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 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 components 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.
A downturn in our business in general, or isolated to a particular sector, could require us to incur restructuring and severance charges and/or asset write-downs.
We face significant challenges managing our capacity expansion strategy.
As part of our strategy to drive growth and increase capacity, we are increasing internal capacity
by investing $329 million in 2023 and plan to invest $1.2 billion total from 2023 to 2025 and plan to increase external capacity by outsourcing additional commodity products to subcontractors. Our capacity expansion plans include building a
12-inch wafer fab in Itzehoe, Germany adjacent to our existing 8-inch wafer fab, a new power inductor site in Mexico, a resistor manufacturing expansion in Mexico, and expanded diode manufacturing in
Taiwan and Turin, Italy. Additionally, the planned transaction with Nexperia BV will add a wafer fabrication facility and operations in Newport, South Wales, U.K. There is no assurance that we will be
able to close the transaction for the Nexperia wafer fabrication facility. There are demand-related risks associated with all growth initiatives. There are also inherent execution risks in building and starting new wafer fabs, acquiring
existing wafer fabs, and expanding production capacity at our own facilities or that of new or existing subcontractors that could significantly increase costs and negatively impact our operating results. The risks include, but are not limited
to, the following:
• design and construction delays and cost overruns;
• issues installing and qualifying new equipment and ramping production;
• poor production process yields and reduced quality control; and
Our business may be adversely affected by the widespread outbreak of diseases and the mitigation efforts
by governments worldwide to control their spread.
We cannot predict when future disease outbreaks or pandemics will occur. The potential risks and effects of future disease outbreaks and the
related economic impact that could have an adverse effect on our business include, but are not limited to:
• Adverse impact on our customers and supply channels;
Such effects could result in us being required to record impairment charges related to our property and equipment, intangible assets, or
goodwill.
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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. The rapid consolidation that
our industry has experienced may further decrease our ability to identify attractive opportunities for acquisition. 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 business and our results of operations are sensitive to supply chain disruptions.
The production and sale of our products is reliant on a complex global interconnected supply chain of vendors, manufacturing facilities, third-party foundries and
subcontractors, shipping partners, distributors, and end market customers. Disruption in one part of the supply chain could cause disruption in all other parts of the supply chain. Global shipping impacts several parts of the supply chain and the
disruptions experienced in recent years have, at times, negatively impacted our ability to manufacture products and to deliver them to customers.
Although most materials incorporated into our products are available from a number of sources, certain materials, including plastics and metals, are produced in only a
limited number of regions around the world or are available from only a limited number of suppliers. Suppliers periodically extend lead times, face capacity constraints, limit supplies, increase prices, experience quality issues, or encounter
cybersecurity or other issues that can interrupt or increase the cost of our supply. The unavailability or reduced availability of these materials could require us to temporarily cease or reduce production or incur additional costs.
Customer requirements and certain laws pertaining to the responsible sourcing of materials, including tantalum, tungsten, tin, gold, and cobalt, all of which are used in
the Company’s products, are increasing and becoming more stringent. Responsible sourcing efforts may result in increased prices and decreased availability of these materials.
Many of the metals used in the manufacture of our products, including gold, copper, and palladium, are traded on active markets and can be subject to significant price
volatility. To ensure adequate supply and to provide cost certainty, our policy is to enter into short-term commitments to purchase defined portions of annual consumption of the raw materials utilized if market prices decline below budget. In
certain circumstances, we purchase precious metals bullion in excess of our immediate manufacturing needs to mitigate the risk of supply shortages or volatile price fluctuations. If after entering into these commitments or purchasing the metals
bullion, the market prices for these raw materials decline, we must recognize losses on these adverse purchase commitments and metals bullion purchases.
Our production can be disrupted by the unavailability of resources, such as water, energy, and gases. The unavailability or reduced availability of these resources
could require us to reduce production or incur additional costs.
We use third-party foundries and subcontractors for certain of our manufacturing activities, primarily wafer fabrication and the assembly and testing of finished goods.
Establishing third-party contract manufacturer relationships can be time consuming and costly, and the number of qualified providers is limited. Our agreements with these manufacturers typically require us to commit to purchase services based on
forecasted product needs, which may be inaccurate, and, in some cases, require us to recognize losses on these adverse purchase commitments. Our agreements may limit our ability to increase production, particularly during periods of growing demand
for our products.
