VSH Vishay Intertechnology Inc - 10-K

Item 1A.   RISK FACTORS

From time to time, information provided by us, including but not limited to statements in this report, or other statements made by or on our behalf, may contain “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks, uncertainties, and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those anticipated. Set forth below are important factors that could cause our results, performance, or achievements to differ materially from those in any forward-looking statements made by us or on our behalf. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Risks relating to our business

Our business is cyclical and future periods of decline and increased demand are not predictable.

We make significant decisions, including order acceptance, production schedules, personnel needs, material purchases, and other resource requirements, based on customer forecasts and estimates of customer requirements.  The electronic component industry is highly cyclical and experiences periods of decline from time to time.  We and others in the electronic components industry have experienced these conditions in the recent past and cannot predict when we may experience downturns in the future.  If demand falls below customers' forecasts or if customers do not control their inventory effectively, customers may significantly and abruptly reduce their demand, or even cancel orders.  Orders for materials purchases from certain suppliers may include noncancellable purchase commitments or advance payments from us, and those obligations and commitments could reduce our ability to adjust our inventory or expense levels to reflect declining market demands. Because certain of our sales, research and development, and internal manufacturing overhead expenses are relatively fixed, a reduction in customer demand likely would decrease our gross margins and operating income.  Unexpected declines in customer demands can also result in lower average selling prices and additional expenses.

We may also experience intense demand for our products in periods of a rising economy and we may have difficulty expanding our manufacturing capacity to satisfy demand during such periods.  We may not be able to purchase sufficient supplies, allocate sufficient manufacturing capacity, hire skilled personnel, or expand our facilities to meet such increases in demand.  Rapid customer ramp-up and significant increases in demand may strain our resources or negatively affect our margins.  Inability to satisfy customer demand in a timely manner may harm our reputation, reduce our other opportunities, damage our relationships with customers, reduce our market share, reduce revenue growth, and/or cause us to incur contractual penalties.

Changes in the demand mix, needed technologies, and these end markets may adversely affect our ability to match our products, inventory, and capacity to meet customer demand and could adversely affect our operating results and financial condition.  A slowdown in demand or recessionary trends in the global economy makes it more difficult for us to predict our future sales and manage our operations, and could adversely impact our results of operations. Capacity that we add during upturns in the business cycle may result in excess capacity during periods when demand for our products recede, resulting in inefficient use of capital which could also adversely affect us.

A downturn in our business in general, or isolated to a particular sector, could require us to incur restructuring and severance charges and/or asset write-downs.

We face significant challenges managing our capacity expansion strategy.

As part of our strategy to drive growth and increase capacity to assure customers of reliable volume as they scale, we are increasing internal capacity by heavily investing in capital expenditures, and plan to increase external capacity by outsourcing additional commodity products to subcontractors.  Our capacity expansion plans include the expansion of the recently acquired Newport wafer fab, building a 12-inch wafer fab in Itzehoe, Germany adjacent to our existing 8-inch wafer fab, a new site in Mexico for power inductors and non-linear resistors, a resistor manufacturing expansion in Mexico, and expanded diode manufacturing in Taiwan and Turin, Italy.   There are demand-related risks associated with all growth initiatives.  There are also inherent execution risks in building and starting new wafer fabs, acquiring existing wafer fabs, and expanding production capacity at our own facilities or that of new or existing subcontractors that could significantly increase costs and negatively impact our operating results.  The execution risks include, but are not limited to, the following:

design and construction delays and cost overruns;

issues installing and qualifying new equipment and ramping production;

poor production process yields and reduced quality control; and

insufficient personnel with requisite expertise and experience to operate the facilities.

We have incurred, and may in the future incur, restructuring costs and associated asset write-downs.

To remain competitive, particularly when business conditions are difficult, or to implement organizational change, we sometimes implement restructuring programs.  The programs attempt to reduce our cost structure by achieving synergies, eliminating redundant facilities and staff positions, and moving operations, where possible, to jurisdictions with lower labor costs.  In 2024, we announced a restructuring program that primarily focuses on optimizing our manufacturing footprint and streamlining business decision making.

Additionally, our long-term strategy includes growing 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 statement of operations, as such expenses are incurred.  For this reason, we expect to have some level of future restructuring expenses due to acquisitions.

Our business may be adversely affected by the widespread outbreak of diseases and the mitigation efforts by governments worldwide to control their spread.

We cannot predict when future disease outbreaks or pandemics will occur.  The potential risks and effects of future disease outbreaks and the related economic impact that could have an adverse effect on our business include, but are not limited to:

Adverse impact on our customers and supply channels;

Decrease in sales, product demand and pricing and unfavorable economic and market conditions;

Increased costs, including higher shipping costs due to reduced shipping capacity;

Restrictions on our manufacturing, support operations or workforce, or similar limitations for our customers, vendors, and suppliers, that could limit our ability to meet customer demand;

Potential increased credit risk if customers, distributors, and resellers are unable to pay us, or must delay paying their obligations to us;

Restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures could result in delays;

Impact on our workforce/employees due to the spread of viruses or diseases and any shelter-in-place orders; and

Cybersecurity risks as a result of extended periods of remote work arrangements.

Such effects could result in us being required to record impairment charges related to our property and equipment, intangible assets, or goodwill.

In the past we have grown through successful integration of acquired businesses, but this may not continue.

Our long-term historical growth in revenues and net earnings has resulted in large part from our strategy of expansion through acquisitions.  Despite our plan to continue to grow, in part, through targeted acquisitions, we may be unable to continue to identify, have the financial capabilities to acquire, or successfully complete transactions with suitable acquisition candidates. The rapid consolidation that our industry has experienced may further decrease our ability to identify attractive opportunities for acquisition.  We are subject to various U.S. and foreign competition laws and regulations that may affect our ability to complete certain acquisitions. Also, if an acquired business fails to operate as anticipated, cannot be successfully integrated with our other businesses, or we cannot effectively mitigate the assumed, contingent, and unknown liabilities acquired, our results of operations, financial condition, enterprise value, market value, and prospects could all be materially adversely affected.

To remain successful, we must continue to innovate, and our investments in new technologies may not prove successful.

Our future operating results are dependent on our ability to continually develop, introduce, and market new and innovative products, to modify existing products, to respond to technological change, and to customize certain products to meet customer requirements. There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the direction of technological change or that we will be unable to develop and market new products and applications in a timely fashion to satisfy customer demands. If this occurs, we could lose customers and experience adverse effects on our financial condition and results of operations.

In addition to our own research and development initiatives, we periodically invest in technology start-up enterprises, in which we may acquire a controlling or noncontrolling interest but whose technology would be available to be commercialized by us. There are numerous risks in investments of this nature including the limited operating history of such start-up entities, their need for capital, and their limited or absence of production experience, as well as the risk that their technologies may prove ineffective or fail to gain acceptance in the marketplace. Certain of our historical investments in start-up companies have not succeeded, and there can be no assurance that our current and future investments in start-up enterprises will prove successful.

Potential investments in artificial intelligence may not be successful, which could adversely affect our business, reputation, or financial results.

We are evaluating investments in A.I. initiatives, including generative A.I.

There are significant risks involved in developing and deploying A.I., and there can be no assurance that the usage of A.I. will enhance our products or services or be beneficial to our business, including our efficiency or profitability.  For example, our A.I.-related efforts, particularly those related to generative A.I., subject us to risk related to harmful content, inaccuracies, bias, discrimination, toxicity, intellectual property infringement or misappropriation, defamation, data privacy, cybersecurity, and sanctions and export controls, among others.  It is also uncertain how various laws will apply to content generated by A.I.  We are subject to risks of new or enhanced governmental or regulatory scrutiny, litigation, or other legal liability, ethical concerns, negative consumer perceptions as to automation and A.I., or other complications that could adversely affect our business, reputation, or financial results.

As a result of the complexity and rapid development of A.I., it is the subject of evolving review by various U.S. governmental and regulatory agencies, and other foreign jurisdictions are applying, or are considering applying, their intellectual property, cybersecurity, data protection and other laws to A.I. and/or are considering general legal frameworks on A.I.  We may not always be able to anticipate how to respond to these frameworks, given that they are still rapidly evolving.  We may also have to expend resources to adjust our use of A.I. in certain jurisdictions if the legal frameworks on A.I. are not consistent across jurisdictions.

As such, it is not possible to predict all of the risks related to the use of A.I., and changes in laws, rules, directives, and regulations governing the use of A.I. may adversely affect our ability to develop and use A.I. or subject us to legal liability.

Our business and our results of operations are sensitive to supply chain disruptions.

The production and sale of our products is reliant on a complex global interconnected supply chain of vendors, manufacturing facilities, third-party foundries and subcontractors, shipping partners, distributors, and end market customers.  Disruption in one part of the supply chain could cause disruption in all other parts of the supply chain.  Global shipping impacts several parts of the supply chain and the disruptions experienced in recent years have, at times, negatively impacted our ability to manufacture products and to deliver them to customers.

Although most materials incorporated into our products are available from a number of sources, certain materials, including plastics and metals, are produced in only a limited number of regions around the world or are available from only a limited number of suppliers.  Suppliers periodically extend lead times, face capacity constraints, limit supplies, increase prices, experience quality issues, or encounter cybersecurity or other issues that can interrupt or increase the cost of our supply. The unavailability or reduced availability of these materials could require us to temporarily cease or reduce production or incur additional costs.

Customer requirements and certain laws pertaining to the responsible sourcing of materials, including tantalum, tungsten, tin, gold, and cobalt, all of which are used in the Company’s products, are increasing and becoming more stringent.  Responsible sourcing efforts may result in increased prices and decreased availability of these materials.

Many of the metals used in the manufacture of our products, including gold, copper, and palladium, are traded on active markets and can be subject to significant price volatility.  To ensure adequate supply and to provide cost certainty, our policy is to enter into short-term commitments to purchase defined portions of annual consumption of the raw materials utilized if market prices decline below budget.  In certain circumstances, we purchase precious metals bullion in excess of our immediate manufacturing needs to mitigate the risk of supply shortages or volatile price fluctuations.  If after entering into these commitments or purchasing the metals bullion, the market prices for these raw materials decline, we must recognize losses on these adverse purchase commitments and metals bullion purchases.

Our production can be disrupted by the unavailability of resources, such as water, energy, and gases.  The unavailability or reduced availability of these resources could require us to reduce production or incur additional costs.

We use third-party foundries and subcontractors for certain of our manufacturing activities, primarily wafer fabrication, the assembly and testing of finished goods, and the manufacturing of certain commodity products.  Establishing third-party contract manufacturer relationships can be time consuming and costly, and the number of qualified providers is limited. Our agreements with these manufacturers typically require us to commit to purchase services based on forecasted product needs, which may be inaccurate, and, in some cases, require us to recognize losses on these adverse purchase commitments.  Our agreements may limit our ability to increase production, particularly during periods of growing demand for our products.

Due to our global supply chain, we are impacted by global trade disputes.  In 2025, the U.S. imposed tariffs on almost all imported goods.  These tariffs negatively impacted trade relationships between the governments of the U.S. and the impacted countries, specifically the People’s Republic of China.  In response, many countries increased tariffs on U.S. exports and implemented other import / export barriers or prohibitions.  While many of these tariffs and reciprocal tariffs have been reduced or paused, the tariffs and any similar disruptions in the global supply chain in the future may adversely impact our business by creating economic uncertainty, increasing the cost of materials, and reducing customer demand for our products.

We remain cognizant of these supply chain challenges and seek to minimize their effects whenever possible.  Despite our best efforts, there can be no assurances we will be successful in mitigating these risks and if we are unable to do so, they may have material negative impacts on our business and results of operations.

Our ability to compete effectively with other companies depends, in part, on our ability to maintain the proprietary nature of our technology and to operate our business without infringing or violating the intellectual property rights of others.

