VISHAY INTERTECHNOLOGY INC

Note 1 – Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of Vishay Intertechnology, Inc. (“Vishay” or the “Company”) have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented. The financial statements should be read in conjunction with the consolidated financial statements filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the fiscal quarter and nine fiscal months ended September 28, 2024 are not necessarily indicative of the results to be expected for the full year.

The Company reports interim financial information for 13-week periods beginning on a Sunday and ending on a Saturday, except for the first fiscal quarter, which always begins on January 1, and the fourth fiscal quarter, which always ends on December 31. The four fiscal quarters in 2024 end on March 30, 2024, June 29, 2024, September 28, 2024, and December 31, 2024, respectively. The four fiscal quarters in 2023 ended on April 1, 2023, July 1, 2023, September 30, 2023, and December 31, 2023, respectively.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current financial statement presentation.

Note 2 – Acquisition Activities

As part of its growth strategy, the Company seeks to expand through targeted acquisitions of other manufacturers of electronic components. These acquisition targets include businesses that have established positions in major markets, reputations for product quality and reliability, and product lines with which the Company has substantial marketing and technical expertise. It also includes certain businesses that possess technologies which the Company expects to further develop and commercialize.

Newport wafer fab

On March 5, 2024, the Company acquired Nexperia’s wafer fabrication facility and operations located in Newport, South Wales, U.K. for $177,457 in cash, net of cash acquired. The transaction included contingent payments of up to $15,000, held in escrow pending receipt of an export license. The wafer fabrication facility is located on 28 acres and is an automotive-certified, 200mm semiconductor wafer fab with capacity to produce more than 30,000 wafers per month. See Note 15 for further discussion on the fair value measurement of the contingent consideration liability.

The transaction was funded by Vishay with cash on-hand. To effect the transaction, Vishay acquired a 100% interest in the legal entity Neptune 6 Limited, and its wholly-owned operating subsidiary, Nexperia Newport Limited, which owns and operates the Newport facility. Neptune 6 Limited was renamed "Vishay UK Holdings Limited," and Nexperia Newport Limited was renamed "Vishay Newport Limited."

Based on an estimate of fair values, the Company allocated the purchase price of the acquisition as follows:

The acquired assets and liabilities are included in the MOSFETs segment. The weighted average useful lives for customer relationships is 3 years. The goodwill associated with this transaction is not deductible for income tax purposes. The preliminary purchase price allocation is pending finalization of tax filings. There can be no assurance that the estimated amounts recorded represent the final purchase price allocation.

The Company recognized $2,984 of acquisition costs classified as a component of selling, general, and administrative expenses. These costs were recognized in the third and fourth fiscal quarters of 2023 and first fiscal quarter of 2024.

The results and operations of this acquisition have been included in the MOSFETs segment since March 5, 2024. The inclusion of this acquisition did not have material impact on the MOSFETs segment's or the Company's consolidated results.

Ametherm, Inc.

On June 5, 2024, the Company acquired all of the outstanding equity interests of Ametherm, Inc., a Carson City, Nevada-based manufacturer of inrush current limiting solutions and power thermistors, for $31,478 in cash, net of cash acquired. Based on a preliminary estimate of fair values, the Company allocated $17,000 of the purchase price to definite-lived intangible assets. After allocating the purchase price to assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the Company recorded goodwill of $11,685 related to this acquisition. The goodwill related to this acquisition is included in the Resistors reporting unit for goodwill impairment testing. The results and operations of this acquisition have been included in the Resistors segment since June 5, 2024.

MaxPower Semiconductor, Inc.

