10-Q 1 vishayintertech_10-q.htm QUARTERLY REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

| (Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the quarterly period ended March 31, 2012
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the transition period from _______ to _______

Commission File Number 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Delaware |  | 38-1686453
(State or Other Jurisdiction of Incorporation) |  | (I.R.S. Employer Identification Number)
63 Lancaster Avenue Malvern, PA 19355-2143 |  | 610-644-1300
(Address of Principal Executive Offices) |  | (Registrant’s Area Code and Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. ýYes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

| Large accelerated filer ý | Accelerated filer ¨
| Non-accelerated filer ¨ (Do not check if smaller reporting company) | Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes ý No
As of April 27, 2012, the registrant had 145,080,898 shares of its common stock and 12,129,227 shares of its Class B common stock outstanding.

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VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
March 31, 2012
CONTENTS

|  |  |  | Page Number
PART I. |  | FINANCIAL INFORMATION |  |
| Item 1. | Financial Statements |  |
|  | Consolidated Condensed Balance Sheets – March 31, 2012 (Unaudited) and December 31, 2011 |  | 4
|  | Consolidated Condensed Statements of Operations (Unaudited) – Fiscal Quarters Ended March 31, 2012 and April 2, 2011 |  | 6
|  | Consolidated Condensed Statements of Comprehensive Income (Unaudited) – Fiscal Quarters Ended March 31, 2012 and April 2, 2011 |  | 7
|  | Consolidated Condensed Statements of Cash Flows (Unaudited) – Three Fiscal Months Ended March 31, 2012 and April 2, 2011 |  | 8
|  | Consolidated Condensed Statement of Equity (Unaudited) |  | 9
|  | Notes to Consolidated Condensed Financial Statements (Unaudited) |  | 10
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 28
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |  | 47
| Item 4. | Controls and Procedures |  | 47
PART II. |  | OTHER INFORMATION |  |
| Item 1. | Legal Proceedings |  | 48
| Item 1A. | Risk Factors |  | 48
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |  | 48
| Item 3. | Defaults Upon Senior Securities |  | 48
| Item 4. | Mine Safety Disclosures |  | 48
| Item 5. | Other Information |  | 48
| Item 6. | Exhibits |  | 48
|  | SIGNATURES |  | 49

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PART I - FINANCIAL INFORMATION

Item 1. | Financial Statements

VISHAY INTERTECHNOLOGY, INC. |  |  |  |  |  |
Consolidated Condensed Balance Sheets |  |  |  |  |  |
(In thousands) |  |  |  |  |  |
|  | March 31, 2012 |  |  | December 31, 2011 |
|  | (Unaudited) |  |  |  |
Assets |  |  |  |  |  |
Current assets: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 785,781 |  |  | $ | 749,088 |
Short-term investments |  |  | 137,172 |  |  |  | 249,139 |
Accounts receivable, net |  |  | 282,071 |  |  |  | 270,970 |
Inventories: |  |  |  |  |  |  |  |
Finished goods |  |  | 111,042 |  |  |  | 104,478 |
Work in process |  |  | 197,463 |  |  |  | 181,354 |
Raw materials |  |  | 132,194 |  |  |  | 131,795 |
Total inventories |  |  | 440,699 |  |  |  | 417,627 |
Deferred income taxes |  |  | 24,907 |  |  |  | 24,632 |
Prepaid expenses and other current assets |  |  | 126,493 |  |  |  | 119,220 |
Total current assets |  |  | 1,797,123 |  |  |  | 1,830,676 |
Property and equipment, at cost: |  |  |  |  |  |  |  |
Land |  |  | 92,538 |  |  |  | 91,507 |
Buildings and improvements |  |  | 508,695 |  |  |  | 493,550 |
Machinery and equipment |  |  | 2,114,001 |  |  |  | 2,079,395 |
Construction in progress |  |  | 83,560 |  |  |  | 94,717 |
Allowance for depreciation |  |  | (1,897,354 | ) |  |  | (1,851,264 | )
|  |  | 901,440 |  |  |  | 907,905 |
Goodwill |  |  | 34,915 |  |  |  | 9,051 |
Other intangible assets, net |  |  | 143,864 |  |  |  | 103,927 |
Other assets |  |  | 140,678 |  |  |  | 142,171 |
Total assets |  | $ | 3,018,020 |  |  | $ | 2,993,730 |
Continues on following page. |  |  |  |  |  |  |  |

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VISHAY INTERTECHNOLOGY, INC. |  |  |  |  |  |
Consolidated Condensed Balance Sheets (continued) |  |  |  |  |  |
(In thousands) |  |  |  |  |  |
|  | March 31, 2012 |  |  | December 31, 2011 |
|  | (Unaudited) |  |  |  |
Liabilities and equity |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |
Notes payable to banks |  | $ | 52 |  |  | $ | 13 |
Trade accounts payable |  |  | 135,055 |  |  |  | 154,942 |
Payroll and related expenses |  |  | 103,317 |  |  |  | 109,833 |
Other accrued expenses |  |  | 157,722 |  |  |  | 161,119 |
Income taxes |  |  | 14,537 |  |  |  | 13,881 |
Total current liabilities |  |  | 410,683 |  |  |  | 439,788 |
Long-term debt less current portion |  |  | 389,486 |  |  |  | 399,054 |
Deferred income taxes |  |  | 110,210 |  |  |  | 110,356 |
Other liabilities |  |  | 118,651 |  |  |  | 117,235 |
Accrued pension and other postretirement costs |  |  | 318,979 |  |  |  | 319,136 |
Total liabilities |  |  | 1,348,009 |  |  |  | 1,385,569 |
Stockholders' equity: |  |  |  |  |  |  |  |
Vishay stockholders' equity |  |  |  |  |  |  |  |
Common stock |  |  | 14,491 |  |  |  | 14,374 |
Class B convertible common stock |  |  | 1,230 |  |  |  | 1,345 |
Capital in excess of par value |  |  | 2,088,352 |  |  |  | 2,086,925 |
(Accumulated deficit) retained earnings |  |  | (469,604 | ) |  |  | (503,416 | )
Accumulated other comprehensive income (loss) |  |  | 30,124 |  |  |  | 3,778 |
Total Vishay stockholders' equity |  |  | 1,664,593 |  |  |  | 1,603,006 |
Noncontrolling interests |  |  | 5,418 |  |  |  | 5,155 |
Total equity |  |  | 1,670,011 |  |  |  | 1,608,161 |
Total liabilities and equity |  | $ | 3,018,020 |  |  | $ | 2,993,730 |
See accompanying notes. |  |  |  |  |  |  |  |

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VISHAY INTERTECHNOLOGY, INC. |  |  |  |  |  |
Consolidated Condensed Statements of Operations |  |  |  |  |  |
(Unaudited - In thousands, except per share amounts) |  |  |  |  |  |
|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Net revenues |  | $ | 538,547 |  |  | $ | 695,151 |
Costs of products sold |  |  | 401,838 |  |  |  | 480,488 |
Gross profit |  |  | 136,709 |  |  |  | 214,663 |
Selling, general, and administrative expenses |  |  | 86,364 |  |  |  | 92,465 |
Operating income |  |  | 50,345 |  |  |  | 122,198 |
Other income (expense): |  |  |  |  |  |  |  |
Interest expense |  |  | (4,717 | ) |  |  | (4,054 | )
Other |  |  | 1,308 |  |  |  | (507 | )
|  |  | (3,409 | ) |  |  | (4,561 | )
Income before taxes |  |  | 46,936 |  |  |  | 117,637 |
Income tax expense |  |  | 12,861 |  |  |  | 42,030 |
Net earnings |  |  | 34,075 |  |  |  | 75,607 |
Less: net earnings attributable to noncontrolling interests |  |  | 263 |  |  |  | 320 |
Net earnings attributable to Vishay stockholders |  | $ | 33,812 |  |  | $ | 75,287 |
Basic earnings per share attributable to Vishay stockholders |  | $ | 0.22 |  |  | $ | 0.46 |
Diluted earnings per share attributable to Vishay stockholders |  | $ | 0.21 |  |  | $ | 0.43 |
Weighted average shares outstanding - basic |  |  | 157,199 |  |  |  | 165,186 |
Weighted average shares outstanding - diluted |  |  | 163,944 |  |  |  | 175,661 |
See accompanying notes. |  |  |  |  |  |  |  |

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VISHAY INTERTECHNOLOGY, INC. |  |  |  |  |  |
Consolidated Condensed Statements of Comprehensive Income |  |  |  |  |  |
(Unaudited - In thousands) |  |  |  |  |  |
|  |  | Fiscal quarters ended |
|  |  | March 31, 2012 |  |  | April 2, 2011 |
Net earnings |  | $ | 34,075 |  |  | $ | 75,607 |
Other comprehensive income, net of tax |  |  |  |  |  |  |  |
| Foreign currency translation adjustment |  |  | 23,228 |  |  |  | 45,728 |
| Pension and other post-retirement actuarial items |  |  | 2,304 |  |  |  | 1,934 |
| Unrealized gain on available-for-sale securities |  |  | 814 |  |  |  | 611 |
Other comprehensive income |  |  | 26,346 |  |  |  | 48,273 |
Comprehensive income |  |  | 60,421 |  |  |  | 123,880 |
Less: comprehensive income attributable to noncontrolling interests |  |  | 263 |  |  |  | 320 |
Comprehensive income attributable to Vishay stockholders |  | $ | 60,158 |  |  | $ | 123,560 |
See accompanying notes. |  |  |  |  |  |  |  |

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VISHAY INTERTECHNOLOGY, INC. |  |  |  |  |  |
Consolidated Condensed Statements of Cash Flows |  |  |  |  |  |
(Unaudited - In thousands) |  |  |
|  | Three fiscal months ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Operating activities |  |  |  |  |  |
Net earnings |  | $ | 34,075 |  |  | $ | 75,607 |
Adjustments to reconcile net earnings to |  |  |  |  |  |  |  |
net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 41,993 |  |  |  | 45,033 |
(Gain) loss on disposal of property and equipment |  |  | (996 | ) |  |  | (959 | )
Accretion of interest on convertible debentures |  |  | 611 |  |  |  | 376 |
Inventory write-offs for obsolescence |  |  | 5,220 |  |  |  | 5,237 |
Other |  |  | 1,416 |  |  |  | 5,665 |
Net change in operating assets and liabilities, |  |  |  |  |  |  |  |
net of effects of businesses acquired |  |  | (59,697 | ) |  |  | (33,202 | )
Net cash provided by operating activities |  |  | 22,622 |  |  |  | 97,757 |
Investing activities |  |  |  |  |  |  |  |
Capital expenditures |  |  | (16,815 | ) |  |  | (18,600 | )
Proceeds from sale of property and equipment |  |  | 2,789 |  |  |  | 1,194 |
Purchase of businesses, net of cash acquired |  |  | (85,642 | ) |  |  | - |
Purchase of short-term investments |  |  | (4,444 | ) |  |  | (339,449 | )
Maturity of short-term investments |  |  | 121,684 |  |  |  | - |
Other investing activities |  |  | 443 |  |  |  | (6 | )
Net cash provided by (used in) investing activities |  |  | 18,015 |  |  |  | (356,861 | )
Financing activities |  |  |  |  |  |  |  |
Principal payments on long-term debt and capital leases |  |  | (5 | ) |  |  | - |
Net payments on revolving credit lines |  |  | (10,000 | ) |  |  | - |
Net changes in short-term borrowings |  |  | 39 |  |  |  | 489 |
Proceeds from stock options exercised |  |  | 174 |  |  |  | 6,793 |
Excess tax benefit from stock options exercised |  |  | - |  |  |  | 302 |
Distributions to noncontrolling interests |  |  | - |  |  |  | (500 | )
Net cash provided by (used in) financing activities |  |  | (9,792 | ) |  |  | 7,084 |
Effect of exchange rate changes on cash and cash equivalents |  |  | 5,848 |  |  |  | 23,233 |
Net increase (decrease) in cash and cash equivalents |  |  | 36,693 |  |  |  | (228,787 | )
Cash and cash equivalents at beginning of period |  |  | 749,088 |  |  |  | 897,338 |
Cash and cash equivalents at end of period |  | $ | 785,781 |  |  | $ | 668,551 |
See accompanying notes. |  |  |  |  |  |  |  |