Due to our global supply chain, we are impacted by global trade disputes. The governments of the U.S. and the People’s Republic of China remain in a trade dispute that
has resulted in tariffs and other trade restrictions including import / export prohibitions. Disruptions to global trade could result in customers seeking different sources of product or requiring us to seek different sources of supply. New or
revised trade agreements could require changes in operations in the long-term.
We remain cognizant of these supply chain challenges and seek to minimize their effects whenever possible. Despite our best efforts, there can be no assurances we will
be successful in mitigating these risks and if we are unable to do so, they may have material negative impacts on our business and results of operations.
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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 are susceptible to certain concentrations.
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. Our ability to compete successfully also depends on elements out of our control. We face significant competition within each of our product segments
from larger global manufacturers and smaller manufacturers focused on specific market niches. 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.
A material portion of our 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 our products, which could have an adverse effect on our results of operations and
financial position.
While no customer comprises over 10% of our consolidated net revenues, certain subsidiaries and product lines are susceptible to customer concentrations and 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 our consolidated financial statements.
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.
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
Secured Overnight Financing Rate ("SOFR") and other currency-specific reference rates. A significant increase in such reference rates 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.
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Cyberattacks and other 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. We are exposed to, and may be
adversely affected by, potential cyberattacks or other disruptions to our information technology systems and data security. 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.
We are subject to numerous laws and regulations regarding privacy and data protection. The scope of these laws and regulations is evolving rapidly and is subject to
differing interpretations, and thus may be inconsistent among jurisdictions. Such laws and regulations have resulted and will continue to result in significantly greater compliance burdens and costs for us.
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.
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 74% of our revenues during 2023 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 53 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 the current war with Hamas, 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. As of December 31, 2023, 65.5% of our cash and cash equivalents and short-term investments were held by subsidiaries outside of the United States. Our 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. A U.S.-domiciled subsidiary is expected to be the acquiring entity of Nexperia's wafer fabrication facility and operations in Newport, South Wales, U.K. 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 and would be required to accrue and pay additional taxes. 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 restricting the export of certain goods and equipment to China,
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.
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, 2023, the holders of Class B common stock held
approximately 49.1% 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 44.0% of the total voting power of our capital stock as of December 31, 2023. 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.
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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 debt instruments, 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 debt instruments. The price of our common stock and our convertible debt instruments could also be affected by possible sales of our common stock by investors who view our
convertible debt instruments as more attractive means of equity participation in us.
Conversion of our outstanding 2025 Notes and 2030 Notes may
dilute the ownership interest of our existing stockholders, including holders who had previously converted their notes.
The conversion of some or all of our outstanding 2.25% convertible senior notes due 2025 (the "2025 Notes") or our outstanding 2.25% convertible senior notes due 2030 (the "2030 Notes") may dilute the ownership
interests of our existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.
We may not have the ability to raise the funds necessary to
settle conversions of our outstanding 2025 Notes and 2030 Notes in cash or to repurchase the notes upon a fundamental change or on a repurchase date, as applicable, and our current debt contains, and our future debt may contain, limitations on
our ability to pay cash upon conversion or repurchase of the 2025 Notes or 2030 Notes.
Holders of our outstanding 2025 Notes and 2030 Notes have the right to require us to repurchase all or a portion of their 2025 Notes or 2030 Notes, as the case may be, upon the occurrence of a fundamental change at
a fundamental change repurchase price equal to 100% of the principal amount of the 2025 Notes or 2030 Notes, as the case may be, to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the 2030 Notes, we will be
required to make cash payments for each $1,000 in principal amount of 2030 Notes converted of at least the lesser of $1,000 and the sum of the daily conversion values as described in the indenture governing the 2030 Notes. Our outstanding 2025
Notes contain similar provisions concerning the holders’ rights to require us to repurchase their 2025 Notes upon a fundamental change and to pay cash to settle conversions of their 2025 Notes. However, we may not have enough available cash or be
able to obtain financing at the time we are required to make repurchases of the 2030 Notes or the 2025 Notes surrendered therefor or notes being converted. In addition, our ability to repurchase the 2025 Notes or the 2030 Notes or to pay cash upon
conversions of the 2025 Notes or 2030 Notes may be limited by law, by regulatory authority or by agreements governing our existing and future indebtedness, as described below.