In October 2022, the Company acquired all of the outstanding equity interests of MaxPower Semiconductor, Inc., ("MaxPower"). The Company paid cash of $50,000, net of cash acquired, at closing. The transaction also included possible contingent payments of up to $57,500, which would be payable upon the achievement of certain technology milestones, upon favorable resolution of certain technology licensing matters with a third party, and upon the disposition of MaxPower's investment in an equity affiliate. As of June 29, 2024, the contingent payments upon favorable resolution of certain technology licensing matters with a third party and upon the disposition of MaxPower's investment in an equity affiliate have been resolved. Additionally, $2,500 has been paid upon the achievement of the first technology milestone. The Company's estimate of the maximum possible contingent payments remaining is now $15,000. See Note 15 for further discussion on the fair value measurement of the contingent consideration liability.

Subsequent Event

On November 5, 2024 the Company entered into definitive agreements to acquire Birkelbach Kondensatortechnik GmbH and certain related assets (“Birkelbach”) for approximately €17,000 ($18,500). The all-cash transaction is expected to close before December 31, 2024, subject to satisfaction of customary closing conditions.

Based in Erndtebrueck, Germany, Birkelbach is a manufacturer of metalized technical films for capacitor dielectrics. Vishay is a major customer of Birkelbach, and the acquired business will be vertically integrated into Vishay’s Capacitors segment. The goodwill related to this acquisition will be included in the Capacitors reporting unit for goodwill impairment testing.

Note 3 – Goodwill and Other Intangible Assets

Goodwill

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. The Company performs its annual goodwill impairment test as of the first day of the fourth fiscal quarter. During the third fiscal quarter of 2024, the Company identified the decrease in its share price in combination with the increase in the book value of its assets as a result of its 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.

Using level 3 inputs, the Company performed a quantitative assessment of each of its business segments, which represent its reporting units for goodwill impairment testing purposes. The assessment was performed using a weighting of the income and market approaches to determine fair value. The Company used a discounted cash flow (“DCF”) method, using unobservable inputs, as its income approach. The significant assumptions in the DCF method include projected EBITDA and a discount rate (and estimates in the discount rate inputs). The Company used comparable company market multiples for its market approach. The resulting estimates of fair value from the income approach and the market approach were then weighted equally in determining the overall estimated fair value of each reporting unit.

Based on the evaluation, the estimated fair value of each reporting unit was determined to exceed 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 its anticipated 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 $76,322 of goodwill in this reporting unit as of September 28, 2024. The Company will continue to monitor its reporting units and related goodwill for any possible future non-cash impairment charges.

Note 4 – Restructuring and Related Activities

On September 24, 2024, the Company announced the implementation of restructuring actions designed to optimize the Company’s manufacturing footprint and streamline business decision making.

The restructuring actions will be implemented in phases and include:

The Company recorded restructuring expenses pursuant to on-going benefit arrangements of $40,614 during the fiscal quarter ended September 28, 2024, primarily related to expected cash severance costs. Severance benefits are generally paid in a lump sum at cessation of employment. Payments prior to the end of the fiscal third quarter were not material. The current portion of the liability is $23,649 and is included in other accrued expenses in the accompanying consolidated condensed balance sheet. The non-current portion of the liability is $16,709 and is included in other liabilities in the accompanying consolidated condensed balance sheet.

Note 5 – Leases

The net right of use assets and lease liabilities recognized on the consolidated condensed balance sheets for the Company's operating leases were as follows:

Lease expense is classified in the statements of operations based on asset use. Total lease cost recognized on the consolidated condensed statements of operations is as follows:

The Company paid $22,618 and $20,912 for its operating leases in the nine fiscal months ended September 28, 2024 and September 30, 2023, respectively, which are included in operating cash flows on the consolidated condensed 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 6.6% as of September 28, 2024.

The undiscounted future lease payments for the Company's operating lease liabilities are as follows:

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.

Note 6 – Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign income taxes. The effective tax rates for the periods ended September 28, 2024 and September 30, 2023 reflect the Company’s expected tax rate on reported income before income tax and tax adjustments. The Company operates in a global environment with significant operations in various jurisdictions outside the United States. Accordingly, the consolidated income tax rate is a composite rate reflecting the Company’s earnings and the applicable tax rates in the various jurisdictions where the Company operates.