Protection of intellectual property often involves complex legal and factual issues. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. We have applied, and will continue to apply, for patents covering our technologies and products, as we deem appropriate. However, our applications may not result in issued patents. Also, our existing patents and any future patents may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. Others may independently develop similar or alternative technologies, design around our patented technologies, or may challenge or seek to invalidate our patents. Also, the legal system in certain countries in which we operate may not provide or may not continue to provide sufficient, intellectual property legal protections and remedies.

Litigation regarding patent and other intellectual property rights is prevalent in the electronic components industry, particularly the discrete semiconductor sector. We have on occasion been notified that we may be infringing on patent and other intellectual property rights of others. In addition, customers purchasing components from us have rights to indemnification under certain circumstances if such components violate the intellectual property rights of others. Further, we have observed that in the current business environment, electronic component and semiconductor companies have become more aggressive in asserting and defending patent claims against competitors.  We will continue to vigorously defend our intellectual property rights, and may become party to disputes regarding patent licensing and cross patent licensing. Although licenses are generally offered in such situations and we have successfully resolved these situations in the past, there can be no assurance that we will not be subject to future litigation alleging intellectual property rights infringement, or that we will be able to obtain licenses on acceptable terms. An unfavorable outcome regarding one of these matters could have a material adverse effect on our business and results of operations.

We face intense competition in our business, and are susceptible to certain concentrations.

Our business is highly competitive worldwide, with low transportation costs and few import barriers. We compete principally on the bases of product quality and reliability, availability, customer service, technological innovation, timely delivery, and price. Our ability to compete successfully also depends on elements out of our control.  We face significant competition within each of our product segments from larger global manufacturers and smaller manufacturers focused on specific market niches.  The electronic component industry has become increasingly concentrated and globalized in recent years as many of our primary competitors have been acquired.  The acquiring companies, most of which are larger than us, have significant financial resources and technological capabilities.

A material portion of our revenues are derived from the worldwide industrial, automotive, telecommunications, and computing markets. These markets have historically experienced wide variations in demand for end products. If demand for these end products should decrease, the producers thereof could reduce their purchases of our products, which could have an adverse effect on our results of operations and financial position.

While no customer comprises over 10% of our consolidated net revenues, certain subsidiaries and product lines are susceptible to customer concentrations and have customers which comprise greater than 10% of the subsidiary’s or product line’s net revenues.  The loss of one of these customers could have a material effect on the results of operations of the subsidiary or product line and financial position of the subsidiary, which could result in an impairment charge which could be material to our consolidated financial statements.

Our backlog is subject to customer cancellation.

Many of the orders that comprise our backlog may be canceled by our customers without penalty. Our customers may on occasion double and triple order components from multiple sources to ensure timely delivery when demand exceeds global supply. They often cancel orders when business is weak and inventories are excessive. Therefore, we cannot be certain that the amount of our backlog accurately reflects the level of orders that we will ultimately deliver. Our results of operations could be adversely impacted if customers cancel a material portion of orders in our backlog.

Our future success is substantially dependent on our ability to attract and retain highly qualified technical, managerial, marketing, finance, and administrative personnel.

Rapid changes in technologies, frequent new product introductions, and declining average selling prices over product life cycles require us to attract and retain highly qualified personnel to develop and manufacture products that feature technological innovations and bring them to market on a timely basis.  Our complex operations also require us to attract and retain highly qualified administrative personnel in functions such as legal, tax, accounting, financial reporting, auditing, and treasury.  The market for personnel with such qualifications is highly competitive.  While we have employment agreements with certain of our executives, we have not entered into employment agreements with all of our key personnel.

The loss of the services of or the failure to effectively recruit qualified personnel could have a material adverse effect on our business.

Significant fluctuations in interest rates could adversely affect our results of operations and financial position.

We are exposed to changes in interest rates as a result of our borrowing activities and our cash balances. Our credit facility bears interest at variable rates based on Secured Overnight Financing Rate ("SOFR") and other currency-specific reference rates.  A significant increase in such reference rates would significantly increase our interest expense. A general increase in interest rates would be largely offset by an increase in interest income earned on our cash and short-term investment balances. However, there can be no assurance that the interest rate earned on cash and short-term investments will move in tandem with the interest rate paid on our variable rate debt.

Cyberattacks and other interruptions in our information technology systems could adversely affect our business.

We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business. We are exposed to, and  adversely affected by, cyberattacks or other potential disruptions to our information technology systems and data security.  Any significant system or network disruption, including, but not limited to, new system implementations, computer viruses, security breaches, phishing, spoofing, cyberattacks, facility issues or energy blackouts could have a material adverse impact on our operations and results of operations.  These incidents, which might be related to industrial or other espionage, include covertly introducing malware and spyware to our computers and networks (or to an electronic system operated by a third party for our benefit) and impersonating authorized users, among others.  Such a network disruption could result in a loss of the confidentiality of our intellectual property or the release of sensitive competitive information or customer, supplier or employee personal data. Any loss of such information could harm our competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages caused by the disruptions or security breaches. We have implemented protective measures to prevent against and limit the effects of system or network disruptions, but there can be no assurance that such measures will be sufficient to prevent or limit the damage from any disruptions and any such disruption could have a material adverse impact on our business and results of operations.

We are subject to numerous laws and regulations regarding privacy and data protection. The scope of these laws and regulations is evolving rapidly and is subject to differing interpretations, and thus may be inconsistent among jurisdictions. Such laws and regulations have resulted and will continue to result in significantly greater compliance burdens and costs for us.

Third-party service providers, such as foundries, subcontractors, distributors, and vendors have access to certain portions of our sensitive data. In the event that these service providers do not properly safeguard our data that they hold, security breaches and loss of our data could result.  Any such loss of data by our third-party service providers could have a material adverse impact on our business and results of operations.

Future acquisitions could require us to issue additional indebtedness or equity.

If we were to undertake a substantial acquisition for cash, the acquisition would likely need to be financed in part through bank borrowings or the issuance of public or private debt. This acquisition financing would likely decrease our ratio of earnings to fixed charges and adversely affect other leverage criteria. Under our credit facility, we are required to obtain the lenders’ consent for certain additional debt financing and to comply with other covenants including the application of specific financial ratios. We cannot make any assurances that the necessary acquisition financing would be available to us on acceptable terms if and when required. If we were to undertake an acquisition for equity, the acquisition may have a dilutive effect on the interests of the holders of our common stock.

We may experience significant variability in our quarterly and annual effective tax rate which would affect our reported net income.

We operate in a global environment with significant operations in various locations outside the United States. Our effective income tax rate is the result of the income tax rates in the various locations where we operate.  Our mix of income and losses in these locations affects our effective tax rate. Variability in the mix and profitability of domestic and international activities, identification and resolution of various tax uncertainties, changes in tax laws and rates, and the extent to which we are able to realize net operating loss and other carryforwards included in deferred tax assets and avoid potential adverse outcomes included in deferred tax liabilities, among other matters, may significantly affect our effective income tax rate in the future.  A relative increase in income in higher tax rate jurisdictions increases our effective tax rate and thus decreases net income.  Similarly, generating losses in tax jurisdictions for which no benefits are available also increases our effective income tax rate.  Our effective income tax rate may also be impacted by the recognition of discrete income tax items, such as required adjustments to our liabilities for uncertain tax positions or our deferred tax asset valuation allowance. A significant increase in our effective income tax rate could have a material adverse impact on our earnings.

Our intangible assets may become impaired.

Goodwill and indefinite-lived intangible assets are not amortized but rather are tested for impairment at least annually.  These tests are performed more frequently whenever events or changes in circumstances indicate that the assets might be impaired.  The testing of assets for impairment requires us to make significant estimates about our future events, including our performance and projected cash flows, as well as other assumptions. These estimates can be affected by numerous factors, including developments in the global economic environment, including the prospect of higher interest rates, market capitalization declines, developments in regulatory, industry and market conditions, changes in business operations, inability to effectively integrate acquired businesses, changes in competition, or changes in technologies. Any changes in key assumptions, or actual performance compared with key assumptions, about our business and its future prospects could affect the fair value of one or more of our assets, which may result in an impairment charge.

We performed a qualitative annual assessment of each of our reporting units in 2025 and determined that the fair value of the reporting units were not more likely than not less than their respective carrying amounts.  We continue to evaluate facts and circumstances to determine if interim impairment analyses are necessary.  If we are not able to achieve our anticipated results or we experience a sustained decline in our stock price, we may determine that an interim impairment analysis is necessary.  There is $180.4 million of goodwill remaining on our balance sheet as of December 31, 2025.  Any impairment charges would adversely affect our results of operations in the periods an impairment is recognized.

Regulatory and compliance related risks

Future changes in our environmental liability and compliance obligations may harm our ability to operate or increase our costs.

Our operations, products and/or product packaging are subject to, among other matters, environmental laws and regulations governing, among other matters, air emissions, wastewater discharges, the handling, disposal and remediation of hazardous substances, wastes and certain chemicals used or generated in our manufacturing processes, employee health and safety labeling or other notifications with respect to the content or other aspects of our processes, products or packaging, restrictions on the use of certain materials in or on design aspects of our products or product packaging, and responsibility for disposal of products or product packaging. We establish reserves for specifically identified potential environmental liabilities. Nevertheless, we have in the past and may in the future inherit certain pre-existing environmental liabilities, generally based on successor liability doctrines, or otherwise incur environmental liabilities. We are involved in remediation programs and related litigation at various current and former properties and at third-party disposal sites both within and outside of the United States, including involvement as a potentially responsible party at Superfund sites. Although we have never been involved in any environmental matter that has had a material adverse impact on our overall operations, there can be no assurance that in connection with any past or future acquisition, future developments, including related to our remediation programs, or otherwise, we will not be obligated to address environmental matters that could have a material adverse impact on our results of operations. In addition, more stringent environmental laws and regulations may be enacted in the future, and we cannot presently determine the modifications, if any, in our operations that any such future regulations might require, or the cost of compliance with current and future laws and regulations. In order to resolve liabilities at various sites, we have entered into various administrative orders and consent decrees, some of which may be, under certain conditions, reopened or subject to renegotiation.

Our products are sold to or used in goods sold to the U.S. government and other governments. By virtue of such sales, we are subject to various regulatory requirements and risks in the event of non-compliance.

We sell products under prime and subprime contracts with the U.S. government and other governments. Many of these products are used in military applications. Government contractors must comply with specific procurement regulations and other requirements. These requirements, although customary in government contracts, impact our performance and compliance costs.  Failure to comply with these regulations and requirements could result in contract modifications or termination, and the assessment of penalties and fines, which could negatively impact our results of operations and financial condition. Our failure to comply with these regulations and requirements could also lead to suspension or debarment, for cause, from government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various statutes, including those related to procurement integrity, export control, government security regulations, employment practices, protection of the environment, accuracy of records and the recording of costs, and foreign corruption. The termination of a government contract as a result of any of these acts could have a negative impact on our results of operations and financial condition and could have a negative impact on our reputation and ability to procure other government contracts in the future.

We have qualified certain of our products under various military specifications approved and monitored by the United States Defense Electronic Supply Center and under certain European military specifications. These products are assigned certain classification levels. In order to maintain the classification level of a product, we must continuously perform tests on the products and the results of these tests must be reported to governmental agencies. If a product fails to meet the requirements of the applicable classification level, its classification may be reduced to a lower level. A decrease in the classification level for a product with a military application could have an adverse impact on the net revenues and earnings attributable to that product.

Our credit facility limits or restricts our current and future operations and requires compliance with certain financial covenants.

Our credit facility limits or restricts, among other things, incurring indebtedness, incurring liens on assets, making investments and acquisitions, making asset sales, and paying cash dividends and making other restricted payments. Our credit facility also requires us to comply with other covenants, including the maintenance of specific financial ratios. If we are not in compliance with all of such covenants, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable. Additionally, our convertible senior notes due 2030 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated.