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VISHAY INTERTECHNOLOGY, INC. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated Condensed Statement of Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(Unaudited - In thousands, except share amounts) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Common Stock |  |  | Class B Convertible Common Stock |  |  | Capital in Excess of Par Value |  |  | Retained Earnings (Accumulated Deficit) |  |  | Accumulated Other Comprehensive Income (Loss) |  |  | Total Vishay Stockholders' Equity |  |  | Noncontrolling Interests |  |  | Total Equity |
Balance at January 1, 2012 |  | $ | 14,374 |  |  | $ | 1,345 |  |  | $ | 2,086,925 |  |  | $ | (503,416 | ) |  | $ | 3,778 |  |  | $ | 1,603,006 |  |  | $ | 5,155 |  |  | $ | 1,608,161 |
Net earnings |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 33,812 |  |  |  | - |  |  |  | 33,812 |  |  |  | 263 |  |  |  | 34,075 |
Other comprehensive income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 26,346 |  |  |  | 26,346 |  |  |  | - |  |  |  | 26,346 |
Stock compensation expense |  |  | - |  |  |  | - |  |  |  | 1,255 |  |  |  | - |  |  |  | - |  |  |  | 1,255 |  |  |  | - |  |  |  | 1,255 |
Stock options exercised (22,095 shares) |  |  | 2 |  |  |  | - |  |  |  | 172 |  |  |  | - |  |  |  | - |  |  |  | 174 |  |  |  | - |  |  |  | 174 |
Conversions from Class B to common stock (1,153,322 shares) |  |  | 115 |  |  |  | (115 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance at March 31, 2012 |  | $ | 14,491 |  |  | $ | 1,230 |  |  | $ | 2,088,352 |  |  | $ | (469,604 | ) |  | $ | 30,124 |  |  | $ | 1,664,593 |  |  | $ | 5,418 |  |  | $ | 1,670,011 |
See accompanying notes. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Vishay Intertechnology, Inc.
Notes to Consolidated Condensed Financial Statements
(Unaudited)
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, 2011. The results of operations for the three fiscal months ended March 31, 2012 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 2012 end on March 31, 2012, June 30, 2012, September 29, 2012, and December 31, 2012. The four fiscal quarters in 2011 ended on April 2, 2011, July 2, 2011, October 1, 2011, and December 31, 2011, respectively.
Recently Adopted Accounting Guidance
In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-4, Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The ASU generally aligns the principles for fair value measurements and the related disclosure requirements under GAAP and International Financial Reporting Standards. The updated guidance clarifies existing fair value measurement and disclosure requirements and requires additional disclosure requirements. The ASU is effective for the Company for interim and annual periods beginning after January 1, 2012. Vishay adopted the ASU on January 1, 2012. The adoption of the ASU had no effect on the Company’s financial position, results of operations, or liquidity.
In September 2011, the FASB issued ASU No. 2011-8, Testing Goodwill for Impairment. Under the revised guidance, the Company has the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the Company determines, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would be required. The ASU does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. In addition, the ASU does not amend the requirement to test goodwill for impairment between annual tests if events or circumstances warrant; however, it does revise the examples of events and circumstances that an entity should consider. The ASU is effective for annual and interim goodwill impairment tests beginning after January 1, 2012. Vishay adopted the ASU on January 1, 2012. The adoption of the ASU had no effect on the Company’s financial position, results of operations, or liquidity.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current financial statements presentation.
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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 2 – Acquisition Activities
As part of its growth strategy, the Company seeks to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets, reputations for product innovation, quality, and reliability, strong customer bases, and product lines with which the Company has substantial marketing and technical expertise.
HiRel Systems LLC
On January 13, 2012, Vishay acquired HiRel Systems LLC, a leading supplier of high reliability transformers, inductors, coils, and power conversion products, for $85,642, net of cash acquired and subject to customary post-closing adjustments. The products and technology portfolio acquired will further enhance the Company’s inductors portfolio, particularly in the field of custom magnetics for medical, military, aerospace and aviation, and applications in the industrial and commercial field such as renewable energy and test and measurement equipment. For financial reporting purposes, the results of operations for this business have been included in the Resistors & Inductors segment from January 13, 2012. The inclusion of this business did not have a material impact on the Company’s consolidated results for the first fiscal quarter of 2012. Based on an estimate of their fair values, the Company allocated $43,950 of the purchase price to definite-lived intangible assets. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the Company recorded goodwill of $25,864 related to this acquisition. The goodwill associated with this transaction is deductible for income tax purposes. The Company will test the goodwill for impairment at least annually in accordance with GAAP. The preliminary allocation is pending finalization of appraisals for property and equipment and intangible assets and the finalization of a working capital adjustment. There can be no assurance that the estimated amounts recorded represent the final purchase allocation.
Had this acquisition occurred as of the beginning of the periods presented in these consolidated condensed financial statements, the pro forma statements of operations would not be materially different than the consolidated condensed statements of operations presented.
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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 3 – Other Intangible Assets
Other intangible assets are as follows:

|  | March 31, 2012 |  |  | December 31, 2011 |
Intangible Assets Subject to Amortization |  |  |  |  |  |
(Definite-lived): |  |  |  |  |  |
Patents and acquired technology |  | $ | 116,217 |  |  | $ | 111,428 |
Capitalized software |  |  | 54,348 |  |  |  | 53,721 |
Customer relationships |  |  | 96,894 |  |  |  | 57,723 |
Tradenames |  |  | 37,365 |  |  |  | 36,762 |
Non-competition agreements |  |  | 1,700 |  |  |  | 1,000 |
|  |  | 306,524 |  |  |  | 260,634 |
Accumulated amortization: |  |  |  |  |  |  |  |
Patents and acquired technology |  |  | (91,125 | ) |  |  | (89,379 | )
Capitalized software |  |  | (49,083 | ) |  |  | (47,836 | )
Customer relationships |  |  | (28,019 | ) |  |  | (26,174 | )
Tradenames |  |  | (14,637 | ) |  |  | (13,615 | )
Non-competition agreements |  |  | (155 | ) |  |  | (62 | )
|  |  | (183,019 | ) |  |  | (177,066 | )
Net Intangible Assets Subject to Amortization |  |  | 123,505 |  |  |  | 83,568 |
Intangible Assets Not Subject to Amortization |  |  |  |  |  |  |  |
(Indefinite-lived): |  |  |  |  |  |  |  |
Tradenames |  |  | 20,359 |  |  |  | 20,359 |
|  | $ | 143,864 |  |  | $ | 103,927 |

The increase in net intangible assets from December 31, 2011 is mainly attributable to the acquisition of HiRel Systems LLC on January 13, 2012. The Company allocated $43,950 of the purchase price to definite-lived intangible assets. Amortization expense (excluding capitalized software) was $3,599, and $3,769, for the fiscal quarters ended March 31, 2012 and April 2, 2011, respectively. HiRel Systems LLC intangible assets accounted for $587 of amortization expense for the fiscal quarter ended March 31, 2012.
Estimated annual amortization expense of intangible assets on the balance sheet at March 31, 2012 for the full year 2012 and each of the next four years is as follows:

2012 |  | $ | 15,278 |
2013 |  |  | 15,282 |
2014 |  |  | 15,162 |
2015 |  |  | 15,094 |
2016 |  |  | 13,406 |

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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 4 – 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 March 31, 2012 and April 2, 2011 reflect the Company’s expected tax rate on reported income from continuing operations 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 January 2011, a new tax law was enacted in Israel which effectively lowered the corporate income tax rate on certain types of income earned after December 31, 2010. Accordingly, the Company’s deferred tax assets in Israel were written down to reflect the lower rate and a one-time tax expense of $10,024 was recorded in the consolidated condensed statement of operations during the three fiscal months ended April 2, 2011.
During the three fiscal months ended March 31, 2012, the liabilities for unrecognized tax benefits increased by $1,203 on a net basis, principally due to increases for interest expense and foreign exchange effects.
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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5 – Long-Term Debt
Long-term debt consists of the following:

|  | March 31, 2012 |  |  | December 31, 2011 |
Credit facility |  | $ | 145,000 |  |  | $ | 155,000 |
Exchangeable unsecured notes, due 2102 |  |  | 95,042 |  |  |  | 95,042 |
Convertible senior debentures, due 2040 |  |  | 98,766 |  |  |  | 98,463 |
Convertible senior debentures, due 2041 |  |  | 50,678 |  |  |  | 50,549 |
|  |  | 389,486 |  |  |  | 399,054 |
Less current portion |  |  | - |  |  |  | - |
|  | $ | 389,486 |  |  | $ | 399,054 |

Convertible Senior Debentures, due 2041
On May 13, 2011, Vishay issued $150,000 principal amount of 2.25% convertible senior debentures due 2041 to qualified institutional investors. GAAP requires an issuer to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The resulting discount on the debt is amortized as non-cash interest expense in future periods.
The carrying values of the liability and equity components of the convertible debentures due 2041 are reflected in the Company’s consolidated condensed balance sheets as follows:

|  | March 31, 2012 |  |  | December 31, 2011 |
Liability component: |  |  |  |  |  |
Principal amount of the debentures |  | $ | 150,000 |  |  | $ | 150,000 |
Unamortized discount |  |  | (99,639 | ) |  |  | (99,843 | )
Embedded derivative |  |  | 317 |  |  |  | 392 |
Carrying value of liability component |  | $ | 50,678 |  |  | $ | 50,549 |
Equity component - net carrying value |  | $ | 62,246 |  |  | $ | 62,246 |

Interest is payable on the debentures semi-annually at a rate of 2.25% per annum; however, the remaining debt discount is being amortized as additional non-cash interest expense using an effective annual interest rate of 8.375% based on the Company’s estimated nonconvertible debt borrowing rate at the time of issuance. In addition to ordinary interest, beginning on May 15, 2021, contingent interest will accrue in certain circumstances relating to the trading price of the debentures and under certain other circumstances.
Interest expense related to the convertible debentures due 2041 is reflected on the consolidated condensed statement of operations as follows:

|  | Fiscal quarter ended |
|  | March 31, 2012 |
Contractual coupon interest |  | $ | 844 |
Non-cash amortization of debt discount |  |  | 204 |
Non-cash amortization of deferred financing costs |  |  | 12 |
Non-cash change in value of derivative liability |  |  | (75 | )
Total interest expense related to the debentures |  | $ | 985 |