In December 2021, the Organization for Economic Co-operation and Development (“OECD”) issued model rules for a new global minimum tax (“Pillar Two”). Various jurisdictions around the world have passed, or are in the process of passing, legislation to enact Pillar Two and certain Pillar Two rules take effect in 2024 and 2025 in those jurisdictions. The United States has not adopted Pillar Two. The Company is continuing to monitor the impacts of Pillar Two on its operations and does not anticipate a material increase in income tax expense associated with jurisdictions that have implemented an income inclusion rule. The Company is continuing to monitor and assess the impacts of Pillar Two rules set to take effect in 2025, such as the under-taxed profits rule.

The Company repatriated $120,000 of accumulated earnings to the United States in the second fiscal quarter of 2024 and paid withholding taxes, in Israel, of $15,000. The withholding tax expense for the repatriation was recorded in prior years.

During the nine fiscal months ended September 28, 2024, the liabilities for unrecognized tax benefits decreased $170 on a net basis, primarily due to statute expirations, partially offset by accruals for the current period.

Note 7 – Long-Term Debt

Long-term debt consists of the following:

The following table summarizes some key facts and terms regarding the outstanding convertible senior notes as of September 28, 2024:

*As the Company has the intent and ability to refinance its convertible senior notes due 2025 (the "2025 Notes") upon maturity using its revolving credit facility, the 2025 Notes remain classified as long-term liabilities.

On August 15, 2024, the Company entered into an amendment to its credit agreement with a consortium of banks led by JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other parties thereto (the "Credit Facility").

The amendment 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 $300,000 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 $300,000.

Other significant terms and conditions of the Credit Facility have not been modified.

Deferred financing costs are recognized as non-cash interest expense. Non-cash interest expense was $1,249 and $3,675 for the fiscal quarter and nine fiscal months ended September 28, 2024, respectively, and $883 and $2,521 for the fiscal quarter and nine fiscal months ended September 30, 2023, respectively.

Subsequent to the end of the third fiscal quarter of 2024, the Company repurchased $40,684 principal amount of 2025 Notes. The repurchase was funded with a draw on the Credit Facility.

Note 8 – Stockholders' Equity

In 2022, the Company's Board of Directors adopted a Stockholder Return Policy that will remain in effect until such time as the Board votes to amend or rescind the policy. The Stockholder Return Policy calls for the Company to return a prescribed amount of cash flows on an annual basis. The Company intends to return such amounts directly, in the form of dividends, or indirectly, in the form of stock repurchases.

The following table summarizes activity pursuant to this policy:

The repurchased shares are being held as treasury stock. The number of shares of common stock being held as treasury stock was 9,233,213 and 7,535,881 as of September 28, 2024 and December 31, 2023, respectively.

Note 9 – Revenue Recognition

Sales returns and allowances accrual activity is shown below:

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:

Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost. See Note 11 for further information.

Note 11 – Pensions and Other Postretirement Benefits

The Company maintains various retirement benefit plans. The service cost component of net periodic pension cost is classified in costs of products sold or selling, general, and administrative expenses on the consolidated condensed statements of operations based on the respective employee's function. The other components of net periodic pension cost are classified as other expense on the consolidated condensed statements of operations.

Defined Benefit Pension Plans

The following table shows the components of the net periodic pension cost for the third fiscal quarters of 2024 and 2023 for the Company’s defined benefit pension plans:

The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 28, 2024 and September 30, 2023 for the Company’s defined benefit pension plans:

Other Postretirement Benefits

The following table shows the components of the net periodic benefit cost for the third fiscal quarters of 2024 and 2023 for the Company’s other postretirement benefit plans:

The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 28, 2024 and September 30, 2023 for the Company’s other postretirement benefit plans:

Note 12 – Stock-Based Compensation

The following table summarizes stock-based compensation expense recognized:

The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at September 28, 2024(amortization periods in years):

Restricted Stock Units

RSU activity under the Company's stock incentive programs as of September 28, 2024 and changes during the nine fiscal months then ended are presented below(number of RSUs in thousands):

• Employees in certain countries are granted equity-linked awards that will be settled in cash and are accounted for as liability awards. The liability awards are not material. The number of RSUs granted excludes these awards.

