VISHAY INTERTECHNOLOGY INC
For the period ended Sep 28, 2024. Filed Nov 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 28, 2024 · Filed Nov 6, 2024
VSH$23.28+5.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-29; filed 2024-08-07.
0000103730-24-000102
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-28; filed 2024-11-06.
0000103730-24-000122
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 134 previous paragraphs and 148 current paragraphs.
90 unchanged; 38 reworded; 15 added; 3 removed; 3 previous and 5 current paragraphs rearranged.
Tables are not compared: 34 previous and 35 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Net earnings (loss) attributable to Vishay stockholders include items affecting comparability. The items affecting comparability are (in thousands, except per share amounts):
Current report
(1) Operating margin for the third fiscal quarter of 2024 includes $40.6 million of restructuring and severance expenses (see Note 4 to our consolidated condensed financial statements).
Current report
Goodwill
Current report
Goodwill represents the excess of the cost of businesses acquired over the fair value of the related net assets at the date of acquisition. Goodwill is not amortized but rather is 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. We perform our annual goodwill impairment test as of the first day of the fourth fiscal quarter. During the third fiscal quarter of 2024, we identified the decrease in our share price in combination with the increase in the book value of our assets as a result of our acquisition and capital spending activities as potential indicators of impairment requiring an interim goodwill impairment test. The interim goodwill impairment test was performed as of September 28, 2024.
Current report
We performed a quantitative assessment of each of our reporting units using an equal weighting of income (discounted cash flow) and market approaches to determine fair value. We determined that the estimated fair value of each reporting unit exceeded its carrying value, although the MOSFETs reporting unit’s fair value exceeded its carrying value by less than 10%. No goodwill impairment charges were recognized, but if the MOSFETs reporting unit is not able to achieve itsanticipated results and/or if its discount rate were to increase, its fair value would be adversely affected, which may result in future impairment. There is $76.3 million of goodwill in this reporting unit as of September 28, 2024.
Current report
The acquisitions of MaxPower Semiconductor, Inc. and the Newport wafer fab, as well as the planned capacity expansions at Itzehoe and Newport, are long-term investments which were not expected to generate significant income or cash flows in the near-term, but should greatly enhance the long-term position of our MOSFETs business. Such investments have significantly increased the net asset base of our MOSFETs business without a corresponding increase in current income or cash flows. We continue to be committed to these long-term projects.
Current report
There are certain execution risks to our strategic plan. These execution risks, as well as the current market price of our common stock, result in the use of a relatively high discount rate in our discounted cash flow analysis. We will continue to monitor our reporting units and related goodwill for any possible future non-cash impairment charges.
Current report
See Note 3 to the consolidated condensed financial statements for additional information.
Current report
Average selling prices decreased significantly versus the prior year periods, and to a lesser extent versus the prior fiscal quarter.
Current report
Gross profit margin decreased versus the prior fiscal quarter and the prior year periods. The decrease versus the prior fiscal quarter and the prior year quarter are primarily due to lower average selling prices and the negative impact of inventory reduction. The decrease versus the prior year-to-date period is primarily due to decreased sales volume, lower average selling prices, and increased inventory obsolescence.
Current report
Changes in Inductors segment net revenues were attributable to the following:
Current report
Segment operating margin decreased versus the prior fiscal quarter and the prior year-to-date period, but was flat versus the prior year fiscal quarter. The decreases are primarily due to gross profit margin decreases.
Current report
On September 24, 2024, we announced a restructuring program designed, in part, to streamline business decision making. The programs are expected to generate annualized cost savings of approximately $12 million of selling, general and administration expenses, when the programs are fully implemented by the end of 2026. We expect SG&A expenses for the fourth fiscal quarter of 2024 to be approximately $126 million, reflecting SG&A cost savings realized from the program so far.
Current report
On August 15, 2024, we entered into an amendment to the credit facility that redefines the Interest Coverage Ratio to remove Capital Expenditures from the calculation, increases the minimum Interest Coverage Ratio to 3.25 to 1.00, increases the threshold of Indebtedness of Foreign Subsidiaries to the greater of $300 million and 15% of Consolidated Tangible Net Worth as of the last day of the fiscal quarter for which financial statements are delivered, and increases the threshold of Investments of Subsidiaries that are not Loan Parties to $300 million.
Current report
Other significant terms and conditions of the credit facility have not been modified.
Removed paragraphs (3)
Previous report
Net earnings attributable to Vishay stockholders for the fiscal quarters ended June 29, 2024, March 30, 2024, and July 1, 2023 and for the six fiscal months ended June 29, 2024 and July 1, 2023 include no items affecting comparability.