For example, our credit facility in effect from time to time may prohibit us from making any cash payments on the conversion or repurchase of the 2025 Notes or the 2030 Notes, as the case may be, upon a fundamental
change repurchase if, after giving effect to such conversion or repurchase (and any additional indebtedness incurred in connection with such conversion or a repurchase), we would not be in pro forma compliance with the applicable financial
covenants under that facility. Any new credit facility into which we may enter may have similar restrictions unless certain conditions are met. Our failure to make cash payments upon the conversion or repurchase of the 2025 Notes or the 2030
Notes, as the case may be, as required under the terms of the applicable indenture governing such notes would permit holders of the 2025 Notes or the 2030 Notes, as the case may be, to accelerate our obligations under the 2025 Notes or the 2030
Notes, as the case may be.
Our failure to repurchase the 2025 Notes or 2030 Notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on future conversions of the 2025 Notes or the 2030 Notes as
required by the applicable indenture would constitute a default under such indenture. A default under such indenture or the fundamental change itself could also lead to a default under agreements governing our existing and future indebtedness,
including our credit facility. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash
payments upon conversions thereof.
The conditional conversion feature of our outstanding 2025
Notes and 2030 Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the 2025 Notes or 2030 Notes is triggered, holders of such notes will be entitled to convert the notes at any time during specified periods at their option. If
one or more holders elect to convert their notes, we would be required to settle any converted principal through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their notes, we
could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Certain provisions in the indentures governing the 2025
Notes and 2030 Notes could delay or prevent an otherwise beneficial takeover or takeover attempt of us.
Certain provisions in the 2025 Notes and 2030 Notes and the applicable indenture could make it more difficult or more expensive for a third party to acquire us. For example, if a takeover would constitute a
fundamental change, holders of the notes will have the right to require us to repurchase their notes in cash. In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders
who convert their notes in connection with such takeover. In either case, and in other cases, our obligations under the notes and the applicable indenture could increase the cost of acquiring us or otherwise discourage a third party from
acquiring us or removing incumbent management, including in a transaction that holders of the notes or holders of our common stock may view as favorable.
21
The capped call transactions may affect the market price of
our common stock.
In connection with the pricing of, and the initial purchasers’ exercise in full of their option to purchase additional, 2030 Notes, we entered into capped call transactions with the option counterparties. The
capped call transactions are expected generally to reduce potential dilution to our common stock upon conversion of any 2030 Notes and to offset any cash payments made in excess of the principal amount of converted 2030 Notes, as the case may be,
with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the capped call transactions, we expect the option counterparties or their respective affiliates to have purchased shares of our common stock and/or entered
into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the 2030 Notes. In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by
entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the 2030 Notes and prior to the
maturity of the 2030 Notes (and are likely to do so on each exercise date for the capped call transactions or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early
conversion of the 2030 Notes). This activity could cause or avoid an increase or decrease in the market price of our common stock.
In addition, if any such capped call transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could
adversely affect the value of our common stock.
We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of our common stock. In addition, we do not make
any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
We are subject to counterparty risk with respect to the
capped call transactions.
The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the capped call transactions. Our exposure to the credit risk of the option
counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to
insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty. Our exposure will depend on many factors but,
generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer more dilution than we currently
anticipate with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparties.
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:
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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 Vishayname 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” markas 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:
• overall economic and business conditions;
• competitive factors in the industries in which we conduct our business;
• changes in governmental regulation;
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 1C.CYBERSECURITY
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats. These risks include, among other things:
operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.