Risks associated with our operations outside the United States

We are subject to the risks of political, economic, and military instability in countries outside the United States in which we operate.

We have substantial operations outside the United States, and approximately 76% of our revenues during 2025 were derived from sales to customers outside the United States. Certain of our assets are located, and certain of our products are produced, in countries which are subject to risks of social, political, economic, and military instability. This instability could result in wars, riots, nationalization of industry, currency fluctuation, and labor unrest. These conditions could have an adverse impact on our ability to operate in these regions and, depending on the extent and severity of these conditions, could materially and adversely affect our overall financial condition, results of operations, and our ability to access our liquidity.

Our business has been in operation in Israel for 55 years, where we have substantial manufacturing operations. Although we have never experienced any material interruption in our operations attributable to these factors, in spite of several Middle East crises, including the recent war with Hamas, our financial condition and results of operations might be adversely affected if events were to occur in the Middle East that interfered with our operations in Israel.

Our global operations are subject to extensive anti-corruption laws and other regulations.

The U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to improperly influence foreign government officials for the purpose of obtaining or retaining business, or obtaining an unfair advantage. Recent years have seen a substantial increase in the global enforcement of anti-corruption laws. Our continued operation and expansion outside the United States, including in developing countries, could increase the risk of such violations or violations under other regulations relating to limitations on or licenses required for sales made to customers located in certain countries. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business, and result in a material adverse effect on our reputation, business and results of operations or financial condition.

We attempt to improve profitability by controlling labor costs, but these activities could result in labor unrest or considerable expense.

Historically, our primary labor cost controlling strategy was to transfer manufacturing operations to countries with lower production costs, such as the Dominican Republic, India, Malaysia, Mexico, the People’s Republic of China, and the Philippines. We believe that our manufacturing footprint is suitable to serve our customers and end markets, while maintaining lower manufacturing costs. We do not anticipate further transferring any significant existing operations to lower-labor-cost countries; however, acquired operations may be transferred to lower-labor-cost countries when integrated into Vishay. Currently, our primary labor cost controlling strategy involves reducing hours and limiting the use of subcontractors and foundries when demand for our products decreases. Shifting operations to lower-labor-cost countries, reducing hours, or limiting the use of subcontractors and foundries could result in production inefficiencies, higher costs, and/or strikes or other types of labor unrest.

We are subject to foreign currency exchange rate risks which may impact our results of operations.

We are exposed to foreign currency exchange rate risks, particularly due to market values of transactions in currencies other than the functional currencies of certain subsidiaries. From time to time, we utilize forward contracts to hedge a portion of projected cash flows from these exposures.

Our significant foreign subsidiaries are located in Germany, Israel, the United Kingdom, and Asia. We finance our operations in Europe and certain locations in Asia in local currencies. Our operations in Israel, the United Kingdom, and most significant locations in Asia are largely financed in U.S. dollars, but these subsidiaries also have significant transactions in local currencies. Our exposure to foreign currency risk is mitigated to the extent that the costs incurred and the revenues earned in a particular currency offset one another. Our exposure to foreign currency risk is more pronounced in situations where, for example, production labor costs are predominantly paid in local currencies while the sales revenue for those products is denominated in U.S. dollars. This is particularly the case for products produced in Israel, the United Kingdom, the Czech Republic, and China.

A change in the mix of the currencies in which we transact our business could have a material effect on results of operations. Furthermore, the timing of cash receipts and disbursements could have a material effect on our results of operations, particularly if there are significant changes in exchange rates in a short period of time.

Most of our operating cash is generated by our non-U.S. subsidiaries, and our U.S. parent company and U.S. subsidiaries have significant payment obligations.

We generate a significant amount of cash and profits from our non-U.S. subsidiaries.  As of December 31, 2025, substantially all of our cash and cash equivalents and short-term investments were held by subsidiaries outside of the United States.  Our revolving credit facility provides us with additional U.S. liquidity.

U.S. tax obligations, cash dividends to stockholders, share repurchases, additional convertible debt repurchases, and principal and interest payments on our debt instruments need to be paid by our U.S. parent company, Vishay Intertechnology, Inc.  A U.S.-domiciled subsidiary is funding the expansion and operations of the Newport wafer fabrication facility.  Our U.S. subsidiaries have other operating cash needs.

If our U.S. cash and cash equivalents and short-term investment and other liquidity sources are inadequate to satisfy these obligations, we may be required to repatriate additional cash to the United States and would be required to accrue and pay additional taxes.  If we are unable to repatriate adequate cash to the United States to satisfy these obligations, it could materially and adversely affect our overall financial condition, results of operations and our liquidity.

Changes in U.S. trade policies, and related factors beyond our control, may adversely impact our business, financial condition, and results of operations.

Our business is subject to risks associated with U.S. and foreign legislation and regulations relating to imports, including quotas, duties, tariffs or taxes, and other import charges or restrictions, which could adversely affect our operations and our ability to import products.  In 2025, the U.S. imposed tariffs on almost all imported goods.  These tariffs negatively impacted trade relationships between the governments of the U.S. and the impacted countries, specifically the People’s Republic of China.  In response, many countries increased tariffs on U.S. exports and implemented other import / export barriers or prohibitions.  While many of these tariffs and reciprocal tariffs have been reduced or paused, the tariffs and any similar disruptions to the global supply chain in the future may adversely impact our business by creating economic uncertainty, increasing the cost of materials, and reducing customer and end market demand.  New or revised trade agreements could require changes in operations in the long-term.

Further changes in U.S. trade policy could trigger additional retaliatory actions by affected countries.  If these consequences are realized, it could result in a general economic downturn or otherwise have a material adverse effect on our business.

Risks related to our capital structure

The holders of our Class B common stock have effective voting control of our company, giving them the effective ability to prevent a change in control transaction.

We have two classes of common stock: common stock and Class B common stock. The holders of common stock are entitled to one vote for each share held, while the holders of Class B common stock are entitled to 10 votes for each share held. At December 31, 2025, the holders of Class B common stock held approximately 49.5% of the voting power of the Company. The ownership of Class B common stock is highly concentrated, and holders of Class B common stock effectively can cause the election of directors and approve other actions as stockholders. Mrs. Ruta Zandman (a member of our Board of Directors) controls the voting of, solely or on a shared basis with Marc Zandman (our Executive Chairman) and Ziv Shoshani (a former member of our Board of Directors), approximately 89.7% of our Class B common stock and 44.4% of the total voting power of our capital stock as of December 31, 2025. Holders of our Class B common stock may act in ways that are contrary to, or not in the best interests of, holders of our common stock.  The voting rights of the holders of our Class B common stock effectively give such holders the ability to prevent transactions that would result in a change in control of us, including transactions in which holders of our common stock might otherwise receive a premium for their shares over the then-current market price.

Our acquisition strategy could be impeded if our Board of Directors were reluctant to authorize the issuance of substantial additional shares.

Our overall long-term business strategy has historically included a strong focus on acquisitions financed alternatively through cash on hand or the incurrence of indebtedness. We may in the future be presented with attractive investment or strategic opportunities that, because of their size and our financial condition at the time, would require the issuance of substantial additional amounts of our common stock.  If such opportunities were to arise, our Board of Directors may consider the potentially dilutive effect on the interests and voting power of our existing stockholders, including our Class B stockholders, and may therefore be reluctant to authorize the issuance of additional shares. Any such reluctance could impede our ability to complete certain transactions.

Our outstanding convertible debt instruments may impact the trading price of our common stock.

We believe that many investors in, and potential purchasers of, convertible debt instruments employ, or seek to employ, a convertible arbitrage strategy with respect to these instruments. Investors that employ a convertible arbitrage strategy with respect to convertible debt instruments typically implement that strategy by selling short the common stock underlying the convertible instrument and dynamically adjusting their short position while they hold the instrument. The implementation of this strategy by investors in our convertible debt instruments, as well as related market regulatory actions, could have a significant impact on the trading prices of our common stock, and the trading prices and liquidity of our convertible debt instruments. The price of our common stock and our convertible debt instruments could also be affected by possible sales of our common stock by investors who view our convertible debt instruments as more attractive means of equity participation in us.

Conversion of our outstanding 2030 Notes may dilute the ownership interest of our existing stockholders, including holders who had previously converted their notes.

The conversion of some or all of our outstanding 2.25% convertible senior notes due 2030 (the "2030 Notes") may dilute the ownership interests of our existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

We may not have the ability to raise the funds necessary to settle conversions of our outstanding 2030 Notes in cash or to repurchase the notes upon a fundamental change or on a repurchase date, as applicable, and our current debt contains, and our future debt may contain, limitations on our ability to pay cash upon conversion or repurchase of the 2030 Notes.

Holders of our outstanding 2030 Notes have the right to require us to repurchase all or a portion of their 2030 Notes, as the case may be, upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the 2030 Notes, as the case may be, to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the 2030 Notes, we will be required to make cash payments for each $1,000 in principal amount of 2030 Notes converted of at least the lesser of $1,000 and the sum of the daily conversion values as described in the indenture governing the 2030 Notes.  However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the 2030 Notes surrendered therefor or notes being converted. In addition, our ability to repurchase the 2030 Notes or to pay cash upon conversion of the 2030 Notes may be limited by law, by regulatory authority or by agreements governing our existing and future indebtedness, as described below.

For example, our credit facility in effect from time to time may prohibit us from making any cash payments on the conversion or repurchase of the 2030 Notes, as the case may be, upon a fundamental change repurchase if, after giving effect to such conversion or repurchase (and any additional indebtedness incurred in connection with such conversion or a repurchase), we would not be in pro forma compliance with the applicable financial covenants under that facility.  Any new credit facility into which we may enter may have similar restrictions unless certain conditions are met. Our failure to make cash payments upon the conversion or repurchase of the 2030 Notes, as the case may be, as required under the terms of the applicable indenture governing such notes would permit holders of the 2030 Notes to accelerate our obligations under the 2030 Notes.

Our failure to repurchase the 2030 Notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on future conversions of the 2030 Notes as required by the applicable indenture would constitute a default under such indenture. A default under such indenture or the fundamental change itself could also lead to a default under agreements governing our existing and future indebtedness, including our credit facility. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof.

The conditional conversion feature of our outstanding 2030 Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the 2030 Notes is triggered, holders of such notes will be entitled to convert the notes at any time during specified periods at their option.  If one or more holders elect to convert their notes, we would be required to settle any converted principal through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Certain provisions in the indentures governing the 2030 Notes could delay or prevent an otherwise beneficial takeover or takeover attempt of us.

Certain provisions in the 2030 Notes and the applicable indenture could make it more difficult or more expensive for a third party to acquire us. For example, if a takeover would constitute a fundamental change, holders of the notes will have the right to require us to repurchase their notes in cash. In addition, if a takeover constitutes a make-whole fundamental change, we may be required to increase the conversion rate for holders who convert their notes in connection with such takeover.  In either case, and in other cases, our obligations under the notes and the applicable indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that holders of the notes or holders of our common stock may view as favorable.

The capped call transactions may affect the market price of our common stock.

In connection with the pricing of, and the initial purchasers’ exercise in full of their option to purchase additional, 2030 Notes, we entered into capped call transactions with the option counterparties. The capped call transactions are expected generally to reduce potential dilution to our common stock upon conversion of any 2030 Notes and to offset any cash payments made in excess of the principal amount of converted 2030 Notes, as the case may be, with such reduction and/or offset subject to a cap.

In connection with establishing their initial hedges of the capped call transactions, we expect the option counterparties or their respective affiliates to have purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the 2030 Notes. In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions following the pricing of the 2030 Notes and prior to the maturity of the 2030 Notes (and are likely to do so on each exercise date for the capped call transactions or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the 2030 Notes). This activity could cause or avoid an increase or decrease in the market price of our common stock.