Previous report
Gross profit margin increased versus the prior fiscal quarter and prior year quarter, but decreased versus the prior year-to-date period. The increase versus the prior fiscal quarter is primarily due to increased sales volume, increased average selling prices, manufacturing efficiencies, and cost containment initiatives. The increase versus the prior year quarter is due to cost containment initiatives and manufacturing efficiencies, partially offset by decreased sales volume and average selling prices. The decrease versus the prior year-to-date period is primarily due to decreased sales volume and average selling prices.
Previous report
Pursuant to the credit facility, the financial maintenance covenants include (a) an interest coverage ratio of not less than 2.00 to 1; and (b) a net leverage ratio of not more than 3.25 to 1 (and a pro forma ratio of 3.00 to 1 on the date of incurrence of additional debt). Net leverage ratio reduces the measure of outstanding debt by up to $250 million of unrestricted cash. 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 was filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed May 8, 2023.
Reworded paragraphs (38)
Previous wording
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 maintaining a prudent capital structure. To drive growth and optimize stockholder value, we plan to capitalize on the mega trends of e-mobility, sustainability, and connectivity through initiatives. We are developing go-to-market strategies and investing in and expanding the key product lines for growth that we have identified. In addition, we are strategically expanding our outsourced production of commodity products to subcontractors. At the same time, we are enhancing our channel management while investing in internal resources by adding customer-facing engineers and filling gaps in technology and market coverage. Taken together, each of these initiatives supports our Think Customer First organizational culture. To increase our internal capacity, we had planned to invest approximately $435 million in 2024. At the midpoint of the year, the industry recovery is slower than expected. Accordingly, we have adjusted our timetable for investments for our new 12-inch wafer fab in Itzehoe, Germany beyond 2024, and now expect total capital expenditures for 2024 to be between $360 million and $390 million. We remain committed to spending a total of $2.6 billion in total capital expenditures for the period 2023 - 2028. We can adjust the timing of our capital expenditures and still fulfill our customer commitments because we now have intermediate capacity due to the qualification of a foundry partner and the acquisition of the Newport wafer fab.
Current wording
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 maintaining a prudent capital structure. To drive growth and optimize stockholder value, we plan to capitalize on the mega trends of e-mobility, sustainability, and connectivity through initiatives. We are developing go-to-market strategies and investing in and expanding the key product lines for growth that we have identified. In addition, we are strategically expanding our outsourced production of commodity products to subcontractors. At the same time, we are enhancing our channel management while investing in internal resources by adding customer-facing engineers and filling gaps in technology and market coverage. Taken together, each of these initiatives supports our Think Customer First organizational culture. To increase our internal capacity, we had planned to invest approximately $435 million in 2024. The industry recovery has been slower than expected. Accordingly, we adjusted our timetable for investments for our new 12-inch wafer fab in Itzehoe, Germany beyond 2024, and now expect total capital expenditures for 2024 to be between $360 million and $390 million. We remain committed to spending a total of $2.6 billion in total capital expenditures for the period 2023 - 2028. We can adjust the timing of our capital expenditures and still fulfill our customer commitments because we now have intermediate capacity due to the qualification of a foundry partner and the acquisition of the Newport wafer fab.
Previous wording
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. In this volatile economic environment, we continue to closely monitor our fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and resources to meet our future needs. We believe we can react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess inventory build in periods of decline and maximize opportunities in periods of growth. We believe we have significant liquidity to withstand temporary disruptions in the economic environment.
Current wording
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. In this volatile economic environment, we continue to closely monitor our fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and resources to meet our future needs. We believe we can react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess inventory build in periods of decline and maximize opportunities in periods of growth. The Company implemented restructuring programs in the third fiscal quarter of 2024 designed to optimize the Company's manufacturing footprint and streamline business decision making. We believe we have significant liquidity to withstand temporary disruptions in the economic environment.
Previous wording
We utilize several financial metrics, including net revenues, gross profit margin, operating margin, segment operating margin, 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 key financial metrics decreased slightly in the second fiscal quarter of 2024 primarily due to the negative impacts of an on-going distributor inventory correction. Net revenues and margins decreased versus the prior year periods primarily due to lower sales volume.
Current wording
We utilize several financial metrics, including net revenues, gross profit margin, operating margin, segment operating margin, 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 key financial metrics decreased slightly in the third fiscal quarter of 2024 primarily due to the negative impacts of an on-going distributor inventory correction. Net revenues and margins decreased versus the prior year periods primarily due to lower sales volume. The restructuring expense recognized in the third fiscal quarter also negatively impacted operating margin.
Previous wording
Net revenues for the fiscal quarter ended June 29, 2024 were $741.2 million, compared to $746.3 million and $892.1 million for the fiscal quarters ended March 30, 2024 and July 1, 2023, respectively. The net earnings attributable to Vishay stockholders for the fiscal quarter ended June 29, 2024 were $23.5 million, or $0.17 per diluted share, compared to $30.9 million, or $0.22 per diluted share for the fiscal quarter ended March 30, 2024, and $95.0 million, or $0.68 per diluted share for the fiscal quarter ended July 1, 2023.