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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Prior to February 15, 2041, the holders may only convert their debentures under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending October 1, 2011 if the sale price of Vishay common stock reaches 130% of the conversion price (currently, $24.73) for a specified period; (2) the trading price of the debentures falls below 98% of the product of the sale price of Vishay’s common stock and the conversion rate for a specified period; (3) Vishay calls any or all of the debentures for redemption, at any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. None of these conditions had occurred as of March 31, 2012.
The debentures are initially convertible, subject to certain conditions, into cash, shares of Vishay’s common stock or a combination thereof, at Vishay’s option, at an initial conversion rate of 52.5659 shares of common stock per $1,000 principal amount of debentures. This represents an initial effective conversion price of approximately $19.02 per share. This initial conversion price represents a premium of 12.5% to the closing price of Vishay’s common stock on the date the offering commenced, which was $16.91 per share. At the direction of its Board of Directors, Vishay intends, upon conversion, to repay the principal amount of the debentures in cash and settle any additional amounts in shares. Vishay must provide additional shares upon conversion if there is a “fundamental change” in the business as defined in the indenture governing the debentures.
Vishay may not redeem the debentures prior to May 20, 2021, except in connection with certain tax-related events. On or after May 20, 2021 and prior to the maturity date, Vishay may redeem for cash all or part of the debentures at a redemption price equal to 100% of the principal amount of the debentures to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of Vishay’s common stock has been at least 150% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period prior to the date on which Vishay provides notice of redemption.
Convertible Senior Debentures, due 2040
On November 9, 2010, Vishay issued $275,000 principal amount of 2.25% convertible senior debentures due 2040 to qualified institutional investors. GAAP requires an issuer to separately account for the liability and equity components of a convertible debt instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The resulting discount on the debt is amortized as non-cash interest expense in future periods.
The carrying values of the liability and equity components of the convertible debentures due 2040 are reflected in the Company’s consolidated condensed balance sheets as follows:

|  | March 31, 2012 |  |  | December 31, 2011 |
Liability component: |  |  |  |  |  |
Principal amount of the debentures |  | $ | 275,000 |  |  | $ | 275,000 |
Unamortized discount |  |  | (176,724 | ) |  |  | (177,131 | )
Embedded derivative |  |  | 490 |  |  |  | 594 |
Carrying value of liability component |  | $ | 98,766 |  |  | $ | 98,463 |
Equity component - net carrying value |  | $ | 110,094 |  |  | $ | 110,094 |

Interest is payable on the debentures semi-annually at a rate of 2.25% per annum; however, the remaining debt discount is being amortized as additional non-cash interest expense using an effective annual interest rate of 8.00% based on the Company’s estimated nonconvertible debt borrowing rate at the time of issuance. In addition to ordinary interest, beginning on November 15, 2020, contingent interest will accrue in certain circumstances relating to the trading price of the debentures and under certain other circumstances.
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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Interest expense related to the convertible debentures due 2040 is reflected on the consolidated condensed statements of operations as follows:

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Contractual coupon interest |  | $ | 1,547 |  |  | $ | 1,547 |
Non-cash amortization of debt discount |  |  | 407 |  |  |  | 376 |
Non-cash amortization of deferred financing costs |  |  | 22 |  |  |  | 22 |
Non-cash change in value of derivative liability |  |  | (104 | ) |  |  | (61 | )
Total interest expense related to the debentures |  | $ | 1,872 |  |  | $ | 1,884 |

Subsequent Event - Amendment of Credit Facility
On April 3, 2012, Vishay amended its credit agreement and entered into an incremental facility agreement that increases the total credit facility commitment from $450,000 to $528,000. The incremental revolving commitments have terms and conditions identical to the terms and conditions of the existing commitments under the credit facility. The other terms and conditions of the credit facility were unchanged. Vishay paid an amendment fee of $390 to complete this amendment. Other significant terms and conditions of the credit agreement have not been changed. The credit agreement, as amended, will expire on December 1, 2015.
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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 6 – Pensions and Other Postretirement Benefits
The Company maintains various retirement benefit plans.
The following table shows the components of the net periodic pension cost for the first fiscal quarters of 2012 and 2011 for the Company’s defined benefit pension plans:

|  | Fiscal quarter ended |  |  | Fiscal quarter ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
|  | U.S. Plans |  |  | Non-U.S. Plans |  |  | U.S. Plans |  |  | Non-U.S. Plans |
Net service cost |  | $ | - |  |  | $ | 814 |  |  | $ | - |  |  | $ | 827 |
Interest cost |  |  | 3,927 |  |  |  | 2,374 |  |  |  | 4,068 |  |  |  | 2,562 |
Expected return on plan assets |  |  | (4,716 | ) |  |  | (412 | ) |  |  | (4,653 | ) |  |  | (391 | )
Amortization of prior service cost |  |  | 550 |  |  |  | - |  |  |  | 641 |  |  |  | - |
Amortization of losses |  |  | 3,111 |  |  |  | 418 |  |  |  | 2,102 |  |  |  | 249 |
Net periodic benefit cost |  | $ | 2,872 |  |  | $ | 3,194 |  |  | $ | 2,158 |  |  | $ | 3,247 |

The following table shows the components of the net periodic benefit cost for the first fiscal quarters of 2012 and 2011 for the Company’s other postretirement benefit plans:

|  | Fiscal quarter ended |  |  | Fiscal quarter ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
|  | U.S. Plans |  |  | Non-U.S. Plans |  |  | U.S. Plans |  |  | Non-U.S. Plans |
Service cost |  | $ | 18 |  |  | $ | 64 |  |  | $ | 19 |  |  | $ | 67 |
Interest cost |  |  | 130 |  |  |  | 73 |  |  |  | 146 |  |  |  | 69 |
Amortization of prior service credit |  |  | (102 | ) |  |  | - |  |  |  | (110 | ) |  |  | - |
Amortization of transition obligation |  |  | 8 |  |  |  | - |  |  |  | 12 |  |  |  | - |
Amortization of gains |  |  | (22 | ) |  |  | - |  |  |  | (61 | ) |  |  | - |
Net periodic benefit cost |  | $ | 32 |  |  | $ | 137 |  |  | $ | 6 |  |  | $ | 136 |

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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 7 – Stock-Based Compensation
The Company has various stockholder-approved programs which allow for the grant of stock-based compensation to officers, employees, and non-employee directors.
The amount of compensation cost related to stock-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Company determines compensation cost for restricted stock units (“RSUs”), phantom stock units, and restricted stock based on the grant-date fair value of the underlying common stock. Compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award.
The following table summarizes stock-based compensation expense recognized:

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Stock options |  | $ | 27 |  |  | $ | 120 |
Restricted stock units |  |  | 1,135 |  |  |  | 1,066 |
Phantom stock units |  |  | 93 |  |  |  | 222 |
Total |  | $ | 1,255 |  |  | $ | 1,408 |

The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at March 31, 2012 (amortization periods in years):

|  | Unrecognized Compensation Cost |  |  | Weighted Average Remaining Amortization Periods |
Stock options |  | $ | 65 |  |  |  | 1.0 |
Restricted stock units |  |  | 8,564 |  |  |  | 1.8 |
Phantom stock units |  |  | - |  |  |  | 0.0 |
Total |  | $ | 8,629 |  |  |  |  |

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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
2007 Stock Incentive Plan
The Company’s 2007 Stock Incentive Program (the “2007 Program”) permits the grant of up to 3,000,000 shares of restricted stock, unrestricted stock, RSUs, and stock options, to officers, employees, and non-employee directors. Such instruments are available for grant until May 22, 2017.
Stock Options
In addition to stock options outstanding pursuant to the 2007 Program, during the periods presented, the Company had stock options outstanding under previous stockholder-approved stock option programs. These programs are more fully described in Note 12 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2011. No additional options may be granted pursuant to these programs.
Option activity under the stock option plans as of March 31, 2012 and changes during the three fiscal months then ended are presented below (number of options in thousands, contractual life in years):

|  | Number of Options |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Life |
Outstanding: |  |  |  |  |  |  |  |  |
January 1, 2012 |  |  | 384 |  |  | $ | 15.40 |  |  |  |
Granted |  |  | - |  |  |  | - |  |  |  |
Exercised |  |  | (22 | ) |  |  | 7.89 |  |  |  |
Cancelled or forfeited |  |  | - |  |  |  | - |  |  |  |
Outstanding at March 31, 2012 |  |  | 362 |  |  | $ | 15.86 |  |  |  | 1.64 |
Vested and expected to vest |  |  |  |  |  |  |  |  |  |  |  |
at March 31, 2012 |  |  | 362 |  |  | $ | 15.86 |  |  |  | 1.64 |
Exercisable at March 31, 2012 |  |  | 306 |  |  | $ | 15.83 |  |  |  | 0.99 |

During the three fiscal months ended March 31, 2012, 5,000 options vested. At March 31, 2012, there are 56,000 unvested options outstanding, with a weighted average grant-date fair value of $10.10 per option.
The pretax aggregate intrinsic value (the difference between the closing stock price on the last trading day of the first fiscal quarter of 2012 of $12.16 per share and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2012 is $2. This amount changes based on changes in the market value of the Company’s common stock. During the three fiscal months ended March 31, 2012, 22,000 options were exercised. The total intrinsic value of options exercised during the three fiscal months ended March 31, 2012 was approximately $110.
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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Restricted Stock Units
RSU activity under the 2007 Program as of March 31, 2012 and changes during the three fiscal months then ended are presented below (number of RSUs in thousands):

|  | Number of RSUs |  |  | Weighted Average Grant-date Fair Value per Unit |
Outstanding: |  |  |  |  |  |
January 1, 2012 |  |  | 891 |  |  | $ | 12.58 |
Granted |  |  | 437 |  |  |  | 12.31 |
Vested |  |  | - |  |  |  | - |
Cancelled or forfeited |  |  | - |  |  |  | - |
Outstanding at March 31, 2012 |  |  | 1,328 |  |  | $ | 12.49 |
Expected to vest at March 31, 2012 |  |  | 1,328 |  |  |  |  |

The Company recognizes compensation cost for RSUs that are expected to vest. The Company expects all performance-based vesting criteria to be achieved. RSUs with performance-based vesting criteria are expected to vest as follows (number of RSUs in thousands):

|  |  | Vesting Date |  | Number of RSUs |
|  |  | January 1, 2013 |  | 324 |
|  |  | January 1, 2014 |  | 233 |
|  |  | January 1, 2015 |  | 276 |

Phantom Stock Plan
The Company maintains a phantom stock plan for certain senior executives. The plan authorizes the grant of up to 300,000 phantom stock units to the extent provided for in the Company’s employment agreements with such senior executives. Each phantom stock unit entitles the recipient to receive a share of common stock at the individual’s termination of employment or any other future date specified in the applicable employment agreement. The phantom stock units are fully vested at all times.
Phantom stock unit activity under the phantom stock plan as of March 31, 2012 and changes during the three fiscal months then ended are presented below (number of phantom stock units in thousands):

|  | Number of units |  |  | Grant-date Fair Value per Unit |
Outstanding: |  |  |  |  |  |
January 1, 2012 |  |  | 87 |  |  |  |
Granted |  |  | 10 |  |  | $ | 9.33 |
Redeemed for common stock |  |  | - |  |  |  |  |
Outstanding at March 31, 2012 |  |  | 97 |  |  |  |  |