In addition, if any such capped call transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the value of our common stock.

We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of our common stock. In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

We are subject to counterparty risk with respect to the capped call transactions.

The option counterparties are financial institutions, and we will be subject to the risk that any or all of them might default under the capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparties.

Anti-takeover defenses in our amended and restated certificate of incorporation, our amended and restated bylaws and under Delaware law may impede or discourage a merger, a takeover attempt or other business combinations, which could also reduce the market price of our common stock.

We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. Our amended and restated certificate of incorporation and amended and restated bylaws also contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our Board of Directors or take other corporate actions, including effecting changes in our management. These provisions include:

the provision that our Class B common stock is generally entitled to ten votes per share, while our common stock is entitled to one vote per share, enabling the holders of our Class B common stock to effectively control the outcome of substantially all matters submitted to a vote of our stockholders, including the election of directors and change of control transactions;

the provision establishing a classified board of directors with three-year staggered terms and the provision that a director may be removed only for cause, each of which could delay the ability of stockholders to change the membership of a majority of our board of directors;

the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

the right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

the requirement that a special meeting of stockholders may be called only by the directors or by any officer instructed by the directors to call the meeting, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

the ability of our board of directors, by majority vote, to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt.

In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. This statute prohibits a Delaware corporation listed on a national securities exchange from engaging in a business combination with an interested stockholder (generally a person who, together with its affiliates, owns or within the last three years has owned 15% or more of our voting stock subject to certain exceptions) for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The application of Section 203 also could have the effect of delaying or preventing a change in control of us. Any of these provisions could, under certain circumstances, depress the market price of our common stock.

The ability of our board of directors or a committee thereof to create and issue a new series of preferred stock and certain provisions of Delaware law and our certificate of incorporation and bylaws could impede a merger, takeover attempt or other business combination involving us or discourage a potential acquirer from making a tender offer for our common stock, which, under certain circumstances, could reduce the market price of our common stock.

Risks related to the spin-off of the Vishay Precision Group

Vishay Precision Group is using the Vishay   name under license from us, which could result in product and market confusion or the loss of certain of our rights to the Vishay name .

VPG has a worldwide, perpetual and royalty-free license from us to use the “Vishay” mark   as part of its corporate name and in connection with the manufacture, sale, and marketing of the products and services that comprise its measurements and foil resistors businesses. The license of the Vishay name to VPG is important to VPG because the success of VPG depends on the reputation of the Vishay brand for these products and services built over many years.  Nonetheless, there exists the risk that the use by VPG could cause confusion in the marketplace over the products of the two companies, that any negative publicity associated with a product or service of VPG following the spin-off could be mistakenly attributed to our company or that we could lose our own rights to the “Vishay” mark if we fail to impose sufficient controls on VPG’s use of the mark.

General Risk Factors

In addition to the risks relating specifically to our business, a variety of other factors relating to general conditions could cause actual results, performance, or achievements to differ materially from those expressed in any of our forward-looking statements. These factors include:

overall economic and business conditions;

competitive factors in the industries in which we conduct our business;

changes in governmental regulation;

changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations;

changes in GAAP or interpretations of GAAP by governmental agencies and self-regulatory groups;

interest rate fluctuations, foreign currency rate fluctuations, and other capital market conditions; and

economic and political conditions in international markets, including governmental changes and restrictions on the ability to transfer capital across borders.

Our common stock, traded on the New York Stock Exchange, has in the past experienced, and may continue to experience, significant fluctuations in price and volume. We believe that the financial performance and activities of other publicly traded companies in the electronic component industry could cause the price of our common stock to fluctuate substantially without regard to our operating performance.

We operate in a continually changing business environment, and new factors emerge from time to time.  Other unknown and unpredictable factors also could have a material adverse effect on our future financial condition and results of operations.

Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis (“MD&A”) is intended to provide an understanding of Vishay's financial condition, results of operations and cash flows by focusing on changes in certain key measures from year to year. The MD&A should be read in conjunction with our Consolidated Financial Statements and accompanying Notes filed herewith, commencing on page F-1 of this report.  This discussion contains forward-looking statements that involve risks and uncertainties.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed elsewhere in this Annual Report on Form 10-K, particularly in Item 1A. “Risk Factors.”

Overview

Vishay Intertechnology, Inc. ("Vishay," "we," "us," or "our") manufactures one of the world’s largest portfolios of discrete semiconductors and passive electronic components that are essential to innovative designs in the automotive, industrial, computing, consumer, telecommunications, military, aerospace, and healthcare markets.

We operate in six segments based on product functionality: MOSFETs, Diodes, Optoelectronic Components, Resistors, Inductors, and Capacitors.

Our goal is to enhance stockholder value by growing our business and improving earnings per share. Since 1985, we have pursued a business strategy of growth through focused research and development and acquisitions.  We plan to continue to grow our business through intensified internal growth supplemented by opportunistic acquisitions, while maintaining a prudent capital structure. We have developed go-to-market strategies and are investing in and expanding the key product lines for growth that we have identified.  In addition, we are strategically expanding our outsourced production of commodity products to subcontractors. At the same time, we are enhancing our channel management while investing in internal resources by adding customer-facing engineers and filling gaps in technology and market coverage.  Taken together, each of these initiatives supports our Think Customer First organizational culture.

We are focused on realizing the full value of our broad product portfolio, becoming a customer-first company, and capitalizing on the mega trends of e-mobility, sustainability, and connectivity to drive top line growth, expand margins, and optimize stockholder returns.  We are using eight strategic levers to achieve these goals.  Despite the industry recovery being slower than expected, we remain committed to our long-term plan of increasing our capacity to assure our customers of reliable volume as they scale.  While we plan to advance our capacity expansion projects, we have and will continue to modulate spending in response to order flow and the timing of customer demand and qualification.  The decreased lead time for equipment and the increased subcontractor capacity are also variables that allow us to adjust our capacity spending.  We invested $273 million for capital expenditures in 2025, 82% of which was invested in capacity expansion projects for high growth product lines, including our wafer fab expansions.

In addition to enhancing stockholder value through growing our business, in 2022, our Board of Directors adopted a Stockholder Return Policy, which calls for us to return at least 70% of free cash flow, net of scheduled principal payments of long-term debt, on an annual basis.  See further discussion in “Stockholder Return Policy” below.

Our business and operating results have been and will continue to be impacted by worldwide economic conditions.  Our revenues are dependent on end markets that are impacted by consumer and industrial demand, and our operating results can be adversely affected by reduced demand in those global markets.  In this volatile economic environment, we continue to closely monitor our fixed costs, capital expenditure plans, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and resources to meet our future needs.  We believe we can react quickly and professionally to changes in demand to minimize manufacturing inefficiencies and excess inventory build in periods of decline and maximize opportunities in periods of growth.  We implemented restructuring actions in the third fiscal quarter of 2024 designed to optimize our manufacturing footprint and streamline business decision making. We believe we have sufficient liquidity to withstand temporary disruptions in the economic environment.  See additional information regarding our competitive strengths and key challenges as disclosed in Part I.

We utilize several financial metrics, including net revenues, gross profit margin, segment operating income, end-of-period backlog, book-to-bill ratio, inventory turnover, change in average selling prices, net cash and short-term investments (debt), and free cash generation to evaluate the performance and assess the future direction of our business.  See further discussion in “Financial Metrics” and “Financial Condition, Liquidity, and Capital Resources” below.  The key financial metrics were mostly higher versus the prior fiscal quarter and the prior year period.  Net revenues increased versus the prior fiscal quarter and the prior year period primarily due to higher sales volume, but margins were mixed versus the prior fiscal quarter and prior year period.  Margins were negatively impacted by lower average selling prices, higher metals prices and labor costs, and tariffs.

Net revenues for the year ended December 31, 2025 were $3.069 billion, compared to net revenues of $2.938 billion and $3.402 billion for the years ended December 31, 2024 and 2023, respectively.  The net loss attributable to Vishay stockholders for the year ended December 31, 2025 was $(9.0) million, or $(0.07) per share, compared to a net loss of $(31.2) million, or $(0.23) per share, and net earnings of $323.8 million, or $2.31 per diluted share, for the years ended December 31, 2024 and 2023, respectively.

We define adjusted net earnings as net earnings (loss) determined in accordance with GAAP adjusted for various items that management believes are not indicative of the intrinsic operating performance of our business.  We define free cash as the cash flows generated from continuing operations less capital expenditures plus net proceeds from the sale of property and equipment.  We define segment operating income as operating income excluding selling, general, and administrative costs of our global operations, sales and marketing, information systems, finance, and administrative groups, as well as restructuring and severance costs, goodwill impairments, and other items affecting comparability.  The reconciliations below include certain financial measures which are not recognized in accordance with GAAP, including adjusted net earnings, adjusted earnings per share, and free cash.  Note 15 to our consolidated financial statements includes the reconciliation for segment operating income.  These non-GAAP measures should not be viewed as alternatives to GAAP measures of performance or liquidity.  Non-GAAP measures such as adjusted net earnings, adjusted earnings per share, free cash, and segment operating income do not have uniform definitions.  These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies. Management believes that adjusted net earnings, adjusted earnings per share, and segment operating income are meaningful because they provide insight with respect to our intrinsic operating results.  Management believes that free cash is a meaningful measure of our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends.  We utilize the free cash metric in defining our Stockholder Return Policy.  Management uses segment operating income, along with segment gross profit, to make decisions, allocate resources, and assess performance of its operating segments.

Net earnings attributable to Vishay stockholders for the years ended December 31, 2025, 2024, and 2023 include items affecting comparability.  The items affecting comparability are (in thousands, except per share amounts) :

Years ended December 31,

GAAP net earnings (loss) attributable to Vishay stockholders

Other reconciling items affecting operating income:

Favorable resolution of a contingency

Impairment of goodwill

Restructuring and severance costs

Reconciling items affecting other income (expense):

Loss on early extinguishment of debt

Reconciling items affecting tax expense:

Changes in tax laws and regulations

Tax effects of pre-tax items above

Adjusted net earnings (loss)

Adjusted weighted average diluted shares outstanding

Adjusted earnings (loss) per diluted share

Although the term "free cash" is not defined in GAAP, each of the elements used to calculate free cash is presented as a line item on the face of our consolidated statements of cash flows prepared in accordance with GAAP.  Our free cash results are as follows (in thousands) :

Years ended December 31,

Net cash provided by continuing operating activities

Proceeds from sale of property and equipment

Less: Capital expenditures

Free cash

Our accelerated investments to expand capacity have positioned us to be able to better serve our customers and capture the early stages of upturns in end market demand. The long-term outlook for our business remains strong.

Our free cash results were significantly impacted by the installment payments of the U.S. transition tax of $47.0 million in 2025, $37.6 million in 2024, and $27.7 million in 2023, respectively, and payments of foreign and withholding cash taxes of $9.4 million in 2025, $15.0 million in 2024, and $63.6 million in 2023 on foreign earnings of $75.0 million, $105.0 million, and $276.8 million that were repatriated to the U.S. in 2025, 2024, and 2023, respectively.

Growth and Company Transformation Initiatives

Effective January 1, 2023, a new executive leadership team, promoted from within, embarked on a new era at Vishay ("Vishay 3.0").  The new executive management team laid out a three-year plan to expand capacity to support our highest growth and highest return product lines and to position Vishay to be ready for the next phase of megatrends in e-mobility, sustainability, and connectivity. 2023 was the staging year for this plan as all elements of the plan progressed throughout the organization.  In 2024, many of these initiatives advanced and increased manufacturing capacity began to be available.  Additional capacity became available in 2025 and we began to benefit from the additional capacity as we are now able to satisfy quick-turn demand while maintaining competitive lead times.  In 2026, we expect to use our additional capacity to supply customers that are in need of product due to unforeseen events or spikes in demand.  We are also in a much-improved position to participate in the EMS channel as EMS customers are frequently operating with only short-term demand visibility.