Current wording
Net revenues for the fiscal quarter ended September 28, 2024 were $735.4 million, compared to $741.2 million and $853.7 million for the fiscal quarters ended June 29, 2024 and September 30, 2023, respectively. The net loss attributable to Vishay stockholders for the fiscal quarter ended September 28, 2024 was $(19.3) million, or $(0.14) per share, compared to net earnings of $23.5 million, or $0.17 per diluted share for the fiscal quarter ended June 29, 2024, and $65.5 million, or $0.47 per diluted share for the fiscal quarter ended September 30, 2023.
Previous wording
Net revenues for the six fiscal months ended June 29, 2024 were $1,487.5 million, compared to $1,763.2 million for the six fiscal months ended July 1, 2023. The net earnings attributable to Vishay stockholders for the six fiscal months ended June 29, 2024 were $54.5 million, or $0.39 per diluted share, compared to $206.8 million, or $1.47 per diluted share for the six fiscal months ended July 1, 2023.
Current wording
Net revenues for the nine fiscal months ended September 28, 2024 were $2,222.9 million, compared to $2,616.8 million for the nine fiscal months ended September 30, 2023. The net earnings attributable to Vishay stockholders for the nine fiscal months ended September 28, 2024 were $35.2 million, or $0.25 per diluted share, compared to $272.3 million, or $1.94 per diluted share for the nine fiscal months ended September 30, 2023.
Previous wording
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. We utilize the free cash metric in defining our Stockholder Return Policy.
Current wording
We define adjusted net earnings as net earnings (loss) 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. We utilize the free cash metric in defining our Stockholder Return Policy.
Previous wording
Our results have been negatively impacted by the distributor inventory correction that began in the fourth fiscal quarter of 2022 and continued through the second fiscal quarter of 2024. Our results for the second fiscal quarter of 2024 remain strong, although weaker than our prior fiscal quarter and prior year results.
Current wording
Our results have been negatively impacted by the distributor inventory correction that began in the fourth fiscal quarter of 2022 and continued through the third fiscal quarter of 2024. The long-term outlook for our business remains strong, although our results are weaker than our prior fiscal quarter and prior year results.
Previous wording
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 second fiscal quarter of 2023 through the second fiscal quarter of 2024(dollars in thousands):
Current wording
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 third fiscal quarter of 2023 through the third fiscal quarter of 2024(dollars in thousands):
Previous wording
Revenues decreased versus the prior fiscal quarter and the second fiscal quarter of 2023 primarily due to lower sales volume and lower average selling prices. The book-to-bill ratio increased slightly versus the prior fiscal quarter, but orders and backlog continued to be negatively impacted by the distributor inventory correction that continued in the second fiscal quarter of 2024. We continue to increase manufacturing capacity for critical product lines. Average selling prices decreased versus the prior fiscal quarter and prior year quarter.
Current wording
Revenues decreased versus the prior fiscal quarter and the third fiscal quarter of 2023 primarily due to lower sales volume and lower average selling prices. The book-to-bill ratio increased slightly versus the prior fiscal quarter, but orders and backlog continued to be negatively impacted by the distributor inventory correction that continued in the third fiscal quarter of 2024. We continue to increase manufacturing capacity for critical product lines. Average selling prices decreased versus the prior fiscal quarter and prior year quarter.
Previous wording
Gross profit margin decreased versus the prior fiscal quarter and the prior year quarter primarily due to decreased average selling prices and the impact of the Newport acquisition. Lower sales volume and cost inflation also contributed to the decrease versus the prior year quarter.
Current wording
Gross profit margin decreased versus the prior fiscal quarter and the prior year quarter primarily due to lower sales volume, decreased average selling prices, and increased depreciation expense. The impact of the Newport acquisition also contributed to the decrease versus the prior year quarter.
Previous wording
The book-to-bill ratio in the second fiscal quarter of 2024 increased to 0.86 versus 0.82 in the first fiscal quarter of 2024.
Current wording
The book-to-bill ratio in the third fiscal quarter of 2024 increased to 0.88 versus 0.86 in the second fiscal quarter of 2024.
Previous wording
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 second fiscal quarter of 2023 through the second fiscal quarter of 2024(dollars in thousands):
Current wording
The following table shows net revenues, book-to-bill ratio, gross profit margin, and segment operating margin broken out by segment for the five fiscal quarters beginning with the third fiscal quarter of 2023 through the third fiscal quarter of 2024(dollars in thousands):
Previous wording
Despite the distributor inventory correction that we are experiencing, the long-term prospects for our business remain favorable, and we continue to increase manufacturing capacities for critical product lines. The decrease in net revenues versus the prior fiscal quarter and prior year quarter are primarily due to sales volume and average selling prices.