**The number of RSUs vested includes shares that the Company withheld on behalf of employees to satisfy the statutory tax withholding requirements.

The number of performance-based RSUs that are scheduled to vest increases ratably based on the achievement of defined performance and market criteria between the established target and maximum levels. RSUs with performance-based and market-based vesting criteria are expected to vest as follows(number of RSUs in thousands):

Phantom Stock Units

Phantom stock unit activity as of September 28, 2024 and changes during the nine fiscal months then ended are presented below(number of phantom stock units in thousands):

Note 13 – Segment Information

The following tables set forth business segment information:

The Company has a broad line of products that it sells to original equipment manufacturers ("OEMs"), electronic manufacturing services ("EMS") companies, and independent distributors. The distribution of sales by channel is shown below:

Net revenues were attributable to customers in the following regions:

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:

Note 14 – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share attributable to Vishay stockholders(shares in thousands):

Diluted earnings per share for the periods presented do not reflect the following weighted average potential common shares that would have an antidilutive effect or have unsatisfied performance conditions(in thousands):

If the average market price of Vishay common stock is less than the effective conversion prices of the convertible senior notes due 2025 and due 2030, respectively, no shares are included in the diluted earnings (loss) per share computation for the convertible senior notes due 2025 and due 2030. Upon Vishay exercising its existing right to legally amend the indenture governing the convertible senior notes due 2025, Vishay will satisfy its conversion obligations by paying $1 cash per $1 principal amount of converted notes and settle any additional amounts due in common stock. Pursuant to theindenture governing the convertible senior notes due 2030, Vishay will satisfy its conversion obligations by paying $1 cash per $1 principal amount of converted notes and settle any additional amounts due in cash and/or common stock.

In connection with the issuance of the convertible senior notes due 2030, the Company entered into capped call transactions, which were not included in the calculation of diluted earnings per share as their effect would have been anti-dilutive. The capped calls are intended to reduce the potential dilution to the Company's common stockin the event that at the time of conversion of the convertible senior notes due 2030 the Company's common stock price exceeds the conversion price of the convertible senior notes due 2030.

Note 15 – Fair Value Measurements

The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis:

There have been no changes in the classification of any financial instruments within the fair value hierarchy in the periods presented.

During the third fiscal quarter, the Company performed an interim goodwill impairment test in which the fair value of the Company's reporting units was calculated. See additional information on the impairment test in Note 3.

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 period. 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 holds investments in debt securities that are intended to fund a portion of its pension and other postretirement benefit obligations outside of the United States. The investments are valued based on quoted market prices on the last business day of the period. The fair value measurement of the investments is considered a Level 1 measurement within the fair value hierarchy.

The Company may be required to make certain contingent payments to non-employee equity holders of MaxPower pursuant to the acquisition agreement, which will be payable upon the achievement of certain technology milestones. The Company may be required to make certain contingent payments upon the receipt of an export license pursuant to the Newport wafer fab acquisition agreement. The fair value of these contingent consideration payments is determined by estimating the net present value of the expected cash flows based on the probability of expected payments. The fair value measurement of the contingent consideration is considered a Level 3 measurement within the fair value hierarchy.

The fair value of the long-term debt, excluding the derivative liabilities and deferred financing costs, at September 28, 2024 and December 31, 2023 is approximately $789,100 and $836,200, respectively, compared to its carrying value, excluding the deferred financing costs, of $845,102. 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 September 28, 2024 and December 31, 2023, 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 areno unrecognized holding gains or losses for these securities during the periods presented. There have beenno 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 September 28, 2024 and December 31, 2023, 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 consolidated condensed balance sheets.

The Company’s financial instruments also include accounts receivable and accounts payable. The carrying amounts for these financial instruments reported in the consolidated condensed balance sheets approximate their fair values.