To focus this growth, we have identified product lines for growth across each reportable segment.   Most of these product lines serve multiple end-market segments, applications, and business channels.   We have developed go-to market strategies for each one of these product lines, concentrating our resources on improving the technical performance of certified and custom products, to better position Vishay to support the mega trends toward electrification and data communications.

See the eight strategic levers being used to achieve our goals in "Key Business Strategies" in Item 1.

All of this is being done as we implement organizational and structural change at Vishay, focused on a “Think Customer First” philosophy, and becoming a more responsive company.  We are fostering collaboration internally and externally, particularly in the functions connected to customer programs.   To facilitate that change internally, we re-designed our short- and long-term incentive plans to align the performance of about 1,000 key employees with Company growth and profitability objectives and stockholder interests.  The equity-based plan was approved by our stockholders at our 2023 annual meeting.

These Vishay 3.0 initiatives are the foundation for our ambitions to unleash the potential at Vishay, realizing the full value of our broad product portfolio and becoming a customer-first company, and for our goals of driving top line growth, expanding margins and optimizing returns.

Stockholder Return Policy

In 2022, our Board of Directors adopted a Stockholder Return Policy, which calls for us to return at least 70% of free cash flow, net of scheduled principal payments of long-term debt, on an annual basis.  We intend to return such amounts to stockholders directly, in the form of dividends, or indirectly, in the form of stock repurchases.  The policy sets forth our intention, but does not obligate us to acquire any shares of common stock or declare any dividends, and the policy maybe be terminated or suspended at any time at our discretion, in accordance with applicable laws and regulations.  As a result of our negative free cash flow for the fiscal year ended December 31, 2025 due primarily to our capacity expansion plans, we exceeded our intended return through quarterly cash dividends and opportunistic share repurchases.  We did not repurchase any shares of common stock after the first fiscal quarter of 2025.  For 2026, we expect to maintain our dividend and opportunistically repurchase shares based on U.S. available liquidity in line with this policy.

The following table summarizes activity pursuant to this policy  (in thousands):

Years ended

December 31, 2025

December 31, 2024

Dividends paid to stockholders

Stock repurchases

Total

The structure of our Stockholder Return Policy enables us to allocate capital responsibly among our business, our lenders, and our stockholders. We will continue to invest in growth initiatives including key product line expansions, targeted R&D, and synergistic acquisitions.

We have paid dividends each quarter since the first quarter of 2014, and the Stockholder Return Policy will remain in effect until such time as the Board votes to amend or rescind the policy.  Implementation of the Stockholder Return Policy is subject to future declarations of dividends by the Board of Directors, market and business conditions, legal requirements, and other factors.  The policy sets forth our intention, but does not obligate us to acquire any shares of common stock or declare any dividends, and the policy may be terminated or suspended at any time at our discretion, in accordance with applicable laws and regulations.

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, segment operating margin, end-of-period backlog, and the book-to-bill ratio. We also monitor changes in our inventory turnover and our or publicly available 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.  We also regularly evaluate gross profit by segment to assist in the analysis of consolidated gross profit.  Gross profit margin and gross profit margin by segment are clearly a function of net revenues, but also reflect our cost management programs and our ability to contain fixed costs.

Operating margin is computed as gross profit less operating expenses, expressed as a percentage of net revenues.  Operating margin is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed costs.

Our chief operating decision maker makes decisions, allocates resources, and evaluates business segment performance based on segment gross profit and segment operating income.  Only dedicated, direct selling, general, and administrative ("SG&A") expenses of the segments are included in the calculation of segment operating income.  We do not allocate certain SG&A expenses that are managed at the regional or corporate global level to our segments. Accordingly, segment operating income excludes these SG&A expenses that are not directly traceable to the segments.  Segment operating income would also exclude costs not routinely used in the management of the segments in periods when those items are present, such as restructuring and severance costs, goodwill impairment charges, and other items affecting comparability.  Segment operating income is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed costs.  Segment operating margin is segment operating income expressed as a percentage of net revenues.

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.  Using our and publicly available data, 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.  All pricing is subject to governing market conditions and is independently set by us.

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 fourth fiscal quarter of 2024 through the fourth fiscal quarter of 2025 (dollars in thousands) :

4th Quarter

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Net revenues

Gross profit margin

Operating margin (1)

End-of-period backlog

Book-to-bill ratio

Inventory turnover

Change in ASP vs. prior quarter

(1) Operating margin for the second fiscal quarter of 2025 includes an $11.3 million gain recognized upon the favorable resolution of a contingency (See Note 2 to our consolidated financial statements).  Operating margin for the fourth fiscal quarter of 2024 includes $66.5 million of goodwill impairment charges (see Note 19 to our consolidated financial statements).

See “Financial Metrics by Segment” below for net revenues, book-to-bill ratio, and gross profit margin by segment.

Revenues in the fourth fiscal quarter of 2025 increased versus the fourth fiscal quarter of 2024 and prior fiscal quarter primarily due to higher sales volume. Favorable foreign currency impacts also contributed to the increase versus the fourth fiscal quarter of 2024.  The book-to-bill ratio and backlog increased significantly versus the prior fiscal quarter and the fourth fiscal quarter of 2024.  We continue to increase capacity for critical product lines.  Average selling prices, including tariff adders, decreased versus the fourth fiscal quarter of 2024 and prior fiscal quarter.

Gross profit margin increased slightly versus the prior fiscal quarter, but decreased versus the fourth fiscal quarter of 2024.  The decrease versus the fourth fiscal quarter of 2024 is primarily due to lower average selling prices, the impact of tariffs, and higher input costs.

The book-to-bill ratio in the fourth fiscal quarter of 2025 increased to 1.20 versus 0.97 in the third fiscal quarter of 2025.

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 fourth fiscal quarter of 2024 through the fourth fiscal quarter of 2025 (dollars in thousands) :

4th Quarter

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

MOSFETs

Net revenues

Book-to-bill ratio

Gross profit margin

Segment operating margin

Diodes

Net revenues

Book-to-bill ratio

Gross profit margin

Segment operating margin

Optoelectronic Components

Net revenues

Book-to-bill ratio

Gross profit margin

Segment operating margin

Resistors

Net revenues

Book-to-bill ratio

Gross profit margin

Segment operating margin

Inductors

Net revenues

Book-to-bill ratio

Gross profit margin

Segment operating margin

Capacitors

Net revenues

Book-to-bill ratio

Gross profit margin

Segment operating margin

Acquisition Activity

part of its growth strategy, the Company seeks to expand through targeted acquisitions of other manufacturers of electronic components.  These acquisition targets include businesses that have established positions in major markets, reputations for product quality and reliability, and product lines with which the Company has substantial marketing and technical expertise.  It also includes certain businesses that possess technologies which the Company expects to further develop and commercialize, businesses with well-developed technologies that the Company expects to grow using its manufacturing capabilities, capacity, and economies of scale to expand production and sell to its global customer base, such as Ametherm, Inc., acquired in 2024; and key niche suppliers to vertically integrate our supply chain, such as Birkelbach Kondensatortechnik GmbH, acquired in 2024.  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 calculate pro forma EBITDA as the adjusted EBITDA of Vishay and the target for the trailing four 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 trailing four fiscal quarters.

In 2024, we acquired Nexperia's wafer fabrication facility and operations located in Newport, South Wales, U.K. for approximately $177.5 million in cash, net of cash acquired.  The wafer fabrication facility is located on 28 acres and is an automotive-certified, 200mm semiconductor wafer fab with capacity to produce more than 30,000 wafers per month.  We plan to use the Newport wafer fabrication facility to further develop and scale our SiC MOSFETs and diodes capabilities.  The facility is a long-term investment which was not expected to generate income or cash flows in 2024 and 2025 while we invested in new equipment and qualified new products, but should enhance the long-term position of our MOSFETs business.  We expect the facility to start generating profit in 2026.

There is no assurance that we will be able to identify and acquire suitable acquisition candidates at price levels and on terms and conditions we consider acceptable.

See Note 2 to our consolidated financial statements.

Cost Management

We place a strong emphasis on controlling our costs, and use various measures and metrics to evaluate our cost structure.

We define variable costs as expenses that vary with respect to quantity produced.  Fixed costs do not vary with respect to quantity produced over the relevant time period.  Contributive margin is calculated as net revenue less variable costs.  It may be expressed in dollars or as a percentage of net revenue. Management uses this measure to determine the amount of profit to be expected for any change in revenues.  While these measures are typical cost accounting measures, none of these measures are recognized in accordance with GAAP.  The classification of expenses as either variable or fixed is judgmental and other companies might classify such expenses differently.  These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies.

We closely monitor variable costs and seek to achieve the contributive margin in our business model.  Over a period of many years, we have generally maintained a contributive margin of between 45% and 47% of revenues.  The erosion of average selling prices, particularly of our semiconductor products, that is typical of our industry, and inflation negatively impact contributive margin and drive us to continually seek ways to reduce our variable costs.  Our variable cost reduction efforts include increasing the efficiency in our production facilities by expending capital for automation, reducing materials costs, materials substitution, 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 recorded as costs of products sold or selling, general, and administrative expenses and maintaining our break-even point (adjusted for acquisitions).  We generally seek to limit increases in selling, general, and administrative expenses to the rate of inflation, excluding foreign currency exchange effects and substantially independent of sales volume changes. At constant fixed costs, we would expect each $1 million increase in revenues to increase our operating income by approximately $450,000 to $470,000.  Sudden changes in the business conditions, however, may not allow us to quickly adapt our manufacturing capacity and cost structure.

As the Company transforms, we are incurring certain costs which are reducing current profitability while positioning the Company for future long-term profitable growth.

The acquisition of Nexperia's Newport fab in 2024 will enhance the manufacturing capacity and capabilities of our MOSFETs segment.  The facility added significant depreciation and other costs to our MOSFETs segment. The facility has generated losses while we invested in new equipment and qualified new products.  We expect the facility to start generating profit in 2026.  Also, beginning in 2023, we began making significant investments in capital expenditures primarily for capital expansion projects primarily outside of China, which has and will further increase depreciation expense.  At the same time, we are focusing on increasing our technical resources, adding additional customer-facing engineers, and intensifying our activities in R&D.

We have seen and expect to continue to see an increase in operating expenses over the next couple of years as we add engineering talents, fill gaps in our technology, and become a preferred supplier to more customers and more broadly sell our product portfolio.

For several years prior to 2023, share-based compensation expense was between $4 million and $6 million annually.  During 2023, we implemented the Vishay Intertechnology, Inc. 2023 Long-Term Incentive Plan (the "2023 Plan") to enable us to recruit and retain highly qualified employees, directors, consultants and other service providers, provide them with an incentive for productivity, and create an opportunity for them to share in the growth and value of the Company.  The 2023 Plan enhanced incentive compensation for our executive officers and is the first broad-based stock compensation program at Vishay in over 20 years.  Share-based compensation expense was $22.4 million in 2025 and is expected to be between approximately $27 million and $30 million in 2026.  Management believes such additional non-cash costs will enhance the long-term performance of the Company by providing selected participants with an incentive to improve the growth and profitability of the Company.

In 2024, we revised our short-term incentive ("STI") compensation structure to better align with our growth objectives.  The revised structure incentivizes daily behaviors and actions of our organizational leaders to create immediate growth in line with our cross-functional business objectives.  Under the structure, organizational leaders are rewarded annually for meeting determined targets in revenue, operating margin, gross margin, and variable margin.  Managers are able to earn up to 130% of their former STI bonus targets for results which exceed expectations.  The better alignment of the STI program with business results creates higher volatility in costs.  The industry downturn that led to results that were below expectations in 2024 led to relatively low bonus accruals and thus lower reported SG&A expenses, while 2025 bonus accruals were higher compared to 2024.  Costs associated with the STI program in 2026 are expected to be significantly higher if business results meet or exceed expectations.

