,783 $
164,790 $
346,537
166,230
157
13,161
22,730
2,864
8,073
(12,141)
3,304
(14,757)
(16,258)
17,792
314,938
(123,599)
403
(25,852)
(293,087)
250,580
(529)
(192,084)
-
-
(151,683)
-
(50,372)
(4,597)
(114)
(600)
(2,016)
(209,382)
12,269
164,461
(157)
14,146
26,494
(552)
2,030
(23,009)
13,341
(14,757)
(38,814)
(11,529)
296,444
(156,641)
577
(11,862)
(111,631)
81,012
3,587
(194,958)
-
(5,394)
(27,863)
-
(48,968)
(4,476)
(16)
(600)
(2,708)
(90,025)
(3,360)
161,863
(2,216)
10,769
23,872
(1,549)
26,583
(55,206)
21,194
(14,757)
(156,767)
(101,817)
258,506
(229,899)
55,561
(14,880)
(175,403)
636,108
(2,058)
269,429
600,000
(15,621)
(960,995)
(150,000)
(42,608)
(3,901)
15
(525)
(2,297)
(575,932)
(14,003)
Net increase (decrease) in cash and cash equivalents
(74,259)
8,101
(62,000)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying notes
694,133
619,874 $
686,032
694,133 $
748,032
686,032
$
F-8
VISHAY INTERTECHNOLOGY, INC.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
Class B
Convertible
Common
Stock
Capital in
Excess of Par
Value
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Total Vishay
Stockholders'
Equity
Common
Stock
Noncontrolling
Interests
Total Equity
$
13,188 $
1,213
$
1,752,506 $
(362,254)
$
25,714 $
1,430,367 $
2,032
$
1,432,399
-
-
-
-
3
-
21
-
-
-
-
-
-
-
(3)
-
-
-
-
-
-
-
-
-
-
2,330
(2,318)
54
4,817
85,262
1,801
345,758
-
(1,801)
-
(30,704)
-
-
-
-
(46,563)
-
-
-
-
-
-
-
-
-
-
345,758
(30,704)
-
-
2,330
(2,297)
(46,509)
4,817
85,262
-
779
-
(525)
-
-
-
-
-
-
-
346,537
(30,704)
(525)
-
2,330
(2,297)
(46,509)
4,817
85,262
-
13,212 $
$
-
1,210
$
(406,640)
1,436,011 $
-
(61,258)
$
-
(6,791) $
(406,640)
1,382,384 $
-
2,286
$
(406,640)
1,384,670
-
-
-
-
-
-
23
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35
23,013
163,936
-
-
-
-
(2,731)
67
6,108
-
(53,511)
-
-
-
(19,855)
23,013
163,936
(19,855)
-
-
-
-
-
-
-
-
35
(2,708)
(53,444)
6,108
-
854
-
-
(600)
-
-
-
-
23,013
164,790
(19,855)
-
(600)
35
(2,708)
(53,444)
6,108
-
13,235 $
$
-
1,210
$
(14,320)
1,425,170 $
-
72,180
$
-
(26,646) $
(14,320)
1,485,149 $
-
2,540
$
(14,320)
1,487,689
-
-
-
-
-
-
21
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
(1,070)
122,923
-
-
-
-
(2,037)
74
5,276
-
(55,043)
-
-
-
40,205
(1,070)
122,923
40,205
-
-
-
-
-
-
-
-
4
(2,016)
(54,969)
5,276
-
860
-
-
(600)
-
-
-
-
(1,070)
123,783
40,205
-
(600)
4
(2,016)
(54,969)
5,276
-
13,256 $
$
-
1,210
$
(19,287)
1,409,200 $
-
138,990
$
-
13,559 $
(19,287)
1,576,215 $
-
2,800
(19,287)
1,579,015
$
Balance at December 31, 2017
Cumulative effect of accounting
change for adoption of ASU 2016-
01
Net earnings
Other comprehensive income (loss)
Distributions to noncontrolling
interests
Conversion of Class B shares
(31,800)
Temporary equity reclassifications
Issuance of stock and related tax
withholdings for vested restricted
stock units (211,328 shares)
Dividends declared ($0.3225 per
share)
Stock compensation expense
Issuance of convertible notes due
2025
Repurchase of convertible
debentures
Balance at December 31, 2018
Cumulative effect of accounting
change for adoption of ASU 2016-
02
Net earnings
Other comprehensive income (loss)
Conversion of Class B shares (18
shares)
Distributions to noncontrolling
interests
Temporary equity reclassification
Issuance of stock and related tax
withholdings for vested restricted
stock units (230,624 shares)
Dividends declared ($0.37 per share)
Stock compensation expense
Repurchase of convertible
debentures
Balance at December 31, 2019
Cumulative effect of accounting
change for adoption of ASU 2016-
13 (see Note 1)
Net earnings
Other comprehensive income
Conversion of Class B shares (261
shares)
Distributions to noncontrolling
interests
Temporary equity reclassification
Issuance of stock and related tax
withholdings for vested restricted
stock units (212,392 shares)
Dividends declared ($0.38 per share)
Stock compensation expense
Repurchase of convertible debt
instruments
Balance at December 31, 2020
See accompanying notes.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Vishay Intertechnology, Inc. (“Vishay” or the “Company”) manufactures one of the world’s largest portfolios of discrete semiconductors and passive electronic
components that are essential to innovative designs in the automotive, industrial, computing, consumer, telecommunications, military, aerospace, and medical
markets. Semiconductors include MOSFETs, diodes, and optoelectronic components. Passive components include resistors, inductors, and capacitors.
Note 1 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ significantly
from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Vishay and all of its subsidiaries in which a controlling financial interest is maintained. For those
consolidated subsidiaries in which the Company’s ownership is less than 100 percent, the outside stockholders’ interests are shown as noncontrolling interest in the
accompanying consolidated balance sheets. Investments in affiliates over which the Company has significant influence but not a controlling interest are carried on
the equity basis. Investments in affiliates over which the Company does not have significant influence are accounted for by the cost method. All intercompany
transactions, accounts, and profits are eliminated.
Revenue Recognition
The Company recognizes revenue from contracts with customers when it satisfies the performance obligations within the contract. The Company has framework
agreements with many of its customers that contain the terms and conditions of future sales, but do not create enforceable rights or obligations. For revenue
recognition purposes, the Company considers the combined purchase orders and the terms and conditions contained within such framework agreements to be
contracts.
Payment terms for the Company's sales are generally less than sixty days. Substantially all of the Company's receivables historically have been and are expected to
continue to be collected within twelve months of the transfer of products to the customer and the Company expects this to continue going forward. Accordingly,
the Company does not recognize a financing component of the transaction price.
Revenue is measured based on the consideration specified in contracts with customers, and excludes any sales incentives and amounts collected on behalf of third
parties. The Company recognizes revenue when it satisfies its performance obligations. The Company analyzes its contracts to determine whether the promise in
the contract to construct and transfer goods to the customer is a performance obligation that will be satisfied over time or at a point in time. When the Company's
performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to
date, the Company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time. The
Company has a limited number of contracts for custom products that meet the criteria to recognize revenue over time.
The Company's contracts contain two performance obligations: delivery of products and warranty protection. The Company does not sell separate, enhanced, or
extended warranty coverage, but through its customary business practices, the Company has created implied service-type warranties, which are accounted for as
separate performance obligations. Revenue is allocated between these two performance obligations and recognized as the obligations are satisfied. The allocation
of revenue to warranty protection is based on an estimate of expected cost plus margin. The delivery of products performance obligation is satisfied and product
sales revenue is recognized when the customer takes control of the products. Warranty revenue is deferred and the warranty protection performance obligation is
satisfied and revenue is recognized over the warranty period, which is typically less than twenty four months from sale to end customer. The warranty deferred
revenue liability is recorded within Other Accrued Expenses and Other Liabilities on the accompanying consolidated balance sheets. The deferred revenue balance
associated with the service-type warranty performance obligations and the components that comprise the change in the deferred revenue balance are not significant.
The Company has a broad line of products that it sells to original equipment manufacturers ("OEMs"), electronic manufacturing services ("EMS") companies, which
manufacture for OEMs on an outsourcing basis, and independent distributors that maintain large inventories of electronic components for resale to OEMs and EMS
companies.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 1 – Summary of Significant Accounting Policies (continued)
The Company recognizes revenue on sales to distributors when the distributor takes control of the products ("sold-to" model). The Company has agreements with
distributors that allow distributors a limited credit for unsaleable products, which it terms a "scrap allowance." Consistent with industry practice, the Company also
has a "stock, ship and debit" program whereby it considers requests by distributors for credits on previously purchased products that remain in distributors'
inventory, to enable the distributors to offer more competitive pricing. In addition, the Company has contractual arrangements whereby it provides distributors with
protection against price reductions initiated by the Company after product is sold by the Company to the distributor and prior to resale by the distributor.
The Company recognizes the estimated variable consideration to be received as revenue and records a related accrued expense for the consideration not expected
to be received, based upon its estimate of product returns, scrap allowances, "stock, ship and debit" credits, and price protection credits that will be attributable to
sales recorded through the end of the period. The Company makes these estimates based upon sales levels to its distributors during the period, inventory levels at
the distributors, current and projected market conditions, and historical experience under the programs. While the Company utilizes a number of different
methodologies to estimate the accruals, all of the methodologies take into account sales levels to distributors 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. The Company believes that it has a reasonable basis to estimate future credits
under the programs. See sales returns and allowances accrual activity in Note 9.
The Company pays commissions to external sales representatives on a per-sale basis. Accordingly, these commissions are expensed as incurred because the future
amortization period of the asset that the Company otherwise would have recognized is one year or less. Internal staff are not paid commissions.
The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the product even if the shipping and handling activities
are performed after the customer obtains control. The Company does not evaluate whether shipping and handling activities are promised services to its customers.
If control transfers and revenue is recognized for the related products before the shipping and handling activities occur, the related costs of those shipping and
handling activities is accrued. The Company applies this accounting policy election consistently to similar types of transactions.
See disaggregated revenue information in Note 15.
Research and Development Expenses
Research and development costs are expensed as incurred. The amount charged to expense for research and development (exclusive of purchased in-process
research and development) aggregated $70,861, $69,827, and $72,885, for the years ended December 31, 2020, 2019, and 2018, respectively. The Company
spends additional amounts for the development of machinery and equipment for new processes and for cost reduction measures.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent
the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents
income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and
tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances have been
established for deferred tax assets which the Company believes do not meet GAAP criteria of “more likely than not” to be realized. This criterion requires a level
of judgment regarding future taxable income, which may be revised due to changes in market conditions, tax laws, or other factors. If the Company’s assumptions
and estimates change in the future, valuation allowances established may be increased, resulting in increased tax expense. Conversely, if the Company is ultimately
able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been established, then the related portion of the valuation allowance can
be released, resulting in decreased tax expense.
The Company and its subsidiaries are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating the
Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for
which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to
which, additional taxes will be due. These reserves are established when the Company believes that certain positions might be challenged despite the Company’s
belief that its tax return positions are fully supportable. The Company adjusts these reserves in light of changing facts and circumstances and the provision for
income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.
These accruals for tax-related uncertainties are based on management’s best estimate of potential tax exposures. When particular matters arise, a number of years
may elapse before such matters are audited by tax authorities and finally resolved. Favorable resolution of such matters could be recognized as a reduction to the
Company’s effective tax rate in the year of resolution. Unfavorable resolution of any particular issue could increase the effective tax rate and may require the use of
cash in the year of resolution. The amount included in current liabilities on the accompanying consolidated balance sheets reflect only amounts expected to be
settled in cash within one year.
See Note 5.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 1 – Summary of Significant Accounting Policies (continued)
Cash, Cash Equivalents, and Short-Term Investments
Cash and cash equivalents includes demand deposits and highly liquid investments with maturities of three months or less when purchased. Highly liquid investments
with original maturities greater than three months, but less than one year are classified as short-term investments. At December 31, 2020 and 2019, the
Company’s short-term investments were comprised of time deposits with financial institutions whose original maturity exceeds three months, but less than one year.
Allowance for Credit Losses
Effective January 1, 2020, the Company estimates its credit losses on financial instruments using a current expected credit loss model. Prior to January 1, 2020,
the Company estimated its credit losses using an incurred loss impairment methodology, which was not materially different than the methodology adopted on
January 1, 2020. See "Recent Accounting Guidance Adopted" below. The Company maintains an allowance for doubtful accounts receivable for estimated losses
resulting from the inability of its customers to make required payments. Payment terms for the Company's sales are generally less than ninety days. Substantially all
of the Company's trade receivables are collected within twelve months of the transfer of products to the customer and the Company expects this to continue going
forward. The credit loss allowance is determined through an analysis of the aging of accounts receivable and assessments of risk that are based on historical trends
and an evaluation of the impact of current and projected economic conditions. Receivables from customers with deteriorating financial condition and those over
180 days past due are removed from the pool and evaluated separately. Net credit loss expense (benefit) for accounts receivable was $475, $(592), and $2,570
for the years ended December 31, 2020, 2019, and 2018, respectively.
The Company’s cash equivalents, short-term investments, and restricted investments are accounted for as held-to-maturity debt instruments, at amortized cost.
Interest income on these instruments is recorded as Other income on the consolidated statements of operations and interest receivable is recognized as a separate
asset and recorded in Prepaid expenses and other current assets on the consolidated balance sheets. The Company has not experienced a credit loss on the
principal or interest receivable of its cash equivalents, short-term investments, or restricted investments. The Company pools its cash equivalents, short-term
investments, and restricted investments by credit rating of the issuing financial institution and estimates an allowance for credit losses based on the corporate bond
default ratios, evaluation of the impact of current and projected economic conditions, and probability of credit loss. Net credit loss expense for cash equivalents,
short-term investments, and restricted investments was immaterial for the year ended December 31, 2020. The Company does not measure an allowance for
credit losses on interest receivable. Any uncollectible interest receivable is recognized by reversing interest income within the fiscal quarter that the interest becomes
uncollectible.
The Company has an immaterial amount of other short-term held-to-maturity debt instruments recorded within Prepaid expenses and other current assets on the
consolidated balance sheets. The Company analyzes these assets on a separate asset basis and estimates an allowance for credit losses based on historical credit
loss rates and an evaluation of the impact of current and projected economic conditions. Net credit loss expense for these other short-term held-to-maturity debt
instruments was immaterial for the year ended December 31, 2020.
Inventories
Inventories are stated at the lower of cost, determined by the first-in, first-out method, or net realizable value. Inventories are adjusted for estimated obsolescence
and written down to net realizable value based upon estimates of future demand, technology developments, and market conditions.
Property and Equipment
Property and equipment is carried at cost and is depreciated principally by the straight-line method based upon the estimated useful lives of the assets. Machinery
and equipment are being depreciated over useful lives of seven years to ten years. Buildings and building improvements are being depreciated over useful lives of
twenty years to forty years. Construction in progress is not depreciated until the assets are placed in service. The estimated cost to complete construction in
progress at December 31, 2020 was approximately $51,600. Depreciation expense was $158,117, $155,985, and $150,056 for the years ended December 31,
2020, 2019, and 2018, respectively. Gains and losses on the disposal of assets which do not qualify for presentation as discontinued operations are included in the
determination of operating margin (within selling, general, and administrative expenses). Individually material gains and losses on disposal are separately disclosed
in the notes to the consolidated financial statements.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of a business acquired over the fair value of the related net assets at the date of acquisition. Certain intangible assets
may be assigned indefinite useful lives. Goodwill and indefinite-lived intangible assets are not amortized but rather are tested for impairment at least annually. These
tests are performed more frequently whenever events or changes in circumstances indicate that the assets might be impaired. The Company's business segments
(see Note 15) represent its reporting units for goodwill impairment testing purposes. At December 31, 2020 and 2019, respectively, the Company has no recorded
indefinite-lived intangible assets.