Current wording
Despite the distributor inventory correction that we are experiencing, the long-term prospects for our business remain favorable, and we continue to increase manufacturing capacities for critical product lines. The decrease in net revenues versus the prior fiscal quarter and prior year quarter are primarily due to decreased sales volume and average selling prices.
Previous wording
Gross profit margins for the fiscal quarter ended June 29, 2024 were 22.0%, versus 22.8% and 28.9%, for the comparable prior quarter and prior year period, respectively. Gross profit margins for the six fiscal months ended June 29, 2024 were 22.4%, versus 30.4% for the comparable prior year period. The decreases versus the prior year periods are primarily due to lower sales volume and cost inflation. Decreased average selling prices and the impact of the Newport acquisition contributed to the decreases versus the prior periods.
Current wording
Gross profit margins for the fiscal quarter ended September 28, 2024 were 20.5%, versus 22.0% and 27.8%, for the comparable prior quarter and prior year period, respectively. Gross profit margins for the nine fiscal months ended September 28, 2024 were 21.8%, versus 29.6% for the comparable prior year period. Gross profit margin decreased versus the prior fiscal quarter primarily due to lower sales volume, decreased average selling prices, and increased depreciation expense. The decreases versus the prior year periods are primarily due to lower sales volume, decreased average selling prices, the impact of the Newport acquisition, and cost inflation.
Previous wording
Gross profit margin decreased versus the prior fiscal quarter and prior year periods. The decrease from the prior fiscal quarter is primarily due to costs associated with the Newport wafer fab. The decreases versus the prior year periods are primarily due to lower sales volume, decreased average selling prices, and costs associated with the Newport wafer fab.
Current wording
Gross profit margin decreased versus the prior fiscal quarter and the prior year periods. The decreases versus the prior fiscal quarter and prior year periods are primarily due to lower sales volume and decreased average selling prices. Costs associated with the Newport wafer fab also contributed to the decreases versus the prior period years.
Previous wording
Net revenues of the Diodes segment decreased slightly versus the prior fiscal quarter and significantly versus the prior year periods. The decrease versus the prior fiscal quarter was primarily due to decreased sales to automotive and industrial end market customers and customers in the Europe region. The decreases versus the prior year periods are due to decreased sales to nearly all end market customers and customers in all regions.
Current wording
Net revenues of the Diodes segment decreased slightly versus the prior fiscal quarter and significantly versus the prior year periods. The decrease versus the prior fiscal quarter was primarily due to decreased sales to distribution customers and customers in the Europe and Americas regions. The decreases versus the prior year periods are due to decreased sales to nearly all end market customers and customers in all regions.
Previous wording
Gross profit margin decreased versus the prior fiscal quarter and prior year periods. The decreases are primarily due to lower sales volume and lower average selling prices. Higher labor costs also contributed to the decreases versus the prior year periods.
Current wording
Gross profit margin decreased versus the prior fiscal quarter and the prior year periods. The decrease versus the prior fiscal quarter was primarily due to lower average selling prices. The decreases versus the prior year periods are primarily due to lower sales volume and lower average selling prices. Higher labor and logistics costs also contributed to the decreases versus the prior year periods.
Previous wording
Net revenues of the MOSFETS segment increased slightly versus the prior fiscal quarter, but decreased significantly versus the prior year periods. The increase versus the prior fiscal quarter is primarily due to the Newport wafer fab acquisition, partially offset by decreased sales to automotive end market customers. The decrease versus the prior year quarter is primarily due decreased sales to distributor customers and customers in all regions. The decrease versus the prior year-to-date period is due decreased sales to all end market customers and customers in all regions, partially offset by the Newport wafer fab acquisition.
Current wording
Net revenues of the Optoelectronic Components segment increased versus the prior fiscal quarter, but decreased versus the prior year periods. The increase versus the prior fiscal quarter is due to increased sales to all end market customers and customers in all regions. The decrease versus the prior year quarter is primarily due to decreased sales to industrial end market customers and customers in the Europe and Americas regions. The decreases versus the prior year-to-date period is primarily due to decreased sales to distribution customers, all end market customers, and customers in the Europe and Americas regions.
Previous wording
Segment operating margin increased versus the prior fiscal quarter, but decreased versus the prior year periods. The fluctuations are primarily due to gross profit margin fluctuations.
Current wording
Segment operating margin decreased versus the prior fiscal quarter and the prior year periods. The fluctuations are primarily due to gross profit margin decreases.
Previous wording
Net revenues of the Resistors segment decreased slightly versus the prior fiscal quarter and significantly versus the prior year periods. The decrease versus the prior fiscal quarter is primarily due to decreased sales to industrial and automotive end market customers and customers in the Europe region. The decreases versus the prior year periods were due to decreased sales to nearly all end market customers and customers in all regions.
