Item 2.02 – Results of Operations and Financial Condition
On February 4, 2020, Vishay Intertechnology, Inc. ("the Company") issued a press release announcing its financial results for the fiscal quarter and year ended December 31, 2019. A copy of the press release is attached as Exhibit 99.1 to this report.
Item 7.01 – Regulation FD Disclosure
Computational Guidance on Earnings Per Share Estimates
The Company frequently receives questions from analysts and stockholders regarding its diluted earnings per share ("EPS") computation. The information furnished in this Form 8-K provides additional information on the impact of key variables on the EPS computation, particularly as they relate to the first fiscal quarter of 2020.
Accounting principles require that EPS be computed based on the weighted average shares outstanding ("basic"), and also assuming the issuance of potentially issuable shares (such as those subject to equity awards and convertible debt) if those potentially issuable shares would reduce EPS ("diluted").
The number of shares related to equity awards included in diluted EPS is based on the "Treasury Stock Method" prescribed in Financial Accounting Standards Board ("FASB") ASC Topic 260, Earnings Per Share ("FASB ASC Topic 260"). This method assumes a theoretical repurchase of shares using the unrecognized compensation expense and any other proceeds at a price equal to the issuer's average stock price during the related earnings period. Accordingly, the number of shares includable in the calculation of diluted EPS in respect of equity awards is dependent on this average stock price and will increase as the average stock price increases. This method is also utilized for net share settlement debt.
The number of shares includable in the calculation of diluted EPS in respect of conventional convertible or exchangeable securities is based on the "If Converted Method" prescribed in FASB ASC Topic 260. This method assumes the conversion or exchange of these securities for shares of common stock. In determining if convertible or exchangeable securities are dilutive, the interest savings (net of tax) subsequent to an assumed conversion are added back to net earnings. The shares related to a convertible or exchangeable security are included in diluted EPS only if EPS as otherwise calculated is greater than the interest savings, net of tax, divided by the shares issuable upon exercise or conversion of the instrument ("incremental earnings per share"). Accordingly, the calculation of diluted EPS for these instruments is dependent on the level of net earnings. Each series of convertible or exchangeable securities is considered individually and in sequence, starting with the series having the lowest incremental earnings per share, to determine if its effect is dilutive or anti-dilutive.
At the direction of its Board of Directors, Vishay intends to waive its rights to settle the principal amount of its convertible debt instruments, its 2.25% Convertible Senior Debentures due 2040 and due 2041, and its 2.25% Convertible Senior Notes due 2025, upon any conversion or repurchase of the debentures or notes, in shares of Vishay common stock.
Pursuant to the indentures governing the respective convertible debt instruments, Vishay has the right to pay the conversion value or purchase price for the convertible debt instruments in cash, Vishay common stock, or a combination of both.
If the convertible debt instruments are tendered for repurchase, Vishay will pay the repurchase price in cash, and if the convertible debt instruments are submitted for conversion, Vishay will value the shares issuable upon conversion and will pay in cash an amount equal to the principal amount of the converted debt instruments and will issue shares in respect of the conversion value in excess of the principal amount.
Vishay will consider its convertible debt instruments to be "net share settlement debt." Accordingly, its convertible debt instruments will be included in the diluted earnings per share computation using the "treasury stock method" (similar to options) rather than the "if converted method" otherwise required for convertible debt. Under the "treasury stock method," Vishay will calculate the number of shares issuable under the terms of its convertible debt instruments based on the average market price of Vishay common stock during the period, and include that number in the total diluted shares figure for the period.
The Company currently has no potentially dilutive instruments included in the diluted EPS calculation using the "if converted method."
The following estimates of shares expected to be used in the calculation of diluted EPS consider the number of the Company's shares currently outstanding and the Company's convertible securities currently outstanding and their exercise and conversion features currently in effect. The Company adjusts its calculation for the estimated effect of expected quarterly activity. The estimates assume no share or convertible debt instrument repurchases during the first fiscal quarter of 2020. Changes in these parameters or estimates could have a material impact on the calculation of diluted EPS.