Definite-lived intangible assets are amortized over their estimated useful lives. Patents and acquired technology are being amortized over useful lives of seven years
to twenty-five years. Capitalized software is amortized over periods of three years to ten years, primarily included in costs of products sold on the consolidated
statements of operations. Customer relationships are amortized over useful lives of five years to twenty years. Noncompete agreements are amortized over
periods of three years to ten years. The Company continually evaluates the reasonableness of the useful lives of these assets.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 1 – Summary of Significant Accounting Policies (continued)
GAAP prescribes a quantitative method for determining goodwill impairment. The Company has the option of performing a qualitative assessment before
performing the quantitative impairment test. If it is determined, on the basis of qualitative factors, that the fair value of the reporting unit is not more likely than not
less than the carrying amount, the quantitative impairment test is not required. If it is determined that the fair value of the reporting unit is more likely than not less
than the carrying amount, the quantitative impairment test is required.
The Company determines the fair value of the reporting unit and compares that fair value to the net book value of the reporting unit. The fair value of the reporting
unit is determined using various valuation techniques, including a comparable companies market multiple approach and a discounted cash flow analysis (an income
approach). If the net book value of the reporting unit were to exceed the fair value, the Company would recognize an impairment charge.
Impairment of Long-Lived Assets
The carrying value of long-lived assets held-and-used, other than goodwill and indefinite-lived intangible assets, is evaluated when events or changes in
circumstances indicate the carrying value may not be recoverable or the useful life has changed. The carrying value of a long-lived asset group is considered
impaired when the total projected undiscounted cash flows from such asset group are separately identifiable and are less than the carrying value. In that event, a
loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset group. Fair market value is determined
primarily using present value techniques based on projected cash flows from the asset group. Losses on long-lived assets held-for-sale, other than goodwill and
indefinite-lived intangible assets, are determined in a similar manner, except that fair market values are reduced for anticipated disposal costs.
Available-for-Sale Securities
Short-term investments and other assets reported on the accompanying consolidated balance sheets include time deposits with financial institutions whose original
maturity exceeds three months, but less than one year that are classified as held-to-maturity instruments, and investments in marketable securities that are classified
as available-for-sale instruments. The available-for-sale instruments include assets that are held in trust related to the Company’s non-qualified pension and deferred
compensation plans (see Note 11) and assets that are intended to fund a portion of the Company’s other postretirement benefit obligations outside of the U.S.
These assets are reported at fair value, based on quoted market prices as of the end of the reporting period. Unrealized gains and losses are reported, net of their
related tax consequences, as Other Income (Expense) on the consolidated statements of operations. At the time of sale, the assets that are held in trust related to
the Company’s non-qualified pension and deferred compensation plans, any gains (losses) calculated by the specific identification method are recognized as a
reduction (increase) to benefits expense, within selling, general, and administrative expenses.
Financial Instruments
The Company uses financial instruments in the normal course of its business, including from time to time, derivative financial instruments. Additionally, from time to
time, the Company enters into contracts that are not considered derivative financial instruments in their entirety, but that include embedded derivative features.
Other financial instruments include cash and cash equivalents, held-to-maturity short-term investments, accounts receivable, and notes payable. The carrying
amounts of these financial instruments reported on the accompanying consolidated balance sheets approximate their fair values due to the short-term nature of these
assets and liabilities.
Stock-Based Compensation
Compensation costs related to stock-based payment transactions are recognized in the consolidated financial statements. The amount of compensation cost is
measured based on the grant-date fair value of the equity (or liability) instruments issued. Compensation cost is recognized over the period that an officer,
employee, or non-employee director is required to provide service in exchange for the award. For awards subject to graded vesting, the Company recognizes
expense over the service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. The Company recognizes
compensation cost for restricted stock units (“RSUs”) that are expected to vest and records cumulative adjustments in the period that the expectation changes.
Foreign Currency Translation
The Company has significant operations outside of the United States. The Company finances its operations in Europe and certain locations in Asia in local
currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. The Company’s operations in Israel and most significant
locations in Asia are largely financed in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency.
For those subsidiaries where the local currency is the functional currency, assets and liabilities on the accompanying consolidated balance sheets have been
translated at the rate of exchange as of the balance sheet date. Translation adjustments do not impact the consolidated results of operations and are reported as a
separate component of stockholders’ equity. Revenues and expenses are translated at the average exchange rate for the year. While the translation of revenues and
expenses into U.S. dollars does not directly impact the statement of operations, the translation effectively increases or decreases the U.S. dollar equivalent of
revenues generated and expenses incurred in those foreign currencies.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 1 – Summary of Significant Accounting Policies (continued)
For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars.
Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the consolidated results of
operations.
Commitments and Contingencies
Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines, penalties, and other sources are
recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. The costs for a
specific environmental remediation site are discounted if the aggregate amount of the obligation and the amount and timing of the cash payments for that site are
fixed or reliably determinable based upon information derived from the remediation plan for that site. Accrued liabilities for environmental matters recorded at
December 31, 2020 and 2019 do not include claims against third parties.
Restructuring and Severance Costs
Restructuring and severance costs reflect charges resulting from cost reduction programs implemented by the Company. Restructuring and severance costs include
exit costs, severance benefits pursuant to an on-going arrangement, voluntary termination compensation under a defined program, and any related pension
curtailment and settlement charges.
The Company recognizes expense for one-time benefits only after management has committed to a plan, the plan is sufficiently detailed to provide the number,
classification, and location of employees to be terminated as well as the expected completion date, the plan has been sufficiently communicated to employees such
that they are able to determine the type and amount of benefits they will receive if terminated, and it is unlikely that the plan will be significantly changed or
withdrawn. If an employee is not required to render service beyond a minimum retention period, the Company recognizes expense once the aforementioned criteria
have been met. If an employee is required to render service beyond a minimum retention period, the Company recognizes expense over the period that the
employee is required to render future service.
The Company recognizes expense for on-going benefit arrangements when the liability is reasonably estimable and considered probable.
The Company recognizes expense for voluntary separation / early retirement when the employee delivers an irrevocable voluntary termination notice pursuant to a
defined Company program.
The Company recognizes other exit costs as incurred.
Self-Insurance Programs
The Company uses a combination of insurance and self-insurance mechanisms to provide for the potential liabilities for workers’ compensation, general liability,
property damage, director and officers’ liability, and vehicle liability.
As part of its self-insurance program for certain risks, the Company created a wholly-owned captive insurance entity in 2007. At December 31, 2020, the captive
insurance entity provides only property and general liability insurance, although it is licensed to also provide casualty and directors’ and officers’ insurance. The
captive insurance entity had no amounts accrued for outstanding claims at December 31, 2020 and 2019.
Certain investments held by the captive insurance entity are restricted primarily for the purpose of potential insurance claims. Such amounts are recorded in other
noncurrent assets, and total $9,281 and $10,259 at December 31, 2020 and 2019, respectively, representing required statutory reserves of the captive insurance
entity.
Convertible Debt Instruments
The Company separately accounts for the liability and equity components of convertible debt instruments that may be settled in cash in a manner that reflects the
Company’s nonconvertible debt borrowing rate. The liability component at issuance is recognized at fair value, based on the fair value of a similar instrument that
does not have a conversion feature. A discount is recorded if debt instruments are issued at a coupon rate which is below the rate of a similar instrument that did
not have a conversion feature at issuance. The equity component is based on the excess of the principal amount of the debt instruments over the fair value of the
liability component, after adjusting for an allocation of debt issuance costs and the deferred tax impact, and is recorded as capital in excess of par. Debt discounts
are amortized as additional non-cash interest expense over the expected life of the debt. The adoption of Accounting Standards Update ("ASU") No. 2020-06,
Debt – Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, on January 1, 2021 significantly impacts the accounting for the Company's
convertible debt instruments. See additional information in "Recent Accounting Guidance Not Yet Adopted" below.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 1 – Summary of Significant Accounting Policies (continued)
Leases
The Company leases buildings and machinery and equipment used for manufacturing and/or sales and administrative purposes. The Company is also party to
various service, warehousing, and other agreements that it evaluates for potential embedded leases. Substantially all of the Company’s leases are structured and
classified as operating leases.
The Company leases assets in each region in which it operates. The Company’s leases are generally denominated in the currency of the leased assets' location,
which may not be the functional currency of the subsidiary lessee. Accordingly, the Company remeasures its lease liability and recognizes a transactional gain/loss
for leases denominated in currencies other than the functional currency of the subsidiary lessee.
The Company recognizes right of use assets and lease liabilities for leases greater than twelve months in duration based on the contract consideration for lease
components through the term of the lease and the applicable discount rate. Leases with a duration less than or equal to twelve months are considered short-term
leases. The Company does not recognize right of use assets or lease liabilities for short-term leases and classifies the expense as short-term lease expense.
Variable lease payments based on an index or rate are included in the right of use assets and lease liabilities based on the effective rates at lease commencement.
Changes in the rates or indices do not impact the right of use asset or lease liability and are recognized as a component of lease expense in the consolidated
statements of operations. Variable lease payments not based on an index or rate are not included in the initial right of use asset and lease liability and are
recognized when incurred as a component of lease expense in the consolidated statements of operations.
The Company has elected to not separate contract consideration for lease and non-lease components for its building leases. In addition to the noncancellable
period of a lease, the Company includes periods covered by extension options it is reasonably certain to exercise, termination options that it is reasonably certain
not to exercise, and extension and termination options controlled by the lessor in its determination of the lease term. The Company uses the rate implicit in the
contract whenever possible when determining the applicable discount rate. When the implicit rate is not used, the Company employs a portfolio approach based
on the duration of the lease. The portfolio lease rates are calculated monthly.
No individual lease is considered significant and there are no leases that have not yet commenced that are considered significant.
See Note 3.
Recent Accounting Pronouncements
Recent Accounting Guidance Not Yet Adopted
In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-06. The ASU simplifies the accounting for certain financial
instruments with characteristics of liability and equity, including convertible debt instruments. The ASU reduces the number of accounting models available for
convertible debt instruments, requires the use of the if-converted method for the calculation of diluted earnings per share for convertible debt instruments, and
increases disclosure requirements. The ASU is effective for the Company for interim and annual periods beginning on or after January 1, 2022, with the ability to
early adopt for interim and annual periods beginning on or after January 1, 2021. The Company will adopt the ASU effective January 1, 2021. Based on work
performed to date, the Company expects to record a $66,078 decrease in additional paid in capital from the derecognition of the bifurcated equity component of
the convertible debt instruments, $59,246 increase in debt from the derecognition of the discount associated with the bifurcated equity component of the convertible
debt instruments and $21,159 increase to the opening balance of retained earnings, representing the cumulative interest expense, net of tax effects, recognized
related to the amortization of the bifurcated conversion option. The Company also expects to write-off the deferred tax liabilities related to the convertible debt
instruments. Adoption of the ASU will not have a significant impact on the diluted sharecount due to Vishay exercising existing rights to legally amend the indenture
governing the convertible senior notes due 2025. See Note 6.
Recent Accounting Guidance Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments. The ASU replaced the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires
consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted the ASU effective January 1,
2020.
The ASU is applicable to the Company's trade accounts receivable, cash equivalents, short-term investments, restricted investments, and other short-term held-to-
maturity debt instruments recorded within Prepaid expenses and other current assets on the consolidated balance sheets. The adoption of ASU 2016-13 on
January 1, 2020 had no material impact on the Company’s allowance for accounts trade receivable credit losses. The Company recorded cumulative-effect
adjustments to January 1, 2020 retained earnings of $810 and $260 to recognize an allowance for credit losses for cash equivalents, short-term investments, and
restricted investments and other short-term held-to-maturity debt instruments, respectively, upon the adoption of ASU 2016-13.
Reclassifications
Certain prior year amounts have been reclassified. Such reclassifications had no effect on reported net earnings attributable to Vishay stockholders, total assets,
stockholders' equity, or the statements of cash flows.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 2 - Acquisition and Divestiture Activities
As part of its growth strategy, the Company seeks to expand through targeted acquisitions of other manufacturers of electronic components that have established
positions in major markets, reputations for product quality and reliability, and product lines with which the Company has substantial marketing and technical
expertise.
Year ended December 31, 2020
On October 1, 2020, the Company acquired the worldwide business and substantially all of the U.S. assets of Applied Thin-Film Products, a California-based,
privately-held manufacturer of custom, build-to-print thin film substrates for the microwave, fiber optic, and life science industries. Concurrently, a Chinese
subsidiary of Applied Thin-Film Products entered into an agreement to sell certain inventory and equipment to a subsidiary of Vishay for approximately $350 at a
later date. The total acquisition price was $25,852, subject to customary post-closing adjustments. Based on its estimate of their fair values pending finalization of
the net working capital adjustment, the Company allocated $10,800 of the purchase price to definite-lived intangible assets. After allocating the purchase price to
the assets acquired and liabilities assumed based on a preliminary estimation of their fair values at the date of acquisition, the Company recorded goodwill of
$6,548 related to this acquisition. The results and operations of this acquisition have been included in the Resistors segment since October 1, 2020. The inclusion
of this acquisition did not have a material impact on the Company's consolidated results for the year ended December 31, 2020. The goodwill related to this
acquisition is included in the Resistors reporting unit for goodwill impairment testing.
Year ended December 31, 2019
On January 3, 2019, the Company acquired substantially all of the assets of Bi-Metallix, Inc. ("Bi-Metallix"), a U.S.-based, privately-held provider of electron
beam continuous strip welding services for $11,862. The Company was a major customer of Bi-Metallix, and the acquired business has been vertically integrated
into the Company's Resistors segment. Based on an estimate of their fair values, the Company allocated $2,900 of the purchase price to definite-lived intangible
assets. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the
Company recorded goodwill of $3,324 related to this acquisition. The results and operations of this acquisition have been included in the Resistors segment since
January 3, 2019. The goodwill related to this acquisition is included in the Resistors reporting unit for goodwill impairment testing.
Year ended December 31, 2018
On February 8, 2018, the Company acquired substantially all of the assets and liabilities of UltraSource, Inc. ("UltraSource"), a U.S.-based, privately-held thin film
circuit and thin film interconnect manufacturer, for $13,596. Based on an estimate of their fair values, the Company allocated $6,500 of the purchase price to
definite-lived intangible assets. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the
date of acquisition, the Company recorded goodwill of $4,227 related to this acquisition. The results and operations of this acquisition have been included in the
Resistors segment since February 8, 2018. The goodwill related to this acquisition is included in the Resistors reporting unit for goodwill impairment testing.
On June 11, 2018, the Company acquired EuroPower Holdings Ltd. ("EuroPower") for $2,939, net of cash acquired. EuroPower is a distributor of electronic
components in the United Kingdom. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at
the date of acquisition, the Company recorded goodwill of $1,068 related to this acquisition. The goodwill related to this acquisition is included in the Resistors
reporting unit for goodwill impairment testing.
Had these acquisitions occurred as of the beginning of the periods presented in these consolidated financial statements, the pro forma statements of operations
would not be materially different than the consolidated statements of operations presented.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 3 – Leases
The net right of use assets and lease liabilities recognized on the consolidated balance sheets for the Company's operating leases as of December 31, 2020 and
2019 are presented below:
Right of use assets
Operating Leases
Buildings and improvements
Machinery and equipment
Total
Current lease liabilities
Operating Leases
Buildings and improvements
Machinery and equipment
Total
Long-term lease liabilities
Operating Leases
Buildings and improvements
Machinery and equipment
Total
Total lease liabilities
December 31,
2020
December 31,
2019
$
$
$
$
$
$
$
97,429 $
5,011
102,440 $
19,370 $
2,704
22,074 $
83,926 $
2,294
86,220 $
108,294 $
87,689
5,473
93,162
17,410
2,807
20,217
75,877
2,634
78,511
98,728
Lease expense is classified in the statements of operations based on asset use. Total lease cost recognized on the consolidated statements of operations is as
follows:
Lease expense
Operating lease expense
Short-term lease expense
Variable lease expense
Total lease expense
Years ended December 31,
2020
2019
$
$
23,363 $
930
248
24,541 $
22,271
2,278
95
24,644
The Company paid $23,814 and $21,552 for its operating leases during the years ended December 31, 2020 and 2019, respectively, which are included in
operating cash flows on the consolidated statements of cash flows. The weighted-average remaining lease term for the Company's operating leases is 8.9 years and
the weighted-average discount rate is 5.9% as of December 31, 2020.