We are committed to maintaining robust governance and oversight of these risks and to implementing mechanisms, controls, technologies, and processes
designed to help us assess, identify, and manage these risks. While we have not, as of the date of this Form 10-K, experienced a cybersecurity threat or incident that resulted in a material adverse impact to our business or operations, there
can be no guarantee that we will not experience such an incident in the future. Such incidents, whether or not successful, could result in us incurring significant costs related to, for example, rebuilding our internal systems, writing down
inventory value, implementing additional threat protection measures, defending against litigation, responding to regulatory inquiries or actions, paying damages, providing customers with incentives to maintain a business relationship with us,
or taking other remedial steps with respect to third parties, as well as incurring significant reputational harm. In addition, these threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or
implementing adequate preventative measures. Based on media reports and other surveys, we believe there is a general increase in cyberattack volume, frequency, and sophistication. We have experienced the same in our own business. We seek to
detect and investigate unauthorized attempts and attacks against our network and to prevent their occurrence and recurrence where practicable through changes or updates to our internal processes and tools; however, we remain potentially
vulnerable to known or unknown threats. In some instances, we, our suppliers, and our customers can be unaware of a threat or incident or its magnitude and effects. Further, there is increasing regulation regarding responses to cybersecurity
incidents, including reporting to regulators, which could subject us to additional liability and reputational harm. See "Risk Factors" for more information on our cybersecurity risks.
We aim to incorporate industry best practices throughout our cybersecurity program. Identifying and assessing cybersecurity risk is integrated into
our overall risk management program. Our cybersecurity strategy focuses on implementing effective and efficient controls, technologies, and other processes to assess, identify, and manage material cybersecurity risks. Our cybersecurity program
is designed to be aligned with applicable industry standards and is tested annually by independent third-party consultants. We have processes in place to assess, identify, manage, and address material cybersecurity threats and incidents. These
include, among other things: annual and ongoing security awareness training for employees; mechanisms to detect and monitor unusual network activity; and containment and incident response tools. We monitor issues that are internally discovered
or externally reported that may affect us, and have processes to assess those issues for potential cybersecurity impact or risk.
Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management. Our Audit Committee is
responsible for the oversight of risks from cybersecurity threats. Members of the Audit Committee receive updates on at least an annual basis from senior management, including leaders from our Information Technology, Internal Audit, and Legal
teams regarding matters of cybersecurity. This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any) and status on key information
security initiatives. Our Board members also engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.
Our cybersecurity risk management and strategy processes are overseen by leaders from our Information Technology, Internal Audit, and Legal teams.
Such individuals have an average of over 20 years of prior work experience in various roles involving information technology, security, auditing, legal, compliance, systems and programming. These individuals are informed about, and monitor the
prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident
response plan, and report to the Audit Committee on any appropriate items.
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Item 2.PROPERTIES
At December 31, 2023, our business had 57 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.
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)
United States
Bennington, VT Capacitors 64,000
Yankton, SD Inductors 60,000
Warwick, RI Resistors 56,000
Niagara Falls, NY Resistors 34,000
Marshall, MN Inductors 22,000
Non-U.S.
Vocklabruck, Austria Diodes 100,000
People's Republic of China
Xi'an MOSFETs and Diodes 133,000
Czech Republic
Blatna Resistors and Capacitors 276,000
Dolni Rychnov Resistors and Capacitors 183,000
Prachatice Capacitors 92,000
France
Chateau Gontier Resistors 82,000
Germany
Selb Resistors and Capacitors 472,000
Landshut Capacitors 75,000
Fichtelberg Resistors 36,000
Budapest, Hungary Diodes 101,000
Loni, India Resistors and Capacitors 405,000
Israel
Dimona Resistors and Capacitors 404,000
Migdal Ha'Emek Capacitors 288,000
Be'er Sheva Resistors, Inductors and Capacitors 276,000
Miharu, Japan Capacitors 165,000
Melaka, Malaysia Optoelectronic Components 156,000
Juarez, Mexico Resistors 75,000
Famalicao, Portugal Capacitors 222,000
Republic of China (Taiwan)
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The principal locations of our leased manufacturing facilities, along with available space including administrative offices, are as follows:
Leased Locations Business Segment Approx. Available Space (Square Feet)
United States
Columbus, NE Resistors 87,000
Attleboro, MA Resistors 40,000
Ontario, CA Resistors 38,000
Dover, NH Inductors 35,000
East Windsor, CT Resistors 30,000
Hollis, NH Resistors 25,000
Fremont, CA Resistors 18,000
Glendale, WI Resistors 14,000
Hudson, MA Resistors 13,000
Montevideo, MN Inductors 11,000
Duluth, MN Inductors 10,000
Non-U.S.