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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 8 – Segment Information
Vishay operates, and its chief operating decision maker makes strategic and operating decisions with regards to assessing performance and allocating resources based on, five reporting segments: MOSFETs, Diodes, Optoelectronic Components, Resistors & Inductors, and Capacitors.
The Company evaluates business segment performance on operating income, exclusive of certain items (“segment operating income”). Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income. The Company’s calculation of segment operating income excludes such selling, general, and administrative costs as global operations, sales and marketing, information systems, finance and administration groups, as well as restructuring and severance costs, asset write-downs, goodwill and indefinite-lived intangible asset impairments, inventory write-downs, gains or losses on purchase commitments, and other items. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the Company. These items represent reconciling items between segment operating income and consolidated operating income. Business segment assets are the owned or allocated assets used by each business.
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NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The following tables set forth business segment information:

|  | MOSFETs |  |  | Diodes |  |  | Optoelectronic Components |  |  | Resistors & Inductors |  |  | Capacitors |  |  | Unallocated Selling, General, and Administrative Expenses |  |  | Total |
Fiscal quarter ended March 31, 2012: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product Sales |  | $ | 94,701 |  |  | $ | 120,134 |  |  | $ | 50,612 |  |  | $ | 157,254 |  |  | $ | 113,926 |  |  | $ | - |  |  | $ | 536,627 |
Royalty Revenues |  |  | 137 |  |  |  | - |  |  |  | 27 |  |  |  | 1,756 |  |  |  | - |  |  |  | - |  |  | $ | 1,920 |
Total Revenue |  | $ | 94,838 |  |  | $ | 120,134 |  |  | $ | 50,639 |  |  | $ | 159,010 |  |  | $ | 113,926 |  |  | $ | - |  |  | $ | 538,547 |
Gross Margin |  | $ | 10,617 |  |  | $ | 25,054 |  |  | $ | 17,294 |  |  | $ | 54,259 |  |  | $ | 29,485 |  |  | $ | - |  |  | $ | 136,709 |
Operating Income |  | $ | 1,323 |  |  | $ | 19,359 |  |  | $ | 14,045 |  |  | $ | 46,512 |  |  | $ | 23,917 |  |  | $ | (54,811 | ) |  | $ | 50,345 |
Fiscal quarter ended April 2, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Product Sales |  | $ | 142,901 |  |  | $ | 159,417 |  |  | $ | 57,706 |  |  | $ | 171,919 |  |  | $ | 161,852 |  |  | $ | - |  |  | $ | 693,795 |
Royalty Revenues |  |  | 97 |  |  |  | - |  |  |  | 42 |  |  |  | 1,217 |  |  |  | - |  |  |  | - |  |  | $ | 1,356 |
Total Revenue |  | $ | 142,998 |  |  | $ | 159,417 |  |  | $ | 57,748 |  |  | $ | 173,136 |  |  | $ | 161,852 |  |  | $ | - |  |  | $ | 695,151 |
Gross Margin |  | $ | 39,439 |  |  | $ | 39,140 |  |  | $ | 19,948 |  |  | $ | 61,158 |  |  | $ | 54,978 |  |  | $ | - |  |  | $ | 214,663 |
Operating Income |  | $ | 29,410 |  |  | $ | 32,800 |  |  | $ | 16,357 |  |  | $ | 54,104 |  |  | $ | 48,333 |  |  | $ | (58,806 | ) |  | $ | 122,198 |

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 9 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share attributable to Vishay stockholders (shares in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Numerator: |  |  |  |  |  |
Numerator for basic earnings per share: |  |  |  |  |  |
Net earnings |  | $ | 33,812 |  |  | $ | 75,287 |
Adjustment to the numerator for continuing operations and net earnings: |  |  |  |  |  |  |  |
Interest savings assuming conversion of dilutive convertible and exchangeable notes, net of tax |  |  | 90 |  |  |  | 47 |
Numerator for diluted earnings per share: |  |  |  |  |  |  |  |
Net earnings |  | $ | 33,902 |  |  | $ | 75,334 |
Denominator: |  |  |  |  |  |  |  |
Denominator for basic earnings per share: |  |  |  |  |  |  |  |
Weighted average shares |  |  | 157,199 |  |  |  | 165,186 |
Effect of dilutive securities: |  |  |  |  |  |  |  |
Convertible and exchangeable debt instruments |  |  | 6,176 |  |  |  | 9,761 |
Other |  |  | 569 |  |  |  | 714 |
Dilutive potential common shares |  |  | 6,745 |  |  |  | 10,475 |
Denominator for diluted earnings per share: |  |  |  |  |  |  |  |
Adjusted weighted average shares |  |  | 163,944 |  |  |  | 175,661 |
Basic earnings per share attributable to Vishay stockholders |  | $ | 0.22 |  |  | $ | 0.46 |
Diluted earnings per share attributable to Vishay stockholders |  | $ | 0.21 |  |  | $ | 0.43 |

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
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):

| Fiscal quarters ended
| March 31, 2012 |  | April 2, 2011
Convertible and exchangeable notes: |  |  |
Convertible Senior Debentures, due 2040 | 19,809 |  | -
Convertible Senior Debentures, due 2041 | 7,885 |  | -
Weighted average employee stock options | 358 |  | 5
Weighted average warrants | 8,824 |  | 8,824
Weighted average other | 208 |  | 36

In periods in which they are dilutive, if the potential common shares related to the exchangeable notes are included in the computation, the related interest savings, net of tax, assuming conversion/exchange is added to the net earnings used to compute earnings per share.
The Company’s convertible debt instruments are only convertible upon the occurrence of certain events. While none of these events has occurred as of March 31, 2012, certain conditions which could trigger conversion have been deemed to be non-substantive, and accordingly, the Company has always assumed the conversion of these instruments in its diluted earnings per share computation during periods in which they are dilutive.
At the direction of its Board of Directors, the Company intends, upon conversion, to repay the principal amounts of the convertible senior debentures, due 2040 and due 2041, in cash and settle any additional amounts in shares of Vishay common stock. Accordingly, the debentures are included in the diluted earnings per share computation using the “treasury stock method” (similar to options and warrants) rather than the “if converted method” otherwise required for convertible debt. Under the “treasury stock method,” Vishay calculates the number of shares issuable under the terms of the notes based on the average market price of Vishay common stock during the period, and that number is included in the total diluted shares figure for the period. If the average market price is less than $13.88, no shares are included in the diluted earnings per share computation for the convertible senior debentures due 2040, and if the average market price is less than $19.02, no shares are included in the diluted earnings per share computation for the convertible senior debentures due 2041.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 10 – Fair Value Measurements
The fair value measurement accounting guidance establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the Company’s own assumptions.
An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. There have been no changes in the classification of any financial instruments within the fair value hierarchy in the periods presented.
The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis:

|  | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
March 31, 2012: |  |  |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Assets held in rabbi trusts |  | $ | 33,143 |  |  | $ | 21,368 |  |  | $ | 11,775 |  |  | $ | - |
Available for sale securities |  | $ | 7,153 |  |  |  | 7,153 |  |  |  | - |  |  |  | - |
|  | $ | 40,296 |  |  | $ | 28,521 |  |  | $ | 11,775 |  |  | $ | - |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Embedded derivative - convertible debentures due 2040 |  | $ | (490 | ) |  | $ | - |  |  | $ | - |  |  | $ | (490 | )
Embedded derivative - convertible debentures due 2041 |  | $ | (317 | ) |  |  | - |  |  |  | - |  |  |  | (317 | )
|  | $ | (807 | ) |  | $ | - |  |  | $ | - |  |  | $ | (807 | )
December 31, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Assets held in rabbi trusts |  | $ | 31,698 |  |  | $ | 20,569 |  |  | $ | 11,129 |  |  | $ | - |
Available for sale securities |  | $ | 6,776 |  |  |  | 6,776 |  |  |  | - |  |  |  | - |
|  | $ | 38,474 |  |  | $ | 27,345 |  |  | $ | 11,129 |  |  | $ | - |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Embedded derivative - convertible debentures due 2040 |  | $ | (594 | ) |  | $ | - |  |  | $ | - |  |  | $ | (594 | )
Embedded derivative - convertible debentures due 2041 |  | $ | (392 | ) |  |  | - |  |  |  | - |  |  |  | (392 | )
|  | $ | (986 | ) |  | $ | - |  |  | $ | - |  |  | $ | (986 | )

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 available for sale investments in debt securities that are intended to fund a portion of its 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 year. The fair value measurement of the investments is considered a Level 1 measurement within the fair value hierarchy.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The convertible senior debentures, due 2040 and due 2041, issued by the Company on November 9, 2010 and May 13, 2011, respectively, contain embedded derivative features that GAAP requires to be bifurcated and remeasured each reporting period. Each quarter, the change in the fair value of the embedded derivative features, if any, is recorded in the consolidated statements of operations. The Company uses a derivative valuation model to derive the value of the embedded derivative features. Key inputs into this valuation model are the Company’s current stock price, risk-free interest rates, the stock dividend yield, the stock volatility, and the debentures’ credit spread over London Interbank Offered Rate (“LIBOR”). The first three aforementioned inputs are based on observable market data and are considered Level 2 inputs while the last two aforementioned inputs are unobservable and thus require management’s judgment and are considered Level 3 inputs. The fair value measurement is considered a Level 3 measurement within the fair value hierarchy.
The fair value of the long-term debt, excluding the derivative liability, at March 31, 2012 and December 31, 2011 is approximately $629,798 and $533,900, respectively, compared to its carrying value, excluding the derivative liability, of $388,679 and $398,068, respectively. The Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates, which are considered Level 2 inputs.
The Company’s financial instruments include cash and cash equivalents, short-term investments, accounts receivable, long-term notes receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the consolidated balance sheets approximate their fair values.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 11 – Restructuring and Related Activities
Subsequent Event – Sale of Property
On April 3, 2012, Vishay sold a property in Belgium vacated as a result of its restructuring activities in prior years for approximately $14,200. Vishay will recognize a gain on the sale of the property of approximately $12,100 within its statements of operations and proceeds from the sale of property and equipment of approximately $3,400 within its statement of cash flows in the second fiscal quarter of 2012. The remaining proceeds will be reported as proceeds from the sale of property and equipment within the statements of cash flows as the cash is received over the next three years.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview
Vishay Intertechnology, Inc. (“Vishay,” “we,” “us,” or “our”) is a global manufacturer and supplier of discrete semiconductors and passive components, including power MOSFETs, power integrated circuits, transistors, diodes, optoelectronic components, resistors, capacitors, and inductors. Discrete semiconductors and passive components manufactured by Vishay are used in virtually all types of electronic products, including those in the industrial, computing, automotive, consumer electronic products, telecommunications, power supplies, military/aerospace, and medical industries.
We operate in five product segments: MOSFETs; Diodes; Optoelectronic Components; Resistors & Inductors; and Capacitors.
Since 1985, we have pursued a business strategy of growth through focused research and development and acquisitions. Through this strategy, we have grown to become one of the world’s largest manufacturers of discrete semiconductors and passive components. We expect to continue our strategy of acquisitions while also maintaining a prudent capital structure.
We are focused on enhancing stockholder value by repurchasing our stock and improving earnings per share. In the fourth fiscal quarter of 2010 and second fiscal quarter of 2011, we completed the repurchase of 21.7 million shares of our common stock for $275 million and 8.6 million shares of our common stock for $150 million, respectively. On September 8, 2011, we entered into an amendment to our credit facility that effectively permits us to repurchase up to $300 million of additional shares, conditioned upon maintaining specific pro forma financial ratios and a required minimal amount of available liquidity, as defined in the amendment. Beginning in 2012, our capacity to repurchase shares of stock increases each quarter by an amount equal to 20% of net income. At March 31, 2012, our total capacity to repurchase shares of stock is $306.8 million. We will continue to evaluate attractive stock repurchase opportunities.
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. For several years, we implemented aggressive cost reduction programs. We continue to monitor the current economic environment and its potential effects on our customers and the end markets that we serve. Additionally, we continue to closely monitor our costs, 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. See additional information regarding our competitive strengths and key challenges as disclosed in Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2012.
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.”) Our business is recovering from the downturn in demand and high inventory levels in the supply chain that much of our industry experienced in the last six fiscal months of 2011. The downturn in demand in the last six fiscal months of 2011 resulted in a reduction of nearly all key financial metrics compared with the prior year period, but improving economic conditions in the first fiscal quarter of 2012 have led to increased orders and improvement in the book-to-bill ratio and end-of-period backlog compared with the fourth fiscal quarter of 2011. Temporary fixed cost reductions and manufacturing efficiencies led to improvement in gross profit margin and operating margin compared with the fourth fiscal quarter of 2011.
Net revenues for the fiscal quarter ended March 31, 2012 were $538.5 million, compared to $695.2 million for the fiscal quarter ended April 2, 2011. The net earnings attributable to Vishay stockholders for the fiscal quarter ended March 31, 2012 were $33.8 million, or $0.21 per diluted share, compared to $75.3 million, or $0.43 per diluted share for the fiscal quarter ended April 2, 2011.
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The net earnings attributable to Vishay stockholders for the fiscal quarter ended April 2, 2011 includes an item affecting comparability as listed in the reconciliation below. The reconciliation below includes certain financial measures which are not recognized in accordance with GAAP, including adjusted net earnings and adjusted net earnings per share. These non-GAAP measures should not be viewed as an alternative to GAAP measures of performance. Non-GAAP measures such as adjusted net earnings and adjusted net earnings per share 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 these measures are meaningful because they provide insight with respect to our intrinsic operating results. Reconciling items to arrive at adjusted net earnings represent significant charges or credits that are important to understanding our intrinsic operations. There were no such reconciling items for the fiscal quarter ended March 31, 2012.
The items affecting comparability are (in thousands, except per share amounts):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
GAAP net earnings attributable to Vishay stockholders |  | $ | 33,812 |  |  | $ | 75,287 |
Reconciling items affecting tax expense: |  |  |  |  |  |  |  |
One-time tax expense |  | $ | - |  |  | $ | 10,024 |
Adjusted net earnings |  | $ | 33,812 |  |  | $ | 85,311 |
Adjusted weighted average diluted shares outstanding |  |  | 163,944 |  |  |  | 175,661 |
Adjusted earnings per diluted share * |  | $ | 0.21 |  |  | $ | 0.49 |
* Includes add-back of interest on exchangeable notes in periods where the notes are dilutive. |