Current wording
Net revenues of the Resistors segment increased slightly versus the prior fiscal quarter, but decreased significantly versus the prior year periods. The increase versus the prior fiscal quarter is primarily due to increased sales to distribution customers mainly in Asia and automotive and military and aerospace end market customers. The decreases versus the prior year periods were due to decreased sales to nearly all end market customers and customers in all regions.
Previous wording
Gross profit margin decreased versus the prior fiscal quarter and prior year periods. The decreases were primarily due to lower sales volume, lower average selling prices, increased labor costs, and increased logistics costs.
Current wording
Gross profit margin decreased versus the prior fiscal quarter and the prior year periods. The decrease versus the prior fiscal quarter is primarily due to lower average selling prices, increased labor costs, and increased materials costs. The decreases versus the prior year periods are primarily due to lower sales volume, lower average selling prices, increased labor costs, increased depreciation, and increased logistics costs.
Previous wording
Net revenues of the Inductors segment increased versus the prior fiscal quarter and prior year periods. The increase versus the prior fiscal quarter was primarily due to increased sales to distribution and EMS customers, medical end market customers, and customers in the Americas region. The increase versus the prior year quarter was primarily due to increased sales to distribution customers, military and aerospace and medical end market customers, and customers in the Americas region. The increase versus the prior year-to-date period was primarily due to increased sales to distribution customers, automotive, military and aerospace, and medical end market customers, and customers in the Americas and Asia regions.
Current wording
Net revenues of the Inductors segment decreased versus the prior fiscal quarter, were flat versus the prior year fiscal quarter, and increased versus the prior year-to-date period. The decrease versus the prior fiscal quarter was primarily due to decreased sales to distribution and OEM customers, all end market customers, and customers in the Americas and Europe regions. The increase versus the prior year-to-date period is primarily due to increased sales to distribution customers, automotive and medical end market customers, and customers in all regions.
Previous wording
Net revenues of the Capacitors segment decreased slightly versus the prior fiscal quarter and significantly versus the prior year periods. The decrease versus the prior fiscal quarter is primarily due to decreased sales to distribution customers and customers in the Americas and Asia regions. The decrease versus the prior year quarter is primarily due to decreased sales to distribution customers, industrial end market customers, and customers in the Europe and Americas regions. The decrease versus the prior year-to-date period is primarily due to decreased sales to industrial end market customers and customers in the Europe and Americas regions.
Current wording
Net revenues of the Capacitors segment decreased versus the prior fiscal quarter and the prior year periods. The decrease versus the prior fiscal quarter is primarily due to decreased sales to distribution customers, industrial end market customers, and customers in the Asia and Europe regions. The decrease versus the prior year quarter is primarily due to decreased sales to industrial and automotive end market customers and customers in the Europe region. The decrease versus the prior year-to-date period is primarily due to decreased sales to distribution customers, industrial and automotive end market customers, and customers in the Europe and Americas regions.
Previous wording
Gross profit margin decreased versus the prior fiscal quarter and prior year periods. The decreases are due to lower sales volume, lower average selling prices, increased labor costs, and production inefficiencies.
Current wording
Gross profit margin decreased versus the prior fiscal quarter and the prior year-to-date period, but increased versus the prior year quarter. The decrease versus the prior fiscal quarter is due to lower sales volume, negative product mix, and increased utilities costs, partially offset by higher average selling prices. The increase versus the prior year quarter is due to improved production efficiencies and lower materials costs. The decrease versus the prior year-to-date period is due to lower sales volume, lower average selling prices, increased labor costs, higher material costs, and production inefficiencies.
Previous wording
The sequential decrease in SG&A expenses is primarily attributable to uneven attribution of stock-based compensation expense and lower bonus compensation. SG&A expenses increased versus the prior year periods due to higher stock-based compensation expense and general cost inflation.
Current wording
The sequential increase in SG&A expenses is primarily attributable to higher stock-based compensation expense and higher research and development expenses, partially offset by lower bonus compensation. SG&A expenses increased versus the prior year periods due to higher stock-based compensation expense and general cost inflation.
Previous wording
Interest expense for the fiscal quarter ended June 29, 2024 increased $0.2 million versus the fiscal quarter ended March 30, 2024 and increased $0.3 million versus the fiscal quarter ended July 1, 2023. Interest expense for the six fiscal months ended June 29, 2024 increased by $1.6 million versus the six fiscal months ended July 1, 2023. The increase versus the prior fiscal quarter is due to higher average outstanding balances on the revolving credit facility. The increases versus the prior year periods are due to the issuance of the convertible senior notes due 2030 in the third fiscal quarter of 2023.