Klagenfurt, Austria Capacitors 150,000
People’s Republic of China
Danshui Capacitors, Inductors, and Resistors 446,000
Shatian Capacitors and Resistors 218,000
Santo Domingo, Dominican Republic Inductors 44,000
Germany
Heilbronn Diodes and Optoelectronic Components 163,000
Mumbai, India Diodes 34,000
Mexico
Manila, Philippines Optoelectronic Components 149,000
Kaohsiung, Republic of China (Taiwan) Diodes 130,000
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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. 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 was also a third-party defendant in a third related matter, United States v Island
Transportation Corp. et al.On September 12, 2022, the United States District Court for the Eastern District of New York dismissed all third-party complaints commenced by
Island Transportation Corp. against nineteen third-party defendants including VGSI. The two remaining cases are pending in the United States District Court for the Eastern District of New York.
The two remaining 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.
VGSI was served in August 2023 with a complaint brought by the Hicksville Water District against multiple
defendants. The matter, Hicksville Water District v.Alsy Manufacturing, Inc., is pending in the Supreme Court of the State of New York, County of Nassau. As with two other previously reported cases pending in the United States District Court for the
Eastern District of New York, the newest case contains claims for recovery of response costs under CERCLA, and alleges that a predecessor’s manufacturing operations in the Site, between 1960 and 1993, impacted groundwater beneath and downgradient
of the Site. VGSI is vigorously contesting plaintiff’s claims and will aggressively prosecute its affirmative claims.
On August 31, 2023, Vishay was notified by the U.S. Environmental Protection Agency ("EPA") of potential violations of the Resource Conservation and Recovery Act and the
Solid Waste Disposal Act. The alleged violations relate to the handling, storage, inspection, and labeling of hazardous waste at Vishay's facility located in Columbus, Nebraska. Vishay has reached an agreement with the EPA, subject to execution of
and finalization of the Consent Agreement, including the filing and ratification of the Consent Agreement, including the filing and ratification of the Consent Agreement by the Regional Hearing Clerk for EPA, Region 7, to settle this matter for a
civil penalty of $387,000 and committing to submit quarterly compliance reports to the EPA for one year. Vishay admits no violation of any law or regulation under the agreement.
The Company does not expect the matter or its settlement as proposed to have a material effect on its financial condition or results of operations.
Item 4.MINE SAFETY DISCLOSURES
None.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table sets forth certain information regarding our executive officers as of February 16, 2024:
Name Age Positions Held
Joel Smejkal* 57 Chief Executive Officer, President, and Director
Lori Lipcaman 66 Executive Vice President and Chief Financial Officer
Jeff Webster 53 Executive Vice President - Chief Operating Officer
Roy Shoshani 50 Executive Vice President - Chief Technical Officer
Peter Henrici 68 Executive Vice President - Corporate Development
* Member of the Executive Committee of the Board of Directors.
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 35.0% of the total voting power of our capital stock as of December 31, 2023. He also serves on the Board of
Directors of Vishay Precision Group, Inc., an independent, publicly-traded company spun-off from Vishay Intertechnology in 2010 (including as non-executive Chair from 2010 - 2022).
Joel Smejkal was appointed President and Chief Executive Officer effective January 1, 2023. Mr. Smejkal served as Executive Vice President, Corporate Business Development from 2020-2022. He has held various positions of increasing responsibility since joining Vishay in 1990, including Executive
Vice President, Business Head Passive Components (2017-2020) and Senior Vice President Global Distribution Sales (2012-2016). His experience with Vishay includes worldwide and divisional leadership roles in engineering, marketing, operations, and
sales.
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.
Jeff Webster was appointed Executive Vice President - Chief Operating Officer effective January 1, 2023. Mr. Webster served as Executive Vice President, Business Head Passive Components from 2020-2022. He 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).
Roy Shoshani was appointed Executive Vice President – Chief Technical
Officer effective January 1, 2023. Mr. Shoshani has held various positions of increasing responsibility since joining Vishay in 2004, including Deputy to the Chief Technical Officer (2021-2022), Vice President Integrated Circuits Division
(2009-2022), and Vice President R&D – Semiconductors (2019-2021). Prior to joining Vishay, Mr. Shoshani worked for Harmonic. Mr. Shoshani’s experience with Vishay includes divisional leadership roles in R&D, marketing, business
development and operations.