Our results for the fiscal quarter ended March 31, 2012 represent an improving business environment following the downturn in demand and high inventory levels in the supply chain that much of our industry experienced in the last six fiscal months of 2011. We again demonstrated our ability to react quickly to changing economic environments and successfully implemented several temporary cost reduction measures that in combination with manufacturing efficiencies enabled us to increase earnings versus the prior quarter despite lower revenues. Our results for the fiscal quarter ended April 2, 2011 represent a period of favorable business environment and the effects of the cost reductions initiated in the prior years enabling us to achieve significantly higher earnings than before the beginning of the 2008-2009 global economic recession at the same sales volume.
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Financial Metrics
We utilize several financial metrics to evaluate the performance and assess the future direction of our business. These key financial measures and metrics include net revenues, gross profit margin, operating margin, segment operating income, end-of-period backlog, and the book-to-bill ratio. We also monitor changes in inventory turnover and average selling prices (“ASP”).
Gross profit margin is computed as gross profit as a percentage of net revenues. Gross profit is generally net revenues less costs of products sold, but also deducts certain other period costs, particularly losses on purchase commitments and inventory write-downs. Losses on purchase commitments and inventory write-downs have the impact of reducing gross profit margin in the period of the charge, but result in improved gross profit margins in subsequent periods by reducing costs of products sold as inventory is used. Gross profit margin is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed costs.
Operating margin is computed as gross profit less operating expenses as a percentage of net revenues. We evaluate business segment performance on segment operating margin. Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income. Segment operating margin is computed as operating income less items such as restructuring and severance costs, asset write-downs, goodwill and indefinite-lived intangible asset impairments, inventory write-downs, gain or losses on purchase commitments, global operations, sales and marketing, information systems, finance and administrative groups, and other items, expressed as a percentage of net revenues. We believe that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the segment. Operating margin is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed costs.
End-of-period backlog is one indicator of future revenues. We include in our backlog only open orders that we expect to ship in the next twelve months. If demand falls below customers’ forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that are included in our backlog, in many instances without the payment of any penalty. Therefore, the backlog is not necessarily indicative of the results to be expected for future periods.
An important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the amount of product ordered during a period as compared with the product that we ship during that period. A book-to-bill ratio that is greater than one indicates that our backlog is building and that we are likely to see increasing revenues in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of declining demand and may foretell declining revenues.
We focus on our inventory turnover as a measure of how well we are managing our inventory. We define inventory turnover for a financial reporting period as our costs of products sold for the four fiscal quarters ending on the last day of the reporting period divided by our average inventory (computed using each fiscal quarter-end balance) for this same period. A higher level of inventory turnover reflects more efficient use of our capital.
Pricing in our industry can be volatile. We analyze trends and changes in average selling prices to evaluate likely future pricing. The erosion of average selling prices of established products is typical for semiconductor products. We attempt to offset this deterioration with ongoing cost reduction activities and new product introductions. Our specialty passive components are more resistant to average selling price erosion.
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The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business. The following table shows net revenues, gross profit margin, operating margin, end-of-period backlog, book-to-bill ratio, inventory turnover, and changes in ASP for our business as a whole during the five fiscal quarters beginning with the first fiscal quarter of 2011 through the first fiscal quarter of 2012 (dollars in thousands):

|  | 1st Quarter 2011 |  |  | 2nd Quarter 2011 |  |  | 3rd Quarter 2011 |  |  | 4th Quarter 2011 |  |  | 1st Quarter 2012 |
Net revenues |  | $ | 695,151 |  |  | $ | 709,838 |  |  | $ | 637,649 |  |  | $ | 551,391 |  |  | $ | 538,547 |
Gross profit margin |  |  | 30.9 | % |  |  | 29.9 | % |  |  | 26.3 | % |  |  | 22.8 | % |  |  | 25.4 | %
Operating margin |  |  | 17.6 | % |  |  | 16.3 | % |  |  | 11.8 | % |  |  | 6.1 | % |  |  | 9.3 | %
End-of-period backlog (1) |  | $ | 911,600 |  |  | $ | 881,800 |  |  | $ | 655,200 |  |  | $ | 530,200 |  |  | $ | 607,100 |
Book-to-bill ratio |  |  | 1.01 |  |  |  | 0.95 |  |  |  | 0.67 |  |  |  | 0.80 |  |  |  | 1.11 |
Inventory turnover |  |  | 4.35 |  |  |  | 4.23 |  |  |  | 3.99 |  |  |  | 3.86 |  |  |  | 3.66 |
Change in ASP vs. prior quarter |  |  | -0.2 | % |  |  | -0.4 | % |  |  | -1.1 | % |  |  | -0.5 | % |  |  | -1.0 | %

________________________________
(1) End-of-period backlog for the first fiscal quarter of 2012 reflects a total of $12.2 million related to the backlog of the HiRel Sytems LLC as of the date of acquisition.
See “Financial Metrics by Segment” below for net revenues, book-to-bill ratio, and gross profit margin broken out by segment.
The low demand and reduction in distribution inventory levels that we experienced in the second half of 2011 reduced our backlog and resulted in a decrease in net revenues and ASP compared to the prior year period. Our first fiscal quarter of 2012 was negatively affected by a reduction of inventory at distribution and a slow start, but our business climate improved progressively through the quarter. Increasing demand for computing and consumer products along with continued strength of automotive and industrial demand and decreasing inventory levels at distribution have led to a substantial increase in orders in the first fiscal quarter of 2012. This increase in orders has led to an improvement in our book-to-bill ratio and increased our backlog versus the fourth fiscal quarter of 2011. Typical pricing pressure, particularly for our established semiconductor products, has resulted in a decrease in average selling prices versus the fourth fiscal quarter of 2011 and the prior year period.
Temporary fixed cost reductions and manufacturing efficiencies led to an increase in gross margins in the first fiscal quarter of 2012 versus the fourth fiscal quarter of 2011 despite lower sales volume. The significant decrease in sales volume versus the prior year period resulted in a significant decrease in gross margins compared to the prior year period.
Due to the substantial increase in orders, the book-to-bill ratio increased to 1.11 in the first fiscal quarter of 2012 from 0.80 in the fourth fiscal quarter of 2011. The book-to-bill ratios for distributors and original equipment manufacturers (“OEM”) were 1.11 and 1.10, respectively, versus ratios of 0.77 and 0.83, respectively, during the fourth fiscal quarter of 2011.
For the second fiscal quarter of 2012, we anticipate revenues between $580 million and $620 million at improved gross margins.
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Financial Metrics by Segment
The following table shows net revenues, book-to-bill ratio, gross profit margin, and segment operating margin broken out by segment for the five fiscal quarters beginning with the first fiscal quarter of 2011 through the first fiscal quarter of 2012 (dollars in thousands):

|  | 1st Quarter 2011 |  |  | 2nd Quarter 2011 |  |  | 3rd Quarter 2011 |  |  | 4th Quarter 2011 |  |  | 1st Quarter 2012 |
MOSFETs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  | $ | 142,998 |  |  | $ | 153,245 |  |  | $ | 131,866 |  |  | $ | 109,871 |  |  | $ | 94,838 |
Book-to-bill ratio |  |  | 1.07 |  |  |  | 0.95 |  |  |  | 0.50 |  |  |  | 0.77 |  |  |  | 1.18 |
Gross profit margin |  |  | 27.6 | % |  |  | 27.9 | % |  |  | 20.7 | % |  |  | 14.5 | % |  |  | 11.2 | %
Segment operating margin |  |  | 20.6 | % |  |  | 21.2 | % |  |  | 13.1 | % |  |  | 5.5 | % |  |  | 1.4 | %
Diodes |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  | $ | 159,417 |  |  | $ | 169,613 |  |  | $ | 150,993 |  |  | $ | 127,470 |  |  | $ | 120,134 |
Book-to-bill ratio |  |  | 1.00 |  |  |  | 0.97 |  |  |  | 0.62 |  |  |  | 0.70 |  |  |  | 1.01 |
Gross profit margin |  |  | 24.6 | % |  |  | 25.8 | % |  |  | 23.7 | % |  |  | 19.8 | % |  |  | 20.9 | %
Segment operating margin |  |  | 20.6 | % |  |  | 21.9 | % |  |  | 19.4 | % |  |  | 14.8 | % |  |  | 16.1 | %
Optoelectronic Components |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  | $ | 57,748 |  |  | $ | 63,761 |  |  | $ | 56,119 |  |  | $ | 52,258 |  |  | $ | 50,639 |
Book-to-bill ratio |  |  | 1.13 |  |  |  | 0.86 |  |  |  | 0.77 |  |  |  | 0.91 |  |  |  | 1.12 |
Gross profit margin |  |  | 34.5 | % |  |  | 34.4 | % |  |  | 30.9 | % |  |  | 29.7 | % |  |  | 34.2 | %
Segment operating margin |  |  | 28.3 | % |  |  | 28.7 | % |  |  | 24.7 | % |  |  | 22.8 | % |  |  | 27.7 | %
Resistors & Inductors |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  | $ | 173,136 |  |  | $ | 168,924 |  |  | $ | 157,037 |  |  | $ | 141,757 |  |  | $ | 159,010 |
Book-to-bill ratio |  |  | 0.94 |  |  |  | 0.99 |  |  |  | 0.85 |  |  |  | 0.90 |  |  |  | 1.13 |
Gross profit margin |  |  | 35.3 | % |  |  | 34.9 | % |  |  | 32.9 | % |  |  | 29.9 | % |  |  | 34.1 | %
Segment operating margin |  |  | 31.2 | % |  |  | 30.6 | % |  |  | 28.6 | % |  |  | 24.6 | % |  |  | 29.3 | %
Capacitors |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues |  | $ | 161,852 |  |  | $ | 154,295 |  |  | $ | 141,634 |  |  | $ | 120,035 |  |  | $ | 113,926 |
Book-to-bill ratio |  |  | 1.00 |  |  |  | 0.89 |  |  |  | 0.65 |  |  |  | 0.75 |  |  |  | 1.12 |
Gross profit margin |  |  | 34.0 | % |  |  | 29.0 | % |  |  | 25.0 | % |  |  | 22.2 | % |  |  | 25.9 | %
Segment operating margin |  |  | 29.9 | % |  |  | 25.0 | % |  |  | 20.8 | % |  |  | 17.1 | % |  |  | 21.0 | %