In September 2024, we announced restructuring actions designed, in part, to optimize our manufacturing footprint and streamline business decision making. We recognized restructuring expense pursuant to on-going benefit arrangements of $40.6 million in 2024. The actions are expected to generate annualized cost savings of approximately $23 million (annualized), including $12 million of selling, general and administration expenses, when the actions are fully implemented by the end of 2026.

We continue to monitor the economic environment and its potential effects on our customers and the end markets that we serve.  We are continuing to assess our manufacturing footprint in light of ongoing geopolitical events and cost savings opportunities.

In uncertain times, we focus on managing our production capacities in accordance with customer requirements, and maintain discipline in terms of our fixed costs and capital expenditures. Even as we seek to manage our costs, we remain cognizant of the future requirements of our demanding markets. We continue to pursue our growth plans through investing in capacities for strategic product lines, and through increasing our resources for R&D, technical marketing, and field application engineering; supplemented by opportunistic acquisitions of specialty businesses.

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 statement of operations, as such expenses are incurred.  We have not incurred any material plant closure or employee termination costs related to any of the businesses acquired since 2011, but we expect to have some level of future restructuring expenses due to acquisitions.

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.  We occasionally use forward exchange contracts to economically hedge a portion of our projected cash flows from these exposures.

GAAP requires that entities identify the “functional currency” of each of their 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 consolidated statement 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 was weaker during 2025 versus 2024, with the translation of foreign currency revenues and expenses into U.S. dollars increasing reported revenues and expenses in 2025 versus 2024.  The net change of the dollar was not material when comparing 2024 versus 2023.

Foreign Subsidiaries which use the U.S. Dollar as the Functional Currency

Our operations in Israel, the United Kingdom, 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 have been unfavorably impacted for the year ended December 31, 2025 compared to 2024 by local currency transactions of subsidiaries which use the U.S. dollar as their functional currency. The costs of products sold and selling, general, and administrative expense were favorably impacted for the year ended December 31, 2024 compared to 2023.

See Item 7A for additional discussion of foreign currency exchange risk and forward contracts used to mitigate certain foreign currency risks.

Critical Accounting Policies and Estimates

Our significant accounting policies are summarized in Note 1 to our consolidated financial statements. We identify here a number of policies that entail significant judgments or estimates.

Revenue Recognition

Revenue is measured based on the consideration specified in contracts with customers, and excludes any sales incentives and amounts collected on behalf of third parties.  We recognize revenue when we satisfy our performance obligations.

We have a broad line of products that we sell to OEMs, electronic manufacturing services ("EMS") companies, which manufacture for OEMs on an outsourcing basis, and independent distributors that maintain large inventories of electronic components for resale to OEMs and EMS companies.

We recognize revenue on sales to distributors when the distributor takes control of the products ("sold-to" model).  We have agreements with distributors that allow distributors a limited credit for unsaleable products, which we refer to as a "scrap allowance." Consistent with industry practice, we also have a "stock, ship and debit" program whereby we consider requests by distributors for credits on previously purchased products that remain in distributors' inventory, to enable the distributors to offer more competitive pricing.  In addition, we have contractual arrangements whereby we provide distributors with protection against price reductions initiated by us after product is sold by us to the distributor and prior to resale by the distributor.

We recognize the estimated variable consideration to be received as revenue and record a related accrued expense for the consideration not expected to be received, based upon an estimate of product returns, scrap allowances, "stock, ship and debit" credits, and price protection credits that will be attributable to sales recorded through the end of the period.  We make these estimates based upon sales levels to our customers during the period, inventory levels at the distributors, current and projected market conditions, and historical experience under the programs. We utilize a number of different methodologies and consider several factors when estimating the accruals.  Some of the factors that we consider are sales levels to customers during the relevant period, 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. These procedures require the exercise of significant judgments.  We believe that we have a reasonable basis to estimate future credits under the programs.

See Notes 1 and 15 to our consolidated financial statements for further information.

Inventories

We value our inventories at the lower of cost or net realizable value, with cost determined using moving average and the first-in, first-out methods. The valuation of our inventories requires our management to make market estimates.  For work in process goods, we are required to estimate the cost to completion of the products and the prices at which we will be able to sell the products.  For finished goods, we must assess the prices at which we believe the inventory can be sold. Inventories are also adjusted for estimated obsolescence and written down to net realizable value based on age of the inventory and upon estimates of future demand, technology developments, and market conditions.

Goodwill

Goodwill represents the excess of the cost of businesses acquired over the fair value of the related net assets at the date of acquisition. We do not amortize goodwill, but test it at least annually for impairment at the reporting unit level.  Impairment tests must be performed more frequently if there are indicators of impairment.  A reporting unit is an operating segment, or one level below an operating segment, if it constitutes a business for which discrete financial information is available and regularly reviewed by segment management.  Our business segments represent our reporting units for goodwill impairment testing purposes.  See Note 15 to our consolidated financial statements for a description of our business segments.

When performing a quantitative goodwill impairment test, we determine fair values generally based on a weighting of income and market approaches.  For purposes of the income approach, fair values are determined based upon the present value of the reporting unit’s estimated future cash flows, discounted at appropriate risk-adjusted rates.  We use our internal forecasts to estimate future cash flows, which may include estimates of long-term future growth rates based upon our most recent reviews of the long-term outlook for each reporting unit.  Cash flow estimates used to establish fair values under our income approach involve management judgments based on a broad range of information and historical results. In addition, external economic and competitive conditions can influence future performance. For purposes of the market approach, we use valuation multiples for companies comparable to our reporting units.

The determination of the fair value of the reporting units requires us to make significant estimates and assumptions.  These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which we compete; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization (components of earnings before interest, taxes, depreciation, and amortization, "EBITDA"); and capital expenditures.

Due to the inherent uncertainty involved in making these estimates, actual financial results could differ from those estimates.  In addition, changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the fair value of the reporting unit and the amount of the goodwill impairment charge.

See Notes 1 and 19 to our consolidated financial statements for a description of our goodwill impairment tests.

Pension and Other Postretirement Benefits

Our defined benefit plans are concentrated in the United States, Germany, and the Republic of China (Taiwan). At December 31, 2025, our U.S. plans include various non-qualified plans.  The table below summarizes information about our pension and other postretirement benefit plans.  This information should be read in conjunction with Note 11 to our consolidated financial statements (amounts in thousands):

Benefit

obligation

Plan assets

Funded

position

Informally

funded assets

Net position

Unrecognized

actuarial

items

U.S. non-qualified pension plans

German pension plans

Taiwanese pension plans

Other pension plans

OPEB plans

Other retirement obligations

Accounting for defined benefit pension and other postretirement plans involves numerous assumptions and estimates. The discount rate at which obligations could effectively be settled and the expected long-term rate of return on plan assets are two critical assumptions in measuring the cost and benefit obligations of our pension and other postretirement benefit plans. Other important assumptions include the anticipated rate of future increases in compensation levels, estimated mortality, and for certain postretirement medical plans, increases or trends in health care costs.  Management reviews these assumptions at least annually.  We use independent actuaries and investment advisers to assist us in formulating assumptions and making estimates.  These assumptions are updated periodically to reflect the actual experience and expectations on a plan specific basis as appropriate.

In the U.S., we utilize published long-term high quality bonds to determine the discount rate at the measurement date. In Germany and the Republic of China (Taiwan), we utilize published long-term government bond rates to determine the discount rate at the measurement date.  We utilize bond yields at various maturity dates that reflect the timing of expected future benefit payments. We believe the discount rates selected are the rates at which these obligations could effectively be settled.

Non-qualified plans in the U.S. are considered by law to be unfunded.  However, the Company maintains assets in a rabbi trust to fund benefit payments under certain of these plans.  Such assets would be subject to creditor claims under certain conditions.  (See also Notes 11 and 18 to our consolidated financial statements.)

Many of our non-U.S. plans are unfunded based on local laws and customs. For those non-U.S. plans that do maintain investments, their asset holdings are primarily cash and fixed income securities, based on local laws and customs. Some non-U.S. plans also informally fund their plans by holding certain available-for-sale investments.  Such assets would be subject to creditor claims under certain conditions. (See also Note 18 to our consolidated financial statements.)

We set the expected long-term rate of return based on the expected long-term average rates of return to be achieved by the underlying investment portfolios.  In establishing this rate, we consider historical and expected returns for the asset classes in which the plans are invested, advice from pension consultants and investment advisors, and current economic and capital market conditions. The expected return on plan assets is incorporated into the computation of pension expense.  The difference between this expected return and the actual return on plan assets is deferred.  The net deferral of past asset losses (gains) affects the calculated value of plan assets and, ultimately, future pension expense (income).

We continue to seek to de-risk our global pension exposures.  Such actions could result in increased net periodic pension cost due to lower expected rates of return on plan assets and/or possible additional charges to recognize unamortized actuarial items if all or a portion of the obligations were to be settled.

We believe that the current assumptions used to estimate plan obligations and annual expenses are appropriate.  However, if economic conditions change or if our investment strategy changes, we may be inclined to change some of our assumptions, and the resulting change could have a material impact on the consolidated statements of operations and on the consolidated balance sheet.

Income Taxes

We are subject to income taxes in the U.S. and numerous foreign jurisdictions.  Significant judgment is required in evaluating our tax positions and determining our provision for income taxes.  During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.  We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.  These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable.  We adjust these reserves in light of changing facts and circumstances and the provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.

These accruals for tax-related uncertainties are based on our best estimate of potential tax exposures. When particular matters arise, a number of years may elapse before such matters are audited by tax authorities and finally resolved.  Favorable resolution of such matters could be recognized as a reduction to our effective tax rate in the year of resolution.  Unfavorable resolution of any particular issue could increase the effective tax rate and may require the use of cash in the year of resolution.

During 2025, certain tax examinations were concluded and certain statutes of limitations lapsed.  Our tax provision for 2025 includes adjustments related to the resolution of these matters.  During 2023, we settled an examination of our U.S. federal income tax returns for the periods ended December 31, 2017 through 2019.  Our federal income tax returns for the years 2022 through 2024 remain subject to examination.  The tax returns of significant non-U.S. subsidiaries currently under examination are located in the following jurisdictions:  Israel (2021), China (2022 through 2024), India (2004 through 2023), and Philippines (2020 through 2022).  The Company and its subsidiaries also file income tax returns in other taxing jurisdictions in the U.S. and around the world, many of which are still open to examination.

See Notes 1 and 5 to consolidated financial statements for additional information.

Results of Operations

Statement of operations’ captions as a percentage of net revenues and the effective tax rates were as follows:

Years ended December 31,

Costs of products sold

Gross profit

Selling, general, and administrative expenses

Operating income

Income (loss) before taxes and noncontrolling interest

Net earnings (loss) attributable to Vishay stockholders

Effective tax rate

Net Revenues

Net revenues were as follows (dollars in thousands) :

Net revenues

Change versus prior year

Percentage change versus prior year

Changes in net revenues were attributable to the following:

Change attributable to:

Change in volume

Decrease in average selling prices

Foreign currency effects

Acquisitions

Other

Net change

For most of 2024 and 2025, we operated in a challenging environment, in part due to distribution customers digesting high channel inventories.  The fourth quarter of 2025 saw short-term market conditions improving, and the long-term prospects for our business remain favorable.  We continue to increase manufacturing capacities for critical product lines.  The increase in net revenues in 2025 is primarily due to higher sales volume.  The decrease in net revenues in 2024 was primarily due to lower sales volume and decreased average selling prices.