Peter Henrici was appointed Executive Vice President – Corporate
Development effective January 1, 2023 and has served as Corporate Secretary since 2012. Mr. Henrici has held various positions in marketing communications, investor relations, and corporate treasury departments since joining Vishay in 1998. Mr.
Henrici has been responsible for corporate communications since 2005.
Michael O'Sullivan was appointed Executive Vice President - Chief Administrative and Legal Officer effective January 1, 2024. Mr. O’Sullivan previously served as Corporate General Counsel since joining the Company in 2012. In July 2016, Mr. O'Sullivan was appointed Regional Country Manager - The Americas. Prior to
joining Vishay, Mr. O'Sullivan worked as an in-house corporate attorney for a subsidiary of Koch Industries, Inc., and in private practice at DLA Piper.
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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 14, 2024. 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 Dividends declared
At February 14, 2024, 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
44.0% of the total voting power of our capital stock as of December 31, 2023.
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."
In 2022, our Board of Directors adopted a Stockholder Return Policy that will remain in effect until such time as the Board votes to amend or rescind the policy. The
Stockholder Return Policy calls for us to return a prescribed amount of cash flows on an annual basis. We intend to return such amounts directly, in the form of dividends, or indirectly, in the form of stock repurchases. We paid $55.6 million of
dividends to stockholders and repurchased $78.7 million of our stock pursuant to the Stockholder Return Policy in 2023.
To enable the operation of the Stockholder Return Policy, Vishay's Board of Directors approves the repurchase of a stated number of shares of common stock
from time-to-time. As of September 30, 2023, approximately 1.3 million shares remained from the previous repurchase authorization of 6.0 million shares. On November 28, 2023, Vishay's Board of Directors approved the repurchase of an additional 2.5
million shares of common stock, to enable the operation of the Stockholder Return Policy for the foreseeable future.
The following table provides information regarding repurchases of our common stock during the fiscal quarter ended December 31, 2023:
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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, 2018 and assumes that all dividends were
reinvested.
Base Years Ending December 31,
Period
Item 6.RESERVED
Not applicable.
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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 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. We have
increased our capacity internally by investing approximately $329 million in 2023 and plan to invest approximately $1.2 billion in total from 2023 - 2025 primarily for capital expansion projects outside of China. In addition, we are
strategically expanding our outsourced production of commodity products to subcontractors. At the same time, we are enhancing our channel management while investing in internal resources by adding customer-facing engineers and filling gaps in
technology and market coverage. Taken together, each of these initiatives supports our Think Customer First organizational culture.
On November 8, 2023, we and Nexperia BV announced that we have entered
into an agreement whereby we will acquire Nexperia’s wafer fabrication facility and operations located in Newport, South Wales, U.K. for approximately $177 million in cash, subject to customary post-closing adjustments. The closing of
the transaction is subject to U.K. government review and customary closing conditions, and is expected to occur in the first quarter of 2024.
In addition to enhancing stockholder value through growing our business, in 2022, our Board of Directors adopted a Stockholder Return Policy, which calls for us to return at least 70% of free cash flow, net of scheduled
principal payments of long-term debt, on an annual basis. See further discussion in “Stockholder Return Policy” below.
On September 12, 2023, we issued $750 million convertible senior notes due 2030. We used the net proceeds from the issuance of these notes to
repurchase $370.2 million principal amount of convertible senior notes due 2025, $94.2 million to enter into capped call transactions intended to mitigate the dilution risk of convertible senior notes due 2030 by synthetically increasing the
conversion price of the notes to approximately $43.98 per share, to repay amounts outstanding on our amended and restated credit facility, and for other general corporate purposes. We recognized a loss of $18.9 million due to the early
extinguishment of the repurchased convertible senior notes due 2025.
On May 8, 2023, we amended and restated our $750 million revolving credit agreement, which replaced our credit agreement that was scheduled to mature
in June 2024. The amendment and restatement extended the maturity date of the revolving credit agreement until May 8, 2028, replaced the previous total leverage ratio used for financial covenant compliance measurement with a net leverage
ratio, and replaced the LIBOR-based interest rate and related LIBOR-based mechanics applicable to U.S. dollar borrowings under the revolving credit agreement with an interest rate based on the Secured Overnight Financing Rate ("SOFR")
(including a customary spread adjustment) and related SOFR-based mechanics. The maturity date of the credit facility will accelerate if within ninety-one days prior to the maturity of our convertible senior notes due 2025, the outstanding
principal amount of such notes exceeds a defined liquidity measure as set forth in the credit facility. The repurchase of $370.2 million principal amount of convertible senior notes due 2025 in September 2023 substantially reduces the risk of
maturity date acceleration. Other terms and conditions are substantially unchanged.