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Acquisition Activity
As part of our growth strategy, we seek to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets, reputations for product quality and reliability, and product lines with which we have substantial marketing and technical expertise. This includes exploring opportunities to acquire targets to gain market share, penetrate different geographic markets, enhance new product development, round out our existing product lines, or grow our high margin niche market businesses. Acquisitions of passive components businesses would likely be made to strengthen and broaden our position as a specialty product supplier; acquisitions of discrete semiconductor businesses would be made to increase market share and to generate synergies. To limit our financial exposure, we have implemented a policy not to pursue acquisitions if our post-acquisition debt would exceed 2.5x our pro forma earnings before interest, taxes, depreciation, and amortization (“EBITDA”). For these purposes, we will calculate pro forma EBITDA as the adjusted EBITDA of Vishay and the target for Vishay’s four preceding fiscal quarters, with a pro forma adjustment for savings which management estimates would have been achieved had the target been acquired by Vishay at the beginning of the four fiscal quarter period.
Our growth plan targets adding, through acquisitions, approximately $100 million of revenues per year over the next five years. Depending on the opportunities available, we might make several smaller acquisitions or a few larger acquisitions. We intend to make such acquisitions using mainly cash, rather than debt or equity, although we do have capacity on our revolving credit facility if necessary. We are not currently targeting acquisitions larger than $500 million.
On January 13, 2012, we acquired HiRel Systems LLC, a leading supplier of high reliability transformers, inductors, coils, and power conversion products, for approximately $85.6 million, subject to customary post-closing adjustments. The products and technology portfolio acquired will further enhance our inductors portfolio, particularly in the field of custom magnetics for medical, military, aerospace and aviation, and applications in the industrial and commercial field such as renewable energy and test and measurement equipment. For financial reporting purposes, the results of operations for this business have been included in the Resistors & Inductors segment from January 13, 2012.
On September 28, 2011, we acquired the resistor businesses of Huntington Electric, Inc., for approximately $19.3 million. The businesses acquired will further enhance our broad resistor portfolio, particularly in the high power and high current ranges, as well as with resistor assemblies for industrial applications. For financial reporting purposes, the results of operations for these businesses have been included in the Resistors & Inductors segment from September 28, 2011.
There is no assurance that we will be able to identify and acquire additional suitable acquisition candidates at price levels and on terms and conditions we consider acceptable.
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Cost Management
We place a strong emphasis on controlling our costs.
The erosion of average selling prices of our established products, particularly our semiconductor products, that is typical of our industry and inflation drive us to continually seek ways to reduce our variable costs. Our variable cost reduction efforts include expending capital to increase automation and maximize the efficiency in our production facilities, consolidating materials purchasing across regions and divisions to achieve economies of scale, materials substitution, maintaining an appropriate mix of in-house production and subcontractor production, increasing wafer size and shrinking dies to maximize efficiency in our semiconductor production processes, and other yield improvement activities.
Our cost management strategy also includes a focus on controlling fixed costs. We seek to maintain selling, general, and administrative expenses at current quarterly levels, excluding foreign currency exchange effects and substantially independent of sales volume changes. Our fixed cost control efforts include automating administrative processes through the expansion of IT systems, gradually migrating to common IT systems across our organization, streamlining our legal entity structure, and reducing our external resource needs by utilizing more cost-effective in-house personnel, while utilizing external resources when day-to-day expertise is not required in-house.
Historically, our primary cost reduction technique was through the transfer of production to the extent possible from high-labor-cost countries, such as the United States and Western Europe, to lower-labor-cost countries, such as the Czech Republic, Israel, India, Malaysia, Mexico, the People’s Republic of China, and the Philippines. The percentage of our total headcount in lower-labor-cost countries is a measure of the extent to which we were successful in implementing this program. This percentage was 74.3% at the end of the first fiscal quarter of 2012 as compared to 57% when this program began in 2001. We believe that our workforce is now appropriately located to serve our customers, while maintaining lower manufacturing costs.
As a result of restructuring activities in 2008-2009, we drastically reduced our break-even point by approximately $450 million. While streamlining and reducing fixed overhead, we exercised caution so that we will not negatively impact our customer service or our ability to further develop products and processes. The risks associated with our cost reduction programs are further detailed in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 23, 2012.
We did not initiate any new restructuring projects in 2011 or the first fiscal quarter of 2012 and thus did not record any restructuring and severance expenses during such periods.
Because we believe that our manufacturing footprint is suitable to serve our customers and end markets, we do not anticipate any material restructuring expenses in 2012. We currently plan to keep our trained workforce even through periods of lower manufacturing activity levels by reducing hours and limiting the use of subcontractors and foundries. However, the recurrence of a significant economic downturn may require us to implement additional restructuring initiatives.
Our long-term strategy includes growth through the integration of acquired businesses, and GAAP requires plant closure and employee termination costs that we incur in connection with our acquisition activities to be recorded as expenses in our consolidated statements of operations, as such expenses are incurred. For this reason, we expect to have some level of future restructuring expenses due to acquisitions.
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Foreign Currency Translation
We are exposed to foreign currency exchange rate risks, particularly due to transactions in currencies other than the functional currencies of certain subsidiaries. While we have in the past used forward exchange contracts to hedge a portion of our projected cash flows from these exposures, we generally have not done so in recent periods.
GAAP requires that we identify the “functional currency” of each of our subsidiaries and measure all elements of the financial statements in that functional currency. A subsidiary’s functional currency is the currency of the primary economic environment in which it operates. In cases where a subsidiary is relatively self-contained within a particular country, the local currency is generally deemed to be the functional currency. However, a foreign subsidiary that is a direct and integral component or extension of the parent company’s operations generally would have the parent company’s currency as its functional currency. We have both situations among our subsidiaries.
Foreign Subsidiaries which use the Local Currency as the Functional Currency
We finance our operations in Europe and certain locations in Asia in local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated balance sheets have been translated at the rate of exchange as of the balance sheet date. Translation adjustments do not impact the results of operations and are reported as a separate component of stockholders’ equity.
For those subsidiaries where the local currency is the functional currency, revenues and expenses are translated at the average exchange rate for the year. While the translation of revenues and expenses into U.S. dollars does not directly impact the statements of operations, the translation effectively increases or decreases the U.S. dollar equivalent of revenues generated and expenses incurred in those foreign currencies. The dollar generally has been stronger during the first fiscal quarter of 2012 compared to the prior fiscal quarter and compared to the first fiscal quarter of 2011, with the translation of foreign currency revenues and expenses into U.S. dollars decreasing reported revenues and expenses versus the prior fiscal quarter and the first fiscal quarter of 2011.
Foreign Subsidiaries which use the U.S. Dollar as the Functional Currency
Our operations in Israel and most significant locations in Asia are largely financed in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency. For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results of operations. While these subsidiaries transact most business in U.S. dollars, they may have significant costs, particularly payroll-related, which are incurred in the local currency. The cost of products sold and selling, general, and administrative expense for first fiscal quarter of 2012 have been slightly favorably impacted (compared to the prior year period) by local currency transactions of subsidiaries which use the U.S. dollar as their functional currency.
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Results of Operations
Statements of operations’ captions as a percentage of net revenues and the effective tax rates were as follows:

| Fiscal quarters ended
| March 31, 2012 |  | April 2, 2011
Cost of products sold | 74.6% |  | 69.1%
Gross profit | 25.4% |  | 30.9%
Selling, general & administrative expenses | 16.0% |  | 13.3%
Operating income | 9.3% |  | 17.6%
Income before taxes and noncontrolling interest | 8.7% |  | 16.9%
Net earnings attributable to Vishay stockholders | 6.3% |  | 10.8%
________ |  |  |
Effective tax rate | 27.4% |  | 35.7%

Net Revenues
Net revenues were as follows (dollars in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Net revenues |  | $ | 538,547 |  |  | $ | 695,151 |
Change versus comparable prior year period |  | $ | (156,604 | ) |  |  |  |
Percentage change versus comparable prior year period |  |  | -22.5 | % |  |  |  |

Changes in net revenues were attributable to the following:

| vs. Prior Year Quarter
Change attributable to: |
Decrease in volume | -22.4%
Decrease in average selling prices | -2.0%
Foreign currency effects | -1.0%
Acquisitions | 1.9%
Other | 1.0%
Net change | -22.5%

Our revenue results for the fiscal quarter ended March 31, 2012 were negatively affected by the low demand for our products in the last six fiscal months of 2011, which significantly reduced our backlog. Our cost management and the adaptation of our manufacturing capacities enabled us to increase earnings versus the prior fiscal quarter despite lower sales volume. Our results for the fiscal quarter ended April 2, 2011 represent a period of favorable business conditions and the effects of the cost reductions initiated in prior years enabling us to achieve significantly higher earnings than before the beginning of the 2008-2009 global economic recession at the same sales volume.
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We deduct, from the sales that we record to distributors, allowances for future credits that we expect to provide for returns, scrapped product, and price adjustments under various programs made available to the distributors. We make deductions corresponding to particular sales in the period in which the sales are made, although the corresponding credits may not be issued until future periods. We estimate the deductions based on sales levels to distributors, inventory levels at the distributors, current and projected market trends and conditions, recent and historical activity under the relevant programs, changes in program policies, and open requests for credits. We recorded deductions from gross revenues under our distributor incentive programs of $18.0 million and $21.0 million for the three fiscal months ended March 31, 2012 and April 2, 2011 respectively, or 3.2% and 2.9% of gross revenues, respectively. Actual credits issued under the programs during the three fiscal months ended March 31, 2012 and April 2, 2011 were $21.7 million and $18.4 million, respectively. Increases and decreases in these incentives are largely attributable to the then-current business climate.
Royalty revenues, included in net revenues on the consolidated condensed statements of operations, were approximately $1.9 million and $1.4 million for the three fiscal months ended March 31, 2012 and April 2, 2011, respectively.
Gross Profit and Margins
Gross profit margins for the fiscal quarter ended March 31, 2012 were 25.4%, versus 30.9% for the comparable prior year period. The decrease in gross profit margin for the fiscal quarter ended March 31, 2012 versus the fiscal quarter ended April 2, 2011 reflects a significant decrease in sales volume and slightly lower average selling prices.
Segments
Analysis of revenues and gross profit margins for our segments is provided below.
MOSFETs
Net revenues of the MOSFETs segment were as follows (dollars in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Net revenues |  | $ | 94,838 |  |  | $ | 142,998 |
Change versus comparable prior year period |  | $ | (48,160 | ) |  |  |  |
Percentage change versus comparable prior year period |  |  | -33.7 | % |  |  |  |