The following estimates of shares expected to be used in the calculation of diluted EPS should be read in conjunction with the information on earnings per share in the Company's filings on Form 10-Q and Form 10-K. These estimates are unaudited and are not necessarily indicative of the shares used in the diluted EPS computation for any prior period. The estimates below are not necessarily indicative of the shares to be used in the quarterly diluted EPS computation for any period subsequent to the first fiscal quarter of 2020. The Company assumes no duty to revise these estimates as a result of changes in the parameters on which they are based or any changes in accounting principles. Also, the presentation is not intended as a forecast of EPS values or share prices of the Company's common stock for any period.
For the first fiscal quarter of 2020:
| • | The Company has approximately 145 million shares issued and outstanding, including shares of common stock and class B common stock. |
| | |
| • | The number of shares included in diluted EPS related to restricted stock units does not vary significantly and is generally less than 1 million incremental shares. |
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| • | The Company's Convertible Senior Debentures due 2040 are convertible at a conversion price of $12.50 per $1,000 principal amount, equivalent to 80.0018 shares per $1,000 principal amount. There is $0.3 million principal amount of the debentures outstanding. The number of shares of common stock that Vishay will include in its diluted earnings per share computation, assuming an average market price for Vishay common stock in excess of the conversion price, will be determined in accordance with the following formula: |
| | |
| | S = $300,000 / $1000 * [(P - $12.50) * 80.0018] / P |
| | |
| | where
|
| | |
| | S = the number of shares to be included in diluted EPS, and
|
| | P = the average market price of Vishay common stock for the quarter. |
| | |
| | If the average market price is less than $12.50, no shares will be included in the diluted earnings per share computation. |
| | |
| • | The Company's Convertible Senior Debentures due 2041 are convertible at a conversion price of $17.13 per $1,000 principal amount, equivalent to 58.3812 shares per $1,000 principal amount. There is $16.9 million principal amount of the debentures outstanding. The number of shares of common stock that Vishay will include in its diluted earnings per share computation, assuming an average market price for Vishay common stock in excess of the conversion price, will be determined in accordance with the following formula: |
| | |
| | S = [$16,890,000 / $1000] * [(P - $17.13) * 58.3812] / P |
| | |
| | where |
| | |
| | S = the number of shares to be included in diluted EPS, and
|
| | P = the average market price of Vishay common stock for the quarter. |
| | |
| | If the average market price is less than $17.13, no shares will be included in the diluted earnings per share computation. |
| | |
| • | The Company's Convertible Senior Notes due 2025 are convertible at a conversion price of $31.44 per $1,000 principal amount, equivalent to 31.8083 shares per $1,000 principal amount. There is $600 million principal amount of the notes outstanding. The number of shares of common stock that Vishay will include in its diluted earnings per share computation, assuming an average market price for Vishay common stock in excess of the conversion price, will be determined in accordance with the following formula: |
| | |
| | S = [$600,000,000 / $1000] * [(P - $31.44) * 31.8083] / P |
| | |
| | where |
| | |
| | S = the number of shares to be included in diluted EPS, and
|
| | P = the average market price of Vishay common stock for the quarter. |
| | |
| | If the average market price is less than $31.44, no shares will be included in the diluted earnings per share computation. |
Accordingly, the following table summarizes the approximate number of shares to be included in the denominator of the diluted EPS calculation assuming net earnings attributable to Vishay stockholders for various average stock prices (number of shares in millions):
Average Stock Price
| | Projected Diluted Shares
|
$
| | | <25.00
| | | | | 145
|
$
| | | 25.00 - 32.00 | | | | | 146
|
$
| | | 33.00
| | | | | 147
|
$
| | | 34.00 | | | | | 147
|
$
| | | 35.00
| | | | | 148
|
Segment Realignment
In the fourth fiscal quarter of 2019, the Company realigned its reportable business segments structure. The Company changed its segment reporting to separate the former Resistors & Inductors reporting segment into separate Resistors and Inductors reporting segments. The chief operating decision maker now makes strategic and operating decisions with regards to assessing performance and allocating resources based on this new segment structure.
The Company has prepared the selected financial data presented in Exhibit 99.2 to provide certain historical business segment financial information for comparative purposes, reflecting the segment realignment executed in the fourth fiscal quarter of 2019. The business segment realignment had no effect on our previously reported consolidated financial position, results of operations, or liquidity.
Item 9.01 – Financial Statements and Exhibits
(d) Exhibits