Our business and operating results have been and will continue to be
impacted by worldwide economic conditions. Our revenues are dependent on end markets that are impacted by consumer and industrial demand, and our operating results can be adversely affected by reduced demand in those global markets. In
this volatile economic environment, we continue to closely monitor our fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and
resources to meet our future needs. We will react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess inventory build in periods of decline and maximize opportunities in periods of growth. We
believe we have sufficient liquidity to withstand temporary disruptions in the economic environment. See additional information regarding our competitive strengths and key challenges as disclosed in Part I.
31
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 key financial metrics decreased in the fourth fiscal quarter of 2023 primarily due to the negative impacts of an on-going distributor inventory correction that resulted in lower
orders. Net revenues and margins decreased versus the prior year period primarily due to lower volume.
Net revenues for the year ended December 31, 2023 were
$3.402 billion, compared to net revenues of $3.497 billion and $3.240 billion for the years ended December 31, 2022 and 2021, respectively. Net
earnings attributable to Vishay stockholders for the year ended December 31, 2023 were $323.8 million, or $2.31 per diluted share, compared to $428.8 million, or $2.98 per diluted
share, and $298.0 million, or $2.05
per share, for the years ended December 31, 2022 and 2021, 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, 2023, 2022, and 2021 include items affecting comparability. The items affecting comparability are (in thousands, except per
share amounts):
Years ended December 31,
Reconciling items affecting gross profit:
Impact of COVID-19 pandemic $ - $ 6,661 $ -
Other reconciling items affecting operating income:
Impact of COVID-19 pandemic $ - $ 546 $ -
Reconciling items affecting other income (expense):
Loss on early extinguishment of debt $ 18,874 $ - $ -
Reconciling items affecting tax expense (benefit):
Effects of changes in uncertain tax positions $ - $ (5,941 ) $ -
Effects of changes in valuation allowances - (33,669 ) (5,714 )
Effect of change in indefinite reversal assertion - 59,642 -
Change in tax laws and regulations - - 45,040
Tax effects of pre-tax items above (498 ) (1,802 ) -
Adjusted earnings per diluted share $ 2.44 $ 3.16 $ 2.32
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The following table reconciles gross profit by segment to consolidated gross profit. Direct costs of the COVID-19 pandemic are not allocated to the segments as the chief operating decision maker's evaluation of segment
performance does not include these costs (in thousands):
Years ended December 31,
Unallocated gross profit (loss) - (6,661 ) -
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. Our free cash results are as follows (in thousands):
Years ended December 31,
Proceeds from sale of property and equipment 1,156 1,198 1,317
Orders are lower due to a distributor inventory correction that began in the fourth fiscal quarter of 2022 and continued throughout 2023. Our results for 2023 remained strong, although weaker than our 2022
results.
Our free cash results were significantly impacted by the installment payments of the U.S. transition tax of $27.7 million in 2023
and $14.8 million in 2022 and 2021, respectively, and $63.6 million and $25.2 million of payments of foreign, withholding, and claw-back cash taxes on foreign earnings for the $276.8 million and $81.2 million (net of taxes) that were repatriated to
the U.S. in 2023 and 2022, respectively.
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Growth and Company Transformation Initiatives
Effective January 1, 2023, a new executive leadership team, promoted from within, embarked on a new era at Vishay. The new executive management team
laid out a three-year plan to expand capacity to support our highest growth and highest return product lines and to position Vishay to be ready for the next phase of megatrends in e-mobility, sustainability, and connectivity. The year 2023 is
generally seen as the staging year for this plan, and all elements of the plan are progressing throughout the organization. In 2024, we expect to advance many of these initiatives and begin to have increased manufacturing capacity available.
Beginning in late 2024 and into 2025, we expect to be in a better position to capture the next step in the growing demand for electrification in our key end-markets.