Current wording
Interest expense for the fiscal quarter ended September 28, 2024 decreased $0.1 million versus the fiscal quarter ended June 29, 2024 and decreased $0.6 million versus the fiscal quarter ended September 30, 2023. Interest expense for the nine fiscal months ended September 28, 2024 increased by $1.1 million versus the nine fiscal months ended September 30, 2023. The decrease versus the prior year fiscal quarter is due to lower average outstanding balances on the revolving credit facility. The increase versus the prior year-to-date period is due to the issuance of the convertible senior notes due 2030 in the third fiscal quarter of 2023.
Previous wording
For the fiscal quarter ended June 29, 2024, our effective tax rate was 34.2%, as compared to 29.0% and 28.5% for the fiscal quarters ended March 30, 2024 and July 1, 2023, respectively. For the six fiscal months ended June 29, 2024, our effective tax rate was 31.3%, as compared to 28.5% for the six fiscal months ended July 1, 2023. We expect that our effective tax rate will be higher than the U.S. statutory rate, excluding unusual transactions.
Current wording
For the fiscal quarter ended September 28, 2024, our effective tax rate was 21.1%, as compared to 34.2% and 31.7% for the fiscal quarters ended June 29, 2024 and September 30, 2023, respectively. For the nine fiscal months ended September 28, 2024, our effective tax rate was 35.7%, as compared to 29.3% for the nine fiscal months ended September 30, 2023. We expect that our effective tax rate will be higher than the U.S. statutory rate, excluding unusual transactions.
Previous wording
During the six fiscal months ended June 29, 2024, the liabilities for unrecognized tax benefits decreased $0.7 million on a net basis, primarily due to statute expirations, partially offset by accruals for the current period.
Current wording
During the nine fiscal months ended September 28, 2024, the liabilities for unrecognized tax benefits decreased $0.2 million on a net basis, primarily due to statute expirations, partially offset by accruals for the current period.
Previous wording
Cash flows provided by operating activities were $55.5 million for the six fiscal months ended June 29, 2024, as compared to cash flows provided by operations of $237.1 million for the six fiscal months ended July 1, 2023.
Current wording
Cash flows provided by operating activities were $106.0 million for the nine fiscal months ended September 28, 2024, as compared to cash flows provided by operations of $359.4 million for the nine fiscal months ended September 30, 2023.
Previous wording
In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle. The following table presents the components of our cash conversion cycle during the five fiscal quarters beginning with the second fiscal quarter of 2023 through the second fiscal quarter of 2024:
Current wording
In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle. The following table presents the components of our cash conversion cycle during the five fiscal quarters beginning with the third fiscal quarter of 2023 through the third fiscal quarter of 2024:
Previous wording
Cash paid for property and equipment for the six fiscal months ended June 29, 2024 was $115.6 million, as compared to $117.3 million for the six fiscal months ended July 1, 2023. To be well positioned to service our customers and to fully participate in growing markets, we have increased and expect to maintain a relatively high level of capital expenditures for expansion in the mid-term. To increase our internal capacity, we had planned to invest approximately $435 million in 2024. At the midpoint of the year, the industry recovery is slower than expected. Accordingly, we have adjusted our timetable for investments for our new 12-inch wafer fab in Itzehoe, Germany beyond 2024, and now expect total capital expenditures for 2024 to be between $360 million and $390 million. We remain committed to spending a total of $2.6 billion in total capital expenditures for the period 2023 - 2028.
Current wording
Cash paid for property and equipment for the nine fiscal months ended September 28, 2024 was $175.2 million, as compared to $184.1 million for the nine fiscal months ended September 30, 2023. To be well positioned to service our customers and to fully participate in growing markets, we have increased and expect to maintain a relatively high level of capital expenditures for expansion in the mid-term. To increase our internal capacity, we had planned to invest approximately $435 million in 2024. The industry recovery has been slower than expected. Accordingly, we adjusted our timetable for investments for our new 12-inch wafer fab in Itzehoe, Germany beyond 2024, and now expect total capital expenditures for 2024 to be between $360 million and $390 million. We remain committed to spending a total of $2.6 billion in total capital expenditures for the period 2023 - 2028.
Previous wording
Free cash flow for the six fiscal months ended June 29, 2024 decreased versus the six fiscal months ended July 1, 2023 primarily due to decreased net earnings and withholding taxes paid for the repatriation of cash to the U.S. We expect that free cash flow will be negatively impacted by the expected high level of capital expenditures for expansion in 2023 - 2025 after which we expect to generate increasingly higher levels of free cash. There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash at our historical levels, or at all, going forward if the economic environment worsens.
Current wording
Free cash flow for the nine fiscal months ended September 28, 2024 decreased versus the nine fiscal months ended September 30, 2023 primarily due to decreased net earnings and withholding taxes paid for the repatriation of cash to the U.S. We expect that free cash flow will be negatively impacted by the expected high level of capital expenditures for expansion in 2023 - 2025 after which we expect to generate increasingly higher levels of free cash. There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash at our historical levels, or at all, going forward if the economic environment worsens.