The undiscounted future lease payments for the Company's operating lease liabilities are as follows:
2021
2022
2023
2024
2025
Thereafter
December 31,
2020
$
22,671
19,128
15,628
14,172
13,227
55,218
The undiscounted future lease payments presented in the table above include payments through the term of the lease, which may include periods beyond the
noncancellable term. The difference between the total payments above and the lease liability balance is due to the discount rate used to calculate lease liabilities.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 4 – Restructuring and Related Activities
The Company places a strong emphasis on controlling its costs and combats general price inflation by continuously improving its efficiency and operating
performance. When the ongoing cost containment activities are not adequate, the Company takes actions to maintain its cost competitiveness.
The Company incurred significant restructuring costs in its past to reduce its cost structure. Historically, the Company's primary cost reduction technique was
through the transfer of production from high-labor-cost countries to lower-labor-cost countries. Since 2013, the Company's cost reduction programs have
primarily focused on reducing fixed costs, including selling, general, and administrative expenses.
In 2019, the Company announced global cost reduction and management rejuvenation programs as part of its continuous efforts to improve efficiency and
operating performance. The programs were primarily designed to reduce manufacturing fixed costs and selling, general, and administrative costs company-wide,
and provide management rejuvenation. These programs are now fully implemented. The Company incurred charges of $24,882, primarily related to cash
severance costs, to implement these programs.
The following table summarizes the activity to date related to this program:
Expense recorded in 2019
Cash paid
Foreign currency translation
Balance at December 31, 2019
Expense recorded in 2020
Cash paid
Foreign currency translation
Balance at December 31, 2020
$
$
$
24,139
(1,330)
35
22,844
743
(10,813)
683
13,457
Severance benefits are generally paid in a lump sum at cessation of employment. The current portion of the liability is $11,595 and is included in other accrued
expenses in the accompanying consolidated balance sheet. The non-current portion of the liability is $1,862 and is included in other liabilities in the accompanying
consolidated balance sheet.
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5 – Income Taxes
U.S. Tax Reform: Tax Cuts and Jobs Act
On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted in the United States. The TCJA represented sweeping changes in U.S. tax law.
Among the numerous changes in tax law, the TCJA permanently reduced the U.S. corporate income tax rate to 21% beginning in 2018; imposed a one-time
transition tax on deferred foreign earnings; established a partial territorial tax system by allowing a 100% dividends received deduction on qualifying dividends paid
by foreign subsidiaries; limited deductions for net interest expense; expanded the U.S. taxation of foreign earned income to include "global intangible low-taxed
income" ("GILTI") of foreign subsidiaries; and imposed a base erosion anti-abuse minimum tax ("BEAT").
As permitted by SAB No. 118, the tax expense recorded in the fourth fiscal quarter of 2017 due to the enactment of the TCJA was considered "provisional,"
based on reasonable estimates. After additional analysis was completed in 2018, the Company identified additional amounts available to be repatriated to the U.S.
and additional information regarding the foreign taxes payable and recorded additional provisional tax expense to accrue the incremental foreign income taxes and
withholding taxes payable to foreign jurisdiction. The Company collected and analyzed detailed information about the earnings and profits of its non-U.S.
subsidiaries, the related taxes paid, the amounts which could be repatriated, the foreign taxes which may be incurred on repatriation, and the associated impact of
these items under the TCJA, including under regulatory guidance issued in 2018, throughout the measurement period that ended as of December 31, 2018. The
Company recognized $25,496 of additional tax expense directly and indirectly related to the enactment of the TCJA in 2018.
The TCJA transitioned the U.S. from a worldwide tax system to a territorial tax system. Under previous law, companies could indefinitely defer U.S. income
taxation on unremitted foreign earnings. The TCJA imposed a one-time transition tax on deferred foreign earnings of 15.5% for liquid assets and 8.0% for illiquid
assets, payable in defined increments over eight years. As a result of this requirement, the Company expects to pay $184,467. The first installments of $14,757
were paid in 2020, 2019, and 2018.
The Company repatriated $104,091, $188,742, and $724,000 to the United States, and paid withholding and foreign taxes of $16,258, $38,814, and $156,767
in 2020, 2019, and 2018, respectively. Tax expense for these repatriation transactions was substantially recorded in 2017 upon enactment of the TCJA.
Substantially all of the amounts repatriated were used to repay certain third party and intercompany indebtedness, to pay the U.S. transition tax, to fund capital
expansion projects, and to fund the repurchase of convertible debt instruments (see Note 6).
There are additional amounts of unremitted foreign earnings in other countries, which continue to be reinvested indefinitely, and the Company has made no provision
for incremental foreign income taxes and withholding taxes payable to foreign jurisdictions related to these amounts. Determination of the amount of the
unrecognized deferred foreign tax liability for these amounts is not practicable because of the complexities associated with its hypothetical calculation.
Certain provisions of the TCJA had a significant impact on the Company's effective tax rate and are expected to have a significant impact in future periods.
Because the various provisions of the TCJA are interrelated, and because of changes in the Company’s operations and changes in the capital structure in response
to the TCJA, the impact of any specific provision of the TCJA cannot be isolated. The Company recognized a significant amount of GILTI income in 2020, 2019,
and 2018, but was able to utilize related foreign tax credits to reduce the impact on the effective tax rate. The Company has elected to account for GILTI tax in the
period in which it is incurred and, therefore, does not provide any deferred taxes in the consolidated financial statements at December 31, 2020, 2019, or 2018.
The inclusion of significant GILTI income was a contributing factor in allowing the Company to avoid a limitation on the deductibility of its U.S. interest expense in
2020, 2019, and 2018. The Company was subject to the BEAT minimum tax of $750, $2,900, and $0 in 2020, 2019, and 2018, respectively. BEAT could
increase the Company’s future tax by disallowing certain otherwise deductible payments from the U.S. to non-U.S. subsidiaries and imposing a minimum tax if
greater than the regular tax.
The Company's repurchase of outstanding convertible debentures (see Note 6) reduced the Company's tax rate.
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5 – Income Taxes (continued)
Income (loss) from continuing operations before taxes and noncontrolling interests consists of the following components:
Domestic
Foreign
Significant components of income taxes are as follows:
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
Total income tax expense
Years ended December 31,
2019
2020
2018
(25,884) $
184,212
158,328 $
(10,992) $
237,290
226,298 $
(39,861)
456,637
416,776
Years ended December 31,
2019
2020
2018
7,327 $
218
55,399
62,944
(6,068)
(538)
(21,793)
(28,399)
34,545 $
9,137 $
415
113,779
123,331
(13,731)
(802)
(47,290)
(61,823)
61,508 $
18,756
209
263,247
282,212
(58,386)
(3,117)
(150,470)
(211,973)
70,239
$
$
$
$
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5 – Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
Deferred tax assets:
Pension and other retiree obligations
Inventories
Net operating loss carryforwards
Tax credit carryforwards
Other accruals and reserves
Total gross deferred tax assets
Less valuation allowance
Deferred tax liabilities:
Property and equipment
Earnings not permanently reinvested
Convertible debentures
Other - net
Total gross deferred tax liabilities
Net deferred tax assets (liabilities)
December 31,
2020
2019
$
53,585 $
19,539
124,251
85,651
31,347
314,373
(206,950)
107,423
(1,604)
-
(12,777)
(6,364)
(20,745)
48,434
19,318
119,420
76,140
29,273
292,585
(194,797)
97,788
(2,391)
(16,448)
(25,219)
(6,499)
(50,557)
$
86,678 $
47,231
The Company makes significant judgments regarding the realizability of its deferred tax assets (principally net operating losses and tax credits). The carrying value
of deferred tax assets is based on the Company’s assessment that it is more likely than not that the Company will realize these assets after consideration of all
available positive and negative evidence. As of December 31, 2020, the Company has generated an excess U.S. foreign tax credit of $68,874. Because the
Company does not anticipate sufficient U.S. foreign source income during the carryforward period, the Company has not recognized the benefit of the
carryforward as of December 31, 2020.
A reconciliation of income tax expense at the U.S. federal statutory income tax rate to actual income tax provision is as follows:
Tax at statutory rate
State income taxes, net of U.S. federal tax benefit
Effect of foreign operations
Tax on earnings not permanently reinvested
Unrecognized tax benefits
Repurchase of senior convertible debentures
TCJA - remeasurement of net deferred tax liabilities
TCJA - transition tax on unremitted foreign earnings
Foreign income taxable in the U.S.
Deferred tax rate impact of corporate reorganization
Other
Total income tax expense
Years ended December 31,
2019
2020
2018
$
$
33,249 $
(252)
(9,896)
4,227
4,351
(1,358)
-
-
4,155
-
69
34,545 $
47,523 $
(301)
9,242
6,256
5,584
(1,461)
-
-
6,090
(12,121)
696
61,508 $
87,523
(2,298)
5,736
9,304
2,669
(52,312)
(1,211)
7,425
15,055
-
(1,652)
70,239
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5 – Income Taxes (continued)
Income tax expense for the years ended December 31, 2020, 2019, and 2018 includes certain discrete tax items for changes in uncertain tax positions, valuation
allowances, tax rates, and other related items. These items total $1,998, $799 (tax benefit), and $39,428 (tax benefit) in 2020, 2019, and 2018, respectively.
For the year ended December 31, 2020, the discrete items include a tax benefit of $1,563 resulting from the early extinguishment of convertible senior debentures,
reflecting the reduction in deferred tax liabilities related to the special tax attributes of the debentures and $190 (tax benefit) of adjustments to remeasure of deferred
taxes related to the cash repatriation program described above, and $3,751 of tax expense for changes in uncertain tax positions.
For the year ended December 31, 2019, the discrete items include $7,554 related to a tax-basis foreign exchange gain on the settlement of an intercompany loan,
which previously had been accounted for at the historical foreign exchange rate (akin to an equity contribution) because the debtor entity did not have the intent or
ability to repay such intercompany loan. Currency translation adjustments were recorded in accumulated other comprehensive income, and were not included in
U.S. GAAP pre-tax income. The Company’s cash repatriation activity resulted in the ability to repay such intercompany loan. Upon settlement of this
intercompany loan, the foreign entity realized a taxable gain. Discrete tax items also include a tax benefit of $1,601 resulting from the early extinguishment of
convertible senior debentures, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the debentures, $9,583 (tax benefit) of
adjustments to remeasure of deferred taxes related to the cash repatriation program described above, and $2,831 of tax expense for changes in uncertain tax
positions.
For the year ended December 31, 2018, the discrete items include $25,496 related to the enactment of the TCJA, as previously described, a tax benefit of
$54,877 resulting from the early extinguishment of convertible senior debentures, reflecting the reduction in deferred tax liabilities related to the special tax attributes
of the debentures, and $10,047 (tax benefit) of adjustments to remeasure the deferred taxes related to the cash repatriation program described above.
At December 31, 2020, the Company had the following significant net operating loss carryforwards for tax purposes:
Austria
Belgium
Israel
Italy
Japan
Netherlands
The Republic of China (Taiwan)
California
Pennsylvania
At December 31, 2020, the Company had the following significant tax credit carryforwards available:
U.S. Foreign Tax Credit
California Research Credit
$
Expires
19,490 No expiration
172,952 No expiration
10,706 No expiration
16,779 No expiration
8,490 2023 - 2030
13,216 2021 - 2026
18,184 2026 - 2028
27,893 2021 - 2040
614,410 2021 - 2040
Expires
$
68,874 2028 - 2030
16,478 No expiration
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5 – Income Taxes (continued)
Net income taxes paid were $69,706, $185,654, and $248,958 for the years ended December 31, 2020, 2019, and 2018, respectively. Net income taxes paid
for the years ended December 31, 2020, 2019, and 2018 include $16,258, $38,814 and $156,767, respectively, for repatriation activity and $14,757 in each
period for the TCJA transition tax.
See Note 19 for a discussion of the tax-related uncertainties for the pre-spin-off period of Vishay Precision Group, Inc. (“VPG”), which was spun off on July 6,
2010.
The following table summarizes changes in the liabilities associated with unrecognized tax benefits:
Balance at beginning of year
Addition based on tax positions related to the current year
Addition based on tax positions related to prior years
Currency translation adjustments
Reduction based on tax positions related to prior years
Reduction for settlements
Reduction for lapses of statute of limitation
Balance at end of year
Years ended December 31,
2019
2020
2018
$
$
36,868 $
663
8,358
1,361
(3,152)
(3,446)
-
40,652 $
21,241 $
2,383
16,190
1,211
-
(3,121)
(1,036)
36,868 $
17,056
4,332
2,066
(984)
-
(1,229)
-
21,241
All of the unrecognized tax benefits of $40,652 and $36,868, as of December 31, 2020 and 2019, respectively, would reduce the effective tax rate if recognized.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2020 and 2019, the Company had
accrued interest and penalties related to the unrecognized tax benefits of $3,239 and $3,561, respectively. During the years ended December 31, 2020, 2019, and
2018, the Company recognized $128, $1,201, and $1,470, respectively, in interest and penalties.
The Company and its subsidiaries file U.S. federal income tax returns, as well as tax returns in multiple states and foreign jurisdictions. The Company's U.S.
federal income tax returns are under examination for the years ended December 31, 2017 and 2018. The IRS may, however, ask for supporting documentation
for net operating losses for the years ended December 31, 2013 - 2016, which were utilized in the year ended December 31, 2017. During the years ended
December 31, 2020, 2019, and 2018, certain tax examinations were concluded and certain statutes of limitations lapsed. The tax provision for those years
includes adjustments related to the resolution of these matters, as reflected in the table above. The tax returns of significant non-U.S. subsidiaries currently under
examination are located in the following jurisdictions: Germany (2013 through 2016), India (2004 through 2017), and Singapore (2015 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.
The timing of the resolution of income tax examinations is highly uncertain, as are the amounts and timing of tax payments that result from such examinations. These
events could cause large fluctuations in the balance sheet classification of current and non-current unrecognized tax benefits. The Company believes that in the next
12 months it is reasonably possible that certain income tax examinations will conclude or the statutes of limitation on certain income tax periods open to examination
will expire, or both. Given the uncertainties described above, the Company can only determine an estimate of potential decreases in unrecognized tax benefits
ranging from $4,506 to $9,249.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 6 – Long-Term Debt
Long-term debt consists of the following:
Credit facility
Convertible senior notes, due 2025
Convertible senior debentures, due 2040
Convertible senior debentures, due 2041
Deferred financing costs
Less current portion
Credit Facility
December 31,
2020
December 31,
2019
$
$
- $
406,268
130
-
(11,512)
394,886
-
394,886 $
-
509,128
126
6,677
(16,784)
499,147
-
499,147
The Company maintains a credit agreement with a consortium of banks led by JPMorgan Chase Bank, N.A., as administrative agent, and the lenders (the "Credit
Facility"), which provides an aggregate commitment of $750,000 of revolving loans available until June 5, 2024. The Credit Facility also provides for the ability of
Vishay to request up to $300,000 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.
Borrowings under the Credit Facility bear interest at LIBOR plus an interest margin. The applicable interest margin is based on the Company's leverage ratio.
Based on the Company's current leverage ratio, borrowings bear interest at LIBOR plus 1.50%. The Company also pays a commitment fee, also based on its
leverage ratio, on undrawn amounts. The undrawn commitment fee, based on the Company's current leverage ratio, is 0.25% per annum.