Gross Profit and Margins

Gross profit margins for the year ended December 31, 2025 were 19.4%, as compared to 21.3% for the year ended December 31, 2024.  The decrease in gross profit margin is primarily due to lower average selling prices and higher metals and materials costs.  Higher labor costs and depreciation expense also negatively impacted the gross profit margin.

Segments

Analysis of revenues and margins for our segments is provided below.

MOSFETs

Net revenues of the MOSFETs segment were as follows (dollars in thousands):

Years ended December 31,

Net revenues

Change versus comparable prior year period

Percentage change versus comparable prior year period

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

Change attributable to:

Change in volume

Decrease in average selling prices

Foreign currency effects

Acquisition

Other

Net change

Gross profit margins and segment operating margins for the MOSFETs segment were as follows:

Years ended December 31,

Gross profit margin

Segment operating margin

Net revenues of the MOSFETs segment increased in 2025 versus the prior year.  The increase is primarily due to increased sales to distribution customers, computing end market customers, and customers in the Asia region.

Gross profit margin decreased versus the prior year primarily due to decreased average selling prices, partially offset by higher sales volume.  Costs associated with the Newport wafer fab also contributed to the decrease versus the prior year.

Segment operating margin decreased versus the prior year.  The decrease is primarily due to gross profit margin decreases and increased segment SG&A expenses associated with the Newport wafer fab.

Average selling prices decreased versus the prior year.

We continue to invest to expand mid- and long-term manufacturing capacity for strategic product lines.  We plan to use the Newport wafer fabrication facility, acquired in 2024, to further develop and scale our SiC MOSFETs and diodes capabilities.  We are also committed to building a 12-inch wafer fab in Itzehoe, Germany.  These are long-term investments which were not expected to generate significant income or cash flows in the near-term, but should greatly enhance the long-term position of our MOSFETs business.

Diodes

Net revenues of the Diodes segment were as follows (dollars in thousands):

Years ended December 31,

Net revenues

Change versus comparable prior year period

Percentage change versus comparable prior year period

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

Change attributable to:

Change in volume

Decrease in average selling prices

Foreign currency effects

Other

Net change

Gross profit margins and segment operating margins for the Diodes segment were as follows:

Years ended December 31,

Gross profit margin

Segment operating margin

Net revenues of the Diodes segment increased in 2025 versus the prior year.  The increase versus the prior year is primarily due to increased sales to distribution customers, industrial and power supply end market customers, and customer in the Europe region.

Gross profit margin decreased versus the prior year primarily due to decreased average selling prices, partially offset by higher sales volume.

Segment operating margin decreased versus the prior year primarily due to decreased gross profit.

Average selling prices decreased versus the prior year.

O ptoelectronic Components

Net revenues of the Optoelectronic Components segment were as follows (dollars in thousands):

Years ended December 31,

Net revenues

Change versus comparable prior year period

Percentage change versus comparable prior year period

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

Change attributable to:

Change in volume

Decrease in average selling prices

Foreign currency effects

Other

Net change

Gross profit margins and segment operating margins for the Optoelectronic Components segment were as follows:

Years ended December 31,

Gross profit margin

Segment operating margin

Net revenues of the Optoelectronic Components segment increased in 2025 versus the prior year.  The increase is primarily due to increased sales to distribution customers, industrial end market customers, and customers in the Europe and Americas regions.

Gross profit margin increased versus the prior year.  The increase is primarily due to increased sales volume, lower fixed and variable costs, and less inventory obsolescence.

Segment operating margin increased primarily due to the increase in gross profit.

Average selling prices decreased versus the prior year.

Resistors

Net revenues of the Resistors segment were as follows (dollars in thousands):

Years ended December 31,

Net revenues

Change versus comparable prior year period

Percentage change versus comparable prior year period

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

Change attributable to:

Change in volume

Decrease in average selling prices

Foreign currency effects

Acquisitions

Other

Net change

Gross profit margins and segment operating margins for the Resistors segment were as follows:

Years ended December 31,

Gross profit margin

Segment operating margin

Net revenues of the Resistors segment increased in 2025 versus the prior year.  The increase is primarily due to increased sales to distribution customers, industrial and automotive end market customers, and customers in the Asia and Americas regions.

Gross profit margin decreased versus the prior year.  The decrease is due to decreased average selling prices and higher materials costs, partially offset by higher sales volume.

Segment operating margin decreased versus the prior year.  The decrease is primarily due to decreased gross profit and increased SG&A costs.

Average selling prices decreased versus the prior year.

We are increasing critical manufacturing capacities for certain product lines.  We continue to broaden our business with targeted acquisitions of specialty resistors businesses.

Inductors

Net revenues of the Inductors segment were as follows (dollars in thousands):

Years ended December 31,

Net revenues

Change versus comparable prior year period

Percentage change versus comparable prior year period

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

Change attributable to:

Increase in volume

Change in average selling prices

Foreign currency effects

Net change

Gross profit margins and segment operating margins for the Inductors   segment were as follows:

Years ended December 31,

Gross profit margin

Segment operating margin

Net revenues of the Inductors segment increased slightly in 2025 versus the prior year.  The increase is primarily due to increased sales to distribution customers, industrial and healthcare end market customers, and customers in the Asia region, partially offset by decreased sales to military and aerospace end market customers.

Gross profit margin decreased versus the prior year.  The decrease is primarily due to higher variable costs.

Segment operating margin decreased versus the prior year.  The decrease is primarily due to decreased gross profit.

Average selling prices increased versus the prior year.

We expect long-term growth in this segment, and are continuously expanding manufacturing capacity for certain product lines and evaluating acquisition opportunities, particularly of specialty businesses.

Capacitors

Net revenues of the Capacitors segment were as follows (dollars in thousands):

Years ended December 31,

Net revenues

Change versus comparable prior year period

Percentage change versus comparable prior year period

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

Change attributable to:

Change in volume

Change in average selling prices

Foreign currency effects

Acquisitions

Other

Net change

Gross profit margins and segment operating margins for the Capacitors segment were as follows:

Years ended December 31,

Gross profit margin

Segment operating margin

Net revenues of the Capacitors segment increased significantly in 2025 versus the prior year.  The increase is primarily due to increased sales to distribution customers, industrial and telecommunications end market customers, and customers in the Asia region, partially offset by decreased sales to military and aerospace end market customers.

Gross profit margin decreased versus the prior year.  The decrease is primarily due to higher material and fixed costs, partially offset by higher sales volume and increased average selling prices.

Segment operating margin decreased versus the prior year.  The decrease is primarily due to decreased gross profit.

Average selling prices have increased slightly versus the prior year.

A large portion of expected growth of our Capacitors segment is in high voltage high power film capacitors used for smart-grid infrastructure projects.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses are summarized as follows (dollars in thousands) :

Years ended December 31,

Total SG&A expenses

as a percentage of sales

We are incurring additional SG&A costs associated with our strategic initiatives.  See "Cost Management" above.  SG&A expenses for the year ended December 31, 2025 increased versus the year ended December 31, 2024 due to higher stock-based compensation, general cost inflation, and foreign currency impacts.  SG&A expenses in 2025 include an $11.3 million gain recognized upon the favorable resolution of a contingency.

Other Income (Expense)

2025 Compared to 2024

Interest expense for the year ended December 31, 2025 increased by $11.2 million versus the year ended December 31, 2024.  The increase is primarily due to higher average outstanding balances on our revolving credit facility.

The following table analyzes the components of the line “Other” on the consolidated statements of operations (in thousands):

Years ended December 31,

Change

Foreign exchange gain (loss)

Interest income

Other components of net periodic pension expense

Investment income (loss)

Other

2024 Compared to 2023

Interest expense for the year ended December 31, 2024 increased by $ 2.3 million versus the year ended December 31, 2023.  The increase is primarily due to the issuance of the convertible senior notes due 2030 in the third fiscal quarter of 2023.

The following table analyzes the components of the line “Other” on the consolidated statements of operations (in thousands):

Years ended December 31,

Change

Foreign exchange gain

Interest income

Other components of net periodic pension expense

Investment income (loss)

Other

Income Taxes

For the years ended December 31, 2025, 2024, and 2023, the effective tax rates were 135.2%, (1,145.5)%,

and 30.4%, respectively.  We expect that our effective tax rate will be higher than the U.S. statutory rate, excluding unusual transactions.  Our GAAP effective tax rates for the years ended December 31, 2025 and 2024 are not meaningful at the low levels of pre-tax loss. Our current effective tax rate is not indicative of expected future tax rates due to relatively small items having a disproportionate impact on the current effective tax rate.  When pre-tax earnings increase, we expect that our effective tax rate will be higher than the U.S. statutory rate, excluding unusual transactions.

On July 4, 2025, H.R. 1 (the "Act"), a tax reconciliation act, was enacted into law in the United States.  The Act did not change the U.S. federal tax rate and most of the provisions of the Act are effective for tax years beginning after December 31, 2025.  We have recorded no change to the deferred U.S. taxes directly related to the Act.  The Act allows the deduction in tax year 2025, or in tax years 2025 and 2026, of some previously capitalized research and development costs.  We anticipate that these additional tax deductions may preclude the utilization of a U.S. foreign tax credit ("FTC") that is due to expire in 2028.  As an indirect result of this change in tax law, we have recorded a valuation allowance of $9.4 million on the deferred tax asset related to this FTC.  The Act made significant change of foreign GILTI income, now called net CFC tested income.  We anticipate that these changes will negatively impact our effective tax rate in the future.

In the third fiscal quarter of 2025, the Federal Republic of Germany enacted tax legislation decreasing the federal tax rate beginning in 2028 by 1% per year for five years.  We have recorded deferred tax expense of $4.2 million to reduce the carrying amount of deferred tax assets in Germany based on these new rates.

There were no unusual tax transactions that impacted the effective tax rate for the years ended December 31, 2024 and December 31, 2023.

We operate in a global environment with significant operations in various locations outside the United States. Accordingly, the consolidated income tax rate is a composite rate reflecting our earnings and the applicable tax rates in the various locations where we operate. Part of our historical strategy has been to achieve cost savings through the transfer and expansion of manufacturing operations to countries where we can take advantage of lower labor costs and available tax and other government-sponsored incentives.

Additional information about income taxes is included in Note 5 to our consolidated financial statements.

Financial Condition, Liquidity, and Capital Resources

Our financial condition as of December 31, 2025 is adequate to meet our capital expenditure and other growth plans.  We have historically been a strong generator of operating cash flows.  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, fund our stockholder return policy, and to reduce debt levels.

Management uses a non-GAAP measure, "free cash," to evaluate our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends.  See "Overview" above for "free cash" definition and reconciliation to GAAP.

Cash flows provided by operating activities were $184.3 million for the year ended December 31, 2025, as compared to cash flows provided by operating activities of $173.7 million for the year ended December 31, 2024.

In order to manage our working capital and operating cash needs, we monitor our cash conversion cycle.  The following table presents the components of our cash conversion cycle during the five fiscal quarters beginning with the fourth fiscal quarter of 2024 through the fourth fiscal quarter of 2025:

4th Quarter 2024

1st Quarter 2025

2nd Quarter 2025

3rd Quarter 2025

4th Quarter 2025

Days sales outstanding ("DSO") (a)

Days inventory outstanding ("DIO") (b)

Days payable outstanding ("DPO") (c)

Cash conversion cycle

a)  DSO measures the average collection period of our receivables.  DSO is calculated by dividing the average accounts receivable by the average net revenue per day for the respective fiscal quarter.

b)  DIO measures the average number of days from procurement to sale of our product.  DIO is calculated by dividing the average inventory by average cost of goods sold per day for the respective fiscal quarter.

c)  DPO measures the average number of days our payables remain outstanding before payment.  DPO is calculated by dividing the average accounts payable by the average cost of goods sold per day for the respective fiscal quarter.