Previous wording
During the second fiscal quarter of 2024, we repatriated $120 million of accumulated earnings to the United States and paid withholding taxes in Israel of $15 million. As of June 29, 2024, $73.4 million of our cash and cash equivalents and short-term investments were held by our U.S. subsidiaries. Based on expected cash payments pursuant to our Stockholder Return Policy and funding of the Newport expansion, we expect to be in a net borrowing position in the U.S. before year-end 2024. As of June 29, 2024, we have approximately $495 million of German and Israeli earnings that are deemed not indefinitely reinvested. Based on the expected timing of future repatriations, we estimate that the tax liability to repatriate these unremitted earnings will be approximately $74 million, which has been accrued, but will only be paid upon repatriation of the unremitted earnings. Repatriating these unremitted earnings earlier than currently planned may not be possible and would incur additional tax expense. We also have amounts of unremitted foreign earnings held by subsidiaries in countries other than Israel and Germany, which continue to be reinvested indefinitely, that we have not accrued for the incremental foreign income taxes and withholding taxes payable to foreign jurisdictions that would be incurred to repatriate these amounts. Certain of these subsidiaries are located in countries with restrictive regulations and high tax rates for repatriating cash. Due to the uncertainties associated with the ability, timing, and method to repatriate these unremitted earnings and other complexities associated with its hypothetical calculation, determination of the amount of tax expense that would be incurred to repatriate the unremitted earnings is not practicable, but could be significant. Our substantially undrawn credit facility provides us with adequate operating liquidity in the United States.
Current wording
During the second fiscal quarter of 2024, we repatriated $120 million of accumulated earnings to the United States and paid withholding taxes in Israel of $15 million. As of September 28, 2024, $24.8 million of our cash and cash equivalents and short-term investments were held by our U.S. subsidiaries. Based on expected cash payments pursuant to our Stockholder Return Policy and funding of the Newport expansion, we expect to be in a net borrowing position in the U.S. before year-end 2024. As of September, 2024, we have approximately $513 million of German and Israeli earnings that are deemed not indefinitely reinvested. Based on the expected timing of future repatriations, we estimate that the tax liability to repatriate these unremitted earnings will be approximately $76 million, which has been accrued, but will only be paid upon repatriation of the unremitted earnings. Repatriating these unremitted earnings earlier than currently planned may not be possible and would incur additional tax expense. We also have amounts of unremitted foreign earnings held by subsidiaries in countries other than Israel and Germany, which continue to be reinvested indefinitely, that we have not accrued for the incremental foreign income taxes and withholding taxes payable to foreign jurisdictions that would be incurred to repatriate these amounts. Certain of these subsidiaries are located in countries with restrictive regulations and high tax rates for repatriating cash. Due to the uncertainties associated with the ability, timing, and method to repatriate these unremitted earnings and other complexities associated with its hypothetical calculation, determination of the amount of tax expense that would be incurred to repatriate the unremitted earnings is not practicable, but could be significant. Our substantially undrawn credit facility provides us with adequate operating liquidity in the United States.
Previous wording
We maintain a $750 million revolving credit agreement that matures on May 8, 2028. The maximum amount available on the revolving credit facility is restricted by the financial covenants described below. The credit facility also provides us the ability to request up to $300 million of incremental facilities, subject to the satisfaction of certain conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt.
Current wording
We maintain a $750 million revolving credit agreement with a consortium of banks led by JPMorgan Chase Bank, N.A., that matures on May 8, 2028. The maximum amount available on the revolving credit facility is restricted by the financial covenants described below. The credit facility also provides us the ability to request up to $300 million of incremental facilities, subject to the satisfaction of certain conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt.
Previous wording
We were in compliance with all financial covenants under the credit facility at June 29, 2024. Our interest coverage ratio and net leverage ratio were 8.60 to 1 and 1.15 to 1, respectively. We expect to continue to be in compliance with these covenants based on current projections.
Current wording
We were in compliance with all financial covenants under the credit facility at September 28, 2024. Our interest coverage ratio and net leverage ratio were 19.99 to 1 and 1.40 to 1, respectively. We expect to continue to be in compliance with these covenants based on current projections.
Previous wording
If we are not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and any amounts then outstanding pursuant to the credit facility could become immediately payable. Additionally, our convertible senior notes due 2025 and due 2030 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated. The maturity date of the credit facility will accelerate if within ninety-one days prior to the maturity of our convertible senior notes due 2025, the outstanding principal amount of such notes exceeds a defined liquidity measure as set forth in the credit facility. The repurchase of $370.2 million principal amount of convertible senior notes due 2025 in 2023 reduces the risk that the maturity date of the credit facility will accelerate.