The Credit Facility allows an unlimited amount of defined “Investments,” which include certain intercompany transactions and acquisitions, provided the Company's
pro forma leverage ratio is equal to or less than 2.75 to 1.00. If the Company's pro forma leverage ratio is greater than 2.75 to 1.00, such Investments are subject
to certain limitations.
The Credit Facility also allows an unlimited amount of defined "Restricted Payments," which include cash dividends and share repurchases, provided the
Company's pro forma leverage ratio is equal to or less than 2.50 to 1.00. If the Company's pro forma leverage ratio is greater than 2.50 to 1.00, the Credit
Facility allows such payments up to $100,000 per annum (subject to a cap of $300,000 for the term of the facility, with up to $25,000 of any unused amount of the
$100,000 per annum base available for use in the next succeeding calendar year).
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 the Company and certain significant subsidiaries
located in the United States, and pledges of stock in certain significant domestic and foreign subsidiaries; and are guaranteed by certain significant subsidiaries.
The Credit Facility limits or restricts the Company and its subsidiaries, from, among other things, incurring indebtedness, incurring liens on its respective assets,
making investments and acquisitions (assuming the Company’s 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 the Company's pro forma leverage ratio is greater than 2.50 to 1.00), and requires the Company to comply with
other covenants, including the maintenance of specific financial ratios.
The Credit Facility also contains customary events of default, including, but not limited to, failure to pay principal or interest, failure to pay or default under other
material debt, material misrepresentation or breach of warranty, violation of certain covenants, a change of control, the commencement of bankruptcy proceedings,
the insolvency of the Company or certain of its significant subsidiaries, and the rendering of a judgment in excess of $50,000 against the Company or its
subsidiaries. Upon the occurrence of an event of default under the Credit Facility, the Company's obligations under the credit facility may be accelerated and the
lending commitments under the credit facility may be terminated.
At December 31, 2020 and 2019, there was $748,690 and $747,912, respectively, available under the Credit Facility. Letters of credit totaling $1,310 and
$2,088 were outstanding at December 31, 2020 and 2019, respectively.
The Credit Facility was entered into on June 5, 2019, and replaced a similar arrangement, which provided up to $640,000 of aggregate commitments.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 6 – Long-Term Debt (continued)
Convertible Debt Instruments
The following table summarizes some key facts and terms regarding the outstanding convertible debt instruments as of December 31, 2020:
Due 2025
Due 2040
Issuance date
June 12, 2018
Maturity date
Principal amount
Cash coupon rate (per annum)
Nonconvertible debt borrowing rate at issuance (per annum)
Conversion rate effective December 10, 2020 (per $1 principal amount)
Effective conversion price effective December 10, 2020 (per share)
130% of the conversion price (per share)
Initial call date
$
$
$
November 9,
2010
November 15,
2040
300
2.25%
8.00%
June 15, 2025
465,344
$
2.25%
5.50%
31.8836
31.36
40.77
n/a
$
$
81.8143
12.22
15.89
November 20,
2020
The terms of the fully retired convertible senior debentures due 2041 and due 2042 were generally congruent to the convertible senior debentures due 2040.
Vishay was prohibited from redeeming the convertible senior debentures prior to the respective initial call dates. On or after the initial call date and prior to the
maturity date, Vishay may redeem for cash all or part of the debentures at a redemption price equal to 100% of the principal amount of the debentures to be
redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of Vishay’s common stock has been at least 150%
of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period prior to the date on which Vishay provides notice of
redemption. On January 5, 2021, Vishay gave notice to the holders of its convertible senior debentures due 2040 that Vishay would redeem the debentures on
February 4, 2021. The redemption price was paid in cash and was equal to 100% of the principal amount plus accrued but unpaid interest to, but excluding
February 4, 2021.
Prior to three months before the maturity date, the holders may convert their convertible senior debentures due 2040 only under the following circumstances: (1) the
sale price of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the debentures falls below 98% of the
product of the sale price of Vishay's common stock and the conversion rate for a specified period; (3) Vishay calls any or all of the debentures for redemption, at
any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified
corporate events. The convertible senior debentures due 2040 were convertible as of December 31, 2020 and remained convertible until they were redeemed.
Prior to December 15, 2024, the holders of the convertible senior notes due 2025 may convert their notes only under the following circumstances: (1) the sale price
of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the notes falls below 98% of the product of the sale
price of Vishay's common stock and the conversion rate for a specified period; or (3) upon the occurrence of specified corporate transactions. The convertible
senior notes due 2025 are not currently convertible.
Effective December 23, 2020, the Company exercised a provision in the Indenture governing the convertible senior notes due 2025, as further described below.
On January 5, 2021, the trustee of the convertible senior notes due 2025 executed a supplemental indenture dated as of December 23, 2020 (the "Supplemental
Indenture"), regarding the notes. The Supplemental Indenture amends the indenture governing the notes dated as of June 12, 2018, to incorporate the Company's
election.
Pursuant to the Supplemental Indenture, at the direction of its Board of Directors, Vishay has fixed the “Specified Dollar Amount” (as defined in the Indenture) that
shall apply to all future conversions of notes at $1 cash per $1 principal amount. The fixing of the Specified Dollar Amount requires Vishay to satisfy its conversion
obligations by paying cash with respect to such Specified Dollar Amount. Prior to entering into the Supplemental Indenture, Vishay had the option to settle any
convertible senior notes due 2025 presented for conversion by delivering cash, shares of common stock or any combination thereof. At the direction of its Board
of Directors, Vishay had always intended, upon conversion, to repay the principal amount of the convertible senior notes due 2025 in cash and settle any additional
amounts in common stock. The entry into a Supplemental Indenture codifies this intention and removes Vishay’s option to settle the principal amount of the
convertible senior notes due 2025 in shares of common stock upon conversion.
The Company intends to early adopt ASU No. 2020-06, effective January 1, 2021. Among other things, ASU No. 2020-06 requires the use of the if-converted
method of calculating diluted earnings per share for the convertible notes due 2025. Entering into the Supplemental Indenture will reduce the potential dilutive
impact of the convertible senior notes due 2025 for purposes of earnings per share computations versus what would have otherwise been required pursuant to
ASU No 2020-06. See more information in Note 1.
The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for the convertible debt
instruments effective as of the ex-dividend date of each cash dividend. The conversion rate and effective conversion price for the convertible senior notes due 2025
is adjusted for quarterly cash dividends to the extent such dividends exceed $0.085 per share of common stock. Vishay must provide additional shares upon
conversion if there is a “fundamental change” in the business as defined in the indenture governing the convertible senior notes due 2025.
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 6 – Long-Term Debt (continued)
Prior to the adoption of ASU No. 2020-06, GAAP requires an issuer to separately account for the liability and equity components of the instrument in a manner
that reflects the issuer’s nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The resulting discount on the debt is
amortized as non-cash interest expense in future periods. Subsequent to the adoption of ASU No. 2020-06, Vishay's convertible debt instruments will not be
bifurcated into liability and equity components and non-cash interest will only include amortization of deferred financing costs.
The carrying values of the liability and equity components of the convertible debt instruments are reflected in the Company’s accompanying consolidated balance
sheets as follows:
Principal
amount of the
convertible
debt
Unamortized
discount
Carrying
value of
liability
component
Equity
component
(including
temporary
equity) - net
carrying value
December 31, 2020
Convertible senior notes due 2025 $
Convertible senior debentures $
Total $
465,344
300
465,644 $
(59,076) $
(170) $
(59,246) $
406,268 $
130 $
406,398 $
December 31, 2019
Convertible senior notes due 2025 $
Convertible senior debentures $
Total $
600,000
17,190
617,190 $
(90,872) $
(10,387) $
(101,259) $
509,128 $
6,803 $
515,931 $
66,127
121
66,248
85,262
7,129
92,391
Interest is payable on the convertible debt instruments semi-annually at the cash coupon rate; however, the remaining debt discount is being amortized as additional
non-cash interest expense using an effective annual interest rate equal to the Company’s estimated nonconvertible debt borrowing rate at the time of issuance. In
addition to ordinary interest, contingent interest will accrue in certain circumstances relating to the trading price of the convertible senior debentures due 2040 and
under certain other circumstances, beginning ten years subsequent to their issuance. Contingent interest is not currently payable on the convertible senior
debentures due 2040. The convertible senior notes due 2025 do not possess contingent interest features.
Interest expense related to the convertible debt instruments is reflected on the accompanying consolidated statements of operations for the years ended December
31:
Contractual
coupon
interest
Non-cash
amortization
of debt
discount
Other non-
cash
interest
expense
Total interest
expense
related to the
debentures
2020
Convertible senior notes due 2025 $
Convertible senior debentures $
Total $
12,097
88
12,185 $
13,118
43
13,161 $
2019
Convertible senior notes due 2025 $
Convertible senior debentures $
Total $
13,500
498
13,998 $
13,925
221
14,146 $
Convertible senior notes due 2025 $
Convertible senior debentures
2018
Total $
7,463
8,627
16,090 $
7,240
3,529
10,769 $
1,623 $
- $
1,623 $
1,816 $
(35) $
1,781 $
1,059 $
254
1,313 $
26,838
131
26,969
29,241
684
29,925
15,762
12,410
28,172
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 6 – Long-Term Debt (continued)
The Company used substantially all of the net proceeds of the 2018 issuance of convertible senior notes due 2025 and cash, including a substantial amount of cash
repatriated to the United States (see Note 5) to repurchase $273,690, $116,922, and $147,832 principal amounts of convertible senior debentures due 2040, due
2041, and due 2042, respectively, in 2018. The net carrying value of the debentures repurchased were $111,294, $45,157, and $62,503, respectively. In
accordance with the authoritative accounting guidance for convertible debentures, the aggregate repurchase payment of $960,995 was allocated between the
liability ($241,706) and equity (including temporary equity, $719,289) components of the convertible debentures, using the Company's nonconvertible debt
borrowing rate at the time of the repurchases. As a result, the Company recognized a loss on extinguishment of convertible debentures of $26,583, including the
write-off of a portion of unamortized debt issuance costs.
The Company used cash to repurchase $1,010, $16,188 and $2,168 principal amounts of convertible senior debentures due 2040, due 2041, and due 2042,
respectively, in 2019. The net carrying value of the debentures repurchased were $417, $6,282, and $924, respectively. In accordance with the authoritative
accounting guidance for convertible debentures, the aggregate repurchase payment of $27,863 was allocated between the liability ($9,568) and equity (including
temporary equity, $18,295) components of the convertible debentures, using the Company's nonconvertible debt borrowing rate at the time of the repurchase. As
a result, the Company recognized a loss on extinguishment of convertible debentures of $2,030, including the write-off of a portion of unamortized debt issuance
costs. The convertible senior debentures due 2042 have been fully repurchased, and the trustee has confirmed that the Company has satisfied and discharged its
obligations under the indenture governing the convertible senior debentures due 2042.
The Company used cash to repurchase $134,656 principal amount of convertible senior notes due 2025 in 2020. The net carrying value of the debentures
repurchased was $115,978. In accordance with the authoritative accounting guidance for convertible debt, the aggregate repurchase payments of $128,328 were
allocated between the liability ($118,587) and equity ($9,741) components of the convertible notes, using the Company's nonconvertible debt borrowing rate at the
time of the repurchases. As a result, the Company recognized a loss on extinguishment of convertible notes of $4,600, including the write-off of unamortized debt
issuance costs.
The Company used cash to repurchase $16,890 principal amount of convertible senior debentures due 2041 in 2020. The net carrying value of the debentures
repurchased was $6,715. The aggregate repurchase payment of $23,355 was allocated between the liability ($10,075) and equity ($13,280) components of the
convertible debentures, using the Company's nonconvertible debt borrowing rate at the time of the repurchase. As a result, the Company recognized a loss on
extinguishment of convertible debentures of $3,473, including the write-off of unamortized debt issuance costs. The convertible senior debentures due 2041 have
been fully repurchased, and the trustee has confirmed that the Company has satisfied and discharged its obligations under the indenture governing the convertible
senior debentures due 2041.
Other Borrowings Information
The Credit Facility, of which no amounts were drawn as of December 31, 2020, expires in 2024. The convertible senior notes mature in 2025.
At December 31, 2020 and 2019, the Company had committed and uncommitted short-term credit lines with various U.S. and foreign banks aggregating
approximately $6,000, with substantially no amounts borrowed.
Interest paid was $15,450, $16,177, and $23,859 for the years ended December 31, 2020, 2019, and 2018, respectively.
See Note 18 for further discussion on the fair value of the Company’s long-term debt.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 7 – Stockholders’ Equity
The Company’s Class B common stock carries 10 votes per share while the common stock carries 1 vote per share. Class B shares are transferable only to certain
permitted transferees while the common stock is freely transferable. Class B shares are convertible on a one-for-one basis at any time into shares of common
stock. Transfers of Class B shares other than to permitted transferees result in the automatic conversion of the Class B shares into common stock.
The Board of Directors may only declare dividends or other distributions with respect to the common stock or the Class B common stock if it grants such
dividends or distributions in the same amount per share with respect to the other class of stock. Stock dividends or distributions on any class of stock are payable
only in shares of stock of that class. Shares of either common stock or Class B common stock cannot be split, divided, or combined unless the other is also split,
divided, or combined equally. Cash dividends were paid quarterly in 2020 and 2019.
The Credit Facility also allows an unlimited amount of defined "Restricted Payments," which include cash dividends and share repurchases, provided the
Company's pro forma leverage ratio is equal to or less than 2.50 to 1.00. If the Company's pro forma leverage ratio is greater than 2.50 to 1.00, the Credit
Facility allows such payments up to $100,000 per annum (subject to a cap of $300,000 for the term of the facility, with up to $25,000 of any unused amount of the
$100,000 per annum base available for use in the next succeeding calendar year).
At December 31, 2020, the Company had reserved shares of common stock for future issuance as follows:
Restricted stock units outstanding
Phantom stock units outstanding
2007 Stock Incentive Program - available to grant
Convertible senior debentures, due 2040*
Convertible senior notes, due 2025*
Conversion of Class B common stock
793,000
198,000
2,307,000
27,600
19,060,723
12,097,148
34,483,471
__________________
*At December 31, 2020, the convertible senior debentures due 2040 are convertible into 24,544 shares of Vishay common stock. Based on the effective conversion rate at December 31,
2020, the convertible senior notes due 2025 would be convertible into 14,836,842 shares of Vishay common stock. The Company has reserved adequate shares to ensure it could issue
the maximum amount of shares to be delivered upon a make-whole fundamental change as defined in the indentures governing the convertible debt instruments.
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 8 – Details of Expenses
The caption “Other” on the accompanying consolidated statements of operations consists of the following:
Foreign exchange gain (loss)
Interest income
Other components of periodic pension expense
Investment income (expense)
Other
Years ended December 31,
2019
2020
2018
$
$
(4,095) $
3,709
(13,613)
2,271
(26)
(11,754) $
(1,414) $
8,445
(13,959)
6,448
61
(419) $
(1,991)
11,940
(13,118)
(1,646)
(266)
(5,081)
The Company repurchased $151,546, $19,366, and $538,444, principal amounts of convertible debt instruments and recognized losses on early extinguishment of
the repurchased convertible debt of $8,073, $2,030, and $26,583 in 2020, 2019, and 2018, respectively.
Impact of the Coronavirus Outbreak
The Company's operations have been impacted by the coronavirus ("COVID-19") outbreak. Some manufacturing facilities were temporarily closed and some are
operating at levels less than full capacity. The Company has incurred incremental costs separable from normal operations that are directly related to the outbreak
and containment efforts, primarily wages paid to manufacturing employees during government-mandated shut-downs, additional wages and hardship allowances for
working during lockdown periods, additional costs of cleaning and disinfecting facilities, costs of additional safety equipment for employees, and temporary housing
for employees due to travel restrictions, which were partially offset by government subsidies. The net impact of the costs and subsidies are reported as cost of
products sold of $4,563 and selling, general, and administrative benefits of $1,451 based on employee function on the consolidated statement of operations for the
year ended December 31, 2020.