Changes in MOSFETs segment net revenues were attributable to the following:

| vs. Prior Year Quarter
Change attributable to: |
Decrease in volume | -31.7%
Decrease in average selling prices | -3.9%
Foreign currency effects | -0.3%
Other | 2.2%
Net change | -33.7%

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Gross profit as a percentage of net revenues for the MOSFETs segment was as follows:

| Fiscal quarters ended
| March 31, 2012 |  | April 2, 2011
Gross profit margin | 11.2% |  | 27.6%

The MOSFETs segment was the segment most adversely affected by the decreased demand for consumer goods and the reduction in distribution orders in 2011. The decrease in gross profit margin versus the fiscal quarter ended April 2, 2011 is primarily due to the decrease in sales volume and a non-recurring manufacturing issue associated with purchased materials.
Typical pricing pressure for our established MOSFETs products continues. We have experienced a normal price decline versus the prior quarter and a moderate decline versus the first fiscal quarter of 2011. Based on a book-to-bill ratio of 1.18 and an increased backlog, we expect the MOSFETs segment to begin to recover in the second fiscal quarter of 2012.
Diodes
Net revenues of the Diodes segment were as follows (dollars in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Net revenues |  | $ | 120,134 |  |  | $ | 159,417 |
Change versus comparable prior year period |  | $ | (39,283 | ) |  |  |  |
Percentage change versus comparable prior year period |  |  | -24.6 | % |  |  |  |

Changes in Diodes segment net revenues were attributable to the following:

| vs. Prior Year Quarter
Change attributable to: |
Decrease in volume | -22.7%
Decrease in average selling prices | -2.4%
Foreign currency effects | -0.6%
Other | 1.1%
Net change | -24.6%

Gross profit as a percentage of net revenues for the Diodes segment was as follows:

| Fiscal quarters ended
| March 31, 2012 |  | April 2, 2011
Gross profit margin | 20.9% |  | 24.6%

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The Diodes segment continues to be adversely affected by high inventory levels at distribution. The decrease in gross profit margin versus the fiscal quarter ended April 2, 2011 is primarily due to the significant decrease in sales volume.
Typical pricing pressure for our established Diodes products continues. We have experienced a normal price decline versus the prior quarter and a moderate decline versus the first fiscal quarter of 2011. Based on a book-to-bill ratio of 1.01, we expect to see indicators of the recovery of the Diodes segment beginning in the second fiscal quarter of 2012.
Optoelectronic Components
Net revenues of the Optoelectronic Components segment were as follows (dollars in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Net revenues |  | $ | 50,639 |  |  | $ | 57,748 |
Change versus comparable prior year period |  | $ | (7,109 | ) |  |  |  |
Percentage change versus comparable prior year period |  |  | -12.3 | % |  |  |  |

Changes in Optoelectronic Components segment net revenues were attributable to the following:

| vs. Prior Year Quarter
Change attributable to: |
Decrease in volume | -7.4%
Decrease in average selling prices | -4.1%
Foreign currency effects | -1.6%
Other | 0.8%
Net change | -12.3%

Gross profit as a percentage of net revenues for the Optoelectronic Components segment was as follows:

| Fiscal quarters ended
| March 31, 2012 |  | April 2, 2011
Gross profit margin | 34.2% |  | 34.5%

The Optoelectronic Components segment was adversely affected by the decreased demand for consumer goods, but benefited from the continued strong demand from the automotive market. The decrease in gross profit margin versus the fiscal quarter ended April 2, 2011 is primarily due to a decrease in sales volume and a reduction from historically high average selling prices. Gross profit margin increased versus the fiscal quarter ended December 31, 2011 due to manufacturing efficiencies as well as lower fixed costs despite a reduction in sales volume.
After experiencing a period of inventory corrections in the last six months of 2011, the Optoelectronic Components segment has entered a phase of recovery. Typical pricing pressure for our established Optoelectronic Components products continues. The slightly elevated price declines versus the prior quarter and the first fiscal quarter of 2011 are expected to be temporary. Based on a book-to-bill ratio of 1.12, we expect further improved results from the Optoelectronic Components segment in the second fiscal quarter of 2012.
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Resistors & Inductors
Net revenues of the Resistors & Inductors segment were as follows (dollars in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Net revenues |  | $ | 159,010 |  |  | $ | 173,136 |
Change versus comparable prior year period |  | $ | (14,126 | ) |  |  |  |
Percentage change versus comparable prior year period |  |  | -8.2 | % |  |  |  |

Changes in Resistors & Inductors segment net revenues were attributable to the following:

| vs. Prior Year Quarter
Change attributable to: |
Decrease in volume | -14.4%
Decrease in average selling prices | -0.6%
Foreign currency effects | -1.4%
Acquisitions | 7.8%
Other | 0.4%
Net change | -8.2%

Gross profit as a percentage of net revenues for the Resistors & Inductors segment was as follows:

| Fiscal quarters ended
| March 31, 2012 |  | April 2, 2011
Gross profit margin | 34.1% |  | 35.3%

The Resistors & Inductors segment entered a phase of recovery in the first fiscal quarter of 2012. We further enhanced the segment’s product portfolio in the first fiscal quarter of 2012 by acquiring HiRel Systems. Specifically, HiRel Systems expands our magnetic and power supplies specialty product portfolio. The integration of Huntington Electric, acquired in the third fiscal quarter of 2011, and HiRel Systems continues as planned. Our results for the first fiscal quarter of 2012 were positively impacted by the acquisitions of Huntington Electric and HiRel Systems and we expect HiRel Systems’ revenue growth to out-perform our corporate average. Gross profit margin levels decreased slightly versus the fiscal quarter ended April 2, 2011 and increased versus the fiscal quarter ended December 31, 2011 due to changes in sales volume.
Average selling prices remained relatively consistent versus the fourth fiscal quarter of 2011 and the prior year period. Based on continued strong demand from the automotive and industrial markets and a book-to-bill ratio of 1.13, we expect continued strong results from the Resistors & Inductors segment in the second fiscal quarter of 2012.
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Capacitors
Net revenues of the Capacitors segment were as follows (dollars in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Net revenues |  | $ | 113,926 |  |  | $ | 161,852 |
Change versus comparable prior year period |  | $ | (47,926 | ) |  |  |  |
Percentage change versus comparable prior year period |  |  | -29.6 | % |  |  |  |

Changes in Capacitors segment net revenues were attributable to the following:

| vs. Prior Year Quarter
Change attributable to: |
Decrease in volume | -28.3%
Decrease in average selling prices | -0.8%
Foreign currency effects | -1.2%
Other | 0.7%
Net change | -29.6%

Gross profit as a percentage of net revenues for the Capacitors segment was as follows:

| Fiscal quarters ended
| March 31, 2012 |  | April 2, 2011
Gross profit margin | 25.9% |  | 34.0%

The Capacitors segment continues to be adversely affected by high inventory levels at distribution. The decrease in gross profit margin versus the fiscal quarter ended April 2, 2011 is primarily due to the significant decrease in sales volume. The increase in gross profit margin versus the fiscal quarter ended December 31, 2011 is primarily due to product mix.
We have experienced a slight price decline versus the prior quarter and the first fiscal quarter of 2011 mainly due to the commodity portion of the business. Based on a book-to-bill ratio of 1.12 and an increasing backlog, we expect the recovery of the Capacitors segment to begin in the second fiscal quarter of 2012.
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Selling, General, and Administrative Expenses
Selling, general, and administrative (“SG&A”) expenses are summarized as follows (dollars in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Total SG&A expenses |  | $ | 86,364 |  |  | $ | 92,465 |
as a percentage of revenues |  |  | 16.0 | % |  |  | 13.3 | %

The overall decrease in SG&A expenses is primarily attributable to temporary cost reduction programs and a positive exchange rate impact. The increase in SG&A as a percentage of revenues is primarily due to the decrease in revenues. Additionally, several items included in SG&A expenses impact the comparability of these amounts, as summarized below (in thousands):

|  | Fiscal quarters ended |
|  | March 31, 2012 |  |  | April 2, 2011 |
Amortization of intangible assets |  | $ | 3,599 |  |  | $ | 3,769 |
Net (gain) loss on sales of assets |  |  | (996 | ) |  |  | (959 | )

The acquisitions of the resistor businesses of Huntington Electric in the third fiscal quarter of 2011 and HiRel Systems LLC in the first fiscal quarter of 2012 increased our amortizable intangible assets balance by $51.1 million. See Note 3 to our consolidated condensed financial statements for an estimate of our annual amortization expense through 2016. Additional acquisition activity will increase these amounts.
Other Income (Expense)
Interest expense for the fiscal quarter ended March 31, 2012 increased by $0.7 million versus the comparable prior year period. The increase is primarily due to interest on the convertible senior debentures due 2041 that were issued on May 13, 2011.
The following tables analyze the components of the line “Other” on the consolidated condensed statements of operations (in thousands):

|  | Fiscal quarters ended |  |  |  |
|  | March 31, 2012 |  |  | April 2, 2011 |  |  | Change |
Foreign exchange gain (loss) |  | $ | (1,290 | ) |  | $ | (1,865 | ) |  | $ | 575 |
Interest income |  |  | 2,543 |  |  |  | 1,476 |  |  |  | 1,067 |
Other |  |  | 55 |  |  |  | (118 | ) |  |  | 173 |
|  | $ | 1,308 |  |  | $ | (507 | ) |  | $ | 1,815 |