Current wording
If we are not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and any amounts then outstanding pursuant to the credit facility could become immediately payable. Additionally, our convertible senior notes due 2025 and due 2030 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated. The maturity date of the credit facility will accelerate if within ninety-one days prior to the maturity of our convertible senior notes due 2025, the outstanding principal amount of such notes exceeds a defined liquidity measure as set forth in the credit facility. The repurchase of $370.2 million principal amount of convertible senior notes due 2025 in 2023 reduces the risk that the maturity date of the credit facility will accelerate. Subsequent to the end of the third fiscal quarter of 2024, we repurchased an additional $40.7 million principal amount of convertible senior notes due 2025. The repurchase was funded with a draw on our revolving credit facility.
Previous wording
Borrowings under the credit facility bear interest at variable reference rates plus an interest margin. The applicable interest margin is based on our total leverage ratio. We also pay a commitment fee, also based on our total leverage ratio, on undrawn amounts. U.S. dollar borrowings under the credit facility are based on SOFR (including a customary spread adjustment). Borrowings in foreign currencies bear interest at currency-specific reference rates plus an interest margin. Based on our current total leverage ratio of 1.63 to 1, any new U.S. dollar borrowings will bear interest at SOFR plus 1.85% (including the applicable credit spread), and the undrawn commitment fee is 0.30% per annum.
Current wording
Borrowings under the credit facility bear interest at variable reference rates plus an interest margin. The applicable interest margin is based on our total leverage ratio. We also pay a commitment fee, also based on our total leverage ratio, on undrawn amounts. U.S. dollar borrowings under the credit facility are based on SOFR (including a customary spread adjustment). Borrowings in foreign currencies bear interest at currency-specific reference rates plus an interest margin. Based on our current total leverage ratio of 1.99 to 1, any new U.S. dollar borrowings will bear interest at SOFR plus 1.85% (including the applicable credit spread), and the undrawn commitment fee is 0.30% per annum.
Previous wording
We expect, at least initially, to fund certain future obligations required to be paid by the U.S. parent company by borrowing under our credit facility. We also expect to continue to use the credit facility from time-to-time to meet certain short-term financing needs. Additional acquisition activity, convertible debt repurchases, or conversion of our convertible debt instruments may require additional borrowing under our credit facility or may otherwise require us to incur additional debt. No principal payments on our debt are due before 2025.
Current wording
We had no amount outstanding on our revolving credit facility at December 31, 2023 and September 28, 2024. We borrowed and repaid $58 million on the revolving credit facility during the nine fiscal months ended September 28, 2024. No amounts were outstanding on our revolving credit facility at any fiscal month-end. We expect, at least initially, to fund certain future obligations required to be paid by the U.S. parent company by borrowing under our credit facility. We also expect to continue to use the credit facility from time-to-time to meet certain short-term financing needs. Additional acquisition activity, convertible debt repurchases, or conversion of our convertible debt instruments may require additional borrowing under our credit facility or may otherwise require us to incur additional debt. No principal payments on our debt are due before 2025.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Net revenues of the MOSFETS segment decreased versus the prior fiscal quarter and the prior year periods. The decrease versus the prior fiscal quarter is primarily due to decreased sales of Newport legacy products. The decreases versus the prior year quarter and prior year-to-date periods are primarily due to decreased sales to all end market customers and customers in all regions, partially offset by the Newport wafer fab acquisition.
Current report — wording carried from elsewhere
Segment operating margin decreased versus the prior fiscal quarter and the prior year periods. The decreases are primarily due to gross profit margin decreases.
Current report — wording carried from elsewhere
Average selling prices decreased versus the prior fiscal quarter and the prior year periods.
Current report — wording carried from elsewhere
Segment operating margin decreased versus the prior fiscal quarter and the prior year periods. The decreases are primarily due to gross profit margin decreases.
Current report — wording carried from elsewhere
Average selling prices decreased versus the prior fiscal quarter and prior year periods.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Net revenues of the Optoelectronic Components segment increased versus the prior fiscal quarter, but decreased versus the prior year periods. The increase versus the prior fiscal quarter is due to increased sales to distribution customers and industrial end market customers and customers in the Asia region. The decreases versus the prior year periods are primarily due to distribution customers, all end market customers, and customers in the Europe and Americas regions.
Previous report — wording carried elsewhere
Changes in net revenues were attributable to the following:
Previous report — wording carried elsewhere
We had no amount outstanding on our revolving credit facility at December 31, 2023 and June 29, 2024. We borrowed and repaid $52 million on the revolving credit facility during the six fiscal months ended June 29, 2024. No amounts were outstanding on our revolving credit facility at any fiscal month-end. We expect to use the revolving credit facility from time-to-time to meet short-term financing needs.