The Company's insurance coverages generally exclude losses incurred due to pandemics. Any amounts that may be received will not be recognized until all
contingencies are settled.
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 9 – Other Accrued Expenses
Other accrued expenses consist of the following:
Sales returns and allowances
Goods received, not yet invoiced
Accrued restructuring
Other
Sales returns and allowances accrual activity is shown below:
Beginning balance
Sales returns and allowances
Credits issued
Foreign currency
Ending balance
December 31,
2020
2019
$
$
39,629 $
30,945
11,595
100,473
182,642 $
40,508
30,515
18,841
96,599
186,463
Years Ended December 31,
2019
2020
2018
$
$
40,508 $
88,844
(90,824)
1,101
39,629 $
42,663 $
107,806
(109,729)
(232)
40,508 $
36,680
102,026
(95,521)
(522)
42,663
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 10 – Accumulated Other Comprehensive Income (Loss)
The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each component are as follows:
Balance at January 1, 2018
Cumulative effect of accounting for adoption of ASU 2016-01
Other comprehensive income before reclassifications
Tax effect
Other comprehensive income before reclassifications, net of tax
Amounts reclassified out of AOCI
Tax effect
Amounts reclassified out of AOCI, net of tax
Net comprehensive income (loss)
Balance at December 31, 2018
Other comprehensive income before reclassifications
Tax effect
Other comprehensive income before reclassifications, net of tax
Amounts reclassified out of AOCI
Tax effect
Amounts reclassified out of AOCI, net of tax
Net comprehensive income (loss)
Balance at December 31, 2019
Other comprehensive income before reclassifications
Tax effect
Other comprehensive income before reclassifications, net of tax
Amounts reclassified out of AOCI
Tax effect
Amounts reclassified out of AOCI, net of tax
Net comprehensive income (loss)
Balance at December 31, 2020
Pension and
other post-
retirement
actuarial
items
Currency
translation
adjustment
Unrealized
gain
(loss) on
available-for-
sale
securities
Total
$
$
$
$
$
$
$
(69,041) $
-
5,617
(1,032)
4,585
8,343
(2,178)
6,165
10,750 $
(58,291) $
(21,473)
5,219
(16,254)
8,694
(2,169)
6,525
(9,729) $
(68,020) $
(22,055)
5,288
(16,767)
10,168
(2,456)
7,712
(9,055) $
(77,075) $
92,954 $
-
(41,454)
-
(41,454)
-
-
-
(41,454) $
51,500 $
(10,126)
-
(10,126)
-
-
-
(10,126) $
41,374 $
49,260
-
49,260
-
-
-
49,260 $
90,634 $
1,801 $
(1,801)
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
- $
25,714
(1,801)
(35,837)
(1,032)
(36,869)
8,343
(2,178)
6,165
(30,704)
(6,791)
(31,599)
5,219
(26,380)
8,694
(2,169)
6,525
(19,855)
(26,646)
27,205
5,288
32,493
10,168
(2,456)
7,712
40,205
13,559
The Company recognized a cumulative-effect adjustment to retained earnings (accumulated deficit) of $1,801 for the cumulative change in fair value of available-
for-sale equity investments previously recognized in other comprehensive income due to the adoption of ASU 2016-01 on January 1, 2018.
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Pensions and Other Postretirement Benefits
The Company maintains various retirement benefit plans. GAAP requires employers to recognize the funded status of a benefit plan, measured as the difference
between plan assets at fair value and the benefit obligation, in its balance sheet. The recognition of the funded status on the balance sheet requires employers to
recognize actuarial items (such as actuarial gains and losses, prior service costs, and transition obligations) as a component of other comprehensive income, net of
tax.
The following table summarizes amounts recorded on the accompanying consolidated balance sheets associated with these various retirement benefit plans:
Included in "Other assets":
Non-U.S. pension plans
Total included in other assets
Included in "Payroll and related expenses":
U.S. pension plans
Non-U.S. pension plans
U.S. other postretirement plans
Non-U.S. other postretirement plans
Total included in payroll and related expenses
Accrued pension and other postretirement costs:
U.S. pension plans
Non-U.S. pension plans
U.S. other postretirement plans
Non-U.S. other postretirement plans
Other retirement obligations
Total accrued pension and other postretirement costs
Accumulated other comprehensive loss:
U.S. pension plans
Non-U.S. pension plans
U.S. other postretirement plans
Non-U.S. other postretirement plans
Total accumulated other comprehensive loss*
December 31,
2020
2019
312 $
312 $
(35) $
(8,314)
(929)
(475)
(9,753) $
(45,529) $
(225,473)
(6,794)
(8,035)
(14,282)
(300,113) $
10,709 $
94,480
344
2,119
107,652 $
303
303
(35)
(7,362)
(872)
(616)
(8,885)
(42,348)
(202,873)
(6,817)
(7,493)
(12,871)
(272,402)
8,839
84,926
(180)
2,179
95,764
$
$
$
$
$
$
$
$
* - Amounts included in accumulated other comprehensive loss are presented in this table pre-tax.
Defined Benefit Pension Plans
U.S. Pension Plans
The Company maintained several defined benefit pension plans which covered most full-time U.S. employees. These included pension plans which are “qualified”
under the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code, and “non-qualified” pension plans which provide defined
benefits primarily to U.S. employees whose benefits under the qualified pension plan would be limited by ERISA and the Internal Revenue Code. The Company’s
principal qualified U.S. pension plan (the Vishay Retirement Plan) was frozen effective January 1, 2009 and terminated in 2016.
The Company’s principal non-qualified U.S. pension plan (the Vishay Non-qualified Retirement Plan) was a contributory pension plan designed to provide similar
defined benefits to covered U.S. employees whose benefits under the Vishay Retirement Plan were limited by the Internal Revenue Code. The Vishay Non-
qualified Retirement Plan was similar in construction to the Vishay Retirement Plan, except that the plan is not qualified under the Internal Revenue Code.
The Vishay Non-qualified Retirement Plan, like all non-qualified plans, is considered to be unfunded. The Company maintains a non-qualified trust, referred to as a
“rabbi” trust, to fund benefit payments under this plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the property of
employees. Therefore, they are accounted for as other noncurrent assets. Assets held in trust related to the non-qualified pension plan were $29,157 and $27,012
at December 31, 2020 and 2019, respectively.
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Pensions and Other Postretirement Benefits (continued)
In 2008, the Company adopted amendments to the Vishay Non-Qualified Retirement Plan such that effective January 1, 2009, the plan was frozen. Pursuant to
these amendments, no new employees may participate in the plans, no further participant contributions were required or permitted, and no further benefits shall
accrue after December 31, 2008. Benefits accumulated as of December 31, 2008 will be paid to employees upon or following retirement, and the Company will
likely need to make additional cash contributions to the rabbi trust to fund this accumulated benefit obligation.
The Company also maintains other pension plans which provide supplemental defined benefits primarily to former U.S. employees whose benefits under qualified
pension plans were limited by the Internal Revenue Code. These non-qualified plans are all non-contributory plans, and are considered to be unfunded.
In 2004, the Company entered into an employment agreement with Dr. Felix Zandman, its Executive Chairman and then-Chief Executive Officer. Pursuant to this
agreement, the Company is providing an annual retirement benefit of approximately $614 to his surviving spouse. The Company maintains a non-qualified trust,
referred to as a “rabbi” trust, to fund benefit payments under this plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the
property of employees. Therefore, they are accounted for as other noncurrent assets. Assets held in trust related to this non-qualified pension plan were $1,243
and $605 at December 31, 2020 and 2019, respectively.
Non-U.S. Pension Plans
The Company provides pension and similar benefits to employees of certain non-U.S. subsidiaries consistent with local practices. Pension benefits earned are
generally based on years of service and compensation during active employment.
The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to U.S. and non-U.S. pension plans:
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan amendments
Actuarial (gains) losses
Benefits paid
Curtailments and settlements
Currency translation
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Benefits paid
Currency translation
Fair value of plan assets at end of year
Funded status at end of year
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
$
$
$
$
$
42,383 $
-
1,366
-
3,623
(1,808)
-
-
45,564 $
- $
-
1,808
(1,808)
-
- $
283,561 $
4,382
3,783
1,015
10,920
(17,737)
(464)
22,349
307,809 $
$
73,629
2,811
12,149
(17,737)
3,482
74,334 $
38,169 $
-
1,696
-
4,309
(1,791)
-
-
42,383 $
-
-
1,791
(1,791)
-
- $
275,207
3,382
5,116
-
20,115
(18,985)
-
(1,274)
283,561
70,820
4,614
15,443
(18,985)
1,737
73,629
(45,564) $
(233,475) $
(42,383) $
(209,932)
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Pensions and Other Postretirement Benefits (continued)
The plan assets are stated at fair value. See Note 18 for further discussion of the valuation of the plan assets.
Amounts recognized in the accompanying consolidated balance sheets consist of the following:
Other assets
Accrued benefit liability - current
Accrued benefit liability - non-current
Accumulated other comprehensive loss
Actuarial items consist of the following:
Unrecognized net actuarial loss
Unamortized prior service cost
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
$
$
- $
(35)
(45,529)
10,709
(34,855) $
312 $
(8,314)
(225,473)
94,480
(138,995) $
- $
(35)
(42,348)
8,839
(33,544) $
303
(7,362)
(202,873)
84,926
(125,006)
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
$
$
10,212 $
497
10,709 $
94,072 $
408
94,480 $
8,199 $
640
8,839 $
84,523
403
84,926
The following table sets forth additional information regarding the projected and accumulated benefit obligations:
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
Accumulated benefit obligation, all plans
$
45,564 $
287,169 $
42,383 $
264,723
Plans for which the accumulated benefit obligation exceeds plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
The following table sets forth the components of net periodic pension cost:
$
45,564 $
45,564
-
$
288,212
275,816
59,070
42,383 $
42,383
-
252,469
239,341
44,670
2020
Years ended December 31,
2019
2018
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses
Amortization of prior service cost
Curtailment and settlement losses
Net periodic pension cost
$
- $
1,366
-
1,609
144
-
$
3,119 $
4,382
3,783
(2,004)
6,554
378
1,148
14,241
$
$
-
1,696
-
827
144
-
2,667
$
$
3,382 $
5,116
(1,956)
5,374
197
2,183
14,296 $
-
$
1,484
-
656
144
-
2,284 $
3,822
4,793
(1,889)
6,196
318
1,111
14,351
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Pensions and Other Postretirement Benefits (continued)
See Note 10 for the pretax, tax effect and after tax amounts included in other comprehensive income during the years ended December 31, 2020, 2019, and
2018. The estimated actuarial items for the defined benefit pensions plans that will be amortized from accumulated other comprehensive loss into net periodic
pension cost during 2021 is $10,000.
The following weighted average assumptions were used to determine benefit obligations at December 31 of the respective years:
Discount rate
Rate of compensation increase
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
2.25%
0.00%
1.02%
2.02%
3.25%
0.00%
1.40%
2.24%
The following weighted average assumptions were used to determine the net periodic pension costs:
Discount rate
Rate of compensation increase
Expected return on plan assets
Years ended December 31,
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
3.25%
0.00%
0.00%
1.40%
2.24%
2.35%
4.50%
0.00%
0.00%
1.96%
2.17%
2.77%
The plans’ expected return on assets is based on management’s expectations of long-term average rates of return to be achieved by the underlying investment
portfolios. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plans are invested, advice from
pension consultants and investment advisors, and current economic and capital market conditions.
The investment mix between equity securities and fixed income securities is based upon achieving a desired return, balancing higher return, more volatile equity
securities, and lower return, less volatile fixed income securities and is adjusted for the expected duration of the obligation and the funded status of the plan.
Investment allocations are made across a range of securities, maturities and credit quality. The Company’s non-U.S. defined benefit plan investments are based on
local laws and customs. Most plans invest in cash and local government fixed income securities, although plans in certain countries have investments in equity
securities. The plans do not invest in securities of Vishay or its subsidiaries. Negative investment returns could ultimately affect the funded status of the plans,
requiring additional cash contributions. See Note 18 for further information on the fair value of the plan assets by asset category.
Estimated future benefit payments are as follows:
2021
2022
2023
2024
2025
2026-2030
U.S.
Plans
Non-U.S.
Plans
$
1,904 $
1,901
8,502
3,260
9,505
11,379
16,593
19,235
17,033
16,808
17,957
84,994
The Company’s anticipated 2020 contributions for defined benefit pension plans will approximate the expected benefit payments disclosed above.
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Pensions and Other Postretirement Benefits (continued)
Other Postretirement Benefits
In the U.S., the Company maintains unfunded non-pension postretirement plans, including medical benefits for certain executives and their surviving spouses, which
are funded as costs are incurred. The Company also maintains two unfunded non-pension postretirement plans at two European subsidiaries.
The following table sets forth a reconciliation of the benefit obligation, plan assets, and accrued benefit cost related to U.S. and non-U.S. non-pension defined
benefit postretirement plans:
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Currency translation
Benefit obligation at end of year
Fair value of plan assets at end of year
Funded status at end of year
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
$
$
$
$
7,689 $
112
236
550
(864)
-
7,723 $
8,109 $
284
64
35
(706)
724
8,510 $
6,994 $
157
286
939
(687)
-
7,689 $
7,953
284
123
311
(413)
(149)
8,109
- $
- $
- $
-
(7,723) $
(8,510) $
(7,689) $
(8,109)
Amounts recognized in the accompanying consolidated balance sheets consist of the following:
Accrued benefit liability - current
Accrued benefit liability - non-current
Accumulated other comprehensive income
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
$
$
(929) $
(6,794)
344
(7,379) $
(475) $
(8,035)
2,119
(6,391) $
(872) $
(6,817)
(180)
(7,869) $
(616)
(7,493)
2,179
(5,930)
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Pensions and Other Postretirement Benefits (continued)
Actuarial items consist of the following:
Unrecognized net actuarial loss (gain)
The following table sets forth the components of net periodic benefit cost:
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
$
$
344 $
344 $
2,119 $
2,119 $
(180) $
(180) $
2,179
2,179
2020
Years ended December 31,
2019
2018
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
Service cost
Interest cost
Amortization of actuarial (gains) losses
Amortization of prior service credit
Curtailment and settlement losses
Net periodic benefit cost (benefit)
$
$
112 $
236
26
-
-
374 $
284
64
132
-
177
657
$
$
157
286
(138)
-
-
305
$
$
284 $
123
107
-
-
514 $
137 $
273
(39)
(148)
-
223 $
288
114
105
-
-
507
The estimated actuarial items for the other postretirement benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit
cost during 2021 are not material.
The following weighted average assumptions were used to determine benefit obligations at December 31 of the respective years:
Discount rate
Rate of compensation increase
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
2.25%
0.00%
0.54%
2.87%
3.25%
0.00%
0.81%
2.87%
The following weighted average assumptions were used to determine the net periodic benefit costs:
Discount rate
Rate of compensation increase
Years ended December 31,
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
3.25%
0.00%
0.81%
2.87%
4.50%
0.00%
1.60%
3.18%
The impact of a one-percentage-point change in assumed health care cost trend rates on the net periodic benefit cost and postretirement benefit obligation is not
material.
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Pensions and Other Postretirement Benefits (continued)
Estimated future benefit payments are as follows:
2021
2022
2023
2024
2025
2026-2030
U.S.
Plans
Non-U.S.
Plans
$
929 $
855
783
703
626
2,216
475
547
275
257
558
3,243
As the plans are unfunded, the Company’s anticipated contributions for 2021 are equal to its estimated benefits payments.
Other Retirement Obligations
The Company participates in various other defined contribution and government-mandated retirement plans based on local law or custom. The Company
periodically makes required contributions for certain of these plans, whereas other plans are unfunded retirement bonus plans which will be paid at the employee's
retirement date. At December 31, 2020 and 2019, the accompanying consolidated balance sheets include $14,282 and $12,871, respectively, within accrued
pension and other postretirement costs related to these plans.