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Income Taxes
For the fiscal quarter ended March 31, 2012, our effective tax rate was 27.4% as compared to 35.7% for the fiscal quarter ended April 2, 2011. The effective tax rate is generally less than the U.S. statutory rate primarily because of earnings in foreign jurisdictions. For the fiscal quarter ended April 2, 2011, our effective tax rate was higher than the U.S. statutory rate because it includes a one-time tax expense in Israel of approximately $10.0 million.
In January 2011, a new tax law was enacted in Israel which effectively lowered the corporate income tax rate on certain types of income earned after December 31, 2010. Accordingly, our deferred tax assets in Israel were written down to reflect the lower rate and a one-time tax expense of approximately $10.0 million was recorded in the consolidated condensed statement of operations during the first fiscal quarter of 2011.
We operate in a global environment with significant operations in various jurisdictions outside the United States. Accordingly, our consolidated income tax rate is a composite rate reflecting our earnings and the applicable tax rates in the various jurisdictions where we operate. Part of our strategy is to achieve cost savings by operating in countries where we can take advantage of lower labor costs and available tax and other government-sponsored incentives. Accordingly, our effective tax rate is generally less than the U.S. statutory tax rate. Changes in our effective tax rate are largely attributable to changes in the mix of pretax income among our various taxing jurisdictions.
During the three fiscal months ended March 31, 2012, the liabilities for unrecognized tax benefits increased by $1.2 million on a net basis, principally due to increases for interest expense and foreign exchange effects.
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Financial Condition, Liquidity, and Capital Resources
We focus on our ability to generate cash flows from operations. The cash generated from operations is used to fund our capital expenditure plans, and cash in excess of our capital expenditure needs is available to fund our acquisition strategy and to reduce debt levels. We have generated cash flows from operations in excess of $200 million in each of the past 10 years, and cash flows from operations in excess of $100 million in each of the past 17 years. A portion of the cash flows from operations was generated by the Vishay Precision Group which was spun off on July 6, 2010.
We refer to the amount of cash generated from operations in excess of our capital expenditure needs and net of proceeds from the sale of assets as “free cash,” a measure which management uses to evaluate our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends. Vishay has generated positive “free cash” in each of the past 15 years, and “free cash” in excess of $80 million in each of the past 10 years. In this volatile economic environment, we continue to focus on the generation of free cash, including an emphasis on cost controls.
We continued to generate positive cash flows from operations and free cash during the fiscal quarter ended March 31, 2012. Despite a slow start to the year, we expect strong cash generation in 2012. There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash at the same levels, or at all, going forward if the current economic environment worsens.
We maintain a credit facility, which as of March 31, 2012 provided a revolving commitment of up to $450 million through December 1, 2015. On April 3, 2012, we amended our credit agreement and entered into an incremental facility agreement that increases the total revolving commitment to $528 million. The incremental commitments provide us with additional flexibility to pursue our growth plan. The incremental revolving commitments have terms and conditions identical to the terms and conditions of the existing commitments under the credit facility. Other significant terms and conditions of the credit agreement have not been changed. Following the expansion, we have the ability to request up to an additional $22 million of incremental commitments, subject to the satisfaction of certain conditions. At March 31, 2012 and December 31, 2011, $145 million and $155 million, respectively, was outstanding under the credit facility.
Borrowings under the credit facility bear interest at LIBOR plus an interest margin. The applicable interest margin is based on our then current leverage ratio. Based on our current leverage ratio, borrowings bear interest at LIBOR plus 1.65%. The interest rate on our borrowings will increase if our leverage ratio exceeds 1.50 to 1. We are also required to pay facility commitment fees of 0.35% per annum on the entire commitment amount.
The borrowings under the credit facility are secured by a lien on substantially all assets located in the United States, including accounts receivable, inventory, machinery and equipment, and general intangibles (but excluding real estate, intellectual property registered or licensed for use in, or arising under the laws of, any country other than the United States, and bank and securities accounts) of Vishay and certain significant domestic subsidiaries, and pledges of stock in certain significant domestic and foreign subsidiaries and are guaranteed by certain significant subsidiaries. Certain of our subsidiaries are permitted to borrow under the credit facility, subject to the satisfaction of specified conditions. Any borrowings by these subsidiaries under the credit facility will be guaranteed by Vishay.
The credit facility includes limits or restrictions on, among other things, incurring indebtedness, incurring liens on assets, making investments and acquisitions, making asset sales, repurchasing our common stock, and paying cash dividends and making other restricted payments. The credit facility also requires us to comply with other covenants, including the maintenance of specific financial ratios.
The financial maintenance covenants include (a) an interest expense coverage ratio of not less than 2.00 to 1; and (b) a leverage ratio of not more than 3.25 to 1 (and a pro forma ratio of 2.75 to 1 on the date of incurrence of additional debt). The computation of these ratios is prescribed in Article 6 of the Credit Agreement between Vishay Intertechnology, Inc. and JPMorgan Chase Bank, N.A., which has been filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed December 1, 2010.
We were in compliance with all covenants under the credit facility at March 31, 2012. Our interest expense coverage ratio and leverage ratio were 16.86 to 1 and 1.24 to 1, respectively. We expect to continue to be in compliance with these covenants based on current projections.
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If we are not in compliance with all of the required financial 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 exchangeable unsecured notes due 2102 and our convertible senior debentures due 2040 and due 2041 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated.
Beginning in 2012, our capacity to repurchase shares of our outstanding common stock increases each quarter by an amount equal to 20% of net income. At March 31, 2012, our credit facility allows us to repurchase up to $306.8 million of our common stock. The amount and timing of any future stock repurchases remains subject to authorization of our Board of Directors.
In 2011, we began investing a portion of our excess cash in highly liquid, high-quality instruments with maturities greater than 90 days, but less than 1 year, which we classify as short-term investments on our consolidated condensed balance sheets. As these investments were funded using a portion of excess cash and represent a significant aspect of our cash management strategy, we include the investments in the calculation of net cash and short-term investments (debt). The following table summarizes the components of net cash and short-term investments (debt) at March 31, 2012 and December 31, 2011 (in thousands):

|  | March 31, 2012 |  |  | December 31, 2011 |
Credit facility |  | $ | 145,000 |  |  | $ | 155,000 |
Exchangeable unsecured notes, due 2102 |  |  | 95,042 |  |  |  | 95,042 |
Convertible senior debentures, due 2040* |  |  | 98,766 |  |  |  | 98,463 |
Convertible senior debentures, due 2041* |  |  | 50,678 |  |  |  | 50,549 |
Total debt |  |  | 389,486 |  |  |  | 399,054 |
Cash and cash equivalents |  |  | 785,781 |  |  |  | 749,088 |
Short-term investments |  |  | 137,172 |  |  |  | 249,139 |
Net cash and short-term investments (debt) |  | $ | 533,467 |  |  | $ | 599,173 |

____________________________
*Represents the carrying amount of the convertible debentures, which is comprised of the principal amount of the debentures, net of the unamortized discount and the associated embedded derivative liability.
Measurements such as “free cash” and “net cash and short-term investments (debt)” do not have uniform definitions and are not recognized in accordance with GAAP. Such measures should not be viewed as alternatives to GAAP measures of performance or liquidity. However, 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, and that an analysis of “net cash and short-term investments (debt)” assists investors in understanding aspects of our cash and debt management. These measures, as calculated by us, may not be comparable to similarly titled measures used by other companies.
Substantially all of our March 31, 2012 cash and cash equivalents and short-term investments balances were held by our non-U.S. subsidiaries. At the present time, we expect the remaining cash and profits generated by foreign subsidiaries will continue to be reinvested outside of the United States indefinitely. If additional cash is needed to be repatriated to the United States, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits), state income taxes, incremental foreign income taxes, and withholding taxes payable to various foreign countries.
Our financial condition as of March 31, 2012 continued to be strong, with a current ratio (current assets to current liabilities) of 4.4 to 1, as compared to a ratio of 4.2 to 1 as of December 31, 2011. This increase is primarily due to a reduction in trade payables in the first fiscal quarter of 2012. Our ratio of total debt to Vishay stockholders’ equity was 0.23 to 1 at March 31, 2012 as compared to a ratio of 0.25 to 1 at December 31, 2011. This decrease is primarily due to a reduction in the outstanding balance on our credit facility and an increase in stockholder’s equity primarily driven by net earnings attributable to Vishay stockholders.
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Cash flows provided by continuing operating activities were $22.6 million for the three fiscal months ended March 31, 2012, as compared to cash flows provided by operations of $97.8 million for the three fiscal months ended April 2, 2011. This decrease is principally due to $41.5 million less net earnings generated in the first three fiscal months of 2012 and changes in working capital.
Cash paid for property and equipment for the three fiscal months ended March 31, 2012 was $16.8 million, as compared to $18.6 million for the three fiscal months ended April 2, 2011. Due to an improving business environment, we have raised our expectation of capital spending in 2012 by 10% to approximately $165 million.
The interest rates on our short-term investments average 2.4% and are approximately 170 basis points higher than interest rates on our cash accounts. Transactions related to these investments are classified as investing activities on our consolidated statements of cash flows.
The balance of our revolving credit facility was $155 million at December 31, 2011. We borrowed $35 million and repaid $45 million on our credit facility during the three fiscal months ended March 31, 2012. The average outstanding balance on our credit facility calculated at fiscal month-ends was $141 million and the highest amount outstanding on our credit facility at a month end was $145 million during the three fiscal months ended March 31, 2012.
Management expects to continue to maintain an outstanding balance of at least $100 million on the credit facility, and may periodically pay down the balance with available cash or use the credit facility to meet short-term financing needs. We expect that cash on-hand and cash flows from operations will be sufficient to meet our longer-term financing needs related to normal operating requirements, obligations under restructuring and acquisition integration programs, and our research and development and capital expenditure plans. Acquisition activity or share repurchases may require additional borrowing under our credit facility or may otherwise require us to incur additional debt.
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Contractual Commitments and Off-Balance Sheet Arrangements
Our Annual Report on Form 10-K for the year ended December 31, 2011 includes a table of contractual commitments as of December 31, 2011. There were no material changes to these commitments during the three fiscal months ended March 31, 2012.
We do not participate in nor have we created any off-balance sheet variable interest entities or other off-balance sheet financing, other than the operating leases described in our Annual Report on Form 10-K for the year ended December 31, 2011.
Safe Harbor Statement
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. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should,” or other similar words or expressions often identify forward-looking statements.
Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance, or achievements may vary materially from those anticipated, estimated, or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions, particularly the pace, continuation, and possible reversal of the recovery in the worldwide economy; difficulties in identifying suitable acquisition candidates, consummating a transaction on terms which we consider acceptable, and integration and performance of acquired businesses; difficulties in new product development; changes in competition and technology in the markets that we serve and the mix of our products required to address these changes; an inability to attract and retain highly qualified personnel, particularly in respect of our acquired businesses; uncertainty related to the effects of changes in foreign currency exchange rates; difficulties in implementing our cost management strategies; and other factors affecting our operations, markets, products, services, and prices that are set forth in our filings with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Our 2011 Annual Report on Form 10-K listed various important factors that could cause actual results to differ materially from projected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Risk Factors.” You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Item 3. | Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risks since December 31, 2011. For a discussion of our exposure to market risks, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on February 23, 2012.

Item 4. | Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are: (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
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Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION

Item 1. | Legal Proceedings

Not applicable.

Item 1A. | Risk Factors

Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on February 23, 2012, contains risk factors identified by Vishay. There have been no material changes to the risk factors we previously disclosed.

Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. | Defaults Upon Senior Securities

Not applicable.

Item 4. | Mine Safety Disclosures

Not applicable.

Item 5. | Other Information

Not applicable.

Item 6. | Exhibits

10.1 | Amendment No. 1 to Lease Agreement, dated February 21, 2012, between Vishay Intertechnology, Inc. and Vishay Precision Group, Inc.
10.2 | Amendment No. 1 to Lease Agreement, dated March 1, 2012, between Vishay Advanced Technology, Ltd. and V.I.E.C. Ltd.
31.1 | Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Dr. Gerald Paul, Chief Executive Officer.
32.1 | Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Lori Lipcaman, Chief Financial Officer.
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Dr. Gerald Paul, Chief Executive Officer.
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Lori Lipcaman, Chief Financial Officer.
101 | Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended March 31, 2012, furnished in XBRL (eXtensible Business Reporting Language)).

| ____________

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | VISHAY INTERTECHNOLOGY, INC.
| /s/ Lori Lipcaman |
| Lori Lipcaman |
| Executive Vice President and Chief Financial Officer
| (as a duly authorized officer and principal financial and
| accounting officer)

Date: May 2, 2012
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