The cash conversion cycle improved to 125 days in the fourth fiscal quarter of 2025, reflecting our sale of $62.2 million trade receivables and disciplined working capital management.

Cash paid for property and equipment for the year ended December 31, 2025 was $273.3 million, as compared to $320.1 million for the year ended December 31, 2024.  Cash paid for property and equipment for the year ended December 31, 2025 was slightly below expectations as delivery of some equipment was delayed until the first fiscal quarter of 2026.  To be well positioned to service our customers and to fully participate in growing markets, we have increased and expect to maintain a relatively high level of capital expenditures for expansion in the mid-term.  We remain committed to our long-term plan of increasing Vishay's capacity, to assure our customers of reliable volume as they scale.  While we plan to advance our capacity expansion projects, we have and will continue to modulate spending in response to order flow and the timing of customer demand and qualifications.  The decreased lead time for equipment and the increased subcontractor capacity are also variables that allow us to adjust our capacity spending.  For 2026, we plan to spend between $400 million to $440 million, at least 70% of which will be invested in capacity expansion projects for high growth product lines, including our wafer fab expansions.

Free cash flow for the years ended December 31, 2025 and December 31, 2024 were negative primarily due to high levels of capital expenditures for expansion.  Free cash flow improved for the year ended December 31, 2025 versus the year ended December 31, 2024 primarily due to the sale of trade receivables and decreased capital expenditures.  We expect free cash flow will be negatively impacted by the expected high level of capital expenditures for expansion after which we expect to generate increasingly higher levels of free cash.  There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash at our historical levels, or at all, going forward if the economic environment worsens.

In 2022, our Board of Directors adopted a Stockholder Return Policy that will remain in effect until such time as the Board votes to amend or rescind the policy.  See “Stockholder Return Policy” above for additional information.

The following table summarizes the components of net cash and short-term investments (debt) (in thousands) :

December 31,

December 31,

Credit facility

Convertible senior notes, due 2025

Convertible senior notes, due 2030

Deferred financing costs

Total debt

Cash and cash equivalents

Short-term investments

Net cash and short-term investments (debt)

"Net cash and short-term investments (debt)" does not have a uniform definition and is not recognized in accordance with GAAP. This measure should not be viewed as an alternative to GAAP measures of performance or liquidity. However, management believes that an analysis of "net cash and short-term investments (debt)" assists investors in understanding aspects of our cash and debt management. The measure, as calculated by us, may not be comparable to similarly titled measures used by other companies.

We invest 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 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 interest rates on our short-term investments vary by location.  Transactions related to these investments are classified as investing activities on our consolidated statements of cash flows.

Our business is geographically diverse and our cash is generated by our subsidiaries around the world.  Cash dividends to stockholders, share repurchases, and principal and interest payments on our debt instruments need to be paid by the U.S. parent company, Vishay Intertechnology, Inc.  We continue to allocate capital responsibly between our business, our lenders, and our stockholders.  The capital allocated to our business is further allocated between our subsidiaries to meet local operating cash needs, to fund capital expenditures as part of our growth plan, and to meet corporate funding needs while also aiming to minimize our tax expense.

During the second fiscal quarter of 2025, we repatriated $75 million of accumulated earnings to the United States and paid withholding taxes in Israel of $9.4 million.  As of December 31, 2025, $13.4 million of our cash and cash equivalents and short-term investments were held by our U.S. subsidiaries.  As of December 31, 2025, we are in a net borrowing position in the U.S. and we expect to continue to be at least through 2026 based on expected cash payments pursuant to our Stockholder Return Policy and funding of our growth plan.  As of December 31, 2025, we have approximately $493 million of German and Israeli earnings that are deemed not indefinitely reinvested.  Based on the expected timing of future repatriations, we estimate that the tax liability to repatriate these unremitted earnings will be approximately $76 million, which has been accrued, but will only be paid upon repatriation of the unremitted earnings.  Repatriating these unremitted earnings earlier than currently planned may not be possible and may incur additional tax expense.  We also have amounts of unremitted foreign earnings held by subsidiaries in countries other than Israel and Germany, which continue to be reinvested indefinitely, that we have not accrued for the incremental foreign income taxes and withholding taxes payable to foreign jurisdictions that would be incurred to repatriate these amounts.  Certain of these subsidiaries are located in countries with restrictive regulations and high tax rates for repatriating cash.  Due to the uncertainties associated with the ability, timing, and method to repatriate these unremitted earnings and other complexities associated with its hypothetical calculation, determination of the amount of tax expense that would be incurred to repatriate the unremitted earnings is not practicable, but could be significant.  Our undrawn credit facility provides us with adequate operating liquidity in the United States.

Upon successful completion of our growth plan, we expect to generate increasingly higher levels of free cash that will be sufficient to meet our long-term financing needs related to normal operating requirements, regular dividend payments, share repurchases pursuant to our Stockholder Return Policy, while allowing us to manage our repatriation and financing activities to minimize tax and interest expense.  During the current period of intensified capital expenditures to achieve our growth plans, we are considering a combination of additional and alternative sources of financing and our cash on hand to fund a portion of the capital expenditures that would conserve cash for future acquisitions while enabling us to minimize tax expense.  In the fourth fiscal quarter of 2025, we entered into agreements to sell accounts receivable on a revolving basis that provides up to approximately $150 million source of funding without impacting our credit facility compliance ratios.

We maintain a $750 million revolving credit agreement with a consortium of banks led by JPMorgan Chase Bank, N.A., that matures on May 8, 2028.  The maximum amount available on the revolving credit facility is restricted by the financial covenants described below.  The credit facility also provides us the ability to request up to $300 million of incremental facilities, subject to the satisfaction of certain conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt.

Pursuant to the credit facility, the financial maintenance covenants include (a) an interest coverage ratio of not less than 3.25 to 1; and (b) a net leverage ratio of not more than 3.25 to 1 (and a pro forma ratio of 3.00 to 1 on the date of incurrence of additional debt).  Net leverage ratio reduces the measure of outstanding debt by up to $250 million of unrestricted cash.

The credit facility limits or restricts us from, among other things, incurring indebtedness, incurring liens on its respective assets, making investments and acquisitions (assuming our pro forma net leverage ratio is greater than 2.75 to 1.00), making asset sales, and paying cash dividends and making other restricted payments (assuming our pro forma net leverage ratio is greater than 2.50 to 1.00).

We were in compliance with all financial covenants under the credit facility at December 31, 2025.  Our interest coverage ratio and net leverage ratio were 9.20 to 1 and 2.42 to 1, respectively.  We expect to continue to be in compliance with these covenants based on current projections.  Based on our current EBITDA and outstanding revolver balance, the usable capacity on the credit facility is approximately $254 million.

If we are not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and any amounts then outstanding pursuant to the credit facility could become immediately payable. Additionally, our convertible senior notes due 2030 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated.

Borrowings under the credit facility bear interest at variable reference rates plus an interest margin.  The applicable interest margin is based on our total leverage ratio.  We also pay a commitment fee, also based on our total leverage ratio, on undrawn amounts.  U.S. dollar borrowings under the credit facility are based on SOFR (including a customary spread adjustment).  Borrowings in foreign currencies bear interest at currency-specific reference rates plus an interest margin.  Based on our current total leverage ratio of 3.23 to 1, any new U.S. dollar borrowings will bear interest at SOFR plus 2.10% (including the applicable credit spread), and the undrawn commitment fee is 0.35% per annum.

The borrowings under the credit facility are secured by a lien on substantially all assets, including accounts receivable, inventory, machinery and equipment, and general intangibles (but excluding real estate, intellectual property registered or licensed solely for use in, or arising solely under the laws of, any country other than the United States, assets located solely outside of the United States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the United States, and pledges of stock in certain subsidiaries; and are guaranteed by certain significant subsidiaries.

We had $136 million outstanding on our revolving credit facility at December 31, 2024 and $219 million outstanding at December 31, 2025.  We borrowed $832 million and repaid $749 million on the revolving credit facility during the fiscal year ended December 31, 2025.  The average outstanding balance on our revolving credit facility calculated at fiscal month-ends was $220 million and the highest amount outstanding at a fiscal month end was $309 million during the fiscal year ended December 31, 2025. We expect, at least initially, to fund certain future obligations required to be paid by the U.S. parent company by borrowing under our credit facility.  We also expect to continue to use the credit facility from time-to-time to meet certain short-term financing needs.  Additional acquisition activity, convertible debt repurchases, or conversion of our convertible debt instruments may require additional borrowing under our credit facility or may otherwise require us to incur additional debt.  No principal amounts of our debt are due until 2028.

The convertible senior notes due 2030 are not currently convertible.  Pursuant to the indenture governing the convertible senior notes due 2030, we will cash-settle the principal amount of $1,000 per note and settle any additional amounts in cash or shares of our common stock.  We intend to finance the principal amount of any converted notes using borrowings under our credit facility.  No conversions have occurred to date.

The convertible senior notes due 2025 matured on June 15, 2025.  Pursuant to the indenture governing the convertible senior notes due 2025 and the amendments thereto incorporated in the Supplemental Indenture dated December 23, 2020, we cash-settled the $41.9 million aggregate principal amount outstanding as of June 15, 2025.  The settlement was funded using borrowings under our credit facility.  No shares were issued to settle the convertible senior notes due 2025.

In evaluating our liquidity and capital resources, we consider our outstanding commitments.  As of December 31, 2025 our commitments were as follows (in

thousands) :

Payments due by period

Total

Thereafter

Long-term debt

Interest payments on long-term debt

Operating leases

Letters of credit

Expected pension and postretirement plan funding

Estimated costs to complete construction in progress

Estimated costs to complete MOSFETs wafer fab

Uncertain tax positions

Purchase commitments

Other long-term liabilities

Total contractual cash obligations

Commitments for long-term debt are based on the amount required to settle the obligation. Accordingly, the capitalized deferred financing costs associated with our long-term debt are excluded from the calculation of long-term debt commitments in the table above.

Commitments for interest payments on long-term debt are cash commitments based on the stated maturity dates of each agreement and include fees under our revolving credit facility, which expires on May 8, 2028.  Commitments for interest payments on long-term debt exclude non-cash interest expense related to the amortization of deferred financing costs.

Various factors could have a material effect on the amount of future principal and interest payments.  Principal and interest commitments associated with our convertible notes are based on the amounts outstanding as of December 31, 2025.  Additionally, interest commitments for our revolving credit facility are based on the rate prevailing at December 31, 2025, but actual rates are variable and are certain to change over time.

Our consolidated balance sheet at December 31, 2025 includes liabilities associated with uncertain tax positions in multiple taxing jurisdictions where we conduct business.  Due to the uncertain and complex application of tax regulations, combined with the difficulty in predicting when tax audits throughout the world may be concluded, we cannot make reliable estimates of the timing of the remaining cash outflows relating to these liabilities. Accordingly, we have classified all non-current uncertain tax positions as payments due thereafter, although actual timing of payments may be sooner.

Expected pension and postretirement plan funding is based on a projected schedule of benefit payments under the plans adjusted for payments from fully-funded plans.

We maintain long-term arrangements with subcontractors, suppliers, and other business partners to ensure access to external capacity and supplies for certain products. The purchase commitments in the table above represent the estimated minimum commitments under these arrangements.  Our actual purchases in future periods are expected to be greater than these minimum commitments.

Other long-term liabilities in the table above include obligations that are reflected on our consolidated balance sheets as of December 31, 2025.  We include the current portion of the long-term liabilities in the table above. Other long-term liabilities for which we are unable to reasonably estimate the timing of the settlement are classified as payments due thereafter in the table above, although actual timing of payments may be sooner.

For a further discussion of our long-term debt, pensions and other postretirement benefits, leases, uncertain tax positions, and purchase commitments, see Notes 4, 5, 6, 11, and 13 to our consolidated financial statements.