The Company’s U.S. employees are eligible to participate in a 401(k) savings plan, which provides for Company matching contributions. The Company’s
matching expense for the plans was $6,363, $6,481, and $6,353 for the years ended December 31, 2020, 2019, and 2018, respectively. No material amounts
are included in the accompanying consolidated balance sheets at December 31, 2020 and 2019 related to unfunded 401(k) contributions.
Certain key employees participate in a deferred compensation plan. During the years ended December 31, 2020, 2019, and 2018, these employees could defer a
portion of their compensation until retirement, or elect shorter deferral periods. The Company maintains a liability within other noncurrent liabilities on its
consolidated balance sheets related to these deferrals. The Company maintains a non-qualified trust, referred to as a “rabbi” trust, to fund payments under this
plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the property of employees. Therefore, they are accounted for as other
noncurrent assets. Assets held in trust related to the deferred compensation plan at December 31, 2020 and 2019 were approximately $27,491 and $24,531,
respectively.
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 12 – Stock-Based Compensation
The Company has various stockholder-approved programs which allow for the grant of share-based compensation to officers, employees, and non-employee
directors.
The amount of compensation cost related to stock-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. The
fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Company determines compensation cost for
restricted stock units ("RSUs"), phantom stock units, and restricted stock based on the grant-date fair value of the underlying common stock adjusted for expected
dividends paid over the required vesting period for non-participating awards. Compensation cost is recognized over the period that an officer, employee, or non-
employee director provides service in exchange for the award.
The following table summarizes share-based compensation expense recognized:
Restricted stock units
Phantom stock units
Total
Years ended December 31,
2019
2020
2018
$
$
5,061 $
215
5,276 $
5,931 $
177
6,108 $
4,603
214
4,817
The Company recognizes compensation cost for RSUs that are expected to vest and records cumulative adjustments in the period that the expectation changes.
The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at December 31, 2020 (amortization
periods in years):
Restricted stock units
Phantom stock units
Total
Weighted
Average
Remaining
Amortization
Periods
0.8
0.0
Unrecognized
Compensation
Cost
$
$
2,760
-
2,760
The Company currently expects all performance-based RSUs to vest and all of the associated unrecognized compensation cost for performance-based RSUs
presented in the table above to be recognized.
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 12 – Stock-Based Compensation (continued)
2007 Stock Incentive Program
The Company's 2007 Stock Incentive Program (the "2007 Program"), as amended and restated, was approved by Vishay's stockholders at Vishay's Annual
Meeting of Stockholders on May 20, 2014. The 2007 Program permits the grant of up to 6,500,000 shares of restricted stock, unrestricted stock, RSUs, stock
options, and phantom stock units, to officers, employees, and non-employee directors of the Company. Such instruments are available for grant until May 20,
2024.
At December 31, 2020, the Company has reserved 2,307,000 shares of common stock for future grants of equity awards pursuant to the 2007 Program. If any
outstanding awards are forfeited by the holder or cancelled by the Company, the underlying shares would be available for regrant to others.
Restricted Stock Units
Each RSU entitles the recipient to receive a share of common stock when the RSU vests.
RSU activity is presented below (number of RSUs in thousands):
2020
Weighted
Average
Grant-date
Fair Value
Number of
RSUs
Years ended December 31,
2019
Number of
RSUs
Weighted
Average
Grant-date
Fair Value
2018
Weighted
Average
Grant-date
Fair Value
Number of
RSUs
17.93
18.30
15.70
19.06
18.90
842 $
272
(308)
(13)
793 $
793
14.77
19.85
11.70
17.71
17.93
$
$
904
314
(361)
(15)
842
842
13.34
18.90
13.67
-
14.77
986 $
252
(334)
-
904 $
904
Outstanding:
Beginning of year
Granted
Vested*
Cancelled or forfeited
End of year
Expected to vest
* The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.
The number of performance-based RSUs scheduled to vest increases ratably based on the achievement of defined performance criteria between the established
target and maximum levels. RSUs with performance-based vesting criteria are expected to vest as follows (number of RSUs in thousands):
Vesting Date
January 1, 2021**
January 1, 2022
January 1, 2023
Expected to
Vest
Not Expected
to Vest
Total
141
174
152
-
-
-
141
174
152
** The performance vesting criteria for the performance-based RSUs with a vesting date of January 1, 2021 were achieved.
In the event of (i) any termination (other than for cause) after attaining retirement age (as defined in the respective executive's employment arrangement), the
executive's outstanding RSUs shall immediately vest and the outstanding performance-based RSUs shall vest on their normal vesting date to the extent applicable
performance criteria are realized; and (ii) a change of control of Vishay, all of such executive’s outstanding RSUs and performance-based RSUs shall immediately
vest. In the event of voluntary termination by the executive prior to attaining retirement age or termination for cause, the executive’s outstanding RSUs and
performance-based RSUs will be forfeited.
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 12 – Stock-Based Compensation (continued)
Phantom Stock Units
The 2007 Program authorizes the grant of phantom stock units to the extent provided for in the Company's employment agreements with certain executives. Each
phantom stock unit entitles the recipient to receive a share of common stock at the individual's termination of employment or any other future date specified in the
applicable employment agreement. Phantom stock units participate in dividend distribution on the same basis as the Company's common stock and Class B
common stock. Dividend equivalents are issued in the form of additional units of phantom stock. The phantom stock units are fully vested at all times.
The following table summarizes the Company’s phantom stock units activity (number of phantom stock units in thousands):
2020
Years ended December 31,
2019
2018
Number of
Phantom
Stock Units
Grant-date
Fair Value per
Unit
Number of
Phantom
Stock Units
Grant-date
Fair Value per
Unit
Number of
Phantom
Stock Units
Grant-date
Fair Value per
Unit
Outstanding:
Beginning of year
Granted
Dividend equivalents issued
End of year
183
10 $
5
198
21.49
170
10
3
183
$
17.72
157
10 $
3
170
21.35
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 13 – Commitments and Contingencies
Environmental Matters
The Company is subject to various federal, state, local, and foreign laws and regulations governing environmental matters, including the use, discharge, and disposal
of hazardous materials. The Company’s manufacturing facilities are believed to be in substantial compliance with current laws and regulations. Complying with
current laws and regulations has not had a material adverse effect on the Company’s financial condition.
The Company has engaged environmental consultants and attorneys to assist management in evaluating potential liabilities related to environmental matters.
Management assesses the input from these consultants along with other information known to the Company in its effort to continually monitor these potential
liabilities. Management assesses its environmental exposure on a site-by-site basis, including those sites where the Company has been named as a “potentially
responsible party.” Such assessments include the Company’s share of remediation costs, information known to the Company concerning the size of the hazardous
waste sites, their years of operation, and the number of past users and their financial viability.
As of December 31, 2020, the Company has accrued environmental liabilities of $11,710, of which $4,929 is included in other accrued liabilities on the
accompanying consolidated balance sheet, and $6,781 is included in other noncurrent liabilities on the accompanying consolidated balance sheet.
While the ultimate outcome of these matters cannot be determined, management does not believe that the final disposition of these matters will have a material
adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. The Company’s present and past facilities have been in
operation for many years. These facilities have used substances and have generated and disposed of wastes which are or might be considered hazardous.
Therefore, it is possible that additional environmental issues may arise in the future, which the Company cannot now predict.
Litigation
The Company is a party to various claims and lawsuits arising in the normal course of business. The Company is of the opinion that these litigations or claims will
not have a material negative effect on its consolidated financial position, results of operations, or cash flows.
Semiconductor Foundry Agreements
The Company’s Siliconix subsidiary maintains long-term foundry agreements with subcontractors to ensure access to external front-end capacity.
Since 2004, Siliconix has maintained long-term foundry arrangements for semiconductor manufacturing with Tower Semiconductor, pursuant to which Siliconix
transferred certain technology to Tower Semiconductor and committed to purchase a minimum amount of semiconductor wafers. The Company has minimum
purchase commitments pursuant to its current arrangements with Tower Semiconductor and other foundry partners of $30,461, $16,011, and $1,560 for the years
2021 through 2023, respectively. The minimum purchase commitments with Tower Semiconductor are based on a 18-month rolling forecast and, accordingly, the
2022 through 2023 minimum purchase commitments will likely increase. The Company has the option to purchase wafers in addition to the minimum commitment
and, accordingly, actual purchases may be different than the amounts disclosed above. The Company paid no penalties due to its 2020 purchase commitments.
The Company's 2019 purchases pursuant to its arrangements were less than the minimum purchase commitment and it paid an immaterial penalty.
Product Quality Claims
The Company is a party to various product quality claims in the normal course of business. See Note 1 for further information on the Company's warranty
obligations.
Executive Employment Agreements
The Company has employment agreements with certain of its senior executives. These employment agreements provide incremental compensation in the event of
termination. The Company does not provide any severance or other benefits specifically upon a change in control.
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 14 – Current Vulnerability Due to Certain Concentrations
Market Concentrations
The Company's largest customer, TTI, Inc., an electronics distributor, represented approximately 10% of consolidated net revenues in 2019, and slightly less than
10% in 2020. The loss of this customer could have a material effect on the results of operations of the Company. No other customers represented greater than
10% of consolidated net revenue in 2020 or 2019.
A material portion of the Company's revenues are derived from the worldwide industrial, automotive, telecommunications, and computing markets. These markets
have historically experienced wide variations in demand for end products. If demand for these end products should decrease, the producers thereof could reduce
their purchases of the Company's products, which could have an adverse effect on the Company's results of operations and financial position.
Certain subsidiaries and product lines have customers which comprise greater than 10% of the subsidiary's or product line's net revenues. The loss of one of these
customers could have a material effect on the results of operations of the subsidiary or product line and financial position of the subsidiary, which could result in an
impairment charge which could be material to the Company's consolidated financial statements.
Credit Risk Concentrations
Financial instruments with potential credit risk consist principally of cash and cash equivalents, short-term investments, accounts receivable, and notes receivable.
Concentrations of credit risk with respect to receivables are generally limited due to the Company’s large number of customers and their dispersion across many
countries and industries. As of December 31, 2020, one customer comprised 17.2% of the Company’s accounts receivable balance. This customer comprised
19.4% of the Company’s accounts receivable balance as of December 31, 2019. No other customer comprised greater than 10% of the Company’s accounts
receivable balance as of December 31, 2020 or December 31, 2019. The Company continually monitors the credit risks associated with its accounts receivable
and adjusts the allowance for uncollectible accounts accordingly. The credit risk exposure associated with the accounts receivable is limited by the allowance and
is not considered material to the financial statements.
The Company maintains cash and cash equivalents and short-term investments with various major financial institutions. The Company is exposed to credit risk
related to the potential inability to access liquidity in financial institutions where its cash and cash equivalents and short-term investments are concentrated. As of
December 31, 2020, the following financial institutions held over 10% of the Company’s combined cash and cash equivalents and short-term investments balance:
MUFG Bank Ltd.*
JPMorgan*
HSBC*
Bank of China
*Participant in Credit Facility
Sources of Supplies
20.1%
18.7%
12.9%
10.8%
Many of the Company’s products require the use of raw materials that are produced in only a limited number of regions around the world or are available from only
a limited number of suppliers. The Company’s consolidated results of operations may be materially and adversely affected if there are significant price increases for
these raw materials, the Company has difficulty obtaining these raw materials, or the quality of available raw materials deteriorates. For periods in which the prices
of these raw materials are rising, the Company may be unable to pass on the increased cost to the Company’s customers, which would result in decreased margins
for the products in which they are used. For periods in which the prices are declining, the Company may be required to write down its inventory carrying cost of
these raw materials which, depending on the extent of the difference between market price and its carrying cost, could have a material adverse effect on the
Company’s net earnings.
Vishay is a major consumer of the world’s annual production of tantalum. Tantalum, a metal purchased in powder or wire form, is the principal material used in the
manufacture of tantalum capacitors. There are few suppliers that process tantalum ore into capacitor grade tantalum powder.
From time to time, there have been short-term market shortages of raw materials utilized by the Company. While these shortages have not historically adversely
affected the Company’s ability to increase production of products containing these raw materials, they have historically resulted in higher raw material costs for the
Company. The Company cannot assure that any of these market shortages in the future would not adversely affect the Company’s ability to increase production,
particularly during periods of growing demand for the Company’s products.
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 14 – Current Vulnerability Due to Certain Concentrations (continued)
Certain raw materials used in the manufacture of the Company’s products, such as gold, copper, palladium, and other metals, are traded on active markets and can
be subject to significant price volatility. To ensure adequate supply and to provide cost certainty, the Company’s policy is to enter into short-term commitments to
purchase defined portions of annual consumption of the raw materials utilized by the Company if market prices decline below budget. If after entering into these
commitments, the market prices for these raw materials decline, the Company must recognize losses on these adverse purchase commitments.
Customer requirements and certain laws regarding so called "conflict minerals," which include tantalum, tungsten, tin, and gold, all of which are used in the
Company’s products, could result in increased prices and decreased supply of these materials, which could negatively affect the Company’s consolidated results of
operations.
Geographic Concentration
The Company has operations outside the United States, and approximately 75% of revenues earned during 2020 were derived from sales to customers outside the
United States. Additionally, as of December 31, 2020, $752,662 of the Company’s cash and cash equivalents and short-term investments were held by
subsidiaries outside of the United States. Some of the Company’s products are produced and cash and cash equivalents and short-term investments are held in
countries which are subject to risks of political, economic, and military instability. This instability could result in wars, riots, nationalization of industry, currency
fluctuations, and labor unrest. These conditions could have an adverse impact on the Company’s ability to operate in these regions and, depending on the extent
and severity of these conditions, could materially and adversely affect the Company’s overall financial condition, operating results, and ability to access its liquidity
when needed.
As of December 31, 2020 the Company’s cash and cash equivalents and short-term investments were concentrated in the following countries:
Singapore
Germany
Israel
United States
People's Republic of China
The Republic of China (Taiwan)
Other Asia
Other Europe
Other
21.2%
17.9%
14.9%
13.5%
12.5%
8.4%
7.2%
3.2%
1.2%
Certain of the Company's non-U.S. subsidiaries have cash and cash equivalents and short-term investments deposited in U.S. financial institutions.
Vishay has been in operation in Israel for 50 years. The Company has never experienced any material interruption in its operations attributable to these factors, in
spite of several Middle East crises, including wars.
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 15 – Segment and Geographic Data
Vishay is a global manufacturer and supplier of electronic components. Vishay operates, and its chief operating decision maker makes strategic and operating
decisions with regards to assessing performance and allocating resources based on, six reporting segments: MOSFETs, Diodes, Optoelectronic Components,
Resistors, Inductors, and Capacitors. These segments represent groupings of product lines based on their functionality:
(cid:404)
(cid:404)
(cid:404)
(cid:404)
(cid:404)
(cid:404)
Metal oxide semiconductor field effect transistors ("MOSFETs") function as solid state switches to control power.
Diodes route, regulate, and block radio frequency, analog, and power signals; protect systems from surges or electrostatic discharge damage; or provide
electromagnetic interference filtering.
Optoelectronic components emit light, detect light, or do both.
Resistors are basic components used in all forms of electronic circuitry to adjust and regulate levels of voltage and current.
Inductors use an internal magnetic field to change alternating current phase and resist alternating current.
Capacitors store energy and discharge it when needed.
Vishay's reporting segments generate substantially all of their revenue from product sales to the industrial, automotive, telecommunications, computing, consumer
products, power supplies, military and aerospace, and medical end markets. An immaterial portion of revenues are from royalties.
The Company evaluates business segment performance on operating income, exclusive of certain items ("segment operating income"). Only dedicated, direct
selling, general, and administrative expenses of the segments are included in the calculation of segment operating income. The Company's calculation of segment
operating income excludes such selling, general, and administrative costs as global operations, sales and marketing, information systems, finance and administration
groups, as well as restructuring and severance costs, the direct impact of the COVID-19 outbreak, and other items affecting comparability. Management believes
that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the Company. These
items represent reconciling items between segment operating income and consolidated operating income. Business segment assets are the owned or allocated
assets used by each business.
The Company also regularly evaluates gross profit by segment to assist in the analysis of consolidated gross profit. The Company considers segment operating
income to be the more important metric because it more fully captures the business operations of the segments.
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 15 – Segment and Geographic Data (continued)
The following tables set forth business segment information:
MOSFETs Diodes
Optoelectronic
Components Resistors
Inductors
Capacitors
Corporate /
Other
Total
Year ended December 31, 2020:
Net revenues
Gross Profit
Segment Operating Income
Depreciation expense
Capital expenditures
$
Total Assets as of December
501,380 $
114,236
76,548
30,835
18,621
502,548 $
90,004
69,663
39,380
31,960
236,616 $
66,502
50,369
16,003
12,873
606,183 $
153,214
130,700
32,531
21,298
293,629 $
92,500
82,472
13,821
20,730
361,542 $
70,010
50,753
17,349
11,198
- $ 2,501,898
581,903
455,942
158,117
123,599
(4,563) $
(4,563) $
8,198 $
6,919 $
31, 2020:
$
447,867 $
704,606 $
341,517 $
693,251 $
330,092 $
438,906 $
198,234 $ 3,154,473
Year ended December 31, 2019:
Net revenues
Gross Profit
Segment Operating Income
Depreciation expense
Capital expenditures
$
Total Assets as of December
509,145 $
126,026
88,994
32,614
35,131
557,143 $
113,647
94,130
38,930
38,242
222,986 $
53,463
37,145
16,803
12,448
657,192 $
186,707
162,969
28,909
34,395
298,642 $
96,893
86,395
13,316
17,836
423,197 $
94,464
74,063
17,253
9,916
- $ 2,668,305
671,200
- $
543,696
- $
155,985
8,160 $
156,641
8,673 $
31, 2019:
$
404,412 $
755,945 $
328,871 $
653,195 $
334,791 $
449,823 $
193,738 $ 3,120,775
Year ended December 31, 2018:
Net revenues
Gross Profit
Segment Operating Income
Depreciation expense
Capital expenditures
$
547,643 $
145,923
106,955
32,104
49,557
712,936 $
196,702
175,752
38,197
57,756
289,727 $
100,219
82,681
16,612
19,935
716,394 $
238,356
214,347
26,416
50,978
301,892 $
98,912
89,224
11,292
29,884
466,097 $
108,412
86,929
17,745
12,200
- $ 3,034,689
888,524
- $
755,888
- $
150,056
7,690 $
229,899
9,589 $
Total Assets as of December
31, 2018:
________________
$
444,356 $
804,784 $
342,656 $
587,595 $
287,240 $
487,540 $
152,027 $ 3,106,198
Reconciliation:
Segment Operating Income
Restructuring and Severance Costs
Impact of COVID-19 on Selling, General, and Administrative Expenses
Unallocated Selling, General, and Administrative Expenses
Consolidated Operating Income (Loss)
Unallocated Other Income (Expense)
Consolidated Income Before Taxes
Years ended December 31,
2019
2020
2018
$
$
$
455,942 $
(743)
1,451
(246,940)
209,710 $
(51,382)
158,328 $
543,696 $
(24,139)
-
(257,127)
262,430 $
(36,132)
226,298 $
755,888
-
-
(270,768)
485,120
(68,344)
416,776
The Company has a broad line of products that it sells to OEMs, EMS companies, and independent distributors. The distribution of sales by customer type is
shown below:
Distributors
OEMs
EMS companies
Years Ended December 31,
2019
1,393,412 $
1,082,701
192,192
2,668,305 $
2020
1,328,953 $
1,003,090
169,855
2,501,898 $
2018
1,742,262
1,085,292
207,135
3,034,689
$
$
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 15 – Segment and Geographic Data (continued)
Net revenues were attributable to customers in the following regions:
Asia
Europe
Americas
$
$
Years Ended December 31,
2019
2020
1,028,073 $
854,847
618,978
2,501,898 $
965,030 $
993,101
710,174
2,668,305 $
2018
1,193,827
1,081,073
759,789
3,034,689
The Company generates substantially all of its revenue from product sales to end customers in the industrial, automotive, telecommunications, computing, consumer
products, power supplies, military and aerospace, and medical end markets. Sales by end market are presented below:
Industrial
Automotive
Telecommunications
Computing
Consumer Products
Power Supplies
Military and Aerospace
Medical
Years Ended December 31,
2019
2020
864,032 $
796,853
109,001
204,166
118,896
116,966
162,484
129,500
2,501,898 $
946,118 $
830,876
170,088
182,781
107,983
119,361
179,228
131,870
2,668,305 $
2018
1,139,880
861,436
200,379
228,831
168,884
144,433
162,921
127,925
3,034,689
$
$
The following table summarizes net revenues based on revenues generated by subsidiaries located within the identified geographic area:
United States
Germany
Other Europe
Israel
Asia
The following table summarizes property and equipment based on physical location:
United States
Germany
Other Europe
Israel
People's Republic of China
Republic of China (Taiwan)
Other Asia
Other
Years ended December 31,
2019
2020
2018
$
$
592,460 $
772,194
103,475
16,609
1,017,160
2,501,898 $
686,985 $
910,509
113,473
17,787
939,551
2,668,305 $
743,647
982,082
123,846
13,299
1,171,815
3,034,689
December 31,
2020
2019
$
$
95,570 $
199,076
118,604
79,267
201,848
167,177
77,024
4,599
943,165 $
100,163
179,218
116,883
92,636
215,139
161,374
81,338
4,774
951,525
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 16 – Earnings Per Share
Basic earnings per share is computed using the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is
computed using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of stock options and restricted stock
units (see Note 12), convertible debt instruments (see Note 6), and other potentially dilutive securities.
The following table sets forth the computation of basic and diluted earnings per share attributable to Vishay stockholders (shares in thousands):
Numerator:
Net earnings attributable to Vishay stockholders
Denominator:
Denominator for basic earnings per share:
Weighted average shares
Outstanding phantom stock units
Adjusted weighted average shares - basic
Effect of dilutive securities:
Convertible debt instruments
Restricted stock units
Dilutive potential common shares
Denominator for diluted earnings per share:
Adjusted weighted average shares - diluted
Years ended December 31,
2019
2020
2018
$
122,923 $
163,936 $
345,758
144,641
195
144,836
144,427
181
144,608
144,202
168
144,370
30
362
392
100
428
528
9,707
545
10,252
145,228
145,136
154,622
Basic earnings per share attributable to Vishay stockholders
Diluted earnings per share attributable to Vishay stockholders
$
$
0.85
0.85
$
$
1.13 $
1.13 $
2.39
2.24
Diluted earnings per share for the years presented do not reflect the following weighted average potential common shares, as the effect would be antidilutive (in
thousands):
Convertible debt instruments:
Convertible Senior Debentures, due 2041
Convertible Senior Notes, due 2025
Weighted average other
Years ended December 31,
2019
2020
2018
100
17,062
341
301
19,063
315
-
10,468
266
The Company's convertible debt instruments are only convertible for specified periods upon the occurrence of certain events. The Company's convertible
debentures due 2040 became convertible subsequent to the December 31, 2020 evaluation of the conversion criteria. In periods that the convertible debt
instruments are not convertible, the certain conditions which could trigger conversion of the debt instruments have been deemed to be non-substantive, and
accordingly, the Company assumes the conversion of these instruments in its diluted earnings per share computation during periods in which they are dilutive.
The Company, upon conversion, will repay the principal amounts of the convertible debt instruments in cash and settle any additional amounts in shares of Vishay
common stock. Prior to the adoption of ASU No. 2020-06 on January 1, 2020, the convertible instruments are included in the diluted earnings per share
computation using the “treasury stock method” (similar to options and warrants) rather than the “if converted method” otherwise required for convertible debt.
Under the “treasury stock method,” Vishay calculates the number of shares issuable under the terms of the convertible instruments based on the average market
price of Vishay common stock during the period, and that number is included in the total diluted shares figure for the period. If the average market price is less than
$12.22, no shares are included in the diluted earnings per share computation for the convertible senior debentures due 2040 and if the average market price is less
than $31.36 no shares are included in the diluted earnings per share computation for the convertible senior notes due 2025.
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 17 – Additional Cash Flow Information
Changes in operating assets and liabilities, net of effects of businesses acquired, consist of the following:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable
Other current liabilities
Net change in operating assets and liabilities
Years ended December 31,
2019
2020
2018
$
$
4,662 $
(24,204)
12,692
18,485
6,157
17,792 $
66,158 $
18,762
271
(43,791)
(52,929)
(11,529) $
(62,433)
(80,182)
(11,670)
(2,277)
54,745
(101,817)
F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 18 – Fair Value Measurements
The fair value measurement accounting guidance establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the Company’s own assumptions.
An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis:
December 31, 2020
Assets:
Assets held in rabbi trusts
Available for sale securities
Non - U.S. Defined Benefit Pension Plan Assets:
Equity securities
Fixed income securities
Cash
December 31, 2019
Assets:
Assets held in rabbi trusts
Available for sale securities
Non - U.S. Defined Benefit Pension Plan Assets:
Equity securities
Fixed income securities
Cash
Total Fair
Value
Level 1
Level 2
Level 3
$
$
$
$
$
$
$
$
$
$
$
$
57,892 $
4,917
34,145 $
4,917
9,446
18,105
46,783
137,143 $
9,446
18,105
46,783
113,396 $
52,148 $
4,405
34,280 $
4,405
10,534
16,381
46,714
130,182 $
10,534
16,381
46,714
112,314 $
23,747 $
-
-
-
-
23,747 $
17,868 $
-
-
-
-
17,868 $
-
-
-
-
-
-
-
-
-
-
-
-
As described in Note 6, the Company allocated the aggregate repurchase payment of convertible debt instruments between the associated liability and equity
components of the repurchased convertible senior debentures based on a nonrecurring fair value measurement of the convertible senior debentures immediately
prior to the repurchases. The nonrecurring fair value measurements are considered Level 3 measurements. See Note 6 for further information on the
measurements and inputs.
F-50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 18 – Fair Value Measurements (continued)
The Company maintains non-qualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and non-qualified pension plans. Rabbi
trust assets consist primarily of marketable securities, classified as available-for-sale, and company-owned life insurance assets. The marketable securities held in
the rabbi trusts are valued using quoted market prices on the last business day of the year. The company-owned life insurance assets are valued in consultation with
the Company’s insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of the marketable securities held in
the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within
the fair value hierarchy.
The Company maintains defined benefit retirement plans in certain of its non-U.S. subsidiaries. The assets of the plans are measured at fair value.
Equity securities held by the non-U.S. defined benefit retirement plans consist of equity securities that are valued based on quoted market prices on the last business
day of the year. The fair value measurement of the equity securities is considered a Level 1 measurement within the fair value hierarchy.
Fixed income securities held by the non-U.S. defined benefit retirement plans consist of government bonds in the Philippines and India and corporate notes that are
valued based on quoted market prices on the last business day of the year. The fair value measurement of the fixed income securities is considered a Level 1
measurement within the fair value hierarchy.
Cash held by the non-U.S. defined benefit retirement plans consists of demand deposits on account in various financial institutions to fund current benefit payments.
The carrying amount of the cash approximates its fair value.
The Company holds investments in debt securities that are intended to fund a portion of its pension and other postretirement benefit obligations outside of the U.S.
The investments are valued based on quoted market prices on the last business day of the year. The fair value measurement of the investments is considered a
Level 1 measurement within the fair value hierarchy.
The Company enters into forward contracts with highly-rated financial institutions to mitigate the foreign currency risk associated with intercompany loans
denominated in a currency other than the legal entity's functional currency. The notional amount of the forward contracts was $100,000 as of December 31, 2020.
There were no such contracts outstanding as of December 31, 2019. The forward contracts are short-term in nature and are expected to be renewed at the
Company's discretion until the intercompany loans are repaid. We have not designated the forward contracts as hedges for accounting purposes, and as such the
change in the fair value of the contracts is recognized in the consolidated statement of operations as a component of other income (expense). The Company
estimates the fair value of the forward contracts based on applicable and commonly used pricing models using current market information and is considered a Level
2 measurement within the fair value hierarchy. The value of the forward contracts was immaterial as of December 31, 2020. The Company does not utilize
derivatives or other financial instruments for trading or other speculative purposes.
The fair value of the long-term debt, excluding the deferred financing costs, at December 31, 2020 and 2019 is approximately $491,400 and $632,200,
respectively, compared to its carrying value, excluding the derivative liability and capitalized deferred financing costs, of $406,398 and $515,931, respectively. The
Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future
payments discounted at risk-adjusted rates, which are considered level 2 inputs.
At December 31, 2020 and 2019, the Company’s short-term investments were comprised of time deposits with financial institutions that have maturities that
exceed 90 days from the date of acquisition; however they all mature within one year from the respective balance sheet dates. The Company's short-term
investments are accounted for as held-to-maturity debt instruments, at amortized cost, which approximates their fair value. The investments are funded with excess
cash not expected to be needed for operations prior to maturity; therefore, the Company believes it has the intent and ability to hold the short-term investments until
maturity. At each reporting date, the Company performs an evaluation to determine if any unrealized losses are other-than-temporary. No other-than-temporary
impairments have been recognized on these securities, and there are no unrecognized holding gains or losses for these securities during the periods presented.
There have been no transfers to or from the held-to-maturity classification. All decreases in the account balance are due to returns of principal at the securities’
maturity dates. Interest on the securities is recognized as interest income when earned.
At December 31, 2020 and 2019, the Company’s cash and cash equivalents were comprised of demand deposits, time deposits with maturities of three months or
less when purchased, and money market funds. The Company estimates the fair value of its cash, cash equivalents, and short-term investments using level 2 inputs.
Based on the current interest rates for similar investments with comparable credit risk and time to maturity, the fair value of the Company's cash, cash equivalents,
and held-to-maturity short-term investments approximate the carrying amounts reported in the accompanying consolidated balance sheets.
The Company’s financial instruments also include accounts receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial
instruments reported in the accompanying consolidated balance sheets approximate their fair values.
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 19 – Related Party Transactions
Vishay Precision Group, Inc.
On July 6, 2010, Vishay completed the spin-off of its measurements and foil resistors businesses into an independent, publicly-traded company, Vishay Precision
Group, Inc. Vishay’s common stockholders received 1 share of VPG common stock for every 14 shares of Vishay common stock they held on the record date,
June 25, 2010, and Vishay’s Class B common stockholders received 1 share of VPG Class B common stock for every 14 shares of Vishay Class B common
stock they held on the record date.
Following the spin-off, VPG is an independent company and Vishay retains no ownership interest.
Relationship with VPG after Spin-off
Following the spin-off, VPG and Vishay operate separately, each as independent public companies. Vishay has no ownership interest in VPG. However, Ruta
Zandman solely or on a shared basis with Marc Zandman and Ziv Shoshani, all of whom are members of Vishay's Board of Directors, control a large portion of the
voting power of both Vishay and VPG. Marc Zandman, Vishay’s Executive Chairman of the Board and an executive officer of Vishay, serves as the Chairman of
VPG. Ziv Shoshani, CEO of VPG, serves as a director of Vishay. Additionally, Timothy V. Talbert, a member of Vishay’s Board of Directors is also a member of
the Board of Directors of VPG.
In connection with the completion of the spin-off, Vishay and its subsidiaries entered into several agreements with VPG and its subsidiaries that govern the
relationship of the parties following the spin-off. Among the agreements entered into with VPG and its subsidiaries were a transition services agreement, several
lease agreements, and supply agreements. None of the agreements have had nor are expected to have a material impact on Vishay’s financial position, results of
operations, or liquidity. Some of these agreements have expired and have not been renewed.
Vishay also entered into a trademark license agreement with VPG pursuant to which Vishay granted VPG the license to use certain trademarks, service marks,
logos, trade names, entity names, and domain names which include the term “Vishay.” The license granted VPG the limited, exclusive, royalty-free right and license
to use certain marks and names incorporating the term “Vishay” in connection with the design, development, manufacture, marketing, provision and performance of
certain VPG products that do not compete with any products within Vishay’s product range as constituted immediately following the separation and certain services
provided in connection with the products. The license cannot be terminated except as a result of willful misconduct or liquidation bankruptcy of VPG.
Until the spin-off, VPG was included in Vishay’s consolidated federal income tax returns and with Vishay and/or certain of Vishay’s subsidiaries in applicable
combined or unitary state and local income tax returns. In conjunction with the spin-off, Vishay and VPG entered a tax matters agreement under which Vishay
generally will be liable for all U.S. federal, state, local, and foreign income taxes attributable to VPG with respect to taxable periods ending on or before the
distribution date except to the extent that VPG has a liability for such taxes on its books at the time of the spin-off. Vishay is also principally responsible for
managing any income tax audits by the various tax jurisdictions for pre-spin-off periods. Vishay has fully indemnified VPG of tax exposures arising prior to the
spin-off.
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 20 – Goodwill and Other Intangible Assets
The Company performs its annual goodwill impairment test as of the first day of the fiscal fourth quarter. No impairment was identified as a result of the Company's
annual impairment tests for 2020, 2019, and 2018.
The changes in the carrying amount of goodwill by segment for the years ended December 31, 2020 and 2019 were as follows:
Balance at December 31, 2018
Bi-Metallix acquisition
Exchange rate effects
Balance at December 31, 2019
Applied Thin-Film Products acquisition
Exchange rate effects
Balance at December 31, 2020
Other intangible assets are as follows:
Intangible assets subject to amortization:
Patents and acquired technology
Capitalized software
Customer relationships
Tradenames
Accumulated amortization:
Patents and acquired technology
Capitalized software
Customer relationships
Tradenames
Net Intangible Assets Subject to Amortization
Optoelectronic
Components Resistors
Inductors
Total
$
$
$
96,849 $
-
-
96,849 $
-
-
96,849 $
24,816 $
3,324
(162)
27,978 $
6,548
993
35,519 $
25,815 $
-
-
25,815 $
-
-
25,815 $
147,480
3,324
(162)
150,642
6,548
993
158,183
December 31,
2020
December 31,
2019
$
$
21,259 $
58,419
71,454
23,105
174,237
(14,340)
(52,990)
(28,659)
(11,453)
(107,442)
66,795 $
31,125
55,862
59,603
22,510
169,100
(24,905)
(50,976)
(23,871)
(8,689)
(108,441)
60,659
Amortization expense (excluding capitalized software) was $8,113, $8,476, and $11,807, for the years ended December 31, 2020, 2019, and 2018, respectively.
Estimated annual amortization expense of intangible assets on the balance sheet at December 31, 2020 for each of the next five years is as follows:
2021
2022
2023
2024
2025
$
7,920
7,227
6,992
6,652
6,384
F-53
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21
Note: Names of Subsidiaries are indented under name of Parent. Subsidiaries are wholly owned unless otherwise noted. (Directors' or other shares required by
statute in foreign jurisdictions and totaling less than 1% of equity are omitted.)
Vishay Americas, Inc.
Vishay Americas do Brasil, LTDA
Vishay Insurance, DAC
Vishay France Holdings SAS
Vishay MCB Industrie S.A.S.
Vishay Dale Electronics, LLC
Electronica Dale de Mexico S.A. de C.V.
Vishay HiRel Systems LLC
Vishay HiRel Systems International, LLC
Vishay Sprague, Inc.
Sprague Electric of Canada Limited
Siliconix incorporated
Vishay Siliconix, LLC
Siliconix Semiconductor, LLC
Vishay Siliconix Electronic Co. Ltd.
Vishay Siliconix Ireland Ltd.
Shanghai Simconix Electronic Company Ltd.
Siliconix Technology C.V.
Vishay Semiconductor Italiana S.p.A.
Vishay Siliconix Singapore Pte. Ltd.
Vishay Semiconductor India Pvt. Ltd.
Siliconix Singapore Pte Ltd
Vishay GSI, Inc.
Vishay GSI Holdings, LLC
Vishay General Semiconductor, L.P.
Vishay General Semiconductor, LLC
Vishay General Semiconductor of Taiwan, Ltd.
Vishay Capella Microsystems (Taiwan) Limited
Vishay Asia GS Investments Pte., Ltd.
ATC Corp.
General Semiconductor Hong Kong Ltd.
Vishay BCcomponents Holdings Ltd.
Vishay BCcomponents B.V.
Vishay Capacitors Belgium NV
Vishay Resistors Belgium BV
Vishay Components India Pvt. Ltd
Vishay BCcomponents Hong Kong Ltd.
Vishay Hong Kong Ltd.
Vishay Intertechnology Asia Pte Ltd.
BCcomponents China Ltd.
Vishay Japan Co. Ltd.
Vishay Korea Co. Ltd.
Vishay (Taiwan) Ltd.
Vishay Malaysia Sdn. Bhd.
Vishay Dutch Holdings B.V.
Delaware
Brazil
Ireland
France
France
Delaware
Mexico
Delaware
Delaware
Delaware
Canada
Delaware
Delaware
Delaware
The Republic of China (Taiwan)
Ireland
China
Netherlands
Italy
Singapore
India
Singapore
Delaware
Delaware
Cayman Islands
Delaware
The Republic of China (Taiwan)
The Republic of China (Taiwan)
Singapore
Delaware
Hong Kong
Delaware
Netherlands
Belgium
Belgium
India
Hong Kong
Hong Kong
Singapore
Hong Kong
Japan
Korea
The Republic of China (Taiwan)
Malaysia
Netherlands
(a)
(b)
(c)
Subsidiaries of the Registrant (continued)
Vishay Israel Limited
Z.T.R. Electronics Ltd.
ECOMAL Israel Ltd.
Vishay Polytech Co. Ltd.
Vishay Europe GmbH
Vishay Europe Sales GmbH
Vishay BCcomponents Austria GmbH
Vishay Electronic GmbH
Vishay Siliconix Itzehoe GmbH
Vishay Electronica Portugal Lda.
ECOMAL Europe GmbH
ECOMAL Sweden AB
ECOMAL Schweiz A.G.
ECOMAL Austria GmbH
Vishay Components, S.A.
ECOMAL Iberia S.A.U.
ECOMAL Nederland BV
ECOMAL Belgium BV
ECOMAL Ceska republika S.r.O.
ECOMAL Denmark A/S
ECOMAL Finland OY
ECOMAL France S.A.S.
ECOMAL UK Ltd.
Vishay Ltd.
ECOMAL Italy s.r.l.
ECOMAL Elektronske Komponente d.o.o.
Vishay Electronic SPOL SRO
Ecomal Poland Sp. Z.o.o.
Ecomal Hungary Kft.
Vishay S.A.
Ultronix, Inc.
Vishay Semiconductor GmbH
Vishay (Phils.) Inc.
Vishay Semiconductor Ges.mbH
Vishay Asia Semiconductor Investments Pte. Ltd.
Vishay Singapore Pte. Ltd.
Vishay Semiconductor Shanghai Co., Ltd.
Vishay General Semiconductor (China) Co., Ltd.
Vishay Micro-Electronics (Xi'an) Co., Ltd.
Vishay China Co. Ltd.
Vishay HiRel Systems Zhuhai Electronics Co Ltd
Vishay Components (Huizhou) Co. Ltd.
Vishay Hungary Elektronikai KFT
Vishay Semiconductor Malaysia Sdn Bhd
Vishay Beyschlag Holding GmbH
Vishay BCcomponents Beyschlag GmbH
Israel
Israel
Israel
Japan
Germany
Germany
Austria
Germany
Germany
Portugal
Germany
Sweden
Switzerland
Austria
Spain
Spain
Netherlands
Belgium
Czech Republic
Denmark
Finland
France
United Kingdom
United Kingdom
Italy
Slovenia
Czech Republic
Poland
Hungary
France
Delaware
Germany
Philippines
Austria
Singapore
Singapore
China
China
China
China
China
China
Hungary
Malaysia
Germany
Germany
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Subsidiaries of the Registrant (continued)
(a) -
(b) -
(c) -
(d) -
(e) -
(f) -
(g) -
(h) -
(i) -
(j) -
Registrant's indirect ownership percentage in Siliconix Technology C.V. is 100%; 89% is owned by its wholly owned subsidiary Siliconix Incorporated,
10% is owned by its indirectly wholly owned subsidiary Siliconix Semiconductor, LLC, and 1% is owned by its indirect wholly owned subsidiary Vishay
Siliconix LLC.
Registrant's indirect ownership percentage in Vishay General Semiconductor, L.P. is 100%; 1% is owned by its indirectly wholly owned subsidiary Vishay
GSI Holdings, LLC, and 99% is owned by its wholly owned subsidiary Vishay GSI, Inc.
Registrant's indirect ownership percentage in Vishay Components India Pvt. Ltd. is 100%; 69% is owned directly and 31% is owned by its indirectly
wholly owned subsidiary Vishay BCcomponents B.V.
Registrant's indirect ownership percentage in Ecomal Israel Ltd. is 66.7%.
Registrant's indirect ownership percentage in Vishay Europe GmbH is 100%; over 99.9% is owned directly or indirectly by its wholly owned subsidiary
Vishay Israel Limited and its affiliates; and less than 0.1% is owned directly.
Registrant's indirect ownership percentage in Vishay Electronica Portugal Lda. is 100%; 70% is owned by its indirectly wholly owned subsidiary Vishay
Europe GmbH and 30% is owned by its indirectly wholly owned subsidiary Vishay Electronic GmbH.
Registrant's indirect ownership percentage in Vishay S.A. is 99.9%.
Registrant's indirect ownership percentage in Vishay Semiconductor Ges.mbH is 100%, 54% is owned by its indirectly wholly owned subsidiary Sprague
Electric of Canada and 46% is owned by its indirectly wholly owned subsidiary Vishay Semiconductor GmbH.
Registrant's indirect ownership percentage in Vishay Singapore Pte. Ltd. is 100%, 48% is owned by its indirectly wholly owned subsidiary Vishay Asia
Semiconductor Investments Pte. Ltd., 26% is owned by its indirectly wholly owned subsidiary Vishay Asia Semiconductor GS Investments Pte. Ltd., and
26% is owned by its indirectly wholly owned subsidiary Siliconix Technology C.V.
Registrant's indirect ownership percentage in Vishay Components (Huizhou) Co. Ltd. is 100%; 36% is owned by its indirectly wholly owned subsidiary
Vishay Hong Kong Ltd. and 64% is owned by its indirectly wholly owned subsidiary Vishay China Co. Ltd.
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
1) Registration Statement (Form S-8 No. 333-144466) pertaining to the 2007 Stock Incentive Program of Vishay Intertechnology, Inc.,
2) Registration Statement (Form S-8 No. 333-178895) pertaining to the Deferred Compensation Plan of Vishay Intertechnology, Inc., and
3) Registration Statement (Form S-8 No. 333-196143) pertaining to the 2007 Stock Incentive Program of Vishay Intertechnology, Inc.;
of our reports dated February 24, 2021, with respect to the consolidated financial statements of Vishay Intertechnology, Inc. and the effectiveness of internal
control over financial reporting of Vishay Intertechnology, Inc. included in this Annual Report (Form 10-K) of Vishay Intertechnology, Inc. for the year ended
December 31, 2020.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 24, 2021
I, Dr. Gerald Paul, certify that:
CERTIFICATIONS
1.
I have reviewed this Annual Report on Form 10-K of Vishay Intertechnology, Inc.;
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: February 24, 2021
/s/ Gerald Paul
Dr. Gerald Paul
Chief Executive Officer
I, Lori Lipcaman, certify that:
CERTIFICATIONS
1.
I have reviewed this Annual Report on Form 10-K of Vishay Intertechnology, Inc.;
Exhibit 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: February 24, 2021
/s/ Lori Lipcaman
Lori Lipcaman
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Vishay Intertechnology, Inc. (the "Company") on Form 10-K for the year ended December 31, 2020 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Dr. Gerald Paul, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Gerald Paul
Dr. Gerald Paul
Chief Executive Officer
February 24, 2021
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Vishay Intertechnology, Inc. (the "Company") on Form 10-K for the year ended December 31, 2020 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Lori Lipcaman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Lori Lipcaman
Lori Lipcaman
Chief Financial Officer
February 24, 2021
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Board of Directors
Marc Zandman
Executive Chairman of the Board
Chief Business Development Officer
Vishay Intertechnology, Inc.
Michael J. Cody
Retired Vice President of
Corporate Development
Raytheon Company
Dr. Abraham Ludomirski
Founder and Managing Director
of Vitalife Fund, a venture capital
company specializing in high tech
electronic medical devices
Dr. Gerald Paul
President
Chief Executive Officer
Vishay Intertechnology, Inc.
Ziv Shoshani
President
Chief Executive Officer
Vishay Precision Group, Inc.
Timothy V. Talbert
Retired Senior Vice President
Credit and Originations Lease
Corporation of America (“LCA”)
Retired President
LCA Bank Corporation
Jeffrey H. Vanneste
Retired Chief Financial Officer
Lear Corporation
Thomas C. Wertheimer
Accounting Consultant,
previously partner
of PricewaterhouseCoopers LLP
Ruta Zandman
Private Stockholder
Vishay Intertechnology, Inc.
Raanan Zilberman
Former President and
Chief Executive Officer
Caesarstone Ltd.
Honorary Executive Chairman of the Board
Dr. Felix Zandman
(Deceased June 4, 2011)
CORPORATE INFORMATION
Executive Officers
Marc Zandman
Executive Chairman of the Board
Chief Business Development Officer
Dr. Gerald Paul
President
Chief Executive Officer
Lori Lipcaman
Executive Vice President
Chief Financial Officer
Johan Vandoorn
Executive Vice President
Chief Technical Officer
Deputy to the CEO
David Valletta
Executive Vice President
Worldwide Sales
Joel Smejkal
Executive Vice President
Corporate Business Development
Clarence Tse
Executive Vice President
Business Head Semiconductors
Jeff Webster
Executive Vice President
Business Head Passive Components
Andreas Randebrock
Executive Vice President
Global Human Resources
Stockholder Assistance
Duplicate Mailings
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account consolidation, registration changes,
lost stock certificates, and Form 1099, please
contact the Company’s Transfer Agent and
Registrar.
If you receive more than one Annual Report
and Proxy Statement and wish to help us
reduce costs by discontinuing multiple
mailings, please contact our Transfer Agent
American Stock Transfer & Trust Company.
Corporate Office
Vishay Intertechnology, Inc.
63 Lancaster Avenue
Malvern, PA 19355-2120
Phone: 610.644.1300
www.vishay.com
Transfer Agent and Registrar
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
Phone: 800.937.5449
Email: info@amstock.com
For other information or questions,
please contact Investor Relations
at 610.644.1300.
Common Stock
Ticker symbol: VSH
The common stock is listed and principally
traded on the New York Stock Exchange.
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Annual Meeting
May 25, 2021 at 9:00 am ET.
Vishay has adopted a virtual annual meeting in
2021 due to health, transportation, and other
logistical issues arising from the COVID-19
pandemic. The annual meeting will be
accessible to stockholders via the Internet at
www.virtualshareholdermeeting.com/VSH2021.
2020 Annual Report
9
Vishay Intertechnology, Inc.
63 Lancaster Avenue
Malvern, PA 19355-2120
United States
610.644.1300
www.vishay.com
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